With the price of crude oil heading for the $100 a barrel benchmark, having risen in dollar terms by 61% and 45% in euro terms since January 2007, the International Energy Agency (IEA), the adviser to 26 industrialised countries including Ireland, said today that the world's primary energy needs are projected to grow by 55% between 2005 and 2030, at an average annual rate of 1.8% per year. Chinese and Indian crude oil imports will almost quadruple by 2030, creating a supply ``crunch'' as soon as 2015,
The IEA says demand in 2030 will reach 17.7 billion tonnes of oil equivalent (toe), compared with 11.4 billion toe in 2005. Fossil fuels will remain the dominant source of primary energy, accounting for 84% of the overall increase in demand between 2005 and 2030. Oil remains the single largest fuel, though its share in global demand falls from 35% to 32%. Oil demand reaches 116 million barrels per day in 2030 - 32 mb/d, or 37%, up on 2006. In line with the spectacular growth of the past few years, coal sees the biggest increase in demand in absolute terms, jumping by 73% between 2005 and 2030 and pushing its share of total energy demand up from 25% to 28%.
Most of the increase in coal use arises in China and India. The share of natural gas increases more modestly, from 21% to 22%. Electricity use doubles, its share of final energy consumption rising from 17% to 22%. Some $22 trillion of investment in supply infrastructure is needed to meet projected global demand. Mobilising all this investment will be challenging.
"The huge energy challenges facing China and India are global energy challenges and call for a global response. The World Energy Outlook 2007 (Exec Summary of report) charts a course to a more secure, competitive, lower carbon energy system � a course that must involve the world�s two emerging giants�, said Nobuo Tanaka, Executive Director of the International Energy Agency (IEA) today in London at the launch of the latest edition of the Outlook. The annual flagship publication of the IEA this year focuses on energy developments in China and India and their implications for the world.
"WEO-2007 demonstrates more clearly than ever that, if governments don�t change their policies, oil and gas imports, coal use and greenhouse-gas emissions are set to grow inexorably through to 2030 - even faster, in fact, than in last year's Outlook. These trends would threaten energy security and accelerate climate change. But the Outlook also shows how new policies can pave the way to an alternative energy future", Tanaka stressed.
Energy developments in China and India are transforming the global energy system as a result of their sheer size and their growing importance in international energy markets. "Rapid economic development will undoubtedly continue to drive up energy demand in China and India, and will contribute to a real improvement in the quality of life for more than two billion people. This is a legitimate aspiration that needs to be accommodated and supported by the rest of the world", said Tanaka. "Indeed, most countries stand to benefit economically from China's and India's economic development through international trade."
But the consequences of unfettered growth in global energy demand are alarming for all countries. If governments around the world stick with existing policies - the underlying premise of the WEO Reference Scenario - the world's energy needs would be well over 50% higher in 2030 than today.
China and India together account for 45% of the increase in global primary energy demand in this scenario. Both countries' energy use is set to more than double between 2005 and 2030. Worldwide, fossil fuels - oil, gas and coal - continue to dominate the fuel mix. Among them, coal is set to grow most rapidly, driven largely by power-sector demand in China and India. These trends lead to continued growth in global energy-related emissions of carbon-dioxide (CO2 ), from 27 Gt in 2005 to 42 Gt in 2030 - a rise of 57%. China is expected to overtake the United States to become the world's biggest emitter in 2007, while India becomes the third-biggest emitter by around 2015. China's per capita emissions almost reach those of OECD Europe by 2030.
Consuming countries will increasingly rely on imports of oil and gas - much of them from the Middle East and Russia. In the Reference Scenario, net oil imports in China and India combined jump from 5.4 mb/d in 2006 to 19.1 mb/d in 2030 � this is more than the combined imports of the United States and Japan today. World oil output is expected to become more concentrated in a few Middle Eastern countries - if necessary investment is forthcoming. Although production capacity at new fields is expected to increase over the next five years, it is very uncertain whether it will be sufficient to compensate for the decline in output at existing fields and meet the projected increase in demand. A supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices, cannot be ruled out.
| Saudi Arabian oil refinery at Yanbu, on the Red Sea coast |
Government action can alter appreciably these trends. If governments around the world implement policies they are considering today, as assumed in an Alternative Policy Scenario, global energy related
CO2 emissions would level off in the 2020s and reach 34 Gt in 2030 - almost a fifth less than in the Reference Scenario. Global oil demand would be 14 mb/d lower - a saving equal to the entire current output of the United States, Canada and Mexico combined. Measures to improve energy efficiency are the cheapest and fastest way to curb demand and emissions growth in the near term.
The savings are particularly large in China and India. For example, tougher efficiency standards for air conditioners and refrigerators alone would, by 2020, save the amount of power produced by the Three Gorges dam. Emissions of local pollutants in both countries, including sulphur-dioxide and nitrous oxides, would also be reduced sharply.
But even in the Alternative Policy Scenario, global CO2 emissions are still one-quarter above current levels in 2030. In a "450 Stabilisation Case", which describes a notional pathway to long-term stabilisation of the concentration of greenhouse gases in the atmosphere at around 450 parts per million, global emissions peak in 2012 and then fall sharply below 2005 levels by 2030. Emissions savings come from improved efficiency in industry, buildings and transport, switching to nuclear power and renewables, and the widespread deployment of CO2 capture and storage (CCS).
Exceptionally quick and vigorous policy action by all countries, and unprecedented technological advances, entailing substantial costs, would be needed to make this case a reality.
Economic growth in China and India could turn out to be significantly faster than assumed in the Reference and Alternative Policy Scenarios, resulting in more rapid growth in energy demand, oil and gas imports and CO2 emissions. In a High Growth Scenario, which assumes that China's and India's economies grow on average 1.5 percentage points per year faster than in the Reference Scenario, energy demand is 21% higher in 2030 in China and India combined. Globally, energy demand rises by 6% and CO2 emissions by 7%. "In this case, it would be all the more urgent for governments around the world to implement policies to curb the growth in fossil-energy demand and related emissions", Tanaka said.
"The emergence of new major players in global energy markets means that all countries must take vigorous, immediate and collective action to curb runaway energy demand", said. Tanaka. "The next ten years will be crucial for all countries, including China and India, because of the rapid expansion of energy-supply infrastructure. We need to act now to bring about a radical shift in investment in favour of cleaner, more efficient and more secure energy technologies.
IEA countries have long recognised the advantages of co-operation with China and India, reflected in a steady broadening of the range of collaborative activities through the IEA. This relationship symbolises the interdependence of the global energy community. One of my priorities as the new IEA Executive Director is to step up our co-operation with both countries. In good time this could hopefully pave the way, with the support of all the governments concerned, to an ultimate objective of their future membership of the Agency."