World Energy Outlook 2007

policies actually adopted, reflecting a general pattern of growing concern, but
more talk than action.
Modelling the impact of the new policies on energy demand and supply
involves two main steps. First, the effects of each policy or measure on the main
drivers of energy markets are assessed quantitatively, policy by policy. As with
the Reference Scenario, a degree of judgment is inevitably involved in
translating policies into formal assumptions. Second, these effects are
incorporated into the IEA’s World Energy Model (WEM) to generate
projections of energy demand and supply, related CO 2
emissions and
investments. As many of these policies have effects at a micro-level, detailed
“bottom-up” sub-models of the energy system have been developed, allowing
all policies to be analysed within a coherent and consistent modelling
framework. These sub-models explicitly incorporate the energy efficiency of
specific technologies, the activities that drive energy demand and the rates of
turnover of the physical capital stock of energy-using equipment. The very long
life of certain types of energy capital goods limits the rate at which more
efficient technology can penetrate and so reduce energy demand. The rebound
effect on energy demand of introducing more efficient energy-consuming
goods is also modelled. The policies of the Alternative Policy Scenario generally
lead to the faster development and deployment of more efficient and cleaner
energy technologies, resulting in a more rapid decline in global energy intensity
than in the Reference Scenario.
Many of the policies 7 analysed in this scenario were proposed a year or more ago
and are still awaiting approval. These include more rigorous action to promote
renewables, including biofuels, more stringent energy-efficiency standards and
more ambitious plans for nuclear power. A number of new policies have also been
proposed, including measures to meet new EU targets to reduce CO 2
emissions
and to increase the share of renewables in primary energy supply by 2020, and an
EU energy-efficiency action plan, as well as new US Corporate Average Fuel
Economy (CAFE) standards for cars (beyond those agreed over the past year) and
a long-term target for biofuel use in US road transport. These policies are
assumed to be implemented in the Alternative Policy Scenario, though their
effectiveness varies, so not all targets are met promptly. High energy prices and
concerns about energy security are the principal drivers of some of these moves,
but they are increasingly motivated by worries about greenhouse-gas emissions.
Other proposed policies aim directly at lowering fossil-energy use and related
emissions, such as the bans on the sale of conventional incandescent light bulbs
that many countries are now considering.
7. The full list of policies and measures analysed for the Alternative Policy Scenario for all countries
can be downloaded from the WEO website at www.worldenergyoutlook.org.
Introduction 67