A WIDENING GAP BETWEEN RHETORIC AND ACTION

The gap between aspiration and the reality in tackling climate change remains as significant as ever, despite mounting evidence of the harm that climate change is causing. Negative effects of climate change are becoming more evident year by year (NASA, WMO, 2020). Yet global energy-related CO2 emissions, despite levelling off periodically, have risen by 1% per year on average over the last decade.

PLANNING FOR THE LONG TERM
To achieve the Energy Transformation Scenario, energy-related CO2 emissions need to fall by 3.8% per year on average until 2050. Annual energy-related CO2 emissions would need to decline by 70% below today’s level by 2050. In the Transforming Energy Scenario by 2050, over half of the necessary reductions in emissions come from renewable energy (both power and end use), followed by around one-quarter coming from energy efficiency (see Figure S.7). When including direct and indirect electrification (such as green hydrogen and technologies like EVs), the total reductions increase to over 90% of what is required. The Deeper Decarbonisation Perspective then describes how reducing the remaining emissions to zero – over two-thirds of which come from challenging sectors such as aviation, shipping and heavy industry – will require additional renewable energy, electrification (both direct use and green hydrogen), energy efficiency, carbon management, and other structural and habit changes. Outside the energy sector, efforts also are needed to reduce emissions from non-energy use, emissions from land use, land-use change and forestry (LULUCF), and fugitive gases in the coal, oil and gas industries.

Drivers for the energy transformation
Climate change has become a major concern of this century. The urgent response to
that concern is an energy transformation that swiftly reduces the carbon emissions
that cause climate change. The Paris Agreement establishes a clear goal to limit the
increase of global temperature to “well below” 2 degrees Celsius (°C), and ideally to
1.5 °C, compared to pre-industrial levels, by this century. To realise this climate target,
a profound transformation of the global energy landscape is essential.

A widening gap between reality and what is needed
To set the world on a pathway towards meeting the aims of the Paris Agreement, energy-related carbon dioxide (CO2) emissions need to be reduced by a minimum of 3.8% per year from now until 2050, with continued reductions thereafter. However, trends over the past five years show annual growth in CO2 emissions of 1.3%. If this pace were maintained, the planet’s carbon budget would be largely exhausted by 2030, setting the planet on track for a temperature increase of more than 3°C above pre-industrial levels. This case cannot be considered as a climate-compatible scenario, as many governments, by signing the Paris Agreement in 2015, committed to reducing their emissions. Figure 1.4 shows the possible paths of annual energy-related CO2 emissions and reductions as per three scenarios: the Baseline Energy Scenario (BES) (indicated by the orange line); the Planned Energy Scenario (PES) (indicated by the yellow line); and IRENA’s energy transformation pathway – the Transforming Energy Scenario (TES) (indicated by the blue line).

STEPPING FORWARD TO A DIGITALISED AND INTERCONNECTED WORLD
Digitalisation is a key amplifier of the power sector transformation, enabling the management of large amounts of data and optimising increasingly complex power systems. Our increasingly digitalised world is becoming ever more interconnected. The growing importance of digitalisation in the power sector is partially a consequence of increasing decentralisation (e.g., increased deployment of power generators at the distribution level) and electrification (e.g., the emergence of EVs, heat pumps and electric boilers). Recent analysis from IRENA shows how all these new small and distributed assets on the supply and demand sides are adding complexity to the system and making monitoring, management and control crucial for the success of the energy transition.

Outlook for 2030 and NDC formulation
National Determined Contributions (NDCs) are the backbone of the Paris Agreement, signed by the 197 member states of the United Nations Framework Convention on Climate Change (UNFCCC) in 2015. NDCs include mitigation actions, and in most cases adaptation actions as well, that a country can put in place to stay in line with the agreement. The year 2020 represents a significant milestone in global efforts to cut energy-related CO2 emissions. As countries review and update their NDCs, they could simultaneously raise their ambitions to scale up renewable energy. The new NDC round offers an important chance to strengthen targets for renewables in the power sector and beyond. Present NDC pledges are far from sufficient to meet climate goals. For example, within the power sector, current NDC power targets overlook 59% of the potential for renewable electricity deployment in line with the Paris Agreement by 2030. For a climate-compatible transformation, more extensive deployment of renewable generation capacity, amounting to 7.7 terawatts (TW) (or 3.3 times current global capacity), could be achieved cost effectively and would bring considerable socioeconomic benefits (Figure 1.18).

GLOBAL SOCIOECONOMIC IMPACT

Renewable energy technologies are at the heart of the needed energy transition. The roadmap for the transition points to a more sustainable energy system and lays the foundation for achieving socio-economic development. The energy transition discourse has thus far been largely technology-oriented and disconnected from the socio-economic aspects upon which it is built and its long-term sustainability depends. A true and complete transition includes both the energy and the socioeconomic system transition, and their interlinkages. Therefore, a wider picture is needed, viewing energy and the economy as part of a holistic system.

Gross domestic product
GDP is the most commonly used indicator for income and growth. In line with earlier IRENA estimates (IRENA, 2019a), the Transforming Energy Scenario boosts global GDP in 2050 by 2.4% over the Planned Energy Scenario. The cumulative gain from 2019 to 2050 amounts to USD 98 trillion.4 The gain is influenced by several drivers in the global economy and is illustrated in Figure 2.8. The investment driver contributes most heavily to the gain during the first years of the transition, remaining positive but with a relatively low impact thereafter. The trade driver makes marginal contributions to global GDP gains over the Planned Energy Scenario, given the intrinsic requirement of global trade being balanced in normal terms. The largest share of the positive global GDP results is explained by changes in consumer spending in response to changes in fiscal policy considered in this analysis.

REGIONAL ENERGY TR ANSFORMATIONS: TECHNO-ECONOMIC CONTEXT

These regions were defined based on geographical grouping, without consideration of socio-economic, political or cultural aspects. Any regional split tends to be somewhat arbitrary and could hide important differences among countries that affect the implications of the energy transformation in each case. Even so, examining IRENA’s energy transformation results at the regional level can offer valuable insights. As the sections that follow demonstrate, important distinctions exist between regions.

Context and characteristics

Priorities and drivers
Figure 3.9 outlines key indicators showing the status of the energy transition in each region. The indicators reveal how each region has drivers for embracing the transformation, ranging from energy security, to emissions reductions and better air quality, to universalisation of energy access and economic development. This section provides more detail about the characteristics of three clusters of regions and some of the measures, technologies and changes that are needed to accelerate the energy transformation.

REGIONAL SOCIO-ECONOMIC IMPACTS

Socio-economic footprints provide essential insights for transition planning and policy making at the global level (Chapter 2), at the regional level (Chapter 4) and the country level (IRENA, 2020a and forthcoming country studies). This chapter presents socio-economic footprints of the world’s ten regions analysed in Chapter 3. The first section briefly describes the socio-economic context underlying the analysis. The second presents the results of the socio-economic footprint of the energy transition for each region. Some of the policy implications are presented in the concluding section, but also in Chapter 6, where the contours of a policy framework for a just energy transition are considered as part of a broader discussion of the
transformative decarbonisation of societies. GDP, employment and welfare effects are determined macro-econometrically, using the E3ME simulation model.1 The main socio-economic variables used to contextualise the analysis include the regional distribution of population, employment and GDP at the beginning of the transition, as well as the evolution of each variable over time. Figure 4.1 shows the regional distribution of population, economy-wide employment and GDP, ranked in decreasing order of population. More than half of global GDP arises from the European Union and North America. Sub-Saharan Africa, Southeast Asia, and Oceania each account for small shares of global GDP. Shares of jobs in global employment are highest in Asia, which also account for the highest share of population.

Socio-economic indicators of the energy transition: Jobs
The energy transition affects different sectors and supply chains of the economy, induces technological changes and shifts investment – all with significant effects on employment, and hence on people’s livelihoods. The most obvious changes will occur in the energy sector, with more jobs in renewables, energy efficiency and energy flexibility, and fewer jobs in fossil fuels. Here, the regional distribution of natural resources, both conventional and renewable, plays a role as important as that of manufacturing capacities and services.

Renewable energy jobs
About 42 million people will work in manufacturing, installing, operating and maintaining renewable energy systems in 2050 under the Transforming Energy Scenario, most in solar energy, followed by bioenergy and wind energy (see Figure 4.7). The greatest number of these jobs will be created in Asia: East Asia (36%), Southeast Asia (16%) and the rest of Asia (12%). The Americas rank second (15%), evenly split between North America and Latin America and the Caribbean. Europe holds a 10% share (with the European Union accounting for 6% and the rest of Europe for 4%). The shares for Sub-Saharan Africa and the MENA region are 5% each.

GETTING TO ZERO

Ensuring that global temperatures stop rising will require that, by the second half of this century, emissions eventually reach zero, or net zero. Additional mitigation measures will therefore be needed beyond what was presented earlier in the Transforming Energy Scenario. This chapter considers these increased mitigation needs and, with the Deeper Decarbonisation Perspective (DDP), presents enhancements to that scenario showing what more could be done.

Getting to zero: Technology options and costs
Carbon dioxide emissions represent three-quarters of greenhouse gas emissions with energy related CO2 (combustion of fossil fuels) and industrial process emissions making up over 80% of CO2 emissions and the remainder coming from land use, landuse change and forestry (LULUCF). Efforts are therefore needed across the energy, industrial and land-use sectors to reduce emissions. Significant efforts are needed in certain sectors, such as in industry and transport, that are sometimes referred to as hard-to-decarbonise” or “hard-to-abate” sectors.

There are two general approaches to reducing emissions to zero: completely decarbonising all energy and industrial processes so that no CO2 is emitted at all (the “zero” emissions approach), and offsetting any remaining emissions through the use of CDR to achieve net-zero emissions (the “net-zero” emissions approach). Examples of CDR include reforestation, afforestation, direct air capture, enhanced weathering and bioenergy CCS.

Challenging sectors: Transport
Transport accounts for around one-quarter of global energy-related CO2 emissions. The path forward to provide transport services while reducing CO2 emissions is becoming clear for some, but not all, transport modes. For light-duty vehicles (cars, sport-utility vehicles and small trucks), battery electric vehicles have shown dramatic improvements in range (kilometres per charge), cost and market share. The path forward here is clear: electrify the light-duty vehicle fleet and provide that electricity from renewable sources. For other modes, the path is less clear, although there is significant untapped potential for sustainable liquid biofuels. Additional solutions will be needed for road freight transport, aviation and shipping. Potential solutions in
these transport modes are described in the following sub-sections.

TOWARDS THE TR ANSFORMATIVE DECARBONISATION OF SOCIETIES

A transformative transition
As countries around the world grapple with the challenge of transforming an energy system – and by extension a global economy – that relies on polluting conventional energy resources, notions of a “Green New Deal” are receiving growing attention. Both the name and the underlying intent are inspired by the massive mobilisation of resources and institutional capacity that took place under the New Deal launched by U.S. President Franklin Delano Roosevelt in the 1930s. The original New Deal entailed fiscal, monetary and banking reforms; public works; and a series of regulatory measures adopted in response to the devastating global financial crisis known as the Great Depression.

Overcoming challenges
Done right, the energy transition not only avoids the use of polluting fuels but creates a vibrant, climate-resilient economy with benefits for all. IRENA’s analysis shows that its transition pathway offers strong employment and welfare gains. Despite positive outcomes at the global level, IRENA’s analysis also indicates that the energy transition will generate highly diverse outcomes for regions and countries (see Chapter 4). Individual countries embark on the transition from different starting points defined by their existing socio-economic structures. Their pathways are also strongly influenced by their level of policy ambition. Two sets of conditions influence the ability of countries to derive benefits from the energy transition: (1) the depth, strength and diversity of their national supply chains; and (2) varying degrees of dependency on fossil fuels and other commodities, technologies and trade patterns (see Figure 6.2).

Foundations for success: Financial mobilisation, policy cohesion and international co-operation
The global energy transition requires an unprecedented mobilisation of financial resources, driven by the unwavering commitment of governments, the private sector and civil society. Governments must adopt a wide array of policies to strengthen public resolve and ensure that no one is left behind. As the massive financial resources mobilised to counter the 2008 economic crisis demonstrated, countries and societies are collectively capable of such ambitious undertakings. The uncharted territory of COVID-19 and its aftermath presents now another test of our shared resolve for a better future.

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