energy and climate: from paris to marrakesh and beyond · energy and climate: from paris to...

© OECD/IEA 2015© OECD/IEA 2015

Marrakesh September 8, 2016

Philippe BenoitHead, Energy Environment Division

International Energy Agency

Energy and Climate:From Paris to Marrakesh

and Beyond

© OECD/IEA 2015

Today’s storyboard

Act 1: A portfolio of action for the low-carbon energy transition

Act 2: INDCs and the Paris Agreement

Act 3: From 2oC to ‘well below’ 2oC

Act 4: The decarbonization challenge in the power sector

Act 5: Renewables and Energy Efficiency are two keys

Act 6: Carbon Pricing in IEA models

Act 7: Reversing the ‘lock-in’ of emissions: facing up to the challenge of existing fossil fuel facilities

Act 8: The world keeps changing …

Act 9: State-owned enterprises – important and special

WEO 2015 CC Special Report

© OECD/IEA 2015

Act 1:A portfolio of actions

for the low-carbon energy transition

© OECD/IEA 2015

0

10

20

30

40

50

60

2011 2020 2030 2040 2050

Gt CO2

ETP 2014, 2015

Changing our portfolio of energy technologies to respond to the climate change challenge

© OECD/IEA 2015

0

10

20

30

40

50

60

2011 2020 2030 2040 2050

Nuclear 8%

Renewables 30%

End-use fuel switching 10%

CCS 13%

End-use fuel and electricityefficiency 38%

Gt CO2

fuel switching 1%Power generation efficiency and


ETP 2014, 2015

© OECD/IEA 2015

To 2 Degrees: More growth, more efficiency, more low carbon

GDP, Primary Energy and CO2 pathways in the 2DS

Decoupling GDPand energy

Decarbonisationof energy mix

IEA scenarios predicated on continued robust global growth

0

50

100

150

200

250

300

350

400

2010 2020 2030 2040 2050

Inde

x 20

10=1

00

GDP

TPED

CO2intensity(ESCII)

© OECD/IEA 2015

Energy intensity of GDP andCO2 intensity of primary energy in 2DS

0

20

40

60

80

100

120

2000 2010 2020 2030 2040 2050

Inde

x 20

12 =

100

TPED perGDP

Carbonintensity(ESCI)

0

20

40

60

80

100

120

2000 2010 2020 2030 2040 2050

Inde

x 20

12 =

100

TPED perGDP

Carbonintensity(ESCI)

© OECD/IEA 2015

Act 2:INDCs and the Paris

Agreement

© OECD/IEA 2015

INDCs . . .


24

27

30

33

36

2015 2020 2025 2030

Gt

450 Scenario

INDC Scenario

INDC Scenario above 2DS INDCs will set the new ‘reference case’ (NPS)

© OECD/IEA 2015

INDC Climate pledges shift theenergy sector

One-quarter of the world’s energy supply is low carbon in 2030; energy intensity improves three-times faster than the last decade

Renewables reach nearly 60% of new capacity additions in the power sector; two-thirds of additions are in China, EU, US & India

Natural gas is the only fossil-fuel that increases its share of the global energy mix

Total coal demand in the US, Europe & Japan contracts by 45%, while the growth in India’s coal use slows by one-quarter

Inefficient coal plants installed in 2030 are only marginally lower than today


© OECD/IEA 2015

A 2 °C pathway requires efforts well beyond INDCs and 2030

16

20

24

28

32

36

40

2010 2015 2020 2025 2030 2035 2040

Gt

Baseline (NPS including INDCs)

450 Scenario

17.9 Gt

Energy efficiency

Fuel & technology switching in end-uses

Renewables

Nuclear

CCS

Other

WEO Special Report 2015

© OECD/IEA 2015

Paris Agreement and the energy sector

“Holding the increase in the global average temperature to well below 2oC above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5oC above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change;”

“… Parties aim to reach global peaking of greenhouse gas emissions as soon as possible, recognizing that peaking will take longer for developing country Parties, and to undertake rapid reductions … so as to achieve a balance between anthropogenic emissions by sources and removals by sinks … in the second half of this century …”

© OECD/IEA 2015

0

10

20

30

40

50

60

2011 2020 2030

2040 2050

Gt CO2

Climate target:Where do we want to go?

Different targets: (i) INDCs, (ii) 2oC,(iii) well below 2oC, and (iv) 1.5oC

New reference case (INDC-based)

© OECD/IEA 2015

Act 3:From 2oC to

‘well below’ 2oC

© OECD/IEA 2015

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2015 2020 2025 2030 2035 2040 2045 2050

Mt/

CO2

Remaining CO2 emissions under 2DS

Othertransformation

Power

Transport

Agriculture

Services

Residential

Industry

From 2°C … to ‘well below 2°C ’

© OECD/IEA 2015

Sectoral shares of cumulative 2DS emissions - 2015-2050

2%

4%

8%

24%

29%

33%

0 50 100 150 200 250 300 350

Agriculture

Othertransformation

Buildings

Transport

Power

Industry

GtCO2

© OECD/IEA 2015

Residual industry emissions shares under 2DS in 2050

Chemicals & petrochemicals

CementOther industries

Iron & steel

Aluminum 4%

Pulp & paper 2%

31%20%

18%

201510,364 Mt CO2

20506,721 Mt CO2

25%

© OECD/IEA 2015

Direct CO2 emissions by region in 2DS

Source: Energy Technology Perspectives, OECD/IEA, Paris.

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2013 2015 2020 2025 2030 2035 2040 2045 2050

Dire

ct C

O2

emis

sion

s (M

t CO

2)

OECD

Other non-OECD

India

China

In 2013 OECD made up 38% of total emissions

In 2050 OCED makes up 23% of emissions

© OECD/IEA 2015

Act 4:The decarbonization

challenge in the power sector

© OECD/IEA 2015

CO2 energy emissions:power dominates sectoral shares

© OECD/IEA 2015

0

2,000

4,000

6,000

8,000

10,000

12,000

2015 2020 2025 2030 2035 2040 2045 2050

TWh

Global Coal Power Generation (without CCS) – 2DS

RoWOECDASEANIndiaChina

Coal ‘High efficient-low emissions’?

© OECD/IEA 2015ETP 2014, 2015

0

100

200

300

400

500

600

700

800

900

1000

2015 2020 2025 2030 2035 2040 2045 2050

gCO

2/kW

h

CO2 intensityin 2DS

Subcritical

Supercritical

Ultra-supercritical

IGCC

Ultra-supercritical+post combcapture

Coal: ‘High efficient-low emissions’?

We will need CCS to make coal “low-carbon’

© OECD/IEA 2015ETP 2016

Coal: total generation (unabated and abated – with CCS) in the 2DS

© OECD/IEA 2015ETP 2014, 2015

0

1,000

2,000

3,000

4,000

5,000

6,000

2015 2020 2025 2030 2035 2040 2045 2050

TWh

Unabated Global Gas Power Generation – 2DS

RoW

OECD

ASEAN

India

China

Gas: a transition or a destination?

© OECD/IEA 2015ETP 2014, 2015

0

100

200

300

400

500

600

2015 2020 2025 2030 2035 2040 2045 2050

gCO

2/kW

h

Gas turbine

Combined-cycle

NGCC+postcom capture

CO2 intensityin 2DS

Gas: a transition or a destination?

© OECD/IEA 2015

Act 5:RE and EE – two key

solutions

© OECD/IEA 2015

0

10

20

30

40

50

60

2011 2020 2030 2040 2050

Nuclear 8%

Renewables 30%


CCS 13%


Gt CO2



ETP 2014, 2015

© OECD/IEA 2015

0

10

20

30

40

50

60

2011 2020 2030 2040 2050

Renewables 30%

Gt CO2


ETP 2014, 2015

Renewables are key

© OECD/IEA 2015

Renewable Energy deployment prospects

With recent policy changes, 35% of gap between main and accelerated case is bridged

World renewable power annual capacity additions, main vs. accelerated case

020

4060

80100

120140

160180

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

G W

United States Japan EU-28 Other OECD India China Brazil Other non-OECD

Historical

MTRMR 2015-Main case October 2015Post- COP21 March 2016

Accelerated (~2DS)

RM5

RM5 The animation and color coding of the figure doesnt work right now properly! Unfortunately I dont quite see how the right version looks like. MALISCHEK Raimund, IEA/STO/ETP/EST, 9/1/2016

© OECD/IEA 2015

Recent announced long-term contract prices for new renewable power to be commissioned over 2016-2019

Wind and Solar PV prices declining

Onshore wind Utility-scale solar PV

ChileUSD 65-68/MWh

BrazilUSD 81/MWh

United StatesUSD 65-70/MWh

PeruUSD 49/MWh

IndiaUSD 67-94/MWh

United Arab EmiratesUSD 58/MWh

South AfricaUSD 65/MWh

United StatesUSD 47/MWh

BrazilUSD 49/MWh

PeruUSD 38/MWh

South AfricaUSD 51/MWh

AustraliaUSD 69/MWh

TurkeyUSD 73/MWh

ChinaUSD 80–91/MWh

GermanyUSD 67-100/MWh

EgyptUSD 41-50/MWh

JordanUSD 61-77/MWh

UruguayUSD 90/MWh

GermanyUSD 87 /MWh

CanadaUSD 66/MWh

This map is without prejudice to the status or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area

MoroccoUSD 30-35/MWh

Best results occur where price competition, long-term contracts and good resource availability are combined

Note: Values reported in nominal USD includes preferred bidders, PPAs or FITs. US values are calculated excluding tax credits. Delivery date and costs may be different than those reported at the time of the auction.

© OECD/IEA 2015

0

10

20

30

40

50

60

2011 2020 2030 2040 2050

Nuclear 8%

Renewables 30%


CCS 13%


Gt CO2



ETP 2014, 2015

© OECD/IEA 2015

0

10

20

30

40

50

60

2011 2020 2030 2040 2050


Gt CO2



ETP 2014, 2015

Energy efficiency is the most important driver to decarbonize

© OECD/IEA 2015

Global Cumulative Investment in the New Policies and 450 Scenarios, 2014-2035

Spending on RE is $4 trillion and on EE is $6 trillion higher in the 450 (2DS) scenario

10 20 30 40 50 60Trillion dollars (2012)

22 6 11450 Scenario

26 7 7New Policies Scenario

Fossil fuels Power T&D Low-carbon

14

8

Energy Efficiency

WEO 2013 Special Report

More investment in energy efficiency

© OECD/IEA 2015

Demand and emissions are linked

Source: WEO

© OECD/IEA 2015

Demand-side drivers: EE and structural change

Source: WEO

Analysis in upcoming publication: Energy, Climate Change and Environment: 2016 Insights

© OECD/IEA 2015

Act 6:Carbon pricing in

IEA Scenarios

© OECD/IEA 2015

Source: Energy Technology Perspectives, 2015

ETP CO2 price assumptions

© OECD/IEA 2015

WEO CO2 price assumptions ($2014 per tonne)

Region Sectors 2020 2030 2040

Current PoliciesScenario

European Union Power, industry, and aviation 20 30 40

Korea Power and industry 20 30 40

New Policies Scenario


Chile Power 6 12 20


China Power and industry 10 23 35

South Africa Power and industry 7 15 24

450 Scenario

United States and Canada

Power and industry 20 100 140


Japan Power and industry 20 100 140


Australia and New Zealand


China, Russia, Brazil, and South Africa


Source: World Energy Outlook 2015

© OECD/IEA 2015

Act 7:Reversing emissions

‘Lock-in’ :facing up to the challenge

of fossil fuel facilities

© OECD/IEA 2015

Power generation

Industry

Transport

Other

Room to manoeuvre

5

10

15

20

25

30

2011 2015 2020 2025 2030 2035

Gt

2 °C trajectory

Lock-in of existinginfrastructure

35

Room to manoeuvre

‘Lock-In’ of 2oC Emissions

Source: WEO 2011

© OECD/IEA 2015

Power generation

Industry

Transport

Other

5

10

15

20

25

30

2011 2015 2020 2025 2030 2035

Gt

2 °C trajectory

Lock-in of existinginfrastructure

2017

Planned fossil fuel infrastructure through 2017 will generate all energy emissions under 2DS through 2035

35

Source: WEO 2011

‘Lock-In’ of 2oC Emissions

Room to manoeuvre

© OECD/IEA 2015

Looking simply at clean energy side of the equation is inadequate given ‘lock-in'

Need to address ‘incumbent’ (existing and imminent) fossil fuel facilities – reversing ‘lock-in’

New clean energy vs. fossil fuels

© OECD/IEA 2015

Three basic types of context:

Existing coal for existing cleaner (e.g., OECD)

Existing coal replaced by new cleaner (e.g., China)

New fossil in favor of new low carbon (e.g. Indonesia)

‘Un-locking’ while meeting current/future energy demand

© OECD/IEA 2015

Source: Bloomberg LP data (2016), IEA analysis (2016)Notes: Hard coal and gas plant efficiency of 32% and 60%, respectively, for low range. Hard coal and gas plant efficiency of 44% and 32%, respectively, for high range.

Marginal cost economics of coal to gas switching compared with the prevailing EU carbon price

Unlocking emissions from existing coal plants through fuel switching

© OECD/IEA 2015

CO2 prices needed to make a new gas, solar PV and onshore wind plant competitive with an existing unabated coal plant in 2020 (7% discount rate)

CO2 price required to make a new gas plant compete with an existing unabated coal plant (USD/tCO2)

CO2 price required to make a new solar PV plant compete with an existing unabated coal plant (USD/tCO2)

CO2 price required to make a new onshore wind plant compete with an existing unabated coal plant (USD/tCO2)

United States $40 $50 $10

Germany $150 $130 $80

China $80 $40 $30

Japan $160 $230 $160

Source: IEA (2015), Project Costs of Generating Electricity: 2015 Edition, OECD/IEA, Paris.

Unlocking emissions from existing coal plants through new build

© OECD/IEA 2015

CO2 prices needed to a new make gas, solar PV and onshore wind plant competitive with a new unabated coal plant in 2020 (7% discount rate)

CO2 price required tomake a new gas plantcompete with a newcoal plant (USD/tCO2)

CO2 price required tomake a new solar PVplant compete with anew coal plant(USD/tCO2)

CO2 price required tomake a new onshorewind plant competewith a new coal plant(USD/tCO2)

United States 0 10 0Germany 100 80 50China 60 30 30Japan 100 180 110

Source: IEA (2015), Project Costs of Generating Electricity: 2015 Edition, OECD/IEA, Paris.

Locking-out emissions from new coal plants through new build

© OECD/IEA 2015

Market mechanisms ETS Carbon taxing

Mandates – portfolio prescriptions /restrictions

Policy directives (e.g. to state-owned enterprises)

Influencing relative pricing

Possible Policy tools to unlock:

Policies to reverse ‘lock-in’

© OECD/IEA 2015

Shifting emissions patterns …

Cumulative energy-related CO2 emissions by region –projection in ‘BAU’

2015-2040

1890-2014

100

200

300

400

500

UnitedStates

European ChinaUnion

Russia Japan India Africa

Gt

Source: based on NPS

© OECD/IEA 2015Source: based on World Energy Outlook 2014

Growing weight of developing countries in global energy demand

Over 95% of the projected growth in energy demand between now and 2035 happens outside the OECD (NPS)

© OECD/IEA 2015

0

10

20

30

40

50

60

1990 2000 2010 2020 2030 2040 2050

GtC

O2

Other OECD 9%

United States 13%

European Union 7%

Other non-OECD 15%

Other emergingeconomies 14%India 13%

China 29%

OECD and non-OECD action for a low-emissions future in 2DS

© OECD/IEA 2015

Non-OECD key to deployment of clean energy technologies in the 2DS

High deployment of low-carbon technologies in emerging economies needed to keep pace with projected near-term energy demand growth.

Power sector technology deployment rates in the 2DS

© OECD/IEA 2015

CO2 emissions per capita

Source: Track the energy transition (2015)

0

2

4

6

8

10

12

14

16

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012

tCO

2/ca

pita

OECD Americas

OECD Asia Oceania

OECD Europe

China

India

Africa

© OECD/IEA 2015

GDP per Capita, 2013

$-

$5,000.00

$10,000.00

$15,000.00

$20,000.00

$25,000.00

$30,000.00

$35,000.00

$40,000.00

$45,000.00

$50,000.00

US

2005

PPP

Global Average

GDP/capita in Non-OECD:starting low with lots of room to grow

© OECD/IEA 2015

State-owned enterprises: not just the what and how, but the who

25

11

68

0

5

10

15

20

25

30

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

5 000

Power Iron & Steel Cement Oil & Gas

Select SOEs

MtC

O2

Other

US

Mexico

Russia

India

China

# Companies(right axis)

Selected 50 SOEs emit about 4.4GT CO2-e

© OECD/IEA 2015

‘Top 10’ energy GHG emitting ‘countries’

Source: IEA 2013 energy combustion

Selected 50 SOEs would, by themselves, constitute the third largest emitting country

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

10000

China USA EU28 India RussianFederation

Japan Germany Korea Canada IslamicRep. of Iran

Saudi Arabia Select 50 SOEs

Emis

sion

s (M

t CO

2)

© OECD/IEA 2015

SOEs own a large share of zero-carbon power

Ownership of ‘zero-carbon’ generation capacity 1 980 GW (hydropower, other utility-scale renewables and nuclear)

Ownership of fossil fuel generation capacity 3 702 GW

State-owned42%

Private49%

Other9%

State-owned60%

Private34%

Other 6%

© OECD/IEA 2015

Private Shareholders

Energy Companies

Government Shareholder

Energy Companies

Provincial Shareholders

Energy Companies

Economic development

Ancillary activities

Social development

Access

Profit-generation, with constraints

Pricing drivers (carbon price)

Public shareholder power

Management control

Funds provider

Pricing drivers

Staff incentives

Central/Regional/Local Gov interplay

Profit-maximization for shareholder equity

SOEs are different from ‘traditional’ private sector companies

© OECD/IEA 2015

Conclusions

Paris Agreement sets strong platform for action, but with increased ambitions

IEA adjusting modeling to match new climate goals Need to expand efforts – not only on clean, but also

on incumbent high-carbon Need to expand approaches: SOEs require adapted

tools; not just about the what and the how, but also the who

Continued ability of energy to support economic and social development is key

energy and climate: from paris to marrakesh and beyond · energy and climate: from paris to...

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