Developing Countries & Global Climate Change: Electric Power Options for Growth

Developing Countries & Global Climate Change: Electric Power Options for Growth

June 1999

By: Mark Bernstein, Pam Bromley, Jeff Hagen, Scott Hassell, Robert Lempert, Jorge Munoz, David Robalino, RAND

Press Release

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Eileen Claussen, Executive Director, Pew Center on Global Climate Change

Understanding the possibilities for greenhouse gas emission reductions in developing countriescan inform the debate over long-term equitable commitments and global participation in a climate change regime. This study investigates policy and technology choices in the electric power sector that can lower carbon dioxide and other air emissions, while maintaining or improving economic growth.

The standard projection shows electric sector CO2 emissions in developing countries nearly tripling over the next twenty years as a result of investments of approximately $1.7 trillion. This sector already represents 10 percent of global emissions. The study presents four alternative paths for new power generation that could maintain economic growth and reduce new emissions to levels below this projection:

  • Including the costs of electricity delivery - not just generation - makes planning and investment decisions more efficient and makes distributed renewable energy more viable, decreasing CO2 emissions by up to 2.5 percent;
  • Increasing privatization of the electricity sector could reduce CO2 emissions by up to 1 percent and boost economic benefits by up to 5 percent;
  • Using low-emissions technologies - for example, increasing the use of natural gas and renew-ables - could reduce CO2 emissions by almost 25 percent while producing the same economic benefits; and
  • Increasing the efficiency of electricity supply and demand could reduce CO2 emissions by roughly 10 percent in one scenario.

T hese findings were based on an aggregated analysis and may not hold for individual countries.For similar benefits to accrue, specific reforms that account for national conditions would have to be implemented in each country. Countries could also participate in the Clean Development Mechanism to increase the available up-front financing to accomplish these reforms.

This report is the fourth in a series by the Center for Climate and Energy Solutions examining policy questions both domestically and internationally. Five case studies - evaluating electric power options in more detail - will be published for Argentina, Brazil, China, India, and the Republic of Korea.

The Pew Center was established in 1998 by the Pew Charitable Trusts to bring a new coopera-tive approach and critical scientific, economic, and technological expertise to the global climate change debate. The Pew Center and its Business Environmental Leadership Council believe that climate change is serious business. Better understanding of those sensible actions that reduce emissions without hurt-ing the economy brings us closer to a serious solution.

Executive Summary

In 1995, 34 percent of global carbon dioxide (CO2 ) emissions were produced by electric power generation, approximately one-third of which came from developing countries. Between 1995 and 2020, developing countries will invest roughly $1.7 trillion building 50 percent of all new global power generation capacity. If these investments are made according to business-as-usual (BAU) investment trends, CO2 emissions from developing country power generation will nearly triple their 1995 levels within 20 years.

This report presents the results of a RAND study that suggests that BAU investment trends are not the only path to strong economic growth. If developing countries adopt different policies and plan-ning methods for their power generation sectors, technologies other than those included in BAU projec-tions could provide lower local and global environmental impacts and produce similar or even higher economic benefits. This study compared the possible impacts that different policies and technology mixes could have on economic growth, air pollution, and CO2 emissions from new electric power genera-tion in developing countries.

In order to consistently and quantitatively examine the economic and environmental impacts of different policies and mixes of power generation technologies, this study developed a simulation model that sought to capture the macro-level relationships between electric power generation, economic growth, and capital investment in the world's developing countries. The simulation model was used to compare current forecasts and BAU trends for electric power to several policy alternatives that also met projected capacity needs. The policy alternatives investigated in this study were: the inclusion of infra-structure costs in new capacity investment decisions; the acceleration of private-sector participation in power generation; the use of low-emissions technologies; and improvements in energy efficiency.

Figure ES-1 presents the range of potential CO2 emissions based on this study's findings. The upper bound of this range shows that accelerated privatization could, under some circumstances, increase new CO2 emissions up to 20 percent relative to BAU investment trends that include infrastruc-ture costs. Other scenarios could decrease the expected growth. Low-emissions technologies could reduce that growth by almost half.