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ENERGY EFFICIENCY AND DEVELOPING COUNTRIES
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584 Environ. Sci. Technol., Vol. 25. No. 4, 1991
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0013-936)(/91/0925-584$02.50/0 0 1991 American Chemical Society
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I Mark D. Levine Stephen P. Meyers Lawrence Berkeley Labomtory Berkeley, CA 94720
Thomas Wilbanks Oak Ridge Laboratory Oak Ridge, TN 37831 Economic and social development will not occur in the world's lower income countries unless they are able to get substantially more energy services than they receive at present. Energy services enable improvements in labor productivity, added mobility, and increased comfort and convenience-contributing to the development process itself and to an enjoyment of the fruits of this process. Meeting the needs of the developing countries for these services over the next several decades, however, is likely to test the limits of the world's economic, political, and environmental systems, and sustained development is in jeopardy as a result. In many ways, this situation poses one of the great technological and policy challenges of the next several generations: increasing energy services for development in Asia, Africa, Latin America and the Caribbean, the Middle East, and eastern Europe-in many cases by multiples of four or more-during a time when conventional energy paths are no longer adequate, because they are too expensive and too damaging to the global environment. In essence, as a global society we need to find ways to deliver more services while shifting from the delivery systems of the past to the systems of the future (11. The features of these systems of the future are still fuzzy at this point, as we learn more about the potentials of renewable energy technologies and other options, but one feature is clear. In industrialized and developing countries alike, the energy production and delivery systems will be far more efficient than they are now. Energy efficiency improvements will be a key, because in many cases they will deliver additional services more cheaply than supply additions, both economically and environmentally (21.
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Moreover, we know that many of the potentials for efficiency improvement are technologically feasible and economically attractive right now, and further potentials can be made attractive with a reasonable amount of additional policy emphasis. While the rest of the vision comes into focus, this is one place where we can proceed with confidence: reducing capital requirements for expanding services, reducing environmental impacts associated with those services, and encouraging more attention to the efficient use of resources as an integral part of any strategy for sustainable development. This paper briefly explores efficiency improvement as an energy strategy for developing countries. First, it describes the evolving energy patterns in these countries and outlines the role that energy efficiency can play in the near and midrange future. Next, it summarizes the main impacts of these patterns and the issues that must be confronted in improving energy efficiency in many countries, together with a growing record of success in this regard. Finally, it suggests what needs to be done to accelerate energy efficiency improvement in the developing world, as a fundamental contribution to economic and social development.
Growth in energy demand Most of the developing world currently faces a growing need for energy services in order to support economic and social development, but inadequate resources exist to meet that need. On a per capita basis, developing countries in 1987 consumed an average of 18 million Btu in commercial fuels and an additional 8 million Btu in biofuels, compared with more than 130 million Btu in Western Europe and 305 million Btu in the United States. Total primary commercial energy consumption in 1987 was 66 quads in the developing world, compared to 77 quads in the United States and 75 quads in the rest of the member countries of the Organization for Economic Cooperation and Development [OCED), Le., Canada, Western Europe, Japan, Australia, and New Zealand (31.
Bicycle-powered gosoline pump, India Environ. Sci. Technol., Vol. 25, No. 4, 1991 585
Although per capita and total energy consumption in the developing world is much less than that in the developed world, the rate of growth in energy consumption has been far higher in the developing countries for the last two decades. As a result, the share of the developing countries in world commercial energy consumption grew from 14% i n 1973 to 22% in 1987. Energy demand growth in the developing countries averaged 5.3% per year, compared to 0.7% per year in the OECD countries, and 3.2% per year in the U.S.S.R. and eastern Europe together. Reasons for the rapid increase in primary energy consumption in the developing economies include (1)faster economic growth than in the OECD countries, particularly in the 1970%(2) migration from rural areas, where energy needs are met primarily with biomass, to urban areas where commercial fuels predominate, (3) penetration of energyintensive technologies (e.g., increasing use of fertilizers, personal vehicles, and electric appliances), (41 limited capability and resources to improve energy efficiency, (5) expansion of energy-intensive industries, and (61rapid population growth. Energy consumption and GDP Overall, commercial energy consumption in the developing world grew around 20% faster than gross domestic product (GDP) between 1973 and 1987. The relationship hetween energy consumption a n d GDP has varied between regions and over time. In Asia (excluding China), energy consumption has grown slightly faster than GDP, especially since 1984. In China, which has experienced rapid GDP growth from the mid-1970s through the late 198Os, increases in energy consumption slowed markedly after 1979, mostly because of improvements i n the industrial sector brought about by policies to encourage energy efficiency and major programs to allocate capital to energy efficiency investments ( 4 ) . In Latin America, energy consumption has grown somewhat faster than GDP, especially during the recession of the early 1980s. In Africa, energy consumption has risen much faster than GDP, which has increased only slightly since 1980. Under-utilization of industrial capacity may have lowered efficiency in Latin America, while growth in the use of commercial fuels for residential purposes, such as cooking, has contributed to the observed trend in Africa. 586 Environ. Sci. Technol., Vol. 25, NO. 4, 1991
Sectoral energy consumption For the developing countries as a group, industry accounted for 50% of final energy consumption in 1986, transportation for 22%, and buildings and agriculture for 29% (Table 1). The share of industry ranged from a high of 59% in China to a low of 30% in the Middle East. Transportation is nearly as important as industry in Latin America. Its relative importance is low only in China, where private transportation is much less used than elsewhere. Energy consumption i n buildings and agriculture ranged in share from 36% in China, which has much more need for space heating, to 18% in the rest of Asia. While industry is the major energy-consuming sector in the developing countries, energy use i n buildings and agriculture has grown faster (5.8% per year in 1973-1986) than industrial energy use (4.9%). Growth in energy consumption in transportation averaged 4.1% per year. Energy demand growth i n buildings and agriculture was fastest in China and Africa, while it was about the same as growth in industry in Latin America and Asia (Figure 1). Transport was the fastest growing sector only in the Middle East. Growth in buildings’ energy use has been primarily due to increase i n appliance ownership, switching from biomass to oil-based fuels for cooking, and construction of modern commercial buildings.
Inefficiency of energy use Overall, developing countries require substantially greater quantities of energy resources to deliver one unit of useful energy than do industrialized countries. One analyst estimates that the energy intensity [energy per unit GDP) of developing and eastern European countries is approximately 60% greater than that of industrialized countries (51. Examples of highly inefficient use of energy in developing countries
are not hard to find. Older power plants consume 1 8 4 4 % more fuel per kilowatt hour of electricity, and suffer transmission and distribution losses 200-400% higher than industrialized countries (61. Many industrial processes in developing countries consume far more energy per unit of output than occurs in advanced economies. For example, twice as much energy is commonly used to produce steel and fertilizer and three times as much for pulp and paper in many applications in poorer nations. One source estimates the potential for cost-effective energy efficiency gains in developing nations to be 20-25% in the near term [the next few years) and much higher in the longer term. The main issues in realizing these potentials for efficiency improvement across the developing world are three questions: If it is such an attractive alternative, why is it not being widely and avidly pursued? What would it take to do better? Is it realistic to think that significant progress can he made? Barriers to efficiency improvement Energy efficiency improvement is in fact occurring in most developing conntries, as older technologies are replaced by more efficient new ones; but it is not occurring as quickly and extensively as most technological, economic, and environmental analyses indicate is “rational.” The reasons are many. Frequently, energy prices are not sending the right signals, effective institutions are lacking, and financial resources are more difficultto acquire for efficiency improvement than supply additions. Moreover, we know from experience that parties making decisions about energy use define their best interests in complex ways; efficiency improvement is not always the highest priority 16). More fundamental, however, are several other obstacles. One is simply a lack of interest in energy efficiency improvement on the part of key decisionmakers in many devel-
TABLE 1
Sectoral shares in final energy consumption in 1986 (%) Region
Latin America Asia China Africa Middle East Total developing countries
Industry
Transponation
38 27
Building an agriculture
23 18
dushial audit programs with implementation of audit recommendations and follow-up audits, along Given these barriers and others, it with efficiency standards for eneris encouraging that progress with gy-using equipment. Energy growth energy efficiency improvement is in Tunisia has declined from 30% being made i n t h e developing greater than to 20% less than GDP world. Much of this record is quite recent, stimulated by some successgrowth. es w i t h energy conservation projects during the 198Os, the im- Efficiency improvement strategy Improving energy efficiency in depending electric “power crisis” in many countries, and the growing veloping countries depends on makrecognition of the feasibility and ing efficiency-improving technolobenefits of activities that promote gies available, economic incentives energy efficiency. Recent examples to use them, and institutional strnctures to implement them. Any strateinclude: Brazil, where the National Elec- gy to accelerate the current slow to tricity Conservation Program moderate rate of progress must focus (PROCEL) has engaged in tech- on creating a self-sustaining process nology, R&D, demonstrations, ed- that stimulates efficiency, i.e., a deciucation, and direct installation of sion-making framework that encowconservation measures since ages decentralized choices of effi1985.With a total budget of about ciency improvement as a preferred option, consistent with other devel$20 million, PROCEL over its short lifetime has achieved sav- opment needs. Moving toward such ings of somewhat more than 1% a framework usually involves the following three considerations: of total electricity consumption First, the policy environment in Brazil (12). China, which starting in 1981 be- should be modified to assure that efgan a nationwide program to ag- ficiency improvement is considered gressively pursue conservation on an equal basis with supply addiand invest significant amounts of tions as a way to provide expanded capital in energy conservation. In energy services. For example, setthe early 198Os, investments in ting energy prices below the marginal cost of energy supplies, which energy conservation projects is a common practice in developing started at more than $500 million per year. They have subsequently countries (especially for electricity), grown to several billion dollars sends improper signals to consumper year. The net effect of this in- ers about the relative value of using vestment has been to cut China’s energy efficiently. Moving from energy growth from’ more than very low prices to substantially higher prices for any commodity or 7% per year to less than 4% (4). Tunisia, which created an indepen- service that is deeply interwoven dent energy conservation agency into people’s lives is difficult for with considerable legislative and any society; but such policy reforms administrative authority. Major em- are a key to efficiency improvement phasis to date has focused on in- in many countries. For instance, making financing at least as available for energy efficiency as for supply-side investments depends heavily on perceptions of the viability and profitability of energyefficiency investments, which in I Middle East 0Africa turn depend on energy prices reI Asia I Eastern Europe flecting their costs. S e c o n d , i n s t i t u t i o n a l performance must improve. Most efficiency improvement strategies depend not only on a balanced policy environment but also on the ability of institutions to define and reach targets effectively. Institutional weaknesses in the energy sector of developing countries have been widely noted (13-16);one particular weakness, which many industrialized countries share, is a lack of institutional responsibility for electricity end-use efficiency. In addition, in-
oping countries. Frequently, not only is efficiency not high on their policy agendas; it is not included in the agendas at all. Meanwhile, many energy analysts are arguing that efficiency improvement can do so much and that it makes so much sense that it should be the centerpiece of energy strategies for industrialized and developing countries alike (7-10).Caught in between, in some cases those leaders in developing countries who are fully aware of this v i e w a n d have even participated in shaping it-remain convinced that their countries will need as much as they can acquire in energy supply additions, as well as efficiency improvements, in order to meet their development needs, and they fear that focusing on efficiency improvement will mislead sources of development assistance and energy sector investment about the need for continued attention to the supply side. This can lead to some caution about joining in a maior global effort to promote energy effiiiency (1 I ) . Still another obstacle is the fact that energy is not the only policy priority for developing countries, together with the fact that financial and leadership resources are usually too scarce to do everything worth doing. In order to make progress with energy efficiency improvement, should a country reduce its emphasis on initiatives in agricultural development, health, or housing? Focusing on efficiency in the energy sector can mean trade-offs in other sectors in the near term, even if the entire economy benefits in the longer term: and this raises the costs associated with the political will that is often required.
Prospects for success
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stitutional gaps in the international aid community, such as a lack of responsibility for funding demonstrations of innovative technologies, also need to be addressed. Accordingly, a strategy should include steps to strengthen organizational capabilities to meet efficiency improvement objectives, ranging from human resource development to institutional restructuring and incentive development. Third, effective international collaboration must be assured. Accelerating energy efficiency improvement in developing countries calls for better ways to work together across national boundaries to improve the flow of information and technologies, to encourage the right kinds of allocations of capital and other resources, and to develop selfsustaining structures for international partnerships, both public and private. The challenge is to approach the development of such relationships in a spirit of true partnership, with full participation by all parties in setting agendas and making strategic decisions. An agenda for action Making major progress in these respects will call for wrenching changes of direction in many cases. As noted by Katzman et al., “(i)n developing countries, it will need an openness to policy reform and external assistance. . . In industrial countries, it will need an unprecedented commitment to support energy e f f i c i e n c y i m p r o v e m e n t through technical, financial, and policy initiatives” (17).
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Industrialized countries’ agenda Lead by example. Wherever highly cost-effective energy efficiency measures are not being adopted widely, or innovative options need to be demonstrated in order to reduce uncertainties, or research and development can make better options available, global progress depends largely on actions by the higher income countries to set the pace (21. This includes making tough policy decisions in order to realize potentials for efficiency improvement. Certainly, where global issues such as climate change are concerned, relatively small percentage improvements in energy efficiencies in affluent countries can make more difference than relatively large percentage improvements in poor countries. Moreover, the industrialized countries have more resources to invest in innovation and 588 Environ. Sci. Technoi.. Vol. 25. No. 4. 1991
risk taking. When industrialized countries are slow in moving to improve efficiencies, developing countries are likely to be suspicious and skeptical about promoting efficiency improvement. Provide collaboration in a spirit of partnership. In many cases, substantial progress with efficiency improvement in lower income countries will depend on access to resources that in turn depend largely on the policies and actions of higher income countries. The main opportunities for initiatives on the part of industrialized countries include training, to upgrade technical and managerial capabilities in developing countries: access to capital, to make financing available for cost-effective energy efficiency improving investments through a combination of public and private sect o r s o u r c e s : a n d s u p p o r t for institutional development, both national and international, related to a commitment to energy efficiency improvement. With this in mind, several pioneering efforts are already under way. In one case, a number of individuals from U S . federal agencies, universities, environmental groups, and other institutions have been working since mid-1989 to catalyze a U S . partnership with developing and eastern European countries to promote energy efficiency improvement. A U S . Working Group for a Global Energy Efficiency Initiative was formed in the fall of 1990 as a step in this process. Another example is the support provided by the Rockefeller Foundation for a cont i n u i n g international dialogue about energy efficiency improvement, including the Bellagio Seminar held in Italy in June 1990. Developing countries’ agenda Recognize energy efficiency improvement as a high policy priority. The starting point is for national leaders and energy sector decision makers to give efficiency improvement careful attention as a development investment option and to pursue it as it merits. Improve institutional performance by building management skills and structures that are goal oriented, adaptable, and resilient. Efficiency improvement requires effective indigenous institutions to mobilize it and carry it out, but in many cases the needed institutions are ineffective or missing entirely. In spite of the inherent difficulties of institutional change (181,a strate-
gy for gap-filling and strengthening is urgently needed. Improve incentives for energy efficiency through policy reforms in such areas as energy pricing and private sector roles. In some cases, this will require facing u p to the classic challenge for policy reform: political economies that need reform the most are often the most resistant to it, because the required degree of painful adjustment is greater (171.Regardless, we know from the experience of many countries that incentives such as market signals are a key to efficiency improvement (191. Combined with effective institutions, in fact, they can stimulate powerful changes through dispersed voluntary decision making (20). More and more developing countries are coming to understand that
Mark D. Levine is program leader in the Energy Anolysis Progrom and group leader in the Energy Conservation Program at the Lawrence Berkeley Labomtory. He received his A.B. degree in chemistry from Princeton University and his Ph.D. degree in chemistry from the University of California. Berkeley.
Stephen P. Meyers (1) is a sfaff scientist in the Energy Ana1,vsis Progmm and lnternotional Energy Studies group at the L a m n c e BerkeleyLatmmto~y.He received his B.A. degree in political science from the Louisiana State Universifyand hisA4.A. in energy and resoumes fmm the Universify of California,Berkeley.
Thomas I. Wilbanks, (r) one of 20 active corpomte research fellows at O M ,leads progmms related to energy and environmental needs which opemte in more than 20 countries. Tmined as a geoppher, he
served on the Syracuse University and Univemify of Oklahoma faculties before joining ORNL in 1977.
traditional energy paths-the paths followed by the industrialized countries in support of their economic growth-are unlikely to be feasible in the future, because of their economic and environmental costs. But the social and economic development of these countries still depends on providing more and more energy services, The challenge to the global community is to identify, explore, and implement alternative paths that are at the same time better for the environment, better for developing economies, and better suited to institutional realities. Entering the 199Os, with every energy and economic forecast pervaded by uncertainties, the nearest thing to a certainty about these alternative paths is that in nearly every country, at nearly every level of development, in nearly every context, energy efficiency improvement will be a central component of an energy strategy for sustained development. But realizing the potential of efficiency improvement will call for forceful action by northern and southern hemispheres alike, working together. The longer we wait to act, the more serious will be the adverse impacts on developing economies and the global environment.
References (1) Wilbanks, T. In Earth ’88, Proceed-
ings of the National Geographic Society Centennial Symposium; Washington, DC, 1988; 96-114. ( 2 ) “Energy and Electricity Supply and Demand: Implications for the Global Environment”; Issue paper, Senior Expert Symposium on Electricity and t h e Environment (Helsinki, May 19901, Vienna, Austria, Oct. 1990. (3) International Energy Agency. World Energy Statistics and Balances 19711987; IEA: Paris, 1989. (4) Levine, M.D.; Liu, X. “Energy Conservation Programs in the People’s Republic of China”; Lawrence Berkeley Laboratory: Berkeley, CA, 1990. (5) Goldemberg, J. In Global Warming: The Greenpeace Report; J. Leggett, Ed.; Oxford University Press: Oxford, 1990. (6) Levine, M. et al. “Energy Efficiency, Developing Nations, and Eastern Europe: An Analysis of Key Issues”; Feb. 1991. (7) Goldemberg, J. et al. A n n u . Rev. Energ y 1985. (8) Goldemberg, J. et al. Energy for a Sustainable World; World Resources Institute: Washington, DC, Sept. 1987a. (9) Goldemberg, J. et al. Energyfor Development; World Resources Institute: Washington, DC, Sept. 1987b. (10) Goldemberg, J. et al. Energy for a Sustainable World; Wiley Eastern Ltd.: New Delphi, 1988. (11)Human Dimensions of Global Change Programme. “Climate Change and Energy Policy in Developing Countries”;
Report of an International Workshop held at Montebello, Quebec, Canada, July 1990. 1 Geller, H. Personal communication, June 1990. 1 Israel, A. Institutional Development; Johns Hopkins University Press: Baltimore, MD, 1987. Minasinghe, M. Gilling, 7.; Mason, M. “A Review of World Bank Lending for Electric Power”; Industry and Energy Department Working Paper Series No. 2; Washington, DC, 1988. United Nations Center for Trade and Development. “Technology Policy in the Energy Sector: Issues, Scope and Options for Developing Countries”; United Nations: New York, 1989. “The Key Issues Facing the Electricity Systems of Developing Countries”; Draft report; Commission of the European Communities, March 1990. Katzman, H. et al. Energy]., in press. Wilbanks, T. “Institutional Issues in Energy R&D Strategies for Developing Countries”; Prepared for Workshop on Energy Research and Development for Developing Countries; Oak Ridge National Laboratories: Oak Ridge, TN, November 1990. Hirst, E.; Greene, D. “Energy Use from 1973 to 1980: The Role of Improved Energy Efficiency”; Report number ORNL-CON-79; Oak Ridge National Laboratory: Oak Ridge, TN, 1981. (201 Warford, J. J. In Environmental Management and Economic Development; G. Schramm; J. Warford, Eds.; Johns Hopkins University Press: Baltimore, MD, 1989; pp. 7-22.
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