COLUMN-World energy getting dirtier, IEA may under-estimate: Wynn

Wed Apr 17, 2013 12:25pm EDT

(The author is a Reuters market analyst. The views expressed are his own.)

By Gerard Wynn

LONDON, April 17 (Reuters) - Global carbon emissions per unit of energy supply have barely changed in more than two decades, the International Energy Agency said on Wednesday, but other data show an even starker picture where world energy is getting dirtier.

Either way, flat or rising carbon intensity in global energy consumption shows how growing adoption of renewable energy in some countries has so far failed to move the dial on the global energy sector.

That in turn underlines a failure to achieve wider carbon emissions cuts beyond switching to renewable sources of electricity.

The IEA has set much stall by an additional rollout of efficiency measures which it says can account for nearly half all global carbon emissions cuts required by 2020 to keep ambitious global climate action on track.

Such measures are failing partly because the private sector demands a very rapid payback on upfront investments, even if these are cost-effective in the longer term.

DATA

The carbon intensity of global energy consumption is rising, according to BP's energy data published last year, and in 2011 was higher than at any time since 1990. (See Chart 1)

The BP data show how the rising carbon intensity trend is almost entirely driven by surging coal consumption in non-OECD countries which are seeking to drive economic growth with one of the world's cheapest, most available fuels. (Chart 2)

Carbon intensity of energy in non-OECD countries in 2011 was at higher levels than at any time since 1984.

The recent financial crisis which particularly engulfed developed countries has had less impact, where the carbon intensity of energy in OECD countries has seen year on year falls since 2007, broadly following earlier trends as the United States shifts from coal to gas and Europe implements renewable energy targets.

The IEA said on Wednesday that the global carbon intensity of energy supply had "remained essentially static, changing by less than 1 percent" since 1990, painting a marginally more optimistic picture. (Chart 3)

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Chart 1: link.reuters.com/xus47t

Chart 2: link.reuters.com/bys47t

Chart 3: (page 8) goo.gl/kp2Vz

Chart 4: link.reuters.com/cys47t

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EFFICIENCY INVESTMENT

Some analysts have argued for a prioritisation of investment in energy research and development, to cut costs before wider adoption of renewable and other low-carbon technologies in future decades.

The IEA's Wednesday report calculated that energy research development and diffusion (RD&D) had fallen to below half 1981 levels, when measured as a proportion of IEA member state wider RD&D budgets.

The IEA appeals to so-called "no regrets" investments in energy efficiency, which have clear economic benefits in fuel savings regardless of concerns about climate change.

That makes sense, but private sector investors sometimes rule out efficiency investments with paybacks of even as few as three years (meaning it takes three years of energy savings to pay off the upfront capital cost), underlining how quickly economic actors discount the benefits of any upfront investment.

The IEA acknowledged that point, in its report.

"Barriers such as high upfront capital costs, customer indifference, and lack of awareness or capacity, leave much cost-effective energy-efficiency potential untapped. Economic incentives are crucial to drive change and investment; standards and codes have also proven effective, as have awareness building and training schemes."

For example, the IEA has previously cited data with regards to a reluctance of truck operators to adopt efficiency measures without rapid paybacks, in its report last year: "Technology Roadmap Fuel Economy of Road Vehicles".

"There is increasing evidence that truckers use a fairly short payback period for fuel efficiency decisions (of) approximately three years ... which is inconsistent with an approach that is optimal for society," it reported.

Desperately slow falls in the carbon intensity of world economic growth (measured as carbon emissions per unit of GDP) over the past decade show how policies to drive more efficient consumption have recently failed to make much headway. (See Chart 4)

One way to drive such efficiency investment is through mandatory standards where a ratcheting down of fuel economy standards in the European automobile sector has successfully wrung cost-effective efficiencies out of carmakers.

But global carbon intensity figures illustrate the difficulty in translating such regional, sectoral efforts into carbon cuts across the global energy sector for as long as developing countries are more focused on growing their economies.

(Editing by Keiron Henderson)