World Energy Outlook 2007

In line with last year’s Outlook, we have assumed that international oil prices in
the Alternative Policy Scenario are the same as in the Reference Scenario, on
the assumption that the investment and production policies of OPEC
countries are adjusted to accommodate lower demand for their oil. Gas prices
are also assumed to be the same, because of the widespread use of oil-price
indexation in long-term gas supply contracts. Coal import prices, however, are
assumed to fall – especially towards the end of the projection period – in
response to the lower supply-demand equilibrium established in the
Alternative Policy Scenario. The average steam coal import price is assumed to
fall from $61 per tonne in 2030 in the Reference Scenario to $56. Electricity
prices increase in some regions, reflecting changes in the fuel inputs and in the
cost of power-generation technologies.
A number of policies in China and India – mainly driven by energy-security
and local environmental concerns – have been taken into consideration in the
Alternative Policy Scenario. The development of more detailed models for both
countries permits a more robust analysis of their impact. China’s 11 th Five-Year
Plan contains a commitment to generate 10% of its electricity from renewables
by 2010 and to cut overall energy intensity by 20% between 2005 and 2010
(though recent trends make this a very challenging target). The plan also
contains targets for local pollutants. In June 2007, China released a National
Climate Change Programme, which includes some new measures to curb the
growth in greenhouse-gas emissions. These policies are taken into
consideration in the Alternative Policy Scenario. In India, we have analysed
80 different policies and measures, including actions aimed at improving
energy efficiency in end-use sectors and promoting the deployment of
advanced power-generation technologies.
There is growing support worldwide for radical and urgent action to bring
long-term CO 2
emissions down in order to achieve stabilisation of
concentrations of the gas at levels compatible with an acceptable increase in
global temperatures. At their recent summit in Heiligendamm, G8 leaders
“agreed to consider” strategies to halve global emissions by 2050 – an objective
in line with long-term stabilisation of the concentration of greenhouse gases in
the atmosphere in the range of 445 to 490 parts per million of CO 2
equivalent
and a maximum rise in temperature of 2.4°C. 8 We estimate that achieving this
goal would require energy-related CO 2
emissions to be reduced to around
23 gigatonnes in 2030 – 11 Gt less than in the Alternative Policy Scenario. We
have developed a “450 Stabilisation Case”, which describes one possible
pathway to achieving this goal, taking the Alternative Policy Scenario as a
starting point, in order to illustrate the extent of the challenge of transforming
8. According to IPCC (2007).
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World Energy Outlook 2007