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IEA's World Energy Outlook 2010 Sends Strong Message

Each year the International Energy Agency (IEA) releases its World Energy Outlook (WEO), a 700+ page report on the global state of the energy industry. This year's report indicates that stronger policy support will be necessary to meet global CO2 reduction targets.

In conducting research for the report, the IEA sets out three scenarios under which to explore the possible future of energy in the world.  The first scenario in WEO 2010 looks at what will happen should there be no new policies and essentially the world conducted its energy business as usual.  This is called the Current Policies Scenario and assumes no change in current energy policy as of mid-2010.  

The report also examines what would happen should all G20 countries enact policies to support commitments and plans that they have announced publicly, including the national pledges to reduce greenhouse- gas emissions and plans to phase out fossil-energy subsidies even where the measures to implement these commitments have yet to be identified or announced.  This is the New Policies Scenario and is the central scenario of this year’s Outlook. “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” said IEA Executive Director Nobuo Tanaka.

Finally, the report authors also set out a scenario they call the 450 Scenario, which sets out an energy pathway consistent with the 2°C goal through limitation of the concentration of greenhouse gases in the atmosphere to around 450 parts per million of CO2 equivalent (ppm CO2-eq).

New Policies Scenario

If governments around the world actually do what they say they will do, world primary energy demand increases by 36% between 2008 and 2035, or 1.2% per year on average.  This means that the policies they will implement actually 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 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,” said Tanaka.

In the New Policies Scenario, government intervention in support of renewables 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 energy demand increases from 7% to 14%.

The energy trends set out 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, mostly from non-OECD nations 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, according to the IEA.

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.

450 Scenario

In order to have a reasonable chance of achieving the Copenhagen 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.

To get to a level of 450 ppm CO2 there will need to be a more rapid implementation of the removal of fossil-fuel subsidies agreed by the G-20 than assumed in the New Policies Scenario. This action would bring about a much faster transformation of the global energy system and a correspondingly faster slowdown in global CO2 emissions, according to the IEA.

For example, in this aggressive scenario oil demand would peak just before 2020 at 88 million barrels per day (mb/d), only 4 mb/d above current levels, and declines to 81 mb/d in 2035. Coal demand would peak before 2020. Demand for gas would also reache a peak before the end of the 2020s. Renewables and nuclear would double their current combined share to 38% in 2035.

However the IEA recognizes that this ambitious goal will most likely never be met. “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,” said the report authors.

“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,” said Tanaka.

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 and that money would be better spent on climate change mitigation strategies said IEA. “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 Tanaka.

More information about the report can be found here.

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