Climate Change:

Implications for
the Energy Sector

Key Findings from theIntergovernmental Panelon Climate Change
Fifth Assessment Report

For sustainable energy.

ThePhysicalScienceofClimateChangeRising temperatures:
The Intergovernmental Panel on Climate Change (IPCC)
Fifth Assessment Report (AR5) concludes that climatechange is unequivocal, and that human activities,
particularly emissions of carbon dioxide, are very likely
to be the dominant cause. Changes are observed in all
geographical regions: the atmosphere and oceans arewarming, the extent and volume of snow and ice arediminishing, sea levels are rising and weather patterns
are changing.

Projections:
Computer models of the climate used by the IPCC indicatethat changes will continue under a range of possible
greenhouse gas emission scenarios over the 21st century.
If emissions continue to rise at the current rate, impacts
by the end of this century are projected to include a
global average temperature 2.6–4.8 degrees Celsius (°C)
higher than present, and sea levels 0.45–0.82 metres
higher than present.
To prevent the most severe impacts of climate change,
parties to the UN Framework Convention on Climate Change(UNFCCC) agreed a target of keeping the rise in average global
temperature since pre-industrial times below 2°C, and to
consider lowering the target to 1.5°C in the near future.
The first instalment of AR5 in 2013 (Working Group I on
the physical science basis of climate change) concluded
that by 2011, we had already emitted about two-thirds ofthe maximum cumulative amount of carbon dioxide that
we can emit if we are to have a better than two-thirds chanceof meeting the 2°C target.

Impact of past emissions:
Even if emissions are stopped immediately, temperatures
will remain elevated for centuries due to the effect ofgreenhouse gases from past human emissions alreadypresent in the atmosphere. Limiting temperature rise will
require substantial and sustained reductions of greenhousegas emissions.

P2 Climate: Everyone's BusinessAboutthis document
The Fifth Assessment Report from theIntergovernmental Panel on Climate Change is theUnited Nation’s most comprehensive analysis of
our changing climate. It provides the scientific fact
base that will be used around the world to formulate
climate policies in the coming years.

PUBLISHED:
June 2014

FOR MORE INFORMATION:
E-mail: AR5@europeanclimate.org
www.cisl.cam.ac.uk/ipcc
www.worldenergy.org
www.europeanclimate.org

REVIEWERS:
This document is one of a series synthesising the most pertinent findingsof AR5 for specific economic and business sectors. It was born of the belief
that the energy sector could make more use of AR5, which is long andhighly technical, if it were distilled into an accurate, accessible, timely,
relevant and readable summary.
Although the information presented here is a ‘translation’ of the key
content relevant to this sector from AR5, this summary report adheres tothe rigorous scientific basis of the original source material.
Grateful thanks are extended to all reviewers from both the science andbusiness communities for their time, effort and invaluable feedback on
this document.
The basis for information presented in this overview report can be foundin the fully-referenced and peer-reviewed IPCC technical and scientificbackground reports at: www.ipcc.ch

Brian Statham, Chairman of the Studies
Committee, World Energy Council,
Dr Christoph Frei, Secretary General,
World Energy Council
Cambridge Team:
Nicolette Bartlett, Stacy Gilfillan,
David Reiner, Eliot Whittington

PROJECT DIRECTOR:Tim Nuthall

PROJECT MANAGER/EDITOR:Joanna BennEDITORIAL CONSULTANTS:
Carolyn Symon, Richard BlackPROJECT ASSISTANTS:
Myriam Castanié,
Simon McKeagney

LAYOUT DESIGN:
Lucie Basset, Burnthebook

INFOGRAPHIC:
Carl De Torres Graphic Design

IMPLICATIONS FOR THE ENERGY SECTOR P3

Key
Findings
Energy demand is increasing globally, causing greenhouse gas (GHG)
emissions from the energy sector also to increase. The trend is set tocontinue, driven primarily by economic growth and the rising population. In
recent years the long-term trend of gradual decarbonisation of energy has
reversed due to an increase in coal burning.
Climate change presents increasing challenges for energy production
and transmission. A progressive temperature increase, an increasing
number and severity of extreme weather events and changing
precipitation patterns will affect energy production and delivery. The
supply of fossil fuels, and thermal and hydropower generation andtransmission, will also be affected. However, adaptation options exist.
Significant cuts in GHG emissions from energy can be achieved
through a variety of measures. These include cutting emissions fromfossil fuel extraction and conversion, switching to lower-carbon fuels (forexample from coal to gas), improving energy efficiency in transmission
and distribution, increasing use of renewable and nuclear generation,
introduction of carbon capture and storage (CCS), and reducing final
energy demand.
Strong global political action on climate change would have major
implications for the energy sector. Stabilisation of emissions at levels
compatible with the internationally agreed 2°C temperature target will
mean a fundamental transformation of the energy industry worldwide in
the next few decades, on a pathway to complete decarbonisation.
Incentivising investment in low-carbon technologies will be a key
challenge for governments and regulators to achieve carbon reduction
targets. Reducing GHG emissions also brings important co-benefits suchas improved health and employment, but supply-side mitigation measures
also carry risks.

P4 Climate: Everyone's Business

The energy industry is both a major contributor toclimate change and a sector that climate change will
disrupt. Over the coming decades, the energy sector
will be affected by global warming on multiple levels,and by policy responses to climate change. The stakes
are high: without mitigation policies, the global
average temperature is likely to rise by 2.6–4.8°C by
2100 from pre-industrial levels.
In the absence of strong mitigation policies, economic
growth and the rising global population will continue
to drive energy demand upwards, and hence GHG
emissions will also rise. Climate change itself may
also increase energy use due to greater demandfor cooling.
The means and infrastructure to produce andtransport energy will be adversely impacted by climatechange. The oil and gas industry is likely to sufferfrom increased disruption and production shutdowns
due to extreme weather events affecting both offshore
and onshore facilities. Power plants, especially thosein coastal areas, will be affected by extreme weather
events and rising sea levels. Critical energy transport
infrastructure is at risk, with oil and gas pipelines incoastal areas affected by rising sea levels and thosein cold climates affected by thawing permafrost.
Electricity grids will be impacted by storms, andthe rise in global temperature may affect electricity
generation including thermal and hydroelectric
stations in some locations. Weather changes may also
affect bioenergy crops. In general, the industry has
options for adapting to climatic changes, but costs arelikely to be incurred.
The energy sector is the largest contributor to global
GHG emissions. In 2010, 35% of direct GHG emissions
came from energy production. In recent years thelong-term trend of gradual decarbonisation ofenergy has reversed. From 2000 to 2010, the growthin energy sector emissions outpaced the growth inoverall emissions by around 1% per year. This was dueto the increasing share of coal in the energy mix.

The energy sector, as defined by the
IPCC, comprises all energy extraction,
conversion, storage, transmission anddistribution processes with the exceptionof those that use final energy in the enduse sectors (industry, transport, building,agriculture, forestry).

From annual emissions of 30 gigatonnes (Gt) of
carbon dioxide (CO2) in 2010, projections indicate thatin the absence of policies to constrain emissions, theemissions associated with fossil fuel use, including
the energy supply sector but also energy use intransport, industry and buildings would contribute
55–70 GtCO2 per year by 2050. To reduce emissions tolevels commensurate with the internationally agreed
goal of keeping the temperature increase since preindustrial times below 2°C, the share of low-carbon
electricity generation by 2050 will need to triple orquadruple. Use of fossil fuels without carbon capture
would virtually disappear by 2100 at the latest. Theenergy sector would be completely decarbonised,
and it is likely that technologies able to withdraw
CO2 from the atmosphere would need to be deployed.
Bioenergy with carbon capture and storage is one
such technology (BECCS).
Replacing existing coal-fired heat and/or power plants
by highly efficient natural gas combined cycle (NGCC)
power plants or combined heat and power (CHP)
plants can reduce near-term emissions (provided
that fugitive methane release is controlled) and bea ‘bridging technology’ to a low-carbon economy.
Increased use of CHP plants can reduce emissions.
CCS, nuclear power and renewables provide lowcarbon electricity, while increasing energy efficiency
and reducing final energy demand will reduce theamount of supply-side mitigation needed. In 2012,
more than half of the net investment in the electricity
sector was in low-carbon technologies.
Nevertheless, a variety of barriers and risks toaccelerated investment exist, including cost.
Additional supply-side investments required tomeet the 2°C target are estimated at USD 190–900
billion per year on average up to 2050. Much ofthis investment would yield co-benefits such as
reduced air and water pollution, and increased local
employment. But supply side mitigation typicallyalso carries risks.

Executive
Summary
IMPLICATIONS FOR THE ENERGY SECTOR P5

Impacts ofclimate change
Three climate-change phenomena will have a particular impact on the energy
sector: global warming, changing regional weather patterns (includinghydrological patterns) and an increase in extreme weather events. Not only willthese phenomena affect energy demand, in some regions they will also affectthe entire spectrum of energy production and transmission. While most climatechange impacts are likely to be negative, there could be some positive impacts
such as lower energy demand in cold climates.
Rising temperatures coupled witha growing world population andeconomic growth will drive an
increase in overall demand forenergy. Rising income levels inpoorer countries in warm climates
are likely to lead to increased
use of air-conditioning. Global
energy demand for residential airconditioning in summer is projected
to increase rapidly from nearly 300
TWh in 2000, to about 4000 TWh
in 2050. Much of this growth is due
to increasing income in emerging
market countries, but some is due
to climate change. Colder, richer
countries will see energy demandfor heating fall, but could still see
overall energy use increase.

P6 Climate: Everyone's BusinessAlthough thermal power plants(currently providing about 80%
of global electricity) are designed
to operate under diverse climaticconditions, they will be affected by
the decreasing efficiency of thermal
conversion as a result of risingambient temperatures. Also, inmany regions, decreasing volumesof water available for cooling andincreasing water temperatures could
lead to reduced power operations,operation at reduced capacity oreven temporary shutdowns.
Extreme weather events pose amajor threat to all power plants
but particularly to nuclear
plants, where they could disrupt
the functioning of criticalequipment and processes that are
indispensable to safe operation
including reactor vessels, coolingequipment, control instruments andback-up generators.

Changing regional weather patterns
are likely to affect the hydrologic
cycle that underpins hydropower
generation. In some regions, adecline in rainfall levels and arise in temperature, leading toincreased water loss, could result
in reduced or more intermittent
ability to generate electricity.
Although projections contain large
uncertainties, hydropower capacity
in the Zambezi river basin in Africa
may fall by as much as 10% by 2030,
and 35% by 2050. On the other
hand, hydropower capacity in Asia
could increase.

The Fifth Assessment Report (AR5)of the Intergovernmental Panel on
Climate Change (IPCC) is the mostdetailed assessment of climatechange ever.

Changing weather patterns andextreme weather events present
challenges to solar and windenergy. An anticipated increase
in cloudiness in some regions
would affect solar technologies,
while an increase in the number
and severity of storms could
damage equipment. Global
warming and changing weather
patterns are likely to adversely
impact agricultural yields,with a knock-on effect on the
production and availabilityof biomass for energy
generation. While there might
be some benefits in temperate
climates, the reduction in yields
in tropical areas is more likely
than not to exceed 5% by 2050.
In some rainy regions, open pits
in the coal industry are likely
to be impacted by increasing
rainfall leading to floods
and landslides.

Climate and weather related
hazards in the oil and gas
sector include tropical cyclones
with potentially severe effects
on offshore platforms andonshore infrastructure, leading
to more frequent production
interruptions. However, thedecline in Arctic sea ice could
lead to the opening up of newareas for oil and gas exploration,
potentially increasing global oil
and gas reserves.
Energy transmission
infrastructure, such as
pipelines and power lines,
is also likely to be affectedby higher temperatures andextreme weather events.
Pipelines are at risk from sealevel rise in coastal regions,thawing permafrost in cold
regions, floods and landslides
triggered by heavy rainfall, andbushfires caused by heat waves
or extreme temperatures in
hot regions. Extreme weather
events, especially strong
wind, are projected to affectpower lines.

Impacts and risks• Increased number and severity of
extreme weather events will impact
on energy production and power
generation for electricity.
• Hydropower and other weatherdriven renewables could be
adversely or positively impacted bychanging weather patterns.
• The reliability of pipelines andelectricity grids may be adversely
impacted.

IMPLICATIONS FOR THE ENERGY SECTOR P7

Climate Change - Everyone's Business Implications for Energy

Energy Sector Faces Major Challenges from Climate Change
Without strong mitigation policies, the global average temperature
is likely to rise above the internationally agreed 2°C target. As a major
source of carbon emissions, the energy sector will be affected by
mitigation policies as well as by climate impacts in multiple ways.

Impacts
andAdaptations

Power Stations

Pipelines

Thermal power plants will be affected by thedecreasing efficiency of thermal conversion
as a result of rising ambient temperatures.
Reduced water for cooling and increasingwater temperatures could lead to reduced
power operations or temporary shutdowns.

Energy transport infrastructure is at risk, with oil
and gas pipelines in coastal areas affected byrising sea levels and those in cold climes by thawing
permafrost. May require new land zoning codes
and risk-based design and construction standards
and structural upgrades to infrastructure.

Emission
Reduction
Options

Carbon Capture & Storage

Increasing Efficiency

Adoption of carbon capture and storage (CCS) for fossil
fuel plants can reduce emissions. CO2 storage capacity
is large and all parts of the technology have been
demonstrated. CCS units burning bioenergy (BECCS)
can draw CO2 from the air. But barriers to CCS and
BECCS remain, including cost.

Energy efficiency can be improved by retrofitting
existing plants and adopting efficient new ones;
improving transmission and distribution andthrough technology improvements in fossil fuelextraction and conversion.

80 CO2 emissions (GtCO2)

Policy Framework
Additional investments, which could
be bolstered by fiscal measures and/or
subsidies are required in the energy
supply sector to keep the global
temperature increase below 2°C.

60

Largest GHG Contributor
The energy sector is the largest source ofgreenhouse gas (GHG) emissions. Meeting the 2°C
target implies swiftly halting the rise in emissions forthe full energy system and bringing them to zero
before the end of the century, with a likely need for'negative emissions' technology such as BECCS.

Business-as-usual
emissions trajectory

40

Emissions traject
likely to keep glo
warming below 2

20

1950

2000

2050

2100

tory
obal
2°C

Key Findings from the Intergovernmental Panel on Climate Change (IPCC) Fifth Assessment Report (AR5)Please visit cisl.cam.ac.uk/ipcc

Global warming, changing
regional weather patterns andextreme weather events willaffect demand and impact energy
production and transmission.
Strong global policy action would
also have major implications on
investments.

ClimateChangePower lines

Renewables

Nuclear

Extreme weather events, especially strong
wind, could damage power lines. Standards
can be amended to implement appropriate
adaptation measures, including re-routing
lines away from high-risk areas.

Changes in regional weather patterns threaten
to impact the hydrologic cycle that underpins
hydropower. An increase in cloudiness insome regions would affect solar technologies,
while an increase in the number and severityof storms could damage equipment.

Lack of water andextreme weather events
may threaten nuclear
plants by disrupting thefunctioning of criticalequipment and processes.

Switching Fuels

Alternatives

Reducing Demand

Switching to lower-carbon fuels (eg fromcoal to gas) can reduce emissions. Movingfrom world-average efficiency coal plant
to state-of-the-art gas can halve emissions
if fugitive methane release is controlled,
and can act as a 'bridging technology'.

Increasing use of renewables suchas solar, wind and biofuels. Increasinguse of nuclear power. Hydropower is currently
the largest single RE contributor, but solar, windand bioenergy are expected to experience thebiggest incremental growth.

Reducing consumer demand is a key
mitigation strategy. The level of demand
reduction determines the size of the
mitigation challenge facing the energy
sector. Potential limitations from 'reboundeffect' to be taken into consideration.

Regulatory Frameworks

Investment in Technology

Carbon Pricing

Governments may facilitate anincreased use of emission reduction
options by creating an attractive
fiscal and regulatory framework.

New technologies can be used
for efficiency improvements,
power generation, extraction,
storage, transmission anddistribution.

For government andregulators, a key challenge
will be to ensure a price ofcarbon that incentivises extra
investment in low-carbon
technologies.

Changes in Regional
Weather Patterns

Extreme
Weather Events

Government
Policyworldenergy.org

Investment

Resilience
There are various options by which the energy
sector can improve its resilience to climate change.
A number of technological improvements are available for thermal power
plants which, if implemented, will bring efficiency gains that more thancompensate for losses due to higher ambient temperatures. Preventativeand protective measures for nuclear power plants include technical andengineering solutions and adjusting operation to extreme conditions,
including reducing capacity or shutting down plants. Weather resistanceof solar technologies and wind power turbines continues to increase.
Coal mining companies can improve drainage and run-off for on-sitecoal storage, as well as implementing changes in coal handling due to theincreased moisture content of coal. Pipeline operators may be forced tofollow new land zoning codes and to implement risk-based design andconstruction standards for new pipelines, and structural upgrades toexisting infrastructure.
Technical standards for power transmission lines are likely to be amended
to force grid operators to implement appropriate adaptation measures,
including in some cases re-routing lines away from high-risk areas.
Authorities can plan for evolving demand needs for heating and coolingby assessing the impact on the fuel mix. Heating often involves directburning of fossil fuels, whereas cooling is generally electrically powered.
More demand for cooling and less for heating will create a downward
pressure on direct fossil fuel use, but an upward pressure on demandfor electricity.

P10 Climate: Everyone's BusinessMitigation
Options
As the sector producing the largest share of GHG emissions, the energy sector would besubstantially affected by policies aimed at meeting the internationally agreed 2°C target
for global warming. A number of mature options exist that can, if scaled up, result in
substantial mitigation of the sector’s GHG emissions. However, the scale of the challenge
is considerable. Pathways compatible with the 2°C target typically envisage achieving
virtual decarbonisation of the energy supply at some point between 2050 and the end of
the century. It is likely that ‘negative emissions’ – technologies that absorb CO2 from theatmosphere – will also be needed.
Options for mitigation include:• Cutting emissions from fossil fuel extraction and conversion• Switching to lower-carbon fuels, for example from coal to gas• Improving energy efficiency in transmission and distribution• Increasing use of renewable energy technologies• Increasing use of nuclear energy• Introduction of carbon capture and storage (CCS), and an extension into CCS plantsthat use bioenergy crops (BECCS) as an approach to achieving ‘negative emissions’• Reducing final energy demand.

IMPLICATIONS FOR THE ENERGY SECTOR P11

Fuel extraction andconversion
Fossil fuel extraction and distribution currently contribute
5–10% of total fossil-fuel related GHG emissions. The movetowards more energy-intensive production of oil and gas fromunconventional sources such as shale and tight gas reserves,
production requiring greater energy inputs at mature fields,
mining of coal from deeper mines and longer transportation
distances may increase this contribution. Mitigation
options include:• Reducing emissions associated with fuel production andtransport through higher energy efficiency and the use of
low-carbon energy sources in mines, oil and gas fields, andtransportation networks• Capture and utilisation of methane from coal mining• Reducing venting and flaring from oil and gas exploration,
production and transportation.
The impact of fuel switching from coal to gas (see below) can
be compromised if fugitive methane release is not controlled.
There is substantial variation in the amount of methane released
from different sites.

Fuel switching
Replacing a higher-carbon fuel with a lower-carbon alternative
can reduce overall emissions. For example, shifting from acurrent world-average coal-fired power plant to a modern
natural gas combined cycle (NGCC) unit can halve emissions,provided that fugitive methane emissions are controlled.
However, by 2050, average power station emissions need to be
below the best available from NGCC plants if the 2°C trajectory
is to be followed, putting the coal-to-gas approach into thecategory of a ‘bridging technology’. As power stations operate on
average for more than 30 years, a continued global programmeof investment over the next few decades in natural gas-fired
generation without CCS would compromise the 2°C target.

Increasing efficiency
Improving energy efficiency in power transmission anddistribution could help reduce GHG emissions. Losses as afraction of energy generated vary widely between countries,
with some developing countries having losses of over 20%.
Combined transmission and distribution losses for the OECD
countries taken together were 6.5% of total electricity output in
2000. Increased use of improved transformers and distributed
power generation would reduce losses, while new technologies
such as dynamic loading, gas-insulated transmission lines andhigh voltage DC transmission (HVDC) could offer reductions.

P12 Climate: Everyone's Business

Renewables
Renewable energy (RE) sources have significant potential for
reducing GHG emissions, and are becoming more competitive.
RE provides just over one fifth of the world’s electricity supply,and in 2012 accounted for just over half of the new electricitygenerating capacity added globally. Generation from wind grew
five-fold and from solar photovoltaics 25-fold in the period
2005–2012. But only a small fraction of renewable potential
has been tapped so far; estimates suggest that in every regionof the world, RE sources can produce at least 2.6 times theenergy demand.
Hydropower is currently the largest single RE contributor, butsolar, wind and bioenergy are expected to experience the biggest
incremental growth. However, much will depend on regional
specificities, with hydropower and geothermal continuing to
be important in certain countries. RE is likely to penetrate most
rapidly in electricity generation, at least in the near to medium
term, followed by heating/cooling and transport.
RE technologies still need direct support (e.g. feed-in tariffs,
RE quota obligations, and tendering/bidding) and/or
indirect support (e.g. sufficiently high carbon prices for theinternalisation of other externalities), if their market sharesare to increase. Expanding the use of RE in the electricity mix
will bring increasing challenges associated with integrating
generation facilities into the grid. Technical options exist formeeting these challenges, but may need additional policy
support and may result in higher costs.

Nuclear energy
Nuclear energy could make an increasing contribution to a lowcarbon energy supply, but a variety of barriers and risks exists.
Continued use and expansion of nuclear energy worldwide
will require greater efforts to improve the safety, economics,
uranium utilisation, waste management, and proliferationof materials. Research and development of next generation
nuclear energy systems, including new fuel cycles and reactor
technologies, are currently underway.

CCS and bioenergy
Carbon capture and storage technologies are capable ofsignificantly reducing the CO2 emissions of fossil fuel-fired
power plants. Global warming is unlikely to be kept under 2°C
without introduction and widespread adoption of CCS, andthe cost of mitigation would be higher in the absence of CCS.
However, while all of the components of integrated CCS systems
already exist, it has not yet been applied to a large, commercial
fossil fuel-fired generation facility.

Geological storage capacity is large and sufficient to meetdemand over the 21st century, but capacity is unevenly
distributed and not geographically matched with the emission
centres. Global underground CO2 practical storage capacity is
estimated at 3900 Gt CO2, of which just 0.03 Gt CO2 has beenutilised to date. By comparison, annual average GHG emissions
from fossil fuels and industrial sources are currently estimatedat around 30 Gt CO2. Economic incentives such as a carbon tax
on emissions or subsidies will be required if CCS plants are to
become widespread. Furthermore, well defined regulations
concerning short- and long-term responsibilities for storage are
essential for large-scale future deployment of CCS.
Even with swift adoption of CCS and other mitigation measures,scenarios indicate that the 2°C target is likely to be missed unless‘negative emission’ technologies (also known as carbon dioxide
removal, or CDR) are introduced. Producing electricity and heatby burning bioenergy crops, then capturing and storing thecarbon emissions (BECCS) is one of the few options available.
However, the technology carries risks, mainly associated withthe large-scale production of bioenergy crops. These include
unreliable supply (particularly given projections of changes
to precipitation and extreme weather events under climatechange), impacts on biodiversity, and competition with otherland uses including food production.

Reducing final energy
demandDemand reduction in energy end-use sectors is a key strategy for
mitigation (and for achieving wider sustainability objectives),
and largely determines the scale of the mitigation challenge forthe energy supply side. Limiting energy demand has multiple
benefits, including:• The ability to maintain a wide portfolio of energy
technologies• Reducing the need for new low-carbon energy supplies• Avoiding lock-in to new, or a potentially premature
retirement of, carbon-intensive infrastructure• Maximising co-benefits for other policy objectives• Reducing risks associated with supply-side mitigation (e.g.
bioenergy crops)• Increasing the cost-effectiveness of the transition.
However, potential limitations from the ‘rebound effect’
need to be taken into consideration.

Co-benefits and risks
Switching to low-carbon technologies can bring significant
co-benefits. In 2010, China’s investment in solar technologies
created nearly half a million power sector jobs. Projections
indicate that the renewables industries in Germany andSpain could each employ 500 000 to 600 000 people by2030. However, the net impact of a low-carbon transition on
employment is uncertain. Jobs in the coal and gas sectors
could be retained through adoption of CCS. Other benefitsof the low-carbon transition include energy security, ruraldevelopment (particularly in poor countries), and healthimprovements through reduced air and water pollution.
All low-carbon generation technologies carry risks.
Hydropower systems disrupt river flows, wind turbines canaffect birds, and all renewables (but particularly bioenergy
crops) need more land than their fossil fuel alternatives.
Nuclear energy carries risks to human health and safety.
However, fossil fuel-based technologies also carry risks(over and above their climate impact), and well-designed
low-carbon electricity supply systems outperform fossil fuelbased approaches on most indicators. The environmental
performance of fossil fuel-based technologies is expected
to decline with increasing use of unconventional resources,
given the adverse impacts of extraction. Mitigating emissions
through demand reduction eliminates some of the risks
associated with supply-side interventions.

PolicyOverall, the success of energy policies depends on capacity
building, the removal of financial barriers, the developmentof a solid legal framework, and sufficient regulatory stability.
Property rights, contract enforcement, and emissions
accounting are essential for the successful implementation ofclimate policies in the energy supply sector. Furthermore, theimpact of policies may be less than envisaged owing to factors
such as the ‘rebound effect’, wherein (for example) an increasein energy efficiency reduces the cost of appliance use to theconsumer, who reacts by increasing use.
Climate change mitigation policies could devalue fossil
fuel assets and reduce revenues for fossil fuel exporters, butdifferences between regions and fuels exist. Most mitigation
scenarios are associated with reduced revenues from coal andoil for major exporters. Impacts on gas producers are less clear,and could involve increased profits for gas exporters up to 2050.
Availability of CCS in some scenarios would mitigate impacts
on revenue.

IMPLICATIONS FOR THE ENERGY SECTOR P13

Climate change willaffect the entire energy
sector, through impacts
and through policy.

Conclusion
Climate change will affect the entire energy sector, through impacts andthrough policy. While the cost of mitigating emissions across all sectors
could reduce annual consumption growth by 0.04–0.14%, the scale ofthe low-carbon transition and the opportunities for investment are likely
to be larger in the energy sector than in others. Additional investments
required in the energy system in order to keep the temperature increasesince pre-industrial times below 2°C are estimated to be USD 190–900
billion per year on the supply-side alone, although this investment
could realise important co-benefits for economies as a whole. However,infrastructure tends to be used for at least 30 years once built; so decisions
made in the next couple of decades will be crucial in deciding whether theenergy sector leads the way towards or away from a 2°C future.
Scenarios project that a fundamental transformation will be necessary
if governments are to meet the globally agreed 2°C target. Generally,
these scenarios envisage three parallel processes: decarbonisation of theelectricity supply, expansion of the electricity supply into areas such ashome heating and transport that are currently fuelled in other ways, andreduction in final energy demand. Much of the incremental investment
will be in developing countries where demand is growing at a faster rate
than in developed countries. The additional capital would be partly offset
by the lower operating costs of many low-GHG energy supply sources.
For government and regulators, a key challenge will be to ensure a priceof carbon that incentivises extra investment in low-carbon technologies,
continued investment in research and development, and an attractive
fiscal and regulatory framework.

P14 Climate: Everyone's BusinessGlossary
ADAPTATION

CLIMATE IMPACT

LOW CARBON ELECTRICITY

The process of adjustment to actualor expected climate and its effects.
In human systems, adaptation seeks
to moderate or avoid harm or exploit
beneficial opportunities. In natural
systems, human intervention may
facilitate adjustment to expectedclimate and its effects.

The effects of climate change on
natural and human systems.

Low-carbon electricity or power comesfrom processes or technologies that,
produce power with substantially lower
amounts of carbon dioxide emissions
than is emitted from conventional fossil
fuel power generation.

BECCS
Bio-energy with carbon captureand storage.
BIOENERGY
Energy derived from any form of
biomass such as recently livingorganisms or their metabolic
by-products.
BIOMASSThe total mass of living organisms in agiven area or volume. The term is also
used to denote solid biofuels.

DECARBONISATION
The process by which countries or otherentities aim to achieve a low-carbon
economy, or by which individuals aim
to reduce their carbon emissions.
EMERGING ECONOMIES
Economies in the low- to middle-income
category that are advancing rapidly andare integrating with global capital andproduct markets.

FINAL ENERGY USE

PROJECTION

All energy supplied to the final
consumer for all energy uses.

A potential future evolution of a quantity
or set of quantities, often computed by amodel. Projections involve assumptions
that may or may not be realised, andare therefore subject to substantial
uncertainty; they are not predictions.

A process in which carbon dioxide fromindustrial and energy related sources
is separated (captured), conditioned,
compressed, and transported to anunderground storage location for longterm isolation from the atmosphere.

Emissions of gases or vapours frompressurised equipment due to leaks andother unintended or irregular releasesof gases, mostly from industrialised
activities including natural gas
extraction and processing.

CO-BENEFIT

GREENHOUSE GAS

The positive effect that a policy ormeasure aimed at one objective might
have on other objectives.

A gas in the atmosphere, of naturaland human origin, that absorbs andemits thermal infrared radiation.
Water vapour, carbon dioxide, nitrous
oxide, methane and ozone are themain greenhouse gases in the Earth’s
atmosphere. Their net impact is to trap
heat within the climate system.
LOCK-IN

CLIMATE CHANGE
Any significant change in climatethat persists for an extended period,
typically decades or longer.

NATURAL GAS COMBINED CYCLE(NGCC) PLANT

The ratio of useful energy output of asystem, conversion process, or activity
to its energy input.

FUGITIVE EMISSIONS

Integrates the production of usable heatand power (electricity) in one single,
highly efficient process.

A human intervention to reduce thesources or enhance the sinks ofgreenhouse gases.

Gas-fired unit for generating electricity
in which waste heat from the initial
gas combustion is captured andused to power a secondary turbine,
usually using steam. This substantially
increases the overall efficiency.

ENERGY EFFICIENCYCARBON CAPTURE
AND STORAGE (CCS)COMBINED HEAT AND POWER (CHP)

MITIGATION

Occurs when a market is stuck witha standard even though participants
would be better off with an alternative.

RENEWABLE ENERGY
Any form of energy from solar,
geophysical or biological sources thatis replenished by natural processes
at a rate that equals or exceeds its
rate of use.
RESILIENCE
The capacity of social, economic,
and environmental systems to copewith a hazardous event or trend or
disturbance, responding or reorganisingin ways that maintain their essentialfunction, identity, and structure.
TIGHT GAS RESERVE
A natural gas that has gathered insmall, poorly connected cavities
between the rocks (mostly sandstone).
Because this rock is not very porous
the natural gas cannot flow freely to
the well and is a tight reserve.
IMPLICATIONS FOR THE ENERGY SECTOR P15

“Continued emissions of greenhouse gases will cause further
warming and changes in all components of the climate system.
Limiting climate change will require substantial and sustained
reductions of greenhouse gas emissions.”
IPCC, 2013

Disclaimer:

About us:This publication has been developed and released by theEuropean Climate Foundation (ECF), the World Energy
Council (WEC) and the University of Cambridge’s Judge
Business School (CJBS) and Institute for Sustainability
Leadership (CISL).

The University of Cambridge Institute for Sustainability
Leadership (CISL) brings together business, government
and academia to find solutions to critical sustainability
challenges.

This project is initiated and financed by ECF and endorsed
by CJBS and CISL.
The family of summaries, of which this report is part, is
not meant to represent the entirety of the IPCC’s Fifth
Assessment Report (AR5) and they are not official IPCC
documents. The summaries have been peer-reviewed byexperts both from the business and science communities.
The English version constitutes the official version.

For more information:
E-mail: AR5@europeanclimate.org
www.cisl.cam.ac.uk/ipcc
www.worldenergy.org
www.europeanclimate.org

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the latest thinking to real-world issues.
The World Energy Council is the principal impartial
network of leaders and practitioners promoting anaffordable, stable and environmentally sensitive energy
system for the greatest benefit of all.

Reproduction and use: The materials can be freely used to advance discussion
on the implications of the AR5 and consequences for business. The report ismade available to any and all audiences via the Creative Commons License
BY-NC-SA. This document is available for download from the CISL website:www.cisl.cam.ac.uk/ipcc