IEA Chief Economist optimistic about Paris climate summit

Ilario D'Amato
Reading time: 5 minutes
5 February 2015

LONDON: Fatih Birol, Chief Economist of the International Energy Agency (IEA), said the global talks in Paris this December are crucial for safely tackling climate change and attracting low carbon investment that is four times above current levels.

The IEA estimates the world is set for warming well beyond the degrees Celsius goal without a new internationally agreed framework to deeply cut emissions, which could be agreed at COP21 in Paris.

During a Grantham Research Institute special lecture on Climate Change and the Environment which was attended by The Climate Group, IEA Chief Economist Fatih Birol warned: “Mother nature gave us a certain amount of emissions to release in the atmosphere. If we go above that we should just say goodbye to our today’s lifestyles”.

Through projections of energy trends as part of the IEA’s World Energy Outlook 2014 report which was released last November, Birol explained how energy systems are expected to look in 2040, covering everything from oil and natural gas to renewables.

Global energy system

The IEA Chief Economist presented our current global energy system as characterized by two major signs of stress: doubts over future oil prices that will “move energy security up high in the energy agenda in the coming years”, and finding an effective solution to climate change “which mainly lies in fixing and greening the energy sector”.

The good news is that increasing emphasis on energy efficiency has brought results, with higher standards often driven by cost concerns. He added: "Now we understand that energy efficiency policies are affecting the trends and the real numbers.”

Fatih Birol hopes changes to the energy system will be driven by policies rather than extreme weather “events”, but acknowledges both are important. He used China as an example of a country that will experience slowing energy demand by 2040 for three main reasons: energy efficiency will be taken more seriously, China’s economic growth will become less energy intensive, and the population is set to peak and then decline.

Low carbon sources in the mix

China is also forecast to provide the biggest contribution to global nuclear power capacity, responsible for “half of the world’s capacityby 2040. Fatih Birol iterated the impact of China’s nuclear growth, which could drive costs down and challenge countries belonging to the Organisation for Economic Co-operation and Development (OECD): “Our numbers show that today 80% of nuclear capacity comes from OECD countries and 20% from the emerging ones, but tomorrow it will be 50, 50%.”

IEA data also suggests renewable energy sources are set to overcome coal to become the leading source of power.

Paris 2015

Addressing the question of whether Paris 2015 is a final opportunity for curbing climate change, the Chief Economist remarked: “Yes, from an energy sector point of view, Paris certainly is our last chance. But I am optimistic, and have reasons to believe so. The Paris process has indeed gathered a strong political momentum.”

However, Fatih Birol stressed that reaching an agreement next December in Paris and reaching the 2 degree target are two very different things. He said the global deal should enforce deep reductions in C02 emissions to finally give a crystal clear signal to investors that the time for the low carbon economy has come, and is here to stay. “We have to invest in low carbon technologies. In order to stay under 2 degrees we need to give new shape to energy investment and increase low carbon investments four times beyond current levels.

In Fatih Birol’s view, in summary the future of energy is stormy primarily due to these factors:

  • Geopolitical and market uncertainties are set to propel energy security high up the global energy agenda.
  • Volatility in the Middle East raises short-term doubts on investments and spells trouble for future oil supply.
  • Nuclear power can play a role in energy security and carbon abatement, yet financing and public concern are key problems that must be addressed.
  • Paris 2015 must send a strong signal for increasing low carbon investment four times beyond current levels, or the world will continue to get warmer above dangerous levels.
  • Far-sighted government policies are essential to steer the global energy system on to a safer and more sustainable course.

Fatih Birol concluded the talk by reminding the audience the International Energy Agency will publish a World Energy Outlook Special Report this June in advance of the critical UN climate talks in Paris, with an in-depth analysis of countries pledges.

Image copyright CC BY-NC-SA 2.0 by World Economic Forum - by Remy Steinegger

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