Asia/World Energy Outlook 2015 - Business School · Asia/World Energy Outlook 2015 ... 1990 2000 2013 2020 2030 2040 ... and fuel switching in transport sector progress along the

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(C) 2015 IEEJ, All rights reserved

Asia/World Energy Outlook 2015

Yukari Yamashita The Institute of Energy Economics, Japan (IEEJ)

15 February 2016

5th IAEE Asia Conference

Asia/World Energy Outlook

MAPPING THE ENERGY FUTURE

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Introduction

Findings from “Asia/ World Energy Outlook 2015”

1. Energy Situation in Asia towards 2040

2. Lower Price Scenario towards 2030

3. Climate Change :Issues and Uncertainties

2

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0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

1990 2000 2013 2020 2030 2040

Million tons of oil equivalent

22

24

58

167

447

533

622

3,281

0 1,000 2,000 3,000 4,000

North America

Oceania

OECD Europe

FSU & Non-OECDEurope

Middle East

LatinAmerica

Africa

Asia

Mtoe

3

2013

13,600 ↓

2040

19,000 (1.4-fold increase)

World

Reference Scenario

Asia

North America

OECD Europe

FSU / Non-OECD Europe Latin America

Middle East

Africa

Oceania

5,400 Mtoe

8,700 Mtoe

Average Annual Growth Rate （2013-2040）

1.8%

2.3%

1.8%

1.8%

0.5%

0.1%

0.5%

0.0%

Increase (2013-2040)

Source: IEEJ, Asia/ World Energy Outlook 2015

Primary Energy Demand by Region (World)

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0

500

1000

1500

2000

2500

3000

3500

4000

1990 2000 2013 2020 2030 2040

Mtoe

0

1000

2000

3000

4000

5000

6000

1990 2000 2013 2020 2030 2040

Mtoe

4

28%

Primary Energy Consumption by Source Solid lines: Reference Dashed lines: Adv. Tech.

World Asia

Oil

Coal

Natural gas

Other renewables

Nuclear Hydro

31%

The percentages indicate the shares of total global/Asian primary consumption

29%

23%

24%

24%

51%

41%

33%

24%

20%

29%

21%

25%

24%

10%

16%

15% 11%

18% 15%

12% 12%

15%

5%

6%

10%

2%

6% 10%

2% 2% 2% 2%

3%

Fossil share 81%→78% （Ref. ）

71% （Adv. Tech. ）

Fossil share 84%→81% （Ref. ）

71% （Adv. Tech.）


Coal

Oil

Natural gas

Other renewables

Nuclear

Hydro

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0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 2000 2013 2020 2030 2040

Coal

Natural gas

Oil

65%

41%

46%

24%8%

7%

77% 78%

78%

0%

20%

40%

60%

80%

100%

120%

1990 2000 2013 2020 2030 2040

Coal

Natural gas

Oil

69%

57%

60%

43%28%

26%

93%98%

98%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1990 2000 2013 2020 2030 2040

Coal

Natural gas

Oil

69%

57%

58%

30%

18%

17%

92% 91%

89%

5

Asia China India

Energy self-sufficiency in Asia Solid lines: Reference

Dashed lines: Adv. Tech.


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World Primary Energy Supply (By Energy) Primary Energy

Fossil Fuels：77％

6 Source: Institute of Energy Economics, Japan, Asia/World Energy Outlook 2015

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What do lower prices bring?


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Various factors influence oil price

8

Expectation in market

Supply

• OPEC’s policy

• Fiscal break-even price

• OPEC’s spare capacity

• Increases in production of unconventional oil

Money

• Stock prices and exchange rates

• Expected inflation

• Money supply

• Risk appetite

• New investment commodity and technology

Risk

• Political situation in producing countries

• Foreign policy

• Terror to related facilities

• Unusual weather, disaster and accident

• Strike, etc.

• Economic growth

• Stock in developed countries

• Oil use policy in developing countries

• Car ownership and fuel economy

Demand


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“History doesn’t repeat itself, but it does rhyme”

9

❖ Oil price

Source: BP

Mark Twain

• Decreases in demand

and increases in

supply by non-OPEC

following high price

after the oil crises

• Severer competition

in OPEC

• Easy supply-demand

balance affected by

the Netback pricing

• Decreases in

emerging economies’

demand by the Asian

financial crisis

• Expansion of OPEC

production quota and

excess production by

the members over

their quota

• Sharp drop of

demand by the

Lehman shock

• Expansion of

production capacity

by Saudi Arabia and

others

• Increases in supply

by non-OPEC and

OPEC

• Slow growth of global

demand

0

50

100

1970 1980 1990 2000 2010 2015

$2

01

4/b

bl

9

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10

❖ Background of the scenarios ❖ Assumption of oil price

Reference Lower Price

Demand Energy conservation

and fuel switching in

transport sector

progress along the

trend.

Strong energy

conservation and fuel

switching by non-

fossil fuel progress.

Supply Conventional

resources

Development in each

country follows its

historical trend.

Unconventional

resources

Production growth in

the United States

declines in and after

2020s.

Slow development is

seen in other

countries.

Conventional

resources

Competition among

low-cost producers

such as OPEC,

Russia, etc. continues.

OPEC loses

effectively its power

as a cartel

organisation.

Unconventional

resources

Reaches to the

highest levels both

inside and outside the

United States.

Note: Future prices are in $2014.

75

100

70 75

0

50

100

150

1990 2000 2010 2020 2030

$/b

bl

Reference Lower Price

We may see lower prices than the Reference Scenario


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(C) 2015 IEEJ, All rights reserved 11

Need for Higher Cost Oil Production

Source: Prepared by IEEJ based on IEA data and others

6.0

1.5

3.0

0

2

4

6

8

10

12

14

Demand growth

until 2020

Supply surplus as

of 2015

Supply growth

from MENA

Depletion from

existing fields

Incremental

supply from

higher cost fields

million b/d

2.0~10.0

3.5~11.5

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12

❖ Crude oil production in selected

regions [2030]

❖ Natural gas production in selected

regions [2030]

0.37

0.86

0.74

1.14 1.11

0.35

0.650.71

0.940.98

0.0

0.2

0.4

0.6

0.8

1.0

1.2

Africa Middle

East

Asia Former

Soviet

Union

North

AmericaTc

m

Reference Lower Price 2013

11.0

15.413.5

16.9

34.7

9.1

13.6 13.8

17.3

29.2

0

10

20

30

40

Africa Former

Soviet

Union

Latin

America

North

America

Middle

East

Mb

/d

Reference Lower Price 2013

Depressed production in traditional exporting regions


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13

❖ Crude oil net imports/exports in selected regions [2030]

* Among the modelled 15 regions. Nominal value.

0 500 1,000

Japan

United States

Western Europe

China

Africa

Former Soviet Union

Middle East

Net

import

sN

et e

xport

s

$ billion

Lower Price

Quantity

contribut ion

Price

contribution

Reference

2014

-457

-148

-115

-217

-102

-150

-50

Benefit for importing countries


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14

❖ Changes in real GDP [2030, compared with the Reference Scenario]

European Union

ASEAN

United StatesIndiaJapan China

Oceania

Russia

Middle East

OthersGlobal average

-4%

-2%

0%

2%

0 20 40 60 80 100

Low

er P

rice

Sce

nar

io (c

om

par

ed w

ith

Ref

eren

ce S

cenar

io)

Reference Scenario ($2010 trillion)

Lower Price is good for Global Economy but…


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Addressing Climate Change - Issues and Uncertainties -

Asia/World

Energy

Outlook

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Concentration of CO2-eq in 2100,

ppm CO2-eq

Sub-category

Change in GHG emissions from 2010 to 2050, %

2100 temperature change relative to 1850-1900 (℃)*

450 （430-480）

Overshoot (vast majority)

-72 to -41 1.5 - 1.7

500 （480-530）

No overshoot -57 to -42 1.7 - 1.9

Overshoot -55 to -25 1.8 - 2.0

550 （530-580）

No overshoot -49 to -19 2.0 - 2.2

Overshoot -16 to +7 2.1 - 2.3

（580-650） -38 to +24 2.3 - 2.6

（650-720） -11 to +17 2.6 - 2.9

（720-1000） +18 to +54 3.1 - 3.7

*Temperatures in parentheses include carbon cycle and climate system

uncertainties

Scenarios in IPCC AR5 WG3

Source: IPCC AR5 WG3 16

From IPCC 5th Assessment Report (AR5)

2 ℃

RCP4.5

RCP6.0

RCP2.6

BAU

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(C) 2015 IEEJ, All rights reserved 17

IPCC 5th Assessment Report v.s. IEEJ Outlook

-10

0

10

20

30

40

50

60

70

2000 2020 2040 2060 2080 2100

Gt

50.4

15.4

-3.4

Fossil CO2 emissions

※Calculated using MAGICC 6.0 Meinshausen, M., S. C. B. Raper and T. M. L. Wigley (2011). "Emulating coupled

atmosphere-ocean and carbon cycle models with a simpler model, MAGICC6: Part I –

Model Description and Calibration." Atmospheric Chemistry and Physics 11: 1417-1456.

RCP6.0 （720-1000ppm category）

RCP4.5 （580-720ppm categories）

RCP2.6 （450ppm category）

2050

21.223.5

32.9

35.7

39.5

42.7

45.9

33.532.6

28.2

23.3

15

20

25

30

35

40

45

50

1990 2000 2013 2020 2030 2040 2050

GtCO2

省エネルギー

バイオ燃料

太陽光・風力等

原子力

燃料転換

CCS

レファレンス

技術進展+CCS

2050年半減

2050

IEEJ: Asia/World Energy Outlook 2015

Reference Adv. Technologies Adv. Tech. +CCS 50% reduction by 2050

Below Zero

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0

1

2

3

4

2000 2020 2040 2060 2080 2100

レファレンス相当

技術進展+CCS相当

2050年半減

°C

18

Temperature change from 1850-1900

Reference

Adv. Tech. +CCS

50% reduction by 2050

How Much is Temperature Change ?

21.223.5

32.9

35.7

39.5

42.7

45.9

33.532.6

28.2

23.3

15

20

25

30

35

40

45

50

1990 2000 2013 2020 2030 2040 2050

GtCO2

省エネルギー

バイオ燃料

太陽光・風力等

原子力

燃料転換

CCS

レファレンス

技術進展+CCS

2050年半減

Reference Adv. Technologies Adv. Tech. +CCS 50% reduction by 2050


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19

Party Date of

submission Target type Reduction target Base year Target year Coverage

EU Mar 6 Absolute emissions 40% 1990 2030 GHG

United States Mar 31 Absolute emissions 26～28% 2005 2025 GHG including LULUCF

Russia Apr 1 Absolute emissions 25～30% 1990 2030 GHG

China Jun 30 GDP intensity 60～65% 2005 2030 CO2

Japan Jul 17 Absolute emissions 26% 2013 2030 GHG

Indonesia Sep 24 Reduction from BAU 29% BAU 2030 GHG

Brazil Sep 30 Absolute emissions 37% （43% for 2030）

2005 2025 GHG

India Oct 1 GDP intensity 33～35% 2005 2030 GHG

Intended Nationally Determined Contributions (INDCs)

: major countries


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0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1990 2000 2010 2020 2030

MtCO2-eq

0

200

400

600

800

1,000

1,200

1,400

1,600

1990 2000 2010 2020 2030

MtCO2-eq

0

1,000

2,000

3,000

4,000

5,000

6,000

1990 2000 2010 2020 2030

MtCO2-eq

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

1990 2000 2010 2020 2030

Reference

Adv. Tech.

INDC

MtCO2-eq

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

1990 2000 2010 2020 2030

MtCO2-eq

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

1990 2000 2010 2020 2030

Reference

Adv. Tech.

INDC

MtCO2

United States EU

China India Russia

Japan

20 Note: Japan’s 2020 target does not include reduction by nuclear power.

China’s target is for CO2, while others are for GHG.

Comparison of INDCs by country


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0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

1990 1995 2000 2005 2010 2015 2020 2025 2030

Reference

Adv. Tech.

INDC

IEA Bridge


MtCO2-eq

Comparison of INDCs with the Reference/Adv. Tech. Scenarios

21

50%

2050


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22

Mitigation

GHG

emission Climate change

Adaptation

Damage

Trade-

off

To take appropriate action to prevent or minimize the damage caused by climate change.

-There is a trade-off relationship among the mitigation, adaptation and damage costs. It is

impossible to reduce all three costs at the same time.

- It would be realistic to expect a balance among the three, while minimizing the total cost.

To reduce or prevent emission of greenhouse gases.

Mitigation and Adaptation Costs


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-2

0

2

4

6

8

10

12

14

16

0% 20% 40% 60% 80%

Reduction from the Reference Scenario

2014 USD trillion/year

Total (A+B)

Damage +adaptation cost (B)

Mitigation cost (A)

23

2100

Mitigation vs. Adaptation Costs in 2100

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0

5

10

15

20

25

30

35

40

45

50

1990 2010 2030 2050 2080

Reference

Adv. Tech.


GtCO2

Sensitivity analysiscompared with the "normal" assumptions:

①Mitigation cost: 2 times

② Damage: one half

③ Climate sensitivity: 2.5°C

④ Damage: 2 times

⑤Mitigation cost: one half

⑥ "Low" discount rate

①

②

④

⑥

③

⑤

Optimal path for climate sensitivity of 3°C and

"normal" discount rate assumption

24

Example of the calculation of the long-term optimal path

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25

-The uncertainty is extremely large.

-A trade-off between “mitigation” and “adaptation” costs

Optimal & realistic is to minimize the total cost

Future R&D should aim to reduce cost hike. Climate sensitivity

Mitigation, adaptation and damage costs

Conclusion: Addressing climate change issues

-”Climate sensitivity” may be lower than previous studies (IPCC AR5, WG1).

-With lower climate sensitivity, damage becomes smaller,

a less ambitious mitigation path being optimal.

・ The current INDCs do not curb GHG emissions sufficiently.

Parties should reduce emissions further.

Actions required considering various scenarios and options other than

only the “450ppm” scenario.

INDCs (Intended Nationally Determined Contributions)

・ Innovative technologies must be developed

including CCS, CCU and artificial photosynthesis

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Asia/World Energy Outlook 2015 - Business School · Asia/World Energy Outlook 2015 ... 1990 2000 2013 2020 2030 2040 ... and fuel switching in transport sector progress along the