Presenting their annual report on Tuesday in Copenhagen, the International Energy Agency (IEA) came up with a mathematical equation – 450 + 147 – that explains the relationship between climate, energy and economics.
And just what does the equation stand for? Well, "450" represents 450 parts per million (ppm). That is the maximum concentration of CO2 that can be in the atmosphere if we hope to keep temperature rises below 2 degrees – which has become the accepted target. The number "147" represents the dollar price of oil per barrel when it hit its highest.
The IEA concludes that if the world sets a goal to keep CO2 under 450 ppm it will prevent oil from rising over $147 per barrel again. That kind of guarantee is one that is good for the climate, economies and energy security.
It would be to the benefit of the world as a whole, because it would mean less reliance on oil. And what's more, it would give us energy security, and it would be much less expensive to take steps to prevent climate change now. The IEA estimates that it would cost an extra $500 million for each year we delay action.Controlling the world's thirst for oil is in everyone's interest, because, no matter what happens, the demand for oil in the coming years is going to increase. As IEA chief economist Fatih Birol put it: "the era of cheap oil is over". And when he said it, it was with a smile on his face, because the last time the IEA wheeled out the proclamation, the price of oil was at its highest. But over the course of 2008, it plummeted to $30 per barrel. Now, though, the price is on its way back up again and has hit $80. We'll no doubt continue to see huge fluctuations in the price in the coming years, but there is nothing to indicate that the price trend is on the way down. Just the opposite. And high oil prices can have big impacts. The IEA, for example, suggests that they played a key role in sparking the financial crisis.
Does that mean that oil pipelines are about to dry up? Not in the least. Even with a 450 ppm scenario, Opec members are expected to be turning out 11 million more barrels of oil a day in 2030 than they do today. That will happen partly due to falling oil production in non-Opec countries. There is still money in oil, even in the 450 ppm scenario. According to IEA calculations, Opec's total revenues for the 2008-2030 period will amount to $27 billion if we continue to consume oil at current rates. In the 450 ppm scenario, they would "only" amount to $23 billion, but, even so, that is a quadrupling of profits earned during the past 22 years. Even if Copenhagen ends with a new climate protocol, oil producers can look forward to 400 percent profit increases.
The equation balances out. It is both technically possible and affordable and, no matter which way you look at it, it makes sense to act. And the time to act is now.
