World Energy Outlook 2007

$41 per tonne to $63 in 2006 (in year-2006 dollars). Exceptionally strong
demand for coal from power generators and steel manufacturers, especially in
China, has boosted overall demand and helped drive up prices – but less in
proportionate terms than oil or gas prices. Market fundamentals point to a
slight weakening of coal prices in 2007 and 2008, after which they are assumed
to remain flat until the middle of the next decade. They are then assumed to
rise very slowly, reaching just over $60 per tonne by 2030. Coal prices are
broadly constant relative to oil prices from the beginning of the next decade.
In the short term, the strength of Chinese and Indian import demand is a
particularly important uncertainty for coal prices. In the medium to longer
term, the price of coal will remain sensitive to environmental restrictions on
coal-burning and developments in clean coal technology, which could allow
coal to be used to generate power much more efficiently and in a way that
emits less carbon dioxide.
The Alternative Policy Scenario
Since 2000, the WEO has presented an Alternative Policy Scenario to assess the
potential impact of additional government actions to rein in the growth of
energy demand for reasons of energy security or environmental sustainability.
The Alternative Policy Scenario takes into account those policies and measures
that countries are currently considering and are assumed to adopt and
implement, taking account of technological and cost factors, the political
context and market barriers. Macroeconomic and population assumptions are
the same as in the Reference Scenario. Only policies aimed at enhancing energy
security and/or addressing environmental problems, including climate change,
are considered. While cost factors are taken into consideration in determining
whether or not they are assumed to be implemented, policies are not selected
according to their relative economic cost-effectiveness. Rather, they reflect the
proposals actually under discussion in the current energy-policy debate.
With each edition of the Outlook, the analysis of the Alternative Policy Scenario
has been deepened and broadened. WEO-2006 raised the bar several notches,
by compiling and analysing more than 1 400 policies from both OECD and
non-OECD countries. This Outlook updates that exercise, adding new policies
that have been proposed during the year to mid-2007 and moving those
policies that have recently been adopted from the Alternative Policy Scenario
to the Reference Scenario. Energy and climate policies have remained at the top
of the political agenda in many countries, reflecting continuing anxieties about
the vulnerability of oil and gas supplies to disruption, rising greenhouse-gas
emissions and firmer evidence about the likelihood, extent and long-term
economic costs of climate change. The number and strength of policies under
consideration continue to grow faster than the number and strength of new
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World Energy Outlook 2007