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Chilling vision of global warming

Our chances of successfully tackling climate change before damage to the environment becomes irreversible are worsening. So says the IEA in its most worrying World Energy Outlook ever. Alex Forbes reports

"WE ARE not running out of energy. We are not running out of money. We are running out of time." It was with these words that Fatih Birol, chief economist at the International Energy Agency (IEA), last month stressed that the need for action to mitigate climate change has become more urgent than ever. His plea came just a week before the Intergovernmental Panel on Climate Change (IPCC) issued a draft summary for its latest report, stating that climate change is "unequivocal" and could lead to "abrupt and irreversible" impacts.

Speaking to journalists at the London launch of the annual World Energy Outlook (WEO) – the IEA's flagship publication, widely regarded as the most authoritative study of its type – Birol and the agency's new executive director, Nobuo Tanaka, were in sombre mood.

"World leaders have made highly publicised pledges to take action to address concerns over energy security and climate change. Nevertheless, since this time last year, when my predecessor [Claude Mandil] launched the 2006 WEO, the long-term outlook has deteriorated," said Tanaka.

"Projected global energy demand is higher than before and supply emission trends are worsening. Energy demand is rising unacceptably, with associated risks of supply interruptions, high prices and damage to the environment."

Tanaka underlined that the deterioration in the outlook over the past year was despite the adoption of several new energy policies. So why is it that the future now looks bleaker than before?

For Birol, who leads the team that produces the WEO, new data and analysis on the effects that China and India are likely to have on the global energy economy have come as a shock. Birol described the numbers that have emerged as "stunning".

Economic growth in both countries has so exceeded the expectations of organisations such as the IMF, the World Bank and indeed the IEA, that previous projections of how the global energy economy might develop now look over-optimistic.

Moreover, because the energy economies of China and India are mainly based on coal – and will probably remain so – the environmental consequences of higher energy consumption, in terms of carbon dioxide (CO2) emissions, are magnified.

Coal resurgent

The resurgence of coal is a central theme of the 2007 WEO and not just because of what is projected to happen in India and China. The high price of oil, and the consequent high price of gas in regions where prices are oil-indexed, has led electricity generators increasingly to favour coal as a fuel. In regions where gas prices are determined by traded markets – mainly North America and the UK – the now-commonplace volatility of gas prices means natural gas, which has lower emissions of CO2 per unit of energy consumed than coal or oil, is no longer seen as the automatic fuel of choice for power generation.

Both Birol and Tanaka were at pains to stress that unless policymakers take "decisive and urgent action" to alter the global energy "trajectory" the implications will be severe, not just for climate change but also for security of energy supply – with an oil-supply crunch possible between now and 2015.

However, continued Birol, supply security is an issue that concerted international action could address in a reasonably short time if there were sufficient political will. The same could not be said of climate change, he stressed, adding that the coming decade would be critical in preventing "irreversible" environmental damage.

In its 2006 WEO, the IEA projected that in a business-as-usual situation (the reference case) world primary energy demand would increase by 53% between 2004 and 2030, or by 1.6% a year, to reach 17.095bn tonnes of oil equivalent a year (toe/y). The reference case in the latest WEO projects an increase of 55% between 2005 and 2030, or 1.8% a year, to 17.721bn toe/y. In other words, projected demand in 2030 is 4% higher.

Figure 2a projects how the fuel mix evolves in the reference case, emphasising that, by 2030, fossil fuels remain overwhelmingly dominant. "In line with the spectacular growth of the past few years," says the IEA, "coal use sees the biggest increase in absolute terms, jumping by 73% between 2005 and 2030, and pushing its share of total energy demand up from 25% to 28%."

This puts primary coal demand in 2030 at 4.994bn toe, up by 12% from the projection of 4.441bn toe in the 2006 WEO (which, in turn, was up by 19% on the projection in the 2005 WEO). The average annual growth rate, put at 1.8% in the 2006 edition, has risen to 2.2%.

Energy-related CO2 emissions in the reference case of the 2006 WEO were projected to rise by 55% between 2004 and 2030, or 1.7% a year, taking them to 40.4bn tonnes a year (t/y). This year's reference case projects an increase of 57% between 2005 and 2030, or 1.8% a year, taking them to 41.9bn t/y.

Investment requirements to meet the growth in demand in the reference case are put at $22 trillion, some $1.7 trillion higher than last year – despite the projection period now being a year shorter – because of cost inflation, particularly in the upstream oil and gas industry.


The reference case assumes that governments implement no new energy policies during the projection period. That means the situation in 2007 differs from the one in 2006 in that policies that have since been adopted are taken into account. These include tighter fuel-economy measures for vehicles, new measures to boost biofuels use in the US, and measures to support renewables in Europe and Japan. However, the IEA points out that "the overall effect of these actions on total energy demand at the global level is limited."

Following the pattern of previous years, the IEA also makes projections using an "alternative" case. This assumes a selection of policies under consideration is adopted during the projection period. Figure 2b shows how demand for fossil fuels – coal, oil and gas – differs from the projections in the reference case.

In building the alternative policy case the IEA took account of numerous proposed policies from both OECD and non-OECD countries. However, the agency notes that: "The number and strength of policies under consideration continue to grow faster than the number and strength of new policies adopted, reflecting a general pattern of growing concern, but more talk than action."

Nevertheless, from both energy security and environmental viewpoints, the alternative case is a substantial improvement on the reference case. Total primary energy demand in 2030 is 15.783bn toe, 11% lower than in the reference case, while CO2 emissions are 19% lower at 33.9bn tonnes. This may be better, but it is still a long way from what is needed to keep climate change within acceptable limits.

Acceptable climate change?

So what are acceptable limits? In early 2007, the European Union (EU) made a hullabaloo about the need to keep global temperatures to within 2°C above the level that prevailed in the pre-industrial era, citing work carried out by the IPCC.

At the Heiligendamm summit in the middle of this year, the leaders of the G8 countries met the leaders of a number of large developing countries and the heads of various international organisations, including the IEA, to discuss climate-change policy. Following those meetings, they committed to "taking strong and early action to tackle climate change ... to stabilise greenhouse-gas (GHG) concentrations at a level that would prevent dangerous anthropogenic interference with the climate system". Again, the emphasis was on the 2°C criterion supported by the EU.

In what is arguably the most worrying part of the WEO, the IEA looks at what it would take to stabilise the concentration of GHG emissions in the atmosphere at a level that would meet this criterion. According to the IEA, the global atmospheric concentration of CO2 increased from a pre-industrial level of about 280 parts per million (ppm) to 379 ppm in 2005.

In its latest reports, the IPCC sets out a range of GHG-emissions forecasts and how various GHG concentrations are likely to affect temperatures. In the most hopeful of these, a concentration of CO2 and other GHGs of 445-490 ppm (expressed in terms of a CO2-equivalent concentration) leads to a global mean temperature increase above pre-industrial levels of 2.0-2.4°C.

Massive reductions ...

The IEA predicts that to stabilise GHG concentrations in this range would require energy-related CO2 emissions to be reduced to around 23bn tonnes in 2030, some 19bn tonnes less than in the reference case and some 11bn tonnes less than in the alternative case. (For the purpose of comparison, the agency says its reference case equates to a 6°C rise while the alternative policy case equates to a 3°C rise.)

The IEA continues that "in response to requests from policymakers" it has examined "one possible pathway to achieving this very ambitious target in order to illustrate the magnitude and urgency of the challenge of transforming the global energy system over the projection period".

Figure 4 shows how GHG emissions would have to fall between now and 2030 in this so-called "450 [ppm] stabilisation case". Says the IEA: "In the 450 stabilisation case, cleaner and more advanced technologies are deployed more quickly than in the alternative policy scenario. In addition, technologies that are not yet financially viable, including CO2 capture and storage and second-generation biofuels technologies, are assumed to be widely deployed."

... impossible target?

The IEA adds that: "Achieving this outcome would be possible only with very strong political will worldwide and at substantial cost." Part of the cost would stem from the need to prematurely retire existing energy-using capital. It is hard to envisage this target becoming reality, for three reasons:

  • Only action taken on a global level could possibly lead to such reductions, because all the largest emitters, including China and India, would have to participate for the strategy to work. Not surprisingly, they argue that their history of emissions is much, much lower than that of OECD countries and that they should not be forced to suffer disproportionately in clearing up the mess made by others;
  • The shocking resurgence in demand for coal is not limited to China and India. The US, in particular, is a significant user of coal for power generation; and
  • The technological hurdles are considerable. Clean-coal technology is still years away from economic viability (to the extent that it is not included in the alternative-policy case). Nuclear power, meanwhile, faces a number of obstacles, not least that of public acceptance in many countries. And renewables, although growing strongly, are starting from a very small base.

The 2007 WEO has certainly caused a stir in the energy community. Last month's World Energy Congress in Rome was dominated by the issue of climate change to an extent unimaginable at the previous congress, in Sydney in 2004. Speaker after speaker repeated Tanaka's mantra that "this is a global issue that requires a global response".

Talks on the UN climate convention continue this month as representatives from 180 countries meet in Bali to discuss what climate mitigation policies should follow the Kyoto Protocol when it expires in 2012. Indonesia's president, Susilo Bambang Yudhoyono, recently described the Bali conference as "crucial to the future of mankind".

What the WEO makes clear is that we now need to see more action than talk.

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