IEA World Energy Outlook Proposes Stepping Up Cooperation with China, India

November 29, 2007 // Published as a news service by IHS

According to WEO-2007, energy developments in China and India are transforming the global energy system as a result of their sheer size and their growing importance in international energy markets.

"Rapid economic development will undoubtedly continue to drive up energy demand in China and India, and will contribute to a real improvement in the quality of life for more than two billion people.

"This is a legitimate aspiration that needs to be accommodated and supported by the rest of the world," said Nobuo Tanaka, executive director of IEA. "Indeed, most countries stand to benefit economically from China's and India's economic development through international trade."

According to IEA, the consequences of unfettered growth in global energy demand are alarming for all countries. If governments around the world stick with existing policies - the underlying premise of the WEO-2007 Reference Scenario - the world's energy needs would be well over 50% higher in 2030.

China and India together account for 45% of the increase in global primary energy demand in this scenario, said IEA. Both countries' energy use is set to more than double between 2005 and 2030.

Worldwide, fossil fuels continue to dominate the fuel mix. Coal is set to grow most rapidly, driven largely by power-sector demand in China and India, said IEA.

These trends lead to continued growth in global energy-related emissions of carbon dioxide (CO2), from 27 gross ton (Gt) in 2005 to 42 Gt in 2030 - a rise of 57%.

China is expected to overtake the U.S. to become the world's largest emitter in 2007, while India will become the third-largest emitter by around 2015, said IEA. China's per-capita emissions will almost reach those of Organisation for Economic Cooperation and Development (OECD) Europe by 2030.

According to WEO-2007, consuming countries will increasingly rely on imports of oil and gas - much of them from the Middle East and Russia. In the reference scenario, net oil imports in China and India combined will jump from 5.4 million of barrels per day (mb/d) in 2006 to 19.1 mb/d in 2030 - this is more than the current combined imports of the U.S. and Japan, said IEA.

World oil output is expected to become more concentrated in a few Middle Eastern countries if necessary investment is forthcoming, said IEA. Although production capacity at new fields is expected to increase over the next five years, it is very uncertain whether it will be sufficient to compensate for the decline in output at existing fields and meet the projected increase in demand, said IEA.

A supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices, cannot be ruled out, said IEA.

According to IEA, government action can alter appreciably these trends. If governments around the world implement policies under consideration, as assumed in an alternative policy scenario, global energy-related CO2 emissions would level off in the 2020s and reach 34 Gt in 2030 - almost a fifth less than in the reference scenario. Global oil demand would be 14 mb/d lower - a saving equal to the entire current output of the U.S., Canada and Mexico combined.

Measures to improve energy efficiency are the cheapest and fastest way to curb demand and emissions growth in the near term, said IEA. The savings are particularly large in China and India.

For example, tougher efficiency standards for air conditioners and refrigerators alone would, by 2020, save the amount of power produced by the Three Gorges dam. Emissions of local pollutants in both countries, including sulphur-dioxide and nitrous oxides, would also be reduced sharply, said IEA.

But even in the alternative policy scenario, global CO2 emissions are still one-quarter above current levels in 2030, said IEA. In a 450 Stabilisation Case, which describes a notional pathway to long-term stabilisation of the concentration of greenhouse gas in the atmosphere at around 450 parts per million, global emissions peak in 2012 and then fall sharply below 2005 levels by 2030, said IEA.

Emissions savings come from improved efficiency in industry, buildings and transport, switching to nuclear power and renewables, and the widespread deployment of CO2 capture and storage (CCS), said IEA.

According to IEA, exceptionally quick and vigorous policy action by all countries, and unprecedented technological advances, entailing substantial costs, would be needed to make this case a reality.

Economic growth in China and India could turn out to be significantly faster than assumed in the reference and alternative policy scenarios, resulting in more rapid growth in energy demand, oil and gas imports and CO2 emissions, said IEA.

In a high growth scenario, which assumes that China's and India's economies grow on average 1.5 percentage points per year faster than in the reference scenario, energy demand is 21% higher in 2030 in China and India combined. Globally, energy demand rises by 6% and CO2 emissions by 7%, said WEO-2007.

"The emergence of new major players in global energy markets means that all countries must take vigorous, immediate and collective action to curb runaway energy demand," said Tanaka. "The next ten years will be crucial for all countries, including China and India, because of the rapid expansion of energy-supply infrastructure. We need to act now to bring about a radical shift in investment in favour of cleaner, more efficient and more secure energy technologies."

Source: International Energy Agency (IEA).