IEA: Decarbonising the economy will save $71 trillion by 2050
Last updated on 12 May 2014, 7:42 am
Economic growth can be decoupled from emissions, while natural gas could lose ‘low carbon’ status by 2025 as renewables boom
By Sophie Yeo
Replacing fossil fuels with renewables as the world’s primary source of energy will not only save the planet from dangerous levels of warming – it will also save the global economy US$ 71trillion by 2050.
This is the finding of a report, Energy Technology Perspectives 2014, released today by the International Energy Agency, which looks at the direction of the energy sector over the next 40 years.
The changes needed to keep the world within 2C of warming— a widely agreed target in efforts to tackle climate change – will benefit the global economy, confirms the report, although a “coordinated policy approach” will be required to unlock these savings.
“The USD 44 trillion additional investment needed to decarbonise the energy system in line with the 2DS [2C scenario] by 2050 is more than offset by over USD 115 trillion in fuel savings – resulting in net savings of USD 71 trillion,” its says.
The findings support those who say that it is possible to decouple economic growth from emissions—something the EU has strongly advocated as it has increased its wealth while at the same time remaining on track to reduce its emissions by 20% by 2020. In China, meanwhile, emissions have rocketed in order to sustain economic growth of around 10% a year.
The future of the energy system will depend upon the price of renewables, energy efficiency, carbon capture and storage (CCS) technology and new climate policies, the report forecasts.
In a 2C scenario, it predicts that renewable energy will provide around 65% of electricity by 2050, compared to 20% in 2011. At the same time, it warns that the continuing rise in the use of coal threatens to undermine progress made in renewables, with growth in coal-fired generation since 2010 amounting to more than that of all non-fossil fuel sources combined.
If climate goals are to be achieved, progress in the development of CCS must be achieved quickly, although its future currently remains uncertain due to a lack of political and financial achievement.
CCS will soon have to be applied to natural gas, adds the report, which is set to lose its status as a low-carbon alternative by 2025, as the increasing volume of renewables on the grid will mean that the energy supplied by gas becomes higher than the shifted average carbon intensity.
But in the short term the report forecasts that gas will continue to play a key role in increasing the integration of renewables and displacing dirtier coal-fired generation. It adds that the outcome of the competition between coal and gas is likely to be determined by economics rather than technology: “If coal and CO2 prices are low, unabated coal plants are sufficiently flexible and will remain profitable,” it says.
Meanwhile, the report forecasts that it is improvements in energy efficiency that will account for the greatest reductions in greenhouse gas emissions by 2050.
A price on carbon continues to show “strong potential” as a means for governments to stimulate the low carbon investment needed to transform the energy sector, the report says, but it is far from being the only solution.
“In the absence of carbon markets, innovation in technology deployment, policy action and investments can enable progress,” it says.
Overall, the report concludes that policy and technology will become driving forces in transforming the energy sector over the next 40 years, and have the potential to avert a future of increasing energy insecurity and a volatile fuel supply.
“Recent technology developments, markets and energy-related events have asserted their capacity to influence global energy systems. They have also reinforced the central role of policy in the increasingly urgent need to meet growing energy demand while addressing related concerns for energy security, costs and energy-related environmental impacts.
“Radical action is needed to actively transform energy supply and end use.”