News and Outreach: Niven Winchester

By Daniel A. Gross

Most economists agree that if we want to efficiently reduce CO₂ emissions, we’ll need to put a price on carbon. But a nagging question remains. How are we supposed to figure out a price for an invisible, amorphous gas that underpins the economy and transforms the climate?

It’s relatively easy to put a price on a t-shirt or a pound of apples. Calculate the cost of all the inputs, from raw materials to labor to shipping. Then add a margin for profit, and the product is ready to be sold.

Why do the costs of carbon vary from country to country?

The costs of carbon, by contrast, are diffuse and diverse—which helps explain why the estimated prices of CO₂ vary wildly across countries and companies. The US government uses an estimate of $33 per ton of CO₂, while Sweden uses the strikingly high figure of $168. In internal calculations, Google Inc. uses $14 per ton, while (perhaps surprisingly) oil companies like BP and Exxon-Mobil use fairly high prices of $40 and $60, respectively.

So where do these carbon price tags come from? Whenever you see dollar amounts tacked on to tons of carbon, economists likely used one of two methods to calculate them.

Calculation methods vary too

The first method is like a very long addition problem. The strategy, according to World Bank senior economist Stephane Hallegate, “is to look at the damages on the environment and societies and people that one ton of carbon would create.” In other words, economists use computer models to tally up all the negative impacts of carbon, and set a carbon price high enough to offset those costs. “If the damages are going to be high, that justifies quite a high carbon price,” explains Niven Winchester, an MIT environmental economist.

In practice, however, adding up the costs of carbon can be extremely tedious. “You’re solving a puzzle,” he says—but the puzzle has a huge number of finicky pieces. A dizzying array of factors can affect the estimated cost of carbon. For example: How much will solar energy cost in 30 years? How much meat will humans consume, one century from now? How much CO₂ would cause the Greenland ice sheet to melt? Because there are so many factors to estimate, MIT outsources its calculations to a massive computing center 100 miles west of Boston, the Massachusetts Green High Performance Computing Center (MGHPCC). Unlike simplified models of the economy, “integrated models” may generate datasets of many terabytes — a reflection of the many environmental and economic processes that researchers hope to capture.

Read the full article at roadtoparis.info

Amanda Peterka | E&E reporter

Bioenergy production would boom and spur steep reductions in greenhouse gas emissions if a global price is slapped on carbon, Massachusetts Institute of Technology researchers say in a report released today.

Examining bioenergy production under a $15-per-metric-ton carbon price that would rise steadily to $59 in 2050, researchers found production hitting 150 exajoules by 2050 -- compared with below 50 exajoules without a carbon price.

Global greenhouse gas emissions would plunge 16 percent under that scenario, the report says, cautioning that the carbon price studied doesn't take into account land-use changes. Taking into account emissions from land-use changes, including deforestation, it says greenhouse gas reduction would be nearly 60 percent from the no-carbon-price baseline.

"The study is one of the most in-depth evaluations to date of how bioenergy might fit into a low-carbon future," MIT said in a release. "The research team developed a cutting-edge modeling tool covering a comprehensive range of bioenergy pathways."

The MIT Joint Program on the Science and Policy of Global Change says its study goal was to see how bioenergy would compete with other low-greenhouse-gas options on a level playing field.

The researchers used the Economic Projection and Policy Analysis model to create both the carbon price scenarios and assumptions about economic, productivity and population growth without a carbon price. The model examined seven first-generation biofuel crops and two cellulosic biofuel conversion technologies -- bioelectricity and heat.

The model also accounted for international trade, ethanol blending limits, changes in land and production costs, and existing policies such as the federal renewable fuel standard, among other factors.

"Biofuels are only one channel for bioenergy," said Niven Winchester, an environmental energy economist at MIT. "If you want to study how land can be used to meet our energy needs, you have to think of all the different ways to use what grows on that land -- including food, feed and fuel."

The carbon price scenario resulted in efficiency improvements and energy use reductions, the report says. Electricity consumption in 2050 dropped 19 percent, while there was 73 percent less electricity from coal.

With a carbon price in the MIT model, bioenergy use rose from 8.5 exajoules in 2015 to 152.4 exajoules in 2050 -- or about a quarter of global energy needs.

The model found that corn ethanol would be produced in the United States until 2025, when it would become uneconomical.

After 2025, cellulosic ethanol would become the primary form of bioenergy; by 2020, cellulosic ethanol would account for about 57 percent of the globe's total bioenergy consumption.

Increased energy prices under a carbon price would make grasses -- one of the main inputs for cellulosic ethanol -- more attractive, while cellulosic producers would face lower land costs than other biofuel producers, according to the report. Rising electricity prices would also increase the revenue that cellulosic producers could receive from producing electricity as a co-product.

Africa and Brazil would become the largest bioenergy producers in a world where cellulosic ethanol is the main form of bioenergy, the MIT study found.

"Africa can become a key player in supplying global energy, if agricultural expertise can be transferred to this region," Winchester said. "It has the right climate and a large amount of land, but also the potential for deforestation if policy safeguards aren't in place."

The growth in cellulosic ethanol assumes that production costs fall over the next 35 years and that ethanol-blending constraints disappear by 2030 partly through the use of more flex-fuel cars.

MIT found that pricing greenhouse gas emissions from bioenergy land-use changes significantly increases the amount of greenhouse emission reductions that occur as a result of bioenergy expansion.

Pricing land use changes would prompt a global reforestation of 800 million hectares between 2010 and 2050, according to the study. In 2050, cumulative carbon-dioxide-equivalent emissions would be 37,381 million metric tons if land-use changes were priced, compared to 74,140 million metric tons if they were not.

"The report concludes that changes spurred by the carbon price, including bioenergy production, could cut greenhouse gas emissions by more than half, with a catch -- to achieve the cut, the carbon price must cover emissions from changing land use," MIT said. "Without this safeguard, deforestation becomes a major concern as forests are cleared to make way for farmland."

Vicki Ekstrom
MIT Joint Program on the Science and Policy of Global Change

As countries try to protect their domestic air carriers from a European Union proposal that would put a price on the emissions they release over European airspace, the global aviation industry is working to curb those emissions. Industry-wide, air carriers set a goal to be carbon neutral by 2020 and cut their emissions in half by 2050. One way they’ll meet this goal is through the use of biofuels.

“Biofuels release significantly fewer emissions than conventional fuel, and could reduce fuel price volatility for airlines,” says Niven Winchester, an economist at the Joint Program on the Science and Policy of Global Change and the lead author of a study looking at the costs and efficiency of making the switch.

To meet the global targets, the U.S. Federal Aviation Administration has set its own goal to use one billion gallons of renewable biofuels each year starting in 2018. Because the goal includes U.S. Air Force and Navy carriers, which consume the vast majority of fuel, commercial airlines are responsible for just 35 percent of the target (350 million gallons). In studying this target, Winchester and his co-authors find that while a carbon tax or cap-and-trade system – as the Europeans have employed – would be the most efficient way to reduce emissions, there are ways to cut the costs of using biofuels.  The study was published in the December issue of Transportation Research.

“The cost of abating emissions in the aviation sector is higher than in other sectors, so a broad cap-and-trade or carbon price policy that covers a variety of sectors would spread out those costs and allow for improvements in technology and infrastructure,” Winchester says. “But because employing a carbon tax or cap-and-trade appears to be politically infeasible at this time in the U.S., we looked for other ways to reduce emissions.”

The researchers find that growing biofuel crops in rotation with food crops, as research from the U.S. Department of Agriculture suggests, can reduce the cost of biofuels. Pennycress, for example, is a winter annual crop that could potentially be grown in the Midwest in rotation with summer corn and spring soybean crops.

The researchers found that without any policy to constrain emissions, airlines will spend $3.41 per gallon of fuel in 2020, or about $71 billion for the year. Using biofuels that are not grown in rotation with food crops would cost $6.08 per gallon – almost double the cost of conventional fuel. But because the biofuel target for commercial aviation represents only 1.7 percent of total fuel purchased by the industry, the average fuel costs for commercial carriers would increase by only $0.04 per gallon. While a seemingly small change, airlines would spend $830 million more per year on fuel. That price tag becomes significantly smaller when biofuels are grown as rotation crops. In this scenario, the average fuel costs could increase by as little as less than one cent per gallon – raising total annual fuel costs by about $125 million.

Using rotation crops is not only a cheaper way of reaching the renewable target, it also delivers greater bang for the buck in terms of reducing emissions – costing just $50 per ton of COâ‚‚ abated versus $400 per ton without their use. But again, it’s far from the most efficient option: a broad carbon tax or cap-and-trade system. Under the European Union’s Emissions Trading System, COâ‚‚ cost $5 per ton in mid-2013, and is predicted to cost $7 per ton in 2018.

“Because biofuels would account for such a small portion of the total fuel used by commercial aviation, meeting the goal would have only a minor impact on the price of jet fuel. But it would also have a minor impact on emissions,” Winchester says.  “A broad cap-and-trade policy or a carbon offsetting scheme, as is currently being promoted by the International Air Transport Association, would reduce emissions at a lower cost by allowing aviation to tap into low-cost abatement options in other industries.”

The study was funded by the U.S. Federal Aviation Administration.