Transcript Emissions Trading: Possible Impacts on Investment

Energy, GHG and Climate
Change Scenarios:
IEA Insights
Cédric Philibert
Energy Efficiency and Environment
Division
European Environment Agency
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Workshop
Growing trend
Energy-Related CO2 Emissions, WEO, 2002
40,000
million tonnes of CO2
35,000
30,000
25,000
20,000
15,000
10,000
5,000
0
1970
World
1980
OECD
1990
2000
Transition economies
2010
2020
2030
Developing countries
World emissions increase by 1.8 % per year to 38 billion
tonnes in 2030 – 70% above 2000 levels
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CO2 Emissions per Capita
14
tonnes of CO2 per capita
12
10
8
6
4
2
0
1990
OECD
2000
2010
Transition economies
2020
2030
Developing countries
Source: WEO 2002
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Climate Stabilisation
Source: IPCC TAR
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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
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comprehensive
agreements
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
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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
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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
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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
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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.
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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
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GHG Emissions Impacts of Biofuels
Well-to-wheel CO2-equivalent GHG emissions from
biofuels, per km, relative to base fuel
0%
-20%
-40%
-60%
-80%
-100%
-120%
Ethanol
Ethanol
Ethanol
Ethanol
from grains, from sugar from sugar
from
NA/EU
beets in the
cane in
cellulosic
EU
Brazil
feedstocks,
US
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Biodiesel
from
rapeseed,
EU
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Ethanol Cost Comparison,
2002 and Post 2010
$ per gasoline-equiv litre
$0.00
$0.20
$0.40
$0.60
$0.80
Gasoline
2002
Ethanol from corn
Ethanol from cellulose (poplar)
Ethanol from Sugar Cane, Brazil
2002
Low
High
Gasoline
Ethanol from corn
Ethanol from cellulose (poplar)
Post
2010
Post
2010
Ethanol from Sugar Cane, Brazil
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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
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Global Technical Potential for Transport Energy
Requirements to be Provided by Biofuels, 2050
Hoogwijk et al , 2003
Lightfoot and Greene, 2002
Low
Estimate
Moreira, 2002
High
estimate
Yamamoto et al, 2001
Fischer and Schrattenholzer
(IIASA), 2001
IPCC Third Assessment Report:
Mitigation, 2001
0%
100%
200%
300%
400%
Percent of World Transport Fuel Demand, 2050
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Nearer Term: A look at Ethanol from
Sugar Cane in 2020
(Billion Litres)
Region
Africa
ASEAN
India
Other Asia
Brazil
Other SA
N&C America
Oceania
Europe (incl.
Russia)
WORLD
Demand
10% gasoline +
3% diesel
9
10
6
56
7
8
88
4
52
Supply
(E4 scenario)
Balance
22
29
49
23
62
17
31
7
0
13
19
43
-33
55
9
-57
3
-52
239
239
1
Source: Johnson, 2002
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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
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Maria R. Virdis
9th Session of the Conference of the Parties.
1-12 December. Milan, Italy
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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 nonfossil 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.
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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.
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The SD Vision scenario: world
total primary energy
1200
1000
800
Other Renewables
EJ
Biomass
Nuclear
600
Gas
Oil
Coal
400
200
0
1990
2000
2010
2020
2030
2040
2050
Years
46% of TPES from renewables & nuclear by 2050
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Comparing carbon emissions
14,0
12,0
10,0
GtC
8,0
6,0
4,0
2,0
0,0
1990
2000
2010
2020
2030
2040
2050
Years
SD Vision
A1T
SD Vision w/o carbon storage
26% of CO2 emissions from fossil fuels is captured and stored by 2050
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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
a
a
3-fold increase for biomass;
13-fold increase for other renewables;
14-fold increase for nuclear.
 Carbon capture & storage: up to 2.6 GtC in 2050.
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Share of Renewables in the Reference
and Alternative Policy Scenarios
30%
25%
20%
15%
10%
5%
0%
2000
2030 Reference
Non-Hydro
2030 Alternative
Hydro
Policies under consideration would increase the share of
renewables to 25% by 2030, compared to 17% in the RS
OECD CO2 Emissions in Alternative
and Reference Scenarios OECD
15,000
14,000
Mt of CO2
13,000
12,000
11,000
10,000
9,000
8,000
7,000
1970
1980
1990
Alternative Scenario
2000
2010
2020
2030
Reference Scenario
Emissions in the Alternative Scenario stabilise towards
the end of the projection period
OECD Investment in Alternative
and Reference Scenarios
4,000
3,500
billion dollars
3,000
2,500
2,000
1,500
1,000
500
0
Reference
Generation
Alternative
Transmission
Distribution
Transmission and distribution investments are much lower in
Alternative Scenario, but generation costs hardly fall
Investment to Ensure Universal
Electricity Access
2001-2030
2,000
Additional investment breakdown
Isolated
15%
billion dollars
1,500
Grid
extension
Mini-grid
49%
36%
1,000
500
0
China
South Asia
Africa
Reference Scenario
East Asia
Latin
America
Middle
East
Electrification Scenario
More than $660 billion is needed to supply basic electricity
services to the world’s very poor – mainly in Africa and South Asia
Universal Electricity Access:
CO2 Emissions Implications in 2030
5,000
Mt of CO
2
4,000
3,000
2,000
1,000
0
Africa
South
Asia
Reference Scenario
East
Asia
Latin
America
Middle
East
OECD
Europe
Universal Electricity Access Scenario
Assuming no change in the fuel mix, universal electricity access
would increase global CO2 emissions by 1.4% in 2030
Carbon Sequestration Scenario
2001-2030
2,500
Capacity with
CO2 capture
2,000
Additional for
CO2 capture
1,500
1,000
500
0
WEO RS capacity
(GW)
CO2 capture case
WEO RS
CO2 capture case
capacity (GW)
investment (billion investment (billion
dollars)
dollars)
Carbon-capture technologies can remove 3.4 GT of CO2 in the
OECD by 2030
BEYOND
KYOTO:
What we
have
learned
Cédric Philibert
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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
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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
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Suggestion 1/3
Keep 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
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Suggestion 2/3
Make 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
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Suggestion 3/3
Reduce 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
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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
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…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
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Thank you!
For more information:
www.iea.org
[email protected]
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