Sustain Energy Report

7/28/2019 Sustain Energy Report

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Sustainable energyor Developing Countries

A report to TWAS,

the academy o sciences or the developing world


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The academy o sciences or the developing world (TWAS) is an internationalautonomous scientic organization dedicated to promoting scientic capacityand excellence or sustainable development in the South.

TWAS was ounded in Trieste, Italy, in 1983 by a group o distinguishedscientists rom the South under the leadership o Nobel laureate Abdus Salamo Pakistan, and ocially launched by the then-secretary general o the UnitedNations, Javier Perez de Cuellar, in 1985. The Academys operational expensesare largely covered by generous contributions rom the Italian government.

Since 1986 TWAS has supported scientic research in 100 countries inthe South through a variety o programmes. More than 2,000 eminent scientists

world-wide, including TWAS members, peer review proposals ree-o-chargeor research grants, ellowships and awards that are submitted to the Academyby scientists and institutions rom developing countries.

2008academy o sciences or the developing worldStrada Costiera 1134014 Trieste, Italyphone +39 040 2240-327ax +39 040 224559email [email protected] www.twas.org


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Contents

Executive Summary 5

1. Introduction 9

2. Essential Context: Historic Energy Trends 11

2.1 Rising Consumption and the Transition to Commercial

Forms o Energy 11

2.2 Increasing Power and Improving Eciency 13

2.3 De-carbonization and Diversication, especially

in the Production o Electricity 15

2.4 Reduction in Conventional Pollutants Associated

with Energy Use 18

3. The Sustainable Energy Challenge rom a Developing-Country

Perspective 21

4. Sustainable Energy Technologies 25

5. Policies and Actions to Promote the Diusion o Sustainable

Energy Technologies 33

5.1 Energy Eciency 34

5.2 Subsidy Reorm 36

5.3 Developing Indigenous Sustainable Resources 39

5.4 Promoting Technology Transer and developing

Human and Istitutional Capacity 41

5.5 Clean, ecient cookstoves 43

6. Conclusion 45

Reerences and Additional Reading 47


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Executive Summary

Developing and emerging economies ace a two-old energy challenge in the21st century: Meeting the needs o billions o people who still lack access tobasic, modern energy services while simultaneously participating in a global

transition to clean, low-carbon energy systems. Both aspects o this challengedemand urgent attention. The rst because access to reliable, aordable andsocially acceptable energy services is a pre-requisite to alleviating extremepoverty and meeting other societal development goals. The second becauseemissions rom developing countries are growing rapidly and are contributing toenvironmental problems, such as climate change and poor air quality, that putthe health and prosperity o people around the worldbut especially peoplein poor countriesat grave risk.

Historically, humanitys use o energy has been marked by our broadtrends: (1) rising consumption and a transition rom traditional sources o energy

(e.g., wood, dung, agricultural residues) to commercial orms o energy (e.g.,electricity, ossil uels); (2) steady improvement in the power and eciency oenergy technologies; and (3) a tendency (at least or most o the 20th century)toward uel diversication and de-carbonization, especially or electricity pro-duction; and (4) improved pollution control and lower emissions.

These trends have largely been positive. The problem is that the rate otechnology improvement has not been sucient to keep pace with the nega-tive consequences o rapid growth in demand.

The task, then, is not so much to change course as it is to accelerateprogress, especially toward increased energy eciency and lower-carbon

energy sources. This acceleration would have many concurrent benets ordeveloping countries in terms o reducing pollution and improving public health,making easible a broad expansion o access to basic energy services and layingthe oundation or more competitive industries and uture economic growth.Moreover, to the extent that sustainable energy policies promote the develop-ment o indigenous renewable-energy industries, they will have the additionalbenet o creating new economic opportunities, reducing countries exposureto volatile world energy markets and conserving resources or internal invest-ment by curbing outlays or imported uel.



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Sustainable energy or developing countries

There are several grounds or optimism that indicate developing coun-tries can succeed as sustainable energy leaders, even as they make substantial

strides toward closing the gap between energy haves and have-nots. The rstis that providing basic energy services to the billions o people who currentlylack such services requires at most a modest shit o global resources. It hasbeen estimated that the amount o electricity required to make it possible orpeople to read at night, pump a minimal amount o drinking water and listen toradio broadcasts amounts to just 50 kWh per person per year. Even multipliedby the 1.6 billion people who currently live without electricity, this incremento consumption would amount to only a tiny raction (less than one-hal o 1percent) o overall global energy demand. At the same time, the price competi-tiveness and reliability o renewable energy technologiesmany o which are

particularly well-suited to small-scale, stand-alone applicationhas continuedto improve, especially in remote rural areas that are not well-connected toelectricity grids or transportation networks.

None o this means the tasks acing developing countries will be easy.On the contrary, markets let to their own devices are not likely to choose thecleanest and most ecient technologies most o the time (especially whenenvironmental and other externalities are not refected in market prices); norwill it always be possible to avoid dicult trade-os.

This is true o markets everywhere in the world. But the trade-os can beespecially dicult in a developing country context where immediate nancial

and institutional constraints are likely to be more acute than in most developedcountries.

In this context and given the scale o the challenges that must be over-come, concerted policy interventions are essential, not only at the nationallevel, but also at the international, regional, and sub-regional levels. Moreover,the interventionsto be ully successulmust be responsive to the particularneeds and constraints o developing countries and must advance, to the great-est extent easible, multiple societal objectives.

This report outlines several policy priorities or developed and develop-ing countries alike: Promote energy eciency and adopt minimum eciency standards or

buildings, appliances and equipment, and vehicles. Reorm and re-direct energy subsidies. Identiy the most promising indigenous renewable energy resources and

implement policies to promote their sustainable development.Seek developed-country support or the eective transer o advanced energy

technologies, while building the indigenous human and institutional capacityneeded to support sustainable energy systems.

Accelerate the dissemination o clean, ecient, aordable cookstoves.


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Sustainable Energy or Developing Countries

None o these policy recommendations will be easy to implement. Allwill eventually require the active engagement o all sectors o society, including

individual consumers and local communities, non-governmental organizations,private businesses and industry, the science and technology communities, gov-ernments, intergovernmental institutions and donor organizations. Developingcountries themselves must take the lead in charting a new energy course. Butdeveloped countries must stand ready to provide support, recognizing thatthey have a vital stake in the outcome.


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Since the dawn o the industrial age, the ability to harness and use dierentorms o energy has transormed living conditions or billions o people, allowingthem to enjoy a level o comort and mobility unprecedented in human historyand reeing them to perorm ever more productive tasks. For most o the last

200 years, steady growth in energy consumption has been closely tied to risinglevels o prosperity and economic opportunity in much o the world.

Now, however, humanity nds itsel conronting an enormous energychallenge. This challenge has at least two critical dimensions. On the one hand,it has become clear that current patterns o energy use are environmentallyunsustainable. Overwhelming reliance on ossil uels, in particular, threatens toalter the Earths climate to an extent that could have grave consequences or theintegrity o vital human and natural systems. At the same time, access to energycontinues to divide the haves rom the have-nots. Globally, a large raction othe worlds populationmore than two billion people, by some estimatesstill

lacks access to one or several types o basic energy services, including electric-ity, clean cooking uels and adequate means o transportation.

The need or a proound transormation o the worlds energy-producingand -using inrastructure is, o course, already widely recognized in the contexto mounting concern about global climate change. Countless reports have beenwritten on the subject o sustainable energy, but ar ewer have approachedthese issues specically rom a developing country perspective. In nations wherea signicant portion o the population still lacks access to basic energy services,concerns about long-term environmental sustainability oten are overshadowedby more immediate concerns about energy access and aordability.

This report addresses the two-old energy challenge that conronts devel-oping and emerging economies: expanding access to energy while simultane-ously participating in a global transition to clean, low-carbon energy systems.

At a broad level, the policy options recommended here will be amiliarsimilar prescriptions have been widely advocated in energy policy discussionsgenerally and in a variety o dierent country contexts. These arguments,however, have oten been grounded in experience or evidence rom wealthier,industrialized countries. To successully implement a sustainable energy agendait will be critical or developing countries to design and implement policies that

1. Introduction


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are both (a) responsive to their particular needs and constraints and (b) advancemultiple objectives, including economic and social development objectives as

well as environmental ones.


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2. Essential Context:Historic Energy Trends

Energy use by human societies has historically been marked by our broadtrends: Rising overall consumption as societies industrialize, gain wealth and transi-

tion rom traditional sources o energy (mostly biomass-based uels such

as wood, dung and charcoal) to commercial orms o energy (mostly ossiluels).

Steady improvements in both the power and eciency o energy-producingand energy-using technologies.

De-carbonization and diversication o uels used, especially or the produc-tion o electricity, throughout most o the 20th century.

Reduction in conventional pollutants associated with energy use.

Each o these trends has played a major role in shaping our currentenergy situation. All o them will be important in determining the nature and

magnitude o the sustainability challenge humanity conronts in the decadesahead. In particular, much will depend on how the trends described in the lastthree bullets interact with the rst. In other words, the ability o developed anddeveloping countries alike to manage the consequences o rising consumptionand increased demand or commercial orms o energy seems likely to dependon whether it will be possible to greatly accelerate historic rates o progresstoward increased eciency, de-carbonization, greater uel diversity and lowerpollutant emissions.

2.1 Rising Consumption and the Transitionto Commercial Forms o Energy

Beore the industrial revolution, humans relied on natural energy fows and onanimal and human power or heat, light and work. Mechanical energy sourceswere conned to drat animals, wind and water. The only orm o energy conver-sion(rom chemical energy to heat and light)came rom burning various ormso biomass. Energy use per capita did not exceed 0.5 tons o oil-equivalent(toe) per year.


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Between 1850 and 2005, overall energy production and use grew morethan 50-oldrom a global total o approximately 0.2 billion toe to 11.4 billion

toe (IEA, 2007). Most o this increase occurred in industrialized societies, whichhad come to rely heavily on the ready availability o energy. On a per capitabasis, people in these societies now use more than 100 times the amount oenergy that was used by our ancestors beore humans had learned to exploitthe energy potential o re (UNDP, 2000, p. 3).

As societies have industrialized, they have not only used more energybut they have used energy in dierent orms, typically switchingas householdincomes riserom such traditional uels as wood, crop residues and dung tosuch commercial orms o energy (i.e., uels that can be bought and sold) as oil,natural gas, propane and electricity. Reliable estimates or the use o traditional

waste and biomass are dicult to obtain, but these uels are estimated to ac-count or approximately 10 percent o overall primary energy use at present.Much o this use is concentrated in the rural areas o developing countries.More reliable statistics are available or the consumption o commercial energy,which grew rapidly during the second hal o the 20th century.1 Because mostcommercial orms o energy are derived rom ossil uels (notably, coal, oil andnatural gas), consumption o these uels grew even asterincreasing roughly20-old in the 20th century alone. Non-renewable, carbon-emitting ossil uelsnow supply approximately 80 percent o the worlds primary energy needs(see Figure 1).

Projecting orward rom current trends suggests that overall energy usewill continue to grow stronglydoubling or even tripling by 2050. More troublingrom a sustainability perspective, ossil uel consumption could grow nearly asstrongly as total energy consumption, meaning that ossil uels would continueto dominate the overall supply mixagain, assuming a continuation o current,business-as-usual trends.

O course, these are the outcomes that a policy agenda guided by climateconcerns and other sustainability considerations would presumably seek tochange. Altering the present trajectory, however, will require governments,businesses and individuals around the world to join in a concerted eort to

accelerate the other historic trends discussed in the next subsectionstrendstoward increased eciency and lower-carbon energy sources, in particular.

1 Starting around 1970, global consumption o commercial orms o energy grew by approximately 2 percentper year. Global growth rates moderated somewhat in the 1990s with the economic contraction o agroup o countries (primarily in central and eastern Europe and central Asia) that were transitioning romcentrally planned to market-based systems. Strong global growth resumed again ater 1998. Recently,high energy prices and recessionary pressures caused by a global credit crunch and volatility in severalmajor currencies may again be causing a global slowdown.


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2. Essential Context: Historic Energy Trends

Figure 1: Share o World Primary Energy Supply in 2005

Source: IEA, http://www.iea.org/textbase/nppd/ree/2007/key_stats_2007.pd, p.6.

2.2 Increasing power and improving efciency

Harnessing oxen increased the power available to human beings by a actor oten, the waterwheel increased it by another actor o six, and the steam engine

by another actor o ten (UNDP, 2000, p. 3). Cumulatively, these innovationsincreased the power available to humans by a actor o 600. The developmento the steam engineinitially powered by coalwas particularly important.

With it, the provision o energy services became site-independent becausecoal could be transported and stored anywhere. Steam engines uelled theactory system and the industrial revolution. Used later in locomotives andships, these engines revolutionized transport as well (Grubler, 1998, p. 249).By the beginning o the 20th century, coal provided almost all o the primaryenergy needs o the then industrializing countries.

Even as technologies like the steam engine vastly increased the power

available to humans, improvements in energy-producing and -using technolo-gies steadily improved the eciency with which energy could be converted todierent orms and be used to deliver goods and services. For example, it isestimated that the thermal eciency o steam engines has increased by a actoro about 50 since 1700, while the eciency o lighting devices has improvedby a actor o about 500 over the past 150 years (Ausubel and Marchetti,1996). Large eciency gains likewise occurred with the development o theinternal combustion engine as a replacement or steam engines in many ormso transport (Grubler, 1998, p. 251).

CombustibleRenewables & Waste

10%Other

1%

Natural gas21%Coal

25%

Hydro2%

Nuclear6%

Oil35%


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Figure 2: Changes in GDP, population, primary energy use,amd electricity use in OECD countries, 1960-97

Source: UNDP, 2000, Figure 1.1, p. 34.

Figure 3: Changes in GDP, population, primary energy use,amd electricity use in developing countries, 1971-97

Source: UNDP, 2000, Figure C.1 (d), p. 459.

1960 1965 1970 1975 1980 1985 1990 1995

1

1.5

2

2.5

3

3.5

4

4.5

5

Electricity

Population

GDP

1971 1975 1979 1983 1987 1991 1995

1

2

3

4

5

6

7

8

Electricity

Population

GDP

Primaryenergy use

Primaryenergy use


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Massive improvements in the eciency o technologies and devices haveallowed or ongoing reductions in the amount o energy required to produce a

unit o goods and services in industrialized economies. This phenomenon hasresulted in the decoupling o economic output rom energy consumptiontwo measures which, until relatively recently, were assumed to grow moreor less in lockstep with each other. Figure 2 shows that primary energy useand gross domestic product (GDP) grew at almost the same rate or membercountries o the Organisation or Economic Co-operation and Development(OECD)2 between 1960 and 1978, but began to diverge thereater, allowingor more output with less energy. The same divergence appears in Figure 3,which presents the same data or developing countries, but it emerges nearly15 years later (in 1993).

Overall, the energy intensity o the OECD countrieswhere energyintensity is measured simply as the ratio o GDP to primary energy consump-tionhas been declining in recent years at an average rate o 1.1 percent per

year. Interestingly, energy intensity has been alling even aster in non-OECDcountries, presumably because many are in the process o modernizing rom aairly inecient industrial base. It is worth emphasizing, however, that aroundthe world electricity intensitythat is, the amount o electricity consumedper unit o GDPhas not been declining. In act, because o its versatility,convenience and lack o emissions at the point o use, electricity use as ashare o overall energy use has tended to increase as societies modernize and

become wealthier. Consequently, electricity growth has been outpacing therate o economic growth in all regions in recent yearsan observation that isrelevant to the discussion o trends in electricity production in the subsectionthat ollows.

2.3 De-carbonization and diversifcation, especiallyin the production o electricity

Another historic trend that is likely to be relevant or uture energy sustainability

involves a change in the carbon content o the uels used as primary energysources. The progression rom wood and other traditional biomass uels toa reliance on coal in the rst part o the industrial age to, more recently, anenergy mix that includes large shares o oil, natural gas and nuclear power inaddition to coal, has implied a gradual reduction in the overall carbon intensity

2 The OECD was established in 1961. Its 30 member countries include the worlds major developedeconomies.


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o the worlds energy supply.3 In act, the ratio o tons o carbon in the primaryenergy supply to units o energy consumed globally has declined by about 0.3

percent per year since 1860, enough to reduce the overall ratio by 40 percent(Nakicenovic, 1996).

From the standpoint o concern about climate change, the trend towardlower carbon intensity in the second hal o the 20 th century has been help-ul in slowing the rate o increase in atmospheric concentrations o carbondioxide. (The earlier transition rom traditional biomass uels to ossil uels,by contrast, has had the opposite eectdespite an associated reduction incarbon intensityor reasons discussed in ootnote 3.) In the three decadesbeore 2000, the carbon intensity othe global economyin kilograms o car-bon (kgC) per U.S. dollar o gross world output (GWP)declined rom 0.35

kgC/$GWP in1970 to 0.24 kgC/$GWP in 2000. This reduction translates toan average yearly decline in carbon intensity o approximately 1.3 percent per

year. More recently, however, the rate o decline in carbon intensity began toslow and even reverse. Globally, carbon intensity per dollar o economic out-put has increased at a rate o approximately 0.3 percent per year since 2000(Canadell/PNAS, 2007).

Whether the last ew years represent an anomaly and whether globalcarbon intensityeven absent climate-related policy interventionswill resumethe downward trend that was underway beore 2000 remains unclear. Globalwarming concerns notwithstanding, higher prices and longer-term supply

concerns or oil and natural gas are likely to prompt increased utilization ocoal and unconventional oil resources (e.g., tar sands and oil shale) that couldsubstantially increase the carbon intensity o the global energy supply mix.Indeed this may already be occurring to some extent.

3 The ratio o hydrogen atoms to carbon atoms in wood is eectively one to ten; in coal it is betweenone to two and one to one; in oil it is two to one; and in natural gas it is our to one. It bears noting,however, that rom a climate change perspective not all sources o carbon are equal. Provided thatbiomass eedstocks are being managed sustainably, carbon dioxide released by the combustion obiomass uels is oset by an equivalent uptake o carbon dioxide rom the atmosphere to supportthe growth o new biomass. As a result there is, in equilibrium, no net change in atmospheric carbondioxide concentrations. The combustion o coal and other ossil uels, by contrast, puts carbon in theatmosphere that has been storedand thus kept out o circulationor millennia. It thereore producesa net increase in atmospheric concentrations. Together, human activitiesprimarily ossil uel com-bustion and land use changesare believed to be responsible or an increase in atmospheric carbondioxide concentrations o approximately 40 percent since pre-industrial times (rom roughly 270 partsper million around 1750 to 380 parts per million in 2005) (IPCC, 2007, Fourth Assessment Report,Summary or Policymakers, p. 5).


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Figure 4: Xxxxxxxxxxxxxx

Source: Canadell, Josep G., etc., in PNAS, 2007, p. 18868.

Longer term, many experts believe that climate change and other con-cerns will necessitate a transitionvia natural gasto a hydrogen economydependent on the introduction o non-carbon energy sources and the sustain-able use o biomass (Ausubel, 1996, p. 4). Based on the historic rate o energyde-carbonization, this process could take 80 years to unold in the absenceo urther policy interventions. The process could possibly be longer i rising

prices and supply constraints or oil and natural gas, coupled with a lack ocost-competitive non-ossil-uel alternatives, create countervailing pressuresto move toward more carbon-intensive uels like coal.

A second distinct trend, one that has clear linkages to the gradual proc-ess o de-carbonization described above, began in the early 20 th century andcontinues today. It is characterized by a prolieration o end-use technologiesthat rely on diversity o uels to generate electricity. Figure 5 shows currentand projected electricity production by uel or developing countries, basedon the International Energy Agencys (IEA) 2005 reerence scenario orecast.

The gure suggests that total electricity production by developing countries will

nearly triple over the next 25 years. Non-hydropower renewables are expectedto increase their share o the total electric sector supply mix rom roughly 1percent to 4 percent over that timerame. Overall, however, coal continues todominateaccounting or roughly hal o total developing-country productionin 2030. O course, the IEA projections do not account or the eect o newpolicies that could be introduced to address climate change and other concernsin the decades ahead. Such policies could urther expand the contribution romnon-ossil primary energy sources in the worlds electricity supply mix over thenext several decades.

1960

fossilfuelintensity

(kgC/US$)

1970 1980

time (y)

1990 2000

0.25

0.30

0.35


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Figure 5: Electricity Generation in Developing Countries:2006 IEA Reerence Case Forecast

Source: IEA, World Energy Outlook 2006, p. 513.

An eective response to the threat o climate change will require a sig-nicant acceleration o the historic trends toward de-carbonization and ueldiversication. This acceleration will need to take place on a global scale. It

cannot be restricted to the developed countries but must be pursued withequal or even greater vigor in developing countries.

2.4 Reduction in conventional pollutants associated with energy use

The archetypal symbol o the industrial age was the smokestack, and in manydeveloping countries large energy acilities continue to represent modernityand economic opportunity. With increasing afuence and better understandingo the adverse environmental and human health impacts associated with most

conventional air pollutants, however, the publics willingness to accept dirtytechnologies has decreased, especially in the last 30 years. The result has beena clear link between rising incomes and increased emphasis on environmentalperormance in many countries. Over time, both energy end-use technologies(e.g., cooking stoves, automobiles) and energy conversion technologies (e.g.,power plants) have become progressively cleaner, at least with respect to vis-ible, local and immediately harmul pollutants.

In act, the energy technology with the most immediate potential to im-prove human health and well-being in many developing countries is relatively

Non-Hydro Renewables

0

5000

10 000

15 000

20 000

1990 2004 2015 2030

Hydropower

Nuclear

Gas

Oil

Coal

billionkWh


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simple: improved cooking stoves. Use o such traditional uels as wood anddung or cooking is inecient and generates extremely high levels o indoor pol-

lution. Accelerating the transition to more expensive, but ar cleaner kerosene,liqueed petroleum gas (LPG), or electric stoves, would dramatically reduceexposure to unhealthy levels o particulate pollution, especially among womenand children, in many developing countries. Other sectors that oer large op-portunities or reducing conventional air pollutant emissions and improvingpublic health are transport and electricity production. More stringent pollutioncontrol requirements or automobiles, heavy-duty vehicles and equipment andpower plants, in particular, could substantially improve air quality.

In some cases, technology improvements that reduce emissions o con-ventional air pollutants (such as sulur dioxide, nitrogen oxides, hydrocarbons

and particulate matter) can be expected to also reduce emissions o greenhousegases. A good example is the use o natural gas or electricity production, whichbecame increasingly common in the United States in the 1990s, in part becausethe avoided cost o pollution controls made natural gas competitive with coalor capacity additions. Some conventional pollutants, such as black carbon, di-rectly contribute to warming. In those cases, conventional emission controls canprovide automatic climate co-benets. In other cases, the relationship is morecomplicated: Sulur particles, or example, actually have a cooling eect in theatmosphere. In general, most post-combustion conventional-pollutant controltechnologies do not reduce emissions o carbon dioxide, the chie greenhouse

gas. Moreover, agreements to reduce or control emissions that could disruptglobal climate systems have proved much more dicult to negotiate.

Devising eective policy responses to a problem that is truly global andmulti-generational in scale presents a challenge that is unprecedented in thehistory o environmental regulation and daunting or developed and developingcountries alike. For developing countries, that challenge is greatly complicatedby the simultaneous need to expand access to essential energy services andto provide low-cost energy or economic development.


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3. PromotingSustainable Energyin Developing Countries

Global consumption o commercial orms o energy has increased steadily overthe last our decades, recently marked by especially dramatic growth ratesin many developing countries. Yet, stark inequalities persist in the worldwide

distribution o access to modern energy services. Between 1970 and 1988,developing countries share o global primary energy consumption increasedrom approximately 13 percent to about 30 percent. In 2005, the non-OECDcountries accounted or just over hal (52 percent) o global primary energyconsumption. This increase in energy consumption has not, however, resultedin more equitable access to energy services on a per capita basis. In 2005,average per capita energy consumption in the OECD countries was morethan our times average per capita energy consumption across all non-OECDcountries, and nearly seven times the average per capita energy consumptionin Arica (IEA, Key Energy Statistics 2007, p. 48).

Overall, at least one-ourth o the worlds 6.6 billion people are unableto take advantage o the basic amenities and opportunities made possible bymodern orms o energy. Inequities in per capita electricity use are even largerthan the inequities in per capita primary energy use. In 2005, the averagecitizen in the OECD countries used 8,365 kwh o electricity. By contrast, theaverage citizen in China used 1,802 kwh, the average citizen elsewhere in Asiaused 646 kwh, the average citizen in Latin America used 1,695 kwh and theaverage citizen in Arica used 563 kwh.

These regionally or nationally aggregated gures mask even starkerwithin-country disparities, since the energy consumption patterns o elites in

many developing countries are similar to those o the general population indeveloped countries. In act, though it is estimated that developing countrieswere spending as much as $40 to $60 billion annually on electricity systems bythe end o the 20th century (G8, RETF, 2001), approximately 40 percent o thepopulation in these countries remained without access to electricity. This meansthat the number o people without access to electricity worldwide has hardlychanged in absolute terms since 1970 (UNDP, 2000, p. 374). Not surprisingly,the rural poor in developing countries account or the vast majority (nearly 90percent) o households without access to electricity worldwide.


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In this context, the most immediate energy priority or many develop-ing countries is to expand access. In act, providing sae, clean, reliable and

aordable energy to those who currently have no access is widely viewed ascritical or advancing other development objectives. While there was no specicchapter on energy in Agenda 21 (1992) and no specic United Nations Millen-nium Development Goal (2000) on energy, access to basic energy services isdirectly linked to most o the social and economic development targets outlinedin the Millennium Declaration (WEHAB Working Group, 2002).

I access is the priority, the immediate obstacle or many poor house-holds and governments in developing countries is a lack o nancial resources.Moreover, where access to energy is lacking, other urgent human and societalneeds are oten unmet too, meaning that energy needs must compete with

other priorities. Fortunately, people need only a relatively modest amount oelectricity to be able to read at night, pump a minimal amount o drinking waterand listen to radio broadcasts (G8-RETF, 2001). It is possible, in other words, togreatly improve the quality o lie or many poor households at a level o energyconsumption ar below that o the average citizen in an industrialized country.

To pay or even basic services, however, households need income-gen-erating opportunities, which also require energy. Table 1 below shows typicalelectric service requirements or o-grid households in developing countries,assuming an average size o ve persons per household. It has been estimatedthat basic household services, along with commercial and community activi-

ties (e.g., rural clinics and schools), could be provided or, on average, just 50kilowatt-hours (kWh) per person per year (note that this gure includes onlybasic electricity needs; energy requirements or cooking and transportationare not included).

Table 1: Typical Electricity Requirements or O-Grid Populationsin Developing Countries

Energy service/Development need Typical energy services Electricity demand kWh/ month per household

Lighting 5 hours/day @ 20 W/household

2.0-6.0

Radio/music 5 hours/day @ 5 W/household

Communications 2 hours/day @ 10 W/household

Portable water Community electric pump providing5 liters/day/capita

Basic medical services 2.5 kWh/day or 100 households 0.5-1.0

education 2.5 kWh/day or 100 households 0.5-1.0

Income generating productive uses 5 kWh/day or 100 households 0.0-20.0

TOTAL -- 3.0-30.0

Source: Adapted rom Table 1, (G8 RETF, 2001, p. 23).


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3. Promoting Sustainable Energy in Developing Countries

An estimated 1.6 billion people worldwide lack access to electricity.Providing basic electricity services to these people at an average annual con-

sumption level o 50 kWh per person would imply an increase in global end-useelectricity demand o roughly 80 billion kWh per year. This gure represents lessthan one-hal o 1 percent o global annual electricity production (estimated at18,235 billion kWh in 2004) and less than one-th o the expected year-to-yearincrease in global electricity production projected or the next two decades,according to the IEAs 2006 reerence case orecast or 20042030.

Besides expanding access, many developing countries ace at least twoother immediate energy-related challenges. The rst and most pressing issueor many oil-importing countries is economic: a rapid rise in world oil prices hasled to a steep and, or some countries, increasingly unmanageable escalation

in their import bill or energy commodities. For example, Indias oil import billincreased more than 20 percent in a single year, rom $33 billion in 2006 to anestimated $40 billion in 2007.4 According to the Economic Research Serviceo the U.S. Department o Agriculture: For oil-importing developing countries,the $137-billion increase in the energy import bill in 2005 ar exceeded the$84 billion o ocial development assistance they received.5 Moreover, oilprices have continued to rise substantially since 2005, adding urther to thisnancial burden.

For many smaller and poorer countries, the combination o rapidly risingenergy prices and a recent, similarly precipitous escalation o world ood prices

is generating concerns about internal economic and political stability. For thesecountries, diversiying their domestic energy resource base and reducing theirdemand or imported uels would carry a host o benets, not only by reeingscarce resources or domestic investment but also by reducing their long-termexposure to the nancial and humanitarian crises that now loom in many partso the world.

A second, important energy-related challenge is environmental. As notedin a previous section, energy use is a signicant and immediate cause o highlevels o air pollution and other orms o environmental degradation in manydeveloping countries. Energy-related emissions rom power plants, automobiles,

heavy equipment and industrial acilities are largely responsible or levels oambient air pollutionespecially in major citiesthat routinely exceed, some-times by an order o magnitude, the health thresholds set by the World HealthOrganization. And in urban and rural areas alike, indoor air pollution attributableto the use o traditional uels or cooking and space heating exposes billions

4 Source: http://www.upiasiaonline.com/Economics/2007/12/11/india_and_china_lose_with_high_oil_prices/6010/

5 Source: http://www.ers.usda.gov/AmberWaves/February08/Features/RisingFood.htm


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generating systems.6 In dispersed, o-grid applications, by contrast, intermit-tency may pose less o a problem and renewable technologies may be more

cost-eective than the next available conventional option. In addition, theirmodularitythat is, the act that many renewable energy technologies can bedeployed in relatively small unit increments7may be advantageous rom acost and risk standpoint in many developing countries.

In general, costs or most orms o renewable energy have declinedsubstantially in recent decades. In the early 1990s, only hydropower wascompetitive with conventional power plants or on-grid applications. Sincethen, expanding markets and experience-driven cost reductions have madewind and geothermal power competitive or nearly competitive with other, con-ventional sources. Solar photovoltaic technology remains more expensive but

can compete in some o-grid niche market applications. These comparisonsare, o course, based on narrow criteria o strict cash fow and ignore otheradvantages, such as environmental benets, that renewable technologies canconer (G8 RETF, 2001, p.16-17).

Table 2 shows current and projected uture costs or selected renewabletechnologies. The gures are somewhat dated, but they indicate how muchurther costs might be expected to all with additional experience, larger-scaledeployment and continued technology improvement. Prospects or continuedcost reductions are promising given recent rapid growth in renewable energymarkets. Over the past several years, the global rate o increase in installed

wind and photovoltaic capacity has averaged as much as 30 percent per year,making these some o the most rapidly expanding energy technology marketsin the world.

6 Longer term, the development o cost-eective storage systems can overcome this drawback orenewable technologies like wind and solar.

7 Most i not all technologies have a range o sizes over which they are most economical or cost-eectiveto use. For a long time, the industry benchmark or power generation was a 500 MW centralized pulver-ized coal plant costing $500 million (or $1000/kW o installed capacity). Given their higher eciency,industrial gas turbines now produce electricity at hal the cost achieved by large-scale coal plants.The range o sizes or these turbines, however, is o the order o 5 to 50 MW. This is now the industrystandard to beat or energy costs. It is possible that micro-turbines, in the 100-kW range, with onemoving part, could produce power at a rate lower than even gas turbines. Fuel cells represent another,potentially promising micro-power option or the uture.


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4. Sustainable Energy Technologies

Table 2: Current and Projected Future Costs oRenewable Energy Technologies:

Current Energy Costs Potential Future Energy Costs

Source Units Low High Low High

Biomass/Ethanol $/GJ 8 25 6 10

Bio-diesel $/GJ 15 25 10 15

Geothermal-Heat c/kWh 0.5 5 0.5 5

Biomass-heat c/kWh 1 6 1 5

Geothermal-Electricity c/kWh 2 10 1 8

Large Hydro c/kWh 2 10 2 10

Small Hydro c/kWh 2 12 2 10

Solar low temperature heat c/kWh 2 25 2 10

Wind Electricity c/kWh 4 8 3 10

Biomass-Electricity c/kWh 3 12 4 10

Marine-current c/kWh 10 25 4 10

Solar Thermal Electricity c/kWh 12 34 4 20

Marine Wave c/kWh 10 30 5 10

Solar PW Electricity c/kWh 25 160 5 25

Marine-ocean thermal c/kWh 15 40 7 20

Marine-tidal c/kWh 8 15 8 15

For comparison, in recent years typical (wholesale) electricity production costs in many de-veloped countries have been on the order o 24 c/kWh; retail prices have been on the order

o 8 c/kWh; prices in o-grid niche markets have been on the order o 14 c/kWh and peakpower prices have typically ranged rom 1525 c/kWh (G8, RETF, 2001).Source: (adapted rom UNDP, 2004, Table 7, p. 50).

Expectations o declining costs with greater eld experience and larger-scale deployment are not unique to renewable energy technologies. They wouldapply as well to other relatively new, low-carbon technology options (such ascarbon capture and sequestration). Figure 6 compares the decline in unit costsor wind and photovoltaic technology in the United States and Japan with thehistoric decline in the prices o gas turbines. The gure shows that or gas tur-

bines the declines were more rapid at rst but tapered o as the technologymatured. This eature is typical o maturing technologies.

All renewable energy sources can be converted to electricity (in prin-ciple, energy can always be converted rom one orm to another). In actualpractice, however, there will be some routes that will be preerred due tocost-eectiveness. Table 3 suggests some specic near-, medium-, and long-term options or supplying basic energy needs in rural areas using low-carbontechnologies. The mix o options likely to be optimal in dierent settings willdepend on cost, scale, location, timing and availability o local resources and


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expertise and a host o other actors. In general, a greater diversity o supplyoptions will help to reduce exposure to resource and technology risks. On the

other hand, there are also trade-os to be consideredsome standardizationcan help to reduce deployment costs and make it easier to develop the localexpertise needed to operate and maintain new technologies and systems.

Figure 6: Experience curves or photovoltaics, windmills,and gas turbines in Japan and the United States

Technology perormance and costs improve with experience, and there is a pattern to suchimprovementscommon to many technologies. The specic shape depends on the technol-ogy, but the persistent characteristic o diminishing costs is termed the learning or experi-ence curve. The curveis likely to all more sharply as technologies rst seek a market niche,then ull commercialization, because lower costs become increasingly important or widersuccess. Source: Nakicenovic, Grbler, and McDonald, 1998.Source: UNDP, 2000, Figure 12.1, p. 436.

10 100 100 0001000

Cumulative megawatts imstalled (log)

1000do

llarsperkilowatt-hour

10 000

100

200

500

1000

2000

5000

10 000

20 000 1981

1992

Photovoltaics(learning rate - 20%)

Research, development, and deployment phaseCommercialization phase

United StatesJapan

Windmills (United States)(learning rate - 20%)

1995

1982

1987

Gas turbines (United States)(learning rate - 20%, - 10%)

1963

1980


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Table 3: Technological Options or Rural Energy

Energy source/service

Present Options Near TermOptions

Medium TermOptions

Long TermOptions

Electricity Grid-based or noelectricity

Natural gas combi-ned cycles, biomassgasiers coupled tointernal combustionengines, wind, pho-to-voltaics, smallhydro or remoteapplications.

Biomass gasierscoupled to micro-turbines; mini gridswith combinationso photovoltaics,wind, small hydro,batteries.

Grid-connectedphotovoltaics andsolar thermal,biomass gasierscoupled to uel cellsand uel cell/turbinehybrids.

Fuel Wood, charcoal,crop residues,animal dung

Natural gas, liquidpetroleum gas, pro-ducer gas, biogas.

Syngas, dimethylether.

Dimethyl etherrom biomass withelectricity as a co-product.

Cogeneration -- Internal combustionengines, turbines.

Micro-turbines withintegrated combi-ned cycles.

Fuel cells, uel cell/turbine hybrids

Cooking Woodstoves Improved wood-stoves, liquid petro-leum gas, biogas.

Producer gas, na-tural gas, dimethylether.

Electric stoves,catalytic burners.

Lighting Oil and kerosenelamps

Electric lights Fluorescent andcompact fuore-scent lamps

Improved fuore-scent lamps, com-pact fuorescentlamps

Motive power Human and animalpower

IC engines, electricmotors

Bio-ueled primemovers, improvedmotors

Fuel cells

Process heat Wood, biomass Electric urnaces,cogeneration, pro-ducer gas, naturalgas/solar thermalurnaces.

Induction urnaces,biomass/solar ther-mal urnaces.

Solar thermalurnaces with heatstorage.

Source: Adapted rom table 10.3, UNDP. 2000, p. 380.

Along with the need to extend basic electricity services to rural areas,many developing countries ace rising demand or grid-connected power tomeet industrial and manuacturing energy needs and to provide electricity inast-growing urban areas. In countries with access to substantial coal supplies,

conventional coal-red steam-electric power plants are oten the cheapestnear-term option or adding large-scale, grid-connected generating capacity. Butsuch investments run the risk o locking in decades o high carbon emissionsandunless modern pollution controls are includedsubstantial quantities oconventional air pollutant emissions. These economy/environment trade-osare dicult to navigate, especially or poorer countries with urgent near-termneeds or low-cost power. In those instances, assistance rom developed coun-tries to oset the additional costs and technology demands o more expensivebut cleaner and lower-carbon technologies will be essential.


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Nearer-term, commercialized alternatives to high-emitting conven-tional coal plants include, among renewable technologies, primarily wind and

biomass;8 higher-eciency conventional coal plants (e.g., super-critical andfuidized bed systems); nuclear power; andwhere natural gas is availableintegrated, combined-cycle gas turbines. Longer-term, advanced coal tech-nologiessuch as integrated, combined-cycle gasication systemscoupledwith carbon capture and sequestration must be successully commercializedto make continued reliance on coal resources compatible with global carbonconstraints.

O the major non-renewable, low-carbon generating options, modernnatural gas systems are relatively clean and ecient and can be cost-competitivewhere ample supplies o natural gas are available. They can also be deployed

relatively quickly and in small (


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attention in recent years. A number o countries with large vehicle markets,including China and India, have adopted more stringent emissions standards

and are considering automobile uel-economy standards. At the same time,global interest in biouels development has intensied markedly, in part becauseo the adoption o aggressive uel mandates in developed countries like theUnited States. Brazil is already a world leader in this area, having successullynurtured a major domestic sugarcane ethanol industry that is economicallycompetitive with conventional gasoline.

The current worldwide boom in biouels is proving a mixed blessing atbest, however, especially in many developing countries where it is being blamedor contributing to accelerated rates o deorestation, habitat destruction andhigh ood prices. These are signicant issues and they should be addressed

expeditiously through a thoughtul re-examination and reorm o current biouelspoliciesnot only in the developing world but also in the developed countriesthat are driving much o the recent push to expand global production.

In the long run, the viability o biouels as an alternative to oilandthe ability to manage or minimize tensions with ood production and habitatpreservationwill depend on the successul commercialization o improvedeedstocks and conversion technologies. In general, such improvementsanexample would be the ability to cost-eectively convert ligno-cellulosic eed-stocks to ethanolwould also greatly enhance the net environmental benetsand greenhouse gas reductions achieved by switching rom conventional uels

to biouels.


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5. Diffusing SustainableEnergy Technologies

The energy challenges conronting developing countries are signicant andgrowing greater in time. Moreover, it is clear that developing countries will notbe able to avoid potentially large adverse consequences without the concerted

policy interventions by developing and developed countries alike.This section ocuses on a relatively short, concrete list o policy actions

that would help shit developing countries to a more sustainable energy trajec-tory. None will be easy to implement. All will require the active engagement oall sectors o society, including individual consumers and local communities,non-governmental organizations, private businesses and industry, the scienceand technology research community, governments, intergovernmental insti-tutions and donor organizations. Developing countries must take the lead incharting a new energy course or themselves, but developed countries muststand ready to provide support, recognizing that they have a vital stake in the

outcome. These policy action include: Promote energy eciency and adopt minimum eciency standards or

buildings, appliances and equipment, and vehicles. Reorm and re-direct energy subsidies. Identiy the most promising indigenous renewable energy resources and

implement policies to promote their sustainable development. Seek developed-country support or the eective transer o advanced energy

technologies, while building the indigenous human and institutional capacityneeded to support sustainable energy technologies.

Accelerate the dissemination o clean, ecient, aordable cookstoves.

Beore proceeding to a more detailed discussion o these policy recom-mendations, it is worth underscoring a broader point concerning the need orharmonized policies and holistic approaches. First, as noted in the introduction,sustainable energy policies are more likely to succeed i they also contributetoward other societal and economic development objectives. Second, govern-ments should look across policies to maximize positive synergies where theyexist and avoid creating cost-cutting incentives. Too oten, governmentsinresponding to dierent pressure groups at dierent timesadopt conficting


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policies that at least partially undermine each other. For example, governmenteorts to promote energy eciency can be undercut by simultaneous subsidies

that tend to promote increased energy consumption.Harmonization will not always be possible or political and other reasons,

and it may not be possible to pursue a comprehensive set o policies all atonce. Nevertheless, governments should recognize that maximum benetscan be achieved through an approach that remains mindul o the interactiono dierent policies, leverages multiple opportunities wherever possible andresponds to the specic needs and constraints o individual countries.

5.1 Energy efciency

Assessments o climate-change mitigation costs consistently nd that energyeciency improvements oer the largest and least costly emissions-reductionpotential, while also providing important ancillary benets such as energy costsavings, reductions in conventional pollutant emissions, reduced dependenceon imported uels and improved economic competitiveness. Energy eciencycan be especially important in rapidly industrializing countries as a way to man-age rapid demand growth, improve system reliability, ease supply constraintsand allow energy production and distribution inrastructure to catch up.

As discussed in an earlier section, historic trends show steady progress

toward improved energy eciency and reduced energy intensity (where inten-sity is measured by the amount o energy required to deliver a unit o goodsor services).

This historic rate o improvement can be expected to continue. Yet,absent policy intervention, such improvement is unlikely to keep pace withcontinued growth in demandespecially in countries that are still in the earlystages o industrialization. Moreover, experience shows that market orcesby themselves oten ail to capture all cost-eective opportunities to improveenergy eciency.9

Countries like the United States have signicant untapped energy e-

ciency potential. The U.S. economy, as is oten pointed out, is only hal asecient as the Japanese economy (that is, the United States consumes twiceas much energy per dollar o GDP). But the opportunities are also large in some

9 A recent report by the McKinsey Global Institute nds that hal o all global growth in emissions couldbe avoided at a negative net cost using energy eciency measures. Specically, the report nds that aglobal investment o US$170 billion per year in energy eciency would yield US$900 billion in benetsannually by 2020, providing an average internal rate o return on investment o 17 percent per year.See: http://www.mckinsey.com/mgi/publications/Curbing_Global_Energy/index.asp


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5. Diusing Sustainable Energy Technologies

rapidly industrializing economies. China, or example, consumes nine times asmuch energy per dollar o GDP as compared to Japan. Overall, a recent assess-

ment o global eciency opportunities by the McKinsey Global Institute (2007)nds that the average annual rate o decline in global energy intensity could beboosted in a cost-eective way to 2.5 percent per yearessentially doublingthe recent global rate o decline, which has been averaging approximately 1.25percent per year. This is a signicant nding as it conrms that even relativelysmall changes in year-to-year improvement can produce a wide divergence ooutcomes over time.

At rst blush, it might seem grossly insensitive to recommend energyconservation to countries that consume so little by global standards. But thehistoric record indicates that small, incremental and cumulative improve-

ments in eciency over long periods can deliver enormous benets by makingeconomies less wasteul, more productive and more competitive. The potentialbenets o such improvements are particularly large in countries with rapidlyexpanding demand or new inrastructure, buildings, appliances and equip-ment. It is typically much easier and more cost-eective to build in a highlevel o eciency rom the outset than to improve eciency at a later point intime. Moreover, policies that ride the waves o grand transitions are less likelyto encounter riction than those that run counter to them. In most situationsand in all countries, programmes to promote more ecient use o energy areessential and represent a no-regret option or reducing demand or all types

o energy (G-8 RETF, 2001, p. 5).Governments have an important role to play in promoting energy e-

ciency and conservation. Eciency standards or appliances, equipmentand automobiles, or example, have proved extremely cost-eective in manydeveloped countries and are oten relatively easy to implement compared toother policiesespecially i countries can harmonize their standards with thestandards manuacturers ace in other large markets. Eciency standards orcodes or buildings, especially commercial buildings, are extremely importantgiven the long lie-span o most structures. To be eective, however, countrieswill need to educate architects and builders and develop the capacity to moni-

tor and enorce compliance. By setting a foor or baseline or energy eciency,minimum standards can deliver substantial energy savings in the uture witha high degree o condence.

To secure additional benets and ensure that manuacturers keep in-novating, other policies and incentives are needed to generate demand orproducts that perorm above the minimum baseline. For example, govern-ments can adopt labeling requirements and pro-active public procurementpolicies. Likewise, intergovernmental and non-governmental organizationsand donors can encourage or insist on the use o more ecient equipment.


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In some countries, utility companies have been successully enlisted in eortsto promote eciency among end-use customers. There is a substantial track

record o such programmes in the United States. But examples can also beound in other countries (the textbox describes one utility-led initiative in India).Energy-eciency or demand-side management programmes can provide anumber o benets in developing countries, including reducing costs to cus-tomers, easing electricity supply problems, enhancing system reliability andmoderating rapid demand growth.

5.2 Subsidy reorm

Although energy subsidies have been declining in many parts o the world overthe last decade, subsidies or ossil uels still amount to several tens o billionso U.S. dollars in developing countries. Cumulatively, these subsidies total lessthan overall taxes imposed on such ossil uels as petrol (G-8 RETF, 2001).But they have several eects that undermine, rather than advance, sustain-able energy objectives. First, by articially reducing the price o certain uels,they distort the market and encourage inecient levels o consumption (thatis, consumption above the level that would be ecient or society based ontheir real costs). Second, ossil uel subsidies make it more dicult or energyeciency and cleaner sources o energy to compete.

The justication usually oered or subsidies is that they help the needy.In act, many developing-country governments rely on subsidies largely be-cause they lack other reliable mechanisms or making transer payments tothe poor. Even as a mechanism or poverty alleviation, however, subsidies arehighly fawed. Because it is oten dicult or impossible to restrict their useto the neediest households, the bulk o the benet typically goes to wealthierhouseholds that can aord a higher level o consumption.

O course, ossil uel subsidies are not peculiar to developing countries.They exist in many countries. They are also addictive and those who benet romthem are usually unwilling to give them up. Thus it is easy or analysts to write

that subsidies should be eliminated or phased out. But this step is notoriouslydicult to take or politicians who have to renew their mandates periodically.

Reorming and re-directing energy subsidiesi necessary over timerather than all at oncemay thus be a more realistic strategy or developingcountries than attempting to abolish subsidies all at once. For example, a gradualreduction in subsidies or conventional ossil uels could be used to provide newsubsidies or more sustainable orms o energy or more ecient technologies.

Alternatively, the public resources conserved by reducing subsidies could bedirected toward other societal needs.


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Where there is concern that poor households will not be able to ac-cess basic energy services i they have to pay the ull market price, it might beeasible to provide subsidies only up to a certain level o consumption. This ismore likely to be practicable in the case o electricity (where, or example, low-income households might be oered reduced rates or the rst increment oconsumption) than in the case o portable uels like petrol or kerosene. In sum,

creative policy approaches are needed to navigate the tensions between expand-ing energy access and promoting sustainable energy outcomes. The researchcommunity and non-governmental organizations (NGOs) should take up thischallenge and begin to explore possible solutions, including new mechanisms ortranserring aid to poor households so that they can meet their basic needs.

In the longer-run, o course, energy prices or ossil uels should not onlybe subsidized, but also increased to refect environmental and public healthexternalities that are currently unrecognized by the marketplace. In principle,monetizing positive and negative externalities and making sure they are included

Box 5.2 A Utility-led Efcient Lighting Program in Bangalore, India

The Bangalore Electric Supply Company (BESCOM), a distribution company servingthe Bangalore metropolitan area in the state o Karnataka, recently partnered with theInternational Institute or Energy Conservation to implement a programme to replaceinecient incandescent light bulbs with compact fuorescent lights (CFLs).

The programme was motivated in part by the need to address peak power shortages.The BESCOM Ecient Lighting Program (BELP) was innovative in the developing

world or several reasons: The programme was piloted on a substantial scale so thatdistribution utilities everywhere could witness its implementation and impacts. Over nine months, BESCOMs monitoring and verication programme showed that

100,000 customers bought an average o two CFLs. Estimated programme benetsincluded a 300-percent increase in CFL sales, reductions in peak-power demand o12 megawatts, energy savings o 10 megawatt-hours and carbon dioxide reductionstotaling 100 tonnes.

The utility and industry ormed a novel and replicable partnership, wherein BESCOMused their billing and collection system to pass energy savings to customers and CFLvendors agreed to meet international product specications and provide improvedwarranties.

Except or the programme design, which was unded by the U.S. Agency or Interna-tional Development, all marketing costs were borne by BESCOM, demonstrating that

subsidies are not always necessary.

The BELP programme was widely viewed as a success and subsequently served as amodel or lighting programmes sponsored by other companies. In addition, the Ministryo Powers Bureau o Energy Eciency (BEE), which implements the Energy Conserva-tion Act o 2001, recently announced a bulk purchase programme to urther reduce the

price o CFLs and invited distribution utilities in India to participate. Several vendors haveagreed to reduce their prices through an across-the-board carbon nancing mechanism,and BESCOM has continued to scale-up its programme.


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in energy prices is an elegant way to address many issues o sustainability. Ab-sent this step, the market will tend to over-allocate resources where there are

negative externalities (such as pollution) and under-allocate resources wherethere are positive externalities (such as improved energy security).

The diculties associated with internalizing externalities are essentiallyparallel to those associated with removing subsidies, with the added complica-tion that it is oten dicult to place a precise monetary value on certain impacts.Figure 7 illustrates the results o one attempt by the European Commission toquantiy the external costs o global warming, public health, occupational healthand material damage associated with dierent ways o generating electricity.

The gure shows that the ignored costs associated with coal, lignite and oilare oten much greater than the current cost dierential with many renewable

technologies. There is, however, considerable uncertainty about what specicnumber or external costs should be assigned to any one technology.

Figure 7: External costs or electricity productionin the EU in Eurocent/kWh.

Data rom the European Commission-ENERGIE Programme (European Union 5 th Researchand Technological Development Framework Programme)

Source: G-8 RETF, 2001, Figure 5, p. 19.

These diculties are not insurmountable. Governments are continu-ally aced with making decisions based on reasonable judgments, negotiatedthrough the political process, in the ace o uncertainty. In practice, the greaterdiculty is likely to be political. Raising energy prices is almost always deeplyunpopular with business leaders and the public. Objections are likely to be

Coal &Lignite

Oil Biomass Hydro PV Wind

0

2

4

6

8

10

12

14

16


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voiced on the basis that higher energy prices could harm consumers and theeconomy, with especially large eects on competitive industries and low-income

households. As with reducing or removing subsidies, any eort to internalizeexternalities must navigate the apparent tension between raising prices ormany conventional orms o energy and expanding access or the poor. (Notethat this general point applies whether government seeks to internalize exter-nalities through a tax or through environmental regulation.) Because o theseparallels, some o the approaches noted in connection with subsidy reormmay be helpul, including using a gradual approach and osetting impacts onpoor households through other orms o assistance. I the mechanism used tointernalize externalities is an emissions tax, or example, the additional publicrevenues can be used to provide increased support or social services or other

(non-energy) necessities or to subsidize other orms o consumption that pri-marily benet the poor.

5.3 Developing indigenous sustainable resources

Many developing countries have abundant renewable energy potential andcould benet rom the positive economic spillovers generated by renewableenergy development, especially in currently underserved rural areas wheredecentralized, small-scale renewable energy technologies are likely to be most

cost-competitive with conventional alternatives.In most cases, however, government policies and public support will be

necessary to capture these opportunities. The World Bank has concluded thatincentives will usually be required to motivate the private sector to invest inproviding services to the oten remote and underdeveloped areas where thepoor reside. In these areas, there is a case or providing intelligently designedincentives and/or subsidies or the development and use o appropriate tech-nologies, preerably in ways that are targeted, simple, competitive and time-limited (G8 RETF, 2001).

Incentives or subsidies by themselves will not always be adequate to

overcome market barriers, especially or risky projects in less accessible areaso developing countries. In those cases, direct nancial support rom the gov-ernment or rom outside groups or institutions may be necessary to implementrenewable energy projects. There is ample precedent or such interventions:international aid organizations and other entities have invested millions o dol-lars in sustainable energy projects in developing countries. The track record orsuch investments, however, is decidedly mixed. Many projects have ailed overtime as a result o inadequate attention to practical problems, local conditionsand the need or ongoing maintenance and operational expertise.


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Given the scale o the challenge in relation to the scale o available re-sources, it is vital that uture eorts improve on the record o the past. This can

partly be accomplished by taking greater care in the design and implementationo projects and by ensuring that the skills and nancial resources needed tosustain new energy installations are in place. For its part, the research com-munity should put greater emphasis on developing renewable energy tech-nologies that are robust and well-adapted to the specic conditions ound indeveloping countries. In addition, researchers and advocates alike must avoidthe tendency to understate costs, or belittle potential problems with the tech-nologies they bring orward. Other aspects o this challenge are discussed insubsequent sections, which address the importance o expanding and improvinginternational technology transer initiatives and the need to build institutional

and human capacity.

Government support or sustainable energy technologies clearly hasa role to play in the demonstration and initial deployment stages describedabove. But government involvement is even more crucial in the earlier stageso research and development (R&D). Not surprisingly, developed countrieshave historically taken the lead in energy R&D spending because they have

had the resources to do so. This is likely to continue to be the case. But it doesnot mean that there is no role or developing countries. Some o the largerdeveloping countries have sucient resources to make their own substantialtechnology investments. Others can participate by targeting investments and/or by working cooperatively with other countries or institutions to ensure thatbroader R&D eorts address the specic opportunities and constraints thatapply in a developing country context. Investment in energy R&D can also beseen as a way to build indigenous human capital in science and engineering.Brazil, or example, has nurtured a viable domestic biouels industry through

Box 5.3 Using Rural Cooperatives or PV electricity in Bangladesh

The Grameen Bank o Bangladesh, a world-renowned micro-lending agency, establisheda non-prot subsidiary, Grameen Shakti, in 1996 to administer loans or photovoltaicsolar home systems to serve those without access to electricity. Initially, Grameen Shaktiound that long distances, poor transport inrastructure, periodically fooded and impass-

able roads, low literacy rates, lack o technical skills and transactions based on bartersall contributed to high transaction costs and diculty in building consumer condencein their product. In 1998, a Global Environment Facility (GEF) grant enabled GrameenShakti to oer improved credit terms to its customers and install thousands o systems.They also ound that a critical mass o installations in an area (o the order o 100 sys-tems) built consumer condence, making it easier and less time consuming to expandthe customer base (G8, RETF, 2001). Grameen Shakti now expects to be able to draw

additional nancing or scale-up activities rom commercial banks.


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all stages o technology development, deployment and commercialization (seetext box below).

Governmental support or energy R&D, however, is currently decliningin all countries (UNDP, 2000, p. 448). Given the challenges at hand, this trendwill need to be reversed because only governments take a long enough view(on the order o decades) to support the long-term investments in energy R&Dthat are needed to ully commercialize new technologies.

5.4 Promoting technology transer and developinghuman and institutional capacity

Substantial eorts to acilitate technology transer rom developed to develop-ing countries are clearly essential to achieving global sustainability objectives.

This need is widely acknowledged and was armed most recently at the De-cember 2007 UN Conerence on Climate Change in Bali. At that conerence,developing-country negotiators called or language explicitly linking mitigation

Box 5.4 National Alcohol Program in Brazil

When concerns about gasoline (petrol) shortages emerged in the rst hal o the 20 thcentury (18961943), many European nations experimented with programmes to blend

gasoline with alcohol. As supply concerns aded, however, so did these programmes.Brazils earliest attempts to introduce blended automotive uels date back to 1903. But

a ull-scale biouels eort did not begin until 75 years later when the National AlcoholProgram (Pro-Alcool) was launched in 1975 in response to an dramatic rise in internationaloil prices and the adverse balance o payments that this increase created.

At various times, Brazils Pro-Alcool programme has avored the use o neat hydratedalcohol (96 percent ethanol, 4 percent water) and gasohol (74 to 78 percent gasoline and

22 to 26 percent anhydrous ethanol), both produced rom sugar cane. Brazil now hasthe largest programme o commercial biomass utilization in the world (UNDP, 2000, p.229). Although automobiles that run on hydrated alcohol are no longer being producedin Brazil, those running on blends sustain an annual production o 200,000 barrels oethanol per day. From 1975 to 1989, the value o the avoided import oil bill associatedwith this level o production was about US$12.5 billion whereas the investments in the

program during the same period did not exceed US$7 billion (Rosa and Ribeiro, 1998,p. 466). The avoided oil import bill reached US$40 billion or the rst 25 years o theprograms operation.

Brazils programme has had many social, economic, and environmental benets. Ithas created signicant number o skilled and semi-skilled jobs, played a signicant rolein developing a strong agro-industrial base, reduced urban environmental pollution byreducing carbon monoxide emissions and improved the global environment by curb-

ing carbon dioxide emissions. Subsidies or this programme were phased out and ullyeliminated in 1999. Not surprisingly, the programme seems to fourish most wheneverinternational oil prices are high and international sugar prices are low.


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action by developing countries to measurable, reportable and veriable sup-port or technology, nance and capacity-building.

Accordingly, Decision 1(d) o the Bali Action Plan10 calls or enhancedaction on technology development and transer to support action on mitigationand adaptation, including consideration o: Eective mechanisms and enhanced means or the removal o obstacles to,

and provision o nancial and other incentives or, scaling up o the develop-ment and transer o technology to developing countries to promote accessto environmentally sound technologies.

Ways to accelerate deployment, diusion and transer o aordable envi-ronmentally sound technologies.

Cooperation on R&D o current, new and innovative technology. Development o eective mechanisms and tools or technology cooperation

in specic sectors.

While the current situation clearly demands that more technology trans-er be done, it also demands that technology transer be done better. In thepast, too many well-intended projects have ailed to live up to their promise.

To ensure that rural areas o developing countries do not become graveyardsor sustainable energy technologies, sustained attention must be paidby hostand donor nations aliketo the human and institutional capacities needed tosupport these technologies on a long-term basis (UNDP, 2000, p. 441).

Research shows that technology transer is more successul and morelikely to produce innovation when the host institution has requisite technicaland managerial skills. Thus there is an urgent need to develop skills to produce,market, install, operate and maintain sustainable energy technologies in devel-oping countries. Ensuring that as much o this capacity-building as possibleoccurs in local communities and companies based in the host country has thepotential to provide additional benets, not only in terms o local job creationand economic development, but also because project developers and opera-tors are likely to be more eective when they have close ties to the populationthat will be using the technology.

One potentially promising approach to capacity building involves thedevelopment o regional institutes that can provide training in basic technologyskills to local organizations and individuals drawn rom the local population.Such institutes could also help provide independent assessments o alternativetechnologies and policy choices, and explore practical strategies or overcomingreal-world barriers to the expanded deployment o sustainable energy technolo-

10 Source: http://unccc.int/les/meetings/cop_13/application/pd/cp_bali_action.pd


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gies (UNDP, 2000, p. 441; Martinot, et al., 2002). The Consultative Group onInternational Agricultural Research (CGIAR) has successully used this approach

to propagate technological and scientic advances in agriculture to developingcountries. This may provide a promising model or the energy eld.

In sum, successul technology transer and a worldwide expansion othe human and institutional capacities needed to implement sustainable tech-nologies are critical elements o an eective global response to the energychallenges we conront.

To meet these challenges, developed countries will need to ollow throughon current commitments and work closely with developing countries to makethe most eective use o scarce resources. Developing countries, or theirpart, must not be passive bystanders in that process. They have everything to

gain rom leveraging uture investments to build their indigenous human andinstitutional capacities and rom taking the lead in adapting and improvingsustainable energy technologies to suit their particular needs.

5.5 Clean, efcient cookstoves

The rationale or immediate policy action to accelerate the transition rom tra-ditional cooking methods to the use o clean, ecient cookstoves is groundedin public health and welare concerns. This recommendation thereore stands

somewhat apart rom the others discussed here, which tend to be motivatedby broader environmental and energy security concerns.

Box 5.5 Ceramic Charcoal Stoves in Kenya

The Kenya Ceramic Stove (jiko) is one o the most successul cookstove initiatives in Arica(UNDP, 2000, p. 198). Between the mid-1980s and the mid-1990s, more than 780,000o these stoves were disseminated. Today, some 16 percent o rural households in Kenya

also use these more ecient jiko stoves.The programme promotes a stove made o local ceramic and metal components made

by the same artisans who make the traditional stoves. The new stoves are not radicallydierent rom the traditional all-metal stoves, except that their energy eciency is nowclose to 30 percent. The remarkable eature o this programme is that rom the begin-ning it has received no government subsidies. This lack o subsidies has orced privateentrepreneurs to ensure sel-sustained production, marketing and commercialization

and prices Kenyas low-income households can aord. The project has now been suc-cessully replicated in Malawi, Rwanda, Senegal, Sudan, Tanzania and Uganda (UNDP,

2000, p. 198).However, the stove still requires charcoal, which needs to be produced and transported.

Charcoal production has been historically very inecient and will also need attention ithe programme is to reach its ull environmental potential.


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Improved cookstoves are worth singling out, however, because they oerenormous public health and welare benets at relatively low cost. Globally, it

has been estimated that exposure to indoor pollution rom the use o uels likewood and dung or cooking and space heating causes as many as 1.6 milliondeaths annually, primarily among women and young children (WHO, 2002).In addition, the need to gather uel can cause local environmental degradationand take up large amounts o time, or women and girls especially, that wouldotherwise be available or more productive activities. A shit away rom tradi-tional uels or cooking could marginally increase demand or commercial uelslike propane, natural gas or electricity. The change would be quite small in thecontext o overall energy requirements but more than justied rom a socialwelare perspective. Various programmes have been deployed to disseminate

improved cookstoves among poor households in rural areas. One o them isdescribed in the text box below.


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6. Conclusion

For the past 10 to 15 years, the energy sectors in most countries have beenin turmoil. Many developing countries have been attempting to restructuretheir energy sectors but are nding it dicult to implement reorms or a hosto reasons, including the multiplicity o actors involved, changing perceptions

o the relative roles o the market and governments, and the baggage o ac-cumulated policies o the past ew decadesmany o which may have madesense when they were proposed but now impose unsustainable burdens.Meanwhile, a sharp run-up in world energy prices over the last two years andgrowing supply concerns related to conventional petroleum (and, in someparts o the world, natural gas), combined with projections o continued strongdemand growth at the global level and greater awareness o the threats posedby climate change, have brought a heightened sense o urgency to national andinternational energy policy debates.

The current energy outlook is challenging to say the least. Whether

governments are chiefy concerned with economic growth, environmentalprotection or energy security, it is clear that a simple continuation o currentenergy trends would have many undesirable consequences at best, and riskgrave, global threats to human well-being at worst.

The situation or developing countries is in many ways more dicult thanor developed countries. Not only are there obvious resource constraints butaccess to basic energy services may be lacking or a signicant part o theirpopulation.

Yet, developing countries also have some advantages: they can learnrom past experience, avoid some o the policy missteps o the last hal century

and have the opportunity to leaprog directly to cleaner and more ecienttechnologies. Fortunately many essential elements o a sustainable energytransition can be expected to mesh well with other critical development objec-tives such as improving public health, broadening employment opportunities,nurturing domestic industries, expanding reliance on indigenous resources andimproving a countrys balance o trade.

This does not mean that cleaner, more ecient technologies will usuallybe the rst choice or that dicult trade-os can always be avoided. In the nearterm, many sustainable energy technologies are likely to remain more expensive


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than their conventional counterpartsand even when they are cost-eective, asis already the case or many eciency technologies, powerul market ailures

and barriers oten stand in the way. Changing the incentives and overcomingthose barriers is or now more a question o political will and coordination thanit is one o adequate resources (at least at the global level).

That doesnt make the task any easierquite the contrary. Surveyingthe current landscape, ample justications could be ound or a prooundlypessimistic viewor an equally optimistic one. Which outlook proves more ac-curate will depend to a large extent on how quickly developed and developingcountries not only recognize, but also begin to act upon, their shared stake inachieving positive outcomes that can be managed only by working together.


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