Henry Sichel, Angela de Michele

Environment and development

Wirtschaftuniversitaet - Wien

Catch-up growth rate of 6-8% per year

Increase in global temperature max 2C°

but

We need «creative destruction», driven by massive investments and innovative technologies

Every delay can lock investment projects in old technologies, which will make the

emission level stuck at high levels.

Environmental objectives

Economic goals

Lack of effective mitigation action

vs

Climate change Development

challenge Energy (60% global emissions)

Without addressing such

an issue:

NO

mitigation targets’ fulfillment in developed countries

NO

catching up in developing world

310 ppm

430 ppm

Abatement fulfillment

through

Land-use mitigation options (15-40% of potential reduction)

Multi-gas emission reduction

Lower costs than addressing only CO2

The lower the stabilization target, the sooner the peak of CO2 and

CO2 equivalent emissions

The role of different scenarios

Predictions’ uncertainty

The higher the limit, the more uncertain the trend

To widespread technology improvements and the adoption of new techniques

Reduction of the rate of energy intensity and to improve carbon intensity

To foster changes in the energy system

To enhance energy efficiency (not sufficient alone)

Upfront investments and rapid diffusion of low-emission technologies

How to reach reduction objectives without jeopardize growth?

• Solar energy;

• CCS;

• Afforestation;

• Biomass;

• Efficiency

What?

• Ranking of technologies and industrial processes according to the net cost of avoiding a ton of CO2

emission

Win-win

• It suggests opportunities for negative costs emissions reductions where the uprfont capital costs are more than paid-back by future savings

Which measure?

• Energy efficiency, low-emissions energy supplies, terrestrial carbon, behavioural change

Coal cluster Oil cluster Renewables

cluster?

Energy intensity has declined

Decarbonization of economy

From a policy perspective, significant investments in «social overhead capital», such as the provision of

energy services, has long been advocated by development economists

Strong investments

Rising productivity

Falling costs

Expanding income and

markets

Suppliers of inputs

Power sector

New activities and markets using

produced outputs

Electricity

Motive power, refrigeration, lighting, etc.

Increased productivity

Increased earnings

Increased household

demand for electricity

Unequal distribution of energy

consumption

North 100 kWh per capita per day < x < 300

South < 35

Thresold of 100 kWh

Is equal to a 0.9

HDI value

Problems

Capacity

Affordability

What to do?

What to do?

100 kWh per capita per day thresold

(minimum target to overcome energy poverty)

Efficiency measures

Energy destitution

China e.g.: Coal use, highly polluting, not satisfactory

Suggestions

To build up the infrastructure…

…together with a decentralized small-scale technology

Massive investments in renewable energy sources…

…able to generate backward links

The longer we wait to introduce new technologies, the higher the emissions reductions will be

Subsidies … but this would require direct subsidies to poor countries in

order to offset the impact of high energy prices

Oil price The scenario could even be better if the oil’s price increased,

triggering profitability of other alternatives…

McKinsey Cost curve < 60€ per ton of CO2: good opportunities to act in those areas

• A2: the «bad» one;

• B1: the «good» one

• The initial difference in upfront investments is limited to 2 trillion

Two alternatives

• The capital costs of enforcing the B1 alternative are lower than the ones showed in the A1 scenario, because of technologica changes and learning effects (learning curve)

In the long-run…

Early investments should be done in developing

countries, which have low potential costs and high

mitigation potentiality, to exploit the learning effects.

Oil

Leading resource for

next ¼ century

Co

al

More polluting

Gas

Attractive because

less polluting

Nu

clea

r

No emissions, but waste-problem

Ren

ewab

les

Not enough resources

invested to make them able to replace non-

renewable sources

Upfront investments

…more efficient electrical storage

devices…

Overcoming of technological hurdles,

like…

…and transmissions systems

The developed world must face diverse challenges, to reduce the reliance on fossil fuels. The required actions are:

Conservation

Reduction of the consumption

patterns

Innovation

Development of more fuel-efficient

devices

Investment

Public and private investments

Capacity expansion in the South is expected to be double that in the North

Lock-in risk

• New capacities could be not build with

recent technologies

Leap-frogging opportunity

• Advanced technologies, and

gaps-cutting with the industrialized world

The opportunity coming from the crises to completely change energy production’s paradigms can be wasted if government chose to subsidize old systems

RD&D is fundamental to

Improve performances

Lower the costs

Transformational changes

Removal of barriers and provision o information

RD&D and Investments

Capacity-building

A policy that obligates companies to «feed into» the grid at a mandate price (tariff) energy generated by any individual or oraganization from renewable sources

Support mechanisms

Mandatory supply of a % of energy from renewable resources

Price-based mechanism (e.g. carbon tax)

Direct/indirect support for renewable sector

Advanced Renewable Tariff (ART) example

First success in California

Germany case-study Subsequent

modification