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Chapter 2: Climate change and the need for new clean energy technologies.

The Growing Global Concern about the Threat of Climate Change

The surge has been remarkable in the call for action to combat climate during 2007. Most notable has been the conclusion of the Fourth Assessment of the Intergovernmental Panel on Climate Change (IPCC 2007b) that warming of the climate system is "unequivocal" and very likely due to the observed increase in anthropogenic greenhouse gas (GHG) emissions.

The evidence is now robust that the stock of GHG emissions in the world's atmosphere is directly related to the flow of human-induced GHG emissions. These are predominantly caused by the energy supply sector; transport; industry; and land use, land use change, and forestry (LULUCF). The energy sector is one of the largest emitters and thus absolutely essential to incorporate in any mitigation strategy. In fact, energy supply has been the fastest growing source of emissions from 1970 to 2004 (+140 percent) and the great majority of projections (for example, the IEA projections in figure 1) expect these emissions to grow even faster in the future. These emissions are generated by the combustion of carbon-intensive fossil fuels such as coal and oil and--to a significantly smaller extent--natural gas. OECD countries are currently the major source of GHG emissions and they have contributed the majority of the stock of GHG currently in the earth's atmosphere. However, due to their rapidly growing economies, size, and cheap and abundantly available fossil fuel resources such as coal, energy-related GHG emissions from developing countries are expected to increase dramatically. The IEA estimates that demand for primary energy will increase globally by 55 percent between 2005 and 2030 and by 74 percent in developing countries (IEA 2007c).

A consensus is forming in the world that global warming should be limited to a 2-3[degrees]C rise in temperature from preindustrial era equilibrium to avert the most serious impacts of climate change. The models that have been used to analyze the impact of this target indicate that this limit requires the stock of CO2 equivalent atmospheric concentrations not to exceed 550 ppm. To accomplish this target requires that GHG emissions peak between 2010 and 2030 and that by 2050 global CO2 emissions be dramatically lower than under business-as-usual projections. IPCC estimates that a stabilization at 550 ppm will require global GHG emissions to peak between 2010 and 2030; by 2050 emissions will then have to decrease: to a range of--30 percent to +5 percent relative to 2000 levels. As a comparison, IPCC's business-as-usual scenarios estimate that already in 2030 GHG emissions will increase to levels 25-90 percent higher than in 2000. Similarly, the Stern Review estimates that global GHG emissions will have to peak in the next 10-20 years and then decrease to 25 percent below the current level by 2050. To put this challenge in context, from 1990 (when the IPCC First Assessment was delivered) until 2005, global GHG emissions increased by 24 percent.


Based on this growing evidence, the IPCC, the Stern Review on the Economics of Climate Change (HM Treasury 2006), and the International Energy Agency (IEA 2006a) conclude that to mitigate the severity of climate change impacts on developing and developed countries alike, GHG emissions must be dramatically reduced. To give an idea of the magnitude of this needed reversal, Figures 1 and 2 show the substantial historical and projected CO2 emissions from fuel combustion broken down by fuel type and region.

Reversing this trend will pose a huge challenge for all parts of the world economy, specially the energy sector, which will have to shift massively to low-carbon technologies within the next 10-20 years.

Clean Energy Technology Options

Major changes from business as usual are needed to shift the energy sector onto a sustainable track. All major reports on climate change confirm that such a shift will require some mix of the following clean energy technologies:

* increased energy efficiency in power supply, demand, and transport

* renewable energy--including wind, hydro, solar, and geothermal power and biofuels

* nuclear energy

* fuel switching to less carbon-intensive fuels (for example, from coal to natural gas)

* carbon capture and storage (CCS).


In addition to these "hardware" technologies, "software" technologies including innovations in information technology, management, and planning (such as urban planning) can also play a critical role in mitigating climate change.

Clean energy technologies differ substantially in their aggregate potential to reduce emissions (a function of the absolute availability of the resource and relative costs) and in terms of the stage of their development (such as whether the technologies have already been commercially proven or not). Figure 3 illustrates the most widely discussed forms of clean energy supply along these two dimensions, indicating the stark differences among the technologies. Appendix A provides a brief description of the innovation chain depicted along the x-axis of the figure. Appendix B provides descriptions of the main assumptions behind the emission reduction potential of each technology as estimated by IEA and of the most promising clean energy technologies under development.

In addition to stage of development and GHG emissions mitigation potential, clean energy technologies differ along other dimensions with strong implications for the design of policy and investment instruments aimed at climate change mitigation, including the following:

* Diversity within each technology category. Many of the technologies commonly described as clean energy technologies actually consist of a wide array of different technologies or technology applications, each at a different stage of development and with distinct characteristics. For example, hydropower ranges from large hydroelectric dams to smaller run-of-river facilities to microhydro plants, each with distinctly different technical, economic, social, and environmental characteristics. Similarly, solar photovoltaic (PV) faces considerably different challenges when applied in off-grid applications or connected to a grid.

* Structure of the supply sector. The supply industries that manufacture each of these technologies differ substantially. For some, only a handful of large, mostly multinational companies are capable of RD&D or actual manufacturing, for example, with nuclear power or carbon capture and storage (CCS). For others, numerous players of various sizes scattered around the globe can and do play a role in the technology's technical advancement and manufacture, for example, with many end-use technologies.

* Structure of demand sector. The consumers both of the technologies themselves and the products generated by those technologies differ substantially. For large power plants, such as ultra-supercritical coal stations, a finite amount of large power generators (primarily utilities) would even consider purchasing one. This effective global oligopsony can strongly influence, and in fact participate in, the direction any development effort may take. Retail products such as compact fluorescent lights (CFLs), however, are sold to millions of consumers through extensive distribution networks and various intermediaries.

* Capital intensity of R&D. The amount of money needed to fund R&D for each technology differs substantially. For example, design and construction of a single CCS demonstration plant costs hundreds of millions of dollars. Other technologies, such as most energy-efficient end-use products, can gain incremental yet important advances from the work of small labs with relatively small sums of money.

* Required adaptation to local conditions. Some technologies will have a global reach while others can only be used under certain conditions or will need to be adapted substantially when being transferred from one region to another. Differences in climatic and natural resource conditions play an important role for many forms of renewable energy, demand density affects the design of electricity systems, and differences in lifestyles and living conditions affect the types of appropriate end-use technologies.

* Production of intermediate or end-user product. In some cases the products from these technologies are intermediate forms of energy that are then used by the final consumer, for example, electricity generators. In other cases the products from these technologies provide the final useful energy form for the final consumers, for example, most end-use technologies such as light bulbs and electric motors.

* Other nontechnical factors. In addition to the technical dimensions described above, technologies differ substantially in how they are affected by nontechnical and institutional factors. Nuclear power and hydropower, for example, can have negative nonCO2 environmental and social costs and risks. Energy-efficient technologies face a host of barriers to deployment such as lack of information, the landlord-tenant (principal-agent) problem, and an inability or unwillingness by consumers to properly consider lifetime costs when making equipment purchases.


The Need for New and Improved Clean Energy Technologies

Despite these important differences, clean energy technologies have in common that the more widespread deployment of most of these technologies is constrained by comparatively high cost and reliability constraints in many applications. For example, new coal technologies--such as integrated gasification combined cycle (IGCC), supercritical, and ultra-supercritical--significantly reduce emissions compared with baseline coal technologies but in most cases they are considerably more expensive. Renewable energies such as solar power and wind generate no emissions during operation but suffer from the intermittency of wind and sunlight and are generally higher-cost than more polluting options for electricity grids.

Consequently, while the more widespread adoption of existing technologies can have significant mitigation potential and should definitely be pursued, the IPCC, the Stern Review, and the IEA all conclude that a truly sustainable energy future can only be achieved if new and improved clean energy technologies beyond those commercially available today are developed. In fact, each of these reports examines the mitigation effects of policies to control emissions, including increased deployment of commercial or near-commercial clean energy technologies, and concludes that while helpful, such efforts will be insufficient unless combined with an accelerated commercialization of new and improved clean energy technologies (see Appendix C). Moreover, these studies emphasize the urgency with which new and improved clean energy technologies have to be developed and deployed. Among other factors, a large increase in funding for energy research, development, and deployment (RD&D) is needed.
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Title Annotation:Accelerating Clean Energy Technology Research, Development, and Deployment: Lessons from Non-energy Sectors
Publication:Accelerating Clean Energy Technology Research, Development, and Deployment
Date:May 1, 2008
Previous Article:Chapter 1: Introduction.
Next Article:Chapter 3: Trends in energy research and development spending.

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