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Deciding theFuture: EnergyPolicy Scenariosto 2050World Energy Council 2007

Promoting the sustainable supply and useof energy for the greatest benefit of all


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Officers of the World Energy Council

Andr Caill

Chair, World Energy Council

Majid Al-Moneef

Vice Chair, Special Responsibility for Gulf States & Central Asia

Francisco Barns de Castro

Vice Chair, North America

Asger Bundgaard-Jensen

Vice Chair, Finance

Alioune Fall

Vice Chair, Africa

Norberto Franco de Medeiros

Vice Chair, Latin America/Caribbean

C.P. Jain

Chair, Studies Committee

Younghoon David Kim

Vice Chair, Asia Pacific & South Asia

Marie-Jos Nadeau

Chair, Communications & Outreach Committee

Chicco Testa

Chair, Rome Congress 2007

Johannes Teyssen

Vice Chair, Europe

Elias Velasco Garcia

Chair, Special Responsibility for Investment in Infrastructure

Ron Wood

Chair, Programme Committee

Zhang Guobao

Vice Chair, Asia

Gerald Doucet

Secretary General

Deciding the Future: Energy Policy Scenarios to 2050

World Energy Council 2007

Copyright 2007 World Energy Council

All rights reserved. All or part of this publication may be used orreproduced as long as the following citation is included on eachcopy or transmission: Used by permission of the World EnergyCouncil, London, www.worldenergy.org

Published 2007 by:

World Energy Council

Regency House 1-4 Warwick StreetLondon W1B 5LT United Kingdom

ISBN: 0 946121 29 X

Deciding the Future:Energy Policy

Scenarios to 2050


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Deciding the Future: Energy Policy Scenarios to 2050 World Energy Council 2007

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Contents 1Foreword 2Preface 41. Introduction 62. The 3 As 143. Four Scenarios in a Nutshell 224. Results of Analysis 295. Regional Achievement of the 3 As 496. Principal Observations and

Conclusions 677. Recommendations 728. Next Steps 859. Further Reading 8710. Appendices 88

Contents


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Deciding the Future: Energy Policy Scenarios to 2050 World Energy Council 2007 Foreword

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Deciding the Future: Energy Policy Scenarios to

2050is a major study from the 20052007 workcycle of the World Energy Council (WEC). Itfollows earlier WEC work, Energy forTomorrow's World(1993)1 and Global EnergyPerspectives(1998)2 that were updated inWECs Millennium Statement Energy forTomorrows World - Acting Now!(2000)3 andDrivers of the Energy Scene(2003)4.

WEC decided at its Sydney Congress in 2004 to

build new energy scenarios with three principalchanges from previous work. First, the scenariosshould be based on policy and on bottom-upregional and specialist work of the MemberCommittees of WEC. Second, they should testplausible storylines against the criteria of theWEC sustainability goals of energy Accessibility,Availability and Acceptability (the 3 As). Finally,they should have a sufficiently long-term focusto underpin clear recommendations on policiesand actions that will achieve targeted results by

2050.

With this study WEC seeks to contribute furtherto the debate on global energy sustainability andto the understanding of prospective collectiveroles in achieving WECs mission, to promotethe sustainable supply and use of energy for thegreatest benefit of all. The study aims to:

1Energy for Tomorrows World, World Energy Council,London, 1993.

2Global Energy Perspectives, World Energy Council,

London, 1998.3 Energy for Tomorrows World: Acting Now, World EnergyCouncil Statement 2000, London.

4Drivers of the Energy Scene, Study Report, World EnergyCouncil, London, 2004.

Better understand possible energyfutures;

Assess the challenges presented in theseenergy futures; and

Identify the role that policy may play tohelp or hinder the achievement of WECsMillennium Goals of Accessibility,Availability, and Acceptability.

Key issues for the energy scene covered in thisreport include:

Supply pressures involving risk in the securityof global resources; the outlook for infrastructureinvestment and alternative energy sources;research, development, demonstration anddeployment (RDD&D); and the introduction ofnew technologies.

Demand pressures related to forecasts ofeconomic growth, expectations of consumer andindustrial demand, constraints imposed byexisting infrastructures, and related expectationsof global economic volatility, all in key regionalmarkets,

Environmental pressures and the likelihood ofpolitical, legislative, and social action to reducecarbon emissions in the near future, and;

Political pressures linked to potential politicalactions in key regions, including the Middle East,Russia, Latin America, and Central and West

Africa; a major question is whether nationalgovernments will use energy resources to

Foreword


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Deciding the Future: Energy Policy Scenarios to 2050 World Energy Council 2007 Foreword

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increase their political influence on global policyand to what degree;

I am grateful to the WEC Studies Committeeand the Officers Council for their analytical andfinancial support for this work and I want toparticularly thank Brian Statham of ESKOM forhis leadership as Chair of the Scenarios StudyGroup over the last three years.

CP Jain, Chair,

WEC Studies Committee

September 2007


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Deciding the Future: Energy Policy Scenarios to 2050 World Energy Council 2007 Preface

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Back in September 2004 when I accepted theinvitation to Chair this study I expected thiswould be a challenging and exciting project. Ihave not been disappointed.

During the three years of this study I have beenexposed to a wide range of thoughts andopinions, many of which have been quitedifferent from my own. I have been challenged inso many different ways to review, justify orchange my perceptions and opinions about the

role energy plays in our global society. I havecome to better understand the different peoplesof our world; their aspirations, their fears, theirstrengths, their vulnerabilities and most of alltheir common vision and drive to achieveexcellence in terms of Accessibility, Availabilityand Acceptability of energy systems.

This study does not claim to have found TheIdeal Energy Policy. It certainly does not claimto be the last word on the topic of Global Energy

Policy Scenarios. To do so would bepresumptuous in the extreme. To the contrary,one of the key lessons from this study is that thepolicy imperatives are quite different from oneregion to another. An understanding and, moresignificantly, empathy for why this is so willgreatly enhance the quality and theeffectiveness of policy formulation andimplementation

However, it does claim to be a reflection of thethoughts and opinions of more than 400 people

working at policy decision-making level aroundthe world, drawn from industry, government,academic and non-governmental organisations.

This is not a theoretical study and neither is itpeople in one region writing about what mighthappen in another region. It is the product ofmany workshops held in various locations duringwhich leaders in that region discussed anddebated the policy issues facing their regionwithin the context of particular global scenariosand circumstances.

These workshops initiated, and this report aimsto perpetuate, a vigorous and robust discussion

about energy policy and its impact on theachievement and sustainability of the goals ofAccessibility, Availability and Acceptability ofenergy systems. It is my hope that as you readthis report you will be challenged, as I havebeen, and that you will be encouraged to takethe debate further.

But more than that, I hope that you willrecognise that there is much still to be done, andmuch that each of us can do, to improve our

progress towards the 3 A goals. Dialogue andthe debate are very important but it is even moreimportant to convert this into meaningful action.This report is entitled Deciding the Futurebecause the study group believes it is long pastthe time when decisions need to be made aboutthe worlds sustainable energy future. Thisreport points the way for policymakers to makeimportant decisions now which can deliverdesirable progress on the 3 As in the periodfrom 2030-2050. This report shows thatirrespective of whether we are in the public or

private sector, there are issues within our ownrange of decision capability that we can act onimmediately. I hope that we each find the

Preface


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Deciding the Future: Energy Policy Scenarios to 2050 World Energy Council 2007 Introduction

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1.1. Objectives of the Study

So much has changed in the world of energysince WEC last prepared scenarios in the1990s. While these were updated at the turn ofthe century to take into account newassumptions about population, the prices of oiland gas, climate change, and technologydevelopments, it became apparent that the realissues today are the emergence of massive newenergy demand in China and India, the marketpower of fewer and fewer large suppliers of oiland natural gas, the shift to generally higherenergy prices worldwide, the role of governmentpolicy and regulation in determining the energymix and the value of carbon, and theregionalisation of energy markets which requireharmonised standards and regulations.

The Terms of Reference for this study containthree analytical elements, explained in moredetail below. The studys basic scope is to

evaluate the impact of four possible scenarioson the fulfillment of the WEC 3 As ofAccessibility, Availability, and Acceptabilityas defined in Section 2. The three analyticalelements are:

Two axes that characterise the nature ofthe policy landscape. These are high orlow engagement by governments, and

high or low cooperation and integrationamong nations and regions, and amongthe public and private sectors.

Four scenarios that overlap through thedevelopment of these two axes.

A number of energy sector metrics thatassist in understanding the details of thelong-term physical energy landscape.

The key challenge facing governments,business, and society at large is summarised inFigure 1-1.Average energy consumption percapita is shown for the nations of the worldtoday (plotted as cumulative population),keeping in mind another one billion people(approximately) have no recorded energy use.To allow everyone in the world to attain just theenergy use per person of Poland today, or about100 GJ/capita,5 would require about twice theamount of energy the entire world alreadyusestoday, assuming that people who are alreadyabove Polands level maintain their current

energy use per capita. To achieve the level ofRussias energy use today (~200 GJ/capita),more than three times as much energy isrequired over what is used today.

Where will this energy come from? How will it beused? What will it cost? What are the ancillaryimpacts? These are profound questions thatpolicymakers have to address, and soon.

51EJ = 1018 joules = 109 GJ = 24 million tonnes of oilequivalent (toe)

1. IntroductionThe only limit to our realisation of tomorrow will be our doubts about today.Franklin D. Roosevelt


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1.2. Two Axes - GovernmentEngagement andCooperation/Integration

WEC Member Committees represent a largeand diverse global community in terms ofgeographic, political, social, environmental, andeconomic conditions. While achieving the 3 As

is largely determined by the social, political, andeconomic environment - and the extent to whichthese factors facilitate or hinder sustainableenergy development - the study group membersinvestigated choices that can be made by keydecision makers in countries and regions aroundthe world.

In Figure 1-2, the two axes lead to fouroverlapping scenarios or plausible storylines(remembering that all scenarios are a prioriequally possible):

1. Government Engagement. Between twoextremes of no government or a dictatorship,there is clearly a continuous spectrum of

government engagement. On the onehand, the policy environment may supportcompetition in the private sector, unleashingthe power of the markets. Or, governmentscan compensate for a lack of privateenterprise capacity. This study has reflectedon three key aspects of the government rolein energy development: engagement,involvement, and interference. Engagement

occurs when government is fully aware ofwhat is going on, what the issues are, andwhat is required of it. It is doing what isnecessary to ensure that energy systemsfunction optimally. Involvementoccurs whenthe government is carrying out a number offunctions, possibly in competition with otherproviders. This may distort the market due toinequity of power. Interferenceoccurs whenthe governments actions or regulations areso obtrusive as to affect the marketnegatively; energy systems are notdeveloped as effectively and efficiently asthey could otherwise be.

Figure 1-1 Energy per capita as a function of cumulative population. (Area between dashed line anddata points is 500 EJ/year and represents everyone below Poland today achieving this same energyusage of 100 EJ per capita.)


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2. Cooperation and Integration. Alliances and

cooperative initiatives between people allowthem to survive and prosper. In some cases,cooperation is driven by mutual need to dealwith a common problem; in other cases, it isdriven by the need to share complementaryresources and wisdom for mutual benefit.Whatever the underlying reason, somedegree of cooperation and integration inenergy development has always existed,sometimes only bilaterally, often regionally,and in some cases internationally, and on a

global scale. This study has reflected onthree forms of cooperation and integration:first, there is government to governmentcollaboration in the form of treaties or

international agreements, for example on

standards or rules of trade; second, thereare private-public partnershipsto designspecific programmes or regulations toachieve specific policy goals; and third, thereare company to company agreements, forexample on the development of newtechnology or voluntary agreements toaddress specific business goals.

The nations of the world do not enjoy equalshares of available primary energy

resources, know-how and technology,financial resources, human capacity, andraw materials. This inequality means there isalways a dynamic for some degree of

Figure 1-2 Schematic representation of the four energy policy scenariosSource: WEC Study Group


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redistribution. Ideally, this happens through aprocess of mutually beneficial cooperationbetween countries. While cooperation canoccur naturally, driven by market forces, thisis by no means true in all cases. There arenumerous examples throughout historywhere countries went to war to gain or denyaccess to resources.

A nation poor in natural and financialresources has little to offer and is unlikely to

attract support from the rich. The privatesector will not invest there because it cannotearn returns commensurate with the risks,and the country is too poor to payappropriate returns to attract investors.There is no transfer of know-how andtechnology and no development of humancapacity. A poverty spiral often resultsunless there is some form of goodwill (e.g.,Development Agencies) that bridges the gapand supports cooperation.

Many countries have entered intocooperative agreements to their mutualbenefit. Exchanges of goods and servicesand international trade agreements areexamples. In some cases, cooperativeagreements are driven by a need to sharecommon resources, such as the case withthe development of hydropower (the riverbeing the common element). Thedevelopment of international power pools is

another example where parties have cometogether for mutual benefit. Sucharrangements often require specificinternational treaties or agreements to

enable them. However, there are also casesof little or no cooperation. In some cases,opposing political ideologies preventcooperation.

Cooperation and integration also has abroad enough spectrum to embrace theaspirations and ideologies of all the WECMember Committees and is material to theachievement of the 3 As.

The core of this report is the assessment of thefour policy scenarios within the context of thesetwo axes. It details the policy choices andactions necessary to advance the achievementof the 3 As.

1.3. Process

The methodology adopted in this reportcomprises group analysis with consistencychecks using mathematical simulations. That

means that, in essence, this is a modified Delphistudy.6 It is also normative because it definesdesirable characteristics of the future related tothe WEC 3 As (see Section 2 for more detail).

Regional groups, in a series of severalworkshops, developed descriptions of how theworld would look in terms of the 3 As, includingrelative changes in quantitative estimates of thechosen indicators. Any Delphi study may befaulted in having a built-in tendency to limit itselfto conventional wisdom and prevailing

6Energy to 2050: Scenarios for a Sustainable Future, IEA,Paris, 2003.


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prejudices. Nevertheless, the significant strengthof this study is that it is a bottom-up effort andthus represents on the ground thinking aboutthe future and addresses important areas ofuncertainty.

Each region developed its descriptions of theenergy landscape using the key indicators,starting in 2005 and in 15-year intervals (2020,2035, and 2050). Against this physicallandscape (see Section 3), the regional groups

then considered how these indicators could beimproved so as to better achieve the 3 As.

Between July 2005 and April 2007, over 20workshops were held in five WEC regionsinvolving some 400 individuals representing theenergy industry (producers, suppliers, users,and financiers), government ministries,academia, non-governmental organisations, andtrade groups. Each region prepared a reportcontaining results for its regions. These reports

are summarised in this synthesis and areavailable online at http://www.worldenergy.org.

In addition to the regional groups, sevenspecialist groups supported the regionalworkshops. These specialist groups developedreports that provided:

1. The latest information on specific areas ofimportance pertaining to the overall studyobjectives of the regional working groups.

2. Consistency in the regional reports withestablished norms of the specialist

communities and feedback to the regionalgroups.

These specialist areas (their reports areavailable online - see Appendix A) are:

Electricity generation

Electricity end-use

Stationary end-use

Transport

Energy-price drivers

Investment and finance

Climate change

The perspectives of these groups aresummarised in Appendix B.

1.4. Mathematical SimulationThe heart of this study is a qualitativeassessment of how policies and measures canmeet emerging challenges and achieveoutcomes closer to the 3 As than wouldotherwise be the case.

To provide the regional groups with aconsistency check on their internal thinking, amathematical simulation model7 of the energy

7Energy Scenario Development and Climate PolicyAnalysis with the POLES Modelling System, Enerdata,Grenoble, 2007, a report prepared for the WEC studygroup on future scenarios.


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sector was used. This provided quantitativebaseline data to compare with the qualitativeregional output, and iterations were made withthe regional groups to identify potentialinconsistencies and disagreements. In manycases, the model was altered to account forthese inconsistencies, and its results were thusstrengthened.

The model is a global simulation model for theenergy sector with a year-by-year recursive

simulation and partial equilibrium framework,endogenous international energy prices, andlagged adjustments of supply and demand byregion. It has a hierarchical structure ofinterconnected regional and national sub-models(e.g., individual countries and sub-regions).

In brief, economic (GDP) and population growthrates are captured with assumptions aboutannual rates of growth for each region and sub-region. Technology trends and energy prices at

the consumer level are the other two maindrivers of energy demand. Energy intensity iscalculated on the basis of energy demand andGDP projections to capture energy efficiencytrends. Primary energy mix is derived eitherdirectly through assumptions about public andprivate investments, or through assumptions onparameters reflecting the necessary marketconditions for these investments to be made byprivate decision makers. Greenhouse gasemissions result from projections for energydemand, fuel mix, and carbon capture and

storage. Supplydemand tensions areaddressed through exogenous inputs related tobusiness development conditions. In the case of

oil and gas, supplydemand tensions reflect thedevelopment of business conditions worldwidethat push international prices up or down.

Inconsistencies between model projections andstudy group analyses fell into three generalcategories: the need for more precision in thequalitative storylines, the need to modify thequantitative assumptions in the model based oninput from the regional study, and the need byone study region to accommodate developments

in another region that affect global developmentand prices.

It is important to note that (1) the model is top-down, (2) this version of the model is aimed atprojections (likely outcomes), and (3) it is aimedto a large extent at showing the need to reducecarbon emissions from energy use. The studygroup, on the other hand, was by definitionlooking at plausible (realistic) storylines (bottom-up) with a number of drivers in play.

For example, study group members questionedassumptions in the model about whether theMiddle East can or will supply oil at the projectedlevels, whether China will decrease its coal useto the levels assumed in the simulation, andwhether North America can produce oil at a levelhigh enough to become a net exporter. This isnot to imply that the model is wrong and thestudy group right, only that they come fromdifferent perspectives. Nevertheless, the resultsfrom the model do show, after iterations with the

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achievement of the 3 As and on the qualitativeelements identified in Section 3. The trendsabout achieving the 3 As are addressed inSection 4.

1.5. The Regions

The study uses a bottom-up process integratingWECs network of Member Committees (Figure1-3). The world was divided into five regions:

Africa - defined as the African continent,including Madagascar and the CapeVerde Islands.

Asia - including East and Southeast Asia,Oceania, Central Asia, and the MiddleEast (Gulf States).

Europe - includes the European Union(EU27) and EFTA nations (Norway,Iceland, Switzerland, etc.), the Balkan

countries, Turkey, Russia, Ukraine, andBelarus.

Latin America and the Caribbean -South America, Central America, and theCaribbean nations.

North America - Canada, Mexico, andthe United States of America.

Each of the regions prepared their ownanalyses, which have been taken into account inthis report and are separately available in theirentirety (see Appendix A).

1.6. Structure of the Report

This report is organised as follows:

Section 2 defines the 3 As and outlinesthe study groups views on their currentstate of achievement.

Section 3 gives a brief description of thefour scenarios and labels them for easyreference.

Section 4 presents findings at a globallevel and for each of the studys regions.

Figure 1-3 Countries of the Member Committees participating in the workshops (67 Member Committeesand 398 individual participants)


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Section 5 discusses likely outcomes inrelation to the 3 As in terms of theregions.

Section 6 lays out the principalobservations and conclusions.

Section 7 is an action plan for energysector stakeholders to better approach theachievement of the 3 As.

Section 8 briefly describes next steps andsome of the areas where WEC mightpursue this work in its next BusinessCycle.

Additional information and access to other partsof the study are available atwww.worldenergy.org (see Appendix A).


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Deciding the Future: Energy Policy Scenarios to 2050 World Energy Council 2007 The 3 As

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2.1. What are the 3 As?

In its Millennium Statement,8 WEC establishedthree sustainability objectives. Coined the 3 Asthey are Accessibilityto modern, affordableenergy for all; Availabilityin terms of continuityof supply and quality and reliability of service;and Acceptabilityin terms of social andenvironmental goals. These objectives haveprovided the basis for WECs work since thenand they underpin the analysis of Energy PolicyScenarios to 2050.

In more detail,

Accessibility means that a minimumlevel of commercial energy services (inthe form of electricity, stationary uses,and transport) is available at prices thatare both affordable (low enough to meetthe needs of the poor) and sustainable(prices reflecting the full marginal costs of

energy production, transmission, anddistribution to support the financial abilityof suppliers to maintain and developthese energy services). Getting access tothe two billion people in the world withoutreliable commercial energy of any kind isthe key.

Availability relates to the long-termcontinuity of supply as well as to theshort-term quality of service. Energyshortages can disrupt economicdevelopment, so a well-diversified

8Energy for Tomorrows World - Acting Now, World EnergyCouncil Statement, 2000, London.

portfolio of domestic or imported (orregionally) traded fuels and energyservices is required. Keeping all energyoptions open is the key.

Acceptability addresses public attitudesand the environment, covering manyissues: deforestation, land degradation orsoil acidification at the regional level;indoor or local pollution such as that fromthe burning of traditional biomass fuels,or because of poor quality coal briquettes

or charcoal production; greenhouse gasemissions and climate change on aglobal scale; nuclear security, safety,waste management, and proliferation;and the possible negative impact of thelarge dams or large-scale modernbiomass developments. Cleantechnologies and their transfer todeveloping countries is the key.

Figure 2-1 relates these 3 A objectives in ageneral way to some drivers, goals, or

constraints commonly used by others (exactboundaries are flexible and subject to individualinterpretation).

2.2. Where are we now on the3 As?

A starting point for this study is gauging thecurrent state of the 3 As globally and region byregion. Opinions were collected from the WECMember Committees across each of the major

regions of the world. There was neither enoughtime nor manpower to accomplish the significanttask of agreeing on an inter-regional comparison

2. The 3 AsHe knows nothing of these events but takes delight in their likeness, lifting onto his shoulders now thefame and fates of all his childrens children.

Virgil (The Aeneid)


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of the present state of achieving the 3 As, andso only qualitative future trends under fourscenarios are discussed.

2.2.1. Africa

The African region rates itself low on the currentstate of achieving the 3 As, and there areseveral reasons behind this assessment.Despite the fact that Africa is rich in naturalresources, it is still the least developed region inthe world overall. Three significant factors arethe lack of investments in infrastructure, the lackof capacity in institutional capabilities, and a lowcapacity of the private sector to provide energyservices. Rapid changes in energy prices andnascent markets represent a burden not only tothe economies of the countries on both macro

and micro levels, but also to the daily lives of theinhabitants, especially those living in remoteareas.

There is no doubt that securing energy supplieson an affordable, accessible, available, andenvironmentally acceptable basis is one of thekey elements for sustainable development inAfrica over the coming decades. Moreover,cooperation among its regions on the one hand,as well as between the continents countries and

the whole world on the other, will play asignificant role in realising the goals of reachinga minimum level of prosperity for Africans.

Accessibility

For Africa, only about one-third of its populationhas access to modern energy services (mostlyin the northern African countries and in SouthAfrica). The remaining two-thirds, representing alargely rural population, do not have the same

level of access.

Availability

Oil currently dominates the primary energy mixand will likely remain the prime source ofcommercial energy for some time to come.Cleaner fossil fuels and large-scale regionalhydropower (e.g., the Inga hydro projects on theCongo River) are realistic options for achievingenergy security, sustainable economicdevelopment, and access to modern energy

services. However, developing the enormousenergy potential of Africa, thus improving thedomestic supply of energy, requires hugeinvestments. Energy efficiency measures in end-use, and improvements in production,transmission, and distribution of electricity inmost of the countries are not being realised.This is clearly demonstrated in measures ofenergy intensity: the average energy intensity inAfrica is 21 MJ/$(ppp), more than double theworld average (about 10 MJ/$(ppp).The maindrivers of growing demand for energy in Africa

are population growth, economic development,and improvement in standards of

Figure 2-1 A comparison between each of the WEC 3 As and commonly used energy related metrics

Accessibility Availability Acceptability

Reliability

Energy Quality

Affordability

Safety

Climate Change

Air Pollution

Infrastructure

Conservation

Public Attitude

Energy Security

Regulation

Technology


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living. Nevertheless, energy supply, based onfossil fuels, is not corresponding to the demand,and thus poses problems.

Acceptability

Energy-related carbon emissions in Africancountries come mainly from thermal-powergeneration, road transportation, and directburning of traditional biomass. Carbonemissions from commercial energy vary greatlyamong sub-regions. For example, North and

Southern Africa emit more carbon dioxide thanthe other sub-regions, because their electricitygeneration from fossil fuels contributes almost90% to the total.

Africa possesses significant resources ofhydropower. Estimated potentials amount tomore than one million GWh/year (economicallyfeasible), 78% of which is concentrated in threecountries (Democratic Republic of Congo,Ethiopia, and Cameroon). A key challenge islarge-scale hydropower flooding potentiallyvaluable rainforest and agricultural land,requiring the relocation of people.

Modern renewable energies, such as wind,solar, and biomass, are valuable alternatives forsupplying electricity to rural populations. Windpower is becoming increasingly competitive inAfrica (as elsewhere), and certain applications ofsolar thermal energy for water heating (solarwater heaters), water pumping, cooking, andcrop drying, in addition to photovoltaic

applications, are being introduced gradually.Desertification and deforestation are also ofgreat concern, exacerbated by intense use of

traditional biomass, mainly fuel wood, forcooking and heating by most of the poorhouseholds.

Public awareness and concern for theenvironment has to become an important factoramong decision makers in their strategies toevolve toward a sustainable path. With thatperspective, more efficient, modern, andenvironmentally sound technologies should beintroduced (by leapfrogging to the best

technologies of the developed world) throughtechnology transfer and deployment. Forexample, the use of cleaner fossil fueltechnologies, and biofuels for road transport,could contribute greatly to a reduction inemissions.

2.2.2. Asia

Asia rates itself in the mid-range as to its currentstate of achieving the 3 As, demonstrating thatmuch improvement is needed. Most Asianeconomies are dynamic and their impact on theglobal energy market is considerable, especiallywith rapidly growing energy demand in China,India, and the other Asian tiger economies.The Asian region is diverse geographically,economically, and socially and its energy issuesand concerns vary greatly from sub-region tosub-region.

Accessibility

Asia is a diverse region and demonstrates clearvariations as a consequence of differenteconomic, social, and political patterns. Thedeveloped countries in the Middle East, Korea,

The African region is currently low in terms of achieving the 3 As.

Significant factors are the lack of investments in infrastructure, thelack of capacity in institutional entities, and a low capacity of theprivate sector to provide energy services.


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Japan, New Zealand, and Australia also havegood and nearly complete access. Theremaining countries of Central and SoutheastAsia, India, and China are on paths to providecomplete access while some areas will notachieve high levels of access for many years tocome.

Availability

Asian countries have attained high economicgrowth (4.0% on average over the past 20years), significantly exceeding that of the worldeconomy (2.7%), thanks to an active cycle ofinvestment and export brought about by foreigndirect investment, as well as significanttechnology imports and a plentiful, high qualityworkforce. Thus, Asian countries have driventhe world economy. In line with this economicgrowth, the Asian region (including the MiddleEast) has an extremely large impact on both theworlds energy supply and its demand. Asiasshare in the worlds primary energy consumption

is currently around 40% while its primary energyproduction is approaching 45% of the total. GDPgrowth rate and other economic aspects, as wellas energy demand and supply, will to a largeextent depend on the strength of the economiesof China and India. These two countries aloneaccount for one-half the global increase inenergy use between 2000 and 20059.

Energy production in Asia (as defined in thisstudy) is now about 200 EJ/year, with the

highest share being coal (35%), followed by oil

9 World Energy Outlook 2007, International Energy

Agency, Paris, 2007

(30%), and gas (15%). The Gulf States have a60% share of Asian production of oil and gas,while coal is 65%, 12%, and 12% from China,Australia, and India, respectively.

Developing Asian economies are fast becomingmore motorised as their standards of livingimprove. This, in turn, will dramatically increasedemand for oil as part of an expanded demandfor transport fuel.

Acceptability

Increasing CO2 emissions is an issue in adelicate balance with Availability. For somedeveloped regions, this might seem to be lessserious, yet it is also quite difficult to address.There are high hopes for the diffusion ofrenewable energy sources with littleenvironmental burden, such as hydropower,geothermal energy, new renewable energy, andin some countries, nuclear power. However, it isdifficult for renewable energy to compete on par

with fossil resources for base energy suppliesdue to higher costs. Renewable and other non-conventional sources of energy must beencouraged, but developing countries are notobsessed with them, Accessibility andAvailability having priority.

2.2.3. Europe

Europe rates itself as high with respect to itscurrent state regarding all 3 As, with some roomfor progress still available. Europe has sub-regions from major energy-consuming nations inthe West to a major energy supplier in the East(Russia), with differing trends and current states

Renewable and other non-conventional sources of energy must be

encouraged in Asia, but developing countries are not obsessed withthem, Accessibility and Availability having priority.


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as well as economic fabric and energystructures. Thus, within the region, there arewide differences in goals and objectives,including the definition of energy security(security of supplies in the West, security ofdemand for Russia).

Accessibility

Nearly all of Western Europe has 100% access.Eastward, the region shows increasingly lowerlevels of access, with several of the newEuropean Union (EU) countries having lowerlevels. This will be addressed over the next fewyears.

Availability

There is an important interdependency betweenRussia and the rest of the European region.Russia, having enormous reserves of oil, naturalgas, and coal, is in a unique position to maintainregional supply. That said, Availability in Russiaitself is not perfect, although current investmentsare improving this position. At the supply end,Europes Availability status is driven in large partby the level and conditions of imports fromRussia. Recent experience with supplydisruptions has demonstrated that this poses arisk to wider European Availability.

Acceptability

The combination of market-based instrumentswith strong regulation and public serviceobligations has meant that Acceptability hasbeen driven to the top of the European agenda.The ethos of the market is strong, as are theregions legislative capabilities to ensure that

social and environmental capital are protected.Many of the elements that will have afundamental effect on Acceptability were not inforce in 2005, for example, the EU EmissionsTrading Scheme, or the revised emission limits(for SO2, NOx, and particulates) and the LargeCombustion Plant Directive. Consequently, whileAcceptability is high, progress is still occurring.

2.2.4. Latin American and the Caribbean

The Latin American and the Caribbean regionrates itself in the middle with regard to its currentstate of achieving the 3 As, indicating muchwork is needed. The nations of the LatinAmerican and the Caribbean region are diversein size, economies, natural resources, socialdevelopment, and political systems. A specificfeature of the Latin American and the Caribbeanregion is the high percentage of its population -over 75% - that live in urban areas. In terms ofenergy, the region is distinctive for its large

renewable resources (mainly hydropower andbiomass). Given the regions characteristics, theelimination of poverty through increasingAccessibility and Availability is a natural focus.Meeting the needs of transport, harnessingnatural resources (particularly agricultural landand hydroelectric potential), and accessingmodern sources, as well as any relationships toclimate change, and Acceptability are priorities.

Accessibility

The region has a high degree of access tocommercial energy, although this does not meanthat energy usage is evenly disseminated,principally because of economic differences

Across Europe there are wide differences in goals and objectives,

including the definition of energy security (security of supplies in theWest, security of demand for Russia).


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between countries and sub-regions.Nevertheless, governments have been investingto overcome these shortcomings. Urban areasare mostly covered by energy supply networksand delivery services of electricity and gas,mainly liquefied petroleum gas (LPG), althoughsome urban areas have natural-gas supplynetworks. Important efforts have been made toextend electricity supply to remote rural areasand small communities, either by networkextension or by local generation. Another feature

that contributes to Accessibility is low electricitytariffs and gas prices for low-incomepopulations, as practiced in most of the region.

Availability

In overall terms, the region has substantialsources of energy, although its distributionamong the various countries is far from uniform.Of particular note are the major heavy-oilreserves in Venezuela. The Atlantic drainagebasin also has huge hydropower potential, of

which less than half has been harnessed, aswell as a major capacity for producing biomassfor electricity and biofuel.

Annual per capita consumption of energy variessignificantly from country to country, being 300GJ/capita in Trinidad and Tobago and only 10GJ/capita in Haiti. Another indicator pointing tothe highly diverse nature of the region is theenergy intensity of the different countries,varying from 36 MJ/$(ppp) in Trinidad and

Tobago (a large exporter of natural gas) to 4MJ/$(ppp) in Barbados. The Latin America andthe Caribbean regions average value is around

11 MJ/$(ppp), slightly above the world averageof about 10 MJ/$(ppp).

Acceptability

The region has a number of achievements in theuse of biofuels and hydroelectricity. Forexample, Brazil is responsible for the mostextensive global programme introducing biofuelsinto its energy matrix (the ethanol programme)and charcoal in iron and steel production. In this

latter context, renewable biomass is favouredover that derived from the extraction of nativewood. The regions dedication to bio-energy wasrecently underlined with the development ofbiodiesel as an alternative fuel, principally fortransport. As a result, the regions carbonemissions per unit GDP are comparatively low.

On the other hand, some parts of the region stilldemand large quantities of firewood forresidential as well as industrial purposes.

Besides being an inefficient and polluting energysource, the origin of this resource is mostlynative forests, not always close to the point ofconsumption - implying high costs for thetransport of firewood or charcoal. This processalso destroys a valuable CO2 sink. The mostserious aspect related to the use of firewood,including charcoal production, is the accelerateddeforestation of certain regions with enormousdamage to the environment, which significantlycontributes to the regions CO2 emissions.

Unconditional use of this source of energy is dueto poor Accessibility to modern sources ofenergy.

Much work is needed in Latin America and the Caribbean to achieve

the 3 As. The region is distinctive for its large renewable resources(mainly hydropower and biomass). Meeting the needs of transport,harnessing natural resources (particularly agricultural land andhydroelectric potential), and accessing modern sources are priorities.


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Environmental questions of a local nature, suchas those related to hydroelectric generation ormonocultures as energy sources, are commonin the majority of the regions countries.Questions of a global nature, particularlyemissions from burning fossil fuels, are commonto all countries, all of which must introducemeasures to reduce such global impacts.

2.2.5. North America

The North America region rates itself as abovethe middle with regard to its current state ofachieving the 3 As and still has to make someprogress. In the context of the 3 As, thedominant one for North America is Acceptability.The challenge for both Availability andAcceptability is to implement more effectivepublic information and education programmes,as well as more effective approval andregulatory processes to ensure reliable andtimely improvements in energy infrastructure.

Accessibility

For North America, access to abundant energyresources, combined with its successfuldevelopment and utilisation, has contributed toits overall economic development andprosperity. In all three countries (Canada,Mexico, and the United States of America),extensive energy resources, with appropriatestewardship and management, will continue tocontribute to economic prosperity of the regionfor the next half-century. This is particularly true

in the United States and Canada; in Mexico,however, there is greater concern. Some 5% ofthe Mexican population has no access to

electricity. In addition, in a few isolatedcommunities in Canada and the United States,access is an issue either because of isolation orbecause of cost.

Availability

In North America, there are two issues withrespect to security of energy supply. The first isrelated to the high degree of dependence onimported oil from other regions of the world,which is perceived to be unreliable. This is aproblem especially for the United States,because it imports 50% of its oil. The secondissue is the combination of reliability andvulnerability of existing energy systems tomaintain a reliable supply - because of supplydemand tightness and vulnerability to extremeclimatic (e.g., hurricanes) and terrorist attacks.Although 95% of the Mexican population hasaccess to electricity, this supply is unreliable andthe present level of reliability is only on the orderof 15% that of the rest of North America.

Lastly, there is a related issue in all three NorthAmerican countries arising from challenges inthe approval of energy plants and infrastructure.Local opposition, referred to as the NIMBY (NotIn My Back Yard) phenomenon, is increasing.Demand has continued to grow, while supplyhas not kept pace, which results in situationswhere the supplydemand balance has becomevery tight, with consequent increase invulnerability to supply interruptions. Supply

being curtailed or voltage being reduced (forelectricity systems) is increasingly beingimplemented to maintain supply. In addition,

In North America Acceptability is a large issue, particularly in the

areas of large future energy developments (unconventional andenhanced oil development, new nuclear power plants, development offrontier lands (oil, natural gas, and hydropower). The challenge is toimplement more effective public information and educationprogrammes, as well as more effective approval and regulatoryprocesses to ensure reliable and timely improvements in energyinfrastructure.


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aging energy plants and infrastructure need tobe upgraded to meet rising standards oftechnical or environmental performance, orsimply replaced at their end-of-life.

Acceptability

In North America, Acceptability is a large issue,particularly in the areas of large future energydevelopments, such as:

Unconventional and enhanced oildevelopment

New nuclear power plants

Development of frontier lands (oil, naturalgas, and hydropower)


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3.1. Scenario 1: Leopard(Low GovernmentEngagement - LowCooperation andIntegration)

The Leopard is chosen as a name as this largeanimal is silent and enjoys the more solitaryexistence characteristic of this scenario. It looks

out for itself with very little cooperation, scanningthe landscape for opportunities and it is swift toact when they arise, but acts alone. Most of thetime, it remains within its territory and interactsvery little with other animals. It protects itsterritory and does not share its food resourceswith others of its species. This scenario might bethought of as being laissez-faire or simplyrestrained.

This scenario has the least government

engagement and global or regional cooperationand integration. Domestic economicdevelopment is the primary driver, underpinnedby domestic energy security. World marketforces and free trade tend to be hindered bynational barriers that protect local production,which may lead to higher prices and lowerefficiencies. Government engagement isconstrained and there are few levies orsubsidies. Many industrialised countries arereluctant to pursue structural reforms and

continue to rely on welfare policies, increasingthe level of unemployment and limiting economicdynamism. Most developing countries see theireconomic growth limited by the lack of equitable

policies in terms of gender equality, education,telecommunication, electricity, water, health, andinfrastructures (road, pipeline, and electricitytransmission).

The low level or lack of government engagementand international cooperation results in less-than-optimal reactivity to external events suchas energy shocks or worldwide recessions.However, the capacity of market forces to fosternew technologies mitigates the impact on those

countries with domestic resources to fundinnovation. The lack of international cooperationreinforces the poverty spiral for countriesalready impoverished. It will affect developingnations in different ways.

The transfer of know-how and technologies isrelatively constrained under this scenario. Fewinternational cooperation treaties encouragesuch exchanges and few market drivers justifyexchanges between highly developed and lessdeveloped countries. Less developed countrieshave neither the market capacity to justifyentrepreneurial investment nor the wealth to payexpected returns on investments. Energyintensity tends to be relatively high, due to lowenergy efficiency, both on the supply side andmore so on the consumption side of the energybalance.

In this scenario, there are no rules of trade forenergy services established under the WorldTrade Organisation and no international post-

Kyoto treaty on climate change. Many actionsalso compromise the environment in other ways.As some countries go on their own to ensuretheir domestic energy supply, more

3. Four Scenarios in aNutshellThe unexpected happens - and prepare for it!

Margaret Thatcher


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internationally traded oil and gas becomeavailable for the rest of the world and mayalleviate to some extent shortages and pricevolatility.

Finally, most policy actions initiated under thisscenario probably benefit have nations ratherthan have-not nations, as there is little, if any,cooperation or proactive policies to aid thepoorer, less developed areas of the world.

3.2. Scenario 2: Elephant(High GovernmentEngagement - LowCooperation andIntegration)

The Elephant is a social animal with a stronghierarchical nature to the family. However, whilethe family unit is strong, there is little inclinationto cooperate between families, and familiesstrive for self-sufficiency. The Elephant also hasa very good memory. In spite of a verystructured existence, the elephant is slow toadapt. This scenario might be thought of interms such as governance, or nationalisticenergy security.

This scenario has significant governmentengagement but minimal international orregional cooperation and integration. The firstpriority is energy security to support economic

activity and growth. Governments intervene andnations take responsibility for their energysecurity (short-, medium-, and long-term)through such actions as diversification of

primary energy sources, development ofindigenous resources, controlling exports, and/orsecuring imports by bilateral negotiations. Inresponse to potential oil and gas shortages,governments may take specific steps to ensurenational and/or regional security of supplythrough actions such as:

Conservation programmes

Coal- or gas-to-liquid projects forcountries with appropriate resources

Enhanced and more expensive oil-recovery projects such as oil sands andoil shale

Biofuel projects

Bilateral development of offshore energyresources

Nuclear power programmes

Large-scale hydropower

Infrastructure investment Subsidies for renewable technologies.

As some countries move to ensure domesticenergy supplies, more internationally traded oiland gas might become available for the rest ofthe world and alleviate or even curtail shortages.Oil price shocks may be less likely. On the otherhand, bilateral agreements might have just theopposite effect.

Countries will act independently to enhance theirenergy security, such as relying on syntheticliquid fuels for transport, but this comes with aprice. For the rest of the world, oil not sold


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elsewhere is available, somewhat mitigating theprice spikes caused by supply constraints. Thisscenario does not end globalisation, but itcreates challenges for international tradedgoods (e.g., petrochemicals) that have becomecheaper under globalisation and free trade.

A strong sense of national pride and strongincentives drive the development of domesticcapacity and supporting capabilities. Thetransfer of know-how and technologies isrelatively constrained under this scenario, as theprimary focus is inward toward domestic needs.Under this scenario, the role of internationalinstitutions (e.g., the United Nations) in drivingglobal programmes is less effective than it mightotherwise be. Countries are much moreconcerned about their own interests. This inwardfocus has a negative impact on economicgrowth, as some domestic solutions are sub-optimal and/or reliant on older and less efficienttechnologies.

Many of the actions also compromiseenvironmental issues:

More reliance on coal without carboncapture and storage increases carbonemissions from CTL projects.

An increasing share of nuclear power inthe energy mix requires moresophisticated and reliable storage for the

additional nuclear waste. More agricultural land and fertiliser use is

devoted to biomass production.

Populations are displaced and methaneemissions are increased by large-scalehydropower development.

Decreases in energy use combined withan increase in renewable and nuclearenergy are positives with respect toclimate change. CTL and oil shaleprojects need to be coupled to carboncapture and storage (CCS) to avoidincreased greenhouse gas emissions.

3.3. Scenario 3: Lion (HighGovernmentEngagement - HighCooperation andIntegration)

The Lion is chosen for its sociability. Adultstransfer experience and expertise to the young.Gathering food through hunting is a very

cooperative effort with careful planning, clearidentification of the goal, and executed in acontrolled, disciplined manner. All members of apride share in the results. This scenario might bethought of in terms of energy globalism or globalcoherence.

This scenario has significant governmentengagement and significant international orregional cooperation/integration. Governmentsactively share their experience and expertise,primarily in achieving basic human rights andalleviating poverty. In some cases, thisstrengthens regional integration initiatives.Countries cooperate on key energy issues of


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sustainable development. The global concernsof greenhouse gas emissions and energypoverty are the subjects of intense negotiationsand strong international agreements andprogrammes. Yet measures to mitigate concernsmay often conflict with each other (e.g.,greenhouse gas emission mitigation may raiseprices and thus affect access for the poor).

Reducing energy poverty and introducingefficient and effective technology boosts energyuse in developing countries. This puts pressureon energy use in the developed world. This maybe a short-term effect if the reduction in energypoverty enhances global productivity. Thestimulus for regional integration or bilateralcooperation enhances prospects for the poor.The reduction of energy poverty comes withincreased demand, putting pressure on energysupplies and infrastructures.

There is a stimulus to develop technologiesappropriate to the needs of developing marketsand time-to-market is shortened, although stillsignificant. Funding such development work andfunding the implementation of successfultechnologies in developing countries needs tobe encouraged through proactive, cooperativeenergy policies, bilateral and regional inter-government agreements, and specific fiscalincentives. The technology focus helps tomitigate some energy constraints. This is a timeof innovation and pushing back technological

boundaries because government is fundingmarginal ventures.

International donor agencies and developmentbanks play a big role. Aid is linked toenvironmental goals. Intellectual property ismore effectively protected, deployed, andtransferred.

Better control of energy resources improveslocal, regional, and global prospects.Greenhouse gas emissions remain under checkwith performance targets implicitly or explicitlycollectively agreed on and respected. Managing

environmental impacts, and especiallyemissions, has a significant cost that has anegative impact on GDP, thereby making itharder to reduce energy poverty.

Thanks to the avoidance of energy shocks andstimulation of developing country economies,GDP growth may be dynamic. However, benefitsare offset by the cost of greenhouse gasemissions mitigation.

This scenario leads to burden sharing betweenthe haves and have-nots at a national and aninternational level.

3.4. Scenario 4: Giraffe (LowGovernmentEngagement - HighCooperation andIntegration)

The Giraffe, the tallest animal on earth, ischosen because it strolls calmly across theplains and sees both danger and opportunity at


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great distances. Giraffes are also very adaptableand can exist on their own. Leadership is a veryloose arrangement with no established overallhierarchy. The giraffe is not constrained by astrong social structure and individual animalshave great freedom of choice. The giraffe isessentially an entrepreneur and can readilyadapt to different circumstances. It is also ableto defend itself, either by running away on itslong legs (avoiding conflict) or by using its legsas weapons. This scenario might be thought of

as market driven or enterprise dominated.

This scenario has minimal governmentengagement but significant international andregional cooperation and integration. In thisscenario, the primary driver is economicdevelopment. The main preoccupation is freeingup global markets to promote GDP growththrough affordable energy and internationaltrade. There is increased reliance on marketmechanisms, including in the developing world.Government involvement is constrained(predominantly directed to market regulation,when necessary) and there are few levies orsubsidies. There are few restrictions on globalmovement of goods and services.

Little is done by governments to proactivelyavoid energy shocks and their effects on allcountries, and what little is done tends to beshort-term oriented. On the positive side is thecapacity of market forces to foster newtechnologies and the role of improved private

sector governance and fewer access limitations.The poor benefit from the open border policies

and possibly from new World TradeOrganisation agreements.

The opening of markets and the reducing oftrade barriers encourage a freer flow of goodsand services. Entrepreneurs actively seek toenter emerging markets, stimulating innovation.Market driven interchange leads to more rapidtransfer of technology and experience.International market opportunities stimulate newenergy-technology development and methods to

protect intellectual property, which plays a veryimportant role in enabling countries to profit fromthese international market opportunities.

Those countries slow to liberalise their marketsare left behind as the entrepreneurs go wherethey see better opportunities. Appropriaterewards are expected for entrepreneurial risksand this results in a downward poverty spiral forthe already impoverished because they cannotafford the necessary returns to stimulate

investment in the private sector.Environmental awareness is enhanced at localand regional levels, but increasing reliance oncoal and increased energy demand increasesgreenhouse gas emissions. Carbon capture andstorage tends to be limited in developingcounties because of a lack of financial andtechnological resources and governmentinaction.

Because of the lack of proactive government

policy intervention and anticipation, severeenergy shocks probably happen, but the open


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world economy is resilient and rebounds fromrecessions.

Success in this scenario depends on the marketdelivering technologies to increase security andreduce greenhouse gas emissions and otherenvironmental impacts. Overall energy andeconomic performance could be better in thisscenario, but it may be less equitable than inScenario 3.

3.5. Key IndicatorsTo assess how proactive policies can meet thechallenges of the physical, social, and economicworld while achieving outcomes closer to the 3As, this Report applies the following keyindicators to the four policy scenarios:

Growth in gross domestic product

Demographic growth

Energy intensity

Primary energy mix

Total primary energy required (TPER)

Greenhouse gas emissions

Supplydemand tensions (the balancebetween the two)

Oil

Gas

Coal

Nuclear power

Renewable energy

Non-commercial or traditional energy

GDP growth (or economic growth) examineshow regional and global economic developmentchanges. Together with population growth,economic growth represents a clear energy-demand driver. Over the long-term, globaleconomic growth has historically followed aconsistent upward trajectory (ignoring short- andmedium-term periods of stagnation or deflationin some countries), but the rate of increase in

that growth in real purchasing power parityterms has declined. Maintaining positive rates ofeconomic growth in all regions of the world istherefore an essential scenario backdrop.

Demographic growth examines how regionaland global demography change over the periodto 2050. Historic trends and existing forecastssuggest that population continues to grow andpeaks at some point prior to 2050. The migrationof people to large cities is a second element thatneeds to be addressed. Both are key drivers of

growth and the demand for energy services andthey will vary according to each scenario.

Energy intensity is measured as the energyrequired to produce a unit of economic activity(e.g., GDP on a PPP basis), allowing for theexplicit consideration of technologicaldevelopment. While reductions in energyintensity are a sign that energy conversion,distribution, and end-use technologies havebecome more efficient, these gains may alsolead to increased energy demand.

Energy mix captures the balance of primaryenergy sources in a countrys portfolio, hencemeasuring diversity and possible security of the


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supply. This is done using concentration indicesthat, for an improvement, should show a growingrange of energy sources, either in terms of thenumber of energy carriers or the sources ofsupply within and outside the country (e.g.,securing gas from several countries rather thanfrom one). A decline shows a narrowing of thesupply base. This is an important indicator inassessing availability and in parallel with supplyand demand tensions clearly describes marketconditions.

Total primary energy required (TPER)describes the total energy supplies, usually intonnes of oil equivalent, for the satisfaction ofenergy demand in an economy or the world as awhole. Driven by socioeconomic factors (andtechnological change), this is a key top-lineindicator of an economys energy scene. Weshould not underestimate the importance oftechnological change which can affect energydemand directly but also indirectly in terms of an

economys energy intensity.

Greenhouse gas emissions need to bemeasured over time within a country, a region orglobally. These are clearly linked to TPER andenergy mix, but we also need to recognise therole of technologies, particularly those thatsuccessfully reduce the link between emissionsand energy demand growth, e.g., fossil fuel usewith carbon capture and storage, nuclear power,renewables including biofuels.

Supplydemand tension measures the relativebalance between the demand for an energycarrier (solid, liquid, gas, or electricity) with its

source. Tensions capture the state of the marketfor each commodity and indicate likely orpossible energy price changes in each region ormarket. These have a pivotal role in determiningmarket development and mapping futures. Hightension signals imbalance while low tensionsuggests good balance.


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Section 4 describes the results from thescenario analyses using 2005 as the departurepoint. Relative winners and losers and thedilemmas in each scenario are presented.Quantitative values from the model are givenwhere appropriate. Access to the five regionalreports in their entirety, along with the modelresults, are noted in Appendix A.

4.1. Scenario 1: Leopard

4.1.1. Global Story

Gross Domestic Product

In this scenario, most regions see slowereconomic growth compared with recent years,due to a lack of coordination, inadequate physicaland institutional infrastructure, and a high degreeof uncertainty - all unfavourable in general toprivate investment. Research and development,as well as technology transfer, are relativelyconstrained compared with today. Economic

growth improves first in North America (around2035), while Latin America and the Caribbeansee improvements possibly only late in theperiod. There is a high degree of uncertaintyabout the future economy in Europe, centred ondiffering perceptions in Western Europe, EasternEurope, and Russia. Most African countries seetheir economic growth decreasing due toinadequate governmental policies related toenergy-capacity development, electricity andwater development, and non-energy

infrastructures (roads, telecommunications,health, and education), and declining investmentfrom within the country or from outside investors.

North America still sees its economy growing,albeit initially at a slower rate than today, andthen increasing its rate of growth later in the studyperiod, driven primarily by the United States. Asiadoes not see the situation depicted in thisscenario as positive, and the lack of proactivegovernment or international strategicinterventions make it impossibly difficult to securenecessary energy resources.

Population

Global population growth maintains its presenttrends. Asia, the dominant contributor topopulation growth today, sees an annual growthrate of 0.8%, resulting in a population increasefrom 3.9 billion today to somewhat more than 5billion in 2050. The IEA WEO2007 predictsChinas population to reach only 1.46 billion in2030 from 1.31 billion today, while Indias ispredicted to grow much more quickly and reachthe overall level of China by 203010. In Africa,little change from the present growth rate of 2.2

% is noted until 2035 when the populationgrowth rate decreases due to a slowing ofeconomic growth, a decrease in livingstandards, and the general expansion ofpoverty. The decline is contrary to the usuallyexpected case because there is increasingly anemancipation of women. In Latin America, thecurrent population growth rate of 1.9%decreases until 2020 and then remains constantto 2050 without active government measures tocontrol birth rates and overall mortality rates

increase with respect to present levels. North

10World Energy Outlook 2007, International EnergyAgency, Paris, 2007

4. Results of AnalysisThe significant problems we face today cannot be solved at the same level of thinking as when theywere created."

Albert Einstein


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America sees its already decreasing growthrates persisting out to 2050. Europe is alreadyexperiencing a downward trend with severalcountries having negative growth rates.

Energy Intensity

Africa and Latin America see energy intensityincreasing because of a deteriorating energyinfrastructure combined with limited globalcooperation and little local or internationalinvestment. Asia is generally more optimistic

about this scenario and believes existing trendswill continue to drive down energy intensity, andthis occurs at an average annual rate of about -0.8% to 2050. The IEA WEO2007 focus onChina and India indicates energy intensitycontinuing to fall in India and resuming a declinein China after increasing earlier in this decade11.North America and Europe see newtechnologies introduced regardless of theconstraints in this scenario and intensitiescontinue to be reduced, although at rates lower

than in the other scenarios.

The mathematical model shows global energyintensities decreasing by more than 20% by2020, about 30% by 2035, and over 35% by2050, compared with 9.7 MJ/$ppp in 2005 (seeFigure 4.1).

Energy Mix

Asia and Europe see the mix of energytechnologies as unchanging from today

11 World Energy Outlook 2007, International EnergyAgency, Paris, 2007

throughout the period to 2050 because of weakincentives and as countries look inward. The IEAWEO2007 reference scenario sees continuinggrowth in all fuels except for biomass and waste,while Chinas coal demand, with a significantcoal to liquids market, is seen as growing as fastas TPER, keeping the share of coal constant12.Africa is pessimistic and sees the inward lookingaspects implying that countries focus only onexisting energy within their borders. LatinAmerica also sees a decrease because of the

difficulty of attracting significant capital outlaysdemanded by large projects. North America isoptimistic that the diversification of energysources will continue, emphasising theintroduction of low carbon technologies.

TPER

With the exception of North America, the earlydemand for energy (2020) in other regions,driven mostly by population increase, results inan increase in the growth of overall energy

requirements. In some cases (e.g., Africa), anincrease in energy intensity exacerbates thistrend. North America sees a correlation witheconomic growth, and when combined withdeclines in energy intensity, TPER remains atcurrent levels.

The model shows primary energy (modern)production in this scenario increasing over thatof today by 35% in 2020, 65% in 2035, anddoubling by 2050 (see Figure 4-2). TPER levels

12 World Energy Outlook 2007, International EnergyAgency, Paris, 2007

Figure 4-1 Percent change in global energy intensity (E/GDP) for the four scenarios from themathematical model projections

-50

-40

-30

-20

-10

0

PercentChange

Leopard

Elephant

Lion

Giraffe

2005 2020 2035 2050


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in 2005 were just under 500 EJ. TheIEAWEO2007 reference scenario shows Chinasand Indias primary energy needs alone doublingby 2030, results that are consistent with thisstudy, bearing in mind that the growth rate inother countries will be lower.

Greenhouse Gases

Greenhouse gas emissions increase in allregions initially and decrease only in laterperiods, first in Europe and then in the Americas- in the former with the introduction ofsignificantly more hydropower, and in the latterwith more non-carbon-emitting sources ofelectricity.

By comparison, the quantitative results from the

model indicate CO2 emissions increasingbetween 3040% in 2020, over 70% in 2035,and nearly 90% in 2050 (see Figure 4-3).

SupplyDemand Tension

Oil. Tension increases in all cases except near2050 in North America and Europe due to theintroduction of new oil production technologies.

Gas. Tension increases everywhere but

becomes neutral in Asia and North Americabetween 2035 and 2050 as new explorationtechnologies are introduced.

Coal. For the most part, all regions see presenttrends continuing, supported by ample supplies;however, Africa and Latin America seeimmediate increases followed by stabilisation.

Nuclear Power. Without strong governmentinvolvement, study participants see the current

uncertainty and ambivalence continuing, with aslight increase in tension in Europe due toincreased demand.

Figure 4-2 Percent change in primary energy production for the four scenarios from the mathematicalmodel projections

0

20

40

60

80

100

120

140

160

2005 2020 2035 2050

PercentChange

Leopard

Elephant

Lion

Giraffe

Figure 4-3 Percent change in greenhouse gas emissions (as CO2 equivalent) for the four scenarios fromthe mathematical model projections

0

20

40

60

80

100

120

2005 2020 2035 2050

PercentChange

Leopard

Elephant

Lion

Giraffe


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Renewable Energies. Without governmentengagement, all regions (with the exception ofAfrica, where an imbalance is due to lowinternational cooperation) see present trendscontinuing. In North America there is thepossibility of a gap between demand and supplyafter 2035. Renewable energy from wastes(wood waste and sawdust, sugar-cane bagasse,rice straw, municipal waste) should increasesince their utilisation involves neither hightechnology nor large capital investments.

Non-commercial Energy. The results here aremixed, with Africa seeing an increase due tomore poverty and dwindling forests. This is notconsidered an issue in North America today andis not expected to be so in the future.

4.1.2. Winners, Losers, and Dilemmas

In a relative sense, oil and coal suppliers farebetter in this scenario, because without

cooperation and government engagement, thereare likely to be fewer regulations aimed atincreasing fuel security or reducing greenhousegas emissions.

Correspondingly, achieving the 3 A goals islikely to suffer, including reductions ingreenhouse gas emissions. Becausegovernment is an essential player in any nuclearpower renaissance, this is less likely to happenand on a relatively smaller scale if it does.Finally, lower cooperation and integration

internationally has a negative effect oninternational finance and investment, particularlyin energy systems and products.

The major dilemma in this scenario is the limitedpolicy instruments or partnership opportunities toaddress the negative outcomes. It is likely thesituation could become unstable and majordisruptions in the energy sector could result,affecting entire economies.

4.2. Scenario 2: Elephant

4.2.1. Global Story


This scenario produces more positive economicresults, in general, than the Leopard scenario,but Latin America sees government efforts asinsufficient, while Africa goes further and seesgovernment interventions distorting the marketsin the 20352050 timeframe with deleteriouseffects on Africas economies. North America ismore optimistic and sees growth increasing bythe 20352050 timeframe, largely driven by theUnited States, with Canada and Mexico being

more pessimistic. In Latin America, this scenariorepresents the situation existing in most of LatinAmerica until the early 1990s whendemocratically elected governments began toflourish.

Population

Most see population growth as stable, with Asiacontinuing to show rates increasing slightly andLatin America seeing demographic growthdecreasing as per recent trends. The

combination of low economic growth andinsufficient government actions leading to lessemphasis on controlling birth rates means that


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the growth rate remains stable. The populationgrowth rate in Africa declines in the periodbetween 2035 and 2050 as poverty persists,birth rates actually decrease with theemancipation of women, and economiesdecline.

Energy Intensity

Intensity decreases in Asia, Europe, and NorthAmerica as new technologies are introducedand governments push strongly forimprovements in energy efficiency. Africa seesthe benefits of these actions earlier, but thencannot sustain its gains due to its lack of accessto new technology because of low internationalcooperation. In Latin America, an increase in theratio of thermal power generation versus moreefficient hydropower generation and an increasein agricultural and industrial exports tocompensate for dependence on foreign hightechnology goods also delays improvementsand increases energy intensity.

The model indicates energy intensities in thisscenario decreasing 20% by 2020, about 30 %by 2035, and nearly 35% by 2050, comparedwith today (see Figure 4-1).

Energy Mix

The diversification of the energy mix improvesgenerally, except in North America where it isalready diverse and stays that way. In LatinAmerica, expansions are seen in natural gas,

biofuels, wind, and solar heating early in theperiod and later toward 2050 with thesubstitution of nuclear power and coal for

hydropower. Governments diversify the energysupply for security reasons. The same situationis generally seen for Africa, except that, at theend of the period, the expansion of the mixstagnates due to limitations in financialresources and limitations on technology transferbecause of the lack of international cooperation.Asia sees an increase in the mix because ofgovernment mandates shifting away from fossilenergy.

TPER

The rate of growth in the TPER increases earlyin the period and then stabilises and evendecreases later, due primarily to governmentpressure and improvements in energy efficiency.In Latin America, this trend is exacerbated by afalling GDP growth rate.

In the model, primary energy (modern)production in this scenario increases by about30% by 2020, between 5060% by 2035, and

around 80% by 2050, reflecting the perceivedinfluence of governments introducing policiesthat reduce energy consumption, primarilythrough improvements in energy efficiency (seeFigure 4-2).

Greenhouse Gases

Due directly to government engagement in thisscenario, North America and Europe see areduction in the growth of greenhouse gasemissions compared with the Leopard scenario.

In contrast, Africa and Latin America do notbelieve governments by themselves have thepower to curb emissions. Limited international


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cooperation is a major impediment toaccomplishing meaningful emissions reductions.In Asia, emissions increase until late in theperiod when any realistic application of highefficiency technologies has an impact.

The model for this scenario leads to lower futureCO2 emissions than the Leopard scenario:around a 25% increase by 2020, just over a 40%increase by 2035, and staying level until 2050(see Figure 4-3).

SupplyDemand Tension

Oil. In general, tension around oil decreases incomparison with the Leopard scenario; however,Africa does not see governments being strongenough to affect the situation and sees tensionincreasing the same as in the Leopard scenario.Perhaps the biggest change from Leopard is inNorth America, where governments have animpact on creating alternative fuels (e.g.,biofuels, oil from sands).

Gas. Gas tension is for the most part seen asthe same as the Leopard scenario. Demandincreases, but new exploration meets increasingdemand to some extent. Much is unknown aboutthe future of this energy source. Gas is assumedto maintain its position in all regions.

Coal. With government engagement, coal losessome of its importance in Europe. Other regionsshow little or no change, with coal continuing tobe exploited as an abundant and relatively

inexpensive energy source.

Nuclear Power. The active engagement ofgovernments in this scenario increases the

supply of nuclear power, and therefore tension,as demand may outstrip industrys ability toprovide the necessary manufacturinginfrastructure. This increase in tension is a clearand recurring signal that everyone sees stronggovernment engagement as absolutely essentialif nuclear power is to play a significant role in theglobal energy mix. Africa is the exception, andsees strong international cooperation(technology and financing) as essential for thedevelopment of nuclear power on the continent.

Thus, for Africa to benefit, a combination ofgovernment engagement in other regions isrequired together with regional cooperation andintegration in Africa.

Renewable Energies. With governmentengagement and encouragement, everyonesees renewable energy demand increasing,along with tension due to inability to keep upwith demand, and as a response to publicconcerns about the effects of climate change.

Non-commercial Energy. Little change is seenfrom the Leopard scenario. Africa seespopulation growth increasing the tension hereand as before, this is not an issue now in NorthAmerica or Western Europe and not seen asone in the future. This may be an issue in Asia,and somewhat less in Latin America, withnegative effects relating to deforestation.

4.2.2. Winners, Losers, and Dilemmas

Because of the stronger role of government inthis scenario in comparison with the Leopardscenario, people who need access to energyand energy services are likely to benefit.


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However, because there is no change ininternational cooperation and integration,international financing and investment in energyproducts and services is not improved. There isalso lower relative energy security as a result ofsupply regions not cooperating to an optimumextent with demand regions and nations. Energyindustries might also suffer due to a lack ofuniform regulation across regions and nations.

A dilemma in this scenario may be how Africa

and Latin America would reduce carbonemissions, as high government involvement byrelatively weak governments could prove to becounterproductive.

4.2.3. Oil Production Limits

For illustration, the model examines the effect oflimits on oil production by the Gulf States.Rather than using the 45 million barrels per dayin 2035 in the model, 25 million barrels per daywere used. In this case, the model shows nochange in energy intensity from this scenario.Primary modern energy requirements and thusCO2 emissions are only slightly lower than theresults for the Leopard scenario in all timeperiods.

4.3. Scenario 3: Lion

4.3.1. Global Story


This scenario produced the most optimisticestimates in many respects, especially in thedevelopment of the global economy. In Asia, the

high growth rates of today continue with thecombination of significant governmentengagement and high degrees of cooperationand integration. In Africa, these conditions helpwith technology transfer and technologyleapfrogging, as well as financing. In LatinAmerica, there is concern that activegovernment engagement leaves insufficientroom for private enterprise, both domestic andforeign, which can bring managerial andtechnical improvements to the region and,

therefore, an increase in economic efficiency.This effect is felt more intensely in the laterperiod.

Population

Demographic growth continues at stable rates inAsia and is somewhat higher initially in NorthAmerica. In Africa and Latin America, populationgrowth rates decline after the initial period due toachieving higher GDP/capita ratios, thereforeimproved standards of living.

Energy Intensity

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