Professional Documents
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A N I P I E C A W O R K S H O P
London, United Kingdom, 1–2 October 2008
Introduction
Executive Summary
O ver the coming decades, energy
demand will grow significantly,
requiring large investments in energy and
strong improvement in energy efficiency,
all while managing risks associated with
greenhouse gas (GHG) mitigation and
E fforts to reconcile society’s growing demand for
energy while promoting efforts to mitigate the
risks relating to climate change pose a
changes in climate and associated fundamental challenge. Large investments are
adaptation. Policies that aim at significant needed to maintain energy supply and satisfy
reductions in GHG emissions by 2020 energy demand in a world of strong economic
would imply drastic changes in the supply growth (punctuated by recessions) and with vastly
and use of energy—with different changes differing circumstances and priorities. Limiting
in different regions—and raise critical GHG emissions while satisfying energy demand
questions for industry. entails even larger investments over decades. Over
the next decade, actions aimed at managing the
risks of climate change are focused on a wide
This IPIECA-organized workshop brought
range of policies to reduce GHG emissions, with
together experts from academia, business,
an emerging focus on adapting to climate change.
governments, and international and non-
These actions will result in an experience base for
governmental organizations to consider
managing climate change risks, and will form a
the outlook for GHG emissions and basis for investment decisions that need to be
climate over the coming decades, and made to satisfy energy demand.
policies being developed and
implemented over this time frame, and to The reduction of energy demand has the largest
explore strategies and best practice for potential for the near-term reduction of carbon
managing risks. dioxide (CO2) emissions associated with energy
use. Demand reduction can result from more
The workshop and this publication are efficient use of energy, choices to use energy for
part of an ongoing effort by IPIECA and different purposes, or simply doing without energy
its members to raise understanding and services—commonly considered an undesirable
provide constructive input on key climate outcome. Energy end use and buildings present
significant technical potential for improvements;
change issues. The workshop presentations
however, there are numerous barriers to be
are available for download from the
overcome to make these improvements a reality.
IPIECA website (www.ipieca.org) along
Industry has been able to continuously improve its
with all the publications in the IPIECA
efficiency through energy management systems
climate change workshop series (see back that identify opportunities for economic
cover for list of titles). improvements, and avoid barriers to their
implementation. Cogeneration offers further
improvements in system efficiency, but can
sometimes face barriers when supplying electricity
beyond the plant gates. Improvements in efficiency
are essential to continue the decreasing trend in
energy intensity, and acceleration of improvements
would be needed if this trend is to be steeper.
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IPIECA Workshop, London, United Kingdom, 1–2 October 2008
of efforts to mitigate GHG emissions. Adaptation ● promote the more rapid dissemination and use of
strategies that reduce vulnerability to a host of efficient, existing commercial technology in both
risks, including those from climate change, may developed and developing countries;
hold particular promise. Adaptation includes any ● encourage the development and widespread
action, public or private, planned or spontane- global use of innovative, currently non-
ous, in anticipation and in response, to reduce commercial technologies; and
the negative impacts of climate change and ● enhance the ability of all countries to acquire and
make the most of the positive impacts. utilize advanced technologies.
Adaptation actions are best taken by those who
actually manage climate-sensitive resources and Analyses of stabilization pathways rely on carbon
operations. Given the deep uncertainty about capture and storage (CCS), bioenergy and nuclear
many of the specific impacts of climate change, power to make major contributions to mitigation, in
improving the robustness and flexibility of addition to improvements in energy efficiency.
infrastructure and increasing our ability to adapt While each of these currently faces opposition to
(‘adaptive capacity’) may be an appropriate large-scale deployment, removing any one of these
strategy. Governments do have roles in options leads to a marked increase (e.g. doubling)
improving adaptive capacity; however, the of the overall cost of mitigation in model studies.
effectiveness of government actions may be Analyses of stabilization also rely on global
limited because, in many cases, the government participation to accomplish mitigation; without
is not the resource manager. Further, adaptation global participation, the cost of mitigation is higher
will require the contributions of the private sector and can be infeasible for low stabilization levels.
in any long-term planning context in both Keeping technology options open, generating
resources and infrastructure. new technology options, and maintaining a
pathway to global participation are each
Policies that aim at significant reductions in GHG important in moving from short-term policies to
emissions by 2020 would imply drastic changes long-term objectives.
in the supply and use of energy. The effects of
such policies hinge on their impacts on the There are significant gaps between the realities of
decisions that are continually being made— energy demand and supply, and society’s
ranging from the preferences of individuals to the expectations of deep reductions in GHG emissions.
investments of firms. Ultimately, reducing GHG Targets such as stabilization at 450 ppm or
emissions from energy supply will involve reductions in GHG emissions of 50 per cent by
thousands of multi-billion dollar investment 2050 would entail a revolution in energy supply
decisions; given the large risk of such investment, and use. Such a revolution has not been
these decisions are not being made at this time. A demonstrated in the historic context, and it is not
wide range of imminent policies—differing from apparent in current statistics of energy research
region to region—seek to reduce GHG emissions and development (R&D) nor trends in energy use
while also avoiding competitive distortions and and society’s expectations. The public generally
distributional effects. believes that deep reductions in emissions can be
achieved at low cost using technologies in use
Near-term actions alone cannot address the long- today—this is inconsistent with economic analyses.
term, global challenges and risks of climate A much broader dialogue by society, and by
change. Addressing them effectively requires business, is needed if society is to manage climate
actions and policy frameworks that: risk in an effective, efficient and equitable way.
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Climate Change and Energy to 2020 and onwards
Efforts to reconcile society’s growing demand for energy while promoting efforts to
mitigate the risk of climate change pose a fundamental challenge.
World energy demand is predicted by the International Energy Agency (IEA) to grow
by more than 50 per cent in the next 25 years, with coal use rising more than any
other form of primary energy in absolute terms. In this projection, oil supply and
demand remain tight in the next decade, with a projected gap opening up in supply
and demand of 12.5 million barrels per day by 2015. And China and India are
likely to account for more than 40 per cent of that increased demand, and more than
60 per cent of the increase in carbon dioxide emissions to 2030. The likely scale of
technology deployment needed to manage or reduce these emissions is massive.
In the IEA’s Baseline scenario1 energy outlook, global CO2 emissions will increase
from 27 Gt CO2 in 2005 to 42 Gt CO2 by 2030. In contrast, in the IEA’s BLUE Map
scenario, emissions fall to 23 Gt CO2 by 2030. The IEA estimates its BLUE Map
scenario is on a path towards CO2 stabilization at 450 ppm (parts per million) CO2
and would lower the risk that the global temperature increase would exceed a 2˚ C
rise. In order to satisfy energy demand whilst limiting GHG emissions under this
scenario, massive amounts of low-carbon generation capacity would need to be
added every year through to 2030 (see Figure 1).
Figure 1: Average annual power generation capacity additions in the 450 ppm stabilization case,
2013–2030 (Note: these additions are the annual totals that have to be added each year) 2
other renewables
0 10 20 30 40 50 60 70 80
additional power generation capacity (GW)
1 Energy Technology Perspectives 2008, IEA 2 World Energy Outlook 2007, IEA
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IPIECA Workshop, London, United Kingdom, 1–2 October 2008
These issues are further compounded by the need to supply electricity to the 1.6
billion people still lacking access. There are surrounding issues of additional
complexity, such as technology transfer to the developing world and the associated
issues of institutional capacity, infrastructure, governance, and intellectual property
rights which will all affect the environment for energy investments3.
14 12
efficiency
fossil fuels CCS
12 10
energy R&D (percent of total R&D)
renewables
funding (billion dollars, 2006)
10 nuclear
8 hydrogen
8 storage technologies
6 other
6 share of energy R&D
4 in total R&D
4
2
2
0 0
1986 1991 1996 2001 2006
3 Increasing the pace of technology innovation and application, IPIECA 2007 4 World Energy Outlook 2007, IEA
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Climate Change and Energy to 2020 and onwards
Figure 3: Estimates of marginal emission reduction costs for the global energy system, 2050 5
1000
transport alternative fuels
technology
800
pessimism
marginal cost (US$/t CO2)
600
industry fuel switching
and CCS 500
-200
0 5 10 15 20 25 30 35 40 45 50
2050 CO2 emissions reduction (Gt CO2/year)
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IPIECA Workshop, London, United Kingdom, 1–2 October 2008
Buildings
The IPCC Fourth Assessment Report notes that buildings, and associated energy use,
offer one of the biggest economically efficient mitigation potentials. There are many un-
costed, or difficult to quantify, co-benefits of building energy efficiency as a form of
GHG mitigation which may even be higher than the value of the energy savings
themselves. These include: reduced morbidity/mortality; improved health and social
welfare; new business opportunities and jobs (retrofitting); and improved energy security.
The role of standards in energy efficiency is vital for assets with 50-year+ lifetimes—
retrofitting buildings is possible, and to a high degree, but is much more expensive.
6 Jim Sweeney’s presentation (see page 16) 7 Saving Energy in the Oil and Gas Industry, IPIECA 2007
Industry
Industrial energy use is shifting to the developing economies. The potential for energy
savings in industries varies greatly across countries. Under the IEA BLUE Map
scenario8, which looks at a 50 per cent reduction in emissions by 2050, industry
accounts for 19 per cent of the 48 Gt CO2 emissions reduction above the
improvements already assumed in the IEA’s Baseline case. By 2050 industry would
need a 21 per cent absolute reduction in emissions—which means a 60 per cent
reduction in intensity. The use of oil is reduced greater than any other fossil fuel or
primary energy. For the refining sector, out to 2050 this implies a reduction in supply,
and also product switching from naptha/petroleum towards kerosene and diesel.
Cogeneration
Cogeneration, the simultaneous production and
capture of electricity and thermal heat or steam
(also known as combined heat and power, CHP),
has the potential to improve operating efficiencies
significantly. This method of production can be
twice as efficient as traditional methods of
producing steam and power separately, since it
recovers energy otherwise discharged into the
atmosphere or lost during the process of
condensing steam back to water at traditional
power plants. However, an exact match between heat is transported long distances, requiring heavily
the heat and electricity needs rarely exists, and insulated pipes at significant cost. Barriers to
cogeneration is at its most efficient when the heat cogeneration include the large up-front capital costs
can be used on site or very close to it. Thermal of the system and relatively low fuel costs providing
efficiency is reduced, and costs increased, when the insufficient incentive to improve efficiencies 9.
8 Energy Technology Perspectives 2008, IEA 9 The Oil and Gas Industry and Climate Change, IPIECA 2007
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IPIECA Workshop, London, United Kingdom, 1–2 October 2008
Transport
Conventional wisdom states that transport is unlikely to provide as large a share of
carbon reductions as other sectors, given expectations of the high demand for
personal and material mobility, and the high cost of technical options10. According to
the US Energy Information Administration (EIA), a carbon price that cuts emissions
from power generation in half by 2030 would have little impact on transport (EIA
2006). Many policies have been developed to curb emissions, including fuel
economy standards, renewable fuels mandates, and research into alternative fuels
such as hydrogen or plug-in vehicles. Whilst powertrains have become more energy
efficient, these improvements have been outpaced by consumer demand for power
and weight rather than fuel efficiency. A number of areas have the potential to
improve results: greater use of price signals; increased efficiency of markets
(information), and transport systems (e.g. air traffic); more attention to neglected
modes of transport (heavy trucks, aircrafts, rail); and more aggressive research and
development.
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Climate Change and Energy to 2020 and onwards
1.5
Observations
Human effects + natural variability
Human effects only
1.0
0.5
10 50 90
Mt Pinatubo
-0.5
1960 1970 1980 1990 2000 2010 2020 2030 2040
Vulnerable regions
Water, food and housing pose serious risks from climate change to social welfare,
and therefore form priorities in adaptation policy. Geographic regions which highlight
these vulnerabilities are likely to exhibit the first large-scale human impacts of climate
change—for example densely populated mega-deltas, especially in Asia, and Africa,
along with small islands, and the Arctic.
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IPIECA Workshop, London, United Kingdom, 1–2 October 2008
Adaptation policy
Adaptation includes any action, public or private, planned or spontaneous, in
anticipation and in response, to reduce the negative impacts of climate change and
make the most of the positive impacts. Adaptation actions are best taken by those
who actually manage climate-sensitive resources and operations. Given the deep
uncertainty in many of the specific impacts of climate change, improving the
robustness and flexibility of infrastructure, and increasing our ability to adapt
(‘adaptive capacity’) may be an appropriate strategy. Governments do have roles in
improving adaptive capacity; however, effectiveness of government actions may be
limited because, in many cases, the government is not the resource manager.
Moreover, in some instances government regulations can hinder adaptive actions.
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Climate Change and Energy to 2020 and onwards
Imminent policies
and implications
carbon sequestration
bioenergy/biomass
nuclear energy
carbon capture
and storage
0 25 50 75 100
public preference (%)
Regional policies
In the European Union (EU), a proliferation of climate policies of various types are
progressing. Targets for 20 per cent of all energy to come from renewables, and for a
20 per cent reduction in primary energy use compared to ‘business a usual’, along
with goals on biofuels and vehicle efficiency have all been proposed. However, there
are complex interactions among these policies that will affect carbon prices and
implementation choices. And with overlaying policies, it becomes increasingly difficult
to estimate and attribute the cost of each policy and its effectiveness, decreasing the
transparency of which policies may be cost-effective.
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IPIECA Workshop, London, United Kingdom, 1–2 October 2008
In the United States, policies are emerging on state, regional and national fronts,
including a broad patchwork of cap and trade, fuel and efficiency standards, and
renewables portfolios. Unfortunately, the public has large misconceptions concerning
potential costs of such policies and is predisposed toward renewable and efficiency
standards, and much less favourable towards nuclear and CCS technologies (Figure 6).
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Climate Change and Energy to 2020 and onwards
Ultimately, effective policies are needed to encourage and enable options such as
CCS if such technologies are to be a reality. If such options are not available, then
the cost of emissions reduction would multiply or the extent of emission reduction
would be reduced. To contribute to achieving policy goals of drastic reductions in
emissions, CCS would need to move beyond the development and demonstration
phase, to be commercialized by, for example, 2020. For that to happen, a series of
demonstration plants has been proposed along with policies to address the financial
gap for CCS demonstration plants and, ultimately, commercial plants14,15.
Polices are also being developed surrounding biofuels to gain perceived economic,
environmental and social benefits. Mandates have been enacted in the EU, Brazil,
and the USA. However, there are major complications in controlling the sustainability
of biofuels, recognizing the interaction between biofuel production and land, water,
labour and food resources16.
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IPIECA Workshop, London, United Kingdom, 1–2 October 2008
Figure 7: Year 2020 USA carbon prices for different international regimes—450 and 550 ppm17
60 60
Impossible with N/A ideal—global
index 550 ppm 2020 price = 1.0
10 8 10
5
1.0 1.2 1.4 2.1
0 0
price of carbon also depends on the relative weighting and inclusion of various sectors
of the economy. For example, costs are halved if terrestrial (land-based) carbon is
valued under a 450 ppm CO2 scenario. If only electric power generators incur a
carbon price, the cost of reducing a tonne of carbon rises by a factor of 5.
International agreement
Under international negotiations, a new agreement is hoped for by December 2009.
However, major sticking points exist between developed and developing countries.
Developed countries see the absolute need for emerging economies such as China
and India to begin emission reduction in earnest if any target of significance is to be
achieved. Conversely, developing countries still wish to see historically responsible
developed nations take the first and substantial steps towards decarbonizing their
economies. Key issues surrounding clean technology transfer and funding for
adaptation and mitigation measures in developing countries have also yet to be
resolved. A likely agreement on reducing deforestation and land degradation could
make a real difference to global emissions.
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Climate Change and Energy to 2020 and onwards
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IPIECA Workshop, London, United Kingdom, 1–2 October 2008
Workshop programme
Welcome
• Richard Sykes (Executive Secretary, IPIECA)
Photographs reproduced courtesy of the following: cover (except globe and background image) and pages 1, 2, 3, 5, 10, 11 and 14 (top, lower left, lower right): ©iStockphoto.com;
cover (centre left) and page 15: ©Photodisc Inc.; cover (background image) and pages 4, 6, 7, 8, 9, 12 and 14 (lower middle): ©Shutterstock.com; page 13: IPIECA
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Climate Change and Energy to 2020 and onwards
T his brochure, the Workshop programme and all speakers’ presentations are available
in PDF format and can be downloaded from the Climate Change publications section
of the IPIECA website at: www.ipieca.org.
Adobe Acrobat Reader™ is required to view the files, and is available as a free
download from the Adobe website at:
www.adobe.co.uk/products/acrobat/readstep2.html
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IPIECA
The International Petroleum Industry Environmental Conservation Association (IPIECA) was founded in 1974 following the
establishment of the United Nations Environment Programme (UNEP). IPIECA provides one of the industry’s principal
channels of communication with the United Nations.
IPIECA is the single global association representing both the upstream and downstream oil and gas industry on key
global environmental and social issues. IPIECA’s programme takes full account of international developments in these issues,
serving as a forum for discussion and cooperation involving industry and international organizations.
IPIECA’s aims are to develop and promote scientifically-sound, cost-effective, practical, socially and economically
acceptable solutions to global environmental and social issues pertaining to the oil and gas industry. IPIECA is not a
lobbying organization, but provides a forum for encouraging continuous improvement of industry performance.
Guide Series
• The United Nations Framework Convention on Climate Change (UNFCCC) and its Kyoto Protocol: A Guide to the Climate
Change Negotiations (2008)
• Climate Change—a Glossary of Terms (4th Edition) (2007)
• A Guide to the Intergovernmental Panel on Climate Change (4th edition) (2006)