IEA World Energy Outlook: good news if we choose

Click to download a summary of the report

For at least the next half century, the United States and its allies will continue to rely on a substantial and growing amount of oil imports, according to this report from MIT in 2004. No they won’t, according to this report from the IEA this morning. The latest World Energy Outlook’s central scenario (“New Policies”) expects that by 2020 the US will become the world’s biggest oil producer and a net exporter of natural gas, thanks to a combination of technologies to exploit shale oil and “tight” gas (hard to access natural gas) and more fuel-efficient transport. By 2035, the US will almost be self-sufficient in energy and North America will be a net oil exporter, accelerating the switch in direction of international oil trade, with almost 90% of Middle Eastern oil exports going to Asia.

An even more startling change is suggested in the “Efficient World” scenario, where the growth in primary energy demand to 2035 is halved. Oil demand would peak just before 2020 and would be almost 13 mb/d lower by 2035 – the current production of Russia and Norway combined. This wouldn’t need any major or unexpected technological breakthroughs. It would be enough to remove the barriers obstructing the implementation of energy efficiency measures that are economically viable. Apart from anything else, greater energy efficiency could also be worth trillions of dollars. Additional investment of $11.8 trillion (in year-2011 dollars) in more energy-efficient technologies would be more than offset by reduced fuel expenditures. The accrued resources would facilitate a gradual reorientation of the global economy, boosting cumulative economic output to 2035 by $18 trillion, with the biggest GDP gains in India, China, the US and Europe. Energy-related CO2 emissions would peak before 2020, then decline.

If you think that sounds too good to be true, you’re probably right. The central scenario isn’t very hopeful: “the world is still failing to put the global energy system onto a more sustainable path”. Global energy demand is expected to grow by more than one-third by2035, with China, India and the Middle East accounting for 60% of the increase. The IEA agrees with that MIT report in saying that fossil fuels will continue to dominate the global energy mix, in part thanks to you and me subsidizing them more than ever: fossil fuel subsidies that amounted to $523 billion in 2011, up almost 30% on 2010 and six times more than subsidies to renewables. Emissions in this scenario correspond to a long-term average global temperature increase of 3.6C, compared with less than 3C in “Efficient World”.

Each edition of the World Energy Outlook shows that the climate goal of limiting warming to 2C is becoming more difficult and more costly with each year that passes. The latest edition shows that almost four-fifths of the CO2 emissions allowable by 2035 are already locked-in by existing power plants, factories, buildings, etc. If action to reduce CO2 emissions is not taken before 2017, all the allowable CO2 emissions would be locked-in by energy infrastructure existing at that time. Rapid deployment of energy-efficient technologies, as in “Efficient World” would postpone this complete lock-in to 2022, buying time to secure a global agreement to cut greenhouse-gas emissions.

World energy in 2035

Useful links

IEA Chief Economist Fathi Birol speaks to the OECD Observer about energy efficiency

Patrick Love

Leave a Reply