In an era of tectonic economic rebalancing toward emerging markets, wider cooperation is necessary to attain shared policy goals. That is especially true within the energy sector, where shifting patterns in consumption and production further complicate the broader trends. The global energy map is not just shifting east. Traditional producers like Saudi Arabia are seeing booming demand, while heavily consuming markets such as North America are experiencing production revolutions thanks to new techniques and technologies.
New trading patterns and technological advances also mean new scope for market integration and reform at the international level — creating a common incentive for market stability and investment promotion. In this context, the growing challenge of mitigating global climate change looks particularly urgent as decarbonisation of the global energy system stalls and the cost of delay becomes even greater. To achieve a sustainable future, while at the same time guaranteeing energy security and economic prosperity, cooperative efforts are necessary to keep the door open to our carbon goals through to 2020 — and to make sure that from then, a comprehensive carbon reduction framework can take effect over the longer term.
The energy sector is the source of two-thirds of global greenhouse-gas emissions and so is pivotal in determining whether or not climate change goals are achieved. The recent report of the Intergovernmental Panel on Climate Change (IPCC) develops the idea of a carbon budget, a quantity of CO2 that we are allowed to emit to have a 50 per cent chance of limiting the long-term rise in global temperatures to 2°C. Looking at this budget today, we see that more than half of it has already been used. Emissions that we project over the period to 2035 — without widespread deployment of Carbon Capture and Storage (CCS) and in the absence of stronger climate policies — would use up much of the remainder. In fact, all of the budget would be used up soon after 2035. Intensive action must start today. While the critically important Conference of the Parties meeting in Paris in 2015 will strive to agree on a long-term framework, effective measures will likely take at least five years to implement. Yet by 2020, global energy-related greenhouse-gas emissions are projected to be nearly 4 gigatonnes higher than a level consistent with attaining the 2°C target. The IEA’s World Energy Outlook 2013 Special Report ‘Redrawing the Energy-Climate Map’ presents a set of four proven measures that can deliver significant emissions reductions by 2020 and can help keep the door open to the 2°C. The include targeted energy efficiency measures; limiting the least-efficient coal-fired power plants; reducing methane releases particularly through flaring; and partially phasing out fossil fuel subsidies. Critically, these measures can be implemented at zero net economic cost. They comprise approaches that are proven and feasible, without compromising energy security or relying on new technology.
Most emissions over the last century have come from Organisation for Economic Cooperation and Development countries — although the share of non-OECD countries is rising quickly. Emerging markets were major contributors to emissions increases in 2012, while Europe and the US have seen falling emissions due to economic contraction and coal-to-gas switching, respectively. If we extend our analysis into the future, the share of non-OECD countries continues to increase.
This is therefore a problem that we must tackle together, including within the energy industry. The impacts of global climate change are also set to have a major impact on energy production itself. An increase in the frequency and intensity of catastrophic weather events poses significant challenges, for example to coastal and offshore oil and gas infrastructure. It can also have clear impacts on hydro-electric operations, variable renewable energy resource outlooks, nuclear plant cooling, and energy transmission infrastructure and operations. Industry must take increasingly costly resiliency measures to ensure energy security in the face of rising weather-related threats, and should take a particular interest in mitigating those threats.
It has been particularly encouraging therefore to see the UAE taking a lead by setting up Masdar in 2006, launching the World Future Energy Summit in 2008, and awarding the annual Zayed Future Energy Prize. These initiatives have brought together political leaders and technology experts to explore practical ways to take forward the diversification of the energy sector. They have also drawn the world’s attention to the huge potential in the Middle East for developing wind, solar and, eventually, nuclear power.
The effects are already coming through. In March 2013 Masdar inaugurated Shams I, a large concentrating solar power plant (at 100 MW). In Riyadh, the King Abdullah Petroleum Studies and Research Centre is now powered by a 3.5 MW PV solar park installed by Saudi Aramco, and the kingdom is considering massive investments in solar electricity. At the other end of the Arab world Morocco has just broken ground on Phase I of the ambitious Ouarzazate concentrating solar power project (at 160MW) with two further phases to follow. Meanwhile the Municipality of the City of Makkah is planning to develop solar power, including for street lighting. This shows also that the initiative does not have to lie with national governments. At the regional or city level, there is huge scope for developing a comprehensive strategy for renewable energy and for energy efficiency. And by diversifying the domestic energy mix in producer countries, these approaches also improve global energy supply security by freeing up greater quantities of fossil fuels for export.
Facing these common economic and environmental challenges will require international energy cooperation at the highest level, as well as strong mandates for international energy governance structures. The IEA is at the centre of international global energy policy, with a core mission to guarantee international energy security while contributing to sustainability and economic prosperity — but to maintain that position it needs to reach beyond its traditional membership. It is for that reason that we have renewed our bilateral agreements with key partner countries, and are in discussions to further deepen ties with leading non-IEA member energy economies.
In order to achieve sustainable energy security, decisive action will be necessary both in the short and the long term, and in close international cooperation.
Maria van der Hoeven is executive director, International Energy Agency (IEA).