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IEA warns of huge cost for energy ‘revolution’

PARIS: The economic crisis gives the world a chance for a low-carbon ‘revolution’ to ensure energy supplies and fight global warming, but it will cost a huge chunk of worldwide output, the IEA warns.

“The scale and breadth of the energy challenge is enormous — far greater than many people realise,” the International Energy Agency said on Tuesday. “But it can and must be met,” it said. “The time to act has arrived.” The language from the usually staid agency, a branch of the OECD in Paris, amounted to an alarm call on the state of the world in terms of energy supplies and the threat of “disastrous climate change.” The IEA laid out the dangers, and its declaration for action, in its World Energy Outlook which falls this year shortly before a landmark international conference on climate change in Copenhagen in December. The IEA is the energy arm of the Organisation for Economic Cooperation and Development, a policy powerhouse for the 30 leading industrialised countries. If governments do not change their policies, there will be ‘alarming’ consequences for energy security, and almost certainly “massive climate change and irreparable damage to the planet.”

The agency estimated that even existing policies to ensure supplies to meet ‘inexorable’ growth of demand and combat green-house gas damage would cost $26 trillion (17.3 trillion euros) in real, or inflation adjusted, dollars for capital investment by 2030. This cumulative bill was equivalent to $1.1 trillion or 1.4 percent of world economic output per year, on average. The power sector needed 53 percent of the total and more than half of the global figure was needed in developing countries. But under its best-case hypothesis of greenhouse gases being limited to an increasingly accepted target of 450 parts per million of carbon dioxide, there would be an additional investment bill of $10.5 trillion. Of this extra amount, 45 percent was needed in the sector of transportation.

The total implied investment cost, in dollars valued in 2008 terms, is therefore about $36.5 trillion over about 20 years. The IEA said: “The recession, by curbing the growth in greenhouse-gas emissions, has made the task of transforming the energy sector easier by giving us an unprecedented, yet relatively narrow, window of opportunity.” The focus should be on investment in low-carbon technology, but “energy investment worldwide has plunged over the past year,” the IEA said. afp

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