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Population
Population assumptions by region
Compound average annual growth ratePopulation
(million)
Urbanisation
(share of population)
2000-202020-302020-50 202020302050 202020302050
North America 0.90% 0.70% 0.50% 496 526 578 82.00% 84.00% 89.00%
United States 0.80% 0.65% 0.50% 330 349 379 83.00% 85.00% 89.00%
C & S America 1.10% 0.70% 0.50% 522 562 603 81.00% 84.00% 88.00%
Brazil 1.00% 0.50% 0.20% 213 224 229 87.00% 89.00% 92.00%
Europe 0.43% 0.00% -0.00% 699 701 690 75.00% 78.00% 84.00%
European Union 0.20% -0.10% -0.20% 451 447 429 75.00% 77.00% 84.00%
Africa 2.60% 2.30% 2.10% 1 340 1 688 2 489 43.00% 48.00% 59.00%
Middle East 2.20% 1.60% 1.10% 247 289 348 72.00% 76.00% 81.00%
Eurasia 0.40% 0.30% 0.20% 236 244 253 65.00% 67.00% 73.00%
Russia -0.10% -0.20% -0.20% 144 142 134 75.00% 77.00% 83.00%
Asia Pacific 1.00% 0.60% 0.40% 4 210 4 488 4 727 47.00% 53.00% 63.00%
China 0.50% 0.20% -0.10% 1 411 1 436 1 375 62.00% 71.00% 80.00%
India 1.43% 0.90% 0.60% 1 380 1 504 1 639 34.00% 40.00% 53.00%
Japan -0.00% -0.50% -0.60% 126 120 105 92.00% 93.00% 95.00%
Southeast Asia 1.2% 0.80% 0.60% 667 726 792 50.00% 56.00% 66.00%
World 1.20% 0.90% 0.70% 7 749 8 501 9 687 56.00% 60.00% 68.00%

Sources: IEA World Energy Outlook 2021

As in previous editions of the WEO, we use the medium variant of the United Nations projections as the basis for our projections. In this variant, global population growth slows over the coming decades, but the total population nonetheless rises from 7.7 billion today to over 9.6 billion in 2050.

More than half of the increase in the global population to 2050 is in Africa, underlining the importance of this continent to the achievement of the world’s sustainable development goals. India accounts for almost 15% of the growth and becomes the world’s most populous country in the near term as China’s population growth stalls.

The share of the global population living in cities and towns is assumed to rise to 68% in 2050 from 56% today. The addition of 75 million people on average each year to the urban population, predominantly in developing economies, means that urban public policies, design and infrastructure choices become crucial variables in the future of global energy. The coastal location of many of the world’s largest cities also puts them in the front line when it comes to the impacts of a changing climate.

The future rate of global population growth slows notably compared with the recent past, due in large part to falling global fertility rates as average incomes rise. The long-term demographic effects of the pandemic are uncertain, although it could be associated in some countries with a break in the trend towards longer global life expectancy, either because of direct health impacts or indirectly because of an increase in global poverty.

Economic growth
Real gross domestic product (GDP) growth assumptions by region
Compound average annual growth rate
2010-2020 2020-2030 2030-2050 2020-2050
North America 1.60% 2.40% 2.00% 2.10%
United States 1.70% 2.30% 1.90% 2.10%
Central and South America 0.30% 2.80% 2.60% 2.70%
Brazil 0.30% 2.30% 2.70% 2.50%
Europe 1.10% 2.30% 1.50% 1.80%
European Union 0.80% 2.10% 1.30% 1.50%
Africa 2.50% 4.20% 4.20% 4.20%
Middle East 1.70% 2.60% 3.10% 2.90%
Eurasia 1.80% 2.50% 1.60% 1.90%
Russia 1.30% 2.20% 1.10% 1.40%
Asia Pacific 4.70% 4.90% 3.10% 3.70%
China 6.70% 5.20% 2.90% 3.60%
India 5.10% 7.10% 4.40% 5.30%
Japan 0.40% 1.10% 0.70% 0.80%
Southeast Asia 4.20% 4.90% 3.20% 3.80%
World 2.60% 3.60% 2.70% 3.00%

Source: IEA World Energy Outlook 2021

In WEO-2021, despite the Covid-19 pandemic, the trajectory for economic recovery is relatively rapid, especially in countries that have mobilised strong fiscal support. The global economy is assumed to grow by around 3.0% per year on average over the period to 2050, with large variations by country, by region and over time. The assumed rates of economic growth are held constant across the scenarios, which allows for a comparison of the effects of different energy and climate choices against a common backdrop.

Prices

International prices for coal, natural gas and oil in the WEM reflect the price levels that would be needed to stimulate sufficient investment in supply to meet projected demand. They are one of the fundamental drivers for determining fossil-fuel demand projections in all sectors and are derived through iterative modelling.

The supply modules calculate the output of coal, gas and oil that is stimulated under the given price trajectory taking account of the costs of various supply options and the constraints on production rates. In the case that the price is not sufficient to cover global demand, a price feedback is provided into the previous price level and the energy demand is recalculated. The new demand arising from this iterative process is again fed back into the supply modules until the balance between demand and supply is reached in each year of projections.

Fossil fuel prices by scenario
Net Zero by 2050 Sustainable Development Announced Pledges Stated Policies
Real terms (USD 2020) 2010 2020 20302050 20302050 20302050 20302050
IEA crude oil (USD/barrel) 92 42 3624 5650 6764 7788
Natural gas (USD/MBtu)
United States 5.2 2.0 1.92.0 1.92.0 3.12.0 3.64.3
European Union 8.8 4.2 3.93.6 4.24.5 6.56.5 7.78.3
China 7.9 6.3 5.34.7 6.36.3 8.58.1 8.68.9
Japan 13.0 7.9 4.44.2 5.45.3 7.66.8 8.58.9
Steam coal (USD/tonne)
United States 60 43 2422 2422 2525 3938
European Union 109 50 5244 5855 6656 6763
Japan 127 69 5850 6763 7363 7770
Coastal China 137 89 6151 7266 7765 8374

Notes: MBtu = million British thermal units. The IEA crude oil price is a weighted average import price among IEA member countries. Natural gas prices are weighted averages expressed on a gross calorific-value basis. The US natural gas price reflects the wholesale price prevailing on the domestic market. The European Union and China natural gas prices reflect a balance of pipeline and LNG imports, while the Japan gas price is solely LNG imports. The LNG prices used are those at the customs border, prior to regasification. Steam coal prices are weighted averages adjusted to 6 000 kilocalories per kilogramme. The US steam coal price reflects mine mouth prices plus transport and handling cost. Coastal China steam coal price reflects a balance of imports and domestic sales, while the European Union and Japanese steam coal prices are solely for imports. Source: IEA World Energy Outlook 2021

The economic recovery in 2021 has tightened commodity markets and put upward pressure on prices. Some analysts see this as an indicator that the world may be entering a new super cycle, i.e. a prolonged period during which strong demand and some constraints on supply lead to high prices for energy and other commodities.

CO2 price assumptions are one of the key inputs into WEM as the pricing of CO2 emissions affects demand for energy by altering the relative costs of using different fuels.

 CO2 prices for electricity, industry and energy production in selected regions by scenario
USD (2020) per tonne of CO2 2030 2040 2050
Stated Policies
Canada 55 60 75
Chile, Colombia 15 20 30
China 30 45 55
European Union 65 75 90
Korea 40 65 90
Announced Pledges
Advanced economies with net zero pledges* 120 170 200
China 30 95 160
Emerging market and developing economies with net zero pledges 40 110 160
Sustainable Development**
Other advanced economies 100 140 160
Other selected emerging market and developing economies - 35 95
Net Zero Emissions by 2050
Advanced economies 130 205 250
Major emerging economies*** 90 160 200
Other emerging market and developing economies 15 35 55

Note: The values are rounded. * The CO2 price for Canada reaches USD 135 per tonne of CO2 in 2030 as stated in its Healthy Environment and Healthy Economy Plan. ** All regions with net zero pledges have the same pricing as in the APS. China’s CO2 pricing rises to the levels of other emerging market and developing economies with net zero pledges in the SDS. *** Includes China, Russia, Brazil and South Africa. Source: IEA WEO-2021.

An increasing range and variety of carbon pricing schemes are coming into operation around the world. The main development since the WEO-2020 has been the launch of China’s national emissions trading system (ETS), which immediately became the world’s largest carbon market (by volume) covering over 4 gigatonnes CO2 emissions.

The STEPS includes only existing and announced initiatives, whereas in the APS, SDS and NZE additional measures of varying stringency and scope are assumed to be introduced. In the NZE, for example, carbon prices are in place in all regions, rising by 2050 to an average of USD 250/tonne CO2 in advanced economies, to USD 200/tonne CO2 in other major economies (in China, Brazil, Russia and South Africa), and to lower levels elsewhere. As with other policy measures, CO2 prices need to be introduced carefully, with a view to the likely consequences and distributional impacts.

For fuel end-use prices, for each sector and WEM region, a representative price (usually a weighted average) is derived taking into account the product mix in final consumption and differences between countries. International price assumptions are then applied to derive average pre-tax prices for coal, oil, and gas over the projection period. Excise taxes, value added tax rates and subsidies are taken into account in calculating average post-tax prices for all fuels. In all cases, the excise taxes and value added tax rates on fuels are assumed to remain unchanged over the projection period.

We assume that energy-related consumption subsidies are gradually reduced over the projection period, though at varying rates across the WEM regions and the scenarios. In the Sustainable Development Scenario the oil price is lower than in the Stated Policies Scenario. In order to counteract a rebound effect in the transport sector from lower gasoline and diesel prices, a CO2 tax is introduced in the form of an increase of fuel duty to keep end-user prices at the same level as in the Stated Policies Scenario. All prices are expressed in US dollars per tonne of oil equivalent and assume no change in exchange rates.

For electricity end-use prices, the model calculates prices as a sum of the wholesale electricity price, system operation cost, transmission & distribution costs, supply costs, and taxes and subsidies. Wholesale prices are calculated based on the costs of generation in each region, under the assumption that all plants recover their variable costs and that new additions recover their full costs of generation, including their capital costs.

System operation costs are taken from external studies and are increased in the presence of variable renewables in line with the results of these studies. Transmission and distribution tariffs are estimated based on a regulated rate of return on assets, asset depreciation and operating costs. Supply costs are estimated from historic data. Taxes and subsidies are also taken from the most recent historic data, with subsidy phase-out assumptions incorporated over the projection period in line with the relevant assumptions for each scenario.

There is no single definition of wholesale electricity prices, but in the World Energy Model the wholesale price refers to the average price (across time segments) paid to generators for their output. They reflect the region-specific costs of generating electricity for the marginal power plants in each time segment, plus any capital costs that are not recovered. The key factors affecting wholesale prices are therefore:

  • The capital cost of electricity generation plants;
  • The operation and maintenance costs of electricity generation plants; and
  • The variable fuel and, if applicable, CO2 cost of generation plants’ output.

The derivation of the wholesale electricity price for any region makes two fundamental assumptions:

  • Electricity prices must be high enough to cover the variable costs of all the plants operating in a region in a given year.
  • If there are new capacity additions, then prices must be high enough to cover the full costs – fixed costs as well as variable costs – of these new entrants.

For each region, WEM breaks the annual electricity demand volume down into four segments: baseload demand, low-midload demand, high-midload demand and peakload demand. For a fuller discussion of load-duration curves and how they are derived, please refer to the methodology document on the calculation of capacity credit for renewables.

Demand must be met by the electricity generation capacity of each region, which consists of variable renewables – technologies like wind and solar PV without storage whose output is driven by weather – and dispatchable plants (generation technologies that can be made to generate at any time except in cases of technical malfunction). In order to account for the effect of variable renewables on wholesale prices, the model calculates the probable contribution of variable renewables in each segment of the simplified load-duration curve. Subtracting the contribution of renewables from each segment in the merit order leaves a residual load-duration curve that must be met by dispatchable generators.

Subsidies

The IEA measures fossil fuel consumption subsidies using a price-gap approach. This compares final end-user prices with reference prices, which correspond to the full cost of supply, or, where appropriate, the international market price, adjusted for the costs of transportation and distribution. The estimates cover subsidies to fossil fuels consumed by end-users and subsidies to fossil-fuel inputs to electricity generation.

The price-gap approach is designed to capture the net effect of all subsidies that reduce final prices below those that would prevail in a competitive market. However, estimates produced using the price-gap approach do not capture all types of interventions known to exist. They, therefore, tend to be understated as a basis for assessing the impact of subsidies on economic efficiency and trade. Despite these limitations, the price-gap approach is a valuable tool for estimating subsidies and for undertaking comparative analysis of subsidy levels across countries to support policy development.