A multi-model study of energy supply investments in Latin America under climate control policy

Journal Article · Sun May 01 00:00:00 EDT 2016 · Energy Economics

DOI:https://doi.org/10.1016/j.eneco.2016.01.005· OSTI ID:1406813

Kober, Tom ^[1]; Falzon, James ^[1]; van der Zwaan, Bob ^[2]; Calvin, Katherine ^[3]; Kanudia, Amit ^[4]; Kitous, Alban ^[5]; Labriet, Maryse ^[6]

---

1. Energy Research Centre of the Netherlands, Amsterdam (The Netherlands). Policy Studies
2. Energy Research Centre of the Netherlands, Amsterdam (The Netherlands). Policy Studies; Johns Hopkins Univ., Bologna (Italy). School of Advanced International Studies; Univ. of Amsterdam (Netherlands). Faculty of Science
3. Pacific Northwest National Lab. (PNNL), Richland, WA (United States)
4. KanORS-EMR, Delhi (India)
5. European Commission, Sevilla (Spain). Joint Research Centre
6. Eneris Environment Energy Consultants, Madrid (Spain)

In this article we investigate energy supply investment requirements in Latin America until 2050 through a multi-model approach as jointly applied in the CLIMACAP-LAMP research project. We compare a business-as-usual scenario needed to satisfy anticipated future energy demand with a set of scenarios that aim to significantly reduce CO₂ emissions in the region. We find that more than a doubling of annual investments, in absolute terms, occurs in the business-as-usual scenario between 2010 and 2050, while investments may treble over the same time horizon when climate policies are introduced. However, investment costs as a share of GDP decline over time in the business-as-usual scenario, as well as the climate policy scenarios, due to the fast economic growth in that region. Business-as-usual cumulative investments of 1.4 trillion US$ are anticipated between 2010 and 2050 in energy supply, and increase when additional climate policies are introduced: under a carbon tax of 50 $/tCO₂e in 2020 increasing with a rate of 4% per year, an additional 0.6 trillion US$ (+45%) investment is needed. Climate control measures lead to increased investment in low-carbon electricity technologies, primarily wind, solar, and CCS applied to fossil fuels and biomass. Our analysis suggests that compared to the business-as-usual case an average additional 21 billion US$ per year of electricity supply investments is required in Latin America until 2050 under a climate policy aiming at 2°C climate stabilization. Conversely, there is a disinvestment in fossil fuels. For oil production, a growth from 58 billion US$ to 130 billion US$ annual investment by 2050 is anticipated in a business-as-usual scenario: ambitious climate policy reduces this to 28 billion US$. Finally, mobilizing necessary additional investment capital, in particular for low-carbon technologies, will be a challenge, and suitable frameworks and enabling environments for a scale-up in public and private investment will be critical to help reach required levels. The economic case for such a transition still remains to be articulated.

• Research Organization: Pacific Northwest National Laboratory (PNNL), Richland, WA (United States)
• Sponsoring Organization: European Union (EU); USDOE; USEPA
• Grant/Contract Number: AC05-76RL01830
• OSTI ID: 1406813
• Report Number(s): PNNL-SA--109344; 453040310
• Journal Information: Energy Economics, Journal Name: Energy Economics Journal Issue: C Vol. 56; ISSN 0140-9883
• Publisher: Elsevier
• Country of Publication: United States
• Language: English

Related Subjects

54 ENVIRONMENTAL SCIENCES
climate policy
low-carbon energy technology
technology investment costs