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Emission projections

Norwegian approachProjection Expert PanelDublin, Oct 25th 2007

Anne Kristin Fosli, Ministry of Finance Senior Adviser

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Finansdepartementet

Outline

• Methodologies and models

• Authorities involved

• Main characteristics

• Challenges

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Finansdepartementet

Demand for projections increases..

• Emission projections are carried out minimum every fourth year in conjunction with the preparation of the White Paper to the Parliament: ”Long Term Economic Prospective”

• Projections and analysis regularly published as a part of the White paper ”Long Term Prospective”

• Projections are carried out and coordinated by Ministry of Finance in close cooperation with The State Pollution Control Authorities

• The need for updates and partially updates have increased for policy purposes, as Kyoto- and Gothenburg commitment years approaches

• Updates are published in National Budgets and Revised National Budgets

• Lately, huge focus on ”without measure scenarios” to document action and effects of policies

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Finansdepartementet

Methodology

• Projections both for GHG gases and LRTAP (nmVOC, SO2 and NOX) are based on a macroeconomic model called MSG (Multi Sectoral Growth)

• An emission calculation model and electricity demand model are included in MSG

• Supplemented by micro-information and branch studies • Projections for non- CO2 GHG- gases emissions are based on

information from concerned sectors and consistent with macroeconomic projections

• NH3 projections based on projections on animal stock and agriculture policies

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Finansdepartementet

Authorities involved

• Ministry of Finance is responsible for the production and publishing of the official emission projections, and activity data fed into the MSG (including energy data)

• The Norwegian State Pollution control is responsible for the production of emission projections of non- CO2 GHG gases

• Ministry of Oil and Energy is responsible for the annual projections of the emissions from the Petroleum sector

• Ministry of Agriculture and The Norwegian State Pollution are responsible for projections of NH3

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Finansdepartementet

Characteristics of the MSG model

• A general equilibrium model• All resources fully utilized• Producer behaviour is characterized by monopolistic

competition in the domestic market. Pricetakers on the world market

• Highly disaggregated• Detailed description of the markets for energy and transport• 40 private production sectors• 7 public sectors • 17 private consumption sectors• Four energy carriers • Long term projections are sensitive to assumptions on

population growth, technological progress and the development of prices in international markets

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Finansdepartementet

Assumptions – supply and use of electricity

•99% of Norwegian mainland electricity production based on hydropower •The production of renewables (water and wind power) is exogenously determined•Marginal long term cost of electricity produced by natural gas decides long term electricity prices in the reference scenario •Requirements of CO2 capture and storage on natural gas fired power plants in Norway make natural gas fired power plants not profitable in Norway•Assumptions on electricity demand, particularly from energy intensive, are important•Imports covers up electricity balance

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Finansdepartementet

Assumptions – price of crude oil

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1960 1970 1980 1990 2000 2010 2020 2030

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Finansdepartementet

Emission calculation model

• 12 pollutants• Emissions are a function of activity and emission coefficients

• Emissions coefficients are exogenous• Relationship between activity and emissions based on

historic observation• Coefficients are related to emitting activities as production

and consumption activities, input of materials, energy inputs and landfill

• Microinformation, used to adjust or overrule model results

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Finansdepartementet

Emission model..cont.

• Statistics Norway develop and update the Emission calculation model in collaboration with The Norwegian State Pollution Control

• Emission calculation model are updated on the basis of historical emission data and takes into account the effects of adopted environmental policies, technological change etc.

• Update of model is done every fourth or fifth year

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Finansdepartementet

Net domestic energy usePetajoule

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1990 1995 2000 20050

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Industry Transport Others

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Finansdepartementet

Energy use in Norway. 2005Petajoule

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Energyproducers

Energyintensive

manufacturing

Woodprocessing

Other industry Primary andserviceindustry

Households Transport0

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Coal, coke Gas

Petroleum products Bio energy

Electricity Remote heating

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Finansdepartementet

NOx- emissions and national projections

Effect of NOX tax/negotiaton with Government on NOx reduction not included in projections

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1970 1980 1990 2000 2010 2020

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ton

n

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Finansdepartementet

Challenges• Conflict of interest: Economic projections versus emission

projections (level of aggregation)• Intersection between macro and micro level in the medium

term• Scenario analyses – definition of BAU ? • How to deal with ”voluntary agreements” in projections and

scenarios when measures and emission reductions would be achieved anyway?

• Reporting issues- Compiling energy projections from emission projections for

various formats Level of details

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Finansdepartementet

Summing up

• Emissions projections consistent with overall macroeconomic projections

• Combination of a top down and a buttom up approach

• Macroapproach to emissions mainly driven by energy use

• Microaproach: non- CO2, GHG- emissions processing industry road traffic petroleum sector

• Micro level and micro information more relevant and available for medium term than long term