Supplementary results for revised oil prices
Paul W. Graham and Luke J. Reedman
EP151636
March 2015
Prepared for the Department of Environment
Citation
Graham, Paul W., and Reedman, Luke J., 2015.Transport Sector Greenhouse Gas Emissions Projections 2014-2050: Supplementary results for revised oil prices, Report No. EP151636, CSIRO, Australia.
Copyright and disclaimer
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Important disclaimer
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Contents
Contentsi
Figuresiii
Tablesiv
Acknowledgmentsv
List of acronyms and abbreviationsvi
Glossaryvii
Executive summaryx
1Introduction1
2Changes in model assumptions3
2.1Background...... 3
2.2The change in the retail fuel price outlook...... 3
2.3Road transport demand...... 4
2.4Preferences for road vehicle types and sizes...... 4
2.5Road vehicle costs...... 4
2.6Road vehicle fuel efficiency...... 5
2.6.1Light vehicles...... 5
2.6.2Heavy duty vehicles...... 5
2.7Non-road fuel choices...... 5
2.8Deployment of alternative fuels...... 5
3Baseline scenario results7
3.1Transport fuel mix...... 7
3.1.1Light duty road...... 7
3.1.2Heavy duty road...... 9
3.1.3Non-road...... 10
3.2Road sector engine mix...... 11
3.3Greenhouse gas emission projections...... 12
4Sensitivity scenario results15
4.1Mandatory emission standards for new light vehicles (Emission standards) scenario...... 15
4.1.1Transport fuel mix...... 15
4.1.2Greenhouse gas emission projections...... 17
4.2High oil price scenario...... 19
4.2.1Transport fuel mix...... 19
4.2.2Greenhouse gas emissions...... 20
4.3Low oil price scenario...... 21
4.3.1Transport fuel mix...... 21
4.3.2Greenhouse gas emissions...... 22
4.4Increased supply of second generation biofuels (High biofuels) scenario...... 23
4.4.1Transport fuel mix...... 23
Non-road...... 24
4.4.2Greenhouse gas emissions...... 25
4.5Delayed supply of second generation biofuels (Delayed biofuel) scenario...... 26
4.5.1Transport fuel mix...... 26
4.5.2Greenhouse gas emissions...... 27
5Measure estimate scenario results29
5.1Estimating the emission impact of the NSW biofuels mandate (No NSW biofuels target scenario).29
5.1.1Transport fuel mix...... 29
5.1.2Greenhouse gas emissions...... 31
5.2Estimating the emissions impact of 2014-15 budget changes to fuel excise arrangements (No excise changes scenario) 32
5.2.1Transport fuel mix...... 33
5.2.2Greenhouse gas emissions...... 35
6Emission range scenario results37
6.1High emission scenario...... 37
6.1.1Transport fuel mix...... 37
6.1.2Greenhouse gas emissions...... 38
6.2Low emission scenario...... 39
6.2.1Transport fuel mix...... 39
6.2.2Greenhouse gas emissions...... 41
References43
Figures
Figure E1: Projected transport sector greenhouse gas emissions under the Baseline and sensitivity scenarios
Figure 11: Assumed oil prices in the Baseline, Low oil price sensitivity and High oil price sensitivity scenarios
Figure 21: Old (left) and new (right) fuel prices to light road vehicles
Figure 22: Old (left) and new (right) retail prices to heavy road vehicles
Figure 31: Light duty road transport fuel consumption by fuel under the Baseline scenario
Figure 32: Heavy duty road transport fuel consumption by fuel under the Baseline scenario
Figure 33: Projected total road transport fuel consumption by fuel under the Baseline scenario
Figure 34: Non-road transport fuel consumption by fuel and mode under the Baseline scenario
Figure 35: Engine type in road kilometres travelled, Baseline scenario
Figure 36: Road transport greenhouse gas emissions by mode under the Baseline scenario
Figure 37: Transport sector greenhouse gas emissions under the Baseline scenario
Figure 41: Projected light duty road transport fuel consumption by fuel under the Emission standards scenario
Figure 42: Engine type in road kilometres travelled, Emission standards scenario
Figure 43: Light duty road transport sector greenhouse gas emissions under the Baseline and Emission standards scenarios (excluding motorcycles)
Figure 44: Transport sector greenhouse gas emissions under the Baseline and Emission standards scenarios
Figure 45: Projected road transport fuel consumption under the High oil price scenario
Figure 46: Transport sector greenhouse gas emissions under the High oil price and Baseline scenarios
Figure 47: Projected road transport fuel consumption by fuel under the Low oil price scenario
Figure 48: Transport sector greenhouse gas emissions under the Low oil price and Baseline scenarios
Figure 49: Projected road transport fuel consumption by fuel under the High biofuel scenario
Figure 410: Non-road transport fuel consumption by fuel and mode under the High biofuel scenario
Figure 411: Transport sector greenhouse gas emissions under the High biofuel and Baseline scenarios
Figure 412: Projected road transport fuel consumption by fuel under the Delayed biofuel scenario
Figure 413: Transport sector greenhouse gas emissions under the Delayed biofuel and Baseline scenarios
Figure 51: Projected road transport fuel consumption by fuel under the No NSW biofuels target scenario
Figure 52: Comparison of total road transport ethanol and biodiesel consumption with and without the NSW biofuel target
Figure 53: Transport sector greenhouse gas emissions under the No NSW biofuels target and Baseline scenarios
Figure 54: Projected road transport fuel consumption by fuel under the No excise changes scenario
Figure 55: Non-road transport fuel consumption by fuel and mode under the No excise changes scenario
Figure 56: Transport sector greenhouse gas emissions under the No excise changes and Baseline scenarios
Figure 61: Projected road transport fuel consumption by fuel under the High emission scenario
Figure 62: Transport sector greenhouse gas emissions under the High emission and Baseline scenarios
Figure 63: Projected road transport fuel consumption by fuel under the Low emission scenario
Figure 64: Non-road transport fuel consumption by fuel and mode under the Low emission scenario
Figure 65: Transport sector greenhouse gas emissions under the Low emission and Baseline scenarios
Tables
Table 21: Non-road transport fuel mix and efficiency assumptions
Table 51: Comparison of real effective fuel excise rates in 2015 and 2020 prior to and after 2014-15 budget changes assuming a constant 2.5 per cent consumer price index (2015 dollars)
Acknowledgments
CSIRO would like to acknowledge the input of staff at the Department ofEnvironmentand an internal referee in developing this report. However, any remaining errors remain the responsibility of the authors.
List of acronyms and abbreviations
bblBarrel
CO2Carbon dioxide
CO2eCarbon dioxide equivalent
CNGCompressed Natural Gas
CSIROCommonwealth Scientific and Industrial Research Organisation
CTLCoal-to-liquids diesel
DoEDepartment of the Environment
DOEDepartment of Energy (U.S.)
E10A blend of 10 per cent ethanol with 90 per cent petrol
ESMEnergy Sector Model
EUEuropean Union
GJGigajoule
GTLGas-to-liquids diesel
LNGLiquefied natural gas
LPGLiquefied petroleum gas
MLMegalitres
MtMegatonnes
NSWNew South Wales
PJPetajoules
STLShale-to-liquids diesel
USUnited States
Glossary
Alternative drive train–a drive train involving a power source in combination or separate from internal combustion to provide power to a vehicle
Alternative fuels –fuels other thanpetrol or diesel
Articulated vehicle –vehicles constructed primarily for the carriage of goods, consisting of a prime mover (having no significant load-carrying capacity) but linked, via a turntable device, to a trailer
Bio-derived jet fuel – a synthetic jet fuel manufactured via the conversion of biomass into jet fuel
Biodiesel – a diesel fuel substitute made from biomass. Those biodiesels produced using the transesterification process are often called Fatty Acid Methyl Esters (FAME) whilst those biodiesels produced using deoxyhydrogenation or Fischer-Tropsch gasification are call ‘renewable biodiesels’. Here we use the term biodiesel to cover both types.
Biomass – trees, crops, stems or other lignocellulosic or woody matters, plant oils or animal fats
Bio-SPK – synthetic paraffinic kerosene produced from tree or plant oils via the deoxyhydrogenation process
Cross-price elasticity of demand – the ratio between the proportional change in demand for a good or service divided by the proportional change in the price of another good or service (at given prices)
Deoxyhydrogenation – a refining process which removes the oxygen from vegetable oils and animal fats using various catalytic reactions at temperature and pressure. Hydrogen is a key input.
Diesel – a petroleum derived fuel suitable for use in compression ignition internal combustion engine vehicles
Drive-trains – the collection of all power transmission components in a vehicle, including the engine, which convert the fuel source into wheel propulsion
Electric vehicle – a vehicle which uses electricity stored in batteries and an electric motor in place of an internal combustion engine and a liquid petroleum fuel tank. Other elements of the conventional drive-train may also be modified or removed
Ethanol – one of several alcohol liquid fuels that can be produced from carbon based primary energy sources
First generation biofuels –Biofuels produced via one of the earlier commercialised technological pathways, including FAME biodiesel from traditional bio-oil crops and ethanol from sugars and starches.
Fischer Tropsch – a process for refining a purified syngas over a catalyst at controlled pressure and temperature into a liquid hydrocarbon. The syngas can be sourced via processing of natural gas or syngases produced from gasification of solid primary carbon fuels such as biomass and coal
Freight sector – the part of the transport sector primarily concerned with delivering non-passenger cargo
Fuel cell vehicle – a vehicle which uses a stored primary fuel such as hydrogen or natural gas, converts it to electricity via a fuel cell which is used to drive an electric motor in place of an internal combustion engine. Other elements of the conventional drive-train may also be modified or removed
Fuel efficiency – the ratio of the vehicle distance travelled per unit of fuel consumed. An alternative measure is distance a tonne is moved per unit of fuel which is more relevant for freight purposes. However, the former is more widely reported and is the preferred measure in this report.
Fuel excise – includes excise on petrol (gasoline), diesel, fuel ethanol, biodiesel, natural gas, liquefied petroleum gas, aviation gasoline, aviation kerosene, fuel oil, heating oil and kerosene. It is imposed at specific rates per unit of product.
Fuel supply chain – the collection of processes beginning from primary energy source extraction or harvesting,through transport of the energy source to a processing, refining or conversion plant, through to transport of the refined fuel the point of sale
Gasification – conversion of solid hydrocarbon fuels such as coal and biomass into a combustible gas rich in hydrogen and carbon monoxide
Greenhouse gas emissions –gaseous materials that have been classified as having a climate changing effect that have been transported into the atmosphere
Heavy duty vehicle – a vehicle with gross mass greater than 3.5 tonnes
Hybrid vehicle – an internal combustion vehicle that has been augmented with batteries and an electric motor which may store electricity generated from the internal combustion engine and then make it available at various times during the drive cycle, particularly when the electric motor is most efficient. The inclusion of an electric motor also allows regenerative breaking and for the internal combustion engine to be completely stopped rather than idled when the vehicle is stationary during a journey.
Internal combustion engine – an engine that uses the combustion of fuels via either spark or compression ignition to create wheel propulsion, usually via pistons.
Light commercial vehicle – light duty vehicle used primarily for business purposes
Light duty vehicle – a vehicle with gross mass less than 3.5 tonnes
Lignocellulosic biomass – the woody, non-food parts of crops, plants and trees
Low carbon fuels – fuels with a lower net lifecycle greenhouse gas emissions profile than petrol or diesel
Modal shift –A change inthe use of one transport mode to another to achieve the same journey. For example, from passenger vehicle to bus or from aeroplane to train.
Motorcycles – two and three wheeled motor vehicles constructed primarily for the carriage of one or two persons. Included are two and three wheeled mopeds, scooters, motor tricycles and motorcycles with sidecars.
Non-road transport – aviation, marine and rail transport
Own-price elasticity of demand – the ratio between the proportional change in demand for a good or service divided by the proportional change in the price of the good or service (at a given price).
Partial Equilibrium Model – a type of economic model which finds the market equilibrium level of demand, supply and prices for a given market sector but not for the whole economy
Passenger kilometres – the number of kilometres travelled by vehicle multiplied by the number of occupants in the vehicle.
Plug-in hybrid electric vehicle – hybrid vehicles that draw electricity from the grid to charge the batteries as the primary source of power, but that also include an on-board internal combustion engine to either supplement or recharge the battery when it becomes depleted in journeys beyond the range of the battery.
Pongamia – an oil seed tree (Millettia pinnata)naturalised to Australia
Premium grade petrol – unleaded petrol with an octane rating of 95 or higher
Projection period – the time period from the present to the year 2050
Range anxiety – the aversion some consumers may have to owning a reduced range vehicle.
Regular grade petrol – unleaded petrol with an octane rating of 91
Rigid trucks – motor vehicles exceeding 3.5 tonnes, which do not have a pivot point to assist turning
Saccharification – the conversion of lignocelluloses into sugars
Second generation/advanced biofuels –biofuels that are produced using non-edible feedstocks of lignocellulose (such as lead, stems, wood) and tree or plant oils which are currently available but not yet used for that purpose
Switching costs – the additional cost to the consumer of purchasing and operating an alternative fuel vehicle
Synthetic fuels – Fuels that mimic the chemical composition of petroleum based fuels such as petrol, diesel and kerosene but are produced from non-petroleum energy sources
Synthetic Pariffinic Kerosene (SPK)– a jet fuel produced from the conversion of biomass via either Fischer-Tropsch gasification or deoxyhydrogenation
Tonne kilometres (tkm) – the number of kilometres travelled by a vehicle (VKT) multiplied by the mass of freight (measured in tonnes) transported.
Transport sector – the aviation, road, rail and marine sectors
Upstream CO2 capture and storage – capturing (via a gas separation process) and storing (in a reservoir coal seam or aquifer) carbon dioxide gas that has been emitted during the process of refining a primary energy source into a transport fuel
Vehicle kilometre – a service unit which represents movement of one vehicle over one kilometre.
Vehicle kilometres travelled (VKT) – the number of kilometres travelled by a vehicle.
Executive summary
CSIRO was commissioned by the Department of Environment(DoE) to provide annual projections of emissions and fuel consumption for the transport sector to 2050 to inform Australia’s Emissions Projections 2014 and subsequently delivered a report in September 2014 (Graham and Reedman, 2014).
However, during the end of 2014 the oil price substantially declined to as low as $45/bbl which is beyond any recent experience leading many institutions to conclude that a step change had taken place in the market such that, previous projections of average oil prices in the range above $100/bbl indefinitely were now less likely.
CSIRO was subsequently commissioned to re-run all of the scenarios and sensitivity cases examined inGraham and Reedman (2014) with a new oil price range. For context the Baselinescenario oil price in Graham and Reedman(2014) report wasA$125/bbl in 2015rising to A$172/bbl in 2050. The scenario set includes a Baseline scenario, five sensitivity scenarios, two additional scenarios estimating the contribution of policy measures to greenhouse gas emissions projection outcomes and two final scenarios to determine the high and low range of emissions projections by combining various drivers in the sensitivity scenarios.
A description of each scenario is as follows:
- Baseline scenario – the central projection scenario including mid-range estimates of the key drivers and existing or announced policy measures.
Sensitivity scenarios:
- Mandatory emission standards for new light vehicles - a sensitivity scenariowhich assumes that,from 2018 on, mandatory CO2 emissions standards on all new light vehicles (passenger and light commercial vehicles) apply. The average emissions intensity of new light vehicles sold in Australiamust reach a target of 105g/km in 2025 (consistent with the US target in 2025)and 75g/km from 2035 onwards (which is broadly consistent with the EU 2025 target).
- High oil prices - a sensitivity case to gauge the impact of high oil prices. Under the Baseline scenario, oil prices are $97/bbl in 2020, $100/bbl in 2030, and $108/bbl in 2050. Under the High oil price scenario, oil prices are $140/bbl in 2020, $132/bbl in 2030 and $115/bbl in 2050 in 2013/14 Australian dollar terms.
- Low oil prices - a sensitivity to gauge the impact of low oil prices on the Baseline scenario. Under the Baseline scenario, oil prices are $97/bbl in 2020, $100/bbl in 2030, and $108/bbl in 2050. Under the Low oil price sensitivity case, oil prices are $82/bbl in 2020, $85/bbl in 2030 and $92/bbl in 2050. All prices are in 2013/14 Australian dollar terms
- Increased supply of second generation biofuels- a sensitivity scenario that explores the impact of a fourfold increase in the rate of expansion of second generation biofuels supply. In the Baseline scenario biofuels derived from lignocelluloses commence in 2036 at 1100ML, and increaseeach year by an imposed maximum limit of 10ML per annum, and biofuels derived from biologically derived oils commence at 400ML in 2036and increase by 10ML per annum.
- Delayed supply of second generation biofuels- a sensitivity scenario that explores the impact of a 15 year delay in the availability of second generation biofuels supply which effectively means that biofuels are not available during the projection period to 2050
Measures estimates: