Global Energy Markets and Environment Challenges: Today and Tomorrow

1. Global Energy Markets and Environment Challenges: Today and Tomorrow Milan, 6 July 2017 Fatih Birol, Executive Director, International Energy Agency

2. A rapidly shifting energy landscape Since 2010, efficiency measures have slowed down growth in global energy consumption . Renewables and natural gas account for almost two-thirds of the growth. Shares in growth in world energy demand 2010-2016 2000-2010

3. US shale the most successful story in the oil history outside Saudi Arabia Largest production increases in the oil history mb/d 6 5 4 3 2 1 0 Saudi Arabia US LTO Iran USSR Russia North Sea Iraq 1985 - 1992 2010 - 2017 1966 - 1973 1972 - 1979 1999 - 2006 1976 - 1983 2009 - 2016 Differently from all other regions, US shale oil growth results from technological and market progress rather than the discovery and deployment of huge oil resources

4. Electric mobility is breaking records, but policy support remains critical The global electric car fleet passed 2 million last year, but sales growth slipped from 70% in 2015 to 40% in 2016, suggesting the boom may not last without sustained policy support Global electric car fleet

5. Trucks were responsible for nearly 40% of the growth in global oil demand since 2000; they are the fastest growing source of oil demand, in particular for diesel. Trucks drive global oil demand 95 Other Petrochemical 90 Other transport Oil demand (mb/d) 85 Cars Transport 80 Trucks 75 70 2000 Increase by sector 2015

6. A modern truck sector is still a long haul away Without further policy efforts, trucks will account for 40% of the oil demand growth to 2050and 15% of the increase in global CO2 emissions CO2 emissions growth in the Reference Scenario, 2015-2050 Power sector Industry sector Coal use Trucks 100 200 300 400 500 600 700 800 900 Mt

7. A 2ndnatural gas revolution is changing the gas security equation A wave of new LNG supply, led by Australia and the US will improve the ability of the system to react to potential demand or supply shocks, but security of gas supply cannot be taken for granted Share of LNG in global gas trade 2000 525 bcm 2015 695 bcm 2040 1 150 bcm LNG26% LNG40% LNG53% Pipeline Pipeline Pipeline

8. Global CO2 emissions flat for 3 years – an emerging trend? IEA analysis shows that global CO2 emissions remained flat in 2016 for the third year in a row, even though the global economy grew, led by emission declines in the US & China Global energy-related CO2 emissions Gt 35 30 25 20 15 10 5 1970 1975 1980 1985 1990 1995 2000 2005 2010 2014 2015 2016

9. Air pollution is a universal problem, especially in emerging economies 6.5 million premature deaths every year are caused by pollution from power plants, factories, cars and trucks globally. Air pollution related health risks are largest in cities around the world. Premature deaths due to air pollution Deaths per 100 000 people Low (0-50) Source: World Health Organization Medium (50-100) High (>100)

10. Supply-side investment needs to be re-directed, not increased; demand-side investment for energy efficiency, electrification & renewables needs to ramp up significantly. Efficiency and renewables key to global climate change mitigation Global CO2 emissions reductions in the Central & 2 °C Scenarioby technology Central Scenario Efficiency 38 Gt 34 Renewables 2 °C Scenario Fuel switching Nuclear 30 CCS Other 26 22 18 2020 2030 2040 2010

11. Better grids, more flexible power plants and storage & demand side response will be needed to integrate larger shares of wind & solar in a secure and cost-effective way Wind & solar transforming the power sector: system integration is key Share of wind and solar in total electricity generation in selected CEM countries % of wind and solar in 2016

12. The potential of clean energy technology remains under-utilised Recent progress in some clean energy areas is promising, but many technologies still need a strong push to achieve their full potential and deliver a sustainable energy future Solar PV and onshore wind Energy storage Electric vehicles Nuclear Transport – Fuel economy of light-duty vehicles Energy-intensive industrial processes Lighting, appliances and building equipment More efficient coal-fired power Carbon capture and storage Building construction Transport biofuels ●Not on track ●Accelerated improvement needed ●On track

13. Global clean energy R&D funding needs a strong boost Global R&D spending on clean energy and electricity networks Top 3 IT company R&D spenders We've tracked a steady $37 billion/year of clean energy and electricity networks R&D spending, with room for growth from the private sector. As a share of GDP, China now spends most on energy R&D

14. Closing remarks • While a continued focus on oil security is essential, a broader approach to energy security is needed to reflect changing nature of natural gas & electricity markets US shale oil triggers a deep transformation of oil industry dynamics A wave of LNG is the catalyst for a second natural gas revolution, with far-reaching implications for gas pricing & contracts The next chapter in the rise of renewables requires more work on systems integration & expanding their use beyond the power sector Limiting the global temperature rise to 2°C would require an energy transition of exceptional scope, depth & speed, including stronger R&D efforts