Nuclear Phase-out Policy in Japan Shiro Takeda (Kyoto Sangyo - PowerPoint PPT Presentation

A CGE Analysis of CO2 regulation and Nuclear Phase-out Policy in Japan Shiro Takeda (Kyoto Sangyo University, Japan) 15th IAEE European Conference 2017, 3rd to 6th September 2017, Hofburg Congress Center, Vienna, Austria

Background • Energy and environment ► Energy and environment are important policy issues in Japan since the 2011 earthquake. ► Climate policy + nuclear use • Climate policy in Japan ► 2050 target: CO2 reduction by 60-80% ► FIT for renewable energy has started since 2012 ► The rise in electricity price • Nuclear use ► 60% of Japanese citizens are opposed to the restart of nuclear power plants (Nikkei, Feb. 29, 2016) ► But the Japanese gov. plans to use a certain amount of nuclear power in the future (about 20% in total electricity generation in 2030). 2

Purpose of analysis • Policy debates ► CO2 reduction target: 60%-80% (less or more?) ► Use of nuclear power: How much nuclear power do we use? • Economic impacts ► To determine climate and energy policies, we need information of their impacts on economic activity. • Purpose of analysis ► We quantitatively examine impacts of CO2 regulation and nuclear reduction on Japanese economy. ► Impacts on macroeconomy (GDP, income), electricity sector, production sectors. 3

Previous studies • Nuclear use (nuclear phase-out policy) ► Yamazaki and Takeda (2013), Yamazaki and Takeda (2016), Lee et al. (2015) ► A static model, a global model, a macro-econometic model. • CO2 regulations ► Takeda et al. (2012, 2013) ► Previous studies have put little emphasis on the relation between CO2 regulation and nuclear use. • This research ► Construct a dynamic CGE model of Japan which tries to capture the details of Japanese economy and energy system ► Examine various scenarios of CO2 reduction and nuclear use (and their combination) 4

Summary of the CGE model • Summary of our CGE (computable general equilibrium) model ► A CGE model for Japanese economy. ► 48 goods and 41 sectors ► A recursive dynamic model to 2050 ► The benchmark data is 2005 IO table 5

Structure of the model Rest of Export Import Export Import the world Import Intermediate inputs Tariff Production Armington Supply to Investment goods Supply to investment Domestic market activity aggregation production CO2 Supply to final Supply to government Primary factor consumption emissions supply Investment = Saving Carbon Government Household: emissions CO2 Transfer or tax Consumption emissions + Saving + Factor supply Emission permit revenue Production tax Flow of goods and factors CO2 emissions Tax 6

Energy • Energy goods and sectors ► 15 energy goods ► 9 energy sectors inc. electricity sectors 5 electricity sectors Notation Energy E_F Fossil fuel E_N Nuclear E_H Hydro E_S Solar E_W Wind 7

CO2 regulation • CO2 regulation ► In the simulation, we examine impacts of CO2 regulation. • Type of CO2 regulation ► Cap & trade ► Initial allocation of emissions permit → auction ► Auction revenue → lump-sum rebate to the household ► Price of emissions permit → Determined by permit market (demand = supply) 8

Simulation scenarios Scenario Explanation BAU Reference scenario 50% reduction in nuclear from 2005 level No regulation on CO2. N70 70% reduction in nuclear from 2005 level Nuclear reduction N90 90% reduction in nuclear from 2005 level C40 40% reduction in CO2 from 2005 level C50 Reduction in CO2 50% reduction in CO2 from 2005 level C60 60% reduction in CO2 from 2005 level N70_C60 N70 + C60 N90_C60 N90 + C60 • BAU ► Reference scenario ► Without no limit on CO2 ► Nuclear after 2020 will be limited to the half of 2005 level. ► This scenario is similar to “Current Policy Scenario” in WEO. 9

Nuclear power and CO2 emissions Electricity generation by nuclear CO2 emissions (MtCO2) (TWh) 1,400 350 1,200 300 1,000 250 800 200 600 150 400 100 200 50 0 0 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 2015 2020 2025 2030 2035 2040 2045 2050 BAU N70 N90 BAU C40 C50 C60 10

Paths of CO2 emissions and GDP in BAU scenario CO2 emissions in BAU scenario Income and GDP in BAU scenario (MtCO2) (Trillion Yen) 1,400 800.0 726.1 700.0 1,159 1,200 600.0 1,000 500.0 800 400.0 300.0 600 200.0 400 100.0 200 0.0 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 0 2005 2010 2015 2020 2025 2030 2035 2040 2045 2050 Income GDP 11

Simulation results 12

Electricity generation by source (TWh, 2050) BAU 1,400 Nuclear reduction CO2 reduction 1,200 1,000 CO2 + Nuclear 800 600 400 200 0 BAU N70 N90 C40 C50 C60 N70_C60 N90_C60 Fossil fuel Nuclear Hydro Solar Wind 13

CO2 reduction rates and carbon price in 2050 CO2 reduction CO2 + Nuclear 70 80 carbon price (1000 yen/tCO2) 70 60 CO2 reduction rate (%) 60 50 50 40 40 30 30 20 20 10 10 0 0 C40 C50 C60 N70_C60 N90_C60 CO2 reduction rate Carbon price 14

Impacts on GDP and real income (%) % change in income and GDP from BAU value (2050, %) N70 N90 C40 C50 C60 N70_C60 N90_C60 0.0 -0.4 -0.6 -2.0 -1.4 -1.5 -2.1 -2.4 -2.7 -4.0 -4.3 -4.5 Nuclear reduction -5.0 -6.0 -6.2 -7.3 -8.0 -8.1 -9.9 -10.0 CO2 reduction -12.0 CO2 + Nuclear Real income GDP 15

Summary • Macro impacts ► Nuclear reduction has relatively small impacts on macro variables. ► CO2 regulation of 60% reduction rate has large negative impact on macro variables. • Sectoral impacts. ► Both nuclear reduction and CO2 regulation have large negative impacts on energy-intensive sectors. • Climate policy in Japan. ► Our analysis quantitatively shows that the current CO2 reduction target (60-80% decrease in GHG by 2050) is likely to have large negative impacts on Japanese economy especially if it is implemented with nuclear reduction. • Limitations ► The benchmak data is old. ► Energy technology (efficiency) improvement. 16

References • Takeda, S., Horie, T. and Arimura, T. H., (2012). A Computable General Equilibrium Analysis of Border Adjustments under the Cap-And-Trade System: A Case Study of the Japanese Economy. Climate Change Economics , 03(01), p.1250003. http://doi.org/10.1142/S2010007812500030 • Takeda, S., Arimura, T. H., Tamechika, H., Fischer, C., and Fox, A. K. (2013) “Output -Based Allocation of Emissions Permits for Mitigating Carbon Leakage for the Japanese Economy.” Environmental Economics and Policy Studies . http://doi.org/10.1007/s10018-013-0072-8 • Yamazaki, M., and Takeda, S. (2016). “A Computable General Equilibrium Assessment of Japan’s Nuclear Energy Policy and Implications for Renewable Energy.” Environmental Economics and Policy Studies . http://doi.org/10.1007/s10018-016-0164-3 • Yamazaki, M. and Takeda, S. (2013). “An assessment of nuclear power shutdown in Japan using the computable general equilibrium model.” Journal of Integrated Disaster Risk Management , 3(1), 36 – 55.http://doi.org/10.5595/idrim.2013.0055 • Lee, S., Pollitt, H. and Park, S.-J. (eds.) (2015) Low-carbon, Sustainable Future in East Asia: Improving energy systems, taxation and policy cooperation, Routledge Studies in the Modern World Economy. 17