Here’s a road map for solving 3 of the world’s biggest problems

Advocates for clean energy are often accused of “carbon blindness” — focusing entirely on how to reduce greenhouse gas emissions without taking other social goals into account. For instance, more than a billion people across the world lack access to basic modern energy. Attempts to solve that problem should be woven into our plans alongside decarbonization.

It is true that a more holistic perspective is generally preferable. But of all the institutions one might have expected to address this critique head on, the International Energy Agency would not have topped the list.

The IEA is widely respected by governments and energy experts. Anyone who studies or works with energy follows its work closely. But it has a reputation as somewhat staid and small-c conservative.

So it is fascinating, and significant, to see the IEA attempting a more holistic analysis in this year’s World Energy Outlook.

Finally, an ambitious plan from the IEA

The WEO is IEA’s annual compendium of facts, statistics, scenarios, and analyses on global energy trends. In WEO2017, the IEA has introduced a brand new modeling scenario: the Sustainable Development Scenario (SDS).

“Increasingly,” the agency writes, “energy sector development pathways are required to move hand-in-hand with economic development and prosperity, social priorities, and environmental needs, supporting policy objectives in all those areas.” Focusing solely on carbon may distort what’s needed to meet those other priorities.

With that in mind, rather target a single goal (reducing carbon emissions), the SDS models the least-cost pathway to achieving three goals simultaneously — namely, the three energy-related goals in the 2030 Agenda for Sustainable Development, which UN nations adopted in 2015.

They are: “to achieve universal energy access to modern energy by 2030; to take urgent action to combat climate change; and to dramatically reduce the pollutant emissions that cause poor air quality.”

IEA

You might think that these goals are overlapping anyway, and they are to a certain extent, but taking them on all at once leads to some intriguing differences, not only with IEA’s status-quo scenarios (obviously) but even with its previous low-carbon scenarios.

Balancing the priorities and resolving the conflicts shapes a different kind of energy strategy.

It also involves, as you might expect, a great deal of work, coordination, and new policy. For a full accounting of all the policies required to fulfill the SDS, you’ll want to head over to Annex B of the (ahem, 800-page) report. There are hundreds. I’ll just touch on a few themes that jumped out at me.

(For more on IEA’s scenarios — more interesting than it sounds! — see the addendum at the bottom of this post. In what follows, “NPS” refers to IEA’s New Policies Scenario, which models currently implemented policies along with policies and intentions that have been publicly announced. Roughly speaking, NPS represents our current ambitions, SDS a much higher level of ambition.)

An enormous humanitarian advance

Achieving the SDS would be an enormous humanitarian step forward: “1.3 billion people gain access to electricity by 2030 (around twice as many as in the New Policies Scenario) and 2.9 billion people get access to clean cooking by 2030 (2 billion more than in the New Policies Scenario).”

Our eyes tend to glaze over at big numbers, but that represents a lot of people transitioning from a grim subsistence existence to, if not quite “modern energy,” at least the first crucial few steps down the path of development.

Also, focusing on air pollution abatement would mean 1.6 million fewer premature deaths per year in 2040 relative to the NPS, which is no small thing.

IEA breaks it down:

IEA

Note that center chart: Together, off-grid and mini-grid solutions, which are smaller and faster to deploy than large grid extensions, will account for more than half of the new energy access.

Getting on the road to 2 degrees

SDS would also put the world on a trajectory toward its long-term climate goals, which the NPS would definitely not.

The SDS wouldn’t guarantee those long-term goals — that will depend on what happens in the latter half of the century, especially whether substantial negative-emissions technologies emerge — but it would get emissions moving in the right direction:

IEA

There is some tension between the goal of universal energy access and the goal of decarbonization — but not that much. Achieving universal access, IEA writes, “even at relatively low levels of per capita consumption and widespread provision of access using low-carbon technologies,” will result, all else being equal, in a small increase in global emissions. But IEA says that increase is relatively easy to compensate for in other areas, at relatively little additional cost.

Here’s where the SDS would get its emission reductions:

IEA

In terms of energy, relative to the NPS, the SDS “puts stronger emphasis on decentralised low-carbon technologies as a means to achieve multiple policy objectives.” That means lots of distributed solar in the developing world.

Natural gas survives the purge as renewables grow

Increasing climate ambition would mean pushing some present-day trends along much faster. Coal demand would peak and begin declining before 2020. As more energy services are transitioned to electricity — yes, SDS is on the electrify-everything bandwagon — oil demand peaks and begins declining shortly thereafter.

As more and more variable renewable energy (solar and wind) comes on the grid, there will be more and more fluctuations in power supply — large fluctuations as the sun comes and goes, but also small-scale fluctuations (clouds) and very long-term (seasonal) fluctuations. Something is needed to balance out those fluctuations.

Large coal and nuclear plants are not good at balancing, at ramping up and down quickly. Natural gas is. It is the perfect partner for renewables in driving coal off the grid and accommodating the oncoming demand of electrified transportation. (Perfect except for the awkward remaining-carbon-emissions issue.)

So in a low-carbon, low-pollution scenario, natural gas will be the last fossil fuel standing. It is the only fossil that doesn’t decline in SDS — it plateaus from 2030 to 2040.

IEA

“Power generation is all but decarbonised” in the SDS, IEA writes, “relying by 2040 on generation from renewables (over 60%), nuclear power (15%) as well as a contribution from carbon capture and storage (6%).”

Here’s power generation by source and installed capacity in 2040, in the SDS:

IEA

Note: As coal and oil decline, more energy services are moved to electricity, and the proportion of renewables rises, so inevitably does the use of domestic energy. Wind and solar are always domestic.

That means enormous savings on oil imports, in the trillion+ range. It also means greater energy security.

Incidentally, given that the US has emerged as the world’s leading natural gas producer, the SDS would also put the US in the catbird seat, geopolitically. America would be both largely decarbonized and the biggest player in remaining fossil fuel markets. (Someone should tell Trump that this is the route to his beloved energy dominance!)

The cost of a livable world

One of the scenario’s most intriguing findings is that adding universal energy access and massive pollution reductions to the menu is relatively cheap. Relative to the NPS, universal energy access would require $793 billion more investment, and pollution reductions $772 billion more investment, cumulatively through 2040. That amounts to about two years of US military spending — peanuts in the grand scheme of things, for a gigantic advance in human welfare.

Decarbonization is the priciest part of the package. Relative to the NPS, the SDS would require enormous shifts in investment away from fossil fuels, toward the power sector and end-use efficiency.

The power sector would require $9 trillion in net new investment; end-use efficiency would require $7 trillion. The reduction in fossil fuel investment would bring that down by $8 trillion, so the overall net new investment required relative to current ambitions would be $8 trillion through 2040.

IEA

That $8 trillion would buy a historic advance in human welfare. It would be an enormous down payment on a livable climate (“contingent both on commensurate efforts outside the energy sector and the pace of energy sector decarbonisation after 2040”). And it would unleash a global wave of innovation and job creation.

The IEA does not attempt to quantify all these benefits of the SDS — it only calculates the changes in direct investment — but my guess is, in the rearview mirror of history, they would look like a screaming bargain.


Fun bonus scenario

The IEA has also developed a Faster Transition Scenario (FTS). It is purely climate-focused, unlike the SDS’s multiple goals, but on climate it goes considerably beyond the SDS. It assumes that energy-related emissions can’t go below zero. And it targets “well below 2 degrees.”

Unsurprisingly, it would involve everything, much faster. This paragraph gives some sense of the mind-boggling scope of action required:

Unlike in the Sustainable Development Scenario, [the FTS] would require the introductoon of CO2 prices for the power and industry sectors in all countries from 2020, the level rising to $170 per tonne of CO2 in 2040. Fossil-fuel subsidies would need to be removed by 2025, much earlier than in the Sustainable Development Scenario. Yet, these measures alone would not be sufficient. There would need to be further co-ordinated decarbonisation policy efforts across all sectors, partly to ensure the market uptake of technologies that are currently only at the stage of RD&D. The additional effort would be largest in end-use sectors. For example, by 2040, around a quarter of the truck fleet would need to be electric (compared to less than 1% in the Sustainable Development Scenario), which would require a large number of motorways to be equipped with electrified overhead (catenary) lines, since batteries alone struggle to support long-haul journeys. Wider deployment of CCS would be needed in the industry sector in order to capture 19 Gt of energy and process-related CO2 emissions from industry through 2040 (compared with 13 Gt in the Sustainable Development Scenario), and widespread improvements achieved in efficiency in the use of materials, including through increasing recycling and light-weighting. In the buildings sector, the entire existing building stock would need to be retrofitted by the middle of this century.

Sure thing!

For more on this supercharged scenario, which the IEA developed alongside the International Renewable Energy Agency (IRENA), see here, where it is laid out in more detail. One can dream.


Addendum: on scenarios

The WEO2017 is an extensive piece of work, weighing in at a hefty 800 pages, daunting to even the wonkiest of wonks.

This year’s WEO dives into two topics in particular depth: China’s energy transition (increasingly driven by air-quality concerns) and the (bright, in every scenario) future of natural gas. Both those sections are worth reading.

I just want to add a quick word on scenarios, for the nerds.

Critics (including, er, me) have long charged the IEA with being unduly pessimistic about renewable energy. Its scenarios have fallen far short of the reality of renewables for so long that it faces frequent charges of bias.

The IEA has responded, again and again, that its scenarios are not predictions. It does not make predictions. That is not what the WEO is for. (It says this about a dozen different ways in the executive summary and first chapter.) Scenario development is meant to inform decision makers, not predict what they’re going to do.

The WEO typically uses two main scenarios, which it continues this year. One is a Current Policy Scenario, which just projects out to 2040 a world that only includes policies firmly implemented by 2017. That scenario is meant as a baseline against which to measure the effects of new policies.

The second is the New Policies Scenario, which takes into account existing policies and policies (or policy intentions) that have been publicly announced. So, for instance, the NPS includes all the contributions that countries promised under the Paris climate agreement (in their NDCs, or nationally determined contributions). The NPS is meant to illustrate the outcomes of our current ambitions.

The IEA states plainly (again):

[T]he primary focus, as in past editions [of the WEO], is on the New Policies Scenario, which reflects both currently adopted measures and, to a degree, declared policy intentions. That this scenario enjoys most of the limelight in the Outlook is often taken as an implicit sign that this is — despite our protestations to the contrary — a forecast. However, the IEA does not have a long-term forecast.

As a basic factual matter, the IEA is right. It has said from the beginning (as in, for the 20 years it has been doing annual WEOs) that it has no forecast, that its scenarios only capture current policy intentions. It has underestimated renewable energy because policy intentions have steadily changed, growing more supportive, which drives scale, which brings down costs. That is, the IEA protests in the introduction to the WEO, a good thing — a positive cycle of rising ambition.

But that answer has also been unsatisfying. After all, policy intentions are going to keep changing. Obviously more is going to happen between now and 2040 than what has been currently announced. So the NPS is not realistic. It inevitably lowballs the growth of clean energy. Insofar as journalists and policy makers take it as a prediction (despite the IEA’s protestations to the contrary), they will adopt an undue pessimism.

There’s no sense in the IEA trying to guess how policy intentions will change through 2040. What its critics have urged it to do instead is flip its approach: produce some scenarios that assume ambitious goals — beyond what have been announced, but sufficient to what is currently believed needed — and work backward from there, determining the lowest cost route to those goals.

Back in 2008, the IEA started doing some side scenarios that were “normative in nature,” as it puts it, including some scenarios targeting various temperatures and others targeting, e.g., low air pollution.

Now it has broadened that normative approach with the SDS. The IEA is not only showing off a new scenario; it’s showing off a new kind of scenario, one that illuminates an ambitious but effective way forward. It’s a great leap in thinking for such an established institution, and I’d love to see the IEA expand and deepen that approach.

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