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The questionsThe questions

Is economic growth leading to excessive exploitation of natural Is economic growth leading to excessive exploitation of natural resources and to degradation of the ecosystem?resources and to degradation of the ecosystem?

Are increases in welfare, as measured by GDP, providing adequate Are increases in welfare, as measured by GDP, providing adequate employment opportunities, and are the benefits widely shared?employment opportunities, and are the benefits widely shared?

What is the right balance between public interventions and market What is the right balance between public interventions and market solutions in responding to these issues?solutions in responding to these issues?

Are governments taking a long-term view of their responsibility Are governments taking a long-term view of their responsibility towards the current and next generations?towards the current and next generations?

How can OECD governments show leadership and commitment to How can OECD governments show leadership and commitment to address pressures on the global commons?address pressures on the global commons?

And how can they help developing countries, many of which lack And how can they help developing countries, many of which lack economic resources and local capacities, to move towards economic resources and local capacities, to move towards comprehensive sustainable development?comprehensive sustainable development?

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Sustainable developmentSustainable development

Sustainable development brings a new perspective to concerns Sustainable development brings a new perspective to concerns over the use of natural resources.over the use of natural resources.

A central policy question is whether the earth’s ecosystem could A central policy question is whether the earth’s ecosystem could sustain the high pressure on natural resources that would result if sustain the high pressure on natural resources that would result if all countries were to adopt lifestyles similar to those now all countries were to adopt lifestyles similar to those now prevailing in the most economically developed countriesprevailing in the most economically developed countries

Given the considerable scope for substitution among resources, Given the considerable scope for substitution among resources, what matters more than absolute scarcity is whether human what matters more than absolute scarcity is whether human ingenuity can keep combining man-made, natural and human ingenuity can keep combining man-made, natural and human capital in ways that enable human needs to be met. capital in ways that enable human needs to be met.

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ExternalitiesExternalities

The importance of externalities - the costs and benefits to society The importance of externalities - the costs and benefits to society of economic activities that are not reflected in the market prices - of economic activities that are not reflected in the market prices - is not limited to natural resources.is not limited to natural resources.

A major obstacle in achieving sustainable economic development A major obstacle in achieving sustainable economic development arises from the presence of external environmental costs and the arises from the presence of external environmental costs and the lack of well-defined property rights for many environmental lack of well-defined property rights for many environmental resourcesresources

Open access to such resources free of charge means that producers Open access to such resources free of charge means that producers and users lack the economic incentives to take the full costs of and users lack the economic incentives to take the full costs of environmental degradation into accountenvironmental degradation into account

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Damage Cost Estimates for Energy Fuel CyclesDamage Cost Estimates for Energy Fuel Cycles(UK Specific Results)(UK Specific Results)

0

1

2

3

4

5

6

Coal Oil Gas Nuclear Wind Biomass

Global warmingNoiseMaterialsCropsOccup. HealthPublic healthE

CU

cent

Source DG XII

5

2

4

6

8

1 0

1 2

1 4

8 1 8 2 8 3 8 4 8 5 8 6 8 7 8 8 8 9 9 0 9 1 9 2 9 3 9 4 9 5 9 6 9 7 9 8

HY

GE

BM

Average Cost in 98 : PV : 30 HY : 8.25 GE : 7.00 WE : 5.33 BM : 5.30 Coal: 3.7 Gas:4.0

WE

EC

Uce

nt/kW

h

Gas

Coal

RES vs Conventional Power Plants Production Cost

6

2

4

6

8

1 0

1 2

1 4

8 1 8 2 8 3 8 4 8 5 8 6 8 7 8 8 8 9 9 0 9 1 9 2 9 3 9 4 9 5 9 6 9 7 9 8

HY

GE

BM Average Cost in 98 PV : 30.0 HY : 8.25 GE : 7.00 WE : 5.33+ 0.25 BM : 5.30+0.60 Gas : 4.00+1.70

WE

Gas

Gas + Ext. cost

BM+Ext cost

WE+ Ext. cost

EC

Uce

nt/kW

h

(Combined cycle Gas Turbines)

Gas vs RES Power Plants Production costIncluding External cost

7

2

4

6

8

1 0

1 2

1 4

8 1 8 2 8 3 8 4 8 5 8 6 8 7 8 8 8 9 9 0 9 1 9 2 9 3 9 4 9 5 9 6 9 7 9 8

HY

GE

BM Average Cost in 98 PV : 30 HY : 8.25 GE : 7.00 WE : 5.33+0.25 BM : 5.30+0.6 Coal : 3.70+5.4

WE

Coal

Coal + Ext. cost

BM+Ext cost

WE+ Ext. cost

EC

Uce

nt/kW

h

(Pulverised fuel combustion plants with gas treatment)

Coal vs RES Power Plants Production costIncluding External cost

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TechnologyTechnology Technology will be critical in meeting the needs of current and Technology will be critical in meeting the needs of current and

future generations and de-linking economic growth from future generations and de-linking economic growth from environmental degradation.environmental degradation.

But appropriate technological change is not automatic, and But appropriate technological change is not automatic, and technologies may also lead to pressures on natural resources, technologies may also lead to pressures on natural resources, create health hazards, and raise difficult ethical considerations.create health hazards, and raise difficult ethical considerations.

Governments must improve framework conditions so as to provide Governments must improve framework conditions so as to provide the right incentives and price signals to firms and influence the right incentives and price signals to firms and influence consumer’s awareness and behaviour.consumer’s awareness and behaviour.

They often have a direct role in the financing of the basic research They often have a direct role in the financing of the basic research underlying innovation in clean technologies and support for the underlying innovation in clean technologies and support for the development of markets for the substantial stock of more energy-development of markets for the substantial stock of more energy-efficient technologies that are close to being competitive.efficient technologies that are close to being competitive.

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The impact of KyotoThe impact of Kyoto Emission reduction targets are legally binding under the Protocol Emission reduction targets are legally binding under the Protocol

whereas under the United Nations Framework Convention on whereas under the United Nations Framework Convention on Climate Change (UNFCCC) there was no legal obligation.Climate Change (UNFCCC) there was no legal obligation.

Inclusion of sinks, which would in principle allow the inclusion of Inclusion of sinks, which would in principle allow the inclusion of the intake of carbon by forests and agricultural soils.the intake of carbon by forests and agricultural soils.

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EnergyEnergy

Energy use and production is by far the most important source of Energy use and production is by far the most important source of total greenhouse gas emissions, representing around 80% of 1990 total greenhouse gas emissions, representing around 80% of 1990 EU emissions. EU emissions.

The most important gas is CO2 coming from fossil fuel The most important gas is CO2 coming from fossil fuel production and use. Around a third of total EU emissions of CO2 production and use. Around a third of total EU emissions of CO2 originates from electricity and heat production.originates from electricity and heat production.

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TransportTransport

Transport accounts for around 20% of total EU emissions in 1990. Transport accounts for around 20% of total EU emissions in 1990. Analysis shows that in the absence of new policy measures it is the Analysis shows that in the absence of new policy measures it is the sector with the greatest potential for growth in CO2 emissions up sector with the greatest potential for growth in CO2 emissions up to 2010.to 2010.

Emissions of NEmissions of N22O due to catalytic converters and HFC emissions O due to catalytic converters and HFC emissions from on-vehicle air conditioning are also expected to grow strongly from on-vehicle air conditioning are also expected to grow strongly over this period.over this period.

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StrategyStrategy Greenhouse gas emissions are linked to a vast variety of economic Greenhouse gas emissions are linked to a vast variety of economic

activities.activities.

A successful policy strategy will have to be comprehensive A successful policy strategy will have to be comprehensive involving the stakeholders belonging to different economic sectors:involving the stakeholders belonging to different economic sectors:

identifying throughout the economy a range of cost-effective identifying throughout the economy a range of cost-effective policy measures.policy measures.

identifying indicative emission objectives for the sectors identifying indicative emission objectives for the sectors mentioned above.mentioned above.

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Clean Coal TechnologiesClean Coal TechnologiesClean Coal TechnologiesClean Coal Technologies

ADVANCED TECHNOLOGICAL PROCESSESADVANCED TECHNOLOGICAL PROCESSES

Advanced pulverised coal-fired boilers (PCF)Advanced pulverised coal-fired boilers (PCF) Atmospheric fluidised-bed combustion (AFBC)Atmospheric fluidised-bed combustion (AFBC) Pressurised fluidised-bed combustion (PFBC)Pressurised fluidised-bed combustion (PFBC) Integrated gasification combined-cycle systems (IGCC)Integrated gasification combined-cycle systems (IGCC) Pressurised pulverised coal combustion (PPCC)Pressurised pulverised coal combustion (PPCC) Integrated gasification fuel cell systems (IGFC)Integrated gasification fuel cell systems (IGFC) Magnetohydrodynamic electricity generation (MHD).Magnetohydrodynamic electricity generation (MHD).

ADVANCED TECHNOLOGICAL PROCESSESADVANCED TECHNOLOGICAL PROCESSES

Advanced pulverised coal-fired boilers (PCF)Advanced pulverised coal-fired boilers (PCF) Atmospheric fluidised-bed combustion (AFBC)Atmospheric fluidised-bed combustion (AFBC) Pressurised fluidised-bed combustion (PFBC)Pressurised fluidised-bed combustion (PFBC) Integrated gasification combined-cycle systems (IGCC)Integrated gasification combined-cycle systems (IGCC) Pressurised pulverised coal combustion (PPCC)Pressurised pulverised coal combustion (PPCC) Integrated gasification fuel cell systems (IGFC)Integrated gasification fuel cell systems (IGFC) Magnetohydrodynamic electricity generation (MHD).Magnetohydrodynamic electricity generation (MHD).

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Net Efficiency of Solid Fuel-Based Power and Heat Generation TechnologiesNet Efficiency of Solid Fuel-Based Power and Heat Generation Technologies

20 % 30 % 40 % 50 % 60 %

Advanced PCF

PFBC

IGCC

PPCC

IGFC

Net Efficiency

1992 2000 2015 Expectations

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Economics of decarbonisationEconomics of decarbonisation

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Click here to type division name

19902000

20102020

20302040

20500

1

2

3

4

5

1000 T

Wh

/year

(EU

)

New RenewableGap - CO2-deposition?Natural gasOilCoalNuclearHydro Power

Fossile fuels with CO2-deposition the only way to bridge the gap to a sustainable future?

Includes yearly growth in demand from 50 TWh/year down to 20 TWh/year in 2050 (no exact figures - for illustration only!!)

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ConclusionsConclusions

Lowering the absolute consumption of energy in a growing Lowering the absolute consumption of energy in a growing economy solely by way of technology improvements is close to economy solely by way of technology improvements is close to impossible, at least in the absence of massive technological impossible, at least in the absence of massive technological breakthroughs.breakthroughs.

To fulfil Kyoto commitments in growing economies it will be To fulfil Kyoto commitments in growing economies it will be necessary to have a mix of technology policies, changes in relative necessary to have a mix of technology policies, changes in relative prices, and associated measures (dissemination) to enhance the prices, and associated measures (dissemination) to enhance the effectiveness of technology and price-related policies.effectiveness of technology and price-related policies.

Competitive markets have to be enable by appropriate policies in Competitive markets have to be enable by appropriate policies in order to allow transparency of prices, rapid and flexible reactions order to allow transparency of prices, rapid and flexible reactions to changing structural conditions and the rapid diffusion of new to changing structural conditions and the rapid diffusion of new technologies.technologies.

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Conclusions (2)Conclusions (2)

Regulations and standards can improve average efficiency and Regulations and standards can improve average efficiency and provide long-term signals for resource allocation.provide long-term signals for resource allocation.

Relative prices have to reflect a society’s preferences. While public Relative prices have to reflect a society’s preferences. While public goods as the prevention of global warming or the maintenance of goods as the prevention of global warming or the maintenance of energy supply security have intrinsic value, their achievement comes energy supply security have intrinsic value, their achievement comes at an economic cost. Care has to be taken to minimise these costs.at an economic cost. Care has to be taken to minimise these costs.

Government policies to facilitate energy technology improvements Government policies to facilitate energy technology improvements need to be strengthened. Efforts need to be concentrated in those need to be strengthened. Efforts need to be concentrated in those areas that are least likely to crowd out private efforts and maximise areas that are least likely to crowd out private efforts and maximise positive spillovers.positive spillovers.

None of these types of actions can deliver least-cost solutions on its None of these types of actions can deliver least-cost solutions on its own. Together they might. own. Together they might.