Energy and climate change

In the Fourth Assessment Report1, the Intergovernmental Panel on Climate Change (IPCC) concluded, "Most of the observed increase in global average temperatures since the mid-20th century is very likely due to the observed increase in anthropogenic greenhouse gas concentrations". The language "very likely" has been upgraded from the "likely" that was referred to in the Third Assessment Report, thus confirming the increasing acceptance by scientists of the link between GHG emissions and global climate change. Energy production and use has various environmental implications. In particular, fuel combustion is responsible for the largest share of global anthropogenic greenhouse gas emissions.

Greenhouse gases and global warming

The increased concentrations of key greenhouse gases are a direct consequence of human activities. Since anthropogenic greenhouse gases accumulate in the atmosphere, they produce net warming by strengthening the natural "greenhouse effect".

1. IPCC Fourth Assessment Report — Climate Change 2007, available at http://www.ipcc.ch. In the summary for Policymakers, the following terms have been used to indicate the assessed likelihood, using expert judgement, of an outcome or a result: Virtually certain > 99% probability of occurrence, Extremely likely > 95%, Very likely > 90%, Likely > 66%, More likely than not > 50%, Unlikely < 33%, Very unlikely < 10%, Extremely unlikely < 5%.

2. The IPCC was created in 1988 by the World Meteorological Or ganization and the United Nations Environment Programme to assess scientific, technical and socio-economic information relevant for the understanding of climate change, its potential impacts, and options for adaptation and mitigation.

Carbon dioxide (CO2) has been increasing compared to the rather steady level of the pre-industrial era (about 280 parts per million in volume, or ppmv). The 2005 concentration of CO2 (379 ppmv) was about 35% higher than a century and a half ago, with the fastest growth occurring in the last ten years (1.9 ppmv/year in the period 1995-2005). Comparable growth has occurred in levels of methane (CH4) and nitrous oxide (N2O).

Some impacts of the increased greenhouse gas concentrations may be slow to become apparent since stability is an inherent characteristic of the interacting climate, ecological, and socio-economic systems. Even after stabilization of the atmospheric concentration of CO2, anthropogenic warming and sea level rise would continue for centuries due to the time scales associated with climate processes and feedbacks. Some changes in the climate system would be effectively irreversible.

Given the long lifetime of CO2 in the atmosphere, stabilizing concentrations of greenhouse gases at any level would require large reductions of global CO2 emissions from current levels. The lower the chosen level for stabilization, the sooner the decline in global CO2 emissions would need to begin, or the deeper the emission reduction would need to be on the longer term.

The 1992 U.N. Framework Convention on Climate Change (UNFCCC) sets an overall framework for intergovernmental efforts to tackle the challenge posed by climate change. The Convention's ultimate objective is to stabilise GHG concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system. This would require significant reductions in global greenhouse gas emissions.

3. See http://unfccc.int.

Energy use and greenhouse gases

Among the many human activities that produce greenhouse gases the use of energy represents by far the largest source of emissions. As seen in Figure 1, energy accounts for over 80% of the anthropogenic greenhouse gases in Annex I countries, with emissions resulting from the production, transformation, handling and consumption of all kinds of energy commodities. Smaller shares correspond to agriculture, producing mainly CH4 and N2O from domestic livestock and rice cultivation, and to industrial processes not related to energy, producing mainly fluorinated gases and N2O.

Figure 1. Shares of anthropogenic greenhouse gas emissions in Annex I countries, 2005*

Figure 1. Shares of anthropogenic greenhouse gas emissions in Annex I countries, 2005*

Source: UNFCCC.

* Based on Annex I data for 2005; without Land Use, Land Use Change and Forestry, and with Solvent Use included in Industrial Processes.

Source: UNFCCC.

* Based on Annex I data for 2005; without Land Use, Land Use Change and Forestry, and with Solvent Use included in Industrial Processes.

Key point: Accounting for the largest share of global greenhouse gas emissions, energy emissions are predominently CO2.

The energy sector is dominated by the direct combustion of fuels4, a process leading to large emissions of CO2. A by-product of fuel combustion, CO2 results from the oxidation of carbon in fuels (in perfect combustion conditions, the total carbon content of fuels would be converted to CO2).

CO2 from energy represents about 80% of the anthropogenic greenhouse gas emissions for the Annex I

4. Energy includes emissions from "fuel combustion" (the large majority) and "fugitive emissions", which are intentional or unintentional releases of gases resulting from production, processes, transmission, storage and use of fuels (e.g. CH4 emissions from coal mining or oil and gas systems).

countries and about 60% of global emissions. This percentage varies greatly by country, due to diverse national energy structures.

Worldwide economic stability and development require energy. As illustrated in Figure 2, the total primary energy supply (TPES) of the world doubled between 1971 and 2006, mainly relying on fossil fuels.

Figure 2. World primary energy supply*

Gigatonnes of oil equivalent

Figure 2. World primary energy supply*

Gigatonnes of oil equivalent

81%

14%

86%

1971 2006

* World primary energy supply includes international bunkers.

Key point: Fossil fuels still satisfy most of the world energy supply.

Despite the growth of non-fossil energy (such as nuclear and hydropower) considered as non-emitting6, fossil fuels have maintained their shares of the world energy supply relatively unchanged over the course of the past 35 years. In 2006, fossil sources accounted for 81% of the global TPES.

Still dependent upon fossil fuels, the growing world energy demand clearly plays a key role in the observed upward trends in CO2 emissions illustrated in Figure 3. Since the industrial revolution, annual CO2 emissions from fuel combustion dramatically increased from near zero to 28 Gt CO2 in 2006.

5. Based on Annex I countries. The Annex I Parties to the UNFCCC are: Australia, Austria, Belarus, Belgium, Bulgaria, Canada, Croatia, Czech Republic, Denmark, Estonia, European Economic Community, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Italy, Japan, Latvia, Lichtenstein, Lithuania, Luxembourg, Monaco, the Netherlands, New Zealand, Norway, Poland, Portugal, Romania, Russia, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, Ukraine, United Kingdom and United States.

6. Excluding the life cycle of all non-emitting sources and excluding combustion of biomass (considered as non-emitting CO2, based on the assumption that the released carbon will be reabsorbed by biomass re-growth, under balanced conditions).

Figure 3. Trend in CO2 emissions from fossil fuel combustion

Gigatonnes of CO2

Figure 3. Trend in CO2 emissions from fossil fuel combustion

Source: Carbon Dioxide Information Analysis Center, Oak Ridge National Laboratory, U.S. Department of Energy, Oak Ridge, Tenn., United States.

1970

Source: Carbon Dioxide Information Analysis Center, Oak Ridge National Laboratory, U.S. Department of Energy, Oak Ridge, Tenn., United States.

Key point: Since 1870, CO2 emissions from fuel combustion have risen exponentially.

The World Energy Outlook projects that world energy supply will rise by 45% between 2006 and 2030. With fossil fuels remaining at 80% of TPES, CO2 emissions are consequently expected to continue their growth unabated, reaching 40.6 Gt CO2 by 2030.

IPCC projections of climate impacts are consistent with this growth in energy demand. Based on the IPCC report , by 2100, temperatures are projected to rise by between 1.8 and 4.0°C, depending on the scenario.

The link between climate change and energy is a part of the larger challenge of sustainable development. The socio-economic and technological characteristics of development paths will strongly affect emissions, the rate and magnitude of climate change, climate change impacts, the capability to adapt, and the capacity to mitigate the emissions themselves.

Scrutinizing the sources of CO2 emissions

Trends in CO2 emissions from fuel combustion illustrate the need for the global economy to shape a more sustainable energy future, with special emphasis first on the industrialised nations, with the highest per capita incomes and that are responsible for the bulk of cumulative emissions. However, with the rapidly growing energy demand of developing countries, it is important that they also strive to use energy in a rational way. Energy Technology Perspectives 2008 shows that enhancing energy efficiency and reducing the carbon intensity of a supply largely reliant on fossil fuels are fundamental steps towards a global low-carbon energy system.

Annual snapshot: 2005-2006

The most recent annual changes in CO2 emissions by fuel type are illustrated in Figure 4. The global increase between 2005 and 2006 was 0.9 Gt CO2 and was primarily due to an increase in the coal demand of developing countries (Non-Annex I Parties to the UNFCCC). This represented a growth rate of 3% in CO2 emissions, identical to that of the previous year.

Figure 4. Global change in CO2 emissions (2005-2006)

Million tonnes of CO2

900 800 700 600 500 400 300 200 100 0 -100

Figure 4. Global change in CO2 emissions (2005-2006)

Million tonnes of CO2

Coal Oil Gas Other

Total

Coal Oil Gas Other

Total

7. Unless otherwise specified, projections from the World Energy Outlook refer to the Reference Scenario from the 2008 edition.

8. IPCC Fourth Assessment Report — Climate Change 2007.

Key point: Combustion of coal in developing countries drove the growth in global emissions between 2005 and 2006.

In the future, coal is expected to satisfy much of the growing energy demand of those developing countries, such as China and India, where energy-intensive industrial production is growing rapidly and large coal reserves exist with limited reserves of other energy sources. Energy Technology Perspectives 2008 shows that intensified use of coal would substantially increase the emissions of CO2 unless there was very widespread deployment of carbon capture and storage.

1970

Fuel contribution to CO2 emissions

Emissions by region

Though coal represented only a quarter of the world TPES in 2006, as shown in Figure 5, it accounted for 42% of the global CO2 emissions due to its heavy carbon content per unit of energy released. As compared to gas, coal is on average nearly twice as emission intensive9. Without additional measures, the World Energy Outlook projects that coal supply will grow from 3 053 million tonnes of oil equivalent (Mtoe) in 2006 to 4 908 Mtoe in 2030.

The dramatic increase of Non-Annex I emissions between 2005 and 2006, seen in Figure 4 above, corroborated the growth already observed over the last decade. Figure 6 shows trends over the period 1971-2006, highlighting changes in the relative contributions from major world regions.

Figure 6. Trends in regional CO2 emissions

Gigatonnes of CO2

Figure 5. World primary energy supply and CO2 emissions: shares by fuel in 2006

Percent share

Figure 5. World primary energy supply and CO2 emissions: shares by fuel in 2006

Percent share

TPES*

34%

26%

21%

19%

CO2

39% I

42%

19%

* TPES includes international bunkers.

** Other includes nuclear, hydro, geothermal, solar, tide, wind, combustible renewables and waste.

Key point: Coal generates about twice the CO2 emissions of gas, despite having a comparable share in the world energy supply.

Oil still dominates TPES, with a share of 34% in 2006. However, the share of oil in TPES decreased by about ten percentage points since 1971, largely counterbalanced by the penetration of gas. The supply of gas in 2006 was more than two and a half times higher than in 1971 and its share in emissions increased by five percentage points over that period.

Observed and projected trends in TPES and CO2 emissions vary greatly by country, depending on stages of economic development and related energy choices, as illustrated in the next section.

Figure 6. Trends in regional CO2 emissions

Gigatonnes of CO2

1971 1990 2006

1971 1990 2006

* Asia includes Korea and excludes Japan (which is included in Annex II).

** Other includes Africa, Latin America, Middle East, Non-Annex I EIT, Turkey, international bunkers, and, for 1971, Annex I EIT.

Key point: Asian emissions will soon rival those of Annex II.

Between 1971 and 2006, global emissions nearly doubled, with industrialized countries (Annex II Parties to the UNFCCC10) dominating historical totals. However, the share of Annex II progressively shrank (61% in 1971, 47% in 1990 and 40% in 2006), as developing countries, led by Asia, increased at a much faster rate. Between 1990 and 2006, CO2 emissions rose by 95% for Non-Annex I countries as a whole and more than doubled for Asia. This is in contrast to the 14% growth which occurred in the Annex II countries. The growth in Asian emissions reflects a striking rate of economic development, particularly within China and India.

9. IPCC default carbon emission factors from the 1996 IPCC Guidelines: 15.3 t C/TJ for gas, 16.8 to 27.5 t C/TJ for oil products, 25.8 to 29.1 t C/TJ for primary coal products.

10. The original Annex II Parties to the UNFCCC are Australia, Austria, Belgium, Canada, Denmark, European Economic Community, Finland, France, Germany, Greece, Iceland, Ireland, Italy, Japan, Liechtenstein, Luxembourg, Monaco, Netherlands, New Zealand, Norway, Portugal, Spain, Sweden, Switzerland, Turkey, United Kingdom and United States. Turkey was removed from Annex II on 28 June 2002.

Emissions from the group of countries with economies in transition (Annex I EIT11) followed a peculiar path due to a rapid decline in industrial productivity subsequent to the 1989 collapse of their centrally planned economies. Between 1990 and 2000, the EIT emissions declined by 36%. Emissions in the former USSR alone fell by over 1.4 Gt CO2, or 39%, between 1990 and 2000. However, this trend was reversed in recent years.

Regional differences in contributions to global emissions conceal even larger differences among individual countries, as illustrated in Figure 7. Two-thirds of world emissions for 2006 originated from just ten countries, with the shares of the United States and China far surpassing those of all others. Combined, these two countries alone produced 11.3 Gt CO2, about 40% of 2006 world CO2 emissions.

Figure 7. Top-10 emitting countries in 2006

Gigatonnes of CO2

Figure 7. Top-10 emitting countries in 2006

Gigatonnes of CO2

Key point: The top-10 emitting countries account for about two-thirds of the world CO2 emissions.

This top-ten group, which includes countries of very diverse economic structures, also produced 63% of the global GDP12. As detailed in the following section, economic output and CO2 emissions are generally strongly linked.

Coupling emissions with socio-economic indicators13

In 2006, the United States, China, Russia, India and Japan, the largest five emitters, produced together 55% of the global CO2 emissions, 50% of the world GDP and comprised 46% of the total population. However, for all three variables, the relative shares of these five countries within the subtotal of the group were very diverse, as illustrated in Figure 8.

Figure 8. Top-5 emitting countries: relative shares in 2006

Percent share

100%

CO2 GDP* Population

■ United States □ China □ Russia □ India □ Japan

* GDP using purchasing power parities.

Note: this is not "world shares", but "relative shares" within the top-five.

Key point: Within the top-5 emitting countries, the relative share of CO2 emissions does not necessarily follow those of GDP and population.

In 2006, the United States alone generated 20% of world CO2 emissions, despite a population of less than 5% of the global total. Conversely, China and India together, contributing to a comparable share of world emissions (20% and 4%), accounted for almost 40% of the world population. Thus, the levels of per capita emissions were very diverse, ranging from 1 tonne of CO2 per capita for India and 4 for China to 19 for the United States.

In the United States, the large share of global emissions is associated with a commensurate share of economic output (GDP), the largest in the world. While the high per capita emissions of the United

11. Annex I EIT Parties include: Belarus, Bulgaria, Croatia, Czech Republic, Slovak Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russia, Slovenia and Ukraine.

12. In this discussion, GDP refers to GDP using purchasing power parities.

13. No single indicator can provide a complete picture of a country's CO2 emissions performance or its relative capacity to reduce emissions. The indicators discussed here provide some guidance but are certainly incomplete.

States in 2006 were comparable to those of 1971, its emissions intensity in terms of economic output (CO2/GDP) was about half, due to energy efficiency improvements and to economic growth in less-CO2-intensive sectors over the 35-year period.

With a GDP about two and a half times larger than that of Russia, Japan emits 24% less. As illustrated for major world regions in Figure 9, economies can achieve quite diverse emission efficiencies.

Figure 9. CO2 emissions per GDP* by major world regions in 2006

Kilogrammes of CO2 per 2000 US$ PPP

World

Middle East Annex I EIT China** Other Non-Annex I Annex II North America Africa Annex II Pacific Asia excluding China Annex II Europe Latin America

* GDP using purchasing power parities. ** China includes Hong Kong.

Key point: Emissions intensity in economic terms varies greatly around the world.

Worldwide, the highest levels of emissions per GDP are observed for the oil and gas exporting region of the Middle East, for the relatively energy-intensive EITs and for China. The rapid decoupling of emissions from economic growth that characterized the Chinese economy during the 1980s and 1990s has recently slowed and reversed, as noted in subsequent sections.

Relatively high values of emissions per GDP indicate a potential for decoupling CO2 emissions from economic growth. Possible improvements can derive from fuel switching away from carbon-intensive sources or from energy efficiency at all stages of the energy supply chain (from fuel extraction to energy end-use)1 .

14. Since 1999, the IEA has collected and classified energy efficiency policies and measures of its member countries. The online database is available at: http://www.iea.org/textbase/effi/index.asp.

The ratio of CO2 emissions per GDP responds to changes in energy intensity (energy per unit of GDP) and in the CO2 intensity of the fuel mix (CO2 per unit of energy)15. For example, industrialized countries witnessed a rapid reduction in emissions per unit of GDP between 1973 and 1990, following the oil price shocks of the 1970s, through a decline in their energy intensity. On the contrary, even on a global scale, the CO2 intensity of the fuel mix (as measured for example by the ratio of CO2/TPES) has remained rather constant between 1971 and 2006 as fossil fuels continued to dominate the global energy supply.

As compared to emissions per unit of GDP, the range of per capita emissions levels across the world is even larger, highlighting wide divergences between living standards of different regions, as illustrated in Figure 10.

Figure 10. CO2 emissions per population by major world regions in 2006

Tonnes of CO2 per capita

World

Annex II North America Annex II Pacific Annex I EIT Annex II Europe Middle East Other Non-Annex I China* Latin America Asia excluding China Africa

* China includes Hong Kong.

Key point: Emissions per capita vary even more widely across world regions than GDP per capita.

Industrialized countries emit far larger amounts of CO2 per capita than the world average. However, some rapidly expanding economies are significantly increasing their emissions per capita. For example, between 1990 and 2006, China more than doubled its per capita emissions and India increased them by almost two-thirds. Clearly, these two countries contributed much to the 7% increase of global per capita emissions over the period.

15. See discussion in Energy Technology Perspectives 2008, IEA, 2008, p. 71.

Figure 9. CO2 emissions per GDP* by major world regions in 2006

Indicators such as those briefly discussed in this section strongly reflect energy constraints and choices made to supply the economic activities of each country. They also reflect the sectors that predominate in different countries' economies. The major sectors driving the observed growth in global emissions are discussed in the next section.

Emissions by sector

In 2006, two sectors, electricity and heat generation and transport, produced nearly two-thirds of the global CO2 emissions, as illustrated in Figure 11. The emissions of these same sectors also increased at faster rates than global emissions (53% and 41%, respectively, versus the average 33%, between 1990 and 2006).

Figure 11. World CO2 emissions by sector

Other*

1971 Total emissions: 14.1 Gt CO2

Figure 11. World CO2 emissions by sector

Other*

1971 Total emissions: 14.1 Gt CO2

Industry

2006 Total emissions: 28.0 Gt CO2

Industry

Residential

Electricity and Heat

Transport 20%

2006 Total emissions: 28.0 Gt CO2

Other* 10%

Electricity and Heat 41%

Residential

Other* 10%

Electricity and Heat 41%

Industry

Transport 23%

Industry

Transport 23%

* Other includes commercial/public services, agriculture/forestry, fishing, energy industries other than electricity and heat generation, and other emissions not specified elsewhere.

Key point: Between 1971 and 2006, the combined share of electricity and heat generation and transport shifted from one-half to two-thirds of global emissions.

Generation of electricity and heat was responsible in 2006 for 41% of the world total CO2 emissions, as compared to 27% in 1971. By 2030, the World Energy

Outlook projects that demand for electricity will be almost twice as high as in 2006, driven by rapid growth in population and income in developing countries, by the continuing increase in the number of electrical devices used in homes and commercial buildings, and by the growth in electrically-driven industrial processes.

Worldwide, the generation of electricity and heat relies heavily on coal, amplifying the sector's share in global emissions. Countries such as Australia, China, India, Poland and South Africa produce between 68% and 94% of their electricity and heat through the combustion of coal.

As illustrated in Figure 12, fossil fuels provide over 70% of the world electricity and heat generation. Coal, the dominant source, supplied 40% of the generation in 2006. In Non-Annex I countries, the share of coal in electricity and heat generation increased from 43% in 1992 to 52% in 2006. On the contrary, the share of oil generally decreased across the world (from 12% in 1992 to 6% in 2006 globally). Gas grew significantly in industrialized countries as a result of their fuel switching efforts: Annex II countries increased the share of gas in electricity and heat generation from 12% in 1992 to 21% in 2006. The future development of the emissions intensity of this sector depends strongly on the fuels that are used to generate the electricity. As an indication, Box 1 presents product-specific implied emission factors per unit of electricity produced.

Figure 12. Coal, oil and gas: shares in world electricity and heat generation*

Figure 12. Coal, oil and gas: shares in world electricity and heat generation*

1992 2006

1992 2006

* Refers to main activity producers and autoproducers of electricity and heat.

Key point: World electricity and heat generation increasingly rely on coal.

Box 1: Implied emission factors from electricity and heat generation

Summary tables presenting CO2 emissions per kWh from electricity and heat generation by country are presented in Part II. However, these values will vary enormously depending on the fuel mix of individual countries. Average implied emission factors by individual product for this sector are presented below. These values represent the average grammes of CO2 per kWh of electricity and heat produced in the OECD countries between 2004 and 2006. These figures will reflect any problems that may occur in net calorific values or in input/output efficiencies. Consequently, these values are given as an approximation and actual values may vary considerably.

Fuel

Grammes CO2 / kWh

Anthracite *

920

Coking Coal *

680

Other Bituminous Coal

830

Sub-Bituminous Coal

930

Lignite/Brown Coal

950

Patent Fuel

870

Coke Oven Coke *

500

BKB/Peat Briquettes *

720-1200

Gas Works Gas *

400

Coke Oven Gas *

370

Blast Furnace Gas *

2200

Oxygen Steel Furnace Gas *

1900

Natural Gas

390

Crude Oil *

630

Natural Gas Liquids *

540

Liquefied Petroleum Gases *

470

Kerosene *

580

Gas/Diesel Oil *

750

Residual Fuel Oil

650

Petroleum Coke *

950

Peat *

570

Industrial Waste *

450-1600

Municipal Waste (Non-Renewable)

450-1900

* These fuels represent less than 1% of electricity and heat output in the OECD. Values will be less reliable and should be used with caution.

Figure 13. CO2 emissions from oil

Gigatonnes of CO2

While electricity and heat generation draws from various energy sources, the transport sector relies almost entirely on oil (95% of the energy used for transport came from oil in 2006). The share of transport in global oil emissions was close to 60% in 2006, as shown in Figure 13. While CO2 emissions from oil consumption in most sectors remained nearly steady in absolute terms since 1971, those of transport more than doubled. Dominated by road traffic, this end-use sector is the strongest driver of world dependence on oil.

Figure 13. CO2 emissions from oil

Gigatonnes of CO2

13%

14%

17%

8%

58%

21%

13%

39%

■ Transport □ Electricity and Heat □ Industry □ Residential □ Other*

1971 2006

■ Transport □ Electricity and Heat □ Industry □ Residential □ Other*

* Other includes commercial/public services, agriculture/forestry, fishing, energy industries other than electricity and heat generation, and other emissions not specified elsewhere.

Key point: With a share that increased by about 50% since 1971, transport dominates emissions from oil.

Economic growth contributes to the increasing demand for transport, both for personal mobility and for shipping goods. For example, the United States has the highest level of travel per capita in the world (more than 25 000 kilometres per person per year). In addition, larger incomes favour the switch to faster modes: air travel is the most rapidly growing mode of transport in industrialized countries, while growth in car travel is first in developing countries. Car ownership generally grows with increasing income per capita.

As for energy intensity and consequent emissions, relatively high fuel prices provide an incentive for more efficient vehicles. In the United States (until recently), lower fuel prices have contributed to a trend towards the use of larger vehicles, while in Europe higher fuel prices have helped encourage improved fuel economy (along with the EU voluntary agreement with manufacturers). As a result, there is more than a 50% variation in the average fuel consumption of new light-duty vehicles across OECD countries

Global demand for transport appears unlikely to decrease in the foreseeable future; the World Energy Outlook projects that transport will grow by 42% by 2030. To limit the emissions from this sector, policy

16. Energy Technology Perspectives 2008, IEA, 2008, p. 435.

Box 2: Biofuels*

Compatible with many conventional engines and blendable with current transport fuels, biofuels have the potential to contribute to energy security by diversifying supply sources for transport, and to reduce greenhouse gas emissions. However, the economic, environmental and social benefits of the current generation of biofuels vary enormously.

Though there are important uncertainties about their efficacy in reducing GHG emissions, biofuels can be classified on the basis of their well-to-wheel performance with respect to conventional fossil fuels. When ethanol is derived from corn, the well-to-wheel greenhouse gas reduction with respect to conventional gasoline is typically in the range of 10 to 30%. The reduction is much higher for sugarcane-based ethanol from Brazil, reaching an estimated 90%. Similarly, oilseed-derived biodiesel leads to greenhouse gas reductions, on a well-to-wheel basis, of 40% to 60% when compared to conventional petroleum diesel. "Second generation" biofuels, derived from non-food crops such as trees and perennial grasses, have the potential to dramatically expand the scope for very low CO2 biofuels production. However these biofuels are still under development. None of these estimates takes into account the possibility that changes in land use from starting biofuels production can result in one-time releases of CO2 that could be quite large; more research is needed into the impacts of both direct and indirect land use change and how to minimize adverse impacts.

For both current and second generation biofuels, production cost is the main barrier to a larger penetration of biofuels in the transport fuel mix. Without subsidies, only ethanol from sugarcane produced in Brazil has been competitive with petroleum fuels, although this may change with the higher oil prices occurring recently. The cost barrier is such that market introduction of biofuels has typically required substantial regulatory intervention and governmental support.

Currently, several countries have mandated or promoted biofuel blending standards to displace oil in domestic transport supply. In Brazil, gasoline contains 20-25% ethanol. Furthermore, 70% of the cars now purchased in Brazil can run on either 100% ethanol or on the gasoline/ethanol blend. With recent high oil prices, most drivers are choosing to operate these vehicles mainly on ethanol. In 2006, the United States introduced mandatory standards and these were extended in 2007 under the EISA law. Blending requirements will reach 9 billion gallons in 2008 and will reach 36 billion gallons by 2022 (of which more than half will be required to be second generation biofuels).

Several years ago the European Union introduced a target for biofuel use equivalent to 2% of the market share of motor fuel by 2005 (although it was not reached) and 5.75% by the end of 2010, while the target for 2020 is now set at 10%. The current legislation also requires "sustainability criteria" in order to prevent mass investment in potentially environmentally harmful biofuels. Australia (New South Wales and Queensland) and Canada are also mandating the use of biofuels, as are a number of non-OECD countries.

For the future, it is crucial that policies foster innovation and support the most sustainable biofuels only, through a continuous monitoring and assessment of their effectiveness in reducing GHG emissions and in providing benefits for rural workers. Suitable land availability and potential influence of biofuel production on global food prices also need to be carefully monitored, taking into account all global food, fibre and energy needs for the growing world population out to 2100. However, barriers to the commercial viability of biofuels shrink as technologies evolve and as prices of conventional fossil fuels remain high.

* See discussions in Biofuels for Transport, IEA, 2004; Focus on Biofuels, IEA Governing Board and Management Committee, June 2006 (IEA/GB(2006)10/REV1) and Energy Technology Perspectives, IEA, 2008.

makers first and foremost should consider measures to encourage or require improved vehicle efficiency, as the United States has recently done and the European Union is currently doing as a follow-up to the voluntary agreement. Policies that encourage a shift from cars to public transportation and to lower-emission modes of transportation can also help. Finally, policies can encourage a shift to new, preferably low CO2 fuels. These include electricity (e.g. electric and plug-in hybrid vehicles), hydrogen (e.g. through the introduction of fuel cell vehicles) and greater use of biofuels (e.g. as a blend in gasoline and diesel fuel -see Box 2).

These policies would both reduce the environmental impact of transport and help to secure domestic fuel supplies sometimes unsettled by the geopolitics of oil trade. As they will ease demand growth, these policies are also likely to help reduce oil prices below what they otherwise might be.

The importance of electricity generation and transport in shaping global CO2 emissions is apparent in Figures 14 and 15, which detail the contributions from individual sectors to trends of the socio-economic indicators discussed in previous sections such as CO2 emissions per GDP and CO2 emissions per capita.

The world average per capita carbon intensity increased marginally since 1971. However, this nearly flat growth concealed a significant rise in the emissions per capita of electricity generation and transport. Between 1971 and 2006, the emissions per capita for these two sectors grew by 77% and 30%, respectively. The growth in the number of people accessing electricity and the growth in electricity infrastructure contributed significantly to this rise.

Figure 14. Per capita emissions by sector

1971=100

Figure 14. Per capita emissions by sector

1971=100

-Elec.+ Heat--Transport -Industry

-Elec.+ Heat--Transport -Industry

Key point: Relative to the almost-stable average emissions per capita, those of power generation and transport have grown markedly since 1971.

Overall, the emissions intensity of the world economy, in terms of CO2 per GDP, declined by almost 40% between 1971 and 2006. However, the electricity and heat sector slowed the global decoupling between emissions and economic growth with a decrease in emissions per global unit of GDP of only 7% over that period.

Power generation and transport challenge the sustainability of both the global economy and the environment. This is particularly pronounced for developing countries that increased their emissions from these two sectors, respectively, by three and a half times and by two times faster than the global average between 1990 and 2006. Access to modern energy services is crucial to eradicating poverty and for economic development of these countries and the challenge will be to help developing countries use energy in a rational way.

Strong energy efficiency gains, the increased use of new technologies for road transport and the decarbonisation of electricity supply (both through a shift toward less carbon-intensive fuels such as natural gas and renewables and through the introduction of CO2 capture and storage) are some of the potential means to achieve a more sustainable energy path17.

Investment decisions taken over the next few years will have a huge long-term impact, since energy systems could be locked into a fuel mix for about 50 years, and consequently into a CO2 emissions trajectory, that may be difficult to change.

17. Energy Technology Perspectives 2008, IEA, 2008.

Figure 15. Per GDP* emissions by sector

1971 =100

Figure 15. Per GDP* emissions by sector

1971 =100

-Elec.+ Heat--Transport -Industry

-Elec.+ Heat--Transport -Industry

* GDP using purchasing power parities.

Key point: Generation of electricity and heat and to a lesser extent transport have slowed down the global decoupling of emissions from economic growth.

The BRICS countries

One of the most important recent developments in the world economy is the increasing economic integration of large non-OECD countries, in particular Brazil, Russia, India, China and South Africa, the so-called BRICS countries. Already, the BRICS represent over one fourth of world GDP, up from 18% in 1990. In 2006, these five countries represented 30% of global energy use and 33% of CO2 emissions from fuel combustion (see Figure 16). These shares are likely to rise further in coming years, if the ongoing strong economic performance currently enjoyed by most of these countries continues, as many commentators expect. In fact, China, Russia and India are already three of the four countries that emit the most CO2 emissions in absolute terms.

This brief discussion focuses on the BRICS countries, of which only Russia is a member of Annex I. Each of these countries has very different endemic resources, energy supply constraints and sectoral consumption patterns. Consequently, the issues relating to CO2 emissions that these five countries are facing are quite different.

Figure 16. The growing importance of the BRICS countries

Gigatonnes of CO2

Key point: With the exception of Russia, the BRICS countries represent a growing share of CO2 emissions in the world.

Russia

Russia is the only one of the BRICS countries where CO2 emissions fell between 1990 and 2006, with a 27% drop over the period. The economic downturn after the break-up of the former USSR caused emissions to fall by 34% between 1990 and 1998. CO2 emissions grew in 1999 and 2000 (3% a year) due to Russia's strong economic recovery, stimulated by the increase in world energy prices. CO2 emissions remained fairly constant for the next five years. However, this temporary levelling off stopped in 2006 when CO2 emissions grew by 4%. The World Energy Outlook projects Russian CO2 emissions will continue to increase steadily, and in 2015 will represent about 86% of the estimated 1990 level.

CO2 emissions from fuel combustion in Russia have stabilised following the collapse of the Soviet Union. However, other sources of greenhouse gases, in particular CH4 emissions from leaks in the oil and gas transmission/distribution system and CO2 emissions from flaring of associated gas, represent an important share of the Russian GHG emissions. To effectively reduce GHG emissions from energy, these two

problems would also need to be addressed .

18. Optimising Russian Natural Gas: Reform and Climate Policy, IEA, 2006.

1990 1992 1994 1996 1998 2000 2002 2004 2006

□ Electricity and heat oOther energy industries

Key point: CO2 emissions in Russia increased in 2006, after having remained fairly constant for the previous five years.

In 2006, the electricity and heat generation sector represented 58% of Russian CO2 emissions, compared to a global average of 41%. Within this sector, 46% of the electricity was generated by natural gas, 18% by coal and only 2% by oil.

Figure 18. Russia: Electricity generation by fuel

Terawatt hour

Figure 18. Russia: Electricity generation by fuel

Terawatt hour

1990 1992 1994 1996 1998 2000 2002 2004 2006

□ Coal/peat □ Oil □ Gas □ Nuclear □ Hydro «Other

1990 1992 1994 1996 1998 2000 2002 2004 2006

□ Coal/peat □ Oil □ Gas □ Nuclear □ Hydro «Other

Key point: A large portion of Russia's electricity and heat generation come from non-emitting (nuclear and hydro) or low-emitting (natural gas) sources.

Of the BRICS countries, in 2006, Russia had the highest CO2 emissions per capita (11.1 t CO2), which put it close to the average of OECD countries (10.9 t CO2). In terms of CO2/GDP, Russia's economy remains CO2 intensive with 1.1 kg CO2 per unit of GDP, more than 2.5 times higher than the OECD average.

Annex I

Other Annex I

Russia

NonAnnex I

Other NonAnnex I

India

China

Annex I

- South Africa

Bunkers

Other Annex

Russia

Non-

Annex I

Other NonAnnex

India

China

2006

. Brazil South Africa

Bunkers

Figure 17. Russia: CO2 emissions by sector

Million tonnes of CO2

2500

2000 1500

Figure 17. Russia: CO2 emissions by sector

Million tonnes of CO2

2500

Canada, whose geography and natural resources are comparable to those of Russia, has a carbon intensity of 0.5 kg CO2/US$ - half of Russia's level. However, IEA statistics show a reduction of Russia's energy intensity of GDP of about 5% per year since 1998. It is not clear how much this can be attributed to energy efficiency improvements as opposed to the dramatic increase in GDP due to Russia's much higher oil and gas-based export earnings.

China

With 5.6 billion tonnes of CO2 in 2006 (20% of global emissions), Chinese emissions surpass by far those of the other BRICS countries - in fact, China overtook the United States in 2007 as the world's largest emitter of energy-related CO2. Chinese CO2 emissions have more than doubled between 1990 and 2006. The increase was especially large in the last four years (16% in 2003, 19% in 2004 and 11% in both 2005 and 2006). The World Energy Outlook Reference Scenario projects that the growth in Chinese emissions will slow down to 3.1% per year up to 2030. Even with this slower growth, emissions in 2030 will be twice those in 2006.

Figure 19. China: CO2 emissions by sector

Million tonnes of CO2

6000

5GGG 4GGG 3GGG 2GGG 1GGG

1990 1992 1994 1996 1998 2000 2002 2004 2006

□ Electricity and heat □ Other energy industries

Key point: For the last four years, China showed dramatic growth in CO2 emissions from electricity and heat generation.

Since 1990, the electricity and heat generation sector grew the most, representing 50% of Chinese CO2 emissions in 2006. The transport sector also grew rapidly, but from a much smaller base. The World Energy Outlook projects that the transport sector will continue to grow and will go from 7% of the energy demand in 2006 to 12% in 2030.

Figure 20. China: Electricity generation by fuel

Terawatt hour

3GGG

Figure 19. China: CO2 emissions by sector

Million tonnes of CO2

6000

5GGG 4GGG 3GGG 2GGG 1GGG

1990 1992 1994 1996 1998 2000 2002 2004 2006

□ Electricity and heat □ Other energy industries

Figure 20. China: Electricity generation by fuel

Terawatt hour

3GGG

1990 1992 1994 1996 1998 2000 2002 2004 2006 □ Coal/peat □ Oil DGas □ Nuclear □ Hydro ■ Other

Key point: Coal dominates China's electricity generation, and its very fast growth.

Chinese demand for electricity was the largest driver of the rise in emissions. Increasing capacity at the rate of two large power plants (2 000 MW) per week19, in 2006 alone China added almost the equivalent of the entire generating capacity of France. Figure 20 illustrates the growing demand for electricity generation and the large role played by coal. Nearly all (99%) of the 1990-2006 emissions growth from power generation derived from coal.

In the past few decades, China had experienced a rapid decoupling of energy consumption and CO2 emissions from economic growth. During the 1980s, the central government in China could influence industrial energy intensity by establishing standards and quotas for the energy supplied to firms and by simply shutting off the power supply when enterprises ex-

ceeded their limits . However, as the Chinese economy has moved towards an open-market operation, investment in energy conservation as a percentage of total energy investment has gradually declined (from 13% in 1983 to 7% in 1995 to 4% in 2003)21. More importantly, rapid expansion of heavy industrial sectors to serve huge infrastructure investments and burgeoning demand for Chinese products from domestic and overseas consumers made the Chinese economy less, not more, emissions efficient from 2002 to 2006.

19. China Electricity Council, Annual Report of Electricity Sector Statistics, CEC, Beijing, 2007.

20. See the complete discussion in Trends in Energy Efficiency Investments in China and the US, Jiang Lin, Lawrence Berkeley National Laboratory, Berkeley, CA, 2005.

21. For a discussion on China's electricity sector, see also China's Power Sector Reforms, IEA, 2006.

Despite this recent trend, the 2006 TPES/GDP is 54% less than in 1990, and a recent push by the government to reduce energy intensity has helped to resume the long-term intensity decline, albeit at a much slower rate than in the past. The increasing share of coal in power generation, however, means that a small decline in energy intensity may still be paired with an increase in emissions intensity, as was the case in 2005 and 2006. Although per capita emissions in China in 2006 were only about one third that of the OECD average, they have doubled since 1990, with the largest increases occurring in the last four years.

India

India emits 4% of global CO2 emissions, and continues to grow. As with China, CO2 emissions have doubled between 1990 and 2006 and the World Energy Outlook is projecting that CO2 emissions in India will almost triple between 2006 and 2030 (increasing by 4.1% per year). A large share of these emissions is produced by the electricity and heat sector, which represented 56% of CO2 in 2006, up from 42% in 1990. The transport sector, which was only 8% of CO2 emissions in 2006, is growing relatively slowly compared to other sectors of the economy.

Figure 21. India: CO2 emissions by sector

Million tonnes of CO2

Figure 21. India: CO2 emissions by sector

Million tonnes of CO2

□ Electricity and heat □ Other energy industries

□ Electricity and heat □ Other energy industries

Key point: The bulk of CO2 emissions in India come from the electricity and heat generation sector, and its share is continuing to grow.

In 2006, 68% of electricity came from coal, another 8% from natural gas and 4% from oil. The share of fossil fuels in the generation mix grew from 73% in 1990 to 85% in 2002. Since then the share of fossil fuels has declined steadily, falling to 81% in 2006. Although electricity produced from hydro has actually increased during this period, the share fell from 25% in 1990 to 15% in 2006. India is promoting the installation of other renewable power sources into its generation mix. With an installed wind capacity of 9 GW in

March 2008 , India has the fourth largest installed capacity of wind power in the world.

Figure 22. India: Electricity generation by fuel

Terawatt hour

Figure 22. India: Electricity generation by fuel

Terawatt hour

1990 1992 1994 1996 1998 2000 2002 2004 2006 □ Coal/peat DOil DGas □ Nuclear □ Hydro «Other

Key point: About two thirds of India's electricity comes from coal.

Of the BRICS countries, India has the lowest CO2 emissions per capita (1.1 t CO2 in 2006), about one fourth that of the world average. However, due to the recent large increases in emissions, the ratio is more than one and a half times that of 1990 and will continue to grow. But India's per capita emissions in 2030 will still be well below those in the OECD countries today.

In terms of CO2/GDP, India has continuously improved the efficiency of its economy and reduced the CO2 emissions per unit of GDP by 19% between 1990 and 2006.

Brazil

Brazil is the fifth largest emitter of GHGs in the world, with the particularity that the country's energy system has a relatively minor impact on GHG emissions (only 19%). The bulk of Brazilian GHG emissions (81%) come, instead, from agriculture, land-use and forestry activities, mainly through the expansion of agricultural frontiers in the Amazon region.

22. According to the website of the Ministry of New and Renewable Energy of the Government of India (http://mnes.nic.in).

Figure 23. Brazil: CO2 emissions by sector

Million tonnes of CO2

350 300 250 200

1990 1992 1994 1996 1998 2000 2002 2004 2006

□ Electricity and heat

□ Manuf. ind. and construction

□ Residential

□ Other energy industries

1990 1992 1994 1996 1998 2000 2002 2004 2006

□ Electricity and heat

□ Manuf. ind. and construction

□ Residential

□ Other energy industries

Figure 24. Brazil: Electricity generation by fuel

Terawatt hour

Figure 24. Brazil: Electricity generation by fuel

Terawatt hour

1990 1992 1994 1996 1998 2000 2002 2004 2006 □ Coal/peat □ Oil □ Gas □ Nuclear □ Hydro «Other

Key point: The transport sector produces the largest share of CO2 emissions from fuel combustion in Brazil.

Compared to Russia, China and India, CO2 emissions from fuel combustion in Brazil are small, representing only 1.2% of global CO2 emissions from fuel combustion. Within the energy sector, the sub-sectors that contribute the most to total GHG emissions - the transport sector (42% in 2006) and the industrial sector (30%) - are also the ones that are likely to grow the most over the next years.

Electricity generation relies heavily on hydropower, as illustrated in Figure 24. Over the last three decades, the number of major dams has grown steadily and hydropower accounted for 83% of the total in 2006. Droughts in recent years have led to a wider diversification in the electricity production mix, increasing the use of gas. However, lack of investment in electricity infrastructure and unclear regulation of the power sector remain an issue. Among the smaller sources of electricity generation, the share of biomass is larger than that of coal. Indeed, the overall energy supply of Brazil is remarkable for the prominence of renewable sources in both electricity generation and transport.

In 2007, the Brazilian government announced the development of five new nuclear power plants amid concerns about the risk of power-supply shortages beyond 2012 unless Brazil builds new capacity. The government's 2030 National Energy Plan anticipates 5 300 MW of additional installed generation capacity from new nuclear plants (Angra 3 and four other plants) by 2030.

Key point: Brazilian electricity generation draws heavily on hydropower.

As Figure 25 illustrates, biofuels supply a comparatively significant share of the energy consumed for road transport. As such, Brazilian transport has a relatively low CO2 emissions intensity23. CO2 emissions per unit of fuel consumed in road traffic are 10% lower than the world average (2.6 versus 2.9 t CO2 per toe).

Figure 25: Share of biofuels energy in road transport (2006)

United States European Union Brazil

Key point: Brazil's relative consumption of biofuels far outstrips that of any other country.

Brazil is the world's largest exporter and consumer of

fuel ethanol from sugarcane , which substituted 230 billion litres of gasoline between 1975 and 2004.

23. Box 2 provides a more complete discussion on the advantages and limitations of using biofuels to replace oil. Note: CO2 emissions intensity considers the tank-to-wheel emissions and assumes that the CO2 emissions derived from the combustion of biomass are zero.

24. In 2005, the United States displaced Brazil as the largest ethanol producer, although mainly derived from corn and not sugarcane.

Currently, cars that can run on either 100% ethanol or a gasoline-anhydrous ethanol blend represent more than 80% of the new cars purchased in Brazil (an estimated 1.3 million in 2006) and cost the same as cars that can only run on conventional fuel. The commercial viability of biofuels in Brazil reflects both an economy well-suited to large-scale sugarcane production and several decades of government intervention through the Brazilian Alcohol Programme (Proalcool) launched in the 1970s. The government offered a variety of incentives, including low-interest loans to build distilleries and favourable pricing relative to gasoline. Mandatory ethanol blending targets were set up for 1977 (4.5% of the gasoline, by volume) and during the 1980s (20-25%). After experiencing severe

problems in the 1990s , the program has now become the largest commercial application of biomass for energy production and use in the world.

South Africa

South Africa currently relies almost completely on fossil fuels as a primary energy source (87% in 2006); with coal providing most of that. Although South Africa accounted for 40% of CO2 emissions from fuel combustion in Africa in 2006, it represented only 1.2% of the global total. The electricity and heat sector produced 64% of South Africa's CO2 emissions in 2006.

Coal dominates the South African energy system, accounting for more than 72% of primary energy supply and nearly a quarter of final energy consumption. In 2006, South Africa generated 94% of its electricity using coal. It follows that the major climate change issue facing South Africa is to reduce its greenhouse gas emissions, primarily by reducing its reliance on fossil fuels.

25. By the mid-1980s more than three quarters of the 800 000 cars could run on ethanol. However, when sugar prices rose sharply in 1989, sugarcane growers diverted crops to the export market, and a severe shortage of ethanol occurred in the second quarter of 1989. This shortage resulted in a loss of consumer confidence in the security of ethanol supply and discredited ProAlcool. In response, the government authorized ethanol imports, and Brazil became the world's largest importer of ethanol. Brazilian drivers as well as Brazilian car makers were left in disarray for lack of fuel and, as a result, ethanol fell into discredit for some time. By the end of the 1990s, the sales of ethanol-fuelled cars amounted to less than 1% of total annual auto sales because fuel manufacturers could not assure hydrous-eth

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