Editing IPCC:AR6/WGIII/Chapter-6 (section)

=== 6.7.7 The Costs and Benefits of Low-carbon Energy System Transitions in the Context of Sustainable Development ===

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The attractiveness of energy sector mitigation ultimately depends on the way that it provides benefitsand reduces the costs for the many different priorities that societies value ( [[#Yang--2018a|Yang et al. 2018a]] ; [[#Wei--2018|Wei et al. 2018]] , 2020). While costs and benefits of climate mitigation are often considered in the context of pure economic outcomes – for example, GDP effects or changes in value of consumption – costs and benefits should be viewed with a broader lens that accounts for the many ways that the energy system interacts with societal priorities (Karlsson et al. 2020). Climate mitigation is not separate from countries’ broader growth and development strategies, but rather as a key element of those strategies.

Cost reductions in key technologies, particularly in electricity and light-duty transport, have increased the economic attractiveness of near-term low-carbon energy system transitions ( ''high confidence'' ). The near-term, economic outcomes of low-carbon energy system transitions in some sectors and regions may be on par with or superior to those of an emissions-intensive future ( ''high confidence'' ). Even in cases when system costs are higher for low-carbon transitions, these transitions may still be economically favourable when accounting for health impacts and other co-benefits (Gielen et al. 2019). Past assessments have quantified the aggregate economic costs for climate change mitigation using different metrics, for example, carbon prices, GDP losses, investments in energy infrastructure, and energy system costs. Assessments of mitigation costs from integrated assessment and energy system models vary widely. For example, scenarios include carbon prices in 2030 of less than USD20 tCO 2 –1 , but also more than USD400 tCO 2 –1 depending on the region, sector boundary, and methodology (e.g., [[#Bauer--2016|Bauer et al. 2016]] ; [[#Brouwer--2016|Brouwer et al. 2016]] ; [[#Oshiro--2017|Oshiro et al. 2017]] ; [[#Vaillancourt--2017|Vaillancourt et al. 2017]] ; [[#Chen--2019|Chen et al. 2019]] ). Those arise both from different methodologies ( [[#Guivarch--2017|Guivarch and Rogelj 2017]] ) and assumptions about uncertainties in key factors that drive costs ( [[#Meyer--2021|Meyer et al. 2021]] ).

Recent developments, however, raise the prospect that economic outcomes could be substantially superior to prior estimates, particularly if key technologies continue to improve rapidly. In some regions and circumstances, particularly in the electricity sector, near-term mitigation may lead to superior economic outcomes than continuing to invest in and utilise emissions-intensive infrastructure (e.g. [[#Brown--2017|Brown et al. 2017]] ; [[#Kumar--2020|Kumar et al. 2020]] ). Given the importance of electricity decarbonisation in near-term mitigation strategies ( [[#6.7.1|Section 6.7.1]] ), decreasing costs of solar PV, wind power, and batteries to support their integration, have an outsized influence on near-term economic outcomes from mitigation. At the same time, economic outcomes may vary across regions depending, among other things, on the characteristics of the current energy systems, energy resources, and needs for integrating VRE technologies.

The long-term economic characteristics of low-emissions energy system transitions are not well understood,and they depend on policy design and implementation along with future costs and availability of technologies in key sectors (e.g., process heat, long-distance transport), and the ease of electrification in end-use sectors ( ''high confidence'' ). The long-term aggregate economic outcomes from a low-emissions future are not likely to be substantially worse than in an emissions-intensive future and may prove superior ( [[#Child--2019|Child et al. 2019]] , Farmer et al. 2020; [[#Bogdanov--2021|Bogdanov et al. 2021]] ) ( ''medium confidence'' ). For the whole economy, the interquartile range of estimated mitigation costs is between 140 USD2015 and 340 USD2015 tCO 2 –1 in 2050 in scenarios limiting warming to 2°C (&gt;67%) and between 430 USD2015 and 990 USD2015 tCO 2 –1 in scenarios limiting warming to 1.5°C (&gt;50%) with no or limited overshoot (Chapter 3). For energy sectors in various regions and globally, different scenarios show a wide range of implied carbon prices in 2050 to limit warming to 1.5°C, from below USD50 tCO 2 –1 to more than USD900 tCO 2 –1 ( [[#Brouwer--2016|Brouwer et al. 2016]] ; [[#Rogelj--2018a|Rogelj et al. 2018a]] ). Mitigation costs for scenarios limiting warming to 2°C (&gt;67%) were 3–11% in consumption losses in AR5, but the median in newer studies is about 3% in GDP losses ( [[#Su--2018|Su et al. 2018]] ; [[#Gambhir--2019|Gambhir et al. 2019]] ).

Estimates of long-run mitigation costs are highly uncertain and depend on various factors. Both faster technological developments and international cooperation are consistently found to improve economic outcomes ( [[#Paroussos--2019|Paroussos et al. 2019]] ). Long-term mitigation is likely to be more challenging than near-term mitigation because low-cost opportunities get utilised first and later efforts would require mitigation in more challenging sectors ( [[#6.6|Section 6.6]] ). Advances in low-carbon energy resources and carriers such as next-generation biofuels, hydrogen produced from electrolysis, synthetic fuels, and carbon-neutral ammonia would substantially improve the economics of net-zero energy systems ( ''high confidence'' ). Current estimates of cumulative mitigation costs are comparably high for developing countries, amounting to up to 2–3% of GDP, indicating difficulties for mitigation without adequate support from developed countries ( [[#Dorband--2019|Dorband et al. 2019]] ; [[#Fujimori--2020|Fujimori et al. 2020]] ). In scenarios involving large amounts of stranded assets, the overall costs of low-carbon transitions also include the additional costs of early retirements (Box 6.11).

Focusing only on aggregate economic outcomes neglects distributional impacts, impacts on broader SDGs, and other outcomes of broad societal importance. Strategies to increase energy efficiency and energy conservation are, in most instances, mutually reinforcing with strategies to support sustainable development. Improving efficiency and energy conservation will promote sustainable consumption and production of energy and associated materials (SDG 12) ( ''high confidence'' ). Contrastingly, successful implementation of demand-side options requires sustainable partnerships (SDG 17) between different actors in energy systems, for example, governments, utilities, distributors, and consumers. Many authors have argued that energy efficiency has a large untapped potential in both supply and demand ( [[#Lovins--2018|Lovins 2018]] ; [[#Méjean--2019|Méjean et al. 2019]] ). For example, improved fossil power plant efficiency has been estimated to lower the costs of CCS from USD80–100 tCO 2 –1 for a subcritical plant to &lt;USD40 tCO 2 –1 for a high-efficiency plant ( [[#Hu--2017|Hu and Zhai 2017]] ; [[#Singh--2017|Singh et al. 2017]] ). This could enhance energy access and affordability. Eliminating electricity transmission losses has been estimated to mitigate 500 MtCO 2 per year globally ( [[#Surana--2019|Surana and Jordaan 2019]] ). For several other options, such as methane mitigation from the natural gas sector, the costs of infrastructure refurbishing could be offset with the value of the recovered natural gas ( [[#Kang--2019|Kang et al. 2019]] ).

Efficient end-use technologies are likely to be particularly cost-effective in developing countries where new infrastructure is rapidly getting built and there is an opportunity to create positive path dependencies ( [[#6.7.3|Section 6.7.3]] ). Aside from reducing energy consumption, efficient end-use technologies reduce resource extraction, for example, fossil fuel extraction or mining for materials used in wind turbines or solar PV cells ( [[#Luderer--2019|Luderer et al. 2019]] ). Reduced resource extraction is an important precursor to SDG 12 on sustainable consumption and production of minerals. End-use efficiency strategies also reduce the need for, and therefore SDG trade-offs associated with, CDR towards the end of the century and avoid temperature overshoot ( [[#van%20Vuuren--2018|van Vuuren et al. 2018]] ). But fully leveraging the demand-side efficiency would entail behavioural changes and thus rely on strong partnerships with communities (SDG 17). For instance, approaches that inform households of the economic value of conservation strategies at home could be particularly useful ( [[#Niamir--2018|Niamir et al. 2018]] ). Improved energy efficiency is interlinked with higher economic growth in Africa ( [[#Lin--2020|Lin and Abudu 2020]] ; [[#Ohene-Asare--2020|Ohene-Asare et al. 2020]] ). An important distinction here between SDGs focusing on infrastructural and behavioural interventions is the temporal context. Improving building heat systems or the electricity grid with reduced T&amp;D losses would provide climate mitigation with one-time investments and minor maintenance over decades. On the other hand, behavioural changes would be an ongoing process involving sustained, long-term societal interactions.

Increasing electrification will support and reduce the costs of key elements of human development, such as education, health, and employment ( ''high confidence'' ). Greater access to electricity might offer greater access to irrigation opportunities for agricultural communities ( [[#Peters--2016|Peters and Sievert 2016]] ) which could have the potential for increasing farmer incomes in support of SDG 1. Coordinated electrification policies also improve enrolment for all forms of education ( [[#Kumar--2018|Kumar and Rauniyar 2018]] ; [[#López-González--2020|López-González et al. 2020]] ). Empirical evidence from India suggests that electrification reduced the time for biomass collection, and thus increased the time children have available for schooling (SDGs 4 and 5) ( [[#Khandker--2014|Khandker et al. 2014]] ). Reduced kerosene use in developing countries has improved indoor air quality (SDG 3) ( [[#Barron--2017|Barron and Torero 2017]] ; [[#Lewis--2020|Lewis and Severnini 2020]] ). These positive linkages between climate change mitigation and other goals have improved perceptions of solar PV among the public and policymakers. ‘Goodwill’ towards solar PV is the highest among all the major mitigation options considered in this chapter ( [[#6.4.2|Section 6.4.2]] ).

Past trends have also indicated that, in some Asian countries, electrification has been obtained at lower income levels as compared to developed countries ( [[#Rao--2017|Rao and Pachauri 2017]] ), with corresponding impacts for development goals. For example, a human development index (HDI) greater than 0.7 (Figure 6.36) which signifies high development is now possible at close to 30 GJ yr –1 per person. This was attainable only at the energy consumption of 50 GJ yr –1 per person in preceding decades.

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[[File:0215b425221c7be3a795dbf8e858f93c IPCC_AR6_WGIII_Figure_6_36.png]]

'''Figure 6.36 | The relationship between total per capita energy use, rate of electrification and human development index (HDI).''' Improved efficiency has lowered the energy demand required for meeting a threshold HDI during 2012–2017.

Electrification also improves energy efficiency, with corresponding implications for development goals. For example, the availability of electric cooking may reduce the cooking primary energy requirement considerably compared to traditional stoves ( [[#Yang--2018|Yang and Yang 2018]] ; [[#Batchelor--2019|Batchelor et al. 2019]] ; [[#Khan--2020|Khan and Alam 2020]] ) while also promoting improved indoor air quality (SDG 3). Similarly, PV-powered irrigation and water pumping reduces pumping energy demands, which has the added advantage of promoting SDG 6 on clean water ( [[#Rathore--2018|Rathore et al. 2018]] ; [[#Elkadeem--2019|Elkadeem et al. 2019]] ).

Phasing out fossil fuels in favour of low-carbon sources is likely to have considerable SDG benefits, particularly if trade-offs such as unemployment to fossil fuel workers are minimised ( ''high confidence'' ). A phase-out of coal (Box 6.2) will support SDGs 3, 7 and 14, but it is also anticipated to create large job losses if not properly managed. At the same time, there are large potential employment opportunities that may be created in alternative sectors such as renewables and bioenergy for both skilled and unskilled workers. ‘Sustainable transition’ pathways have indicated a complete fossil phase-out which could entail numerous other co-benefits. For instance, fossil fuels are estimated to generate only 2.65 jobs per million USD as compared to projected 7.49 from renewables ( [[#Garrett-Peltier--2017|Garrett-Peltier 2017]] ). Similar synergies may also emerge for nuclear power in the long term, though the high costs create trade-offs in developing country contexts ( [[#Agyekum--2020|Agyekum et al. 2020]] ; [[#Castor--2020|Castor et al. 2020]] ). While bioenergy production may create jobs, it may also be problematic for SDG 2 on zero hunger by affecting the supplies and prices of food. Phasing out of fossil fuels will also improve air quality (SDG 3) and premature deaths by reducing PM2.5 emissions, ( [[#He--2020|He et al. 2020]] ; [[#Li--2020c|Li et al. 2020c]] ). Energy transitions from fossil fuels to renewables, as well as within fossil fuels (coal to gas switching), are already occurring in some regions, spurred by climate concerns, health concerns, market dynamics, or consumer choice (e.g., in the transport sector).

CDR and CCS can create significant land and water trade-offs ( ''high confidence'' ). For large-scale CDR and CCS deployment to not conflict with development goals requires efforts to reduce implications on water and food systems. The water impacts of carbon capture are large, but these impacts can be strategically managed ( [[#Magneschi--2017|Magneschi et al. 2017]] ; [[#Liu--2019a|Liu et al. 2019a]] ; [[#Realmonte--2019|Realmonte et al. 2019]] ; [[#Giannaris--2020|Giannaris et al. 2020]] c). In addition, high-salinity brines are produced from geologic carbon storage, which may be a synergy or trade-off depending on the energy intensity of the treatment process and the reusability of the treated waters ( [[#Klapperich--2014|Klapperich et al. 2014]] ; [[#Arena--2017|Arena et al. 2017]] ); if the produced brine from geologic formations can be treated via desalination technologies, there is an opportunity to keep the water intensity of electricity as constant ( [[#6.4.2.5|Section 6.4.2.5]] ). Both implications of CCS and CDR are related to SDG 6 on clean water. CDR discussions in the context of energy systems frequently pertains to BECCS which could affect food prices based on land management approaches ( [[#Daioglou--2020a|Daioglou et al. 2020a]] ). Several CDR processes also require considerable infrastructure refurbishment and electrification to reduce upstream CO 2 emissions ( [[#Singh--2021|Singh and Colosi 2021]] ). Large-scale CDR could also open the potential for low-carbon transport and urban energy (by offsetting emissions in these sectors) use that would create synergies with SDG 11 (sustainable cities and communities). Effective siting of CDR infrastructure therefore requires consideration of trade-offs with other priorities. At the same time, several SDG synergies have also been reported to accompany CCS projects, such as with reduced air pollution (SDG 3) ( [[#Mikunda--2021|Mikunda et al. 2021]] ).

Greater energy system integration (Sections 6.4.3 and 6.6.2) would enhance energy-SDG synergies while eliminating trade-offs associated with deploying mitigation options ( ''high confidence'' ). Energy system integration strategies focus on codependence of individual technologies in ways that optimise system performance. Accordingly, they can improve economic outcomes and reduce negative implications for SDGs. For example, VRE electricity options raise intermittency concerns and hydrogen can be expensive due to the costs of electricity. Both are relevant to SDG 7 on affordable and reliable energy access. Routing excess solar generation during daytime for hydrogen production will improve grid stability as lower hydrogen costs ( [[#Tarroja--2015|Tarroja et al. 2015]] ). Due to the varying patterns of solar and wind energy, these two energy sources could be operated in tandem, thus reducing the material needs for their construction and for storage, thus promoting SDG 12 on sustainable production ( [[#Weitemeyer--2015|Weitemeyer et al. 2015]] ; Wang et al. 2019d). For CCS facilities, co-firing of fossil fuels and biomass could enable a more gradual, near-term low-carbon transition ( [[#Lu--2019|Lu et al. 2019]] ). This could enable early retirements (associated with SDG 1) while also providing air pollution reductions (associated with SDG 3).

Overall, the scope for positive interactions between low-carbon energy systems and SDGs is considerably larger than the trade-offs (Figure 6.37) ( [[#McCollum--2018b|McCollum et al. 2018b]] ). Some critical trade-offs include impact to biodiversity due to large-scale mineral mining needed for renewable infrastructure ( [[#Sonter--2020|Sonter et al. 2020]] ).

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[[File:163dff3047bb58740489fdc359109b0f IPCC_AR6_WGIII_Figure_6_37.png]]

'''Figure 6.37 | Nature of the interactions between SDG 7 (Energy) and the non-energy SDGs.''' Source: [[#McCollum--2018c|McCollum et al. 2018c]] , reproduced under Creative Commons 3.0 Licence.

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