On the road to disaster

In May, the European Commission (EC) published its World Energy, Technology and Climate Policy Outlook (WETO), which sets out a detailed picture of global challenges in this field expected in less than 30 years. The study puts into question the long-term impact of environmental measures in cutting greenhouse gases and encouraging greater use of renewable sources of energy. Developing countries are expected to have a serious influence on the global energy picture, representing more than 50% of the world's energy demand, as well as a corresponding level of carbon dioxide (CO2) emissions. In addition, in relation to 1990 figures, the USA's contribution to CO2 emissions will have increased by 50%, compared to an 18% European Union (EU) increase.

"We cannot afford to ignore these research findings and their implications for world-wide sustainable development," said European research commissioner Philippe Busquin. "To safeguard energy supplies and meet our Kyoto commitments, Europe must intensify its research efforts. This study provides us with an invaluable insight into the world's energy and environmental problems of the future. It will enable us to establish our future research and technological development priorities in the energy and environment field."

WETO was produced by a consortium of EU research teams, including ENERDATA and CNRS-IEPE in France, Bureau Fédéral du Plan in Belgium and the Commission Joint Research Centre's facility in Seville, Spain. The report sets out:

• World energy projections (including future energy demand and supply, CO2 emissions, fossil fuels production and prices).

• Energy technology progress (including learning curves and specific cases for power generation technologies).

• Climate change policy impacts (including a CO2 emission abatement case and the consequences of accelerated technological development).

The results of WETO have been primarily obtained by using a world energy model ("POLES") developed during the last ten years by different EU initiatives in energy research. This simulation model projects long-term energy supply and demand for the different regions of the world under a set of consistent assumptions concerning, in particular, economic growth, population and hydrocarbon resources.

Reference scenario

The reference scenario of WETO provides a coherent picture of the evolution of energy supply and demand by world regions, as only driven by the economic fundamentals, over the next 30 years. The framework of hypotheses was chosen so as to reflect the state of the world in a "business and technical change as usual" perspective, which can serve as a benchmark for the economic evaluation of the future EU policy options related to energy supply and demand, and to carbon constraints.

For this purpose, the reference does not take into account specific energy or environment policy objectives and measures beyond what is actually embodied in 'hard decisions' (investment actually made, regulation actually enforced in law and voluntary agreements actually signed). This means in particular that the reduction objectives in the Kyoto Protocol, the phase-out of nuclear planned or envisaged for the future in some countries, the targeted share of renewables or the future modifications planned or envisaged in the economic instruments (such as coal subsidies) are not part of the reference. The reference does neither aim at predicting what will happen or what is the most probable future, nor at illustrating the EU policy targets, but rather at identifying and sizing the possible problems and constraints raised by a business as usual development.

Global trends

In the reference case, the picture of the world energy scene in 2030 mainly reflects an expanded vision of the current system. However, some significant changes occur, particularly in the relative shares of the main world regions and of the primary energy sources. These changes are associated, respectively, to different population and economic growth dynamics and to higher energy prices and more efficient technologies.

World energy consumption is projected to increase by some 70% over the 2000-2030 period. This translates into an average increase of 1.8% per year to be compared with 1.4% per year over the 1990-2000 period. This growth is driven by economic and population growth (of respectively 3.1% and 1% per year on average), whose impacts are nevertheless moderated by a decrease in energy intensity of 1.2% per year, due to the combined effects of structural changes in the economy, of technological progress and of energy price increases.

Industrialised countries experience a slowdown in their energy demand growth (0.4% per year in the EU). Conversely, the energy demand of developing countries is growing rapidly. In 2030, some 55% of the world energy demand is expected to come from developing countries, compared to 40% now.

In 2030, fossil fuels (coal, lignite, oil and natural gas) are projected to represent 88% of world energy consumption. This compares to an 81% share observed in 2000. Despite a rapid growth of coal and gas use, oil still represents the largest share (34%) of the world gross inland consumption (GIC) in 2030.

Nuclear energy increases slightly in absolute terms. During the 1990-2000 decade the growth of nuclear was 2.7% per year, but this rate weakens to 0.9% per year over the projection period. In 2030, nuclear represents 5% of the world GIC, compared to 7% in 2000.

The share of large hydropower and geothermal energy stabilises at 2% of world GIC. Wind, solar and small hydropower increase together by 7% per year between 2000 and 2010 and then by around 5% per year until 2030. In spite of the marked acceleration in the diffusion process of these renewable sources and because of their limited initial penetration, their market share represents less than 1% of world GIC in 2030. Conversely, wood and wastes consumption decreases steadily during the projection period, but its share in world GIC (5% in 2030, to be compared with 9% today) remains higher than the share of the new renewable sources.

Globally, energy from renewable sources is projected to cover 8% of world energy requirements in 2030. This is less than the 13% share observed in 2000 and is essentially due to the continuous decline of traditional biomass consumption in Asia and Africa, due to increased urbanisation, deforestation and substitution to modern energies in rural areas.

Carbon emissions

On a world scale, CO2 emissions more than double over the 1990-2030 period, from 21 to 45Gt of CO2. The regional shares also change significantly: in 1990, the emissions from the industrialised regions represented 70% of CO2 emissions; this share decreases to 42 % by 2030. By then China is the largest world CO2 emitter in absolute terms but not relative to population.

Emissions growth in developing countries is expected to be extremely rapid, whereas developed and industrialised regions undergo a more moderate growth or even a decline. For instance, India experiences a six-fold increase (5% per year). The emissions in the other developing regions increase in a range of 200-350%.

CO2 emissions of the CIS (Community of Independent States) and CEEC (Central and Eastern European Countries) decreased spectacularly during the economic recession of the nineties, with a drop in emissions of 41% and 22% respectively in the 1990-2000 period. Only in 2030 do their CO2 emissions reach again the level of 1990. The EU, the Japan and Pacific region and North America experience a more moderate but still substantial growth of their emissions with increases of 18%, 32% and 50% respectively.

Uncertainties

The reference scenario involves many uncertainties that may considerably change the world energy development pattern in the next three decades. Two of these uncertainties are considered in WETO: the resource estimates for oil and gas, and the development of new electricity production technologies. Regarding the latter, WETO assesses the potential impact of four different technology cases:

• The 'gas' case, which assumes enhanced availability of natural gas and introduces further improvements for combined cycle gas turbines and fuel cells.

• The 'coal' case, which involves major improvements in advanced coal technologies, namely supercritical coal plants, integrated coal gasification combined cycle plants and direct coal firing plants.

• The 'nuclear' case, which assumes a breakthrough in nuclear technology in terms of cost and safety. It has an influence on standard large light water reactors but especially on new evolutionary nuclear reactors.

• The 'renewables' case, which supposes a major improvement in renewable energies notably wind power, biomass gasification, solar thermal power plants, small hydro and photovoltaic cells.

Nuclear case

For nuclear, the 'technology case' was implemented by altering the technical-economic characteristics of the two types of nuclear plants considered in the study:

• Standard large LWR. In the reference case this plant type is supposed to exhibit capital costs slightly increasing over time due to increased investment in security measures. In the technology case, the investments as well as O&M costs are assumed to be about 35% lower as compared to the reference case in 2030.

• New evolutionary nuclear design. This technology is assumed to be introduced gradually after 2010 in the reference and costs about 30% less to construct than the LWR by 2030 thanks primarily to its inherent safety characteristics. In the reference it gained a substantial share of the total nuclear market (around 12%). For the nuclear technology case this type of plant is assumed to be 35% cheaper to construct and operate than in the reference.

These changes have an important impact on the market penetration of these plants. In the reference they become less and less competitive in most regions of the world, even for the high annual loads. In the nuclear technology case, they become generally cost-attractive vis-à-vis combined cycle gas turbines at around 5500hours/year and vis-à-vis supercritical coal technologies in the region of 4500hours/year. The competitiveness gains are particularly marked for the new nuclear design. It is worth noting, however, that the changes in costs are phased in gradually and that power plants and especially nuclear ones are characterised by a slow capital turnover.

The overall effect of this technology case is a worldwide reduction of CO2 emissions in 2030 of 2.8% (4.6 % in the OECD). At global scale there is considerable increase in nuclear electricity generation. Overall nuclear contribution increases from 9% to over 15.5% (from 16% to 37% in the OECD). Nuclear power an expensive option in the reference projection penetrates into the high to medium annual loads displacing coal and gas fired electricity production (see Figure below). The relatively important reduction in GTCC (gas turbine combined cycle) just reflects its fundamental contribution in middle and high loads in the reference case. International coal prices are 5-10% lower while gas prices are down 3-8%. World oil prices stand virtually unaffected (-1%) since most of the changes implied by this technology case occur within the electricity sector where petroleum plays a small role.

Carbon impact

The technology cases in WETO provide a closer look on the role of energy technologies in carbon emissions and emission reduction. The different assumptions on technology development lead to significant changes in the electricity production structure. The impact on total global CO2 emissions, however, is limited. All the technology cases as defined in the study do not offer definitive solutions for the global CO2 emission problem. This is largely because the technology cases are defined in terms of clusters of technological breakthroughs affecting only a part of the energy market, basically the power generation sector. Important though the power sector may be, it only accounts for about one third of world CO2 emissions.

The authors of the study note that it is hard to see how clusters of energy technologies could by themselves make a major impact on the global CO2 problem if they are not accompanied by major policy initiatives.

Policy issues

In order to explore the long-term consequences for the energy sector of greenhouse emission constraints at world level, a carbon abatement case (CA) has been developed up to the 2030 horizon. Its aim is to describe a reasonable hypothesis for the development of CO2 emissions, while taking into account the different regions'

consent to commit themselves in medium-term reductions and the expected reinforcement of climate change policies beyond the year 2010.

The CA case is defined so as to reach a level of CO2 emissions in 2030 that is comparable to the emissions projected in the "B1" scenario 28 of the IPCC (Intergovernmental Panel on Climate Change) projections. The IPCC integrated assessment analysis indicates that this type of emission profile assumes the implementation of sustainable development policies in a large amount of sectors of the economy. Such an emission path lies at the upper end of an emission control strategy that would remain compatible with an objective of stabilisation of greenhouse gas concentration around 550ppm (by volume) (twice the pre-industrial concentration) by the end of this century and a global temperature rise of no more than 2°C relative to the year 1850.

Demand and emissions

The major changes in world energy-related CO2 emissions, total energy consumption and fuel switching as resulting from the above-defined alternative case are illustrated in the Table above.

The carbon value leads to the achievement of a reduction of about 9GtCO2 compared to the reference a decrease of 21%. Nevertheless, both cases project an increase in world CO2 emissions in 2030 compared to the 1990 level. The average growth between 1990 and 2030 is projected to be 1.3 % per year in the CA case compared to 1.9 % per year in the reference.

The results of the CA case show that the projected reduction by 21% of world CO2 emissions compared to the reference comes in equal parts, on the one hand from the reduction in energy demand and on the other hand from the decrease in the carbon intensity of the total consumption which is the result of drastic changes in the world energy mix. The total energy demand decreases from 17.1Gtoe (billion tons of oil equivalent) to 15.2Gtoe. This reduction needs to be examined in the light of the projected increase of the total consumption from about 8.7 Gtoe in 1990. It also shows that both actions on the energy system, namely the slowdown in energy demand growth and the changes in the primary fuel mix, are necessary to achieve significant CO2 emission reductions.

The 11% reduction in the carbon intensity of the world total consumption in the CA case reflects the opportunities for fuel substitution in the energy system. As expected, the carbon value affects primarily the fuels with the greatest carbon content, namely coal (-42 %) and oil (-8 %). Natural gas is not affected as the downward pressure on gas consumption is compensated by coal-to-gas substitutions; the market shares lost by coal and oil are compensated with nuclear (increase of 36%) and renewable energies (35%). Within renewables, a 20-fold increase for wind, solar and small hydro is expected.

Generation technologies

In a context where electricity demand grows at an annual rate twice the growth of final energy consumption and where power generation technologies with very different carbon content are currently competing, the carbon value also results in significant substitutions among fuels and technologies.

The Figure below shows the change in the fuel mix for electricity generation. In relative terms, the largest impact is for renewable sources: wind (2.7 fold increase), solar (two-fold increase) and small hydro (+60%). In absolute terms however, the most significant changes occur for nuclear and combined heat and power (CHP), while thermal production decreases significantly.

Accelerated technology

The potential effect of accelerated technology development on the cost of fulfilling environmental targets (in this case a carbon emission reduction target) is also examined. For this purpose the assumptions on accelerated technology development as defined in the technology cases described earlier have been applied to the carbon abatement case.

The carbon values used in the CA case result in lower emissions as compared to the reference. The nuclear scenario produces in the long run (up to 2030) the lowest carbon values. Results by region show that cost reductions are more marked in OECD countries, which are better placed to benefit from the technologies concerned.