Global Energy Dilemmas: Revisited

By Michael Bradshaw

When it comes to global energy consumption, business as usual is no longer an option. Here Michael Bradshaw reflects on the energy dilemmas we face today, at the beginning of what will be a crucial year in determining the international community’s future energy agenda.

It is now a year since my book‭ ‬Global Energy Dilemmas ‬was published‭ ‬‮–‬‭ ‬and nearly two years since I sent the completed manuscript to the publisher‭. ‬Last month I participated in an event entitled‭ ‬“Geography 2050‭: ‬mounting an expedition to the future‭”, ‬organised by the American Geographical Society and hosted by the Earth Institute at Columbia University‭. ‬The occasion gave me the opportunity to reflect on what has changed since I finished‭ ‬Global Energy Dilemmas and to consider the major challenges we face in the coming years in orchestrating a transition to a more sustainable energy system‭. ‬This article is the fruit of those thoughts‭.‬

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The central thesis of my book is that the world faces an energy dilemma: can we have access to secure, affordable and equitable energy services that are environmentally benign? I say energy services because that is what we demand of the energy system – light, heat and motion etc. – and in each instance there are multiple ways in which the energy system can provide those services. For example, electricity can be generated from a wide variety of sources and the prime movers in the global economy have gone through a series of transitions: from animate, wind and hydro power through inanimate fossil fuels, nuclear power and back to hydro power, wind and other renewables.

Climate change is real and demands that we transform the global energy system.
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The ways in which we secure our energy services has important implications for the impact of the energy system on the environment. All energy sources have environmental impacts, most of which – such as air pollution – are relatively localised; climate change is different in this respect because it is global in impact and thus requires a global solution. It is the process of industrialisation – which has enriched the so-called “developed world” – that is the root cause of the high levels of carbon dioxide (and other green house gases, or GHG) in the atmosphere today. The latest figures from the IEA suggest that the concentration of CO2 in the atmosphere in 2013 (396 parts per million in volume or ppmv) was 40 percent higher than in the mid-1980s.1 In 2010 the energy system accounted for 69 percent of total anthropogenic GHG emissions. Thus, the energy system is centre stage in any policy that aims to constrain and then reduce global GHG emissions. The notion of “secure, affordable and equitable” access to energy services encapsulates the concept of energy security, and the trade-off between this, environmental sustainability and affordability (and the related concern of economic competitiveness) is often described as the energy trilemma. Following on from the recent series of reports from the Intergovernmental Panel on Climate Change (IPCC), the starting point in this analysis is that climate change is real and demands that we transform the global energy system. However, to do that we must first identify the key processes that drive CO2 emissions.

 

The ‘Kaya Identity’: Putting it All Together

The bulk of the anthropogenic CO2 currently in the atmosphere originated in the OECD economies, which now have a moral obligation to make space in the atmosphere for the future emissions required to meet the demands of the emerging regions and lift the global south out of poverty.

The analysis at the heart of Global Energy Dilemmas deploys the “Kaya Identity”, developed by Japanese energy economist Yoichi Kaya, that is also at the centre of analysis by the IPCC, the International Energy Agency (IEA) and the US Energy Information Administration (EIA), to mention just three. This simple formula postulates that total emissions of Carbon Dioxide from energy are the result of four factors: the carbon intensity of energy (the amount of carbon emitted per unit of energy produced); the energy intensity of the economy (the amount of energy consumed per unit of energy produced); the level of economic activity measured as gross domestic product per capita (or Gross National Income or GNI); and the size of the population. The growth rate of each factor provides an indication of their relative importance to different economies at particular times in their development. The associated concept of energy transitions suggests that national economies, and with them the global economy, have gone through periods when particular primary energy sources dominated the energy mix – thus influencing the carbon intensity of energy use – and when there was a particular relationship between energy and economic growth. Thus, the early phases of industrialisation are associated with high levels of carbon intensive (coal) energy consumption per unit of output (heavy industry); but as the economy matures and eventually moves into a post-industrial phase, so energy consumption and economic growth are “decoupled”. The related notion of the “demographic transition” also stipulates that as an economy develops and restructures, so its demographic characteristics change and the rate of population growth slows. This is significant because more people equals more energy demand, which in turn equals more GHG emissions – especially if those people live in cities and benefit from rising living standards.

 

Mapping the Kaya Identity

A mapping of the geographies of the different elements of the Kaya Identity reveals a common spatiality dominated by two axes: a north-south axis of relative economic development and population growth; and a west-east axis of economic growth and energy demand growth. The two combine to highlight the fact that the global system is in a process of transition as the old-world dominance of the industrially developed West is being surpassed by the dynamism of Emerging Asia, the potential of Latin America and the promise of sub-Saharan Africa. Late last decade the non-OECD (Organisation for Economic Co-operation and Development) countries exceeded the OECD as the major consumers of global energy and all of the projections agree that the vast majority – 90 percent plus – of future energy demand growth will come from the non-OECD. How those countries meet that demand for energy services will have a profound impact on the concentrations of GHG gases in the atmosphere. However, we should not lose sight of the fact that the bulk of the anthropogenic CO2 currently in the atmosphere originated in the OECD economies, which now have a moral obligation to make space in the atmosphere for the future emissions required to meet the demands of the emerging regions and lift the global south out of poverty. This is what is understood by “common, but differentiated responsibilities” and sooner, rather than later, those emerging economies must also peak and constrain their own emissions if we are to stay within the planetary boundaries to limit global warming to 2˚C or thereabouts (the internationally agreed target). China’s recent commitment to peak its emissions by 2030 is an important step in the right direction.

 

Different Strokes for Different Folks

The cumulative consequence of the different geographies of the Kaya Identity is that different regions face a different take on the global energy dilemma. In the original analysis four types of energy dilemmas divided the world: the High-Energy Societies (the OECD), the Post-Socialist States, the Emerging Economies and the Developing World. A contemporary reassessment suggests a more conventional division along the lines used by the World Bank: High Income, Middle Income – divided into Lower and Upper Middle Income – and Low Income. The starting point for the original analysis was 1990, the base year for the Kyoto Protocol, but this also straddled the fall of the Berlin Wall in 1989 and the collapse of the Soviet Union in 1991. The end of the Centrally Planned Economy, renowned for its low energy efficiency and high levels of environmental degradation, brought windfall gains to the global climate in terms of lower GHG emissions (a recent analysis by The Economist suggests that the Collapse of the USSR saved 709 million tons of CO2 emissions between 1992 and 1998, or 118 million tons a year).2 It is now more than 20 years since the collapse of the Soviet Union and the 27 “transition economies” have found their own places in the global political economy. Some have joined the EU, while others have joined the ranks of the developing world. As ever, Russia has followed its own path and continues to defy simple categorisation. The net result is that the Post-Socialist States no longer have a common signature in the global energy system.

 

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Source: World Bank Development Indicators 2014.3

 

Table 1 presents the relative share of the global regions along the dimensions of the Kaya Identity. The original analysis covered the period from 1990 to 2008 and made it clear that the most dynamic element was the emerging economies, synonymous with the World Bank’s Upper Middle income category. After two decades of growth the relative weight of the global economy is shifting in their direction. That their share of global Gross National Income (GNI) is significantly lower than their share of total energy use and carbon dioxide emissions highlights that they are at the energy – and carbon-intensive stage of the development process. The high-income societies now account for 68.1 percent of global GNI, but only 49.4 percent of energy use and 47.0 percent of emissions. This reflects the impact of economic restructuring, energy efficiency gains and the relative decarbonisation of their energy systems. As noted by BP in their 2035 energy outlook: “global energy intensity is improving rapidly, converging across countries at lower and lower levels”, and they project it to decline by 36 percent by 2035.4 They also note that carbon intensity is declining at a slower pace; the reason for this is that emerging economies such as China and India have powered their economic growth on the basis of coal, which has made a significant contribution to the growth of global carbon emissions. It is noteworthy that neither energy intensity nor carbon intensity are declining anywhere near fast enough to constrain global carbon emissions.

That the low-income economies are home to 11.9 percent of the world’s population but account for less than one percent of global energy use highlights the problem of energy access in the global south. According to the UN: “Worldwide, nearly 2.4 billion people still use traditional biomass fuels for cooking and nearly 1.6 billion people do not have access to electricity”. UN Secretary-General Ban Ki-moon has described Energy as “the golden thread that connects economic growth, increased social equity, and an environment that allows the world to thrive”. Perhaps in recognition that energy access was the missing Millennium Goal, the UN has declared 2014-2024 the “Decade of Sustainable Energy for All” and has set the following targets: ensuring universal access to modern energy services; doubling the rate of improvement in energy efficiency; and doubling the share of renewable energy in the global energy mix.5

 

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The Triple Global Energy Challenge

Analysis of the dynamics of the Kaya Identity suggests that the global energy system faces a triple challenge: to improve energy intensity, that is to reduce the amount of energy used per unit of economic output; to reduce the carbon intensity of energy use, that is to reduce the amount of CO2 produced per unit of energy used, and to achieve the above in ways that are: secure, affordable and equitable (and that do not threaten economic growth). The recent “Better Growth, Better Climate” report suggests that the starting point must be to “get energy pricing right, implementing energy prices that enable cost recovery for investment and less wasteful use of energy, and removing subsidies for fossil fuel consumption, production and investment”.6 The current fall in oil prices provides an opportunity to remove subsidies without prompting protest and this should not be missed.

 

A Global Agenda for Energy and Climate Change

The coming year, 2015, is a critical time for the energy and climate change debate. Increasingly it is understood that economic globalisation is the missing link that explains the changing relationship between energy and environment. The Millennium Development Goals, to be achieved by 2015, are set for assessment and the development agenda must also be reset. The issue of energy access must find a place in that new agenda. Towards the end of the year the World’s leaders will meet in Paris to discuss a global agreement on climate change. Early commitments from the EU, the US and China suggest a positive outcome, but the evidence from the recent negotiations in Peru in late 2014 suggests that any agreement will likely fall some way short of the radical reductions required by climate change science. But climate change pragmatism is surely better than no agreement at all? Whatever the outcome, it is clear that over the coming decades the global energy system must address three distinct challenges. The challenge for High-Energy Societies is to continue to promote energy efficiency and demand reduction while rapidly decarbonising energy services to achieve an 80% reduction in CO2 emissions from energy by 2050 (although it isn’t just about carbon). For the Emerging Economies the challenge is to secure the energy needed to fuel economic growth and improved living standards while constraining and then rapidly reducing CO2 emissions. For the Developing Economies the challenge is to ensure sustainable energy access for all and a future based on sustainable prosperity. For everyone, climate change now means that business as usual, which will inevitably result in a level of global warming above 2˚C, is no longer an option.

About the Author

fMichael Bradshaw is Pro-fessor of Global Energy at Warwick Business School, UK, and has a PhD from the University of British Columbia. His research focuses on the geopolitical economy of global energy. Michael’s publications include Global Energy Dilemmas (2013) and a forthcoming book on the geopolitics of natural gas.

References

1. IEA (2014). CO2 Emissions from Fuel Combustion – 2014 Edition.

2. ‘The Deepest Cuts’, The Economist, September 20 2014. Available at: http://www.economist.com/news/briefing/21618680-our-guide-actions-have-done-most-slow-global-warming-deepest-cuts

3. World Bank Development Indicators 2014. Available at: http://wdi.worldbank.org/tables

4. http://www.bp.com/content/dam/bp/pdf/Energy-economics/Energy-Outlook/Energy_Outlook_2035_booklet.pdf

5 http://www.se4all.org/decade

6. http://newclimateeconomy.report

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