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Faster and Cleaner 2 Faster and Cleaner 2 KICK-STARTING GLOBAL DECARBONIZATION: IT ONLY TAKES A FEW ACTORS TO GET THE BALL ROLLING April 2017 SEBASTIAN STERL, Markus Hagemann, Hanna Fekete, Niklas Höhne - NewClimate Institute Jasmin Cantzler, Andrzej Ancygier, Matt Beer, Bill Hare - Climate Analytics Karlien Wouters, Yvonne Deng, Kornelis Blok - Ecofys Casey Cronin, Seth Monteith, Dan Plechaty, Surabi Menon - ClimateWorks Foundation Lead authors for the sector focus chapters Power sector: Andrzej Ancygier Transport sector: Sebastian Sterl Buildings sector: Karlien Wouters This technical report accompanies a shorter policy brief. AUTHORS NewClimate Institute: SEBASTIAN STERL, Markus Hagemann, Hanna Fekete, Niklas Höhne Ecofys: Karlien Wouters, Yvonne Deng, Kornelis Blok Climate Analytics: Jasmin Cantzler, Andrzej Ancygier, Matt Beer, Bill Hare ClimateWorks Foundation: Casey Cronin, Seth Monteith, Dan Plechaty, Surabi Menon ACKNOWLEDGEMENTS The Climate Action Tracker team and ClimateWorks Foundation sincerely thank the editors, designer, sectoral experts and reviewers, and data providers for their invaluable contributions to this report. For framing the report’s messaging and editing its content: Cindy Baxter and Melissa Edeburn For designing the final report: Nolan Haims For reviewing the content of our work with sector expertise: David de Jager (Ecofys), Sven Schimschar (Ecofys), Rob Winkel (Ecofys), Anthony Eggert (ClimateWorks), Jess Lam (ClimateWorks), Jan Mazurek (ClimateWorks), Charles McElwee (ClimateWorks) and Prodipto Roy (ClimateWorks). For providing core data to our report: Fabio Sferra (Climate Analytics), Jing Zhang (NewClimate Institute), Joeri Rogelj (IIASA), Takeshi Kuramochi (NewClimate Institute), John Dulac (IEA) and Will Nelson and Ethan Zindler (Bloomberg New Energy Finance). CONTACT Markus Hagemann, NewClimate: +1 415 632 7728, [email protected] Andrzej Ancygier, Climate Analytics: +49 30 259 22 95 38, [email protected] Sebastian Sterl, NewClimate: +49 221 999 833 03, [email protected] Yvonne Deng, Ecofys: +44 7788 973 714, [email protected] Casey Cronin, ClimateWorks Foundation: +1 415 202 5993, [email protected] Climate Action Tracker TABLE OF CONTENTS 1. Introduction 3 2. Executive Summary 5 Major findings 6 3. Power Sector: Modern Solar And Wind Technology 7 3.1 What is needed for Paris-compatible development? 7 3.2 Past and projected trends 8 3.3 Explanation of the drivers 8 3.3.1 Policies and targets 9 3.3.2 Innovation, Research, and Development 12 3.3 Achieving critical mass 13 3.4.1 Grid integration—changing the power market paradigm 15 4. Transport Sector: Electric-Drive Vehicles 16 4.1 What is needed for Paris-compatible development? 16 4.2 Past and projected trends 17 4.3.2 Innovation, research, and development 21 4.4 Achieving critical mass 22 4.4.1 Developing more effective policy packages 22 4.4.2 Improved coordination efforts 23 NEWCLIMATE INSTITUTE • CLIMATE ANALYTICS • ECOFYS • CLIMATEWORKS FASTER & CLEANER 2: KICK-STARTING GLOBAL DECARBONIZATION 1 5. Building Sector: Zero-Carbon Buildings 23 5.1 What is needed for Paris-compatible development? 23 5.2 Past and projected trends 24 5.3 Explanation of the drivers 26 5.3.1 Policies and targets 26 5.3.2 Costs 30 5.3.3 Barriers 31 5.4 Achieving critical mass 32 6. Discussion and Conclusions 36 7. Bibliography 38 NEWCLIMATE INSTITUTE • CLIMATE ANALYTICS • ECOFYS • CLIMATEWORKS FASTER & CLEANER 2: KICK-STARTING GLOBAL DECARBONIZATION 2 1. INTRODUCTION Achievement of the Paris Agreement’s long-term temperature goal requires an almost complete decarbonization of the major CO2-emitting sectors, such as power, transport, and buildings, by mid-century (Rogelj et al. 2015). In this report, we look at technology trends in these three sectors that have seen very different degrees of transformational change. First, we assess how the current technology trends relate to the long-term temperature goal in the Paris Agreement. Second, we look at the drivers behind these technology trends, mainly in terms of policy making and innovation. Finally, we draw conclusions from the successes and apply them to future challenges in each sector. We showcase how individual actors can drive change, providing a supportive environment for technological transformation. That environment consists, in large part, of policies that make it possible for new technologies, often financed by RD&D (research, development, and demonstration) funds, to enter the market. These policies create demand for products, which otherwise would not be competitive with the established technologies. Heightened demand pushes research to increase performance and decrease costs, making the new technologies more and more competitive, in turn leading to uptake in new regions or by new actors who form a transformative group of frontrunners. That group helps the new technologies achieve critical mass in the market and eventually to become mainstream technologies (see Figure 1). NEWCLIMATE INSTITUTE • CLIMATE ANALYTICS • ECOFYS • CLIMATEWORKS FASTER & CLEANER 2: KICK-STARTING GLOBAL DECARBONIZATION 3 Figure 1 — Stages of technology adoption. BALL GETTING THE ROLLING TECHNOLOGIES MORE BECOME AMBITIOUS MARKETS FOR AVAILABLE & POLICIES THE NEW TECHNO- SUPPORTIVE EMERGE IN TECHNOLOGIES LOGIES POLICIES ARE A FEW ACHIEVE BECOME IMPLEMENTED COUNTRIES CRITICAL MASS MAINSTREAM The right policies in just a few countries can kick-start clean technologies and make them mainstream This report starts with a summary of findings failure so far of yet another sector (buildings) to and goes on to examine the following: take advantage of well-established technologies to make Paris Agreement-compatible change. • Changes needed for Paris Agreement- compatible development in each sector. • Acceleration of decarbonization through transformational coalitions. We explain how actors • Past and projected trends as they relate to Paris could quickly increase global uptake of new Agreement-compatible development in each sector. technologies by working together in formalized, • Drivers of trends to date. We highlight how a few high-ambition transformational coalitions. actors have facilitated transformative change in one sector (power), examine the first signs of such change in another (transport), and explore the NEWCLIMATE INSTITUTE • CLIMATE ANALYTICS • ECOFYS • CLIMATEWORKS FASTER & CLEANER 2: KICK-STARTING GLOBAL DECARBONIZATION 4 2. EXECUTIVE SUMMARY Meeting the Paris Agreement’s long-term temperature vehicles (EDVs) in the transport sector, if fully scaled, limit requires a decarbonization of the global could trigger further transformation for that sector. The energy system by mid-century. Decarbonizing the building sector, however, has seen limited progress power sector is the first step in the comprehensive and lags far behind its technological potential. transformation of the energy system (Rogelj et al. The transformational changes in the power and transport 2015). This requires transformational changes in sectors have so far been triggered by policymaking efforts each sector of the energy system before 2050. of only a few frontrunners —a small group of countries This report looks at the technology trends and regions with the right policy incentives—who have driving decarbonization in three sectors—power, transformed the global market for the technologies and transportation, and buildings—along with empirical allowed the transition to move beyond the frontrunners evidence on what can drive these rapid transitions. to a wider circle. A transformative coalition of countries and sub-national actors in the building sector could It identifies success factors that could support transitions accelerate the sector’s decarbonization with approaches in other areas to make the transformation scalable. that take into account the considerable differences The stringency of the Paris Agreement’s aim to pursue between the building stocks in various regions. efforts to limit global temperature increase to 1.5°C places significant additional pressure on the rate of Lessons learned from these early-mover countries could transformation needed in each of these sectors. enable these kinds of transitions to become mainstream, achieve critical mass—and transform not just the internal Technological trends in these three sectors have markets of countries participating but significantly experienced different levels of change, with the power influence development outside of those markets (Figure sector witnessing the most transformation due to the 1), eventually allowing for rapid global decarbonization. rapid development of renewables that have far exceeded expectations. The accelerated uptake of electric-drive Figure 2 — Stages of system change achieved by zero-carbon buildings, electric-drive vehicles, and modern solar and wind power technologies. ZERO ELECTRIC MODERN CARBON DRIVE SOLAR & WIND BUILDINGS VEHICLES TECHNOLOGY BALL GETTING THE ROLLING TECHNOLOGIES MORE BECOME AMBITIOUS MARKETS FOR AVAILABLE & POLICIES THE NEW TECHNO- SUPPORTIVE EMERGE IN TECHNOLOGIES LOGIES POLICIES ARE A FEW ACHIEVE BECOME IMPLEMENTED COUNTRIES CRITICAL MASS MAINSTREAM NEWCLIMATE INSTITUTE • CLIMATE ANALYTICS • ECOFYS • CLIMATEWORKS FASTER & CLEANER 2: KICK-STARTING GLOBAL DECARBONIZATION 5 Major findings (EDVs) that have contributed significantly to electric car sales reaching close to a million in 2016 (Kuramochi et al. Renewable energy technologies are transforming 2016), but EDV uptake needs to accelerate significantly. the power sector,
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