INTERNATIONAL ENERGY AGENCY ORGANISATION FOR 9, rue de la Fédération, ECONOMIC CO-OPERATION 75739 Paris Cedex 15, France AND DEVELOPMENT The International Energy Agency (IEA) is an Pursuant to Article 1 of the Convention autonomous body which was established in signed in Paris on 14th December 1960, and November 1974 within the framework of the which came into force on 30th September Organisation for Economic Co-operation and 1961, the Organisation for Economic Development (OECD) to implement an Co-operation and Development (OECD) international energy programme. shall promote policies designed: It carries out a comprehensive programme • to achieve the highest sustainable of energy co-operation among twenty-six* economic growth and employment and a of the OECD’s thirty Member countries. The rising standard of living in Member basic aims of the IEA are: countries, while maintaining financial • to maintain and improve systems for stability, and thus to contribute to the coping with oil supply disruptions; development of the world economy; • to promote rational energy policies in a • to contribute to sound economic global context through co-operative expansion in Member as well as relations with non-member countries, non-member countries in the process of industry and international organisations; economic development; and • to operate a permanent information • to contribute to the expansion of world system on the international oil market; trade on a multilateral, non- • to improve the world’s energy supply and discriminatory basis in accordance with demand structure by developing international obligations. alternative energy sources and increasing the efficiency of energy use; The original Member countries of the OECD • to assist in the integration of are Austria, Belgium, Canada, Denmark, environmental and energy policies. France, Germany, Greece, Iceland, Ireland, Italy, Luxembourg, the Netherlands, Norway, *IEA Member countries: Australia, Austria, Portugal, Spain, Sweden, Switzerland, Belgium, Canada, the Czech Republic, Turkey, the United Kingdom and the United Denmark, Finland, France, Germany, States. The following countries became Greece, Hungary, Ireland, Italy, Japan, the Members subsequently through accession at Republic of Korea, Luxembourg, the the dates indicated hereafter: Japan (28th Netherlands, New Zealand, Norway, April 1964), Finland (28th January 1969), Portugal, Spain, Sweden, Switzerland, Australia (7th June 1971), New Zealand Turkey, the United Kingdom, the United (29th May 1973), Mexico (18th May 1994), States. The European Commission also the Czech Republic (21st December 1995), takes part in the work of the IEA. Hungary (7th May 1996), Poland (22nd November 1996), the Republic of Korea (12th December 1996) and Slovakia (28th September 2000). The Commission of the European Communities takes part in the work of the OECD (Article 13 of the OECD Convention). © OECD/IEA, 2002 Applications for permission to reproduce or translate all or part of this publication should be made to: Head of Publications Service, OECD/IEA 2, rue André-Pascal, 75775 Paris Cedex 16, France or 9, rue de la Fédération, 75739 Paris Cedex 15, France World Energy Outlook 2002 FOREWORD It is always a genuine pleasure to present the World Energy Outlook, the IEA’s most ambitious and widely read publication. It is particularly gratifying to introduce WEO 2002: first, because of the circumstances of its launch and, second, because of the importance of the messages it has to convey. We decided to release the book, almost two months ahead of the originally planned schedule, at the 2002 Ministerial Meeting of the International Energy Forum, Consumer-Producer Dialogue, in Osaka, Japan. This decision responds to a request from the government of Japan, one of our largest and most dedicated members. It also recognises the value we place on the increasingly confident and fruitful dialogue taking place between oil producers and consumers. The World Energy Outlook is a compendium of thousands of numbers and hundreds of pages of detailed analysis. It is a rich quarry. According to his special interests, the reader may seize upon any one or more of its many facets: • that world energy demand will grow by two-thirds in the next 30 years; • that fossil fuels will continue to dominate the energy mix; • that nearly two-thirds of the growth in energy demand will arise in developing countries; • that financing the required new energy infrastructure is a huge challenge, depending largely on the framework conditions created by governments; • that international energy trade will expand dramatically; • that natural gas demand growth will outpace that of any other fossil fuel, but will itself be outpaced by demand growth for renewables; • that transport will dominate the growth in oil use; • that electricity use will grow faster than any other energy end-use; • that the proportion of the world’s population without access to electricity will fall by a third; or, conversely, that 1.4 billion people will still lack access to electricity in 2030; Foreword • that, on the basis of present policies, carbon dioxide emissions from energy use will continue to grow steeply; • that new technologies will emerge on the energy scene within 30 years; but that it will be much longer before they become dominant. An Alternative Policy Scenario in this book serves two purposes: it reminds us how the basic picture painted depends on key assumptions, including continuity of present policies; and it indicates how, and to what extent, that picture might be changed by deliberate policy actions. Many changes are possible, for example in policies related to poverty alleviation, energy security, environmental priorities, the nuclear component of supply and many other issues. The policy mix adopted by governments has to conform to today’s standards of sustainable economic development. Economic development cannot be achieved without energy; and it cannot be sustained unless the energy supply is reliable, i.e. secure. But energy production and use also have to be environmentally sustainable – and meet social needs and expectations. Policy-makers have to find the right way to reconcile these requirements. No single element can override the others. The last chapter of this book deals with energy and poverty. Energy policy-makers alone cannot solve this problem, still less energy analysts. Energy analysts can, however, define the problem properly – the first step towards its solution. That is what we have sought to do. The definition has shocked us. It is totally unacceptable – both morally and economically – that 1.4 billion people should still be without electricity 30 years into this millennium. This work is published under my authority as Executive Director of the IEA and does not necessarily reflect the views or policies of the IEA Member countries. Robert Priddle Executive Director World Energy Outlook 2002 Comments and questions are welcome and should be addressed as follows: Fatih Birol Chief Economist Head, Economic Analysis Division International Energy Agency 9, rue de la Fédération 75739 Paris Cedex 15 France Telephone: (33-1) 4057 6670 Fax: (33-1) 4057 6659 Email: [email protected] Foreword World Energy Outlook Series World Energy Outlook – 1993 World Energy Outlook – 1994 World Energy Outlook – 1995 Oil, Gas & Coal Supply Outlook – 1995 World Energy Outlook – 1996 World Energy Outlook – 1998 World Energy Outlook – 1999 Insights Looking at Energy Subsidies: Getting the Prices Right World Energy Outlook – 2000 World Energy Outlook – 2001 Insights Assessing Today’s Supplies to Fuel Tomorrow’s Growth World Energy Outlook – 2002 World Energy Outlook – 2003 Insights (forthcoming) Global Energy Investment Outlook World Energy Outlook 2002 TABLE OF CONTENTS (The Highlights edition contains excerpts from the full text of the WEO 2002). Foreword 3 Acknowledgements 9 Executive Summary 13 Chapter 1 The Analytical Framework 23 Chapter 2 World Energy Trends 25 Energy Demand 26 Energy Production and Trade 37 Implications for Global CO2 Emissions 41 Technological Developments 50 Chapter 3 The Enery Market Outlook 57 Chapter 4 OECD North America 59 Chapter 5 OECD Europe 61 Chapter 6 OECD Pacific 63 Chapter 7 China – An In-Depth Study 65 Chapter 8 Russia 67 Chapter 9 India 69 Chapter 10 Brazil 71 Chapter 11 Indonesia 73 Chapter 12 The OECD Alternative Policy Scenario 75 Chapter 13 Energy and Poverty 77 Table of Contents ACKNOWLEDGEMENTS This study was prepared by the Economic Analysis Division (EAD) of the International Energy Agency (IEA) in co-operation with other divisions of the IEA. The Director of the Long-Term Office, Olivier Appert, provided support and encouragement during the project. The study was designed and managed by Fatih Birol, Head of the Economic Analysis Division. Other members of the EAD who were responsible for bringing this study to completion include: Armando Acosta, Maria Argiri, Amos Bromhead, François Cattier, Laura Cozzi, Lisa Guarrera, Claudia Jones, Hiroyuki Kato, Teresa Malyshev, Trevor Morgan, Scott Sullivan and Michael Taylor. The following colleagues were also part of the Outlook team: Carmen Difiglio, Fridtjof Unander, Sohbet Karbuz, Mike Ting (Energy Technology Policy Division), Miharu Kanai (Oil Market Division), Peter Fraser (Energy Diversification Division) and Kyung-Hwan Toh (Non-Member Countries Division). Input was provided by other IEA staff, namely: Richard Baron, Xavier Chen, Sylvie Cornot, Sylvie Lambert D’Apote, Ralf Dickel, Mark Hammonds, Lew