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Europe leads the global clean energy transition

MD Staff

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An ambitious political agreement on increasing renewable energy use in Europe was reached today between negotiators from the Commission, the European Parliament and the Council. Today’s deal means that two out of the 8 legislative proposals in the Clean Energy for All Europeans package (adopted by the European Commission on 30 November 2016) have been already agreed by the co-legislators. On 14 May, the first element of the package, the Energy Performance in Buildings Directive, was adopted. Thus, progress and momentum towards completing the Energy Union is well under way and the work started by the Juncker Commission, under the priority “a resilient Energy Union and a forward-looking climate change policy” is delivering its promises.

The new regulatory framework includes a binding renewable energy target for the EU for 2030 of 32% with an upwards revision clause by 2023.Thiswill greatly contribute to the Commission’s political priority as expressed by President Juncker in 2014 for the European Union to become the world number one in renewables. This will allow Europe to keep its leadership role in the fight against climate change, in the clean energy transition and in meeting the goals set by the Paris Agreement. The rules agreed today serve also to create an enabling environment to accelerate public and private investment in innovation and modernisation in all key sectors. We are making this transition to a modern and clean economy taking into account the differences in the energy mix and economic structures across the EU. Beyond updating and strengthening our energy and climate legislation, the EU aims at developing enabling measures that will stimulate investment, create jobs, improve the skills of people, empower and innovate industries and ensure that no citizen, worker or region is left behind in this process.

Commissioner for Climate Action and Energy Miguel Arias Cañete said: “Renewables are good for Europe, and today, Europe is good at renewables. This deal is a hard-won victory in our efforts to unlock the true potential of Europe’s clean energy transition. This new ambition will help us meet our Paris Agreement goals and will translate into more jobs, lower energy bills for consumers and less energy imports. I am particularly pleased with the new European target of 32%. The binding nature of the target will also provide additional certainty to the investors. I now call on the European Parliament and the Council to continue negotiating with the same commitment and complete the rest of the proposals of the Clean Energy for All Europeans Package. This will put us on the right path towards the Long-Term Strategy that the Commission intends to present by the end of this year”.

Main achievements:

  • Sets a new, binding, renewable energy target for the EU for 2030 of 32%, including a review clause by 2023 for an upward revision of the EU level target.
  • Improves the design and stability of support schemes for renewables.
  • Delivers real streamlining and reduction of administrative procedures.
  • Establishes a clear and stable regulatory framework on self-consumption.
  • Increases the level of ambition for the transport and heating/cooling sectors.
  • Improves the sustainability of the use of bioenergy.

Next steps

Following this political agreement, the text of the Directive will have to be formally approved by the European Parliament and the Council. Once endorsed by both co-legislators in the coming months, the updated Renewable energy Directive will be published in the Official Journal of the Union and will enter into force 20 days after publication. Member States will have to transpose the new elements of the Directive into national law 18 months after its entry into force.

Background

The Renewable Energy Directive is part and parcel of the implementation of the Juncker Commission priorities to build “a resilient Energy Union and a forward-looking climate change policy”. The Commission wants the EU to lead the clean energy transition. For this reason the EU has committed to cut CO2 emissions by at least 40% by 2030, while modernising the EU’s economy and delivering on jobs and growth for all European citizens. In doing so, the Commission is guided by three main goals: putting energy efficiency first, achieving global leadership in renewable energies and providing a fair deal for consumers. By boosting renewable energy, which can be produced from a wide variety of sources including wind, solar, hydro, tidal, geothermal, and biomass, the EU lowers its dependence on imported fossil fuels and makes its energy production more sustainable. The renewable energy industry also drives technological innovation and employment across Europe.

The EU has already adopted a number of measures to foster renewable energy in Europe. They include:

  • The EU’s Renewable energy directive from 2009 set a binding target of 20% final energy consumption from renewable sources by 2020. To achieve this, EU countries have committed to reaching their own national renewables targets. They are also each required to have at least 10% of their transport fuels come from renewable sources by 2020.
  • All EU countries have adopted national renewable energy action plans showing what actions they intend to take to meet their renewables targets.

As renewables will continue to play a key role in helping the EU meet its energy needs beyond 2020, Commission presented on 30 November 2016, as part of the Clean Energy for All Europeans, package, its proposal for a revised Renewable Energy Directive.

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The Race for Universal Energy Access Speeds Up

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Fondly referred to as “mini Africa” by local residents, Sabon Gari is one of Nigeria’s biggest markets, where you can find anything from electronics and clothes to toys and hardware. Shops here used to depend on expensive diesel generators for electricity. But today, thanks to a new solar mini-grid, shop owners say they now spend just a fraction of what they used to previously on electricity.

More than 5000 miles (8000 kms) away, in the remote island of Monpura in Bangladesh, Lhota Khatun runs her own sewing business out of her bedroom, thanks to a solar mini-grid installed on the island. Since 2016, she has had dependable electricity access that helps her work at night, after her children are in bed.

Sabon Gari and Monpura represent communities around the world that, today, are more productive and prosperous through reliable and affordable access to electricity.

Energy is at the heart of development. Access to electricity makes communities safer, helps small businesses thrive and powers essential services such as schools and clinics. It also helps provide a conducive environment for investments, innovations and new industries that spur growth and provide jobs for entire economies.

The World Bank constantly works with governments to tailor solutions to suit every country’s unique energy needs. These approaches, led by countries, are working.

For example, a new $350 million electrification program in Nigeria is expected to attract $410 million in private investment, and create a vibrant market for mini grid and off-grid energy solutions.

In Kenya, the World Bank supports more than $1.3 billion of generation, transmission, distribution and off-grid investments, helping the country more than double electricity access rates from 23 percent in 2009 to 56 percent in 2016. A new $150 million off-grid project is designed to provide service to another 240,000 households living in more remote and poorer areas.

And in Bangladesh, the World Bank supports the largest off-grid solar program in the world, powering over four million households through solar home systems, 1,000 solar irrigation pumps, and 13 solar-based mini-grids. More than 18.5 million people in rural Bangladesh now have reliable access to solar-powered electricity through this program.

Altogether, between 2014 and 2017, the World Bank helped deliver new and improved electricity services to more than 45 million people.

Progress has sped up.  Sub-Saharan Africa’s electricity deficit has begun to close for the first time.  India is bringing electricity to 30 million people a year – more than any other country.  And a number of pioneering countries have put in place approaches that have allowed them to rapidly expand electricity services. Among these are a commitment to both grid and off-grid electrification efforts, long-term national electrification planning, and a focus on the quality and affordability of service.

The success of these approaches has led to a jump in demand from countries for support for energy access programs, which is being reflected in the World Bank’s portfolio.  In recent years the World Bank provided an average of $900 million a year in energy access financing.  This grew to $1.4 billion last year.

Support to mini-grid and off-grid programs is growing the fastest, from roughly $200 million a year in recent years to $600 million last year. The World Bank is on track to provide 20 percent of the projected investment needed for solar home systems in developing countries over the next four years.

The recent progress on energy access will be discussed as part of the review of global energy targets under Sustainable Development Goal 7 (SDG7) at the UN High-Level Political Forum. Underpinning these discussions is the fact that while progress is picking up towards universal energy access, more than 600 million people will still not have electricity access in 2030 if current trends persist.  That could have a devastating impact on health, education and economic prospects for a significant part of the world’s population.

Accelerating progress will require the private sector to play a key role. The World Bank is actively mobilizing private investment for energy access projects by helping to put in place conducive policies, demonstrating viable business models, and providing targeted funding to leverage commercial financing.

In Haiti, a project supported by the World Bank and Climate Investment Funds establishes a fund that will provide grants and loans to mini- and off-grid businesses. The project is expected to eventually mobilize $45 million in private financing and help bring electricity to 10 percent of Haiti’s population.

Innovation and technology are also playing a key role. Geospatial mapping is changing the face of electricity planning, with unprecedented detail and accuracy on unserved populations. For example, the Nigerian Rural Electrification Agency is mapping more than 200 sites for mini-grid development based on this approach.

The World Bank is committed to help countries harness these innovations, whether technological, financial or on the policy side, to accelerate the expansion of reliable and affordable electricity services, and to end energy poverty once and for all.

World Bank

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The importance of real-world policy packages to drive energy transitions

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Authors: Anita Hafner, Peter Janoska and Caroline Lee.

Last December, China announced a roadmap for establishing the largest carbon market in the world: an emissions trading system (ETS) that will start at 1.5 times the size of the European Union ETS, and very likely expand further. For the world’s largest energy consumer and greenhouse gas emitter, this national ETS is set to form a key element of its multi-layered policy approach to driving sustainable energy transition: a transition with aims not only to reduce greenhouse gas emissions, but also improve air quality, spur green economic development and enhance energy security.

China is just one country – though a crucial one – pursuing sustainable energy transitions through a complex mixture of policies that cover multiple aspects of energy transition. These policies need to drive change in all energy sub-sectors, act in both the short- and long-term, be cost-effective and support innovation and diffusion of clean technologies.

Carbon pricing is a cornerstone that can support many of these goals. As of September 2017, over 40 countries and 25 provinces and cities have adopted carbon pricing policies. Taken together, these cover nearly a quarter of global greenhouse gas emissions. However compared to prices that would have a transformative impact on energy systems, carbon prices remain low in the vast majority of countries. For example, in IEA’s World Energy Outlook model, carbon prices reach USD 75-100/tCO2 by 2030 and USD 125-140/tCO2 by 2040 in a scenario consistent with meeting Paris Agreement goals. These are levels far above most current domestic carbon prices.

In power generation and industry, a robust carbon price tends to drive deployment of low-carbon fuels, increased efficiency, carbon capture and storage (CCS) and early retirement of high-emission assets. For example, high carbon prices in China would have a significant effect in reducing coal-fired power generation without CCS, particularly after 2025.

In contrast, in sectors that are shaped by consumer choice carbon pricing plays a more supportive role. For example in transport, carbon pricing can be crucial to offset the effects of lower oil prices in a decarbonised world. However further policies such as standards, mandates and subsidies are needed to unlock more substantial technology shifts, such as electrification, advanced biofuels development and other large-scale investments for transport infrastructure, which are not driven by price alone.

Therefore in the absence of such high carbon prices, complementary energy policies are needed to fill the gaps, creating even more complex policy mixes. These real-world policy packages will be shaped by both domestic energy transition objectives (such as economic development, climate goals, air quality, public health, energy security and access), and constraints (such as limited resources, barriers to raising energy prices, and existence of high-carbon infrastructure).

This is particularly true in power and industry. In power, regulations may be needed to actively encourage the retirement of coal-fired generation that is not CCS-equipped, something we have already seen in the UK and Canada. In both power and industry, measures would be needed to drive deployment of technologies such as CCS and for integration of variable renewables. In transport, even further strengthening of fuel standards and subsidies for alternative vehicles could be needed to offset the lack of carbon price incentive that would otherwise have moderated transport demand from conventional vehicles.

Beyond clarifying the role of carbon pricing within a country’s policy mix, it is crucial to understand how a suite of policies interact – either positively or negatively – and seek ways to enhance coherence and alignment of the whole policy package over time. The more complex the policy mix, the more difficult this challenge becomes.

The next phase of our IEA work programme will be to tackle these questions in the context of China’s national emissions trading system as it relates to ongoing power sector reform and a myriad of other low-carbon policies on energy conservation, renewable energy, and control of coal supply and consumption. But there will be a need by many countries around the world to further strengthen thoughtful, real-world packages of complementary energy policies to keep their sustainable energy transitions on track. The IEA will continue to contribute with our insights and analysis.

*Members of the IEA’s Environment and Climate Change Unit

IEA

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From energy to chemicals

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Authors: Peter Levi and Araceli Fernandez Pales*

We live in a world dependent on chemicals. Fertilisers are used to increase agricultural yields. The cosmetics and pharmaceutical industries are reliant on the chemical sector for their key ingredients. And packaging – much of which is used for food and beverages – accounts for the largest share (36%) of global plastic demand, including synthetic textiles. At the current rate of production, Europe alone produces enough plastic packaging to encase the Eiffel Tower in plastic the thickness of a shopping bag every six seconds.

This demand for chemical products has a direct impact on energy demand (and consequently CO2 emissions). The sector accounts for approximately 11% and 8% respectively of the global primary demand for oil and natural gas.

More than half of the energy inputs to the sector are consumed as “feedstock”, or raw material. Feedstocks undergo a complex series of chemical transformations and ultimately leave the sector embedded in chemical products – for example the million or so plastic bottles consumed every minute around the globe.

The figure below lays out the path that fossil fuel feedstocks take through the chemical and petrochemical sector. A large proportion of oil gets converted into high value chemicals within the chemical sector, with refineries supplying around a third directly. The dominant feedstock for both ammonia and methanol is natural gas, although coal is also used in China. Collectively, these primary chemicals form the building blocks for thousands of intermediates, eventually ending up in fertilisers, plastics and other chemical products.

The total mass of chemical products leaving the sector is larger than the quantity of feedstock entering it. This is because in addition to feedstock (mainly composed of carbon and hydrogen), several chemical products contain other elements (mainly oxygen, nitrogen and chlorine) that are added and substituted at various points in the supply chain.

Partly as a result of this dependence on energy as feedstock, the chemical sector is the largest industrial energy consumer – but only the third largest source of industrial CO2 emissions after iron and steel and cement. In addition, further CO2 and other air pollutants can be released during the use of certain chemical products, such as fertilisers and cleaning products. Also, plastics and fertilisers can cause devastation to marine life when they leak into water courses, without effective management of waste and agricultural practices.

There are alternative pathways to producing chemicals, including recycling of thermoplastics and increased use of alternative feedstocks such as water, CO2 and bioenergy. These alternatives have the potential to reduce demand for primary chemicals made from fossil fuels, cutting both energy use and CO2 emissions. For example, for each tonne of polyethylene being recycled, roughly one tonne of ethylene demand can be avoided, saving the equivalent of at least 1.5 tonnes of oil.

Together with traditional routes equipped with carbon capture, the untapped potential of these alternative routes to decouple chemicals production from CO2 emissions is high. Global recycling of plastic was estimated to reach only 18% of all non-fibre plastic waste in 2014. Meanwhile, bioplastics only make up about 1% of the plastic produced around the world, each year, and electrolytic routes are still at the pilot project phase. Clearly there is much scope for progress. In theory, the chemical sector could do without fossil fuels entirely, though carbon and hydrogen in its feedstock will remain a necessity, whatever their origin.

Finding alternatives is key, because demand for fertilisers and plastics is set to grow as people live longer and enjoy better standards of living. The global transition towards a more sustainable future will rely on outputs from the chemical sector. For example, increasing the use of plastics in vehicles can support strategies to reduce their overall weight – ultimately reducing fuel consumption. Modern insulation materials that reduce the demand for heating and cooling in buildings also rely on products from the chemical sector.

Given the strong link between chemicals and fossil fuels and the potential for sustainable alternatives, what does the future hold for chemicals? Which technologies, strategies and policies could enable the sector to develop sustainably? What will be the consequent impacts on energy demand? The future of the chemical sector – as for the energy system as a whole – is uncertain. At the same time, a future without chemical products seems unlikely.

These questions and challenges will be examined in a forthcoming publication – “The Future of Petrochemicals.” This is the third report from the IEA that focuses on “blind spots” of the global energy system, following the “The Future of Trucks,” which was released in July 2017, and more recently “The Future of Cooling.”

Araceli Fernandez Pales, IEA Energy Analyst

Source: IEA

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