The world's dirty energy victory

New data show that carbon intensity in OECD countries hit a post-1965 low last year, but with non-OECD countries hitting a 28-year high on the same metric, CO2 emissions keep on rising.

Energy consumption among rich and developing countries got cleaner and dirtier respectively last year, in a starker than ever trend which reinforces how global climate action is now in the hands of emerging economies.

Carbon intensity of energy measures the CO2 emissions per unit of consumption, in other words how polluting energy is in carbon terms.

Data published by energy company BP last Wednesday showed that such carbon intensity in OECD countries reached a record low last year, in data going back to 1965.

That reflected a vigorous trend towards deployment of renewable energy and gas, both less carbon-emitting than coal, against the backdrop of falling energy demand.

By contrast, in non-OECD countries, carbon intensity reached a 28-year high, following a leap in coal consumption, continuing an upward trend which started in 2000.

You now have to go back to 1984 for a time when non-OECD countries had a dirtier energy mix.

That matters because it is also these countries which are growing their energy consumption.

It is their energy policy, therefore, that will over-whelmingly decide the temperature of the planet at the end of the century and beyond: the signs are not promising.

The present transition away from coal to shale gas in the United States and to renewable energy in the European Union is less important.

Calculating what happens next in global CO2 emissions requires an unpicking of trends in growth in GDP and energy consumption, and the available data suggest that there is no prospect for global CO2 emissions to stop rising.

Rising CO2

In 2011, demand for energy grew fastest in absolute (not percentage) terms, in China, followed by India, Russia, Saudi Arabia, Canada, Turkey and Brazil, the BP data show.

In all these countries carbon intensity also rose.

Energy demand fell fastest in Japan, followed by Germany, Britain, France, the United States, the Netherlands and Italy.

These countries all saw their carbon intensity of energy fall, with the exception of Italy and the Netherlands, which saw small rises.

The message? Developed countries are cleaning up their energy system, but only at the margins as they replace ageing stock, in an effect more than offset by emerging economies which are both growing and becoming dirtier at the same time.

The result is surging CO2 emissions, both in non-OECD countries (up 6 per cent in 2011) and globally (up 3 per cent).

What will happen?

Scientists say global CO2 emissions should peak by 2020 and then start falling to keep climate change within safer, more predictable limits.

What do the BP data tell us about the chance of that?

In a simple equation, the world's carbon emissions equal its carbon intensity per unit of energy multiplied by its total energy consumption.

For carbon emissions to start falling, carbon intensity must therefore fall quicker than energy consumption rises.

At present, globally, both are rising.

Looking first at energy consumption, this is inextricably linked to economic output.

The forecast rate of global economic growth suggests no prospect for energy consumption to slow to a halt by 2020.

For example, the International Monetary Fund forecasts real (constant dollars) global GDP growth actually to accelerate through the decade, from 4.1 per cent annually in 2013 to 4.7 per cent in 2017.

The world is becoming more efficient (less energy intensive), by a very consistent 1 per cent annually over all timescales in the past several decades: not enough to offset such forecast GDP growth.

Energy consumption will therefore continue to grow, probably by about 3 per cent annually, barring global economic disaster or some disruptive, unforeseen advance in efficiency technology.

To hold back carbon emissions, therefore, the onus is on cutting the carbon intensity of energy consumption, by several percentage points annually, for example by replacing coal with wind, hydro, gas or nuclear.

In fact, the global carbon intensity of energy has been roughly flat for the past 25 years, rising by about 0.2 per cent annually over the last decade (in line with emerging economies), and falling by the same amount in the decade before that.

There appears no prospect, therefore, of the kind of 'greening' of the world's energy supply - particularly in emerging economies - needed to stall growth in CO2 emissions.

That has important consequences either for disruptive policy change, where governments might suddenly introduce punitive carbon taxes, or the kind of dangerous climate change as predicted by scientists.

This story was first published by Reuters. Republished with permission.

InvestSMART FORUM: Come and meet the team

We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.

Want access to our latest research and new buy ideas?

Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.

Sign up for free

Related Articles