International Energy Agency calls for urgent action to reduce use of power

It is the year 2030. Global energy demand has jumped by 53 per cent. Emissions of greenhouse gases have soared by 55 per cent over today's levels. The earth is heading for meltdown.

That is the catastrophic scenario of continuing with "business as usual" depicted in the International Energy Agency's annual World Economic Outlook. That is, unless policymakers and consumers can be persuaded to alter their behaviour radically.

"On current trends, we are on course for a dirty, expensive and unsustainable energy future," the IEA's executive director Claude Mandil said at the report's launch in London yesterday. "In response, urgent government action is required. The key word is urgent."

The IEA advises industrialised countries on their energy needs. At last year's Gleneagles summit of world leaders, it was given the job of "advising on alternative energy scenarios and strategies aimed at a clean, clever and competitive energy future."

The answer it produced yesterday is stark. The world must embrace nuclear power and consumers have to invest in more energy-efficient equipment and cars, if we are to meet our needs in a sustainable way. And, we have to find $20 trillion to invest in energy infrastructure.

"The world is facing twin energy-related threats: that of not having adequate and secure supplies of energy at affordable prices and that of environmental harm caused by consuming too much of it... the current pattern of energy supply carries the threat of severe and irreversible environmental damage," the report said.

The IEA took two scenarios, the "reference" case of continuing current trends, and the "alternative" model, which sees a sharp reduction in energy demand. Under the business-as-usual case, global oil demand reaches 99 million barrels per day in 2015, and 116 mbd in 2030 - compared with 84 mbd in 2005. By 2030, the OECD group of 26 industrialised countries would import two-thirds of its oil needs, from 56 per cent today. Much of the additional imports would come from the Middle East, "along vulnerable maritime routes".

The price of crude oil, in nominal terms, will reach $97 ($55 in real terms) in 2030, or around $130 if the required investment is delayed, the IEA predicted.

More than 70 per cent of the increase in demand for oil and other primary energy sources would come from developing countries, with China alone accounting for 30 per cent. The level of investment required to service our energy needs between now and 2030 is just over $20 trillion, of which the power sector accounts for 56 per cent. More than half of all the energy investment required worldwide is in developing countries. China alone needs $3.7 trillion.

This is going to be very hard to meet. According to the OECD, the oil price boom over the last few years has led to only a "slight" increase in investment, when measured in real terms against rising costs.

The reference scenario foresees a 55 per cent increase in carbon dioxide emissions from the energy sector between now and 2030, with 39 per cent coming from China alone.

The problem is that not much can currently be done about China. As a developing country, it is not obliged under the Kyoto Protocol to reduce its emissions. And the world's current biggest emitter, the US, has not, famously, implemented Kyoto either.

Jim Watson, an energy expert at Sussex University, who was not involved in the IEA report, said: "China is amenable to talks [about emissions reductions] but the problem is that the US stays outside the international framework. The big developing countries are involved in a sort-of Mexican stand-off with the US. They will not move until the US does."

The IEA is not all doom and gloom. There is a big opportunity because the West is about to enter into a phase of replacing its ageing power generation infrastructure (60 per cent of power plants in the OECD will be "retired" in the next 10 years), while developing countries are putting up hundreds of new power stations.

Fatih Birol, chief economist at the IEA, pointed out that a new coal-fired power plant, for instance, could be expected to have a life of 60 years. This presents us with a "chance and a challenge". He said: "The choices of the next 10 years will drive the next 50 or 60 years... If we want to see a difference, we have to make those choices now."

That means the deployment of the cleanest available technology in the new power plants. It should be remembered that China is putting up a new coal-fired power plant every week - and most of these cannot later be modified for "carbon capture" technology. Dr Birol said that if Chinese power plants' efficiencies were brought up to OECD levels, an awful lot of energy could be saved. And we cannot make major reductions without relying on nuclear technology, for some 15 per cent of our energy needs, the IEA said.

The report is perhaps most interesting when advocating a "demand-side" response - that is, action by consumers of energy - which, it said, was much more cost-effective than investing in the supply of energy. The report said the world's consumers needed to spend an extra $2.4 trillion on more efficient refrigerators, cars and other energy-consuming devices. An additional dollar spent on more efficient electrical equipment and appliances avoids $2 investment on the supply side, the IEA said. Dr Birol said: "The cleanest power plant is the one you don't need to build."