posted by Wendy Stott
Published: February 15, 2011
Signals and Signposts -- updates our thinking by taking into account the
impact of the global economic and financial crisis. Over the next four
decades, the world's energy system will see profound developments. Heightened
collaboration between civil society and the public and private sectors is
vital if we want to address economic, energy and environmental challenges.
Partnerships must be grounded in commercial reality, but energy and
environmental developments have to accelerate in the right direction. We must
widen and deepen the debate across industry and geographical boundaries.
1. We believe that the world is entering an era of volatile transitions
and intensified economic cycles. The recession interrupted the oil and
commodity price boom but it may return. Emerging nations like China and India
are going through materially intensive development and a tighter market will
continue to put pressure on prices and generate volatility. Improvements in
policy-making and strong gains in productivity have helped economies to grow
without inflation in the last two decades. We do not believe the moderating
effect of this combination of good policies, good practices, and good luck
will continue into the future.
2. We are seeing a step change in energy use. Developing nations,
including population giants China and India, are entering their most
energy-intensive phase of economic growth as they industrialise, urbanize,
build infrastructure, and increase their use of transportation. Demand
pressures will stimulate alternative supply and more efficiency in energy use
- but these alone may not be enough to offset growing demand tensions
completely. Underlying global demand for energy by 2050 could triple from its
2000 level if emerging economies follow historical patterns of development.
3. In broad-brush terms, natural innovation and competition could spur
improvements in energy efficiency to moderate underlying demand by about 20%
over this time. Ordinary rates of supply growth -- taking into account
technological, geological, competitive, financial and political realities --
could naturally boost energy production by about 50%. But this still leaves a
gap between business as- usual supply and business-as-usual demand of around
400 EJ/a - the size of the whole industry in 2000. This gap - this Zone of
Uncertainty - will have to be bridged by some combination of extraordinary
demand moderation and extraordinary production acceleration.
4. Supply will struggle to keep pace with demand. By the end of the
coming decade, growth in the production of easily accessible oil and gas will
not match the projected rate of demand growth. While abundant coal exists in
many parts of the world, transportation difficulties and environmental
degradation ultimately pose limits to its growth. Meanwhile, alternative
energy sources such as biofuels may become a much more significant part of
the energy mix - but there is no "silver bullet" that will completely resolve
5. Smart urban development, sustained policy encouragement and commercial
and technological innovation can all result in some demand moderation. But so
can price-shocks, knee-jerk policies and frustrated aspirations. Timescales
are a key factor. Buildings, infrastructure and power stations last several
decades. The stock of vehicles can last twenty years. New energy technologies
must be demonstrated at commercial scale and require thirty years of
sustained double-digit growth to build industrial capacity and grow
sufficiently to feature at even 1-2% of the energy system. The policies in
place in the next five years shape investment for the next ten years, which
largely shape the global energy picture out to 2050.
6. The global economic crisis has coincided with a shift in geopolitical
and economic power from west to east. This decisive shift is transforming the
global economic and political system. The change is gradual, but its
potential consequences are profound. The economic crisis in the west may
accelerate this trend. Future generations may see 2008 as the turning point.
The world faces a period of uncertain global politics. Strategic fault lines
are emerging. Rising powers are increasingly and confidently asserting what
they see as their national interests. This is undermining global mechanisms
for ensuring collective security.
7. Environmental stresses are increasing. Even if it were possible for
fossil fuels to maintain their current share of the energy mix and respond to
increased demand, CO2 emissions would then be on a pathway that could
severely threaten human well-being. Even with the moderation of fossil fuel
use and effective CO2 management, the path forward is still highly
challenging. Remaining within desirable levels of CO2 concentration in the
atmosphere will become increasingly difficult.