Download Reference Scenario

THESEUS Summer School 2007
Reconciling Energy Security and
Climate Change Mitigation:
The Investment Challenge
Richard Bradley, PhD
Head, Energy Efficiency and Environment Division
International Energy Agency
3 July 2007
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
What is Energy Security?
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
Assessment approach
Quantitative framework based on indicators
Climate change: CO2 emissions
Energy security implications of resource
concentration: develop new indicators
♦ Consider price and physical availability risk
separately
• Price: oil, coal and gas
• Physical availability: gas
Energy security indicators
88% of world
total
86% of world
total
Stabilisation and equilibrium global
mean temperatures
• Equilibrium temperatures reached after 2100
• Uncertainty of climate sensitivity important
Post-SRES (max)
35
35
Stabilization
targets:
Post-SRES (max)
Stabilization targets:
B: 535-590
ppm CO2-eq
B: 535-590
CO2-eq
25 ppm
A2: 490-535
ppm CO2-eq
A2: 490-535 ppm
CO2-eq
20
15
10
A1: 445-490 ppm CO2-eq
A1: 445-490
ppm CO2-eq
20
15
10
5
5
Post-SRES (min)
0
Equilibrium global mean temperature
increase over preindustrial (°C)
25
Post-SRES (min)
0
Equilibrium global mean temperature
increase over preindustrial (°C)
E: 850-1130 ppm CO2-eq
D: 710-850
CO2-eq
30 ppm
D: 710-850
ppm CO2-eq
C: 590-710 ppm
CO2-eq
C: 590-710
ppm CO2-eq
Wold CO2 Emissions (GtC)
Wold CO2 Emissions (GtC)
E: 850-1130 ppm CO2-eq
30
-5
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
-5
2000 2010 2020 2030 2040 2050 2060 2070 2080 2090 2100
Multigas and CO2 only studies combined
GHG concentration stabilization level (ppmv CO2-eq)
GHG concentration stabilization level (
IPCC
Long term mitigation (after 2030)
•Mitigation efforts over the next two to three decades will have a large
impact on opportunities to achieve lower stabilization levels
Stab level
(ppm CO2-eq)
Global Mean
temp.
increase
at equilibrium
(ºC)
Year global
CO2 needs
to peak
Year global
CO2
emissions
back at
2000 level
Reduction in 2050
global CO2
emissions
compared to
2000
445 – 490
2.0 – 2.4
2000 - 2015
2000- 2030
-85 to -50
490 – 535
2.4 – 2.8
2000 - 2020
2000- 2040
-60 to -30
535 – 590
2.8 – 3.2
2010 - 2030
2020- 2060
-30 to +5
590 – 710
3.2 – 4.0
2020 - 2060
2050- 2100
+10 to +60
710 – 855
4.0 – 4.9
2050 - 2080
+25 to +85
855 – 1130
4.9 – 6.1
2060 - 2090
+90 to +140
IPCC
Other Objectives
Economic Growth
Energy Security
12000
Africa
Tankers
11000
10000
Other Asia
9000
Transition economies
8000
Latin America
7000
OECD
6000
0
10
20
30
40
50
GDP per capita in thousand $(2000) using PPPs
5000
2030
2002
1971
4000
Environmental Protection
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Bridging the Welfare Gap
Year
40 000
35 000
9
8
30 000
TPES - toe per capita
25 000
20 000
15 000
6
5
4
3
2
10 000
1
di
a
In
As
ia
ric
a
Af
in
a
Ch
Br
az
il
er
ic
a
in
a
Am
La
tin
Ea
st
le
Ar
ge
nt
FS
U
M
id
d
Ja
pa
n
O
St
at
es
ite
d
0
1971
EC
D
0
5 000
Un
Mt of CO2
7
1980 1990 2000 2010 2020 2030
Coal
Oil
Gas
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
FOSSIL FUEL RESOURCES
Atmosphere
750PgC
PgC
Atmosphere 790
Vegetation
610 PgC
Oil 130 Gas 120
PgC
PgC
Coal
5,000 to 8,000 PgC
Unconventional Liquids and Gases
INTERNATIONAL ENERGY AGENCY
40,000 PgC
AGENCE INTERNATIONALE DE L’ENERGIE
Mitigation Policy & Technology
Capital Stock Turnover Rates
• Capital stock
turnover—You don’t
kill the “cash cow.”
Thus, the margin for
learning is the new
capital stock market.
• Increasing marginal
cost of rapid
deployment.
Household Appliances
Res. Water Heaters
Residential. HVAC
Automobiles
Commercial Vehc
Commercial HVAC
Manufacturing Equip
Elec. Trans, Telecom, Pipelines
Refinery Processes
Power Stations
Buildings Stock - Res/Comm
Transport Links & Urban Development
0
20 40 60 80 100 120 140 160 180 200
Early market signals and technology R&D can
work together to assist the market transition – Policies
and R&D are inseparable!
Source: Adapted from PNL/U of Maryland
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
Tackling
Investment
Challenges in
Power
Generation
Power plants are ageing
In IEA Countries
Total capacity
2 397 GW
More than
30 years old
638 GW
(27%)
Coal
323 GW
Oil
130 GW
Gas
140 GW
Nuclear
46 GW
INTERNATIONAL
ENERGY AGENCY
 Age of existing plants, technological development,
tighter environmental controls, and nuclear phase out
policies drives the need for replacements
What Needs to Happen
National policies to change the
emission path in the short to medium
term
Development of new large technologies
International institutional framework
providing cost effective incentives for
emissions reductions and technology
deployment.
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
Are Emissions On Track?
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
Reference Scenario:
World Primary Energy Demand
18 000
Other renewables
Nuclear
Biomass
16 000
14 000
Gas
Mtoe
12 000
10 000
Coal
8 000
6 000
4 000
Oil
2 000
0
1970
1980
1990
2000
2010
2020
2030
Global demand grows by more than half over the next quarter of a
century, with coal use rising most in absolute terms
© OECD/IEA - 2006
Reference Scenario:
Primary Energy Demand by Region
10 000
Mtoe
8 000
Developing countries become the
biggest energy consumers within
a decade
6 000
4 000
2 000
0
1980
OECD
1990
2000
2010
Developing countries
2020
2030
Transition economies
World oil demand grows by just over half between 2004 and 2030,
with 70% of the increase coming from developing countries
© OECD/IEA - 2006
Reference Scenario:
World Primary Oil Supply
120
50%
100
45%
mb/d
80
60
40%
40
35%
20
0
30%
2000
2005
Middle East OPEC crude*
Non-OPEC crude*
OPEC market share
2015
2030
Other OPEC crude*
Non-conventional oil
* Including NGLS
OPEC takes the lion’s share of oil market growth as conventional non-OPEC
production peaks, but non-conventional oil plays a growing role
© OECD/IEA - 2006
Reference Scenario:
Will the Investment Come?
Cumulative Investment in Energy-Supply Infrastructure,
2005-2030 = $20.2 trillion (in $2005)
Exploration &
development
73%
Refining
Other
18%
9%
Electricity
56%
Oil 21%
$4.3 trillion
46%
Power
generation
54%
Transmission
& distribution
89%
Mining
11%
Shipping &
ports
$11.3
trillion
Biofuels 1%
$3.9 trillion
Exploration &
development
LNG chain
Transmission and
distribution
56%
Gas 19%
Coal 3%
7%
37%
Just over half of all investment needs to 2030 are in developing
countries, 18% in China alone
© OECD/IEA - 2006
Tackling
Investment
Challenges in
Power
Generation
Investments mostly gas-fired but
increased interest in coal
In IEA Countries
Changes in installed capacity in OECD
GW
300
250
200
150
100
50
0
1990-1999
1980-1989
2000-2004
-50
Coal
INTERNATIONAL
ENERGY AGENCY
Oil
Gas
Nuclear
Hydro
Construction
2005-2010
Wind
Planned
2005-2015
Other Renewables
Reference Scenario:
Energy-Related CO2 emissions by Region
15
Rest of non-OECD
Gigatonnes of CO2
12
China
9
6
Rest of OECD
United States
3
0
1990
2000
2010
2020
2030
China overtakes the US as the world’s biggest emitter before 2010, though
its per capita emissions reach just 60% of those of the OECD in 2030
© OECD/IEA - 2006
Is Technology Development
On Track?
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
25000
70
RD&D budget vs. Crude Oil Prices
all data are in 2004 real USD
JAN
06
60
20000
50
15000
40
30
10000
20
5000
10
0
-
1970
1973
1976
1979
1982
1985
1988
1991
1994
1997
2000
2003
Conservation
Fossil Fuels
Renewable Energy
Nuclear Fission
Nuclear Fusion
Power & Storage technologies
Other
Real Crude Oil Prices
INTERNATIONAL ENERGY AGENCY
2006
AGENCE INTERNATIONALE DE L’ENERGIE
Asian-Pacific Partnership on Clean
Development and Climate
 Purpose: The partnership will collaborate to promote and
create an enabling environment for the development,
diffusion, deployment and transfer of existing and emerging
cost-effective, cleaner technologies and practices, through
concrete and substantial cooperation so as to achieve
practical results.
 Task Forces:








Aluminium
Buildings and Appliances
Cement
Cleaner Use of Fossil Energy
Coal Mining
Power Generation and Transmission
Renewable Energy and Distributed Generation
Steel
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
Is the Institutional
Framework On Track?
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
Global CO2 emissions
from energy are growing rapidly
Gigatonnes CO2
25
International Bunkers
20
Non-Annex I Parties
15
Non-Participating Annex I Parties
10
5
0
1990
Kyoto Parties
1995
Kyoto target (4)
2000
2004
Copyright IEA
What Can Be Done?
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
Alternative Policy Scenario:
Global Savings in Energy-Related CO2
Emissions
42
Increased nuclear (10%)
Increased renewables (12%)
Power sector efficiency & fuel (13%)
Electricity end-use efficiency (29%)
38
Gt of CO2
Reference Scenario
Fossil-fuel end-use efficiency (36%)
34
Alternative Policy Scenario
30
26
2004
2010
2015
2020
2025
2030
Improved end-use efficiency of electricity & fossil fuels accounts for twothirds of avoided emissions in 2030
© OECD/IEA - 2006
Alternative Policy Scenario:
Energy Investment
3 000
Change in Cumulative Energy-Related Investment
vs. Reference Scenario, 2005-2030
billion dollars (2005)
2 000
1 000
0
-1 000
-2 000
-3 000
-4 000
Additional demand- Avoided supply-side
Net change in
side investment
investment
energy investment
Avoided supply-side investment more than outweighs the additional
investment by consumers in more expensive end-use capital stock
© OECD/IEA - 2006
Alternative Policy Scenario:
Change in Energy-Related CO2
Emissions, 2004-2030
United States
European Union
Japan
Rest of OECD
Transition economies
China
India
Rest of developing Asia
Latin America
Africa
Middle East
Emissions in 2030 are below
current levels
-1
0
1
2
3
Gt of CO2
Alternative Policy Scenario
4
5
6
Reference Scenario
OECD emissions also peak & then decline before 2030, falling below
2004 levels in Europe and Japan
© OECD/IEA - 2006
Impact of Concrete 2006 & 2007 IEA Recommendations
on World Final Energy Consumption
550
2030 low savings
estimate 50 EJ
500
Lighting
Buildings
Transport
450
WEO 2006 Projection
EXAJOULES
Equipment
2030 moderate
savings estimate
83 EJ
400
350
300
250
200
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
INTERNATIONAL ENERGY AGENCY
12
20
14
20
16
20
18
20
20
20
22
20
24
20
26
20
28
20
30
AGENCE INTERNATIONALE DE L’ENERGIE
ENERGY
TECHNOLOGY
PERSPECTIVES
2006
Scenarios &
Strategies
to 2050
© OECD/IEA, 2006
ENERGY
TECHNOLOGY
PERSPECTIVES
2006
Scenarios &
Strategies
to 2050
© OECD/IEA, 2006
Technology
• The range of stabilization levels can be achieved by
– deployment of a portfolio of technologies that are currently available and
– those that are expected to be commercialised in coming decades.
• This assumes that appropriate and effective incentives are in place for
development, acquisition, deployment and diffusion of technologies
and for addressing related barriers
IPCC
Recent Policy Developments
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
IPCC: What are the macro-economic costs in
2030?
•Costs are global average for least cost appoaches from top-down models
•Costs do not include co-benefits and avoided climate change damages
Trajectories
towards
stabilization
levels
(ppm CO2-eq)
Median
GDP
reduction[1]
(%)
Range of GDP
reduction [2]
(%)
Reduction of average
annual GDP growth
rates [3]
(percentage points)
590-710
0.2
-0.6 – 1.2
< 0.06
535-590
0.6
0.2 – 2.5
<0.1
Not available
<3
< 0.12
445-535[4]
[1] This is global GDP based market exchange rates.
[2] The median and the 10th and 90th percentile range of the analyzed data are given.
[3] The calculation of the reduction of the annual growth rate is based on the average reduction during the period till 2030
that would result in the indicated GDP decrease in 2030.
[4] The number of studies that report GDP results is relatively small and they generally use low baselines.
IPCC
European Union
 Commission recently set a target of a 20%
reduction by 2020.
 Set a long term goal of limiting the
temperature change to 2oC
 EU ETS directive now under review for post2012.
 ETS to be linked to Norway effective 1 January
2008
 Energy Efficiency Action Plan
20% savings by 2020; 20% CO2 reduction; 20%
renewables target; 10% biofuels
 Broad range of policies addressing all major
sectors

INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
New White House Initiative
 To convene high-level meeting of 15 largest emitters
to develop long term framework by 2008





The participants will develop parallel national commitments to
promote key clean energy technologies.
The proposal seeks to bring together the world’s top
greenhouse gas emitters and energy consumers.
In creating a new framework, the major emitters will work
together to develop a long-term global goal to reduce
greenhouse gasses.
Each country will work to achieve this emissions goal by
establishing its own ambitious mid-term national targets and
programs, based on national circumstances.
They will ensure advancement towards the global goal with a
review process that assesses each country’s performances.
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
U.S. Legislative Activity
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
Other Developments in the US
The formal launch of the Western
Regional Climate Action Initiative
(WRCAI) - California, Oregon,
Washington, Arizona and New Mexico
The US CAP initiative
Regional Greenhouse Gas Initiative
(RGGI) among NE States
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
Australia
 10 December 2006, the Prime Minister announced the
establishment of a joint government-business
taskforce on emissions trading
 the Task Group has concluded:






Australia should not wait until a genuinely global agreement
has been negotiated
Emissions trading scheme should form the principal
mechanism to achieve emissions-reduction goals
A workable global emissions trading scheme is likely to
evolve slowly through a patchwork of linked national and
regional schemes.
Australia’s medium term emissions trajectory and its longterm aspirational goal must be set with great care while
recognising the need for deeper emissions reductions over
time.
a ‘safety valve’ emissions fee
mixture of free allocation and auctioning of single-year dated
emissions permits
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE
Conclusions
 It is not yet possible to discern a human
influence on emissions reductions.

Policy effort is insufficient
 Fossil fuels will dominate the energy supply
for the foreseeable future
 Technology development is being focused,
but may not be adequate.
 Investors need an international cost effective
framework soon if energy security and
climate change objectives are to be met.
INTERNATIONAL ENERGY AGENCY
AGENCE INTERNATIONALE DE L’ENERGIE