Report extract

Macro drivers

Population
Population assumptions by region

 

Compound average annual growth ratePopulation (million)Urbanisation share
 2000-192019-302019-402019204020192040
North America0.9%0.7%0.6% 493 55882%87%
United States0.8%0.6%0.5% 329 36782%87%
Central & South America1.1%0.8%0.6% 520 59281%86%
Brazil1.0%0.5%0.4% 211 22987%91%
Europe0.3%0.1%0.0% 695 69775%81%
European Union0.2%-0.1%-0.1% 448 43775%80%
Africa2.6%2.3%2.2%1 3092 07743%54%
South Africa1.4%1.1%0.9% 59 7167%76%
Middle East2.2%1.6%1.3% 243 32172%79%
Eurasia0.4%0.3%0.3% 235 24865%70%
Russia-0.1%-0.2%-0.2% 145 13875%80%
Asia Pacific1.0%0.7%0.5%4 1774 66149%60%
China0.5%0.2%0.1%1 4061 42261%77%
India1.4%0.9%0.7%1 3661 59334%46%
Japan0.0%-0.4%-0.5% 126 11392%94%
Southeast Asia1.2%0.9%0.7% 661 76749%61%
World1.2%0.9%0.8%7 6729 15456%64%
Sources: UN Population Division databases; IEA databases and analysis.

As in previous editions of the WEO, we use the medium variant of the United Nations projections as the basis for our projections. In this variant, global population growth slows over the coming decades, but the total population nonetheless rises from 7.7 billion today to around 9.2 billion in 2040, an increase of 1.5 billion people.

Around half of the increase in the global population to 2040 is in Africa, underlining the importance of this continent to the achievement of the world’s sustainable development goals. India accounts for 15% of the growth and becomes the world’s most populous country in the near term as China’s population growth stalls.

The share of the global population living in cities and towns is assumed to rise to 64% in 2040 from 56% today. The addition of 78 million people on average each year to the urban population, predominantly in developing economies, means that urban public policies, design and infrastructure choices become crucial variables in the future of global energy. The coastal location of many of the world’s largest cities also puts them in the front line when it comes to the impacts of a changing climate.

The future rate of global population growth slows notably compared with the recent past, due in large part to falling global fertility rates as average incomes rise. The long-term demographic effects of the pandemic are uncertain, although it could be associated in some countries with a break in the trend towards longer global life expectancy, either because of direct health impacts or indirectly because of an increase in global poverty.

Economic growth
Real gross domestic product (GDP) growth assumptions by region

 

 Stated Policies Scenario / Sustainable Development ScenarioDelayed Recovery Scenario
 2010-192019-252025-402019-402019-40
North America2.3%1.4%2.0%1.9%1.4%
United States2.3%1.3%1.9%1.7%1.4%
Central and South America1.0%1.8%3.1%2.7%2.2%
Brazil0.7%1.2%3.1%2.6%2.0%
Europe1.9%1.4%1.5%1.5%1.1%
European Union1.6%1.2%1.3%1.3%0.9%
Africa3.1%2.6%4.4%3.9%3.5%
South Africa1.5%1.0%2.8%2.3%1.9%
Middle East2.2%1.1%3.1%2.5%2.1%
Eurasia2.2%1.6%2.1%2.0%1.6%
Russia1.6%1.2%1.6%1.5%1.1%
Asia Pacific5.5%4.2%3.9%4.0%3.5%
China7.2%4.9%3.6%4.0%3.6%
India6.6%4.5%5.7%5.4%4.9%
Japan1.0%0.7%0.9%0.8%0.6%
Southeast Asia5.1%4.2%4.1%4.2%3.6%
World3.4%2.7%3.1%3.0%2.6%

The Stated Policies and Sustainable Development scenarios are based on macroeconomic outlooks that are broadly consistent with the latest assessments from the IMF. The pandemic triggers a sharp recession in 2020, with a global GDP decline of 4.6%. Where feasible, governments and central banks respond with large-scale fiscal stimulus programmes and monetary expansion so as to maintain financial stability and limit negative spillovers. Social distancing measures and eventually a vaccine enable a gradual recovery of the services sector.

The implications of the pandemic and economic slump are significant, particularly in some emerging market and developing economies. The supply side effects, however, are limited by the relatively short duration of the crisis together with effective policy responses, and the trend growth in global GDP after 2022 returns to close to the pre-pandemic rate. The fall in GDP and large deficits lead to a major increase in government debt, but low interest rates and resumed growth make this manageable. Beyond the medium-term horizon, the increasing capacity utilisation of the economy enables a normalisation of monetary conditions. While there are some measures in the interests of resilience to ensure self-sufficiency in specific value chains, notably for some kinds of medical equipment, global trade and investment flows are broadly maintained.

The Delayed Recovery Scenario, by contrast, reflects the risk of a longer and more serious epidemic which blunts the effectiveness of macroeconomic policy responses. Extended social distancing measures and other restrictive measures lead to a sharp drop in GDP, and the global economy in 2021 is still smaller than in 2019. Governments respond, but skyrocketing debt and political constraints limit the effectiveness of fiscal stimulus, while a private sector debt overhang and weak confidence constrain the effect of monetary expansion. Ultra-low interest rates persist for several years without a strong stimulus impact. With recurring outbreaks of infection across the world, the services sector has a very weak and gradual recovery, and this leads to persistent unemployment. A combination of high unemployment and fragile financial positions depresses consumer confidence and affects demand and investment even in sectors not directly hit by the pandemic. Constrained global trade and investment flows lead to further efficiency losses. Economic disruption and high levels of debt, together with stranded human and physical capital, especially in the services sector, causes long-term damage to economic growth.

Prices

International prices for coal, natural gas and oil in the WEM reflect the price levels that would be needed to stimulate sufficient investment in supply to meet projected demand. They are one of the fundamental drivers for determining fossil-fuel demand projections in all sectors and are derived through iterative modelling.

The supply modules calculate the output of coal, gas and oil that is stimulated under the given price trajectory taking account of the costs of various supply options and the constraints on production rates. In the case that the price is not sufficient to cover global demand, a price feedback is provided into the previous price level and the energy demand is recalculated. The new demand arising from this iterative process is again fed back into the supply modules until the balance between demand and supply is reached in each year of projections.

Fossil fuel prices by scenario

 

Stated Policies ScenarioSustainable Development ScenarioDelayed Recovery Scenario
Real terms ($2019) 2010201920252030203520402025204020252040
IEA crude oil ($/barrel) 91637176818557535972
Natural gas ($/MBtu)           
United States 5.12.63.53.53.84.22.12.03.23.7
European Union 8.76.76.77.57.98.34.84.96.27.6
China 7.88.28.48.38.58.86.06.47.98.2
Japan 12.910.19.28.98.99.05.45.78.48.5
Steam coal ($/tonne)           
United States 60465344475037324844
European Union 108616671706957556064
Japan 125847779787768617171
Coastal China 135928383827973677673
Notes: MBtu = million British thermal units. The IEA crude oil price is a weighted average import price among IEA member countries. Natural gas prices are weighted averages expressed on a gross calorific-value basis. The US natural gas price reflects the wholesale price prevailing on the domestic market. The European Union and China gas prices reflect a balance of pipeline and liquefied natural gas (LNG) imports, while the Japan gas price is solely LNG imports; the LNG prices used are those at the customs border, prior to regasification. Steam coal prices are weighted averages adjusted to 6 000 kilocalories per kilogramme. The US steam coal price reflects mine-mouth prices (primarily in the Powder River Basin, Illinois Basin, Northern Appalachia and Central Appalachia markets) plus transport and handling cost. Coastal China steam coal price reflects a balance of imports and domestic sales, while the European Union and Japanese steam coal price is solely for imports.

The equilibrium prices for fuels have been revised down from those in the WEO-2019 because of the dampening effect of the crisis on demand, and because of changes to strategies and cost structures on the supply side. However, although prices are lower, the possibility of price volatility and of new price cycles has risen.

In the case of oil, keeping the market in balance in the STEPS requires a rebound in investment that is stimulated by a rise in prices to around $70/barrel over the next five years, after which prices flatten in a range between $75-85/barrel. Shale supply is quite elastic at these prices, and major conventional resource-holders are also assumed to be wary of encouraging a major influx of US shale to the market.

In the case of natural gas, the current global supply surplus gradually erodes in the STEPS, and regional divergences between spot prices reappear, reflecting the costs of moving gas between the different markets. Gas prices rise in most importing markets to plug a potential supply deficit that would otherwise emerge in the mid-2020s. The US Henry Hub remains an important reference price for global gas markets, and stays in a $2-4 per million British thermal units (MBtu) range through to 2040. Asia is the key growth market for imports, which are increasingly priced off indices that reflect the region’s supply-demand balance, rather than oil prices; nonetheless, Europe remains a crucial balancing market for internationally traded natural gas.

International coal prices have also been revised downwards in the STEPS, reflecting lower overall demand, together with ambitions in China and India to satisfy a larger share of demand from domestic supply.

Prices in the DRS are lower for each fuel than in the STEPS because demand is lower and it takes longer to work off the existing overhang in supply capacity. In the SDS, fuel prices stabilise at still lower levels because of considerably lower demand for fossil fuels, removing the need to develop higher cost resources.

CO2 price assumptions are one of the key inputs into WEM as the pricing of CO2 emissions affects demand for energy by altering the relative costs of using different fuels.

CO2 prices in selected regions by scenario ($2019 per tonne)

 

RegionSector20252040
Stated Policies Scenario
CanadaPower, industry, aviation, others*3438
ChilePower820
ChinaPower, industry, aviation1735
European UnionPower, industry, aviation3452
KoreaPower, industry3452
South AfricaPower, industry1024
Sustainable Development Scenario
Advanced economiesPower, industry, aviation**63140
Selected developping economiesPower, industry, aviation**43125
* In Canada's benchmark/backstop policies, a carbon price is applied to fuel consumed in additional sectors. ** Coverage of aviation is limited to the same regions as in the STEPS. Note: Carbon prices in the DRS are close to those of the STEPS.

The prices actually paid by consumers in the various scenarios are strongly affected by policies, notably by efforts to remove fossil fuel consumption subsidies and to account for environmental externalities by putting a price on carbon. All existing or announced carbon pricing schemes, at national and sub-national level, are reflected in the STEPS. Higher carbon prices are applied on a much more widespread basis in the SDS.

For fuel end-use prices, for each sector and WEM region, a representative price (usually a weighted average) is derived taking into account the product mix in final consumption and differences between countries. International price assumptions are then applied to derive average pre-tax prices for coal, oil, and gas over the projection period. Excise taxes, value added tax rates and subsidies are taken into account in calculating average post-tax prices for all fuels. In all cases, the excise taxes and value added tax rates on fuels are assumed to remain unchanged over the projection period.

We assume that energy-related consumption subsidies are gradually reduced over the projection period, though at varying rates across the WEM regions and the scenarios. As described above, in the Sustainable Development Scenario the oil price is lower than in the Stated Policies Scenario. In order to counteract a rebound effect in the transport sector from lower gasoline and diesel prices, a CO2 tax is introduced in the form of an increase of fuel duty to keep end-user prices at the same level as in the Stated Policies Scenario. All prices are expressed in US dollars per tonne of oil equivalent and assume no change in exchange rates.

For electricity end-use prices, the model calculates prices as a sum of the wholesale electricity price, system operation cost, transmission & distribution costs, supply costs, and taxes and subsidies. Wholesale prices are calculated based on the costs of generation in each region, under the assumption that all plants recover their variable costs and that new additions recover their full costs of generation, including their capital costs.

System operation costs are taken from external studies and are increased in the presence of variable renewables in line with the results of these studies. Transmission and distribution tariffs are estimated based on a regulated rate of return on assets, asset depreciation and operating costs. Supply costs are estimated from historic data, and taxes and subsidies are also taken from the most recent historic data, with subsidy phase-out assumptions incorporated over the Outlook period in line with the relevant assumptions for each scenario.

There is no single definition of wholesale electricity prices, but in the World Energy Model the wholesale price refers to the average price (across time segments) paid to generators for their output. They reflect the region-specific costs of generating electricity for the marginal power plants in each time segment, plus any capital costs that are not recovered. The key factors affecting wholesale prices are therefore:

  • The capital cost of electricity generation plants;
  • The operation and maintenance costs of electricity generation plants; and
  • The variable fuel and, if applicable, CO2 cost of generation plants’ output.

The derivation of the wholesale electricity price for any region makes two fundamental assumptions:

  • Electricity prices must be high enough to cover the variable costs of all the plants operating in a region in a given year.
  • If there are new capacity additions, then prices must be high enough to cover the full costs – fixed costs as well as variable costs – of these new entrants.

For each region, WEM breaks the annual electricity demand volume down into four segments: baseload demand, low-midload demand, high-midload demand and peakload demand. For a fuller discussion of load-duration curves and how they are derived, please refer to the methodology document on the calculation of capacity credit for renewables.

Demand must be met by the electricity generation capacity of each region, which consists of variable renewables – technologies like wind and solar PV without storage whose output is driven by weather – and dispatchable plants (generation technologies that can be made to generate at any time except in cases of technical malfunction). In order to account for the effect of variable renewables on wholesale prices, the model calculates the probable contribution of variable renewables in each segment of the simplified load-duration curve. Subtracting the contribution of renewables from each segment in the merit order leaves a residual load-duration curve that must be met by dispatchable generators.

Subsidies

The model calculates for each region the subsidies to renewable energy – renewables-based electricity generation and biofuels – identifying its additional economic cost as the difference between the prices paid (assumed equivalent to the cost of production) per unit of renewable energy and the market value (or reference price) of substitutable technologies or fuels.

For the subsidies to renewables-based electricity generation, the additional economic cost is calculated for each renewable energy technology and for the amount of that technology installed in any given year, taking into account its levelised cost per unit of generation (in $/MWh) and the wholesale electricity price for each year of its economic lifetime. Because the wholesale electricity price changes from year to year, the difference between the levelised cost and the wholesale price also changes every year. The average wholesale electricity price received by each technology also varies according to the simulated operations.

In the case of biofuels subsidies, we calculate the difference between the costs of biofuels production for ethanol and biodiesel and the projected price of the liquid fossil fuel equivalent, i.e. gasoline and diesel, before taxes. This cost increment is then multiplied by the volume of ethanol and biodiesel used in each year, for each region.

The IEA measures fossil fuel consumption subsidies using a price-gap approach. This compares final end-user prices with reference prices, which correspond to the full cost of supply, or, where appropriate, the international market price, adjusted for the costs of transportation and distribution. The estimates cover subsidies to fossil fuels consumed by end-users and subsidies to fossil-fuel inputs to electricity generation.

The price-gap approach is designed to capture the net effect of all subsidies that reduce final prices below those that would prevail in a competitive market. However, estimates produced using the price-gap approach do not capture all types of interventions known to exist. They, therefore, tend to be understated as a basis for assessing the impact of subsidies on economic efficiency and trade. Despite these limitations, the price-gap approach is a valuable tool for estimating subsidies and for undertaking comparative analysis of subsidy levels across countries to support policy development.

Policies

The policy actions assumed to be taken by governments are a key variable in the World Energy Outlook and the main reason for the differences in outcomes across the scenarios. An overview of the policies and measures that are considered in the various scenarios is included below.  The policies are additive: measures listed under the Sustainable Development Scenario (SDS) supplement those in the Stated Policies Scenario (STEPS). The tables begin with broad cross-cutting policy frameworks, followed by more detailed policies by sector: power, transport, industry and buildings.

The tables list only the “new policies” enacted, implemented or revised since the publication of the WEO-2019. Some regional policies have been included if they play a significant role in shaping energy at a global scale (e.g. regional carbon markets, standards in very large provinces or states). The tables do not include all policies and measures, rather they highlight the policies most shaping global energy demand today, while being derived from an exhaustive examination of announcements and plans in countries around the world. 

Cross-cutting policy assumptions by scenario for selected regions

 

Region/Country Scenario Assumptions
All regions SDS
  • Universal access to electricity and clean cooking facilities by 2030.
  • Staggered introduction of CO2 prices (see Table 2.3 in Chapter 2).
  • Fossil fuel subsidies phased out by 2025 in net-importing countries and by 2035 in net-exporting countries.
  • Maximum sulphur content of oil products capped at 1% for heavy fuel oil, 0.1% for gasoil and 10 ppm for gasoline and diesel.
  • Policies promoting production and use of alternative fuels and technologies such as hydrogen, biogas, biomethane and CCUS across sectors.
  • Investments included in the IEA Sustainable Recovery Plan (IEA, 2020).
United States STEPS
  • Announcements by states and utilities to raise renewable portfolio standards, including 100% zero carbon electricity targets.
SDS
  • State-level and company targets for net-zero GHG emissions by 2050.
European Union STEPS
  • Partial implementation of Green New Deal update to NDCs and 2030 Climate and Energy Framework.
  • Investments included in the European Green Deal Investment Plan from Phase 1 (2021-27).
SDS
  • Full implementation of Green New Deal update to NDCs and 2030 Climate and Energy Framework, reducing GHG emissions to 55% below 1990 levels.
  • Long-term strategy for climate neutrality by 2050.
  • Hydrogen Strategy for a Climate Neutral Europe.
Other Europe STEPS
  • Some implementation of the United Kingdom’s target for net-zero GHG emissions by 2050.
SDS
  • Partial implementation of the United Kingdom’s target for net-zero GHG emissions by 2050.
Australia & New Zealand STEPS
  • Partial implementation of New Zealand’s target for net zero, non-biogenic GHG emissions by 2050.
SDS
  • Full implementation of New Zealand’s target for net zero, non-biogenic GHG emissions by 2050.
Japan STEPS
  •  5th Strategic Energy Plan under the Basic Act on Energy Policy.
China STEPS
  • “Made in China 2025” transition from heavy industry to higher value-added manufacturing.
SDS
  • Peak emissions in advance of the committed 2030 target.
  • Announced pledge to strive to be carbon neutral by 2060.
India STEPS
  • National Mission on Enhanced Energy Efficiency.
  • Nearly achieves target of 450 GW of renewables and 60% installed capacity being renewable by 2030.
  •  “Make in India” campaign to increase the share of manufacturing in the national economy.
SDS
  • Fully achieves target of 450 GW of renewables and 60% installed capacity being renewable by 2030.
Central and South America STEPS
  • Chile: Updated NDC; annual GHG emissions of 95 Mt CO2-eq by 2030;  emissions peak by 2025 and a carbon budget for 2020-2030 of 1 100 Mt CO2-eq.
: STEPS = Stated Policies Scenario; SDS = Sustainable Development Scenario; C & S America = Central and South America; ppm = parts per million; CCUS = carbon capture, utilisation and storage; NDC = Nationally Determined Contributions (Paris Agreement); GHG = greenhouse gases; GW = gigawatts; Mt CO2-eq = million tonnes of carbon dioxide equivalent. The policies and measures for the scenarios pertaining to Africa and Southeast Asia can be found within the respective WEO-2019 special reports, Africa Energy Outlook 2019 (IEA, 2019b) and Southeast Asia Energy Outlook 2019 (IEA, 2019d).
Power sector policies and measures as modelled by scenario for selected regions

 

Region/Country Scenario Assumptions
All regions SDS
  • Increased deployment of renewables.
  • Lifetime extensions of nuclear power plants and some increased new builds, where applicable and with public acceptance.
  • Expanded support for the deployment of CCUS.
  • Efficiency and emissions standards that prevent the refurbishment of old inefficient plants.
  • Stringent pollution emissions limits for industrial facilities above 50 MWth input using solid fuels, set at 200 mg/m3 for SO2 and NOX, and 30 mg/m3 for PM2.5.
United States STEPS
  • Nuclear zero emission credits provided in five states.
  • 100% carbon-free electricity targets in eight states plus Puerto Rico and Washington D.C.
  • Affordable Clean Energy Rule.
European Union STEPS
  • Emissions Trading System in accordance with 2030 Climate and Energy Framework.
  • Endorsed coal phase out plans in 14 member states, notably in Germany, Greece, Hungary and Slovakia.
  • Early retirement of all nuclear plants in Germany by end-2022.
Other Europe STEPS
  • United Kingdom phase out of traditional coal-fired power by 2024.
  • United Kingdom Offshore Wind Sector Deal, with up to 30 GW of offshore wind by 2030.
Korea STEPS
  • By 2034: renewables reach 40% of installed power capacity.
Japan STEPS
  • Policy direction to phase out inefficient coal plants to meet the energy mix set out in the 5th Strategic Energy Plan.
China STEPS
  • 35% share of renewables in total electricity consumption by 2030.
India STEPS
  • Nearly achieves target of 450 GW of renewables and 60% installed capacity being renewables by 2030.
  • National Wind-Solar Hybrid Policy expanded definition of storage technologies for large-scale wind-solar hybrid power projects.
  • “Make in India” programme stimulus funding for renewable energy and batteries.
SDS
  • Fully achieves target of 450 GW of renewables and 60% installed capacity being renewables by 2030.
Southeast Asia STEPS
  • Indonesia: 23% share of renewable energy in primary energy supply by 2025 and 31% by 2050 from forthcoming RUPTL 2020-2029.
  • Malaysia, Philippines and Singapore reach capacity installation targets for 2025 and 2030.
  • Reach capacity and electricity share targets for 2031 in Myanmar, for 2037 in Thailand, and for 2030 in Viet Nam.
Africa STEPS
  • Implementation of renewable electricity programmes in some countries:
  • South Africa: 2019 Integrated Resource Plan (with Covid-19 delay).
  • Egypt: Wind and solar competitive bidding projects.
  • Partial implementation of national electrification strategies.
Notes: CCUS = carbon capture, utilisation and storage; MWth = megawatts thermal; mg/m3 = milligrams per cubic metre; RUPTL = Rencana Usaha Penyediaan Tenaga Listrik, the Indonesian utility’s Integrated Resource Plan; SO2 = sulphur dioxide; NOX = nitrogen oxides; PM2.5 = fine particulate matter.

 

Industry sector policies and measures as modelled by scenario in selected regions

 

Region/Country Scenario Assumptions
All regions SDS
  • Policies to support increasing deployment of CCUS and hydrogen in various industry and fuel transformation sub-sectors.
  • Policies to support circular economies through increased recycling of aluminium, steel, paper and plastics, and material efficiency strategies.
  • Enhanced minimum energy performance standards by 2025, in particular for electric motors; incentives for the introduction of variable speed drives in variable load systems and implementation of system-wide measures.
  • Mandatory energy management systems or energy audits.
United States STEPS
  • Increased R&D funding and extended tax credits for CCUS technologies.
  • Update to Superior Energy Performance certification that supports the introduction of energy management systems.
European Union STEPS
  • EU Circular Economy Action Plan for sustainable products, services and business models.
  • EU Carbon Pricing with an increased minimum carbon price in accordance with the 2030 Climate and Energy Framework.
  • Industrial Emissions Directive, including new standards for Large Combustion Plants from the review of the Best Available Techniques Reference Document.
  • Netherlands: Industry carbon tax for major emissions sources in the sector to complement the EU Emissions Trading System.
SDS
  • Germany: Hydrogen Strategy as part of the stimulus programme, with 5 GW of electrolyser capacity by 2030.
  • France: Hydrogen Strategic Plan and 6.5 GW of capacity by 2030.
Other Europe STEPS
  • United Kingdom: Climate Change Agreement on industrial energy efficiency standards and incentives.
  • Turkey: Energy intensity plan on industrial energy efficiency standards and incentives.
Australia and New Zealand SDS
  • Australia: National Hydrogen Strategy.
China STEPS
  • Roll back of energy intensity targets for 2020 in response to pandemic.
  • “Made in China 2025” targets for industrial energy intensity.
India STEPS
  • Bureau of Energy Efficiency Plans adopts ISO standards in energy-intensive industries.
  • Further implementation of the National Mission for Enhanced Energy Efficiency recommendations including a tightening of the Perform, Achieve, Trade mechanism and continuation beyond 2020 (cycles 4 and 5).
  • Further implementation of the New Industrial Policy leading to a boost in domestic industrial production. ”Make in India” policy promotes the manufacturing sector.
Southeast Asia STEPS
  • Viet Nam: Minimum energy performance standards for electric motors.
Central and South America STEPS
  • Brazil: Third cycle of the Strategic Alliance Program for Energy Efficiency for industrial energy efficiency standards and incentives. BNDES / PROESCO energy efficiency programmes.
CCUS = carbon capture, utilisation and storage; ISO = International Organization for Standardization; GW = gigawatts.
Buildings sector policies and measures as modelled by scenario in selected regions

 

Region/Country Scenario Assumptions
All regions SDS
  • Sustainable Development Goal 7.1: universal access to affordable, reliable and modern energy achieved by 2030.
  • Phase out least efficient appliances, light bulbs and heating/ cooling equipment by 2030 at the latest.
  • Emissions limits for biomass boilers set at 40-60 mg/m3 for PM2.5 and 200 mg/m3 for NOX.
  • Introduction of mandatory energy performance standards for all appliances and space cooling equipment.
  • Mandatory energy conservation building codes, including net-zero emissions requirement for all new buildings by 2030 at the latest.
  • ·   Increased support for energy efficiency and CO2 emissions reduction measures in existing buildings, including building retrofits, heat pumps, and direct use of solar thermal and geothermal energy in certain economies.
  • Digitalisation of buildings electricity demand to increase demand-side response potential through increased flexibility and controllability of end-use devices.
United States STEPS
  • Updated minimum energy performance standards for central air conditioning and heat pumps.
Canada STEPS
  • Community efficiency financing (second phase, financing for community energy transitions).
  • Appliance efficiency standards.
European Union STEPS
  • EU recovery plan on green mortgages and revised state aid guidance.
  • France: Buildings Environmental regulation RE2020 (strengthened energy efficiency building codes).
  • ·   Germany: Replacement bonus for central heating systems (incentives for clean heating). Tax deductions for building renovations (retrofit subsidies). CO2 building renovation (retrofit subsidies).
  • Italy: Incentives for efficient appliances.
  • Estonia: Subsidies for retrofits in apartment buildings.
  • Ireland: Community Energy Grant Scheme.
  • Portugal: Support programme for sustainable buildings for retrofits in public housing and government buildings.
  • Poland: Subsidies for retrofits in the Clean Air Plan.
SDS
  • EU Energy Performance of Buildings Directive objective to achieve a highly energy efficient and decarbonised building stock by 2050.
Other Europe STEPS
  • United Kingdom: Public Sector Decarbonisation Scheme and Social Housing Decarbonisation Fund; Green Homes Grants.
  • United Kingdom: Low Carbon Heat Support and Heat Networks Investment Project.
  • United Kingdom: Scheme for improving buildings efficiency as part of Plan for Jobs.
Australia and New Zealand STEPS
  • New Zealand: Incentives for clean heating in the Warmer Kiwi Homes programme.
Korea STEPS
  • Energy audits for older buildings.
  • Rebate for purchase of appliances entitled to energy efficiency grade 1.
  • Green New Deal in the third supplementary budget proposal.
China STEPS
  • Standard for maximum energy consumption per square metre in buildings.
  • Investment in housing renovation as part of a wider industry support package.
  • Green and High-Efficiency Cooling Action Plan.
  • Minimum performance standards and energy efficiency labelling grades for room air conditioners.
India STEPS
  • India Cooling Action Plan. Standards and labelling for light commercial air conditioners, freezers and light bulbs.
  •  Energy efficiency labelling for residential buildings for renters and homeowners to reflect retrofits in prices.
Southeast Asia STEPS
  • Viet Nam: MEPS and labelling for appliances and lighting in residential and commercial sector.
Central and South America STEPS
  • Argentina: Strengthened energy efficiency building codes and mandatory efficiency labelling for new social housing.
Africa STEPS
  • Egypt: MEPS for incandescent lamps.
  • Morocco: MEPS and labelling for appliances. Mandatory energy efficiency audits for services.
  • Nigeria: MEPS for refrigerators, air conditioners, central heating/cooling systems and space heating.
  • Benin: MEPS and energy labelling system for lamps and unit air conditioners.
  • Rwanda: MEPS for air conditioners and refrigerators.
mg/m3 = milligrams per cubic metre; SO2 = sulphur dioxide; NOX = nitrogen oxides; PM2.5 = fine particulate matter; MEPS = minimum energy performance standards
Transport sector policies and measures as modelled by scenario in selected regions

Region/Country Scenario Assumptions
All regions SDS
  • Strong support for electric mobility, alternative fuels and energy efficiency.
  • Retail fuel prices kept at a level similar to the STEPS, applying CO2 taxes across the regions in the IEA’s World Energy Model.
  • PLDVs: on-road stock emissions intensity limited to 50 g CO2/km in advanced economies and 65 g CO2/km elsewhere by 2040.
  • Two/three-wheelers: phase out two-stroke engines.
  • Light-duty gasoline vehicles: three-way catalysts and tight evaporative controls required.
  • Light-duty diesel vehicles: limit emissions to 0.1 g/km NOX and 0.01 g/km PM2.5.
  • Light commercial vehicles: full technology spill-over from PLDVs.
  • New heavy-freight trucks are 30% more efficient by 2040 than in the STEPS.
  • ·   Heavy-duty diesel vehicles: limit emissions to 3.5 g/km NOX and 0.03 g/km PM2.5. ·   Aviation: fuel intensity reduced by around 3% per year; scale up of biofuels driven by long-term CO2 emissions target (50% below 2005 levels in 2050).
  • International shipping: annual GHG emissions trajectory consistent with 50% below 2008 levels in 2050, in line with IMO GHG emissions reduction strategy.
United States STEPS
  • The Safer Affordable Fuel Efficient Vehicles Final Rule for Model Years 2021-2026.
  • Electric truck penetration in the United States is driven by Advance Clean Trucks policy in California, which requires manufacturers to sell zero emissions trucks by 2025, reaching 55% of Class 2b – 3 truck sales, 75% of Class 4 – 8 straight truck sales and 40% of truck tractor sales. 
European Union STEPS
  • EU recovery plan: purchasing facility for clean vehicles, EV recharging infrastructure.
  • Regulation setting CO2 emission performance standards for new passenger cars and new light commercial vehicles (vans) after 2020 (EU 2019/631).
  • Regulation reducing CO2 Emissions from heavy-duty vehicles (EU 2019/1242).
  • Italy: Subsidies for low-emissions vehicles.
  • Spain: Mobility stimulus – promoting EV sales, scrappage programmes, charging infrastructure, transport logistics programmes and hydrogen research.
  • Germany: Recovery Plan – vehicle tax, R&D for vehicle manufacturers and supply industry, charging station infrastructure, bus and truck fleet modernisation.
  • France: Vehicle scrappage scheme and conversion premium.
  • Ireland: 10% biofuel blending mandate from 2019.
SDS
  • Partial implementation of announced targets for all new passenger vehicles being zero emissions vehicles by 2030.
  • Electro mobility trends partially aligned with the net-zero target of the European Union by 2050.
Other Europe STEPS
  • United Kingdom: In 2035, partial implementation of ban on new gasoline- and diesel-powered cars and vans.
  • United Kingdom: Partial inclusion of aviation net-zero emissions target.
SDS
  • United Kingdom: Full implementation of aviation net-zero emissions target by 2050.
Australia and New Zealand STEPS
  • New Zealand: Clean Car Standard and Clean Car Discount.
Korea STEPS
  • Partial implementation of one-third of new passenger car sales targets in 2030 are EVs or FCVs.
China STEPS
  • New Energy Vehicle (NEV) Industry Development Plan (2021-2035) setting out 25% of new car sales will be NEVs by 2025.
  • Financial Subsidy Policy for the Promotion and Application of New Energy Vehicles.
  • Extension of NEV credits.
  • Cash-for-clunker schemes at provincial level.
India STEPS
  • Faster Adoption and Manufacturing of Hybrid and EV (FAME) II programme.
  • New EV policies in New Delhi and Tamil Nadu.
  SDS
  • Partial implementation of 20% bioethanol blending target for gasoline and 5% biodiesel in 2030.
Southeast Asia STEPS
  • Indonesia: Introduction of the B30 programme to increase biodiesel blends to 30% in gasoil.
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g CO2/km = grammes of carbon dioxide per kilometre; NOX = nitrogen oxides; g/km = grammes per kilometre; PM2.5 = fine particulate matter; IMO = International Maritime Organization; PLDVs = passenger light-duty vehicles; EVs = electric vehicles; FCVs: fuel cell vehicles; GHG = greenhouse gases.