IEA warns of high oil prices if climate pledges not met

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The International Energy Agency (IEA) has appealed to governments to implement their climate pledges vigorously to avoid doubling oil prices.

The weak pledges made at the Copenhagen summit last year have increased the cost of meeting global climate goals by $1 trillion between now and 2035, the energy watchdog warned in its annual World Energy Outlook, published yesterday (9 November).

Due to a lack of ambition, far higher and more expensive emissions cuts will be required after 2020, it said.

The latest edition of the IEA's annual report looks for the first time at a new policy scenario which assumes a "cautious" implementation of climate commitments.

But rising demand for fossil fuels would still drive the global temperature rise above 2°C without a "phenomenal policy push" by governments around the world, the IEA said.

Even if governments implement their current climate commitments, energy demand will still rise by 36% between 2008 and 2035, driven primarily by non-OECD countries, the IEA estimates.

China overtook the US as the world's largest energy user in 2009 and will contribute 35% to the projected growth in global energy use, it said.

Oil prices will nearly double to $113 per barrel in 2035 from just over $60 in 2009 in the 'new policy scenario'. Demand will reach 99 million barrels per day by 2035, according to the agency's estimates.

Oil is therefore set to remain the leading fuel globally in 2035, followed by coal, even if all climate commitments are fulfilled, the report forecasts. Renewable energies would, however, double their share to cover 14% of total energy demand in 2035. Nuclear's share would increase to 8% as a result of higher oil prices and government measures to promote fuel efficiency.

Natural gas, on the other hand, will be the fossil fuel least affected by efforts to move away from fossil fuels due to its lower emissions, according to the IEA. It expects global natural gas demand to resume growth in 2010 and increase by 44% between 2008 and 2035.

"The message here is clear. We must act now to ensure that climate commitments are interpreted in the strongest way possible and that much stronger commitments are adopted and taken up after 2020, if not before. Otherwise, the 2°C goal could be out of reach for good," said Nobuo Tanaka, IEA executive director.

For the energy sector to evolve towards supporting climate objectives, governments should accelerate the removal of inefficient fossil fuel subsidies as agreed by the G20, the report urges. These subsidies amounted to $312 billion in 2009, and phasing them out by 2020 could cut oil demand alone by 4.7 mb/d, or around a quarter of current US demand, it estimates.

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