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Energy Doing Business with the World - The new role of corporate leadership in global development Geneva, September 2007 World Business Council for Sustainable Development Overview The global view: Tomorrow’s energy demand Energy: An essential for economic and social development Share of traditional biomass in residential consumption Energy options at the base of the pyramid 22 The global view: Tomorrow’s energy Energy market segments demand Energy demand is expected to increase by 50% between now and 2030, according to the International Energy Agency. Predicted increase in world primary energy demand, according to reference scenario Source: World Energy Outlook 2006 33 Energy: An essential for economic and social development Growing demand Global population divided into income groups: Poorest (GDP < $1,500) Developing (GDP < $5,000) Emerging (GDP < $12,000) Developed (GDP > $12,000) Population growth Primary energy Developed (GDP>$12,000) Emerging (GDP<$12,000) Developing (GDP<$5,000) Poorest (GDP<$1,500) 10000 By 2050, world population could rise to around 9 billion.1 8000 6000 4000 Shifting the development profile further to a “developed” world means energy needs triple by 2050 Population, millions Shifting the development profile to a “low poverty” world means energy needs double by 2050 2000 Base case 2000 Low Poverty 2050 Prosperous world 0 44 Source: WBCSD adaptation of IEA 2003 Population growth Share of traditional biomass in residential consumption According to the IEA, traditional biomass accounts for over 90% of household energy use in many developing countries. Without access to modern energy sources such as electricity, the poor have to spend time gathering biomass fuels instead.1 Annual deaths from indoor air pollution 2.8 millions 3 2 1.2 1.3 1.6 1 0 Source: IEA, World Energy Outlook 2006. Malari a Smoke TuberculosisHIV/AIDS from biomass Source: IEA, World Energy Outlook 2006. 55 Energy options at the base of the pyramid Patterns of fuel use change as household income changes.1 66 Needs & Challenges Growth, development, and energy demand Societal needs Projected energy demand in developing countries What are the key challenges? Energy for development: competing interests 77 Growth, Growth,development developmentand andenergy energy "Energy is one of the areas that shows demand demand most clearly the gap between the global rich and the global poor, and the social and economic inequities that result." Basic premise: energy use and growth are strongly linked -Millennium Campaign 400 Energy is a key indicator of human development. 300 250 Global Trend EU-15 North America Korea 1970-2000 Malaysia 1970-2000 China 1970-2000 200 150 100 50 0 $0 $5'000 $10'000 $15'000 $20'000 $25'000 $30'000 GDP per capita, US$ 1995 ppp 88 Source: WBCSD adaptation of IEA 2003 Energy Use, GJ per capita 350 Societal needs Access to sources of energy are unequal People without access to electricity, 2005 Measured base of the pyramid (BOP) spending on energy splits about 40% urban, 60% rural.1 The base of the pyramid is defined as those with incomes less than US $3,000 in local purchasing power. 1 However, rural households spend an average of 44% less on energy than do their urban counterparts. 1 Source: IEA. World Energy Outlook 2006 99 Projected energy demand in developing countries Projected primary energy demand in developing countries Source: IEA. World Energy Outlook 2006 10 10 What are the key challenges? Fossil fuels are unevenly distributed Raw materials for generating energy are limited in scope for export National development strategies lack comprehensive energy policies Negative environmental impacts Bottom-up approach needed: making energy affordable and changing consumption habits 11 11 Energy Energyfor fordevelopment: development: competing competing interests interests Energy Development MNCs: Localising operations Growth Access Security Business solutions Local businesses: SMEs / Microentrepreneurs Climate change Eco-systems Biodiversity Environment People: Basic needs Product use In developing areas, industries, schools, and hospitals are at the mercy of sporadic power supplies and regular power outages that hinder efficiency and delivery of basic services. 12 12 Opportunities Sustainable energy future Market size Market opportunities Key messages WBCSD Resources 13 13 Sustainable energy future The key to a sustainable energy future for the planet rests on four actions: A move toward a low-carbon economy Reduced dependency on fossil fuels Significantly improved energy efficiency across all sectors The development of cheap and affordable energy solutions 14 14 Market size According to the International Energy Agency, energy demand is expected to increase by 50% between now and 2030 Households in the BOP500 income group spend $148 (on average) per year on energy; an average of $264 for those in the BOP1000; and $379 annually in BOP1500.1 These amounts may be small, but when aggregated, they form large, underserved markets. 15 15 Market Opportunities Market expansion in developing countries New markets are emerging in alternative energies, energy conservation services, and energy efficient technologies. Opportunity for building and marketing these products and services Opportunity for businesses that are more energy efficient to enjoy lower operating costs and reduced exposure to potentially volatile energy prices. 16 16 Key messages For business, investing in sustainable energy services can: Create new markets and associated revenue streams for energy related products and services for the currently underserved in developing countries Create competitive advantage by developing new and affordable energy technologies that reduce emissions and/or improve energy efficiency Reduce reliance on fossil fuels in the energy mix Lower operating costs by improving energy efficiency For governments, an effective policy framework for sustainable energy services can: Improve access and reliability of energy supplies Lead to successful implementation of lower carbon technologies using Promote growth in the SME sector to provide energy services, particularly in rural areas Raise consumer awareness on energy efficiency Improve public health by promoting cleaner forms of energy supply Reduce deforestation and ecosystem degradation from harvesting biomass 17 17 WBCSD Resources Policy Directions to 2050: A business contribution to the dialogues on cooperative action asserts that the only way to combat climate change is through decisive, concerted and sustained actions between governments, businesses and consumers. Pathways to 2050 - Energy & climate change builds on the WBCSD’s 2004 Facts and Trends to 2050: Energy and Climate Change and provides a more detailed overview of potential pathways to reducing CO2 emissions. Facts & Trends to 2050: Energy & climate change provides an overview of key facts and societal challenges related to economic development, future energy demand and the impact that demand could have on the climate system. 18 18 www.wbcsd.org/web/development.htm