Energy Challenges of Our Time. Dr. Fatih BIROL IEA Chief Economist

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1 Energy Challenges of Our Time Dr. Fatih BIROL IEA Chief Economist

2 The context: fresh challenges add to already worrying trends Economic concerns have diverted attention from energy policy and limited the means of intervention Post-Fukushima, nuclear is facing uncertainty MENA turmoil raised questions about region s investment plans CO 2 emissions rebounded to a record high

3 Energy efficiency is crucial for energy security and climate change Annual change in global energy intensity for selected periods 1.%.5%.% -.5% - 1.% - 1.5% Global energy efficiency development is going in the wrong direction

4 Billion USD Europe: rising energy prices compound the pain of austerity Cost of net imports of oil and gas in the European Union % 3.3% Debt of Greek government (end of 211) % EU s net import bills Gas 2 Oil % Share of GDP EU spending on imports was almost two-thirds higher in 211 than 29 as a result of higher international oil prices & oil-indexed gas prices

5 Emerging economies continue to drive global energy demand Mtoe Growth in primary energy demand China India Other developing Asia Russia Middle East Rest of world OECD Global energy demand increases by one-third from 21 to 235, with China & India accounting for 5% of the growth

6 Iraq is the largest source of oil supply growth Major changes in world liquids supply in the New Policies Scenario, Iraq Saudi Arabia Brazil Canada Kazakhstan Venezuela UAE Kuwait United States OPEC Non-OPEC The rise in MENA production is over 9% of the growth in global oil output to 235 while companies operating elsewhere turn increasingly to more difficult & costly sources mb/d

7 Changing oil import needs are set to shift concerns about oil security mb/d Net imports of oil China India European Union United States Japan US oil imports drop due to rising domestic output & improved transport efficiency: EU imports overtake those of the US around 215; China becomes the largest importer around 22

8 Golden prospects for natural gas Largest natural gas producers in 235 Russia United States China Iran Qatar Canada Algeria Australia India Norway Conventional Unconventional Unconventional natural gas supplies 4% of the 1.7 tcm increase in global supply, but best practices are essential to successfully address environmental challenges bcm

9 Coal won the energy race in the first decade of the 21st century Mtoe 1 6 Growth in global energy demand, Nuclear Renewables 1 8 Oil Natural gas Total non-coal Coal Coal accounted for nearly half of the increase in global energy use over the past decade, with the bulk of the growth coming from the power sector in emerging economies

10 Billion dollars (nominal) Fossil-fuel subsidies remain costly Global economic cost of fossil-fuel consumption subsidies Electricity Coal Natural gas Oil Fossil-fuels subsidies amounted to $49 billion in 21 with negative consequences on energy efficiency, environment and penetration of renewable energy.

11 The overall value of subsidies to renewables is set to rise Billion dollars (21) 25 2 Biofuels Electricity Renewable subsidies of $66 billion in 21 (compared with $49 billion for fossil fuels), need to climb to $25 billion in 235 as rising deployment outweighs improved competitiveness

12 Russia remains a cornerstone of the global energy economy Russian revenue from fossil fuel exports 21 $255 billion 235 $42 billion China 2% Other 21% Other Europe 16% European Union 61% China 2% Other 17% Other Europe 15% European Union 48% An increasing share of Russian exports go eastwards to Asia, providing Russia with diversity of markets and revenues

13 Energy poverty is widespread Million people without electricity Million people without clean cooking facilities Sub-Saharan Africa China Latin America India Rest of developing Asia billion people in the world live without electricity and 2.7 billion live without clean cooking facilities

14 Million Modern energy brings health benefits Premature annual deaths from household air pollution and selected diseases Malaria Tuberculosis Smoke from biomass HIV/AIDS Clean cooking facilities would prevent the majority of deaths attributable to indoor air pollution from burning biomass

15 Billion tonnes of oil equivalent Gigatonnes Implications of modern energy for all % 4.7% Additional energy demand in the Energy for All Case 3 Additional CO 2 emissions in the Energy for All Case World energy demand 23 World CO 2 emissions 23 Achieving modern energy for all would only have a negligible impact on energy security and climate change

16 Energy is at the heart of the climate challenge Gigatonnes 5 4 Cumulative energy-related CO 2 emissions in selected regions By 235, cumulative CO 2 emissions from today exceed three-quarters of the total since 19, and China s per-capita emissions match the OECD average United States China European India Japan Union

17 The door to 2 C is closing, but will we be locked-in? CO 2 emissions (gigatonnes) C trajectory C trajectory Delay until 217 Delay until 215 Emissions from existing infrastructure Without further action, by 217 all CO 2 emissions permitted in the 45 Scenario will be locked-in by existing power plants, factories, buildings, etc

18 Climate situation after Durban In Durban all countries agreed to implement a new framework to reduce global greenhouse gas emissions A protocol has to be agreed by 215 and enacted by 22 the timeframe increases dangerously the risk of a lock-in into a high carbon infrastructure By 217 only 15% of global emissions will be covered by a carbon price Energy investments have not become less carbon-intensive since Durban Urgent need for bold political action