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CLOSE THIS BOOKWorld Energy Assessment - Energy and the Challenge of Sustainability (UNDESA - UNDP - WEA - WEC, 2000, 517 p.)
Overview - Energy and the challenge of sustainability
VIEW THE DOCUMENTIntroduction
VIEW THE DOCUMENTPart I: Energy and major global issues
VIEW THE DOCUMENTPart II: Energy resources and technological options
VIEW THE DOCUMENTPart III: Are sustainable futures possible?
VIEW THE DOCUMENTPart IV: Where do we go from here?

World Energy Assessment - Energy and the Challenge of Sustainability (UNDESA - UNDP - WEA - WEC, 2000, 517 p.)

Overview - Energy and the challenge of sustainability

Introduction

The World Energy Assessment provides analytical background and scientific information for decision-makers at all levels. It describes energy's fundamental relationship to sustainable development and analyses how energy can serve as an instrument to reach that goal. This overview synthesises the key findings of the report, which is divided into four parts.

Part 1 (chapters 1-4) begins with an introduction to energy, especially its relationship to economic development. It then considers the linkages between the present energy system and major global challenges, including poverty alleviation, health, environmental protection, energy security, and the improvement of women's lives. The chapters find that although energy is critical to economic growth and human development, affordable commercial energy is beyond the reach of one-third of humanity, and many countries and individuals are vulnerable to disruptions in energy supply. Further, energy production and use have negative impacts at the local, regional, and global levels that threaten human health and the long-term ecological balance.

Part 2 (chapters 5-8) examines the energy resources and technological options available to meet the challenges identified in part 1. It concludes that physical resources are plentiful enough to supply the world's energy needs through the 21st century and beyond, but that their use may be constrained by environmental and other concerns. Options to address these concerns - through greater energy efficiency, renewables, and next-generation technologies - are then analysed. The analysis indicates that the technical and economic potential of energy efficiency measures are under-realised, and that a larger contribution of renewables to world energy consumption is already economically viable. Over the longer term, a variety of new renewable and advanced energy technologies may be able to provide substantial amounts of energy safely, at affordable costs and with near-zero emissions.

Part 3 (chapters 9-10) synthesises and integrates the material presented in the earlier chapters by considering whether sustainable futures - which simultaneously address the issues raised in part 1 using the options identified in part 2 - are possible. As a way of answering that question, chapter 9 examines three scenarios to explore how the future might unfold using different policy approaches and technical developments. The analysis shows that a reference scenario based on current trends does not meet several criteria of sustainability. Two other scenarios, particularly one that is ecologically driven, are able to incorporate more characteristics of sustainable development. Chapter 10 examines the challenge of bringing affordable energy to rural areas of developing countries. It presents approaches to widening access to liquid and gaseous fuels for cooking and heating and to electricity for meeting basic needs and stimulating income-generating activities.

Part 4 (chapters 11-12) analyses policy issues and options that could shift current unsustainable practices in the direction of sustainable development (as called for by every major United Nations conference of the 1990s), using energy as an instrument to reach that goal. Creating energy systems that support sustainable development will require policies that take advantage of the market to promote higher energy efficiency, increased use of renewables, and the development and diffusion of cleaner, next-generation energy. Given proper signals, the market could deliver much of what is needed. But because market forces alone are unlikely to meet the energy needs of poor people, or to adequately protect the environment, sustainable development demands frameworks (including consistent policy measures and transparent regulatory regimes) to address these issues.

One way of looking at human development is in terms of the choices and opportunities available to individuals. Energy can dramatically widen these choices. Simply harnessing oxen, for example, multiplied the power available to a human being by a factor of 10. The invention of the vertical waterwheel increased productivity by another factor of 6; the steam engine increased it by yet another order of magnitude. The use of motor vehicles greatly reduced journey times and expanded human ability to transport goods to markets.

Today the ready availability of plentiful, affordable energy allows many people to enjoy unprecedented comfort, mobility, and productivity. In industrialised countries people use more than 100 times as much energy, on a per capita basis, as humans did before they learned to exploit the energy potential of fire.1

Although energy fuels economic growth, and is therefore a key concern for all countries, access to and use of energy vary widely among them, as well as between the rich and poor within each country. In fact, 2 billion people - one-third of the world's population - rely almost completely on traditional energy sources and so are not able to take advantage of the opportunities made possible by modern forms of energy (World Bank, 1996; WEC-FAO, 1999; UNDP, 1997).2 Moreover, most current energy generation and use are accompanied by environmental impacts at local, regional, and global levels that threaten human well-being now and well into the future.

In Agenda 21 the United Nations and its member states have strongly endorsed the goal of sustainable development, which implies meeting the needs of the present without compromising the ability of future generations to meet their needs (WCED, 1987, p. 8).3 The importance of energy as a tool for meeting this goal was acknowledged at every major United Nations conference in the 1990s, starting with the Rio Earth Summit (UN Conference on Environment and Development) in 1992.4 But current energy systems, as analysed in this report and summarised here, are not addressing the basic needs of all people, and the continuation of business-as-usual practices may compromise the prospects of future generations.

Energy produced and used in ways that support human development over the long term, in all its social, economic, and environmental dimensions, is what is meant in this report by the term sustainable energy. In other words, this term does not refer simply to a continuing supply of energy, but to the production and use of energy resources in ways that promote - or at least are compatible with - long-term human well-being and ecological balance.

Energy produced and used in ways that
support human development in all its
social, economic and environmental
dimensions is what is meant by
sustainable energy.

Many current energy practices do not fit this definition. As noted in Agenda 21, "Much of the world's energy...is currently produced and consumed in ways that could not be sustained if technology were to remain constant and if overall quantities were to increase substantially" (UN, 1992, chapter 9.9).5 Energy's link to global warming through greenhouse gas emissions (most of which are produced by fossil fuel consumption) was addressed by the United Nations Framework Convention on Climate Change, adopted in 1992. And in 1997 a United Nations General Assembly Special Session identified energy and transport issues as being central to achieving a sustainable future, and set key objectives in these areas.

The energy industry also recognises the need to address energy issues within a broad context. For example, the conclusions and recommendations of the 17th Congress of the World Energy Council discuss the need to provide commercial energy to those without it, and to address energy-linked environmental impacts at all levels (WEC, 1998).6

Although there seem to be no physical limits to the world's energy supply for at least the next 50 years, today's energy system is unsustainable because of equity issues as well as environmental, economic, and geopolitical concerns that have implications far into the future. Aspects of the unsustainability of the current system include:

· Modern fuels and electricity are not universally accessible, an inequity that has moral, political, and practical dimensions in a world that is becoming increasingly interconnected.

· The current energy system is not sufficiently reliable or affordable to support widespread economic growth. The productivity of one-third of the world's people is compromised by lack of access to commercial energy, and perhaps another third suffer economic hardship and insecurity due to unreliable energy supplies.

· Negative local, regional, and global environmental impacts of energy production and use threaten the health and well-being of current and future generations.

More specific - and more quantifiable - elements of sustainability are identified below in the section on energy scenarios. Before looking into the future, however, some basic features of energy and its relationship to economic development are described, and the linkages between energy and major global challenges are analysed.

Part I: Energy and major global issues

Part 1 analyses the linkages between energy and the economy, social and health issues, environmental protection, and security, and describes aspects of energy use that are incompatible with the goal of sustainable development. It shows that:

· Affordable, modern energy supplies - including gaseous and liquid fuels, electricity, and more efficient end-use technologies - are not accessible by 2 billion people. This constrains their opportunities for economic development and improved living standards. Women and children are disproportionately burdened by a dependence on traditional fuels.

· Wide disparities in access to affordable commercial energy and energy services are inequitable, run counter to the concept of human development, and threaten social stability.

· Unreliable supplies are a hardship and economic burden for a large portion of the world's population. In addition, dependence on imported fuels leaves many countries vulnerable to disruptions in supply.

· Human health is threatened by high levels of pollution resulting from energy use at the household, community, and regional levels.

· The environmental impacts of a host of energy-linked emissions - including suspended fine particles and precursors of acid deposition - contribute to air pollution and ecosystem degradation.

· Emissions of anthropogenic greenhouse gases, mostly from the production and use of energy, are altering the atmosphere in ways that may already be having a discernible influence on the global climate.

Finding ways to expand energy services while simultaneously addressing the environmental impacts associated with energy use represents a critical challenge to humanity. The resources and options available to meet this challenge - energy efficiency, renewables, and advanced energy technologies - are analysed in the next sections.

An introduction to energy

An energy system is made up of an energy supply sector and energy end-use technologies. The object of the energy system is to deliver to consumers the benefits that energy offers. The term energy services is used to describe these benefits, which in households include illumination, cooked food, comfortable indoor temperatures, refrigeration, and transportation. Energy services are also required for virtually every commercial and industrial activity. For instance, heating and cooling are needed for many industrial processes, motive power is needed for agriculture, and electricity is needed for telecommunications and electronics.

The energy chain that delivers these services begins with the collection or extraction of primary energy that, in one or several steps, may be converted into energy carriers, such as electricity or diesel oil, that are suitable for end uses. Energy end-use equipment - stoves, light bulbs, vehicles, machinery - converts final energy into useful energy, which provides the desired benefits: the energy services. An example of an energy chain - beginning with coal extraction from a mine (primary energy) and ending with produced steel as an energy service - is shown in figure 1.

Energy services are the result of a combination of various technologies, infrastructure (capital), labour (know-how), materials, and primary energy. Each of these inputs carries a price tag, and they are partly substitutable for one another. From the consumer's perspective, the important issues are the economic value or utility derived from the services. Consumers are often unaware of the upstream activities required to produce energy services.

Per capita consumption of primary energy in the United States was 330 gigajoules in 1995, more than eight times as much as used by an average Sub-Saharan African (who used 40 gigajoules that year when both commercial and traditional energy are included). Many people in the least developed countries use much less. Figure 2 shows commercial and non-commercial energy consumption in various regions.

In most low-income developing countries, a small, affluent minority uses various forms of commercial energy in much the same way as do most people in the industrialised world. But most people in low-income developing countries rely on traditional, non-commercial sources of energy using inefficient technologies such as unventilated stoves or open fires. Traditional energy sources are generally not reflected in energy statistics. Analysis based on per capita consumption of commercially distributed energy resources is common because the data are much easier to collect. The resulting analysis, however, does not accurately reflect the world's energy situation, which is why estimates of non-commercial energy use are included in table 1 and figure 2. Though less well documented, non-commercial energy is very significant globally, and is used far more widely than commercial energy in rural areas of many developing countries, particularly the least developed countries.

The rate of global commercial energy consumption is thousands of times smaller than the energy flows from the sun to the earth. Primary energy consumption is reliant on fossil fuels (oil, natural gas, and coal), which represent nearly 80 percent of the total fuel mix (table 1). Nuclear power contributes slightly more than 6 percent, and hydropower and new renewables each contribute about 2 percent.

World-wide, traditional (often non-commercial) energy accounts for about 10 percent of the total fuel mix. But the distribution is uneven: non-commercial energy accounts for perhaps 2 percent of energy consumption in industrialised countries, but an average of 30 percent in developing ones. In some low-income developing countries, traditional biomass accounts for 90 percent or more of total energy consumption.

If the global growth rate of about 2 percent a year of primary energy use continues, it will mean a doubling of energy consumption by 2035 relative to 1998, and a tripling by 2055. In the past 30 years developing countries' commercial energy use has increased at a rate three and a half times that of OECD countries, the result of life-style changes made possible by rising personal incomes, coupled with higher population growth rates and a shift from traditional to commercial energy. On a per capita basis, however, the increase in total primary energy use has not resulted in any notable way in more equitable access to energy services between industrialised and developing countries. Clearly, more energy will be needed to fuel global economic growth and to deliver opportunities to the billions of people in developing countries who do not have access to adequate energy services.

However, the amount of additional energy required to provide the energy services needed in the future will depend on the efficiencies with which the energy is produced, delivered, and used. Energy efficiency improvements could help reduce financial investments in new energy supply systems, as they have over the past 200 years. The degree of interdependence between economic activity and energy use is neither static nor uniform across regions. Energy intensity (the ratio of energy demand to GDP) often depends on a country's stage of development. In OECD countries, which enjoy abundant energy services, growth in energy demand is less tightly linked to economic productivity than it was in the past (figure 3).

The trend towards a reduction in energy intensity as economic development proceeds can be discerned over a long historical period, as shown in figure 4, which includes the developing country examples of China and India. A detailed, long-term analysis of energy intensity for a number of countries reveals a common pattern of energy use driven by the following factors:

· The shift from non-commercial to commercial forms of energy, industrialisation, and motorisation initially increase the commercial energy-GDP ratio. (In the 1990s this ratio increased in transition in economies, mainly because of slower economic growth.)

· As industrialisation proceeds and incomes rise, saturation effects, as well as an expansion of the service sector (which is less energy intensive), decrease the ratio of commercial energy to GDP after it reaches a peak. This maximum energy intensity has been passed by many countries, but not by low-income developing countries.

· As a result of world-wide technology transfer and diffusion, energy efficiency improvements can be the main limiting factor in the growth of energy demand arising from increasing populations and growing production and incomes.

· The more efficient use of materials in better-quality, well-designed, miniaturised products, the recycling of energy-intensive materials, and the saturation of bulk markets for basic materials in industrialised countries contribute to additional decreases in energy intensity.

· In developing countries, technological leapfrogging to the use of highly efficient appliances, machinery, processes, vehicles, and transportation systems offers considerable potential for energy efficiency improvements.

These drivers are leading to a common pattern of energy use per unit of GDP in industrialised and developing countries.

Energy prices influence consumer choices and behaviour and can affect economic development and growth. High energy prices can lead to increasing import bills, with adverse consequences for business, employment, and social welfare. High energy prices can also stimulate exploration and development of additional resources, create a pull for innovation, and provide incentives for efficiency improvements.

Although some impacts of energy prices are fairly steady, others are more transient. For example, different absolute price levels have had little effect on economic development in OECD European countries or Japan relative to the much lower energy prices in the United States and some developing countries. What affected economic growth in all energy-importing countries were the price hikes of the 1970s. It appears that economies are more sensitive to price changes than to prices per se.


FIGURE 1. AN EXAMPLE OF THE ENERGY CHAIN FROM EXTRACTION TO SERVICES

Source: Adapted from chapter 6.

TABLE 1. WORLD PRIMARY ENERGY CONSUMPTION, 1998

Source

Primary energy (exajoules)

Primary energy (109 tonnes of oil equivalent)

Percentage of total

Static reserve-production ratio (years)a

Static resource base - production ratio (years)b

Dynamic resource base - production ratio (years)c

Fossil fuels

320

7.63

79.6





Oil

142

3.39

35.3

45

~ 200

95


Natural gas

85

2.02

21.1

69

~ 400

230


Coal

93

2.22

23.1

452

~ 1,500

1,000

Renewables

56

1.33

13.9





Large hydro

9

0.21

2.2

Renewable


Traditional biomass

38

0.91

9.5

Renewable


'New' renewablesd

9

0.21

2.2

Renewable

Nuclear

26

0.62

6.5





Nucleare

26

0.62

6.5

50f

>> 300f


Total

402

9.58

100.0




a. Based on constant production and static reserves. b. Includes both conventional and unconventional reserves and resources. c. Data refer to the energy use of a business-as-usual scenario - that is, production is dynamic and a function of demand (see chapter 9). Thus these ratios are subject to change under different scenarios. d. Includes modern biomass, small hydropower, geothermal energy, wind energy, solar energy, and marine energy (see chapter 7). Modern biomass accounts for about 7 exajoules, and 2 exajoules comes from all other renewables. e. Converted from electricity produced to fuels consumed assuming a 33 percent thermal efficiency of power plants. f. Based on once-through uranium fuel cycles excluding thorium and low-concentration uranium from seawater. The uranium resource base is effectively 60 times larger if fast breeder reactors are used.

Source: Chapter 5.


FIGURE 2. PRIMARY PER CAPITA ENERGY CONSUMPTION (COMMERCIAL AND NON-COMMERCIAL) BY REGION, 1995

Source: World Bank, 1997; WRI, 1998.

Capital investment is a prerequisite for energy development. Energy system development and structural change are the results of investment in plants, equipment, and energy system infrastructure. Difficulties in attracting capital for energy investment may impede economic development, especially in the least developed countries. Scarce public funds, especially in developing countries, are needed for many projects - ranging from rural development, education, and health care to energy supplies. Because energy supply, more than any other alternative, is often seen as more readily capable of generating early revenues, energy investments are increasingly viewed as a private sector affair. Yet private funds are not flowing into many developing countries for a variety of reasons, especially risks to investors.

Foreign direct investment approached $400 billion in 1997 - up from $50 billion in 1984 - and represents an increasing share of international investment flows.7 Foreign direct investment is generally commercially motivated, and investors not only expect to recover the initial capital but also count on competitive returns. These outcomes cannot be guaranteed in developing countries with potentially fragile governments or without free markets. In fact, very little foreign direct investment reaches the least developed countries.

Unlike foreign direct investment, official development assistance has remained flat relative to gross world product. In 1997 it totalled $56 billion, or 0.25 percent of the GDP of OECD countries - which have agreed in principle to a target of 0.7 percent of GDP.8 Against this backdrop, financing is inadequate for energy projects in developing countries. Until the economic risks to foreign investors can be managed (for example, through clear and stable rules for energy and financial markets, steady revenue generation through bill collection, and profit transfers), most developing countries may have to continue to finance their energy development from domestic savings.

Although energy investment as a share of total investment varies greatly among countries and at different stages of economic development, on balance, 1.0-1.5 percent of GDP is invested in the energy sector. This ratio is expected to remain relatively stable. Based on these rules of thumb, current energy supply sector investment totals $290-430 billion a year. But this does not include investment in end-use energy efficiency.

Energy and social issues

Energy use is closely linked to a range of social issues, including poverty alleviation, population growth, urbanisation, and a lack of opportunities for women. Although these issues affect energy demand, the relationship is two-way: the quality and quantity of energy services, and how they are achieved, have an effect on social issues as well.

Poverty is the overriding social consideration for developing countries. Some 1.3 billion people in the developing world live on less than $1 a day. Income measurement alone, however, does not fully capture the misery and the absence of choice that poverty represents. The energy consumption patterns of poor people - especially their reliance on traditional fuels in rural areas - tend to keep them impoverished.

World-wide, 2 billion people are without access to electricity and an equal number continue to use traditional solid fuels for cooking. As shown in the next section, cooking with poorly vented stoves has significant health impacts. In addition, hundreds of millions of people - mainly women and children - spend several hours a day in the drudgery of gathering firewood and carrying water, often from considerable distances, for household needs. Because of these demands on their time and energy, women and children often miss out on opportunities for education and other productive activities.

Lack of electricity usually means inadequate illumination and few labour-saving appliances, as well as limited telecommunications and possibilities for commercial enterprise. Greater access to electricity and modern fuels and stoves for cooking can enable people to enjoy both short-term and self-reinforcing, long-term advances in their quality of life. Table 2 summarises some of the specific improvements that may result.

Limited income may force households to use traditional fuels and inefficient technologies. Figure 5 shows the average primary energy demand for various fuels as a function of income levels in Brazil. For low-income households, firewood is the dominant fuel. At higher incomes, wood is replaced by commercial fuels and electricity, which offer much greater convenience, energy efficiency, and cleanliness. Because convenient, affordable energy can contribute to a household's productivity and income-generating potential, its availability can become a lever for breaking out of a cycle of poverty.

World-wide, 2 billion people are
without access to electricity and
an equal number continue to
use traditional solid fuels
for cooking.

Although population growth tends to increase energy demand, it is less widely understood that the availability of adequate energy services can lower birth rates. Adequate energy services can shift the relative benefits and costs of fertility towards a lower number of desired births in a family. An acceleration of the demographic transition to low mortality and low fertility (as has occurred in industrialised countries) depends on crucial developmental tasks, including improving the local environment, educating women, and ameliorating the extreme poverty that may make child labour a necessity. All these tasks have links to the availability of low-cost energy services.

The growing concentration of people in urban centres is another key demographic issue linked to energy. Although the general trend towards urbanisation has many components and may be inevitable, providing more options to rural residents through energy interventions could potentially slow migration and reduce pressure on rapidly growing cities. Although the negative externalities associated with energy use in urban areas can be severe, various strategies can mitigate their effects and promote energy conservation. Taking energy into consideration in land-use planning, and in designing physical infrastructure, construction standards, and transportation systems, can reduce some of the growth in energy demand that accompanies rapid urbanisation.

Transportation systems may be especially important in this regard, given the rapid growth in the number of motor vehicles world-wide. Since about 1970 the global fleet has been increasing by 16 million vehicles a year, and more than 1 billion cars will likely be on the road by 2020. Most of these cars will be driven in the cities of the developing world, where they will create more congestion, aggravate urban pollution, and undermine human health - even with optimistic projections about efficiency improvements and alternative fuels.


FIGURE 3. GDP AND PRIMARY ENERGY CONSUMPTION IN OECD COUNTRIES, 1971-96

Source: IEA, 1999.


FIGURE 4. PRIMARY ENERGY INTENSITIES IN VARIOUS COUNTRIES, 1850-2000

Two energy intensity paths are shown for Japan and the United States, one based on total energy consumption from all sources and the other only on commercial energy. The paths converge where traditional sources have been replaced by commercial energy. Because of distortions from market fluctuations, energy intensity paths for China and India are calculated in two ways: using total and commercial energy divided by GDP measured at market exchange rates (as with Japan and the United States), and divided by GDP measured at purchasing power parities (PPP). Energy intensities for the former Soviet Union, derived using both market exchange rates and PPP, are data points only.

Source: Nakicenovic, Grbler, and McDonald, 1998.

In developing countries, addressing the energy needs of the poor, who represent a large majority, will require major structural changes. On the other hand, in industrialised countries adequate access to affordable energy is problematic only for a minority, and thus more amenable to social policy solutions. Throughout the world, however, poor households pay a larger fraction of their incomes for energy than do the rich, and so are vulnerable to rapid increases in the price of energy. Increases in the price of oil in the winter of 1999/2000, for example, posed a hardship for many people, even in some industrialised countries.

Eradicating poverty is a long-term goal of development. But long before that goal is achieved, convenient and affordable energy services could dramatically improve living standards and offer more opportunities to people. Today's inequity is unsustainable. Satisfying the energy needs of the poor with modern technologies has the potential to improve standards of living and health, and to create new jobs and business opportunities. Allowing one-third of the world's population to continue to endure the constraints associated with traditional energy is unacceptable from a humanitarian and moral standpoint. Making commercial energy more widely available makes sense from a political perspective as well. The wave of democratisation sweeping the world is putting political power in the hands of the economically disenfranchised. Societies with grave inequalities and disparities tend to be unstable, and large populations below the poverty line are fertile ground for social upheavals.

TABLE 2. ENERGY-RELATED OPTIONS TO ADDRESS SOCIAL ISSUES

Social challenge

Energy linkages and interventions

Alleviating poverty in developing countries

· Improve health and increase productivity by providing universal access to adequate energy services - particularly for cooking, lighting, and transport - through affordable, high-quality, safe, and environmentally acceptable energy carriers and end-use devices.
· Make commercial energy available to increase income-generating opportunities.

Increasing opportunities for women

· Encourage the use of improved stoves and liquid or gaseous fuels to reduce indoor air pollution and improve women's health.
· Support the use of affordable commercial energy to minimise arduous and time-consuming physical labour at home and at work.
· Use women's managerial and entrepreneurial skills to develop, run, and profit from decentralised energy systems.

Speeding the demographic transition (to low mortality and low fertility)

· Reduce child mortality by introducing cleaner fuels and cooking devices and providing safe, potable water.
· Use energy initiatives to shift the relative benefits and costs of fertility - for example, adequate energy services can reduce the need for children's physical labour for household chores.
· Influence attitudes about family size and opportunities for women through communications made accessible through modern energy carriers.

Mitigating the problems associated with rapid urbanisation

· Reduce the 'push' factor in rural-urban migration by improving the energy services in rural areas.
· Exploit the advantages of high-density settlements through land planning.
· Provide universal access to affordable multi-modal transport services and public transportation.
· Take advantage of new technologies to avoid energy-intensive, environmentally unsound development paths.

Source: Adapted from chapter 2.

Energy, the environment, and health

The environmental impacts of energy use are not new. For centuries, wood burning has contributed to the deforestation of many areas. Even in the early stages of industrialisation, local air, water, and land pollution reached high levels. What is relatively new is an acknowledgement of energy linkages to regional and global environmental problems and of their implications. Although energy's potential for enhancing human well-being is unquestionable, conventional energy9 production and consumption are closely linked to environmental degradation. This degradation threatens human health and quality of life, and affects ecological balance and biological diversity.

The environment-energy linkage is illustrated in table 3, which shows the share of toxic emissions and other pollutants attributable to the energy supply. The human disruption index is the ratio of the human-generated flow of a given pollutant (such as sulphur dioxide) to the natural, or baseline, flow. Thus, in the case of sulphur, the index is 2.7, which means that human-generated emissions of 84 million tonnes a year are 2.7 times the natural baseline flow of 31 million tonnes a year. The table indicates that, together with other human activities, energy systems significantly affect the global cycling of important chemicals. Although by itself the index does not demonstrate that these emissions translate into negative impacts, their magnitudes provide warning that such impacts could be considerable. Some impacts, as discussed below, are already significant.


FIGURE 5. AVERAGE ENERGY DEMAND BY INCOME SEGMENT IN BRAZIL, 1988

Source: De Almeida and de Oliveira, 1995.

Just in the course of the past 100 years, during which the world's population more than tripled, human environmental insults10 grew from local perturbations to global disruptions. The human disruptions of the 20th century - driven by more than 20-fold growth in the use of fossil fuels, and augmented by a tripling in the use of traditional energy forms such as biomass - have amounted to no less than the emergence of civilisation as a global ecological and geochemical force. In other words, the accelerating impact of human life is altering the world at the global level.

TABLE 3. ENVIRONMENTAL INSULTS DUE TO HUMAN ACTIVITIES BY SECTOR, MID-1990s

Insult

Natural base- line (tonnes per year)

Human disruption indexa

Share of human disruption caused by




Commercial energy supply

Traditional energy supply

Agriculture

Manufacturing, other

Lead emissions to atmosphereb

12,000

18

41% (fossil fuel burning, including additives)

Negligible

Negligible

59% (metal processing, manufacturing, refuse burning)

Oil added to oceans

200,000

10

44% (petroleum harvesting, processing, and transport)

Negligible

Negligible

56% (disposal of oil wastes, including motor oil changes)

Cadmium emissions to atmosphere

1,400

5.4

13% (fossil fuel burning)

5% (traditional fuel burning)

12% (agricultural burning)

70% (metals processing, manufacturing, refuse burning)

Sulphur emissions to atmosphere

31 million (sulphur)

2.7

85% (fossil fuel burning)

0.5% (traditional fuel burning)

1% (agricultural burning)

13% (smelting, refuse burning)

Methane flow to atmosphere

160 million

2.3

18% (fossil fuel harvesting and processing)

5% (traditional fuel burning)

65% (rice paddies, domestic animals, land clearing)

12% (landfills)

Nitrogen fixation (as nitrogen oxide and ammonium)c

140 million (nitrogen)

1.5

30% (fossil fuel burning)

2% (traditional fuel burning)

67% (fertiliser, agricultural burning)

1% (refuse burning)

Mercury emissions to atmosphere

2,500

1.4

20% (fossil fuel burning)

1% (traditional fuel burning)

2% (agricultural burning)

77% (metals processing, manufacturing, refuse burning)

Nitrous oxide flows to atmosphere

33 million

0.5

12% (fossil fuel burning)

8% (traditional fuel burning)

80% (fertiliser, land clearing, aquifer disruption)

Negligible

Particulate emissions to atmosphere

3,100 milliond

0.12

35% (fossil fuel burning)

10% (traditional fuel burning)

40% (agricultural burning)

15% (smelting, non-agricultural land clearing, refuse)

Non-methane hydrocarbon emissions to atmosphere

1,000 million

0.12

35% (fossil fuel processing and burning)

5% (traditional fuel burning)

40% (agricultural burning)

20% (non-agricultural land clearing, refuse burning)

Carbon dioxide flows to atmosphere

150 billion (carbon)

0.05e

75% (fossil fuel burning)

3% (net deforestation for fuelwood)

15% (net deforestation for land clearing)

7% (net deforestation for lumber, cement manufacturing)

Note: The magnitude of the insult is only one factor determining the size of the actual environmental impact. a. The human disruption index is the ratio of human-generated flow to the natural (baseline) flow. b. The automotive portion of human-induced lead emissions in this table is assumed to be 50 percent of global automotive emissions in the early 1990s. c. Calculated from total nitrogen fixation minus that from nitrous oxide. d. Dry mass. e. Although seemingly small, because of the long atmospheric lifetime and other characteristics of carbon dioxide, this slight imbalance in natural flows is causing a 0.4 percent annual increase in the global atmospheric concentration of carbon dioxide.

Source: Chapter 3.

At every level (local, regional, global), the environmental consequences of current patterns of energy generation and use make up a significant fraction of human impacts on the environment. At the household level, solid fuel use for cooking and heat has significant health impacts. Poor air quality - at the household, local, and regional levels - is associated with increased sickness and premature death. About 2 million premature deaths a year - disproportionately of women and children - are estimated to occur from exposure to indoor air pollution caused by burning solid fuels in poorly ventilated spaces. Particulate matter (which is both emitted directly and formed in the air as the result of the emissions of gaseous precursors in the form of oxides of sulphur and nitrogen) and hydrocarbons are growing concerns world-wide. They are especially troublesome in many parts of the developing world, where dirtier fuels predominate with little emissions abatement. No safe threshold level for exposure to small particulate matter has been established.

Fossil fuel combustion is problematic on several levels (although natural gas produces significantly fewer harmful emissions than do oil or coal). The main pollutants emitted in the combustion of fossil fuels are sulphur and nitrogen oxides, carbon monoxide, and suspended particulate matter. Ozone is formed in the troposphere from interactions among hydrocarbons, nitrogen oxides, and sunlight. Energy-related emissions from fossil fuel combustion, including in the transport sector, are major contributors to urban air pollution. Precursors of acid deposition from fuel combustion can be precipitated thousands of kilometres from their point of origin - often crossing national boundaries. The resulting acidification is causing significant damage to natural systems, crops, and human-made structures; and can, over time, alter the composition and function of entire ecosystems. In many regions acidification has diminished the productivity of forests, fisheries, and farmlands. Large hydropower projects often raise environmental issues related to flooding, whereas in the case of nuclear power, issues such as waste disposal raise concern.

Fossil fuel combustion produces more carbon dioxide (CO2) than any other human activity. This is the biggest source of the anthropogenic greenhouse gas emissions that are changing the composition of the atmosphere and could alter the global climate system, including the amount and pattern of rainfall. Achieving a stable atmospheric CO2 concentration at any level would require that CO2 emissions eventually be cut by more than half from current levels. Stabilising CO2 at close to the present concentration would require reducing emissions to half of current levels within the next few decades. Instead, CO2 emissions continue to increase. Current CO2 emission trends, if not controlled, will lead to more than a doubling of atmospheric concentrations before 2070, relative to pre-industrial levels. Changes have been observed in climate patterns that correspond to scientific projections based on increasing concentrations of greenhouse gases. The balance of evidence, according to the Intergovernmental Panel on Climate Change, suggests that there is already a discernible human influence on global climate.

Numerous energy
strategies could simultaneously
benefit the environment,
the economy and human
well-being.

Because, by definition, sustainable energy systems must support both human and ecosystem health over the long term, goals on tolerable emissions should look well into the future. They should also take into account the public's tendency to demand more health and environmental protection as prosperity increases.

Although the scope of environmental problems related to energy may seem overwhelming, numerous 'win-win' strategies could simultaneously benefit the environment (at several levels), the economy, and human well-being. For example, the replacement of solid fuels for cooking with gaseous or liquid fuels could have significant environmental benefits at the local, community, regional, and global scales, with attendant benefits for health and productivity.

Energy security

Energy security means the availability of energy at all times in various forms, in sufficient quantities, and at affordable prices. These conditions must prevail over the long term if energy is to contribute to sustainable development.

Attention to energy security is critical because of the uneven distribution both of the fossil fuel resources on which most countries currently rely and of capacity to develop other resources. The energy supply could become more vulnerable over the near term due to the growing global reliance on imported oil. For example, the oil dependence (net imports as a share of total demand) of OECD countries is expected to grow from 56 percent in 1996 to 72 percent in 2010.

In addition, although energy security has been adequate for the past 20 years, and has in fact improved, the potential for conflict, sabotage, disruption of trade, and reduction in strategic reserves cannot be dismissed. These potential threats point to the necessity of strengthening global as well as regional and national energy security. Options to enhance energy security include:

· Avoiding excessive dependence on imports by increasing end-use efficiency and encouraging greater reliance on local resources (particularly those whose development will have other positive externalities such as job creation, capacity building, and pollution reduction), provided these do not involve disproportionate costs or waste scarce resources.

· Diversifying supply (including both suppliers and energy forms).

· Fostering greater political stability through international cooperation and long-term agreements among energy-importing countries and between importing and exporting countries. Examples might include wider adoption - and more effective implementation of - the Energy Charter Treaty,11 as well as increased sharing of infrastructure for transporting natural gas.

· Encouraging technology transfers (for example, through joint ventures and public-private partnerships) to developing countries so they can develop local resources and improve energy efficiencies.

· Increasing national and regional strategic reserves of crude oil and oil products through increased investment and advanced exploration technologies.

Although markets play a prominent role in securing energy supply in OECD countries, their role is modest in some developing countries and absent in others. Where markets do not flourish, the security of supply and services depends almost solely on government action and multinational companies, which may not serve the best interests of consumers. In such situations, energy security can be enhanced by encouraging the development of frameworks that allow markets to contribute to the allocation of energy resources.

Because of small fuel requirements, nuclear power contributes to the diversity of supply and to supply security. But public concerns about economic necessity, reactor safety, and radioactive waste transport and disposal - as well as weapons proliferation - have curbed nuclear energy development in many countries. A nuclear accident anywhere in the world or a proliferation incident linked to nuclear power could further reduce support for nuclear power programmes, with long-term loss in the diversity of the energy supply mix. But if generally accepted responses could be found to the above concerns, nuclear energy could contribute significantly to secure electricity generation in many parts of the world.

Individuals and commercial enterprises are also vulnerable to disruptions of energy supply. Although the trend towards the liberalisation of energy markets generally has enhanced energy security by offering more options, supplies, and competition, it has also raised concerns that those who are impoverished will be left out of the process, resulting in continued energy insecurity for some individuals.

Part II: Energy resources and technological options

Physical resources and technical opportunities are available - or could become available - to meet the challenge of sustainable development. Without policy changes, cost differentials may favour conventional fuels for years to come. Options for using energy in ways that support sustainable development, which requires addressing environmental concerns, include:

· More efficient use of energy, especially at the point of end use in buildings, electric appliances, vehicles, and production processes.

· Increased reliance on renewable energy sources.

· Accelerated development and deployment of new energy technologies, particularly next-generation fossil fuel technologies that produce near-zero harmful emissions - but also nuclear technologies, if the problems associated with nuclear energy can be resolved.

All three options have considerable potential, but realising this potential will require removing obstacles to wider diffusion, developing market signals that reflect environmental costs, and encouraging technological innovation.

Energy resources

Careful analysis of the long-term availability of energy resources, starting with conventional and unconventional oil and gas, indicates that these resources could last another 50-100 years - and possibly much longer - with known exploration and extraction technologies and anticipated technical progress in upstream operations. Coal resources and nuclear materials are so abundant that they could, respectively, last for centuries or millennia. Moreover, although fossil fuel prices may rise slowly over time, the large, cost-driven increases in energy prices projected in the 1970s and 1980s will not take place in the foreseeable future.

As evidenced by rising oil prices in the winter of 1999/2000, however, prices are subject to volatility. This may occur, for example, if cartels set prices independent of production costs. Some fluctuations in prices can also be expected, especially during the transition to a large-scale use of unconventional oil and gas resources, because the timing of investments in upstream production capacities may not correspond with demand. Other cost-pushing factors could arise from the environmentally more challenging extraction of unconventional oil resources.

Renewable resources are more evenly distributed than fossil and nuclear resources, and energy flows from renewable resources are more than three orders of magnitude higher than current global energy use. But the economic potential of renewables is affected by many constraints - including competing land uses, the amount and timing of solar irradiation, environmental concerns, and wind patterns.

Although there are no real limitations on future energy availability from a resource point of view, the existence of resources is of little relevance without consideration of how these can contribute to the supply of (downstream) energy services. Rather, the key concerns are: Can technologies to extract, harvest, and convert these vast energy stocks and flows be developed in time? Will these processes have adverse implications? Will the energy services eventually generated from these resources be affordable? Historical evidence suggests that these concerns may be at least partly offset by technological progress, but that such progress needs to be encouraged - by regulations to improve market performance, temporary subsidies, tax incentives, or other mechanisms - if it is to occur in a timely fashion.

Energy end-use efficiency

The quadrupling of oil prices in the 1970s, the growing awareness of energy-related pollution, and the possibility of climate change have all contributed to a re-evaluation of energy use. The result has been an improvement in the efficiency with which energy is used in industry and power generation as well as in lighting, household appliances, transportation, and heating and cooling of buildings. This more efficient use of energy is a major factor contributing to the improvements in energy intensity that have occurred historically in almost all OECD countries, and more recently in many transition economies, as well as in some in fast-growing developing countries such as Brazil and China.

Today the global energy efficiency of converting primary energy to useful energy is about one-third (see figure 1). In other words, two-thirds of primary energy is dissipated in the conversion processes, mostly as low-temperature heat. Further significant losses occur when the useful energy delivers the energy service. Numerous and varied economic opportunities exist for energy efficiency improvements, particularly in this final conversion step from useful energy to energy services. Taking advantage of these opportunities, which have received relatively little attention, has the largest potential for cost-effective efficiency improvements. It would mean less costly energy services and lower energy-related pollution and emissions.

Over the next 20 years the amount of primary energy required for a given level of energy services could be cost-effectively reduced by 25-35 percent in industrialised countries (the higher figure being achievable by more effective policies). These reductions are mostly in the conversion step of useful energy to energy services in the residential, industrial, transportation, public, and commercial sectors. Reductions of more than 40 percent are cost-effectively achievable in transition economies. And in most developing countries - which tend to have high economic growth and old capital and vehicle stocks - the cost-effective improvement potentials range from 30 to more than 45 percent, relative to energy efficiencies achieved with existing capital stock.12

The improvements of about 2 percent a year implied by the above figures could be enhanced by structural changes in industrialised and transition economies, by shifts to less energy-intensive industrial production, and by saturation effects in the residential and transportation sectors. These combined effects, made up by efficiency improvements and structural changes, could lead to decreases in energy intensity of 2.5 percent a year. How much of this potential will be realised depends on the effectiveness of policy frameworks and measures, changes in attitudes and behaviour, and the level of entrepreneurial activity in energy conservation.

The next few decades will likely see new processes, motor systems, materials, vehicles, and buildings designed to reduce useful energy demand. Because the demand for cars is expected to grow rapidly in the developing world, gaining greater efficiencies in this area will be very important. In addition, rapidly industrialising countries could greatly profit from the introduction of radically new and more efficient technologies in their energy-intensive basic materials processing. Because these countries are still building their physical infrastructure, they have a growing demand for basic materials. This opens a window of opportunity to innovate and improve efficiencies of production, particularly in countries undergoing market reform. The opportunities are larger at the point of new investment, relative to retrofitting.

Over the next 20 years the amount of
primary energy required for a given
level of energy services could be
cost-effectively reduced by 25-35
percent in industrialised
countries.

Over the long term, additional and dramatic gains in efficiency are possible at all stages of energy conversion, particularly from useful energy to energy services. Analysis shows that current technologies are not close to reaching theoretical limits, and that improvements of an order of magnitude for the whole energy system may eventually be achieved.13

For a number of reasons the technical and economic potentials of energy efficiency, as well as its positive impact on sustainable development, have traditionally been under-realised. Achieving higher end-use efficiency involves a great variety of technical options and players. Because it is a decentralised, dispersed activity, it is a difficult issue for which to organise support. And because it has little visibility, energy efficiency is not generally a popular cause for politicians, the media, or individuals looking for recognition and acknowledgement. In addition, significant barriers - primarily market imperfections that could be overcome by targeted policy instruments - prevent the realisation of greater end-use efficiencies. These barriers include:

· Lack of adequate information, technical knowledge, and training.

· Uncertainties about the performance of investments in new and energy-efficient technologies.

· Lack of adequate capital or financing possibilities.

· High initial and perceived costs of more efficient technologies.

· High transaction costs (for searching and assessing information and for training).

· Lack of incentives for careful maintenance.

· The differential benefits to the user relative to the investor (for example, when energy bills are paid by the renter rather than the property owner).

· External costs of energy use, not included in energy prices.

· Patterns and habits of consumers, operators, and decision-makers, which may be influenced by many factors, including ideas of social prestige and professional norms.

Realising cost-effective energy efficiency potentials will be beneficial not only for individual energy consumers, but also for the economy as a whole. For example, saved energy costs can be used to produce energy-saving domestic goods and services. And as cost-effective energy improvements are realised, additional profitable opportunities for improvement will continue to open up as a result of research and development, learning curves, and economies of scale. That means that continual cost-effective energy efficiency improvements can be expected.

Energy efficiency policies that use direct or indirect price mechanisms (such as the removal of subsidies and the incorporation of externalities) are effective in lowering consumption trends in price-sensitive sectors and applications. But even without changing the overall price environment, energy efficiency policies should be pursued to address market failures. For example, efficiency standards, appliance and product labelling, voluntary agreements, and professional training or contracting can increase GDP growth by improving environmental and economic performance, using a given quantity of energy. Legal standards; well-informed consumers, planners, and decision-makers; motivated operators; and an adequate payments system for energy are central to the successful implementation of energy efficiency improvements.14

Renewable energy technologies

Renewable energy sources (including biomass, solar, wind, geothermal, and hydropower) that use indigenous resources have the potential to provide energy services with zero or almost zero emissions of both air pollutants and greenhouse gases. Currently, renewable energy sources supply 14 percent of the total world energy demand. The supply is dominated by traditional biomass used for cooking and heating, especially in rural areas of developing countries. Large-scale hydropower supplies 20 percent of global electricity. Its scope for expansion is limited in the industrialised world, where it has nearly reached its economic capacity. In the developing world, considerable potential still exists, but large hydropower projects may face financial, environmental, and social constraints.

Altogether, new renewable energy sources contributed 2 percent of the world's energy consumption in 1998, including 7 exajoules from modern biomass and 2 exajoules for all other renewables (geothermal, wind, solar, and marine energy, and small-scale hydropower). Solar photovoltaics and grid-connected wind installed capacities are growing at a rate of 30 percent a year. Even so, it will likely be decades before these new renewables add up to a major fraction of total energy consumption, because they currently represent such a small percentage.

Substantial price reductions in the past few decades have made some renewables competitive with fossil fuels in certain applications in growing markets. Modern, distributed forms of biomass seem particularly promising for their potential to provide rural areas with clean forms of energy based on the use of biomass resources that have traditionally been used in inefficient, polluting ways. Biomass can be economically produced with minimal or even positive environmental impacts through perennial crops. Wind power in coastal and other windy regions is promising as well.

Unlike hydropower and conventional thermal power sources, wind and solar thermal or electric sources are intermittent. Nevertheless, they can be important energy sources in rural areas where grid extension is expensive. They can also contribute to grid-connected electricity supplies in appropriate hybrid configurations. Intermittent renewables can reliably provide 10-30 percent of total electricity supplies if operated in conjunction with hydropower - or fuel-based power generation. Emerging storage possibilities and new strategies for operating grids offer promise that the role of intermittent technologies could be considerably larger.

Renewable energy sources have
the potential to provide energy
services with zero or almost zero
emissions of both air
pollutants and green-
house gases.

Significant barriers, which could be overcome by appropriate frameworks and policies, stand in the way of the accelerated development of renewable technologies. These barriers include economic risks, regulatory obstacles, limited availability of products, information and technology gaps, and lack of investment. The greatest challenge is financial, even though costs have come down significantly over the past several decades. Table 4 summarises the status of various renewable technologies, and also provides information on trends in cost and capacity.

Many renewable technologies, because they are small in scale and modular, are good candidates for continued cost-cutting as a result of field experience. The cost reductions of manufactured goods, which are typically rapid at first and then taper off as the industry matures, are called experience curves. These curves resulted in industry-wide cost declines of about 20 percent for each cumulative doubling of production for solar photovoltaics, wind generators, and gas turbines - due to learning effects, marginal technological improvements, and economies of scale (figure 6). Similar declines are expected for other small-scale renewables.

A rapid expansion of renewable-based energy systems will require actions to stimulate the market in this direction. This expansion can be achieved by finding ways to drive down the relative cost of renewables in their early stages of development and commercialisation, while still taking advantage of the economic efficiencies of the marketplace. Pricing based on the full costs of conventional energy sources (including phasing out subsidies and internalising externalities) will make renewables more competitive. Because internalising external costs may be controversial for some time, 'green' pricing of electricity and heat (which lets consumers pay more for environmentally benign energy supplies if they choose) may be an immediate option in industrialised countries.

Advanced energy technologies

Fossil energy

Sustainability goals indicate the importance of evolving fossil energy technologies towards the long-term goal of near-zero air pollutant and greenhouse gas emissions without complicated end-of-pipe control technologies. Near-term technologies and strategies should support this long-term goal.

The technological revolution under way in power generation, where advanced systems are replacing steam turbine technologies, does support this long-term goal. Natural-gas-fired combined cycles offering low costs, high efficiency, and low environmental impacts are being chosen wherever natural gas is readily available - in some countries even displacing large new hydropower projects. Cogeneration is more cost-effective and can play a much larger role in the energy economy - if based on gas turbines and combined cycles rather than on steam turbines.

Reciprocating engines and emerging microturbine and fuel cell technologies are also strong candidates for cogeneration at smaller scales, including commercial and apartment buildings. Coal gasification by partial oxidation with oxygen to produce syngas (mainly carbon monoxide and hydrogen) makes it possible to provide electricity through integrated gasifier combined cycle (IGCC) plants with air pollutant emissions nearly as low as for natural gas combined cycles. Today power from IGCC cogeneration plants is often competitive with power from coal steam-electric plants in either cogeneration or power-only configurations.

Although synthetic liquid fuels made in single-product facilities are not competitive, superclean syngas-derived synthetic fuels (such as synthetic middle distillates and dimethyl ether) produced in polygeneration facilities that make several products simultaneously may soon be. Syngas can be produced from natural gas by steam reforming or other means or from coal by gasification using oxygen, as noted. Expanding markets for clean synthetic fuels are likely to result from toughening air pollution regulations. Synthetic fuels produced through polygeneration will be based on natural gas if it is readily available. Synthetic middle distillates so produced are likely to be competitive where low-cost natural gas is available (as at remote developing country sites); the technology might facilitate exploitation of relatively small remote natural gas fields.

In natural-gas-poor, coal-rich regions, polygeneration based on coal gasification is promising. Such systems might include production of extra syngas for distribution by pipelines to small-scale cogeneration systems in factories and buildings - making possible clean and efficient use of coal at small as well as large scales. Rapidly growing polygeneration activity is already under way in several countries based on the gasification of low-quality petroleum feedstocks - activity that is helping to pave the way for coal-based systems.

TABLE 4. CURRENT STATUS AND POTENTIAL FUTURE COSTS OF RENEWABLE ENERGY TECHNOLOGIES

Technology

Increase in installed capacity in past five years (percent a year)

Operating capacity, end 1998

Capacity factor (percent)

Energy production, 1998

Turnkey investment costs (U.S. dollars per kilowatt)

Current energy cost

Potential future energy cost

Biomass energy









Electricity

» 3

40 Gwe

25-80

160 TWh (e)

900-3000

5-15 ¢/kWh

4-10 ¢/kWh


Heata

» 3

> 200 GWth

25-80

>700 TWh (th)

250-750

1-5 ¢/kWh

1-5 ¢/kWh


Ethanol

» 3

18 billion litres


420 PJ


8-25 $/GJ

6-10 $/GJ

Wind electricity

» 30

10 Gwe

20-30

18 TWh (e)

1100-1700

5-13 ¢/kWh

3-10 ¢/kWh

Solar photovoltaic electricity

» 30

500 MWe

8-20

0.5 TWh (e)

5000-10000

25-125 ¢/kWh

5 or 6-25

Solar thermal electricity

» 5

400 MWe

20-35

1 TWh (e)

3000-4000

12-18 ¢/kWh

4-10 ¢/kWh

Low-temperature solar heat

» 8

18 GWth
(30 million m2)

8-20

14 TWh (th)

500-1700

3-20 ¢/kWh

2 or 3-10

Hydroelectricity









Large

» 2

640 GWe

35-60

2510 TWh (e)

1000-3500

2-8 ¢/kWh

2-8 ¢/kWh


Small

» 3

23 Gwe

20-70

90 TWh (e)

1200-3000

4-10 ¢/kWh

3-10 ¢/kWh

Geothermal energy









Electricity

» 4

8 GWe

45-90

46 TWh (e)

800-3000

2-10 ¢/kWh

1 or 2-8 ¢/kWh


Heat

» 6

11 GWth

20-70

40 TWh (th)

200-2000

0.5-5¢/kWh

0.5-5 ¢/kWh

Marine energy









Tidal

0

300 MWe

20-30

0.6 TWh (e)

1700-2500

8-15 ¢/kWh

8-15 ¢/kWh


Wave

-

exp. phase

20-35

Unclear

1500-3000

8-20 ¢/kWh

Unclear


Current

-

exp. phase

25-35

Unclear

2000-3000

8-15 ¢/kWh

5-7 ¢/kWh


OTEC

-

exp. phase

70-80

Unclear

Unclear

Unclear

Unclear

Note: The cost of grid-supplied electricity in urban areas ranges from 2-3 (c/kWh (off-peak) to 15-25c/kWh) (peak). See chapter 11. a. Heat embodied in steam (or hot water in district heating), often produced by combined heat and power systems using forest residues, black liquor, or bagasse.

Source: Chapter 7.

Barriers to widespread deployment of advanced cogeneration and polygeneration systems are mainly institutional. Most systems will produce far more electricity than can be consumed on-site, so achieving favourable economics depends on being able to sell co-product electricity at competitive prices into electric grids. Utility policies have often made doing so difficult, but under the competitive market conditions towards which electric systems are evolving in many regions, cogeneration and polygeneration systems will often fare well.


FIGURE 6. EXPERIENCE CURVES FOR PHOTOVOLTAICS, WINDMILLS, AND GAS TURBINES IN JAPAN AND THE UNITED STATES

Technology performance and costs improve with experience, and there is a pattern to such improvements common to many technologies. The specific shape depends on the technology, but the persistent characteristic of diminishing costs is termed the 'learning' or 'experience' curve. The curve is likely to fall more sharply as technologies first seek a market niche, then full commercialisation, because lower costs become increasingly important for wider success.

Source: Nakicenovic, Grbler, and McDonald, 1998.

The near-term pursuit of a syngas-based strategy could pave the way for widespread use of hydrogen (H2) as an energy carrier, because for decades the cheapest way to make H2 will be from fossil-fuel-derived syngas. The successful development of fuel cells would facilitate the introduction of H2 for energy. Fuel cells are getting intense attention, especially for transportation, because they offer high efficiency and near-zero air pollutant emissions. Automakers are racing to develop fuel cell cars, with market entry targeted for 2004-10. The fuel cell car will compete for the role of 'car of the future' with the hybrid internal combustion engine/battery powered car already being introduced into the market.

Syngas-based power and H2 production strategies also facilitate separation and storage of CO2 from fossil energy systems, making it possible to obtain useful energy with near-zero emissions of green-house gases without large increases in energy costs. Recent research suggests that the global capacity for secure disposal of CO2 in geological reservoirs might be adequate to dispose of CO2 from fossil fuel use for hundreds of years, although more research is needed to be sure about this.

Other advanced technologies (ultrasupercritical steam plants, pressurised fluidised-bed combustion, coal IGCC based on partial oxidation in air for power generation, direct coal liquefaction for synthetic fuels production) offer benefits relative to conventional technologies. But unlike syngas-based technologies, such options in the near term would not offer clear paths to the long-term goal of near-zero emissions without significant increases in costs for energy services.

Nuclear energy

World-wide, nuclear energy accounts for 6 percent of energy and 16 percent of electricity. Although nuclear energy dominates electricity generation in some countries, its initial promise has not been widely realised. Most analysts project that nuclear energy's contribution to global energy will not grow - and might decline during the initial decades of the 21st century. Nuclear power is more costly than originally projected, competition from alternative technologies is increasing, and there has been a loss of public confidence because of concerns related to safety, radioactive waste management, and potential nuclear weapons proliferation.

But because nuclear power can provide energy without emitting conventional air pollutants and greenhouse gases, it is worth exploring if advanced technologies could offer simultaneously lower costs, boost public confidence in the safety of nuclear reactors, assure that peaceful nuclear programs are not used for military purposes, and demonstrate effective nuclear waste management practices. Unlike Chernobyl-type reactors, the light water reactors (LWRs) that dominate nuclear power globally have a good safety record - although this record has been achieved at considerable cost to minimise the risk of accidents.

If wise decisions
are not made during the next
few decades, certain development
opportunities might not
be achievable.

The potential linkage between peaceful and military uses of nuclear energy was recognised at the dawn of the nuclear age. Efforts to create a non-proliferation regime through the Nuclear Non-Proliferation Treaty and a series of regional treaties, controls on commerce in nuclear materials and goods and services that might be used to further military ambitions, and safeguards applied to nuclear materials in peaceful nuclear applications have been largely successful in separating peaceful and military uses. If there is to be an energy future in which nuclear power eventually contributes much more than at present, stronger institutional measures will be needed to maintain this separation. These measures should be complemented by technological advances aimed at limiting opportunities to acquire nuclear weapons under the guise of peaceful nuclear energy applications and to steal weapons-usable nuclear materials.

Reactor development activity for the near term has involved both evolutionary LWRs and new concepts. Reactor vendors now offer several evolutionary LWRs with improved safety features and standardised designs, for which there can be a high degree of confidence that performance and cost targets will be met. Another evolutionary activity involves modifying LWRs to make them more proliferation resistant through a denatured uranium or thorium fuel cycle. One concept being revisited, the pebble bed modular reactor, offers the potential for a high degree of inherent safety without the need for complicated, capital-intensive safety controls. A pebble bed modular reactor could also be operated on a proliferation resistant denatured uranium - or thorium fuel cycle.

Access to low-cost uranium supplies could constrain nuclear power development based on LWRs. The plutonium breeder reactor, which requires reprocessing spent fuel to recover plutonium for recycling in fresh fuel, was once thought to be a viable option for addressing this challenge. But electricity costs for breeders would probably be higher than for LWRs, at least until late in the 21st century, and preventing proliferation is much more challenging with reprocessing and plutonium recycling than with LWRs operated on once-through fuel cycles.

Other long-term options for addressing the nuclear resource constraint are alternative breeder concepts - including particle-accelerator-driven reactors, uranium from seawater, and thermonuclear fusion. The prospective costs, safety, and proliferation resistance features of such alternative breeder concepts are uncertain, and the concepts would take decades to develop. Recent research suggests it might be feasible, at relatively low cost, to extract uranium from seawater, where its concentration is low but total quantities are vast. If the technology could be deployed at globally significant scales, it might be feasible to avoid making major commitments to nuclear fuel reprocessing and plutonium recycling. Fusion could provide an almost inexhaustible energy supply, but it will probably not be commercially available before 2050.

Radioactive waste by-products of nuclear energy must be isolated so that they can never return to the human environment in concentrations that could cause significant harm. Although the safety of long-term waste disposal has not been proven, the technical community is confident that this objective can be realised - largely because of the small volumes of wastes involved. But in most countries there is no social consensus on the goals and standards for radioactive waste disposal and on strategies (both interim and long-term) for implementing them. The issues involved are only partly technical. The current social stalemate on waste disposal not only clouds prospects for nuclear expansion, it also has made spent fuel reprocessing a de facto interim nuclear waste management strategy in some countries. This has happened even though fuel reprocessing does not offer economic gains and does not solve the waste disposal problem - it merely buys time and is creating large inventories of plutonium that must be disposed of with low proliferation risk.

Part III: Are sustainable futures possible?

Analysis using energy scenarios indicates that it is possible to simultaneously address the sustainable development objectives set forth in part 1 using the resources and technical options presented in part 2. The scenarios exercise and subsequent sections suggest that:

· Continuing along the current path of energy system development is not compatible with sustainable development objectives.

· Realising sustainable futures will require much greater reliance on some combination of higher energy efficiencies, renewable resources, and advanced energy technologies.

· A prerequisite for achieving an energy future compatible with sustainable development objectives is finding ways to accelerate progress for new technologies along the energy innovation chain, from research and development to demonstration, deployment, and diffusion.


· Providing energy services to rural areas poses particular challenges. But it also offers considerable opportunity for improving the lives of billions of people within a relatively short period. Promising approaches include decentralised solutions, appropriate technologies, innovative credit arrangements, and local involvement in decision-making.

Energy scenarios

Energy scenarios provide a framework for exploring future energy perspectives, including various combinations of technology options and their implications. Many scenarios in the literature illustrate the degree to which energy system developments will affect the global issues analysed in part 1. Some describe energy futures that are compatible with sustainable development goals. Key developments in sustainable scenarios include increases in energy efficiencies and the adoption of advanced energy supply technologies. Sustainable development scenarios are characterised by low environmental impacts (local, regional, and global) and equitable allocation of resources and wealth.

The three cases of alternative global developments presented in chapter 9 suggest how the future could unfold in terms of economic growth, population trends, and energy use. The challenge is formidable. For example, by 2100, 6-8 billion additional people - significantly more than today's world population - will need access to affordable, reliable, flexible, and convenient energy services.15 All three cases achieve this through different energy system developments, but with varying degrees of success in terms of sustainability (table 5).

A middle-course, or reference, case (B) includes one scenario and is based on the general direction in which the world is now headed. This scenario assumes the continuation of an intermediate level of economic growth and modest technological improvement, and it leads to adverse environmental impacts, including regional acidification and climate change. Although this middle-course scenario represents a substantial improvement relative to the current situation, it falls short of achieving a transition towards sustainable development. The other two scenarios and their variants lead to higher economic development with vigorous improvement of energy technologies. They both - and especially the ecologically driven case (C) - achieve, to a much higher degree, a transition towards sustainable development (table 6).

For instance, one of the three high-growth case A scenarios (A3) achieves some goals of sustainable development, primarily through rapid economic growth and a shift towards environmentally more benign energy technologies and options. In this scenario, higher levels of affluence result from impressive technological development, including a significant role for clean fossil, renewable, and nuclear energy. Dedicated decarbonisation of the energy system contributes to environmental sustainability. Two other variants of this high-growth case are also considered. Both lead to higher dependence on carbon-intensive fossil fuels, resulting in high energy-related emissions. Consequently, they are unsustainable from an environmental point of view.

A third case (C) includes two scenarios and is ecologically driven, with high growth in developing countries (towards being rich and 'green'). The difference between the two scenarios is that one, C1, assumes a global phase-out of nuclear energy by 2100, whereas the other, C2, does not. Both assume the introduction of carbon and energy taxes directed at promoting renewables and end-use efficiency improvements. The revenues from carbon and energy taxes are assumed to be used to enhance economic growth and promote renewables and end-use efficiency, rather than to reduce other taxes in industrialised regions.

TABLE 5. SUMMARY OF THREE ENERGY DEVELOPMENT CASES IN 2050 AND 2100 COMPARED WITH 1990



Case A
High growth

Case B
Middle growth

Case C
Ecologically driven

Population (billions)

1990

5.3

5.3

5.3


2050

10.1

10.1

10.1


2100

11.7

11.7

11.7

Gross world product (trillions of 1990 dollars)

1990

20

20

20


2050

100

75

75


2100

300

200

220

Gross world product (annual percentage change)

1990 - 2050

High

Medium

Medium


1990 - 2100

2.7

2.2

2.2



2.5

2.1

2.2

Primary energy intensity (megajoules per 1990 dollar of gross world product)

1990

19.0

19.0

19.0


2050

10.4

11.2

8.0


2100

6.1

7.3

4.0

Primary energy intensity improvement rate (annual percentage change)

1990 - 2050

Medium

Low

High


1990 - 2100

- 0.9

-0.8

- 1.4



- 1.0

-0.8

- 1.4

Primary energy consumption (exajoules)

1990

379

379

379


2050

1,041

837

601


2100

1,859

1,464

880

Cumulative primary energy consumption, 1990-2100 (thousands of exajoules)

Coal

8.9 - 30.7

17.5

7.1 - 7.2


Oil

27.6 - 15.7

15.3

10.9


Natural gas

18.4 - 28.7

15.8

12.2 - 12.9


Nuclear energy

6.2 - 11.2

10.5

2.1 - 6.2


Hydropower

3.7 - 4.2

3.6

3.6 - 4.0


Biomass

7.4 - 14.3

8.3

9.1 - 10.1


Solar energy

1.8 - 7.7

1.9

6.3 - 7.4


Other

3.0 - 4.7

4.3

1.4 - 2.2


Global total

94.0 - 94.9

77.2

56.9

Energy technology cost reductions (through learning)

Fossil

High

Medium

Low


Non-fossil

High

Medium

High

Energy technology diffusion rates

Fossil

High

Medium

Medium


Non-fossil

High

Medium

High

Environmental taxes (excluding carbon dioxide taxes)


No

No

Yes

Sulphur dioxide emissions (millions of tonnes of sulphur)

1990

58.6

58.6

58.6


2050

44.8 - 64.2

54.9

22.1


2100

9.3 - 55.4

58.3

7.1

Carbon dioxide emission constraints and taxes


No

No

Yes

Net carbon dioxide emissions (gigatonnes of carbon)

1990

6

6

6


2050

9 - 15

10

5


2100

6 - 20

11

2

Cumulative carbon dioxide emissions (gigatonnes of carbon)

1990 - 2100

910 - 1,450

1,000

540

Carbon dioxide concentrations (parts per million by volume)

1990

358

358

358


2050

460 - 510

470

430


2100

530 - 730

590

430

Carbon intensity (grams of carbon per 1990 dollar of gross world product)

1990

280

280

280


2050

90 - 140

130

70


2100

20 - 60

60

10

Investments in energy supply sector (trillions of 1990 dollars)

1990 - 2020

15.7

12.4

9.4


2020 - 50

24.7

22.3

14.1


2050 - 2100

93.7

82.3

43.3

Number of scenarios


3

1

2

The three cases unfold into six scenarios of energy system alternatives: three case A scenarios (A1, ample oil and gas; A2, return to coal; and A3, non-fossil future), a single case B scenario (middle course), and two case C scenarios (C1, new renewables; and C2, new renewables and new nuclear). Some of the scenario characteristics, such as cumulative energy consumption, cumulative carbon dioxide emissions, and decarbonisation, are shown as ranges for the three case A and two C scenarios.

Source: Nakicenovic, Grbler, and McDonald, 1998.


FIGURE 7. PRIMARY ENERGY SHARES, 1850-1990, AND IN SCENARIOS C1 AND C2 TO 2100

Source: Nakicenovic, Grbler, and McDonald, 1998.

Both case C scenarios assume decentralisation of energy systems and reliance on local solutions. They also require considerably lower supply-side investments than the others. They would, however, require substantial investments in the end-use sector, which is not captured in the scenarios. Ambitious policy measures control local and regional pollutants, and a global regime results in reduced greenhouse gas emissions. Of the three cases considered, case C is the most compatible with the aims of sustainable development, as analysed in part 1 (table 6). In scenario C1 this occurs through a diminishing contribution of coal and oil to the primary energy mix, with a large increase in the share of solar and biomass energy by 2100 (figure 7).

Also shown for illustrative purposes is the primary energy mix for scenario C2, in which nuclear energy could play a large role if the problems associated with it (cost, safety, waste disposal and weapons proliferation) can be adequately resolved.

The considerable differences in expected total energy consumption among the scenarios reflect different approaches to addressing the needs for energy services in the future, and they demonstrate clearly that policy matters (figure 8). Achieving the two scenarios with characteristics of sustainable development will require a substantial increase in private and public research, development, and deployment efforts to support new energy technologies. Otherwise, most clean fossil and renewable technologies, as well as many energy-efficient end-use technologies, may not reach competitiveness. (The mix of needed efforts may vary depending on the maturity of the specific technology.) Significant technological advances will be required, as will incremental improvements in conventional energy technologies.

In terms of their expected high growth in energy demand, developing countries are well-positioned to take advantage of innovations in energy technologies and policies that support them. In general, scenarios A3, C1, and C2 require significant policy and behavioural changes within the next several decades to achieve more sustainable development paths. Taken together, the outcomes of these changes, which are described in more detail in part 4, represent a clear departure from a business-as-usual approach.

Another crucial prerequisite for achieving sustainability in the scenarios is near-universal access to adequate, affordable energy services and more equitable allocation of resources. Finally, environmental protection - from indoor pollution to climate change - is an essential characteristic of sustainable development in these scenarios. The resolution of these future challenges offers a window of opportunity between now and 2020. The nature of the decisions made during this time will largely determine whether the evolution of the energy system is consistent with current practices (along the lines of the B scenario), or whether it achieves the transition towards more sustainable development paths (along the lines of the A3, C1, and C2 scenarios).

Because of the long lifetimes of power plants, refineries, steel plants, buildings, and other energy-related investments such as transportation infrastructure, there is not sufficient turnover of such facilities to reveal large differences among the alternative scenarios presented here before 2020. But the seeds of the post-2020 world will have been sown by then. Thus choices about the world's future energy systems are relatively wide open now. This window of opportunity is particularly significant where much infrastructure has yet to be installed, offering the possibility of a rapid introduction of new, environmentally sound technologies.

Once the infrastructure is in place, a phase of largely replacement investments begins. Changes can be made in this phase, but they take much longer to affect average system performance. If wise decisions are not made during the next few decades, we will be locked into those choices, and certain development opportunities might not be achievable. Thus the achievement of sustainable development demands a global perspective, a very long time horizon, and the timely introduction of policy measures.

Rural energy in developing countries

Between 1970 and 1990 about 800 million additional people were reached by rural electrification programmes. Some 500 million saw their lives improve substantially through the use of better methods for cooking and other rural energy tasks, particularly in China. Despite these enormous efforts to improve energy services to rural populations in the past 20-30 years, the unserved population has remained about the same in absolute numbers - 2 billion people.

An effective strategy
to address the energy needs
of the rural populations is
to promote the climbing of
the 'energy ladder'.

Although the unavailability of adequate energy services in rural areas is probably the most serious energy problem confronting humanity in the near future, rural energy remains low on the list of priorities of most government and corporate planners. And the increased demands of the more influential (and rapidly growing) urban population will make it more difficult to keep rural development on the agenda.

An effective strategy to address the energy needs of rural populations is to promote the climbing of the 'energy ladder'. This implies moving from simple biomass fuels (dung, crop residues, firewood) to the most convenient, efficient form of energy appropriate to the task at hand - usually liquid or gaseous fuels for cooking and heating and electricity for most other uses. Such climbing involves not only a shift to modern fuels but is often also complemented by the synergistic use of modern, more efficient end-use devices such as cooking stoves.

Climbing the energy ladder does not necessarily mean that all the rungs used in the past should be reclimbed. In the case of cooking, for example, users do not have to go from fuelwood to kerosene to liquefied petroleum gas (LPG) or electricity. What users should do - whenever possible - is leapfrog directly from fuelwood to the most efficient end-use technologies and the least polluting energy forms (including new renewables) available. Because of the emergence of new technologies, it is also possible to introduce new rungs on the energy ladder, and gain even greater efficiencies and environmental acceptability.

TABLE 6. CHARACTERISTICS OF SUSTAINABILITY IN THREE ENERGY DEVELOPMENT SCENARIOS IN 2050 AND 2100 COMPARED WITH 1990

Indicator of sustainability

1990

Scenario A3

Scenario B

Scenario C1

Eradicating poverty

Low

Very high

Medium

Very high

Reducing relative income gaps

Low

High

Medium

Very high

Providing universal access to energy

Low

Very high

High

Very high

Increasing affordability of energy

Low

High

Medium

Very high

Reducing adverse health impacts

Medium

Very high

High

Very high

Reducing air pollution

Medium

Very high

High

Very high

Limiting long-lived radionuclides

Medium

Very low

Very low

High

Limiting toxic materialsa

Medium

High

Low

High

Limiting GHG emissions

Low

High

Low

Very high

Raising indigenous energy use

Medium

High

Low

Very high

Improving supply efficiency

Medium

Very high

High

Very high

Increasing end-use efficiency

Low

High

Medium

Very high

Accelerating technology diffusion

Low

Very high

Medium

Medium

a. For this row only, the qualitative indicators are not based on quantitative features of the scenarios, but were specified by the authors on the basis of additional assumptions.

Source: Chapter 9.

The energy-related sustainable development goals for rural areas are to:

· Satisfy basic human needs by providing all households with minimally adequate amounts of electricity for uses such as lighting and fans, in addition to cleaner cooking fuels. Specifically, all households should move away from unprocessed solid fuels (biomass and coal) for cooking and heating to modern energy forms, which may potentially be derived from renewable sources (biomass and solar) or fossil fuels.

· Provide electricity that is sufficiently affordable to support industrial activity in rural areas, which can provide employment and help curb urban migration.


FIGURE 8. GLOBAL PRIMARY ENERGY REQUIREMENTS, 1850-1990, AND IN THREE CASES, 1990-2100

The figure also shows the wide range of future energy requirements for other scenarios in the literature. The vertical line that spans the scenario range in 1990 indicates the uncertainty across the literature of base-year energy requirements.

Source: Nakicenovic, Grbler, and McDonald, 1998; Morita and Lee, 1998; Nakicenovic, Victor, and Morita, 1998.

The current path of
energy development, and the rate
of change, are not compatible with
key elements of sustainable
development.

In many cases the rural poor are willing and able to pay for energy services if appropriate financing options are offered to help them meet high first costs. The economics of providing basic electricity to rural households should be evaluated according to the costs of supplying comparable energy services through less efficient carriers. In most cases home solar photovoltaic systems can provide energy services at a lower cost than the kerosene and batteries they replace and can be an economically viable source of rural household power, even at relatively low levels of service provision.

The availability of affordable and adequate energy services in rural areas could lead to significant improvements in living conditions and to the fulfilment of basic human needs over a relatively short time frame. The amount of energy needed to provide such services in rural areas is relatively small. Modern ways of using biomass more efficiently could go a long way towards achieving this objective. Experience has shown that to find the most viable and appropriate solutions to rural energy, the active participation of the people who will use it is a must.

The challenge is to find ways to make modern energy carriers affordable to satisfy the basic needs of all rural residents - which may, at least initially, require subsidies. The key is to introduce market efficiencies if possible to use the smallest subsidy needed to achieve social objectives. If a subsidy is required, it might be provided as an integral part of a new social contract, whereby energy providers serve rural energy needs while simultaneously, highly competitive conditions are created in the energy sector (a key element of energy reforms). One way to finance the subsidies that might be needed would be to complement the creation of competitive markets with the establishment of a public benefits fund generated by non-bypassable wire and pipe charges on electricity and on gas providers. Such funds have been adopted or are under consideration in several countries as a means of protecting public benefits under competitive market conditions. Other options include carefully designed economic incentives, perhaps using tax regimes.

Specifically, some of these revenues could be used to subsidise the very poorest households until they are able to work themselves out of poverty. This strategy could be made entirely consistent with a shift to greater reliance on market forces to efficiently allocate resources. If, for example, a rural energy concession was the preferred approach for bringing adequate energy services at a set price to a particular rural area, and if the concession was awarded competitively, market forces would be brought into play to find the least costly mix of energy technologies with the least amount of subsidy to satisfy the concessionaire's obligation to provide affordable energy services to all.

Part IV: Where do we go from here?

Part 4 identifies key strategies and policies for achieving both economic growth and sustainable human development. They include:

· Setting the right framework conditions - including continued market reforms, consistent regulations, and targeted policies - to encourage competition in energy markets, reduce the cost of energy services to end users, and protect important public benefits.

· Sending accurate price signals, including phasing out subsidies to conventional energy and internalising externalities.

· Removing obstacles or providing incentives, as needed, to encourage greater energy efficiency and the development and diffusion to wider markets of new sustainable energy technologies.

The challenge of sustainable energy will require a concerted effort from national governments, the energy community, civil society, the private sector, international organisations, and individuals. Whatever the difficulties of taking appropriate action, they are small relative to what is at stake. Because today's world is in a dynamic and critical period of economic, technological, demographic, and structural transition, and because energy systems take decades to change, the time to act is now.

Energy and economic prosperity

The demand of industrialised and transition economies for energy services is likely to grow, although increasing efficiency in conversion and end uses may result in a levelling off or even a reduction in the demand for primary energy. In developing countries, however, primary energy demand is expected to grow at about 2.5 percent a year as industrialisation and motorisation proceed and living standards improve.

Meeting these projected demands will be essential if developing countries are to achieve economic prosperity. It will require considerable investment - on the order of 2.0-2.5 percent of the GDP of developing countries over the next 20 years. This is close to historical norms and, with good financial and economic policies, should be affordable. In the past, energy investments in developing countries rested heavily - and unnecessarily - on government subsidies, and too little on the financial resources that would be generated by real cost-based pricing, regulatory policies, and efficient management.

In general, there is no reason the energy sector should not be financially self-sufficient in the following sense: appropriate pricing and regulatory policies would raise revenues to cover operating costs and generate returns on investment sufficient to attract large-scale private finance and investment. Indeed, one of the primary aims of market liberalisation and the new forms of regulation introduced in many countries in the 1990s was precisely this: to reduce the need for government subvention and to attract private capital and investment to the energy sector. The other aims were to encourage innovation, cost-effectiveness, and managerial efficiency.

But temporary government subsidies may be needed to help people who are excluded from the market by extreme poverty. Just as poor areas in today's industrialised countries benefited in the past from non-market energy policies, such options should be still available, when justified, in developing countries. Moreover, the poor may need to be shielded from economic hardships caused by trends over which they have no control. In some developing countries, for instance, the oil price increases of the 1970s and early 1980s contributed to large increases in external debt - up to 50 percent in some cases.16 The effects of that debt - impoverishment of the country and widespread unemployment - were particularly hard on the poor, even though their main source of fuel was and continues to be firewood rather than oil. The debt burden from the 1970s persists in many developing countries.

Although there seem to be no physical limitations on total energy resources, potentially severe problems are likely if appropriate economic, technological, and environmental policies are not developed in a timely manner. Rational energy pricing is part of what is needed, but so is a willingness to prompt markets to find technological solutions to problems before they begin exacting high societal and environmental costs. Finding ways to curb energy-related greenhouse gas emissions and to address other environmental problems, while still expanding energy services, will require enlightened research, development, and demonstration policies. Much therefore will depend on the energy and environmental policies that are introduced, and on their relationship to the forces of globalisation and liberalisation (discussed below).

Thanks to technological advances and better information on impacts, developing countries are in a position to address local and regional environmental problems early in the 21st century, and at an earlier stage of development than industrialised countries did. By addressing these negative externalities of energy generation and use early on, developing countries would find their overall economic well-being and the prospects of their people improved, not diminished. The issue of global climate change, however, may prove more difficult to reconcile with high levels of economic growth.

Overall, however, the analysis in this report suggests that there are no fundamental technological, economic, or resource limits constraining the world from enjoying the benefits of both high levels of energy services and a better environment. This is not to suggest that these benefits are to be expected - only that they are achievable. As the scenarios discussed above demonstrate, sustainable futures depend on ambitious policy measures and support for technological innovation.

In analysing appropriate policies, it is important to keep in mind key features of the political and economic environment in which new energy systems will evolve:

· The broad structure of macroeconomic and development policies - particularly those for education and broad-based growth. Below a certain level of per capita income, subsistence needs other than energy dominate household budgets and priorities. Income growth among groups without access is the most important determinant of whether they will be willing to pay for energy services (and thus provide the demand required for markets to work effectively). This, in turn, depends on policies beyond the control of energy industries.

· The widespread liberalisation of energy markets and the restructuring of the energy sector. These changes are driven by inefficient monopolies, government budget constraints, and expanding technological opportunities - especially in electric power generation. Liberalisation and restructuring can lower costs and generate the finance required for the expansion and extension of supplies (as long as it is profitable to do so). But in restructured energy markets, cross-subsidies will not be available to increase access in areas that are not attractive to investors, unless restructuring is accompanied by policy measures that specifically address such concerns.

· Globalisation and the transformations of the information age. Related to the liberalisation of markets is globalisation - the world-wide expansion of major companies and their acquisition of, or partnership with, local companies. Procurement of materials and services from distant and foreign sources has become common. New technologies are also diffusing at rates faster than ever before, spurred by world-wide access to the Internet and other information technologies. This expansion can expedite the awareness of sustainable energy options and the deployment of new technologies.

Energy policies for sustainable development

The scenarios exercise showed that, although energy can contribute to sustainable development, its performance in this respect will depend on a range of factors. These include attitudes and behaviour, information and technologies, the availability of finance and supporting institutions, and - in particular - policies and policy frameworks that encourage change in the desired direction. The current path of energy development, and the rate of change, are not compatible with key elements of sustainable development. The divergence of alternative futures that becomes apparent in the scenarios after about 20 years reflects the long-term nature of energy systems. It also indicates that if governments, corporations, and international institutions do not introduce appropriate policies and measures now, critical windows of opportunity are likely to close. It will then become even more difficult to change course.

The most critical issues that sustainable energy strategies and the policies derived from them need to address are how to widen access to reliable and affordable modern energy supplies, and how to ease the negative health and environmental impacts of energy use.

Given proper frameworks, pricing signals, and regulatory regimes, markets can efficiently deliver on the economic objectives of sustainable development. But markets alone cannot be expected to meet the needs of the most vulnerable groups and to protect the environment. Where markets fail to protect these and other important public benefits, targeted government policies and consistent regulatory approaches will be needed. The problem is that government interventions are usually less efficient than market approaches. Government intervention may have unintended consequences at odds with its original aims. For that reason, there is a need to try different approaches and learn from the experiences of other countries.

Policies and policy frameworks in support of sustainable development should focus on widening access, encouraging energy efficiency, accelerating new renewable energy diffusion, and expanding the use of advanced clean fossil fuel technologies, while keeping open the nuclear option. These policy areas, as well as related decisions on private-public transportation and city planning, have the greatest relevance to the environmental and safety problems associated with conventional fuels.

The broad strategies for encouraging sustainable energy systems are straightforward. But achieving them will require wide acknowledgement of the challenges we face and stronger commitment to specific policies. The strategies are largely aimed at harnessing market efficiencies to the goal of sustainable development and using additional measures to speed up innovation, overcome obstacles and market imperfections, and protect important public benefits. Among the basic strategies, six stand out.

Making markets work better

Driven by the forces of competition, markets do a better job than administered systems in allocating resources. But the marketplace fails to adequately account for the social and environmental costs of energy provision and use. Policies that reduce market distortions - that level the playing field - would give sustainable energy (renewable sources, energy efficiency measures, new technologies with near-zero emissions) a considerably better market position relative to current uses and practices.

Market distortions can be reduced by phasing out permanent subsidies to conventional energy (estimated at $250-300 billion a year in the mid-1990s) and by including social and environmental costs in prices. Several countries have experimented with energy and environment taxes as a way to address the latter. In many cases incentives will be needed to induce or accelerate changes. One such option is a targeted, time-limited (through a 'sunset clause') subsidy. Where energy markets cannot function effectively because of absolute poverty, additional resources, including official development assistance, are required.

Another aspect of making markets work better is finding ways to overcome obstacles to energy end-use efficiency measures. Even in the absence of subsidies, market barriers - such as lack of technological knowledge, different interests of investors and users, and high transaction costs of individual investors - keep energy efficiency measures from reaching their cost-effective potential. Options to overcome these barriers include voluntary or mandatory standards (effectively applied) for appliances, vehicles, and buildings, labelling schemes to better inform consumers, procurement policies to achieve higher standards and economies of scale, technical training in new energy efficiency technologies and their maintenance, and credit mechanisms to help consumers meet higher first costs.

Complementing energy sector restructuring with regulations that encourage sustainable energy

The ongoing, world-wide restructuring of the energy industry - largely driven by the increasing globalisation of the economy - will lead to more economically efficient energy markets. This restructuring presents a window of opportunity for ensuring that the energy-related public benefits needed for sustainable development are adequately addressed in emerging policies for energy market reform. The process could be enhanced if governments set goals that define the performance characteristics of qualifying sustainable energy technologies (for example, by specifying air pollution emission limits or minimum standards on plants, machinery, and vehicles).

These goals for suppliers can be complemented by mechanisms that favour sustainable energy technologies in energy market choices. Other regulatory approaches supportive of sustainable energy include mandating that a certain percentage of energy comes from renewable sources, requiring that energy grids be open to independent power producers, and ensuring that rural populations are served. Such regulations are based on the recognition that energy market restructuring in itself may not help achieve sustainable development.

Mobilising additional investments in sustainable energy

Energy markets in many countries are rapidly becoming more competitive. For that reason, successful sustainable energy policies, whether involving financing, incentives, taxes, or regulations, must engage the private sector and catalyse private investment on a large scale. But for political or institutional reasons, many of the transition and developing economies that most need investment have problems attracting private enterprise and gaining access to financial markets. Reliable commercial legislation and jurisdiction, as well as incentives, may be needed to encourage private companies to invest in sustainable energy - or to defray the risks associated with such investments.

Official developement assistance may also need to play a greater role in the least developed countries, especially in those where the conditions that attract private sector investment are lacking. Political stability, application of the rule of law, avoidance of arbitrary intervention, and the existence of institutions that facilitate savings and investment are generally important for promoting investment. Supportive financial and credit arrangements (including microcredit arrangements like those now in existence) will be needed to introduce commercial energy to people excluded from markets, especially in rural areas.

Encouraging technological innovation

Currently applied technologies are not adequate and profitable enough to deliver the energy services that will be needed in the 21st century and simultaneously protect human health and environmental stability. Adequate support for a portfolio of promising advanced and new technologies is one way to help ensure that options will be available as the need for them becomes more acute. Energy innovations face barriers all along the energy innovation chain (from research and development, to demonstration projects, to cost buy-down, to widespread diffusion). Some of these barriers reflect market imperfections, some inadequacies in the public sector, and some different views about needs, corporate priorities, relevant time horizons, and reasonable costs.

Innovation and leadership
in energy technologies could be
highly profitable for developing
countries in economic,
environmental, and
human terms.

The public support needed to overcome such barriers will vary from one technology to the next, depending on its maturity and market potential. Obstacles to technology diffusion, for example, may need to be given higher priority than barriers to innovation. Direct government support is more likely to be needed for radically new technologies than for incremental advances, where the private sector usually functions relatively effectively. Options to support technological innovation, while still using competition to keep down costs, include tax incentives, collaborative research and development ventures, government or cooperative procurement policies, 'green' labelling schemes, and market transformation initiatives.

Supporting technological leadership and capacity building in developing countries

Because most of the projected growth in energy demand will occur in the developing world, innovation and leadership in energy technologies could be highly profitable for developing countries in economic, environmental, and human terms. Developing economies need to further develop their resources - human, natural, and technological - so they can create energy systems appropriate to their own circumstances. But they also need assistance with technology transfer, financing, and capacity building.

The declining share of official development assistance relative to required investment capital suggests that much of this investment will need to be led by the private sector or private-public partnerships. International industrial collaboration offers one means by which the private sector could gain markets while fostering the private research institutes, and regional institutes that provide training in technological management offer additional possibilities for furthering technology sharing and capacity building.

Encouraging greater cooperation at the international level

The ongoing process of globalisation means that ideas, finances, and energy flow from one country to another. Productive ways of moving forward might include combining national efforts, for example, in the procurement of renewable energy technologies. Other options include international harmonisation of environmental taxes and emissions trading (particularly among industrialised countries), as well as energy efficiency standards for mass-produced products and imports of used machinery and vehicles. The need for concerted action on energy is clear from Agenda 21, which emerged from the 1992 Earth Summit.

The challenge of sustainable energy includes crucial enabling roles for governments, international organisations, multilateral financial institutions, and civil society, including non-governmental organisations and individual consumers. Partnerships will be required, based on more integrated, cooperative approaches and drawing on a range of practical experience. A common denominator across all sectors and regions is setting the right framework conditions and making public institutions work effectively and efficiently with the rest of society and other economic actors to reach beneficial, shared objectives.

Clearly, energy can
serve as a powerful tool
for sustainable
development.

Clearly, energy can serve as a powerful tool for sustainable development. Redirecting its power to work towards that overarching goal, however, will require major changes of policy within an enabling overall framework. Poverty, inequity, inefficiency, unreliable service, immediate environmental priorities, a lack of information and basic skills, and an absence of needed institutions and resources - require changes to be made. Unless these changes occur within the next few decades, many of the opportunities now available will be lost, the possibilities for future generations diminished, and the goal of sustainable development unrealised.

References

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IEA (International Energy Agency). 1999. Energy Balances of OECD Countries. Paris.

Morita, T., and H.-C. Lee. 1998. "IPCC SRES Database, Version 0.1, Emission Scenario". Database prepared for IPCC Special Report on Emissions Scenarios, http://www.cger.nies.go.jp/cger-e/db/ipcc.html

Nakicenovic, N., A. Grbler, and A. McDonald, eds. 1998. Global Energy Perspectives. Cambridge: Cambridge University Press.

Nakicenovic, N., N. Victor, and T. Morita. 1998. "Emissions Scenarios Database and Review of Scenarios". Mitigation and Adaptation Strategies for Global Change 3 (2-4): 95-120.

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UNDP (United Nations Development Programme). 1997. Energy after Rio. New York.

WCED (World Commission on Environment and Development). 1987. Our Common Future. Oxford: Oxford University Press.

WEC (World Energy Council). 1998. Round Up: 17th Congress of the World Energy Council. London.

WEC (World Energy Council). 2000. Statement 2000: Energy for Tomorrow's World - Acting Now! London.

WEC-FAO (World Energy Council and Food and Agriculture Organization of the United Nations). 1999. The Challenge of Rural Energy Poverty in Developing Countries. London.

World Bank. 1996. Rural Energy and Development: Improving Energy Supplies for Two Billion People. Washington, D.C.

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Notes

1. In this report the term industrialised countries refers primarily to high-income countries that belong to the Organisation for Economic Co-operation and Development (OECD). Developing countries generally refers to lower income countries that are members of the G-77 and China. Although many transition economies also have a high degree of industrialisation, they are often considered and discussed separately because of their specific development requirements.

2. In this report the terms traditional energy and non-commercial energy are used to denote locally collected and unprocessed biomass-based fuels, such as crop residues, wood, and animal dung. Although traditional energy sources can be used renewably, in this report the term new renewables refers to modern biofuels, wind, solar, small-scale hydropower, marine, and geothermal energy.

3. The Brundtland Report, as the World Commission on Environment and Development report is commonly known, set forth a global agenda for change.

4. Energy's links to sustainable development were most recently acknowledged by the UN General Assembly Special Session on Small Island Developing States in 1999. The major conferences that noted the importance of energy issues were the UN Conference on Population and the UN Conference on Small Island Developing States in 1994, the Copenhagen Social Summit and the Beijing Fourth World Conference on Women in 1995, and the World Food Summit and HABITAT II in 1996. The energy issues emerging from these conferences are summarised in chapters 1 and 2 of UNDP (1997).

5. Agenda 21 is the plan of action for sustainable development adopted at the Rio Earth Summit.

6. Means for achieving these objectives are discussed in more detail in WEC (2000).

7. Unless otherwise noted, all prices are in U.S. dollars.

8. This target was reaffirmed in 1992 (in chapter 33 of Agenda 21).

9. In this report the term conventional energy is used to refer to fossil fuel, nuclear energy, and large-scale hydropower.

10. In this report the word insult is used to describe a physical stressor produced by the energy system, such as air pollution. The word impact is used to describe the resulting outcome, such as respiratory disease or forest degradation.

11. The Energy Charter Treaty, together with a protocol on energy efficiency and related environmental aspects, entered into force in 1998. It has been signed by about 50 countries, including the members of the European Union and the Commonwealth of Independent States, Australia, and Japan.

12. Analysis of efficiency potentials in end-use sectors in the next 20 years appears in chapter 6 of this report and is based on detailed techno-economic studies and examples of best practices.

13. Conventionally, energy efficiency has been defined on the basis of the first law of thermodynamics. The second law of thermodynamics recognises that different forms of energy have different potentials to carry out specific tasks. For example, a gas boiler for space heating may operate at close to 100 percent efficiency (in terms based on the first law of thermodynamics). This seems to suggest that limited additional efficiency improvements are possible. But by extracting heat from the ground or other sources, a gas-driven heat pump could generate considerably more low-temperature heat with the same energy input. The second example illustrates the potential for energy efficiency improvements according to the second law of thermodynamics.

14. An adequate payments system means using meters and payment collection to ensure that all energy services have a price that is paid by all users on a regular basis.

15. Both figures include the 2 billion currently without access to commercial energy. UN population projections were revised downwards in 1998, after the scenarios described here were developed. Although the population assumption used for the scenarios described here (11.7 billion by 2100) is slightly higher than the UN medium scenario (10.4 billion), the two are not inconsistent.

16. The policies of industrialised countries and inflationary pressures from petro-dollars could also have contributed to debt levels.

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