Carbon caps to speed fall in oil demand

New limits on carbon pollution likely to be agreed on this year will
reduce the world’s need for oil more quickly than previously forecast,
according to the International Energy Agency (IEA).

To limit
global warming to an average increase of 2° Celsius, global consumption
of fossil fuels will have to peak within 10 years, said the IEA, a
Paris-based group of energy consuming nations.

The new
projections show efforts to curb carbon emissions could have a
significant effect on demand for the UAE’s most important export.

the IEA also predicts that under a strict climate regime, oil revenues
in OPEC member states will be four times higher by the end of 2030 than
they were in the past 22 years, because of the combined effect of
higher oil prices and increased OPEC output.

The study, released
as negotiators gather in Bangkok to find common ground on a new climate
change treaty, shows an “energy revolution” is feasible, said Yvo de
Boer, the executive secretary of the UN Framework Convention on Climate

“The global economy does not suffer much from the costs
incurred,” he said in a preface to the report. “The cost of addressing
climate change is manageable. The cost of not doing so is unaffordable.”

World leaders hope to reach a final deal at a summit in Copenhagen in December.

the proposals offered by the IEA in which the proportion of carbon in
the atmosphere is kept to the benchmark 450 parts per million, world
oil consumption in 2030 would be 15.3 million barrels per day (bpd)
less than in a business-as-usual scenario. This is equivalent to almost
20 per cent of current global oil demand.

The world would also
increase energy investment by US.5 trillion (Dh38.56tn) over the
20-year period to boost energy efficiency, substitute coal-fired power
stations with gas and renewables, and make electric cars a mainstay of
the global transport fleet.

The IEA will not release its
estimates for long-term oil demand until next month, but last year it
predicted consumption in 2030 would reach 106 million bpd if large
emission cuts are not implemented. The world currently uses almost 84
million bpd.

In an effort to demonstrate that a climate change
treaty will not hurt oil exporters, the IEA predicts OPEC oil and gas
revenues would rise to tn by the end of 2030. The sum is lower than
OPEC’s revenues under a business-as-usual scenario, but four times
higher than members’ total revenues since 1985.

Officials from
Saudi Arabia and other OPEC countries have called for economic aid from
industrialised countries to help them to adapt to a future where oil is
no longer the world’s key energy source.

Such efforts are
unlikely to receive the support of western leaders, since OPEC states
have large reserves to invest in their economies, said Mari Luomi, a
Gulf climate expert at the Finnish Institute of International Affairs
in Helsinki.

“Economic assistance from the industrialised
countries is politically and morally impossible, as there are poor
developing states that are much more in need of assistance,” she said.

IEA’s scenario calls for carbon emissions from some of the largest
developing countries including the Middle East, Russia and China to
peak by 2020, but says primary responsibility for reductions lies with
industrialised countries.

A dispute over which countries should
bear the burden of emissions cuts has been the key issue in global
climate change talks. Leaders from developing states have resisted
specific emissions targets, saying industrialised states are
responsible for the bulk of carbon now in the atmosphere.

leaders, however, say their own emissions cuts will be ineffective
without big contributions from fast-developing states like China and

The silver lining in yesterday’s forecast was that the
recession has bought more time for reducing emissions. Emissions in
2020 will be 5 per cent lower than before the onset of the crisis, the
IEA said.

“By reducing emissions, the financial and economic crisis has created a window of opportunity,” Mr de Boer said.