The world’s policymakers must not lose sight of the long-term signs of stress that are emerging in the global energy system, the International Energy Agency warned today at the launch of its annual World Energy Outlook 2014 report in London.

Chief among these underlying issues, said IEA chief economist Fatih Birol, is the world’s disappearing carbon budget. The carbon budget that will keep global temperatures from rising over the 2°C limit needed to prevent climate change is around 2300 Gt. But without major policy changes, Birol warned, by 2040 we will have used up the entire amount, with the energy sector the main source of greenhouse gas emissions.

In 2013, global CO2 emissions increased by 2.6 per cent, reaching a record high of 33 Gt, and Birol said today’s policies risk locking in the current level of carbon emissions for many years to come.  China is responsible for 60 per cent of global emissions, which makes yesterday’s US-China climate agreement especially welcome as together the two countries are responsible for 45 per cent of world emissions.Maria van der Hoeven

However, while IEA executive director Maria van der Hoeven (pictured) called the two countries’ deal “a huge opportunity to make a difference”, she added that, “as always, it’s not only about announcing a deal but seeing that it’s going to work – then we’ll wait and see how effective the deal will really be”.  

And while Birol called next year’s global climate summit in Paris “our last chance” to avert climate change, van der Hoeven said many governments are giving “mixed signals” in the run-up to the event.

According to Birol, global low-carbon investment totalled less than $0.5 trillion in 2013, and is set to double by 2020. But in order to prevent climate change, that investment would need to increase by a factor of four compared to today – and he said “we are far from that”. Energy efficiency measures, which have significantly reduced worldwide energy demand, constitute the one bright spot in the likely scenario.

A changing energy mix

According to the Outlook, liquefied natural gas (LNG) is set to become the world’s “first fuel”, replacing coal, in all regions except Europe – which is “good news” from an energy diversification perspective, Birol said.

Meanwhile, the world’s demand for coal is set to plateau in the 2020s. China’s coal demand is already starting to slow, with an increase of 5 per cent in 2013 compared to 10 per cent in previous years. Future growth will come mainly from India, which will be the world’s second largest coal consumer in 2020 after China, overtaking the US. But, said Birol, while coal remains a cheap source of fuel and crucial for economic development in Asia, the future of the coal industry will hinge on its use – or not – of high-efficiency plants and carbon capture and storage technologies.

Addressing public opinion will be crucial to the further development of nuclear power, which the IEA did not explicitly endorse, although Birol said “many countries” consider it important for energy security, reliable baseload power generation and emissions reduction.

However, there are “public concerns” around nuclear power which “need to be heard and addressed by governments”, while decommissioning the large number of plants set to retire will be “a challenge for all of us – worldwide, we do not have much experience [with decommissioning] and are not well-prepared to deal with the 200 reactors that will retire in the next Fatih Birol IEA25 years in terms of policies and funds”. Birol also pointed to the permanent disposal of nuclear waste as an issue the world needs to solve, and soon.

Renewables, van der Hoeven said, will “go from strength to strength” to account for nearly half of global capacity additions by 2040 and overtake coal as the world’s leading source of electricity. Wind power is set for the largest growth, followed by hydropower and solar photovoltaics (PV). But as wind and solar’s share of the world’s energy mix quadruples, their integration into existing energy systems will become more challenging from both technical and market perspectives.

Fossil fuel subsidies currently in place are also a huge problem for renewables development, warned Birol (pictured right).

Competing with artificially low prices for fossil fuels “means renewables don’t have any chance”, he said. “If a government puts subsidies on fossil fuels, this means ‘Please use energy as inefficiently as possible with your electricity or car’ – this is giving all the wrong messages. This is why one of our main suggestions for a healthy energy system is to phase out fossil fuel subsidies”. However, while he emphasized that growth in renewables is necessary in order to address climate change and energy security issues, a diverse energy mix is still needed and “we cannot have everything renewable”.

Van der Hoeven perhaps best summed up the cautionary tone of the report, saying: “While some things may not seem urgent today, this doesn’t mean they can be put off until tomorrow. If governments implement the right policies, they can help to move the world in the right direction.”

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