Low-CO 2 energy pathways and regional air pollution in Europe

Energy Policy 29 (2001) 871–884

Low-CO2 energy pathways and regional air pollution in Europe

Sanna Syria,b,*, Markus Amannb, Pantelis Caprosc, Leonidas Mantzosc, Janusz Cofalab,Zbigniew Klimontb

aFinnish Environment Institute, P.O. Box 140, FIN-00251 Helsinki, Finlandb International Institute for Applied Systems Analysis (IIASA), Schlossplatz 1, A-2361 Laxenburg, Austria

cNational Technical University of Athens, 42Patission Str., 106 82 Athens, Greece

Received 6 December 1999

Abstract

This paper compares three scenarios of energy demand in the European Union until 2010 and analyses their effects on carbonemissions as well as their impacts on the precursor emissions for acidification and ground-level ozone. The analysis links the results

of energy model PRIMES with the integrated environmental assessment model RAINS. Important synergies between climatechange policies and policies to control regional air pollution have been identified. Mitigation of acidification and ozone according tothe current EU strategy will be easier and cheaper if the Kyoto targets for the reduction of the emissions of greenhouse gases (GHG)

are to be met. In case when the Kyoto target needs to be achieved by individual EU member countries without trading in CO2

emission rights, the costs of controlling the pollutants contributing to acidification and ground-level ozone can be up to 10% lowerthan for the baseline scenario which does not assume any climate change policies. Although lower, the effects are also important if

trading in carbon emission rights is allowed. These cost savings compensate up to 20% of higher costs of energy supplies in the EUand associated with them welfare losses caused by the necessity to meet the carbon constraint. # 2001 Elsevier Science Ltd. Allrights reserved.

Keywords: CO2 emissions; Acidification; Ground-level ozone; Optimal emission control; Emission control costs

1. Introduction

In the past, emission control legislation used toaddress single sectors, single substances and/or singleenvironmental problems. For instance, in the EuropeanUnion (EU) various legislative acts prescribe emissionlimit values for individual categories of emission sourceslike road vehicles (EU, 1998c) or large combustionplants (EU, 1988). They also address single substances,like e.g., the Solvents Directive (EU, 1996), which coversthe emissions of non-methane volatile organic com-pounds (VOC). On a global level, the Kyoto protocol tothe Framework Convention on Climate Change setsemission targets for greenhouse gases (UN, 1997).Since the design of all these regulations is complex in

itself, side impacts of the proposed emission controlmeasures are often neglected. With increasingly strin-gent environmental ambition levels and progressing

consummation of the cheap control potentials, the cost-effectiveness of proposed strategies gains growingimportance. For achieving cost-effectiveness, emissionreductions need to be balanced across all sourcescontributing to a given environmental problem. Theyneed to be allocated among different countries andeconomic sectors, taking into account differences inenvironmental sensitivities and in emission control costs.A further aspect critical for achieving cost-effectivenessis the consideration of possible side effects of measures.Side effects may occur in relation to emissions of othersubstances from the same source. Many controltechnologies affect two or more pollutants simulta-neously. For instance, catalytic converters for carssimultaneously reduce emissions of nitrogen oxides(NOx) and volatile organic compounds (VOC). In othercases emissions have impacts on more than oneenvironmental problem. For example, nitrogen oxidescontribute to acidification, but are also important ozoneprecursors. Side effects of controlling a certain problemcan also be negative. For instance, if NOx emissions arereduced to control acidification or eutrophication in the

*Corresponding author. Tel.: +358-9-4030-0303; fax: +358-9-4030-

0390.

E-mail address: [email protected] (S. Syri).

0301-4215/01/$ - see front matter # 2001 Elsevier Science Ltd. All rights reserved.

PII: S 0 3 0 1 - 4 2 1 5 ( 0 1 ) 0 0 0 2 2 - 2

Benelux countries, it may result in a worsening of ozoneproblem due to the non-linear behaviour of ozoneformation (Heyes et al., 1997).Recently developed integrated assessment methods

and models for analysis of regional air pollution control(compare Amann et al., 1999b) provide an importantstep towards a comprehensive assessment of interactionsamong individual pollutants. These methods adopt theso-called ‘multi-pollutant/multi-effect’ approach thatsearches for cost-optimal and balanced reduction ofpollutants contributing to acidification and eutrophica-tion of ecosystems and to the formation of ground-levelozone. Integrated assessment methods have been ap-plied for the preparation of the National EmissionCeilings (NEC) Directive proposed by the EuropeanCommission (COM, 1999), and in the context of therevision of the UN/ECE protocols to the Convention onlong-range transboundary air pollution (UN/ECE,1999). While this multi-pollutant/multi-effect approachhas improved the comprehensiveness of air pollutioncontrol strategies at a continental scale, it still falls shortin capturing the global and long-term scales related tothe emissions of gases contributing to global warming.This paper illustrates potential synergies of global andregional emission control strategies in the energy sectorby demonstrating the effects of low-CO2 energy scenar-ios on regional air pollution. Section 2 describes themethodology and the models used in the analysis.Section 3 presents the main characteristics of energyscenarios used in the study. In addition to the ‘Baseline’scenario, which assumes the future development ofenergy systems in the EU-member countries withouttaking into consideration the reduction in the emissionsof CO2, two ‘post-Kyoto’ scenarios have been devel-oped. The first assumes meeting the Kyoto targets forcarbon emissions by each individual EU membercountry without the possibility of trading of emissionrights (the ‘post-Kyoto no trade’ case). The secondscenario (the ‘full trade’ case) assumes that the target forthe EU can be achieved with trading within the EU andwith Annex B countries. The impacts of these energyscenarios on emissions of pollutants contributing toacidification and ozone are discussed in Section 4. Thissection also compares costs of achieving the environ-mental targets resulting from the EU acidification andozone strategies with the costs for achieving the carbonconstraint. Section 5 interprets the results and drawsconclusions.

2. Methodology

The PRIMES model was used to develop scenarios offuture energy supply and demand in the Member Statesof the European Union, simulating (a) the ‘business asusual’ expectations of European energy policies, (b) full

compliance with the obligations of the Kyoto Protocolwithout emission trading and (c) compliance with theKyoto Protocol but allowing for trading of greenhousegas emissions within the EU and with Annex Bcountries. These scenarios were then input to theRegional Air Pollution Information and Simulation(RAINS) model, which explored the most cost-efficientchoice of measures to reach the environmental targetsfor acidification and ground-level ozone established bythe European Union.

2.1. The PRIMES model

PRIMES is a modelling system that simulates amarket equilibrium solution for energy supply anddemand in the EU member states (Capros, 1998a).1

The model determines the equilibrium by finding theprices of each energy form such that the quantity thatproducers find best to supply matches the quantityconsumers wish to use. The equilibrium is static (withineach time period) but repeated in a time-forward path,under dynamic relationships. The model includes adetailed description of energy and pollution abatementtechnologies. The system reflects considerations aboutmarket economics, industry structure, energy andenvironmental policies and regulations. These areconceived so as to influence market behaviour of energysystem agents. The modular structure of PRIMESreflects a distribution of decision making among agentsthat decide about their supply and demand, and prices.PRIMES is a general purpose model developed for

forecasting, scenario construction and policy impactanalysis. It covers a medium- to long-term horizon. It ismodular and allows either for a unified model use or forpartial use of modules to support specific energy studies,regarding environment, pricing, taxation, regulation,market liberalisation and technology progress. ThePRIMES model has been designed to support technol-ogy assessment at the energy system level. Thedynamics, as simulated by the model, influence thepenetration of new technologies. Several parameters andformulations are built-in to represent non-economicfactors that affect the rate of penetration of newtechnologies. For example, modules include learningby doing curves, parameters that represent subjectiveperception of technology costs as seen by consumers,standards, etc. These can be used to represent marketfailures or inertia that may deprive the system from cost-effective technology solutions.The electricity and steam sub-model of PRIMES

simulates the behaviour of agents that use fuels and

1PRIMES is a result of collaborative research under a series of

projects supported by the programme Joule of directorate General for

Research of the European Commission. The model was developed by

the National Technical University of Athens.

S. Syri et al. / Energy Policy 29 (2001) 871–884872

other energy forms to produce, transmit and distributeelectricity, industrial steam and district heating. Thisbehaviour concerns the choice of equipment and the fuelmix to satisfy demand, the setting of selling prices andthe purchase of fuels from the energy markets. Afundamental assumption in PRIMES is that producersand consumers both respond to changes in prices.Factors determining the demand for and the supply ofeach fuel simulate the demand and/or supply behaviourof the agents. Through an iterative process, the modeldetermines the economic equilibrium for each fuelmarket. Price-driven equilibrium is considered in allenergy and environment markets. PRIMES was used inseveral studies of energy demand in the EU. The resultsof these studies as well as details of the methodology aredescribed in (Capros et al., 1999a–c; Capros, 1999).

2.2. The RAINS model

The Regional Air Pollution Information and Simula-tion (RAINS) model combines information on econom-ic and energy development, existing emission controlpotentials and costs, atmospheric dispersion character-istics and environmental sensitivities towards air pollu-tion (Amann et al., 1999b). The model covers allpollutants that are relevant for acidification, eutrophi-cation and formation of ground level ozone. Pollutantsincluded are sulphur dioxide (SO2), nitrogen oxides(NOx), ammonia (NH3), and non-methane volatileorganic compounds (VOC). A detailed description ofthe RAINS model (Fig. 1) as well as input data to themodel can be found on the Internet (http://www.iia-sa.ac.at/�rains).

As far as possible, the RAINS model relies oninternationally harmonised, verified and accepted data-bases. The European implementation of the RAINSmodel incorporates databases on energy consumptionfor 42 regions in Europe, distinguishing 21 categories offuel use in six economic sectors (Cofala et al., 2000). Thetime horizon extends from the year 1990 to the year2010. Emission estimates are based on the CORINAIRinventory of the European Environmental Agency(EEA, 2000). In the RAINS framework energy devel-opment is an exogenous input. Emission reductionscalculated by the model are assumed to be achievedexclusively by technical control options; any feedback ofemission controls on the level and the structure ofenergy consumption is neglected. Options and costs forcontrolling emissions of the various substances arerepresented in the model by reflecting the internationallydocumented characteristic technical and economicfeatures of the most important emission reductionoptions. Atmospheric dispersion processes over Europefor sulphur and nitrogen compounds as well as of VOCare modelled based on results of the European EMEPmodels for acidifying substances and for photo-oxi-dants. The sensitivities of ecosystems against acidifyingdeposition and ground-level ozone are assessed using thecritical loads concept (Nilsson and Grennfelt, 1988). TheRAINS model incorporates databases on critical loadsand critical levels compiled at the Coordination Centerfor Effects (CCE) at the National Institute for PublicHealth and Environmental Protection (RIVM) in theNetherlands.The model framework makes it possible to estimate,

for a given energy- and agricultural scenario, the costs

Fig. 1. Structure of the RAINS model.

S. Syri et al. / Energy Policy 29 (2001) 871–884 873

and environmental effects of user-specified emissioncontrol policies. Furthermore, a non-linear optimisationmode can be used to identify the cost-minimal combina-tion of emission controls meeting user-supplied airquality targets, taking into account regional differencesin emission control costs and atmospheric dispersioncharacteristics. The optimisation capability of RAINSenables developing multi-pollutant, multi-effect pollu-tion control strategies. One of those strategies guidedthe Commission’s proposal on the National EmissionCeilings Directive for the EU-15 (cf. Amann et al.,1999a).

2.3. Linkage of PRIMES and RAINS

This paper presents emission scenarios that werejointly derived from the PRIMES and RAINS models.For each Member State of the European Union nationalenergy scenarios developed by PRIMES were imple-mented in RAINS, and the optimisation algorithm ofRAINS was subsequently used to identify emissionlevels that meet the EU targets for acidification andozone. Thereby, the necessary abatement measures ineach country and economic sector were identified andtheir costs calculated.Although PRIMES includes its own databases and

functions that adjust energy costs in response to theenvironmental legislation in force, this feedback me-chanism was not employed for the calculations reportedin this paper. Potentially, such feedback mechanismscould change costs of emission controls in PRIMES,which would influence the optimal fuel mix.Using the GEM-E3 model (Capros et al., 1997) and

the results from RAINS, an earlier study showed thatmacroeconomic effects of acidification and ozonepolicies and their impacts on the structure of energysystems are limited, while CO2 control policies may havea strong effect on energy scenarios and thereby also onstrategies to control acidifying pollutants and ozoneprecursors (RIVM, 2000).

3. Energy scenarios addressing CO2 emissions

3.1. ‘Baseline’ scenario

The ‘baseline’ energy scenario, which was developedin close interaction with the European Commission (cf.Capros, 1998a), simulates the development of energysupply and demand within the next 20 years for the ‘pre-Kyoto’ energy policies of the EU Member States. Thescenario features the major trends of present energypolicy (liberalisation of electricity and gas markets,further penetration of mature low-cost gas-based powergeneration technologies, continued promotion of renew-able energy and stringent control of acidifying emissions

(SO2, NOx), in particular for large combustion plants.However, no measures for complying with the obliga-tions of the Kyoto Protocol are assumed.The scenario assumes a long-term economic growth of

the EU of about 2.5% per year (Table 1) with acontinuing sectoral shift from energy-intensive activitiestowards the service sector. For the energy supplyinfrastructure, the ‘baseline’ scenario extrapolates thedynamic trends of technological progress that improvethe efficiency of the energy system (at a rate of 1.1% peryear). Energy prices2 are assumed to gradually increasefrom the low levels of the late 1990s following a smoothascending path (Table 2), and no changes in energytaxation are assumed.As a result, the ‘baseline’ scenario projects an increase

in energy consumption of more than 18% between 1990and 2010 despite certain saturation effects in someMember States. Even without a concern about green-house gas emissions, consumption of solid fuelsdecreases in absolute as well as in relative terms,substituted mainly by natural gas, for which the scenarioresults in a market share of 27% in 2010 (Table 3).The increased energy demand is predicted to be met

mostly by fossil fuels and hence an increase of CO2

emissions is projected. Compared to 1990 emissions,CO2 emitted in the EU is shown to increase by about8% in 2010. While nuclear power sees only a marginalextension, renewable energy sources become moreimportant despite the very limited growth in hydro-power and biomass, the dominant forms of renewableenergy.

3.2. ‘Post-Kyoto’ scenario without emission trading(NT)

The ‘no trade’ scenario assumes implementation ofthe Kyoto protocol within the borders of the EU15without any GHG emission trading, neither within theEU nor internationally. The distribution of the CO2

emission reduction between the member states followsthe Burden Sharing Agreement.3 While the ‘baseline’energy scenario yields an increase of CO2 emissionsbetween 1990 and 2010 by about 8%, the ‘no trade’scenario results in an overall reduction of CO2 emissionsof the 15 EU countries by 8%, which corresponds to theEU target in the Kyoto agreement.In 2010, nearly half of the reduction in CO2 emissions

is achieved by more efficient use of energy leading tolower consumption of primary energy, while theremainder is caused by the replacement of carbon-intensive fuels by energy forms with lower CO2

2Assumptions made in March 1999 when oil prices where in average

about 12–15 $/barrel.3Decision of the European Council of Environmental Ministers,

March 1998.


emissions. Both trends favour an increased use ofnatural gas and renewable energy, while the use of solidfuels experiences a significant drop (Table 4). Theseefficiency improvements and substitutions are most

visible in the lower consumption of primary energy,while in the end use sector there is only a limited scopefor an additional shift towards less carbon intensivefuels on top to what is foreseen in the base case scenario.

Table 1

Macroeconomic assumptions for the EU in the ‘baseline’ scenario

Billion "’90 % structure of GDP % change per year

1995 2000 2010 1995 2010 2010–1995

Gross domestic product 5672 6457 8191 2.5

Energy intensive manufacturing 338 373 455 6.0 5.8 2.0

Non-energy intensive manufacturing 1165 1300 1609 20.5 20.1 2.2

Services 3589 4142 5348 63.3 64.1 2.7

Population (million persons) 371.7 376.5 383.1 0.2

Table 2

‘Baseline’ assumptions on energy prices

Average border prices at the EU in Eur’90 per toe

1995 1998 2005 2010

Crude oil 81.7 58.6 81.2 86.2

Natural gas 65.7 58.6 72.7 79.7

Coal 51.7 50.9 50.4 51.1

Average % change per year

1998–1995 2005–1998 2010–2005

Crude oil �10.5 4.8 1.2

Natural gas �3.8 3.1 1.9

Coal �0.5 �0.1 0.3

Table 3

Primary energy demand by fuel, comparison of scenariosa

European Union Baseline No trade Full trade

Mtoe % change Mtoe % change in

2010

Mtoe % change in

2010

1990 2010 1990–2010 2010 From 1990 From

baseline

2010 From 1990 From

baseline

Solid fuels 301 180 �40.4 101 �66.3 �43.5 130 �56.8 �27.5Liquid fuels 543 654 20.5 590 8.6 �9.9 626 15.2 �4.4Natural gas 222 409 84.1 412 85.8 0.9 422 90.2 3.3

Nuclear 181 226 24.3 223 23.1 �1.0 223 23.1 �1.0Electricity 2 2 �11.5 2 �11.7 �0.2 2 �9.6 2.1

Hydro power 22 27 19.8 26 18.3 �1.2 26 17.8 �1.7Renewable en. Sources 2 10 303.7 14 474.4 42.3 12 399.4 23.7

Wood-based fuels 39 50 26.7 69 74.8 38.0 55 41.0 11.3

Total 1313 1556 18.5 1437 9.4 �7.6 1497 13.9 �3.8

Energy intensity

(toe/MEUR90)

240 190 �20.9 175 �26.9 �7.6 183 �23.9 �3.8

Energy per capita (toe/cap) 3.66 4.06 10.8 3.75 2.4 �7.6 3.91 6.6 �3.8Carbon intensity

(tn of CO2/toe)

2.34 2.13 �8.9 1.96 �16.2 �8.1 2.04 �12.5 �4.0

Total CO2 (Mt CO2) 3068 3311 7.9 2812 �8.3 �15.1 3057 �0.3 �7.7

aSource: PRIMES.


It is also important to note that the tertiary sector ismost sensitive to a carbon constraint (Table 4). In 2010energy demand in the tertiary sector declines 3 timesmore than in other sectors. On the other hand, there ishardly any difference between the two scenarios in thetransportation sector, because no new cost-effectivefuels are expected to enter the transportation sector ina significant way in the near future.4 Consequently, anyreductions in transport emissions are achieved by lowerenergy demand rather than by the changed fuel mix.Overall, changes at the level of final energy demandaccount for about 40% of total reduction in emissionsimposed by the carbon constraints under the ‘no trade’scenario.

3.3. ‘Post-Kyoto’ scenario with full emission trading(FT)

In the ‘full trade’ case, it is assumed that CO2 emissionpermits are traded with Annex B countries, while thenational allocation of reductions is derived from least-cost calculations of the PRIMES rather than from theburden sharing agreement. Thus, the marginal abate-ment costs within the EU are aligned to the permit pricewithin the international permit market. Permit priceshave been set at 50 " (1990) per tonne of carbon.5

Carbon constraints have been applied as global con-straints in solving the PRIMES model in order to obtain

an allocation of energy and emission reduction. Theimposition of a global emissions constraint is equivalentto the inclusion of a variable that reflects the economiccosts imposed by the global constraint.6 The mechanismthrough which the carbon constraint is attained involvesthe attribution of an appropriate economic value to thereduction of emissions of carbon. Equivalently, theability to emit carbon obtains a scarcity value andthereby an implicit price. Economic agents face corre-sponding changes in the relative prices, reflecting thecarbon emissions that each commodity or activityinvolves. This, of course, leads to adjustments in thebehaviour of agents, tending to shift away fromactivities that involve emissions.The increased flexibility of the ‘full trade’ scenario due

to (a) only one EU-wide constraint on CO2 emissionsand (b) trading possibilities with other countries leads toless drastic changes in the level and the structure ofprimary energy demand than resulting from the ‘notrade’ scenario. Total primary energy demand decreasesin 2010 by about 3.8% from the ‘baseline’ level,compared with the 7.6% decrease in the ‘no trade’scenario. Consumption of solid fuels decreases by 28%compared with 44% in the ‘no trade’ case. Also the

Table 4

Final energy demand by sector, comparison of scenariosa


% change % change in 2010 % change in 2010

1990 2010 1990–2010 2010 From 1990 From baseline 2010 From 1990 From baseline

Total (Mtoe) 850 1048 23.3 968 13.8 �7.7 1016 19.4 �3.1

Industry 255 279 9.2 263 3.3 �5.5 273 6.9 �2.1Tertiary 109 158 44.4 133 22.0 �15.5 145 33.0 �7.9Households 234 268 14.6 251 7.4 �6.3 262 12.1 �2.2Transports 253 344 36.3 320 26.8 �7.0 336 33.1 �2.4

Total CO2 (Mt CO2) 1799 2040 13.4 1829 1.7 �10.3 1956 8.7 �4.1

Industry 424 381 �10.2 339 �20.0 �10.9 363 �14.5 �4.7Tertiary 190 218 14.9 166 �12.5 �23.9 195 2.7 �10.7Households 450 447 �0.8 400 �11.1 �10.4 428 �4.9 �4.2Transports 735 994 35.3 924 25.7 �7.1 970 32.1 �2.4

aSource: PRIMES.

4The use of low or zero carbon fuels in transportation implies the

massive development of infrastructure for new fuel cycles, like

hydrogen and methanol originating from biomass or fossil fuels with

CO2 sequestration.5All costs and prices in this paper are in " 1990. To convert to

current prices one has to multiply by roughly 1.3.

6The PRIMES energy system model formulates energy market

equilibrium according to the mixed-complementary mathematical

methodology, which roughly corresponds to the Kuhn–Tucker

conditions that are dual to a mathematical programming problem.

Consequently, the imposition of a global constraint on emissions is

mathematically strictly equivalent to the inclusion of a shadow

variable, a shadow cost, which appropriately affects all economic

costs, proportionally to their emissions. We have called this shadow

variable a ‘carbon value’. It represents the additional total costs for the

energy system that are necessary for avoiding the emission of one ton

of CO2.


changes in the final energy demand sector are lesspronounced (Table 4).In the ‘full trade’ scenario CO2 emissions of the EU-

15 are in the year 2010 similar to those in 1990, while therequired emission cuts are acquired outside the EU. Thedistribution of emissions among countries is ratherdifferent from the base case (Table 6): whereas Austria,Denmark and Germany decrease their emissions com-pared with 1990, the emissions of all other countriesincrease.

3.4. Impacts on costs and energy systems structure

PRIMES simulates the energy system’s response to acarbon constraint while maintaining the same level ofGDP. The response can be characterised by the changesin ‘energy intensity’ (primary energy demand per unit ofGDP) and in ‘carbon intensity’ (carbon emissions perunit of primary energy demand), which are shown inTable 3. Clearly, a larger reduction in emissionsoriginates from the process of transformation ofprimary energy into final energy. More specifically, theEU-15 power and steam generation system appears tobe the sector that can adjust in the most cost-effectiveway to carbon emission constraints. This is because ofthe high flexibility of the electricity and steam generationsystem. Its output does not decline as sharply as that ofother forms of final energy. Since nearly half ofelectricity generation takes place using carbon freeprimary fuels, such as hydro and nuclear, a 1%reduction in emissions in the system can take place with

only half as much reduction in output. Generation usingthe carbon-free fuels increases.7 Coal and oil plantsswitch to natural gas, which has lower emissions per unitof output. Besides, for all technologies the possibleoptions for efficiency improvement are adopted. Theoperation of the above mechanisms can be seen in Table5. A modified composition of fuels used in the powersystem has an important effect on CO2 emissions. Forevery percent reduction in generation output there is amultiple decline in CO2 emissions. In the ‘no trade’scenario, the reduction of electricity and steam genera-tion by just 4% causes a 23% reduction in CO2

emissions. This accounts for about 57% of the overallreduction needed to reach the carbon constraint.As already discussed, in the ‘no trade’ scenario the

EU member states achieve a reduction of CO2 emissionsby 8% in 2010 compared to 1990 levels on the basis ofthe burden sharing agreement. In the ‘full trade’scenario the EU member states achieve a stabilisationof CO2 emissions in 2010 to 1990 levels. Table 6summarises the reduction by each member state. Themarginal efforts differ substantially across memberstates and scenarios. The imposition of emissionreduction target results in an increase in energy systemcosts. Additional costs implied by a CO2 emissionreduction target are conveyed to the energy systemthrough the carbon value, which represents the marginalabatement cost incurred by the system in avoiding the

Table 5

Comparison of scenarios for the electricity and steam generation sectora


% change % change in 2010 % change in 2010

1990 2010 1990–2010 2010 From

1990

From

baseline

From

1990

From

baseline

Electricity and steam output (TWh) 3138 4255 35.6 4083 30.1 �4.0 4164 32.7 �2.1Fossil fuels 2158 2981 38.1 2774 28.5 �7.0 2878 33.3 �3.5Nuclear 720 891 23.7 882 22.5 �1.0 882 22.5 �1.0Hydro and renewables 260 383 47.5 427 64.4 11.5 404 55.8 5.6

Total CO2 (Mtn CO2) 1268 1271 0.2 982 �22.6 �22.7 1101 �13.2 �13.4

Electricity and steam 1211 1219 0.6 934 �22.9 �23.4 1051 �13.3 �13.8Other energy 57 52 �9.0 48 �16.0 �7.7 50 �12.2 �3.5

Fossil fuel inputs in electricity and steam

generation (Mtoe)

364 423 16.4 375 3.0 �11.5 392 7.8 �7.4

Solids 198 134 �32.0 66 �66.7 �51.0 90 �54.6 �33.2Liquids 86 87 1.2 66 �22.8 �23.8 75 �11.8 �12.9Gas 62 174 178.9 197 216.2 13.4 194 210.6 11.4

Biomass/waste 18 28 57.7 45 153.3 60.7 33 84.1 16.7

Efficiency rates of electricity and steam

generation

0.51 0.61 18.6 0.64 24.7 5.2 0.63 23.7 4.3

aSource: PRIMES.

7However, with regard to nuclear power the scenario assumes no

capacity expansion till 2010 above the ‘baseline’ level.


last tonne of CO2 emitted. The marginal abatementcosts for the EU are in the range from 50 " in the ‘fulltrade’ scenario to 180 " on the average in the ‘no trade’scenario (all carbon values are expressed per tonne ofcarbon avoided in 2010). Due to the nature of the ‘notrade’ scenario (achievement of the emission reductiontarget on the basis of the burden sharing agreement)large differences between countries are observed. Whereasfor Germany a carbon value of 80 " is necessary for theachievement of the target, the corresponding value for theNetherlands reaches 480 " (see Table 7).

Carbon constraints induce external costs to theeconomy compared to ‘baseline’ conditions. Under sucha constraint, the system bears a net loss of welfare foreach tonne of CO2 avoided equal to the marginalabatement cost corresponding to that tonne. Therefore,the total loss of welfare implied by the emissionconstraint is equal to the area (the integral) below themarginal abatement cost curve. The total welfare loss ofreaching the emission targets under the two scenariosfor the EU in 2010 is between 0.02 and 0.13 of onepercentage point of GDP (Table 7). The energy system

Table 6

CO2 emissions by country, comparison of scenariosa

Baseline No trade Full trade

Mt CO2 % change Mt CO2 % change in 2010 Mt CO2 % change in 2010

1990 2010 1990–2010 2010 From 1990 From baseline 2010 From 1990 From baseline

Austria 55 58 6 48 �13 �17 54 �3 �8Belgium 105 123 17 97 �7 �21 117 11 �5Denmark 53 55 4 42 �21 �24 50 �5 �9Finland 51 72 41 51 0 �29 61 19 �15France 352 393 12 355 1 �10 370 5 �6Germany 952 839 �12 755 �21 �10 772 �19 �8Greece 71 109 54 89 25 �19 96 35 �12Ireland 30 43 43 34 13 �21 40 31 �8Italy 388 430 11 363 �6 �15 398 3 �7Netherlands 153 207 35 144 �6 �30 192 25 �7Portugal 39 65 65 50 27 �23 61 56 �6Spain 202 275 36 233 15 �15 254 26 �8Sweden 50 69 38 53 7 �23 63 26 �9UK 567 572 1 498 �12 �13 531 �6 �7

EU14 3068 3311 8 2812 �8 �15 3057 0 �8

aSource: PRIMES.

Table 7

The share of CO2 emission reduction by country and its impact on GDP in 2010a

Carbon value (Eur’90/t of carbon avoided) Welfare loss (% of GDP) % Share emission reduction

Full trade No trade Full trade No trade Full trade No trade

Austria 50 152 0.02 0.10 1.8 2.0

Belgium 50 287 0.02 0.40 2.5 5.1

Denmark 50 160 0.02 0.17 2.0 2.6

Finland 50 157 0.05 0.22 4.4 4.2

France 50 92 0.01 0.03 9.0 7.7

Germany 50 80 0.02 0.04 26.4 16.8

Greece 50 183 0.08 0.27 5.3 4.1

Ireland 50 170 0.02 0.19 1.3 1.8

Italy 50 149 0.02 0.09 12.5 13.3

Netherlands 50 480 0.03 0.94 6.1 12.6

Portugal 50 168 0.03 0.36 1.5 3.0

Spain 50 120 0.02 0.10 8.4 8.5

Sweden 50 194 0.02 0.14 2.5 3.2

UK 50 123 0.02 0.09 16.3 15.0

EU14 50 180 0.02 0.13 100 100

aSource: PRIMES.


cost of CO2 emission reduction differs substantiallyacross the EU member states. As explained before, thisis because there are large differences among member-states in the structure of power and steam generation, inthe fuel mix and technology choices and in base yearemissions. In addition, the introduction of country-specific targets in the ‘no trade’ scenario leads to furtherdifferentiation of welfare losses for each country, clearlyillustrating the ease or the difficulty of achieving thecountry-specific target. It is important to note that theseestimates are based on the PRIMES model, which onlycovers the energy system. Thus, the net additionalwelfare losses for the rest of the economy have not beenevaluated.The increase in total energy system cost from the

‘baseline’ level is 72 billion " per year for the ‘no trade’scenario and 25 billion " per year for the ‘full trade’scenario. This increase reflects higher capital expendi-tures (more expensive plant technology), the costs ofstranded capital, and the extra fuel costs needed for fuelswitching. It is by no means a pure economic cost sincemost of the additional funds will be recycled within theoverall economy. The various economic sectors areaffected differently by the carbon constraint in 2010.Average cost of sectoral output of energy intensiveindustries increases by 4% in the ‘full trade’ scenarioand by 11% in the ‘no trade’ case, while for otherindustries the increase ranges from 0.1% to 1.5%. Theenergy costs in the transport sector also rise between 5%(‘full trade’ scenario) and 11% (‘no trade’ scenario).However, the cost of transportation increases less,ranging from 0.9% to 2% for passenger vehicles andfrom 1.5% to 3.5% for freight. The average power andsteam generation cost increases from 9% (‘full trade’scenario) to 23.5% (‘no trade’ scenario). Electricitytariffs increase by 7.5–20%. Costs incurred by theaverage EU household for all kinds of energy servicesand related equipment increase by 3–6%. In absoluteterms, this is equivalent to 40–100 " per household peryear. These costs do not include additional costsresulting from higher prices for, e.g., industrial goodsin other sectors.

4. Emissions of air pollutants contributing to

acidification and ground-level ozone

Energy combustion is also a major source of airpollutants emissions that cause serious threats to humanhealth and natural ecosystems. The energy pathwaysdescribed in the previous section were introduced intothe RAINS model to analyse the implications ofpossible CO2 control scenarios on strategies to controlacidification and ground-level ozone.In response to widely observed damage in Europe,

stringent legislation to control precursor emissions of

acid rain (SO2, NOx and NH3) and ground-level ozone(NOx and VOC) were introduced in the recent years. A‘Current Legislation’ (CLE) emission scenario wasconstructed to explore the effects of the present legalrequirements in each European country.8 This scenariotakes into account all emission standards and emissionceilings resulting from the protocols to the LRTAPConvention as well as national legislation in force ineach country. In particular, for the EU MemberCountries the following EU-wide legislation has beenincluded:

} the Large Combustion Plant Directive (EU, 1988)and its proposed revision (COM, 1998);

} directives on sulphur content of liquid fuels (EU,1998a);

} controls on emissions from road motor vehiclesresulting from the Auto-Oil Programme (EU,1998b–d) and regulations for non-road machineryengines (EU, 1997);

} the regulations on gasoline storage and distributionand carbon canisters for cars (EU, 1991) and theSolvent Directive (EU, 1996).

Details on the legislation included in the CLE controlstrategy can be found in Amann et al. (1999a).

4.1. The ‘baseline’ scenario

For the ‘baseline’ energy pathway, present legislationon emission controls is expected to decrease emissions ofSO2 in the year 2010 by more than 70% compared with1990 (Table 8). Emissions of NOx and VOC decrease byapproximately 50% of 1990 levels, and the emissions ofammonia decrease by 12%.However, even these distinct cuts in emissions are not

sufficient to meet the environmental long-term targets(full protection of human health and ecosystems againstdamage from air pollution) of the EU. Consequently,the European Commission established for the year 2010environmental interim targets to safeguard continuedprogress towards the long-term goal. These interimobjectives aim at a cut of health-related excess ozoneexposure by at least two-thirds compared to the 1990situation. For acidification, the total acidifying deposi-tion in excess of ecosystem tolerance should be reducedin all countries by 95%, and vegetation-relevant excessozone should improve by one-third.The optimisation feature of the RAINS model was

used to identify the least-cost combination of emissioncontrol measures (on top of what is already required bycurrent legislation) that would achieve the environmen-tal interim targets proposed by the European Commis-sion. Using the ‘baseline’ energy pathway, the analysis

8The CLE strategies presented in this paper include legislation

adopted before March 1999.


reveals that, on an aggregated level, SO2 and VOCemissions have to be cut by an additional 22% below theCLE level, emissions by NOx by 14% and emissions ofNH3 by 10% (Table 8, column ‘baseline/target’).Country results are presented in Table 9. Emissioncontrol costs (for the EU-15) increase from 58.5 billionEURO/yr in the CLE case to 66.1 billion EURO/yr in thebaseline/target scenario, i.e., by about 13% (Table 10).These emission reductions will yield substantial

environmental benefits. In the EU-15 instead of 37million ha (25% of ecosystems), only 4.4 million ha ofecosystems (less than 3%) will be exposed to unsustain-able acid deposition above their critical loads. Largestimprovements are expected in central Europe and in theBenelux countries (Fig. 2). An indicator that reflectsaggregated human exposure to ground-level ozone inexcess of the WHO guideline values (60 ppb as 8-h mean

concentration) is calculated to decrease by 76%compared to 1990, and an indicator that measuresvegetation exposure to excess ozone will decline byabout 50%. While in 1990 ozone levels exceeded theWHO guideline values at 50–60 days in large areas inFrance, Germany and Italy, it is expected that theenvisaged reductions in the precursor emissions willlimit exceedance days in these regions to below 25(Fig. 3).

4.2. The ‘post-Kyoto’ scenarios

The same analysis carried out for the ‘post-Kyoto’energy scenarios described in the preceding sectionsclearly demonstrates that the structural changes inenergy systems necessary to meet the carbon constraintfacilitate the control of precursor emissions of acid rain

Table 8

Emissions of pollutants contributing to acidification and ground level ozone in 1990 and for the ‘baseline’ and ‘post-Kyoto’ energy scenarios in 2010

(in kt, values rounded)a

‘Baseline’ ‘Post-Kyoto’

Pollutant 1990 No trade Full trade

CLEb Targetc CLE Target CLE Target

SO2 16,340 4690 3640 �22% 3640 2800 4110 3050

NOx 13,230 6850 5920 �14% 6010 5510 6280 5640

VOC 14,030 7130 5580 �22% 6810 5730 6820 5740

NH3 3580 3150 2830 �10% 3150 2970 3150 2910

aSource: RAINS.bCLE, control policies according to ‘Current Legislation’.cTarget, cost-optimal emissions meeting the ozone and acidification target.

Table 9

National emissions in 2010 for the scenarios with acidification and ozone target (in kt)a

NOx VOC NH3 SO2

Country ‘Post-Kyoto’ ‘Post-Kyoto’ ‘Post-Kyoto’ ‘Post-Kyoto’

Baseline No trade Full trade Baseline No trade Full trade Baseline No trade Full trade Baseline No trade Full trade

Austria 91 89 89 129 174 148 67 67 67 40 36 39

Belgium 127 99 111 102 97 100 57 69 69 76 59 68

Denmark 127 137 143 85 85 86 71 71 71 77 58 90

Finland 152 128 138 110 130 130 31 31 31 116 116 116

France 679 648 658 932 802 873 718 771 725 218 245 270

Germany 1051 995 974 924 968 966 413 473 466 463 399 369

Greece 264 251 260 173 182 187 74 74 74 546 378 382

Ireland 59 51 58 55 47 48 123 126 125 28 25 27

Italy 869 831 815 962 1079 1081 430 432 432 566 162 255

Luxembourg 8 6 7 6 6 6 7 7 7 4 4 4

Netherlands 238 192 230 156 150 156 104 107 105 50 39 43

Portugal 144 127 145 102 119 109 67 67 67 141 91 149

Spain 781 695 715 662 618 617 353 353 353 746 750 746

Sweden 152 179 160 219 213 214 48 48 48 67 57 63

UK 1181 1083 1136 964 1064 1020 264 274 274 497 383 424

EU-15 5922 5510 5639 5581 5732 5739 2826 2969 2912 3637 2801 3045

aSource: RAINS.


and ground-level ozone. This applies not only to thescenarios with environmental targets but also to theemission projection of ‘Current legislation’, whichresults in 0.6 (for the ‘full trade’) to 1.0 million tons

(for the ‘no trade’ case) less emissions of SO2 and NOx

compared to the ‘baseline’ case (Tables 8–10).A ‘post-Kyoto’ starting point would make it easier

and cheaper to achieve the environmental interim

Table 10

Costs of scenarios with acidification and ozone target, billion EURO a�1a

Country Post Kyoto

Baseline No trade Full trade

Austria 1.21 1.06 �13% 1.12 �8%

Belgium 2.76 2.17 �21% 2.37 �14%

Denmark 0.75 0.71 �6% 0.72 �4%

Finland 0.89 0.73 �17% 0.79 �11%

France 9.58 8.81 �8% 8.79 �8%

Germany 15.96 15.33 �4% 15.75 �1%

Greece 1.82 1.02 �44% 1.05 �42%

Ireland 0.66 0.45 �32% 0.51 �23%

Italy 10.05 9.23 �8% 9.69 �4%

Luxembourg 0.14 0.13 �7% 0.11 �21%

Netherlands 3.24 2.91 �10% 3.24 0%

Portugal 1.59 1.30 �18% 1.36 �15%

Spain 6.52 5.76 �12% 5.89 �10%

Sweden 1.64 1.52 �7% 1.65 1%

UK 9.31 7.58 �19% 7.91 �15%

EU-15 66.1 58.7 �11% 61.0 �8%

aSource: RAINS.

Fig. 2. Number of days with violations of the WHO health guideline value for ozone (a) in 1990 and (b) in 2010 for the ‘baseline/target’ scenario.


targets for acidification and ground-level ozone. The lesscarbon intensive fuel structure and lower consumptionlevels reduce control costs for SO2, NOx, VOC and NH3

by 11% in the ‘no trade’ case and by 8% in the ‘fulltrade’ case compared to the ‘baseline’ energy pathway.There is a clear influence of the energy structures in thevarious countries, leading to cost savings in the order of20% and more in Belgium, Greece, Ireland, Portugal,and the UK, while in Denmark, France, Germany, Italyand Sweden the differences in costs are below 10%.Emission control costs are lower because there is less

consumption of carbon-intensive fuels (coal and oil),which makes the control of SO2 and NOx emissioncheaper. The optimisation routine harvests these costsavings and it allocates additional reduction volumesbelow the original emission ceilings (though at lowercosts) for these pollutants. These extra cuts make itpossible to relax some of the most expensive controloptions for VOC and NH3 (so that emission ceilings forthese pollutants are slightly above the emission ceilingsof the ‘baseline’ case), which leads to additional costsavings. For the ‘no trade’ case, emission ceilings forSO2 are 23% lower than in the ‘baseline’ case, and thosefor NOx are 7% lower.Obviously, the cost savings in the ‘post-Kyoto’

scenarios can only be achieved through the modified

energy structure, which in itself is associated withsubstantial additional costs. However, it turns out that,e.g., in the ‘no trade’ scenario the cost savings for thecontrol of the conventional air pollutants amount toapproximately 10% of the additional costs incurred bythe carbon constraint. Although the cost savings for airpollution in the ‘full trade’ scenario are lower in absoluteterms, they amount to about 20% of the additional(carbon reduction) costs due to the lower implementa-tion costs brought about by the carbon tradingpossibility.

5. Conclusions

This paper examines implications of CO2 controlstrategies on strategies for controlling acidification andground-level ozone in the EU-15. Using the PRIMESenergy model three scenarios for the energy supplystructure were assessed: a ‘baseline’ (pre-Kyoto) case, aKyoto case without trading possibilities for CO2 permitsand a ‘full trade’ scenario where CO2 permits are tradedwithin and outside the EU-15. These scenarios illustratethat carbon constraints induce important changes in thestructure and level of energy demand and supply.However, although energy systems’ costs in the

Fig. 3. Percentage of ecosystems not protected against acidification (a) in 1990 and (b) in 2010 for the ‘baseline/target’ scenario.


‘post-Kyoto’ scenarios are higher, the associated welfarelosses are limited.There are important spillover effects from CO2

control policies on strategies to control regional airpollution. If simultaneously implemented, the structuralchanges in the energy systems that are required to limitemissions of CO2 make it easier and cheaper to achieveenvironmental policy targets for acidification andground-level ozone. The lower consumption of coaland oil reduces costs for controlling SO2 and NOx

emissions, so that lower emission ceilings than in a‘baseline’ situation can be realized at lower costs. Thisopens the way for relieving the most expensive measuresto control VOC and NH3 emissions in other economicsectors (e.g., in agriculture and for the industrialprocesses). The analysis demonstrates that the resultingcost savings can compensate up to 20% of the additionalcosts incurred by the constraint on carbon emissions.Depending on the scope, these reduced welfare lossescould make it possible to set more ambitious targets forregional air pollution to yield the benefits of environ-mental sustainability at a regional level.The analysis presented a first attempt to demonstrate

strategic and economic linkages between emissioncontrol strategies addressing global climate and regionalair pollution. The potential magnitude of cost savingswarrants larger attention so that the existing synergismscould be fully harvested. As demonstrated in this paper,tools for analysis of these interactions are available, butthey need further refinement before they can provideconcrete and robust quantitative policy advice.

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