The latest annual energy outlook by the International Energy Agency, though not radically different from earlier editions in broad outline, nonetheless paints a very dramatic picture of the next quarter century.
The global oil market will remain tight, with prices trending toward $120 per barrel, and with all new net demand coming from the transport sector in rapidly developing countries. Though Russia's role as an oil producer and exporter will decline somewhat, its position in natural gas will be more pivotal than ever, with a fast-growing share going to China and a somewhat shrinking share to Europe. So crucial is the role of Russia, the report contains for the first time a special section devoted to it and has posted that section, in Russian, on the report's homepage.
Like previous outlooks, this one distinguishes between a business as usual scenario and a New Policies Scenario in which governments generally try to curtail consumption of fossil fuels and promote green energy; it appears to consider the New Policies Scenario (NPS) the more likely one. Even in NPS, however, fossil fuels remain dominant for the next 25 years and renewables continue to account for only about 10 percent of total world primary energy demand, thought their share of electricity production grows sharply.
Some of the report's most compelling highlights are displayed in a free-standing document containing ten charts, which is well worth a look even if time is lacking to study the whole report. For example, those subscribing to that theory that oil accounted for the decision of George W. Bush's administration to launch a second Gulf War will find Figure 3.17 arresting: Among the countries expected to make large additions to the world's liquid fuel supplies in the next quarter century, Iraq leads the pack by a healthy margin and is well of ahead of Saudia Arabia and total world biofuels. Other highlights incude:
• with oil production declining in all existing fields, an increasing share of liquid fuels will come from natural gas liquids and oil sands
• despite all the current concern about the prospect of declining subsidies for renewable energy, the 2011 NPS predicts that total renewables subsidies will increase to $250 billion in 2035, from $66 billion in 2010; European subsidies will increase only modestly from a big base, U.S. subsidies more rapidly from a smaller base, and "rest of world" subsidies more rapidly still from an even smaller base
• in terms of power generation, NPS expects additions of renewable energy to roughly equal additions of gas and coal combined, with nuclear accounting for a considerably smaller share of increases
• even so, NPS sees a relatively robust future for nuclear, with the long-term Fukushima impact rather surprisingly small
• looking at where we are right now and how we got here, the Outlook finds that in the last decade, coal has met almost half of new demand for energy, roughly equally all other sources of energy
Mainly because coal is still so dominant, the Outlook finds prospects for greenhouse gas reduction rather grim. While the world is supposedly still committed to limiting the additional increase in global temperatures to 2 degrees Celsius, the Outlook concludes that on a business as usual scenario, the increase will be 6 °C. In the NPS scenario, the temperature rise is held to 3.5 °C, a prospect that is not comforting. Accordingly, the IEA also evaluates a third scenario, a 450-ppm one--that is, one in which the atmospheric concentrations of carbon dioxide goes no higher than 445 ppm, and the rise in temperature no higher than 2 °C.
Achieving the NPS scenario, implying a temperature rise almost twice as great as what the world supposedly wants, would require energy investment of $38 trillion over the next 25 years. The 450-ppm scenario requires a $15 trillion more--that is, $53 rather than 38 trillion.
Even at that level of investment, in the 450 scenario four-fifths of total CO2 emissions in 2035 already are "locked in" by capital stock existing today. "As each year passes without clear signals to drive investment in clean energy, the 'lock-in' of high-carbon infrastructure is making it harder and more expensive to meet our future energy needs and climate goals," said Fatih Birol, IEA Chief Economist.