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Welcome to the California Energy Commission
Public Interest Energy Research Program: Final Report
PIEREA Climate Change Research, Development and Demonstration Plan
Consultant Report

Publication Number: 500-03-025FS
Publication Date: April 2003

The executive summary, abstract and table of contents for this report are available below. This publication is available as an Adobe Acrobat Portable Document Format Files. In order to download, read and print PDF files, you will need a copy of the free Acrobat Reader software installed in and configured for your computer. The software can be downloaded from Adobe Systems Incorporated's website.

Download Report in Acrobat PDF. (89 pages, 1.8 megabytes - note size!)


Attachment I: Modeling Regional Climate Change in California
(Pub # 500-03-023FA-I, Acrobat PDF, 30 pages, 397 kilobytes)
Attachment II: The Effect of Global Climate Change on California Water Resources
(Pub # 500-03-023FA-II, Acrobat PDF, 66 pages, 1.5 megabytes- note size!)
Attachment III: Ecological Impacts of a Changing Climate
(Pub # 500-03-023FA-III, Acrobat PDF, 48 pages, 525 kilobytes)
Attachment IV: Carbon Sequestration in California's Terrestrial Ecosystems and Geologic Formations
(Pub # 500-03-023FA-IV, Acrobat PDF, 78 pages, 719 kilobytes)
Attachment V: Developing Greenhouse Gas Supply Curves for In-State Sources
(Pub # 500-03-023FA-V, Acrobat PDF, 85 pages, 1.0 megabytes- note size!)
Attachment VI: The Economics of Climate Change Mitigation and Adaptation in California
(Pub # 500-03-023FA-VI, Acrobat PDF, 55 pages, 532 kilobytes)
Attachment VII: Glossary
(Pub # 500-03-023FA-VII, Acrobat PDF, 10 pages, 181 kilobytes)

Executive Summary


The PIER Program's Role in Climate Change Research

Climate change is no longer a hypothetical or distant possibility - it is occurring, and is likely to have a profound impact on human society and the natural environment over the coming decades. Climate change and its global impacts are the focus of an intense and broad-based international research effort in the natural and social sciences. However, understanding the nature and potential consequences of climate change on regional scales, and specifically in California, is a challenge we have just begun to meet.

The California Energy Commission's PIER (Public Interest Energy Research) program has prepared this research plan to support California's intensifying efforts to understand how climate change will affect the state's social, economic, and natural systems; and to help provide policy-makers with the knowledge and tools they need to anticipate and plan for these impacts.

The PIER program was created to ensure that California citizens fully benefit from important public purpose programs involving energy research, development, and demonstration (RD&D). This work is supported by California's electricity ratepayers through an annual $62 million collected by the state's investor-owned electric utilities, and this fund is managed by the Energy Commission.

Within PIER, the Energy-Related Environmental Research area (otherwise called the PIER Environmental Area, or PIEREA) is responsible for addressing the environmental impacts and beneficial uses of electricity in California. As defined by the PIER strategic plan, the overall mission of the PIEREA is to:

Develop cost-effective approaches to evaluating and resolving environmental effects of energy production, delivery, and use in California, and explore how new energy applications and products can solve environmental problems.

In the context of this mission, there are three primary reasons for a major PIEREA research effort on climate change. First, electricity generation in (or for import into) California is a major source of greenhouse gas (GHG) emissions. Second, there is a high likelihood that higher temperatures attributable to climate change will increase energy consumption - and particularly electricity consumption - in California. Third, by altering precipitation patterns across the West, climate change is likely to affect the supply and cost of hydropower, which represents about 20 percent of in-state electricity generation. Thus, it is necessary for PIEREA to study both how to mitigate the climate-related effects of electricity generation and how to maintain reliable and affordable flows of electricity to California's households and businesses in the context of a changing regional climate.

The PIEREA Climate Change RD&D Plan

The PIEREA Climate Change RD&D Plan provides a strategic vision for supporting climate change research in California, focusing on research areas that will be funded over the next five years. This plan is drawn primarily from climate change research road maps commissioned by the PIER program. Under the direction of PIEREA staff, the road maps were developed by recognized climate change experts. The following road maps were produced:

  • Modeling Regional Climate Change in California (Larry Gates, Lawrence Livermore National Laboratory)

  • The Effect of Global Climate Change on California Water Resources (Maurice Roos, California Department of Water Resources)

  • Ecological Impacts of a Changing Climate (Rebecca Shaw, Department of Global Ecology, Carnegie Institution of Washington, Stanford University)

  • Carbon Sequestration in California's Terrestrial Ecosystems and Geologic Formations (Edward Vine, California Institute of Energy Efficiency and Mark Wilson, Consultant)

  • Developing Greenhouse Gas Supply Curves for In-State Sources (Mike Rufo, Xenergy, Inc.)

  • The Economics of Climate Change Mitigation and Adaptation in California (Alan H. Sanstad, Lawrence Berkeley National Laboratory)

The road maps were developed with generous input from technical representatives of multiple state agencies (i.e., the California departments of Water Resources, Food and Agriculture, Forestry and Fire Protection, and the Air Resources Board); researchers from the University of California, California State University, and other universities; national laboratories; environmental groups; federal agencies; the Electric Power Research Institute; electric utilities; California irrigation districts; the California Climate Registry; and the United States Global Change Research Program. [ 1 ]

Collectively, the road maps have become a de facto statewide climate change research plan. The research recommended in the road maps is, however, beyond the resources available to the PIER program. Therefore, in developing funding recommendations for the Energy Commission, research areas were evaluated on their relevance to the energy sector, their potential to advance the science in a critical area, and the clear need for the state to support research on climate change and California that is not currently being funded by the federal government or other research funding agencies. PIEREA is already funding work to address many of these issues (as are many other public and private entities), and the goal of this effort is to build upon that work and leverage the collective expertise in this area.

The plan itself is a "living document" that will be revised periodically to address other high-priority needs as they arise or are identified, as will the road maps on which the plan was based. In addition, PIEREA will continue its collaborative effort by developing road maps that address other issues, such as climate change impacts on human health and on forests and agriculture in California.

An Integrated, Collaborative Research Approach

PIEREA's role in climate change research is one of cooperation and coordination with other state and federal agencies, research programs, and funding agencies. This approach avoids duplication of efforts, leverages limited resources, and ensures the production of high-quality, policy-relevant research for California. PIEREA will fulfill this role by seeking input from different stakeholders throughout the execution of this research plan, and by organizing regular scientific climate change workshops and conferences, where the work funded by PIEREA and others will be presented - with the goal of sharing results and building collaborations. PIEREA has joint projects with the California Departments of Forestry and Fire Protection, Water Resources, and Food and Agriculture. PIER will continue to work with these and other state agencies. Similar work is under way with federal agencies and the U.S. Climate Change Science Program.

Climate Change and California

Global and Regional Climate Change

There is now a broad scientific consensus that the global climate is changing in ways that are likely to have significant socioeconomic consequences, and that these changes will continue and probably intensify through the twenty-first century. Climate change research findings have been detailed by the authoritative International Panel on Climate Change (IPCC). In its Third Assessment Report (TAR), released in 2001, the IPCC concluded that the increase in the global average surface temperature during the twentieth century "...is likely to have been the largest of any century during the past 1,000 years." Moreover, the modeling studies considered by the IPCC project that this temperature will increase by 1.4 to 5.8 degrees Celsius (2.5 to 10.4 degrees Fahrenheit) over the period 1990 to 2100.

There is also mounting evidence that observed global climate change is due substantially to human activities - specifically the emissions of GHGs such as carbon dioxide, methane, and nitrous oxide. The TAR concludes that "there is new and stronger evidence that most of the warming observed over the last 50 years is attributable to human activities." A recent report prepared by the U.S. National Academy of Science at the request of the Bush Administration confirms this finding.

Both scientific and socioeconomic global climate change research has focused mostly on scenarios of gradual and smooth shifts, primarily as measured by long-run equilibrium increases in mean global surface temperature. Such scenarios do not apply directly to regional scales, however, and understanding and projecting regional climate change is a significant research challenge (as discussed in the Research Agenda section, below). Nevertheless, current scientific understanding indicates that the character of climate change in California may be much more in the nature of abrupt shifts, greater variability, and an increased number of "extreme events" such as droughts and floods than long-run smooth changes in trends. Moreover, human-induced climate change affecting California directly will be superimposed upon, and possibly interact with, existing natural patterns and variation in the regional climate. For these reasons, anticipating California-specific climate change impacts is more a challenge of assessing risks and uncertainties than of making specific predictions. Enough is understood regarding the regional climate to anticipate some possible impacts, and in certain cases, relate them to present day trends. However, improved data and tools need to be developed to better identify and quantify impacts and interactions, and to provide policy-makers with the information they need to formulate robust policies that will mitigate impacts from climate change.

Climate Change Impacts on California

Climate change and variability will have important implications for a number of California's natural and socioeconomic systems. The state is one of the most diverse regions - ecologically, geographically, and culturally - of any in the world. California's 1.3 trillion dollar economy is the largest among the states in the United States, and would rank in the G-7 group of the seven largest OECD economies were it an independent country. California is the most populous and fastest-growing state in the nation, and climate change impacts will exacerbate the environmental and economic stresses already occurring from continued development and urbanization. Natural climatic events such as floods, mud slides, coastal erosion, droughts, fires, and heat waves also affect the state's economy and quality of life. Climate change could further increase the variability and impact of these events, affecting all of the state's people and places, and the valuable natural and engineered systems on which we depend.

A wide range of potential impacts to California's critically important engineered systems, natural resource systems, economic and health systems, and ecosystems may be caused by climate change and variability. Impacts to any one of these interrelated systems invariably affects another, and could stem from a variety of causes:

  • Changes in precipitation intensity and distribution could reduce water availability for hydroelectricity generation; temperature increases could increase summer peak-load electricity demand; and extreme weather events and fires could threaten or damage transmission and distribution infrastructure.

  • California's economy depends critically on an extensive engineered water infrastructure. In addition to its role in hydroelectric generation, this system provides water to California agriculture as well as to urban households and businesses. Climate change may exacerbate the already critical stresses on this system, affecting both water availability and cost.

  • Ecosystems in California, whether natural or managed, will likely be affected by climate change and variability. Plants and animals, already pressured by human encroachment, will be further stressed by temperature changes and shifting precipitation. Wildlife will have to adapt to changing habitats; some species will move, others may alter their behavior, and some may not be able to adapt. The number of threatened and endangered species in the state (already the largest in the contiguous 48 states) could rise significantly from these combined stresses.

  • Human health in the California region is likely to be affected by climate change and variability. Most likely, greater climate variability and changes in climate patterns will cause both direct and indirect effects. Direct health impacts will stem from the extreme events mentioned above, which could result in flooding and landslides, prolonged high temperatures, and increased fire frequency and intensity. Secondary or indirect effects include damages to infrastructure - causing, for example, sanitation and water treatment problems leading to an increase in water-borne infections. Air quality impacts, such as increases in ground-level ozone as a result of higher temperatures, may also cause secondary health impacts.

Electricity Generation Serving California is a Major Source of Greenhouse Gas Emissions

In addition to addressing the risks posed by potential climate change impacts, California may in the coming years be compelled to mitigate its contributions of GHGs to the global atmosphere, under policies originating at the international, national, or state levels. Carbon dioxide (CO2) emissions represent about 85% of the in-state GHG emissions, and the vast majority are generated from the combustion of fossil fuels. In-state electricity generation contributes about 16% of the annual CO2 emissions (about 55 million tons per year) from all the sources located in the state. California's electricity consumption, however, is responsible for much higher emissions, because the state imports about 30% of the electricity consumed in the state from other states - some of it from coal-burning power plants. Burning coal generates about twice the amount of CO2 per unit of energy released during combustion than natural gas, the fuel of choice in California. As a result, out-of-state power plants emit more CO2 than in-state power plants. If emissions from out-of-state power plants serving California were counted as in-state emissions, power plants would contribute about 28% of the total CO2 emissions in the state's inventory.

PIEREA Research Agenda and Benefits


The development process for PIEREA's climate change research program identified a range of interrelated research needs in the areas of climate change monitoring, analysis and modeling; estimating costs of reducing GHG emissions; impacts of climate change on California's water and ecological resources, sequestration of carbon in the state's terrestrial ecosystems and geological formations; and the economics of climate change mitigation and adaptation in the state. The research agenda summarized in the following sections was developed by evaluating the detailed research needs discussed in the PIER road maps and selecting projects for the first five years of funding, according to the criteria outlined in the first section of this Summary. This research plan is intended to provide a strategic California climate change program that can be enhanced with collaboration and funding from other state, federal, and private entities. Two of the research areas described in the following sections play distinctive roles in the plan: climate change monitoring, analysis, and modeling would provide critical inputs to all other areas, while the research on the economics of mitigation and adaptation would integrate the results of the other areas and help depict their potential policy implications.

Climate Change Monitoring, Analysis, and Modeling

Impact and mitigation analyses play an important role in enabling California planners and policy makers to craft effective plans and regulations. These analyses rely to a large extent on the results of sound climate change monitoring, analysis, and modeling; therefore, the development of climate change scenarios for California, using the best scientific tools, must be a priority for California and PIEREA.

General circulation models (GCMs) are complex computer models that are used to simulate natural and human-induced climate changes on a global scale. They make use of large grid cells (on the order of 300 km) that cannot resolve important topographic features such as the Sierra Nevada and the coastal mountain ranges, as shown in Figure 1. The resolution of most GCMs offers no detail of California's topography. At the 50-km resolution, common to many regional models, the Central Valley and Sierra Nevada begin to be discernible; whereas, a grid size of 10 km reveals their regional structures, as well as those of the coast ranges. Scientists working on impact and adaptation analyses need climatic data at a much higher geographical and temporal resolution than that available from GCMs.

Figure 1

Figure 1. Resolution at GCM scale, 50 km, and 10 km.

PIEREA-sponsored research on regional climate would address the following questions:

  • How is the climate in California changing in relation to the historical and pre-historical conditions? How much of this change can be attributed to natural variability?

  • What are the expected signals of a changing climate in the state, and how they should be monitored?

  • What are the potential changes of California climatic conditions, based on the increased concentration of GHGs in the atmosphere?

  • What is the estimated likelihood of the different climatic scenarios?

  • How would the frequency and severity of extreme events change in the future?

  • What is the potential from abrupt climate changes in the state, and how would the new potential climate look?

  • Which GCMs are most appropriate for providing inputs to the study of regional climate change affecting California?

PIEREA is recommending the following research to address those questions:

Compilation and Analysis of Historical Climate and Measurement of Key Variables

PIER, in conjunction with other state agencies, would sponsor and contribute to the development of a comprehensive California-focused climate database, using existing data sources and adding key measurement sites as needed. Existing data would be quality-checked and digitized, if necessary. The database would be used to understand how climate has changed and is changing in the state, and for evaluation of regional models. Researchers would conduct additional meteorological and hydrological monitoring and measurements, especially for high-elevation areas where changes in snowmelt are a concern. PIEREA would support the development of non-intrusive and less expensive remote monitoring systems to increase substantially the number of monitoring sites and monitoring parameters measured in key regions of the state.

Benefits: This effort would facilitate better snow-level forecasting and detection of subtle climatic changes, help develop improved models based on higher-quality and more comprehensive data, enhance the state's ability to determine to what extent the observed increase (or decrease) in cooling degree-days (or heating degree-days)[ 2 ] is attributable to increased urbanization, and improve understanding of energy consumption patterns and climate.

Intercomparison of Regional Climate Models

PIEREA, in conjunction with other state agencies, would fund the development of a modeling protocol to validate and intercompare regional climate models (RCMs), which includes numerical and statistical models and other promising modeling approaches. Once developed, PIEREA would compare models against each other and against observational data, at resolutions needed for climate change applications, to identify characteristic model errors. When researchers identified the most effective model(s), they would identify a common nested model domain[ 3 ] and develop a regional modeling protocol. Further research would compare statistical methods against numerical RCMs and historical data not used in the development of the statistical methods.

Benefits: Standardization of modeling protocols would enable the state to evaluate models and compare data, and identify the most appropriate RCM(s) for California applications.

Development of Climate Scenarios for California

The best-performing RCMs from the previous project would be used to develop ensembles of regional climate change projections, which would allow researchers to assign probability to the different climate scenarios. This work would be coordinated with the projects on impact and adaptation analyses, to ensure that the climate modeling results provide adequate geographical and temporal resolutions for the parameters needed.

Benefits:California would gain the ability to develop a comprehensive understanding of likely regional climate changes that will affect its hydrology, agriculture, and natural ecosystems.

Impacts of Climate Change on California Water Resources

California's water resources contribute to the success of every public and private sector activity in the state. In the electricity sector, hydroelectric generation represents about 20% of the electricity generated in the state, and California imports a significant amount of hydropower from the Pacific Northwest.

PIEREA-sponsored research on regional climate would address the following questions:

  • How may climate change and population growth affect California's future water resources, including hydropower production and ecological systems?

  • How should the operation of hydropower facilities be improved to be able to cope or benefit, if feasible, under expected significant changes in precipitation levels and the timing of snowmelt in the Sierra Nevada?

  • What hydrological variables should be monitored to improve our understanding of the state's natural and managed water systems?

PIEREA is recommending the following research to address those questions:

Monitoring of Hydrologically Important Variables

As noted in the previous section, PIEREA in conjunction with other state agencies, would conduct regular, consistent and sustained measurements of hydrologically important variables such as precipitation, snowpack, and streamflow, to track changes in these variables and to verify model predictions. Monitoring would focus on locations where significant change is expected (e.g., mountain snow zones) and locations where additional measurements could enable researchers to analyze important processes.

Benefits: Improved understanding of important hydrological processes and being able to detect and interpret climate change signals as early as possible. (The latter goal would require a long-term monitoring program that should be supported by PIEREA, but conclusive results should not be expected during the implementation period of this plan.)

Testing the Operation of the State Water System under Plausible Climate Scenarios

In conjunction with the Department of Water Resources, this project would study the state water system, with an emphasis on the operation of the Central Valley Project and the State Water Project, which together furnish about 30% of California net water demand for agricultural and urban uses. The major reservoirs of these two projects are located on watersheds likely to see large shifts in runoff patterns as a result of rising snow levels. This work would draw upon approximately 50 years of monthly hydrology data, to include simulations during the two major six-year historical droughts (1928-1934 and 1987-1992) and the climate scenarios mentioned above. It could involve modification of the CALSIM model (used for state water planning) and the CALVIN model (an economic-engineering optimization model of California's water supply system that identifies optimum operation conditions) for climate change studies. This work would also expand upon the "INFORM" demonstration project, currently funded by PIEREA, which is analyzing the application of modern hydrological forecasting and decision analysis methods to the operation of several California reservoirs.

Benefits: The state would have the ability to study the impact of climate change on the availability of water for agricultural, urban, industrial, recreational, and environmental purposes; and conduct scenario studies of a large portion of its water system.

Impacts of Climate Change on Ecological Resources

Land use changes and vegetation patterns may have a strong effect on regional climate and the hydrological cycle, both at the global and regional levels. Of course, climate also affects vegetation patterns; therefore, they form a complex, interacting system. Changes in vegetation patterns and hydrology will, in turn, impact energy demand and the availability of hydropower. Policy and decision makers need to understand how these factors will affect California if they are to make informed decisions about the use of the state's land, water, and other natural resources. These issues involve a range of research questions that exceeds the availability of PIEREA resources for support. PIEREA's approach would be to provide "seed money" to address the following questions, while working actively to generate additional funding from other sources to expand work on ecological impacts in California:

  • What are the potential changes in vegetation patterns in California, and how would they affect and be affected by the state's climate and the hydrological cycle?

  • How would urban development and climate change affect vegetation patterns in California? Would urban areas impede the migration of species, and therefore be a dominant feature determining vegetation patterns?

PIEREA is recommending the following research to address those questions:

Enhancement and Application of Dynamic Vegetation Models (DVMs) for California

Building on previous PIER-funded DVM work, this project would explore ecosystem responses to multiple global changes and identify trends that would affect California ecosystems through the use of ecosystem models that incorporate unexploited or new field data. Researchers would enhance DVMs to evaluate the effects of: land use (e.g., the impacts of current land use, land use change, land cover fragmentation, the history of land management on ecosystem dynamics, and migration corridors); vegetation age structure; species dispersal rates and modes (for a few target species); and non-native invasive species and introduced pest pathogens. The DVMs should also consider the impact of other stressors (such as air pollution) and be used with regional climate models to investigate the interaction between climate and vegetation. This work should be coordinated with field studies and provide seed funds for additional field studies, if necessary.

Benefits: DVMs that model interactions between a greater number of critical ecosystem factors would improve understanding of the impacts of each factor and of the interrelated systems. These models could also enable researchers to identify and interpret ecological trends more readily.

Carbon Sequestration in Terrestrial Ecosystems and Geological Formations

In September 2002, the legislature required the California Climate Action Registry[ 4 ] to allow the registration of carbon reductions produced by the sequestration of carbon in forested lands or by reforestation. Terrestrial ecosystems offer significant potential to capture and store carbon at modest costs, providing multiple social benefits. PIEREA-supported projects would address the following questions:

  • What would be the costs associated with carbon sequestration projects in the state? How much carbon would they be able to sequester? What areas are the best sites for these projects?

  • What are the potential social, economical, and environmental impacts associated with the most promising carbon sequestration options in the state?

  • What would be the role of bioenergy in any efforts designed to reduce GHG emissions from in-state sources?

PIEREA is recommending the following research to address those questions:

Development of Cost Estimates for Forestry and Agricultural Soil Carbon Sequestration Options in California

Understanding the potential for carbon sequestration in soil in California requires careful estimation of the costs of various specific sequestration options. The development of such estimates for forestry strategies in California would enhance ongoing PIEREA/California Department of Forestry and Fire Protection (CDF) work by adding field measurement studies and performing a detailed analysis for one or two counties in California, to generate more precise cost estimates and more realistic estimates of carbon sequestration potential. Research on agricultural soil carbon sequestration would identify agricultural carbon sequestration opportunities. In conjunction with the CDF, researchers would conduct field studies of promising management practices, evaluate models of carbon and nitrogen budgets and carbon sequestration , and estimate the costs and carbon sequestration opportunities for the selected county(ies), based on a validated model(s). PIEREA would also fund some work regarding unresolved monitoring and verification issues.

Benefits: An economic assessment of forestry and agricultural soil carbon sequestration strategies would help decision makers prioritize those strategies, and also help agricultural and forestry specialists who are involved in allocating resources among competing alternatives.

Economic Studies of Bioenergy Strategies in California

This project would complement PIER-funded renewables research by conducting analytical studies to identify obstacles in the deployment of bioenergy technologies, and improve understanding of the private and social costs associated with the use of bioenergy projects as a GHG emissions-reduction tool. The effort could: (1) Collect and analyze costs to farmers and foresters on energy crop cultivation in California (including collection, processing, and distribution costs); (2) conduct life-cycle assessments of bioenergy strategies in California;[ 5 ] (3) study the economics of biorefineries, to reduce the costs of biomass collection and transport in California; (4) study the economic feasibility of using urban carbon-based residuals for bioenergy production; (5) develop models of broad-scale biobased products and bioenergy market development; and (6) develop models of rural development that would support biomass production, processing, and use.

Benefits: A comprehensive understanding of the feasibility and economic factors involved in bioenergy use in California, and potential solutions for overcoming barriers to the use of bioenergy in the state.

Carbon Sequestration in Geological Formations

This project would support research designed to address the major technical issues associated with geologic storage in California. Research topics include: (1) monitoring and verification; (2) risk assessment, human health and environmental impact; (3) tectonic stability; (4) economic analysis/viability of technologies; (5) leakage assessment and petroleum reservoir analogues; (6) performance assessment; and (7) evaluation of novel technologies. PIEREA also proposes to support the development and demonstration of storage technologies through collaborative field demonstrations. Candidate technology demonstrations include: enhanced oil recovery, optimized for CO2 storage; enhanced gas recovery, optimized for CO2 storage: disposal in deep saline formations; and disposal accompanying subsidence mitigation. A second parallel activity would address CO2 sources and storage infrastructures. Research needs to characterize present and potential CO2 sources and assess compression, pipeline, and injection well infrastructure needs. PIEREA would provide seed money for this effort, but substantial outside funding is needed for the complete execution of this project.

Benefits: Identification and quantification of the feasibility, economics, and potential of various strategies for sequestering carbon in geological formations would help decision makers prioritize options. Implementation of this carbon sequestration option could result in enhanced recovery of oil and gas from California oil/gas fields.

Greenhouse Gas (GHG) Reduction Curves and Inventory Methods

"Supply curves" have been used for many years to graphically display, in simple terms, the cost and availability of a resource or other market good. "Greenhouse gas reduction curves" work in a similar way - illustrating the cost and effectiveness (in terms of GHG reduction) of various GHG-reduction strategies. As shown in Figure 2, the curve's vertical axis represents the cost of each GHG reduction strategy (per unit saved), and the horizontal axis represents the quantity of units saved or avoided. Measures are ordered on a marginal, least-cost basis. To conduct sound evaluations of GHG-reduction measures, these curves must be expanded to include longer time horizons, technological advancements, and non-energy cost and benefits. In addition, there is a need for better data to resolve the uncertainties in GHG emission inventories, so that emissions trends can be tracked more accurately.

PIEREA-supported projects would address the following questions:

  • What are the costs associated with reducing GHG emissions in other sectors of the economy, in comparison to those of reducing GHG emissions from the electricity sector?

  • What emission estimation methods should be improved to better characterize GHG emissions and GHG emission reduction opportunities?

  • What methodological features should be enhanced to improve the usefulness of supply curves for policy analyses and for their consideration in macroeconomic analyses?

Figure 2

Figure 2. Example GHG-reduction Supply Curve

PIEREA is recommending the following research to address those questions:

Energy Balances for California

Currently available energy balances for California, which are used to estimate multiple emissions from a variety of sources, require further refinement to ensure that all pertinent fuel information is included, to achieve an appropriate level of disaggregation for state-level analysis, and to correct certain inaccuracies and inconsistencies. PIEREA would fund the development of California energy balances at the highest possible level of spatial and temporal disaggregation. Researchers would also perform a critical review of existing fuel consumption data for all power plants in the state.

Benefits: Accurate data would be available in a form that researchers can use to improve estimates of energy consumption and CO2 emissions from the combustion of fossil fuels in California, and more data would be available for economic analyses.

Research on New, Improved Methods to Estimate Non-CO2 Emissions

Research has attempted to determine the level of uncertainty in the existing non-CO2 GHG emissions inventories by assigning probabilities to the range of potential parameters in the equations that are used to estimate emissions. However, in some cases, the basic equations or methods used to estimate emissions do not incorporate all the parameters necessary to do so adequately, thereby rendering the results incorrect. Problems with the existing methods also cast doubt on the reported trends in official GHG emissions inventories. This project would: study the level of uncertainties associated with different emissions sources; identify potential new sources not being considered in existing inventories (such as the state strategy of composting to reduce waste volumes because existing methods assume that composting does not generate emissions); and prioritize which methods to study in detail with field studies and/or model development work.

Benefits: Standardized methods to estimate non-CO2 emissions could be developed, based on more comprehensive, California-focused data. Accurate estimates are necessary for the development of sound emission reduction options.

Development of Supply Curves for California

This research would be coordinated heavily with the inventory methods development work, and would study and implement a number of methodological and macroeconomic integration issues. Based on studies developing short-term supply curves for California for the electricity sector, PIEREA would develop methods to extrapolate them to much longer time horizons that account for potential technology changes. This project would also develop curves that identify adoption barriers of various options included in the supply curves and their effect on the actual performance of the different options. This process would include the consideration of non-energy costs and benefits that are traditionally not quantified in the development of these curves. PIEREA would also develop the information needed to include the options identified in the supply curves studies in macroeconomic analyses.

Benefits: Dynamic supply curves that researchers can use to estimate the long-term costs and benefits of GHG-mitigation measures, over a larger portion of the economy, to make direct comparisons between competing options.

The Economics of Climate Change Mitigation and Adaptation in California

Economic methods are the primary tools for evaluating the socioeconomic implications of climate change and the costs and benefits of policy responses. Economics is also the primary disciplinary source of theoretical and computational tools for integrating climate science and policy. Several decades of research on the economics of climate change at the national and international levels, as well as PIEREA-supported recent work specific to California, provide a foundation for new PIEREA-sponsored research on the economics of climate change in California. PIEREA-supported projects would address the following questions:

  • How will the impacts of climate change and measures to abate GHGs affect the California economy in the coming decades?

  • What are the key economic risks for California from climate change, and what are the particular risks from abrupt and/or extreme climate change?

  • How will climate change affect the state's integrated water/agricultural system, and what will be the costs and benefits of policies to address potential impacts on this system?

  • What are the costs and benefits of both price and non-price-based policies designed to increase energy efficiency in the California economy, and how are they influenced by energy-related technological change?

  • How should California design regional markets for emissions trading?

  • How should GHG-abatement and air quality policies be integrated?

  • What are the costs of abating non-CO2 GHGs?

PIEREA is recommending the following research to address those questions:

Integrated Modeling and Impact Analysis

In energy and climate applications, economists use computable general equilibrium (CGE) models to estimate the costs of price-based policies (e.g., carbon or energy taxes, or tradable emissions permit systems) to reduce GHG emissions - as well as the costs of climate change impacts. This PIEREA project would modify and significantly enhance a CGE model of California, in order to estimate the potential impacts of climate change and GHG mitigation policies on the state economy. Researchers would also analyze the potential for California to use proceeds from measures to improve the state's fiscal balances ("revenue recycling"). Further, they would design and support the development of a new modeling framework to analyze the economics of climate change in California that would account for risk and uncertainty. Both the CGE modeling and new decision-analysis framework would be used to integrate and apply findings from new PIEREA research on the sector-specific impacts of climate change in California. This work would develop a large range of plausible scenarios for the future regional climate evolution.

PIEREA would focus research addressing abrupt and/or extreme climate change, institutional factors, and realistic decision rules on California's water and water-related sectors, which are perhaps the major pathway through which climate change will affect the state's economy. In California and neighboring states, a major pathway by which increased climate variability and change will affect the society and economy of the region is through the impact on streamflow within the region and on the regions' developed water supply. Any change in the developed water supply will have important consequences for the allocation of water between agricultural water users, urban water users, hydropower generation, and in-stream uses of water for water-based recreation and ecosystem services. Each stakeholder group may face increased costs and/or reduced benefits as the result of a reduction in the reliability of water availability.

This research would assess the impacts on each sector from changes in water supply reliability. Researchers will develop quantitative and explicitly probabilistic measures of water supply reliability for agricultural and urban water users at different California locations, using existing climate conditions, and basing assessments on the state's water system operation over the past 20-30 years. Researchers will use these measures to develop sets of marginal benefit functions that show the incremental benefit or losses associated with changes in water supply reliability for agricultural users, urban users, and hydropower generation at various locations around the state. This analysis will utilize the empirical measures of supply reliability for agricultural and urban users described above. A third research component will develop projections and analyses of water use and electricity demand, taking account of location and housing density. PIER research will estimate both the monetary and non-monetary magnitudes of these impacts, incorporating several methodological innovations that will reflect the research priorities described above: explicit treatment of the surface water supply system, inclusion of regulatory and legal constraints on the existing process for water allocation, and representation of the actual decision rules employed in California's water system.

Benefits: This effort would provide a benchmark for further work and a first assessment of the possible aggregate economic impacts of climate change and GHG policy on California. The state CGE modeling effort would provide an initial integrating framework that would incorporate results of the PIEREA research on water and agriculture, energy demand, technological change, and other key areas. In addition, this research would provide improved theoretical and empirical tools for understanding the potential impacts of climate change on California's integrated water/energy/economic system, as well as the costs and benefits of potential adaptation and mitigation measures associated with this system. Ultimately, this work would enable policy-makers to develop robust strategies in response to uncertain climate, economic, and technological change.

Energy Efficiency and Technological Change

Because California's energy system will be a major focus of any future carbon mitigation policies, PIEREA-sponsored research would improve policy-relevant methodologies for estimating carbon abatement costs, which would provide California's policy-makers with improved tools for implementing carbon mitigation policies. This research would be integrated with PIEREA's GHG-reduction-curve research. First, research would focus on the degree to which energy-efficient technology is optimally allocated by markets in the absence of policy intervention, because such policies will almost certainly form a major component of California's carbon mitigation efforts. According to standard economic models, the benefits of these policies cannot exceed their costs, which is a quandary demanding careful attention from economists and technology researchers. Researchers would evaluate the literature to determine the robustness of sources and data quality, the soundness of the theoretical models employed, and the role of assumptions regarding market structure. Based on that evaluation, they would develop new models of consumers' and firms' efficiency-related choices, in the context of behavioral economics. Further, research would measure and model energy-related technological change, which affects cost estimates of reducing energy demand or carbon emissions. Researchers would also develop case studies on selected state industries to model and measure learning-by-doing and its relation to other key parts of the industrial innovation process, such as the adoption and diffusion of new technology. They would also study ways of incorporating both endogenous technological change and learning-by-doing in the program's CGE modeling and in the new computational modeling framework that would be developed. As part of this effort, PIEREA would seek co-funding to study how information technology may affect California's energy system and its response to carbon abatement policies, and incorporate the results of this work in the CGE and further aggregate modeling sponsored by PIEREA.

Benefits: This project would help improve understanding of the role of energy efficiency in reducing GHG emissions by quantifying benefits and costs from these measures and exploring the optimal implementation and use of energy efficiency technologies for this purpose.

Non-CO2 GHGs and Markets for Emissions Trading

A number of policies to control CO2 emissions would also reduce emissions of other pollutants, with important implications for regional air quality. It is important to integrate CO2 with other GHGs when devising mitigation strategies - both to reduce costs through the achievement of multiple benefits, and to achieve more benefits more rapidly. In this project, PIEREA would support research to develop a multi-GHG approach that fully exploits potential synergies and reaps ancillary benefits. Simultaneously, PIEREA-funded research would improve the methodology for constructing marginal cost or supply curves for non-CO2 greenhouse gases, in order to develop a theoretical model that allows for empirically verifiable negative cost abatement and cost-reducing technological change. This work would be integrated with the PIEREA-funded development of GHG-reduction curves. In addition, because emissions trading has emerged in recent years as a favored instrument for reducing GHG emissions, PIEREA would sponsor a study on the feasibility of developing a California intrastate trading market. This study would examine the appropriate geographical and sectoral scope, which GHGs would be included, the required institutional mechanisms, and related elements. The goal would be to determine the appropriate elements of a regional trading market, whether implemented as a stand-alone state response to climate change or in response to national or international agreements.

Benefits: Multi-GHG reduction strategies would expand and speed air quality benefits, at a lower overall cost. Development of a regional GHG trading market could also speed GHG-emissions reduction.

PIEREA: Supporting Informed and Systematic Planning for Climate Change

In developing this research plan, the California Energy Commission is responding to a broad range of important issues related to the development of effective responses to climate change. Research that provides a foundation for policy and investment decisions in the state is of critical importance, and PIEREA has developed this collaborative climate change research program to meet those needs. PIEREA's intention is to produce a comprehensive report, integrating the results of the research described above, approximately five years following the inception of this research program.

In considering appropriate strategies to deal with climate change, we must consider the nexus among mitigation strategies, sensitivity to changes, capacity to change or adapt, and vulnerability to change. These factors will inform cost/benefit estimates and the social and political assessment of risk acceptability. Ultimate action will also be driven by a sense of ethics and morals.

Moreover, economic activities, the physical infrastructure, and natural systems in California are inextricably linked. A good understanding of the dynamics of these systems is essential, as is a clear sense of their interrelationships. These concepts apply as much to business enterprises as they do to ecosystems. The goal of California decision-makers and stakeholders should therefore be to craft investment and policy strategies to maintain ecosystem health, productive capacity, and quality of life. These decisions must in turn be based on an accurate scientific understanding of the issues. To the extent that we are learning and living by "adaptive" management, we need to maximize the level of resilience in California's natural and engineered systems.

The PIEREA climate change research program is designed to support this important challenge.

Table of Contents

Executive Summary

1. Background and Overview

1.1 The PIER Role in Climate Change Research

1.2 Development of the PIER Climate Change RD&D Plan

1.3 Coordination and Cooperation with Other State Agencies

1.4 Key Benefits

1.5 PIEREA Climate Change Research Plan Organization

2. Climate Change and California

2.1 From Global to Regional Climate Change

2.2 Pathways of Climate Change in California

2.3 Potential Impacts of Climate Change in California

2.4 California Greenhouse Gas Emissions

2.5 Summary

3. PIEREA Research Agenda and Benefits

3.1 Climate Change Sensing and Modeling

3.1.1 Compilation and Analysis of Historical Climate and Measurement of Key Variables

3.1.2 Intercomparison of Regional Climate Models

3.1.3 Development of Climate Scenarios for California

3.2 Impacts of Climate Change on California Water Resources

3.2.1 Monitoring of Hydrologically Important Variables

3.2.2 Testing the Operation of the State Water System under Different Plausible Climate Scenarios

3.3 Impacts of Climate Change on Ecological Resources

3.3.1 Enhancement and Application of Dynamic Vegetation Models (DVMs) for California

3.4 Carbon Sequestration in Terrestrial Ecosystems and Geological Formations

3.4.1 Development of Carbon Supply Curves for Forestry and Agricultural Soil Strategies in California

3.4.2 Economic Studies of Bioenergy Strategies in California

3.4.3 Carbon Sequestration in Geological Formations

3.5 Inventory Methods and Supply Curves

3.5.1 Energy Balances for California

3.5.2 Research on New, Improved Methods to Estimate Non-CO2 Emissions

3.5.3 Development of Supply Curves for California

3.6 The Economics of Climate Change Mitigation and Adaptation in California

3.6.1 Integrated Modeling and Impact Analysis

3.6.2 Energy Efficiency and Technological Change

3.6.3 Non-CO2 GHGs and Markets for Emissions Trading

4. Bibliography

List of Tables

Table 1. Key California Storm Events

Table 2. Other Major Events in California

List of Figures

Figure 1. Changes in Atmospheric CO2

Figure 2. PDO Pattern, 1900-2000

Figure 3. El Niño Anomalies

Figure 4. Sea Level Rise on California's Coast

Figure 5. Monthly Upwelling Indices for a Region Between Bodega Bay and Fort Bragg

Figure 6. Normalized 30-Year Average Cooling Degree Days

Figure 7. California Carbon Dioxide Emissions, by Fossil Fuel

Figure 8. California Per Capita Electricity Use

Figure 9. CO2 Emissions from the Combustion of Fossil Fuels, Per Capita and Per GSP or GDP

Figure 10. California's Electricity Generation Mix: 1999

Figure 11. Differences in Resolution Among GCMs

Figure 12. Example Conservation Supply Curve

Figure 13. Crude Oil Processed in California Refineries, 1990-2001

List of Attachments

Attachment I......Modeling Regional Climate Change in California

Attachment II......The Effect of Global Climate Change on California Water Resources

Attachment III......Ecological Impacts of a Changing Climate

Attachment IV......Carbon Sequestration in California's Terrestrial Ecosystems and Geologic Formations

Attachment V......Developing Greenhouse Gas Supply Curves for In-State Sources

Attachment VI......The Economics of Climate Change Mitigation and Adaptation in California

Attachment VII......Glossary


1) The California Energy Commission is publishing the roadmaps as attachments to the PIEREA Climate Change RD&D Plan.

2) Increased cooling or heating degree-days represent an increase in the amount of energy needed for cooling or heating houses and buildings.

3) A model's domain is the area being modeled.

4) This is a non-profit organization created by the state legislature to allow companies to register their annual GHG emissions for potential consideration in any regulatory scheme that may evolve in the future.

5) This work would be coordinated with other life-cycle analyses identified in the PIER Environmental Area Research Plan. Life-cycle assessments for other carbon sequestration strategies may be conducted.

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