Leaders deaf to the climate alarm bell

The world's markets have been riding a rip-roaring rollercoaster from one crisis to the next. Every day a new problem crops up: Greece, Italy, the euro, Berlusconi buffoonery, the bland faces of Eurocrats unable to find a way through the political and economic minefield of the euro zone, the failure of the Group of 20 so-called leaders to understand anything beyond the domestic photo-ops of the summit.

This is a world lurching from day to day, in which ordinary people try to cope with inflation and unemployment, and businesses struggle with higher taxes and falling demand. Few politicians are looking at life beyond the crises.

Anyone concerned about the kind of world their children will face should be worried about the findings of the World Energy Outlook 2011 published last week by the International Energy Agency (IEA). The world is heading for the disaster of irreparable climate change, it says.

The report notes that in spite of an uneven recovery in the world economy, 'global primary energy demand rebounded by a remarkable 5 per cent in 2010'.

The agency tries to assess the state of the global energy market over the next 25 years, highly contentious territory that involves making forecasts about areas of modern economic life where powerful vested interests roam, technologies are changing rapidly and lifestyle choices are key. There are also geopolitical issues, such as turmoil in the Middle East and whether to plunder pristine wilderness for new energy supplies.

The IEA has the advantage of being sober and thoughtful and not given to scaremongering. It also looks at energy prospects in the light of global warming. Its conclusions are sobering. 'There are few signs that the urgently needed change in global energy trends is under way,' it says. It notes that the 5 per cent increase in primary energy demand pushed carbon dioxide emissions to a new high. 'Subsidies that encourage wasteful consumption of fossil fuels jumped to over US$400 billion,' it adds. 'The number of people without access to electricity remained unacceptably high at 1.3 billion, around 20 per cent of the world's population. Global energy intensity worsened for the second straight year.'

Natural and human disasters have also taken their toll, casting 'doubts on the reliability of energy supply, while concerns about sovereign financial integrity have shifted the focus of government attention away from energy policy and limited their means of policy intervention, boding ill for agreed global climate change objectives'.

The IEA's conclusions on climate change make grim reading. 'We cannot afford to delay further action to tackle climate change if the long-term target of limiting the global average temperature increase is to be achieved at reasonable cost,' the IEA says.

The deadline for action will come soon. Strict new controls on carbon emissions must be in place by 2017 because existing capital stock of power plants, buildings and factories means that certain emissions are already locked in.

'If we do not have an international agreement whose effect is put in place by 2017, then the door will be closed forever,' IEA chief economist Fatih Birol warns.

Climate experts say that to limit the increase in global temperatures to 2 degrees Celsius above pre-industrial levels means limiting greenhouse gas emissions to 450 parts per million (ppm) of carbon dioxide equivalent. The level in April was 393. Some leading climate scientists, including James Hansen and Rajendra Pachauri, advocate reducing emissions to 350ppm. Any increase of more than 2 degrees would produce irreversible climate damage that would change life on earth forever.

The report shows that the world is on track for disaster but offers options. If its 'new policies scenario', where governments cautiously implement commitments to restrain energy use, is followed, demand for energy will rise by a third between 2010 and 2035, assuming 3.5 per cent annual average growth in GDP and a global population increase of 1.7 billion.

The average crude oil import price would be US$120 a barrel in 2010 prices by 2035 but price-volatile. There would be a shortfall of 47 million barrels of oil, though this could be compensated by production of natural gas liquids, unconventional sources and biofuels.

The dynamics of energy markets will also shift to newly developing countries, with China consolidating its position as the world's biggest energy consumer, using 70 per cent more than the US, even though per capita use will be half that of the US. Countries outside the OECD (the club of rich industrial nations), will account for 90 per cent of population increase, 70 per cent of economic output and 90 per cent of energy demand in the 25 years from 2010. But the 'new policies scenario' would still cause global temperatures to rise by 3.5 degrees. If current policies continue, the temperature rise will be 6 degrees or more, bringing prospects of a traditional fiery hell to life on earth.

The IEA's '450 scenario' to contain the increase in greenhouse gases to 450ppm and the temperature rise to 2 degrees requires strict restrictions and new investments. It estimates that US$48 billion a year would have to be invested in energy between now and 2030, against US$9 billion in 2009.

The prospects for action are poor. Looking at the body language between Hu Jintao and Barack Obama at the Apec summit and listening to the mutual sniping backed by hawkish choruses on each side of the Pacific, it is sadly clear that world leaders still do not understand the threats to the world they live in.

$48b

The energy investment, in US dollars, needed every year to keep world temperature rises at a 'tolerable' level