The global economic recession has provided a narrow window of opportunity to invest in low-carbon technology at a time when emissions are well below what they would have been had the recession not occurred, states the International Energy Agency’s 2009 World Energy Outlook, with the much awaited report released last week.
The temporarily lowered emissions as a result of the recession will “count for nothing” unless countries take solid action to curb the growth of greenhouse gas emissions, the report states.
The IEA is hoping the outlook will add momentum to negotiations at the United Nations Climate Change Conference, which takes place Dec. 7-18 in Copenhagen, said Nobuo Tanaka, executive director of the IEA.
The IEA’s suggested course of action, titled the “450 Scenario,” would capitalize on the currently lowered emissions levels in order to stabilize the concentration of greenhouse gases in the atmosphere at 450 parts per million.
While households and businesses are largely responsible for making the required investments, governments hold the key to changing the mix of energy investment, the outlook states. The scenario requires governments to take collective policy action to limit greenhouse gases through cap-and-trade and other measures.
In the IEA reference scenario, a situation wherein businesses and governments continue at status quo, demand increases by 40 percent between now and 2030, reaching 16.8 billion tons of oil equivalent. China and India alone represent more than 53 percent of incremental demand to 2030.
Projected global demand is lower than in last year’s outlook due to the impact of the economic crisis and new government policies introduced over the past year. Fossil fuels account for more than three-quarters of incremental demand. In addition to increasing susceptibility to energy price spikes, the reference scenario projects a high level of spending on oil and gas imports.
On the other hand, the 450 Scenario sets out an aggressive timetable of actions needed to limit the long-term concentration of greenhouse gases in the atmosphere, with fossil fuel demand peaking in 2020 and energy-related carbon dioxide emissions falling to 26.4 gigatons in 2030 from 28.8 Gt in 2007.
To reach the goals of the 450 Scenario, an incremental worldwide investment of $10.5 trillion is required, but the cost is largely offset by economic, health and energy-security benefits, according to the report. Energy bills in transport, buildings and industry alone are reduced by $8.6 trillion globally over the period of 2010-30.
The outlook theorizes that the current lower investment in the oil sector as a result of the recession is a threat to the world economy. Investment in upstream oil and gas has dropped by more than $90 billion this year, a 19 percent drop compared to 2008, dovetailing with a decline in demand for oil products. However, the IEA predicts that demand will begin to recover in 2010, reaching 88 million bpd in 2015 and then 105 million bpd in 2030, which is a 24 percent expansion in global consumption. A sharp increase in demand following a decrease in investment in fossil fuels could lead to price spikes at a time when economies are still weak.
The capital required to meet projected energy demand through to 2030 is large, amounting in cumulative terms to $26 trillion (in year-2008 dollars) - equal to $1.1 trillion or 1.4 percent of global GDP per year on average, the outlook states.
Tanaka said increased investments in oil and gas production is consistent with the IEA’s 450 Scenario, but alone they won’t be enough to both stabilize world economies and lower emissions. Staying at status quo will have “profound” implications for environmental protection, energy security and economic development, the report states. They would also exacerbate ambient air quality concerns, causing serious public health and environmental effects.
The reference scenario sees a continued rapid rise in energy-related CO2 emissions through to 2030, resulting from increased global demand for fossil energy. Having already increased from 20.9 Gt in 1990 to 28.8 Gt in 2007, CO2 emissions are projected to reach 34.5 Gt in 2020 and 40.2 Gt in 2030 - an average rate of growth of 1.5 percent per year over the full projection period.
Preliminary data suggest that global energy-related emissions of CO2 may decline in 2009 by about 3 percent, but they are expected to resume an upward trajectory from 2010, the outlook states.
“The CO2 concentration implied by the Reference Scenario would result in the global average temperature rising by up to 6 degrees Celsius,” the outlook states. “This would lead almost certainly to massive climatic change and irreparable damage to the planet.”
Whatever climate policies are introduced, natural gas is also set to continue to play a bridging role in meeting the world’s sustainable energy needs, the report states. In the reference scenario, gas demand rises by 41 percent from 3.0 trillion cubic meters in 2007 to 4.3 Tcm in 2030. Gas demand also continues to expand in the 450 Scenario but is 17 percent lower in 2030 than in the Reference Scenario due to more efficient use, lower electricity demand and increased switching to non-fossil energy sources.
The world’s remaining resources of natural gas are easily large enough to cover any conceivable rate of increase in demand through 2030 and well beyond, the report states. The long-term global recoverable gas resource base is estimated at more than 850 Tcm. Unconventional gas resources - mainly coalbed methane, tight gas (from low-permeability reservoirs) and shale gas - make up about 45 percent of this total.
Eventually, the unexpected boom in North American unconventional gas production, together with the current recession’s impact on demand, will contribute to a glut of gas supply in the next few years, the outlook states. The IEA estimates that the under-utilization of pipeline capacity between the main regions and global LNG liquefaction capacity combined rises from around 60 Bcm in 2007 to close to 200 Bcm in the period 2012-2015.
The 450 Scenario also shows that universal electricity access could be achieved by an additional annual worldwide investment of $35 billion through 2030, which is only 6 percent of the power-sector investment projected in the reference scenario. Currently, one-fifth of the world’s population is without electricity, the report states.
