The world will lock itself into an “insecure, inefficient and high-carbon energy system” if it does not adopt a “bold change of policy directions,” the International Energy Agency has warned.
The Western countries’ energy watchdog said governments need to introduce “stronger measures to drive investment in efficient and low-carbon technologies,” as it launched its flagship publication, the 2011 World Energy Outlook, on Tuesday.
It also warned that oil prices could reach $150 a barrel by 2035 if investment in the key Middle East and North Africa region falls by just one-third between 2011 and 2015.
“The scale of the energy challenge is becoming increasingly difficult,” said Maria van der Hoeven, IEA executive director, citing the Fukushima nuclear accident in Japan and the unrest in the Middle East this year which have disrupted supplies.
The IEA went on to warn that, without major new investments in clean energy technology, the “door is closing” on governments’ attempts to meet their goal of limiting the temperature rise to 2 degrees Celsius.
“There is a need for an international legally binding agreement to put a price on carbon, to put in place some new regulations,” said Fatih Birol, the IEA’s chief economist. “If we look at the current state of climate talks and … the financial crisis, it is difficult to say the wind is blowing in the right direction,” he added.
The world must also accept that demand for energy will continue to grow, said the IEA, as it raised its forecast for primary energy demand by one-third between 2010 and 2035, with 90 per cent of the growth in countries outside the 34 developed nations that make up the Organization for Economic Co-operation and Development. The forecast is based on the IEA’s New Policies Scenario which assumes that recent government commitments are implemented in a cautious manner.
“The global energy demand will grow very strongly,” said Mr. Birol, adding that decisions on new energy will be made in emerging market capitals such as Beijing. China will consolidate its position as the world’s largest energy consumer and is expected to consume nearly 70 per cent more energy than the U.S. by 2035.
The mix of fuels will also change. The share of fossil fuels in global primary energy consumption will fall from about 81 per cent today to 75 per cent in 2035.
Oil will remain the single most important fuel for the next 25 years, the IEA said, as it raised its forecast for oil demand from 87 million barrels a day in 2010 to 99 million barrels a day in 2035, “with all the net growth coming from the transport sector in emerging economies.”
There are about 800 million cars today and the agency expects this to more than double to 1.7 billion in 2035, Mr Birol said. The IEA predicts that half of the global oil demand will come from China, mainly owing to increased car ownership.
In terms of supply, Mr. Birol said the majority of production will come from the Middle East and Africa.
The use of coal, meanwhile, which met almost half of the increase in global energy demand over the last decade, will rise 65 per cent by 2035.
The IEA also published a scenario modelled on a low nuclear case in the wake of the Japanese crisis, which examines what will happen if the anticipated contribution of nuclear to future energy supply were to be halved.
Such a slowdown, it said, would increase import bills, heighten energy security concerns and “make it harder and more expensive to combat climate change.”