1. Energy, Sustainable Development and Integrated Assessment Models October 10, 2011 Jan Steckel with Robert J. Brecha, Jessica Strefler, and Gunnar Luderer

2. 2Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 2011 Outline Introduction Energy and Development in the past Models, energy and development The role of infrastructure Discussion and Conclusion

3. 3Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 20113 Introduction Looking at IAMs, economic development is not greatly affected when measured in GDP or reduced consumption BUT: Can we trust these results with respect to sustainable development? (Sustainable) development is more than consumption IAMs were not developed to tackle questions of SD … GlobalNA-I countries Luderer et al. 2011

4. 4Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 20114 Energy and development in the past Threshold? Very high High Intermediate Low

5. 5Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 20115 Literature results Thresholds for per capita FE are found in the literature: Krugman and Goldemberg (1983): 45 GJ/year (Africa, LAM, Asia) for “acceptable levels”, bottom up Goldemberg et al. (1985): 31 GJ/year for the future, taking efficiency improvements into account Giannini Pereira, Vasconcelos Freitas, and da Silva (2011): 10 GJ/year for rural households to escape absolute poverty Question of causality: Inconclusive results in the literature Majority of studies (e.g. Asafu-Adjaye 2000, Wolde-Rufael 2005, Chien-Chiang Lee und Chang 2008) imply a causality from energy to economic development for low levels of development

6. 6Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 20116 Model results Models and Scenarios used in the analysis 1540 22

7. 7Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 20117 Model results Non Annex I Annex IEurope India FE per capita [GJ] 25 30 35 40 45 50 55 FE per capita [GJ] 15 20 25 30 80 100 120 140 160 80 100 120 140 FE per capita [GJ] Baseline 2030 Baseline 2050 Cat 3+4 2030 Cat 3+4 2050 Cat 1+2 2030 Cat 1+2 2050 Baseline 2030 Baseline 2050 Cat 3+4 2030 Cat 3+4 2050 Cat 1+2 2030 Cat 1+2 2050 Baseline 2030 Baseline 2050 Cat 3+4 2030 Cat 3+4 2050 Cat 1+2 2030 Cat 1+2 2050 Baseline 2030 Baseline 2050 Cat 3+4 2030 Cat 3+4 2050 Cat 1+2 2030 Cat 1+2 2050

8. 8Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 2011 Energy and development patterns in ReMIND BAU $10 $30$50 Final Energy per capita [GJ] GDP per capita [$]

9. 9Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 2011 ReMIND results in perspective World NA-1 AN-1 USA CHNIND Baseline $10 initial tax $30 initial tax $50 initial tax ADAM and RECIPE scenarios

10. 10Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 201110 Wrap up of results In developing countries, final energy levels decrease significantly in mitigation scenarios with respect to baseline scenarios Historic patterns of energy consumption and development seem to break Final energy levels might not cross a level that can be considered a threshold for “development” Questions Are results consistent with “energy threshold theory”? Efficiency improvements? Realistic? How would these societies look? What about infrastructure?

11. 11Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 2011 Infrastructure Goal: Estimating the energy needed for infrastructure (i.e. steel and cement) in the future OLS linear regression with capital investements and population being explanatory variables for 11 (ReMIND) regions Per capita steel production [kg] USAIndia Per capita cement production [kg CO2] EU27Latin America

12. 12Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 2011 Infrastructure – Cement and Steel production Cement production [t cement/cap] Steel production [kg steel/cap] - Econometric model seems to give reasonable results for the future - Can be used to calculate future energy demand: Steel: 18 GJ/t – 2.5 GJ/t; Cement 5 GJ/t – 1.8 GJ/t 1970-2050

13. 13Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 2011 Energy demand in the future Other Asia Latin America India 5 15 25 5 15 25 35 10 20 30 40 Without massive efficiency improvements future energy demand for infrastructure will stabilize between 5 and 20 GJ/cap across regions Japan 20 60 100 FE per capita [GJ] EU 27 20 60 100 USA 50 100 150 200 China 10 30 50 70 Africa 5 15 25

14. 14Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 2011 Discussion and Conclusion (Some) Models implicitly assume massive energy efficiency improvements, e.g. in the provision of infrastructure or even substitutions of particular energy intensive inputs or/and Developing countries will be societies that grow without producing energy intensive capital (no industry, no infrastructure) Do not consider the importance of energy supply for low income countries in growth processes Developing countries unlikely to totally decouple from energy use in the future Growth-Energy assumptions in (some) IAMs questionable Results – particularly for developing countries - might change if: Regional distinctions for developing countries Energy needs in development processes … were included

15. Thank you for your attention! jan.steckel@pik-potsdam.de

16. 16Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 2011 Literature Asafu-Adjaye, John. 2000. The relationship between energy consumption, energy prices and economic growth: time series evidence from Asian developing countries. Energy Economics 22, no. 6: 615-625. Chontanawat, Jaruwan, Lester C. Hunt, und Richard Pierse. Does energy consumption cause economic growth?: Evidence from a systematic study of over 100 countries. Journal of Policy Modeling 30, no. 2 (März): 209-220. doi:doi: DOI: 10.1016/j.jpolmod.2006.10.003. Giannini Pereira, Marcio, Marcos Aurélio Vasconcelos Freitas, und Neilton Fidelis da Silva. 2011. The challenge of energy poverty: Brazilian case study. Energy Policy 39, no. 1: 167-175. Goldemberg, T.B. Johansson, A.K.N. Reddy, und R Williams. 1985. Basic Needs and Much More with One Kilowatt per Capita. Ambio. Jakob, M., Luderer, G., Steckel, J., Tavoni, M., Stephanie Monjon (2011): Time to act now? Assessing the costs of delaying climate measures and benefits of early action. Climatic Change, accepted for publication Krugman, H., und J Goldemberg. 1983. The Energy Cost of Satisfying Basic Human Needs. Technological Forecasting and Social Change. Lee, Chien-Chiang, und Chun-Ping Chang. 2008. Energy consumption and economic growth in Asian economies: A more comprehensive analysis using panel data. Resource and Energy Economics 30, no. 1: 50- 65. Luderer, G., V. Bosetti, M. Jakob, M. Leimbach, J. Steckel, H. Waisman, O. Edenhofer (2011): On the economics of decarbonization: Results and insights from the RECIPE model intercomparison. Climatic Change, accepted for publication Masih, Abul M.M., und Rumi Masih. 1996. Energy consumption, real income and temporal causality: results from a multi-country study based on cointegration and error-correction modelling techniques. Energy Economics 18, no. 3: 165-183. Oh, Wankeun, und Kihoon Lee. 2004. Energy consumption and economic growth in Korea: testing the causality relation. Journal of Policy Modeling 26, no. 8-9: 973-981. Wolde-Rufael, Yemane. 2005. Energy demand and economic growth: The African experience. Journal of Policy Modeling 27, no. 8: 891-903.

17. Backup slides

18. 18Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 2011 The ReMIND model Production structure Overall structureFully coupled macro- economy and energy system Intertemporal optimization of regional welfare Intertemporal equilibrium of capital, energy and goods markets (Pareto optimum) 11 world regions, heterogeneous capital stocks in energy sector, international trade Regionally specific fossil fuel endowments and renewable energy potentials

19. 19Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 2011 Infrastructure Goal: Estimating the energy needed for infrastructure (i.e. steel and cement) in the future OLS linear regression with capital investements and population being explanatory variables for 11 (ReMIND) regions

20. 20Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 2011 Cement

21. 21Jan Steckel, ENTDEKEN workshop Hamburg, October 10, 2011 Steel