Because of fundamental interdependencies and linkages between demand and supply, the services- oriented demand-side transformation as illustrated above in the Low Demand Scenario also provide a number of tangible benefits on the supply-side of resource processing systems as well. These include: • Over-proportional leverage effect of demand-side
resource conservation on supply-side resource use • Enabling and accelerating structural change in
supply-side systems toward decarbonization • Increasing flexibility and resilience in upstream
supply-side technologies
• Accelerating the SDG transformation processes throughout the entire system through higher use 6 The trade-off shown for the demand-side measure “Behavioral response: sustainable healthy diets and reduced food waste” on SDG1 (no poverty) is based on a single reference from IPCC (2014) arguing that healthier diets and reductions in food waste could jeopardize traditional animal husbandry in parts of sub- Saharan Africa. The argument on this potential trade-off is unsupported by other literature and also counterfactual. Dietary changes and reductions in food waste are prime concerns for affluent societies of the Global North. Traditional animal husbandry is not integrated into international food trade and hence remains unaffected by dietary regime changes outside sub-Saharan Africa.
of granular options that turn over much faster than lumpy supply-side technologies.
We discuss each of these systems benefits below.
Leverage effect of demand-side resource conservation on supply-side resource use
Because of inherent conversion losses along the entire service-provisioning system, improvements in service delivery at the end of the supply chain, that is, at the service demand level, have over-proportional impacts on the supply-side inputs. These impacts, or leverage effects, are a function of the compounded conversion losses over the entire resource provisioning system that are substantial (see Section 3.4.1 above), yielding an upstream leverage effect up to typically a factor 6–7. Thus, saving one unit of output (resource use at the level of service provision) can conserve up to 6–7 units of inputs (resource extraction as input to the supply side of service-provisioning systems) and associated adverse environmental impacts (GHG emissions and air pollution, water and land-use, etc.).
Enabling and accelerating structural change in supply-side systems
Under continued demand growth, even record levels of investments into post-fossil alternatives have to date been unable to yield structural change in energy supply systems, as capacity and output growth of post-fossil alternatives have continuously fallen short of demand growth. Figure 29 illustrates this for renewable electricity generation into which the lion’s share of public policy support and induced investments have been flowing over the last two decades. With the exception of the year 2009, where as a result of the demand contraction following the 2008 financial crises, growth in renewable electricity output (for ‘new’ renewables including wind, solar, and geothermal, as well as for all renewables together, also including conventional hydropower) actually substituted fossil fuel electricity generation, and ever larger record numbers of renewable electricity generation have been outpaced by demand growth. Noticeable and accelerated structural change in supply systems (e.g., as evidenced by declining emissions and other adverse impacts) is therefore enabled by a service-oriented efficiency strategy that lowers resource demands in absolute terms. In contracting markets, investments into sustainable alternatives can lead to rapid structural change. Changes in dietary preferences and food demand (e.g., lowering red meat consumption) will likewise underpin successful resource conservation efforts and a reversal in land- use changes and agricultural water use and losses (see Box 12).
Increasing flexibility and resilience in upstream supply-side technologies
Lowered demand also significantly increases flexibility and resilience of supply-side systems, particularly in cases of innovation failures, such as, anticipated technological options do either not materialize, remain uneconomic, or are unacceptable on social or environmental grounds. This has been demonstrated in the scenario studies performed under the auspices of the Global Energy Assessment (GEA 2012, Riahi et al. 2012). Figure 30 contrasts the (high demand) GEA Supply Scenario with the (low demand) GEA Efficiency Scenario to 2050. Next to differences in demand, both scenarios are also characterized by two alternative perspectives on the evolution of transportation technologies: conventional and advanced (e.g., electrification) transport systems. For each of these two scenario variants alternative so-called ‘technology knock-off’ scenarios were developed in which a range of 10 alternative supply-side options were assumed not to be available for future energy supply. Examples of options ‘knocked off’ the supply portfolio included nuclear, BECCs, unlimited biofuels (and hence land- use conflicts), among others. The significant finding
was that only under the low demand GEA Efficiency scenario, future energy supply remains robust across all 20 ‘knock-off’ scenario variants, that is, supply remains feasible even under a (significantly) restricted supply-side technology portfolio. Conversely, in the high demand GEA Supply Scenario, especially under conventional transport technologies, the unavailability of a range of supply-side technologies (‘knock-offs’) resulted in infeasibilities, that is, the high level of energy demand could no longer be met with a restricted supply-side portfolio in 8 out of 10 cases, with only 2 scenario subvariants remaining feasible. With lower demand therefore supply-side systems become more flexible and tolerant to the exclusion of supply-side options thus increasing their resilience.
Harness the benefits of granular (small unit-scale) options
Demand-side transformations also enable harnessing particularly the benefits of granularity. The concept of ‘granularity’ (akin ‘small is beautiful’) has recently been demonstrated to be of particular relevance in accelerating low-carbon transformations (Wilson et al. 2020a). Granular, that is, small unit-scale technologies Figure 29. Interannual change in global electricity demand (blue), ‘modern’ renewables (wind, solar, geothermal, red) and total renewable electricity production (including hydropower, green), in TWh. Changing quantities are reported by the following year, i.e. changes between the year 2000 and 2001 are reported for the year 2001. The graphic compares two data sources, one from an environmental post-fossil NGO (EMBER) and a predominantly fossil fuel company (BP). Both data sources agree that with the exception of 2008–2009 where electricity demand was reduced as a result of the 2008 financial crisis, demand growth has persistently outstripped even record numbers of expansion of renewable electricity generation over the last 20 years. As a result, no impactful structural change in electricity supply was possible and emissions continued to grow. Source: data from EMBER (https://ember-climate.org/reports/) and BP (2019). Graphic courtesy Arnulf Grubler.
Figure 30. Contrasting the low demand GEA Efficiency Scenario with the high demand GEA Supply Scenario. Evolution of primary energy use 1850 to 2010 and in the two scenarios to 2050 (in EJ). Stacked bars show the corresponding energy supply by 2050 in a range of scenario sensitivities in which alternatively various supply-side options are assumed not to be available (are ‘knocked off’ the available technology portfolio). Altogether 20 scenario subvariants were calculated differentiated for conventional and advanced (e.g. electrification) transport systems. In the low demand GEA Efficiency Scenario all ‘knock-off’ variants remain feasible, whereas in the high demand GEA Supply Scenario only a limited set of scenario variants remained feasible, especially in the conventional transport scenario setup. Source: Riahi et al. (2012). support accelerated systems transformations
through three main mechanisms: they enable exit from lock-in into existing systems (technologies and practices), they allow for rapid deployment and diffusion, as well as enjoying greater social legitimacy due to their associated employment and beneficial economic spillover effects. Wilson et al. (2020a) examine 10 indicators in these three dimensions of granularity benefits and demonstrate empirically how smaller-scale technologies could accelerate systems transformations.
Figure 31 illustrates three examples of their granularity indicators associated with accelerated systems transformations: shorter technical lifetimes leading to faster technology turnover; higher learning rates (cost reductions with accumulated deployment); as well as greater equality in availability and access
(increasing social legitimacy). All three factors: faster capital turnover, faster improvements, and higher social acceptance of granular options enable a significant acceleration of systems transformations. While the benefits of granularity accrue to all options, irrespective if these are supply-side or demand-side ones, demand-related technologies are generally much smaller in scale and thus much more granular than supply-side technology options.7 Hence demand-side approaches to sustainability transitions enjoy the advantage of better being able to harness the benefits of granularity.
7 Counterexamples of ‘lumpy’ (large unit-scale) demand-side technologies include wide-body aircraft or skyscrapers, or, conversely, solar PV, as ‘granular’ technology on the energy supply side.
Figure 31. Three example indicators of granularity benefits (out of 10 examined in Wilson et al, 2020a). Smaller-scale, ‘granular’ technologies tend to have shorter lifetimes (Panel (i), implying faster turnover of capital stock), have higher learning rates (cost reductions per doubling of cumulative output, the cost reductions shown in panel (ii) correct for economies of scale effects and therefore represent ‘true’ learning rates), and enable higher equality of access (Panel (iii), low unit scale times low unit costs imply low cost barriers and hence higher affordability of access for the poor and thus more equitable access). Source: Adapted from Wilson et al. (2020a).
3.5. Summary
This chapter has elucidated the types of innovation required across the Six Transformations to ensure a sustainable, equitable, and resilient future with an emphasis on efficiency, sufficiency, and demand reduction. By taking a demand-based services approach, rather than a supply-based product approach, the chapter shows that providing DLS for all can be achieved sustainably at significantly lower cost and fewer environmental impacts than current business-as-usual scenarios. However, given the
current development trajectory and vested interests, the necessary innovations highlighted in this chapter will not eventuate without direct intervention—that is, they need to be managed and socially steered in the right direction. This is the topic of the next chapter, which outlines the requisite changes and innovations in governance and institutions required across all sectors and at all levels, from local to global, to enable the transformation to a sustainable future.