IEA: Bold Change of Policy Direction Needed for Sustainable World Energy Future

Without a bold change of policy direction, the world will lock itself into an insecure, inefficient, and high-carbon energy system, the International Energy Agency (IEA) warned as it launched the 2011 edition of the World Energy Outlook (WEO) today in London.

The agency’s flagship publication says 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. But we cannot continue to rely on insecure and environmentally unsustainable uses of energy,” said IEA Executive Director Maria van der Hoeven.

“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.”

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 one-third between 2010 and 2035, with 90% of the growth in non-OECD economies. China consolidates its position as the world’s largest energy consumer: it consumes nearly 70% more energy than the U.S. by 2035, even though, by then, per capita demand in China is still less than half the level in the U.S.

Coal, Renewables to Surge

The share of fossil fuels in global primary energy consumption falls from around 81% today to 75% in 2035. Renewables increase from 13% of the mix today to 18% in 2035; the growth in renewables is underpinned by subsidies that rise from $64 billion in 2010 to $250 billion in 2035, support “that in some cases cannot be taken for granted in this age of fiscal austerity,” the IEA says. By contrast, subsidies for fossil fuels amounted to $409 billion in 2010.

The use of coal—which met almost half of the increase in global energy demand over the last decade—rises 65% by 2035. “Prospects for coal are especially sensitive to energy policies—notably in China, which today accounts for almost half of global demand,” the IEA says. 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.

“Golden Age of Gas”

The future for natural gas is more certain: Its share in the energy mix rises, and gas use almost catches up with coal consumption, underscoring key findings from a recent WEO Special Report that examined whether the world is entering a “Golden Age of Gas.” 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. While Russia remains an important supplier to its traditional markets in Europe, a shift in its fossil fuel exports toward China and the Asia-Pacific gathers momentum. If Russia improved its energy efficiency to the levels of comparable OECD countries, it could reduce its primary energy use by almost one-third, an amount similar to the consumption of the United Kingdom. Potential savings of natural gas alone, at 180 bcm, are close to Russia’s net exports in 2010.

Cut to Nuclear Could Jeopardize Security, Increase Power Prices

The disaster at Fukushima Daiichi has raised questions about the future role of nuclear power. In the New Policies Scenario, nuclear output rises by over 70% by 2035, only slightly less than projected last year, as most countries with nuclear programs have reaffirmed their commitment to them.

“But given the increased uncertainty, that could change,” the IEA warned. A special 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,” it says.

Rising CO₂ Emissions
In the New Policies 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 3.5C. 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 6C.

“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 IEA Chief Economist Fatih Birol.

The WEO presents a 450 Scenario, which traces an energy path consistent with meeting the globally agreed goal of limiting the temperature rise to 2C. 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, 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 $1 of investment in cleaner technology that is avoided in the power sector before 2020, an additional $4.30 would need to be spent after 2020 to compensate for the increased emissions,” the IEA says.

Source: IEA