International Energy Agency Energy Technology Perspectives – Scenarios and Strategies to 2050 Study Authored: 2010

Study Authorship and Governance Study Author International Energy Agency (IEA) - an autonomous agency, was established in November Its mandate is two-fold: to promote energy security amongst its member countries through collective response to physical disruptions in oil supply and to advise member countries on sound energy policy. Publication Committee This publication was prepared by the International Energy Agency’s Directorate of Sustainable Energy Policy and Technology, under the leadership of Bo Diczfalusy, and in co-operation with other divisions of the Agency. Peter Taylor, Head of the Energy Technology Policy Division, was the project manager and had overall responsibility for the design and implementation of the study. Other main authors include: Pierpaolo Cazzola, François Cuenot, Joana Chiavari, David Elzinga, Lew Fulton, Ben Gibson, Tom Kerr, Steven Lee, Uwe Remme, Cecilia Tam, Michael Taylor, Paul Tepes and Nathalie Trudeau. Reviewers A large number of reviewers provided feedback and input to the analysis presented in the report, see actual report for complete list 2 IEA Energy Technology Perspectives Overview Presentation to CSC March 31, 2011

Objectives and Overview A study about the role of technology globally (OECD and non-OECD countries) and across industries (buildings, transport, industry, power generation, etc.) and the need for a global energy technology revolution to meet climate change and energy security challenges through least-cost pathways The study utilizes scenario models that simulate the economic & technological relationship between the economy & GHG emissions and estimate the cost of reducing GHG emissions in the energy sector The scenarios are not forecasts The BLUE scenario explores the least-cost solutions to meet the goal of 50% emission reductions from 2005 levels by 2050 through technology deployment pathways The BLUE scenario assumes that technologies that are not available today are developed to the point at which they become commercial. It also requires the rapid and widespread uptake of such technologies into the market. A global price for carbon is necessary but by itself is insufficient to accelerate the needed energy technology advancements Study does not provide specific recommendations about the direction of climate change policies. Includes individual technology roadmaps that highlight pathway(s) to reach large scale production of technologies that can support GHG goals by: – identifying and addressing technology-specific barriers – highlighting necessary deployment policies and incentives – directing increased RD&D funding for new technologies – supporting technology diffusion, knowledge sharing among countries IEA Energy Technology Perspectives Overview Presentation to CSC March 31,

Methodology Baseline Business-as-Usual Scenario: Based on the WEO2009 Reference Case; foreshadows the situation in the absence of policy change and major supply constraints leading to increases in oil demand and CO2 emissions. This scenario has been further elaborated to include the period 2030 to 2050 using the Energy Technology Perspectives (ETP) model. (see appendix slide for further detail) Assumes oil prices are assumed to increase to USD 120 per barrel (bbl) in 2050 Blue Scenario: Reduce emissions 50% from 2005 levels by 2050 Explore what needs to be done to meet ambitious emissions reduction goals and other policy objectives based on a set of optimistic but plausible technology assumptions Utilizes the ETP model of global energy supply and demand to analyze the BLUE scenarios for the period 2007 to Assumes Carbon price of USD 175 per tonne of CO2eq saved by 2050; Oil price assumed USD 70/bbl in 2050; With carbon, the effective oil price seen by consumers in 2050 is much higher, at around USD 140/bbl in real terms; Transport Sector Scenarios: A variant of the Baseline scenario and two variants of the BLUE Map scenario are used: High Baseline assumes a higher growth in passenger light-duty vehicle ownership in the developing world and faster growth in vehicle travel and freight transport, especially trucking; Blue MAP Max. efficiency gains; Greater use of advanced biofuels; Deployment of EVs/FCVs; Blue Shifts assumes that travel is shifted towards more efficient modes and a modest reduction in total travel growth; no advanced technology deployment Blue MAP/Shifts combines the technology changes in BLUE Map with the travel pattern changes in BLUE Shifts. Step 1Step 2Step 3 Develop baseline “Business-as-Usual” Scenario Projecting GHG & Fuel Use from Develop alternative scenario to explore different technological pathways to achieve emission reductions Develop additional scenarios for specific sectors based on a number of variants from the Baseline and Blue MAP scenarios* IEA Energy Technology Perspectives Overview Presentation to CSC March 31, *Other Sectors Include: Electricity, Buildings, Industry

A Comparison of Scope Focus AreaIEA ETP 2010NPC - FTF Reduce GHG – 2005 Baseline E by 50% by 2050 E by 50% by 2050 Transportation / Infrastructure System improvements EE Vehicle fuel efficiency EE Vehicle technological advancement required EE Fuel processing advancement required EE Transportation Modal Shifts E Improve energy security EE Improve economic competitiveness EE 5 IEA Energy Technology Perspectives Overview Presentation to CSC March 31, 2011

Analysis Results Summary: GHG Reductions Global CO2 emissions double in the Baseline, but in the BLUE Map scenario abatement across all sectors reduces emissions to half 2005 levels by Global energy-related CO2 emissions in the Baseline and BLUE Map scenarios Key technologies for reducing global CO2 emissions A wide range of technologies will be necessary to reduce energy-related CO2emissions substantially. IEA Energy Technology Perspectives Overview Presentation to CSC March 31, 2011

Analysis Results Summary: United States Fossil fuel demand in the United States is reduced by almost 2/3 under the BLUE Map scenario. 7 Primary energy demand by fuel and by scenario in the United States Contributions to CO2 emissions reductions in the United States in 2050 A wide range of options are needed, with energy efficiency and decarbonising the power sector providing the largest emissions reductions. IEA Energy Technology Perspectives Overview Presentation to CSC March 31, 2011

Analysis Results Summary: Transport Changes Global 8 IEA Energy Technology Perspectives Overview Presentation to CSC March 31, 2011 Well-to-Wheel Passenger Mobility Greenhouse Gas Emissions by Mode Sources of Greenhouse Gas Emission Reduction, Transport Sector Baseline: energy demand and CO2 emissions in transport nearly doubled by 2050 (from 2007) mainly due to LDV and aviation High baseline: 20% higher energy use than baseline, And 150% higher carbon emissions (over 2007 levels) due to more expensive, higher carbon fuel types (Unconventional, CTL, GTL) BLUE Map: efficiency improvements and alternative fuels together can cut CO2 emissions in transport by 70% compared to the Baseline in 2050 (i20% below 2005) Modal shift, efficiency and alternative fuels all play significant roles in cutting greenhouse-gas emissions by 2050.

Analysis Results Summary: Transport Changes US 9 Passenger light-duty vehicles sales by technology in the United States US Transport Energy Use by Fuel in Blue MAP and Blue Shift Scenarios In the BLUE Map scenario, US LDV sales become dominated by EVs, PHEVs and FCVs by 2050 By 2020, hybrid vehicles reach a quarter of sales and PHEVs also reach sales of over one million. Electric vehicles reach sales of one million a year by 2025 and are widespread among the LDV fleet by Electric vehicles penetrate the market mainly in the small- and medium-car segments and PHEVs penetrate mainly in the larger-car segments Assumes CAFE standard is further tightened after 2016 so that by 2030 the average efficiency of the LDV stock 56 mpg The BLUE Shifts scenario for the United States assumes a 17% reduction in car and air travel by 2050 relative to the Baseline scenario, with about 10% coming from shifts to bus and rail travel, and 7% coming from land-use practices that result in fewer and shorter trips and travel avoidance, e.g. through substituting telecommunications for travel. LDV Biofuel use rises thru 2030 and then declines due to hydrogen and electricity, but continues to rise through demand from trucks, rail, and ships thru 2050 IEA Energy Technology Perspectives Overview Presentation to CSC March 31, 2011

Appendix 10 IEA Energy Technology Perspectives Overview Presentation to CSC March 31, 2011

IEA ETP Model 11 The primary tool used for the analysis of the BLUE scenarios is the IEA ETP model. Global 15-region model permits the analysis of fuel and technology choices throughout the energy system, from energy extraction through fuel conversion and electricity generation to end-use. The model’s detailed representation of technology options includes about individual technologies. The ETP model belongs to the MARKAL family of bottom-up modeling tools (Fishbone and Abilock, 1981). MARKAL has been developed over the past 30 years by the Energy Technology Systems Analysis Program (ETSAP), one of the IEA Implementing Agreements (ETSAP, 2004). The ETP-MARKAL model uses optimization to identify least-cost mixes of energy technologies and fuels to meet the demand for energy services, given constraints like the availability of natural resources. The ETP model has been supplemented with detailed demand-side models for all major end- uses in the industry, buildings and transport sectors. These models were developed to assess the effects of policies that do not primarily act on price. IEA Energy Technology Perspectives Overview Presentation to CSC March 31, 2011

In the BLUE Map scenario, oil demand in 2050 is 27% lower than in 2007 and coal and gas demand are 36% and 12% lower respectively. These reductions in demand lead to substantial fuel savings. Even so, fossil fuels remain an important element of the world’s energy supply in 2050 in all scenarios. Increasing energy efficiency (through many low-cost options) offers the greatest potential for reducing CO2 emissions over the period to 2050 and should be the highest priority in the short-term Will require Government funding in low-carbon technologies to be 2X-5X higher for RD&D than current levels (Globally) Decarbonising the power sector is crucial and must involve increasing the shares of renewables and nuclear power and adding CCS to generation The BLUE Map scenario delivers net financial benefits compared to the Baseline. Investments over the period 2010 to 2050: (Transport Sector Specific) – Total additional investment costs for vehicles in the BLUE Map scenario to 2050, relative to the Baseline, amount to about USD 22 trillion. This is about 10% higher than the levels of investment in the Baseline scenario of around USD 231 trillion and reflects significant cost reductions over time. – At a 2050 oil price of USD 120/bbl, fuel savings in the BLUE Map scenario reduce costs by around USD 20 trillion, nearly offsetting the higher vehicle costs. – At USD 70 per barrel of oil in 2050 (as assumed under BLUE Map), fuel costs are reduced by USD 47 trillion. In that case, the total vehicle and fuel costs in the BLUE Map scenario are around USD 25 trillion less than those in the Baseline scenario. With a 10% discount rate, the vehicle and fuel costs in the Baseline drop to about USD 95 trillion, with the costs in BLUE Map about USD 1 trillion higher. Analysis Results Summary: Overview Across Sectors IEA Energy Technology Perspectives Overview Presentation to CSC March 31,