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.
But 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 Change.
“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.
Under 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$10.5 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 $23tn 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.
The 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.
Western leaders, however, say their own emissions cuts will be ineffective without big contributions from fast-developing states like China and India.
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.