The energy revolution
Humanity's future, to say nothing of its prosperity, will depend on how the world tackles two central energy challenges: securing reliable supplies of affordable energy, and switching to efficient low-carbon energy.
The Reference Scenario - in which no new policies are introduced - in the International Energy Agency's 2008 World Energy Outlook sees annual global primary energy demand growing 1.6 per cent on average up to 2030, from 11,730 million tons of oil equivalent (Mtoe) to just over 17,010 Mtoe - an increase of 45 per cent in just over 20 years.
China and India account for just over half of this increase, with Middle East countries contributing a further 11 per cent to demand. Non-OECD countries account for 87 per cent of the increase, so their share of world primary energy demand will rise from 51 per cent to 62 per cent.
Most oil production increases are expected to come from just a few countries - mainly in the Middle East, but also Canada with its vast oil-sands reserves, the Caspian region, and Brazil. Gas production in the Middle East will triple, and more than double in Africa, where there are large low-cost reserves.
The trend by which consuming countries grow steadily more reliant on energy from a small number of producing countries threatens to exacerbate energy-security worries. The supply stand-off between Russia and Ukraine of 2009 made these worries crystal clear in Europe, where gas imports are set to rise to 86 per cent of demand by 2030, from 57 per cent in 2006.
Longer-term energy-security risks are also set to grow. As a small group of countries increasingly accounts for the world's remaining oil reserves, their market dominance may threaten the pace of investment. The greater the demand for oil and gas from these regions, the more likely these regions are to seek higher prices, and to maintain them by deferring investment and limiting production.
Unfettered growth in energy demand will clearly have serious consequences for the climate as well. Under the Reference Scenario, which represents "business as usual," the IEA points to continuing growth in CO2 and other greenhouse-gas emissions. CO2 emissions are projected to rise 45 per cent by 2030, with other greenhouse gases contributing to an eventual average temperature increase of up to 6°C.
Three-quarters of the extra CO2 will come from China, India, and the Middle East, and as much as 97 per cent from non-OECD countries as a whole - although non-OECD per capita emissions will still be far lower on average than in the OECD. Bucking the global trend, only the European Union and Japan will see lower emissions in 2030 than today.
Two IEA climate-policy scenarios show how we could stabilise the concentration of greenhouse gases at 550 or 450 parts per million of CO2 equivalent. The 550 scenario equates to an increase in global temperature of approximately 3°C, while the 450 scenario implies an increase of around 2°C.
In the 550 scenario, energy demand up to 2030 rises by about 32 per cent, with the share of fossil fuels falling markedly, and average demand up 1.2 per cent yearly, compared to 1.6 per cent in the Reference Scenario. Energy-related CO2 emissions would peak in 2025 and decline slightly by 2030.
The 450 scenario presents an immense challenge. The 2030 emissions level for the entire world would be less than the emissions projected for non-OECD countries alone in the Reference Scenario. In other words, even if OECD countries reduce their emissions to zero, they alone could not put the world onto the 450-ppm trajectory. To do so would mean a technology shift that - in terms of scale and speed of deployment - is unprecedented.
The good news is that we already know many of the policies and technologies that can deliver substantial savings in energy consumption and CO2 emissions. But making and implementing the right decisions must begin now.
We're talking about significant changes in the pattern of investment across the supply and demand chains, as well as huge additional spending on new capital stock, especially in power plants and in more energy-efficient equipment and appliances. Although the sheer scale of the transformation means placing a substantial burden on both the public and private sectors, the current financial crisis should be used as an opportunity rather than a barrier for launching it.
Renewable energy will have a major role to play. Global renewables-based electricity generation (mainly hydro and wind, but also solar and biomass) is set to double between 2006 and 2030. In the EU, wind's share in total power generation is set to rise to 14 per cent by 2030, from two per cent today, and would account for well over half the total increase in the EU power generation. In the 450 scenario, renewables comprise 30 per cent of the EU power-generation mix in 2030, up sharply from 10 per cent today.
Governments must galvanise this transformation. Clear price signals, including carbon pricing, are crucial, and many non-OECD countries, in addition to needing financial support to help reduce their greenhouse gas emissions, can benefit from the removal of fuel subsidies.
But clear price signals are not enough, as a low-carbon future requires major breakthroughs in technology development and deployment. Governments can create incentives to innovate, encourage research, and break down international barriers. And much of the additional spending needs to be made by households, driven by a profound change in social attitudes to energy efficiency.
Mr Birol is the chief economist of the Paris-based International Energy Agency.
© Project Syndicate, 2009, www.project-syndicate.org.