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Assessment of Policy Instruments Focused towards

Climate Change Mitigation

Annual Progress Seminar I


By
Pankaj Kumar (144406002)

Under guidance of
Prof. Trupti Mishra
Prof. Rangan Banerjee
• Introduction
• Energy security and climate change mitigation in Indian context
Contents • Electricity Sector scenario in India
• Command and Control vs Market Based Instruments
• Need for Low carbon scenarios

• Literature review
• Climate policy scenario in India and rest of the world
• Review of past modeling studies
• Review of energy models
• Research gap & research questions
• Rationale for choice of TIMES
• Assessment of policy instruments
• Assessment Methodology
• Modeling Baseline
• Identification of policy options

• Future Plan of Work


Introduction
Energy Security and Climate Change Mitigation In
Indian Context
• India is world’s 2nd largest country by population, fourth largest by GDP (PPP), contributing 6.1%
of global emissions (IEA, 2015).

• Poor in global standards with a very low per capita GDP of 1630 USD (current USD)(WDI, 2014).

• Per capita energy consumption (India 0.76 MWh/capita) (2012)


(world 2.97 MWh/capita)
(OECD 8.09 MWh/capita) (IEA, 2015).

• Economic development, energy access and energy security on agendas of policy makers.

“India faces an enormous challenge if it is to meet her energy requirement over the coming 25 years
and support a growth rate of 8 percent. This challenge can be met with a coherent approach, which
develops all available energy resources.” Integrated Energy Policy, (2006)

Introduction Literature Review Assessment of Policy Instruments


• India is highly reliant on fossil fuels for satisfying its
energy needs, where coal constitutes about 71% of
total electricity production (IEA, 2015).
• India’s rapid growth poses a big challenge for
success of global climate change mitigation efforts
• Kaya identity- Emissions as function of energy and
carbon intensity.(Kaya, 1990)

Extended Kaya identity Total electricity production in India by fuel type (TJ) (IEA, 2015)

(Ang et al., 2003; Ang and Liu, 2001; Ang, 2005)

Introduction Literature Review Assessment of Policy Instruments


2500

2000

1500

CO2 emissions (Mt)


1000

500

0
1991199219931994199519961997199819992000200120022003200420052006200720082009201020112012

-500

-1000
Year

total p total g total e total s total f

Decomposition of CO2 emissions (kt) using extended Kaya


identity (Author Calculated using IEA data)

Introduction Literature Review Assessment of Policy Instruments


• India cannot be denied right to economic convergence.
• in spite of decrease in energy intensity, the resulting emissions have continued to increase
• Reducing energy intensity effect has been overshadowed by increase in population, increase
in coal based energy and increase in GDP
• The affluence effect(g effect) of GDP growth has the most dominant positive effect on
growth of emissions followed by s effect which is governed by increasing penetration of
fossil fuels.
• Energy intensity effect has played a major role in curbing emissions over the decades.
• not possible for India to engage in binding emission targets in global climate negotiations.

But India should mitigate because


• India is vulnerable to climate change
• Edenhofer et al., (2015) different countries may face different incentives for pricing of emissions
where developing countries can avoid climate damages along with co-benefits like clean air and
energy security, and these unilateral incentives can form the basis of climate negotiations.

Introduction Literature Review Assessment of Policy Instruments


1200000

Electricity Sector In India 1000000

Electricity Production (GWh)


• Third largest producer of electricity after China 800000

and US with a total generation of 12,08,400 600000

GWh (BP, 2014) 400000


• 5.1% of global share
• Electricity generation capacity in India has 200000

expanded rapidly 0

1995

2006
1990
1991
1992
1993
1994

1996
1997
1998
1999
2000
2001
2002
2003
2004
2005

2007
2008
2009
2010
2011
2012
• Electricity sector is also the largest contributor Year
of GHG emissions in India amounting to about
coal oil gas biofuels waste
38% of total gross emissions as of 2007 (INCCA, nuclear hydro geothermal solar PV solar thermal

2007, WRI 2014) wind tide others


Total electricity production in India by energy technologies (GWh) (IEA, 2012)
• The total carbon emissions from electricity
Total Emissions (kt)(CO2eq)
sector have also shown a marked increase.
1200000
• where coal has been the major contributor 1000000
historically. (calculated by IPCC TIER 2 method) 800000

• Need efficient policies for decarbonization to 600000

ensure low carbon growth. 400000

200000

1993
1990
1991
1992

1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Total carbon emissions from electricity sector (kt) (Author calculated using IPCC methodology from IEA
Introduction Literature Review data) Assessment of Policy Instruments
Command and Market based
control mechanisms
Static efficiency
Dynamic efficiency
Reduced compliance costs.
Requires a force of law for
implementation Flexible in accommodating
changes in economy and
Dependability emissions abatement
Strengths Consistency and Predictability technologies.
Accountability Lesser information requirements
and hence decision making can
be decentralized.
Revenue surplus instrument

Not flexible in accommodating


changes in economy and
emission abatement High administration costs due to
technologies. additional mechanisms for Compiled from Montogmery
monitoring, reporting and
Regulators need to track verification. (1972), Baumol and Oates
Weaknesses technology changes and hence (1988), Tietenberg (1995),
require large information. Can lead to political
disagreements between Centre OECD (1989, 1994, 1997),
Gives limited incentive for and state.
innovation and contribution Stavins, R.N (2000a, 2000b);
beyond compliance targets. Sorell (2001), Shukla et al.,
(2005), Baldwin et al., (2012)

Introduction Literature Review Assessment of Policy Instruments


• Harrington et al., (2004) took up case studies involving command & control and economic instruments
and found that economic instruments have lower social costs through their lower unit cost of
abatement as well as incentive to reduce emissions.

• Fischer et al., (1997) used the Indian module of second generation model (SGM) and found that
tradable permits represent a lower cost method to stabilize Indian emissions than carbon taxes.

• Gambhir et al., (2014) found the potential benefits for India by engaging in international carbon permit
trading and found that India can earn significant revenues through selling international carbon credits
by offsetting some of the costs of decarbonization.
Need for Low carbon scenarios
• The search for optimal developmental pathways, infrastructure and energy futures are yet
to be shaped in developing countries.
• Green energy modelling and low carbon scenarios can serve as powerful tools to avoid
locking into carbon intensive pathways.
• Assess impacts of different developments under certain outcomes which are critical in
framing policy recommendation.
• Scenarios can be critical to decision-makers in providing scientific evidences on energy and
climate.
• Can provide helpful inputs regarding environmental and cost effectiveness of different
policy instruments in a scientific and systematic manner.

Introduction Literature Review Assessment of Policy Instruments


Literature Review
Climate policy scenario in India and rest of the world

Introduction Literature review Assessment of Policy Instruments


Design elements of Market based mechanisms (IEA, 2012)

Foundations, (participation requirements, unit allocation/auction

Coverage of GHG emissions by emissions trading schemes (IETA, 2013) (blue process, rules for use of credits, coverage of sources, emissions
line shows total emissions, green line shows percentage of emissions covered) caps)

Nuts and Bolts, (Monitoring reporting, unit issuance and


registries, trading periods, banking rules)

Verification, (3rd party accreditation, verification)


Indian Policy Scenario
Coal cess, renewable purchase obligations by state electricity boards, targets under JNNSM, Renewable energy
tariffs, Generation based Incentives, Accelerated Depreciation and tax exemption. (specifically in electricity
sector)

RECs (Electricity sector)


• To address the mismatch between availability of renewable energy sources and market demand
• Cost of electricity generation from renewable energy sources is priced as cost equivalent to
conventional sources and environmental attributes.
PAT (Industrial)
• To tap the potential to improve energy efficiency in energy intensive industries
• The first period of compliance from 2012-2015 includes 478 plants in eight sectors which account for about
60% of India’s total primary energy consumption by setting plant targets towards an average 4.8% reduction
in specific energy consumption (Kumar and Agrawala, 2013).

Surat ETS for SOx, NOx, SPM (Industrial)

Introduction Literature review Assessment of Policy Instruments


Sr.
Study Authors/ Year
Review of Low carbon no.

India's CO2 emission pathways to 2050: What role Gabriel Anandrajah, Ajay Gambhir
1
can renewables play? 2014
scenarios
Ajay Gambhir, Tamaryn A. Napp,
India’s CO2 emissions pathways to 2050: with and
2 Christopher J.M. Emmott, Gabrial
• Modeling rationale without carbon trading
Anandarajah 2014

• Model types 3
Low carbon and clean energy scenarios for India:
P R Shukla, Vaibhav Chaturvedi 2012
Analysis of targets approach
• Baselines P R Shukla, Subhash Dhar,
4 Low carbon society scenarios for India
Diptiranjan Mahapatra 2011
• Policy considerations and mitigation
India's energy transition- Pathways for a low
5 B S Reddy 2014 IGIDR WP
carbon economy
drivers
Projecting India's Energy requirements for policy Kirit S Parikh, Vivek Karandikar,
6
formulation Ashish Rana, Prasana Dani 2009

7 India's energy needs and low carbon options Jyoti Parikh, Kirit Parikh 2011

A tale of two countries: Emission scenarios for


8 Emanuele Massetti 2011
China and India

India's GHG emission scenarios: Aligning


9 P R Shukla 2006
development and stabilization paths

Introduction Literature review Assessment of Policy Instruments


Modeling rationale and findings
Sr no. Study Rationale
Analyzed the role of renewables using TIMES integrated assessment model in
meeting India’s climate change mitigation targets with two scenarios, with and
Gabriel Anandrajah, Ajay without CCS (renewable energy can play an important role in decarbonizing the
1
Gambhir 2014 economy, especially power sector. Deployment of CCS creates favourable conditions
for biomass CCS, solar and wind, whereas non CCS employs a higher role for wind
and solar.)
Ajay Gambhir, Tamaryn A. Explored potential benefits of entering a 2 deg C mitigation target for India by
Napp, Christopher J.M. analyzing long term mitigation options using a TIMES integrated assessment model
2
Emmott, Gabrial (India can significantly overachieve on mitigation targets by earning revenues
Anandarajah 2014 through selling international credits.)
Used GCAM to apply a targets approach for pushing low carbon technologies like
solar, wind, and nuclear in electricity sector from 2005 to 2095(found that wind and
P R Shukla, Vaibhav
3 nuclear energy do not require subsidy push in long run to meet targets, while
Chaturvedi 2012
subsidies drive penetration of these technologies throughout the century. A subsidy
push for wind, solar and nuclear also decreases share of CCS. )
Created low carbon society scenarios by visualizing social, economic and
P R Shukla, Subhash Dhar, technological transition for a carbon future. A comparative analysis was done for
4 Diptiranjan Mahapatra conventional and sustainable development scenarios using multiple indicators such
2011 as energy security, air quality, technology stock and adaptive capacity (displayed
mitigation as a function of carbon tax as well as development choices.)
Introduction Literature review Assessment of Policy Instruments
Used a bottom up policy framework with integrated-energy-engineering-
environmental-economic system model for low carbon growth scenario considering
5 B S Reddy 2014 IGIDR WP
national preferences, possibilities and policies (30-35% emission reductions can be
technically feasible at reasonable costs in comparison to baseline)
Took a top down approach with an activity analysis model IESM (Integrated Energy
Kirit S Parikh, Vivek System Model) to map out extremes of feasible energy technology options. (even
6 Karandikar, Ashish Rana, after utilization of domestic resources to full potential, there will be a continued rise
Prasana Dani 2009 of fossil fuels and import dependence. Hence, there is need for development of
alternative sources.)
Examine potential to reduce CO2 emissions and associated costs involved with
different energy technology options (India can reduce 30% of CO2 emissions by 2030
7 Jyoti Parikh, Kirit Karikh, 2011
with additional costs where most favourable approach is to reduce demand with
energy efficiency increases)
Used a hybrid WITCH integrated assessment model to study the impacts of different
carbon taxes applied in order to reduce greenhouse gas emissions. (carbon tax in
8 Emanuele Massetti 2011
excess of $10/tCO2, which coincides with about 25% cut in emissions, would be
excessively costly)
Created emission scenarios for India following IPCC SRES framework for energy
sector without any climate policy intervention but with different endogenous
9 P R Shukla 2006
emission drivers (endogenous development decisions are key determinants of
emission pathways.)

Introduction Literature review Assessment of Policy Instruments


Model Types
1. TIAM-UCL (1 and 2)
2. GCAM-IIM (3) (top down recursive dynamic model with energy and land use)
3. AIM-CGE+ANSWER MARKAL+END USE DEMAND MODEL+ AIM SNAPSHOT (4)
End use demand model (model the demands using a logistic regression)
AIM SNAPSHOT(spreadsheet tool designed to calculate the energy balance table and CO2 emission
table with inputs such as service demands, share of energy, and energy improvements by
classifications of service and energy in the base and target years.)
4. Integrated energy economy environment model (IEEE) (variant of MARKAL) (5)
5. Integrated Energy System Model (IESM) (6)
(multi-period, multisector, bottom-up discounted cost optimizing continuous linear programming
model with base year as 2000.)
6. World Induced Technological Change Hybrid model (WITCH)(8)
(economic growth engine, perfect foresight, endogenous technological change, non co operative
action)
7. MARKAL+AIM+ERB model (Edmunds-Reilly-Barns model) (9)
(ERB: a global top-down energy sector partial equilibrium model)

Introduction Literature review Assessment of Policy Instruments


Modeling Base year and baseline scenarios
Study End emissions Scenario type Carbon price
Gabriel Anandrajah, Ajay
1 Gambhir 2014 Ref: 2Gtco2 (2010)-8gtco2 (2050), Unabated reaches 8GTco2. nil
Ajay Gambhir, Tamaryn A.
Napp, Christopher J.M. Ref: least cost energy mix without
nil
Emmott, Gabrial any policy or CO2 constraints. Ref: Unabated. Renewables without policy
2 Anandarajah 2014 increases to 8 GtCO2 by 2050. or constraints.
P R Shukla, Vaibhav BAU (Business as usual with no carbon
3 Chaturvedi 2012 770ppmv for BAU path by 2100 price or electricity targets) nil
BAU-T (Business as usual with no carbon
P R Shukla, Vaibhav price or but exogenously specified
4 Chaturvedi 2012 770ppmv for BAU path by 2100 electricity targets) nil
base case scenario (socio economic
P R Shukla, Subhash Dhar, development mirrors resource intensive
Diptiranjan Mahapatra 650ppmv (550 for co2+100 non path. BAU improvements in energy 3$/tco2 rising
5 2011 co2) intensity and renewables. to 20$/tco2

6B S Reddy 2014 IGIDR WP not explicitly mentioned baseline nil


Kirit S Parikh, Vivek
Karandikar, Ashish Rana,
7 Prasana Dani 2009 not explicitly mentioned S1: Coal based development scenario nil
8Emanuele Massetti 2011 1.41GTin 2005 to 5.15GT by 2050 BAU: no explicit consideration of policies. nil
IA2: Mixed Economy (Ref scenario) (A:
9P R Shukla 2006 no targets centralization, 2:Fragmented markets ) nil
Introduction Literature review Assessment of Policy Instruments
Modeling Base year and baseline scenarios

• Population projections are usually incorporated from UN median projections.

• Carbon intensity of energy systems are more a function of respective modeling


approaches.

• Model projections also indicate increase in GDP and energy efficiency gains over the
modeling period (which vary from 2030-2100).

• Different studies use different metrics for setting up the targets in terms of ppmv of
CO2 concentration, overall carbon budgets (GT CO2), or energy targets.

• Most of the studies have relied on a baseline scenario with no explicit carbon price,
which is mostly coal dominated.

Introduction Literature review Assessment of Policy Instruments


Policy considerations and mitigation
drivers
Sr no. Study Policy and mitigation drivers
Gabriel Anandrajah, Ajay Gambhir
1
2014 carbon price trajectory w.r.t CO2 targets
Ajay Gambhir, Tamaryn A. Napp,
2 Christopher J.M. Emmott, Gabrial
Anandarajah 2014 carbon pricing drives mitigation. Trading drives additional electrification.
P R Shukla, Vaibhav Chaturvedi
3
2012 carbon price drives mitigation
P R Shukla, Subhash Dhar,
4
Diptiranjan Mahapatra 2011 carbon price in scenario 1, co benefits in scenario 2.

5 B S Reddy 2014 IGIDR WP Implementation of low carbon technologies, low carbon activities in
manufacturing and services
Kirit S Parikh, Vivek Karandikar,
6
Ashish Rana, Prasana Dani 2009 only targets considered

7 Emanuele Massetti 2011 carbon price drives uptake of low carbon technologies and increase in energy
efficiency
Economic growth, demographic profile, technological change, energy
8 P R Shukla 2006 resource endowments, geographic integration of markets, institutions and
policies
Introduction Literature review Assessment of Policy Instruments
Other Studies
• Mathur et al., (2003) studied the impact of introducing carbon taxes in power sector using MARKAL for four
different trajectories.
(The study found that there exists a potential of 25% reduction in greenhouse gas emissions in comparison to BAU
scenario for a time period 2000-2025.)

• Chaturvedi and Shukla (2013) analyzed the role of end use efficiency improvements as a part of climate change
mitigation policy and co benefits associated with it using GCAM model with six scenarios (with and without energy
efficiency at BAU, 450ppm and 550ppm stabilization)
(The study found that final energy and emissions get significantly reduced with energy efficiency improvements
especially in buildings and transportation sector but climate policy is still necessary for achieving mitigation targets.)

• Shukla et al., (2010) used a soft linked integrated modeling approach (AIM CGE, ANSWER MARKAL, Land Use
model, AIM strategic Database and end use demand model) to model a conventional and sustainable development
pattern leading to a 450ppmv CO2-eq trajectory.
(The study found a low carbon future would be good for renewable energy with a higher share in sustainable
development pathway. The study also concluded that with a competition from other low carbon technologies like
nuclear and CCS, deployment of renewables depends critically on the reduction in costs. )

Introduction Literature review Assessment of Policy Instruments


Review of Energy Models
• Analytical approach

• Underlying methodology

• Timeframe

• Mathematical approach

• Geographical coverage

• Sectoral Coverage

• Time Horizon

• Model Structure: Internal and external assumptions


Introduction Literature review Assessment of Policy Instruments
Analytical Approach-Top down and bottom up

• Top down approach segregates a system into


• Bottom up approach aggregates elements of a
smaller ones to gain insights about them
system to give rise to a bigger system.
• Can be used to frame economy wide
• Lack of macroeconomic perspective with high
interactions with less technology explicit
technological detail.
framework.
• Dominated by energy sector and suited for
• Used to address policy impacts via changes
problems where there are no interactions with
in public finance, economic competitiveness
other sectors
and employment
• For eg. TIMES, MESSAGE
• For eg. CGE, EPPA

(Hourcade et al.,1995), (Hourcade et al., 1996) (Van Beeck, 1999)

Introduction Literature review Assessment of Policy Instruments


Timeframe – Static, Dynamic, Recursive dynamic (Keppo and Strubegger, 2010)
• Static models (optimize in only one period)

• Dynamic models (optimize with respect to the whole planning period).

• Dynamic recursive models (optimize only for subsets of planning period and decisions in
earlier periods become inputs for later periods)

Mathematical approach (IIASA (1995), and Kleinpeter (1995).

• Linear programming models (most profitable set of outputs) (linear relationships)

• Mixed integer programming allows for greater detail in formulating problems and relations in
energy system by incorporating decision variables into integer values like (0, 1, 2, 3) or (yes/no).

• Dynamic programming models work by dividing original problem into smaller subproblems whose
solutions are calculated.

Introduction Literature review Assessment of Policy Instruments


Underlying methodology (Van Beeck, 1999)

Macro-economic models
• frame entire economy and sectoral interactions by
Econometric Models taking energy demand analysis from a Neo-
• Apply statistical techniques to Keynesian perspective (output is demand
extrapolate past trends and predict determined).
future. • Input output tables are used for determining
• Do not possess technological detail. transactions and energy economy interactions.
• Can be only used by experienced • These models have a limitation that they can only be
econometricians and have high data used if the returns to scale remain constant and
requirements. Munasinghe (1988) and aggregation is perfect.
APDC (1985) • Do not represent specific technologies and require
high expertise.

Introduction Literature review Assessment of Policy Instruments


Optimization Models
• optimize investments in energy systems Simulation Models
endogenously (results directly determined • descriptive models based on a logical
by input). representation of a system and are aimed at
• The output of the model represents most reproducing a simplified operation of a system
profitable or least cost solution for given (World Energy Conference, 1986).
variables within specified constraints. • Simulation models can be used to do scenario
• use linear programming techniques. analyses and explore consequences of certain
• do not account for energy economy options.
interactions.

Economic equilibrium models (partial and general equilibrium models)


• Partial equilibrium models focus on equilibria in selected parts of economy for eg. energy supply
and demand, whereas general equilibrium models are concerned with simultaneous equilibrium as
well as determinants of equilibria in overall economy.
• General equilibrium models consider all markets in an economy and also allow for feedback effects
between individual markets (Slesser, 1982).
• have benchmarked years to guarantee consistency in outputs.
• They rely on perfect market equilibrium conditions without any consideration of structural
unemployment.

Introduction Literature review Assessment of Policy Instruments


• Geographical coverage-Global, Regional, National, Local or Project (Van Beeck, 1999)

• Sectoral Coverage- single sector, multi sector

• Time Horizon- short (5 years or less), medium (between 3-15 years), long term (10 or more)
Grubb et al., (1993)

Model Structure
• The degree of endogenization.
• The extent of the description of the non-energy sector components of the economy.
• The extent of the description of energy end-uses.
• The extent of the description of energy supply technologies.

Introduction Literature review Assessment of Policy Instruments


Research Gap

• Although all the above studies analyze the cost effectiveness of carbon tax for renewables,
potential environmental effectiveness of carbon tax & co-benefits of mitigation, none of them
focuses specifically on current policy regimes under implementation.
• Limited studies on trading mechanisms.
• Limited studies focused on mitigation at sectoral level in Indian context.
• This study targets this research gap and analyzes the implications of implementing a market based
policy regime against command and control policy options in electricity sector which has the
largest share in total emissions.

General Objective
The objective of this study is to generate technologically detailed low carbon policy scenarios for
Indian electricity sector using an energy model while specifically assessing role of market based
instruments.

Introduction Literature review Assessment of Policy Instruments


Research questions
1. What can be the role of existing policies in achieving decarbonization in electricity sector?

2. What can be the potential role of market based instruments as a part of India’s electricity sector decarbonization
policy?

3. How would India's energy mix change in low carbon policy regimes? What challenges does it imply?

4. What can be the suitable design elements for market based policy?

Introduction Literature review Assessment of Policy Instruments


Research questions
1. What can be the role of existing policies in achieving decarbonization in electricity sector?
Specific Objectives
a. To perform sectoral demand projections.
b. To create a reference energy system.
c. To create a baseline scenario with existing policies.

2. What can be the potential role of market based instruments as a part of India’s electricity sector decarbonization
policy?
Specific Objectives
a. To create a carbon tax scenario with stabilization targets.
b. To create a market based policy scenario with stabilization targets.

3. How would India's energy mix change in low carbon policy regimes? What challenges does it imply?
Specific Objectives
a. To analyze the changes in energy mix, technology options and assess the investment needs for low carbon
scenarios.

4. What can be the suitable design elements for market based policy?
Specific Objectives
a. To establish the optimal choice of design elements for market based trading/crediting system.

Introduction Literature review Assessment of Policy Instruments


Rationale for choice of TIMES
• Assessment of technology policy options requires a technology explicit framework which can represent
impact of policies on economic viability of energy technologies and thus derived low carbon pathways.

• Top down models lack technological detail which can be addressed with bottom up models like TIMES.

• Use of a bottom up model like TIMES provides an adequate representation of technology options in terms
of costs, availability etc.

• TIMES is dyamic in nature and optimizes over the entire timeframe while also considering retirement of
technologies in accordance with their lifetimes and investment in new ones for entire modeling period.

• TIMES can create user defined constraints and optimize scenarios within them which can be created for
reflecting emission bounds or limitations on resources.

• Partial equilibrium models do not consider all the impacts on economy but macroeconomic performance is
not within the focus of this study.

Introduction Literature review Assessment of Policy Instruments


Assessment of Policy Instruments
Assessment Method
TIMES (The Integrated MARKAL EFOM System)
Dynamic linear programming model of a generalized energy system, constraints can be specified,
demand driven which is provided exogenously, perfect foresight

Components
• System wide parameters (discount rate and temporal disaggregation)
• Energy service demands (specific energy end use services which cater to individuals and companies.
Eg. Lighting, cooling etc.)
• Energy carriers (various forms of energy produced and consumed in the system which include fossil
fuels, electricity, heat, synthetic fuels and renewable energy)
• Technology parameters (technology costs, input and output commodities, technical efficiencies,
start year of new technology, availability factors and current existing installed capacity, user limits,
technology specific discount rates)
• Environmental component

Introduction Literature Review Assessment of Policy Instruments


Research Framework

Introduction Literature Review Assessment of Policy Instruments


Mathematical description
𝑡=𝑝
NPV = 𝑀𝑖𝑛 𝑡=1
(1 + 𝑑)𝑦∗(1−𝑡) ∗ 𝐴𝑁𝑁𝐶𝑂𝑆𝑇(𝑇) ∗ (1 + 1 + 𝑑 −1 + 1+𝑑 −2 + ⋯+ 1 + 𝑑 1−𝑦 )

Where ANNCOST(t) is the annual cost for period t, d is the general discount rate, p is the number of periods
in the planning horizon and y is the number of years in each period t.

• Annualized investment cost*new capacity


addition + fixed O&M costs*installed
capacity + variable O&M*activity level +
delivery cost*amount of
commodity*activity level
• Specific Mining cost*quantity + specific
transport cost*quantity traded+ import
price*import – export price* export

• Specific tax*amount of pollutant

Introduction Literature Review Assessment of Policy Instruments


Solution of TIMES
• An optimal resource/fuel/technology mix.
• Complete breakdown of costs associate with each technology.
• Emission levels for each technology and overall energy system in each time period.

Modeling Baseline
• Demographic trends
• electricity sector trends (energy efficiency improvements, penetration of low carbon technologies as
well as current government policy trends)
• timeframe taken from 2015 to 2050.
Mitigation policy options for low carbon scenarios
Market Based Instruments
Command and Control
Taxes/Subsidies Trading
coal cess
Renewable Purchase Obligation
REC Markets
JNNSM targets
Emission standards RE Tariffs
Generation Based Incentives
Emissions Trading
Accelerated Depreciation
Scheme
Tax exemption
Introduction Literature Review Assessment of Policy Instruments
Way Ahead
Deliverables
a. Sectoral energy demand projections
b. Reference energy system
c. Baseline scenario with existing policies
d. Carbon tax scenario with stabilization targets
e. Market based policy scenario with stabilization targets.
d. Diagnosis of low carbon scenarios.
e. Optimal design elements.

Timeline
Sept Oct Nov Dec Jan Feb March April May June July Aug
Literature review and data
collection

Sectoral demand projections


Creating reference energy
system

Low carbon scenarios


Data Sources
CEA website
CMIE prowess
TERI Energy & Environment Data Diary and Yearbook (TEDDY)
IEA, EIA databases
References
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Ang, B. and Liu, F. (2001). A new energy decomposition method: perfect in decomposition and consistent in aggregation. Energy, 26(6), pp.537-548.

Ang, B., Liu, F. and Chew, E. (2003). Perfect decomposition techniques in energy and environmental analysis. Energy Policy, 31(14), pp.1561-1566.

APDC, (1985). Integrated Energy Planing: A Manual. Vol. 1: Energy Data, Energy Demand. Kuala Lumpur: Asian and Pacific Development Centre.

Baldwin, R., Cave, M. and Lodge, M. (2012). Understanding regulation. New York: Oxford University Press.

Baumol, W. and Oates, W. (1975). The theory of environmental policy. Englewood Cliffs, N.J.: Prentice-Hall.

Bohringer, C. and Rutherford, T. (n.d.). Combining Top-Down and Bottom-Up in Energy Policy Analysis: A Decomposition Approach. SSRN Electronic Journal.

BP, (2014). BP Statistical Review.

Edenhofer, O., Jakob, M., Creutzig, F., Flachsland, C., Fuss, S., Kowarsch, M., Lessmann, K., Mattauch, L., Siegmeier, J. and Steckel, J. (2015). Closing the emission price gap. Global
Environmental Change, 31, pp.132-143.

EIA, (2015). [online] Available at: http://www.eia.gov.in [Accessed 24 Aug. 2015].

Fisher-Vanden, K., Shukla, P., Edmonds, J., Kim, S. and Pitcher, H. (1997). Carbon taxes and India. Energy Economics, 19(3), pp.289-325.

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