The innovation challenge STAKEHOLDER CONFERENCE "Post-2012 climate policy for the EU" 22 NOVEMBER 2004 Niklas Höhne ECOFYS Cologne, Germany

The innovation challenge Stabilization paths (Source: Ecofys, adapted from post SRES stabilization paths Morita et al. 2001, CO 2 only) Corresponding temperature levels at equilibrium: 550ppm: around 3.2°C 450ppm: above 2.5°C 350ppm: around 1.5°C (Source: IPCC TAR 2001, average climate sensitivity) Reference

The innovation challenge Content What needs to be done today to reach stabilization of CO 2 concentrations and the 2°C target? –Stabilization of CO 2 concentrations at any level level requires global emissions to decline to a very low level. –For 450ppmv CO 2 globally below 1990 levels in 2050 and in industrialized countries below 1990 levels by factor 3 to 5 1.Technological change 2.Choice of technologies 3.Costs

The innovation challenge Emissions = activity energy/activity GHG/energy (Source: K. Blok, Technology choices: how to set innovation targets for energy-efficiency improvement and low-carbon energy sources?) Share of zero emission sources Annual energy efficiency improvement Emission reduction in the EU until 2050 At 2% annual increase in energy consuming services

The innovation challenge Two options for action on technology development Option A: Develop new technologies to be applied later -Danger that technologies will not emerge as planned (e.g. fusion) -Danger of lock-in: Old technologies and infrastructure prescribe future path Option B: Support new technologies now -Technological learning: Performance improvements, cost reduction and diffusion

The innovation challenge Development of wind technology Source: Wolfgang Eichhammer, Fraunhofer Institute for Systems and Innovation Research, Karlsruhe, Germany

The innovation challenge Development of wind technology Development of wind turbines

The innovation challenge Long-term impact of todays decisions Existing stock is constantly replaced

The innovation challenge Conclusions technological learning Use low emission technologies now to reduce the costs in the long term Use todays huge investments in the energy system Avoid lock-in effect

The innovation challenge Case I: Carbon capture and storage (Edmonds) Without capture and storage technology With capture and storage technology Edmonds conclusions: Cost to move from reference to path with CO 2 storage technology is significantly lower than to path without CO 2 storage technology -> storage technology lowers cost of stabilization Source: Kim & Edmonds 2000, Potential for advanced carbon capture and sequestration technologies in a climate constrained world

The innovation challenge Case II: German Advisory Council on Global Change Exemplary path that meets 450 ppmv CO 2 concentration Source: WBGU 1.Major reduction in fossil fuels 2.Phase-out of nuclear 3.Expansion of solar 4.Substantial improvement in energy efficiency Council conclusions: A fossil / nuclear path: substantially larger risks and significantly more expensive mainly due to CO 2 sequestration Time lag: the period of next 10–20 years is decisive window of opportunity for transforming energy systems. If missed: higher costs

The innovation challenge Conclusions choice of technology Ambitious energy efficiency improvements and development of zero emission technologies are needed No single technology alone can be the solution – many should be supported Technological development is uncertain Cost and effect of R&D is difficult to model Opinions diverge on the optimal path

The innovation challenge Costs to introduce technologies Source: Sandén & Azar (2003), Assumption: growth rate 30%/year, progress ratio 0.8. Empirical example: Wind in Germany (feed-in tariff): ~+0.4 Cent/kWh for all electricity used Model result: PV in OECD countries < 0.1 Cent/kWh for all electricity used

The innovation challenge Case III: IIASA IIASAs conclusions: Total energy system costs and emissions are lower, if fast technological development is assumed Source: Roehrl & Riahi 2000, Technology Dynamics and Greenhouse Gas Emission Mitigation All scenarios: high economic growth (3%/a), global cooperation, but with different technological developments A1C - Coal: R&D per turnover: 0.3%, todays rate A1T - Technology: Large scale targeted R&D:4-13%, cheap nuclear and renewables Costs include non-discounted cumulative cost of operation and maintenance of energy production, conversion, transformation and distribution, but not end-use technologies and R&D investments (assumed to be smaller than differences shown here)

The innovation challenge Cost for stabilization: IPCC Presented as difference between GDP in 2050 in reference case and GDP in 2050 in stabilization case: 4% GDP loss over 50 years = 0.08% per year Source: IPCC TAR

The innovation challenge Cost for stabilization is only postponement of GDP growth Source: Azar & Schneider 2002

The innovation challenge Conclusions Be ambitious in - energy efficiency improvements - development of zero-emission technologies No single technology alone can be the solution Opinions diverge on the optimal path A portfolio of policies is necessary to stimulate long-term technological development –Act now: Avoid the lock-in into an emission intensive path, next 10 to 20 years are crucial –Use new technology: Application of still expensive technologies today can accelerate the cumulative learning and be cost effective in the long term –Intensify development of new technologies: huge joint long-term research and development efforts needed Possibly higher cost in the short term but lower absolute cost in the long term. Total global cost may be large in absolute terms, but small compared to the expected growth in GDP