Sustainable Recovery

World Energy Outlook Special Report
River running through a forest

Evaluation of possible recovery measures

Summary
  • This chapter assesses a menu of over 30 energy-related measures for key sectors that policy makers could consider as part of a plan to boost growth and create new jobs while building a more sustainable and resilient energy sector. For each measure we examine the impacts of the Covid-19 crisis on the sector, job creation potential, cost effectiveness, and CO2 emissions reduction potential. We also suggest specific policies for consideration. The assessments set out in this chapter form the building blocks for a sustainable recovery plan for the energy sector: this plan is set out in a dedicated chapter. The chapter covers the following sectors:
  • Electricity: A range of measures could be put in place to support the expansion and modernisation of electricity grids; accelerate new wind and solar installations and repower existing ones; maintain the role of hydro and nuclear power, mainly by preserving existing facilities; and manage gas- and coal-fired generation. Each option has the potential to create 1-14 jobs per million dollars invested, and would have very different impacts on energy resilience and sustainability.
  • Transport: Car sales are expected to drop by around 15% globally in 2020. Government support through schemes such as “cash-for-clunkers” could reduce job losses, boost the efficiency of the vehicle fleet and promote the use of electric cars. Investment in high-speed rail and urban transport – ranging from walking and cycling infrastructure, electric vehicle recharging and mass transport – has significant job creation potential, would reduce local air pollution and help shift future transport patterns.
  • Buildings: Measures to improve the efficiency of buildings and appliances could be implemented quickly, in some cases have very short payback periods and would create 10-15 jobs per million dollars invested. In low-income countries, over 2.5 billion people still lack access to clean cooking. Low LPG prices make providing access attractive, with payback periods of just one year, plus substantial job creation potential.
  • Industry: One-in-four jobs are in industry, and the Covid-19 pandemic has disproportionately hit small and medium industrial enterprises. Investing in energy efficiency, notably motors and agricultural pumps, and recycling would create around 10 and 18 million jobs per million dollars invested respectively.
  • Fuels: Investment to reduce methane emissions could mitigate some job losses in the oil and gas sector while cost effectively reducing GHG emissions. The current period of low oil and gas prices provides fertile ground for renewed efforts to phase out fossil fuel subsidies. The biofuels sector is being hit hard by Covid-19: supporting growth in sustainable biofuels could create around 15-30 jobs per million dollars invested. 
  • Innovation: Technology innovation plays a crucial role in improving future energy systems, and innovation in hydrogen, batteries, small modular nuclear reactors and carbon capture, utilisation and storage could bring enormous long-term sustainability and resilience benefits while creating 3-8 new jobs per million dollars invested.
Introduction

The fallout from the Covid-19 pandemic means that there is an urgent need for significant levels of investment in the energy sector to sustain and boost employment, boost economic growth, and improve future sustainability and resilience. Investment decisions made now will impact the ways in which energy is produced and consumed for decades, and they therefore need to be aligned with long-term national and global objectives.

This chapter explores a range of energy-related measures that countries may wish to consider adopting. These measures do not cover every option: we have had to be selective. Where possible we quantify the impact of investing 1 million dollars on job creation; we also look at greenhouse gas (GHG) emissions, energy security and resilience, and how these factors may vary by region. When we look at job creation, we consider both jobs that would be created by spending on the measure and the jobs that could be lost as a result of the Covid-19 crisis. We also provide an overview of selected policies for each measure.

Energy sector measures analysed

Sector

Measure

Electricity

  • Expand and modernise grids
  • Accelerate the growth of wind and solar PV
  • Maintain the role of hydro and nuclear power
  • Manage gas- and coal-fired power generation

Transport

  • New vehicles
  • Expand high-speed rail networks
  • Improve urban infrastructure

Buildings

  • Retrofit existing buildings and more efficient new constructions
  • More efficient and connected household appliances
  • Improve access to clean cooking

Industry

  • Improve energy efficiency and increase electrification
  • Expand waste and material recycling

Fuels

  • Reduce methane emissions from oil and gas operations
  • Reform fossil fuel subsidies
  • Support and expand the use of biofuels

Strategic opportunities in technology innovation

  • Hydrogen technologies
  • Batteries
  • Small modular nuclear reactors
  • Carbon capture, utilisation and storage

 

The assessments in this chapter provide the buildings blocks for an integrated recovery plan. The next chapter sets out a sustainable recovery plan for the energy sector that draws on these assessments: it also sets out and explains the criteria that determine the inclusion of the measures in the plan. 

Job creation1

To standardise the comparison of employment creation, we have developed employment multipliers for the various measures based on the gross number of jobs that would be produced for every million dollars of spending. These numbers represent global weighted averages for the gross direct and indirect jobs created by the spending. Jobs that may be induced (or lost) by the subsequent spending (or saving) of the new workers are not included.

The figure below is divided into two types of measures: long-lived infrastructure, where jobs are given per million dollars of capital investment from government or private sources; and spending on final demand of energy or energy devices, where jobs are given per million dollars spent on final products.

Construction and manufacturing jobs created per million dollars of spending by measure of the Sustainable Recovery Plan

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Construction and manufacturing jobs created per million dollars of capital investment in the Sustainable Recovery Plan

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Employment multipliers for a given technology can vary substantially between regions. Low employment multipliers are typically associated with sectors with higher wages and with relatively complex, capital-intensive projects. High multipliers are typically associated with measures that employ a larger number of lower wage workers and measures where material costs represent a smaller share of project costs. Since the multipliers are global weighted averages, measures that are primarily deployed in countries with lower average wages and lower labour efficiency have higher multipliers. the figure above provides the global average estimates: further detail and ranges across regions are provided in the individual sector discussions in the following sections.

The employment multipliers discussed in this chapter include only the jobs directly involved in the delivery of the measure and paid for by each million dollars of investment or spending, such as those in manufacturing, construction, sales and production. Most of these jobs would be created quickly but would only last as long as it takes for the relevant work to be completed.

For investment measures, energy efficiency in buildings and industry together with solar PV create the most jobs per million dollars of investment: on average, these three measures create between 10-15 jobs for every million dollars. Energy efficiency measures tend to be labour intensive, and the jobs involved tend to pay relatively low average wages, while the rapid cost reductions in solar photovoltaic (PV) in recent years means that labour now represents a much larger portion of total costs than was the case in the past. Large projects such as electricity grids and centralised power plants provide between 1-7 jobs per million dollars of capital investment. Building new grids and maintaining existing ones are at the higher end of this range because of the need to construct systems such as transmission towers and power lines; wind and new hydro or nuclear power are at the lower end of the range. Developing economies account for a large share of current investment in nuclear, hydro and coal power, as well as new grids: these regions tend to have lower cost labour, raising the multipliers for these technologies slightly.

For spending measures, recycling and biofuels have the highest multipliers because of the labour intensity of processing feedstocks. Growth for both of these industries is fastest in developing markets, which tend to have a large informal economy and relatively low wages in the formal economy. Measures relating to new vehicles, batteries, and appliances typically create 6-9 jobs per million dollars of spending in advanced economies: a high degree of automation however means that manufacturers contribute less to overall employment than the suppliers who provide the materials they use. Manufacturing jobs in advanced economies on average pay higher wages than is the case elsewhere, while less-automated processes in developing economies may require more workers to produce the same output.

New long-lived infrastructure or assets created by investment require continuing operation and maintenance (O&M). Sustaining these O&M jobs would require spending by the wider market or project beneficiaries that is additional to the initial capital investment or consumer spending. We therefore discuss these O&M jobs separately. Other important issues include are how quickly the jobs can be created, job location, and the skill sets required: these factors are also discussed within each sector.

Abatement costs

Abatement costs show for each measure the cost or savings associated with reducing greenhouse gas (GHG) emissions by 1 tonne of carbon dioxide (CO2) equivalent.2 This is based on the lifetime cost of deploying the measure and the savings that would accrue to the consumer (both discounted to the present based on sector- and region-specific discount rates) divided by the cumulative CO2 emissions savings over the measure lifetime. The costs and savings of the measures are given relative to a number of different base case technologies. For example, for new energy efficient cars, the abatement costs are compared with the cost of buying and operating a new internal combustion engine (ICE) vehicle within each region; for appliances and retrofits, they are compared with the energy cost of a standard inefficient appliance or of not undertaking the retrofit; for biofuels, they are compared with the cost of gasoline.

Positive abatement costs mean that the measure would cost money to reduce emissions, while negative abatement costs would reduce emissions while also saving money. A large number of the energy efficiency measures in industry, buildings and transport save money over their lifetime for consumers or industry while also reducing emissions. Extending the lifetime of hydro and nuclear power plants, and installing new solar PV panels in some regions, also have negative abatement costs. In oil and gas operations, the value of captured methane emissions can sometimes be greater than the cost of deploying the abatement measure (even though natural gas prices have fallen substantially in most regions globally), meaning that some of these options also have negative abatement costs. In contrast, a number of the measures that involve substituting for an existing fuel or technology (for example by switching to biofuels, or adding carbon capture, utilisation and storage [CCUS] to a coal-fired power plant) would reduce emissions but would also entail additional cost over their lifetimes.

GHG abatement costs for selected measures of the Sustainable Recovery Plan

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There is a wide range of abatement costs for some of the measures, reflecting differences between regions and technologies. The range of abatement costs for different regions and various technologies within each of the measures is shown in the figure below. Regions have varying fuel prices (especially for gas and electricity), taxation regimes (e.g. on gasoline or diesel), capacity factors (e.g. for solar PV and wind capacities), emission intensities of electricity and country-specific characteristics. For example, abatement costs for electric buses are positive in the United States because of its low tax levels on gasoline and diesel, and its high power and range needs, meaning that larger batteries are required; abatement costs are however negative in Europe, where countries tend to have relatively low emissions intensity electricity and higher tax levels for gasoline and diesel, and where range needs allow for smaller battery packs.

References
  1. Details on definitions and methods for developing employment figures and employment multipliers are given in Annex A of the PDF.

  2. We assume that 1 tonne of methane is equivalent to 30 tonnes of CO2, which is the 100-year global warming potential.