81944 - Laboratory of Environmental Engineering and Energy Economics

Learning outcomes

Introduction to energy and environmental economics applied to markets and industries; Full understanding of the economical interaction between energy consumption and environment in particular concerning CO2 emission; Ability to economically evaluate the environmental damage, mainly from energy production; Comprehension of the different instruments to reach environmental targets; Understanding of the current Global and European environmental policy, first of all the Kyoto protocol; Economic analysis of different solutions to reduce greenhouse gas emissions.

Course contents

Requirements/Prior knowledge

A prior knowledge and understandings of basic elements of economics, such as needs and resources, demand and supply, markets and price mechanisms) are required to attend with profit this course. Typically this knowledge is provided by the course of “Economics and Business Organization”.

Language: English

Fluent spoken and written English is a necessary pre-requisite:all lectures and tutorials, and all study material will be in English.

The laboratory is divided in two parts, the first, covering scenario and macro-trends, is held by Tabarelli, Bianchi will conduct the second, dedicated to specific mechanisms of mitigations.

Tabarelli – Part 1

Aim

Aim of the laboratory is to introduce some basic elements of the energy and environmental economics applied to markets and industries with a particular attention to the main sources consumed today worldwide and in the future. Among the main urgencies, that human being has to face there is the growing CO2 concentration in the atmosphere and this is coming largely from energy consumption. Environmental policies in the last decades have progressively moved to contain emissions through energy efficiency, reduction of consumption or move to energy sources with no CO2 emission or with a lower carbon content. In December 2015 the COP 21st took place where an agreement was reached for the first time to limit the increase of world temperature to 2° C.

Already in 1997 an important agreement was signed in Kyoto for a protocol which results were disappointing. Recently all these commitements are starting to give results with a stabilisation of toal world emission of CO2 from energy uses.

The reasons of this gap are the main target of the discussion in the laboratory. They lie in the strong growth of fossil fuel use in several countries, especially in those of new industrialisation. Developed countries are making efforts, especially in Europe, to switch towards carbon free energy sources, mainly renewable, however their growth is still too slow to sustain a larger switch from traditional fossil fuels. Efficiency use of energy, that means obtaining the same amount of benefits from smaller quantities consumed, has improved dramatically, both thanks to specific policies but also thanks to high prices that, however, fell in 2015. Energy consumption worldwide is increasing fast for the need of a growing number of people to access to this essential element in order to improve the quality of their life. It is evidence in two main forms:

• Rising electricity demand, where demand is causing mainly additional coal use;
• Request of more mobility that relies mostly on the consumption of oil-derived products.

For these reasons, attention in the Laboratory focuses on power production through different technologies and on the oil industry, from the top of exploration and production to final use in the engines of almost one billion of car worldwide.

CONTENTS

Basic economic elements and outlook

• Basic principles of environment and energy economics
• General view of environmental economics
• Free markets or state policies
• Which alternative to fossil fuel?

Future energy scenarios

• Why energy is important
• Forecast of world population growth
• Measures and indicators of human wealth for different nations
• Future demand of energy and long term trends

Power generation and renewable energy sources

• The growing use of electricity
• The supremacy of coal in power production
• Hydro and the other renewable
• The green revolution and the impacts of the grids

The oil industry

• Oil as the primary source of energy
• Price mechanism
• Politics and futures developments
• Refining and distribution
• Final prices of oil products

Bianchi – Part 2

AIM

Economic aspect of technologies related to energy industries will be the focus of the discussion in the laboratory. Technology is than a key element in making possible the increase of traditional energy sources, in a better exploitation of existing reserves of natural gas, oil and coal or in searching new one.

Government defined energy policies since the seventies in order to improve energy efficiency, boost production from renewable energy sources, reduce emission from energy consumption and contain prices for final consumers. This latter point was the main objective during the first period of energy policies immediately after the energy crises until the end of the eighties, then environmental issues became more important.

Emissions, scenarios, technologies and policies are all different elements that are affecting the industries through the markets and the laboratory will address the main issues analysing their economics, also through case studies and exercisesù. The aim is to emphasise the reasons why fossil fuel consumption are still the main best available solution for covering the growing energy needs of human being.

Specific analysis will be conducted on energy policies instruments, like the Kyoto protocol, the Emission Trading System in Europe, or certificate mechanisms both to boos renewable energy production or to stimulate energy efficiency.

CONTENTS

The laboratory will be divided into the following main parts:

• Effect on environment from energy uses: the concept of externality
• Main problems related to the value of resources
• Methodologies for the evaluation of Externalities: direct and indirect
• Externalities from power generation
• scenarios of electricity generation, local and greenhouse gas emission
• emission of CO2 by country and by sectors
• Environmental policies for the reduction of CO2 emission
• Flexibility mechanism in Kyoto protocol
• Emission Trading in Europe
• Taxation on energy and environmental taxation
• Policies in favour of energy efficiency: The case of white certificate in Italy

Readings/Bibliography

Material and slides provided by the professors.

Further studies suggested through:

R. Kerry Turner, David Pearce, Environmental Economics: An Elementary Introduction, Johns Hopkins Univ Pr.

Teaching methods

Frontal classes and exercises using power point presentations and excel files for practical cases. Representatives of the energy industries will give specific lessons exposing their actual experience.

Assessment methods

Oral exams with idoneous or not-idoneous results. Usually three questions will be asked that the candidate must answer to all in order to be idoneous.

Teaching tools

Professors will send material of each lesson, with slides of power point or excel files for exercises, at the end of the lesson.

Office hours

See the website of Davide Tabarelli

See the website of Alessandro Bianchi