The cost of CO2 cuts

Comments:When the Climate and Pollution Control Directorate (Klima- og forurensingsdirektoratet) presented their report "Klimakur 2020", they showed a cost of 1100 NOK (ca 200 USD) per ton of CO2 reduction - when the target for cuts is 12 million tonnes of CO2.

The head of Norwegian Water Resources and Energy Directorate, Agnar Aas presented the sector "buildings and their energy consumption" (representing 26% of the Norwegian CO2 emissions). He started by reflecting on the fact that most of the energy consumed in this sector is electrical power produced with close to zero CO2 emissions (hydro electric power). Cuts will therefore not directly affect the emissions of CO2. Indirectly, however, the cuts will be important:

• Electrifying the transport sector: providing the required energy for CO2 cuts in the transport sector
• Replacing heating based on fossil-fuels: driving heatpumps, balanced ventilation and even traditional electrical ovens
• Producing aluminum with electricity in Norway rather than with coal in other countries: is good for the planet even though it might not affect the CO2 numbers for Norway    
• Export of clean electricity to countries where they use coal and oil for the production of electricity. Replacing 1 KWh of coal-based electricity can save 1 kg of CO2 emissions. If we could save 12 TWh of electricity per year in the building sector like Sintef Byggforsk has claimed, and all of this energy replaced coal-based electricity in EU - then theoretically our efforts here would save 12.000.000 tonnes of CO2 per year in EU (12 Mt of CO2). We loose some of the energy while sending the electricity over cables to EU, but still...                       

He did, however, not say that there are no possibilities for direct CO2 cuts in "his sector". He said that the mentioned efforts to replace fossil-fuel burners for heating could result in a 1.3 Mt of direct CO2 cuts - at moderate cost compared to the other efforts mentioned in the other sectors (most of the efforts were estmated below 1000 kr/ton).

I wanted to compare these numbers to the cost of energy cuts (and hence CO2 cuts) in the real-world example here in our "Jahus". In a previous blog post (link) I estimated the cost mer ton CO2 to be: 5 kg CO2 per USD or 1 NOK/kg CO2. Take this number and convert it to NOK/ton of CO2 and you get 1000 NOK/ton.

It is very important to note that this is before the return on investment such as savings on the electricity bill (50%) and increased value of the house (increasingly true when energy efficiency lables become obligatory on all houses for sale in Norway from July 1st 2010). The estimated return on investment is 10 years when we only count the savings on the electricity bill (not the expected increase in value of the house). If tax cuts, cheap loans and other incentives were introduced - the ROI could come down to 5 years, and more people would feel tempted to do this in their houses. 



In the most unlikely scenario that the government decided to pay for all "Jahus" projects, the cost per ton of CO2 reduction (1000) would be below the 1100 NOK/ton they estimated in the report and the total savings could be above 10 Mt of CO2. Not entirely true of course because 1 KWh is not equal to 1 kg of CO2 in the real world:
- 1 KWh transferred from Norway to Poland is not 1 KWh when it arrives (transmission losses)
- Norway does not have the capacity to export this amount of energy to EU (need more powercables)
- There are efforts underway to convert coal and oilbased powerstations to gas (which reduces the CO2 emissions by almost 50%)