Energy costs to soar if no carbon deal, agency says

The International Energy Agency says that without a global agreement on climate change, the ratio of energy spending to gross domestic product will double by 2030.

The world faces a surge in energy costs, as well as in planet-warming carbon emissions, unless it can swiftly agree a climate change deal, the International Energy Agency said Tuesday.

Arguing strongly for a global deal at the U.N. Climate Change summit in Copenhagen in December, the IEA said use of fossil fuels will increase quickly if policies remained unchanged.

Without an international agreement on climate change, the ratio of energy spending to gross domestic product for the largest consumer countries would double by 2030.

The world would have to spend an extra $500 billion to cut carbon emissions for each year it delayed implementing a deal on global warming, the IEA said in its annual World Energy Outlook.

"As the leading source of greenhouse-gas emissions, energy is at the heart of the problem and so must be integral to the solution. The time to act has arrived," it said.

IEA Chief Economist Fatih Birol told Reuters in an interview the world needed to stabilize the concentration of greenhouse gas emissions in the atmosphere at 450 parts per million of CO2 equivalent.

"The world needs to go to the 450 parts per million target, not only because of climate change but because of growing problems within our energy system and its possible implications again on the economy," Birol said.

Global energy demand would rise by an average of 2.5 percent per year over the next five years if governments made no changes to their existing policies and measures.

Under these circumstances, which the IEA called its reference scenario, world primary energy demand would rise by an average of 1.5 percent per year over the next two decades.

Oil demand, excluding biofuels, would increase by 1 percent per year to 105 million barrels per day by 2030 from 85 million barrels per day in 2008. This was a slight decrease in its demand forecast, reflecting the impact of the global economic downturn.

Last year the agency, which advises 28 industrialized nations, forecast oil use would reach 106 million barrels per day by 2030.

But the IEA stressed the trend toward heavier use of hydrocarbons would be unabated without a climate change deal.

"Fossil fuels remain the dominant sources of primary energy worldwide in the reference scenario, accounting for more than three-quarters of the overall increase in energy use," it said.

A key driver of energy demand would be inexorable growth in power generation, it said, forecasting in its reference scenario world electricity demand would grow 2.5 percent a year to 2030.

Stressing the need to move away from dependence on fossil fuels, Birol said that without a climate change deal, the European Union's annual energy bill would more than double to $500 billion by 2030, up from $160 billion in the last 30 years.

Oil prices soared to a record of nearly $150 a barrel in July 2008. They then collapsed to less than $33 last December, but have since recovered to around $80.

The price collapse, combined with the credit crisis, choked off investment and the Paris-based IEA has warned the oil market could surge back, damaging still fragile economic growth.

Birol said the oil price was likely to reach $100 per barrel by 2015 and $190 by 2030: "This means that if we don't do anything to our energy system, we will be in difficulty."

Bank of Ireland analyst Paul Harris said the IEA had taken a "rather cautious approach" in the report.

"There's an emerging consensus that the demand and supply balance is really going to start to tighten by 2015 which should sound the death knell for cheap oil."

 

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