Bridges Trade BioRes • Volume 8 • Number 20 • 14th November 2008

Energy Agency Calls for Tough Action on Climate Change

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The 2008 edition of the International Energy Agency’s World Energy Outlook reaffirmed previous predictions about the world’s continued heavy reliance of fossil fuels. The agency somewhat scaled back its projected oil growth rates due to the current recession, and called for urgent action to address climate change.

“Current trends in energy supply and consumption are patently unsustainable – environmentally, economically and socially – they can and must be altered”, said Nobuo Tanaka, Executive Director of the International Energy Agency (IEA).

Overall, the IEA projected that global energy demand will grow by 45 percent by 2030, implying a 1.6 percent annual increase. A third of this new demand will be met by coal. In addition to the obvious climate concerns this raises, the World Energy Outlook also said that the rapidly growing demand requires major investment, which is not necessarily being made – especially in light of the current economic recession. The one trillion US$ needed on an annual basis are not being invested due to the credit crunch. In fact, the report warned of a potential energy crunch once the global economy begins to pick up speed again.

On a positive note, the IEA projected that renewables will become the second largest source of electricity soon after 2010, in part because of the high prices of fossil fuels.

The volatile oil market

According to the IEA, oil will remain the dominant energy source in the world. In terms of production, the World Energy Outlook said Middle East OPEC members will provide most of the additional oil demand, while traditional non-OPEC providers will register a slight production decline. Even under strict climate change policies, oil production would continue to grow within the period up until 2030.

The market itself will change, as more government producers emerge, and there will be less room for market price signals. In addition, many current oil fields will be declining in productivity, leaving expensive and challenging options for new exploitation.

Commenting on the current price of oil – at just under US$60 a barrel, down 60 percent since historical highs in July - Tanaka said that “one thing is certain. While market imbalances will feed volatility, the era of cheap oil is over.”

Climate mitigation scenarios

As in previous years, the IEA juxtaposed “business as usual” projections of the global energy landscape in 2030 with those needed to actively address the very real threat of climate change. The report developed two different alternative scenarios, comprising the interventions necessary to contain global warming at plus two degrees Centigrade – a target embraced by the EU because it would allow the world to avoid the full force of “dangerous climate change” – and three degrees Centigrade, respectively. Under the “business as usual” scenario, run-away warming would amount to six degrees Centigrade within a century, with catastrophic consequences for humanity, warned the IEA.

Stressing the importance of reaching an agreement at the upcoming meeting of the UN Framework Convention on Climate Change (UNFCCC) in Copenhagen in December 2009, the World Energy Outlook noted the need for action not only on behalf of OECD-countries. In fact, in order to stay within the two degree target, emerging economies would have to curtail their emissions growth as well, with emissions peaking at around 2020. Even if OECD countries were to bring down their emissions to zero, this would not be enough without action on behalf of the emerging economies, the report says.

While staying clear of any suggestions for burden-sharing or financing arrangements, the IEA developed its global alternative policy scenarios based on low-carbon energy development. The most important measures related to increased energy efficiency. In reaching both the target of a maximum warming of two and three degrees, efficiency measures would contribute more than half of the necessary decarbonisation of growth. The following categories of measures, in order of importance, were renewables and biofuels, carbon capture and storage, and nuclear.

Environmental group WWF said it agreed with the need for an energy revolution to tackle climate change, as called for by the IEA. Regarding the US$17 trillion investment needed under the alternative policy scenario set to keep temperatures at plus two degrees maximum, Stephan Singer, Director of WWF’s Global Energy Programme, said, “that sounds a lot of cash. But it’s only around 0.5 percent of global GDP which is far less than the price of inaction in form of the much higher costs of damaging impacts of climate change. Also, the various non-climate benefits such as reduced air pollution, new market opportunities for clean technologies, and saved money from energy bills are not included in this calculation.”

“We cannot let the financial and economic crisis delay the policy action that is urgently needed to ensure secure energy supplies and to curtail rising emissions of greenhouse gases,” Tanaka says in conclusion. “We must usher in a global energy revolution by improving energy efficiency and increasing the deployment of low-carbon energy.”

ICTSD reporting; “New Energy Realities – WEO Calls for Global Energy Revolution Despite Economic Crisis,” IEA RELEASE, 12 November 2008; “New Energy Realities – WEO Calls for Global Energy Revolution Despite Economic Crisis,” WWF RELEASE, 12 November 2008; “International Energy Agency raises alarm on oil, climate,” EURAKTIV, 13 November 2008; “IEA stokes doubts over world’s climate fight,” REUTERS, 12 November 2008.