Green growth and energy

The energy sector poses a particular challenge for green growth given the scale of change required and the extent to which many countries are locked into polluting and greenhouse gas emitting energy sources.

Fossil fuels will continue to dominate energy supply for some time simply because they are so energy dense, societies and infrastructure have evolved around them, and due to the fact that innovation and change take time. Nevertheless, new sources of energy need to be deployed on a scale equivalent to the industrial revolution. Without decisive action, energy-related emissions of CO₂will double by 2050.

Clean energy growth enables opportunities for new green industries, jobs and technologies, while managing the structural changes associated with the transition to a green economy. Energy and transport will be among the earliest drivers of green growth.

Promoting the transition to green growth requires measures that promote growth whilst guiding the energy sector into modes of production and consumption that are more efficient and secure, have a lower environmental impact, and improve opportunities to prosper.

Current energy trends – in the ‘’business-as-usual’’ approach – are unsustainable in relation to environment, energy security and economic development objectives. From 1990 to 2000, global CO₂emissions increased by an average of 1.1% per year, and jumped to a 3% annual growth rate over the next seven years. Two main factors contributed: rising energy demand in coal-based economies; and an increase in coal-fired power generation in response to higher oil and natural gas prices. The rate of increase in emissions from coal use rose from 0.6% per year from 1990 to 2000 to 4.8% per year from 2000 to 2007. Ongoing dependence on fossil fuels, especially coal, continues to drive up both CO₂emissions and the price of fossil fuels while “locking in” carbon-intensive infrastructure for the next decades.

Energy technology pathways and mitigation

Energy efficiency, many types of renewable energy, carbon capture and storage, nuclear power, smart grids and new transport technologies could all contribute to curtailing greenhouse gas emissions while promoting energy security. This will also deliver wider environmental and social benefits.

There are reasons for optimism in pursuing a greener energy sector. Policy-makers and businesses are making commitments. National targets for renewable energy are spreading. More than 70 governments around the world, including all IEA member countries, have put in place targets and policies to support development of renewable energy technologies. In doing so, they improve energy security and access to modern energy services, reduce dependence on energy imports, protect the environment, provide employment and strengthen the competitive edge of domestic industry. However, there is still an urgent need to accelerate the pace of change.

Current Work

Efficiency improvements can reduce the need for investment in energy infrastructure, cut fuel costs, increase competitiveness, lessen exposure to fuel price vitality and improve consumer welfare. It also delivers on environmental benefits by reducing greenhouse gas emissions and local air pollution. Efficiency gains can also boost energy security by decreasing reliance on imported fossil fuels.

The IEA suggests adopting a consolidated set of recommendations that cover 25 fields of action across seven priority areas: buildings, industry, power utilities, appliances, lighting, transport and cross-sectoral activities. If implemented globally without delay, these recommendations could reduce global CO₂ emissions by 8.2 Gt per year by 2030 – equivalent to about twice the amount of current CO₂ emissions in the European Union.

See the full set of recommendations: Energy Efficiency Policy Recommendations (2008)

Mainstreaming low-carbon energy technologies

Governments must take swift action to implement a range of technology policies that target the cost competitiveness gap while also fairly reflecting the maturity and competitiveness of individual technologies and markets. The overriding objectives should be to reduce risk, stimulate deployment and bring down costs.

Governments of both the Major Economies Forum and the IEA have agreed to dramatically increase and co-ordinate public-sector investments in low-carbon RD&D, with a view to doubling such investments by 2015.

Created in response to a request from the G8 and IEA Ministers, the International Low-Carbon Energy Technology Platform seeks to encourage, accelerate and scale-up action for the development, deployment and dissemination of low-carbon energy technologies.

Fostering innovation

Innovation is a key driver in the transition to a green economy. Developing new sources of growth will depend on investing in innovation and skills. Policy-makers have to take the lead, by setting regulatory environments that foster innovation.

One of the key findings of the OECD Innovation Strategy is that countries that harness innovation and entrepreneurship as engines for new sources of growth will be more likely to pull out of and stay out of recession. To foster green innovation, the standardisation of technical specifications for multidisciplinary and converging technologies is necessary to accelerate successful deployment.

A range of OECD work underscores that innovation is core to moving onto a green growth path. For example, it looks at eco-innovation in industry; greener and smarter ICTs and transition to a low-carbon economy. Another demonstrates that green technology development is accelerating in air pollution control and renewable energy as measured by the number of patented inventions.

Creating the right conditions for markets to work

Policy-makers involved in green growth strategies should ensure that favourable conditions to foster the transition are provided, including:

Establishing sound regulatory frameworks that remove barriers to green investments; providing incentives to spur green economic activity; regulating environmentally harmful practices through standards or command and control regulations; and aligning existing regulatory regimes to objectives to foster green economic activity.
Eliminating or at least reforming misallocated subsidies in line with green growth goals.
Directing public spending to procurement methods that help build markets for green products and services, and to infrastructure that enable the large-scale transformations needed in energy and transportation systems.
Using environmental taxes and market-based instruments to enable a more level playing field, to influence consumer behaviour and to promote innovation.
Investing in education, training and capacity building. Enabling actions to foster wider industry and public support for low-carbon energy systems include: fostering industry leadership; developing a skilled low-carbon energy workforce; deepening public engagement and strengthening international collaboration.
Strengthening international governance in areas that regulate economic activity, e.g. trade law and multilateral environment agreements.

The OECD and IEA have released the joint report Green Growth Studies: Energy, which looks at the implications for the energy sector in moving towards a green growth model and the policies to facilitate the transition.

OECD Innovation Strategy: www.oecd.org/innovation/strategy

Fossil Fuel Subsidies www.oecd.org/g20/fossilfuelsubsidies

Greening energy

Green growth and energy