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Greenhouse Gas Marginal Abatement Cost Curve Development & Macroeconomic Foundational Modeling for Oregon

Phase One: Supporting Development of the Governor’s 10-Year Energy Action Plan

In support of the Governor’s 10-Year Energy Action Plan the Oregon Department of Energy contracted in 2012, after a competitive bid process, with the Center for Climate Strategies (CCS) to conduct foundational analysis and modeling for a suite of energy and greenhouse gas reduction measures.  The project had two major objectives.

  • To produce marginal abatement cost curves (MACCs) that show the greenhouse gas emissions abatement potential relative to the cost of that abatement over a range of emission reduction measures.  Multiple cost curves were produced representing differing assumptions about levels of commitment and action toward greenhouse gas abatement by external drivers, such as federal policy and technological progress, for two points in the future – the 10-Year Energy Action Plan horizon of 2022 and an end point of 2035.  Over 200 emission reduction measures were analyzed and included in the MACCs.
  • To complete foundational macroeconomic modeling using the REMI PI+ model.  Forecasts were done for the Renewable Portfolio Standard in its current form and two “least cost” forecasts of maintaining a trajectory to achieve Oregon’s greenhouse gas reduction goals by using different MACCs and assuming that the emission reduction measures chosen are cumulatively implemented, from most cost-effective to least, so that the state remains on track to meeting Oregon’s greenhouse gas emission reduction goals. 

The cost curves provide a means of weighing emission reduction measures against each other across sectors to compare their potential impact on greenhouse gas reduction with their cost effectiveness.  This comparison is more difficult from a state policy perspective, because external forces (particularly federal action) may drive reductions regardless of what the state does.   Thus an important component of this project was to provide different cost curves so that emission reduction measures could be understood in the context of different potential futures – in this case one future where little is done at the federal level (low effort) and one where a moderate amount of effort is made at the federal level.  A third future is considered, one in which both external action (e.g., federal policy) and state action are significant, but moderate, and taken together result in more greenhouse gas abatement than either alone.  This vision of a shared commitment between Oregon and the federal government is assumed to be the most likely future and receives the most attention in the project. 

The project was funded by federal ARRA (stimulus) money and, for that reason, had an extremely short timeline of about three months, with a non-extendable deadline at the end of July 2012.  When the final report from the contractor was released in early October 2012, the department asked for technical comments to ensure that any data gaps or other technical issues were identified.   In addition, a discussion webinar was held to provide greater understanding of the project context and to receive additional feedback from interested parties. 

Important Points to Remember About the Final Report

  • The report was not an economic analysis of the Governor’s 10-Year Energy Action Plan.  This project preceded the release of the draft Plan by several months.
  • The report was not a comprehensive cost-benefit analysis of the emission reduction measures.  The focus is on greenhouse gas reductions.  A least-cost approach does not necessarily maximize other benefits the state may be interested in pursuing, such as economic return, air quality, employment, health, and energy security. 
  • This work did not reinvent the wheel.  Existing greenhouse gas emissions analysis was used where possible.

Download the full report here:
10-Year Energy Action Plan Foundational Modeling Report(5MB)

Download Part 1 (Main Report) here:
10-Year Energy Action Plan Foundational Modeling Main Report(1.8 MB)

Download Part 2 (Appendices) here:
 10-Year Energy Action Plan Foundational Modeling Report Appendices(3.2MB) 

 

Discussion Webinar Presentation & Technical Comments from October 2012:

Oregon Greenhouse Gas Marginal Abatement Cost Curve Development Discussion Webinar Presentation (PDF)

GhGMACC Development Technical Comments [PDF]

Oregon GhGMACC Consolidated Response to Technical Comments [PDF]

 

Phase Two: Addressing Stakeholder Concerns and Improving the Original Project

In order to address stakeholder concerns and suggestions from the original project (as noted in the technical comments), and to generally improve the analytical rigor and robustness of the MACCs, the department reengaged with contractors to improve the MACCs in the latter half of 2013.  With the limited funds available the primary goals of this phase of the project were as follows:

  1. To better integrate the power supply and demand measures in order to reduce “double counting” where emission reductions were being credited to both energy efficiency and power generation measures, making the measures more accurate. 
  2. To better align the power generation measures with the three levels of “effort and commitment” in the original project so as to create more realistic scenarios.
  3. To provide a means of allowing easier sensitivity analysis of key power measures.
  4. To fill key gaps in the original transportation analysis related to vehicle technologies.
  5. To generally improve and update the transportation analysis with new modeling results.

Two contractors were engaged.  The contractor for the original project (CCS) was chosen to improve upon the power supply and energy-efficiency measures. A webinar was held with stakeholders to receive input and suggestions for improving these measures. The key result from this work was a new integration tool that provides new scenario-specific results for key power supply and demand-side measures, as well as an easy way to change key assumptions behind those measures and conduct sensitivity analysis. Cambridge Systematics was chosen to redo, expand, and improve upon the original project’s transportation measures with a special emphasis on ensuring consistency with the Oregon Statewide Transportation Strategy, which they also were the primary contractor for.  Resulting from this work was a suite of new or modified transportation measures that serve as a direct replacement for the original set of transportation measures.  The work is summarized in the following:

Summary memo on changes to transportation MACC component

Technical memo on creation of new power supply & demand side integration tool

Webinar presentation on approaches to updating power supply & demand side measures

 

Combined Results:  Foundational Data for Stakeholders and Interested Parties

The net result of the two phases of this project are a set of open-source spreadsheets and spreadsheet tools that allow stakeholders and interested parties to delve into these data, conduct sensitivity analysis, modify the core assumptions as deemed appropriate, and contribute to an ongoing process to develop greenhouse gas marginal abatement cost curves that satisfy the concerns of a broad array of interested parties and that can inform climate and energy policy in Oregon for years to come. 

Keep in mind that a MACC analysis such as this is not a comprehensive cost-benefit analysis of the emission reduction measures.  The focus is on greenhouse gas reductions.  A least-cost approach does not necessarily maximize other benefits the state may be interested in pursuing, such as economic return, air quality, employment, health, and energy security.  Also keep in mind that the underlying analysis must by necessity rely on a number of simplifying assumptions and related modeling.  For example, the RPS proxy used in the scenario analysis is a simple least-cost model that can’t capture all the complexities of the “real world” RPS policy. Most importantly, a MACC analysis should be viewed as a starting point for thinking about how different policies relate to each other from a simplified cost-effectiveness view point.  Any serious consideration of the emission reduction measures presented in this type of analysis requires much more detailed analysis and modeling. In addition, many of the emission reduction measures are fundamentally interrelated (e.g., transit and land use).  So viewing their cost effectiveness separately in this type of analysis may not provide the full policy picture.

Power Supply and Demand-Side/Industrial Measures

Integration Tool (with sensitivity analysis function)

Power Supply Measures (full energy cycle emissions)

Power Supply Measures (direct emissions)

Demand-Side & Industrial Measures (Residential/Commercial/Industrial)

Transportation Measures

Updated Transportation Measures (replaces those from original project)

Vehicle Technology & Fuels Measures Detail

Background Data on Vehicle & Fuels Measures

Transit Expansion Measures (see summary memo regarding minor tweaks)

Freight Measures (see summary memo regarding minor tweaks)

Agriculture Measures

Forestry Measures

Waste Measures

Common Data Worksheet from Original Project