IEA urges $45 trln "energy revolution" to halve CO2

TOKYO (Reuters) - World governments must start a $45 trillion dollar “energy technology revolution” or risk a 130 percent surge in carbon emissions by 2050, the International Energy Agency warned on Friday.

In a report commissioned by Group of Eight leaders three years ago, the IEA also said a goal of halving emissions by 2050 would require that the cost of carbon rise to $200 a ton and possibly as high as $500 a ton. Carbon emissions credit rights now trade in Europe at only around $30 a ton.

Japan is urging leaders of the Group of Eight rich nations to set a global target to halve greenhouse gases by 2050, when they meet at a G8 summit in Toyako, northern Japan, next month. The group’s energy ministers meet this weekend in Japan.

The report also said that oil demand would rise by 70 percent if governments continued with current policies -- an increase it said was equivalent to five times Saudi Arabia’s production.

“We are very far from sustainable development, despite the widespread recognition of the long-term problem. In fact, CO2 emissions growth has accelerated considerably in recent years,” said Nobuo Tanaka, Executive Director of the IEA, the energy watchdog for industrialized nations.

Scientists say that the world must brake and reverse annual increases in greenhouse gas emissions to avoid catastrophic climate change including rising seas and more extreme weather.

Analysts said the IEA’s cost estimate of $45 trillion, or about 1.1 percent of global GDP each year from now to 2050, sounded fair.

“Carbon emissions must be cut. Costs of about 1 percent of GDP are not outrageous, so this target is realistic,” said Go Hibino, a senior manager at Mizuho Information & Research Institute.

Environment ministers from the G8 urged their leaders last month to set a global target to halve greenhouse gas emissions by 2050.

A massive research and development effort will be needed in the next 15 years costing about $10 billion to $100 billion per year to develop technology to cut CO2 emissions, the IEA said in its Energy Technology Perspectives report.

“Emissions halving implies that all options up to a cost of $200 per ton CO2 will be needed. This is based on a set of optimistic assumptions for technology development. Under less optimistic assumptions, options that would cost up to $500 per ton CO2 may be needed,” Tanaka said.

The report said the power sector would need to be “decarbonized” by installing CO2 capture and storage on 35 coal- and 20 gas-fired power plants a year between 2010 and 2050, each with a cost of $1.5 billion. The sector would also need to build 32 new nuclear plants and install 17,500 wind turbines each year.

The IEA, established during the world’s last major energy crisis in the 1970s, also stressed the energy security benefits of halving emissions, which would effectively cut total oil demand in 2050 by 27 percent from 2005 levels.

The report comes ahead of a weekend meeting of G8 energy ministers plus their peers from China, India and South Korea in Aomori in northern Japan, where they must try to agree on the role of consumer nations in stemming oil’s five-year price rally.

Record oil prices have triggered protests across Europe, pushed airlines into the red and forced Asian nations into unwanted fuel price rises, intensifying inflationary pressures. Coal and natural gas costs have also surged, adding pressure to household and industrial power prices as well.

Tanaka said non-IEA members such as India, China and other developing countries must conserve energy as these nations are already big emitters and are expected to emit more in future.

“There is a need for some kind of financial facility or some scheme to help developing countries participate more easily,” Mizuho’s Hibino said.

“It would be hard for the IEA to achieve the goal without the participation of developing countries.”

For a graph of energy efficiency levels across G8 nations: here

Reporting by Chikafumi Hodo; Writing by Jonathan Leff; Editing by Hugh Lawson