IEA warns on climate change inaction

www.environmental-finance.com/
London, 12 November:

The International Energy Agency (IEA) today warned against letting the current global financial crisis overshadow efforts to tackle climate change, and cautioned that global temperatures could rise by 6°C if no new policies to tackle rising emissions are adopted.

At the launch of its World Energy Outlook 2008 report, Faith Birol, chief economist at the Paris-based agency, said: "Ignoring the climate change issue, or letting it slide down the list, may mean we have to deal with the climate change issue in the future in more difficult conditions." He added that delaying investments in energy infrastructure because of turmoil in the financial sector could lead to higher prices than seen this summer - when oil peaked at $147/barrel - in the long term. The agency projects that oil prices will average $100/bl over 2008-15 (in 2007 dollars), rising to over $120/bl by 2030 and could spike to $200/bl.

In its reference scenario, based on policies enacted by mid-2008, the IEA said that global greenhouse gas (GHG) emissions could surge by 35% to 60 billion tonnes of carbon dioxide equivalent (t CO2e) in 2030, from 44 billion t CO2e in 2006. Energy-related CO2 emissions would rise by 45% over the same period, to 41 billion t from 28 billion t, and three-quarters of this rise is projected to come from China, India and the Middle East.

But this scenario would also see renewables overtake gas to become the second-largest source of electricity, with wind and solar energy leading the way.

The IEA also modelled two additional scenarios for climate change: one in which the global temperature rise is held at 3°C, and GHG concentrations at 550 parts per million (ppm) CO2e; and a second scenario where the temperature rise is restricted to 2°C and GHG concentrations at 450ppm CO2e. Both scenarios assume that a new international climate change deal is agreed next year in Copenhagen, and the use of cap-and-trade as well as voluntary action is also envisaged.

Birol noted that, even if OECD countries were to eliminate all emissions-producing activities, this would still not be enough to achieve the 450ppm goal, which would see global energy-related GHG emissions drop to 25.7 billion tonnes CO2e by 2030.

"We have to have non-OECD countries on board to reach 450ppm, or any meaningful reductions," he said. "The biggest challenge we are facing is how to get developing countries on board." The IEA estimates the additional cost to reach the 550ppm goal, on top of reference scenario costs, is $4.1 trillion over 2010-30, equal to 0.24% of annual global GDP. For the 450ppm scenario, the costs equate to 0.55%.

"Is it high or not?" asked Birol, referring to the 450ppm GDP costs. "Depends on who you talk to. Compared to other expenditures, it may not seem such a big expense. "We all agree we need to tackle climate change - but what we don't agree on is who will do what."