Executive Summary

In 1995, 34 percent of global carbon dioxide (CO₂ ) emissions were produced by electric power generation, approximately one-third of which came from developing countries. Between 1995 and 2020, developing countries will invest roughly $1.7 trillion building 50 percent of all new global power generation capacity. If these investments are made according to business-as-usual (BAU) investment trends, CO₂ emissions from developing country power generation will nearly triple their 1995 levels within 20 years.

This report presents the results of a RAND study that suggests that BAU investment trends are not the only path to strong economic growth. If developing countries adopt different policies and plan-ning methods for their power generation sectors, technologies other than those included in BAU projec-tions could provide lower local and global environmental impacts and produce similar or even higher economic benefits. This study compared the possible impacts that different policies and technology mixes could have on economic growth, air pollution, and CO₂ emissions from new electric power genera-tion in developing countries.

In order to consistently and quantitatively examine the economic and environmental impacts of different policies and mixes of power generation technologies, this study developed a simulation model that sought to capture the macro-level relationships between electric power generation, economic growth, and capital investment in the world's developing countries. The simulation model was used to compare current forecasts and BAU trends for electric power to several policy alternatives that also met projected capacity needs. The policy alternatives investigated in this study were: the inclusion of infra-structure costs in new capacity investment decisions; the acceleration of private-sector participation in power generation; the use of low-emissions technologies; and improvements in energy efficiency.

Figure ES-1 presents the range of potential CO₂ emissions based on this study's findings. The upper bound of this range shows that accelerated privatization could, under some circumstances, increase new CO₂ emissions up to 20 percent relative to BAU investment trends that include infrastruc-ture costs. Other scenarios could decrease the expected growth. Low-emissions technologies could reduce that growth by almost half.