International Energy Agency Urges $45 trillion ‘Energy Revolution’ to Halve CO2

World governments must quickly start a $45 trillion “energy technology revolution” that could drive up the cost of producing carbon ten-fold, or risk emissions surging by 2050, the West’s energy watchdog warned on Friday.

The world would need to build dozens of nuclear power plants a year and bury carbon emitted from dozens more gas and coal plants, plus cutting the carbon intensity of cars, trucks, buses and planes eightfold, to halve emissions by mid-century, the International Energy Agency said in a new report.

Without taking action on government policy, emissions would surge by 130 percent and oil demand would rise by 70 percent by 2050, the IEA said, far beyond the level that many experts believe the world is capable of sustainably producing.

The report, commissioned by the Group of Eight three years ago, lays down the gauntlet for G8 leaders gathering in northern Japan next month, where Tokyo is expected to urge them to agree on a target of chopping greenhouse gases in half by 2050.

“There should be no doubt — meeting the target of a 50 percent cut in emissions represents a formidable target. We would require immediate policy action and technological transition on an unprecedented scale,” Nobuo Tanaka, Executive Director of the IEA, said in a statement.

“It will essentially require a new global energy revolution which would completely transform the way we produce and use energy… We need to act now.”

The IEA said halving emissions by 2050 would require “all options up to a cost of $200 per ton of CO2” — and in the worst case $500 a ton — giving a rare long-term forecast that suggests a sharp rise from the €27 ($42) a ton price for carbon emissions rights trading in Europe.

“You would have to see one of the biggest rises in a commodity price in history to get $500 a ton,” said Tom Luckock, a lawyer with international law firm Norton Rose.
Scientists say that the world must brake and reverse annual increases in greenhouse gas emissions to avoid catastrophic climate change including rising seas and more extreme weather.

But governments are at odds over how to split the costs of funding cleaner energy technology, particularly in the developing world. The IEA said the $45 trillion is equal to 1.1 percent of average annual global gross domestic product over the period.
“Carbon emissions must be cut. Costs of about 1 percent of GDP are not outrageous, so this target is realistic,” said Go Hibino, a senior manager at Mizuho Information & Research Institute.

About 190 nations are racing to craft a framework by the end of 2009 to succeed the Kyoto Protocol, which binds 37 advanced nations to cut emissions by an average of 5 percent from 1990 levels by 2008-12.

OIL DEMAND CURBS
The report, which comes just ahead of a G8 energy ministers meeting this weekend in Japan, highlighted the security benefits of cracking down on carbon.

“Oil demand by 2050 would be 27 percent below the level of 2005. Yet massive investments in remaining reserves will be needed to make up for the shortfall as low-reserve provinces are exhausted,” Tanaka said.

A massive research and development effort will be needed in the next 15 years costing about $10 billion to $100 billion per year to develop technology to cut CO2 emissions, the IEA said in the Energy Technology Perspectives report.

It said the power sector would need to be “decarbonized” by installing CO2 capture and storage (CCS) at 35 coal- and 20 gas-fired power plants a year from 2010 to 2050 at a cost of $1.5 billion each. The sector would also need to build 32 new nuclear plants and install 17,500 wind turbines a year.

Germany’s RWE Supply and Trading said on Wednesday that CCS, often regarded as commercially impossible, could be viable with carbon prices of less than €100 ($156).

The report comes ahead of a weekend meeting of G8 energy ministers and their China, India and South Korea peers in Aomori in northern Japan, where they will try to agree on the role of consumer nations in stemming oil’s five-year price rally.

Tanaka said non-IEA members such as China, India and other developing countries must conserve energy to achieve the target as they are already big emitters and are likely to emit more.

“Some kind of financial facility or some scheme is needed to help developing countries participate more easily,” Mizuho’s Hibino said. “It would be hard for the IEA to achieve the goal without the participation of developing countries.”

(Additional reporting by Emma Graham-Harrison in BEIJING; Writing by Jonathan Leff; Editing by Michael Urquhart)