Scenario: Business as Usual

Overview of Business as Usual

This scenario is based on the oil and gas output projections prepared by Dr. Fatih Birol and his colleagues at the International Energy Agency (IEA). In World Energy Outlook 2004, they write:

“Global oil production will not peak over the projection period [i.e., before 2030] so long as necessary investments in supply infrastructure are made. New capacity will be needed to offset production declines and to meet demand growth. About $3 trillion will need to be invested in the oil sector from 2003 to 2030. Financing that effort will be a major challenge.”

However, if the investments are made, they think that oil output will be able to match demand, which they expect to grow from 77 million barrels a day (mb/d) in 2002 to 121mb/d in 2030. This is an annual growth rate of 1.6%, rather less than demand is growing at the moment.

For gas, the IEA team says that “resources can easily meet the projected increase in global demand” provided that $2.7 trillion, or about $100 billion a year, is invested in gas supply infrastructure between now and 2030. This level of investment would allow world gas consumption to rise at 2.3% a year to just less than double its present level.

Following the oil price shocks of 2005/2006 a significant find of oil and gas in the Siberian Arctic restores confidence in the market and oil prices return to $60, thereby growing each year by on average 3%.

BAU Economy Summary

Characteristics of Business as Usual

Government Policy

The IEA’s reassurances about future supplies have made it easy for governments to continue with their current policies and we assume that this will continue to be the case in Ireland until 2030. During this period, we assume that

• Investment in roads and airports etc will continue.
• Energy prices will be kept low to enhance international competitiveness. Carbon taxes will not be introduced.
• Fossil fuel subsidies will stay in place and will even be augmented in some areas. For example, the government will give loan guarantees to the developers of gas pipelines.
• There will be a continued push to increase exports.
• Electricity will continue to be generated largely from current sources – coal, peat and gas. Renewable sources will only be developed if they become relatively cheaper than fossil sources during the period – no importance will be given to replacing energy imports with energy produced from Irish sources.
• The same will apply to the development of biofuels for transport. In general Ireland will do whatever the EU requires, such as encouraging greater energy efficiency, but never rush to do it.
• Ireland will continue to concentrate on developing knowledge-intensive (i.e. Low energy) businesses. Goods requiring a large amount of energy in their manufacture will be imported.
• Economic growth will continue to be the primary national goal. To the extent that growth is possible, the capital stock of the country will rise. This will require increased amounts of energy to run and to maintain.

Business Sector

Our main assumption here is that the business sector will expect energy prices to rise steadily between now and 2030 and will plan accordingly.

• The level of waste will grow in step with national income. Waste disposal will become even more costly and incinerators will be presented as an energy source. Recycling will develop to the extent that it is commercially viable.
• Firms will do what they can to move incrementally towards environmental and social sustainability but no big changes will occur as they will expect payback within 18 months from their projects. .
• Construction industry energy efficiency standards will meet EU regulations but not to exceed them. Energy-intensive construction materials will continue to be used although the Energy Performance in Buildings Directive will cause a drop in the energy consumption of buildings in use.
• Labour will still be regarded as the major cost of production and reducing the cost of labour per unit of output will continue to have priority over reducing the cost of energy. (Dave: When does the model say that energy becomes the major cost for the economy as a whole? (It will obvious vary from sector to sector and it might be useful to show where each sector switches from one to the other. One problem you will probably find in answering this question is that there is a major difference between the energy costs of an established business, where the energy tied up in capital equipment was invested years ago and a new business which needs to buy capital equipment embodying large amounts of energy now.)

Households

• As energy price rises become news, people become more conscious of the money they spend on energy and try to waste less.
• People take separating waste for granted.
• Houses that have been built to require low energy input increase in value.
• Long commutes increase as people seek a better quality of life and cheaper housing. This is facilitated by road improvements.

Business As Usual Timeline

2005 – 2015

• Energy prices grow at 3% per year to 2012.
• Research continues at its present level into alternative energy sources and into the development of better methods of energy storage. The costs of photovoltaics fall as production volumes build up
• The Kyoto Protocol has no noticeable effect of levels of fossil energy use in the countries covered by it as emissions trading and offsets under the Clean Development Mechanism, plus the switch to natural gas for electricity generation together with the movement of heavy industry to countries outside the OECD enable countries to meet their targets on paper.
• 2011 First commercial airliner in service that has a hybrid fuel cell/jet fuel engine. (http://www.netl.doe.gov/publications/proceedings/03/seca/DavidDaggett.pdf)

2016 - 2035

• Energy prices grow at 6% including an additional 3% to cover the cost of purchasing climate change emissions permits. This means that people begin to notice that they have less of their wages left for other purchases once their energy bills have been paid.
• Ireland’s population continues to grow in step with its economic growth as the government maintains its policy of keeping wages down and thus boosting Ireland’s export competitiveness by attracting people from all over the world. The growing population helps drive the construction industry.
• The fact that the oil and gas peak will occur some time in the next five years is accepted in 2030 and serious investments in energy alternatives begin.
• Because it anticipated the steady rise in the real cost of energy, the business sector has implemented all the energy efficiency measures that are profitable at the prices currently ruling

2036 - 2055

• Oil and gas prices now start to grow at 9%
• Ireland becomes uncompetitive compared to many EU countries because its energy mix incorporates a greater proportion of oil and gas than is the case in countries such as Britain, Germany, Denmark and Spain which use more renewables, or Finland and France which took the nuclear route.
• The higher energy prices take more and more purchasing power out of the country each year. Living standards begin to fall sharply. Ireland moves into depression

Life in 2015 - Business As Usual

I'm a knowledge worker with Microsoft Ireland. about the only thing that is not change for me in the last ten years is the company I work for. In 2005 I was a techie working in Dublin and commuting three hours every day. Now I live in a small village outside Tralee in County Kerry and commute to my purpose built office next door.

We build this luxury eco home on the age of the village looking out to sea in 2007, just before the end of housing boom. Like everyone else, we moved our money out of Irish property and into Eastern Europe and I think this is what caused a soft landing for the property market. Even in 2007 we could see that energy prices were only going to go up so we put in all latest technology to make our house really efficient and we find it costs no more to run than our neighbours little house built by a local developer.

We chose this area because it is unspoiled. None of the big farmers have managed to buy the land here, or don't want it! It is mostly mountain and small fields. The problem is, the local farmers don't seem to have much interest in keeping the farms tidy, so some areas are starting to look run down. The village has kept its quaint old Irish look, even though many of the people living here are now Chinese! We try to buy something in local shop each week to show we support the village, but with LIdl doing free delivery with online ordering, it's usually own a litre of milk or the newspaper on Sunday.

Key Business As Usual Facts in 2015

Government Policies

• Growth at all costs
• Continued investment in roads and airports
• No carbon taxes
• Energy from current sources - gas, oil, peat
• Comply with EU but no more and never in a rush to do so

Economy

• Energy prices growing at 6% per year in 2015
• Petrol prices have increased by 37% since 2005
• Electricity prices have increased by 40% since 2005

Business

• Renewables now 15% of electricity generation
• Waste a big issue - much is exported
• 5 Incinerators built since 2005

Households

• We are running to stand still - many people have 2 or 3 jobs
• Long commutes are common though working from home part-time is increasing
• Housing boom ended in 2009 but soft landing

Culture in 2015

What are we eating?

Same menu as 2005 but different sources.

• Irish Beef
• Chips from Eastern Europe potatoes
• Peas from Israel
• Ice Cream from Irish milk powder

What are we watching?

• Big Cars 3
• We All Want to Be Millionaires
• Greed is Good

Most popular Websites

• www.AAtrafficwatch.ie
• www.buildyourhomeonline.com
• www.celebs.com

What are we selling

• Cork-Dublin road permit - 4 months to run. EUR 240.
• Hybrid car, 2009, 169,000km save 50% on your fuel bills!
• I want to start a new car pool for those travelling from Mallow to Cork weekdays. Anyone interested call.

Headlines

• New incinerator reduces waste export bill - We have finally given in and built incenerators as we seem unable to find any other alternative. This has reduced the cost of waste, much of which was previously exported.
• Irish muslim council deplores government stance on Libyan accession - Libya joins the EU
• Protests and nostalgia as UK finally joins Euro - The EU has become a more popular currency, more and more contracts are written Euros instead of Dollars. The UK, not wanting to be left out of a good thing, finally switches from the Pound to the Euro.
• Fly Waterford to Iraq - Air travel has continued to grow and with new business links between Ireland and Iraq, even small airports such as Waterford are offering flights.
• Irish grand slam marred by doping scandal - Sport continues to be a serious subject and winning more important than ever. Drugs are found in all sports.
• Group Four end of year results show firth year of consecutive growth - With the rich getting richer and the poor getting poorer, security firms are doing well.
• Local Government Bill abandoned - Localisers on retreat - Moves to put more power in local government have not succeeded.
• Hydrogen economy still very promising - There has been no real drive to replace oil with hydrogen and the costs of using hydrogen still remains high, so the Hydrogen economy is still an idea for the future.
• French Fusion demonstration plant already over budget - The dream of Nuclear fusion is having significant amounts of money thrown at it.
• Child abduction foiled by GPS watch - Another security story.
• One-off rural housing now half of new development - The trend for building large,isolated and energy demanding houses in the countryside.
• Domestic heating cost rise - renewed call for Insulation grants - Ireland still not offering householders financial incentives to become more energy efficient.