Energy Policy in Theory

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Energy Policy in Theory Practice

• John P. Holdren
• Teresa John Heinz Professor of Environmental
  Policy
• John F. Kennedy School of Government
  Professor of
  Environmental Science Policy
• Department of Earth Planetary Sciences
• HARVARD UNIVERSITY
• Director
• THE WOODS HOLE RESEARCH CENTER
• Presentation for the AGI Leadership Forum on
  Communicating Geoscience to
  Policymakers Washington,
  DC, 30 April 2007

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In theory
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THE MULTIPLE AIMS OF ENERGY POLICY

• ECONOMIC AIMS
• provide reliable fuel electricity for basic
  needs economic growth
• limit consumer costs of energy
• limit cost vulnerability from imported oil
• help provide energy basis for economic growth
  elsewhere

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THE MULTIPLE AIMS (continued)

• ENVIRONMENTAL AIMS
• improve urban and regional air quality
• avoid nuclear-reactor accidents waste-mgmt
  mishaps
• limit impacts of energy development on fragile
  ecosystems
• limit greenhouse-gas contribution to
  climate-change risks

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THE MULTIPLE AIMS (concluded)

• HOMELAND- NATIONAL-SECURITY AIMS
• minimize dangers of conflict over oil gas
  resources
• avoid spread of nuclear weapons from nuclear
  energy
• reduce vulnerability of energy systems to
  terrorist attack
• avoid energy blunders that perpetuate or create
  deprivation

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POTENTIAL PROBLEMS

• Cumulative consumption ? resource depletion
• Growth of demand outstrips capacity to expand
  supply, constrained by needs for
• capital
• skills
• equipment
• Energy supply becomes too costly
• economically
• environmentally
• politically
• Unmanageable tensions emerge among economic,
  environmental, security goals

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In practiceQuantitative context
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Where are we and where are we headed?
World primary energy supply 1850-2000
Hydro means hydropower plus other renewables
besides biomass
Energy supply grew 20-fold between 1850 and 2000.
Fossil fuels supplied 80 of the worlds energy
in 2000.
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World electricity supply by source
About 1/3 of primary energy is used to generate
electricity, and 2/3 of this comes from fossil
fuels
Other renewable
2004
Total 17,450 billion kWh
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USA, China, World in 2005

• USA
  China World
• Population, millions 297
  1306 6420
• GDP/pers, 2005 (ppp) 42000
  7300 9150
• Total energy supply, EJ 106
  80 514
• Oil consumption, EJ 42
  15 175
• Oil imports, Mb/d
  12 3.4 50
• Electricity generation, TWh 4200 2500
  18200
• Electricity share from coal 50
  80 40
• C emitted in CO2, MtC 1700 1400
  7500
• ppp at purchasing-power parity, EJ
  exajoules, TWh terawatt-hours, MtC megatons
  of carbon in CO2. Total energy supply includes
  biomass fuels. Electricity generation is gross,
  not net.

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Business-as-usual (BAU) forecasts to 2030

• 2005 2030
• Primary energy, exajoules
• World 514 750
• United States 106 150
• China 80 140
• Electricity, trillion kWh
• World 17.3 30
• United States 4.0 6.0
• China 2.4 4.8

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Energy-related CO2 emissions
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Under continuation of BAU

• World use of primary energy reaches 2.5 times the
  2000 level by 2050 and 4 times by 2100.
• World electricity generation reaches 3 times the
  2000 level by 2050 and 5 times by 2100.
• World CO2 emissions from energy reach 2 times the
  2000 level by 2050 and 3 times by 2100.

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In practiceWhat are the problems?
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The problem is not running out of energy

• Some mid-range estimates of world energy
  resources. Units are terawatt-
• years (TWy). Total world energy use is 15
  TWy/year.
• TWy
• OIL GAS, CONVENTIONAL 1,000
• UNCONVENTIONAL OIL GAS (excluding clathrates)
  2,000
• COAL 5,000
• METHANE CLATHRATES 20,000
• OIL SHALE 30,000
• URANIUM in conventional reactors 2,000
• ...in breeder reactors
  2,000,000
• FUSION (if the technology succeeds)
  250,000,000,000
• RENEWABLE ENERGY (available energy per year)
• sunlight on land 30,000
• energy in the wind 2,000
• energy captured by photosynthesis
  120

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Nor is the problem running out of money
Projected capital investment for energy
supply 2001-2030
International Energy Agency 2005
This is under 1 of projected GWP and only about
5 of projected world investment. (But it could
reach 15 of investment in developing countries.)

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Real problem intolerable environmental cost
Impacts of fossil CO2 on global climate
Mid-range scenarios are heading for Ts last seen
30 million years ago.
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Real problem tensions among energy-policy aims

• cost minimization vs. modernization, increased
  robustness reliability, environmental
  improvements, energy security
• increased domestic fossil-fuel production (for
  security) vs. protection of fragile ecosystems
• increased nuclear-energy production (for
  greenhouse-gas abatement) vs. reducing risks of
  nuclear accidents terrorism

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Real problem No silver bullet
No known energy option is free of question
marks

• conventional oil gas not enough resources?
• coal, tar sands, oil shale not enough
  atmosphere?
• biomass not enough land?
• wind hydro not enough good sites?
• photovoltaics too expensive?
• nuclear fission too unforgiving?
• nuclear fusion too difficult?
• hydrogen energy to make it? means to
  store it?
• end-use efficiency not enough smart
  end- users?

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In practice
The tasks for current policy
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The primary tasks of energy policy in light of
current competing objectives are

• to find and implement the best compromise among
  the most important economic, environmental,
  security objectives, given the resources
  technologies available at the time
• to promote technological advances over time that
  reduce limitations of existing energy options,
  open new options, and reduce the tensions among
  energy-policy objectives.

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These ends cannot be achieved by markets alone,
because...

• many of the objectives relate to public goods
  (like national security) externalities (like
  pollution) that are not priced in markets unless
  policies achieve this
• markets often also need other kinds of help to
  avoid market failures from abuse of monopoly
  power, lack of information, perverse incentives,
  short time horizons, etc.

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The National Commission on Energy Policy

• Launched in 2002, the Commission
• was thoroughly bipartisan multi-sectoral,
• was funded mainly by the William and Flora
  Hewlett Foundation, with minority participation
  by MacArthur, Pew, Packard, Energy Foundation.
• Its 1st report, Ending the Energy Stalemate A
  Bipartisan Strategy To Meet Americas Energy
  Challenges
• was released at the end of 2004
• had a significant influence on the national
  energy legislation passed by Congress and signed
  by President Bush in summer 2005
• A 2nd report, Recommendations to the President
  and the 110th Congress, was released earlier
  this month.

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Elements of the US energy stalemate

• Gap between rising oil demand and declining
  domestic production widening since 1985, with
  little policy action to address it on either
  supply side or demand side.
• Corporate average fuel economy (CAFÉ) standards
  unchanged since 1985 for passenger cars,
  constant from 1987 to 2005 for light duty
  trucks (pickups, vans, SUVs). Whole-fleet
  average 24 mpg in 2003 ( 1981).
• Thirteen years after USA ratifies UN Framework
  Conven-tion on Climate Change (Rio), no
  requirement or incentive to reduce CO2 emissions
  from energy sector in place.
• No new nuclear reactor ordered in the USA since
  1978 siting of new LNG terminals and even wind
  farms increasingly stymied by Not in my
  backyard (NIMBY).
• Real 2004 Federal spending on energy-technology
  research, development, demonstration same as in
  1987.

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The Commissions formula for overcoming the
stalemate

• Adopt a bipartisan, revenue-neutral approach.
• Address both supply and demand in an integrated
  fashion.
• Dont try to solve the problem at once, but begin
  to change the trajectory.
• Recognize there are no silver bullets.
• Wherever possible, rely upon markets
  appropriately regulated to produce the most
  efficient solutions.
• Invest in technology.

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Recommendations were in 5 categories

• Expanding oil gas supply and strategic
  petroleum reserves
• Dampening growth of demand for liquid fuels
• Strengthening protecting energy-supply
  infrastructure
• Limiting reducing greenhouse-gas emissions
• Accelerating energy-technology innovation

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The 2005 energy legislation

• Embraced most of the Commissions recommen-
• dations about
• oil gas supply
• strengthening energy infrastructure
• deployment incentives for renewables, nuclear,
  clean-coal technology
• RD incentives for industry
• It failed to embrace the recommendations about
• strengthening CAFE standards
• significantly increasing federal energy RD
• mandatory, economy-wide GHG restraints

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The 2007 Energy Commission update

• Establish new-vehicle fuel-economy improvement
  target of 4 per year.
• Implement mandatory, economy-wide, market-based
  program to reduce greenhouse-gas emissions,
  aiming to return to 2006 emission level by 2020
  and fall to 15 below 2006 level by 2030.
• 10 / ton CO2 initial safety valve, escalating at
  5/yr real
• production credits for electricity generation
  with CO2 capture, yielding effective incentive
  exceeding 30 / ton CO2
• Increase government investments toward
  commercial-ization of CO2 capture sequestration
• Enact renewable portfolio standard to achieve 15
  of U.S. electricity from renewables by 2020
• Address impasse in radioactive-waste management

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Some key references

• National Commission on Energy Policy, Ending the
  Energy Stalemate A Bipartisan Strategy to Meet
  Americas Energy Challenges, December 2004
  http//www.energycommission.org
• John P. Holdren, The energy innovation
  imperative, Innovations Technology/
  Globalization/Governance, Vol. 1, No. 2, Spring
  2006 http//bcsia.ksg.harvard.edu/BCSIA_content/do
  cuments/Innovations_The_Imperative_6_06.pdf
• Intergovernmental Panel on Climate Change,
  Climate Change 2007 The Physical Science Basis.
  Summary for Policy Makers. 2007.
  http//www.ipcc.ch/SPM2feb07.pdf
• UN Scientific Expert Group on Climate Change
  Sustainable Development, Confronting Climate
  Change Avoiding the Unmanageable and Managing
  the Unavoidable, United Nations Foundation, 2007
  http//www.unfoundation.org/SEG/
• National Commission on Energy Policy, Energy
  Policy Recommendations for the President and the
  110th Congress, April 2007 http//www.energycommi
  ssion.org