Table of Contents

  • Global demand for energy is increasing rapidly, because of population and economic growth, especially in emerging market economies. While accompanied by greater prosperity, rising demand creates new challenges. Energy security concerns can emerge as more consumers require ever more energy resources. And higher consumption of fossil fuels leads to higher greenhouse gas emissions, particularly carbon dioxide (CO2), which contribute to global warming. At the same time, the number of people without access to electricity remains unacceptably high.

  • Energy is a fundamental input to economic activity. Modern energy services light up our homes and schools, fuel economic activity to produce and consume, provide comfort and mobility, pump water and contribute to health and well-being. Harnessing energy sources to replace manual and animal labour was the platform of the Industrial Revolution: a period of unprecedented economic and social development.

  • Energy is a fundamental input to economic activity; however a major transformation is required in the way we produce, deliver and consume energy. The current energy system is largely dependent on fossil fuels, which negatively impact air quality, and contribute significantly to carbon emissions.

    Global demand for energy is rapidly increasing, arising from population and economic growth, especially in emerging market economies, which will account for 90% of energy demand growth to 2035.

    There is currently a window of opportunity to undertake transformational change in the energy supply sector to meet economic and environmental objectives, as there is a need to replace aging plants and add new capacity, especially in emerging economies, to meet growing electricity demand.
  • The energy sector presents a particular challenge to achieving green growth, due to its size, complexity, path dependency and reliance on long-lived assets. Green growth policies for the energy sector can achieve important outcomes, including better resource management, innovation and productivity gains, creating new markets and industries, and reducing environmental damage.

    It is possible, using existing and emerging technologies, to halve global emissions by 2050, with an additional cumulative investment of USD 46 trillion. All technology options are needed, and fundamental changes are also required by key energy users: transportation, industry and buildings.

    The energy revolution that is needed can be characterised by the following elements: improved energy efficiency, widespread introduction of carbon capture and storage, increased deployment of renewable energy, nuclear energy, continued fuel switching, and support for new and enabling technologies.

    Broadly, the key policies that are required to set the framework for the transformation of the energy sector include (these will vary by energy sector):

    • Provide price signals for externalities.

    • Eliminate fossil fuel subsidies.

    • Set frameworks to make markets work.

    • Radically improve energy efficiency.

    • Foster innovation and green technology policy.
  • Current energy systems are “locked-in” to high carbon production and consumption patterns that can be difficult to break. Structural change in the energy sector will involve more than just changing existing technologies; it will also affect supply chains, physical infrastructure, user practices, markets and regulatory systems. Countries will choose the most appropriate option depending on national circumstances, whether it is low-carbon energy supply, carbon capture and storage or energy efficiency. Flexibility should be built into long-lived new energy assets to allow for changes of environmental regulations and wider economic conditions such as fuel prices.

    The transition to a low-carbon energy system is likely to have a positive impact on employment within the energy sector, as renewable energy tends to be more labour-intensive than fossil fuelbased energy, although the actual employment impact will differ by energy technology. Governments should pay attention to the distributional impacts of the energy transition, both within countries in terms of the effect on the poor, who tend to spend a larger share of their income on energy, and between countries, as patterns of trade related to fossil fuels change.
  • Developing and implementing green growth policies in the energy sector requires appropriate information and indicators to support policy design and analysis and monitor progress. The OECD has developed a conceptual framework for monitoring progress towards green growth. While the set of indicators is still being refined, indicators pertinent to the energy sector are those that measure the carbon-productivity or intensity of energy production and consumption, energy intensity and efficiency, “clean” energy-related research and development and patents, as well as measures of energy related taxes and subsidies.

    This needs to be complemented with (i) end-use indicators that help policy makers understand how users will respond to changes in energy prices, income, technology, energy efficiency, production patterns, and lifestyle, (ii) additional energy-environment indicators, and with indicators characterising the level of access to energy.

    While energy statistics are well established in countries and at international level, measuring energy efficiency and innovation is difficult, and coherent industry level information is scarce. More needs to be done to improve data quality, methodologies and definitions, and to link the data to economic information.