Energy, GHG and Climate Change Scenarios: IEA Insights

1. Energy, GHG and Climate Change Scenarios: IEA Insights Cédric Philibert Energy Efficiency and Environment Division European Environment Agency Workshop Copenhagen, 29 June 2004

2. Growing trend Energy-Related CO2 Emissions, WEO, 2002 World emissions increase by 1.8 % per year to 38 billion tonnes in 2030 – 70% above 2000 levels

3. CO2 Emissions per Capita Source: WEO 2002

4. Climate Stabilisation Source: IPCC TAR

5. Technology Innovation, Development and Diffusion • All options needed • Timing and “lock-in” matter • Technology policies help provide for long term non-carbon energy; • Comprehensive tools (caps, taxes) promote short term results… • … and provide long-term price signals • International technology collaboration helpful, but cannot substitute to comprehensive agreements

6. Key energy technologies • End-use efficiency • Building sector • Industry • Transport • Fuel switching • Conversion efficiency • ‘Non carbon’ energies: nuclear, renewable, CCS • Excluding any of these options is likely to drive higher costs/higher concentrations

7. Nuclear energy • Currently 7,3% of world TPES • Concerns: risks, waste, proliferation • Member countries have various policies • Costs: may not be an issue if carbon is priced • Various new designs may: • Reduce size and costs • Minimise waste and expand the resource base • Alleviate proliferation concerns

8. Carbon Capture and Storage • Pre-, post- and oxyfuel combustion technologies • Pre-combustion capture could be one way to provide a versatile fuel: hydrogen • Plentiful geological storage capabilities • But current experiments not numerous enough • Ocean storage would be temporary only • Achieving stabilisation may require storing significant CO2 (100s of GT) • The question of permanence

9. Renewable • Biomass and waste about 11% TPES • Not always renewable, often unhealthy use • Hydro about 2.3% world TPES • But additional capabilities face social and environmental concerns • Others: less than 1% world TPES • Rapid growth of wind energy • Issues of costs and intermittence • Space occupation may limit biomass • Potential: 9,000 times current TPES • GHG increase the efficiency of Earth & Atmosphere capturing solar energy • If solar energy creates the problem it must be able to solve it

10. An area issue? Area needed to produce with solar power the same yearly energy than the Assouan Dam (global efficiency of 10%) Source: Dennis Anderson, Imperial College, R.-U.

11. Solar power plants exist! • 354 MWe since 84-89 on Los Angeles grid • Contrating solar power plants cheaper than PV • Fossil fuel back-up or heat storage guarantees power • Projects in Spain, Italy, Mexico, India, Egypt, Morocco, Algeria, Jordan, Israel, the US • 70 million+inhab cities in suitable areas

12. GHG Emissions Impacts of Biofuels Well-to-wheel CO2-equivalent GHG emissions from biofuels, per km, relative to base fuel

13. Ethanol Cost Comparison, 2002 and Post 2010 2002 2002 Post2010 Post2010

14. Biofuels Potential In IEA Countries • In most countries, conventional biofuels (ethanol/grains, biodiesel/FAME) can probably provide 5% of motor gasoline/diesel fuel without major disruptions to other crop production, markets • 5% in US, EU will require 15%-20% of cropland • Above 5% we could begin to see strong competition for crop use in many countries • Biodiesel is much more land-intensive than ethanol • Going to cellulosic feedstocks could increase potential by several-fold

15. Global Technical Potential for Transport Energy Requirements to be Provided by Biofuels, 2050

16. Nearer Term: A look at Ethanol from Sugar Cane in 2020 (Billion Litres) Source: Johnson, 2002

17. Biofuels in sum • Biofuels: many types of impacts • Biofuels use growing rapidly • Conventional biofuels in IEA countries are expensive, modest GHG reductions • Sugar cane ethanol is a bargain • Advanced biofuels processes look promising • Global potential appears substantial • Development of trade in biofuels would benefit many countries

18. Maria R. Virdis 9th Session of the Conference of the Parties. 1-12 December. Milan, Italy

19. SD Vision: a normative scenario with 3 targets to 2050 • Energy security: • Our supply vulnerability concerns mostly oil. Transport is the most dependent sector. < 40% of energy demand for transport satisfied by oil by 2050. • Climate mitigation and environmental sustainability: • Target focuses on decarbonisation of energy supply and on transition to a non-fossil fuel energy base 60% of world TPES from zero-carbon sources by 2050 • Access to energy: • Depends on economic growth and income gap reduction. Access to electricity to > 95% of world population by 2050. Purpose: to help identify a policy path and a technology roadmap to get to the desirable future world.

20. Quantitative framework for 2050 • Needed to appreciate magnitude of the targets and scale of the challenges. Existing scenarios considered: • WEO 2002 (but horizon limited to 2030) • IPCC SRES scenarios of the A1 family (A1B and A1T). • A1T scenario (simulated by IIASA with MESSAGE) chosen as the initial basis for its characteristics. • That scenario was further modified to produce our SD Vision scenario, whose characteristics are • policy driven • lower GDP (-5%with respect to A1T value in 2050) • lower energy demand (-15% w.r. to A1T value in 2050); • increased share of zero carbon technologies (renewables, nuclear) and introduction of carbon storage.

21. The SD Vision scenario: world total primary energy 46% of TPES from renewables & nuclear by 2050

22. Comparing carbon emissions 26% of CO2 emissions from fossil fuels is captured and stored by 2050

23. Energy in 2050 (SD Vision) • Energy intensity would fall by 53% over the period. • Gas would become the dominant fuel: security of supply risks may surface in long term. Pipeline construction thrives. • Oil to satisfy about 38% of transport energy demand • Renewables: a bigger share than coal and oil (35% vs. 28). • 46% of non-carbon based energy sources in TPES implies: • a 3-fold increase for biomass; • a 13-fold increase for other renewables; • a 14-fold increase for nuclear. • Carbon capture & storage: up to 2.6 GtC in 2050.

24. Share of Renewables in the Reference and Alternative Policy Scenarios Policies under consideration would increase the share of renewables to 25% by 2030, compared to 17% in the RS

25. OECD CO2 Emissions in Alternative and Reference ScenariosOECD Emissions in the Alternative Scenario stabilise towards the end of the projection period

26. OECD Investment in Alternative and Reference Scenarios Transmission and distribution investments are much lower in Alternative Scenario, but generation costs hardly fall

27. Additional investment breakdown Isolated Grid extension Mini-grid Investment to Ensure Universal Electricity Access2001-2030 More than $660 billion is needed to supply basic electricity services to the world’s very poor – mainly in Africa and South Asia

28. Universal Electricity Access: CO2 Emissions Implications in 2030 Assuming no change in the fuel mix, universal electricity access would increase global CO2 emissions by 1.4% in 2030

29. Carbon Sequestration Scenario2001-2030 Capacity with CO2 capture Additional for CO2 capture Carbon-capture technologies can remove 3.4 GT of CO2 in the OECD by 2030

30. BEYOND KYOTO: What we have learned Cédric Philibert

31. From theory and experience • Climate change is global, long-term and surrounded by (cost and benefit) uncertainties • Growing energy needs will not make it easy! • Price instruments would perform better • Benefits relate to concentrations, costs to emissions • But carbon taxes are unlikely to succeed • And fixed & binding targets hard to swallow (by nature arbitrary) • Technology push useful, no silver bullet

32. The ultimate objective dilemma • Costs and benefits uncertain – costs matter • “Dangerous” climate change hard to define • Inertia requires but constrains early action • Possible way out: Aim at low concentration levels with achievement conditional on costs • From “Hard laws, weak targets” to “Soft laws, strong targets” – but ensuring action • Ambition matters, not emission certainty

33. Suggestion 1/3Keep emissions trading • Cost-effective • Environmentally effective • Allows (some) free allocation • Helps deal with vested interests • Allows the rich to pay for the poor • Mobilises private, not government funding

34. Suggestion 2/3Make it global • Large, sector-wide, unilaterally-funded CDM • Non-binding targets for developing countries • Set « targets » close to baseline emissions • No threat for economic development • No need for tropical hot air up-front • Commitment period reserve and buy-back option to prevent selling false carbon money

35. Suggestion 3/3Reduce cost uncertainty • Index targets on economic output… • Intensity targets only a special case of indexation • Only reduce uncertainty from unabated emissions trend • … and/or cap the costs (safety valve) • Sell supplementary permits at a fixed price • At international or domestic levels • Set the price in the upper range of expectations • A price cap is not a tax! • Single price cap not that difficult… nor necessary • Use of the price cap money not a difficulty

36. Don’t worry… • Most likely, a more stringent target is achieved (thanks to lower expected abatement costs) • Price cap ‘in use’ if higher-than-projected costs • ...a cost benefit analysis would have suggested higher emissions and concentration levels… • Price cap with more ambitious targets performs ‘en route’ the CBA impossible today • Price caps make short-term targets more palatable, long-term targets indicative only

37. …be happy! • The EU (and other countries /stakeholders) with ambitious targets • The US (and other countries /stakeholders) with price caps • The developing countries with investment and technology inflows from emissions trading based on non-binding targets • All, with effective global climate change mitigation and response to energy needs

38. Thank you! For more information: www.iea.org cedric.philibert@iea.org