Lecture 2- Emission Reduction and Taxation

8/11/2019 Lecture 2- Emission Reduction and Taxation

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KXGM 6302ENERGY EFFICIENCY

Chapter 2:

Emission Reduction

and Taxation



Introduction

• Rising concentrations of greenhouse gases including carbon

dioxide, methane, nitrous oxide (NOx) and sulfur oxide (SOx)

has increased the average earth surface temperature over

time. This has given rise to climate change phenomena.

• Carbon dioxide is one of the main greenhouse gases (GHG)

that is widely blamed for climate change.

• Carbon dioxide (CO2) increase the atmosphere is primarilyattributed to fossil fuel burning.



Introduction

• Among the South East Asian countries, Malaysia is the highest

emitter of CO2 .

• Total carbon dioxide emissions has increased by 221% from

the year 1990 – 2004 in Malaysia.

• In view of the rapid growth in power generation capacity and

the corresponding rise in global CO2 emission

• There is a need for the authority to plan the electricity

generation capacity expansion to meet the electricity demandas well as to achieve an overall reduction in CO2 emissions.



Emission reduction

Change the energy sources

• Hydropower is power derived from the energy of falling waterand running water, which may be utilized for useful purposes.

• Wind energy is the energy from a wind turbine device thatconverts kinetic energy from the wind.

• Solar energy is radiant light and heat from the sun and utilizedusing a range of ever-evolving technologies such as solarheating, solar photovoltaic, solar thermal electricity, solararchitecture and artificial photosynthesis.

• Biomass energy is the energy derived from biological material,

living, or recently living organisms. It also from plants or plant-derived materials.

• Geothermal energy is thermal energy generated and stored inthe Earth. Thermal energy is the energy that determines thetemperature of matter.



Kyoto Protocol

• The United Nations Framework Convention on Climate Change

(UNFCC) has developed the Kyoto Protocol in 1998 to stabilize

the GHG emissions in the atmosphere by having industrialized

countries commit to reduce their GHG emissions.

• The legal binding accord was signed by 195 countries to

reduce GHG emissions.

• Many developed countries have agreed to legally bindinglimitations/reductions in their emissions of greenhouse gases in

two commitments periods.



Kyoto Protocol

Kyoto Protocol participation map(commitment period: 2013 –20)



Kyoto Protocol

• The first commitment period applies to emissions between

2008-2012, and the second commitment period applies to

emissions between 2013-2020

• The 2008-2012 commitments (% of base year) reduction

of CO2 based on 1990 emission levels.



Case study-

Emission reduction and taxation for

electricity



Introduction

• The electricity generation is one of the main contributors for

emission.

• Due to fossil fuel prices increase and environmental

consciousness, this has forced many countries to change thetype of energy sources to generate electricity.

• Another policy is introducing CO2 taxation for electricity

generation company to replant trees.

• This case study presented an example of proposed policy that

changing type of energy sources and with apply the taxation

scenario which will help to reduce emission.



Survey data

Year Total (GWh)

0 2175

10 7912

20 19 469

21 21 442

27 49 080

30 52 300

40 105 762

50 195 253

Table 1

Electricity generation data

The data used for this study are the electricity consumption data,percentage fuel type for electricity generation data and fossil fuel

CO2 emission for a unit electricity generation data. All of the survey

data are shown in Tables 1, 2, 3 and 4



Survey data

Table 2Percentage of electricity generation based on fuel types

In the proposed policy, the electricity generation company haschanged fuel use gradually from 70% of gas, 15% of coal, 10% of

hydro, and 5% petroleum in year the starting policy to 40% of gas,

30% hydro, 29% of coal, and only 1% of petroleum in the final year.

Fuels Year 30th Year 40th Year 50th

BAU NP

BAU

NP

BAU

NP

Coal

15%

15%

15%

18%

15%

29%

Petroleum

5%

5%

5%

2%

5%

1%

Natural Gas

70%

70%

70%

50%

70%

40%

Hydro 10% 10% 10% 30% 10% 30%



Survey data

Table 3Fossil fuel CO2 emission for a unit electricity generation

Fuels CO2 per kWh

(kg)

Coal 1.18

Petroleum 0.85

Natural Gas 0.53

Hydro

0.00

Other

0.00



Survey data

Table 4CO2 taxation, cost of replanting and survival factor of trees

Description Values

CO2 taxation RM 57 /ton

Cost of replanting RM 3.04 /tree

Survival factor 60%



Methodology

• None of the existing policy models captures the full effects to

climate change strategies. For this reason, this study uses the

scenario approach for the analysis.

• The scenarios are tools for ordering one’s perceptions aboutalternative future environments and can help to foresee the

decisions.

• No matter how things might actually turn out, both the analystand the policy maker will have a scenario that resembles a

given future and that will have helped us think through both the

opportunities and the consequences of that future.



Methodology

• Initially, the electricity pattern and percentage type of fuel use

for electricity generation should be identified. Some of the data

are already available but others have to be calculated with

respect to the electricity consumption trend.

• The method used to estimate the rest of the calculation data is

polynomial curve fitting.

• Mathematically, a polynomial of order k in x is expressed in thefollowing form:





Methodology

• Number of trees replanting is a function of CO2 production,

taxation and the survival factor of the trees divided the cost of a

tree replanting which can be calculated by the following

equation:



Data Analysis

• Based on the data shown in Table 1, using Eq. (1), the total

energy consumption in a county from the starting to end of the

policy can be predicted by the following equation:

• Based on data shown in Table 2, using Eq. (1), the fuel mix of

electricity generation from the year 30th to 50th can be predicted. The

percentage of coal used for electricity generation can be predicted by

the following equation:



Data Analysis

• The percentage of petroleum used for electricity generation can be

predicted by the following equation:

• The percentage of gas uses of electricity generation can be predicted

by the following equation:

• The percentage of hydropower uses of electricity generation can be

predicted by the following equation:



Data Analysis

• The predicted results data based on Equations (3) - (7)

from the year 30 to 50 are tabulated in Table 4

Table 4Predicted electricity consumption andpercentage fuel mix of electricitygeneration

Year

Total(GWh)

Coal(%)

Petroleum

(%)

Gas(%)

Hydro(%)

30

52300

15.00

5.00

70.00

10.00

31

61151

14.94

4.61

67.55

12.90

32

66159

14.96

4.24

65.20

15.60

33

71368

15.06

3.89

62.95

18.10

34

76779

15.24

3.56

60.80

20.40

35 82390 15.50 3.25 58.75 22.50

36 88203 15.84 2.96 56.80 24.40

37

94217

16.26

2.69

54.95

26.10

38

100433

16.76

2.44

53.20

27.60

39 106850 17.34 2.21 51.55 28.90

40

113468

18.00

2.00

50.00

30.00

41

120287

18.74

1.81

48.55

30.90

42

127308

19.56

1.64

47.20

31.60

43

134530

20.46

1.49

45.95

32.10

44 141954 21.44 1.36 44.80 32.40

45 149578 22.50 1.25 43.75 32.50

46

157404

23.64

1.16

42.80

32.40

47

165431

24.86

1.09

41.95

32.10

48

173660

26.16

1.04

41.20

31.60

49

182090

27.54

1.01

40.55

30.90

50 190721 29.00 1.00 40.00 30.00



Fig 1.1. Predicted electricity consumption and percentage fuel mix forelectricity generation

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

Hydro

Gas

Petro

Coal



Data Analysis

• The fuel percentage trend will be used to predict future

potential CO2 reduction.

• The potential CO2 savings is computed from the carbon

burden of each fuel. CO2 produced from fuel burden for

generating electricity is calculated in term kg/kWh

electricity generation.





Results (change of energy sources)

Year BAU(Ton)

NP(Ton)

CO2 Reduction(Ton)

31

36 109 666

35 069 609

1 040 056

32 39 066 890 36 925 190 2 141 699

33 42 142 804 38 853 310 3 289 494

34 45 338 000 40 871 919 4 466 081

35

48 651 295

42 999 341

5 651 954

36 52 083 872 45 258 018 6 825 854

37

55 635 139

47 670 787

7 964 351

38 59 305 687 50 263 503 9 042 184

39 63 094 925 53 062 992 10 031 933

40 67 002 854 56 098 579 10 904 275

41 71 029 474 59 401 570 11 627 904

42

75 175 374

63 005 748

12 169 626

43 79 439 965 66 945 895 12 494 070

44 83 823 837 71 259 772 12 564 065

45 88 325 809 75 985 624 12 340 185

46 92 947 062 81 165 687 11 781 375

47

97 687 006

86 842 673

10 844 333

48 102 546 230 93 062 310 9 483 920

49

107 524 145

99 871 266

7 652 879 50 112 620 751 107 318 707 5 302 044

Table 5 Potential CO2 reduction by fuel substitution for electricity generation




Fig. 3.Potential CO2 reduction due to the changes of energy sources for

electricity generation

0

2000000

4000000

6000000

8000000

10000000

12000000

14000000

31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50

C a r b o n D i o x i d e R e d u c t i o n ( T o n

)




• The results compare the potential CO2 production for Business as

Usual (BAU) situation to the New Policy (NP) sources of fuel used is

shown

0

20000000

40000000

60000000

80000000

100000000

120000000

30 32 34 36 38 40 42 44 46 48 50

C a r b o n D i o

x i d e P r o d u c t i o n ( T o n )

BAU NP



Results (taxation policy)

• The carbon trees replanting is a function of CO2 emitted

by fossil fuel from every unit of electricity generation.

• The potential trees replanting is a function of CO2

production in the particular year.

• The CO2 production, potential CO2 taxation and trees

replanting are tabulated in Table 6 and shown in Fig. 4 &

5.



Year

CO2 Production(Ton)

Tax(MR$)

TreesReplanting

33 38 853 310 2 214 638 678 437 099 739

34 40 871 919 2 329 699 362 459 809 085

35 42 999 341 2 450 962 437 483 742 586

36 45 258 018

2 579 707 011

509 152 700

37

47 670 787

2 717 234 862

536 296 354 38

50 263 503 2 865 019 651 565 464 405

39 53 062 992 3 024 590 555 596 958 662

40 56 098 579

3 197 619 014

631 109 016

41 59 401 570 3 385 889 478 668 267 660

42 63 005 748 3 591 327 617 708 814 661

43 66 945 895

3 815 916 006

753 141 317

44

71 259 772

4 061 807 025

801 672 439

45 75 985 624 4 331 180 568 854 838 270

46 81 165 687 4 626 444 182 913 113 983

47 86 842 673 4 950 032 338 976 980 067

48 93 062 310 5 304 551 675 1 046 950 988

49 99 871 266 5 692 662 189 1 123 551 748

50

107 318 707

6 117 166 282

1 207 335 450

Table 6 Potential CO2 reduction by fuel substitution for electricitygeneration




0

10000000

20000000

30000000

40000000

50000000

60000000

70000000

80000000

90000000

100000000

110000000

120000000

3 4 5 6 7 8 9 1 0

1 1

1 2

1 3

1 4

1 5

1 6

1 7

1 8

1 9

2 0

C O

2 P r o d u c t i o n ( T o

n )

Fig 4. Predicted CO2 production from electricity generation




0

1,000,000,000

2,000,000,000

3,000,000,000

4,000,000,000

5,000,000,000

6,000,000,000

7,000,000,000

8,000,000,000

9,000,000,000

10,000,000,000

0

100,000,000

200,000,000

300,000,000

400,000,000

500,000,000

600,000,000

700,000,000

800,000,000

900,000,000

1,000,000,000

1,100,000,000

1,200,000,000

1,300,000,000

T a x a t i o n ( M R $ )

T r e e s r e p l a n t i n g )

Tree

Tax

Fig. 5: Potential CO2 taxation and trees replanting



Conclusion

• This study shows that fuel substitution for electricity generation

from fossil fuel to renewable fuel and taxation policy offers a

solution to the environment protection.

• The analysis found that the savings are quite large by fuel

switching and CO2 taxation for replanting tree .• In addition, it has also reduced other emission which is not

discussed in this study.

• CO2 taxation for tress replanting has been introduced in some

developed countries such as U.S. but relatively very limited in

developing countries have implement this strategy.

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Lecture 2- Emission Reduction and Taxation

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