UK Marginal Abatement Cost

168 Pages·2008·0.95 MB·English

UK Marginal Abatement Cost Curves for the
Agriculture and Land Use, Land-Use Change and
Forestry Sectors out to 2022, with Qualitative
Analysis of Options to 2050

Final Report to the Committee on Climate Change

a a a
Dominic Moran , Michael MacLeod , Eileen Wall ,
a b b
Vera Eory , Guillaume Pajot , Robin Matthews ,
a a a
Alistair McVittie , Andrew Barnes , Bob Rees ,
c d e
Andrew Moxey , Adrian Williams , Pete Smith

a. Research and Development Division, SAC, West Mains Road,
Edinburgh, EH9 3JG
b. MLURI, Craigiebuckler, Aberdeen
c. Pareto Consulting, Edinburgh
d. Cranfield University
e. Aberdeen University
Date: 20/11/2008

Prepared for: The Committee on Climate Change

Project reference: RMP4950

Prepared by: SAC Commercial Ltd
King’s Buildings
Edinburgh EH9 3JG

2
Acknowledgements

We would like to thank Jenny Byars and Mike Thompson of the CCC, who
provided continuous and insightful steering of this project. We would also like
to thank participants at a Defra workshop held on the 24th June to provide
input to the project. We acknowledge core funding from Scottish Government
RERAD, which enabled us to undertake further modification to the project
report.
Contents

Executive summary vii
1 Introduction 1
1.1 Background 1
1.2 Objectives and Scope 3
1.3 Key MAC Parameters 5
1.4 Baselines 6
2 Mapping BAU3 onto the MACC Carbon Budget Years 10
2.1 Baseline information for LULUCF 10
2.2 Identifying additionality in abatement 10
2.3 Identifying technical potentials 11
2.4 Quantifying costs and the timing of benefits 15
2.5 Costs 17
3 Farm Level Modelling Approach 18
3.1 Define Farm Types 18
3.2 Identify Financial Profiles 19
3.3 Running Scenarios 19
3.4 Aggregation of Changes to Costs 19
3.5 Discounting costs 20
3.6 Measure Interactions 21
3.7 Reconciliation with National Inventory 21
4 Mitigation options in Crops and Soils 23
4.1 Key Findings 23
4.2 General 24
4.2.1 Overview of sector 24
4.2.2 What's covered in crops and soils category 24
4.2.3 Crops and soils emissions: how much and trends 24
4.2.4 Main modelling complexities 25
4.2.5 Criteria/rationale and brief description for screening measures in each
sector 25
4.3 Selection and Description of Mitigation Measures 26
4.4 Data and Measurement 28
4.4.1 Baselines and Additionality 28
4.4.2 Costs 29
4.4.3 Abatement rate and potential 29
4.4.4 Cost-effectiveness (CE) 30
4.4.5 Uncertainties 32
ii
4.5 Results and conclusions 33
Annex A4 Full list of measures and reasons for omission from interim list 36
Annex B4 Interim list of measures and estimated abatement rates 40
Annex C4 Description of the measures on the short list 44
Annex D4 Assumptions used in calculating the costs of measures 47
Annex E4 Cost and stand-alone cost-effectiveness 49
Annex F4 Table of interaction factors, assuming 50% overlap 50
Annex G4 Results 51
Annex H4 "Get Ranking" 57
Annex I4 Crops/Soils Measures Expert Group 58
5 Mitigation options from livestock 59
5.1 Key Findings 59
5.2 Background 60
5.3 Prioritisation of abatement options examined 60
5.4 Methodology for estimating the abatement potential and cost-effectiveness
of mitigation options from livestock 61
5.5 Modifications to the diet and dietary supplementation 63
5.6 Breeding for improved efficiency 66
5.7 Manure management options 69
5.8 Anaerobic digestion 70
5.8.1 On Farm Anaerobic Digestion (OFAD) 70
5.8.2 Central Anaerobic Digestion (CAD) 71
5.8.3 Use of digestate 71
5.8.4 Livestock and holdings projections 72
5.9 Results 73
Annex A5 Review and ranking of potential mitigation options from livestock 75
Annex B5 Summary of costing assumptions for livestock animal and livestock
manure management options excluding anaerobic digestion. 81
Annex C5 Livestock measures results 84
6 Mitigation options in forestry 87
6.1 Key Findings 87
6.2 Overview of the sector 88
6.3 Mitigation measures 88
6.4 Data, measurement and assumptions 90
6.4.1 Baselines, rotation lengths, carbon sequestration and substitution benefits
90
6.4.2 Costs and incomes 94
6.5 Results 96
6.5.1 Abatement potential 96
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6.5.2 Cost effectiveness 97
6.5.3 Discussion 97
7 Mitigation options in Land Use and Land Use Change (LULUC) 99
7.1 Key findings 99
7.2 Background 99
7.3 Overview of sector 99
7.4 Main modelling complexities 100
7.4.1 Criteria/rationale and brief description for screening measures in each
sector 100
7.5 Mitigation measures 100
7.5.1 Conversion from arable to grassland 100
7.5.2 Reduced ploughing of grassland 101
7.5.3 Peat restoration 101
7.5.4 Halting liming of organic soils 101
7.6 Data and Measurement 102
7.6.1 Land use transition matrices 102
7.6.2 Baselines 103
7.7 Costs 104
7.7.1 Sources of data 104
7.7.2 Costs 104
7.7.3 Other assumptions 105
7.7.4 Farm scale model description 105
7.8 Abatement potential 109
7.8.1 Sources of data 109
7.8.2 Modelling abatement potential 110
7.8.3 What is included and excluded 110
7.8.4 Uncertainties 110
7.9 Results 112
8 Discussion 114
8.1 Exclusions 122
8.2 Recommendations for further work 123
References 124
Annex A Systems LCA Perspectives on Measures Proposed to Reduce GHG
emissions from Agriculture 130
Annex B Qualitative assessment of ancillary costs and benefits of measures
140
Annex C Interaction of MACC measures and GHG Inventory 148
Annex D 2050 potentials 151
iv
List of Tables

Table E.1 2022 Abatement potential CFP xi
Table 1.1 Aggregated emission trends per source category (Mt CO equivalent) 2
2
Table 2.1 Categorisation of potential depending on cost and ease of enforcement 13
Table 2.2 Uptake/compliance rates 13
Table 2.3 Uptake/Compliance with existing policies 14
Table 2.4 Example: Precision farming 16
Table 4.1 BAU3 land use projections 29
Table 4.2 Calculating the abatement rate of combinations of measures 31
Table 4.3 Effect of overlap on abatement 31
Table 4.4 Example showing the effects of measure interaction on CE 32
Table 4.5 Total abatement potential (MtCO e/y) at a cost of <=£100/tCO e, and
2 2
discount rate 3.5% 34
Table 4.6 Crops and Soils Measures Central Feasible Potential, 2012, 3.5% discount
rate 51
Table 4.7 Crops and Soils Measures Central Feasible Potential 2017, 3.5% discount
rate 52
Table 4.8 Crops and Soils Measures Central Feasible Potential 2022, 3.5% discount
rate 53
Table 4.9 Crops and Soils Measures High Feasible Potential 2022, 3.5% discount rate
54
Table 4.10 Crops and Soils Measures Low Feasible Potential 2022, 3.5% discount rate
55
Table 5.1 List of applicable livestock abatement options studied in this report 61
Table 5.2 Description of the “direct” and “indirect” costs associated with dairy animal
abatement measures 62
Table 5.3 Description of the “direct” and “indirect” costs associated with beef animal
abatement measures 62
Table 5.4 Effect of increasing starch content of the diet in dairy cattle (IGER, 2001) 64
Table 5.5 Effect of increasing proportion of maize silage in the diet (IGER, 2001) 65
Table 5.6 Summary of the abatement potential assumptions for animal management
options of dairy cows.* 69
Table 5.7 Summary of the abatement potential and cost assumptions for livestock
manure management abatement options* 69
Table 5.8 Livestock holding sizes assumed for estimating abatement potential via
anaerobic digestion. 70
Table 5.9 Total abatement potential (MtCO e/y) at a cost of <=£100/tCO e, 3.5%,
2 2
social metric 73
Table 5.10 Livestock Measures Central Feasible Potential, 2012 84
Table 5.11 Livestock Measures Central Feasible Potential 2017 84
Table 5.12 Livestock Measures Central Feasible Potential 2022 85
Table 5.13 Livestock Measures High Feasible Potential 2022 85
Table 5.14 Livestock Measures Low Feasible Potential 2022 86
Table 6.1 Emissions under low, mid and high planting scenarios 92
Table 6.2 Timber prices: sales contracts for standing coniferous timber from forest
enterprise areas 95
Table 6.3 Income generated from harvest (thinnings and clear cut) 95
Table 6.4 Sequestration abatement potential for afforestation, central feasible potential
96
Table 6.5 Abatement potential for shorter rotations, central feasible potential 97
Table 6.6 Cost effectiveness of the forestry measures, 2022, CFP, social metric 97
Table 7.1 Input data for the various enterprises used in the analysis. Gross margins ,
fertiliser and lime data from Beaton et al. (2007). 104
Table 7.2 Unit costs (£ tCO e-1) and technical abatement potential (MtCO e) of various
2 2
land use transitions from arable to grassland for England. 105
Table 7.3 Unit costs (£ tCO e-1) and technical abatement potential (MtCO e) of various
2 2
land use transitions from arable to grassland for Scotland. Only those
transitions with a positive technical abatement potential (i.e. GHG emission
reductions) are shown. 106
v
Table 7.4 Unit costs (£ tCO e-1) and technical abatement potential (MtCO e) of various
2 2
land use transitions from arable to grassland for Wales. Only those
transitions with a positive technical abatement potential (i.e. GHG emission
reductions) are shown. 107
Table 7.5 Unit costs (£ tCO e-1) and technical abatement potential (MtCO e) of various
2 2
land use transitions from arable to grassland for Northern Ireland. 108
Table 7.6 Unit costs (£ tCO e-1) and technical abatement potential (MtCO e) of various
2 2
land use transitions from arable to grassland for the whole of the United
Kingdom. 109
Table 8.1 MACC, central feasible potential 2022, social metric 118
Table 8.2 Central Feasible Potential 2022 using a 7.0% discount rate 121

List of Figures

Figure E.1 MACC for UK agriculture 2022, CFP xiii
Figure E.2 MACC for UK agriculture 2022, MTP xiv
Figure 1.1 Illustrative Marginal Abatement Cost Curve 3
Figure 1.2 Deriving the domestic budget from a MACC 5
Figure 1.3 MACC development process 6
Figure 2.1 Abatement potential measured against baseline 11
Figure 4.1 Approach to screening measures 35
Figure 4.2 Crops and soils MACC, Central Feasible Potential 2022, private discount rate
56
Figure 5.1 Impact of increasing the proportion of propionate in the rumen on methane
output (IGER, 2001). 65
Figure 5.2 Livestock MACC with interactions for the central feasible in 2022 with a
discount rate = 7% 86
Figure 7.1 Land use transition matrices calculated in the UK Greenhouse Gas Inventory,
1990 to 2006 (Choudrie et al., 2008). The 1990-91 areas were estimated
from the Countryside Survey data, translated into IPCC land use categories
and adjusted to take account of other data sources. 103
Figure 7.2 Areas of set-aside in the United Kingdom 1990-2007. Source: Defra
Agricultural Land Use; United Kingdom (Table 3.1). 112
Figure 7.3 Annual changes in set-side in the United Kingdom 1990-2007. Source: Defra
Agricultural Land Use; United Kingdom (Table 3.1). 112
Figure 7.4 Technical abatement potential (MtCO e) of converting all arable land in the
2
UK into grassland with different uses (beef, sheep, dairy, no livestock). 113
Figure 8.1 MACC, central feasible potential 2022, private discount rate 120

vi
Executive summary

Greenhouse gas emissions from agriculture, land use and land use change
(ALULUCF) are a significant percentage of UK emissions. The UK Government is
committed to ambitious targets for reducing emissions and all significant sources are
coming under increasing scrutiny. The task of proposing future reductions falls to the
newly appointed Committee on Climate Change (CCC), which needs to consider
efficient mitigation potential across a range of sectors.

Government recognises the need to achieve emissions reductions in an economically
efficient manner. In theory this means that some attempt should be made to equalise
marginal abatement costs across different sectors. In other words, the cheapest
units of greenhouse gas should be abated first. This suggests a requirement for
information on abatement schedules or marginal abatement cost curves (MACC’s),
which show the relative cost of greenhouse gas mitigation by alternative mitigation
methods and technologies. The CCC can then use these curves as a tool for setting
carbon budgets. The MACCs can also be used by government to negotiate with
emitting sectors and to develop a policy route map for affecting emissions reductions
to meet proposed budgets.

This report describes the derivation of MACC’s to depict abatement potential for
(ALULUCF) in the UK. MACC analysis offers a representation of cost and abatement
potential that is built up from a bottom-up analysis of data on mitigation options within
respective sectors. These mitigations are projected to be adopted over and above a
baseline of what would normally happen, thereby giving rise to extra abatement
potential. This information provides a basis for identifying a sector’s potential
contribution to greenhouse gas budgets that is based on a cost-effectiveness
analysis.

The methodology for deriving abatement potentials and the derivation of associated
cost curves was supplied by the CCC to be consistent with MACC analysis in other
sectors of the economy. The methodology allows for abatement potentials to be
represented using a range of alternative cost metrics.

This project focussed predominantly on CO abatement in forestry and non CO
2 2
gases, specifically, methane and nitrous oxide, which make up the main emissions
from the land based sector. A range of sub sector specific abatement measures was
identified from a variety of published and unpublished sources. Information on
relevance and applicability to UK conditions was then derived from expert opinion,
which was also used to estimate abatement potentials under UK conditions, and the
extent to which measures would be additional to a business as usual baseline.
Expert input was also sought for some of the relevant information on implementation
costs. Cost information was augmented by modelling decision-making at the farm
scale.

The resulting abatement potentials are clearly influenced by levels of expected
adoption of these measures. Accordingly, the analysis considers a range of technical
potentials that might set the limits on abatement. A maximum technical potential
(MTP) determined the absolute upper limit that might result from the highest
technically feasible level of adoption or measure implementation in the sub sectors.
Since this limit is not informed by the reality of non adoption or likely policy or social
constraints, we also estimate high, central and low feasible potential (HFP/CFP/LFP)
abatements, which are the levels thought most likely to emerge in the time scales
and policy contexts under consideration.
There are several ways to present the resulting MACC information for the CCC
budget periods, 2012, 2017 and 2022. In addition to the differing levels of abatement
related to adoption, MACC variants can be created using private or social costs or a
hybrid of both. The key distinctions here are the different discounting assumptions,
and whether or not the analysis reflects private or social costs. Abatement potentials
have also been estimated for the separate UK devolved administrations, i.e. England,
Scotland, Wales and Northern Ireland.

The information was compiled in spreadsheets that allow transparency and flexibility
in altering assumptions in several key data inputs.

Forestry potential contributes to the estimated total abatement in ALULUCF, which
may be further enhanced by the extent to which wood products are assumed to
displace carbon intensive construction materials and energy sources. We also
estimate significant abatement potential in crop and soil measures and in livestock
management. We do not identify any specific significant abatement opportunities in
land-use change, but note that previous studies have, and that small opportunities
may exist in terms of peat land restoration. But these opportunities may be relatively
costly compared to any reasonable cost threshold such as the current UK Shadow
Price of Carbon.
The combined total CFP abatement estimates for 2012, 2017 and 2022 (social
discount rate) are 2.66 MtCO e, 6.58 MtCO e and 10.83 MtCO e respectively. In
2 2 2
other words, by 2012, and assuming a feasible policy environment, ALULUCF could
be mitigating around 6% of current greenhouse gas emissions (which the NAEI
reported to be 45.253MtCO e in 2005 – not including emissions from agricultural
2
machinery). By 2022 this rises to nearer 25%. The combined total MTP abatement
estimates for 2012, 2017 and 2022 (social discount rate) are 5.83 MtCO e, 14.91
2
MtCO e and 23.86 MtCO e respectively.
2 2
The estimated CFP and MTP potentials for 2022 are demonstrated in Table E.1 and
2, respectively, where the final column of cumulative abatement potential defines the
MACC curve shown in Figure E.1and Figure E.2
For illustrative purposes, using the 2022 MACC this total central feasible potential
can be divided between crop and soil measures 6.461 MtCO e, livestock measures
2
3.40 MtCO e, and forestry measures 0.98 MtCO e.
2 2
Table E.1 also suggests that all three sub sectors offer measures capable of
delivering abatement at zero or low cost (expressed in 2006 prices) below thresholds
set by the Shadow Price of Carbon (currently about £36/t CO e projected for 2025).
2
Indeed around 6.34 MtCO e could possibly be abated at negative or zero cost. As
2
demonstrated by Table E1 and associated MACC, costs then rise progressively.
After measure AC (crop-soils drainage) there is a steep rise in the abatement cost
per tonne.
For agriculture alone, the central feasible potential of 7.85MtCO e (at <£100/t)
2
represents 17.3% of the 2005 UK agricultural NAEI GHG emissions. Although there
are no similar benchmark studies, the results presented here partly corroborate
conclusions on abatement potential identified in IGER (2001) and CLA/AIC/NFU
(2007) in relation to N O. The MACC curves presented here provide more detail that
2
builds on a preliminary MACC exercise set out in Nera (2007).

1 Where possible figures are reported to several decimal places for maximum transparency.
Rounding to one significant figure would better reflect the uncertainties involved.
viii