Co2

Energy

In more general terms, the Kaya identity can be expressed as:

CO2 emissions = Activity drivers x Economic drivers x x Energy intensity x Carbon intensity.

The various terms are defined differently in each end use sector. For example, while activity is generally linked to population in all sectors, it also includes commodity production levels in the industrial sector, number of persons per household in the residential sector, square meters of building space in the commercial sector, and number of vehicles in the transport sector.

The Kaya identity is a simplified presentation of the changes; structural differences in an economy are not broken down but are hidden in the economic driver. In other words, low energy intensity may not necessarily mean that energy is used sustainably, or efficiently; this may only be the result of a high share of high value-added activities in the economy, while energy-intensive activities and products are imported. The economy (expressed as GDP per capita) can hence be viewed as a representation of a collection of activities, end use sector, or energy services. In other words, in the Kaya identity, GDP is seen as a single energy service.

In practice, society is interested in providing a variety of energy services to support a given lifestyle (e.g., a comfortable home, lighting, transport). An energy service is the ultimate service (e.g., lumen of light) provided by the energy-using device (e.g., a lamp). Ultimately, the economy is not interested in using energy, but in the provision of energy services—at the lowest cost to society. Hence, sustainable use of energy means the provision of these services at the lowest energy consumption level, or highest energy efficiency.

The energy services included in the GDP basket may differ over time (structural change) and between countries, while the value of an activity may vary between different economies. To enable comparison of activity levels in a given economy, economists have introduced the purchasing power parity (PPP) correction for GDP. Basically, the PPP method corrects for price differences of a basket of services to compare the value of different economies over time. In practice, this means that PPP-corrected GDP of developing countries will increase in comparison to GDP based on market exchange rates.

To assess the sustainability of the energy services provided, we can devise, similar to the PPP correction, a basket of energy services that are necessary for a comfortable life and society. Understanding the service levels within the basket, and efficiency with which these services are provided, can help us understand the sustainable character with which society uses energy sources, and how these vary over time and between economies. However, it is a challenge to design a basket of activities that is representative of the variety of lifestyles found in the world, and, at the same time, equitable.

Given currently available data, factor decomposition of energy use and economic development can be used to develop a first proxy for the intensity and efficiency with which energy services are provided. The Kaya identity is one of the simplest forms of a decomposition of observed trends in energy consumption. Decomposition of energy use is applied to understand the drivers and changes in energy use and estimate the contribution of the different factors (or drivers). Decomposition analysis has been used in many countries and sectors to deepen the understanding of past trends. Various methodologies and literature exist. Data availability limits the representation of energy services to activity levels of parts of the economy. With more detailed data, it should be possible to further decompose trends into changes in the increase in energy services, changes in the service levels, and improvements in energy efficiency.

A typical example of a (relatively detailed) decomposition analysis for the economy of The Netherlands has been done by Farla and Blok (2000) for the period 1980-1995. During this period, total energy use in The Netherlands grew, while energy intensity declined. The study demonstrated a strong increase in the level of activities in all parts of the economy, which were partly offset by dematerialization and energy efficiency improvement. However, the study does not provide data on the level and quality of energy services provided, as such data is lacking in statistics, and no good and accepted measures exist. Similarly, a recent report by the IEA discusses the developments and factors affecting energy demand in IEA member states since the early 1970s (IEA 2004).

In typical decomposition analyses, the activity effect in current analyses is a de-facto increase in the volume of energy services (or a proxy thereof) provided, while sectoral shifts indicate a change in the mix of activities between (e.g., a shift towards the services economy) and within sectors (e.g., a shift from energy-intensive to light industries). The energy efficiency effect then describes the actual reduction in energy intensity for a given set of activities (when held constant over the studied period). While overall trends for different countries may be comparable, the contribution of the different factors may vary. For example, a reduction of the energy consumption can be achieved by reducing the production of energy-intensive materials or by making the production more energy efficient. If the former leads to increased imports of energy-intensive materials, the global effect of the reduction in energy use may be negligible or even negative, if the imported materials are produced with higher energy intensity than they were produced domestically. In the climate debate, this development is referred to as leakage (see e.g., Oikonomou et al. 2006). While there is limited evidence today for the existence of leakage, future trade patterns have the potential of leading to (increased) leakage without a consistent global climate policy in place. In a globalized world (made possible by the low costs of energy), the relations between economies become stronger, not only moving the boundaries of the production system, but also those concerned with the attempts to measure sustainability of the energy system in a given country. Some have argued that the analysis of energy use of economies that are dependent on the export of energy-intensive commodities demands a better understanding of import and export flows to assess the development of energy use (e.g., Machado et al. 2001). Others have argued that energy intensities of an economy should not be based on the domestic production, but rather on the energy intensity of the provided services, and that this is a better basis for equitable distribution of the burden and gains of climate policy. Given the increasingly open character of global economies, it is hard to account for the "embodied energy" of imports and exports, and it will be extremely hard to design workable policies. Note that recently selected major retailers (e.g., Walmart in the U.S., TESCO in the U.K.) have set first steps in such a direction to account for embodied carbon emissions in products by requesting information and accountability from their suppliers.

Therefore, to measure the (changes in the) sustainability of energy consumption, it is not sufficient to measure macro-trends in energy use and intensities. It is essential to develop a more in-depth understanding of the factors driving the macro changes, including, e.g., economic structure and trade patterns but also the energy efficiency for the different activities or energy services.

Changes in energy efficiency result from the introduction of new (energy) technologies or the retrofit of existing technologies. Both play a role, with the shares of each dependent on the length of period studied, technology turnover, speed of innovation, and other factors. Few analyses have been able to disentangle the role of both factors. One case study of electric arc furnaces in the U.S. iron and steel industry has shown that new construction was responsible for two-thirds of the change in energy intensity over a period of 12 years (Figure 21.2) (Worrell and Biermans 2005).

Over the long-term, innovation of new stock will be the driver for transformations in the energy system. Important investments will be made in the upcoming decades that will affect society economically and environmentally for a long period. Developing economies, such as China, are constructing new coal-fired power stations at an unprecedented pace. However, different choices are possible. Recent analysis by the IEA (2006b) suggest that an alternative development scenario which puts more emphasis on a sustainable energy system (by investing more in energy efficiency and other sustainable energy technologies) will actually result in lower economic costs (even without including externalities) and investments than the envisioned business-as-usual development path, which emphasizes expansion of energy extraction and supply. This means that moving boundaries in our energy system not only affects the environmental sustainability, but also economic sustainability, and that these, moreover, are interconnected.

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