Post-2012 Climate Policy for EU: Stabilizing CO2 Emissions for a Sustainable Future

1. Niklas Höhne n.hoehne@ecofys.de ECOFYS Cologne, Germany The innovation challengeSTAKEHOLDER CONFERENCE "Post-2012 climate policy for the EU"22 NOVEMBER 2004

2. Stabilization paths Reference Corresponding temperature levels at equilibrium: 550ppm: around 3.2°C 450ppm: above 2.5°C 350ppm: around 1.5°C (Source: IPCC TAR 2001, average climate sensitivity) (Source: Ecofys, adapted from post SRES stabilization paths Morita et al. 2001, CO2 only)

3. Content What needs to be done today to reach stabilization of CO2 concentrations and the 2°C target? • Stabilization of CO2 concentrations at any level level requires global emissions to decline to a very low level. • For 450ppmv CO2 globally below 1990 levels in 2050 and in industrialized countries below 1990 levels by factor 3 to 5 • Technological change • Choice of technologies • Costs

4. Emissions = activity  energy/activity  GHG/energy Emission reduction in the EU until 2050 Share of zero emission sources At 2% annual increase in energy consuming services Annual energy efficiency improvement (Source: K. Blok, “Technology choices: how to set innovation targets for energy-efficiency improvement and low-carbon energy sources?”)

5. Two options for action on technology development Option A: Develop new technologies to be applied later • Danger that technologies will not emerge as planned (e.g. fusion) • Danger of “lock-in”: Old technologies and infrastructure prescribe future path Option B: Support new technologies now • Technological learning: Performance improvements, cost reduction and diffusion

6. Development of wind technology Source: Wolfgang Eichhammer, Fraunhofer Institute for Systems and Innovation Research, Karlsruhe, Germany

7. Development of wind technology Development of wind turbines

8. Long-term impact of today’s decisions Existing stock is constantly replaced

9. Conclusions technological learning • Use low emission technologies now to reduce the costs in the long term • Use today’s huge investments in the energy system • Avoid “lock-in” effect

10. Case I: Carbon capture and storage (Edmonds) Without capture and storage technology With capture and storage technology Edmond’s conclusions: Cost to move from reference to path with CO2 storage technology is significantly lower than to path without CO2 storage technology -> storage technology lowers cost of stabilization Source: Kim & Edmonds 2000, Potential for advanced carbon capture and sequestration technologies in a climate constrained world

11. Case II: German Advisory Council on Global Change • Council’ conclusions: • A fossil / nuclear path: substantially larger risks and significantly more expensive mainly due to CO2 sequestration • Time lag: the period of next 10–20 years is decisive window of opportunity for transforming energy systems. If missed: higher costs • Major reduction in fossil fuels • Phase-out of nuclear • Expansion of solar • Substantial improvement in energy efficiency Exemplary path that meets 450 ppmv CO2 concentration Source: WBGU www.wbgu.de

12. Conclusions choice of technology • Ambitious energy efficiency improvements and development of zero emission technologies are needed • No single technology alone can be the solution –many should be supported • Technological development is uncertain • Cost and effect of R&D is difficult to model • Opinions diverge on the optimal path

13. Costs to introduce technologies Empirical example: • Wind in Germany (feed-in tariff): ~+0.4 Cent/kWh for all electricity used Model result: • PV in OECD countries< 0.1 Cent/kWh for all electricity used Source: Sandén & Azar (2003), Assumption: growth rate 30%/year, progress ratio 0.8.

14. Case III: IIASA Source: Roehrl & Riahi 2000, Technology Dynamics and Greenhouse Gas Emission Mitigation All scenarios: high economic growth (3%/a), global cooperation, but with differenttechnological developments A1C - Coal: R&D per turnover: 0.3%, today’s rate A1T - Technology: Large scale targeted R&D:4-13%, cheap nuclear and renewables Costs include non-discounted cumulative cost of operation and maintenance of energy production, conversion, transformation and distribution, but not end-use technologies and R&D investments (assumed to be smaller than differences shown here) IIASA’s conclusions: Total energy system costs and emissions are lower, if fast technological development is assumed

15. Cost for stabilization: IPCC Presented as difference between GDP in 2050 in reference case and GDP in 2050 in stabilization case: 4% GDP loss over 50 years = 0.08% per year Source: IPCC TAR

16. Cost for stabilization is only postponement of GDP growth Source: Azar & Schneider 2002

17. Conclusions • Be ambitious in - energy efficiency improvements - development of zero-emission technologies • No single technology alone can be the solution Opinions diverge on the optimal path • A portfolio of policies is necessary to stimulate long-term technological development • Act now: Avoid the ‘lock-in’ into an emission intensive path, next 10 to 20 years are crucial • Use new technology: Application of still expensive technologies today can accelerate the cumulative learning and be cost effective in the long term • Intensify development of new technologies: huge joint long-term research and development efforts needed • Possibly higher cost in the short term but lower absolute cost in the long term. Total global cost may be large in absolute terms, but small compared to the expected growth in GDP