Crisis could boost emissions long term: IEA

ROME (Reuters) - The economic crisis may lower carbon emissions in the short term but will raise them over the long term by crimping investment in cleaner energy sources, the International Energy Agency’s chief economist said on Thursday.

A woman wearing a face mask rides her bicycle down a hutong located next to a coal-burning power station in Beijing November 17, 2008. REUTERS/David Gray

The impact of the financial crisis and the ensuing economic slump on energy investments had been “stronger than anyone expected” and significant enough to have an impact on climate change and the whole energy supply chain, warned Fatih Birol.

“To think that lower economic growth is good for the environment is completely wrong,” Birol told Reuters.

“Because there are many investments that are good for the environment, like efficiency, renewables and nuclear, that are being postponed or canceled. One or two years of lower carbon emissions won’t count for much at the end of the day.”

A $100 a barrel price drop from a record high last year has hurt oil producers, but is a bigger threat to generators of more environmentally-friendly fuels, which are considered commercially viable only as alternatives to expensive oil.

Birol, who is leading a study on the crisis’s impact on the energy sector that will be presented at the G8 energy ministers meeting in Rome in May, also said governments must play a key role in addressing the lack of energy investments.

He warned that if investment in energy generation was not carried out in a timely manner then oil prices would surge again once demand returned during an eventual economic recovery.

“If demand comes back very strongly with the recovery, we may have difficulties, both on the supply-demand side and on the price side,” he said.

He declined to quantify how high prices could go, saying that would depend on the type of economic recovery once it is underway. He also said energy sector consolidation was likely as large, healthy firms buy out small firms during the crisis.

The Paris-based IEA, which advises 28 industrialized countries, has often warned that investment in new supply is too low and that there could be an oil supply crunch from 2010 once global energy demand recovers.

Editing by Guy Dresser