Successful decarbonisation needs more than the right energy mix. A new study by the Locomotion project suggests it also requires a sound policy mix combining energy efficiency, electrification and demand management accounting for sectoral interdependencies.
Published in the Journal of Industrial Ecology by the Research Group on Energy, Economy and System Dynamics from the University of Valladolid, the study highlights energy intensity as a vital factor shaping our economies. Based on an input-output analysis of the global economy over 15 years across 35 sectors, the study analyses how energy patterns impact the economic structure.
The researchers found that successful decarbonisation is dependent on linking energy and industrial policies while taking into account sector interactions:
‘The decision to ban coal would lead to changes in the mining, electricity generation, and iron and steel sectors. The transition to renewables, in turn, would potentially produce a shift from the mining and refining (of fossil fuels) sectors to those processing the critical raw materials required to deploy the renewable infrastructure.’
The researchers identified the far-ranging impacts of specific measures by zooming in on the dynamics across sectors.
In some sectors, decreasing energy intensity can reduce resource demand to deliver the same value and support smoother decarbonisation processes. This makes energy efficiency and electrification measures crucial for many sectors dependent on fossil fuels, particularly mining, energy refining, manufacturing, and inland and water transport.
However, for sectors such as freight transportation, consumption reduction should be prioritised, considering their easily reachable technical limits of efficiency improvements and material constraints. These findings align with other recent research on the need for degrowth in the transport sector due to prospects of depleting reserves of materials such as copper, nickel and manganese.
Managing demand is also essential due to rebound effects. More efficient economies are likely to face higher added value generation and price drops, leading to more consumption and offsetting the impact of efficiency improvements. The researchers recommend demand management to reduce consumption, re-investing added value and implementing progressive taxation to finance sustainability policies.
The study’s lead author, Jaime Nieto, reflected on the importance of thinking beyond innovation and efficiency.
He commented: ‘Efficiency measures can always fire back if we don’t keep relationships among sectors and material scarcities in mind. Of course, we want renewables to replace fossil fuels quickly, but we need to ensure they can serve our society well over the long term. Successful decarbonisation requires putting collaboration, coordinated policies, and rethinking of our demand at the centre of policymaking.’
The avoid-shift-improve framework in transportation is one example of combining several measures when the potential for reducing energy intensity is limited: using behavioural change and adjusting urban planning can help reduce transport demand while mainstreaming and improving collective and low-emission transport.
The study adds to the ongoing work on the next-generation integrated assessment model (IAM) called WILIAM, intended to help policy-makers develop breakthrough sustainability policies. The study allows for more precise and elaborate modelling of relationships between economy, energy and environment, providing deep disaggregated insights on potential outcomes of different policies.
Jaime Nieto highlights the importance of nuanced modelling for effective policymaking.
‘Silver bullet solutions have rarely worked for sustainability transitions. Building a sustainable economy requires considering differences in economic structure, links across sectors and regions, and energy and material constraints of different transition pathways. Capturing those factors makes models like WILIAM invaluable in policymaking.’
As the EU struggles to adjust its energy demand amid the energy crisis while failing to deliver on social and climate justice, the study outlines essential opportunities for a more organised and effective energy transition based on expanded awareness about factors that shape the economic structure and sectoral interdependencies.
