"The key to getting the global energy system onto a more sustainable path is to break the links among economic activity, energy demand and GHG emissions" says Fatih Birol, Chief Economist, IEA as he discusses the global energy challenge.
Perhaps what has surprised – and disappointed – me most is that the industrialized countries have made so little progress on addressing the energy-related challenge of climate change. That threat was already recognized two decades ago, and there has been a tremendous amount of discussion about the need for action and the form it should take. But remarkably little has actually been achieved so far. That is not to say that governments have done nothing, nor that energy suppliers and consumers have not taken their own decisions about providing and using energy in a more sustainable manner. But the scale and urgency of those responses, without question, fall far short of what is required.
The key to getting the global energy system onto a more sustainable path is to break the links among economic activity, energy demand and GHG emissions. That has yet to happen: demand has remained highly correlated to gross domestic product (GDP), despite a sharp increase in the prices of oil and other fuels in the last few years. And emissions have recently been rising even faster than energy demand, mainly because of an unexpected resurgence in coal consumption – largely for power generation. What this demonstrates is that such policies and measures that some Organisation for Economic Co-operation and Development (OECD) governments have introduced aimed at curbing the growth in fossilenergy demand and emissions have had a negligible overall impact at the global level. That is partly because those efforts have not been vigorous enough. But it is increasingly because the bulk of the growth in demand and emissions is occurring in the emerging economies and developing countries, which are only now starting to worry seriously about the impact of runaway energy demand on the environment – and on their energy security.
It is not too late to respond to the challenge of mitigating climate change, though past delays in doing so mean that much tougher and more urgent action is now needed. The next decade will be critical, as the rate of expansion of energy infrastructure is likely to be particularly rapid. There is a real danger that we will lock in dirty and ineffi cient technology for decades to come. So it is vital that we take action now to put in motion a radical shift in the pattern of investment in favour of more secure, lower-carbon energy sources and technologies. The longer that process takes, the higher the economic and social costs will be in the long term.
Looking ahead, I suspect one of the biggest surprises that will occur for a lot of people over the next 20 years may be the sheer extent to which China and India come to dominate and transform the global energy market. At the beginning of the current decade, China accounted for 11% of world primary energy demand; by 2005 – a mere six years later – that share had jumped to 15%. On current policies, the underlying assumption of the Reference Scenario in the International Energy Agency’s (IEA’s) latest World Energy Outlook, it will rise further to almost 22% by 2030. In a High Growth Scenario, in which China’s GDP is assumed to grow on average by 7.5% compared with only 6% in the Reference Scenario, China’s share of the global energy demand reaches one-quarter. In the longer term, India’s share is also set to rise. It has been constant at a little under 5% since 2000, but is projected to rise to over 7% in 2030 in the Reference Scenario and 8% in the High Growth Scenario (in which India’s GDP also grows 1.5 percentage points faster than in the Reference Scenario). As much of the increase in demand in both countries will be met by coal, the shares of China and India in global CO2 emissions increase even faster. And rising oil demand will push up their oil imports, threatening the security of energy supplies to all consuming countries.
The emergence of China and India as major players in global energy markets means that tackling the problems of energy sustainability and energy insecurity will hinge increasingly on the success of those countries’ efforts to curb runaway fossil-energy demand and emissions. It is in our mutual interests for us in the industrialized world to work with China and India to address these global challenges in a collective way. The twin threats to global climate and energy security are global challenges that require global responses. That is already well understood, I think. IEA countries already cooperate extensively with China and India on policy and collaborate on developing and deploying new technologies. We need to step up those efforts – a development that I am convinced would yield big dividends for all of us in the longer term.
This article is brought to you in partnership with the World Economic Forum