Re-energizing energy
Nobuo Tanaka, executive director of the International Energy Agency, sees boundless business opportunities for companies involved in cutting CO2 emissions, and those developing technology for improved energy efficiency.
The energy industry has met with two fundamental problems in the past 18 months: Climate change has brought with it the ominous cloud of more severe carbon policies that threaten to rain down on producers of CO2. And the sharp rise in oil prices brought on largely by China and India’s growing energy demands has raised fears about the security of oil supplies.
Oil accounts for 35% of global energy consumption, and coal produces 40% of the world’s electricity supply. These figures are unlikely to change significantly for at least two more decades, providing an even greater need for innovative technological solutions to ensure a cleaner and sustainable future.
The Paris-based International Energy Agency (IEA) was set up in 1974 in response to the oil embargo, to provide security management and energy policy cooperation among member states. The IEA has changed with the times and now incorporates the “Three E’s” of balanced energy policy making: energy security, economic development and environmental protection.
In the 2008 edition of its biennial Energy Technology Perspectives, the IEA foresees a 70% increase in oil demand by 2050 and a 130% rise in CO2 emissions under a baseline or ‘business as usual scenario’. According to the UN’s Intergovernmental Panel on Climate Change (IPCC), a rise in CO2 emissions of such magnitude could raise global average temperatures by 6°C, perhaps more. The consequences would
be a significant change in all aspects of life and irreversible change in the natural environment.
For IEA Executive Director Nobuo Tanaka, the twin challenges of CO2 reduction and increased energy demand represent opportunities rather than crises: “Our analysis suggests that total additional investment of $45 trillion between now and 2050 would be needed in order to cut global CO2 emissions by 50% by that time. This amounts to roughly 1.1% of average annual global GDP over the period. But at the same time there would be significant new business opportunities,” he says.
At this year’s G8 finance ministers meeting in Japan, an Action Plan for Climate Change to Enhance the Engagement of Private and Public Financial Institutions was agreed upon. Subsequently, Japan,
the United States and Britain have all launched Climate Investment Funds currently worth $12 billion. The funds have been set up to assist developing countries in curbing greenhouse gas emissions.
“The IEA series Energy Technology Perspectives is one of our responses to the G8 call on the IEA to provide guidance on how to bridge the gap between what is happening and what needs to be done in terms of energy-related CO2 emissions and how we can respond with new technologies,” Mr. Tanaka explains. “We proposed 25 concrete recommendations for energy efficiency measures. The most important step now is implementation. We know what to do, but the will of governments to implement is the key. Additionally, we need to invest in new technologies, renewables, Carbon Capture and Storage (CCS), nuclear in those countries where it is acceptable, and in the transportation sector. With these investments, we can respond to the twin challenges of climate change as well as energy security.”
The IEA’s main message is that there is an urgent need for energy efficiency. End- user efficiency could potentially account for 40% of CO2 reduction. Decarbonising the power generation sector, through increased use of renewable energy, nuclear energy and CCS, are also identified as important steps towards reducing CO2 emissions.
“But to achieve a 50% cut in CO2 emissions by 2050, we need a real energy technology revolution. We would need a virtual de-carbonisation of the power and transportation sectors, either by using second generation biofuels or by wide-scale use of electric or fuel cell hydrogen vehicles. Hydrogen can be produced without carbon by using electric power, but this can be really costly. De-carbonising the transportation sector is estimated to cost $200 per ton of CO2. So this is why a staggering $45 trillion investment is needed to make this energy revolution happen,” Mr Tanaka points out.
While governmental implementation is an important part of the solutions required to reduce CO2 emissions, so too is the role of business: “Of the $45 trillion, most of it should come from the private sector and ultimately from consumers, but the business community needs good, stable and transparent policy frameworks which governments need to develop,” says Mr Tanaka.
Given that fossil fuels are such a significant part of the energy mix, the IEA views the development of Carbon Capture and Storage (CCS) as imperative: “Countries such as China and India are growing rapidly. If they want to expand their use of coal-fired power plants and reduce emissions we need the CCS technology to become successful. Without CCS, we can not achieve 50% reduction in CO2 emissions by 2050. In the G8 summit meeting, I said very clearly that we can reduce our CO2 emissions to the required level, but we need a clear focus point, and that is to make CCS possible in China. The development of CCS is a litmus test of seriousness for the negotiators in this climate change issue,” Mr. Tanaka warns.
Mr Tanaka, who is familiar with the CCS test plant in Mongstad, Norway, is also aware that it has been described as the ‘moon-landing’, by leading Norwegian industry figures and politicians due to the technological complexity of the project. “We have to test this technology as soon as possible in a full-scale demonstration plant. In our Energy Technology Perspectives 2008, we concluded that –
to achieve a decarbonisation of the power sector – we would need, among other things, to fit on average per year 35 coal and 20 gas-fired power plants with CCS technology between 2010 and 2050 at a cost of USD 1.5 billion each. Costs, regulatory frameworks, liability issues, all these elements must be clarified, otherwise large scale investment will not happen.”
Reaching the target of 50% reduction in CO2 emissions is possible, in the eyes of Mr Tanaka it’s: “a huge effort – we need immediate policy action and technological transition on an unprecedented scale, with significant investment in the energy infrastructure, much more research and development and considerable efforts in energy efficiency. Otherwise this 50% reduction in CO2 emissions will become science fiction.”
