R&D Activities ● Systems Analysis GroupRITE Today 2021

Systems Analysis Group
Members (As of Dec. 2020)
Keigo Akimoto, Group Leader, Chief Researcher
Toshimasa Tomoda, Chief Researcher
Koya Yamada, Associate Chief Researcher
Kenichi Wada, Senior Researcher
Miyuki Nagashima, Senior Researcher
Takashi Homma, Senior Researcher
Fuminori Sano, Senior Researcher
Junichiro Oda, Senior Researcher
Hironobu Yamakawa, Senior Researcher
Haruo Kanaboshi, Senior Researcher (concurrent)

Ayami Hayashi, Senior Researcher
Atsuko Fushimi, Senior Researcher
Yuko Nakano, Researcher
Naoko Onishi, Researcher
Hitotsugu Masuda, Researcher
Kiyomi Yamamoto, Assistant Researcher
Misako Saito, Assistant Researcher
Kiyomi Kitamura, Assistant Researcher
Sachiko Kudo, Assistant Researcher

Research Activities in Systems Analysis GroupThe Systems Analysis Group aims to provide valuablepromotion of mineralization, such as mineralization ofinformation about response measures to global warm-cement, does not require additional energy during theing and energy issues through systematic approaches

process.

and analyses. This article presents the outcomes of theIt should be noted that the fuel use, for instance, does

analyses that our group has been conducting for futurenot have CO2 emission reduction effect since CO2 cap-scenarios with regard to the countermeasure strategies

tured and used for synthesis is emitted at combustion.

for decarbonization.

In that case, CO2 plays a role as an intermediary for hydrogen transport to enhance the convenience of hydro-

1. Role of CCU for realizing Carbon Neutrality

gen. CO2 can be reduced by replacing fossil energy withThe direction of the measures for realizing carbon

carbon-free hydrogen energy. The CO2 emission reduc-neutrality and the role of Direct Air Carbon Capture andtion effect by the alternative is the same as the amount

Storage (DACCS) as a negative emission technology areof CO2 used for synthesis.

explained in the featured article about Beyond EXPO. InIn principle, there is no difference in the CO2 used forthis chapter, we introduce the role of Carbon Capture

synthetic fuels regardless of its source, even if the CO2Utilization (CCU) for pursuing carbon neutrality with thefrom fossil fuel combustion is captured and used. How-

analyses by our global energy and climate change mit-

ever, in that case, fossil fuel combustion is performed

igation assessment model, DNE21+.

separately, and gross zero emission cannot be achieved.

1.1. Overview and Focal points of CCU

Therefore, in order to achieve net zero emission, nega-There are several forms of CCU, such as Enhanced Oiltive emission technologies (NETs) should be conducted

Recovery (EOR) as a form of CO2 storage, and the use

somewhere in the world to cancel out the CO2 emission

for fuels, chemicals and promoting mineralization, andfrom the fossil fuel combustion. There are some argu-so on. CO2 is chemically stable thus additional energy

ments on one hand that the CO2 used for synthetic fuelswith synthesized hydrogen etc. is necessary to utilize itshould be limited to the CO2 captured by DAC or fromfor energy or chemicals. On the other hand, thebioenergy emission, however, it is necessary to evaluate

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R&D Activities ● Systems Analysis GroupRITE Today 2021

in terms of economic efficiency for the whole system.

consumption, hydrogen will be used as itself in various

Although the evaluation of CCU is difficult, which mayways, including power generation, hydrogen direct re-lead to both overevaluation and under-evaluation, it isduction steelmaking, and transportation, and also theimportant to make a better assessment in the whole

use for synthetic fuels with captured CO 2, such as syn-system considering the current status.

thetic methane and synthetic oil, is evaluated as an economically efficient measure. Fig. 2 shows the global CO2

1.2. Evaluation of the role of synthetic fuel, a representa-consumption for synthetic fuels. This amount is equal totive example of CCU by DNE21+

CO2 reduction effect caused by replacing fossil fuelsThis section shows the example of the analyses on thewith use of synthetic fuels (carbon-free hydrogen). The

countermeasures for global carbon neutrality by global

result shows that the CO2 used for synthetic fuels is notenergy and climate change mitigation model, DNE21+.

limited only to captured CO2 by DAC or from biomass

The DNE21+ can make an assessment until 2100, withcombustion but mainly captured CO2 from fossil fuel54 regions, in which around 500 technologies can becombustion, even under B1.5D_3_DAC, where DAC is as-assessed. Here, we introduce the analysis results aboutsumed available.

synthetic fuels for which systematic analysis is considered particularly important. For detailed assessment ofTable 1

Model analysis scenarios

synthetic methane and synthetic oil, please refer to Reference 1) and 2), respectively. Reference 1) indicatesthat applying synthetic methane would be economicallyefficient in the case that there are large differences in
the marginal abatement cost (MAC) of emission reduction target among nations, as it would be economicallyrational that methanation is conducted in the country
where MAC is relatively low and the methane is exported to and used in the country where MAC is relatively high. The result of the scenario where the globallyequalized MAC is assumed, which tends to show slightlyNote) 1: The assumed PV costs in the standard scenario are below
60$/MWh accounting for about 6% of the global PV potential and
60-80$/MWh for about 24% in 2050. Those in the low cost scenarios are below 30$/MWh accounting for 15% of the global PV potential and 30-40$/MWh for about 14%. 2: It is assumed that fullyautonomous cars are available in 2030 and ride-/car-sharing is accelerated in the fully autonomous cars and share mobilities acceleration scenarios. 3: The assumed necessary energy for DAC is
4.7GJ/tCO2 in 2050.

conservative result for synthetic fuels, is introduced inthis article.
Table 1 shows the assumed scenarios for model analysis.
The production and consumption of hydrogen which
is an energy source of synthetic fuels are shown in Fig.
1. The major production method will be gasificationfrom coal and lignite with CCS (blue hydrogen) in thestandard cost case of PV (2DS_1 scenario) and waterelectrolysis by solar PV (green hydrogen) in the low-Fig.1

Global hydrogen balances

cost case of PV (scenarios other than 2DS_1). As for23

R&D Activities ● Systems Analysis GroupRITE Today 2021

(hereinafter referred to as BCA) is being discussed as
one of the options to deal with this problem. In general,
the BCA is a border measure that imposes the sameburden on imported products from countries with insufficient emission reduction efforts as domestic products.
In December 2019, Ursula von der Leyen, the president of the European Commission, announced the European Green Deal (see Reference 3), that contains aFig. 2

Global CO2 consumption for synthesis fuels

goal of net zero greenhouse gas emissions by 2050. It
also includes a roadmap for the carbon border adjust-The use of synthetic methane can contribute to real-

ment mechanism (CBAM). At the European Council

izing carbon neutrality with utilizing existing infrastruc-meeting in July 2020, it was agreed that the institutional

ture and gas appliances by use of piped gas. As for syn-design would be completed in the first semester of 2021

thetic oil, it will be possible to achieve carbon neutrality

with a view to its introduction at the beginning of 2023.

while utilizing existing infrastructure and technologies,

It should be noted that introduction of BCA involves

such as hybrid vehicles, in the road transport sector.

challenging issues, regarding such as compatibility withAlso, the use of those synthesis fuels will be effective forWorld Trade Organization (WTO) rules, the methodol-

the measures which are difficult to replace with electric-ogy for assessing the carbon content of products andity or hydrogen in the aviation, marine bunkers, industry,

how the tax rate is adjusted.

and other sectors. The role of synthetic fuel as CCU
should be evaluated integrally with hydrogen supply,

2.2. Methodology

and the evaluation is not simple. However, our analyses

We examine the impacts of BCA by using the global

suggest that it can be an important piece of measuresenergy-economic model that we have developed,

for achieving carbon neutrality.

called the DEARS model4). The model is an integrated
model of a top-down economic module (general equi-

2. Assessing impacts of border carbon adjustment usinglibrium type) whose objective function is to maximize

global energy-economic model

the global utility of consumption, and a simplified bot-

2.1. Background of border carbon adjustment (BCA)

tom-up energy system module. In the economic mod-The goal of achieving net zero emissions by 2050 hasule, 16 non-energy industries are assumed, and the in-been set by countries around the world. If the cost of

put-output (IO) structure based on the GTAP (global IO

burden of reducing GHG emissions in one country istable), is explicitly modeled. Regarding trade, the Arm-

greater than that in other countries, it will affect the in-ington structure with the substitution between im-

ternational competitiveness of energy intensive coun-ported and domestic products is formulated.

tries in that country and will lead to leakage of CO 2This study focuses on steel products as a case study

emissions to other countries (substitution of domestic

and shows the economic impacts and CO2 emissions

products by overseas products and transfer of produc-under multiple cases, by assuming two types of tarifftion bases overseas). Border Carbon Adjustment

methods for border adjustment as follows.

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R&D Activities ● Systems Analysis GroupRITE Today 2021

I. BCA tariff

the impact of favorable treatment for the product group

In general, the BCA tariff rate is determined by the av-

with the lowest intensity.

erage CO2 intensity embodied in the imported products
made in the country of origin. In this case, heterogene-

Table 2
Case name

Simulation cases

Regions

CarbonFavora-Retali-with do-tariffs:

bleatory

ity within the same products is not considered.

mestic32$/tC

treat-tariffs

II. CSTR (Cooperative Sectoral Tariff Reduction) tariff

carbonO2ment forbytax:

goodROW

32$/tCO2per-(-R)

The CSTR tariff, proposed by Banks and Fitzgerald

former(2020)5), is based on the differentiated CO2 intensity em-[w/o tax

bodied in the imported products, taking into accountiff]

the heterogeneity within the same ones. The CSTR tariff
will encourage a shift to the products with relatively lowand tar(-G)(1) TRI[US,EU,××JPN](2) WLDAll regions

intensity, which leads to more reduction in CO2 emis-(3) TRI-BCA[US,sions. However, because of the considerable difficulty(4) TRI-BCA-R

involved in estimating the distribution of energy inten-(5) TRI-CSTR

sity of steel production within each country, the follow-

××××

EU,

BCA

××

EU,

BCA

×〇

EU,CSTR

××

EU,CSTR

×〇

EU,

CSTR

〇×EU,CSTR〇〇JPN][US,JPN][US,JPN](6) TRI-CSTR-[US,ing assumptions were made for this analysis. First, steel

RJPN](7) TRI-CSTR-[US,products are classified into three product groups (uni-GJPN](8) TRI-CSTR-[US,versal grouping) according to their energy intensity: (i)G-RJPN]

Good (0.10[GJ/$]), (ii) Middle (0.80), and (iii) Poor (1.50)(hereinafter referred to as Good, Mid., and Poor, respectively). Then, the ratios belonging to each productgroup by region are assumed to be consistent with thestatistical data of regional average energy intensity insteel production.
Following previous studies6)7), we assume substitutability between demand of imported products and thatof domestic ones by using a CES-type function with theelasticity of substitution (δ) that is assumed to be 1.5 inthe standard case. Furthermore, we assume an elasticity
of substitution of 2.0 for the demand between the product groups.
Table 2 shows the simulation cases in this study. WeWe assume that the carbon price and carbon tariff are
32$/tCO2 referring to the EUA price of EU-ETS (July2019), and the tax revenue is used for government consumption (the general account). The carbon price andcarbon tariff are assumed to be levied on emissions after allocating electricity and heat. Export tax rebate, therefund of carbon tax paid on exported products, is also
considered. Although various types of retaliatory
measures can be considered, we assume that the samerate as carbon tariff is levied on the steel products as aretaliatory tariff. The baseline (without additional climate policies) socio-economic scenario in this study is
assumed to be the median scenario (SSP2)8).

examine the impact of BCA and retaliatory measures
based on a simplified scenario in which Japan, the US
and the EU cooperate in implementing domestic emission reduction measures while the rest of the world(ROW) do not take any measures. Two types of carbon
tariff are assumed as mentioned above, and we explore

2.3. Results(1) Impacts of different carbon tariffs
In the BCA (Cases 3 and 4) and CSTR (Cases 5 through8) implemented by the US, the EU and Japan, the steel
production values have turned positive, respectively,

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R&D Activities ● Systems Analysis GroupRITE Today 2021

In the case of retaliatory measures by ROW in response

will reduce the decline in international competitivenessto the border adjustments by the US, the EU and Japan,(Fig. 3). Also, the introduction of BCA and CSTR has thethe relative price of import from the US, the EU and Ja-effect of reducing carbon leakage when compared topan in ROW relative to the cases without retaliation will

Case 1 (Fig. 4).

increase, resulting in a shift of steel production from the

1.0
0.8
0.6
0.4
0.2
0.0
-0.2
-0.4
-0.6
-0.8
-1.0

US, the EU and Japan to ROW (Fig.5). In addition, retal-

Mid. & Poor_ROW

iatory tariffs will reduce the international competitive-Good_ROW
Mid. & Poor_US, EU and Japan
Good_US, EU and Japan

0.80.6
Mid. &0.4Poor_ROW

Changes in steel productions(10Billion$, relative to (5))

Mid. & Poor_ROW

0.2
Good_ROW
0.0-0.2-0.4
Mid. & Poor_US,EU-0.6
and Japan-0.8
Good_US,EU andJapan(6)
TRI-CSTR-R

8%
6%
4%
2%
0%-2%

0.8
0.6
0.4
0.2
0.0
-0.2
-0.4
-0.6
-0.8
(4)
TRI-BCA-R(2020)

Changes in steel productions(10Billion$, relative to (3))(5)
TRI-CSTR(7)
TRI-CSTR-G

estimated to be very small.

Fig. 3 Impact of BCA and CSTR on steel production

Good_ROW
Mid. & Poor_US,EUand JapanGood_US,EU andJapan(8) TRI-CSTR-G-R(7) TRI-CSTR-G(6) TRI-CSTR-R(5) TRI-CSTR(4) TRI-BCA-R(3) TRI-BCA

Fig. 5 Impact of retaliatory tariffs on steel production(1) TRI

Carbon leakage rate(%)

ness of the US, the EU and Japan, and worsen leakage(Fig. 4). The impact on global emission, however, is also

TOTAL

(3)
TRI-BCA

Changes in steel productions(10Billion$, relative to (1))

relative to Case 1, therefore, both types of carbon tariffs(2020)(3) Impacts of international cooperation
In Case 2, which assumes all countries cooperate to re-Fig. 4 Carbon leakage (2020)

duce emissions and impose the same rate of carbonNote) Carbon leakage is expressed as increase in CO 2

price on domestic production of steel in all countries,emissions (for steel productions) in the rest of the world

the steel production of “Mid” and “Poor” in ROW de-(ROW) over CO2 reductions in the US, the EU and Japan

creases compared to Case 1, while the production byrelative to the baseline.

the US, the EU and Japan increases (Fig. 6).

the production shift to steel products with the lowestintensity (classified as “Good”), however, the impact ofdifferences in tariff methods is not significant. Similarly,
with regard to the global CO2 reduction effect, the dif-Mid. & Poor_ROW

2.00
1.00

Good_ROW

0.00
Mid. & Poor_US, EU and Japan

-1.00
-2.00

Good_US, EU and Japan

-3.00

(2)
WLD

It is estimated that both BCA and CSTR will promote

Changes in steel productions(10Billion$,relative to (3)TRI-BCA)

3.00

TOTAL

ference caused by the differentiated tariff methods isFig. 6 Impact of international cooperation on steel pro-not large, such as from the comparison between Case 3

duction (2020)

and Case 5 in Fig. 4. Rather, the exemption for products“Good” has a large impact on the production shift to(4) Comparison of impacts by region

products “Good”, but the impact on the global emission

When the US, the EU and Japan implement border ad-reduction is limited.

justment measures, other countries such as China havehigher incentives to implement retaliatory measures(2) Impacts of retaliation(Fig. 5). Under such circumstances, the impact on the US,26

R&D Activities ● Systems Analysis GroupRITE Today 2021

When the elasticity of substitution between domestic

retaliation being relatively large in Japan and small inand import products is large (δ=2.8)10), the carbon leak-the US (Fig. 7). The following two factors can be consid-

age rate increases in Case 1 compared to the standard

ered. First, although Japan has a lower intensity of bothassumption (δ=1.5) due to a larger shift to other regions

converter steel and electric furnace steel than that of(Fig. 8). Moreover, while the border adjustment

other countries9), Japan’s superiority is not properly re-measures have the effect of reducing leakage, the retal-

flected in a framework that does not distinguish be-

iatory measures increase the leakage rate compared totween converter steel and electric furnace steel. There-the standard case.

5%
δ＝2.80%different regional impacts of border adjustment and re-No
BCA/CSTR

BCA/CSTR
and no retaliation(8)
TRI-CSTR-G-R(6)
TRI-CSTR-R

port-import ratio of steel products is also a factor in the(4)TRI-BCA-R-5%(7)
TRI-CSTR-G(high ratio of electric furnace steel)”. Second, the ex-δ＝1.510%(5)
TRI-CSTR“Japan (high ratio of converter steel) > the EU> the US

15%

(3)
TRI-BCA

after tariffs are levied, is estimated to be in the order of20%(1)
TRIfore, the rate of increase in the price of steel products

Carbon leakage rate(%)

the EU and Japan will differ, with the negative impact ofBCA/CSTRand retaliation

taliatory measures. The ratio of steel product export toFig. 8 Impact of change in elasticity of substitution on

import in the baseline scenario in 2020 is estimated tocarbon leakage rate (2020)

be 5.0 for Japan, 0.9 for the US, 2.0 for the EU, and 1.5
2.4. Conclusionof border measures and large negative impacts of retal-

The two types of carbon tariffs methods, a general BCA

iatory measures.

tariff based on the average product intensity and a

Conversely, the US has a high import ratio, suggesting

CSTR tariff based on the intensity of each product, werethat the benefits of border measures are large and theestimated to reduce the loss of international competi-

negative impacts of retaliatory measures are small. Intiveness due to domestic reduction measures and to re-addition, under the framework that does not distinguishduce carbon leakage, with little difference between thebetween converter steel and electric furnace steel, thetariff methods.

US with its high ratio of electric furnaces, is estimatedConversely, retaliatory measures were estimated to re-to be superior in terms of intensity. Therefore, in thisduce the international competitiveness of Japan, the USframework, the US has a high incentive to implement

and the EU and to worsen carbon leakage, although theborder adjustment measures even with retaliation.

impact on global emissions was very small. Under the1.00.5

Japan0.0EU-0.5

US(8) TRI-CSTR-G-R(7) TRI-CSTR-G(6) TRI-CSTR-R(5) TRI-CSTR(4) TRI-BCA-R(3) TRI-BCA(2) WLD-1.0(1) TRI

Changes in steel productions(10Billion$,relative to baseline)

for China. Japan’s high ratio will result in small benefits

Fig. 7 Changes in steel production by region (2020)

framework we examined, the results implied that the incentives to introduce border adjustments would differ
depending on the regional structures of production andtrade.
For future work, it will be important to consider theextension of the classification of converter steel andelectric furnace steel with respect to steel products, as(5) Sensitivity analysis on elasticity of substitution be-

well as the extension to other energy-intensive and ma-tween domestic and imported products

jor trade products.

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R&D Activities ● Systems Analysis GroupRITE Today 2021

3. Overview of Research Project (EDITS) on Low Energy
Demand Society Affected by Technological Innovationand Social change
In 2020, RITE started a new research project, EDITS(Energy Demand changes Induced by Technological andSocial innovations), which includes international modelcomparisons of analyses on energy demand changes

Fig. 9and their impacts. The project is supported by Ministry

Global Energy Consumption by Usage（when primary energy consumption is 100%）11)

of Economy, Trade and Industry (METI).
3.1. BackgroundFor example, advances in ICT can have a significant

We do not consume energy because we want to. We

impact on mobility. A change called Connected; Auton-consume its embodied energy for obtaining services. Aomous; Service & Shared; Electric (CASE) is happening.

lot of energy is wasted to obtain that service, especially

The utilization rate of private cars is estimated to benear the final demand (Fig. 9).

about 4-5%, and private cars are not used for many

The energy required for the final services is estimatedhours.

to be around 5% of the total primary energy consump-However, if a fully autonomous vehicle is realized,

tion. However, the over consumption will be basicallyeven with ride sharing or car sharing, it will not impair

rational if we consider the "hidden costs" that hinder

convenience significantly and likely to be used at a low

our convenience, and the energy supplies and demands

cost because of an increase of operation rate. Ride shar-in the current society was determined with over energy

ing can directly reduce the energy consumption of au-

consumptions. Although having said that, it is being

tomobiles, and car sharing can reduce the number ofchanged along with technological progress. For exam-

automobiles, reduce the use of materials such as ironple, lighting has been practical use which turns off au-and plastic as well as the energy consumption required

tomatically when there are no people around and air

for the manufacture. These reductions can contribute toconditioners can also cool a specific area where people

the simultaneous achievement of the SDGs. Excessive

are intensively. These technologies led to energy sav-production is being carried out not only in automobiles

ings while suppressing service degradation. On thebut also in apparel, food systems, etc., and there is aother hand, there is still a lot of waste as a social system.

possibility that these can be reduced by the progress ofThe progress of information and communication

ICT. It is important to control total energy demand oftechnology (ICT) has the potential to induce social in-society by not only directly reducing energy but also re-novation on the final energy demand side and to leads

ducing the energy embodied in services and products.

to triggering: (1) from independent technology to con-On the other hand, ICT can increase energy consump-nection between technologies, (2) from possession totion in data centers and other various rebound effects,

use, and (3) inducing sharing economy and circularsoeconomy.

changes is required.

comprehensive

analysisincludingbehavioral

3.2. Overview of EDITS
Under these circumstances, the EDITS project has just28

R&D Activities ● Systems Analysis Groupstarted the following research:•RITE Today 2021

8） O’Neill, B.C., et al., Climatic Change 122, 2014

Building a research community: Promoting better

9） Oda, J., et al, Energy Policy, 44, 2012

understanding through interaction between re-10） Global Trade Analysis Project (GTAP)

search and policy analysis with sharing new data,11） Global Energy Assessment, 2012

new concepts, methodologies, and policy analysis
focused on the demand side.
•Improvement of state-of-the-art demand sidemodel: Further refinement of environmental and climate policy analysis by mutual comparison andsharing of methodologies and models across disciplines and environmental fields.

•

Model-to-model comparative analysis: Conduct
model analysis and simulation to assess synergies
and trade-offs, potential impacts and barriers toSDGs from demand-side policies while particularly
focusing on digitization, sharing economy, and policy design with synergies from the integration ofSDGs and climate goals
Many domestic and foreign research institutes andresearchers will work together to tackle this importantand difficult analytical tasks.

RITE and the Institute forInternational Applied Systems Analysis (IIASA) playing acentral role and collaborate with Tokyo University,
Osaka University, Lawrence Berkeley National Laboratory (LBNL), Stanford University, Wisconsin University,
Tsinghua University of China, and other institutes inSouth Korea, Italy, Germany, Thailand, Brazil, etc.

Reference
1） Sano, F., et al, Journal of Japan Society of Energy andResources, 42(1), 2021
2） Kanaboshi, H., et al, The 37th Conference on Energy,Economy, and Environment, 2021
3） European Commission, The European green deal
4） Homma, T., and Akimoto, K., Energy Policy 62, 2013
5） Banks, G.D. and Fitzgerald, Climatic Change, 162, 2020
6） MIT, EPPA Model Structure7） JCER, Analysis by JCER-CGE, 2009 (in Japanese)

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