Fatih Birol: Our Global Energy Future

We are seeing a very sharp increase in CO₂ emissions worldwide on one hand. On the other hand, we see an increasing number of extreme weather events. Normally, increasing CO₂ emissions and the increasing number of extreme weather events should put climate change higher in the policy agenda, but we see the opposite trend. We see that the importance of climate change is declining in the international policy agenda. This is definitely not good news, because in order to reverse the trend of increasing CO₂ emissions we need growing public awareness and action from governments, business leaders and other key stakeholders. But I do not see this happening, and this is one reason why I feel pessimistic about this situation.

The second reason is that a big chunk of the emissions are coming from developing nations in Asia, Latin America, Africa and so on. These countries are making huge infrastructure investments, and most of those investments are in fossil fuel–based technologies, so in a way we are locking in our future. It will be more and more difficult to change the trends in the energy sector if the bulk of the infrastructure is built in an unsustainable way. It will be more and more costly to find a solution to the climate change problem. The more we wait, the more costly it will be, and the more costly it will be, the more difficult it will be to get a global agreement.

Scientists tell us that in order to maintain our lifestyle similar to what we have now, we need to limit the temperature increase to 2 degrees [Celsius]. If it is more than [that], it will be a different way of life, a significant increase in sea level, an increasing frequency of the extreme weather events, including droughts and hurricanes. In order to be in line with the chance to follow the 2 degrees C trajectory we need to change our way of consuming energy within the next three or four years. If we do not make this major change in our policies we may see that our infrastructure will be completely locked in. We have already used up 80 percent of the emissions that allow us to stay on this trajectory. And this 80 percent is increasing every day, so that in 2017, all the emissions that allow us to stay under 2 degrees C will be locked in if we do not change our policies. So we need to urgently change our policies substantially towards using energy more efficiently and fostering low-carbon technologies.

When I look at today’s general energy policy context I do not see major moves happening except one important development. It’s the very fact that many countries now are pushing the energy efficiency button. In the United States, Europe, China and Japan, in the last 18 months, many new energy efficiency policies were introduced. These were perhaps not driven by climate change concerns — they were mainly driven by cost concerns — but they also help reduce CO₂ emissions. I think we are building momentum on the energy efficiency side, which is something we can be hopeful for, and which may then be one of the key game changers in the climate change debate if countries continue to push energy efficiency in a stronger way.

When I look at the many energy-using sectors — such as businesses, households, electricity generators, the transportation sector — I see that the business sector is the one which uses the energy efficiency potential the highest, because they know that using energy more efficiently will also reduce their costs. Albeit slowly, I see that business is moving in the right direction, faster than many other energy-consuming sectors. This is one way to keep the door open and not closed for a 2 degrees C trajectory.

I think traditionally European countries have been very successful in pushing renewable energy technologies in the past 10 to 15 years. However, recently when I look at the new investments of wind and solar capacity, China by far is now the most important country.

When you look at the future, we expect almost half of the growth in global renewable energy will come from China, together with Europe and the United States. However in order to see this growth in renewable energies, these technologies will need government support. Without this support it would be very difficult to see that renewable energy would have a significant share in the global energy mix.

In the World Energy Outlook, we choose special topics for two reasons. One is to identify topics that we think are crucial to the future of the energy sector and therefore look at the implications and bring it to the attention of the wider energy community. And the second is topics which need to get public attention and do not get the attention they deserve. We chose climate change for the second reason. Climate change, as I have mentioned, is not high in the policy agenda despite the alarming times we see and will see. We wanted to use the modest muscles of the World Energy Outlook to lift up climate change high in the energy policy agenda. We will look, among other things, at what kind of zero-cost policy measures are there to help us in the next few years not to close the door for 2 degrees C trajectory; or in other words, what energy sector measures are readily available which wouldn’t temper economic growth and at the same time [would] help us to reduce CO₂ emissions. This would be the main thrust of this special report. And secondly, in the year 2015 there is talk of new negotiations, so we want to make some suggestions about what kind of steps and measures countries can consider towards a internationally legally binding framework. Finally, we will address questions about a potential “carbon bubble,” where investment in fossil fuel reserves and related energy infrastructure may exceed by some way the level that is justified under a 2 degrees C trajectory, highlighting the potential risk of stranded energy assets.

I think the biggest threat is the fact that in many countries there are substantial subsidies towards consumption of fossil fuels (oil, gas, coal) and electricity derived from them, which lowers artificially and significantly the price of fossil fuels. Our analysis shows that half a trillion dollars of subsidies —  i.e., over $500 billion — are artificially lowering the prices of oil, gas, coal and electricity derived from them, which leads to inefficient use of energy and increasing CO₂ emissions. I consider this as the public enemy number one for sustainable energy development. In terms of opportunities, I think the biggest opportunity with respect to greater use of renewables is the current high energy prices. This economic incentive, together with our desire to find a solution to climate change, is an opportunity to develop renewable energies.