World's energy policy is not sustainable-IEA
Date: Tuesday, November 08, 2005 @ 22:34:21 GMT
Topic: General

By Marguerita Choy and Peg Mackey
Reuters News

PARIS/LONDON, Nov 7 (Reuters) - The world must change its energy habits or struggle with choking fumes, runaway oil demand and a growing dependence on the volatile Middle East for fuel, the International Energy Agency said on Monday.

Energy demand and greenhouse gas emissions will soar by more than 50 percent by 2030 if consumers keep burning oil unchecked, the IEA said in its World Energy Outlook. That would blow a hole in the Kyoto protocol aimed at cutting developed nations' emissions five percent below 1990 levels by 2008-12.

To keep pace with booming demand over the next 25 years, top producer Saudi Arabia and its neighbours would have to spend an annual $56 billion on rigs and refineries or oil prices will race higher, said the IEA, adviser to 26 industrialised nations.

"These projected trends have important implications and lead to a future that is not sustainable," said IEA Executive Director Claude Mandil. "We must change these outcomes and get the planet onto a sustainable energy path."

The message had added resonance coming from an agency whose members include the world's top polluter and oil user the United States, which quit Kyoto in
2001. The IEA was set up after the 1973-74 Arab oil embargo to oversee Western energy needs.

"This is a grim prognosis based on business as usual," said Klaus Toepfer, Executive Director of the U.N. Environment Programme.

"So it must be a clear signal that, in order to avoid such a disaster, we must deploy technologies and adopt economic measures that are already available and feasible."

Under the IEA's reference scenario, a likely but undesirable outcome the agency said, Middle East and north African producers must double annual investment on oilfields to satisfy consumers' thirst for fuel. Failure to spend enough over the next 25 years could slap an extra $13 a barrel on the projected oil price.

"If investments do not come in a timely and sufficient manner, there will be higher oil prices, and global economic growth will suffer," said IEA Chief Economist Fatih Birol.

The IEA also outlined a deferred investment scenario, where producers delay spending -- inadvertently or deliberately -- and a world alternative policy scenario, where importing nations take action to cut demand and change the pattern of fuel use.


"Consuming countries have realised there has to be a policy response to these prices and that process has begun," IEA Deputy Executive Director William Ramsay said.

"We would be quite happy to see our reference scenario made irrelevant by good policy decisions."

The combined emissions of countries that have signed up to Kyoto are well below half the world total. Apart from the United States, which accounts for about 25 percent of all emissions, the other big emitters outside Kyoto are China and India.

"The good news is that China, India and Indonesia don't much like pollution either... but they've got to deal with the politics of energy development and pricing," said Ramsay.

China raised its targets for increasing its use of renewable energy on Monday but acknowledged that coal would remain its primary energy source for decades.

Environmentalists welcomed the IEA's report, but said it was now up to governments to take action.


It was drastic spending cuts on oilfield expansions in the late 1980s and
1990s that have left the world stretched for supplies as demand explodes in Asia and the United States.

The Paris-based agency says it is high time Middle East and north African producers "reinvest with confidence".

Saudi Arabia would have to shell out $174 billion on oil and gas projects through 2030 under the IEA's reference scenario.

For its part, Riyadh already has a $50 billion oil and gas expansion project in train.

Even if world governments got tough on tackling the environment and energy security, demand in 2030 would still soar by 37 percent and the Middle East and north Africa would be pumping much more oil than now.

"This will add to the vulnerability to a disruption and to the risk that those countries will seek to use their dominant market position to force up prices at some point in the future," said the IEA. (additional reporting by Alister Doyle in Oslo, Stuart Penson, Barbara Lewis and Janet McBride in London)

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