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CCXG, 8 September 2015

Laura Cozzi Deputy Head, Directorate of Global Energy Economics

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Energy & climate change today

Energy production & use accounts for two-thirds of global greenhouse-gas emissions

Renewables additions were at record high in 2014 and energy intensity declined at twice the rate of fall of the last decade

Momentum is building: 31 developed & developing countries have put forward new pledges to

reduce emissions and adaptation plans Around 11% of energy-related emissions is covered by carbon markets Many energy companies & investors are starting to engage

Energy sector must cut emissions, while powering economic growth, boosting energy security & increasing energy access

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Energy emissions stall but economic engine keeps running

Global energy-related CO2 emissions

For the first time, energy-related CO2 emissions stalled despite the global economy expanding by 3%

5

10

15

20

25

30

35 Gt

1985 1990 1995 2000 2005 2010

Dissolution of Soviet Union

Global economic downturn

2014

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National pledges build towards a global agreement

Submitted INDCs cover almost 70% of energy-related CO2 emissions, with implications for future energy & emissions trends

Submitted INDCs

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Climate pledges shift the energy sector

One-quarter of the world’s energy supply is low carbon in 2030; energy intensity improves three-times faster than the last decade

Renewables reach nearly 60% of new capacity additions in the power sector; two-thirds of additions are in China, EU, US & India

Natural gas is the only fossil-fuel that increases its share of the global energy mix

Total coal demand in the US, Europe & Japan contracts by 45%, while the growth in India’s coal use slows by one-quarter

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But inefficient coal remains flat

Subcritical coal capacity and retirements/additions in the INDC Scenario

Despite new pledges, inefficient coal plants installed in 2030 are only marginally lower than today

200

400

600

800

1 000

1 200

1 400

2014 2030

GW

Rest of world India China OECD Retirements Additions

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Climate pledges accelerate low carbon investment

Cumulative investment in the INDC and 450 Scenarios (2015-2030)

Overall energy investment needs in the INDC scenario are similar to the 450 Scenario, but a stronger emphasis on low-carbon power and efficiency is needed

10 20 30 40

450 Scenario

INDC

Trillion dollars (2013)

Fossil fuels Power T&D Low-carbon Energy efficiency

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Implications for energy-related emissions

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27

30

33

36

2015 2020 2025 2030

Gt

450 Scenario

INDC Scenario

In the INDC scenario energy-related emissions grow more slowly, but more action is needed to achieve a near term peak in emissions

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What does the energy sector need from COP21?

The IEA proposal for COP21:

1. Peak in emissions – set the conditions which will achieve an early peak in global energy-related emissions

2. Five-year revision – review contributions regularly, to test the scope to lift the level of ambition

3. Lock in the vision – translate the established climate goal into a collective long-term emissions goal

4. Track the transition – establish a process for tracking energy sector achievements

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1. Peak in emissions: IEA strategy to raise climate ambition

Five measures save almost 5 Gt of emissions by 2030 & achieve a global emissions peak by 2020, without harming economic growth & using only proven technologies

Energy efficiency

49%

Reducing inefficient coal

Renewables investment

Upstream methane reductions

Fossil-fuel subsidy reform

17%

15%

10%

Emissions savings in the Bridge Scenario by measure, 2030

9%

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1. Peak in emissions: Bridging strategy is flexible across regions

The measures in the Bridge Scenario apply flexibly across regions, with energy efficiency & renewables as key measures worldwide

GHG emissions reduction by measure in the Bridge Scenario, relative to the INDC Scenario, 2030

United States

European Union

China

India

Middle East

Latin America Africa

Southeast Asia

Russia

Fossil-fuel subsidies

Efficiency

Renewables Inefficient coal plants

Methane reductions

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1. Peak in emissions

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27

30

33

36

2015 2020 2025 2030

Gt

450 Scenario

Bridge Scenario

INDC Scenario

The implementation of the Bridge strategy achieves a peak in energy-related emissions by 2020, but doesn’t decarbonise as quickly as a 2 C trajectory would need

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2. Five-year revision: World’s carbon budget is shrinking

A five-year review cycle would enable pledges to keep pace with energy sector innovation; building ambition before the carbon budget is consumed

Today 2020 2025 2030 2035 2040

World’s remaining carbon budget

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Total

50

100

150

200

2015 2020 2025 2030 2035 2040 M

illio

n Vehicle sales

3. Lock in the vision: What more does it take for 2 °C?

Cost reductions & deployment of electric vehicles

An emissions goal would give greater clarity & certainty to the energy sector, strengthening the case for RD&D investment & technology transfer

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200

300

400

Dolla

rs p

er k

Wh

Electric

Battery costs Electric vehicles (right axis)

Solar PV additions

Capacity Capital costs Solar PV (right axis)

Cost reductions & deployment of all solar PV

25

50

75

100

2015 2020 2025 2030 2035 2040

GW

1 400

2 100

2 800

Dolla

rs p

er k

W

700

Internal combustion

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4. Track the transition: Impact of pledges must be monitored

Energy sector indicators are needed to track the low-carbon transition; IEA identifies key metrics to monitor energy sector achievements

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400

500

600

CO2 intensity

Power

g CO

2 per

kW

h

-42%

Average fuel consumption of new cars

2

4

6

8

litre

s per

100

km

-43%

Transport

Lighting intensity of buildings

2

4

6

8

kWh

per m

2

-40%

Residential

2013 2030

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Conclusions

Pledges are not yet enough to achieve our climate goal, but are a basis from which to build ambition

For COP21, the IEA proposes four key energy sector outcomes: 1. Target a near-term peak in emissions 2. Five-year revision, to test the scope for raising ambition 3. Lock in the vision by setting a long-term emissions goal 4. Track the transition in the energy sector

Climate change will lead the agenda at the IEA’s Ministerial meeting on 17-18 November 2015

The energy sector is key for a successul outcome in Paris

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Free to download at: www.worldenergyoutlook.org/energyclimate