Michał Lewarski’s research while affiliated with Institute of Environmental Protection and other places

This report provides a comprehensive analysis of strategies to enhance the EU Emissions Trading System (EU ETS) and align it with global climate goals. The report explores the implications of linking the EU ETS with other emissions trading systems (ETS), the introduction of the Carbon Border Adjustment Mechanism (CBAM), the role of offsets, and the potential establishment of a European Central Carbon Bank (ECCB). Structured in two parts, the report first examines the global landscape of ETS frameworks, including systems in the UK, USA, Canada, South Korea, Mexico, and China. It reviews their sectoral coverage, carbon price levels, and institutional arrangements, while also analyzing past attempts at ETS integration and the role of the Paris Agreement in fostering carbon market linkages. The second part offers a quantitative macroeconomic assessment using a computable general equilibrium (CGE) model. Two scenarios are analyzed: Scenario 1: Linking the EU ETS with other systems, enabling cross-border allowance trading. Scenario 2: Integrating offsets from Global South emission reduction projects. Key findings indicate that ETS linking can lower compliance costs, stabilize carbon prices, and enhance international cooperation, while CBAM and offsets can mitigate carbon leakage and promote sustainable development. These measures contribute to market stability and a cost-effective pathway toward climate neutrality by 2050.

This report is structured to analyse the dynamic interactions between complementary policies and emission trading systems, notably the EU Emissions Trading System (EU ETS) and the new ETS2. The report focus on understanding policy interactions. In particular, it examines: - How pricing for CO2 removals through mechanisms like BECCS (Bioenergy with Carbon Capture and storage) and afforestation of arable lands, interact with existing emission trading frameworks. - Additionally, it evaluates strategies aimed at decarbonizing the transport sector, including the implementation of emission standards for heavy-duty vehicles and policies accelerating the scrapping of old fossil fuel cars. - The report also delves into the subsidization of green hydrogen, examining its role and integration within the broader EU climate strategy. The emission reduction targets in the scenarios are consistent with the net-zero path as outlined in the European Green Deal and the ‘Fit for 55’ package. The report also considers the impact of the European Commission's recent proposals for ambitious climate targets for 2040 on key macroeconomic indicators. Through this multi-dimensional approach, the report aims to contribute substantively to the ongoing discourse surrounding the development of EU climate policy. The report seeks to offer valuable insights that are crucial for making informed decisions in the context of the European Union’s ambitious climate goals, thereby supporting policymakers in the strategic planning and implementation of effective climate actions.

Background The transition to a climate neutral society such as that envisaged in the European Union Green Deal requires careful and comprehensive planning. Integrated assessment models (IAMs) and energy system optimisation models (ESOMs) are both commonly used for policy advice and in the process of policy design. In Europe, a vast landscape of these models has emerged and both kinds of models have been part of numerous model comparison and model linking exercises. However, IAMs and ESOMs have rarely been compared or linked with one another. Methods This study conducts an explorative comparison and identifies possible flows of information between 11 of the integrated assessment and energy system models in the European Climate and Energy Modelling Forum. The study identifies and compares regional aggregations and commonly reported variables. We define harmonised regions and a subset of shared result variables that enable the comparison of scenario results across the models. Results The results highlight how power generation and demand development are related and driven by regional and sectoral drivers. They also show that demand developments like for hydrogen can be linked with power generation potentials such as onshore wind power. Lastly, the results show that the role of nuclear power is related to the availability of wind resources. Conclusions This comparison and analysis of modelling results across model type boundaries provides modellers and policymakers with a better understanding of how to interpret both IAM and ESOM results. It also highlights the need for community standards for region definitions and information about reported variables to facilitate future comparisons of this kind. The comparison shows that regional aggregations might conceal differences within regions that are potentially of interest for national policy makers thereby indicating a need for national-level analysis.

This article presents the results of a comparative scenario analysis of the “green hydrogen” development pathways in Poland and the EU in the 2050 perspective. We prepared the scenarios by linking three models: two sectoral models for the power and transport sectors, and a Computable General Equilibrium model (d-Place). The basic precondition for the large-scale use of hydrogen, in both Poland and in European Union countries, is the pursuit of ambitious greenhouse gas reduction targets. The EU plans indicate that the main source of hydrogen will be renewable energy (RES). “Green hydrogen” is seen as one of the main methods with which to balance energy supply from intermittent RES, such as solar and wind. The questions that arise concern the amount of hydrogen required to meet the energy needs in Poland and Europe in decarbonized sectors of the economy, and to what extent can demand be covered by internal production. In the article, we estimated the potential of the production of “green hydrogen”, derived from electrolysis, for different scenarios of the development of the electricity sector in Poland and the EU. For 2050, it ranges from 76 to 206 PJ/y (Poland) and from 4449 to 5985 PJ/y (EU+). The role of hydrogen as an energy storage was also emphasized, highlighting its use in the process of stabilizing the electric power system. Hydrogen usage in the energy sector is projected to range from 67 to 76 PJ/y for Poland and from 1066 to 1601 PJ/y for EU+ by 2050. Depending on the scenario, this implies that between 25% and 35% of green hydrogen will be used in the power sector as a long-term energy storage.

Background: The transition to a carbon neutral society such as that envisaged in the European Union Green Deal requires careful and comprehensive planning. Integrated assessment models (IAMs) and energy system models (ESMs) are both commonly used for policy advice and in the process of policy design. In Europe, a vast landscape of these models has emerged and both kinds of models have been part of numerous model comparison and model linking exercises. However, IAMs and ESMs have rarely been compared or linked with one another. Methods: This study conducts an explorative comparison and identifies possible flows of information between 11 of the integrated assessment and energy system models in the European Climate and Energy Modelling Forum. The study identifies and compares regional aggregations and commonly reported variables We define harmonised regions and a subset of shared result variables that enable the comparison of results across the models. Results: The results highlight similarities and differences on final electricity demand, electricity supply and hydrogen across three levels of aggregation. However, the differences between the regional aggregation of the models limit detailed analysis. Conclusions: This first-of-its-kind comparison and analysis of modelling results across model type boundaries provides modellers and policymakers with a better understanding of how to interpret both IAM and ESM results. It also highlights the need for community standards for region definitions and information about reported variables to facilitate future comparisons of this kind.

The report analysed options of transition towards climate neutrality in line with the goals set in the European Green Deal. Our main focus was on changing the climate policy architecture through gradual extension of the EU ETS up to 2050. We analysed the impact of inclusion of new sectors in the EU ETS on the economy and sector-specific production at EU and regional levels. The report also points to the special role of technological and natural options of carbon capture, which will be necessary to achieve climate neutrality.

Raport przedstawia możliwe kierunki zmian w sektorze elektroenergetyki i ciepłownictwa systemowego w Polsce i w krajach UE. W raporcie przeanalizowano kilka scenariuszy istotnych z punktu widzenia wyzwań transformacji oraz ryzyka związanego z zawirowaniami na rynkach paliw w obecnej sytuacji geopolitycznej: 1) scenariusz odniesienia (BASE) zakładający osiągnięcie jedynie 60% redukcji emisji w UE w 2050 r. vs. 1990 r. 2) scenariusz neutralności (NEU) – zakładający osiągnięcie neutralności klimatycznej na poziomie UE w 2050 r., 3) scenariusz neutralności z wysokimi cenami paliw kopalnych (NEU_HPRICE) – symulujący wpływ wyższych cen paliw na poziom zapotrzebowania na energię elektryczną i koszty emisji, 4) scenariusz neutralności z niższym potencjałem rozwoju morskich farm wiatrowych (NEU_LWIND) – badający wrażliwość wyników na skalę rozwoju OZE w UE, w tym możliwości generacji bezemisyjnej energii elektrycznej oraz zielonego wodoru. Transformacja energetyczna będzie się wiązała ze znacznym wzrostem zapotrzebowania na energię elektryczną, koniecznością wzrostu udziału OZE w miksie, współpracy odbiorców energii w bilansowaniu systemu elektroenergetycznego (DSR, ładowanie samochodów elektrycznych), budowy znacznych mocy bilansujących niesterowalne OZE (elektrolizery, magazyny bateryjne).

Summary of the report showing the directions of energy transformation in energy sector in Poland and EU. The report analyses several scenarios that take into account the challenges of the energy transformation and current fuel crisis: 1) the baseline scenario (BASE) assuming only 60% emission reduction in the EU in 2050 vs. 1990, 2) the neutrality scenario (NEU) – assuming the achievement of climate neutrality at the EU level in 2050, 3) neutrality scenario with high fossil fuel prices (NEU_HPRICE) – simulating the impact of increased fuel prices on the level of electricity demand and emission costs, 4) neutrality scenario with a lower potential of offshore wind farms (NEU_LWIND) – investigating the sensitivity of the results on the scale of RES development in the EU, including the possibility of generating zero-emission electricity and green hydrogen. The energy transformation will require a significant increase in the demand for electricity, an increase in the share of RES in the energy mix, cooperation of energy consumers in balancing the power system (DSR, charging electric cars), significant investments in technologies for balancing unstable RES (electrolysers, energy storages).

This paper describes the linking between four models developed and maintained by the Center for Climate and Energy Analysis (CAKE): the macroeconomic Computable General Equilibrium (CGE) model (d-PLACE), energy model (MEESA), transport model (TR3E) and agriculture model (EPICA). It explains the procedure for solving the models in the iterative mode and provides documentation of additional components of the models’ code that facilitate the linking. The primary purpose of linking is to ensure that changes due to mitigation effort in one sector are reflected in the costs and potential of mitigation effort in the other sectors. Standard sectoral models are a valuable source of projections of detailed changes in the structure of production inputs and output in individual sectors. However, when these models run in isolation, the projections are based on the assumptions that a number of critical variables, such as demand for sectoral output, carbon price and prices of inputs are exogenous, that is they do not react to changes in climate policy considered in the simulation, or this reaction is crudely simplified. In reality, individual sectors are not isolated from the rest of the economy: they have an impact on and are affected by changes in prices and macro conditions. These feedback effects and inter-sectoral dependencies are likely to have critical importance for the evaluation of climate policies. For instance, faster deployment of renewable energy sources (RES) in the energy sector (e.g. induced by climate policy) will reduce demand for emission allowances and reduce their price. A drop in the price will have a negative effect on the adoption of low-carbon technologies in industry as well as a feedback effect on deployment of renewables in the energy sector. Similarly, reduction in the availability of BioEnergy with Carbon Capture and Storage (BECCS) technologies in the energy sector would have an effect spilling over all EU ETS sectors. Acceleration of electric vehicles in the transport sector generates demand for electricity that increases its price – again, with consequences for transport, energy and all other industrial sectors. Reduction in beef consumption in agriculture reduces demand for emissions in non-ETS sectors, which will decrease pressure for the decarbonisation in the transport sector. Interaction between macroeconomic conditions and individual sectors are taken into account in models with General Equilibrium (GE) setting, but this is at the expense of less detailed modelling at the sectoral level. GE macroeconomic models, such as CGE and Dynamic Stochastic General Equilibrium (DSGE) models, analyse simultaneously changes in all key sectors of the economy (transport, energy, agriculture), however this necessitates limiting the number of commodities in each sector, comparing to sectoral models. In addition, GE models often do not include physical constraints, such as availability of particular technologies or constraints on the availability of resources, which can be easily incorporated in the sectoral models. Moreover, the detailed structure of sectoral models allows to explicitly take into account the time necessary for new technologies to diffuse (e.g. the diffusion paths of electric vehicles), complex complementarities between technologies (e.g. the potential of dispatchable energy technologies to stabilize renewable energy sources), variability of demand (e.g. changes in demand for electricity across seasons, days of the week and hours) and complex cross-price effects across commodities (e.g. impact of price of emission-intensive agricultural products on the demand for other agricultural products). The solution to this problem, which we adopted in LIFE Climate CAKE PL project, is the linking between a CGE model and partial equilibrium sectoral models. The linking of the models ensures that the projections of the models provide the complete and detailed picture of actions aimed at reducing greenhouse gas emissions. In particular, the use of sectoral models made it possible to capture in greater detail the specificity of reduction potentials and technologies in key areas – energy, transport and agriculture. On the other hand, the linking ensures that the estimated changes in emissions in various sectors of the economy add up to the assumed total reduction targets, and moreover, the marginal costs of reducing emissions in individual sectors are equal.

The achievement of climate neutrality in the European Union by 2050 will not be possible solely through a reduction in fossil fuels and the development of energy generation from renewable sources. Large-scale implementation of various technologies is necessary, including bioenergy with carbon capture and storage (BECCS), carbon capture and storage (CCS), and carbon capture and utilisation (CCU), as well as industrial electrification, the use of hydrogen, the expansion of electromobility, low-emission agricultural practices, and afforestation. This research is devoted to an analysis of BECCS as a negative emissions technology (NET) and the assessment of its implementation impact upon the possibility of achieving climate neutrality in the EU. The modelling approach utilises tools developed within the LIFE Climate CAKE PL project and includes the MEESA energy model and the d-PLACE CGE economic model. This article identifies the scope of the required investment in generation capacity and the amount of electricity production from BECCS necessary to meet the greenhouse gas (GHG) emission reduction targets in the EU, examining the technology’s impact on the overall system costs and marginal abatement costs (MACs). The modelling results confirm the key role of BECCS technology in achieving EU climate goals by 2050.