Access, Development and Climate Change: Where does the rubber meet the road?

Access, Development and Climate Change: Where does the rubber meet the road? Columbia Global Energy Program Columbia University, New York City February 8, 2018 Philippe Benoit Managing Director Energy Global Infrastructure Advisory Services 2050 philippe.benoit@gias2050.com

Act 1 Energy drives our climate constraint

Energy s GHG emissions 50 GtCO 2 -eq 45 40 35 30 25 20 15 10 Total anthropogenic emissions (including LUCF) Energy sector emissions Energy sector is a key driver as it represents over 60% of human generated emissions... 5 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 Source: IEA graphics

Act 2 energy demand drives energy emissions

GHG emissions/climate change and energy demand are closely linked Left axis: Primary energy demand Right axis: Energy-related CO 2 emissions ~ 6 o C ~ 4 o C ~ 2 o C Source: IEA s WEO 2015

The climate change constraint has fundamentally altered sustainability of energy for development

Act 3 Access and the climate constraint

Lack of energy access continues to affect billions Number of people without modern energy access by selected region, 2016 China Sub-Saharan Africa Middle East 12 17 457 India Latin America 21 88 588 848 834 239 Rest of developing Asia 200 583 Source: IEA WEO 2017; OLADE Nearly 1.1 billion people without electricity and 2.8 billion without clean cooking facilities Million people without electricity Million people without clean cooking facilities This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

What impact will access have on energy demand and climate? IEA s 2017 Energy Access Outlook Report [0.3% of 13,500 Mtoe] [incl.119twh] [0.2% of 32Gt] Source: Reproduced from IEA WEO Access Special Report 2017

Source: Production and emissions from 2014 IEA data How much power & emissions in providing access to 1.1 billion? Population (billions) Power Generation (TWh) Power CO 2 emissions (Gt) Power CO 2 / 1.1 billion (Gt) % of Energy CO 2 (32GT) Uni. elec access WEO 2011 1.1 840 0.2 0.2 0.7% US 0.3 4,200 2.0 7.3 23% Europe (EU) 0.5 3,100 1.1 2.8 7% China 1.3 5,000 4.1 3.5 10% India 1.3 1,100 1.0 0.8 2% Sub-Saharan Africa 1.1 440 0.3 0.3 0.9%

What impact will basic access have on energy demand and climate... a. Upward pressures: population needing access might grow from 1.1 billion today to >1.5 billion by 2030 if no action (Cf. WEO 2011) b. Downward dynamics: from access to actual energy consumption Poor (mostly rural) populations don t consume much Limited resources and limited opportunities for consumerism From energy consumption to CO 2 emissions: High % rural population (~85%) and many remote households (e.g., logistical challenges for re-fueling) favors off-grid, incl. small/mini grids and household systems facilitates renewable systems. Various donors have preference for renewables High % of renewables further delinks access from emissions

What impact will basic access have on energy demand and climate... a. Upward pressures: population needing access might grow from 1.1 billion today to >1.5 billion by 2030 if no action (Cf. WEO 2011) Energy for all* by 2030 b. Downward dynamics: from access to actual energy consumption would increase only minimally Poor (mostly rural) populations don t consume much Limited resources and limited opportunities for consumerism global demand ( ~ 1% or less) From energy consumption to CO 2 emissions: and High % rural population (~85%) and many remote households (e.g., logistical challenges for re-fueling) favors off-grid, incl. small/mini grids and household systems GHG emissions ( ~ 0.5% to negative) facilitates renewable systems. Various donors have preference for renewables High % of renewables further delinks access from emissions * Basic access

Act 4 How the energy for development dynamic has pivoted to domestic consumption

Shift from energy for development via revenues from extractives North South $

GDP and domestic energy demand: partners in China s growth to date 94% access 98% access 100% access Source: IEA; Access source: indexmundi from World Bank

GDP and domestic energy demand: partners in India s growth to date Source: IEA - WEO 2015 India Special Report

GDP and domestic energy demand: partners in Brazil s growth to date Source: IEA - WEO 2013

Domestic energy consumption in developing countries has been driving development

Act 5 Looking ahead: even more energy for development

China s energy demand: still growing, albeit at a slower rate Total primary Energy energy demand demand in China & GDP in China Energy demand (Mtoe) 49 000 3 000 6 000 2 000 3 000 1 000 Energy demand GDP Renewables Nuclear GDP Gas Energy Oil demand Coal 60 40 20 GDP (trillion dollars, PPP) 2000 2010 2020 2030 2040 Source: IEA Graphics- WEO 2014, 2015

Energy demand in India growing rapidly going forward Source: IEA - WEO 2015 India Special Report

Global demand: Developing countries set the pace while OECD recedes Projected change in energy demand in selected regions, 2014-2040 Mtoe 1 200 900 600 300 0-300 Latin America West Asia Southeast Asia Africa China India Japan United States European Union Source: IEA - WEO 2014, 2015

Developing countries set the pace on energy demand while OECD recedes 14000 Total Primary Energy Demand: OECD vs. non-oecd (Historic and Forecast) OECD Non-OECD Million Tonnes of Oil Equivalent (Mtoe) 12000 10000 8000 6000 4000 2000 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040 Source: Center for Strategic and International Studies Energy and National Security Program Source: Adapted from BP and IEA data (August 2017) Source: Ladislaw, Benoit (CSIS, 2017)

What is driving future demand growth? The Emergent Consumer Class What is the emergent consumer class? middle class segment ($10-100/d/person, 2005 PPP), rich (>$100/day), and aspirants consumer segment (~$3-10/d) wedged between middle and extreme poor; Emergent consumer class does not include extreme poor, who consume little (except local traditional biomass, with little impact on global flows) Numbers growing from less than 2B in 1990 to nearly 4B in 2015 to over 6B in 2030 (OECD pop remains constant around 1.2B) Developing country energy demand projected to grow by nearly 4000 Mtoe by 2040 (double the U.S. demand), while access needs <200 Mtoe Source: Benoit (CSIS, 2018)

What is driving future demand growth? The Emergent Consumer Class Emergent consumer class responsible (directly and indirectly) for most of energy demand More demand for: Transport (from minibuses to commuter trains to personal cars) New homes/apartments, cars, petrochemicals, appliances, ACs, etc. China s emergent consumer population grew from less than 60% in 1990 to over 96% today China s exporting smaller share of its GDP (down from 35% in 2006 to 18% in 2016); GDP net of exports is over $9 trillion; net exports <5% of GDP; more/most of its GDP is being used for domestic consumption In 2018, Chinese domestic retail purchases projected to equal U.S. at $5.8 trillion (more than the GDP of Japan, Germany or any other country) As China goes, will (can) other developing countries follow? Source: Benoit (CSIS, 2018)

E.g.: Middle class segment of Emerg. Cons. Class is getting bigger & consuming more 7 Developing countries: Middle Class and its expenditures 50 Population (billions) 6 5 4 3 2 1 45 40 35 30 25 20 15 10 5 PPP, constant 2011 billion $ 0 2015 2030 0 Mid Class Pop $ Consumption Source: Kharas, 2017 Brookings 2016

Exploding demand for cars in developing countries Passenger vehicle growth to 2050 (6DS) Source: IEA Mobility Model Large projected increase in non-oecd countries Source: IEA 2014

Cities in emerging/developing economies will be critical Final energy demand in the 4DS 600 500 Urban Emerging/developing Urban non-oecd EJ 400 Urban - World 300 Urban OECD OECD Developed economies Urban Urban 200 Non-Urban World 100 0 2015 2020 2025 2030 2035 2040 2045 2050 Two-thirds of the growth in global energy demand to 2050 comes from cities in emerging and developing economies Source: IEA ETP 2016

Energy CO 2 emissions in developing countries and the 2 o C budget 35 Emissions for Developing Countries compared to World in 2 o C 30 CO 2 emissions (Gt) 25 20 15 10 5 0 1990 2000 2010 2015 2025 2030 2035 2040 Developing Countries (NPS) World (2oC) Developing Countries (2oC) * World also includes bunker and aviation emissions Source: IEA data WEO 2017

The needs of developing countries for energy to promote growth is at the center of the climate dynamic (this is where the rubber meets the road )

Most action in 2 o C Scenario takes place in developing countries 60 Other OECD 9% 50 United States 13% 40 European Union 7% GtCO2 30 20 Other non-oecd 15% Other emerging economies 14% India 13% 10 China 29% 0 1990 2000 2010 2020 2030 2040 2050 Source: IEA ETP 2014, 2015

Bulk of low carbon investments take place in developing countries Power sector technology deployment rates in the 2DS Source: IEA ETP 2014, 2015

Act 6 How to grow while lowering energy emissions

Renewables growth has shifted to developing countries Projected growth of 40% in cumulative capacity from 2014-2020 (700 GW) Shares of net additional renewable capacity, 2014-20 India 9% Brazil 5% Rest non-oecd 13% EU 13% USA 9% Japan 5% Rest OECD 8% China 38% As the OECD slows, non-oecd countries account for two-thirds of renewable growth, driven by fast-growing power demand, diversification needs and local pollution concerns Source: IEA 2016

Sustainable transport systems: cheaper cleaner way to provide service Urban transport investments USD trillion 8 7 6 5 4 3 2 1 Vehicles Internal combustion engine Electrified Infrastructure Parking and road Metro and light rail 0 4DS 2015 2050 2DS Source: IEA ETP 2016 In the 2DS, by 2050 one billion cars are electric vehicles while public transport travel activity more than doubles

Cooling and heating: the growing elephant in the room Global urban heating and cooling demand 40 30 Cooling Non-OECD EJ 20 OECD Cooling 10 Heating Heating Non-OECD 0 4DS 2DS OECD 2013 2050 Heating and cooling energy demand in cities can be reduced by 25% without compromising thermal comfort, particularly cooling in emerging economies Source: IEA ETP 2016

Energy has an air pollution problem that can motivate climate action Pollutant emissions, 2015 Nitrogen oxides (NO X ) Sulfur dioxide (SO 2 ) Fine particulate matter (PM 2.5 ) 108 Mt 81 Mt 41 Mt Coal 43% >99% Oil >99% 85% Biomass 61% 43% Coal Oil Energy-related Gas Non-energy Bioenergy Other Energy is the single most important cause of emissions of all main pollutants Source: IEA WEO AQ special report launch presentation, 2016

Energy has an air pollution problem that can motivate climate action Pollutant emissions, 2015 Nitrogen oxides (NO X ) Sulfur dioxide (SO 2 ) Fine particulate matter (PM 2.5 ) 108 Mt 81 Mt 41 Mt >99% >99% 85% Energy-related Non-energy Energy is the single most important cause of emissions of all main pollutants Source: IEA WEO AQ special report launch presentation, 2016

Act 7 Access and the climate constraint - revisited

Energy consumption increases with increasing incomes out of poverty 3,500 (in Latin America) 3,000 Annual energy expenditure (US$) 2,500 2,000 1,500 1,000 500 0 Poorest D2 D3 D4 D5 D6 D7 D8 D9 Richest Expenditure (~income) decile Source: IDB, Jimenez, Yepez, (2017)

CO 12 2 /capita has changed over time as poverty has reduced 10 8 tco2/capita 6 4 China India 2 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: IEA - Track the energy transition (2015)

Basic access affects climate only at the margin but longer-term fuller prosperity will change the equation

Growth in developing country energy demand is compatible with 2 o C goal 12000 Non-OECD 10000 8000 6000 4000 2000 0 1990 2015 2040 (450 Scenario) Source: IEA Total Energy Demand (Mtoe)

Act 8 but what happens in developed economies remains key

CO 2 energy GHGs shares: CO 2 emissions (Gt) 30 25 20 15 10 5 0 1990 2010 2020 (NPS) 2040 (NPS) 2040 (450) OECD Non-OECD Source: IEA data WEO 2016

OECD and Non-OECD GDP/capita $50,000.00 GDP per Capita, 2013 $45,000.00 $40,000.00 $35,000.00 US 2005 PPP $30,000.00 $25,000.00 $20,000.00 $15,000.00 $10,000.00 $5,000.00 $- Source: IEA Graphics- Global Average

CO 2 emissions per capita 16 tco2/capita 14 12 10 8 6 OECD Americas OECD Asia Oceania OECD Europe China 4 2 India Africa 0 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Source: IEA - Track the energy transition (2015)

Epilogue Closing thoughts

Some closing thoughts Energy has fueled the recent economic & social development boom but climate constraint fundamentally alters the role of energy going forward As developing countries grow, energy demand will also grow... While some growth in energy demand in developing countries is consistent with 2 o C target, we need to delink economic growth from emissions Need to meet challenge of increasing household/business consumption that will accompany poverty reduction and wealth creation Requires focus on the emergent consumer class (soon to number 6B) and their aspirations for transport, appliances, heating, cooling, etc. Access for 1.1B poorer households only affects climate at the margin but as poor (hopefully) move towards middles class status, increasing consumerism and energy demand will generate pressure on climate Lowering emissions in developed countries faster and deeper leaves more room for growth in developing countries consistent with 2 O C

Thank You