In a fossil fuel-dominated market a weaker appetite for energy may save the planet from the global warming chaos
Every time you start your car engine, you’re making the planet warmer. Environmentalists have already screamed their throats sore warning about the dangers of climate change and failure to curb CO2 emissions, but rallying widespread support has been extremely difficult.
The efforts such as the “Anti-Smog Day,” which on Feb. 28 featured more than 30 Italian cities blocking non-emergence traffic for a day are commendable, but changing the big picture requires more than that. Having said this, we shouldn’t forget that motorists stay away from the road in order to put a lid on pollution, whereas fighting the global warming is a “by-product” of their agenda. Impacting the problem globally requires a concerted effort on a far bigger scale, involving the governments of the world’s biggest energy spenders.
Following in the footsteps of the Kyoto Protocol, one such attempt was made at the UN Climate Change Conference (COP15) in Copenhagen last December. Expectations were high, but results were moderate, to say the least. Instead of yielding a firm, binding agreement participating nations exited the nine-day forum with a piece of paper that entailed no formal obligations, pledging instead to keep the rise of global temperature below 2 degrees Celsius. The signatories recognized the need for “deep cuts in global emissions,” but such a vague formulation can hardly please energy experts who warn that we are on course for a 6-degree temperature rise which could wreak environmental havoc.
The International Energy Agency’s “450 Scenario” asserts the 2-degree goal is achievable if carbon concentration is kept within 450 ppm. However, in the absence of a legally binding deal, the energy mix will still be dominated by fossil fuels, the difference being that almost the entire growth in energy would come from outside the industrialized world, namely from China, the Middle East and India. According to environmentalists, the fossil fuel-dependent market is a major threat to fighting climate change and the major reason behind their calls for a quicker switch to cleaner, alternative fuels.
“The energy sector is at the heart of climate change. More than two-thirds of the emissions causing climate change come from the energy sector,” IEA chief economist Fatih Birol told the audience at Moscow’s Oil & Gas Outlook Russia 2009 forum last December. “The domination of the fossil fuels – oil, gas, coal – will bring a temperature increase of 6 degrees Celsius in the decades to come. It is a catastrophic rise in terms of its effects on climate, agriculture and even the rise of sea level. If that happens, the entire equilibrium of our planet will be changed with catastrophic consequences.”
It Takes Oil to Produce Oil
One of the major concerns, though, is while demand for oil is likely to grow and will mainly be driven by the developing world, 2009 saw a dramatic decline in oil and gas investments – last year, global upstream spending (Fig. 1) was budgeted to fall by over $90 billion or 19 percent over 2008, recording the first drop in a decade. According to Birol, the main reasons behind that plunge were the “difficulty in accessing the capital as well as the loss of producers’ appetite for investment at a time when the demand is uncertain.” The reluctance to invest, coupled with a potentially strong growth in oil demand – which could be driven by an economic rebound – may spearhead further growth in oil prices, posing a major risk to global economic recovery.
Speaking in Moscow Birol warned that depletion of the resource base is another serious concern for the oil industry. “The bulk of global oil output today is coming from the so-called giant and supergiant fields and a big portion of them is in decline. They are declining at different rates, but globally it’s a strong decline,” he said.
In practical terms, this means that oil output has to be increased in order to compensate the decline in existing fields and to meet the growth in demand.
It won’t be easy. According to Birol, even keeping the current global oil output of 85-86 million barrels per day in 20 years’ time may be a tough challenge. “If we assume that the oil demand would be flat, at zero growth, and in 2030 we want to produce the same 85-86 million barrels per day, we would have to increase production by 45 million barrels per day just to compensate the decline in existing fields. So that’s additional oil we need to bring onstream just to be able to stay where we are today. And 45 million barrels per day means finding four new Saudi Arabias,” he said.
Global Gas Market Will Need Four New Russias
The gas sector is going through a similar phase, says IEA. Conventional production in many fields in North America, North Sea, Western Siberia, Iran and elsewhere is shrinking and today’s output of 3 trillion cubic meters per year will be halved by 2030. “To compensate that decline and meet the growth in demand, we need to deliver 2.7 billion cubic meters to the market, which means we have to bring four new Russias onstream so we can just stay where we are today. In other words, by 2030 about 60 percent of production would need to come from the fields that are not producing today,” explained Birol.
Russia with its current production of 650 billion cubic meters per year and an expected increase to 760 billion by 2030 will retain the role of a key supplier in the global market, but may be in for a rocky patch in the next few years in the face of a seemingly inevitable gas glut.
Its plans – as well as those of existing and potential LNG exporters in the Middle East and North Africa – to ship LNG to the U.S. market, have been dealt a serious blow by what experts call a “silent revolution” in U.S. shale gas production. Its low cost (an IEA analysis rates it at $5 per Mbtu) combined with a 10-percent return rate promises a growing role of shale gas in the U.S. energy mix, at the same time largely reducing its needs for imported LNG. This and the biggest drop in gas demand over the last 40 years (in 2009 it fell by 4-5 percent globally) is expected to bring a gas glut of some 200 billion cubic meters by 2015.
Finding the Exit
IEA forecasts that fossil fuel use will peak around 2020, whereas the big environmental impact should be made by the zero-carbon fuels: wind, hydropower, biofuels and nuclear energy. Under the “450 Scenario” the current 18-percent share of renewables in the energy mix should double by 2030 (Fig. 2). In a wider context, the global strategy to limit greenhouse gas emissions rests on four pillars: energy efficiency, renewables, nuclear energy and carbon capture and storage (CCS, which aims to bottle up CO2 emissions by large polluters such as fossil fuel-fired power plants).
Of the 190 participants of the Copenhagen summit, six share the biggest responsibility for fighting global warming: the United States, Russia, China, Japan, EU and India. Moscow and Washington have already declared CO2 reduction targets of 25 and 17 percent respectively, but these pale in comparison with the commitment made by China, which promised to cut down its emissions by 1 Gigaton!
“It is about one-fourth of the emissions we need to reduce worldwide and this puts China at the forefront of combat against climate change. The image of China as a dirty country with a lot of coal may change over the coming decades,” said Birol, adding that China’s switch from coal to gas could boost the current level of Beijing’s gas imports from 10 billion cubic meters per year to 90 billion in the future, making China an important market for gas exporters. “Many developing countries like China are traumatized by $147 oil and don’t want to have the same experience again or their economies to be vulnerable – that is why they approach energy security very seriously.”
No less important in fighting climate change is the effort to use energy more efficiently. Russia has pledged to improve its energy efficiency by 50 percent over the next 20 years (Fig. 3). It is a tall order in an energy-devouring world plagued by consumerism, but then… how much of a choice do we really have? Getting back to where this story started, do think twice before turning that ignition key. Keeping it in your pocket may be the “small step for man, but one giant leap for mankind.” To make your mark in history today, you no longer need to fly into outer space.