Limiting climate change will cost $10.5tr says Energy Agency

Avoiding the most severe potentials of climate change will require global investment of $10.5tn (£6.3tr) over the next 20 years, with renewables accounting for 60 per cent of energy production, according to estimates from the International Energy Agency (IEA).

In its annual World Energy Outlook report, released on Tuesday, the organisation lays out various scenarios for how the energy industry and governments should respond to climate change and the part low-carbon technologies have to play in combating climate change up to 2030.

But some insiders at the agency claim the organisation is being deceptive in its estimates.

One of the scenarios from the IEA includes the actions that need to be taken to limit the long-term concentration of greenhouse gases in the atmosphere to 450 parts per million of CO2 and to limit the global temperature rise to 2 degrees centigrade.

The so-called 450 Scenario will require fossil-fuel demand to peak by 2020 and energy-related CO2 emissions to fall to 26.4 gigatonnes from 28.8 gigatonnes in 2007.

"At the IEA Ministerial meeting, a large majority of Ministers showed their intention to take the lead, organise themselves and commit to the challenge to reach the 450 Scenario - the energy path of Green Growth. Only by mitigation action in all sectors and regions can we turn the 450 Scenario into reality," said Nobuo Tanaka, executive director of the International Energy Agency, speaking at a launch event for the report in London.

Energy efficiency is one of the most important strategies in the 450 Scenario, accounting for half of the energy savings required by 2030.

The organisation forecasts that 60 per cent of global electricity production must come from low-carbon technologies, with 37 per cent coming from renewables, 18 per cent from nuclear and 5 per cent from coal and gas plants fitted with carbon capture and storage.

The organisation also sees the need for a major shift in car sales with hybrids, plug-in hybrids and electric vehicles accounting for around 60 per cent of sales in 2030 - a massive increase from the 1 per cent of the market today.

This fundamental change in the energy and transport sectors will require an investment of around $10.5tr by 2030.

However, the IEA believes much of the cost will be offset by corresponding savings in health, energy-security and general economic benefits from averting the worst impacts of climate change.

"The challenge for climate negotiators is to agree on instruments that will give the right incentives to ensure that the necessary investments are made, and on mechanisms to finance those investments in non-OECD countries," said Tanaka.

"In our 450 scenario in OECD countries the carbon price reaches $50 (£30) per tonne of CO2 in 2020 and $110 (£66) in 2030."

But while the EIA report appears to be progressive about the severe measures needed to combat climate change, one insider at the orgnisation reportedly told the Guardian this week that its estimates of oil reserves have been fudged to avoid panic in financial markets.

The senior official told the paper that pressure has been put on the IEA to claim that oil reserves are declining at a slower rate and the chance of finding future reserves are higher than they actually are.

"Many inside the organisation believe that maintaining oil supplies at even 90m to 95m barrels a day would be impossible, but there are fears that panic could spread on the financial markets if the figures were brought down further, " the insider told the Guardian.

Responding to the Guardian story, IEA's Tanaka defended the agency's independence and analysis.

"I think that article is just groundless. We are very much a neutral agency and we are proud of our analysis. We have always been saying investment is necessary," he said.