Policy directions to 2050

Policy Directions to 2050 DEDICATED TO MAKING A DIFFERENCE Energy & Climate Change

This presentation . . . . This presentation builds upon the storyline and messages of our previous publications as it explores policy ideas and concepts for the transition to a low-carbon economy. Its primary goal is to identify and explore policy options to sustain economic growth while transforming the ways we access, produce and consume energy. It is not meant to lay out a set of ‘must do’ policy approaches.

Our energy system Oil Biomass Gas Coal Nuclear Renewables Primary Energy Liquids Direct combustion Industry and Manufacturing Mobility Final Energy Consumer Choices Energy Energy Energy Buildings Power Generation

Energy Development Challenges Primary Energy, EJ 200 0 400 2000 1920 -1930’s New renewables such as wind and solar Coal economy 600 The transition is uncertain Development of oil, gas and large-scale hydro, introduction of nuclear. Non-OECD OECD 2050 High Low

High and low carbon pathways 0 2 4 6 8 10 12 14 16 2000 2010 2020 2040 2050 Global Carbon Emissions, GT 2030 2002 IEA reported fossil emissions plus correction for unsustainable biomass & deforestation. WRE 450 (IPCC) WRE 550 (IPCC) WRE 1000 (IPCC) Theoretical carbon emissions profiles published in IPCC 3 rd Assessment Report

High and low carbon pathways 0 2 4 6 8 10 12 14 16 2000 2010 2020 2040 2050 Global Carbon Emissions, GT 2030 WRE 450 (IPCC) WRE 550 (IPCC) WRE 1000 (IPCC) Theoretical carbon emissions profiles published in IPCC 3 rd Assessment Report 2002 IEA reported fossil emissions plus correction for unsustainable biomass & deforestation. >900 ppm Trajectory Energy by 2050: Coal over 2x, no Carbon Capture & Storage (CCS), some coal to liquids. Oil up 50% Gas over 2x Biofuels make up 10% of vehicle fuel mix. Electricity 1/3 of final energy. Modest increase in nuclear. Renewables provide 1/3 of electricity generation. Vehicle efficiency up 50%. <550 ppm Trajectory Energy by 2050: Coal up 50%, but half of power stations use CCS. Oil down 10-15%. Gas nearly 2-3x Biofuels make up 20% of vehicle fuel mix. Hydrogen has arrived. Strong shift to electricity as final energy (~50% final energy). Strong increase in nuclear. Renewables provide half of electricity generation. Vehicle efficiency up 100% Sustainable biomass practices

Options for change A further shift to natural gas Nuclear power Renewables Bio-products Carbon capture and storage Mass transportation Road transport Buildings Low energy appliances Doing things differently Energy conservation and efficiency Emission reduction

Milestones – what to achieve by 2025 Achieved significant efficiency gains , with developed countries improving by more than 2% annually (1-1.5% today). Commercialised coal power generation with carbon capture and storage and have some 100 or more plants in operation globally Gained full public acceptance of nuclear power as a viable zero-carbon power generation option and restarted long term growth in this industry Achieved wide deployment of high efficiency vehicles (e.g. plug-in hybrid diesel) in developed countries, with developing countries following, and started deployment of zero emission vehicles Recognised the potential of advanced bio-fuels and reached a level of more than 5% bio-fuels in transport fuels globally Introduced wind and solar power on a large scale globally, with over 1 TW of installed wind capacity By 2025 we must be well on the way, with technologies proven and energy policy aligned with the objective. For example, we need to have:

Energy for Britain – Today to 2050 An illustration of the infrastructure changes needed as Britain reduces its CO 2 footprint by up to 60% over the first half of this century.

Policy Directions to 2050 An international framework built on national approaches Key megatrends Power generation Industry and manufacturing Mobility Buildings Consumer Choice

Policy Directions to 2050 Three key questions for each… What is needed? Why is it needed? How could it work…

Technology development and deployment Number of installations / Products Technology cost Future policy must focus on both the development of new technology and the rapid deployment of the both new and existing technology Early development phase may need direct assistance Competing technology More cost competitive Earlier deployment Purchase incentives and/or CO 2 price Purchase incentives and/or the CO 2 market drive(s) early deployment

Opportunity starts at the national / sectoral level A. Opportunity Wedges (National) (Developed Country Example) National CO 2 trajectory CO 2 Emissions, MT per annum B. National/Sectoral Goals & Targets Efficiency Buildings Industry xx % p.a. Domestic through to 20xx Power Renewables xx MW p.a. by 20xx Generation CCS xx tonnes CO 2 p.a. Mobility Bio-fuels xx litres p.a. by 20xx Efficiency xx mpg by 20xx Choice Hybrid / Diesel uptake Mass transit C. National Policies Buildings – adopt new country building standards, design awareness Industry – Sectoral agreements, emissions trading, technology standards Domestic – carbon labeling, increased product standards (e.g. standby energy) Renewable Energy – renewables targets. CCS – funding for infrastructure, tax cuts on capital investments, price signals for carbon via emissions trading Biofuels – targets, support for manufacturing, CO 2 labeling Vehicle Efficiency - support technology, incentives, sectoral agreements Mobility Choice - consumer incentives, promote public/private partnerships for transport networks

The development of energy policy Energy policy is set at the national level. It is now one of the principal responsibilities of government. The development of energy policy is responsive to; Financial considerations Available natural resources Security of supply Environmental signals A future framework must recognise the sovereign nature of energy policy decisions, but at the same time provide clarity, context and drive for such decisions.

A future framework – What is needed? A long-term goal Established by 2010 Described in terms of CO 2 e * emissions. Technology development and deployment framework Expanded support for R&D Global standards Technology transfer driven by standards Risk management Emissions management at national and sectoral level Bottom-up approach aligned with energy policy Sector by sector Expanded project mechanism Progressive inclusion of all countries Linkage framework to encourage international trading * All GHGs but as CO 2 equivalent

Clean development partnerships & programs Clean development partnerships and technology programs based on standards and benchmarking can drive new technology development.

Managing new technology risks Direct and Indirect Incentives Well funded clean development networks with aggressive targets for pilot and near commercial demonstrations. R&D incentives Infrastructure funding CO 2 product labelling Regulatory Uncertainty Multilateral financing mechanisms such as GEF Far-out issuance of reduction units as a special case within the project mechanisms.

GHG markets are expanding globally 2000 2005 2010 2015 2020 2025 Pre-Kyoto Kyoto Linkage framework is implemented Linkages develop between all systems and more systems appear Danish-ETS UK-ETS California vehicle CO 2 & ETS Australian states ETS Canadian LFE-ETS EU-ETS CDM CDM evolves to includes sectors Expanding EU-ETS US NE-States ETS Japan technology standards

CO2 targets and trading at national level Opportunity Wedges (National) (Developed Country Example) National CO 2 trajectory At the national level: CO 2 Emissions, MT per annum 2005 2050 Trajectory for 2013 to 2018 for international allocation purposes.

CO2 targets and trading derived from sectors Opportunity Wedges (National) (Developed Country Example) National CO 2 trajectory Or at the sector level only: CO 2 Emissions, MT per annum 2005 2050 Power sector CO 2 trajectory Renewables CCS Trajectory for 2013 to 2018 for international allocation purposes.

Progressive Build-Up from National Programs 12 10 8 6 4 2 2010 2020 2030 2040 2050 Carbon Emissions, GT per annum The long term goal A global GHG market remains an important goal of the revised international framework. But it is constructed bottom-up through a linkage framework, rather than a “big-bang” creation from the top. Emissions, tonnes CO 2 Economy wide emissions Business as usual profile Net emissions Economy wide ETS Emissions, tonnes CO 2 per tonne of cement Cement industry Business as usual profile Energy efficiency Structured multi-national cement sectoral initiative. Best available technology Emissions, tonnes CO 2 Power generation emissions Business as usual profile Renewables / CCS wedge Net emissions Emissions, tonnes CO 2 Transport emissions Business as usual profile Bio-fuel wedge Net emissions Progressive build-up from national programs

Agenda Framework Comparison Kyoto – 2008-2012 WBCSD Revised Framework Top down reduction obligations Bottom-up – National / sector policies and commitments Short term (5 year) compliance obligation Longer term (50 year emissions trajectory) Allocation of a reduction obligation – equitable allocation difficult to achieve politically National opportunities and policies aligned with energy security and climate change priorities Least cost compliance – not enough certainty for large investments in new technologies Technology development and deployment focus Emissions market Deeper engagement of capital markets and greater influence over allocation of capital driven by a wide range of policies and a broad based emissions market. Targets –tons reduced relative to a baseline Targets still in terms of carbon reductions – but aligned to specific actions with GHG benefits – e.g. XX MW of wind power by 20XX.

Five “Megatrends” in our energy system Oil Biomass Gas Coal Nuclear Renewables Primary Energy Liquids Direct combustion Industry and Manufacturing Mobility Final Energy Consumer Choices Energy Energy Energy Buildings Power Generation

Power Generation – Growing in importance 2002 2025 2050 350 EJ 300 250 200 150 100 50 Power Generation – Growing In Importance

Agenda Key technologies… Renewables Nuclear power Clean coal technology - including carbon capture and storage (CCS) Natural gas Key directions . . . Decarbonisation GHG emissions management Energy efficiency improvements Electriticy as a preferred domestic and commercial final energy source Power Generation – What is needed?

Power Generation – How could it work ? Number of installations / Products Technology cost Competing technology Financial assistance for large scale CCS demos International collaboration for Gen IV nuclear development National renewables goal National infrastructure CO 2 pipelines Transmission grids Emissions trading (“cap-and-trade”) Extensive use of project mechanisms (CDM) for CCS, hydro and renewables Liability issues (Nuclear and CCS) “ Green” electricity tariffs Renewable certificates Government procurement Planning permission

Industry & Manufacturing 2002 2025 2050 Carbon emissions in 2002, GtC Diverse range, including metals, mining, chemicals, cement and forest products. The sector accounts for up to 32% of global energy consumption. Energy use and emisson levels are rising in industry and manufacturing due to: Rising population levels; Continuing economic growth (e.g. GDP per capita in China increases by more than a factor of 7). Industry and Manufacturing 1.11 GtC 1.51 GtC 94 EJ 171 EJ Carbon emissions in 2050, GtC Energy Use in 2002, EJ Energy Use in 2050, EJ

Agenda Key directions . . . Energy efficiency measures Breakthrough low-GHG manufacturing technologies Rapid deployment of best available technology Industry and Manufacturing – What is needed? Sectoral Approach . . . Many different policies already exist, but a sector based initiative offers scope for wide coverage and inclusiveness. Creation / Expansion of the international project mechanism to recognise whole sectors as a “project”.

Number of installations / Products Technology cost Competing technology Industry and Manufacturing – How could it work? Technology development and transfer forums (e.g. Asia-Pacific Clean Development). Support for manufacturing technology R&D. Capability building (education, engineering skills etc.) Performance benchmarks Enhanced “sectoral” project mechanism Participation through the sector projects in international GHG markets. Voluntary industry agreements.

Mobility – Doing much more with less 2002 2025 2050 100 EJ 80 60 40 20 0 5 10 15 20 25 trillion-kms 13.9 0 5 10 15 20 25 trillion-kms 22.5 0 5 10 15 20 25 trillion-kms 28 Mobility – Doing Much More with Less

Agenda Key directions . . . Involve fuel producers, vehicle makers and the consumer. New more efficient vehicles Broadening the range and type of fuels Changing the way we use mobility Mobility – What is needed? Key technologies . . . Hybrids and plug-in hybrids (drive trains and batteries) 2nd generation biofuels, synthetic diesels, electricity. Integrated public / private transport mechanisms Hydrogen

Number of installations / Products Technology cost Competing technology Mobility – How could it work? Support development of fuel manufacturing technology. Demonstration projects for advanced technologies (e.g. hydrogen fuel-cell vehicles). R&D support for new vehicle technologies (e.g. plug-in hybrids), vehicle efficiency programmes and alternative fuel vehicles. Consumer awareness programmes. Public transport investment. Consumer awareness programmes focussing on vehicle choice, use and maintenance (e.g. tyres, servicing). CO 2 certification of fuels, especially bio-fuels, as a basis for fuel taxes and duty. Government procurement policy. Sectoral approach drive by benchmarking to improve vehicle efficiency. Road use schemes (congestion charging)

Buildings Carbon emissions in 2050, GtC Energy Use in 2002, EJ Energy Use in 2050, EJ Carbon emissions in 2002, GtC 2002 2025 2050 Rising living standards Growing service sector Information economy Rural to urban living Radical design Placement Efficient appliances New materials In-situ energy generation Buildings 0.78 GtC 0.75 GtC 104 EJ 237 EJ

Key directions . . . Energy standards and codes for buildings, appliances and lighting. Education programmes for operators and occupiers. Transparency and awareness. Focus on building materials and their lifecycle emissions. Innovation in building design. Buildings – What is needed?

Number of installations / Products Technology cost Competing technology Buildings – How could it work? Urban planning decisions. Encouraging radical design – e.g. design prizes. Education and awareness programmes. Training. Minimum efficiency standards for heating and cooling equipment. Appliance standards – e.g. lighting, standby power consumption etc. Use of project mechanisms linked to the national / international GHG market. Benchmarks – Japanese “Top-Runner”. Encouraging “electrification”. Government procurement and construction. Tax breaks and credits.

Tonnes Carbon p.a. A family of four: Large detached house 2.57 + Extra air-conditioning 0.04 + Heated swimming pool 1.48 But could install: Insulation & double glazing -0.9 Efficient lighting -0.13 Solar heating & electricity -0.34 And could also: Use A* appliances -0.16 Adjust the thermostat -0.18 Switch off lights -0.31 Drives two cars: A large SUV, 15,000 miles 1.42 A regular sedan, 10,000 miles 0.78 And travels by air regularly: ~15 short-haul trips 0.73 ~ 8 long-haul trips 2.38 Also produces waste 0.25 But could recycle some -0.15 9.65 tonnes p.a . Source: www.bp.com/carbonfootprint Tonnes Carbon p.a. A family of four: Semi-detached house 1.57 And has installed: Insulation & double glazing -0.22 Efficient lighting -0.09 Solar heating & electricity -0.26 A ground-sourced heat pump -0.59 And also: Uses A* appliances -0.11 Adjusts the thermostat -0.04 Switches off lights/appliances -0.06 Drives one car: A hybrid, 5,000 miles 0.23 And makes extensive use of alternative transport Travels regionally by air on vacation: ~8 short-haul trips 0.32 Also produces waste 0.25 but recycles where possible -0.15 0.85 tonnes p.a . Consumer choice

Agenda Consumer choice – what is needed? Key directions Increased consumer awareness and understanding of the energy/ carbon issue Robust programs to encourage energy efficiency targeted at consumers Attribute a value to carbon, which allows consumers to recognize its cost throughout product and service life cycle Market conditions that influence the consciousness of consumers

Policy directions to 2050

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Policy directions to 2050