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CO2 Marginal Abatement Cost and Its Impacts on Emissions perIts Impacts on Emissions per Import Value from Containerships in the United States
HAIFENG WANGUniversity of [email protected]
0
Outline of Analysis
• Impacts of emission levy on countries and commodity types– Prepare basic inventories and trade weight– Combine CO2 inventory and trade– Analyze the price increase due to levy by countries and by
commodity groups• Impacts of speed reduction on CO2 reduction
– CO2 reduction rate from cutting fleets’ speeds– Marginal abatement cost (MAC) of reducing CO2 emissionsMarginal abatement cost (MAC) of reducing CO2 emissions– Compare MAC with cap-and-trade prices in other markets
1
BackgroundI t ti l t d i i i i th t d d b f th• International trade is increasing in the recent decade before the recession– Average above 3%
• More than 80% trade in volume was carried by ships• Ship is one of the major sources of several pollutants
– 1.2-1.6 million metric tons of particulate matterp– 4.7-6.5 metric tons of sulfur oxides– 5.0-6.9 metric tons of nitrogen oxides
• Increasing attention is paid to GHG especially CO• Increasing attention is paid to GHG, especially CO2
– 1019 million tons of CO2– 3.3% of world CO2 emissions– 90% is from international shipping
2
14,000
16,000
10,000
12,000
tric Tons
Trade
6,000
8,000
Millions of M
etby
Seaborne
2,000
4,000
M
0
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006
Other Cargo Crude Oil Oil Products Iron Ore Coal Grain Total Trade
3
g
1000
1200
600
800
on Ton
s
400
Millio
0
200
Fuel Use for Ships Fuel Use for International Ships
4
CO2 from Ships CO2 from International Ships
2 32912 3059
3500
1662 1710 1733 1805 1916 2020 2101 2186 2290 2431 2533 2622 2737
2000
2500
3000
1662
1000
1500
0
500
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Average TEU Ship Number Index Capacity Growth Index
5
Potential impact of shipping on WRE 450 / 550 emissions stabilization
8000
10000
12000
4000
6000
Tg C
yr-1
WRE550
WRE450
WRE 450 Path Adjusted for Ship Trend
0
2000
2000 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
Year
Buhaug, Ø.; Corbett, J. J.; Endresen, Ø.; Eyring, V.; Faber, J.; Hanayama, S.; Lee, D.S.; Lee, D.; Lindstad, H.; Mjelde, A.; Pålsson, C.; Wanquing, W ; Winebrake J J ; Yoshida K Updated StudyW.; Winebrake, J. J.; Yoshida, K. Updated Studyon Greenhouse Gas Emissions from Ships: Phase I Report; International Maritime Organization (IMO) London,UK, 1 September, 2008
6
Regulator Responses to CO2
• IMO Policy Instrument to reduce CO2
– Market-based instrumentMarket based instrument– Ship operational index– Ship design index
• Main Engine retrofit• Main Engine retrofit• Retrofit hull improvement
• Europe UnionWith Japan they are pushing to give IMO authority to audit the– With Japan, they are pushing to give IMO authority to audit the flag states
– They plan to regulator GHG within EU if IMO does not take enough actionenough action
7
From Wartsila
8
Questions
• What is the effect of CO2 reduction cost on trade• Its impacts on countries and commoditiesIts impacts on countries and commodities
• What is the effect of speed reduction• No technology bottleneck
E t f d it• Easy to enforce and monitor
• What is the economy behind• Higher cost on trade• Marginal abatement cost of slowing vessels
9
Data Source
• US Army Corps of Engineers– Clearance and Entrance (2002) datasetClearance and Entrance (2002) dataset– More than 7,000 routes identified and analyzed– More than 10,000 international ship calls to the United States
Ship Traffic Energy and Environmental Model (STEEM)• Ship Traffic Energy and Environmental Model (STEEM)– Port to Port distances
• Department of Commerce– U.S. Import and Export Dataset– Trade data by commodity groups and by countries
10
Inventory Estimate
• Bottom-up approach– Estimate CO2 emissions from each ship that called the U.S.Estimate CO2 emissions from each ship that called the U.S.
ports in 2002– Add up emissions from each ship
• Parameter assumption• Parameter assumption– SFOC: 206 g/kwh– Average main engine load factor: 0.8
f 0– Average auxiliary engine load factor: 0.5
11
Inventory Esimation
Fuel usage estimate CO2 Emission
∑ ××+×=
ji
jikkkji s
dAEfuel
ssMEfuelFuel
, 1
,3
0
1,, 24
))(( ∑⎪⎭
⎪⎬⎫
⎪⎩
⎪⎨⎧
××⎥⎥⎦
⎤
⎢⎢⎣
⎡+⎟⎟
⎠
⎞⎜⎜⎝
⎛××=
kji k
ijk
k
kk s
dAF
ss
MFCO,, 1
3
0
12 24
17.3
Total CO2 emissions: ~22 million tons
12
Basic Facts
• Total CO2 emissions from International Shipping that call the United 2States: ~22 million tons
• 13.6 billion kg commodities were imported to the United States• 2 ton CO2 emission for every one ton of commodity2 ton CO2 emission for every one ton of commodity• Unit emission: Emission/weight of imported commodity
13
Top Emitters of CO2 in Trade with the United Statest e U ted States
Country Emission (ton) Annex I
Japan 19,365,000 Yes
NSouth Korea 7,366,000 No
China Taiwan 5,267,000 No
China Mainland 5,229,000 No
Mexico 4,841,000 No
Canada 4,451,000 Yes
Venezuela 3 027 000 NoVenezuela 3,027,000
Spain 3,001,000 Yes
United Kingdom 2,777,000 Yes
14
Top Unit Emitters of CO2 in Trade with the United Statesthe United States
Country CO2Annex I
A i S 1 05 NoAmerican Samoa 1.05 No
Pacific Islands N.E.C. 0.75 No
St. Helena 0.58 No
Western Sahara 0 31 NoWestern Sahara 0.31Eritrea 0.26 No
South Pacific Islands 0.18 No
Gambia 0.16 No
Kiribati 0.12 No
Cuba 0.08 No
Guam 0.04 No
15
Emission/Import Ration by Commodity
• Trade data classified by 2 digit Harmonized System (HS2)• One underpinning assumption: CO2 emissions from containerships
are proportional to trade weight.– In practice commodities are packed in containers in one ship andIn practice commodities are packed in containers in one ship and
transported– Calculate CO2 emission and total weight– Assign CO emissions to different commodity types according to– Assign CO2 emissions to different commodity types according to
their weight ratio
16
Unit Emission by Commodity4 096
Mineral ProductsChemicals & Allied
Industries
0 512
1.024
2.048
4.096
Animal and Animal Product
Service0.128
0.256
0.512
by cou
ntry
Product
Vegetable Products
Foodstuffs
Wood and Wood Products
Stone/Glass
Metals
M hi /El t i l
Transportation0.016
0.032
0.064
CO2 ratio
b
Plastics/Rubbers
Raw Hides, Skins, Leather, & Furs
Footwear/Headgear
Machinery/Electrical
Miscellaneous0.002
0.004
0.008
17
TextilesMiscellaneous
0.001
Price Increase due to CO2 levyAssume a $ 50 per ton CO2 levy is imposed to commodities that are
HS19: Food HS72: Steal HS61: Textile
transported by international shipping
Guam 370% Guadeloupe 2770% Guam 70%
Pacific Islands N.E.C. 370% Belize 790% Dominican Republic 40%
Kiribati 360% Bahamas 540% Sao Tome and Principe 3%Kiribati 360% Bahamas 540% Sao Tome and Principe 3%
Fiji 15% New Zealand 530% Kiribati 2%Georgia 4% Panama 530% Ivory Coast 1%Panama 4% Portugal 490% Fiji 0.5%g jFrench Guiana 3% Ukraine 430% New Zealand 0.4%Albania 3% France 410% Greenland 0.3%Cayman Isl 2% Denmark 370% Namibia 0.3%Ivory Coast 2% Korea 350% Haiti 0.3%A % 3% 0 %
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Average 5% 3% 0.5%
Speed Reduction and CO2 Mitigation2Re-visit equation 2, the CO2 is directly related to the relationship between operational speed and designed speed
∑⎪⎭
⎪⎬⎫
⎪⎩
⎪⎨⎧
××⎥⎥⎦
⎤
⎢⎢⎣
⎡+⎟⎟
⎠
⎞⎜⎜⎝
⎛××=
kji k
ijk
k
kk s
dAF
ss
MFCO,, 1
3
0
12 24
17.3
Reducing speed can reduce CO2 emission
19
30000000
35000000
40000000
)
15000000
20000000
25000000
30000000O2
emission
(mt)
0
5000000
10000000
10% 20% 30% 40% 50%
CO
Assume no extra ship
Total CO2 (mt/yr) CO2 saving (mt/yr) Series3
Percent Reduction in Speed
CO2 saving (mt/yr)
Fuel usage(mt/yr)
CO2 saving % change Assume no extra ship
is added into the lineup to cover the already published
h d l
Speed (mt/yr) (mt/yr) change
10% 6,520,000 9,210,000 19%
20% 12,290,000 7,390,000 35%schedule30% 17,340,000 5,800,000 50%
40% 21,640,000 4,440,000 62%
50% 25,180,000 3,330,000 72%
20
Marginal Abatement Cost of CO22
• Marginal abatement cost = extra reduction of CO2/extra cost of reducing CO22
• Marginal abatement cost = CO2 price• Calculation
– Assume ships operate at their optimal speed which is defined as– Assume ships operate at their optimal speed which is defined as the speed that shipping companies produce maximum profit
– When regulators mandate speed reduction from optimal speed, there is cost (opportunity cost)there is cost (opportunity cost)
21
• IMO is looking at the 3/13)( ⎟⎞
⎜⎛ ⋅⋅+ sAFPCg
possibility of 10% speed reduction
Marginal cost is around $20 $120
01 2
)(⎟⎟⎠
⎞⎜⎜⎝
⎛⋅
+=
k
kkkk MFP
sAFPCs
– Marginal cost is around $20 per ton
• Haven't considered extra $60
$80
$100
$120
Price ($)
ships that maintain the frequency– Otherwise, the CO2 reduction
$0
$20
$40
10% 20% 30% 40%Carbon
P, 2
rate will be discounted– Marginal cost will be much
higher
Mandate Speed Reduction Rate (% of Optimal Speed)
Marginal cost
g
22
Policy Implication
• CO2 emission is directly related to trade– Regulations regarding the emissions from international shippingRegulations regarding the emissions from international shipping
will effect international trade– More coordination between IMO and WTO
• Countries and commodities would be hit unequally if there were a• Countries and commodities would be hit unequally if there were a CO2 reduction cost– Though bigger countries are responsible for most emissions,
small countries are most severely hurtsmall countries are most severely hurt– Heavy goods are most affected– True for both Cap-and-Trade and Emission Levy
23
$50
• Speed reduction is one of solutions to CO2 from
$40
$45
CO2 trad
ing price
2)
ships• CO2 price is higher than
current market prices$35
$40
Clim
ate Exchan
ge C
(US$/ton
CO2
current market prices– Even without
consideration of extra ships
$25
$30
Europe
an
2008 Trade Dates
3.4
3.5
3.6
e ($/ton
)
2.9
3
3.1
3.2
3.3
RGGI Clearance Price
24
2.8
Sep‐08 Oct‐08 Nov‐08 Dec‐08 Jan‐09 Feb‐09 Mar‐09
RGGI Clearance Price ($/ton)
Future Work
• The marginal cost when extra ships are taken into considerations– Fewer CO2 reductionFewer CO2 reduction– More cost– Higher marginal cost
A separate carbon market?– A separate carbon market?• Its influence on international trade
– Empirical works linking low transport cost with growing trade– What is the opposite
25
Discussion Welcome
Save the Environment and Ocean Is the Responsibility ofSave the Environment and Ocean Is the Responsibility of Our Generation
Contacts:Haifeng WangUniversity of DelawareT l 302 465 8323Tel: [email protected]
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