Greening the global energy system
Today’s post is from Dana Krechowicz, Research Associate at Sustainable Prosperity, Ottawa, Canada
Energy is the foundation of our modern lives, providing us with mobility, comfort and convenience, and powering the economy. Although the carbon-intensity of energy production varies from country to country, the current energy system is a significant contributor to CO2 emissions (accounting for 84% of global global greenhouse gas [GHG] emissions). It’s clear that a fundamental transformation is required in the way we produce, deliver and consume energy to reduce its carbon-intensity. But given the energy sector’s size, complexity, path dependency and reliance on long-lived assets, how do we get there? This question is at the heart of the climate change dilemma.
Following the release of the 2011 World Energy Outlook, the IEA and OECD have released a joint report Green Growth Studies: Energy . This study draws on the IEA’s work on global energy trends and predictions to outline the necessary policy interventions to redirect the global energy system onto a greener path.
A comprehensive green growth strategy for the energy sector will take into account the inter-relationships between economic sectors, transport systems, land-use patterns, social welfare and environmental integrity. A range of mutually reinforcing policies is required, which address market failures and barriers, and create the enabling policy framework for large-scale private sector investment.
Governments play an important role in fostering innovation and supporting the scaling up of deployment of existing and emerging technologies in the energy sector, since many low-carbon technologies currently are more costly than fossil fuels, although their costs are declining. In fact, to achieve a 50% reduction in CO2 emissions, government funding for research and development in low-carbon technology needs to be two to five times higher than current levels.
Government support for specific technologies needs to be tailored according to the stage of technology development, which can be categorized as promising, technically proven, close to competitive and competitive. On one end of the scale, for emerging technologies, governments can provide financial support for research and large-scale demonstration; at the other end, more mature and competitive technologies need governments to help tackle market, informational and other barriers to large-scale deployment.
Broadly, the key policies that are required to set the framework for the transformation of the energy sector include:
- Set enabling conditions to make markets work.
- Eliminate fossil fuel subsidies.
- Provide price signals for environmental externalities (e.g. carbon).
- Radically improve energy efficiency.
- Foster innovation and green technology policy.
The energy revolution that is needed can be characterized by improved energy efficiency, widespread introduction of carbon capture and storage, increased deployment of renewable energy, continued fuel switching, and support for new and enabling technologies.
A large-scale transformation of the global energy sector is possible, though it will require significant investment. Global emissions could be halved by 2050, using existing and emerging technologies, with additional new investment of $46 trillion. It is vital for governments to create the enabling policy framework to catalyze private sector investment in the transition to a low-carbon energy sector. It is cheaper in the long-run to act now, as every dollar of energy sector investment not spent before 2020 will require an additional $4.3 to be spent after 2020 to compensate for increased GHG emissions by building zero-carbon plants and infrastructure by 2035.
Without decisive action, existing and emerging low-carbon technologies won’t be deployed on the scale necessary to make large reductions in GHG emissions, due to the entrenchment of fossil fuels.
Investments in a new energy strategy would however pay dividends in areas other than cliumate too. The report finds that the transition to a low-carbon energy system is likely to have a positive impact on employment in the energy sector because renewables tend to be more labour-intensive that fossil fuel-based energy. Increased deployment of solar phtovoltaics would yield the largest number of jobs, with strong growth also expected in the energy efficiency, geothermal and solar thermal sectors.