1. 1 Bridging the Gap Between Energy Producers and Consumers Carmen Difiglio, Ph.D. U.S. Department of Energy International Conference on Economics Turkish Economic Association September, 2006

2. 2 Outline of Talk l Problems facing energy producers and consumers. l Oıl market factors/access to capital. l CO 2 emıssıon trends (ıntensıty). l Role of advanced technologıes to reduce CO 2 emıssıons. l Technology scenarios. l IEA analysıs used to achıeve a world- wıde perspectıve.

3. 3 Problems Facing Energy Consumers l Rising prices. l Uncertain supplıes. l Conflict between economic growth and environment. l Energy security. l Role of government.

4. 4 Problems Facing Energy Producers l Uncertainties: –Future markets. –Environmental constraints. –Government policies. l Short-term vs. long-term planning horizon.

5. 5 World Primary Energy Demand (IEA WEO) Fossil fuels account for almost 90% of the growth in energy demand between now and 2030 Oil Natural gas Coal Nuclear power Hydro power Other renewables 0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 1970198019902000201020202030 Mtoe 0 1 000 2 000 3 000 4 000 5 000 6 000 7 000 1970198019902000201020202030 Mtoe

6. 6 Increase in World Primary Energy Production by Region (IEA WEO) Almost all the increase in production to 2030 occurs outside the OECD 3% 12% 85% 0 1 000 2 000 3 000 4 000 5 000 6 000 1971-20022002-2030 Mtoe OECDTransition economiesDeveloping countries 31% 10% 59% share of total increase (%)

7. 7 Access to Oıl l Future oıl supplıes are ıncreasıngly not dıctated by market forces but by government polıcıes. l This partly reflects exercıse of monopoly power but also can reflect natıonal polıcıes that are not as self servıng. l Access of foreıgn capıtal can ımprove productıvıty, reduce waste and envıronmental damage assocıated wıth energy productıon.

8. 8 Access to Oil Reserves (IEA WEO) National companies only (Saudi Arabia, Kuwait, Mexico) 35% Limited access - National companies 22% Production sharing 12% Concession 21% Iraq 10% 1,032 billion barrels Access to much of the world’s remaining oil reserves is restricted

9. 9 Undiscovered Oil & Gas Resources & Exploration Wells Drilled, 1995-2003 (IEA WEO) Middle East Former Soviet Union North America Africa, Latin America and Asia Undiscovered Oil & Gas Resources Europe 1.9 trillion boe Number of New Wells Drilled in 1995-2003 24 500 fields Discoveries have fallen in recent year, mainly because exploration has shifted to less prospective regions

10. 10 Environment l Pollution vs Climate-Changing Emissions l Reducing pollution (sulfur, NO x, VOCs, PM) has tangible benefits that are easily recognized. Local actors receive the benefits. l Reducing climate-changing emissions (CO 2, methane, etc.) has less tangible benefits. Benefits accrue to non-actors in non- predictable ways. l While substantial progress has been made to produce and use energy without pollution, climate-changing emissions are much more difficult problem.

11. 11 Technology Opportunities and Limits l Clean energy technologies can provide more secure energy services but do not always represent a good business investment. l It is usually more profitable to produce energy than to save energy. l Without government support, there is little incentive for industry to commercialize uncompetitive technologies with the goal of making them competitive through technology learning.

12. 12 Global emissions grow 62% between 2002 & 2030, and developing countries’ emissions will overtake OECD’s in the 2020s World Energy-Related CO 2 Emissions (IEA WEO)

13. 13 Growth in World Energy Demand and CO 2 Emissions (IEA WEO) Average carbon content of primary energy increases slightly through 2030 – in contrast to past trends 0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 1971-20022002-2030 average annual growth rate Primary energy demand CO 2 Emissions

14. 14 IEA’s Energy Technology Perspectives l 2006 Publication of the International Energy Agency. l Provides status of energy technologies that can reduce provide energy service demand while reducing CO 2 emissions. l Using the Energy Technology Perspectives model, provides scenarios of technology use through 2050. l Assumes upper limit of $25 USD/tonne CO 2 (incremental cost to achieve emission reduction).

15. 15 Scenarios (IEA ETP) l Baseline l ACT Map = achieves expected success in all technology areas with government efforts and CO 2 reduction incentives. l No CO 2 capture and storage scenario. l Low –efficiency, –renewables, & –nuclear scenarios. l TECH = high success in all technology areas.

16. 16 Global CO 2 Emissions 2003-2050 (IEA ETP)

17. 17 Contribution of Technologies to CO 2 Emissions Reduction – 2050 (IEA ETP)

18. 18 Emission Reduction by Technology Area Emission Reduction by Technology Area (IEA ETP)

19. 19 Emission Reduction among OECD, Transition and Developing Countries (IEA Emission Reduction among OECD, Transition and Developing Countries (IEA ETP)

20. 20 Marginal Cost with Low Technology Development

21. 21 Key Findings Key Findings Energy Technology Perspectives l Most energy still comes from fossil fuels in 2050. l CO 2 emissions can be returned towards today’s level by 2050. l Growth in oil and electricity demand can be halved. l Power generation can be substantially de- carbonised by 2050. l De-carbonising transport will take longer but must be achieved in the second half of the century.

22. 22 Policy Messages Policy Messages Energy Technology Perspectives l Improving end-use energy efficiency is top priority. l Well-focused R&D is essential. l Tech R&D to deployment incentives are critical. l Stable policy environment needed that promotes low carbon technologies and also address non-economic barriers. l Collaboration among developed & less- developed countries is essential.