Energy

Energy is the backbone of the global economy. Ensuring a reliable supply of electricity and other sources of energy is critical to the health, safety and economic growth of households and businesses across the world. As communities that have been without power after an extreme weather even know all too well, reliable and resilient power is critical to providing health care, air conditioning, sanitation and basic services essential for human well-being and financial security.

While dynamic enough to respond to the climate conditions of the past, energy systems as currently designed are poorly prepared for future climatic changes.  Rising temperatures, increased competition for water supply, and elevated storm surge risk will affect the cost and reliability of energy supply.  There are a number of points in the long and complex energy supply chain where climate-related disruptions could interrupt delivery of electricity, heating, or transport fuels.

As communities that have been without power after an extreme weather even know all too well, reliable and resilient power is critical to providing health care, air conditioning, sanitation and basic services essential for human well-being and financial security

Climate change will also shape the amount and type of energy consumed. Energy demand is highly climate-sensitive in many sectors of the global economy, and temperature in particular is a significant determinant of both the quantity and type of energy consumed. Demand for heating and cooling fluctuates hourly, daily, and seasonally in response to outdoor ambient temperatures. Hotter temperatures will increase demand for residential and commercial air conditioning run on electricity. Climate-driven changes in air conditioning can have an out-sized impact on the electric power sector, forcing utilities to build additional capacity to meet even higher peak demand when temperatures rise. At the same time, in northern latitudes, warmer winter temperatures as a result of climate change will reduce heating demand.

Lab Findings

The Lab’s research reveals a deep divide between wealthy and poor populations when it comes to energy use, a divide that is likely to persist as the planet warms and cooling technologies like air conditioning become increasingly critical. The research shows that—while there are vastly unequal effects among regions—globally, on net, emitting one additional ton of carbon dioxide (CO₂) today results in a modest reduction in future energy spending, driven mainly by declines in the need for heating through fuels such as coal, natural gas, and oil, and the slow adoption of electricity in today’s developing world. Based on these findings, the research estimates a partial social cost of carbon for energy consumption valued between -$3 and -$1 per ton. This value represents the first peer-reviewed, empirically derived estimate of the global cost of climate change for a single sector of the economy.

The research contradicts previous estimates of the global economic damage caused by CO₂ that suggested hotter temperatures would drive massive increases in energy spending by the end of the century. This includes the models that underlie the original 2010 social cost of carbon estimates, which were calibrated with data exclusively from wealthy countries.

To fill this knowledge gap, Climate Impact Lab researchers combined energy use data from 146 countries across four decades with historical weather observations, and then modeled the sensitivity of energy consumption to extreme temperatures. On hot days (average temperature 35°C/95°F) in wealthy locations, they find per-person electricity consumption soars, especially among the richest 10%. For the poorest 60%, extreme heat results in virtually no increase in electricity consumption, although extreme cold days (average temperatures 0°C/32°F) result in an uptick among all but the poorest 20% in consumption of fuels used for heating, such as coal, oil, and natural gas.

As income, population growth, and climate change evolve throughout this century, the analysis finds that most of the world will increase its electricity consumption while consuming less of the fuels commonly used for heating due to fewer cold days. Today’s middle-income regions, like parts of India, China, Indonesia, and Mexico, will likely benefit from expanded access to electricity. In contrast, lower-income, hot areas, such as much of sub-Saharan Africa, are projected to remain relatively poor through 2100 and therefore lack the means to protect themselves with cooling during increased heat.