IEA WEO 2015

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“The direction of travel is changing, but the destination is still not 2 degrees”, IEA warns 

 

151110 - Despite the shift in policy intentions catalysed by COP21, more is needed to avoid the worst effects of climate change, The IEA said in its latest World Energy Outlook published on November 10.

According to the IEA, there are unmistakable signs that the much-needed global energy transition is underway, but not yet at a pace that leads to a lasting reversal of the trend of rising CO2  emissions. Annual investment in low-carbon technologies in the Agency’s central scenario increases, but the cumulative $7.4 trillion invested in renewable energy to 2040 represents only around 15% of total investment in global energy supply. The steady decarbonisation of electricity supply is not matched by a similarly rapid shift in end-use sectors, where it is much more difficult and expensive to displace coal and gas as fuels for industry, or oil as a transport fuel. The net result is that energy policies, as formulated today, lead to a slower increase in energy-related CO2 emissions, but not the full de-coupling from economic growth and the absolute decline in emissions necessary to meet the 2 °C target.

In a WEO special report released in June 2015, Energy and Climate Change, the IEA experts showed what more can be done, at no net economic cost, to bring about a peak in energy-related emissions by 2020 – an essential step if the door to a 2°C outcome is to remain open:

n       Increasing energy efficiency in the industry, buildings and transport sectors.

n       Progressively reducing the use of the least-efficient coal-fired power plants and banning their construction.

n       Increasing  investment  in  renewable  energy  technologies  in  the  power  sector from Zone de Texte: © OECD/IEA, 2015 $270 billion in 2014 to $400 billion in  2030.

n       Phasing out of remaining fossil-fuel subsidies to end-users by 2030.

n       Reducing methane emissions in oil and gas production.


The conclusion, reinforced by projections from the WEO-2015 central scenario, is that the framework for climate action agreed at COP21 needs to provide a procedure which will secure progressively stronger climate commitments over time if the world is to keep to an emissions trajectory consistent with the 2 °C goal. A clear and credible vision of long-term decarbonisation is vital to provide the right signals for investment and to allow a low-carbon, high-efficiency energy sector to be at the core of international efforts to combat climate change, the IEA said.

Concerning oil prices, the IEA considers that an extended period of lower oil prices would benefit consumers but would trigger energy-security concerns by heightening reliance on a small number of low-cost producers, or risk a sharp rebound in price if investment falls short.

The WEO report finds that the plunge in oil prices has set in motion the forces that lead the market to rebalance, via higher demand and lower growth in supply, although the adjustment mechanism in oil markets is rarely a smooth one. In the central scenario of WEO-2015, a tightening oil balance leads to a price around $80 per barrel by 2020. But WEO-2015 also examines the conditions under which prices could stay lower for much longer. Since prices at today's levels push out higher-cost sources of supply, such a scenario depends heavily on the world's lower-cost producers: reliance on Middle East oil exports eventually escalates to a level last seen in the 1970s. Such a concentration of global supply would be accompanied by elevated concerns about energy security, with Asian consumers – the final destination of a huge share of regionally-traded oil – particularly vulnerable. Developing Asia, a region in which India takes over from China as the largest source of consumption growth, is the leading demand centre for every major element of the world's energy mix in 2040 – oil, gas, coal, renewables and nuclear. By 2040, China's net oil imports are nearly five times those of the United States, while India's easily exceed those of the European Union.

"It would be a grave mistake to index our attention to energy security to changes in the oil price," said IEA Executive Director Fatih Birol. "Now is not the time to relax. Quite the opposite: a period of low oil prices is the moment to reinforce our capacity to deal with future energy security threats."

The report also underlines that the single largest energy demand growth story of recent decades is near its end: China's coal use reaches a plateau at close to today's levels, as its economy rebalances and overall energy demand growth slows, before declining. India – the subject of an in-depth focus in WEO-2015 – moves to centre stage in global energy, with high levels of economic growth, a large (and growing) population and low (but increasing) levels of energy use per capita all pushing energy demand to two-and-a-half-times current levels.

Overall, world energy demand grows by nearly one-third between 2013 and 2040 in the central scenario of WEO-2015, with the net growth driven entirely by developing countries. The links between global economic growth, energy demand and energy-related emissions weaken: some markets (such as China) undergo structural change in their economies and others reach a saturation point in demand for energy services. All adopt more energy efficient technologies, although a prolonged period of lower oil prices could undercut this crucial pillar of the energy transition; diminished incentives and longer payback periods mean that 15% of the energy savings are lost in a low oil price scenario. Lower prices alone would not have a large impact on the deployment of renewables, but only if policymakers remain steadfast in providing the necessary market rules, policies and subsidies.

 

Download the WEO 2015 Executive Summary and Factsheet HERE 

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