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© OECD/IEA 2015 © OECD/IEA 2015
Climate Change and Energy Sector Transformation: Implications for Asia-Pacific Including Japan
Aligning Policies for the Transition to a Low-carbon Economy:
OECD Recommendations and Implications for Asia-Pacific Including Japan
ISAP 2015 Yokohama, 29 July 2015
Takashi Hattori
Head of Environment & Climate Change
© OECD/IEA 2015
Aligning Policies for a Low-carbon Economy
Chapter 7: Reframing investment signals and incentives in electricity
Electricity is essential to the decarbonisation agenda
Source: Energy Technology Perspectives 2015
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Electricity Generation in 2DS
Growing share of variable renewables demand for a more flexible and integrated system
Low-carbon generation: higher capital cost, lower operational cost vs. coal and gas
Source: Energy Technology Perspectives 2015
Low carbon High
carbon
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Electricity markets
Regulatory framework for electricity systems determines investment context, cost, and reliability of system
Current wholesale electricity markets in many OECD countries are not strategically aligned with the low-carbon transition
Require new market arrangements as well as a robust CO2 price
Regulated electricity systems also face challenges, e.g. fair grid and market access for new low-carbon sources
© OECD/IEA 2015
Considerations for Japan
Deregulated electricity markets may not deliver the long-term price signal needed for investment in high capital cost, low-carbon technologies.
Competitive and timely investment in low-carbon solutions will require new market arrangements such as long-term supply agreements, as well as a robust and stable CO2 price signal.
Jurisdictions with regulated systems that consider introducing greater competition need to adopt market arrangements that will encourage, rather than hinder, investment in low-carbon technologies.
© OECD/IEA 2015
Towards COP21
A major milestone in efforts to combat climate change is fast approaching – COP21 in Paris in December 2015
Momentum is building:
• Historic US-China joint announcement; EU 2030 targets agreed
• Developed & developing countries are putting forward new pledges to reduce emissions
• Many energy companies & investors are starting to engage
• Pope Francis’ encyclical LAUDATO SI’
Source: Brookings Institute Source: Business & Climate Summit Source: US Embassy
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WEO Special Report 2015
Pledges are not yet enough to achieve our climate goal, but are a basis from which to build ambition
Companies that do not anticipate stronger energy & climate policies risk being at a competitive disadvantage
Proposes four key energy sector outcomes for COP21
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Emissions burden moves over time
Cumulative energy-related CO2 emissions by region
Past emissions are important, although the source of emissions shifts with changes in the global economy
2015-2040
1890-2014
100
200
300
400
500
United
States
European China
Union
Russia Japan India Africa
Gt
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National pledges build towards a global agreement
Submitted INDCs cover two-thirds of energy-related GHG emissions, with implications for future energy & emissions trends
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But it’s not enough…
8
16
24
32
40
1990 2000 2010 2020 2030
Gt
INDC Scenario
450 Scenario
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What does the energy sector need from COP21?
The IEA proposal for COP21:
1. Peak in emissions – set the conditions which will achieve an early peak in global energy-related emissions
2. Five-year revision – review contributions regularly, to test the scope to lift the level of ambition
3. Lock in the vision – translate the established climate goal into a collective long-term emissions goal
4. Track the transition – establish a process for tracking energy sector achievements
© OECD/IEA 2015
1. Peak in emissions: IEA strategy to raise climate ambition
Global energy-related GHG emissions
Five measures – shown in a “Bridge Scenario” – achieve a peak in emissions around 2020, using only proven technologies & without harming economic growth
20
25
30
35
40
2000 2014 2020 2025 2030
Gt
CO
2-eq
Bridge Scenario
INDC Scenario
Energy efficiency
49%
Reducing inefficient coal
Renewables investment
Upstream methane reductions
Fossil-fuel subsidy reform
17%
15%
10%
Savings by measure, 2030
9%
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A five-year review cycle would enable pledges to keep pace with energy sector innovation; building ambition before the carbon budget is consumed
Today 2020 2025 2030 2035 2040
World’s remaining carbon budget
2. Five-year revision: World’s carbon budget is shrinking
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Total
50
100
150
200
2015 2020 2025 2030 2035 2040 M
illio
n
Vehicle sales
Cost reductions & deployment of electric vehicles
An emissions goal would give greater clarity & certainty to the energy sector, strengthening the case for RD&D investment & technology transfer
100
200
300
400
Do
llars
pe
r kW
h
Electric
Battery costs
Electric vehicles (right axis)
Solar PV additions
Capacity Capital costs
Solar PV (right axis)
Cost reductions & deployment of solar PV
40
60
80
100
2015 2020 2025 2030 2035 2040
GW
20
1 000
1 500
2 000
2 500
Do
llars
per
kW
500
Internal combustion
3. Lock in the vision: What more does it take for 2 °C?
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Energy sector indicators are needed to track the low-carbon transition; IEA identifies key metrics to monitor energy sector achievements
4. Track the transition: Impact of pledges must be monitored
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Japan: a closer look
INDC: 26% below 2013 by 2030
Unique challenges:
• limited resources
• high energy prices
• already high efficiency
Nuclear post-Fukushima
0%
20%
40%
60%
80%
100%
2010 2014 2030
Coal
Oil
LNG
Nuclear
Renewables
© OECD/IEA 2015
Energy, Climate Change & Environment 2014:
Unlocking high-emission assets
Chapter on policies and actions to “unlock” existing high-emissions assets • Retirement of coal plant
• Change dispatch of existing power plant fleet
• Efficiency retrofit of coal plant
• Retrofit of coal plant for CCS
Examples from Canada, China, UK, US, EU
© OECD/IEA 2015
Energy, Climate Change & Environment 2016
Preliminary topics:
Tracking the progress of the INDCs and the 2015 agreement
Coal and climate
Complementary approaches in industry/business
Energy sector resilience to climate change
Electricity markets and climate policy
Energy and emissions data
© OECD/IEA 2015
Thank you
Takashi Hattori [email protected]
Head, Environment & Climate Change Unit
Sustainable Technology and Policy Directorate
International Energy Agency
