A Radical Change in Supply and Demand Needed to Reach Paris Agreement

Jules Kortenhorst, CEO, RMI
Thomas Koch Blank Principal, RMI

As shown below in the ETC’s energy transitions matrix, we know the world needs a two-part solution: reducing emissions from energy supply, and radically increasing energy productivity (the economic output generated from each unit of energy used).

Reaching the goal of well below 2 degrees C that the delegates committed to in Paris will require never before seen progress in both energy efficiency and decarbonizing the energy supply: a 3 percent improvement in energy productivity per year and a 1 percent decarbonization rate per year.

This is far greater than our historic rate of 0.9 percent energy productivity improvement and of 0.1 percent decarbonization per year from 1980 to 2014. The challenge of this acceleration in the energy transformation should not be underestimated.

With that in mind, the ETC commissioned Ecofys to analyze the INDCs of 16 countries and the EU region, covering both developed and developing countries, to see if we are on the right path, and where there are opportunities to improve. Unfortunately, the immediate conclusion is that the current INDCs fall far short of the required shift.

GLOBAL PRIMARY ENERGY DEMAND, 2012–2050

Source: Courtesy Energy Transitions Commission

BEYOND THE INDCS

While the INDCs in their current form are clearly insufficient, the commitments from the Paris signatories are unbalanced between supply and demand levers, and very limited in scope outside the power sector. So although the challenges are great, we are confident they can be overcome with affordable and practical solutions for which the majority of required technologies exist today. But it requires significant change in countries’ transport, building, power, and agriculture sectors on both sides of the equation—supply (decarbonization) and demand (improved energy productivity).

The recently released position paper of the ETC highlights what needs to be done to limit global temperature rise to well below 2 degrees C and elaborates on pathways for how to go about doing it.

TRANSPORT

For example, in the transport sector, continued improvements in vehicle efficiency and design can greatly increase energy productivity of personal transport systems. But equally or more importantly, transitioning to shared, autonomous, service-based vehicles—what we at RMI call mobility as a service—would decrease fuel demand even more. Coupled with electrified vehicles (assuming the electricity comes from renewable sources), this would drive a step-change in decarbonization of the energy supplied to the sector.

BUILDINGS

The way in which new residential and commercial buildings are constructed will have a huge influence on emissions, both in the choice of building materials themselves and in the power needed to heat and cool the buildings. The ETC will identify where new technologies and changed policies and behaviors have the greatest potential to reduce energy demand and then catalyze the implementation. At RMI, we are not only accelerating the shift to extremely efficient (net zero energy) new buildings, but also working on retrofitting existing buildings—both residential and commercial—to greatly reduce energy use.

ELECTRICITY

While we’ve seen a lot of progress toward decarbonizing the electricity sector in the past few years, wind and solar only accounted for 2.9 and 0.7 percent of total global power generation respectively in 2014. Obviously we have a long way to go.  The ETC determined that 30 to 50 percent of global primary energy consumption needs to come from zero-carbon energy by 2050 to stay below a 2 degrees C temperature rise. We must both electrify more sectors and applications while at the same time deploying more renewable resources and other technologies such as hydrogen derived from zero-carbon sources or bioenergy (provided it’s harvested sustainably and does not compete with food production). At RMI we are working toward 80 percent renewables by 2050 in the U.S., and helping China achieve 20 percent non-fossil energy by 2030.

THE ETC FIVE CORE BELIEFS

The commissioners of the ETC are working to provide decision makers with insights and options for action, focusing on the mechanism of change. We have five core beliefs:

• There is an affordable, practical set of solutions, and climate goals and economic growth are interdependent and must be achieved together.
• Energy policy and business decisions made over the next 15 years are critical.
• Significant innovation in technology, financing, and business models is required on the both the supply and demand side of energy.
• Hidden costs and cross-subsidies in existing energy systems and transition costs need to be addressed.
• The ETC can add most value by focusing on the how rather than the why—learning from the past and challenging and learning from each other.

The Energy Transitions Commission is made up of leaders and experts from all sectors—energy incumbents, new market entrants, technology leaders, finance sector players, and policy influencers. We believe that if the commission can come together—with its diverse viewpoints, priorities, incentives, and experience—with the shared objective to accelerate change toward low-carbon energy systems, it is possible to achieve economic growth and take the necessary climate action simultaneously.

Reprinted from the RMI Outlook, May 4, 2016