Delivering on the Paris Climate Goals throughAccelerating Energy Transitions
US-Japan Forum: Challenges for the Global Economy
and a Better Globalization

Amar BhattacharyaBrookings Institution
May 25, 2018

Structure The Paris Agreement

 The twin energy challenge:
 Enhancing Access Decarbonization

 Accelerating Energy Transitions: Policy Technology
 Finance2

Global action on climate change continues

1600

Paris (CoP 21)
1400

1,359

Solar and wind are now some of the cheapest
source of electricity in many countries, new RE
plants are competitive with fossil fuels in mostregions (IRENA, 2018)

No. of laws and policies

1200

1000

Copenhagen (CoP 15)

Deployed energy storage reached 930
megawatts in 2016; year-on-year growth of over
50% for (non-hydro) storage (IEA, 2017)

800

600

EV car stock has reached 2 million units incirculation.

400

200

0Powering Past Coal Alliance – 26 members,including 19 countries and 7 provinces/statesfrom Canada (5 provinces) and the USA (2states) pledged to phase out coal power.

More than 1,300 laws and policies in 164 countries representing 95% of global GHG emissions

3The Paris Agreement
 Paris Agreement was a turning point and forms the basis of new,international, cooperative, long-term action on climate change—building on
the broader commitment to the sustainable development goals embodied in
the 2030 development agenda and financing for development in Addis in
July 2015.
 Key pillars of the Paris Agreement:• Ambitious goals both to hold the increase in global average temperatures tobelow 2 degrees and to achieve net zero emissions in the second half of thiscentury;• Continuously review and update emission targets every five years;• Call for countries to indicate national commitments (NDCs) and their long-term
strategies for low-emission development by mid-century;• Enhancing resilience through adaptation;• Mobilization of finance.

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Drivers of the agreement in Paris;
view shifted from the “costs of action” to “investment and growth”
 Paris was agreed based on the recognition that growth, sustainable development,poverty reduction and climate action are complementary and interwoven. There isno “horse-race”.
 The notion of “costs of action” is being transformed by rapid technological advances:• Efficiency, demand management; renewable energy (solar, wind) and energy
storage technology.
 Opportunity to:• Boost shorter-run growth from increased investment in the low-carbontransition (sustainable infrastructure);• Spur innovation, creativity and growth in medium term;• Offers the only feasible longer-run growth on offer (high-carbon growth selfdestructs)
 Better understanding of dynamics of change and learning; and of the consequencesof dirty infrastructure (e.g. air pollution from burning fossil fuels).
5While action is happening there is still a large gap between current
NDCs and what is required to reach the Paris temperature targets

4What to do to hold warming “below 2oC”
 Can do a little more earlier and a little less later and vice versa but shape of feasible paths

similar.
 Stabilising temperatures requires stabilising concentrations, which will require net-zeroemissions. The lower the target temperature, the earlier the necessary achievement of net-zero;balancing sources and sinks.
Paths to achieve under 2oC likely to require:• zero total emissions well before the end of century (2070 - 2080),• Net negative emissions in major sectors (because some sectors likely to be positive).
 Total current Paris pledges (NDCs) are for emissions of around 55-60 GtCO2e per annum in 2030

(10% increase as compared to today). Whilst improvement on BAU (ca. 65-68 GtCO2e perannum), need to be around 40 GtCO2e or less per annum by 2030 (20% decrease).
 Current NDCs (if met) point us to 3°C path, temperature not seen for around 3 million years.

Holding temperature to below 2°C requires immediate and rapid action across whole world;
focus on energy, cities and land.

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Further delay in action is dangerous

The window for making the right choices is uncomfortably narrow. Remainingcarbon budget is shrinking rapidly.

Further delay in action to learn more would be a profound mistake:• The “ratchet effect” from flows of GHGs to concentrations (CO2 hard to remove)• Dangers of “locking in” long-lived high-carbon capital/infrastructure. This
involves either commitment to high emissions or early scrapping ofcapital/infrastructure.
• Rapid urbanisation and building of infrastructure.
• Potential devastating impacts on ecosystems, biodiversity, forests, water, airquality; tipping points.

 Delay increases reliance on unproven future technologies (e.g. negative emissions) ormore ambitious action in future (politically feasible?).

8Structure The Paris Agreement

 The twin energy challenge:
 Enhancing Access Decarbonization

 Accelerating Energy Transitions: Policy Technology
 Finance

9Challenge to low-carbon energy transition: Improving energy access•Historically, about 100 GJ ofprimary energy per capita
per year has been requiredto achieve energy access.

•By 2050, the world’s
population is expected to be
9-10 billion, all of whom
deserve a good standard ofliving.

•Currently about 1 billion
people still have little or noaccess to electricity andaround 3 billion do not haveaccess to clean cooking
facilities, mostly in Africa
and Asia (SE4all, 2016).

•The central question is: how
can we create an energyabundant future that
supports development andkeeps temperature rises“well below 2C“?

Average per capita primary energy consumption; GJ/capita; 2014

Source: Energy Transitions Commission, 2016

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Challenge to low-carbon energy transition: Improving energy access

2030 Gaps in access to electricity & clean cooking - planned and current
policies
Rest of the developing Asia
15%
West Africa
28%

Southern Africa
23%

Other
Southern Asia
8%

China
7%
India
26%

DevelopingAsia
8%

East Africa
20%
Central Africa
18%

Other Sub-Saharan Africa
40%

Source: IEA Energy Access: From Poverty to Prosperity, WEO Special Report, 201711

Challenge to low-carbon energy transition: Decarbonization

Fossil fuel consumption by 2040 in a 2˚C scenario

Source: Copenhagen Economics for the Energy Transitions Commission, 2017. The Future of Fossil Fuels

6Structure The Paris Agreement

 The twin energy challenge:
 Enhancing Access Decarbonization

 Accelerating Energy Transitions: Policy Technology
 Finance

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Accelerating Energy Transitions
 Even with radical improvements in energy productivity, global energy use willneed to grow by around 80 percent to meet the needs of a global population
likely to reach 9 billion by 2030.
 Limiting global mean temperatures to less than 2 degrees (with a probability of66%) would require an energy transition of exceptional, scope, depth and speed.
A fundamental ramp up in low carbon technologies is needed in all countries
driven by improvements in energy and material efficiency and a fundamental
reorientation of energy supply investments with much higher deployment ofrenewable energy.
 The required transition will require progress along four dimensions:• Decarbonization of power combined with extended electrification;• Decarbonization of activities which cannot be easily electrified;• Acceleration in the pace of energy productivity improvement; and• Optimization of fossil fuels use within the overall carbon budget constraints.

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Opportunities for developing regions: Africa and South Asia
 Poor people are hit hardest by pollution and earliest by climate change. They often live invulnerable places, have less resilience to shocks and are more exposed to deterioratingenvironments.
 Rapidly developing countries and cities offer the opportunity to integrate RE and energy

flexibility from the early stages; design of network infrastructures (electricity, transport,water…)• Poor people benefit the most from ability to travel (e.g. public transport)
 To achieve SDG 7 (affordable and clean energy), the current pace of electrification expansion

must double. Mostly needed in developing regions of Africa, Asia and Latin America.
• To meet climate change goals, almost all new electricity infrastructure must be clean andgreen starting now (Pfeiffer et al., 2016)
 For many, centralised grids are high costs and low access. The falling costs of RE and improved

reliability strengthen the case for a decentralised approach.
 Increases in RE use can not only support reaching 100 GJ of primary energy per capita per year,

but also support environment, social and economic development.

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Drivers of change: Policy
A well-designed carbon price is an indispensable part of a strategy for
reducing emissions in an efficient way
Map of carbon pricing systems in place orplanned worldwide

Source: World Bank Group, 2017. Carbon
Pricing Dashboard.

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Drivers of change: Policy
At least 40 countries at least partially reduced subsidies for fossil energy
between 2015-2017

Source: International Institute for Sustainable Development, 2017; based on data from IEA, World Energy Outlook
2016.
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Drivers of change: Technology
Renewable energy costs are now cheaper than fossil fuels in many countries• Record lows for renewable energy are being achieved in many
countries through auctions:
CountrySolar

Wind - Onshore

India

Rs 2.44 (2017)

Rs 2.43 (2017)

MexicoUS$ 0.0197 (2017)

US$ 0.0177 (2017)

Japan

US$ 0.153 (2017)

GermanyEuro 0.049 (2017)

Chile

US$ 0.0325 (2017)

Global weighted average CSP, solar PV, onshore and offshore wind project LCOE data to2017 and auction price data to 2020, 2010-2020

Euro 0.038 (2017)

All prices per kWh (year record achieved)
Rs 65 to 1 USD
Source: IRENA, 201718

Drivers of change: Technology

Observed Battery prices

USD per Wp

USD per kWh of storage

Solar PV Module Prices

2010

2011

2012

2013

2014

2015

2016

2017

Source: EIA, 201719

Drivers of change: Financing
The rapid growth of the green bond market shows the potential of green finance
The issuance of green bonds has rapidly increased recently

The green bond market 2012-2016

Source: Climate Bonds Initiative11

Drivers of change: Financing
The recommendations of the Task Force on Climate-related Financial
Disclosures should be considered for designing a policy and institutionalframework for climate financeAligning finance: Task Force on Climate-related Financial Disclosures

Source: Task Force on Climate-related Financial Disclosures

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Financing: The key role of MDBs
 Key role for MDBs around supporting investment by enhancing the quality ofthe project, reducing risk and crowding in private finance.
 Their presence can impart confidence, reduce risks (particularlygovernment-induced policy risk), bring relevant instruments for managing
risks (equity, guarantees, long-term loans…) and encourage participation ofother sources of financing.
 This can bring down the cost of capital: crucial for volume and sustainability(quantity and quality).
 They are trusted conveners that can help coordination and help establish

replicable and scalable models.
 They play a crucial role in getting projects through difficult early stages.

After that institutional investors can be attracted by stable long-term
returns; great potential scale. Development banking can be profitable.
 A major expansion of MDB financing will be needed to support energy

access and the acceleration of energy transitions.
22Thank you!