Dr Fatih Birol is the chief economist of the International Energy Agency, and is responsible for its World Energy Outlook publication. He is also chairman of the World Economic Forum’s energy advisory board. Before joining the IEA in 1995, he worked at the Organisation of the Petroleum Exporting Countries (OPEC) in Vienna. Birol will take over as chief executive of the IEA in September.
On renewables and coal: “Renewables will be, if the INDCs [ Intended Nationally Determined Contributions] are implemented, in 2030 the first fuel in terms of providing electricity. Efficiency improvements accelerate by a factor of three, which is extremely important and we see that the coal consumption gets strong downward trend.”
On current climate pledges: “The INDCs will not bring us there, where we want to go. They are far from bringing us to our 2C scenario.”
On banning some coal plants: “The first area in terms of coal we should focus would be to ban inefficient coal-fired power plants and this can save a lot of emissions and this is not out of reach.”
On carbon capture and storage: “Without having a significant carbon price in many countries it will be difficult to see CCS having an important market share.”
On oil demand projections: “People who want to look at the future, need to look at the efficiency policies and their impact on the demand growth much more closely.”
On a 100% renewable future: “If it is tomorrow, that’s wishful thinking. But if it’s in the very future, it is definitely feasible, and it is also something that I would like to see.”
CB: Your bridge scenario, that you published today and identified additional action needed to keep the 2C goal in sight beyond what countries are already pledging in their INDCs [ Intended Nationally Determined Contributions], how confident are you, given what you’ve seen so far, that INDCs are the best way to capture national ambition and to ratchet it up over time?
FB: I think when we look at INDCs today, first of all from a political perspective, I am optimistic because for the first time I see there is a global growing commitments coming from many countries, developed and developing countries, and like Europe. We have seen many developing countries, like Ethiopia and Gabon, Russia, US, Europe, Canada and Mexico, they are all putting their pledges, and this is definitely very encouraging. At the same time, I see some other countries, such as China, such as Japan, making indications what they are going to do in terms of INDCs. Then we look at all of them together. They are covering more than two thirds of the global emissions, and then we look at the implications of those INDCs in terms of energy, there is a material impact on the energy sector.
Renewables are the main beneficiaries here. Renewables will be, if the INDCs are implemented, in 2030 the first fuel in terms of providing electricity. Efficiency improvements accelerate by a factor of three, which is extremely important and we see that the coal consumption gets strong downward trend, especially in the OECD countries, and slows down in the emerging countries. So, all in all, INDCs make an important change in the energy sector, and provide a much-needed momentum for the innovation and technology improvement. But the INDCs will not bring us there, where we want to go. They are far from bringing us to our 2C scenario. Since they are not bringing us to where we want to go, we want to build a bridge, which we call the bridge scenario. In this scenario, we have five major policy initiatives, which can be implemented tomorrow with no economic cost and with no new discovery of new technologies in place, so we can make it with existing technologies. As such, it is a set of policies which can help us to bring to a 2C trajectory – at least, leave the door open for a 2C trajectory.
CB: One of the parts of your bridge scenario is to stop building less efficient coal plants and also to phase out existing coal plants of that type. Can you talk me through the thinking there and explain why it’s still okay to build some new coal as long as it’s more efficient – within the context of a 2C goal?
FB: So then, if we are serious to have agreement in Paris, we have to get all the countries on board. A big challenge here, of course, is to have the emerging countries on board. When we look at emerging countries, climate change is not their, perhaps, first priority – they have other concerns as well, such as energy security, such as the cost, and the access to energy. Today, 1.2bn people have no access to electricity, and in many countries, fossil fuels are the cheapest source of generating electricity, if there is no agreement worldwide to provide some support, aid, or something like that. So it is, therefore, important to have inclusive view here therefore we talked the first area in terms of coal we should focus would be to ban inefficient coal-fired power plants and this can save a lot of emissions and this is not out of reach. So, for example, today, the inefficient sub-critical coal-fired power plants, where their efficiency is about 35%, if you increase their efficiency by two percentage points – to around 37% – the emissions saved is equal to all those from the EU’s INDC for 2030. There is a big potential there. Therefore, we thought to combine those countries plans, programmes and ambitions – and the global ambitions – and a good way would be to ban the inefficient coal-fired power plants and hope to see if those countries do not want to go to another way of producing electricity, they would at least go for more efficient technologies.
CB: So do you see that as something that would need to lead to a step further to phasing out of coal completely at a later stage?
FB: I think the higher technologies we use, with less emissions that come out – for example, we were discussing carbon capture and storage – if carbon capture and storage becomes economically and technologically much more reliable than today this can be another way of using coal in the future.
CB: So in the IEA scenarios for the technology roadmap for CCS that you published in 2013 you have a series of goals and the goal for 2015 involves capturing and storing about 7bn tonnes of carbon dioxide each year. That’s much more than 4bn tonnes of oil extracted each year at the moment. So do you think that’s even possible or desirable?
FB: For carbon capture and storage to have major inroads in the energy system there are three conditions that need to be fulfilled. The first one is, in terms of technology, we still have some room to improve to be sure about every aspect of the chain of the technology, we still have to make certain things more definite. Second, we need to make sure that the regulatory framework, especially in position of the carbon that this is solved. Third, and most importantly, we have to see that the economics of CCS does work. Today, the main reasons that we do not have more CCS throughout the world is mainly because of the economics do not appear to be on the side of CCS. And without having a significant carbon price in many countries it will be difficult to see CCS having an important market share because we shouldn’t forget that we will not mainly need CCS in Norway or Canada, but mainly in China and India where the coal is used extensively.
CB: Recent IEA reports – I’m thinking of your medium-term oil market report earlier this year, but also the similar report for gas that was more recent – signalled that the world was perhaps entering a new normal where demand growth was much slower than previously expected. But BP in their energy outlooks see fossil fuels continuing to grow relatively strongly for the next few decades. Do you think that oil company projections are hard-wired to see demand for the products and do you think they are making, perhaps, sort of the error that you talked about earlier today in assuming that climate policy won’t affect them?
FB: I think every company and organisation have their own expectations and projections, but what I see in general, including us, including the companies and governments, that one aspect may not be fully reflected in the future expectations, namely, the growing role of energy efficiency on the demand side. So I see it comes oil, for example. More and more countries in the world are setting mandatory fuel efficiency standards for cars. I soon expect the trucks, a very important driver of the oil demand import, will face the same issue. So, more stringent efficient standard for trucks. So, therefore, I think an important challenge, in other words an important task for the people who want to look at the future, need to look at the efficiency policies and their impact on the demand growth much more closely.
CB: You talked today about emissions having decoupled, perhaps, in 2014 from economic growth. Do you think that’s just a blip? As in, like a 1-year impact?
FB: I really don’t know, but I hope it is the case. because what we have seen in 2014 is the emissions stay the same. They didn’t increase. While the global economy increase by a handsome 3%. So, therefore, it is our wish to see that economic growth worldwide as emissions remains the same and even decline. Because, as I have said, I would like to see a peaceful divorce of economic growth and emissions. And the INDCs are the first step of that [inaudible] divorce.
CB: So in 2014 a big part of the story was related to what’s happening in China, for instance, their coal demand not growing even though they’re still building a lot of new coal capacity. How do you see things playing out in China and do you think they could peak emissions as early as 2020, as some people are saying?
FB: I know that, as everyone knows, the Chinese President, and the US President agreed in a historic announcement that the Chinese emissions will peak 2030, if not earlier. And looking at the Chinese data, talking with my Chinese counterparts, I wouldn’t be surprised if that peak is earlier than 2030. And this is not only driven by the climate change concerns, but also the local pollution concerns in many Chinese cities. The measures taken to address the local pollution in the cities, especially the use of coal, will at the end have to reduce the CO2 emissions. But China is one of the leading countries in the world. I am sure [they] will take the necessary measures and reduce the carbon footprint, and may well make a surprise to the rest of us, to more, er, using energy more efficiently, making more and more renewable energies, and nuclear power, to reduce their emissions, and the share of coal I expect to go lower in the Chinese energy mix.
CB: So if I could push you to say what year you would guess they might peak emissions, what would you go for?
FB: I think this is a question in Chinese, and I don’t speak Chinese.
CB: [Laughs] OK. Last week the G7 declaration said that those leaders wanted the global economy to decarbonise over the course of the century, which many at the time interpreted on newspaper frontpages as the beginning of the end of the fossil fuel era. How significant do you think that declaration was and what do you think it means for coal, oil and gas?
FB: I think we will definitely see that we will still need oil. We will still need gas. And because current – the transportation system is based on oil. 99% of cars we run today are oil-based, so-called internal combustion engines. So to go from one day from this level of dependency to something else would be definitely wishful thinking. But, if we put [the] right policies in place, building on the INDCs, and following our bridge scenario, and if we can get a good signal from Paris, we may well get signals for the investor to look for other options as an opportunity to make money in the future. Electric cars is one of them. But we need to bring the cost of batteries down, and this would require a signal. Because investors will never invest primarily because it is good for the world. They will invest only, or I should say mainly, because they will make profits. Therefore, we need to get a signal from Paris, that they may make money if they invest more in the new technologies coming, and therefore these are technologies which would reduce the role of fossil fuels in the very future. But tomorrow, to think that we would not need fossil fuels, may be rather again, wishful thinking.
FB: No, it depends on which future, and when. If it is tomorrow, that’s wishful thinking. But if it’s in the very future, it is definitely feasible, and it is also something that I would like to see.
CB: OK, thanks very much.
FB: Thank you very much
Main image: Fatih Birol, Chief Economist of the International Energy Agency (IEA).
(The interview was conducted by Simon Evans on 15 June 2015 at One Great George Street in London.)