Deciding the Future: Energy Policy Scenarios to 2050

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94 Deciding the Future: Energy Policy Scenarios to 2050 World Energy Council 2007 Appendices The key requirements for a regulatory framework are that it should protect both public and investors’ short-term and long-term interests and be transparent, stable, and predictable over the long-term and independent from political authorities, which pleads for national rather than local regulation. The second pillar is the predictability of revenues, a cornerstone for financing such efforts. Energy markets must be organised to offer predictability. A number of solutions, however, exist to this seemingly intractable position. These solutions (especially for electricity power) reflect differing levels of market evolution: “Energy Only” - effectively free trade and competitive market solutions “Capacity Payments” - a way to foster provision/availability of capacity, with variable rewards following those of the Energy-Only option “PPA” model - long-term contracts are signed for the purchase of electricity, providing clarity and certainty. Each potential market model has its place in all countries, although precise solutions depend on the level of political will and the ability to support market development. Without such models (and possibly in countries where such models exist), further political and credit support will still be required. It should, however, be acknowledged that credit support to emerging markets through aid mechanisms should be closely tied to a commitment by the host government to put in place the above referred predictable legal, political, and commercial framework. This credit support should thus be seen as a catalyst, enabling the transition toward subsequent nonsubsidised investments. Overall, there are clearly sufficient funds and there has been sufficient thought on solutions. The key is for all of the stakeholders to work together to develop an appropriate system that is robust and above all transparent. 10.1.6. Climate Change 17 If policies are to be effective at dealing with climate change, they have to be aimed at the right targets -those parts of the energy sector significant in their emissions and their opportunities for cost-effective reductions. Sustainability will not be achieved if lower emissions are reached at the cost of social and economic development, especially for the two billion people who lack access to modern energy and its attendant services. The analysis shows how different the emissions trends are in different regions of the world and how different are the underlying drivers. It is clear that each country will have to develop its own response to climate change - no simple single solution or even set of solutions will solve all problems for every country. 17 Energy and Climate Change, World Energy Council, London, 2007.
Deciding the Future: Energy Policy Scenarios to 2050 World Energy Council 2007 Appendices 95 Table B-2 Emissions Intensity in terms of energy and GDP for selected countries (data from IEA, 2005, and World Energy Council, 2007). CO 2 /E (Mtonne/Mtoe) CO 2 /GDP (tonnes/kUSD) CO 2 /E (Mtonne/Mtoe) CO 2 /GDP (tonnes/kUSD) Argentina 2.12 303.0 Australia 2.99 597.2 Bangladesh 1.54 144.9 Brazil 1.62 238.7 Canada 2.05 577.1 China 2.90 671.8 France 1.41 238.2 Germany 2.44 406.8 India 1.96 377.9 Iran 2.73 853.3 Japan 2.37 360.6 Republic of Korea 2.24 521.6 Mexico 2.39 419.0 Russia 2.44 1247.6 Saudi Arabia 2.41 1118.5 South Africa 3.18 841.6 Sweden 1.05 216.0 Syria 2.68 812.3 Tanzania 0.17 139.3 Thailand 2.26 448.0 United Kingdom 2.36 342.5 United States 2.50 553.8 There are some overall patterns - greenhouse gas emissions tend to rise as the population grows and gets wealthier. If this were the whole story, reducing emissions would indeed be incompatible with sustainable development - the only way of reducing emissions is to slow population or economic growth. Fortunately, it is not the whole picture. The emission intensity of economies varies significantly (Table B-2). While big, populous economies like the United States and China naturally have the highest level of overall emissions, there are many examples of economies at similar levels of development but with very different levels of emission intensity. France and Sweden, for instance, have relatively low levels of emissions intensity compared with broadly similar countries like Germany and Australia; similarly, Brazil’s emissions are lower than South Africa’s. There are different reasons for this such as climate differences (there is less demand for heating in some countries than in others) and differences in industrial activity and efficiency, and differing fuel mixes. Decades are required, even with the most effective application of policy and technologies, to achieve significant sustainable reductions in CO 2 emissions from the world’s energy economy, in large part because of the time and cost involved in replacing existing and building new infrastructure and other long-lived assets. Just to keep pace with the world’s growing energy demands will require $800 billion per year of investment over the next 25 years, according to the IEA. To make this investment climate-friendly is an even greater challenge, but it is possible to scope out a roadmap to try and meet this challenge in three stages: 10.1.7. 2020: Credible commitments and slower emissions growth Measures might include long-term carbon tax credits with a specific focus on promoting investment; specific schemes of support for lowcarbon; power-generation alternatives; and stronger renewable energy portfolio standards facilitated by intelligent electricity-delivery technology. In addition, broad commercial introduction of advanced clean coal technology, particularly in rapidly industrialising nations such as China and India. However, there are questions about China’s and/or India’s willingness to be bound to limits on emissions in the framework of any post-Kyoto Protocol 18 . In the transportation sector, growth in emissions should be restrained by a combination of measures - technical approaches via vehicle efficiency, hybrid vehicles, and biofuels, along with non-technical measures aimed at changing behaviour to lower carbon-transport modes via taxation, regulation, or other means. Achieving and maintaining a significantly greater global investment in technology development and 18 World Energy Outlook 2007, International Energy Agency, Paris, 2007
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