IEA report, Part 1

Act now with clean energy or face 6 degrees C warming; cost is not high; media blows story

Posted by Joseph Romm (Guest Contributor) at 5:43 AM on 09 Jun 2008

Read more about: greenhouse-gas emissions | climate | oil | energy

When the normally conservative International Energy Agency agrees with both the middle of the road IPCC and more ... progressive voices like mine, it should be time for the world to get very serious, very fast on the clean energy transition. But when the media blows the story, the public and policymakers may miss the key messages of the stunning new IEA report, "Energy Technology Perspectives, 2008" (executive summary here).

You may not have paid much attention to this new report once you saw the media's favorite headline for it: "$45 trillion needed to combat warming." That would be too bad, because the real news from the global energy agency is

Failing to act very quickly to transform the planet's energy system puts us on a path to catastrophic outcomes.
The investment required is "an average of some 1.1 percent of global GDP each year from now until 2050. This expenditure reflects a re-direction of economic activity and employment, and not necessarily a reduction of GDP." In fact, this investment partly pays for itself in reduced energy costs alone (not even counting the pollution reduction benefits)!
The world is on the brink of a renewables (and efficiency) revolution. Click figure to enlarge:

I do feel vindicated that the IEA's 450 ppm "solution" is quite similar to the one I proposed, though I do have some differences with them -- they think hydrogen cars are part of the answer!

"Radical and urgent" change needed to avoid catastrophe

Probably the biggest difference between the IEA and the U.S. Energy Information Administration is that the EIA lives in a fantasy world where oil production can continue growing forever and greenhouse gas emissions are not something an energy agency needs to factor into planning. The IEA, however, lives in the real world, as its new report makes painfully clear:

Unsustainable pressure on natural resources and on the environment is inevitable if energy demand is not de-coupled from economic growth and fossil fuel demand reduced.

The situation is getting worse ... Baseline scenario foreshadow a 70 percent increase in oil demand by 2050 and a 130 percent rise in CO2 emissions ... a rise in CO2 emissions of such magnitude could raise global average temperatures by 6 degrees C (eventual stabilisation level), perhaps more. The consequences would be significant change in all aspects of life and irreversible change in the natural environment.

In short, business as usual energy policy leads to atmospheric CO2 concentrations of 1000 parts per million or more, and that is the end of life as we know it on this planet (see here).

The solution looks expensive but isn't

Where the media really blew the story is the cost. Yes, $45 trillion sounds like an unimaginably large amount of money, but spread over more than four decades and compared to the world's total wealth during that time, it is literally a drop in the bucket -- 1.1 percent, or one part in 90 of the world's total wealth. Indeed, the IEA notes that one reason the dollar value of the investment is so high is "in part due to the declining value of the dollar." [Note to self: How diabolical of President Bush -- by weakening our economy he has increased the total dollar cost of action on climate, thus encouraging inaction!]

And while the additional investments seem high, "they do not represent net costs." They are not a pure negative hit to global GDP. That's because "technology investments in energy efficiency" and many low-carbon power sources "reduce fuel requirements." In all the scenarios the IEA considers ...

... the estimated total undiscounted fuel cost savings for coal, oil and gas over the period to 2050 are greater than the additional investment required (valuing these fuels at Baseline prices). If we discount at 3 percent, fuel savings exceed additional investment needs in the ACT Map scenario [in which CO2 emissions in 2050 only return to 2005 levels].

Also, the IEA scenarios "show a more balanced outlook for oil markets." Indeed in the BLUE Map scenario [hey, don't blame me, I didn't come up with these names], where CO2 emissions in 2050 go to half 2005 levels, we get "oil demand actually 27 percent less than today in 2050."

So what exactly is the net GDP reduction of the BLUE Map (450 ppm) scenario? The IEA doesn't say, but given how close their analysis matches the IPCC's, it would seem quite reasonable to concluded it is of the same order of magnitude as the IPCC's -- 0.1 percent of GDP per year or less (see here).

And, again, that does not include the enormous value to the planet of avoiding catastrophic -- 6 degrees C -- warming, or the value of reducing urban air pollution, such as smog and particulates, or the value of starting to get us off our oil addiction before peak oil drives prices to economically ruinous levels.

The price is wrong

Finally, you may have read that the IEA's price of CO2 needed to get a 50 percent cut in global emissions by 2050 is $200 a ton up to even a startling $500 a ton (see Pielke here or WSJ here). In fact, those are both the cost at the margin for the final few billion tons of CO2, and the $500 figure assumes "technology pessimism" (and, I'll argue, has other flaws). The key point is that ...

... the average cost of the technologies needed for BLUE Map is much lower than the marginal, in the range of USD 38 to USD 117 per tonne of CO2 saved.

That's right, if the aggressive technology strategy turns out more successful than not, the average price of CO2 emissions reductions might be as low as $38/ton of CO2 in the 450 ppm case.

Although the IEA report is a very detailed analysis by some of the best energy experts and energy economists working on the issue -- and although their analysis and conclusions are quite similar to mine -- I don't agree completely with their proposed solution and hence its likely cost, especially from a CO2/ton perspective.

What exactly is the IEA's solution, and why is it a tad off? That will be the subject of Part II.

[Note to Marketwatch: You write, "A whopping $45 trillion investment would be required to reduce the world's carbon dioxide emissions by 50 percent by the year 2030, the International Energy Agency said in a study released Friday." That would be 2050, not 2030.]

This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.

For story: IEA report, Part 1
9 Comments | Post a Comment

weaning off fossil fuels.

We are going to be weaned of fossil fuel consumption one way or another in the not too distant future. We are currently enjoying the effects of having not tried to wean ourselves off of oil, but instead waiting for depletion to hit. All CO2 limits do is bring the reductions forward in time a bit. And as the reductions are man controlled, the rate of reduction/price can be controlled to avoid sudden shocks. We are seeing today instead, what can happen with the uncontrolled approach, as litterally trillions of dollars of wrongheaded investment (SUVs, jet airplanes, fishing trawlers...) is being stranded.

by bigTom at 7:22 AM on 09 Jun 2008

A few nagging questions

Joe,

I'd feel much better about this kind of analysis if I knew 1) where the energy to build out the alternative source infrastructure was coming from; 2) what the decline in fossil fuel rates would be over the same time horizon; and 3) knowledge that the population increase and development in under-developed countries would not eat the profits.

#1 is a biggy. Right now the infrastructure for building solar, wind, etc. energy capture and distribution capital is subsidized by fossil fuels. You don't currently, build a photovoltaic plant using photovoltaics. You don't even manufacture the photovoltaics with photovoltaics. Until alternative sources can self-subsidize (maintenance, construction, and construction of plants [actually even subsidizing food production for the workers!]) they are not sustainable and will need considerable input from fossil fuels. This same applies to nuclear power.

#2 is implied, of course, but it appears to be a simple inverse of the increase in alternative sources. Given the point of #1 and of #3, it seems to me there are hidden feedback loops in the scenario that will actually keep demand for fossil fuels high, or at least not declining by the assumed rate. I believe serious cutbacks in consumption are needed to provide energy leverage. That is people are going to need to sacrifice the typical American way of life in order to have sufficient FF to help bootstrap the alternative future and achieve overall reductions in emissions.

#3 remains something of an open question. How many people? How much energy per captia will be needed to support 9+ billion lives. How much increase in per capita energy consumption will be allowed for development equity?

Until the analyses can be shown to take these and factors I haven't mentioned, like cost of adaptation to whatever climate change takes place, into account I remain skeptical of the promise of a bright future with no (or even little) pain.

Question Everything

George

George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life

by gmobus at 7:47 AM on 09 Jun 2008

ooo! i wanna try to answer these!

george those are awesome questions!!!!!!

it strikes me that they suffer a chicken-egg problem. you can't know the answers until you've in progress. you have to eyeball it (to the 9th power) beforehand. still i wanna try!!!!

where will the energy to build out the alternative source infrastructure come from?

let's say there are three parts to this:

retooling
manufacturing
installing

ok. i'm going to guess that retooling will take almost no additional energy, except political; manufacturing resources can be scrounged, from energy waste capture and retargeting production (e.g., going from large cars on a fast replacement schedule to microcars+turbines); and installation, over years, would take very little more energy than that being used to blow iraq to smithereens, which is an enormous project involving hundreds of thousands of workers doing nothing useful with what must be in the ballpark of 2% of our energy output (combining cost of manufacture with cost of operation).

what will the decline in fossil fuel rates be over the same time horizon?

this question needs to be broken out by sector. until we know what we're going to try to do, how fast we can do it is hard to say. if we take james hansen's advice into account, which means, basically, getting rid of coal use in this country by 2025, then obviously a major focus of early efforts would be to green the grid, because that's where coal is largely used. during that time, for, say, the first decade, we could be concentrating on making the most efficient gas-powered cars possible -- in terms of both operation and manufacture -- and worry about how to shift away from gasoline once we were confidently moved away from coal.

will the population increase and development in under-developed countries eat the profits?

only if their focus continues to be generating cash (mostly of benefit to the local rich) instead of raising standard of living through service provision. i would say that for about the next 25 years, the focus should be on setting and maintaining baselines without regard to means because means will be changing as costs and circumstances change. "making more billionaires" is not the right plan for this particular time.

Until the analyses can be shown to take these and factors I haven't mentioned, like cost of adaptation to whatever climate change takes place, into account I remain skeptical of the promise of a bright future with no (or even little) pain.

you won't get an analysis with this level of detail. it's unknowable, except for saying that without action, the situation will be worse.

you basically have to look back to the other major shifts and satisfy yourself that it's possible or not.

by hapa at 9:25 AM on 09 Jun 2008

gmobus

Wind and Concentrating solar pay their energy costs in six months or less. CSP typically lasts 30 years, wind at least 20. PV pays back its energy costs in three years or less.

Efficiency improvements pay back their energy costs even more quickly. So they are not "subsidized" by fossil fuels. Yes most of that input being repaid comes from fossil fuels. But that is simply because so small a percentage of our energy currently comes from renewable sources. Six months to two years consumption of fossil fuels could completely power the replacement our current generation and consumption infrastructure.

Of course capital replacement involves a lot more than energy input. (But energy input was your point.) It requires factories, and it requires factories to build those factories. It requires a shift of labor resource - i.e. massive retraining. That is tough, but not impossible,and certainly not painful. In fact that is a heck of a lot new GDP.

It is true that pricing alone won't get us there. If we really had 50 years, a carbon price along with modest public investment might do it. But it looks like we have three critical timing issues:

Emissions need to peak by or before 2015. That means the global north needs to cut consumption by that time.
Emissions worldwide need to drop by 60%-80% by 2030.
Emissions need to drop to around 100% by 2050, and become negative to make up for past emissions thereafter.

So how do we make that schedule? The answer is that we don't rely primarily on price signals, though we certainly take advantage of them as one tool. Quite simply, we spend an amount approximately equal to worldwide military spending in direct public investment. We put in place tough efficiency and renewable requirements, and put a price on emissions to encourage private investment that matches or dwarfs the public investment mentioned. These will be mutually reinforcing, and work much more quickly and effectively than any one of these policies would work alone.

by Gar Lipow at 9:41 AM on 09 Jun 2008

hapa says:

you won't get an analysis with this level of detail. it's unknowable, except for saying that without action, the situation will be worse.

If it is unknowable and yet they are good questions to ask because they do, indeed, play into the picture, then how can we accept the conclusions of the IEA report? How do you extrapolate from unknowns?

Given that there are cadres of economists collecting and analyzing more complex data then what I would like to see, it isn't obvious to me that these questions must go unanswered.

Also, given that peak oil implies that we have very little margin of error, it would seem prudent not to just 'get going' only to find later we were off on the wrong track.

George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life

by gmobus at 9:57 AM on 09 Jun 2008

Gar

Wind and Concentrating solar pay their energy costs in six months or less. CSP typically lasts 30 years, wind at least 20. PV pays back its energy costs in three years or less.

This is good. But it won't matter until sufficient capture and distribution capital have been built to compensate for the diminishment of ff energy. We need consumption supply plus replacement energy. Sometime in the future these ratios you claim sound like they could produce a self-sustaining production capacity, under assumptions about population size and per capita consumption demand. The only remaining question is how do we get there from here (considering the scale of the problem)?

Six months to two years consumption of fossil fuels could completely power the replacement our current generation and consumption infrastructure.

I hope you have numbers to back this up. Are you saying there is enough excess capacity in ff production that no one will notice siphoning off some to build out, or at least bootstrap, the alternative future?

As for efficiency, again, I hope you have some numbers. There are several estimates that suggest our prime mover technologies are close to maximum thermodynamic efficiency now. I'd like to know how we are going to squeeze additional efficiency into that sector (esp. since we're talking major capital replacement). As for wastage - a different but related category (e.g. line losses for electrical distribution), I agree there is a tremendous amount we need to do there, but I disagree that there will be little or no energy cost (ff subsidization) since we will be talking about infrastructure reworking. Increasing insulation in the home is not without its energy costs. It will take real physical work to re-do our infrastructure to fight waste.

WRT: building factories and factories to build factories (and farms to feed workers)...

That is tough, but not impossible,and certainly not painful. In fact that is a heck of a lot new GDP.

That is the claim about which I am most skeptical -- no pain. That needs a lot of explaining given exactly what we are seeing in our economy today. We are already suffering pain due to energy flatness in supply while demand goes up. Once we are on the downslope of production in oil we are going to see major pain and that is before we siphon off resources to produce the alternative energy capital.

As for GDP, ala Herman Daly, et al, it is a miserable measure of welfare, let alone income. The clean up (such as it has been) from Katrina counts as positive GDP, but only fools (read politicians and neoclassical economists) believe it is a meaningful measure of progress.

I think your 1, 2, 3 points and your conclusion are actually pointing in the right direction. And, to be frank, I think those would come out of an analysis based on my questions (and assertions above) rather than where you started.

If you truly believe we can avoid serious pain, as in minimal if any economic sacrifice, then it behooves you to map out a complete program for how this is to be accomplished. That includes specifics in terms of capital (money = energy) investments, savings programs, technology priorities, and a whole lot more. Just saying there will be no pain and "all you have to do is..." won't cut it.

This is exactly what I and a few others have embarked on, developing a strategic plan for a human future, followed by logistical and tactical plans to drive implementation and operations. I have no idea how far we will get. It sounds even more audacious than Barack Obama's hope. But it does have the advantage of starting from the big picture with no low level assumptions to bias the work. We'll see how far it gets.

George

George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life

by gmobus at 10:31 AM on 09 Jun 2008

@gmobus

If it is unknowable and yet they are good questions to ask because they do, indeed, play into the picture, then how can we accept the conclusions of the IEA report?

i don't. i ignore them, largely. when pressed i'm quite caustic toward plans and even people who extend resource assumptions more than 20 years into the future. you can even a find a recent local example of this horrible behavior. i'm having trouble modulating it; once i get over being scared $#!+less, i should be better company.

How do you extrapolate from unknowns?

not actually being president of the world, all i do is look at current vulnerabilities and future vulnerabilities and wing it, based on the most trustworthy paths i see that would retain a measure of navigability under much heavier, stranger pressure.

preferring self-supporting systems -- "build it and keep it clean and it works" -- over highly network-dependent equipment. one step away from self-sufficiency is fine. two steps away is a shaky; three is probably already an also-ran.

Given that there are cadres of economists collecting and analyzing more complex data then what I would like to see, it isn't obvious to me that these questions must go unanswered.

it depends what you mean by "answered." from my POV, in many ways, future earth, not long from now, is more obscured by climate change and what maybe we could call "peak substitution" -- a lack of technological or material avenues at necessary scale, right -- it's a strange earth -- more difficult for us to visit in our planning process than it is for us to plan a landing and soil sampling on a saturnian moon. the reason for that discrepancy is that we know what is likely to happen to a spacecraft as it travels from here to the outer solar system. all we have to do is pack it a lunch and launch it.

i feel that what we're up to now is more like the transoceanic voyages of our ancestors. this is a mass migration. in place. we know how to navigate, how to use the sources of food and energy that are plentiful or replenishable, but as to where we're going and what conditions we'll find along the way, and how long the trip will take -- such excitement!

like the first scuba divers, maybe. except we're all about to go live on the bottom of the sea or something.

Also, given that peak oil implies that we have very little margin of error, it would seem prudent not to just 'get going' only to find later we were off on the wrong track.

you have some idea that we will all go the same direction, at the same speed, with the same map. toss that. we have more minds and hands available than any generation before us and better resource modeling than ever and we can run through a lot of scenarios, in theory and in practice, before stumbling on things that will go "the distance."

your model will be one of many, for instance.

[from your note to gar]

If you truly believe we can avoid serious pain, as in minimal if any economic sacrifice, then it behooves you to map out a complete program for how this is to be accomplished.

no. other people's expertise should not be excluded. the advantages of a complex industrial society with redundant capacity should be put to their best use, which i think is to say, here are the goals we need to meet. here are the most serious limitations and pitfalls we have identified. let's talk about it and get started as soon as we can with components we agree will either cover our asses in the short run or still be useful at the next stopping point, maybe a decade from now.

As for efficiency, again, I hope you have some numbers. There are several estimates that suggest our prime mover technologies are close to maximum thermodynamic efficiency now.

irrelevant. we make tons of vanity goods. conservation in that area while we overhaul the other equipment won't cause a depression (that isn't already coming to us because our financial managers are among the greatest idiots in history).

I'd like to know how we are going to squeeze additional efficiency into that sector (esp. since we're talking major capital replacement).

if you're not willing to allow any equipment that requires more than a week to pay back the total investment, of course not! don't be silly on this. we have more than a week.

As for wastage - a different but related category (e.g. line losses for electrical distribution), I agree there is a tremendous amount we need to do there, but I disagree that there will be little or no energy cost (ff subsidization) since we will be talking about infrastructure reworking. Increasing insulation in the home is not without its energy costs. It will take real physical work to re-do our infrastructure to fight waste.

you're making good points but i still think the key points to getting started are:

there's a big surplus, in absolute terms, between what we need and what we build. that capacity can be turned toward more productive use without any new energy generated. if we need to go a short time with holes in our knees, coughing-wheezing cars, and sharing living quarters, that's not a serious drop in standard of living.
there are a lot of hidden fees in american life right now that are ridiculous. cutting those will free up enormous capacity to volunteer time directly or through the purchase of gizmos that might not retain their full value but will at least pay their own way through to some next level.
we are responsible for maintaining a general quality of life. if the standard of living of the top 5% of the population comes crashing back to earth, that is not "pain."
setting the tightest standards we can get away with now -- buildings that would still be affordably used in 2050, appliance standards that rise to previous best, all that kind of stuff -- will save us much work in the future.

by hapa at 1:52 PM on 09 Jun 2008

Hapa

We'll check back in a few years, heh? I'm disinclined to respond to what sounds like strawmen, e.g.

if you're not willing to allow any equipment that requires more than a week to pay back the total investment, of course not! don't be silly on this. we have more than a week.

or trivialization of points, e.g.

irrelevant. we make tons of vanity goods. conservation in that area while we overhaul the other equipment won't cause a depression (that isn't already coming to us because our financial managers are among the greatest idiots in history).

Or mis-characterization of my point, e.g.

you have some idea that we will all go the same direction, at the same speed, with the same map. toss that.

I don't know how you expect to engage in conversation with someone with this style.

George Mobus, Associate Professor, Institute of Technology, University of Washington Tacoma, and Professional Student for Life

by gmobus at 4:00 PM on 09 Jun 2008

@gmobus

well you did throw away tons of arguments for new building based on the equipment's time to pay back its investment in energy. no timeframe seemed to be short enough. it wasn't a strawman -- you seemed to be broadly rejecting EROEI.

and i do think it's irrelevant that we're at peak efficiency for various equipment, quite seriously, because what we're doing with that equipment is in some part useless except to have money change hands. money can change hands while broader social needs are being met.

and you kept saying that you thought there was no margin for error and there was one right track. i don't agree with that, at all, that seeking of perfection. we don't even know all the ways we can use the equipment we've got and we won't until we bring more people in on the conversation.

and everybody will check back in a few years. what we know in 5 or 10 years will be clearer. hopefully we won't wait until then to make apparently durable changes.

i wish i could remember the exact quote, i think it was rumsfeld, maybe quoting clausewitz -- wait, let's just go for clausewitz.

The great uncertainty of all data in war is a peculiar difficulty, because all action must, to a certain extent, be planned in a mere twilight, which in addition not infrequently -- like the effect of a fog or moonshine -- gives to things exaggerated dimensions and unnatural appearance.

by hapa at 4:32 PM on 09 Jun 2008

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