IEA criticises ‘epic failure of energy policy making’

The International Energy Agency has lamented the failure of the world to get to grips with the potential for energy efficiency with Chief Economist Fatih Birol calling it an ‘epic failure of policy makers of many countries around the world’.

Mr Birol was speaking in London at the launch of the agency’s World Energy Outlook for 2012.
Fatih Birol
The report provided two scenarios, the Efficient World Scenario, consisting of its recommended path, and the New Policies Scenario, which documents the realistic outcomes if present energy policies are pursued, contrasting both to highlight its message of greater attention to energy efficiency.

The agency’s flagship annual publication also emphasised the impact of North America on the global energy balance, with the extraordinary growth in oil and natural gas output from the US marking a sea-change in global energy flows.

But it was on the area of energy efficiency that the report was particularly pressing, with Mr Birol vocal on the opportunity being lost by governmental non-action worldwide.

“There is a growing need to push the energy efficiency button.”

“Our analysis shows that in the absence of a concerted policy push, two thirds of the economically viable potential to improve energy efficiency will remain unrealised through to 2035.

Action to improve energy efficiency could delay the complete ‘lock-in’ of the allowable emissions of CO2 under a 2 degree trajectory, set to happen by 2017, until 2022, buying time to secure a much-needed global climate change agreement. It would also bring substantial energy security and economic benefits.”

Mr Birol said “the world is still failing to put the global energy system on to a more sustainable path”, and pointed out that fossil fuels received $523bn in subsidies in 2011, as opposed to $88bn to renewables the same year.

The findings underline the agency’s contention that the world is losing out by not doing more to encourage energy efficiency.

Mr Birol and Executive Director Maria Van Der Hoeven used the occasion to introduce the IEA’s Efficient World Scenario, the agency’s recommendations for governments to embrace energy efficiency, based on economic motivations.

The agency believes that if governments adopt the measures suggested, growth in energy demand would drop by 50 per cent, with significant accruing benefits including greater energy security, economic gain and environmental protection.

In essence advice is provided to governments as to what policies are required to lower market barriers, minimise transaction costs and enable energy efficiency investment to go ahead.

The IEA’s prediction is that if the Efficient World Scenario is followed, global economic benefit will be boosted through 2035 by as much as $18trn.

Other projections detailed in its New Policies Scenario forecast fossil fuels to continue to remain dominant in the global energy mix, noting that subsidies had jumped by 30 per cent to $523bn in 2011, mainly down to increases in the Middle East and North Africa.

By 2035 the US will almost be energy self-sufficient, and by 2020 a net exporter of oil and gas, which will have a big impact on energy flows worldwide. Demand for energy will grow by one third by 2035, with China, India and the Middle East responsible for 60 per cent of it.

A pronounced shift towards gas and renewables is also indicated, with the report estimating renewables as the second largest source of power generation by 2035, behind coal.

As it stands further renewables progress is dependent on subsidies being bolstered to the tune of $4.8trn if the world is to successfully achieve 2020 targets, and half of that figure has already been committed to existing projects.

The report noted that while nuclear power generation had been scaled back, India, China, Korea and Russia will be responsible for a rise in capacity.

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