Authors: Laura Cozzi and Tim Gould
Today’s energy choices and their consequences
Today’s energy choices will shape the future of energy, but how should we assess their impact and adequacy? This is the task the World Energy Outlook takes on. It aims to inform the thinking of decision makers as they design new policies or consider new investments. It does so by exploring possible futures, the ways they come about and some of the main uncertainties – and it lays out the consequences of different choices for our energy use, energy security and environment.
One key element of this is to assess where the global energy system is heading, based on the policy plans and investment choices we see today. A second is to assess what would need to be done differently in order to reach the climate, energy access, pollution and other goals that policy makers have set themselves.
As ever, this year’s World Energy Outlook, to be released on 13 November, brings many changes from the 2018 edition. In this commentary, we wanted to highlight two in particular.
Introducing the Stated Policies Scenario
In this year’s Outlook, the New Policies Scenario is renamed as the Stated Policies Scenario (the acronym is STEPS – STated Energy Policies Scenario). As with its predecessor, this scenario is designed to reflect the impact not just of existing policy frameworks, but also of today’s stated policy plans. The name change underlines that this scenario considers only those policy initiatives that have already been announced. The aim is to hold up a mirror to the plans of today’s policy makers and illustrate their consequences, not to guess how these policy preferences may change in the future.
The planned policies analysed in this scenario cover a wide spectrum. For example, a country might state that it intends to remove fossil-fuel consumption subsidies or, alternatively, that it will walk back a previous reform. Another might say that it will tighten future fuel efficiency standards or step up support for electric vehicles. One might open up new resource developments in oil and gas while another might limit them.
Many countries today are raising their ambitions for clean energy deployment, as reflected by the rising interest in offshore wind that we explored in depth in a special focus from this year’s World Energy Outlook that was released separately in Copenhagen last week. Countries may also announce new rural electrification targets or ambitions to bring clean fuels to parts of their population that rely on firewood or other solid biomass for cooking.
All of these stated policies are assessed individually and their impacts are modelled. In our updated and expanded online explainer on the World Energy Model, the large-scale simulation model that is used to generate all our projections, we have made all the key policy assumptions available for all scenarios, along with all the underlying assumptions on population, economic growth and energy resources (which are held constant across the scenarios) and information on prices and technology costs (which vary by scenario depending on the market and policy context).
There is one type of policy announcement that deserves special attention: the growing number of long-term decarbonisation targets, including “net zero” commitments. After the UN Climate Summit in September, there were at least 65 jurisdictions, including the European Union, that had set or were actively considering long-term net-zero carbon targets. These economies together accounted for 21% of global gross domestic product and nearly 13% of energy-related CO2 emissions in 2018.
Are these “net zero” targets all incorporated into the Stated Policies Scenario? It depends. The target has to be announced or adopted officially, but the crucial variable is how visible the pathway is to reach it. As always with the World Energy Outlook, the details matter. Is there a strategy to decarbonise heat? What about heavy industry? What about trucks or aviation? To the extent that these pathways are laid out, then the overall ambition is also reflected in this scenario.
And it’s not only about national governments: other commitments are becoming increasingly important, whether from sub-national authorities, cities, companies or investors. We also keep a close eye on changing public attitudes and preferences, as these can be very significant in shaping energy use (as, for example, with the rising popularity of SUVs).
In aggregate, these commitments are enough to make a significant difference. The comparison with the Current Policies Scenario, which only looks only at policies in place but from which the effects of announced policies are excluded, makes this clear. However, there is still a large gap between the projections in the Stated Policies Scenario and an energy system that meets global sustainable energy goals.
Extending the Sustainable Development Scenario to 2050
What should policy makers do? What pathways might help meet these targets? What technologies need a boost? Where should innovation, research and investment be directed? How can we balance growing energy demand with the need to reduce air pollution and carbon emissions? How can millions of people gain access to critical energy services while also meeting climate goals?
The IEA seeks to help policy makers in government and industry shape a more secure and sustainable energy future. This is why the World Energy Outlook has been providing detailed climate mitigation scenarios for more than a decade. Two years ago, we introduced a new scenario, the Sustainable Development Scenario, which also incorporates two other crucial elements of the Sustainable Development agenda: cleaner air and universal access to energy, in addition to climate targets.
In the IEA’s view, these elements are profoundly interconnected aspects of global energy transitions. The Sustainable Development Scenario is one of the very few deep decarbonisation scenarios that considers all of them in detail and provides a pathway that achieves them simultaneously, along with detailed attention to the security and affordability of energy supply. In our view, no vision of a sustainable energy world can be considered complete if parts of the global population do not have access to modern energy.
Another new feature of this year’s WEO is that the horizon for the Sustainable Development Scenario is extended by a decade to 2050. This has little impact on achieving modern energy for all, both for electricity and clean cooking. That goal is reached by 2030 in this scenario. But it provides a clearer view on how dramatic improvements in air quality reduce pollution-related premature deaths. And it gives considerable additional clarity on how the scenario meets the Paris Agreement goal of holding the rise in global temperatures to “well below 2°C … and pursuing efforts to limit [it] to 1.5°C.”
The Sustainable Development Scenario models a rapid and deep transformation of the global energy sector. It is consistent with all the “net zero” goals contemplated today being reached on schedule and in full. The technology learning and policy momentum that they generate means that they become the leading edge of a much broader worldwide effort, bringing global energy-related CO2 emissions down sharply to less than 10 billion tonnes by 2050, on track for global net zero by 2070.
This means that the Sustainable Development Scenario is “likely” (with 66% probability) to limit the rise in the average global temperature to 1.8 °C, which is broadly equivalent to a 50% probability of 1.65 °C stabilisation. These outcomes are achieved without any recourse to net negative emissions.
How does this scenario relate to the pursuit of a 1.5 °C outcome? For one answer to this question, we turned to the IPCC Special Report on 1.5 °C. Almost all the 1.5 °C scenarios assessed by the IPCC (88 out of 90) assume some level of net negative emissions. A level of net negative emissions significantly smaller than that used in most scenarios assessed by the IPCC would provide the Sustainable Development Scenario with a 50% probability of limiting the rise in global temperatures to 1.5°C.
However, as we have pointed out in the past, there are reasons to limit reliance on early-stage technologies for which future rates of deployment are highly uncertain. That is why the Outlook has always emphasised the importance of early policy action. That is also why, in the WEO-2019, we explore what it would take to achieve stabilisation at 1.5 °C with a 50% probability without net negative emissions.
Two different types of scenario make a powerful mix
The World Energy Outlook incorporates two different approaches to scenario design. The first defines a set of starting conditions and sees where they lead; the Stated Policies Scenario and the Current Policies Scenario are of this type.
The second approach does the opposite, defining a set of ambitious future outcomes and then working out how they can be achieved: this is the principle underlying the Sustainable Development Scenario.
Each of these approaches, on its own, offers powerful insights. In combination, they provide a broad perspective not just on the energy and climate challenges that we face today, but on what can be done to address them.
*Tim Gould, Head of Division for Energy Supply Outlooks and Investment.
