The world is still failing to put the global energy system onto a more sustainable path. Global energy demand grows by more than one-third over the period to 2035 in our central scenario, with China, India and the Middle East accounting for 60 percent of the increase. Despite the growth in low-carbon sources of energy, fossil fuels remain dominant in the global energy mix, supported by subsidies that amounted to $523 billion in 2011, up almost 30 percent on 2010 and six times more than subsidies to renewables. Emissions in [this] scenario correspond to a long-term average global temperature increase of 3.6°C.

Energy developments in the United States are profound, and their effect will be felt well beyond North America — and the energy sector. The recent rebound in US oil and gas production, driven by upstream technologies that are unlocking light tight oil and shale gas resources, is spurring economic activity — with less expensive gas and electricity prices giving industry a competitive edge — and steadily changing the role of North America in global energy trade. By around 2020, the United States is projected to become the largest global oil producer (overtaking Saudi Arabia until the mid-2020s) and starts to see the impact of new fuel-efficiency measures in transport.

The result is a continued fall in US oil imports, to the extent that North America becomes a net oil exporter around 2030. This accelerates the switch in direction of international oil trade toward Asia, putting a focus on the security of the strategic routes that bring Middle East oil to Asian markets. The United States, which currently imports around 20 percent of its total energy needs, becomes all but self-sufficient in net terms — a dramatic reversal of the trend seen in most other energy-importing countries.

Energy efficiency is widely recognised as a key option in the hands of policymakers, but current efforts fall well short of tapping its full economic potential. In the last year, major energy-consuming countries have announced new measures: China is targeting a 16 percent reduction in energy intensity by 2015; the United States has adopted new fuel economy standards; the European Union has committed to a cut of 20 percent in its 2020 energy demand; and Japan aims to cut 10 percent from electricity consumption by 2030. These help to speed up the disappointingly slow progress in global energy efficiency seen over the last decade. But even with these and other new policies in place, a significant share of the potential to improve energy efficiency — four fifths of the potential in the buildings sector and more than half in industry — still remains untapped.

Tackling the barriers to energy efficiency investment can realise huge gains for energy security, economic growth and the environment. These gains are not based on achieving any major or unexpected technological breakthroughs, but just on taking actions to remove the barriers obstructing the implementation of energy efficiency measures that are economically viable.

Successful action to this effect would have a major impact on global energy and climate trends. The growth in global primary energy demand to 2035 would be halved.

Successive editions of this report have shown that the climate goal of limiting warming to 2°C is becoming more difficult and more costly with each year that passes. Almost four-fifths of the COemissions allowable by 2035 are already locked-in by existing power plants, factories, buildings, etc. If action to reduce COemissions is not taken before 2017, all the allowable COemissions would be locked-in by energy infrastructure existing at that time. No more than one-third of proven reserves of fossil fuels can be consumed prior to 2050 if the world is to achieve the 2°C goal, unless carbon capture and storage (CCS) technology is widely deployed.

Unconventional gas accounts for nearly half of the increase in global gas production to 2035, with most of the increase coming from China, the United States and Australia. But the unconventional gas business is still in its formative years, with uncertainty in many countries about the extent and quality of the resource base. There are also concerns about the environmental impact of producing unconventional gas that, if not properly addressed, could halt the unconventional gas revolution in its tracks. Public confidence can be underpinned by robust regulatory frameworks and exemplary industry performance.

Coal has met nearly half of the rise in global energy demand over the last decade, growing faster even than total renewables. Whether coal demand carries on rising strongly or changes course will depend on the strength of policy measures that favour lower-emissions energy sources, the deployment of more efficient coal-burning technologies and, especially important in the longer term, carbon capture and storage. The policy decisions carrying the most weight for the global coal balance will be taken in Beijing and New Delhi — China and India account for almost three-quarters of projected non-OECD coal demand growth.

A steady increase in hydro power and the rapid expansion of wind and solar power has cemented the position of renewables as an indispensable part of the global energy mix; by 2035, renewables account for almost one-third of total electricity output. Solar grows more rapidly than any other renewable technology. Renewables become the world’s second-largest source of power generation by 2015 (roughly half that of coal) and, by 2035, they approach coal as the primary source of global electricity.

Consumption of biomass (for power generation) and bio-fuels grows four-fold, with increasing volumes being traded internationally. Global bio-energy resources are more than sufficient to meet our projected bio-fuels and biomass supply without competing with food production, although the land-use implications have to be managed carefully. The rapid increase in renewable energy is underpinned by falling technology costs, rising fossil-fuel prices and carbon pricing, but mainly by continued subsidies: from $88 billion globally in 2011, they rise to nearly $240 billion in 2035.

The anticipated role of nuclear power has been scaled back as countries have reviewed policies in the wake of the 2011 accident at the Fukushima Daiichi nuclear power station. Japan and France have recently joined the countries with intentions to reduce their use of nuclear power, while its competitiveness in the United States and Canada is being challenged by relatively cheap natural gas. Our projections for growth in installed nuclear capacity are lower than in last year’s Outlook and, while nuclear output still grows in absolute terms (driven by expanded generation in China, Korea, India and Russia), its share in the global electricity mix falls slightly over time. Shifting away from nuclear power can have significant implications for a country’s spending on imports of fossil fuels, for electricity prices and for the level of effort needed to meet climate targets.

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