14 November 2011
Without a bold change of policy direction, the world will lock itself into an insecure, inefficient and high-carbon energy system, the International Energy Agency warned as it launched the 2011 edition of the World Energy Outlook (WEO). “Growth, prosperity and rising population will inevitably push up energy needs over the coming decades. But we cannot continue to rely on insecure and environmentally unsustainable uses of energy,” said IEA Executive Director Maria van der Hoeven. “Governments need to introduce stronger measures to drive investment in efficient and low-carbon technologies.”
Three global scenarios were analyzed in the report:
- The New Policies Scenario, the central scenario for the WEO, which assumes recent government policy commitments will be implemented in a cautious manner.
- The Current Policies Scenario, which assumes no new policies are added to those in place as of mid-2011 (“business as usual”).
- The 450 Scenario, consistent with the globally agreed goal of limiting the long-term increase in the global mean temperature to 2°C above pre-industrial levels.
Under the New Policies Scenario, primary energy demand increases by one-third between 2010 and 2035, with 90% of the growth in non-OECD economies, including China and India. The share of fossil fuels in global primary energy consumption falls from around 81% today to 75% in 2035. Renewables increase from 13% of the mix today to 18% in 2035; the growth in renewables is underpinned by subsidies that rise from $64 billion in 2010 to $250 billion in 2035, support that in some cases cannot be taken for granted in this age of fiscal austerity. By contrast, subsidies for fossil fuels amounted to $409 billion in 2010.
Oil demand rises from 87 million barrels per day (mb/d) in 2010 to 99 mb/d in 2035, with all the net growth coming from the transport sector in emerging economies. The passenger vehicle fleet doubles to almost 1.7 billion in 2035 and the transport oil demand reaches almost 60 mb/d in 2035, a growth of about 14 mb/d over 2010 levels. Alternative technologies, such as hybrid and electric vehicles that use oil more efficiently or not at all, continue to advance but they take time to penetrate markets.
The outlook for oil demand differs sharply between the three scenarios. Under the Current Policies Scenario oil demand would reach 107 mb/d by 2035, a 24% increase over 2010 levels, or an average annual increase of 0.8%. In the 450 Scenario, on the other hand, oil demand peaks before 2020 at just below 90 mb/d and declines to 78 mb/d, almost 10% below 2010 levels, by 2035.
The cost of bringing oil to market rises as oil companies are forced to turn to more difficult and costly sources to replace lost capacity and meet rising demand. Production of conventional crude oil—the largest single component of oil supply—remains at current levels before declining slightly to around 68 mb/d by 2035 (New Policies Scenario). To compensate for declining crude oil production at existing fields, 47 mb/d of gross capacity additions are required, twice the current total oil production of all OPEC countries in the Middle East. A growing share of output comes from natural gas liquids (over 18 mb/d in 2035) and unconventional sources (10 mb/d). The largest increase in oil production comes from Iraq, followed by Saudi Arabia, Brazil, Kazakhstan and Canada. Biofuels supply triples to the equivalent of more than 4 mb/d, bolstered by $1.4 trillion in subsidies over the projection period.
The use of coal—which met almost half of the increase in global energy demand over the last decade—rises 65% by 2035. Prospects for coal are especially sensitive to energy policies—notably in China, which today accounts for almost half of global demand.
In the New Policies Scenario, nuclear output rises by over 70% by 2035, as most countries with nuclear programs have reaffirmed their commitment to them. But given the increased uncertainty since the Fukushima Daiichi incident, that could change, said IEA.
The future for natural gas is more certain: its share in the energy mix rises and gas use almost catches up with coal consumption. One country set to benefit from increased demand for gas is Russia, which is the subject of a special in-depth study in WEO-2011. Key challenges for Russia are to finance a new generation of higher-cost oil and gas fields and to improve its energy efficiency. If Russia improved its energy efficiency to the levels of comparable OECD countries, it could reduce its primary energy use by almost one-third, an amount similar to the consumption of the United Kingdom.
Under the New Policies Scenario, cumulative CO2 emissions over the next 25 years amount to three-quarters of the total from the past 110 years, leading to a long-term average temperature rise of 3.5°C. Were the new policies not implemented, we are on an even more dangerous track, to an increase of 6°C. China’s per-capita emissions match the OECD average in 2035.
As each year passes without clear signals to drive investment in clean energy, the “lock in” of high-carbon infrastructure is making it harder and more expensive to meet the climate goals assumed in the 450 Scenario (2°C temperature increase). Four-fifths of the total energy-related CO2 emissions permitted to 2035 in the 450 Scenario are already locked-in by existing capital stock, including power stations, buildings and factories. Without further action by 2017, the energy-related infrastructure then in place would generate all the CO2 emissions allowed in the 450 Scenario up to 2035. Delaying action is a false economy: for every $1 of investment in cleaner technology that is avoided in the power sector before 2020, an additional $4.30 would need to be spent after 2020 to compensate for the increased emissions, estimated the IEA.