22nd AIM International Workshop
December 9-11, 2016
National Institute of Environmental Studies (NIES)
Tsukuba, Japan

Low Carbon Development with INDC Targetsand Carbon Tax in Selected Sectors of Nepal
Ram M. Shrestha, Bijay B. Pradhan and Anantaa Pandey
Asian Institute of Technology and Management
Lalitpur, Nepal

1Sector Overview• The agriculture, forestry and forest and grassland
conversion accounts for as high as over 80% of thetotal GHG emission in 2000

• Forestry sector sequestered 69% of the total GHG
emissions from the country in 2000

Source: Nepal Second National Communication (MOSTE, 2014)
2This Study
1. Analyses emissions from the agriculture, forestry andother land use (AFOLU) sector using AFOLU-B model.
2. Assesses the implications of Nepal’s Nationally
Determined Contributions (NDCs) throughelectrification and fossil fuel reduction targets (usingthe AIM/Enduse model) during 2010-2050 on:ooooooo

GHG emissions,
Local/regional environmental emissions,
Energy security,
Renewable energy usage,
Hydropower development,
Total cost and Investment requirements andIncremental abatement cost3

GHG Emission Mitigationfrom AFOLU in Carbon Tax
Scenarios4

AFOLU Scenarios
The BAU Scenario:
oAssumes the technology shares during 2010-2050 to continue
to be the same as that in the base year (i.e., 2010).

The Reference Scenario:oNo constraint on the shares of the mitigation technologies thatare in BAU.

oConsiders additional GHG abatement countermeasures.

Seven different carbon tax scenarios:
o $10, $25, $50, $75, $100, $300 and $500/tCO2e5

GHG emission from the AFOLU sector
during 2010-2050 in BAU
GHG emission [MtCO2eq/yr]

80

6860
40

35

39

4655

Forest and grassland conversion
Emission and removals from soils20

Changes in forest and otherwoody biomass stocks

0

Agriculture total emission

-20
-40

-32
2010

-32
2020

-32
2030

-31
2040

-312050

AFOLU net emission

During 2010-2050, increase of GHG Emissions in:• Agriculture sector by 120%
• AFOLU gross emissions by 90%• AFOLU net emissions by 9.8 times

6

GHG emission from agriculture during
2010-2050 in the BAU scenario
GHG emission [MtCO2e/yr]

70
60
Agricultural soils (N2O)
50
40

Rice cultivation (CH4)30

Manure management (N2O)

20

Manure management (CH4)10Enteric fermentation (CH4)2050

20452040

2035

2030

20252020

2015

2010

0During 2010-2050:• Highest GHG emitter: Enteric fermentation (Share decreases from 46.1% to 44.1%).
• Rice cultivation: Share decreases from 9.9% to 4.3%.
• Change in GHG emission shares of:o Agriculture soils: from 28% in 2010 to 30% in 2050.
o Manure management (N2O): from 14% in 2010 to 20% in 2050.
o Manure management (CH4): from 1% in 2010 to 2% in 2050.

GHG emission from LULUCF during
2010-2050 in BAU
GHG emission [MtCO2eq/yr]

1050-5

2010-10-15-20-25

2020

2030

2040

2050

Forest and grassland
conversion
Emission and removals
from soils
Changes in forest and otherwoody biomass stocks
Net Sequestration-30-35

During 2020-2050:• Net sequestration from LULUCF would remain at 25.4 MtCO2eq/year
8Carbon Tax and Annual AFOLU sector GHG abatement
potential in 2030 and 2050
-Indicates the presence of no-regret options in agriculture.
-No significant increase in the abatement potential at carbon taxes above $50/tCO2e

Carbon price [$/tCO₂e]
2030

500

300

10075502510

Reference

500

300

10075502510

Reference

Mitigation/Sequestration [MtCO2e]

35302520
151050

LULUCF
Agriculture

Carbon price [$/tCO₂e]
2050

Net Emissions in BAU in 2030: 14.7 MtCO2e

Net Emissions in BAU in 2050: 36.7 MtCO2e

The net abatement potential in 2030:• 7.2 MtCO2e in the reference scenario(compared to BAU)
When compared to the reference scenario,
mitigation potential increases by• 1.4 times at $10/tCO2e and• 1.7 times at $500/tCO2e

The net abatement potential in 2050:• 10.7 MtCO2e in the reference scenario(compared to BAU)
When compared to the reference scenario,mitigation potential increases by:• 1.5 times at $10/tCO2e and9• 1.9 times at $500/tCO2e

Cumulative GHG emission & sequestrationfrom the AFOLU sector during 2016-2050
There would be cumulative net sequestration atcarbon tax of $10 and above.

700

Cumulative GHG
Emission/Sequestration [MtCO2e]600

No significant change in level of net cumulative
sequestration at carbon taxes of $10 to $50/tCO2e500
400
300

Carbon taxes above $75 are not so effective
for cumulative mitigation.

200
100
0-100

BAUReference10-200

2550

75

100

300

500

Carbon price [$/tCO₂e]• Cumulative net emission in the BAU is 646 MtCO2e• Cumulative emission in the Reference scenario is 41.5% less than that in the BAU• At carbon tax of $10 and above, there is cumulative net sequestration:• 16 MtCO2e at $10/MtCO2e• At $75 the cumulative net carbon sequestration would be 4 times of that at $10.

10Annual GHG mitigation from the AFOLU sector atcarbon tax of $10/tCO2e & $75/tCO2e

Mitigation & Sequestration[MtCO2e]No significant increase in mitigation & sequestration
40 potential at tax rate $10/tCO2e and $50/tCO2e. Similarly
no significant effect above $75/tCO2e3030
20141219

17222528

MM: Dome digester, cooking
fuel and light
RC: Midseason drainage

2020

2030

2040

$75/tCO2e$10/tCO2e$75/tCO2e$10/tCO2e$75/tCO2e$10/tCO2e$75/tCO2e$10/tCO2e100

EF: Replacement of roughage
with concentrates
EF: High genetic merit

MS: High efficiency fertilizer
application
MS: Tillage and residue
management
Community forest management
Improvement of harvesting
techniques
Short-rotation forestry

2050• Share of “EF: Replacement of roughage with concentrates” decreases from 42% in 2020
to 34% in 2050 in $10/tCO2e and 31% in 2020 to 25% in 2050 in $75/tCO2e• Share of “Short-rotation forestry” increases from 24% in 2020 to 30% in 2050 in$10/tCO2e and from 22% in 2020 to 27% in 2050 in $75/tCO2e

11

GHG Emission Mitigation from Energy
Using Sectors under NDC Scenarios

12The BAU Scenario in the Energy
Using Sector• Does not consider any climate change policy (e.g.,GHG emission reduction targets and carbon tax);• Urban population to grow at CAGR of 2.7% andrural population to grow at CAGR of 0.2% during
2010-2050• GDP growth at 6% per annum during 2015-2050

13

INDC Electrification and Fossil Fuel
Reduction Scenarios
The government NDC electrification related targets are mostly qualitative in nature.
This study considers some specific quantitative targets in electrification scenarios by2050, which are presented in the table below.
NDC Scenarios by 2050
Electrification

SectorFossil fuel

EL1EL2

EL3• 30% EVs
• Introduction of 20%
passenger train in2040 to 30% in 2050
• 10% Fossil fuelreduction in 2020 to50% reduction in
2050• 40% EVs
• Introduction of 30%
passenger train in
2040 to 40% in 2050
• 10% Fossil fuelreduction in 2020 to50% reduction in
2050• 50% EVs
• Introduction of 40%
passenger train in
2040 to 50% in 2050
• 10% Fossil fuelreduction in 2020 to50% reduction in
2050

Residential/C 50% electrification inommercialcooking and heating

60% electrification incooking and heating

70% electrification incooking and heating

Agriculture

40% electrification

50% electrification

Transport

Industrial

30% electrification

NoneFFR50%
reduction infossil fuelconsumption

14

Gross GHG emission from the AFOLU
and energy using sectors in BAU
GHG emission[MtCO2eq/year]

1201008060402002010

2020
AFOLU (gross)

2030

2040

Energy relatedTotal

2050

Growth rates (CAGR) of GHG emissions:(a) AFOLU sector gross emissions:
1.6%(b) Energy using sectors’ emissions:
5.2%(c) Combined emissions of (a) and (b): 2.4%
15

GHG Emission Reduction in the Energy
Using Sectors

Mt CO2e

BAU = 38 MtCO2e36322824201612840

EL1= -25%
EL2= -26%
EL3= -27%FFR = -51%Reduction in2050
2010

2015

2020

2025

2030

2035

2040

2045

2050

Cumulative GHG emission in 2010-2050 in BAU: 145 MtCO2e
Cumulative GHG emission in 2020-2050 in BAU: 135 MtCO2e
Cumulative GHG reduction during 2020-2050:• 17% in EL3 and• 15% in EL1,
• 30% in FFR scenarios• 16% in EL2,
Significant decline in GHG emission in FFR between 2045 and 2050 due to dramatic
16
increase in electricity use.

Overall CO2 Intensity
CO2 intensity [2010 value = 1.0]

1.2
1BAU in 2050 = 38 MtCO2e0.8

EL1= -25%EL2= -26%
EL3= -27%
FFR = -51%

0.6
0.4

Reduction in 2050

0.202010 2015 2020 2025 2030 2035 2040 2045 2050
17GHG emission (MtCO2e)

Sectoral Cumulative GHG Emission fromEnergy Use during 2010-2050
80.0

70.1

60.0

47.1

40.0
20.0

12.1

9.7

6.4

Transport

Residential

Commercial

Agriculture

BAU

EL2

FFR

0.0
Industrial

EL1

EL3

Compared to the BAU, cumulative GHG emission during 2010-2050 would decreaseby:• 29% in FFR and 31% in EL3 in Transport Sector• 15% in FFR and 42% in EL3 in Residential Sector• 31% in FFR and 41% in EL3 in Commercial Sector• 9% in EL3 and 11% in FFR in Agriculture Sector
35% decrease in the Industrial Sector in the FFR Scenario

18

Options considered in different sectors
Transport Sector:• Fuel cell vehicle• Biofuel vehicle• MRT• Trolley bus• Electric ropeway• Electric rail

Residential and CommercialSector:• Briquette stove• Solar cooker• LED display TV• Energy efficient air
conditioner/fanIndustrial Sector:• CCS in cement manufacturing• Efficient electric motor• Vertical shaft brick kiln in brickindustry• Energy efficient fuelwood boiler

Agriculture Sector:• Solar water pump
• Energy efficient electricpump• Energy efficient diesel pump
19

Cost-effective Mitigation Options in the FFR
Scenario
Mitigation options in the Transport Sector:• Biofuel vehicles• Electric vehicles (i.e., car, bus, micro-bus)• Gasoline hybrid vehicles (i.e., car and taxi)• Diesel hybrid vehicles (i.e., Pickup)• Diesel hybrid vehicles (i.e., Trucks)
Mitigation options in the Residential and Commercial Sectors:• Biogas cooking• Electric cooking• Solar water heater• Energy efficient bulbs (CFL&LED)
Mitigation options in the Industrial Sector• Electric motor (motive power)• Improved fixed chimney brick kiln
• Energy efficient coal boiler• Bagasse boiler• Fuelwood boiler

20Changes in Energy Supplyand Consumption in INDC
Scenarios

21

TPES in the BAU Scenario
30
25
Hydropower

Mtoe

20

Renewables
Coal

15

Other oil products (LPG)10

Oil products

5Biomass02010

2015

2020

2025

2030

2035

2040

2045

2050

• share of oil products increase from 10% to 26% during 2010-2050• share of renewables (mainly hydropower) increase from 3% to 21%• share of biomass decrease from 84% to 35%
22Total Primary Energy Supply in NDCElectrification and Fossil Fuel Reduction Scenarios
FFR

25

25

20

20

15

15Mtoe

Mtoe

BAU

10

105

500
2010 2015 2020 2025 2030 2035 2040 2045 2050

EL3

2010

2015

2020

Renwables

Mtoe

20
Coal

15
10

Other oil products(LPG)

5Oil products

0Biomass

2015

2020

2025

2030

2035

2030

2035

2040

2045

2050

Hydropower

25

2010

2025

2040

2045

2050

Cumulative TPES during
2010-2050:• In FFR is 2% lower than inBAU and• In EL3 is 8% below that inBAU
23

Total Primary Energy Supply in NDCElectrification and Fossil Fuel Reduction Scenarios
Cumulative biomass consumption during 2010-2050:• 8% higher In FFR (than in BAU)
• 15% lower In EL3
Cumulative renewable supply (mainly from hydropowergeneration) during 2010-2050 in EL3 is higher than in FFR:
• 30% higher in FFR (than in BAU)
• 52% higher in EL3
Cumulative fossil fuel supply during 2010-2050:• 30% lower in FFR (than in BAU)
• 18% lower In EL324

Electricity Supply
100In 2050, increase by:

EL3= 57%EL2= 48%
FFR = 47%
EL1= 39%
BAU = 56 TWh80TWh60402002010 2015 2020 2025 2030 2035 2040 2045 2050

Electricity consumption in the BAU in 2020: 6 TWh
Cumulative electricity supply during 2020-2050 in BAU: 171 TWh
Cumulative electricity supply during 2010-2050, compared to that in BAU:
• Would increase by 37% in EL1, 44% in EL2 and 51% in EL325• Would increase by 30% in the FFR scenarioImplications of INDCs for Hydropower
Development
Total Hydropower Capacity (MW)Scenarios

2020

2030

2040

2050

BAU

2,333

4,232

7,887

17,028EL12,484

5,327

10,94122,229

EL2

2,483

5,510

11,687

23,249

EL3

2,483

5,680

12,31624,216

FFR

2,340

4,662

9,830

23,198During 2010-2040, the totalhydropower capacity would increaseby:• 8 times in BAU,
• 12 times in EL1 ,• 13 times in EL2,
• 13 times in EL3 and• 10 times in FFR.

During 2010-2050, the totalhydropower capacity would increaseby:• 19 times in BAU,
• 25 times in EL1 ,• 26 times in EL2,
• 27 times in EL3 and• 26 times in FFR.
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Final Energy Consumption inINDC Scenarios• Total electricity consumption:
o 30% higher in FFR and 52% higher in EL3 than in BAU• Total biofuel consumption:
o14% higher in FFR and 42% lower in EL3 than in EL1 (note:no biofuel consumption in BAU).

• Total biomass consumption:
o8% higher FFR and 15% lower in EL3 than in BAU• Total fossil-fuel consumption:
o 30% lower In FFR and 18% lower in EL3 than in BAU
27

INDC Co-benefits

28Co-benefits: Cumulative Air
Pollutant Reduction
Percentage change compared to BAU during 2010 - 2050
CasesEL1EL2EL3FFRBC-8-12-15
8CO-11-14-1725

NMVOC-9-13-150OC-9-13-16
19PM10-8-12-14
7PM2.5-8-11-1423

NOx-9%-11%-12%-14SO2-4-5-7-20

Increases due to replacement of fossil fuel by biomass• Reduction in BC, CO, NMVOC, OC, PM10 and PM2.5 emissions in theEL1, EL2 and EL3 scenarios• Increased emissions of these pollutants in FFR• Higher reduction in NOx and SO2 emissions in FFR than that in EL1,EL2, and EL3 scenarios

29Energy Security Co-benefits• Oil intensity in FFR is lower than that in EL1, EL2 and EL3.
• Electricity intensity in EL scenarios mostly higher than that in FFR.
• The electricity intensity in FFR is below that of the EL scenarios• The biomass intensity in FFR is higher than in EL1, EL2 and EL3• Lower diversification of energy resources in FFR with theincreased use of local resources (such as Hydropower and biomass)
Net Energy Import Dependency (%)
BAU
EL1EL2EL3FFR

2010 2015 2020 2025 2030 2035 2040 2045 2050
1317212330363942461316212124272829291316212225
28282928131723242832
3436
38
1317212125
27282724

Lower net energy (mainlyoil) import dependency inFFR (i.e., Higher EnergySecurity)
30

Cost Implications of INDCs

31

Cost
Investment Requirement

Total Cost
35.50

34.98

34.50

34.16

34.46

34.00
33.50

33.33

33.00

4.20
4.10

32.00

3.80
EL1

EL2

EL3

4.43

EL2

EL3

4.15
4.06

4.00
3.90

FFR

4.41

4.30

32.50
BAU

4.37

4.40
Billion USD

Billion USD

35.00

4.50

35.25

BAUFFR

EL1The total cost of FFR will be 3% less than the total cost in EL3 scenario
Total cost in FFR and EL3 cases would be 2% and 6% higher respectively than thatin BAU.
Investment requirement in FFR and EL3 cases would be 2% and 9% higher
respectively than that in BAU
32

Incremental Abatement Cost
Total Incremental Abatement Costs ($/ton CO2e)
Total

FFR91.5

EL1224.3

EL2309.9EL3340.7• IAC of FFR is lower than that of EL1, EL2 and EL3 scenarios.
• Electrification NDC strategies are not so cheap!
• Total IAC: ranges from $91.5/tonCO2e in FFR to $340.7/tonCO2e in the EL3
scenario.

33

Conclusion• There are no-regret abatement options in the agriculture sector.
• There would be cumulative net sequestration at carbon tax of $10and above. No significant change in level of net cumulative
sequestration at carbon prices of $10 to $50/tCO2e. Carbon taxes
above $75 are not so effective for cumulative mitigation.
• Role of energy related emissions is growing. Total GHG emissions fromenergy using sectors are estimated to grow by 7 times during 20102050. The AFOLU sector gross emissions is estimated to increase by 0.9
times during the same period. Sequestration remains the same
throughout the period at 31MtCO2e/year.
• INDC overall FFR target is found to be more cost effective to reduce
GHG emission than the INDC electrification targets: GHG emission InFFR scenario is 30% lower than that in the BAU and16% lower than thatin the EL3 scenario.
• However, investment in FFR is 6% less than that in the EL3 scenario.
• Emissions of most local air pollutants are higher in the FFR scenario dueto larger usage of biomass energy.
• FFR would result in higher energy security than the Electrification
scenarios.
34Conclusion (contd..)• Cumulative electricity generation during 2010-2050
in FFR would be lower than that in the EL scenarios.
• Hydropower capacity requirement in FFR would be
36% more than that in BAU and 4% less than in EL3.
• Cumulative biomass use during 2010 - 2050 in FFR
would be 8% more than in BAU and 27% more thanin EL3.
• IAC is in the range of $91.5 in FFR to 340.7/ton CO2ein EL3 scenario.
• CO2 intensity decreases in the range of 25% in EL1 to
51% in FFR in 2050.
35

Thank You!!
(Email: ram.m.shrestha@gmail.com)

36