Download Lecture 4 - Cambridge Centre for Climate Change Mitigation Research

EP06: Energy and Climate Change
Dr Jean-Francois Mercure,
Pablo Salas,
[email protected]
[email protected]
Lecture 4 – Energy economics
Lecture 4-H1: Energy demand and intensity
- GDP, intensity and energy demand
- Classical approach: the Kaya identity
- Energy intensities of GDP and carbon intensities of energy
- Energy efficiency of systems
- Expected future Kaya terms from the IPCC 2014
- Technological progress and learning by doing
- Learning-by-doing
- Technological progress and energy intensity
- Evidence for asymmetric response: the oil crisis
- Rebound effects
Lecture 4-H2: Energy, emissions and economic development
-
Future projections of energy demand
Decoupling of carbon intensity from energy intensity
Issues with the classical approach
Energy demand and economic development
Energy poverty and access
Lecture 4-H1: Energy demand and intensity
- GDP, intensity and energy demand
- Classical approach: the Kaya identity
- Total primary energy production: 560 EJ/y
- Fossil fuels: 461 EJ/y
- Oil: 176 EJ/y
- Coal: 166 EJ/y
- Gas: 119 EJ/y
- Nuclear: 27 EJ/y
- Renewables: 74 EJ/y
- Hydro: 13 EJ/y
- Biomass: 54 EJ/y
- Wind: 1.9 EJ/y
- Solar: 1.3 EJ/y
- Geothermal: 2.7 EJ/y
- Total primary energy use: 560 EJ/y
- Energy industry + transf.: 176 EJ/y
- Industry: 106 EJ/y
- Transport: 105 EJ/y
- Buildings: 130 EJ/y
- Non-energy 34 EJ/y
IEA Extended World Energy Balances 2014
Lecture 4-H1: Energy demand and intensity
- GDP, intensity and energy demand
- Classical approach: the Kaya identity
- Kaya identity:
- 1st term: population
- 2nd term: Income per capita
- 3rd term: Energy intensity of income (GDP)
- 4th term: GHG intensity of the energy supply
- If terms were independent, we could explore changes (taking a derivative):
- This is incorrect: changes may be interrelated
- Problem is: what are growth, energy and carbon intensities?
Are they independent variables?
How do they evolve with time?
See IPCC AR4 WGIII CH3 p182 (2007)
Lecture 4-H1: Energy demand and intensity
- GDP, intensity and energy demand
- Energy intensities of GDP and carbon intensities of energy
- A) Energy use as a function of GDP is not constant,
and different across countries
- B) Energy use per GDP against GDP is not constant
and different across countries
- C) Emission intensity of energy use changes
Global Energy Assessment Ch6 p396 (2012)
Global Energy Assessment Ch1 p114,120 (2012)
Lecture 4-H1: Energy demand and intensity
- GDP, intensity and energy demand
- Energy intensities of GDP and carbon intensities of energy
- Changes in fuel type consumed stems from changes of technologies used
- Technological change is gradual and follows distinct patterns
- Leads to gradual changes in carbon intensities
Marchetti & Nakicenovic, IIASA Working Paper, (1978)
Lecture 4-H1: Energy demand and intensity
- GDP, intensity and energy demand
- Energy efficiency of systems
-
Engineering systems (machines) have all sorts of efficiencies
Different national energy systems work at different intensities
Energy costs is only one of the multiple considerations by engineers and designers
The amount of energy used is not the relevant quantity; service generation is key
The energy used per service generated changes all the time as technology evolves
The technology changes at different rates in different contexts
M. Grubb Planetary Economics Ch1 p.15-16 (2014)
Lecture 4-H1: Energy demand and intensity
- GDP, intensity and energy demand
- Expected future Kaya terms from the IPCC 2014
IPCC AR5 WGIII Ch6 Assessing Transformation Pathways p15 (2014)
Lecture 4-H1: Energy demand and intensity
- Technological progress and learning by doing
- Learning-by-doing
- Costs of technologies decrease with
cumulated investment
(we will come back to that)
- Follows a power law relationship
- Learning rate is % cost decrease per
doubling of investment
- ‘Ordering principle’ observed in myriads of
contexts
Weiss et al Energy Policy (2012), Grubler, Nakicenovic & Victor, Energy Policy (1999)
Lecture 4-H1:
Van Bursik et al Environ. Res. Lett. 9 (2014) 114010
Lecture 4-H1: Energy demand and intensity
- Technological progress and learning by doing
- Technological progress and energy intensity
- Technologies (industry, end use) have a lifetime
- Consumers and firms replace technology
periodically
- Technology R&D works forward
(No going back to older models!)
- As technology gets scrapped, ‘quality’ is ever
increasing, including energy consumption
- Higher prices may incentivise higher turnover
rate or choices towards higher efficiency
(both on the supply and demand sides)
- Therefore:
Hypothesis:
- Price hikes lead to permanent changes in energy
efficiency
- As a result: energy efficiency is not a unique
function of energy prices
- Hysteresis exists, it depends on history!
Energy
Prices
Energy
Intensity
But is it true?
Global Energy Assessment Ch6 p396 (2012)
Lecture 4-H1: Energy demand and intensity
- Technological progress and learning by doing
- Evidence for asymmetric response: the oil crisis
Evidence:
- Efficiency is not a simple function of the price of oil
- Efficiency changed following the price increase
- It did not decrease again after the price hike
- Efficiency stopped progressing after 1985
- Note: standards and policy were involved in instigating the
changes
Conclusion:
- Path-dependence
Left M. Grubb ‘Planetary Economics’ Ch1 p5 (2014)
Right McKinsey p161 (2007)
See also M. Grubb ‘Planetary Economics’ Ch5 p171 (2014)
Lecture 4-H1: Energy demand and intensity
- Technological progress and learning by doing
- Rebound effects
Direct rebound effect:
- As energy end-use technologies improve,
energy costs to households go down
- As energy costs go down, households have
leftover income
- Households spend part of the income on
higher levels of the same energy end-use
services (e.g. heating, mobility)
Indirect rebound effect
- As technologies improve and energy costs
go down, income is used to consume other
goods/services (e.g. holidays)
International rebound effects
- As energy end-use technologies improve,
fuel consumption go down in some groups
- Energy prices go down with lower demand
- Other groups increase their consumption
with lower energy prices
(e.g. in different countries in the case of oil)
Chitnis et al Ecological economics (2014)
Lecture 4-H1: Energy demand and intensity
- Technological progress and learning by doing
- Energy expenditures
Evidence:
- Energy Prices x Intensity = Constant
- Means constant expenditure 6-10% GDP
- When energy prices are higher, economies
apparently adjust with lower consumption
- Likely related to rebound effects
- Likely related to path-dependent
technological change (Lectures 5-6)
M. Grubb Planetary Economics Ch6 p.209 (2014)
Lecture 4-H2: Energy, emissions and economic development
-
Future projections of energy demand
Decoupling of carbon intensity from energy intensity
Issues with the classical approach
Resource intensity and emissions
Energy demand and economic development
Energy poverty and access
Lecture 4-H2: Energy, emissions and economic development
- Future projections of energy demand
Future energy demand:
- According to current energy-economy models
- Useful as an order of magnitude range
- Goes from 500 EJ/y now to between 600 and 1200 EJ/y in 2100
- Consistent with IEA projections
Edenhofer et al Energy Journal (2010), IEA World Energy Outlook (2010)
Lecture 4-H2: Energy, emissions and economic development
- Decoupling of carbon intensity from energy intensity
Baseline IPCC scenarios (i.e. without specific climate change mitigation policies)
Business as usual scenarios from the IPCC
(Baselines)
- Varying rates of intensity decline against GDP
in model assumptions
- Varying total intensities
- Emissions: up to ~100 GtCO2 in 2100
IPCC AR5 WGIII Ch6 p17 (2014)
Lecture 4-H2: Energy, emissions and economic development
- Decoupling of carbon intensity from energy intensity
100
60
40
GtCO2/y
80
20
0
Back to the RCPs:
- RCP 8.5 similar to median baseline of IPCC scenario database
- The predominant change in emissions comes from intervention
- Incentivised by radical climate change mitigation policies
- Transformations of energy systems: technologies and resources used
- Fossil fuels (i.e. new carbon from the ground) nearly entirely phased
out in 2100 for RCP 2.6
IPCC AR5 WGI TS p94 (2014)
Lecture 4-H2: Energy, emissions and economic development
- Decoupling of carbon intensity from energy intensity
Example of analysis:
Energy modelling using MESSAGE (IIASA)
and IMAGE (PBL Netherlands):
Normative analysis
- Different scenarios with different objectives
- Universal energy access
- Avoid warming beyond 20C with 50% chance
- Improve Energy security
GEA Ch. 17 Energy Pathways for Sustainable Development (2012)
Lecture 4-H2: Energy, emissions and economic development
- Issues with the classical approach
Back to the Kaya identity:
- Technological progress is a complex process:
1- Emissions and energy use are not a
unique function of economic activity
2- The carbon intensity is not a simple
function of time or GDP
- Why?
- Technological change is complex and pathdependent
- Due to technological learning and diffusion
and historical events
- The future can take different directions
depending on choices or events
that happen along the way
- We will discuss this further in Lectures 5-6
M. Grubb Planetary Economics Ch10 p.385 (2014)
Lecture 4-H2: Energy, emissions and economic development
- Energy demand and economic development
- Different stages of economic development require
different energy consumption growth rates
Mercure et al. Energy Policy 2014
See also GEA Chapter 6 (2012)
Lecture 4-H2: Energy, emissions and economic development
- Energy poverty and access
- Two way relationship between access to energy and economic development
- Relationship between poverty and lack of access to energy services (electricity, mobility, etc)
- Development and access to energy can lead to lock-ins to
high emissions systems or low emissions systems
GEA Ch2 p 164-165 (2012)
Lecture 4: Further reading
- Following this lecture, please read:
- Global Energy Assessment 2012 – Freely accessible to download
http://www.globalenergyassessment.org
- Chapter 1: Energy Primer
- Chapter 6: Energy and Economy
- Michael Grubb Chapter 1
- Further reading (not in the exam but interesting):
- Global Energy Assessment Chapter 17: Energy Pathways for Sustainable Development
Lecture 4: References
Edenhofer et al. The economics of low stabilisation, Energy Journal, 2010, special issue
https://www.pik-potsdam.de/research/sustainable-solutions/flagshipspld/MitigationScenarios/adam
Chitnis, Sorrell, Druckman, Firth & Jackson, Ecological economics 106 (2014) 12-32
Global Energy Assessment (GEA) (2012) Cambridge University Press, http://www.globalenergyassessment.org
Grubler, Nakicenovic & Victor, Energy Policy 27 (1999) 247-280
IEA CO2 emissions from fuel combustion 2014, IEA Extended World Energy Balances 2014
Access IEA databases through http://ukdataservice.ac.uk/get-data/key-data/international-macro-databanks.aspx
IPCC AR5 WGI (2013), IPCC AR5 WGIII (2014)
Fifth Assessment Report of the Intergovernmental Panel on Climate Change,
Work Group 1: The physical sciences basis (2013), http://www.ipcc.ch
Work Group 3: Mitigation of Climate Change (2014)
Marchetti & Nakicenovic, IIASA Working Paper, (1978), http://www.iiasa.ac.at/Research/TNT/WEB/PUB/RR/rr-79-13.pdf
McKinsey, Curbing Global Energy Demand Growth: The Energy Productivity Opportunity (2007)
Mercure, J.-F., Salas, P., Foley, A., Chewpreecha, U., Pollitt, H., Holden, P. B., & Edwards, N. R. (2014). The dynamics of
technology diffusion and the impacts of climate policy instruments in the decarbonisation of the global electricity sector. Energy
Policy, 73, 686–700. http://dx.doi.org/10.1016/j.enpol.2014.06.029
Michael Grubb, Planetary Economics, (2014) Routledge
Van Bursik, Kantner, Gerke & Chu, Environment Research Letters 9 (2014) 114010
Weiss, Patel, Junginger, Perujo, Bonnel & van Grootveld, Energy Policy 48 (2012) 374-393,