Industrialised countries would have to mobilise $100 billion (£62 billion) a year by 2020 to meet global climate change targets, the International Energy Agency (IEA) estimates.
Another $312 billion in fossil fuel subsidies might need to be cut because they “encourage wasteful consumption”, the IEA says in its World Energy Outlook for 2010.
The Copenhagen Accord sets a non-binding objective of limiting the increase in global temperature to two degrees Celsius above pre-industrial levels. All countries are meant to cut global emissions by at least half by 2050. Those efforts, however, suffered a serious setback when countries were dealing with the aftermath of the financial crisis and diverted funding to other parts of their economies.
The IEA warns that “much stronger efforts, costing considerably more” are necessary to meet the goals. Even if policies agreed upon were to be implemented, they would not hit the targets. (article continues below)
“The speed of the energy transformation that would be needed after 2020 is such as to raise serious misgivings about the practical achievability of cutting emissions sufficiently,” the report says. The World Energy Outlook hinges on government policy action and how it affects technology, the price of energy services and end-user behaviour.
Some subsidies even encourage the exact opposite of reducing the global temperature. They also distort markets, impede investment in clean energy sources and thereby undermine efforts to deal with climate change.
Ankit Jain, a renewable energy equity analyst at Standard & Poor’s, says such subsidies, especially in developing countries, are difficult to cut. “While developed countries receive subsidies for industrial production, in developing countries subsidies are meant for the consumer side,” he says.
If all policies announced are implemented, world primary energy demand would increase by 36% between 2008 and 2050, from about 12,300m tonnes of oil or equivalents to over 16,700m. While demand for all types of energy is set to rise, the rate of increase is forecast to fall to 1.2% a year, down from 2% over the past 27 years.
Jain says more investment in renewable energy is needed. However, several developing countries, notably China and India, have started to invest in renewable energy.
This move is significant as they and other non-members of the Organisation for Economic Cooperation and Development (OECD) are expected to account for 93% of the increase in energy demand. This can be attributed to faster growth in economic activity, production, population and urbanisation.
China, which overtook America as the world’s largest energy consumer, is expected to account for 36% of the non-OECD total.