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Cost to Reduce Carbon Emissions in Developing World Higher than in Industrial Nations

Knowing the costs of reducing carbon emissions from power plants and other sources is crucial to calculating the overall costs of mitigating climate change. Previous calculations used by the Intergovernmental Panel on Climate Change (IPCC), the United Nations-sponsored organization that studies the issue, suggested that reducing carbon emissions in the developing world was cheaper than reducing them in the industrial world.

An example of a combined cycle gas turbine project in Assam, India.

Figure. An example of a combined cycle gas turbine project in Assam, India.

A new study by researchers at the Environmental Energy Technologies Division (EETD) at Lawrence Berkeley National Laboratory (Berkeley Lab) suggests the opposite. The study, published in the journal Energy Policy, looked at the cost of replacing electric power generation from coal-fired plants with generation from lower-emission combined-cycle gas turbines that use liquid natural gas (LNG) as the fuel source. The study compared the costs for this replacement in India and in the U.S.

Jayant Sathaye, leader of EETD's International Energy Studies Group, primary author of the study says, "The IPCC's Third Assessment Report assumed that reducing the cost of carbon emissions would decline with the increase in global emissions trading, which allows large-emitting nations to buy carbon credits from smaller emitters. This decline assumes that it costs less to reduce emissions in developing countries. We tested this assumption by comparing the costs in India and the U.S. of a common type of carbon reduction project: building cleaner combined-cycle gas turbines in place of coal-burning plants."

Knowing the costs, according to Sathaye, helps us determine where the least-expensive reductions in emissions are likely to come from and what strategies can maximize those reductions at the lowest cost.

Developing Interest in Gas Turbines

"Indian power generators and the Indian government have shown considerable interest in building new gas turbine plants," says Sathaye. "Because reserves of natural gas in India are thought to be modest, we assumed that these plants would be fueled with imported liquefied natural gas."

Sathaye and Amol Phadke of the University of California, Berkeley, compared the capital costs of power plants and equipment as well as fuel and operations and maintenance costs in the two countries. They also analyzed the sensitivity of total cost of electricity generation to changes in each of these components and studied the changes in cost between new and mature markets.

Gas Turbines More Expensive in India

"Our conclusion is that the cost of carbon emissions reduction from fuel switching in the electric power sector is higher in India than in the U.S., and each major component of cost is higher in India," says Sathaye. The study shows that capital, fuel, and other costs of Indian coal plants differ only slightly from the costs in comparable U.S. plants, but the costs of all components are higher for combined-cycle units in India. Therefore, the cost of shifting electricity production from coal to gas turbines would be higher in India than in the U.S.

"We believe that this conclusion is true not only for India but for other developing countries," says Sathaye. "Capital costs of combined-cycle gas turbines are reported to be higher in many developing countries, and this may translate to higher generation costs, depending on whether the natural gas is available in country or has to be imported."

The paper, which appears in the September 2005 issue of Energy Policy, is titled "Cost and carbon emissions of coal and combined cycle power plants in India: Implications for costs of climate mitigation projects in a nascent market," by Jayant Sathaye and Amol Phadke.

— Allan Chen

For more information, contact:

  • Jayant Sathaye
  • (510) 486-6294; Fax (510) 486-6996

This research was supported by the U.S. Environmental Protection Agency.

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