IEA Releases WEO 2010
Ecoal, January 2011, Vol. 73
The International Energy Agency (IEA) recently released the 2010 edition of the World Energy Outlook, which makes projections for global energy markets to 2035 under a range of policy scenarios. A new addition to this year's report is the New Policies Scenario, which covers all energy and climate change policies committed to by governments around the world by mid-2010.
This sits in-between the business-as-usual scenario and a hypothetical case where a global agreement is reached to restrict the rise in the average global temperature to 2oC in 2050. The new scenario has been developed to provide a more accurate picture of the direction in which energy markets are currently heading. Policies taken into consideration in this scenario include the non-binding commitments made by countries under the Copenhagen Accord following its agreement in late 2009.
Impacts of Energy & Climate Change Policies
WEO 2010 places a large emphasis on the impact of the New Policies Scenario, projecting a 36% increase in global energy demand between 2008 and 2035, compared to 47% under business-as-usual. Although the implementation of new policies is expected to slow the demand growth of fossil fuels (in comparison to projections included in previous editions of WEO), coal, oil and natural gas are still expected to dominate the global energy mix in 2035.
Other key findings under the New Policies Scenario include:
- Non-OECD countries will account for 93% of the increase in global energy demand between 2008 and 2035
- CCS will see relatively slow growth, accounting for 1.5% of global electricity generation in 2035
- The use of renewable energy will triple globally by 2035.
While the projected figure for the role of CCS is disappointing, the New Policies Scenario does not take into account any future global treaty to tackle climate change. If such a treaty is agreed, with a target of limiting climate change to 2oC, the IEA anticipates that CCS will play a much larger role in global electricity generation, contributing up to 20% of the mitigation effort in the sector.
New Outlook for Coal
Global coal demand growth under the New Policies Scenario will be around 20% between 2008 and 2035, with 100% of this increase occurring in non-OECD countries. Global coal demand is expected to peak around 2025 and begin to slowly decline thereafter.
Nonetheless, total coal demand is projected to have reached 5.6 billion tonnes in 2035, up from 4.7 billion tonnes in 2008.
Coal, along with hydropower, is seen by the IEA as one of the energy sources most susceptible to changes in energy and climate change policy. With many OECD countries expected to reduce their reliance on coal due to new policy commitments, WEO 2010 projects that by 2035 non-OECD countries will account for 82% of global coal use, with China, India and Indonesia responsible for the vast majority of this. China is now predicted to contribute over 50% of total coal demand in 2035.
Against this backdrop, the IEA anticipates significant shifts in the make-up of global coal trade. China, having tripled its hard coal imports in 2009, is expected to become increasingly reliant on imports from countries such as Colombia, as well as on traditional suppliers including Australia, Indonesia and Vietnam.
Removal of Fossil Fuel Subsidies
This year's report includes a special section on the impacts of the removal of fossil fuel subsidies. The gradual removal of these subsidies, a measure committed to by the G20 amongst others, represents one of the important policy developments taken into account under the New Policies Scenario. The report highlights that the issue of fossil fuel subsidies is likely to become particularly prevalent in non-OECD countries. These countries, which are set to dominate the projected increase in global energy demand, are now responsible for the vast majority of remaining subsidies. However, the report highlights that oil and gas subsidies far outweigh those provided for coal.
The removal of subsidies can have a drastic effect on energy market projections. In fact, the IEA goes so far as to estimate that world energy demand would fall by 5% were all fossil fuel subsidies phased out by 2020. The report also suggests that the removal of subsidies should be considered as "an integral building block for tackling climate change", with the potential to reduce global CO2 emissions by 2Gt.
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