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International Energy Agency
November 12, 2008
Executive Summary
The world’s energy system is at a crossroads. Current global trends in energy supply and consumption are patently unsustainable — environmentally, economically, socially. But that can — and must — be altered; there’s still time to change the road we’re on. It is not an exaggeration to claim that the future of human prosperity depends on how successfully we tackle the two central energy challenges facing us today: securing the supply of reliable and affordable energy; and effecting a rapid transformation to a low-carbon, efficient and environmentally benign system of energy supply. What is needed is nothing short of an energy revolution. This World Energy Outlook demonstrates how that might be achieved through decisive policy action and at what cost. It also describes the consequences of failure.
Oil is the world’s vital source of energy and will remain so for many years to come, even under the most optimistic of assumptions about the pace of development and deployment of alternative technology. But the sources of oil to meet rising demand, the cost of producing it and the prices that consumers will need to pay for it are extremely uncertain, perhaps more than ever. The surge in prices in recent years culminating in the price spike of 2008, coupled with much greater short-term price volatility, have highlighted just how sensitive prices are to short-term market imbalances. They have also alerted people to the ultimately finite nature of oil (and natural gas) resources. In fact, the immediate risk to supply is not one of a lack of global resources, but rather a lack of investment where it is needed. Upstream investment has been rising rapidly in nominal terms, but much of the increase is due to surging costs and the need to combat rising decline rates — especially in higher-cost provinces outside of OPEC. Today, most capital goes to exploring for and developing high-cost reserves, partly because of limitations on international oil company access to the cheapest resources. Expanding production in the lowest-cost countries will be central to meeting the world’s needs at reasonable cost in the face of dwindling resources in most parts of the world and accelerating decline rates everywhere.
Preventing catastrophic and irreversible damage to the global climate ultimately requires a major decarbonisation of the world energy sources. On current trends, energy-related emissions of carbon-dioxide (CO2) and other greenhouse gases will rise inexorably, pushing up average global temperature by as much as 6°C in the long term.
Strong, urgent action is needed to curb these trends. The 15th Conference of the Parties, to be held in Copenhagen in November 2009, provides a vital opportunity to negotiate a new global climate-change policy regime for beyond 2012 (the final year of coverage of the first commitment period of the Kyoto Protocol). The conference will need to put in place a framework for long-term co-operative action to bring the world onto a well-defined policy path towards a clear, quantified global goal for the stabilisation of greenhouse gases in the atmosphere. It will also need to ensure broad participation and put in place robust policy mechanisms to achieve the agreed objective.
The energy sector will have to play the central role in curbing emissions — through major improvements in efficiency and rapid switching to renewables and other lowcarbon technologies, such as carbon capture and storage (CCS).
Securing energy supplies and speeding up the transition to a low-carbon energy system both call for radical action by governments — at national and local levels, and through participation in co-ordinated international mechanisms. Households, businesses and motorists will have to change the way they use energy, while energy suppliers will need to invest in developing and commercialising low-carbon technologies. To make this happen, governments have to put in place appropriate financial incentives and regulatory frameworks that support both energy-security and climate-policy goals in an integrated way. Removing subsidies on energy consumption, which amounted to a staggering $310 billion in the 20 largest non-OECD countries in 2007, could make a major contribution to curbing demand and emissions growth. High international oil prices, by deterring consumption and encouraging more efficient demand-side technologies, push in the same direction, but only at the expense of economic growth and of living standards in consuming countries, both rich and poor. And some of the alternatives to conventional oil that high prices encourage are even more carbon-intensive. Many countries have made progress in crafting national responses, but much more needs to be done. A new international climate agreement is but a first essential step on the road towards a sustainable energy system; effective implementation is just as crucial. Delay in doing either would increase the eventual cost of meeting any given global climate target.
© 2008 Climate Security Project