Energy policy

No silver bullet
Oil prices may be high, causing more than a little anxiety among governments and the public. Yet, it is precisely at such times that a calm look at the energy situation is needed.
Although newspaper headlines are typically dominated by events of a short-term nature, it is crucial that we keep our eyes on the medium and longer-term pressures that economic, security and environmental demands place on our energy system.This is what the IEA’s World Energy Outlook tries to help us to do. It coolly provides policymakers and industry experts with insight into the evolution of energy markets and analysis of the key challenges that we must overcome to ensure the existence of secure, efficient, environmentally acceptable and flexible energy systems and markets worldwide.The latest edition appeared in 2004 at an extremely volatile and uncertain moment in world energy markets. Soaring oil, gas and coal prices, exploding energy demand in China, war in Iraq and electricity blackouts in many OECD countries reflected the many transformations buffeting the energy sector.Our experts avoided hype, but they nonetheless paint a sobering picture of how the global energy system could evolve from now to 2030. The messageis simple: without new government policies or an accelerated deployment of new technology, world energy demand is set to rise by 60%. Some 85% of this increase will be in the form of carbonemitting fossil fuels: coal, oil and natural gas, while two thirds of the new demand will come from developing countries, especially China and India. The world will need to invest $16 trillion to maintain and expand energy supply to ensure this demand is met.Sobering indeed. These projected market trends raise serious concerns about energy security and sustainability.Major oil and gas importers–including most OECD countries, China and India–will become ever more dependent on imports from a few distant, often politically unstable parts of the world. We will be looking at this more closely in the 2005 edition, but for now it suffices to point out that while this booming trade will strengthen the mutual dependence among exporting and importing countries, it will also exacerbate the risks that wells or pipelines could be closed or tankers blocked by piracy, terrorist attacks or accidents.There are environmental implications, too. Emissions of carbon dioxide will grow marginally faster than energy use. They will be more than 60% higher in 2030 than now. Well over two thirds of the projected increase in emissions will come from developing countries, which will remain major users of coal–the most carbon-intensive of fuels.Little dent is expected to be made in the 1.6 billion people–a staggering one quarter of the world’s population–who currently lack electricity. In fact, the ranks of those using traditional fuels such as wood or other biomass in unsustainable and inefficient ways for cooking and heating will actually increase. Providing these people with access to modern energy services would contribute to each of the economic, social and environmental dimensions of human development.Thankfully, the future is not set in stone. More vigorous government action could steer the world onto a more sustainable energy path. In an alternative scenario, the World Energy Outlook considers the impact of environmental policies that countries around the world are already examining, as well as the effects of faster deployment of energy-efficient technologies. It demonstrates that global energy demand and carbon dioxide emissions can be dramatically reduced. As can dependence on imported energy in major consuming countries and the world’s reliance on Middle East oil and gas. The energy-efficient technologies needed to achieve the bulk of these savings are currently available and are affordable. However, even in this alternative scenario carbon dioxide emissions would be higher in 2030 than today. In other words, the action we outline could slow carbon dioxide emissions, but not reduce them.For that to happen, technological breakthroughs would be needed that dramatically alter how we produce and use energy. Carbon capture and storage technologies hold out the tantalising prospect of using fossil fuels in a carbon-free way. Advanced nuclear reactor designs or breakthrough renewable technologies could one day help free us from our dependence on fossil fuels.Governments have an important role in implementing the policies needed to spur the development and implementation of such technologies. In formulating responses it is important to recognise that there is no silver bullet to a sustainable energy future. Regions and countries have different resources upon which they wish to draw, as well as different preferences and infrastructures to bear in mind. Accordingly, no single fuel or technology should be canonised, nor should any single fuel or technology be crucified.Still, there are a few basic points that we must all remember. Economic development cannot be achieved without energy and cannot be sustained unless the energy supply is secure. But energy production and use must also be environmentally sustainable. Finding the right balance between these requirements is a challenge we all face.© OECD Observer No. 249 May 2005ReferencesIEA (2004), World Energy Outlook, OECD, Paris.Visit

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