Energy and climate change: challenges and solutions

1. Context

  • The production and use of energy is by far the greatest source of greenhouse gas – GHG – emissions (2/3 of emissions). This is mostly due to the fact that large quantities of CO2 are released in the burning of fossil fuels (coal, oil, gas). As may be seen in the following graph, 90% of GHG emissions.

 

Diagram 1. Greenhouse gas emission sources worldwide

ficha-energia-1

Source: Key CO2 Emissions Trends 2016. CO2 Emissions from Fuel Combustion. International Energy Agency (IAE).

  • According to data gathered by the International Energy Agency, CO2 emissions from energy source amount to about 32 Gt worldwide. The main sources are the generation of electricity (42% of the total), the transport sector (23%) and the industrial sector (19%). The residential and other sectors account for 6% and 10%, respectively.

Diagram 2. Participation by each sector in CO2 emissions from energy sources. 2014

ficha-energia-2

Source: Key CO2 Emissions Trends 2016. CO2 Emissions from Fuel Combustion. International Energy Agency (IAE).

  • Bringing down greenhouse gas (GHG) emissions is crucial for combating climate change and limiting the rise in global temperature to 2o.
  • The electricity sector, which accounts for 25% of global greenhouse gas (GHG) emissions, [will have a central role to play both as regards the challenges to be faced and the solutions to be implemented.

 

2. Progress

 

  • Emissions from energy sources are slowing down worldwide. In 2014, CO2 emissions from energy sources were slightly higher than the levels in 2013 (just 0.8% higher). This increase was much lower than the one recorded in 2013 (1.7%) and than the average annual growth rate since 2000 (2.4%).
  • This trend can for the most part be explained by the favourable evolution of renewable energies and energy efficiency, which is still very positive in global terms, despite the low prices of oil and natural gas. For example, renewable energies accounted for over two-thirds of investments in electricity generation in 2015 and investments in energy efficiency allowed to reduce the energy intensity worldwide by 1.8% in 2015, slightly better than the improvement achieved in 2014 (when the reduction was 1.5%).
  • In the area of energy efficiency, the most recent report[3] from the International Energy Agency (IAE) on energy reveals a 1.8% reduction in energy intensity worldwide in 2015, which is slightly better than the improvement in 2014 (when it dropped 1.5%). The biggest change was recorded in the emerging economies. There was a 5.6% drop in energy intensity in China (mostly due to the improvements in industry driven by a mandatory programme with energy efficiency targets and the structural change towards sectors that are less energy-intensive) compared to the 2.2% improvement in the group of OECD countries. According to the analysis by the IEA, the low prices of energy in these years did not have much of an impact on how energy efficiency evolved, mostly on account of policies such as standards (for example, maximum consumption requirements for equipment) and energy and environmental taxation. As regards this latter aspect, they highlighted that taxation has softened the impact of the drop in the price of crude oil on end prices, thus maintaining the incentives to rationalise consumption. In Europe, this factor played a very important role.  For example, in Germany, the 60% drop in the price of oil between 2014 and 2016 only led to a 16%  transfer to the end price for hydrocarbons (38% in the U.S.).
  • As regards renewable energies, it is notable that electricity has led the introduction of this type of energies, far ahead of any other sector. In 2015, electricity generation from renewable sources increased by 5% to make up 23% of the global energy mix. 40% of the increase in renewable energies was in onshore wind power.
  • The electricity sector makes an essential contribution to halting global emissions.  There was a 0.2% increase in emissions by the electricity sector in 2014, much lower than the 2.1% recorded in 2013, and continuing the trend of decoupling from economic growth.

3. Statements

  • We see a broad shift of spending toward cleaner energy, often as a result of government policies,”. “Our report clearly shows that such government measures can work, and are key to a successful energy transition. But while some progress has been achieved, investors need clarity and certainty from policy makers. Governments must not only maintain but heighten their commitment to achieve energy security and climate goals.” Fatih Birol Post or title should be added here. 14 September 2016.

4. Challenges to be faced

  • In analysing the challenges to be faced in order for the emissions path in the energy sector to be consistent with the 2oC target, the conceptual framework provided by the International Energy Agency is normally used, with three scenarios: 6DS (a very unambitious scenario based on few measures to combat climate change), 4DS (which includes targets and policies approved, with a certain degree of ambition as regards combating climate change), and 2DS (the scenario that considers that measures have been implemented to keep the increase in global temperature below 2oC).
  • Taking these scenarios into account, the basic challenge is to take the necessary measures to move beyond the 4DS scenario, which internalises the policies and targets already underway, to the 2DS scenario, which will allow to meet the target set in the Paris Agreement. Measures have to be implemented in order to progress from the former to the latter. The main block of measures will focus on improving energy efficiency (almost half the reduction in emissions that is needed), followed by the promotion of renewable energies (29% of the reduction needed). Finally, other kinds of measures are considered, such as nuclear energy (technology that does not produce any CO2 emissions) or carbon capture and storage (CCS).

Diagram 3. Measures needed to move from a scenario that takes approved targets and policies into consideration (4DS) to the 2oC target set by the Paris Agreement.

ficha-energia-3

Source: Energy Technology Perspectives 2016. International Energy Agency (IAE).

  • In implementing all of these solutions for combating climate change, prospective analyses show that the electricity sector has a key role to play. For example, the analyses conducted by the IAE highlight the crucial role to be played by the electricity sector in order to meet the 2oC scenario (2DS):
  • There is a trend towards the electrification of the global economy (the 79% increase in the final electricity demand for 2050 contrasts with the evolution in other energy sources), with electricity accounting for a higher weighting in the end-use sectors, reaching 28% of the end-use energy mix in 2050 and becoming the largest supplier of energy for end-uses in absolute terms.
  • It has been pointed out that the electricity sector is the one that will be making the greatest effort in terms of reducing CO2 emissions (39% of the accumulated reduction by 2050), reaching almost complete decarbonisation for the sector by the year 2050.  In fact, so that the 2oC rise is not exceeded, the mass roll-out of low-carbon generation technologies will lead to a drop in the intensity of CO2 emissions to below 40 g CO2/kWh by 2050.

Diagram 4.- Accumulated reduction in CO2 emissions per sector and technology by 2050

ficha-energia-4

Source: Energy Technology Perspectives 2016. International Energy Agency

  • As regards the challenges to be faced, it is noteworthy that fossil fuels still play an important role in the global energy mix. They still meet a lot of the demand for primary energy and in an intermediate scenario (4DS) they would continue to be the main source of energy.

Diagram 4. Meeting primary energy needs in the 4DS scenario

ficha-energia-5

Source: World Energy Outlook 2015 (p. 62). International Energy Agency.

 

5. Call to Action

  • The transition towards an emissions path from energy sources that is consistent with the 2oC target calls for a framework of goals and policies that allow for effective, efficient progress to be made with each of the blocks of measures intended to mitigate emissions.
  • We shall now go on to sum up some general proposals in the main spheres of action:
    • Efficiency in end-uses for energy is a key vector in combating climate change.
    • Improving energy efficiency generally consists of reducing the amount of energy that is needed to produce a unit of a particular product, in order to enjoy a particular level of service or comfort. For example, if a home is able to maintain a comfortable temperature in winter using less energy than the previous winter, then it could be said to have improved its energy efficiency. This improvement could be due to a change in boiler, better insulation for walls and windows, changing a habit so that the length of time that windows are left open for ventilation purposes is shortened, etc.
    • There are a huge variety of policies and measures to promote energy efficiency. They can be grouped in four main areas:
    • Including environmental costs in energy prices properly so that the price signal encourages more efficient energy consumption, particularly as regards the sources that produce the most pollution.
    • Developing global standards that provide incentives to reduce emissions, especially in sectors that are not subject to CO2 pricing schemes. The standards consist of setting minimum mandatory requirements for equipment that consumes energy (vehicles, buildings, electrical appliances and other items of electronic equipment).
    • Improving information, awareness and the possibilities available to consumers.
    • Other types of measures: for example, adopting standards for the construction and refurbishment of buildings, promoting energy service companies (ESCOs), stricter regulations for the public sector as regards building and approval for suppliers, voluntary agreements with companies and funding for R&D.Energy efficiency
  • Renewable energies
    • Together with energy efficiency, renewable energies are crucial in combating climate change:
    • They represent almost 30% of the reduction in greenhouse gas emissions that is needed by 2050 in order to meet the 2oC target.
    • They will account for over half of the electricity generated in 2040 in a scenario of compliance with the 2oC target.[2]
    • Political support for renewable energies worldwide, and particularly in Europe, is driven by three main catalysts that have been given significant importance by governments when setting energy policy goals and establishing the supportive frameworks to achieve them. We shall now go on to talk about these three catalysts and analyse their connection to the roll-out of renewables:
    • Improved economic competitiveness, because the cost of renewable energies is dropping, in contrast to the long-term trend of rising prices for energy raw materials from fossil sources.
    • The reduction in greenhouse gas (GHG) emissions, as a means of keeping the increase in global temperature below 2o
    • The improvement in energy security achieved by reducing the external dependence on fossil fuels.
    • With a view to promoting the roll-out of technological options that are CO2 free (such as renewable energies), it is of key importance to include the cost of producing CO2 emissions in the prices of the various energy sources. This will be very useful in encouraging technological change and reducing the support needed by renewable energies.
    • The high penetration rate of renewable energies, which have a variable output that is not easily predictable in the long term, will require stronger, smarter networks, a flexible and efficient back-up generation capacity, a stable framework and new services in the system that can guarantee the quality and continuity of supply.
    • It is vitally important to make progress in the area of R&D in order to develop and roll out technology on both the supply and demands sides, so as to make efficient progress with reducing emissions. One basic challenge in this regard would be to improve the relative competitiveness of technologies that do not produce CO2 compared to those that are based on fossil fuels.

R&D

Carbon pricing schemes

  • Carbon pricing mechanisms are hugely important cross-disciplinary tools for making progress towards the decarbonisation of the economy.  By imposing taxes on CO2 or setting up emissions trading schemes with strong price signals, governments can sustainably promote the transition towards a low-carbon economy.  In order for this to be achieved, these mechanisms should be designed according to the “polluter pays” principle and be applied to all sectors of the economy.