GHG emission mitigation measures and technologies in the Czech Republic

GHG emission mitigation measures and technologies in the Czech Republic

Applied Energy, Vol. 56, Nos 3/4, pp. 30%324, 1997 II~} !-. ELSEVIER PII: S0306-261 © 1997 Elsevier Science Ltd All rights reserved. Printed in Gr...

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Applied Energy, Vol. 56, Nos 3/4, pp. 30%324, 1997

II~} !-. ELSEVIER

PII:

S0306-261

© 1997 Elsevier Science Ltd All rights reserved. Printed in Great Britain 9(97)0001 3-5 0306-2619/97517.00+0.00

GHG Emission Mitigation Measures and Technologies in the Czech Republic Milos Tichy SEVEn, The Energy Efficiency Center, Slezsk~i 7, 120 56 Prague 2, Czech Republic ABSTRACT The paper presents an overview of the main results in two fields: projection of GHG emission from the energy sector in the Czech Republic and assessment of technologies and options for GHG mitigation. The last part presents an overview of measures that were prepared for potential inclusion in the Czech Climate Change Action Plan. © 1997 Elsevier Science Ltd. INTRODUCTION The US Country Studies Program provided an exceptional opportunity to assess future possible development in regard to greenhouse gas (GHG) emission and measures to reverse its steady increase. The Czech Country Study to Address Climate Change concentrated on projections until 2010 and initial assessment of mitigation technologies and measures 1. It is being followed by project of preparation of Climate Change Action Plan under US Program "Support for National Action Plan. "~ This paper presents a short overview of the main results of both projects in two fields: (i) projection of CO2 emission from the energy sector and (ii) assessment of technologies and options for CO2 mitigation.The last part of the paper presents an overview of measures that were prepared for potential inclusion in the Czech Climate Change Action Plan. PROJECTIONS OF CO2 EMISSION FROM ENERGY PRODUCTION AND USE In the framework of the Country Study, we chose to use technologicallyoriented models and established the following approach for GHG emission projections: • projections of macroeconomic development • projections of energy demands • modeling the coverage of the projected demand and calculation GHG emissions using technologically oriented models. It is necessary to keep in mind the advantages and limitations of the chosen approach: the "one-way" approach of inferring from the total GDP assures the internal consistency of the results, but the absence of feedback - that is, 309

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the reaction of the national economy to energy prices that are too high (or too low) - may lead to unrealistic results. M e t h o d s a n d i n p u t data

The period 1990- 2010 was selected for study; 1990 is the reference year for FCCC and year 2010 is the most distant point where any projection of a transitional economy may have some validity.

GDP growth: Dramatic changes in the economy over the past four years ruled out the use of standard macroeconomic models, which are usually based on time series and their smoothness. Therefore, macroeconomic projection w a s produced by means of a simple spreadsheet tool which helps experts to express their views on future development and ensures the internal consistency of the projection. The projections of macroeconomic development carried out by several organizations vary in their GDP growth rates from zero to seven percent 3, which means that there is a wide range of future possibilities. The predicted changes in GDP structure are based on the assumption that by the year 2010, the GDP structure of the Czech Republic (CR) will be similar to that of Western countries 4 (see Fig. 1). Two macroeconomic scenarios were developed: high (4.7%) and medium (3.2%) annual growth as the unofficial opinion of experts from the Economic Institute of the Czech National Bank. ~ The higher rate was found more appropriate later and only results concerning this case are presented.

Energy SectorModeling: We chose to process the energy sector data using three independent models in parallel: LEAP, EFOM+MAED, and MARKAL. Since the MARKAL model best fulfilled the demands that the study made on technology-oriented models, only results of this model are presented here. We constructed a baseline scenario and several scenarios concerned on specific mitigation technologies. The following assumptions shape the baseline scenario: The baseline scenario includes emissions limits of regional pollutants (SO2, NOx, CO, fly-ash) currently in effect for new sources and coming to full Industry 42%

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Fig. 1.

Structure of GDP in 1990 and assumed structure in 2010.

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power in 1999. These norms (Clean Air Act and subsequent decrees) require the treatment of exhaust gases, changes in fuel, and the reconstruction, and in some cases dosing of most main electric power plants, boiler plants, and district heating plants. In the case of the major producer (77%) of electricity, I~EZ (the Czech Power Utility), the situation is fairly predictable; a schedule has been published for plant closings totaling about 2200 MWe~ of installed capacity. 5 This capacity will be replaced by the Temelin nuclear power plant° This measure represents a yearly CO2 emissions decrease estimated to about 15 Mt in 1999 (about 10% of emissions in 1990). Estimating the impact of the new laws on boiler plants and heating plants is more problematic, because the method of treatment of the individual sources depends primarily on the large number of plant owners. The estimate we made - - 13.3 Mt of CO2 per year - - partially takes into account the drop in demand, which stems mainly from decreased production in industry. The removal of energy price subsidies was also included in the baseline scenario. Subsidies for heat as well as cross-subsidies for electricity and gas will be gradually eliminated. 2 A constant level of energy intensity in all categories of heat consumption except for consumption in new buildings is assumed. An almost imperceptible increase (0.05%) is predicted in new residential buildings, as a result of the increased size of apartments (energy intensity per m 2 remains constant). In the service sector, we expect a decrease due to improved insulation and higher energy prices than for households. The specific consumption of non-substitutable electricity - - electricity for lighiing and air conditioning (in offices) - - will grow as the number of electric demand devices in offices increases. The exception is lighting in households, where an increase in amenities is not expected, and current prices do not motivate energy conservation. Natural savings (i.e., those realized through the implementation of new technology designed for a purpose other than energy efficiency) in industry act to counter the increase in amenities, and the result is a more or less constant energy intensity for non-substitutable electricity. Other input factors in final consumption are the efficiencies of demand devices. We predict a constant level of efficiency among current demand devices as a conservative estimate. The efficiency of all new demand devices in both existing and new buildings can be expected to rise. Modeling work on the MARKAL model for the Czech Republic started in 1994, when 1990 was set as the reference year and a test period composed of five time intervals each five years long. Because the energy sector in the CR had undergone very significant changes during the years 1991-95, we revised the database of the model in both the source section and the final section (demand for energy) on the basis of all available data. For 1995 we prepared a preliminary energy balance. Therefore, the changes primarily concern 1995, in which were included actual data, or results from the preliminary energy balance. Additional corrections were made for the period 2000-2010. These mainly concerned trends of intensity and control variables on the demand side of energy sector.

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Results In Fig. 2 the final consumption is shown together with corresponding GDP growth for the baseline scenario. The final consumption is expected to grow at an average rate of 1.5% per year after 1995. The graph shows that as long as the economy develops according to the stated premises, final consumption grows 2-3% slower than the rate of GDP growth. In 2010 final consumption will reach 6% higher level than in 1990. The development of primary energy sources consumption is similar to that of final consumption (see Fig.3): after a decrease 1990-95, there is an expected increase of 1.7%/year, which is almost the same increase as for end-use consumption. The major change in the fuel structure is the replacement of coal with gas and nudear energy. The share of coal, which was 64% in 1990, drops to 58% in 1995 and to 41% by 2010. It is predicted that by the year 2010, gas will be the second-largest energy source (27%). In the figure we see "delayed increase" of CO2 emissions (relative to energy consumption) caused mainly by improvements in energy sources (as a consequence of Clean Air Act). The distribution of CO2 sources is gradually changing (see Fig. 4). The decrease and subsequent increase in emissions from energy transformation, as well as the changes in the household, service, and agricultural sectors, reflect the growing share of gas and the increasing consumption of electricity and centralized heat in final energy consumption. The following conclusions were reached on the basis of the results: • The development of CO2 emissions indicates a relatively positive state of affairs: as long as the economy develops according to the stated premises, the Czech Republic will have no difficulty in fulfilling its FCCC obligation not to exceed 1990 emissions level in the year 2000. m m m Electricity ;1500

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The decrease in emissions in 1990-2010 is a result of the drop in GDP during the years 1990-95, and of new laws regarding regional air pollution, and not of any specific policy on climate change. CO2 emissions may increase much more sharply if the mentioned assumptions are not fulfilled. The main factors which could lead to the non-fulfillment of these assumptions are the following: * Pressure to ease the limits set on emissions of regional pollutants.

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*

The enormous growth in electricity consumption, especially due to the mass use of electricity for heating. * Slowing down energy price liberalization, which means the elimination of direct subsidies to district heat~g systems and of cross-subsidies for electricity and gas. Under the above-mentioned predictions, the rate of GDP growth is higher by 2-3% than the final consumption growth. The growth in primary energy consumption is basically the same as that of final consumption. For CO2 emissions, the start of the growth is "delayed" compared to other quantities like GDP or final energy consumption. ASSESSMENT OF TECHNOLOGIES AND OPTIONS FOR GHG MITIGATION

This section presents results concerning both technologies for mitigation as technological solution, mainly from energy conservation field, and government policies or programs to reach lower CO2 emissions. In the baseline scenario presented in the last section, energy consumption was affected by expected development of energy intensities (like amount of energy needed for production of ton of steel or iron) and by increase energy efficiency of devices which directly satisfy demands like boilers or lighting devices. To assess development of consumption in the case of availability of a wide range of energy conservation technologies, we have constructed a "mitigation scenario." The availability does not only mean a market availability but also financial availability in a concrete environment of governmental support. We concentrated on conservation technologies in households, which is a sector where we expect, partially thanks to construction technologies used in last twenty years, a substantial potential for conservation. In addition, we have studied consequences of different developments in electricity prices in households. Assessment of technologies for GHG mitigation in wide range of sectors The following conservation technology areas were included into "mitigation scenario" as additional to baseline efficiency development: Industry: furnace control and insulation, monitoring and regulation, pipe insulation, new electric motors, cooling equipment and lighting. Commercial sector: monitoring and regulation, decreasing infiltration, basic insulation of roofs and exterior walls, additional insulation of windows, new lighting (linear tubes with electronic ballast). Residential sector: exterior walls and roof insulation, additional insulation of windows, decreasing infiltration, pipe and equipment insulation, monitoring and regulation, new lighting including CFL fixtures and replacement of bulbs by CFLs.

The first assessment of economic potential of these technologies using MARKAL model showed the amount of saved energy increasing with time. In 2010, a total of 7-8% of final consumption is saved in comparison to the

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Mitigation potentials and cost of saved CO 2 for various technology options baseline scenario. It is equivalent to mitigation potential of about 9 Mtco2 and includes technologies having cost of saved energy below the cost of energy produced. A general picture is given in Fig. 5 where cost curve of technologies "accepted by model" is given. The largest savings in absolute terms were in the area of technological heat in industry (almost one third of the total savings). The relatively largest portion of saved energy (relative to final consumption in the given category) of energy was saved in household lighting (47%) and hot water preparation (24%). A smaller proportion of the savings came from the service sector. The levelized cost per non-emitted ton of CO2 ranges from 15 to 150 USD/tco2, but for most of the technologies it ranges between 40 and 55 USD/tcoz (Currency rate 27 C Z K / U S D was used in the study.) It must be noted that the achieved potential is highly subjective because it depends on the "production" limit of the technology, which is difficult to establish. This limit expresses realistic assessment of technology deployment taking into account more technical than economic limits. These limits (as mitigation potential) and corresponding costs of saved energy as shown in Fig. 5 (for more detailed description of technologies see reference 1). Energy conservation for heating residential b u i l d i n g s The goal was to ascertain changes in energy consumption for the residential sector from implementing a group of technologies that can save heating energy. Residential buildings were categorized according to insulation properties and the levels of possible savings into 20 separate groups, and to each of these was included a group of energy efficiency technologies with investment costs and corresponding energy savings. Then this set of twenty groups was included into MARKAL model as "conservation" scenario.

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Each group corresponds to a type of residential building and contains the following technologies: comprehensive weatherization, induding roofs, walls, w i n d o w s , doors, and sealing; insulation of heat pipes; central regulation and metering and regulation of the heating system; and energy management (monitoring and rationalizing consumption). Each g r o u p is characterized b y total investment costs per saved unit of heat' and potential savings per year (see Fig. 6). The total technical potential is 37 PJ/year, which is about 50% of the energy consumed in the subsector in question. "Offered" energy efficiency technologies replace actual heat sources in the model w h e n their costs are lower than the price of the most expensive heat carrier used in the model. The model accepted the first eight groups with costs less than 10.5 U S D / G J (dashed line in Fig. 6). Fig. 7 shows clearly the

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• The basic figure on the investment demands of a group of technologies is the total investment costs (paid out over the lifetime of the project) resulting in saving 1 GJ/year [CZK/GJ/year]. These values for various energy efficiency technologies (enteredinto the model as investment costs) cannot be compared because the lifetime of the technologies is different. Investment costs [CZK/GJ] derived from multiplying by the annualizing coefficient can be compared with fuel prices. The annualizing coefficienttised assumes a lifetime of 25 years and a discount (interest) rate of 10%. In view of the fact that the model assumes economywithout inflation and discount rate represents only capital price, 10% is a relatively high rate.

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capacity of energy efficiency technologies to cover demand for usable heat for the residential sector (the area between the full and dashed lines). The amount ranges between 13 and 26 PJ, which is 20 - 40% of energy used for household heating. This share is the "economic potential" of given groups of technologies. Changes in consumption are also interesting from the perspective of a change in the composition of energy carriers used. In comparison to the baseline scenario, the consumption of brown and black coal stays effectively the same. Energy efficiency technologies replace the most expensive final fuels: coke, electricity, gas, and district heating. Here, the model diverges to a certain extent from the reality that could be expected: modernization of the apartment stock is often linked with a conversion from heating with solid fuels to heating with gas. The potential to mitigate emissions corresponds to the energy-saving potential. This is significant in the first period (1995-2000), where it is possible to save about 1.3 Mtco2/year, which represents about 0.7% of national CO2 emissions during this period. After 2000 the energy-saving technologies will bring additional (more expensive) savings, but to a lesser extent (0.6 Mtco2 in 2005 and 0.12 Mtco2in 2010). Average investment costs to reduce emissions are high (52-85 USD/tco2) and will rise over time. However, incremental costs of technologies are negative; that is, during their lifetime there will be earnings from reduced fuel costs.

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Continuation in subsidizing electricity for households One of the big dangers for a favorable development of CO= emission level is the significant increase taking place in electricity consumption for heat and preparation of hot water for households. In order to estimate the consequences of this development we created two extreme scenarios, results of which are given in Fig. 8. The baseline scenario includes the plan to eliminate cross subsidies for household electricity prices; an average annual growth of 8.3% (the increase above inflation) is expected during the period 1995-2010. By the year 2000 it is expected that prices will reach the level of production costs for electricity. In the year 2005, prices include expenses and profits of distribution and production companies. The second scenario is an average annual increase of only 3.5% in real electricity prices for heating in households. For this scenario, the model projects an increase in demand of more than four times in comparison to 1995 level. On a country-wide level, this means an increase of almost 30% in total electricity consumption assuming that consumption, in other categories will stay on the same level as that of 1995. This obviously has consequences for CO2 emissions because electricity is the most carbon-intensive means of heating. The mentioned increase in yearly electricity consumption of 50PJ (14TWh) means about 10Mtco~. However, this large increase can be taken as a "modeling effect". According to some experts, the number of households where a change to electricity heating is expectable in 5-year period can cause at most a two-fold increase in electricity consumption.

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MITIGATION MEASURES PREPARED FOR CLIMATE CHANGE ACTION PLAN This section contains a short description of specific government policies proposed by SEVEn to interministerial committee for preparation of the 2nd National Communication to FCCC and for Climate Change Action Plan. In several cases, presented polices might represent various responses to the same problem. For example, heat subsidies could be eliminated or converted to subsidies for energy savings, or energy tax burden can be enlarged by increase of VAT or introduction of carbon/energy tax.

Legislative and standardizing policies • Standard method for energy audits in buildings Create a basic method for carrying out energy audits of residential buildings. The audit will evaluate the current state of the building, determine the annual energy consumption under normal operating conditions, and, on the basis of the audit, recommend appropriate energy-saving measures. In essence, it would be a kind of '"ouilding energy label" that will be used in the framework of additional measures if appropriate. • Mandatory energy audits for applicants for support for energy efficiency projects The state can introduce mandatory energy audits for applicants for support for energy efficiency projects in order to obtain better information for a efficient allocation of state support. Such a measure would be a necessary condition for receiving state support. Decisions on support could thus be better qualified and at the same time increase knowledge and thereby the possibilities to make use of audits among potential implementers of energy efficiency measures. • Energy labels for equipment In accordance with a directive by the European Union, introduce labels with data on annual energy consumption (and, where appropriate, on energy payments) of selected widely-used energy appliances, such as refrigerators, freezers, water heaters, etc. Make it possible for customers to select appliances that need less energy, and gradually improve the selection of available appliances in regard to lower consumption. • Energy standards for appliances Together with energy labels, the states of the EU are preparing to introduce energy standards formulated according to energy efficiency minimums that the products in the given category must attain. In the event that the standard is not met, the product could be subject to a fine or be barred from the market. There is a proposal for a similar measure to protect the Czech market from outdated energy appliances with a disproportionately high consumption of energy. Tax policies

• Reducing the tax on profits from municipal bonds used to reduce C02 emissions Bonds are an appropriate source of financing for investments in

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reconstructing heating systems as well as in new, energy-efficient technologies. Municipal bonds are a relatively expensive source of financing. To make the net income from bonds attractive to investors, the issuer must set relatively high interest rates since the interest on bonds is at the present time subject to a 25% tax. In some countries, making profits from municipal bonds exempt from income tax is common for all forms of municipal bonds. In the Czech Republic, at least municipal bonds that finance measures that reduce emissions could be exempted. The envisaged use of financing will be given in the prospectus of the bond issuer. For this purpose, the prospectus will be supplemented by data according to which a tax exemption will be granted and according to which adherence to the investment plan will be verified. • Reducing the write-offperiodfor energy-saving equipment The current tax laws consider several applications of energy-saving technologies to the investments in construction with a write-off period of 45 years, which is far longer than the lifetime of most of these technologies. It is also too long in comparison to the payback period required by most investors. This time-span should be reduced, at least for investments that concern environmental protection, such as energy-saving technology. • Introducing a tax on hydrocarbon fuels and a tax on energy consumption Introduce a tax on hydrocarbon fuels and a tax on energy consumption calibrated to EU levels. The tax on hydrocarbon fuels and energy could become part of an entirely new trend in which the consumption of fossil fuels would be taxed instead of labor. This tax concerns systemic change throughout the entire economy that could not be carried out without prior in-depth analyses of how the economy would change. At the same time, it would be necessary to carefully assess how impact of this tax would actually appear and, if necessary, to adjust the amount of the tax to the necessary level. Calculations of the future situation made beforehand on energy and econometric models are indispensable.

It would be necessary to gradually harmonize this tax with those of EU countries. The CR should test this possibility and get ready to carry it out in advance, especially if the proposed work gives evidence of additional benefits stemming from this change. In regard to its effect on energy efficiency levels, this policy would be a very powerful tool. While analyses from several West European countries support the view that it would be possible to expect a strong effect on consumption after imposing a tax of $10/barrel on crude oil, this effect would come into play sooner under conditions in the CR because of the lower price level. • Adjustment of value-added tax for energy sources All energy sources should be subject to full value-added tax (17%). Lower VAT rate should only be allowed for energy from renewable sources meeling all environmental protection requirements. Increasing the VAT is a necessary condition for initiating full competition between energy-saving technologies and the supply of various forms of energy, especially in residential buildings.

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• Tax breaks, or subsidies, for investments in renewable sources of energy The spread of renewable sources of energy is not proceeding because, among other reasons, prices of conventional sources of energy are distorted by various indirect - and in some cases even direct - subsidies. Compensating this market imbalance should be done by the state through appropriate supporting measures. Tax policy is one of the fields where there could be a partial rectification, for example, through income tax credits or depreciation rate changes.

Subsidization policies .P Elimination of energy-price subsidies After changes in energy-price tariffs at the beginning of the 1990s, the price structure stabilized in a situation where households still have highly subsidized energy prices. Energy-price subsidies for the households are provided without regard to the income bracket of recipients. The source of subsidies for heating apartments is the state budget; other subsidies are cross-subsidies within specific sectors (electricity, gas). Over the next several years, it will become impossible to support households with emergency subsidies because of rises in gas prices and the cost of electricity production. The state budget is increasingly burdened with heat subsidies. Nevertheless, energy subsidies for households have become a political issue, since households with a lower per capita income would only be able to pay full energy prices with difficulty.

Energy subsidies could be eliminated altogether and support targeted on lowincome groups could be introduced. This support could be gradually reduced in conjunction with rises in average wages in the Czech economy. In addition to the fact that part of the resources devoted to subsidies would be saved, this measure would also have a significant effect on the introduction of energy-saving technologies. Energy savings would bring more rapid payback on investments, since they would be computed according to actual prices. The current, deformed energy prices (reduced by subsidies) make energy efficiency projects less economically attractive. •

Converting heat subsidies to energy-saving subsidies

Existing heat-price subsidies act against the rational use of heat. It would be far more effective to use at least part of these resources to reduce the consumption of subsidized energy and thereby also indirectly the amount of subsidies from the state budget. At the present time, the difference between the maximum price of heat from central heating (6.7 USD/GJ) and expenses that the producer can demonstrate are compensated by a subsidy amounting to 185 - 260 USD million per year from the state budget. On average, this means 2.6-3.7 USD/GJ or 170 USD/apartment. There is a potential for energy savings in apartments in concrete prefabricated residential buildings requiring about USD 740 per apartment; i.e., total expenses of USD 1.15 million. Heat subsidies used for partial financing of these investments would decrease payback period to 4-6 years.

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• Supporting mortgages on energy-efficient buildings Constructions meeting previously set criteria should be eligible for more state support for mortgage credit, or in the case of constructing a new apartment building it should be possible to have a higher level of state support for mortgage credit. Constructions should meet previously determined technical criteria whose fulfillment should be verified by an energy audit that would accompany the issuance of the construction permit. In the event of the purchase of an unfinished or already-built apartment building, there should be state support for mortgage credit. The energy audit would be a necessary document accompanying the purchase contract. In the event that the previously determined technical criteria are met, the buyer should have the right to receive a certain level of state support. •

State support for preparing energy efficiency projects financed with commercial sources

Overcome barriers to financing energy efficiency projects with commercial sources by giving assistance in the preparation of feasibility studies and guarantees on the quality of preparation of the groundwork necessary for banks or private investors to make a decision. This measure is linked to the "Revolving Fund" project. Experience gained, for example, by the Czech Energy Agency in evaluating projects for the Fund could also be used later in helping to secure sources of financing. A common problem is the fact that, from the bank's perspective, the amount of investment is relatively small in comparison to the atypical construction of the project (the production of energy savings). A financial analysis of the project endorsed by a respected state institution would increase the credibility of the project in the eyes of financial institutions.

Negotiations with equipment producers and buyers • Voluntary agreements between manufacturing groups Voluntary agreements with producers as a step to accomplish the goals proclaimed by the state represents a new, continuously developing form of cooperation. Voluntary agreements between state organs and associations of manufacturers have developed in several industrially developed countries, especially in the field of environmental conservation. They express a willingness on behalf of manufacturing groups to cooperate in energy-saving programs and programs to mitigate the negative effects on the environment, thereby rendering restrictive measures by state organs unnecessary. In the Czech Republic it is possible to gradually initiate similar activities. The proposal is oriented towards institutional support and concrete possibilities to stimulate voluntary agreements focused on increasing energy efficiency. • Technology procurement Procurement for energy-efficient technologies is a special kind of tender organized either to develop new or to spread existing modem technology emphasizing energy efficiency. In this way it is possible to achieve the rapid incorporation of technologies meeting qualitative and financial demands of users, including energy-saving measures. It generally concerns a large-scale order or an application that can be repeated many times. There is a proposal

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to implement this progressive method in the Czech Republic (for example, through the Czech Energy Agency). An organization concerned with carrying out the "technology procurement" process will meet with producers and consumers (distributors or consumer organizations) to discuss the technical specifications and prices of highefficiency products that the producers are capable of either manufacturing or developing. The result should be an agreement between the producer and consumers on the purchase of a certain quality of products at a previously set price, assuming that the producer succeeds in meeting the agreed-upon parameters. • Organizing competitions between manufacturers Competitions between manufacturers for the best technological parameters or parameters meeting certain fixed requirements is a practice followed in many industrially developed countries. This method of increasing the efficiency of electric appliances could precede the application of standards (it would ensure that the producers would be prepared to meet standards) or to promote development of appliances with efficiency higher than standards. "Golden-carrot" competition was carried out in the USA, and because of its positive benefits in increasing the efficiency level of refrigerators it became a known standard around the world. The winner of the competition gets a certain bonus, thereby effectively reducing product development costs. It is also possible to consider linking competition between producers to the introduction of labels. ,, Facilitating the leasing of energy efficiency technologies Support the creation of new leasing products, such as, for example, operating leasing. Stimulate the development of leasing in this field. An example of these products is the utilization of non-traditional financing with variable repayment based on obtained energy savings, which would help optimize the cash flow of the leaseholder. Another possibility is expanding the operating lease of high-efficiency motors in a wide capacity range, which would make it possible for leaseholders to react flexibly to changes in the extent of business activity. An operating lease makes it possible to exchange leased equipment in the framework of a single contract. It is very advantageous for leasing highefficiency motors. With the expectation of future expansion, excessively large electric motors are often purchased, and they often operate outside of the optimal routine. If the operator has the possibility to exchange the electric motor at any time, the operating lease contributes to energy efficiency and thus to the optimal distribution of financing. CONCLUSION Under the framework of U.S. Country Studies Program, a set of three technological models were prepared and tested for GHG emission projection. Projections of energy demand and related emissions for period 1990-2010 were calculated using the best suited model, MARKAL. This model was calibrated to data of 1995.

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The projections show a relatively positive state of affairs, that the Czech Republic will comply with its FCCC commitment on stabilization of GHG emissions. The main drivers included in the baseline scenario which ensures the above goal are: decrease of overall production, increase of nuclear energy use, and Clear Air Act coming into full force in 1999. Several threats to the presented development exist. Enormous increase of use of electricity for household heating is of special concern. Using the MARKAL model a possible increase of electricity consumption of tens of percent was demonstrated if the trend of very cheap household tariffs will continue. The second case study has shown economic potential for saving 17 to 40% of heating energy use in households. This corresponds to 0.7% of the national CO~ emissions. A set of government policies and measures was developed for preparation of the Climate Change Action Plan and the 2nd National Communication. These options will be considered by interministerial committee to develop consensus.

REFERENCES 1. Tichy M.: Projection of greenhouse-gas emissions and mitigation methods, final report of the third part of the Country Study on Climate Change Czech Republic, SEVEn 95/004/c, Prague, February 1996 2. Tichy M et al: Technologies and policy options to mitigate greenhouse-gas emissions, SNAP Program Report,, SEVEn 96/017/c, Prague, October 1996 3. Complex study of Energy Sector and Integrated Study Prices and Taxes for the Czech and Slovak Republics, ETSU &COWIconsult, Praha 1994 4. H~ijek, M. and Kacvinsky, P.: A Macroeconomic Forecast of Development in the Czech Republic to the Year 2005, SEVEn Study No. 94/009/c,a. 5. Basic Frame of Business Plan of I~EZ for Period 1994-2000, t~EZ, a.s.,

Praha 1994, (in Czech) 6. Splitek V.: Revision and completion of data in the MARKAL model for the Czech Republic, study for SEVEn, SRC International CS, C-1145, July 1996 (in Czech)