4.0 Challenges for energy and climate

Ensuring access to modern energy sources for all, while limiting global climate change and air pollution will require both short- and long-term actions.

Improving access to modern energy can be achieved by using financial instruments to lower the cost of modern fuels and stoves, distribution programmes for improved biomass stoves, and ambitious electrification programmes, all targeted at the poorest households. In order to reduce greenhouse gas emissions it is necessary to improve energy efficiency and use more low or zero greenhouse gas emitting technologies. Standards and financial tools (e.g. taxation) can be effective policy instruments to unlock existing potential. Further electrification in the transport and household sectors could ensure more flexibility in reducing emissions. By 2050, around 60% of all energy would need to come from non-CO2 emitting energy sources. Reducing non-CO2 greenhouse gas emissions is also part of any effective strategy.

To implement these actions, five fundamental short-term policy priorities can be defined:

  1. Substantially increase efforts to ensure modern energy for all

  2. Start decarbonisation before 2020 and steadily accelerate afterwards

  3. Prepare for adaptation

  4. Ensuring sufficient financing

  5. Make energy policies need to become more consistent

Other routes

4.1 Substantially increase access to modern energy

Universal access to electricity and clean fuels for cooking and heating would have large development benefits and could be achieved at relatively low costs.

Access to modern energy sources improves human health mostly through better indoor air quality, as well as income opportunities through, for example, reductions in the time spent to collect firewood and . Electrification policies should target those communities that, from an economic perspective, would otherwise not be connected. Improving access to modern fuels for cooking and heating requires well-targeted subsidies on modern fuels, combined with policies that improve the affordability of the required stoves. Additional programmes include the distribution of improved biomass-fuelled cooking stoves for the poorest communities.

4.2 No trade-off between access to energy and climate policy

Providing access to modern energy would lead in the worst case to only a small increase in greenhouse gas emissions and possibly even a decrease

Even if access to modern fuels for cooking and heating would be achieved with fossil-fuel-based products, this would result in only a small increase in CO2 emissions, (partly) compensated by reduced emissions from deforestation and of black carbon. The reasons why these increases would only be small are: 1) the per-capita energy consumption of the people involved would (initially) be low; 2) energy services would be provided much more efficiently; and 3) the emissions associated with the traditional use of biofuels would be reduced.

4.3 Achieving the 2 °C climate target requires early action

In order to reach the 2 °C climate target, global emissions would need to peak within the next 10 years. This would require that decarbonising the economy is started as early as possible, unsustainable actions are reduced and confidence is built.

Scenario analyses show that emissions need to peak soon, in order for them not to overshoot the emission budget that is consistent with meeting the 2 °C climate target. Further delays could make climate policy very costly. In this context, government should consider phasing out the construction of coal power plants that do not use carbon capture and storage (CCS), before 2020. Early action may be achieved through appropriate pricing, but also through more direct government policies aimed towards utilities.

4.4 The energy transition would rely on several technologies

The changes required in the energy system are fundamentally different from current trends. Different mitigation measures contribute to the emission reductions required to achieve the 2 °C climate target.

Important measures to reduce greenhouse gases are reducing non-energy-related greenhouse, energy efficiency improvements and low- and zero-carbon technologies. Although the potential for reducing non-energy-related greenhouse gases is limited, measures are very cost-effective and would have co-benefits related to air pollution. Furthermore, energy-efficiency improvements need to occur at double the historical rate. However, in the long run more reductions may be achieved through using low- and zero-carbon technologies, such as carbon-capture-and-storage, bio-energy, other renewables and nuclear power. Electrification and increased hydrogen use can help making the energy system more flexible.

Improved access to modern energy

  • + large benefits in terms of health improvement, development opportunities and time saved on collecting fuelwood

  • + relatively low costs compared to other energy-related issues

  • + co-benefits for biodiversity due to reduced consumption of traditional bio-energy

  • 0 no substantial increase in greenhouse gas emissions/ likely decrease

  • - Implementation barriers (lack of financial options of the poor to pay-back investments)

Energy efficiency

  • + Reduces air pollutants and greenhouse gases

  • + Leads to less energy security risks

  • +/- costs can be low or high (depending on sector and option)

  • - Implementation barriers

Behavioural change to reduce energy consumption

  • + Reduces air pollutants and greenhouse gases

  • + Leads to less energy security risks

  • +/- costs mostly unknown and indirect

  • - Implementation barriers / little success historically

Wind energy / solar energy

  • + No greenhouse gas and air pollutant emissions

  • + potential to produce off grid electricity to improve access to modern energy in remote areas

  • - Relatively high costs / high initial investments

  • - Local opposition against wind power

  • - Problems related to intermittency

Carbon capture and storage

  • + easy to integrate into current energy systems /does not lead to significant changes in interests

  • + relatively low costs option to reduce greenhouse gas emissions

  • + reduces CO2 emissions but also several air pollutants

  • - loss of overall efficiency

  • - local opposition against storage

  • - technology not applied at large scale

  • - risk of leakage

Nuclear power

  • + reduces CO2 emissions and air pollutants

  • 0 depletion of nuclear fuels somewhat unclear (depends on technology development)

  • - Nuclear risks and waste

  • - Risks associated with proliferation

  • - High investments / relatively high costs

Bio-energy

  • + relatively low costs option to reduce CO2 emissions, particularly in transport

  • - Leads to substantial land-use (unless produced from residues)

  • - Potentially leads to indirect greenhouse gas emissions and N2O emissions from fertilizers)

Reducing non-CO2 emissions

  • + reduces greenhouse gas emissions and may lead to co-benefits for air pollution

  • + includes many low costs options

  • -/+ CH4 and N2O emission reduction has co-benefits for air pollution

  • - implementation barriers

Reducing air pollutant emissions (abatement technology)

  • + reduces air pollutant emissions

  • + often relatively low costs options

  • +/- leads to reduction of greenhouse gas emissions depending on the pollutant

  • - Several options have very little co-benefits

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4.5 Decarbonisation rates should be beyond historical experience

Achieving air pollution and especially climate targets would require fundamental changes to the energy sector, compared with current trends

Select graph

Decarbonisation rate

This fundamental shift implies a strong reduction in the ratio between CO2 emissions and GDP (decarbonisation). Historically, the highest improvement occurred during the 1980s, at around 2% annually, driven by the high energy prices and subsequent government response programmes. To achieve the 2 °C climate target, the decarbonisation rate would need to reach an annual level of around 4.5%, on average, over the 2010–2050 period. The required improvement rate is around three to four times the historical rate.

4.6 Lifestyle changes reduce the required technology transition

Consumer changes may help to ensure sustainability goals are achieved. It is important to stimulate the debate on less energy-intensive consumption patterns, but also to use financial instruments, such as a carbon tax to promote energy efficiency.

Energy efficiency has an important potential and may achieve multiple targets, simultaneously. Specific policy instruments, both financial and regulatory, may increase the likelihood of efficiency measures being implemented. Furthermore, on top of efficiency measures, also low-energy lifestyles would offer an interesting potential for change. Stimulation of dietary changes, an increased use of public transport and reduced use of heating and cooling all may be effective in reducing emissions.

4.7 Adaptation to climate change will still be necessary

Even if countries are able to implement policies leading to a maximum global mean temperature increase of 2 °C, it is useful to prepare for the impacts of possibly an even higher temperature increase.

The analysed energy transitions are expected to lead to a less than 2 °C increase in global mean temperature. However, uncertainties in the climate system imply that a warming by 3 °C or more may also be possible, even if emission reductions are successful, while there is also the risk of not achieving the emission targets. Therefore, countries will need to adapt to climate change and prepare for the impacts of a warming of 2 °C or more.

4.8 Additional investment are needed

Reaching the energy targets not only requires a shift in existing investments, but also considerable additional investments. Therefore, public and private funding of energy transition infrastructures must be arranged.

Estimates of the required level of investment in the energy system are likely to be several 1000 billion per year. Without the sustainability transition energy system investments towards 2050 are estimated the order of 4% of GDP. Meeting the sustainable development targets would lead investments in a different direction. Moreover, additional investments would be needed, certainly in the short term, estimated at around 1% to 2% of GDP; in particular, those to reduce greenhouse gas emissions. These investments can come from public and private sources. Often, private funding can be more effective. Ensure that public money is set aside for infrastructure and to provide access to modern energy for the poorest people. Well-designed subsidy schemes for clean fuels for poor customers have proven to be successful. However, once incomes reach the level on which households will have the ability to pay, these subsidies need to be phased out.

Cumulative investments 2010-2050 (trillion US$) (Estimates in literature) Cumulative investments 2010-2050 (trillion US$) (Medium range) Average annual investments (billion US$)
Investments without addressing sustainability challenge IEA (2011): 38ab
GEA (2012): 50 - 90c
Other literature: 120
60-100 1600-2500
Additional investments for climate policy IEA (2011): 15.2 - 4.6ad
IMAGE-studies: 25 - 80d
GEA (2012): 68 - 84
Stern (2007): -10 - +50d
IPCC (2007): 20-70de
25-80 600-1940
Additional investments for access to modern energy IEA (2011): 1e
IMAGE: 1.4e
Bazilian (2010): 0.2 – 2.8
Literature: 0.2 – 0.8e
0.6-1.4e 30-70e
Additional investments for adaptation to climate change UNFCCC: 2.0-6.8 2.0-6.8 50-170

a2010-2035; bsupply side only; cBased on current investments and increase in energy consumption; dclimate policy only; e2010-2030

4.9 Energy policies need to become more consistent

Energy policies address a large number of different targets, both for the short term and the long term. In order to meet long-term targets, it is important that they are also considered in short-term decisions.

Energy efficiency measures could contribute to multiple targets including those for climate, air pollution, and energy security. Removal of harmful subsidies is another example of areas from which multiple benefits could be obtained. In other cases, trade-offs between policy targets exist that have to be dealt with in a transparent way in relation to the long-term vision. Policy coherence would need to be discussed publicly and nationally. Furthermore, this would require a balance between 'private' and 'global public' aspects of the global energy system.

Climate change Air pollution Energy security Energy access
Climate change positive result mixed result negative result
Air pollution mixed result mixed result mixed result
Energy security mixed result mixed result mixed result
Energy access mixed result mixed result mixed result

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