Business-as-Unusual: Existing policies in energy model baselines

Baselines are generally accepted as a key input assumption in long-term energy modelling, but energy models have traditionally been poor on identifying baselines assumptions. Notably, transparency on the current policy content of model baselines is now especially critical as long-term climate mitigation policies have been underway for a number of years. This paper argues that the range of existing energy and emissions policies are an integral part of any long-term baseline, and hence already represent a “with-policy” baseline, termed here a Business-as-Unusual (BAuU). Crucially, existing energy policies are not a sunk effort; as impacts of existing policy initiatives are targeted at future years, they may be revised through iterative policy making, and their quantitative effectiveness requires ex-post verification. To assess the long-term role of existing policies in energy modelling, currently identified UK policies are explicitly stripped out of the UK MARKAL Elastic Demand (MED) optimisation energy system model, to generate a BAuU (with-policy) and a REF (without policy) baseline. In terms of long-term mitigation costs, policy-baseline assumptions are comparable to another key exogenous modelling assumption - that of global fossil fuel prices. Therefore, best practice in energy modelling would be to have both a no-policy reference baseline, and a current policy reference baseline (BAuU). At a minimum, energy modelling studies should have a transparent assessment of the current policy contained within the baseline. Clearly identifying and comparing policy-baseline assumptions are required for cost effective and objective policy making, otherwise energy models will underestimate the true cost of long-term emissions reductions.