© OECD/IEA - 2009

World Energy Outlook 2009Energy Sector Implications Post-Copenhagen

Laura CozziIEA Day, Copenhagen, 16 December 2009

© OECD/IEA - 2009

World primary energy demand in the absence of an agreement in Copenhagen

Non-OECD countries account for 93% of the increase in global demand between 2007 & 2030, driven largely by China & India

0

2 000

4 000

6 000

8 000

10 000

12 000

1980 1990 2000 2010 2020 2030

Mto

e China and India

Rest of non-OECD

OECD

© OECD/IEA - 2009

Change in primary energy demand,in the absence of an agreement in Copenhagen, 2007-2030

Fossil fuels account for 77% of the increase in world primary energy demand in 2007-2030, with oil demand rising from 85 mb/d in 2008 to 88 mb/d in 2015 & 105 mb/d in 2030

- 500 0 500 1 000 1 500 2 000

Other renewables

Biomass

Hydro

Nuclear

Gas

Oil

Coal

Mtoe

OECD

Non-OECD

© OECD/IEA - 2009

Average annual expenditure on net imports of oil & gas in the Reference Scenario

The Reference Scenario implies persistently high spending on oil & gas imports, with China overtaking the United States by around 2025 to become the world's biggest spender

0

100

200

300

400

500

600

European

Union

United

States

China Japan India ASEAN

Billion d

ollars

(2008)

1971-2008

2008-2030

1%1%

1%

2%

3%

% Share of GDP

2%

2%

3%

3% 6%

3%

0.4%

© OECD/IEA - 2009

The policy mechanisms in the 450 Scenario

A combination of policy mechanisms, which best reflects nations’ varied circumstances & negotiating positions

We differentiate on the basis of three country groupings> OECD+: OECD & other non-OECD EU countries

> Other Major Economies (OME): Brazil, China, Middle East, Russia & South Africa

> Other Countries (OC): all other countries, including India

A graduated approach> Up to 2020, only OECD+ have national emissions caps

> After 2020, Other Major Economies are also assumed to adopt emissions caps

> Through to 2030, Other Countries continue to focus on national measures

Emissions peaking by 2020 will require> A CO2 price of $50 per tonne for power generation & industry in OECD+

> Investment needs in non-OECD countries of $200 billion in 2020, supported by OECD+ through carbon markets & co-financing

© OECD/IEA - 2009

Global Greenhouse Gas Emissions in the Reference Scenario and 450 Scenario

In the 450 Scenario, greenhouse gas emissions are 35% lower in 2030 compared to the Reference Scenario and 70% lower in 2050.

0

10

20

30

40

50

60

70

80

RS RS RS 450 RS 450 RS 450 RS 450

2005 2010 2020 2030 2040 2050

Gt

CO

2-e

q.

F-gases

N2O

CH4

CO2 LULUCF

Other CO2

CO2 energy2

2

2

2

4

© OECD/IEA - 2009

Abatement by policy type in the 450 Scenario relative to the Reference Scenario, 2020

After realising the abatement potential of policies & measures and sectoral approaches, cap-and-trade in OECD+ yields a further 1.8 Gt

30 31 32 33 34 35

Gt

Emissions

450 Scenario

Reference Scenario

Abatement:

OECD+

Other Major Economies

Other Countries

Domestic policies and measures

Sectoral agreements

OECD+ cap-and-trade for

power and industry

(including international credits)

© OECD/IEA - 2009

World abatement of energy-related CO2 emissionsin the 450 Scenario

An additional $10.5 trillion of investment is needed in total in the 450 Scenario, with measures to boost energy efficiency accounting for most of the abatement through to 2030

26

28

30

32

34

36

38

40

42

2007 2010 2015 2020 2025 2030

Gt

450 Scenario

Reference Scenario

OECD+

OME

OC

3.8 Gt

13.8 Gt

CCSNuclear

Renewables

& biofuels

Efficiency

World abatement by technology

2020

3.8 Gt

65%

19%

13%3%

2030

13.8 Gt

57%

23%

10%

10%

© OECD/IEA - 2009

World additional investment in the 450 Scenario relative to the Reference Scenario

$10.5 trillion of additional investment is needed in the 450 Scenario in the period 2010-2030 compared with the Reference Scenario, costing 0.5% of GDP in 2020 & 1.1% of GDP in 2030

0

200

400

600

800

1 000

1 200

2015 2020 2025 2030

Bill

ion

dolla

rs (200

8)

Industry

Power plants

Buildings

Biofuels

Transport

© OECD/IEA - 2009

Incremental world electricity productionin the Reference and 450 Scenarios, 2007-2030

Renewables, nuclear and plants fitted with CCS account for around 60% of electricity generation globally in 2030 in the 450 Scenario, up from less than one-third today

-1 000

0

1 000

2 000

3 000

4 000

5 000

6 000

7 000

Coal Gas Oil Nuclear Hydro Wind Biomass Solar Other

renewables

TWh

Reference Scenario

450 Scenario

© OECD/IEA - 2009

Power generation investment in the 450 Scenario

Low-carbon technologies account for an increasing share of power generation investment –reaching more than 90% in the post 2020 period

0

1 000

2 000

3 000

4 000

5 000

2010-2020 2021-2030

Bill

ion

dolla

rs (200

8)

Fossil fuels

without CCSRenewables

CCS

Nuclear

71%

91%

% Share in total

investment

© OECD/IEA - 2009

World installed coal capacity and retirements/mothballing in the 450 Scenario

By 2030, coal-fired capacity in the 450 Scenario is about half than in the Reference Scenario, as the majority of coal plants built before 2000 becomes uneconomical

0

500

1 000

1 500

2 000

2 500

3 000

3 500

2008 2015 2020 2025 2030

GW

Total retirements/mothballing

Total installedcapacity in 450

lower needs

Plants built before 2000 New coal additions without CCS

Plants built after 2000 New coal additions with CCS

Under construction Additional coal capacity needs in RS

Additional retirements/mothballing Retirements in Reference Scenario

Coal capacity in RS

© OECD/IEA - 2009

World passenger vehicle sales & average new vehicle CO2 intensity in the 450 Scenario

Improvements to the internal combustion engine & the uptake of next-generation vehicles & biofuels lead to a 56% reduction in new-car emission intensity by 2030

0%

20%

40%

60%

80%

100%

2007 2020 2030

Electric vehicles

Plug-in hybrids

Hybrid vehicles

ICE vehicles

Sha

re o

f sa

les

205

125

90

0

50

100

150

200

250

Gra

mm

es

per

kilo

metr

e

CO2 intensity

of new vehicles

(right axis)

© OECD/IEA - 2009

World primary energy demand by fuel in the 450 Scenario

In the 450 Scenario, demand for fossil fuels peaks by 2020, and by 2030 zero-carbon fuels make up a third of the world's primary sources of energy demand

0

2 000

4 000

6 000

8 000

10 000

12 000

1990 2000 2010 2020 2030

Mto

e

0%

6%

12%

18%

24%

30%

36% Fossil fuels

Zero-carbon fuels

Share of zero- carbon fuels

(right axis)

© OECD/IEA - 2009

World oil productionby scenario

Curbing CO2 emissions would also improve energy security by cutting oil demand, but even in the 450 Scenario, OPEC production increases by 11 mb/d between now and 2030

36

mb/d

0

20

40

60

80

100

120

2008 Reference Scenario

2030

450 Scenario

2030

mb/d

Non-OPEC

OPEC

11 mb/d

16 mb/d

© OECD/IEA - 2009

Cumulative OPEC oil export revenuesby scenario

Though slightly lower than in the Reference Scenario, OPEC revenues in the 450 Scenario are over four times as high as in the last 20 years

0

4

8

12

16

20

24

28

1985-2007

Reference Scenario 450 Scenario

2008-2030

Trillion d

ollars

(2008)

© OECD/IEA - 2009

World primary natural gas demand by scenario

Gas demand continues to grow in both scenarios, peaking by around 2025 in the 450 Scenario & highlighting the potential role of gas as a transition fuel to a clean energy future

0

750

1 500

2 250

3 000

3 750

4 500

2007 2015 2020 2025 2030

bcm Reference Scenario

450 Scenario

+41% (1 264 bcm)

+17% (511 bcm)

© OECD/IEA - 2009

Average IEA crude oil import price

The oil price in real terms is assumed to rebound from around $60 per barrel in 2009 with the economic recovery, reaching $100 by 2020 & $115 per barrel by 2030 in Reference Scenario

0

25

50

75

100

125

150

175

200

1970 1980 1990 2000 2010 2020 2030

Dolla

rs p

er

ba

rrel

Nominal – Reference Scenario

Nominal – 450 Scenario

Real ($2008) – Reference Scenario

Real ($2008) – 450 Scenario

© OECD/IEA - 2009

Additional investment and fuel-cost savings in the 450 Scenario vs. the Reference Scenario

Fuel cost savings in industry, buildings and transport of $8.6 trillion over the period 2010-2030 more than offset the additional investment needed of $8.3 trillion

-12 000

-9 000

-6 000

-3 000

0

3 000

6 000

9 000

12 000

15 000

18 000

Fuel cost savings 2010-2030 Fuel cost savings over lifetime

Billion d

ollars

(2008)

Transport

Buildings

Industry

Incremental investment

2010-2030

© OECD/IEA - 2009

Abatement in the 450 Scenario by key emitters, 2020

China, the United States, the European Union, India, Russia & Japan account for almost three-quarters of the 3.8 Gt reduction in the 450 Scenario

0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

China United

States

European

Union

India Russia Japan

Gt

International carbon markets

Cap & trade in power

& industry sectors

International sectoral standards

in transport & industry

National policies

© OECD/IEA - 2009

Additional investment need in non-OECD countries by policy type, 2020

Non-OECD abatement measures co-funded

Abatement (Mt)

Investment ($ billions)

All 450 Scenario abatement

2166 196.9

Sectoral agreements in industry and transport

660 71.8

National policies and measures

907 71.4

Further measures (market mechanisms)

599 53.7

© OECD/IEA - 2009

World abatement of energy-related CO2 emissionsin the 450 Scenario

Current pledges point direction but further efforts would be needed to reach the 450 Scenario

26

28

30

32

34

36

38

40

42

2007 2010 2015 2020 2025 2030

Gt

450 Scenario

Reference Scenario

OECD+

OME

OC

3.8 Gt

13.8 Gt

27

29

31

33

35

2007 2010 2015 2020

Gt

Reference Scenario

450 Scenario

Current

Pledges

© OECD/IEA - 2009

Summary & conclusions

The financial crisis has halted the rise in global fossil-energy use, but its long-term upward path will resume soon on current policies

Tackling climate change & enhancing energy security require a massive decarbonisation of the energy system

> We are now on course for a 6°C temperature rise & rising energy costs

> Limiting temperature rise to 2°C will require big emission reductions in allregions

A 450 path towards ‘Green Growth’ would bring substantial benefits

> Avoiding the worst effects & costs of climate change

> Energy-security benefits, lower oil & gas imports & reduced energy bills

> Much less air pollution & huge health benefits

Natural gas can play a key role as a bridge to a cleaner energy future

The challenge is enormous – but it can and must be met

> Improved energy efficiency & technology deployment are critical

> Each year of delay adds $500 bn to mitigation costs between today & 2030