Bridges Weekly Trade News Digest • Volume 12 • Number 39 • 19th November 2008

World Energy Outlook Calls for ‘Global Energy Revolution’

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Reaffirming previous predictions about the world’s heavy reliance on fossil fuels, the 2008 edition of the International Energy Agency’s World Energy Outlook called for massive investment in energy development and urgent action to address climate change, but its projected oil growth rates were scaled back from earlier calculations due to the current recession.

“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, with growth from China and India accounting for over a half of this increase. While the IEA projected that renewable will become the second largest source of electricity soon after 2010, in part because of the high prices of fossil fuels, a third of the new energy demand will be met by coal.

In addition to the obvious climate concerns this raises, the World Energy Outlook said that the rapidly growing demand requires major investment. But the US$ 26 trillion the IEA’s analysts predict that governments will need to spend on the development of energy infrastructure between 2007 and 2030, up approximately US$ 4 trillion from the figure cited in the IEA’s 2007 outlook, is not necessarily being invested - especially in light of the current economic recession. In fact, the report warned of a potential energy crunch once the global economy begins to pick up speed again.

And 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 non-OPEC providers will register a slight production decline. Even under strict climate change policies, oil production is projected to continue to grow until peak production in 2030, where oil prices are likely to average more than US$ 120 per barrel, the report said.

But the oil market itself will change, according to the IEA. As more government producers emerge, there will be less room for market signals. Furthermore, many current oil fields will decline 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 historic highs in July - Tanaka said: “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. Under the “business as usual” scenario, run-away warming would amount to a six-degree-centigrade increase within a century, with catastrophic consequences for humanity, warned the IEA.

But the report said that alternative scenarios based on low-carbon energy development and energy efficiency could contain global warming at plus two to three degrees centigrade - a target embraced by the EU because it would allow the world to avoid the full force of “dangerous climate change.”

“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.”

To access the 2008 World Energy Outlook: http://www.worldenergyoutlook.org/2008.asp.

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.