Chapter 5: Energy PDF

Stuvia.com - The Marketplace to Buy and Sell your Study Material Chapter 5: Energy 1. Facts about energy supply and consumpIon InternaBonal Energy Agency (IEA) data Key World Energy StaBsBcs 2021 provides data about the situaBon up to 2019/2020 World Energy Outlook 2023 assesses the cur...

Stuvia.com - The Marketplace to Buy and Sell your Study Material Chapter 5: Energy 1. Facts about energy supply and consumpIon InternaBonal Energy Agency (IEA) data Key World Energy StaBsBcs 2021 provides data about the situaBon up to 2019/2020 World Energy Outlook 2023 assesses the current situaBon and looks into the future SituaBon unBl 2019/2020 Total Primary Energy Supply: o Fossil fuels remain dominant: in 2019 oil, coal and natural gas were the top sources of the world energy supply, accounBng for 31%, 27% and 23%, respecBvely o Renewable energy from biofuels, hydro and solar sources consBtuted about 14% of the world’s energy supply in 2019 o The shares of China and Asia have risen substanBally o The share of renewables in electricity producBon is rising Total Final ConsumpBon: o The share of electricity has risen considerably o The shares of China and Asia have risen substanBally StaBsBcs: Total primary energy supply: where does our energy comes from? o In Belgium we import a lot of energy o For the world as a whole it cancels out o The supply is transformed in energy we can use and losses o Electricity is one of the forms in which we consume energy o The total final consumpBon is always lower than the total energy supply, because of the losses Since the 1970 up unBl now the majority of our energy comes from fossil fuels o The share of oil had decreased o Coal has increased its share (remarkable!) China and Asia now have a much larger share in total energy supply than in 1970 o The share of OECD countries (rich countries) has reduced! Natural gas producBon has increased much more than the producBon of oil o Because gas is considered to be a cleaner fossil fuel than oil o But you have blips is 2008 (financial crisis) and covid in 2020 o Rich countries are producing less natural gasses as they used to Coal producBon has increased starBng in 2000 o Because the expansion in China that invested massively in coal producBon o They used it to rapidly develop Electricity generaBon mostly produced, and increased by fossil fuels o Renewable energy is increasing today China produced the most energy o Mostly coal (more than half) o Next US, India, Russia, Japan ConsumpBon mostly by China o Mostly in the industry; next US (transport), India, Russia, Japan 41 Downloaded by: carolinaalmeidadj | [email protected] Want to earn $1.236 Distribution of this document is illegal extra per year?  Stuvia.com - The Marketplace to Buy and Sell your Study Material AddiBonal data There are huge differences in per capita energy use between rich and poor countries o Much more in rich countries! Similar differences exist for per capita electricity generaBon In 2019, 761 million people did not have access to electricity o Before: more people that didn’t have access lived in South Asia o Now: in Sub- Sahara Africa about half of the populaBon (it has increased!) Current situaBon: Things have been stressful in the last years: The world’s energy system is in turmoil due to the war in Ukraine (and the situaBon in the Middle East) Especially the markets for gas and oil have been affected High prices create strong economic incenBves to act o Look for alternaBves o More investments in renewable energy Outlook: three scenarios to explore how the energy system evolves The Stated Policies Scenario (STEPS) assumes that the current policy se ngs are maintained o Most likely, no major new iniBaBves The Announced Pledges Scenario (APS) assumes that governments achieve all the pledges they have adopted The Net Zero Emissions by 2050 Scenario (NZE) assumes that everything necessary to cap global warming to 1.5 °C is achieved Graphs: We haven’t reached a peak of fossil fuels use! If you look at the emissions that come from fossil duels, will conBnue increasing in the coming years! o PredicBon: a fossil fuels peak before the end of this decade, with declines in advanced economies and China offse ng increasing demand elsewhere o Oil consumpBon will increase, and only slowly start to go down (same with natural gas) o According to the STEP scenario (post likely) PosiBve: much more investments in clean energy sources (wind, solar) & more electric vehicles (less fossil fuels) In the following years there will be negaBve growth rates in the use of coal o Mostly used for electricity (and steal, cement…) Natural gasses: similar pa;ern => We are about to reach a period of peaks! Hopefully a`er that, it is going to go down => Already today shares of investment in fossil fuels is way less than investments in clean energy -> sign that things are going to go down 42 Downloaded by: carolinaalmeidadj | [email protected] Want to earn $1.236 Distribution of this document is illegal extra per year?  Stuvia.com - The Marketplace to Buy and Sell your Study Material 2. Energy crisis There is a wide variety of forms of primary energy, but high-income economies sBll rely predominantly on fossil fuels, especially oil, gas and coal Since the 1970s several energy shocks occurred 1973-74: Arab-Israeli war, boyco; by OPEC and quadrupling of oil prices 1979-80: Iranian revoluBon, doubling of prices 1990-91: Iraq invasion of Kuwait and 1st Gulf war 2003: US/UK/... invasion of Iraq 2022: Russian invasion of Ukraine Each crisis leads to high prices and a transfer of wealth from consuming countries to producer countries price increases are never permanent! Daily prices are also volaBle (depending on supply and demand) TradiBonally, countries of the Middle East have been the largest supplier of oil to the US, Western Europe and Japan. However this region is highly unstable and torn by conflicts NaBonal: Arabs – Israel, Iraq – Iran, Syria – Iraq, Egypt – Libya Religious: Muslim – Jew, ChrisBan – Muslim, Shiite Muslim – Sunni Muslim, fundamentalist Muslim – secular Social and ideological: tradiBonalist – modernist The wealth transfer mechanism from oil importers to oil exporters, especially to the Middle East, has come under pressure due to other compeBng source countries (e.g., Russia) and to the development of shale oil (e.g., in the US) OPEC and its role The mission of OPEC (OrganizaBon of the Petroleum ExporBng Countries) is “to coordinate and unify the petroleum policies of its Member Countries and ensure the stabiliza6on of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those inves6ng in the petroleum industry” It is a cartel of 13 countries that tries to fix prices by quanBty restricBons (1/3 of the global world supply) The low-cost OPEC cartel sets its price at profit maximizing level o They want to obtain a high price. If there are signs that prices will go low, they will voluntarily lower their supply so that oil prices will go up again. o They keep a stable and high price of oil CompeBBve non-OPEC supply puts pressure on OPEC o OPEC is a large player of the oil market, but is not dominaBng anymore o Of OPEC decide to decrease their demand; but non-OPEC countries increase their demand, their strategy doesn’t work anymore As many OPEC countries are unstable regimes, there is an external cost to consuming naBons to secure access (military expenditures, especially for US) OPEC collaborates with 10 other oil-producing countries (Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, Sudan, South Sudan) in what is now known as OPEC+ Idea: if you have a larger group with the same strategy, you will have more impact on the oil market In October 2022 and again in April 2023 OPEC+ announced it would voluntarily cut crude oil producBon o The expectaBon is that this will stabilize crude oil prices (at a higher level) 43 Downloaded by: carolinaalmeidadj | [email protected] Want to earn $1.236 Distribution of this document is illegal extra per year?  Stuvia.com - The Marketplace to Buy and Sell your Study Material 3. Government responses to the energy crises The US remains highly dependent on oil, but investments in shale oil and gas have massively increased domesBc oil producBon Vehicles account for 40% of oil consumpBon The private cost of energy (oil) is low (even including gasoline taxes – about 25% of the retail price), but the social costs are high (externaliBes) o Eg: military costs, environmental damages, health costs,... Several iniBaBves in the 1970s (Nixon, Carter) were not effecBve The Bush administraBon took steps (2005, 2007) to reduce dependency by more reliance on nuclear power and research in renewable sources Development of shale oil and gas has been a game changer European countries have opted for energy conservaBon policies using taxes, regulaBon and subsidies (e.g., gasoline taxes up to 3⁄4 of price) DiversificaBon of supply North Sea oil, gas from Russia, LNG (liquid natural gas) from Algeria, Qatar,... France, Finland (nuclear opBon), Norway & Britain (North sea oil and gas) Germany is phasing out nuclear power and invesBng in renewable energy (“Energiewende”) Belgium intended to phase out nuclear power very soon, but is hesitaBng Development of shale gas (Poland, Germany, France,...?) Main policies: conserva6on, diversifica6on, renewables Japan is the most vulnerable of all OECD countries with a high dependency on oil and gas imports (it imports more than 80% of its energy), but it has a tradiBon of conserva6on (historical scarcity) Main policies: Investment in increasing energy efficiency (e.g., small car technology) o Not using too much energy Oil storage faciliBes (reserves for several months) Nuclear opBon, but future of this industry very uncertain o Safety concerns (ageing reactors) o 2011 Fukushima-tsunami disaster o Restarts began in 2015 (only 10 reactors up to now; more than 20 reactors have been decommissioned) China is the largest energy user in the world with huge coal reserves and coal covering about 2/3 of energy supply, resulBng in severe air and water polluBon (external costs) Largest emi;er of CO2 in absolute terms, but per capita emissions lower than the US and some other OECD Diversifica6on strategy Investments in oil-producing naBons to secure supply Nuclear power plants (+25 between 2015 and 2019) (industrial east) Methane gas (rural areas) Investment in solar, wind, small hydro, biomass 44 Downloaded by: carolinaalmeidadj | [email protected] Want to earn $1.236 Distribution of this document is illegal extra per year?  Stuvia.com - The Marketplace to Buy and Sell your Study Material 4. Economics and energy There is a close correlaBon between energy use and level of development But: the relaBonship is non-linear At low and medium levels of development, the relaBonship is linear At high levels of development (Human Development Index > 0.9), there is large variaBon in per capita energy use o Some countries use a lot more energy per capita than other countries that are evenly rich o Because of lifestyle etc Decoupling of energy use and growth is o`en seen as a feasible strategy to reduce energy use (and emissions) In the past: if countries grow, their energy consumpBon per capita also grows According to some this will not conBnue (= decoupling) There are some signs of decoupling (e.g., in the US): o Less energy per $ producBon due to change in industrial structure (from heavy industry to services) o More efficient use of energy (fuel economy of cars, land use planning,...) But: empirical evidence suggests decoupling is sBll far away (see e.g., Decoupling Debunked) Effects of the energy crisis on the development plans of Least Developed Countries (LDCs) The iniBal stages of development (transport, agriculture, industry) are very energy intensive Many LDCs are resource poor in energy requiring imports, and the resulBng trade deficits are financed by debt build-up The surge in demand from BRICS (Brazil, Russia, India, China, South-Africa) resulted in high oil & gas prices at the start of the 21st century, and “the end of cheap oil” was predicted o In recent years oil and gas prices tended to decrease (Great Recession, shale oil and gas, OPEC price fixing power, boom-bust cycles,...) o The Russia-Ukraine conflict has reversed this tendency High oil prices create a “Fourth world”, o It would prevent those countries from starBng their process of economic development § In the first stages of economic development, you rely a lot on industrial acBvity, which requires a lot of energy § If they have to pay a high price for this, it would make this very difficult o i.e. poor countries without energy resources (e.g., Bangladesh, Sri Lanka) 45 Downloaded by: carolinaalmeidadj | [email protected] Want to earn $1.236 Distribution of this document is illegal extra per year?