COMUNICACION DEL ACADEMICO DE NUMERO
ECOLOGIA DE LOS PASTIZALES DE LA DEPRESION DEL SALADO
Energy consumption in the transport sector is mainly accounted for by petrol (36 per cent in 2005), diesel oil (46 per cent in 2005) and kerosene (17 per cent in 2005) with negligible amounts of electricity, LPG and biofuel. Most of the kerosene used in the transport sector is to fuel jet aircraft for international travel. With the increase in domestic aviation and the expansion of low-cost international carriers such as RyanAir, the consumption of kerosene took off after 1995. However, the most rapid growth up to 2005 is in diesel consumption. It has outstripped the growth in GNP for the whole period between 1990 and 2005. Note that diesel fuels most of the freight vehicles transporting goods as well as all diesel- powered cars.
MAIN ASSUMPTIONS
The demand for transport is driven both by the level of economic activity and its cost, which is directly tied to the price of fuel. The early 1990s saw a drop in the price of fuel, whereas it started recovering in the late 1990s and has grown steadily since. The assumption is that it will continue to grow in line with the world market price of oil. In the following forecasts a key assumption is that a carbon tax will be implemented starting in 2010 and that it will equal the price of carbon emission permits in the European Trading System (ETS).69
Starting this year, HERMES forecasts the demand for petrol separately from the demand for diesel. Petrol consumption is driven by the number of cars in the economy and the relative price of petrol in Ireland with respect to the United Kingdom. The number of cars in turn is a function of disposable income, the underlying demographic trends and the rate at which the number of cars per adult reaches saturation (set at 0.8 cars per adult – roughly the same level as in Germany today). The relative price of fuel with respect to the United Kingdom drives the extent of “fuel tourism” (see Box 5.4).
The model does not consider other forms of transport. Implicitly, we assume that cycling and walking continue to decline, and that the consequent additional demand for motorised transport is met by public transport. Car and lorry remain the main mode of transport.
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Diesel consumption is a function of tonne-kilometres70 of freight (which
depend on GNP) and the price of diesel in Ireland relative to its price in the United Kingdom. The latter again drives the amount of “fuel tourism”.
Box 5.4: Fuel Tourism
Fuel tourism is defined as the amount of fuel bought in Ireland but consumed abroad. When fuel is cheaper in the Republic of Ireland, consumers from Northern Ireland and Great Britain will engage in cross- border fuel shopping. HERMES estimates this behaviour by measuring the sensitivity of sales of fuel to the ratio of the fuel price in the Republic of Ireland with respect to its price in the UK.
In this Medium-Term Review we estimate that in 2005 between 5 and 9 per cent of total petrol sales in Ireland were consumed abroad. The figure for diesel is 15 to 20 per cent. More work is needed to measure fuel tourism with precision. We can, however, get an idea of the effect of changes in taxation on fuel tourism and revenue entries. Adopting a carbon tax equal to €20/tonne of CO2 would reduce fuel tourism and associated
carbon emissions by about 285 thousand tonnes of CO2 in 2005, which is
about 0.5 per cent. The decrease in fuel tourism would reduce the amount of excise taxes paid by non-residents to the Irish revenue by about €26 million. The non-residents who continue buying fuel in Ireland pay the carbon tax, thereby increasing Irish revenues by €14 million. On net, the Irish revenue would lose approximately €12 million (or about 0.03 per cent of its 2005 revenue) by imposing a tax of €20/tonne of CO2.
FORECAST
Table 5.6 shows the forecasted growth rates of the main transport variables up to 2025 in five-year periods. The growth rate of GNP is also reported for convenience.
Table 5.6: Average Growth Rates of Transport Variables and their 2005 Levels
Average Annual Growth Rates
2005 1990- 1995- 2000- 2005- 2010- 2015- 2020- Level* 1995 2000 2005 2010 2015 2020 2025 GNP 4.3 8.6 4.4 4.1 3.8 3.5 3.0 Total energy 5,031 3.4 11.3 4.3 2.1 2.7 2.5 2.1 Kerosene 857 1.4 9.5 6.4 4.3 4.3 3.7 3.3 Petrol 1,822 3.2 7.6 2.7 0.7 0.2 0.0 -0.2 Diesel 2,329 4.7 16.6 4.9 2.3 3.8 2.4 2.8 Cars 1,662 4.5 5.9 4.7 2.8 2.0 1.8 1.6 Freight 18.2 1.4 17.6 8.0 7.5 4.2 3.7 2.8
* Thousand tonnes of oil equivalent for total energy and fuels; thousand cars; billion tonne-kilometres.
The growth rate in the demand for petrol decreases over time. This is due to a combination of factors: the number of cars is increasing, but this is accompanied by a slight decrease in the average mileage of cars; there is an
increase in the number of diesel cars; and there is an improvement in fuel efficiency, although this is in part countered by a tendency towards buying larger cars.71
Figure 5.1 shows the profile of the Irish stock of cars, disaggregated by size of engine. The engine size has been growing over time.72 The type of
cars that will be bought in the future (shown as “undecided” in Figure 5.173) will be influenced by consumers’ income, the price of fuel and
government policies. If the price of fuel continues to rise and a carbon tax is implemented, small-engine cars would become more appealing.
Figure 5.1: The Stock of Cars by Engine Size (Million Cars)
< 1.0 litre 1.0-1.5 litre > 1.5 litre Undecided 0.0 0.5 1.0 1.5 2.0 2.5 3.0 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025
Diesel use grows much faster than petrol use (Table 5.6). This is due in part to an increased adoption of diesel-fuelled cars, which are cheaper per kilometre to drive. The main driver of the growth in diesel use, however, is the increase in the amount of freight transported. Table 5.6 shows that after 2010 the amount of freight transported in Ireland, measured in tonne- kilometres, grows broadly in line with GNP. This reflects the limited options available in Ireland to shift the transport of goods away from the road. Road freight transport represented about 99 per cent of total inland freight transport in 2006, and freight transport by rail is unlikely to increase within the next 20 years. This is because of limited capacity of the current rail infrastructure, and because the average length of haul in Ireland is short, which makes the use of rail unattractive.
71 As the 2008 reform of the Vehicle Registration Tax and the Motor Tax left the prices of
most cars unchanged, we have no reason to assume that these trends will not continue in the future.
72 Note that this trend was reversed in the first two months of 2008. It is too early to say
whether this is a trend break, or a temporary deviation as in 1996-7.
73 Note that after 2007, the assumption is that existing cars will be scrapped at the same
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Finally, the increase in kerosene use mirrors the expected increase in flights, both domestically and internationally.74
TRENDS IN CO2 EMISSIONS
Given the level of activity shown in the previous paragraphs, it is possible to forecast CO2 emissions from transport.
Table 5.7 shows the level of carbon dioxide emissions from transport and their average yearly growth rate. In Table 5.7, CO2 emissions from
kerosene are limited to the amount of fuel used in domestic aviation in accordance with the international accounting rules for greenhouse gas emissions.
Table 5.7: Average Growth Rates of Greenhouse Gases and their 2005 Levels Average Annual Growth Rates
2005 1990- 1995- 2000- 2005- 2010- 2015- 2020-
kTCO2eq 1995 2000 2005 2010 2015 2020 2025
GNP 4.3 8.6 4.4 4.1 3.8 3.5 3.0
Greenhouse gases Total 70,269 1.3 3.1 0.4 -0.1 0.0 1.1 0.5
Carbon dioxide Total 47,723 1.7 4.8 1.3 0.3 0.4 1.4 0.7
Electricity 15,136 3.7 3.7 -0.7 -2.5 -3.7 -1.8 1.6 Transport 12,797 3.9 11.5 4.0 1.8 2.3 2.4 2.0 Cement 4,431 -5.6 10.7 10.2 1.6 3.6 4.8 3.8 Other 15,358 0.3 1.7 -0.7 1.1 0.7 1.1 -2.9 Methane Total 13,262 0.5 -0.4 -0.4 -1.1 -1.4 0.6 -0.6 Agriculture 11,454 0.3 -0.3 -0.6 -1.7 -1.5 -1.5 -1.6 Waste 1,646 3.2 -0.8 1.6 2.7 -0.9 5.3 4.6
Nitrous oxide Total 8661 0.9 0.3 -2.9 -1.4 -1.5 -1.4 -1.5
Halocarbons Total 623 41 23 1.8 10.5 8.1 7.9 6.5
Even with a carbon tax that starts at €20/tonne of CO2 emissions in
2010 and grows over time, emissions from transport grow by more than 35 per cent between 2005 and 2020. This is notably higher than the 20 per cent decrease for the economy as a whole suggested by the EU climate change and renewable energy package currently being discussed in Brussels. There are two reasons for this. First, the level of the carbon tax is low. Petrol, for instance, would be taxed by €0.11 per litre in 2025 (see Table 5.1). One would not expect a large change in driving behaviour, a substantial increase in the purchase of more energy-efficient cars, or a modal shift to public transport, cycling, or walking. Second, even if commuters would like to change their behaviour, they are not necessarily able to. Alternative modes of transport may be unavailable and impractical, or may be deemed unsafe or of low social status. Public transport infrastructure, in particular, takes considerable time to build. Currently, planned extensions of rail and light rail will provide an alternative to a
74 Kerosene used for international flights is assumed to grow in proportion to the number
of outbound and inbound international tourists according to Hamilton, Maddison and Tol, 2005.
fraction of commuters only. Cars with very high energy- or carbon- efficiency are a niche market at present, and although we expect this niche to grow, we do not expect that these cars will dominate sales by 2020, let alone the stock of cars. Driving behaviour, finally, is determined by habit and patterns of living and work – both factors change only slowly, and are difficult to influence.
The above forecasts assume that little biofuel will be burned before 2025. There is an EU biofuels target for Ireland, but this has yet to be implemented in domestic policy. Economically, biofuels are a bad proposition (Fitz Gerald, 2003) and the environmental benefits are controversial (Crutzen et al., 2007). If policy mandates a 5 per cent mix of biofuel in total transport fuel, CO2 emissions from transport would
increase by about 0.2 per cent in 2020, relative to the baseline in Table 5.7.75 Box 5.5 explains in more detail the issues associated with the
adoption of biofuel in Ireland.
Box 5.5: CO2 Emissions and Biofuel Adoption
Biofuels are transformed from biomass into liquid or gas fuels that can be used for transport or heating. They are seen as an alternative to fossil fuels and are encouraged for two main reasons. First, they reduce the need for oil imports, although this does not necessarily increase the security of supply (Brännlund et al., 2008). Second, some biofuels (but not all) reduce air pollution. The most common types of biofuel at the moment are ethanol, a substitute for petrol, and biodiesel, a substitute for diesel. Ethanol is mostly made from corn and sugarcane, whereas biodiesel is mainly produced from plant oils such as rapeseed, palm, coconut and soybean. Whether or not these biofuels are net providers of energy is subject to debate. The answer depends on the biomass source of the fuel, the refinement process and the estimation techniques (Dufey, 2007; Brännlund et al., 2008).
At the moment at least 90 per cent of biofuels are consumed in the country in which they are produced (Dufey, 2007). However, international trade is bound to grow quickly, especially if countries pursue biofuel adoption targets. It is unlikely that there will be sufficient biomass available in Ireland to produce the amount of biofuel necessary to replace 5 per cent of motor fuel. This means that Ireland, and other countries in the same situation, will need to import at least part of their biofuel needs, which makes it important to understand issues surrounding international trade of bioenergy.
The international law governing bioenergy trade is at the moment undeveloped (Switzer, 2007). Dufey (2007) points out the potential pitfalls in international trade of bioenergy.
First, there are no well-recognised standards that certify bioenergy as being sustainable. The life-cycle emissions of biofuels depend heavily on the way in which biomass is grown and on the process used to transform the raw material into fuel. Life-cycle emissions also depend on transport
75 This specific calculation assumes that biodiesel would substitute traditional diesel in
order to attain the 5 per cent target. The result is the same if we assume 5 per cent biodiesel and 5 per cent bioethanol.
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and land use change. There is ongoing work to determine standards and standard certification, but they are not at all defined.
Second, there are huge disparities in tariffs applied to bioenergy products, since they are classified as food (biodiesel) and spirits (bioethanol). Developing countries may end up exporting raw materials, which face lower tariffs, and therefore miss out on the stages of biofuel refinement that produce the most value added. This is subject to ongoing negotiations in the World Trade Organisation.
Third, biofuels production may replace food production. Although this should diminish with the adoption of second-generation of biofuels – based on the transformation of non-edible (parts of) plants – competition for land and water will remain an issue.
In addition, accounting rules for greenhouse gas emissions need to be clarified. If biofuels are produced in Brazil and consumed in Ireland, which country accounts for the carbon sequestration taking place while the biomass is growing? Most likely Ireland will not be allowed to claim any of the carbon sequestration benefits, but will have to account for all the tailpipe emissions of the biofuel it uses. Since CO2 emissions for biofuel
and fossil fuel combustion are similar, imported biofuels would help in meeting the biofuel target, but would not help in curbing Irish carbon emissions.
Given the uncertainty surrounding all stages of international trade in biofuels, our best guess is that carbon emissions for countries like Ireland will not change significantly even if biofuel targets are met, be they at 5 per cent, 10 per cent or 20 per cent of oil consumption in transport.
E
missions to air are projected using the ISus model.76 FollowingO’Doherty and Tol (2007), ISus uses the median change in the past emission intensities per sector and substance to project future emission intensities. ISus further uses the projected sectoral output from the
HERMES model, downscaled to the 19 sectors in the ESRI
Environmental Accounts (Lyons, Mayor and Tol, 2008). For household emissions, we use the estimated income elasticities of emission per capita and the number of people as projected by the demographic model. Emissions of carbon dioxide from power generation are taken from the dispatch model (see Section 5.3). Emissions of methane from landfill are taken from the waste model (see Section 5.6).