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A multi-model study of energy supply investments in Latin America under climate control policy

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  • Kober, Tom
  • Falzon, James
  • van der Zwaan, Bob
  • Calvin, Katherine
  • Kanudia, Amit
  • Kitous, Alban
  • Labriet, Maryse

Abstract

In this paper we investigate energy supply investment requirements in Latin America until 2050 through a multi-model approach as jointly applied in the CLIMACAP-LAMP research project. We compare a business-as-usual scenario needed to satisfy anticipated future energy demand with a set of scenarios that aim to significantly reduce CO2 emissions in the region. We find that more than a doubling of annual investments, in absolute terms, occurs in the business-as-usual scenario between 2010 and 2050, while investments may treble over the same time horizon when climate policies are introduced. Investment costs as share of GDP, however, decline over time in the business-as-usual scenario as well as the climate policy scenarios, as a result of the fast economic growth of the region. In the business-as-usual scenario, cumulative investments of 1.4 trillion US$ are anticipated between 2010 and 2050 in electricity supply. These investments increase when additional climate policies are introduced: under a carbon tax of 50 $/tCO2e in 2020 growing with a rate of 4%/yr, an additional 0.6 trillion US$ (+45%) of cumulative investment is needed. Climate control measures lead to increased investment in low-carbon electricity technologies, primarily based on wind and solar resources, as well as CCS applied to fossil fuels and biomass. Our analysis suggests that, in comparison to the business-as-usual case, an average additional 21 billion US$/yr of electricity supply investment is required in Latin America until 2050 under a climate policy aiming at 2°C climate stabilisation. Conversely, there is a disinvestment in fossil fuel extraction and transformation. For oil production, a growth to 130 billion US$ annual investment by 2050 is anticipated in a business-as-usual scenario. Ambitious climate policy reduces this to 28 billion US$. Mobilising the necessary additional investment capital, in particular for low-carbon energy technologies, will be a challenge. Suitable frameworks and enabling environments for a scale-up of public and private investment will be critical to help reach the required low-carbon energy deployment levels.

Suggested Citation

  • Kober, Tom & Falzon, James & van der Zwaan, Bob & Calvin, Katherine & Kanudia, Amit & Kitous, Alban & Labriet, Maryse, 2016. "A multi-model study of energy supply investments in Latin America under climate control policy," Energy Economics, Elsevier, vol. 56(C), pages 543-551.
    • Handle: RePEc:eee:eneeco:v:56:y:2016:i:c:p:543-551
    DOI: 10.1016/j.eneco.2016.01.005
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    References listed on IDEAS

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    2. van der Zwaan, Bob & Lamboo, Sam & Dalla Longa, Francesco, 2021. "Timmermans’ dream: An electricity and hydrogen partnership between Europe and North Africa," Energy Policy, Elsevier, vol. 159(C).
    3. van der Zwaan, Bob & Kober, Tom & Calderon, Silvia & Clarke, Leon & Daenzer, Katie & Kitous, Alban & Labriet, Maryse & Lucena, André F.P. & Octaviano, Claudia & Di Sbroiavacca, Nicolas, 2016. "Energy technology roll-out for climate change mitigation: A multi-model study for Latin America," Energy Economics, Elsevier, vol. 56(C), pages 526-542.
    4. Lucena, André F.P. & Hejazi, Mohamad & Vasquez-Arroyo, Eveline & Turner, Sean & Köberle, Alexandre C. & Daenzer, Kathryn & Rochedo, Pedro R.R. & Kober, Tom & Cai, Yongxia & Beach, Robert H. & Gernaat,, 2018. "Interactions between climate change mitigation and adaptation: The case of hydropower in Brazil," Energy, Elsevier, vol. 164(C), pages 1161-1177.
    5. Shubin Wang & Weijie Li & Hasan Dincer & Serhat Yuksel, 2019. "Recognitive Approach to the Energy Policies and Investments in Renewable Energy Resources via the Fuzzy Hybrid Models," Energies, MDPI, vol. 12(23), pages 1-17, November.
    6. van der Zwaan, Bob & Kober, Tom & Longa, Francesco Dalla & van der Laan, Anouk & Jan Kramer, Gert, 2018. "An integrated assessment of pathways for low-carbon development in Africa," Energy Policy, Elsevier, vol. 117(C), pages 387-395.
    7. Liliana Proskuryakova & Georgy Ermolenko, 2022. "Decarbonization Prospects in the Commonwealth of Independent States," Energies, MDPI, vol. 15(6), pages 1-16, March.

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    More about this item

    Keywords

    Climate policy; Low-carbon energy technology; Technology investment costs;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • F53 - International Economics - - International Relations, National Security, and International Political Economy - - - International Agreements and Observance; International Organizations

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