New policy direction needed to avoid locking world into high-carbon energy system

Unless a bold change of policy direction is made, the world is set to lock itself into an insecure, inefficient and high-carbon energy system, the International Energy Agency warned today as it launched the 2011 edition of the World Energy Outlook (WEO).

According to the publication, which was released today in London, there is still time to act, but the window of opportunity is closing.

“Growth, prosperity and rising population will inevitably push up energy needs over the coming decades,” said IEA executive director, Maria van der Hoeven. “But we cannot continue to rely on insecure and environmentally unsustainable uses of energy.

“Governments need to introduce stronger measures to drive investment in efficient and low-carbon technologies. The Fukushima nuclear accident, the turmoil in parts of the Middle East and North Africa and a sharp rebound in energy demand in 2010 which pushed CO2 emissions to a record high, highlight the urgency and the scale of the challenge.”

New policies scenario
In the WEO’s central new policies scenario, which assumes that recent government commitments are implemented in a cautious manner, primary energy demand increases by a third between 2010 and 2035, with 90pc of the growth in non-OECD economies. China consolidates its position as the world’s largest energy consumer, consuming nearly 70pc more energy than the United States by 2035.

The scenario sees the share of fossil fuels in global primary energy consumption falling from around 81pc today to 75pc in 2035. Renewables increase from 13pc of the mix today to 18pc in 2035. The growth in renewables is underpinned by subsidies that rise from US$64bn in 2010 to US$250bn in 2035. By contrast, subsidies for fossil fuels amounted to US$409bn in 2010.

Oil demand rises from 87m barrels per day (mb/d) in 2010 to 99 mb/d in 2035, with all the net growth coming from the transport sector in emerging economies, says the report. Alternative technologies, such as hybrid and electric vehicles that use oil more efficiently or not at all, continue to advance but they take time to penetrate markets.

The use of coal rises 65pc by 2035 in this scenario. Prospects for coal are especially sensitive to energy policies – notably in China, which today accounts for almost half of global demand. More efficient power plants and carbon capture and storage (CCS) technology could boost prospects for coal, but the latter still faces significant regulatory, policy and technical barriers that make its deployment uncertain.

In the scenario, nuclear output rises by over 70pc by 2035, only slightly less than projected last year, as most countries with nuclear programmes have reaffirmed their commitment to them. But given the increased uncertainty, that could change.

A special low nuclear case examines what would happen if the anticipated contribution of nuclear to future energy supply were to be halved. While providing a boost to renewables, such a slowdown would increase import bills, heighten energy security concerns and make it harder and more expensive to combat climate change.

Natural gas’ share in the energy mix rises and gas use almost catches up with coal consumption, according to the scenario. One country set to benefit from increased demand for gas is Russia, which is the subject of a special in-depth study in WEO-2011. Key challenges for Russia are to finance a new generation of higher-cost oil and gas fields and to improve its energy efficiency.

In the scenario, cumulative CO2 emissions over the next 25 years amount to three-quarters of the total from the past 110 years, leading to a long-term average temperature rise of 3.5°C. China’s per-capita emissions match the OECD average in 2035. “Were the new policies not implemented, we are on an even more dangerous track, to an increase of 6°C,” said the IEA.

“As each year passes without clear signals to drive investment in clean energy, the ‘lock-in’ of high-carbon infrastructure is making it harder and more expensive to meet our energy security and climate goals,” said Fatih Birol, IEA chief economist.

The WEO presents a ‘450 Scenario’, which traces an energy path consistent with meeting the globally agreed goal of limiting the temperature rise to 2°C. The IEA said four-fifths of the total energy-related CO2 emissions permitted to 2035 in the 450 Scenario are already locked-in by existing capital stock, including power stations, buildings and factories.

Without further action by 2017, it said the energy-related infrastructure then in place would generate all the CO2 emissions allowed in the 450 Scenario up to 2035.

“Delaying action is a false economy: for every US$1 of investment in cleaner technology that is avoided in the power sector before 2020, an additional US$4.30 would need to be spent after 2020 to compensate for the increased emissions,” said the agency

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