Nobuo Tanaka Executive Director International Energy Agency Beijing, 17 November 2010 OECD/IEA 2010 The context: A time of unprecedented uncertainty The worst of the global economic crisis appears to be over but is the recovery sustainable? Oil demand & supply are becoming less sensitive to price what does this mean for future price movements ? Natural gas markets are in the midst of a revolution will it herald a golden era for gas? Copenhagen Accord & G-20 subsidy reforms are key advances but do they go far enough & will they be fully implemented ? Emerging economies will shape the global energy future where will their policy decisions lead us ? OECD/IEA 2010 Overview of WEO-2010 scenarios New Policies Scenario is the central scenario in WEO-2010 > assumes cautious implementation of recently announced commitments & plans, even if yet to be formally adopted > provides benchmark to assess achievements & limitations of recent developments in climate & energy policy Current Policies Scenario takes into consideration only those policies that had been formally adopted by mid-2010 > equivalent to the Reference Scenario of past Outlooks The 450 Scenario sets out an energy pathway consistent with the goal of limiting increase in average temperature to 2 O C OECD/IEA 2010 International oil price assumptions The age of cheap oil is over, though policy action could bring lower international prices than would otherwise be the case Scenario CO 2 price in 2035 ($/ tCO 2 ) International oil price in 2035 ($/bbl) Effective oil price in 2035 ($/bbl) Current Policies 42 in EU 135 152 in EU New Policies 50 in OECD 113 134 in OECD 450 Scenario 120 in OECD 90 139 in OECD 0 20 40 60 80 100 120 140 1980 1990 2000 2010 2020 20302035 D o l l a r s
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( 2 0 0 9 ) Current Policies Scenario New Policies Scenario 450 Scenario OECD/IEA 2010 0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 M t o e 1980 1990 2000 2010 2020 2030 2035 World primary energy demand by fuel in the New Policies Scenario Fossil fuels maintain a central role in the primary energy mix in the New Policies Scenario, but their share declines, from 81% in 2008 to 74% in 2035 Other renewables Biomass Hydro Nuclear Gas Oil Coal WEO-2009 Total: Reference Scenario OECD/IEA 2010 Recent policy commitments, if implemented, would make a difference Global energy use grows by 36% in 2008-2035, with the OECD share of world demand falling from 44% today to 33% in 2035 World primary energy demand by region in the New Policies Scenario 0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 M t o eRest of world China OECD WEO-2009: Reference Scenario OECD/IEA 2010 Other renewables Biomass Hydro Nuclear Gas Oil Coal WEO-2009 Total: Reference Scenario 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 1980 1990 2000 2010 2020 2030 M t o e 2035 China primary energy demand by fuel in the New Policies Scenario Total primary energy demand in China grows at 2.1% per year on average in 2008-2035, an overall increase of 75% OECD/IEA 2010 Emerging economies dominate the growth in demand for all fuels Demand for all types of energy increases in non-OECD countries, while demand for coal & oil declines in the OECD Incremental primary energy demand in the New Policies Scenario, 2008-2035 - 600 - 300 0 300 600 900 1 200 1 500 Other renewables Hydro Nuclear Gas Oil Coal Mtoe OECD China Rest of world OECD/IEA 2010 Fossil-fuel subsidies are distorting price signals Fossil-fuel consumption subsidies amounted to $312 billion in 2009, down from $558 billion in 2008, with the bulk of the fall due to lower international prices Economic value of fossil-fuel consumption subsidies by country, 2009 T u r k m e n i s t a n Electricity (generated from fossil fuels) Gas Oil Coal Additional subsidy in 2008 I r a n S a u d i
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d o l l a r s 20 40 60 80 100 OECD/IEA 2010 Booming demand for mobility in the emerging economies drives up oil use The global car fleet will continue to surge as more & more people in China & other emerging economies buy a car, overshadowing modest growth in the OECD 0 200 400 600 800 1 000 1 200 1 400 1 600 1980 1990 2000 2008 2020 2035 M i l l i o n China Other non-OECD United States Other OECD Passenger vehicles in the New Policies Scenario OECD/IEA 2010 0 20 40 60 80 100 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 m b / d Crude oil: fields yet to be developed Crude oil: currently producing fields Total crude oil Oil production becomes less crude Global oil production reaches 96 mb/d in 2035 on the back of rising output of natural gas liquids & unconventional oil, as crude oil production plateaus World oil production by type in the New Policies Scenario Unconventional oil Natural gas liquids Crude oil: fields yet to be found OECD/IEA 2010 More oil from fewer producers Production rises most in Saudi Arabia & Iraq, helping to push OPECs market share from 41% today to 52% by 2035, a level last seen prior to the first oil shock of 1973-1974 Incremental oil production by key country in the New Policies Scenario, 2009-2035 0 1 2 3 4 5 6 Algeria Libya Nigeria Qatar Iran Kuwait UAE Venezuela Canada Kazakhstan Brazil Iraq Saudi Arabia mb/d OPEC Non-OPEC OECD/IEA 2010 A golden age for gas? Gas is set to play a key role in meeting the worlds energy needs > demand rises by 44%, led by China & Middle East Unconventional gas accounts for 35% of the increase in global supply to 2035, with new non-US producers emerging Gas glut will peak soon, but may dissipate only very slowly The glut will keep pressure on gas exporters to move away from oil-price indexation, notably in Europe Lower prices could lead to stronger demand for gas, backing out renewables & coal in power generation OECD/IEA 2010 Coal remains the backbone of global electricity generation A drop in coal-fired generation in the OECD is offset by big increases elsewhere, especially China, where 600 GW of new capacity exceeds the current coal-fired capacity of the US, EU & Japan 0 2 000 4 000 6 000 8 000 10 000 12 000 1990 2000 2010 2020 2030 2035 T W h China India Other non-OECD OECD Coal-fired electricity generation by region in the New Policies Scenario OECD/IEA 2010 Renewables enter the mainstream. The use of renewable energy triples between 2008 & 2035, driven by the power sector where their share in electricity supply rises from 19% in 2008 to 32% in 2035 Renewable primary energy demand in the New Policies Scenario 0 100 200 300 400 500 European Union United States China Brazil India Africa OECD Pacific Mtoe 2008 2035 OECD/IEA 2010 .but only if there is enough government support Government support remains the key driver rising from $57 billion in 2009 to $205 billion in 2035 but higher fossil-fuel prices & declining investment costs also spur growth Annual global support for renewables in the New Policies Scenario B i l l i o n
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( 2 0 0 9 ) Biofuels Renewables-based electricity 0 30 60 90 120 150 180 210 2007 2008 2009 2015 2020 2025 2030 2035 OECD/IEA 2010 China becomes the market leader in low-carbon technologies Passenger car sales Capacity additions Chinas share of cumulative global additions to 2035 for selected technologies Given the sheer scale of Chinas market, its push to expand the role of low-carbon energy technologies is poised to play a key role in driving down costs, to the benefit of all countries 85 GW 335 GW 105 GW 0% 10% 20% 30% Solar PV Wind Nuclear Electric & plug-in hybrids 8.5 million vehicles OECD/IEA 2010 Caspian energy riches could enhance global energy security Kazakhstan drives an increase in Caspian oil production to 5.2 mb/d by 2035, while Turkmenistan & Azerbaijan push up gas production to over 310 bcm Caspian oil & gas outlook in the New Policies Scenario 0 1 2 3 4 5 6 2000 2009 2020 2035 m b / d Oil net exports Inland oil consumption 0 50 100 150 200 250 300 350 2000 2009 2020 2035 b c m Gas net exports Inland gas consumption OECD/IEA 2010 Number of people without access to electricity (million) Today, there are 1.4 billion people lacking access to electricity. Based on current trends, 1.2 billion people or 15% of the worlds population will still lack access in 2030 OECD/IEA 2010 The 450 Scenario: A roadmap from 3.5C to 2C The 450 Scenario sets out an energy pathway consistent with limiting the increase in temperature to 2C Assumes vigorous implementation of Copenhagen Accord pledges to 2020 & much stronger action thereafter The failure of the Copenhagen Accord pledges: > As many lack transparency, there is 3.9 Gt of uncertainty over the level of abatement pledged to 2020 > As many lack ambition, the cost of achieving the 2 C goal has increased by $1 trillion in 2010-2030 compared with WEO-2009 OECD/IEA 2010 In the 450 Scenario, compared with the Current Policies Scenario, efficiency measures provide 53% of the necessary abatement, but renewables, CCS & nuclear are also crucial World energy-related CO2 emission savings by technology in the 450 Scenario relative to the Current Policies Scenario 20 25 30 35 40 45 2008 2015 2020 2025 2030 2035 G t Efficiency 53% Renewables 21% Biofuels 3% Nuclear 9% CCS 15% Share of cumulative abatement between 2010-2035 42.6 Gt 21.7 Gt 450 Scenario 20.9 Gt Current Policies Scenario The 450 Scenario: Abatement by technology OECD/IEA 2010 The 450 Scenario: Abatement by technology In moving from the New Policies Scenario to the 450 Scenario, more expensive abatement options such as CCS play a growing role World energy-related CO2 emission savings by technology in the 450 Scenario relative to the New Policies Scenario 20 25 30 35 40 45 2008 2015 2020 2025 2030 2035 G t Efficiency 50% Renewables 18% Biofuels 4% Nuclear 9% CCS 20% Share of cumulative abatement between 2010-2035 42.6 Gt 35.4 Gt 21.7 Gt Current Policies Scenario 450 Scenario New Policies Scenario 13.7 Gt 7.1 Gt OECD/IEA 2010 In the 450 Scenario, compared with the Current Policies Scenario, China & the US account for 48% of the cumulative emission abatement that is needed in 2010-2035 World energy-related CO2 emission savings by country in the 450 Scenario relative to the Current Policies Scenario 20 25 30 35 40 45 2008 2015 2020 2025 2030 2035 G t China 33% United States 15% European Union 9% India 8% Middle East 5% Russia 3% Rest of world 24% Share of cumulative abatement between 2010-2035 Japan 3% 42.6 Gt 21.7 Gt Current Policies Scenario 450 Scenario 20.9 Gt The 450 Scenario: Abatement by country OECD/IEA 2010 Achieving the 2C goal will require rapid decarbonisation of global energy Carbon intensity would have to fall at twice the rate of 1990-2008 in the period 2008-2020 & almost four times faster in 2020-2035 Average annual change in CO 2 intensity in the 450 scenario 0% 1% 2% 3% 4% 5% 6% 1990-2008 2008-2020 2020-2035 A four-fold increase needed OECD/IEA 2010 A fundamental change is needed in power generation Low-carbon technologies account for over three-quarters of global power generation by 2035 in the 450 Scenario, a four-fold increase on today Share of world electricity generation by type and scenario Additional low-carbon generation in 450 Scenario Low-carbon generation in the NPS Fossil-fuel fired generation 0% 20% 40% 60% 80% 100% 2010 2015 2020 2025 2030 2035 in the 450 Scenario OECD/IEA 2010 and also in transport Plug-in hybrids & electric vehicles reach 39% of light-duty vehicle sales by 2035, making a big contribution to CO 2 abatement, thanks to a major decarbonisation of the power sector Sales of plug-in hybrid and electric vehicles in the 450 Scenario CO 2 intensity in power generation (right axis) Electric vehicles Plug-in hybrids & CO2 intensity of the power sector 0 100 200 300 400 500 600 700 G r a m m e s
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k W h 0 10 20 30 40 50 60 70 2010 2015 2020 2025 2030 2035 M i l l i o n OECD/IEA 2010 Will peak oil be a guest or the spectre at the feast? Oil demand peaks at 88 mb/d before 2020 & falls to 81 mb/d in 2035, with a plunge in OECD demand more than offsetting continuing growth in non-OECD demand Oil demand World demand in 450 Scenario Inter-regional (bunkers) Other non-OECD India China OECD Right axis: 2009 2015 2020 2025 2030 2035 m b / d 68 72 76 80 84 88 92 96 100 m b / d -16 -12 -8 -4 0 4 8 12 16 World demand in New Policies Scenario Peak demand in the 450 Scenario OECD/IEA 2010 Combating climate change will bring economic benefits as well as costs In the 450 Scenario, annual spending on oil imports in 2035 by the five largest importers is around $560 billion, or one-third, lower than in the New Policies Scenario Oil-import bills as share of GDP in selected countries 0% 1% 2% 3% 4% 5% 6% 7% 8% European Union United States Japan China India 1980 2008 2009 2035: New Policies Scenario 2035: 450 Scenario OECD/IEA 2010 China in the 450 Scenario OECD/IEA 2010 China abatement in the 450 Scenario In the 450 Scenario, compared with the Current Policies Scenario, efficiency measures account for 53% of Chinas abatement in 2010-2035 China energy-related CO2 emission savings in the 450 Scenario relative to the Current Policies Scenario Efficiency 53% Renewables 22% Biofuels 1% Nuclear 8% CCS 16% Share of cumulative abatement between 2010-2035 12.6 Gt 5.2 Gt 7.4 Gt 4 5 6 7 8 9 10 11 12 13 2008 2015 2020 2025 2030 2035 G t Current Policies Scenario 450 Scenario OECD/IEA 2010 China abatement in the 450 Scenario In moving from the New Policies Scenario to the 450 Scenario, China starts to rely more on CCS as room for further abatement from lower-cost options becomes limited China energy-related CO2 emission savings in the 450 Scenario relative to the New Policies Scenario Efficiency 50% Renewables 18% Biofuels 1% Nuclear 8% CCS 23% Share of cumulative abatement between 2010-2035 12.6 Gt 5.2 Gt 5.0 Gt 4 5 6 7 8 9 10 11 12 13 2008 2015 2020 2025 2030 2035 G t Current Policies Scenario 450 Scenario 10.1 Gt 2.4 Gt New Policies Scenario OECD/IEA 2010 Low-carbon technologies account for 78% of Chinas power generation by 2035 in the 450 Scenario, up from 19% today Share of China electricity generation by type and scenario Additional low-carbon generation in 450 Scenario Low-carbon generation in the NPS Fossil-fuel fired generation 0% 20% 40% 60% 80% 100% 2010 2015 2020 2025 2030 2035 in the 450 Scenario Power generation in China in the 450 Scenario OECD/IEA 2010 Sales of plug-in hybrid and electric vehicles in the 450 Scenario CO 2 intensity in power generation (right axis) Electric vehicles Plug-in hybrids & CO2 intensity of the power sector in China 0 3 6 9 12 15 18 21 24 2010 2015 2020 2025 2030 2035 M i l l i o n 0 100 200 300 400 500 600 700 800 G r a m m e s
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k W h Transport in China in the 450 Scenario In China, plug-in hybrids & electric vehicles reach 45% of new light-duty vehicle sales by 2035 OECD/IEA 2010 Summary & conclusions Recently announced policies can make a difference, but fall well short of what is needed for a secure & sustainable energy future Lack of ambition in Copenhagen has increased the cost of achieving the 2C goal & made it less likely to happen > Unless commitments are fully implemented by 2020, it will be all but impossible to achieve the goal The age of cheap oil is over, though policy action could bring lower international prices than would otherwise be the case Renewables are entering the mainstream, but long-term support is needed to boost their competitiveness Getting the prices right, by phasing-out fossil-fuel subsidies, is the single most effective measure to cut energy demand OECD/IEA 2010 Implications for China China's role in global energy is set to expand & its policies will significantly impact global energy trends & prospects for limiting climate change A golden age of gas led by China in the interest of diversifying the fuel mix can contribute greatly to reducing CO2 and other emissions Continued energy pricing reforms in China is a triple-win for enhancing energy security, reducing emissions & immediate economic gains China's role as leader in developing, manufacturing & deploying low- carbon technologies can drive down costs, to the benefits of all countries Growing interconnectedness & China's increasing weight in the energy market links its energy security to global energy security Energy Prices in Europe Past, Present & Future www.energy.eu