Class 3: outlook

Question 1

problems with forecasting

Answer 1

unforeseeable new events and technologies (fracking, nuclear fusion, wars, political decisions, etc.)
you must make assumptions, those could be false

Question 2

where forecasting is used in energy econ.

Answer 2

policy-making, price estimation, investment decisions, supply of RES (when will it be windy/sunny)

Question 3

what is the IEA? when was it founded, what does it do?

Answer 3

International Energy Agency, founded after oil crises in 70s, collects statistics on energy production/ consumption and makes forecasts for different scenarios

Question 4

what are STEPS, APS and NZE?

Answer 4

different forecasts by IEA
Stated policies scenario: climate change and energy consumption if current policies stay constant
Announced pledges scenario: if countries follow through with announced climate pledges
Net zero emissions by 2050: forecast if we want 0 CO2 emissions globally by 2050
(forecasts graph in word!)

Question 5

basic forecasting assumptions

Answer 5

all GDPs grow, higher growth in poor countries
population increase to 9.8 billion by 2050
no breakthrough tech

Question 6

which regions have made pledges?

Answer 6

US, Europe, China have pledged to reduce fossils (especially coal) and increase RES
Middle East pledges to replace oil with natural gas
Rest of Asia will increase RES but also fossils

Question 7

demand in OECD vs non-OECD countries

Answer 7

OECD: decreased demand for fossils, increased for RES
non-OECD: slight increased demand for oil and coal, big increase in gas and RES

Question 8

what happens to estimated fuel prices in different scenarios?

Answer 8

under STEPS, prices expected to increase
under more ambitious scenarios (APS & NZE) expected to decline (because demand falls)

Question 9

what happens to oil markets in different scenarios?

Answer 9

in APS and NZE, overall demand falls by 2050 due to EVs
but in STEPS, demand increases in developing economies, more oil in transport but less in heating, other industries, global demand stays about constant

Question 10

what happens to natural gas markets in different scenarios?

Answer 10

STEPS: demand increases due to developing economies demanding a lot
electricity expected to replace gas in long run in other scenarios

Question 11

what happens to coal markets in different scenarios?

Answer 11

decrease in all scenarios, drastic decrease in NZE scenario
demand almost only in developing economies (because it’s cheap)

Question 12

what happens to electricity markets in different scenarios?

Answer 12

increases in all, most drastic increase under NZE
source of energy will switch from fossils (coal and gas) to RES, under NZE largely solar and wind, some nuclear

Question 13

what happens to RES (and mineral) markets in different scenarios?

Answer 13

expected to grow a lot due to shift to electricity from fossils
demand for minerals necessary for batteries will grow (copper, cobalt, etc.)
(graph in word!)

Question 14

how will climate-friendly policies and energy look in OECD vs non-OECD countries?

Answer 14

OECD: replacing fossils tech/ infrastructure with RES
non-OECD: providing access to energy in the form of RES

Question 15

what are the necessary changes to meet climate/ emissions targets?

Answer 15

policy: subsidize and invest in RES
markets: variable cost structure, prices will fluctuate wildly because supply is dependent on weather conditions
behavior: slow down demand growth, especially in rich countries
efficiency: increase energy efficiency so 85% isn’t lost (better insulation in buildings, better motors, etc.)

Question 16

carbon lock-in effect

Answer 16

fossil fuel infrastructure that is already built/planned prevents countries from switching (oil pipelines, ships to transport gas, etc.)

Question 17

what is goal of NZE and is it attainable?

Answer 17

net zero emissions by 2050, less than 1.5C temp increase
only possible if much stronger investments and efforts are made asap, most change must already have happened by 2040

Question 18

what happens to CO2 and other emissions (methane, nitrous oxide) in scenarios limiting temp change to 1.5C?

Answer 18

CO2 falls, may even become negative (carbon capture)
other emissions fall, but not to 0 (necessary for production, agriculture)

Question 19

which event in 2011 changed many countries’ forecasts and sustainability plans?

Answer 19

the nuclear plant accident in Fukushima, politicians decided to phase out nuclear

Question 20

what are Switzerland’s specific goals for climate neutrality by 2050?

Answer 20

more heat pumps, almost 4 million EVs, building insulation to decrease heating demand, half of electricity from hydro, many heat pumps (geothermal)

Question 21

what are zero basis/A/B/C?

Answer 21

Swiss-specific scenarios for zero emissions by 2050
all slightly different ways to achieve goal (e.g. faster vs slower electrification)
idea: offset remaining emissions with CCS
in all, demand must drop

Question 22

what is CCS?

Answer 22

carbon capture and storage, big part of net-zero goals

Question 23

how will electricity be covered in zero basis models?

Answer 23

no more nuclear, covered by new RES and hydro

Question 24

what are some models used for long-term predictions?

Answer 24

macroeconomic general equilibrium models, using past trends to predict future, running simulations

Question 25

what are some models used for short-term predictions?

Answer 25

financial tools and econometrics (predicting prices), developing models

Question 26

how are GDP and energy consumption linked?

Answer 26

positive correlation, although some evidence for Kuznets curve (at certain point, higher GDP leads to less consumption due to higher efficiency, climate concerns)

Question 27

what is IPAT?

Answer 27

impact = population * affluence (GDP per capita) * technology (e.g. how CO2 per GDP or kWh per Fr.)

Question 28

what does it mean if fuel prices are an exogenous vs. endogenous variable in a forecasting model?

Answer 28

exogenous: it’s a given factor that influences something else (like how high would prices need to be for companies to start investing in RES?)
endogenous: it’s the factor influenced by other assumptions you’re making (like how will prices change if we increase investment in RES by certain amount?)

Question 29

what is a partial equilibrium model?

Answer 29

you analyze the equilibrium in only one market without considering interactions with other markets