Energy Agency releases World Energy Outlook

Nov. 17, 2010, London, UK – Recent policy
moves are a start, but much stronger action is needed to accelerate the
transformation of the global energy system, says the International Energy
Agency (IEA)’s World Energy Outlook 2010 (WEO-2010).

“The Copenhagen Accord and the agreement
among G20 countries to phase out subsidies are important steps forward. But,
these moves still fall a very long way short of what is required to set us on
the path to a truly sustainable energy system,” says Nobuo Tanaka, executive
director of the IEA.

The strength of the economic recovery holds
the key to how energy markets will evolve over the next few years. WEO-2010
demonstrates that it is what governments do, and how that action affects
technology, prices 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,” says Tanaka.

The central scenario in WEO-2010—the New
Policies Scenario—takes account of the broad policy commitments and plans that
have been announced by countries around the world. “We have taken governments
at their word, in assuming that they will actually implement the policies and
measures, albeit in a cautious manner, to ensure that the goals they have set
are met,” says Tanaka. In that scenario, 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 the New Policies Scenario, non-OECD
countries account for 93% of the projected increase in world primary energy
demand. China, which IEA preliminary data suggest 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,” notes Tanaka. 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.

Globally, fossil fuels remain dominant over
the Outlook period in the New Policies Scenario, though their share of the
overall energy mix decreases in favour of renewable energy sources and nuclear
power. Nonetheless, oil remains the leading fuel in the energy mix by 2035,
followed by coal. Of the three fossil fuels, gas consumption grows most
rapidly, with its share of total energy use almost reaching that of coal.

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 more than 6
mb/d. Crude oil output reaches an undulating plateau of just under 69 mb/d by
2020, and production of natural gas liquids (NGLs) and unconventional oil,
notably Canadian oil sands, grows strongly. OPEC countries account for a
growing 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,” says Tanaka. 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 effect, 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 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.

To have a reasonable chance of achieving
the goal, the concentration of greenhouse gases would probably need to be
stabilised 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 energy double their current combined share to 38% in
2035.

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,” says Tanaka. “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.”

In analysis that builds on the IEA’s
ongoing work for the G-20, 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”, says Tanaka.

To download the executive summary, click here.


To order a copy of the full report, go
here: www.worldenergyoutlook.org/.