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This chapter describes the impact of the technological scenarios, which were presented in the previous chapter on the global power generation system. In order facilitate the evaluation of the impacts of the changes in assumptions, the baseline power generation trends are presented first

This part of the volume deals with technology and policy options to tackle the problem of rising emissions in the period to 2010. It was seen in the first part of this volume that, under baseline assumptions, CO2 emission was likely to grow substantially in the period to 2010. Even in Europe emissions were projected to increase by almost 8% above their level of 1990. Yet over the past couple of years there has been a great deal of debate on how to reduce emissions even in the medium term. This debate reached a turning point in the Kyoto Conference on climate change where all developed regions of the world undertook firm commitments and set targets for reductions in CO2 emissions by 2010. The European Union agreed to decrease the CO2 emissions in 2010 by 8% compared to the level of emissions in 1990. This would involve a reduction of nearly 16% when compared to the level of emission projected for that year under baseline assumptions.

This chapter explores the implications for the European Union of accelerating the progress of key energy technologies in the demand and supply sectors over the period 2010–2030.

Technological innovations often require public support during the early stages of their development. Since public support can only be limited it must of necessity be selective and the setting of priorities of EU R&D policy becomes an important issue.

This chapter uses the POLES model in order to attempt an examination of the comparative costs of emission reductions in countries and regions outside the EU. For comparison purposes, the POLES results for the EU, which is examined in greater detail in the previous chapter, are also included. As in the previous chapter, the methodology selected was to determine the marginal and total costs incurred in achieving the reduction targets by introducing a “shadow carbon-tax” in the various countries and regions identified in the model..

This chapter presents a general discussion on the present state and likely future developments in a number of groups of related power generation technologies. These groups, or clusters, of technologies then form the basis of the technology scenarios presented and analysed in later chapters.

The global economic and energy outlook plays a critical part in the analysis and results of this volume. The energy sector is, to a large extent, already operating within a world context and any regional analysis that does not take into account international influences is likely to prove deficient. One extreme illustration of this is the oil market, which is globally integrated. It is simply not possible to examine future oil market trends in the EU without taking into account global supply and demand, which will determine future oil prices. Similar considerations apply in the case of natural gas. European gas prices and demand will depend not only on the developments in countries, like Russia, that supply gas to the EU but also on countries as far afield as China since they are likely competitors as consumers of Russian gas.

Technological development is a complex phenomenon that has drawn the interest of many scholars. Understanding the nature of the forces behind the process of scientific discovery, technological innovation and know-how dissemination is a challenge for which many theories have been formulated and are still under discussion. It is customary to distinguish between basic research, often supported by public funding, and applied research, whose outcome is protected by intellectual property rights under some legal scheme. It is probably impossible to forecast completely the nature and stage of development of the technologies that will be relevant for power generation in 2030. Indeed, at least for the time being, there are no large scale energy models, which even try to model technology progress endogenously.

The baseline scenario8 simulates a dynamic path of the EU economy up to 2030. It is derived from exogenous assumptions about the evolution of technology progress associated to production factors, the change of the world context (prices and demand) and a continuation of current pattern of public finance policy.

Energy is a key issue that is present in all the sectors of modern economies. The availability of cheap, abundant and safe energy sources is indeed a requisite for sustained economic development in emerging economies. The ways in which it is consumed and used to produce welfare is the matter of several disciplinary fields. Energy technologies are important because energy is crucial in the overall economic system, not only because of the scarcity of the resources (the world energy mix is based on non renewable energy carriers), but also because of the environmental concerns. Indeed, environmental degradation is due, to a large extent, to the effects of energy production, transformation and use.

The Intergovernmental Panel on Climate Change (IPCCa 1996) distinguishes between technological options and policy measures. The dividing line between the two is fuzzy because technological options stand behind most policy measures. (The only other major source of emission reductions is consumer behaviour). In this report, we focus on technological measures, but we discuss policies and consumer behaviour where we think it influences our analysis in an important way.