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Copenhagen failure could cost US$1 trillion

World Energy Outlook highlights ongoing fallout from the summit.

By Daniel Cressey

The failure of the Copenhagen climate talks to culminate in an agreement could cost the world "at least $1 trillion", according to this year's flagship report from the International Energy Agency (IEA).

The World Energy Outlook suggests that unambitious pledges made at last year's United Nations Framework Convention on Climate Change conference in Copenhagen will mean that much tougher action is needed after 2020 if the world is to meet the goal of limiting atmospheric carbon dioxide (CO2) to 450 parts per million (p.p.m.). But as a result of foot-dragging before that, additional spending required on low-carbon technologies will amount to around US$1 trillion by 2030, says the agency -- an intergovernmental body advising 28 nations, including the United States and Japan, on energy policy.

"While still achievable, the 450 p.p.m. scenario is now much more difficult to obtain," Nobuo Tanaka, executive director of the IEA, told reporters in London. "It is very, very, very difficult."

The World Energy Outlook forecasts future energy demand and costs every year. Previous reports have looked at two scenarios: a 'current policies' scenario extrapolating from governments' existing positions and the '450 scenario', in which the 450 p.p.m. CO2 levels would limit global temperature to a 2°C rise above pre-industrial levels as committed to at Copenhagen.

But as climate policies will not remain the same as they are now and a 2°C target is seen by some as rather ambitious, this year's report comes with a new scenario. The 'new policies' scenario lies somewhere between the two and takes account of governments' proposed actions.

Under current policies, energy demand will increase by 1.4% per year through to 2035. Under new policies this drops to 1.2%. Under the 450 scenario, demand increases just 0.7% per year.

Money matters

In this year's 450 scenario, spending on low-carbon technology necessary to keep to the 2°C target as increased by $1 trillion compared with last year's estimates, from $10.6 trillion to $11.6 trillion. The cost to global gross domestic product (GDP) in 2030 of sticking to this limit has increased from 0.9% in last year's estimate to 1.6% in this year's. The IEA estimates annual GDP growth at 3.2% per year in its models.

In terms of global demand, preliminary data from 2009 suggest that China overtook the United States to become the largest user of energy, and China drives much of the change predicted by the IEA. However, even after years of growth to 2035, China will still use less energy per person than countries in the Organisation for Economic Co-operation and Development (OECD), suggests the agency.

Chinese growth will push demand for fuels, contributing 36% to predicted growth in global energy use.

China is also on its way to becoming a global leader in renewable energies, although most of these technologies will require ongoing government subsidies, says the agency's chief economist Fatih Birol.

Birol says subsidies for fossil fuels should be phased out in favour of support for renewables. "Renewable energies are becoming a mainstream fuel but in most cases they need support to compete with other fuels," he says.

This is especially important as the world experiences an ongoing gas glut, which is a lower CO2-emitting fuel than coal but can also compete with and push out renewable energy. Also on the rise are 'unconventional oil' sources such as Canada's oil sands or bitumen deposits.

Amid all this talk of energy demand, the IEA also emphasises another of its estimates: 1.4 billion people across the world lack any access to electricity and 2.7 billion still use wood or other biomass to cook. While governments argue over energy policy, a huge proportion of the world population is still stuck in energy poverty.

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