**Statement of**

**Neil Hirst**

**Director, Energy Technology and R&D**

**International Energy Agency**

**Hearing on "Challenges to Meeting Future Energy Needs and**

**Developing Technologies for Meeting Increased Global Energy Demand**

**In the Context of Addressing Global Climate Change"**

**Before the**

**U.S. Senate Committee on Energy and Natural Resources**

**June 25, 2008**

Mr. Chairman, ranking member Domenici, members of the committee, thank
you for the opportunity to appear before you today to discuss the
International Energy Agency's (IEA) recent publication: *Energy
Technology Perspectives 2008*.

I have included at the end of this statement a copy of the full
Executive Summary of the Report, as well as a number of additional
charts and graphs that summarize the key points of the report.

**Introduction**

At the Gleneagles Summit in 2005, the leaders of the G8 addressed the
issues of climate change, clean energy, and sustainable development.
They asked the IEA to provide "scenarios and strategies" for a more
sustainable energy future, and they asked us to report back to this
year's Hokkaido summit.

The Energy Technology Perspectives 2008 (ETP) study is a response to
that request. The report shows how we can use energy technology to
achieve really deep cuts in global CO~2~ emissions and also, in the
medium and longer term, ease the pressures on energy markets. We
describe the technologies required, how they could be deployed across
the globe, and their costs.

The analysis is based on extensive analytical and modelling work at the
IEA, and draws on the work of the many experts who participate in our
international energy technology network. This study concerns CO~2~
emissions from the energy sector only -- including energy use in the
transportation and industrial sectors. This accounts for approximately
60% of all greenhouse gasses. Analysis of other sources, such as
forestry and agriculture, is needed for a complete view of the potential
impact on climate change. This is not the IEA's area of expertise and is
not addressed in the ETP study.

At present, global CO~2~ emissions are increasing steadily, and in our
business as usual case (the "Baseline") this trend is accelerated by a
rising share of coal in energy markets. By 2050, global CO~2~ emissions
could be 130% higher than they are today.

In Energy Technology Perspectives "ACT" scenarios we examine, as we have
done before, what it would take to bring global CO~2~ emissions back to
their current levels by 2050. But we also examine, for the first time,
what would be required for the world to halve the emissions from the
energy sector, relative to 2005, by 2050. According to the
Intergovernmental Panel on Climate Change, cuts at least this deep are
required to contain global warming within the range of 2-3 degrees C.
This 50% reduction case is referred to as the "Blue" scenario in ETP

A global energy technology revolution is necessary to meet the Blue
target, it is both necessary and achievable; but it will be a tough
challenge. ETP 2008 demonstrates the extent of the task.

**Emissions Stabilisation - ACT**

To stabilise global emissions in 2050 at today's levels we need to
achieve very large improvements in energy efficiency across all sectors
of the energy economy. In addition, we need to substantially decarbonise
power generation.

The IEA has set out specific measures that we believe governments should
take to enhance energy efficiency -- and these represent the most
cost-effective measures to reduce CO~2~ emissions and as well as energy
demand.

Decarbonising the power generation sector can be achieved through
renewables, nuclear power, and the capture and storage of CO~2~
emissions from coal plants. There is a degree of choice, for each
country, as to the balance of these technologies to adopt. These
measures -- improving energy efficiency and decarbonising power
generation-- could enable us to bring emissions back to current levels
by 2050. We would need to use all abatement options with a cost of up to
\$50 per tonne of CO~2~, and the total additional investment required is
7% higher than in the Baseline at \$17 trillion between now and 2050.
But as the IPCC has highlighted, this effort may not be enough.

**Emissions Reduction by 50 Percent - Blue**

The additional technologies required to halve current emissions -- the
"Blue" scenario -- include buildings with near zero emissions and the
more extensive capture and storage of emissions from industry. They also
include the development of technologies for alternative transport fuels,
such as electric or hydrogen fuel cell vehicles.

Emissions halving implies that all options up to a cost of \$200 per
tonne of CO~2~ will be needed. And even this is based on a set of
optimistic assumptions for technology development. Under less optimistic
assumptions we might need to include options costing up to \$500 per
tonne. The total additional investment needs for research, development
and deployment (RD&D) and commercial investments between now and 2050
are 18% higher than the Baseline and amount to \$ 45 trillion, or 1.1%
of average annual GDP over the period. That's about the GDP of Canada
each year.

Much more research and development is required before some of these
technologies are ready for the market. Governments, as well as industry,
will need to raise their efforts in this area -- we estimate the cost of
additional research, development and demonstration to be \$ 2 -- 3
trillion.

Chart 1 shows the breakdown of CO~2~ savings for the Blue MAP scenario.

![](media/image1.png){width="6.773611111111111in"
height="3.623611111111111in"}Chart 2 shows the marginal cost curve for
the technologies in the Blue scenario.
![](media/image2.png){width="6.461111111111111in"
height="4.14375in"}There should be no doubt - meeting the target of a
50% cut in emissions represents a formidable challenge. Immediate policy
action is required, to achieve technological transition on an
unprecedented scale. It would require a new global energy revolution
transforming the way we produce and use energy. The participation of all
major economies is essential to this process because, as reflected in
our Baseline case, less than one-third of global emissions in 2050 will
come from the developed (OECD member) countries.

**The Power Sector**

Chart 3 shows the capacity additions needed in the power sector for both
the ACT and Blue scenarios.

![](media/image3.png){width="6.498611111111111in"
height="3.982638888888889in"}

The capacity additions in the power sector are a measure for the energy
technology revolution that is needed. Investments in CO~2~-free power
generation need to rise from around 50 GW per year at present to around
330 GW per year in the period 2035 to 2050. Annual hydro capacity
additions must be maintained at the level of today. Nuclear capacity
additions must rise to 1.5 times their historical high. Wind capacity
additions must increase five-fold, Solar PV by twenty-fold. New
industries for CO~2~ capture and storage, concentrating solar power and
enhanced geothermal power generation systems must be developed. On
average 35 coal-fired power plants with CCS must be installed per year
between now and 2050. Given the challenges of establishing a single CCS
project today, this is really an energy technology revolution. More
importantly, it is not a matter of choosing one of these technology
options, but doing all at once.

**Transport Sector**

The transport sector plays a key role and accounts for 78% of the oil
savings. Half of these energy savings are accounted for by fuel
efficiency measures, the other half by alternative fuels. In the Blue
Map scenario, advanced biofuels, battery electric vehicles and hydrogen
fuel cell vehicles each play a role of similar importance. These are the
most expensive CO~2~ saving options and account for the majority of the
incremental investment required in the Blue case, they also are some of
the most uncertain technology options.

**Supply security benefits**

So far I have focused on the CO~2~ challenge, although there are other
benefits from reduced local pollution from power plants, factories, and
vehicles. But of course we have another urgent energy policy challenge-
that of supply security and spiralling energy costs. ETP's Baseline
scenario would require a massive expansion of fossil fuel production, to
an extent that can be questioned. For example, as shown in Chart 4, oil
production would have to rise from today's level of around 85 million
barrel per day to around 135 million barrels a day in 2050 just to meet
rising demand levels. Oil industry experts are divided if such an
expansion is feasible.

![](media/image4.png){width="6.498611111111111in"
height="4.5159722222222225in"}In contrast, oil demand in Blue Map in
2050 is 27% below the level of 2005. Such a development would certainly
ease the supply challenge and could be expected to have a significant
impact on price. However, even this level of production will require
massive investments in new supply in the coming years and decades as oil
fields are depleted. Importantly, total fossil fuel demand in the Blue
Map scenario in 2050 is the same as today. So in any case fossil fuels
will remain a key pillar of our energy supply in the coming decades.

Of course the big investments in energy efficiency, renewables, and
nuclear power also lead to fuel cost reductions. At a 3% "social"
discount rate, these savings would not quite be sufficient to recover
the incremental investment costs. .

**Roadmaps: The Transition**

The study includes 17 energy technology roadmaps which explain how to
get from today's situation to the target situation for 2050. We think
that the development of internationally agreed technology transition
paths and the use of indicators to monitor the progress on these paths
will be crucial. The IEA and its technology collaboration network are
ready to support this change.

**R&D Investments**

Government R&D spending has nearly halved in the last 25 years, to a
level of USD 10 billion per year. Two countries, the United States and
Japan, account for 80% of this investment. Energy R&D accounts for a
mere 3% in total R&D. Clearly this trend is incompatible with energy
policy ambitions and the need for an energy technology revolution. A
very significant rise of research, development and deployment (RD&D)
spending is needed, both in the public and in the private sector, and
this change is urgent.

**Conclusion**

In conclusion, deep emission cuts are technically achievable. However a
global energy revolution is needed where all countries and all sectors
must participate. This change is urgent. Financing needs, capital stock
turnover and the rate of technology development means that there is no
time to lose. The IEA and its technology network stand ready to support
such a transition to a brighter more sustainable future.

This concludes my statement, and I would be happy to answer any
questions the committee members may have.

Attachments: 1) Executive Summary, *Energy Technology Perspectives 2008:
Scenarios and Strategies to 2050.*

2\) Handout, Additional Figures