The International Energy Agency warned today that the world’s use of fossil fuels will have to peak by 2020 if it is to escape a dangerous spike in global temperatures.
Fatih Birol, the IEA’s chief economist, said at the launch of the agency’s annual flagship World Energy Outlook: “This would be a revolution. This revolution could only take place if there is a financial signal to the energy industry.” He added: “We need a deal in Copenhagen. We need a signal for the energy industry. Without that, nothing will move.”
Better energy efficiency, rapid growth in renewable energy, and increased use of nuclear power will be critical to move the world away from fossil fuels, the IEA believes. A second revolution would have to happen in the automobile industry so that six of every ten cars sold in 2030 are hybrids or electric by 2030.
The greatest responsibility lies with the US, but the greatest scope for change will be in China, which if it meets its own targets, will be responsible for more than a quarter of the emissions reductions the IEA says is needed to avoid the worst climate change risk.
In industrialised countries the price of carbon will need to reach $50 a tonne by 2020 and $110 by 2030. In developing countries the price of carbon would need to reach $30 a tonne by 2020 and $50 by 2030.
Developing countries will need to invest $200bn annually to move away from fossil fuels, the IEA believes. Mr Birol said: “The OECD should co-finance some of the projects in the non-OECD on top of the mitigation OECD countries should do at home.”
The IEA brushed off as groundless an article in the Guardian newspaper, which quotes anonymous sources saying the IEA was pushed by US officials to downplay the risk that the world was running out of oil.
Nobuo Tanaka, executive director of the IEA, said:; “I think that article is just groundless. We are very much a neutral agency and we are proud of our analysis. We have always been saying investment is necessary.”
In fact, the IEA last year undertook the most comprehensive global study of oil field production decline rates and today warned that the world would have to find “four new Saudi Arabias” – the country with the world’s biggest oil resources, with production capacity of about 12.5m barrels per day – to overcome the production decline from old fields over the next 21 years. Like many in the energy industry, the IEA maintains that the world has plenty of oil and natural gas reserves, but that access to those reserves is constrained by politics and countries erecting investment barriers. It adds that the recent drop in the oil price to around $80 a day today from $147 a barrel last July, has reduced investments. The IEA warns that a quick world economic recovery and lack of environmental policies that reduce oil demand, would create a supply crunch by the middle of the next decade.
Mr Birol said: “The era of cheap oil is over. We said it last year and continued to say it throughout the year even though oil went to $30 a barrel [at the end of 2008 and start of 2009].”