Competitiveness of non-carbon technologies
It is often believed that climate policies should mainly aim to accelerate the introduction of carbon-free or
carbon-lean energy technologies in competitive markets. Implicitly, this view supposes that sooner or later
these technologies will become fully competitive on their own merits, and will be able to compete with
increasingly scarce carbon emitting fossil fuels. Inherent in this view is that if we support pre-competitive
technologies, they can ultimately take over in the market.
1
It may be argued that the full life cycle of these so-called “carbon free” technologies still involve some
carbon emissions. Building a nuclear power plant or manufacturing PV cells requires fair amounts of energy – and
currently this implies CO2 emissions. This however, reflects the current energy mix. If the proportion of these
technologies increases in the energy mix, the production of power generating capacity will progressively involve less
indirect carbon emissions.
2
While various concepts for such reactors have been suggested, industrial developments remain hypothetical only;
see IEA et al.,
2002 for a more complete discussion.
3
For example, most macro-economic models project a substantial continued growth in global CO2 emissions from the
energy sector under a business as usual scenario. (see, for example, IEA, 2002c)
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This perception tends to fuel the vision that technological change alone is the key to solving the climate
change problem. But this vision may well rest on an incorrect perception of market and technology
dynamics.
The fossil fuel resource base contains much more carbon than the atmosphere can likely accommodate in a
way that would respond to the ultimate objective of the climate change UN Convention. While all
conventional oil and gas resources could be burned without driving CO2 concentrations above a 450 ppm
level, unconventional resources and, first and foremost, coal are plentiful and their full use would drive
concentrations to very high levels (see, e.g., IEA 2002a, p.44).
Moreover, the fossil fuel industry has demonstrated a great capacity to react to changing energy prices by
reducing costs through technological changes. In the early 1980s cost of oil from new deep-water
platforms was estimated to be around US $25/bbl. Today such fields are still being developed with
production costs of about US $ 10/bbl – thanks to many technical improvements.
Other technology refinements have effectively alleviated– at least to some extent –concerns for the local
environment arising from the production and use of fossil fuels. Air pollution has been significantly
reduced in all Member countries (either from fuel switching, from fuel cleaning or from end-of-pipe
technologies). Environmental regulations have and will continue to add costs to using fossil fuels –
although seldom enough to make them costlier than alternatives. “Ancillary benefits” of CO2 emission
reduction strategies must be factored in, but there should be no presumption that fossil fuels will become
uncompetitive if local environmental issues are given more weight in the future.
While conventional oil and gas resources inexorably move toward eventual exhaustion, the magnitude of
the coal resource suggests that almost any near-term energy future will likely rest (at least in part) on coal,
and may well include massive conversion of coal into synthetic fuels. Such technologies already exist and
their deployment will likely drive costs down. There is no guarantee that non-carbon sources or capture
and storage will ever be fully competitive with coal-based synthetic fuels for transport or home use – and
even less with coal-fuelled electric power.
As a consequence, there is no guarantee that strategies focussing on research and development (including
dissemination efforts) of carbon-free technologies will necessarily be successful. This is particularly true if
technologies are developed under current market conditions rather than with changes in the pricing of
climate change externalities. In fact, the level of stabilised atmospheric CO2 concentrations possibly
achieved following strategies focussing exclusively on technological change “push” is unknown.
2.3 Non-carbon energy futures
A growing number of studies undertaken by companies, governments, academics or diverse institutions or
NGOs attempt to evaluate long term non-carbon energy futures, either at global level or at country level
(for a review of recent work, see IEA, 2002i). An example of ongoing work is the IEA/EU collaborative
ACROPOLIS project. This projects is investigating, through the use of fifteen global, regional and national
models, policies that might bring about the development and penetration of sufficient low-carbon
technologies to reduce GHG emissions. The model simulations explore some possible policy impacts on
total energy system costs, total primary energy supply, CO2 emissions, electricity generation capacity and
the share of different technologies in both power generation and energy end-use. The time horizon
considered by the models varies from 2020 to the year 2100 (IEA, 2003e).
While this body of work is essentially descriptive, it also has a normative function. By illustrating various
and contrasted possible energy futures it suggests that some are more desirable than others – in particular,
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but not exclusively, in terms of climate change and the environment. Thus, these scenarios might be used
to engage policymakers and society at large in a discussion of what the future may look like –
or of what
the future should look like. Eventually, short-term decisions could be inspired by the willingness to see
some of these scenarios become reality – and to avoid the realisation of others.
Scenarios established by governments may be even more normative. For instance, the recent UK’s Energy
White Paper “Our energy future – creating a low carbon economy”4
clearly sets goals: to put the UK on a
path to cut the country’s CO2 emissions by some 60% by about 2050; to maintain the reliability of energy
supply; to promote competitive markets in the UK and beyond; and to ensure that every home is
adequately and affordably heated. The White Paper, however, does not indicate what the energy
consumption could be in 2050, nor does it describe the energy mix of the country at the time. While it
provides for some targets in 2010 (e.g. for renewable energy), its energy scenario for 2020 remains
qualitative.
In sum, the variety of available scenarios, as well as the information reviewed in the Appendix, suggest
that there is no uniquely valid technology path for a given energy and environment future. However, future
work could include the building or the review of various and contrasted indicative scenarios.
