London, UK - Nobuo Tanaka, Executive Director of
the International Energy Agency, delivered a stern
warning at a press conference yesterday to launch of the
latest World Energy Outlook - WEO-2010. He
said the energy world is facing unprecedented uncertainty
and the strength of the economic recovery holds the key to how
energy markets will evolve over the next few
years.

 

class=”MsoNormal”>Recent policy moves are a good start,
he said, but much stronger action is needed to accelerate the
transformation of the global energy system. In
particular, he singled out the Copenhagen Accord and the agreement
among G20 countries to phase out fossil fuel
subsidies.

class=”MsoNormal”> 

class=”MsoNormal”>These are important steps forward, he
said, but these moves still fall a very long way short of what is
required to set the world on the path to a truly sustainable energy
system. 

 

The
World Energy Outlook notes that the global demand for energy is
rising and fossil fuels - coal, oil and gas -account for over 50%
of the increase. Oil will continue as the dominant global fuel to
2035, and natural gas is set to become increasingly important in
meeting the world’s energy needs, the report
stresses.

 

On top
of that, oil prices are set to rise reflecting the growing
insensitivity of both demand and supply to price. Unconventional
oil such as found in Canada’s oil sands deposits, will become an
even more important part of the world’s oil supply regardless of
what governments do to curb demand.

 

Although renewable energy sources are expected to
become increasingly competitive as fossil fuel prices rise and
renewable technologies mature, their total share of the global
primary energy supply will remain relatively minor in comparison to
fossil fuels.

 

The
report is particularly harsh on the issue of fossil-fuel subsidies,
which remain commonplace in many countries, and which result in an
economically inefficient allocation of resources and market
distortions, while often failing to meet their stated
objectives.

 

WEO-2010 reveals that fossil-fuel
subsidies amounted to $312 billion in 2009. “Getting the prices
right, by eliminating fossil-fuel subsidies, is the single most
effective measure to cut energy demand in countries where they
persist, while bringing other immediate economic benefits”, said Mr
Tanaka.

 

WEO-2010 demonstrates that what
governments do, and how that action affects technology, the price
of energy services and end-user behaviour, that will shape the
future of energy in the longer term.

“We
need to use energy more efficiently and we need to wean ourselves
off fossil fuels by adopting technologies that leave a much smaller
carbon footprint”, Mr. Tanaka said.

 
 

The
central scenario in this year’s Outlook - the New Policies
Scenario - sees world primary energy demand increases by 36%
between 2008 and 2035, or 1.2% per year on average. The assumed
policies make a tangible difference to energy trends: demand grew
by 2% per year over the previous 27-year period.

 

In this
Scenario, Non-OECD countries account for 93% of the projected
increase in world primary energy demand. China - which IEA
preliminary data suggests overtook the United States in 2009 to
become the world’s largest energy user despite its low per capita
energy use - contributes 36% to the projected growth in global
energy use.

 

“It is
hard to overstate the growing importance of China in global energy.
How the country responds to the threats to global energy security
and climate posed by rising fossil-fuel use will have far-reaching
consequences for the rest of the world”, Mr. Tanaka
added.

 

China is at the forefront of efforts to
increase the share of new low-carbon energy technologies, including
alternative vehicles, which will help to drive down their costs
through faster rates of technology learning and economies of scale,
and boost their deployment worldwide.

 

Globally, fossil fuels remain dominant over the
Outlook period in the New Policies Scenario, though their
share of the overall energy mix falls in favour of renewable energy
sources and nuclear power. Oil nonetheless remains the leading fuel
in the energy mix by 2035, followed by coal.

 

Of the
three fossil fuels, gas consumption grows most rapidly, its share
of total energy use almost reaching that of coal.

 

Other
key points in the New Policies Scenario are:

• 
  
  The
  oil price is set to rise, reflecting the growing insensitivity of
  both demand and supply to price. In the New Policies Scenario, the
  average IEA crude oil price rises from just over $60 in 2009 to
  $113 per barrel (in year-2009 dollars) in 2035. 
   
  
  

• 
  
  Oil
  demand continues to grow steadily, reaching about 99 million
  barrels per day (mb/d) by 2035 - 15 mb/d higher than in 2009. All
  of the net growth comes from non-OECD countries, almost half from
  China alone; demand in the OECD actually falls, by over 6
  mb/d.
  
  

• 
  
  Crude
  oil output reaches an undulating plateau of just under 69 mb/d by
  2020 while production of natural gas liquids (NGLs) and
  unconventional oil - notably Canadian oil sands - grows
  strongly. 
  
  

• 
  
  OPEC
  countries will account for an even larger share of global
  production, with the biggest increases coming from Saudi Arabia and
  Iraq. Production in and exports of oil (and gas) from the Caspian
  region also grow substantially. 
   
  
  

• 
  
  
  “Renewable energy can play a central role in reducing
  carbon-dioxide emissions and diversifying energy supplies, but only
  if strong and sustained support is made available”, Mr. Tanaka
  said. In the New Policies Scenario, government intervention in
  support of renewables (electricity from renewables and biofuels)
  increases from $57 billion in 2009 to $205 billion (in 2009
  dollars) by 2035. 
   
  
  

• 
  
  The
  share of modern renewable energy sources, including sustainable
  hydro, wind, solar, geothermal, modern biomass and marine energy,
  in global primary energy use triples between 2008 and 2035 and
  their combined share in total primary energy demand increases from
  7% to 14%. 
   
  
  

• 
  
  The
  energy trends envisioned in the New Policies Scenario imply that
  national commitments to reduce greenhouse-gas emissions, while
  expected to have some impact, are collectively inadequate to meet
  the Copenhagen Accord’s overall goal of holding the global
  temperature increase to below 2°C. 
   
  
  

• 
  
  
  Rising demand for fossil fuels would continue to drive
  up energy-related carbon-dioxide (CO2)
  emissions through to 2035, making it all but impossible to achieve
  the 2°C goal, as the required reductions in emissions after 2020
  would be too steep.
  
  

The New
Policy Scenario trends are in line with stabilizing the
concentration of greenhouse gases at over 650 parts per million
(ppm) of CO2-equivalent (eq), resulting
in a likely temperature rise of more than 3.5°C in the long
term.

 

In
order to have a reasonable chance of achieving the goal, the
concentration of greenhouse gases would probably need to be
stabilized at a level no higher than 450 ppm
CO2-eq.

 

The 450
Scenario describes how the energy sector could evolve were this
objective to be achieved. It assumes
implementation of measures to realize the more ambitious end of
target ranges announced under the Copenhagen Accord and more rapid
implementation of the removal of fossil-fuel subsidies agreed by
the G-20 than assumed in the New Policies
Scenario.

 

This
action brings about a much faster transformation of the global
energy system and a correspondingly faster slowdown in global
CO2 emissions. For example, oil demand
peaks just before 2020 at 88 mb/d, only 4 mb/d above current
levels, and declines to 81 mb/d in 2035. Coal demand peaks before
2020. Demand for gas also reaches a peak before the end of the
2020s. Renewables and nuclear double their current combined share
to 38% in 2035.

 

class=”Default”>style=”mso-bidi-font-style: normal;”>A lack of ambition
in the Copenhagen Accord pledges has increased our estimated cost
of reaching the 2°C goal by $1 trillion and undoubtedly made it
less likely that the goal will actually be achieved. Doing so would
require a phenomenal policy push by governments around the world.
The technology exists today to enable such a change, but the
required rate of technological transformation would be
unprecedented.

 

“The
message here is clear. We must act now to ensure that climate
commitments are interpreted in the strongest way possible and that
much stronger commitments are adopted and taken up after 2020, if
not before. Otherwise, the 2°C goal could be out of reach for
good”, Mr. Tanaka said.

 

href=”http://www.worldenergyoutlook.org/”
target=”_blank”>Presentation graphs and Fact Sheets are available
here