IEA calls for “Clean Energy New Deal” to stimulate global economy and combat climate change

“The global economic slowdown must be viewed as an opportunity, not a distraction from efforts to mitigate climate change. Countries planning fiscal stimulus packages should invest in energy efficiency and clean technologies to build sustainable energy infrastructure.” So said Nobuo Tanaka, Executive Director of the International Energy Agency (IEA), today at the UN climate talks (COP14) in Poznan, Poland. “This sort of ‘Clean Energy New Deal’ not only generates economic growth and makes sense from an environmental standpoint, but it also enhances energy security. All countries could benefit,” he added.

A Clean Energy New Deal for the energy sector
The energy sector must play a key role in tackling climate change. Global energy-related CO₂ emissions, which account for 61% of global greenhouse gas emissions, show no sign of decline. The latest complete data of CO₂ emissions indicate a 33% rise between 1990 and 2006. Between 2005 and 2006, all of the growth in these emissions took place outside the OECD region. OECD countries clearly felt the rise in energy prices earlier this year. In other parts of the world, vibrant economic growth but also subsidies that shield consumers from substantial energy price increases have led to emissions growth. Energy subsidies amounted to a staggering USD 310 billion in 20 non-OECD countries representing 80% of total non-OECD primary energy demand in 2007. The dramatic fall in energy prices in recent months has helped provide breathing space for the depressed economy, but could cause delays in investment in new production, leading to a supply crunch in the medium term as energy demand grows, and slow progress in energy efficiency and the development of cleaner alternative technologies.

“The current volatility in global energy markets and the broader economic slowdown must not push us off-track from our efforts to address climate change. We must put in place the framework that will guide investment during the recovery, and we must start the green infrastructure that will enable the sustainable economy going forward. We think there is an enormous opportunity to develop a ‘Clean Energy New Deal’ to achieve energy security, economic and environmental goals,” Mr. Tanaka stated. “By adopting new energy efficiency measures, constructing green energy infrastructure and taking steps to integrate cleaner energy into the power grids, governments can lock in sustainable technologies and reduce CO₂ emissions by almost 40% relative to the projected baseline emissions for 2030.” According to the IEA publication World Energy Outlook 2008 (WEO), greening the energy system requires additional investment of USD 3.6 trillion in power plants and USD 5.7 trillion in energy efficiency over the period 2010-2030. These additional investments correspond to 0.6% of GDP per year, but bring fuel cost savings to consumers of the order of USD 6 trillion.

All countries must work together to stabilise emissions
The IEA is actively supporting governments in the design of the best policy packages to manage the energy revolution needed to arrive at a sustainable post-2012 global climate change policy regime. The WEO 2008 presents policy scenarios consistent with a long-term stabilisation of greenhouse-gas concentration at 550 and 450 parts per million of CO₂-equivalent. Both are based on a hybrid policy approach, with a plausible combination of cap-and-trade systems, sectoral approaches and national measures. All nations will need to be involved in a fair and proportionate manner. “Our analysis shows that OECD countries alone cannot put the world onto a 450-ppm trajectory, even if they were to reduce their emissions to zero,” Mr. Tanaka warned.

Looking out to 2050, the IEA publication Energy Technology Perspectives 2008 confirms that urgent technology development and deployment at unprecedented rates are needed, from renewables to carbon capture and storage (CCS), nuclear power, low carbon fuels, and end-use efficiency. “Because these technologies need all the financial help they can get, the IEA supports the inclusion of carbon capture and storage in the Clean Development Mechanism or other flexible mechanisms within the UN climate change regime,” said Mr. Tanaka.

The IEA highlights key steps to foster action. First, instead of allowing the global economic slowdown to hinder mitigation efforts, countries planning fiscal stimulus programmes to construct new energy infrastructure and enhance energy efficiency must identify and deploy clean technologies. Second, the power generation sector, where the risk of carbon lock-in is highest, needs a strong carbon price signal to divert investment away from CO₂-emitting capacity. Efforts to incorporate more renewables into the power grid should also be encouraged. Third, some of the more globalised industries could rely on sectoral approaches to achieve reductions while removing competitiveness concerns that arise as installations in parts of the world stand to gain competitive advantage on the back of climate policy. Finally, all countries must take immediate steps to revive their energy efficiency policies – a cost-saving means to improve both energy security and lower CO₂ emissions. “We need worldwide implementation now of energy efficiency policies: the IEA tabled 25 concrete recommendations which G8 leaders strongly supported in Hokkaido which, if implemented globally, would save 8.2 Gt CO₂ annually to 2030,” Mr. Tanaka explained.

The IEA is also acting on two additional fronts to push progress on energy and climate policy. First, it is increasingly involving countries beyond its membership, including large emerging economies, in its debates on energy policy issues. Secondly, the Agency is enhancing its collection of indicators to assess the energy performance of various sectors around the world and to support more effective climate policies in the energy sector. “The IEA is ready to provide robust data and analysis to support action, to advance practical solutions to climate change in the energy sector,” Mr. Tanaka emphasised.