sectoral economic costs and benefits of ghg mitigation - IPCC

Energy Intensive Industries
Costs and Benefits of Mitigation in Energy Intensive
Industries
Gina Roos
Summary
As individuals, energy intensive industries have two basic options for mitigating greenhouse gas
emissions: energy efficiency improvements and fuel switching. Further synergies could be
obtained from an integrated system approach, but this falls more within the realm of the bulk
energy suppliers. There are costs and benefits associated with each of the basic options. The
direct costs associated with energy efficiency improvements include the cost of new technologies
(with a higher depreciation cost on current assets) and associated training requirements. Direct
benefits center around reduced energy costs and associated local impacts.
Secondary costs and benefits associated with improvements in energy efficiency are more
dependent on circumstance i.e. whether local supporting industries can adapt or even take
advantage of the changes in market demand. The secondary costs and benefits could be
substantial but they often do not accrue to the industry itself and so they need to be considered
from a national perspective.
While the direct costs associated with fuel switching will also include technology and training
costs, there may also be a substantial cost incurred to establish appropriate infrastructure. The
direct benefits associated with fuel switching depend on the relative price and quality of the new
type of energy input. With a change in energy markets (as demand for less carbon intensive fuels
increases) it is possible that the price of alternative fuels will increase.
The profile of energy intensive industries differs substantially among developing countries. Less
developed countries tend to have a small industrial base which is specific to the resource base
and which generally makes use of a dedicated source of energy. In this case, a threat to the
energy source could be a threat to the industry itself. More developed countries tend to have a
larger industrial base which utilises a greater diversity of resources and may have access to more
diverse energy sources as well.
Generally, the cost of mitigation options will depend on the return on investment period,
proximity to alternative energy sources, costs and quality of alternative energy sources, whether
local synergies are possible and whether the mix of local and foreign inputs is sustainable over
time.
This presentation will present a South African perspective and then extend the discussion to
consider implications for the range of developing countries, in order to highlight how specific
costs can be to local circumstance.
Background
Emissions Inventory
Shackleton et al., (1996) estimated South Africa’s carbon dioxide (CO 2 ) emissions in 1992 at
between 236 and 399 million tons per annum. These figures are supported by preliminary results
of the South African Emissions Inventory for 1990 (van der Merwe and Scholes, 1999), where it
was estimated that approximately 374 million tons of CO 2 equivalents were emitted. Carbon
dioxide emissions contributed 81.5%, methane (CH 4 ) emissions 12.5% and nitrous oxide (N 2 O)
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