due to lower energy costs) – reducing employment; and (3) higher productivity of work (driven by higher life expectancy and access to social services in G2). However, our calculation does not include potential employment creation from energy efficiency improvements (which is the case for end-use in the residential and commercial sectors), due to the lack of relevant literature.
The green investment will lead to a considerable energy efficiency improvement by 2050, practically decoupling energy use and economic growth, particularly in the most energy-intensive industries. The improved energy efficiency is projected to mitigate total energy and process-related CO2
emissions in the industrial sector by
51 per cent (3.7 Gt in the G2 case) by 2050, curbing the trend of growth as of 2025. Total emissions from the six selected manufacturing sectors would also decline to 1.3 Gt in the green case, from 2.7 Gt in the brown alternative (BAU 2) - (Figure 10).
At the industry level, the avoided energy consumption averages 52 per cent by 2050 – comparing G2 to BAU2 – (or 52 per cent relative to BAU2), resulting in avoided costs of up to US$ 193 billion relative to BAU 2 per year, on average, between 2010 and 2050 depending on the industry considered12
BLUE high-demand 2050 (%)
CCS (energy and process) 14
Electricity supply side measures 50
Fuel swiching 11
Energy efficiency 16
Electricity demand
reduction 9
Figure 8: Contribution to CO2 reductions from
industry per type of measure – IEA model (2009b) Adapted from: Tukker and Tischner (2009)
120 . The chemical and plastics sector
provides the greatest opportunity, with a potential of US$ 193 billion relative to BAU2 in yearly avoided energy costs. Steel follows with an average US$ 115-136 billion potential savings per year. Paper and pulp saves US$ 37 billion, textiles US$ 17 billion and leather US$ 8 billion. Aluminum is the least promising, with US$ 44 billion of yearly avoided energy cost in the G2 case. The above estimates are only proposed as examples, based on an assumed investment of US$ 37.6 billion per year on average between 2011 and 2050 (Figure 11).
The model also assumes the same cost per tonne of emissions abatement for all industries, although in reality they rely on very different technologies. But the G2 model runs provide some insight into the aggregated potential opportunity cost of investment in low carbon technologies and efficiency improvements.
The average total cost of emissions in the BAU and green economy scenarios (based on IEA projections) would be US$ 629 billion (BAU2) and US$ 380 billion (G2). Assuming an emissions cap-and-trade mechanism with carbon prices aligned with the recent US domestic proposal, and no free allowances, the green economy investment would yield US$ 264-US$ 249 billion per year on average between 2011 and 2050 in avoided costs relative to corresponding brown scenarios (or US$ 230- US$ 195 billion from the BAU case).
12. Avoided costs are not pure economic gain, since they imply disinvestment and disemployment in the traditional energy sectors (the inverse of rebound).
100
80
60
40
20
0 BAU BAU2
Chemicals and plastic Paper and pulp Leather Textile Aluminium Iron and steel
Figure 9: Employment per manufacturing sector
by 2050 in G2 and BAU scenarios (person per year) Source: IEA (2009)