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Low Carbon

The "Low Carbon" (LC) research line deals with the implications of the transition to a low carbon economy. The major source of carbon emissions is the production and consumption of energy, and a great deal of our effort is devoted on understanding how to reduce emissions without unduly affecting economic and social wellbeing, especially among most vulnerable people. 

Nuclear

This line has been very active over the past five years; contributing to many different areas. As an overview, our research covers the transition to a low carbon economy from the micro level (for example, the decision of a firm or consumer on whether or not to invest in energy efficiency) to the global level (such as the implications of different climate agreements). We analyse the economic implications of climate policies (including distributional impacts) and their impact on households, economic sectors and regions. The interrelations and interactions of climate policies with energy, economy, the environment, land use, trade and health policies are also explored, linking our work with the other research lines at BC3.

The methodologies applied are very diverse. Real option theory and models, for example, are used to analyze optimal investments by considering the existing uncertainty in the price of commodities. Energy-system models are used to better understand the implications of the transition to a low-carbon economy in some key sectors, such as power. Input-Output and CGE models are used to analyze the energy-economy-environment (E3) implications of policies that have economy-wide effects at regional, national and global levels. Additionally, we explore the microeconomic and distributional consequences of public policies using micro-simulation models. Finally, we also explore the interrelations between the economy and the climate system, using Integrated Assessment models (DICER and GCAM-BC3) to analyze different issues related to climate policy such as the implications of different climate agreements for the energy system and the optimal climate policy considering different estimations for damage functions. Other examples include the consequences of climate policies and scenarios in terms of costs, global temperature change and sea level rise. All these tools are in constant development, enabling us to quantitatively explore the full implications of a low-carbon transition and effectively support decision making processes.

These are some of the ongoing research topics:

  1. Optimal climate policy: In this area we explore the implications of an optimal global climate policy considering uncertainty in the damage from climate change and in mitigation costs. For this purpose, a systematic sensitivity analysis (Monte Carlo simulation) with a top-down Integrated Assessment model (the DICER model) is applied. Future steps will include the integration of stochastic variables into the model and the evaluation of the impact of unexpected climate-related events. Given that some degree of global warming is inevitable, the best combination of mitigation and adaptation strategies to reduce future damages is also being explored. Work on this topic is coordinated with the BC3 research line on Climate Policy.
  2. Cost-effective transition to a low-carbon economy: This topic explores cost-effective pathways for the transition to a low-carbon economy in order to achieve stabilization targets, such as the 2 degree target. The technical feasibility and economic implications of different economic growth, and convergence scenarios are being studied. In addition, different socio-economic pathways with bottom-up Integrated Assessment models such as POLES and GCAM-BC3 model are being investigated. This research area will be expanded in the future to assess how energy resource constraints, technology development and behavioral changes will impact low carbon strategies. Work to help understand the complementarity between low-carbon policies and policies for energy security and environment protection is also envisaged.
  3. Windmill
  4. Macro-economic and sectorial impacts of climate policies: In this area the implications of climate policies on the energy-economy-environment system are explored, as wells as implications of policies of all kinds (environment, trade, etc.) that have economy-wide scope; and, therefore, effect GHG emissions. Input-Output and CGE models at local, national and regional/global levels are used for many different purposes. For example, local implications of carbon leakage, the national-level effect of environmental fiscal reforms, and global impacts on jobs have been analyzed. Future work is expected to cover how loss of competitiveness and carbon leakage can be avoided if some countries do not have a price or any regulations on CO2, using, for example, carbon-embodied tariffs. This research will also focus on the complementarity between low-carbon policies and policies for energy security.
  5. Micro-economic and distributional impacts of climate policies: Research in this area focuses on the micro-economic and distributional implications of different climate instruments, such as taxes, subsidies and regulations. To date, some of the programmes set up by the Basque and Spanish governments to promote high energy-efficiency appliances, such as the RENOVE programme, have been assessed, along with various policies with special emphasis on the environmental effectiveness and the economic efficiency of the policy proposals. Concerning distributional implications, the regressivity of environmental and climate taxes have been compared. These analyses are highly relevant in increasing political and public acceptance of climate policies. Work on this topic is coordinated with the BC3 research line on Climate Policy.
  6. Optimal investment in low-carbon technologies with uncertainty: This area of work explores optimal investment in different technologies or projects when there is uncertainty in some of the variables, e.g. the price of oil, gas, CO2, etc. Some examples include optimal abandonment of coal-fired power plants, optimal investment in enhancing energy efficiency and, more recently, an assessment of two carbon capture and storage technologies.
  7. Analysis of the co-benefits of climate policies: An important consequence of reducing the use of fossil fuels is a reduction of emissions of pollutants, which benefits both public health and the environment. Quantification and communication of such benefits is important to motivate governments to adopt low-carbon technologies, as these alternatives are generally more expensive than carbon-intensive ones. In this area, the health effects of different technologies in the power sector have been analyzed. Work on this topic is coordinated with the BC3 research line on Health and Climate.
  8. Exploring the competition between energy and food: This area of work explores the relation between energy and climate policies and their implications for land use and food security. Key questions include how biofuel production and biofuel promotion policies can affect the competition between food and energy production and what the implications of those policies are in ecosystem service provision, such as REDD. This line focuses on issues such as changes in consumption patterns (“diets”). Work on this topic is co-ordinated with other research lines at BC3 on the Climate and Natural Environment and Health.
 

 

 



 
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