Promotion of Constructing Zero Carbon Society ... · society. It is important to consider the back-casting scenario of how to achieve it. In order to realize the zero carbon society,

CLIMATEANDENVIRONMENT

PromotionofConstructingZeroCarbonSociety:EffectivenessofQuantitativeEvaluationofTechnologyandSystemfor

SustainableEconomicDevelopment

KoichiYamada(CenterforLowCarbonSocietyStrategy(LCS)JapanScienceandTechnologyAgency

(JST))KanakoTanaka(LCS,JST)

March15,2019

Abstract

Whensettingconstructionofeuphoricandsatisfyingzero-carbonsocietyasagoal,weshouldconsidertheback-castingscenarioofhowtoreachit.Tothatend,itisnecessarytouseasimplebutclearindicatorofGDPandCO2emissionswithoutseparating,economicdevelopmentanddecarbonization.To achieve the target below 2 degrees, technology development anddiffusion (TD&D) play key role. This paper clarifies the usefulness andimportance of quantitative technical evaluation that can be used forinvestmentjudgmentandexpansionofTD&Dwhichpracticallyacceleratetolowcarbonizationandinnovationinworld.

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ClimateChangeandEnvironment

Challenge

Globallycommonandinevitablegoalforusisaimingatbuildingazerocarbonsociety.Itisimportanttoconsidertheback-castingscenarioofhowtoachieveit. In order to realize the zero carbon society, quantitative evaluation isindispensable.

First of all, we must respond to the questions whether targeted society isreachablefromtheviewpointofeconomicdevelopment,andsecondly,whethersocietycanreachthegoalwithfewerbarriers.Theanswertotheformercanbethoughtofasasimpleyetclear indicatorofGDPandCO2emissions.For thelatter, the development and thewidespread diffusion of technology are themost effective measures with less barriers. In that context, appropriatequantitative assessment of technology has an important role in investmentdecisionsintechnologydevelopmentanduse.

l Byadequatelymonitoringthescaleandtimingofintroducingtheoptimallow-carbontechnologysystemwillmaximizelower-costandlower-carbonopportunities.

l Usually future cost of technology in estimationmodels is often derivedfrom numerical values calculated from ‘black box’. In order to makeeffective investmentdecisions, it isnecessarytoclarifywhosebasisandboundaryconditionsofthecalculation.

l Investment opportunities are fully utilized by implementing thetechnology installation plan with considering development level of thecountryand/orregion.

l Tointroducelow-carbontechnology,itisimportanttoclarifythespillovereffectsoneconomic,energyandenvironmentalaspectsinawholesociety.It reduces the risk of being marginalized due to difficulties such asinflexibleandshort-terminvestmentdecisions.

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Proposal

Proposal 1: To achieve the globalwarming target of 2 degrees or less, it isimportanttoraisethedecreasingrateofCO2emissionsperGDP.Tothatend,itis necessary to accelerate the technology transfer speed and to introduceappropriatetechnologysystemsthroughinternationalcooperation.

Rationale

l Figure1showsthechangeinworldCO2emissionsperGDPfrom1850tothepresent.FromtheIndustrialRevolutiontothebeginningofthe1900speriod,theincreaseduetoexpansionofindustrieswithhighCO2emissionswasremarkable.After thepeakof0.93 t/1000USD in1913, therewasadecreaseduetochangesintheindustrialstructureandthespreadofnewtechnologies.Inthepast100years,theaveragerateofreductionis0.0047/year,inthepast50yearsitwas0.0074/year.

l FuturetemperaturecanbeestimatedbyusingthisCO2/GDP,relationof∆TandaccumulatedCO2(Matthews,2009),andeconomicgrowthrate(Figure2).Iftherateofdecreaseslowsdown(0.0030/yr.),Thetemperaturerisewillbe4.3degreesin2100,whilecontinuingwiththecurrentreductionrate(0.0074/yr.), thegoalbelow2degrees canbeachievedby reducing theannualcarbonemissionstozeroby2074.

l Figure3showstherelationshipbetweenpopulationandGDPgrowthrateof seven developed countries (upper two figures) and regions (lower).Whenthegrowthrateofthepopulationishigh,GDPgrowthratetendstobehigh.Indevelopedcountries,theeconomicgrowthrateinrecentyearshas declined. On the other hand, in developing countries the populationgrowthratehasslowedsomewhat,buttheeconomicgrowthrateishigh1.By innovation fordecarbonization leading to theseeconomicgrowthandintroduction of new systems, we must induce leapfrogging of thedevelopmentofdevelopingcountries.Inthesecountries, infrastructureisnot ready and should be newly installed. In other words, there will be

1Theannualgrowthrateofpopulationfrom2015to2050isexpectedtofalltolessthan1%inmostareas,butonlyAfricaisstillhigh,2.2%(UN,2017),andtheGDPgrowthrateisalsohighat4.4%.(EDMC,2018).

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advantage of being easy to introduce the state of art equipment/facility.Therefore, compared with developed countries, investment fordecarbonizingsocietyismoreefficient,effectsappearearlier.

Suggestionsonmeanstoimplement

l ByincreasingthereductionrateofCO2emissionsperGDP,itispossibletoapproach the goal of 2 degrees or less. To this end, mechanism andframework will be significant that raises GDP by reducing CO2, e.g.,technologydevelopmentanddeployment.

l Asthepopulationdecreases,itisimportanthowquicklytodecreaseGHGemissions,anditisnecessarytolookatbotheconomyandenvironment.Tothat end, it is important to link technologicalprogressandeconomyandacceleratetechnologytransferbetweencountries/regions.

Figure1.HistoricalchangeofCO2perGDPintheworld.

Note:LCScalculatedfromseveraldatasource:1971-2015:GDP,CO2fromEDMCdatabank.Before1970:GDPfromMaddison(1995),CO2fromBodenetal(2010).AsGDPfrom1971to2015wasbasedon2010andGDPpriorto1970wasbasedon1990,sothetwoperiodswereconsolidatedattheratioto1971andadjustedto2010base.Source:Yamada,2017and2019.

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Figure2.Effectoftechnologyprogressandeconomicgrowthonglobalwarming.

Source:Yamada,2019

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Figure3.RelationshipbetweenannualgrowthrateofpopulationandGDP.(Left:7developedcountries,Right:worldregions)

EstimatedbyLCS.

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Table1.RelationshipbetweenannualgrowthrateofpopulationandGDP

GDPgrowthrate Populationgrowthrate 1971-2015 1971-2000 2000-2015 1971-2015 1971-2000 2000-2015US 2.8% 3.3% 1.8% 1.0% 1.1% 0.9%Canada 2.7% 3.1% 2.0% 1.2% 1.2% 1.0%UK 2.2% 2.4% 1.7% 0.3% 0.2% 0.7%Germany 1.9% 2.4% 1.1% 0.1% 0.2% -0.04%France 2.1% 2.6% 1.1% 0.5% 0.5% 0.6%Italy 1.7% 2.6% -0.002% 0.3% 0.2% 0.4%Japan 2.5% 3.4% 0.8% 0.4% 0.6% 0.02%

Source:EDMC,2018.Originalsource:WorldDevelopmentIndicators,WorldBank.

Note:UsedUSDwithexchangerateof2010averageforGDP.

Proposal 2: It is essential to establish a scheme that quantitatively predictsfuture technological innovationandprovidesnecessary information, suchastimingandscale,ofinfrastructureinvestmentforlow-carbonsociety.

Rationale

l Capitalinvestmentisimportantfortechnologydevelopmentanddiffusion,andtheevolutionoftechnologyinnovationisdecideddependingonhowtojudgetimingandscaleoftheinvestment.Inparticular,itisimportanttopayattentiontothosethatdonotpenetratethemarketsufficientlyyetbutneedmassivediffusionatanearlystageinthefuture,suchaslowcarbontechnology. The data of CO2 emissions, energy consumption, andenvironmental performance of new technology cannot be derived bysimply extending information on the existing technologies and thetechnology-introductioneffectstovalue-chainisunclearinsuchcase.Itisdifficult to make investment decisions by learning curves. In LCS,quantitativetechnologyevaluationmethod,ECCC(EngineeringbasedCO2emissionandCostClarificationmethodology)hasbeendeveloped.Thisisadetailedstudyofthemanufacturingprocessoftechnologyfromheatandmaterialbalance,buildingadatabase,andmakingitpossibletocalculatecost, energy consumption and CO2 emissions for manufacturing of lowcarbon technology (Fig. 4). This clarifies the cost, CO2 emissions andmaterialkindandamountneededtointroducingindividualtechnologiesintosocietyaswellasintegratingvarioustechnologiesincombination.

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l Figure5showsthetransitionofthepredictedcostvalueaccordingtoECCCmethod(marker’○’inthefigure)andtheactualprice(‘×’inthefigure)ofthepastsolarcells.Asof1991,whentheannualproductionof10MWto100GWforsolarcellmanufacturingsystemwasevaluated,andthecostwasabout$4perW,anditwascalculatedtobecomelessthan1USD/W,byfuturetechnology,.Infact,thecurrentpriceisalmostthesameasthepreviously estimated price. According to latest LCS forecasts based ontechnologyassessment, itwillbe less than40cents in2030. .Thus, thequantitative technology evaluation by ECCC method, can predict thetechnologycostbeforethetechnologypenetratesintherealworld,andcanprovide important information (timing, size) for capital investmentjudgment.

l Table2showstheestimationofthepowergenerationcostinthecaseatdifferent technological levels using the ECCC method for various lowcarbontechnologiesinJapan(LCS,2017).Asthetechnicallevelrises,thepower generation cost decreases. For example, in the case of a 80%reduction in CO2 emissions, promoting the technical level of solar andstoragebatterysystemsfromthe2020leveltothe2030levelisequivalenttoa1-2trillionreduction inannualpowergenerationcost. Themarketpotential after future technological innovation can be calculatedquantitatively,andthecombinationofmultipletechnologiescanalsoshowthewaytoalowcarbonsocietyandasustainablesociety.


l Bymakingcapitalinvestmentandmanagementdecisionstodisseminatetechnology based on quantitative technological evaluation, which canclarifyCO2emissions,amountofmaterial/resourcesused,andeconomicsof current and future technology, it is possible to propose win-winmeasuresleadingtoearlylowcarbonreductionandeconomicgrowth.

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Figure4PlatformforDesign(PFD)&Evaluation:AutomatedprocessdesignsupportsystemdevelopedbyLCS.

Figure5CalculatedcostbyLCSmethodologyandactualpriceofPVmoduleandsystem(100JPY=1USD).

Source:KomiyamaandYamada,2018.

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Table2.Renewableenergygenerationcostcalculatedfromdifferenttechnologylevel,Japan

Facility

utilizationrate

Powergenerationcost[JPY/kWh]（CalculationbasedonLCStech.scenario）

Presenttech.(2015yr.level)

Advancedtech.(2020yr.level)

Tech.withinnovation(2030yr.level)

Solar 11% 16.0 9.5 5.7Wind 23% 14.1 10.2 8.4Geothermal 70% 12.5 12.5 8.0Geothermal（Hotdryrock） 70% - - 6.9Biomass 70% 33.6 10.9 10.9Hydro 54% 10.8 10.8 10.8Battery - 50[JPY/Wh] 10[JPY/Wh] 6[JPY/Wh]Source:Inoue,2017

Proposal3:Itisnecessarytodevelopanddisseminatetechnologyaccordingtothe development conditions of each country and region. For that purpose,quantitativetechnologyevaluationshouldbeutilizedforinvestmentjudgment.

Rationale

l Theintroductionofalargeamountofrenewableenergyinafuturelow-carbonsocietycreatesanewenergygeography.Asanexampletoclarifythis,herewetakeacaseoftheMiddleEastregion.Tables3and4showsthepowersupplystructureandcostofJapanandUAEfor80%reductionofCO2in2050,estimatedbyLCSwithcostminimizationmodel.ItshowsthatUAEcanachievean80%reductionathalfcostofJapan’scase,duetothe amount of available renewable resources, especially solar energy.Moreover, it is assumed that the power demandwill increase from thepresent 100TWh to 700TWh. This amount of power is, for example, anamount that can meet the production of more than half of the worlddemand for producing aluminum. Thus, it is important to consideroptimizationofglobalenergyusebasedonquantitativemethodology.

l Thesizeofthemarketchangeswiththetimesduetothechangeofsocial

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system,anditisveryimportanttoconsideritproperly.Dependingonthedegree of development, the necessary infrastructure technology isdifferent (Figure 6). Especially after basic infrastructure developmentwhichisessentialtodevelopingcountrieshasprogressed,itisshiftedtoinfrastructure investmentthattakes intoconsiderationtheenvironmentandsustainability.Itdependsonhowleapfroggingispossibleduringthistransition.Also,asdevelopmentprogresses,itbecomestimetointroduceadvanced systems in suchareaof informationandmedical care.At thisstage,aimingforhigheraddedvalueeconomicactivity,wemustleadtothedevelopmentoflowCO2/GDP.


l Inordertoclarifytheinvestmentdestinationoflow-carbontechnology,itisnecessarytoconsiderthecostinformationbyconsideringtheregionalenergy situation, natural environment, etc. in a quantitative technologymodel.

l Making judgments for investment abroad based on reliablemarket sizeforecastsbydetailed technicalevaluations rather thanbasedoncurrentmarket size only, will provide sustainable scheme for donor developedcountriesbeyondsimpleaidingsystem.

l Asdevelopmentprogresses, appropriate intergovernmental cooperationandassistanceshouldbepromoted,andahighlyvalue-addedsocietywillbeformedtoreduceCO2emissionspereconomicactivity.

Table3.PowerStructureandCostinJapanfor80%and100%reductionofCO2in2050

Elec.demand(TWh) 800 1,000

Gen

erationPo

wer

（TWｈ）

Nuclear 0 0Hydro 130 130Coal 24 4LNG 257 308Solar 441 525Wind 2 0Geothermal 12 12

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Geothermal（Hotdryrock） 0 100Biomass 27 29Total 894 1,108

Hydrogen(TWh) 0 0StorageBattery（GWh） 647 790GenerationCost（JPY/kWh） 10.7 10.0

Note:inertiaregulationis50%.EstimatedbyLCS

Table4.PowerStructureandCostinUAEfor80%reductionofCO2in2015and2050

2015 2050Elec.demand(TWh) 100 400 700

Gen

erationPo

wer(TWh)

Nuclear 0 100 175Hydro 0 0 0Coal 0 0 0LNG 109 22 22Oil,Other 1 0 0Solar 0 298 614Wind 0 6 6Total 110 426 817

Hydrogen(TWh) - 0 0StorageBattery（GWh） 0 200 500GenerationCost（JPY/kWh） 6.3 5.2 5.4CO2emission（Mt-CO2/y） 56 11 11

Note:inertiaregulationis25%.EstimatedbyLCS

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Figure6Degreeofdevelopmentandnecessarytechnology,timingSource:LCS

Proposal4:Fromviewpointsofenvironment,resourceandenergyefficiency,further improvement and replacement of industries on a global scale isnecessaryinthefuture,andascenariothattakesintoaccounttheplansforsuchproperandeffectiveinternationalspecializationisindispensable.

Rationale

l Inthefuturesociety,majorreformshavealreadybeenforeseen,suchasdecarbonizationofenergyandmassiveincreaseinmaterialdemandduetopopulationandeconomicgrowth.TheIPCCreportedthatlow-carbonorzero-carbon energybecomes from three to four times of 2010 levels in2050 at the 450 ppm scenario. In addition, large-scale use of carboncaptureandstorage(CCS)andbio-energyCCS(BECCS)areassumed.Thedemandformaterialsandproductsintheworldhasalsobeenrisinginthelast40years(Figure7),andwill increase in the future, considering thefuturedevelopmentoftheworld,whichwillalsoincreaseGHGemissions.Insucha largelychangingsociety, it is important toconsider the futureindustrial structure, international cooperation and specialization of

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industry for optimal production of products and materials. The effortsinclude energy efficiency, carbon efficiency, material efficiencyimprovementatthemanufacturingstage,andserviceutilizationefficiencyattheserviceutilizationstage.

l Fig. 7 shows the correlation between GDP per capita (degree ofdevelopment) and annual net domestic demand per capita of steel (=apparent consumption - indirect export + indirect import) and socialstock.Thehigherdegreeofdevelopment,thehighernetdomesticdemand(blue)andaccumulatedamount(orange). Indevelopedcountries, thereare sufficient stocks and many countries have stabilized net domesticdemand.Incontrast,developingcountriestendtohavelowstocksbuthighnet domestic demand (blue above orange). The further development ofdevelopingcountrieswillresultthatsteeldemandcontinuestoincrease.Forexample, in2100, theworldpopulationwill increase to11.2billionpeople according toUN estimate. Assuming that theworld's average ofsteelstockpercapitaisatthecurrentlevelofdevelopedcountries(15t/capita), society will need 136 billion tons of new steel by 2100. Thisrequires virgin iron instead of scrap iron. (This corresponds to anadditionalemissionsofabout190billiontonsofCO2).Itdependsonhowclean this amount of new iron can be produced in the futurewith lowcarbon technology. It is clear that further efforts for global technicalcooperationandlowcarbonizationareimportant.


l Thefutureindustrialstructurewillchange.Itisimportanttolookatfutureindustrial structures from the long-term social image that takes intoconsiderationprogressof innovativetechnologiessuchasITandAIandstructuralchangeofenergysupplyanddemand,populationandlabor.Weshould identify thebasicmaterialmanufacturing industriesrequired forsocialinfrastructureandnewlow-carbonindustriestobepromotedthatcanproducehighaddedvalue.

l Inordertoreducecarbon,resources,materialsandproductsusedontheeartharehandledbyinternationalcooperationandinternationaldivisionof labor. Establish a framework of international partnership for that

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purpose.

Figure7WorldMaterialsandProductsTrendSouce:IPCC2014

Figure8Correlationbetweendegreeofdevelopmentandnetdomesticdemandandstockofsteel

Souce:Tanaka,2019

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Proposal5:Showingrelationshipbetweenresultsofquantitative technologyscenariosandevaluationmethodsofindustrialstructurechangeisafootholdforcreatingnewindustrieswithhigheconomicbenefit..

Rationale

l Themodelusingtheinput-outputtablesofarhasnotclarifiedthespillovereffect when new technology is introduced into society or society istransformed. Therefore, LCS has developed a new input-output tablemodelthatenablesspilloverassessmentusingECCC.EconomicimpactandtotalCO2emissionswhenusingzerocarbonpowersourceareshowninTable 5 using the new assessment model based on input-output tabledevelopedbyLCS (Figure9) (Yamada, 2019 ). It is assumed that otherenergyuseisthesameasthecurrentsituation,sodecarbonizingthepowersupplywillreduceCO2emissionsonlyto63%.Forfurtherreduction,itisnecessary to cover fossil fuel utilization currently consumedas thermalenergywithdecarbonizingpowerand to reduce carbonemissions fromindustrialprocesses.

l Not only decarbonization of power supply, but also social change isimportant. For example, by promoting tourism, advanced health care,applicationofelectricvehicles,enhancingeducationandcommunication,high functional steel use and energy saving at residential and industrysectors(*),CO2willbereducedto43%andCO2/GDPwillbereducedto0.96g-CO2/JPY.


l Effortstodecarbonizationshouldbediscussedintheoverallsocialimage,usingamodelthatcanassesswhatkindofspillovereffectsareexistinginthewhole industry.Thismakes itpossible toconsider theproposalofanewsocialsystemanditseconomy-wideimpact.

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Figure9ModelstructureofLCSnewInput-Outputmodel.

Table5GDPandCO2emissionswithzero-carbonpowerstructure,usingnewLCSInput-Outputmodel

Unit 2011Decarbonizedpowerstructure

Decarbonizedpowerstructureandnewsocial

systems(*)GDP TrillionJPY 489 493 563CO2emissions Mt-CO2/yr. 1254 794 543CO2/GDP g-CO2/JPY 2.56 1.61 0.96

Note:Electricitydemandis992TWh/Yr.Source:Yamada,2019

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Promotion of Constructing Zero Carbon Society ... · society. It is important to consider the back-casting scenario of how to achieve it. In order to realize the zero carbon society,

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