1. 禁無断転載 (C) 2015 IEEJ, All rights reserved Asia/World Energy Outlook 2015 Yukari Yamashita The Institute of Energy Economics, Japan (IEEJ) 15 February 2016 5 th IAEE Asia Conference Asia/World Energy Outlook MAPPING THE ENERGY FUTURE

2. 禁無断転載 (C) 2015 IEEJ, All rights reserved Introduction Findings from “Asia/ World Energy Outlook 2015” 1.Energy Situation in Asia towards 2040 2.Lower Price Scenario towards 2030 3.Climate Change :Issues and Uncertainties 2

3. 禁無断転載 (C) 2015 IEEJ, All rights reserved 3 2013 13,600 ↓ 2040 19,000 (1.4-fold increase) World Reference Scenario Asia North America OECD Europe FSU / Non-OECD Europe Latin America Middle East Africa Oceania 5,400 Mtoe 8,700 Mtoe Average Annual Growth Rate （ 2013-2040 ） 1.8% 2.3% 1.8% 0.5% 0.1% 0.5% 0.0% Increase (2013-2040) Source: IEEJ, Asia/ World Energy Outlook 2015 Primary Energy Demand by Region (World)

4. 禁無断転載 (C) 2015 IEEJ, All rights reserved 4 28% Primary Energy Consumption by Source Solid lines: Reference Dashed lines: Adv. Tech. World Asia Oil Coal Natural gas Other renewables NuclearHydro 31% The percentages indicate the shares of total global/Asian primary consumption 29% 23% 24% 51% 41% 33% 24% 20% 29% 21% 25% 24% 10% 16% 15% 11% 18% 15% 12% 15% 5% 6% 10% 2% 6% 10% 2% 3% Fossil share 81%→78% （ Ref. ） 71% （ Adv. Tech. ） Fossil share 84%→81% （ Ref. ） 71% （ Adv. Tech. ） Source: IEEJ, Asia/ World Energy Outlook 2015 Coal Oil Natural gas Other renewables Nuclear Hydro

5. 禁無断転載 (C) 2015 IEEJ, All rights reserved 5 Asia China India Energy self-sufficiency in Asia Solid lines: Reference Dashed lines: Adv. Tech. Source: IEEJ, Asia/ World Energy Outlook 2015

6. 禁無断転載 (C) 2015 IEEJ, All rights reserved World Primary Energy Supply (By Energy) Primary Energy Fossil Fuels ： 77 ％ 6 Source: Institute of Energy Economics, Japan, Asia/World Energy Outlook 2015

7. 禁無断転載 (C) 2015 IEEJ, All rights reserved What do lower prices bring? Asia/World Energy Outlook

8. 禁無断転載 (C) 2015 IEEJ, All rights reserved Various factors influence oil price 8 Expectation in market Supply OPEC’s policy Fiscal break-even price OPEC’s spare capacity Increases in production of unconventional oil Money Stock prices and exchange rates Expected inflation Money supply Risk appetite New investment commodity and technology Risk Political situation in producing countries Foreign policy Terror to related facilities Unusual weather, disaster and accident Strike, etc. Economic growth Stock in developed countries Oil use policy in developing countries Car ownership and fuel economy Demand Source: IEEJ, Asia/ World Energy Outlook 2015

9. 禁無断転載 (C) 2015 IEEJ, All rights reserved “History doesn’t repeat itself, but it does rhyme” 9 ❖ Oil price Source: BP Mark Twain Decreases in demand and increases in supply by non-OPEC following high price after the oil crises Severer competition in OPEC Easy supply-demand balance affected by the Netback pricing Decreases in emerging economies’ demand by the Asian financial crisis Expansion of OPEC production quota and excess production by the members over their quota Sharp drop of demand by the Lehman shock Expansion of production capacity by Saudi Arabia and others Increases in supply by non-OPEC and OPEC Slow growth of global demand 9

10. 禁無断転載 (C) 2015 IEEJ, All rights reserved 10 ❖ Background of the scenarios ❖ Assumption of oil price ReferenceLower Price DemandEnergy conservation and fuel switching in transport sector progress along the trend. Strong energy conservation and fuel switching by non- fossil fuel progress. SupplyConventional resources Development in each country follows its historical trend. Unconventional resources Production growth in the United States declines in and after 2020s. Slow development is seen in other countries. Conventional resources Competition among low-cost producers such as OPEC, Russia, etc. continues. OPEC loses effectively its power as a cartel organisation. Unconventional resources Reaches to the highest levels both inside and outside the United States. Note: Future prices are in $2014. We may see lower prices than the Reference Scenario Source: IEEJ, Asia/ World Energy Outlook 2015

11. 禁無断転載 (C) 2015 IEEJ, All rights reserved 11 Need for Higher Cost Oil Production Source: Prepared by IEEJ based on IEA data and others

12. 禁無断転載 (C) 2015 IEEJ, All rights reserved 12 ❖ Crude oil production in selected regions [2030] ❖ Natural gas production in selected regions [2030] Depressed production in traditional exporting regions Source: IEEJ, Asia/ World Energy Outlook 2015

13. 禁無断転載 (C) 2015 IEEJ, All rights reserved 13 ❖ Crude oil net imports/exports in selected regions [2030] * Among the modelled 15 regions. Nominal value. Benefit for importing countries Source: IEEJ, Asia/ World Energy Outlook 2015

14. 禁無断転載 (C) 2015 IEEJ, All rights reserved 14 ❖ Changes in real GDP [2030, compared with the Reference Scenario] Lower Price is good for Global Economy but… Source: IEEJ, Asia/ World Energy Outlook 2015

15. 禁無断転載 (C) 2015 IEEJ, All rights reserved Addressing Climate Change - Issues and Uncertainties - Asia/World Energy Outlook

16. 禁無断転載 (C) 2015 IEEJ, All rights reserved Concentration of CO 2 -eq in 2100, ppm CO 2 -eq Sub- category Change in GHG emissions from 2010 to 2050, % 2100 temperature change relative to 1850-1900 ( ℃ ) * 450 （ 430-480 ） Overshoot (vast majority) -72 to -411.5 - 1.7 500 （ 480-530 ） No overshoot -57 to -421.7 - 1.9 Overshoot -55 to -251.8 - 2.0 550 （ 530-580 ） No overshoot -49 to -192.0 - 2.2 Overshoot -16 to +72.1 - 2.3 （ 580-650 ） -38 to +242.3 - 2.6 （ 650-720 ） -11 to +172.6 - 2.9 （ 720-1000 ） +18 to +543.1 - 3.7 *Temperatures in parentheses include carbon cycle and climate system uncertainties Scenarios in IPCC AR5 WG3 Source: IPCC AR5 WG3 16 From IPCC 5 th Assessment Report (AR5) 2 ℃2 ℃ RCP4.5 RCP6.0 RCP2.6 BAU

17. 禁無断転載 (C) 2015 IEEJ, All rights reserved 17 IPCC 5 th Assessment Report v.s. IEEJ Outlook Fossil CO 2 emissions ※ Calculated using MAGICC 6.0 Meinshausen, M., S. C. B. Raper and T. M. L. Wigley (2011). "Emulating coupled atmosphere-ocean and carbon cycle models with a simpler model, MAGICC6: Part I – Model Description and Calibration." Atmospheric Chemistry and Physics 11: 1417-1456. RCP6.0 （ 720-1000ppm category ） RCP4.5 （ 580- 720ppm categories ） RCP2.6 （ 450ppm category ） 2050 IEEJ: Asia/World Energy Outlook 2015 Reference Adv. Technologies Adv. Tech. +CCS 50% reduction by 2050 Below Zero

18. 禁無断転載 (C) 2015 IEEJ, All rights reserved 18 Temperature change from 1850-1900 Reference Adv. Tech. +CCS 50% reduction by 2050 How Much is Temperature Change ? Reference Adv. Technologies Adv. Tech. +CCS 50% reduction by 2050 IEEJ: Asia/World Energy Outlook 2015

19. 禁無断転載 (C) 2015 IEEJ, All rights reserved 19 Party Date of submission Target typeReduction targetBase yearTarget yearCoverage EU Mar 6 Absolute emissions 40% 19902030 GHG United States Mar 31 Absolute emissions 26 ～ 28% 20052025 GHG including LULUCF Russia Apr 1 Absolute emissions 25 ～ 30% 19902030 GHG China Jun 30 GDP intensity 60 ～ 65% 20052030 CO 2 Japan Jul 17 Absolute emissions 26% 20132030 GHG Indonesia Sep 24 Reduction from BAU 29% BAU2030 GHG Brazil Sep 30 Absolute emissions 37% （ 43% for 2030 ） 20052025 GHG India Oct 1 GDP intensity 33 ～ 35% 20052030 GHG Intended Nationally Determined Contributions (INDCs) : major countries IEEJ: Asia/World Energy Outlook 2015

20. 禁無断転載 (C) 2015 IEEJ, All rights reserved United StatesEU ChinaIndiaRussia Japan 20 Note: Japan’s 2020 target does not include reduction by nuclear power. China’s target is for CO 2, while others are for GHG. Comparison of INDCs by country IEEJ: Asia/World Energy Outlook 2015

21. 禁無断転載 (C) 2015 IEEJ, All rights reserved Comparison of INDCs with the Reference/Adv. Tech. Scenarios 21 50% 2050 IEEJ: Asia/World Energy Outlook 2015

22. 禁無断転載 (C) 2015 IEEJ, All rights reserved 22 Mitigation GHG emission Climate change Adaptation Damage Trade- off To take appropriate action to prevent or minimize the damage caused by climate change. -There is a trade-off relationship among the mitigation, adaptation and damage costs. It is impossible to reduce all three costs at the same time. - It would be realistic to expect a balance among the three, while minimizing the total cost. To reduce or prevent emission of greenhouse gases. Mitigation and Adaptation Costs IEEJ: Asia/World Energy Outlook 2015

23. 禁無断転載 (C) 2015 IEEJ, All rights reserved 23 2100 Mitigation vs. Adaptation Costs in 2100

24. 禁無断転載 (C) 2015 IEEJ, All rights reserved 24 Example of the calculation of the long-term optimal path

25. 禁無断転載 (C) 2015 IEEJ, All rights reserved 25 -The uncertainty is extremely large. -A trade-off between “mitigation” and “adaptation” costs Optimal & realistic is to minimize the total cost Future R&D should aim to reduce cost hike. Climate sensitivity Mitigation, adaptation and damage costs Conclusion: Addressing climate change issues -”Climate sensitivity” may be lower than previous studies (IPCC AR5, WG1). -With lower climate sensitivity, damage becomes smaller, a less ambitious mitigation path being optimal. ・ The current INDCs do not curb GHG emissions sufficiently. Parties should reduce emissions further. Actions required considering various scenarios and options other than only the “450ppm” scenario. INDCs (Intended Nationally Determined Contributions) ・ Innovative technologies must be developed including CCS, CCU and artificial photosynthesis

26. 禁無断転載 (C) 2015 IEEJ, All rights reserved IEEJ’s Asia/World Energy Outlook 2015 Will be available at the site below: http://eneken.ieej.or.jp/en/whatsnew/421.html Asia/World Energy Outlook MAPPING THE ENERGY FUTURE IEEJ - Best think tank in the World in the category of Energy and Resource Policy