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We Need Energy Technology
Breakthroughs to Effectively Stem
Climate Change
Mike Toman
Research Department, World Bank
iSEE Congress, University of Illinois
September 13, 2016
Responsibility for the content of this presentation is
mine alone and the views expressed should not be
attributed to the World Bank or any member countries.
Key conclusions
• Reducing global greenhouse gases enough to
significantly mitigate climate change risks will
require complete global energy
transformation, starting soon
• There are important limits to economically
feasible mitigation actions at present given
costs of energy system emissions reductions
• Additional international cooperation to
develop more affordable low-carbon energy
options is crucial to avoid dangerous warming
2
Key conclusions (2)
• Putting more emphasis on sectoral and
technology-focused measures for emissions
reduction may be effective for building
international cooperation
• Lower-income countries still striving to meet
basic needs should not be expected to bear
significant cost burdens for GHG mitigation
3
Climate change and other
environmental risks
4
Without additional mitigation, global mean surface temperature is
projected to increase by 3.7 to 4.8°C over the 21st century – causing
significant risks for the environment and human well-being.
Based on WGII AR5 Figure 19.4
Source: [2]
5
Other environmental risks matter too
[3]
6
Energy priorities for most
developing countries
• Improved access to affordable, clean energy
– Basic access for cooking, heating, lighting
– Expanded access to electricity for growth
• Improved reliability of electricity availability
– Mitigate productivity as well as direct welfare losses
– Increase investment in modern growth sectors
• Financial sustainability of sector
– Subsidy, other governance reforms
• Improved energy efficiency that lowers costs
7
Possibilities for and Potential Costs of
GHG mitigation
8
Regional patterns of GHG emissions are shifting along with
changes in the world economy.
Based on Figure 1.6
Source: [2]
9
GHG emissions rise with growth in GDP and population;
long-standing trend of decarbonisation of energy reversed.
Based on Figure 1.7
Source: [2]
10
GHG emissions rise with growth in GDP and population;
long-standing trend of decarbonisation of energy reversed.
Based on Figure 1.7
Source: [2]
11
Decomposition formula for growth in
CO2 emissions
C=emissions, E=energy, Y=income, P=population
𝐸
𝐶
%Δ𝐶 = %Δ 𝑌 + %Δ
+ %Δ( )
𝑌
𝐸
In words, the % increase in total GHG emissions is the
sum of the growth rate of income, the % change in
energy intensity of economic activity, and the % change
in carbon intensity of energy used
The action is in reducing energy intensity and decarbonizing
energy system
12
An Example:
• Suppose population growth is 1% per year, and
per capita income growth is 3% -- so total income
growth is 4%
– Very modest income growth relative to what is
needed to reduce global poverty
• Sustained energy efficiency improvement of 2%
per year is ambitious
• With that, still need 2% per year reduction in
carbon intensity of energy to hold total GHG
emissions constant; But….
13
Even with fairly strong renewables growth, fossil
energy dominates the mix absent major change
Growth in total primary energy demand
1987-2011
Gas
2011-2035
Coal
Renewables
Oil
Nuclear
IEA projection
Source: [5]
500
1 000
1 500
2 000
2 500
3 000
Mtoe
While primary energy demand roughly doubles from 2011-2035, fossil energy only
shrinks from 82% to about 75% absent much more aggressive GHG emissions mitigation
There is far more carbon in the ground than emitted in any
baseline scenario; fuel scarcity not a major emissions constraint
Based on SRREN Figure 1.7
Source: [2]
15
More ambitious GHG mitigation involves more substantial
scaling up of low-carbon energy.
Source: [2]
16
More ambitious GHG mitigation involves more substantial
scaling up of low-carbon energy.
Based on Figure 7.16
Source: [2]
17
Global costs rise with the ambition of the mitigation goal.
Based on Table SPM.2
Source: [2]
18
How to evaluate these costs?
• While the % deviations from baseline are small, in
absolute terms even a few % of (growing) future
global consumption is a large amount
• Such cost estimates typically assume cost-effective
measures for international mitigation (i.e. globally
efficient carbon pricing) – costs will be significantly
larger without them
• Assumption of profound increases in energy
efficiency (e.g. ~ 40% of total “wedge”)
• Costs will be significantly larger than shown if all lowcarbon technologies are not available – even those
that are pre-commercial and controversial
19
Availability of technology can greatly influence mitigation costs.
Based on Figure 6.24
Source: [2]
20
Further technical progress is needed to reduce
costs of low-carbon options
• Land use and environmental concerns with biofuels;
“second generation” options still in future
• Fuel cells need significant advances to be economic
• Wind and solar have inherent challenges to scale up
(intermittency/grid stability, storage, land use)
• Solar thermal still in intermediate stage of
commercial maturation
• Nuclear remains costly, public concerns
• Carbon capture and storage (CCS) seems technically
feasible but essentially untested at a commercial
scale, with unknown performance and permanence
21
International cooperation for global
GHG mitigation
22
Criteria for evaluating agreements
•
•
•
•
Environmental effectiveness
Aggregate economic performance impacts
Distributional and social impacts
Institutional feasibility (participation,
compliance)
23
Standard prescription
• Countries agree on individual emissions
reductions targets
• Countries implement policies to achieve their
targets:
– Use of price-based policies, like a tax on carbon
emissions or energy taxes based on the carbon
content of the energy source, will lower the cost
of achieving the targets
– Such policies also motivate technical innovation to
lower the cost of emissions mitigation
• But….
24
International “free riding” on emissions
reductions agreements
• Deep and costly cuts in global emissions also
increase incentives to shirk
• Broader participation becomes feasible only
with more modest objectives and thus lower
environmental effectiveness
– Search for commonly held, implementable
principle of equitable burden sharing elusive
25
“Disruptive” energy technology
transformation
26
Need to lower the cost of completely
restructuring global energy system
• Lower cost means decarbonization consistent
with individual countries’ self-interests
• Incentive-oriented policies for GHG limits
definitely can and do induce needed lowcarbon innovation, lowering compliance cost
• But given current costs of and barriers to
greatly scaling-up low-carbon energy
resources, a more incremental path to energy
system transformation risks being too slow
27
Resource requirements for engendering
disruptive technology transformation
• Cost of transformation is very uncertain, but
likely well above recent OECD energy RD&D
spending of ~$15B/yr.
– Energy R&D recently has been ~ 5% of total R&D –
half what it was in 1980
– IEA estimates ~$45 trillion needed by 2050 to
limit dangerous global temperature rise, on top of
the resources required to meet growing global
energy demands
• Calls for 5x increase in RD&D spending
28
Energy RD&D has slipped in priority
OECD R&D spending
50%
Defence
40%
Health and
environment
General
university funds
Non-oriented
research
Space
programmes
Energy
30%
20%
10%
0%
1981
1985
Source: [6]
1990
1995
2000
2005
2010
Major RD&D funding increases will require
major intergovernmental cooperation
• Sums this large ( ~0.2% global GDP) will have to be
raised by governments – beyond the means and
incentives of private sector to finance
• Need assurance that knowledge will be shared but
not poached
– Needed basic knowledge advances will not be patentable –
spillovers unavoidable
• Countries may want to specialize in major
investments in certain activities, and need a range of
these to find best opportunities
– So need assurance that there will be shared
contributions to global effort
30
The beginnings of an international
technology cooperation initiative are there
• November 2015 20-country agreement to
double clean energy R&D
• Breakthrough Energy Coalition
• “Global Apollo Programme” proposal in UK
(0.02% GDP – versus 0.2%)
• Support at Paris climate meetings
31
Focus on sector-specific and technologybased cooperation for emissions mitigation
also can reinforce RD&D cooperation
• Many developing countries need to improve their
energy and transport systems anyway
– Focus in financing on trade in new capital goods, expanded
use of affordable lower-C options
• Sector-based, technology-focused approaches do not
preclude shift toward broader economy-wide price
instruments
32
What about “rebound effects”?
• Reducing the cost of low-carbon energy will
limit the rebound from technology policies to
improve energy efficiency
• The threat of lower alternative energy costs is
not likely to accelerate fossil energy depletion
that much
– Could be some speed-up in depletion of marginal
oil resources
33
Uses of international financial resources
for GHG mitigation need to reflect
developing country priorities
• “Carbon finance” will have limited effect
without stronger commitments from
developed and major developing countries to
curb emissions
• Need to emphasize development benefits
• Local environmental “co-benefits” – shouldn’t
developing countries pursue improved air quality
anyway?
34
Thank you – I look forward to
comments and questions.
[email protected]
35
Sources for individual slides
•
[1] WGIIAR5-Slides-June 12 2014; downloaded at http://ipcc-wg2.gov/AR5/report/
•
[2] IPCC_WGIII_AR5_Presentation; downloaded at www.mitigation2014.org/report
•
[3] OECD 2012 Environmental Outlook figures downloaded at
http://www.oecd.org/env/indicators-modellingoutlooks/oecdenvironmentaloutlookto2050theconsequencesofinaction.htm
•
[4] IPCC AR5 WGIII Summary for Policy Makers Figure SPM.2; downloaded at
http://mitigation2014.org/report/figures/summary-for-policymakers-figures
•
[5] Presentation by Fatih Birol on IEA World Energy Outlook 2013 for OECD
Parliamentary Days, Paris, 5 February 2014. Downloaded at
http://www.oecd.org/about/membersandpartners/publicaffairs/parliamentarydays201
4slides.htm
•
[6] IEA Energy technology Perspectives 2012 slide deck; downloaded at
http://www.iea.org/etp/etp2012/
•
[7] Global Commission On The Economy And Climate, The New Climate Economy Report
(Global Report): Figures 1.6 (McKinsey curve), 5.2 (subsidies)
•
[8] IEA, Redrawing the Energy-Climate Map, Figure 3.16.
36
GHG mitigation and developing countries
37
Who should go first?
• Controlling climate change is and for some
time should be an issue primarily for highemitting upper and middle income countries
– Consistent with UNFCCC
• Lower income countries – especially those not
able to meet basic energy needs – should not
be carrying out costly decarbonization
– Important implications for international project
financing
38
Several policies can reduce help reduce
GHG emissions at relatively low cost, risk
• Energy efficiency performance standards
• Reduced deforestation
• Reform of trade policies that restrict diffusion
of lower-carbon technologies
• Energy subsidy reforms
– But political economy difficulties provide a
cautionary lesson
39
[3]
40
Putting a price on carbon remains crucial
• Increased cost-effectiveness
• Economic instruments motivate cost-reducing
innovation in low-carbon technologies
– Important complement to public investment in
new knowledge for lowering mitigation costs
41
42
Substantial reductions in emissions would require large
changes in investment patterns and appropriate policies.
Based on Figure 16.3
Source: [2]
43
“McKinsey MAC curve” shows lots of win-win
Source: [7]
44
Difficulties with this narrative
• MAC curve has several flaws
– Evaluation of individual mitigation opportunity costs
– Interactions among mitigation components
• A large body of analysis indicates that to make
deep GHG cuts we will have to make intensive
use of the ostensibly more expensive options
• Counting co-benefits:
– Often are cheaper options for pursuing co-benefits
than GHG mitigation
– If many co-benefit measures should be pursued
already, why aren’t they?
45
Reform of energy consumption subsidies
offers significant win-win opportunities – if
political barriers can be overcome
Source: [7]
46
Stabilization of atmospheric concentrations requires moving
away from the baseline – regardless of the mitigation goal.
Based on Figure 6.7
Source: [2]
47
Stabilization of atmospheric concentrations requires moving
away from the baseline – regardless of the mitigation goal.
~3°C
Based on Figure 6.7
Source: [2]
48