World Energy Outlook 2018

WEO 2019
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Themes

World Energy Outlook 2018 examines future patterns of a changing global energy system at a time of increasing uncertainties and finds that major transformations are underway for the global energy sector. Across all regions and fuels, policy choices made by governments will determine the shape of the energy system of the future.

GHG emissions

The energy sector is the principal source of global greenhouse gas emissions. The World Energy Outlook 2018 contains updated projections for energy-related CO2 emissions and other greenhouse gases.

In the New Policies Scenario, CO2 emissions keep rising gradually to 2040. Across sectors, there is particular growth in the transport and industry sectors. While emissions in advanced economies fall, that decline is more than made up by growing emissions in most developing economies. In China, emissions grow slowly until around 2030 and then start to decline, in line with the country’s Nationally Determined Contribution under the Paris Agreement.

The global trajectory in the NPS is far from what is required to achieve the outcomes of the Paris Agreement. In contrast, the Sustainable Development Scenario is fully in line with holding the global temperature rise to well-below 2°C above pre-industrial levels. The scenario sees CO2 emissions peaking soon and entering a steep decline to 2040.

CO2 emissions by region in the New Policies Scenario, 2010-2040

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Today, energy-related GHG emissions (including methane and nitrous oxide as well as CO2) amount to around 39 Gt CO2-equivalent. Three-quarters of this is accounted for by only eight source categories. The largest category by far is coal-fired power generation, accounting for 27% of emissions. Buildings make up nearly 9%, followed by about 8% each for gas-fired power generation and petroleum-fueled cars. Emissions from cement production and oil and gas operations account for 7% each, with trucks making up 6% and steel around 5% of the total.

In the SDS, energy-related GHG emissions fall to around 21 Gt CO2e. The same eight categories account for around 60% of emissions in 2040, but the split between them changes. Emissions from coal-fired power fall by 90% to account for only 5% of total emissions. Buildings become the largest emitter in 2040 (11%) followed by gas-fired power generation and trucks (around 10% each). Cement production accounts for 9% of emissions (of which the majority is process emissions). Emissions from cars fall by half, despite the number of cars increasing by more than 60% (of which about 50% are electric), and those with internal combustion engines (ICEs) have vastly improved efficiency. Oil and gas sector emissions reduce significantly, mostly due to improvements in the GHG intensity of supply.

Energy-related GHG emissions from selected sectors, 2017 and SDS in 2040

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The CO2 emissions trajectory to 2040 in the SDS is lower than most published decarbonisation scenarios aiming at a long-term global average temperature rise of 1.7-1.8 °C above pre-industrial levels. What happens after 2040 is also critical for the climate outcome, and a continuation of the pre-2040 emissions reduction rate in the scenario would lead to global energy-related CO2 emissions falling to net zero by 2070 (for more information visit our SDS page).

To achieve the temperature goal, the Paris Agreement calls for emissions to peak as soon as possible and reduce rapidly thereafter, leading to a balance between anthropogenic emissions by sources and removals by sinks (i.e. net-zero emissions) in the second half of this century. These conditions are met in the SDS: global CO2 emissions peak around 2020 and then decline steeply to 2040, on course towards net-zero emissions in the latter half of the century.

From now until 2040 (the period covered by the model), the emissions trajectory of the SDS is at the lower end of other decarbonisation scenarios projecting a median temperature rise in 2100 of around 1.7 °C to 1.8 °C. It is also within the envelope of scenarios projecting a temperature rise below 1.5 °C, as assessed by the recent IPCC Special Report on 1.5 C.

Scenarios drawn from the Scenario Explorer released alongside the IPCC Special Report on 1.5 C of global warming. See https://data.ene.iiasa.ac.at/iamc-1.5c-explorer/

To place the world on the trajectory of the SDS, significant further policy action is needed. In 2015, a World Energy Outlook special report identified five opportunities that would achieve an early peak in energy-related greenhouse gas (GHG) emissions at no net cost to the economy:

  • Boosting end-use energy efficiency
  • Increasing investment in renewables
  • Phasing out the least-efficient coal-fired power plants
  • Phasing out inefficient fossil fuel subsidies
  • Reducing methane emissions from oil and gas production

While not sufficient on their own to avoid severe impacts from climate change, these measures – if implemented in full – nonetheless could keep the door open for further action later and provide a bridge (hence the name Bridge Scenario) to an emissions trajectory consistent with long-term decarbonisation goals. WEO 2018 assesses progress against these measures and analyses their potential contribution to achieving an SDS trajectory. Almost half of the emissions reductions needed in the SDS can be achieved by rapid implementation of these 5 key measures. Achieving the other half of the reductions requires deeper implementation of these same measures as well as extensive deployment of other clean energy technologies such as nuclear and CCUS.

CO2 and methane reductions in the Bridge Scenario and Sustainable Development Scenario, relative to the New Policies Scenario, 2010-2040

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Access to energy

In 2015, 193 Member States of the United Nations agreed as part of the Sustainable Development Goals on SDG 7, a specific goal to “ensure access to affordable, reliable, sustainable and modern energy for all by 2030” – of which target 7.1 envisions universal access to electricity and clean cooking. For nearly 20 years, the IEA has been at the forefront of international efforts to assess and understand the persistent energy access deficit and chart a pathway to Energy for All by 2030. The IEA is also chairing the next edition of the Tracking SDG7 report to be published in May 2019, a joint work of the SDG 7 co-custodian agencies (IEA, IRENA, UN Statistics Division, WHO, and World Bank). Achieving modern energy for all by 2030 is possible, and the benefits far outweigh the costs.

Our updated data on energy access available in World Energy Outlook-2018 show that progress has been made worldwide.

For the first time, the number of people without access to electricity fell below 1 billion in 2017, according to the IEA’s most up-to-date data. It also shows that the number of people without access to clean cooking facilities has begun to gradually decline, a cause for celebration as this will also lead to a reduction in premature deaths related to household air pollution. An increased reliance on liquefied petroleum gas (LPG) and on improved biomass cookstoves underpins the decline.

Despite recent developments, however, progress remains uneven across the world. About 600 million people in sub-Saharan Africa (or 57% of the region’s population) and 350 million people in developing Asia (or 9% of the population of that region) remain without access to electricity. Nearly 2.7 billion people lack access to clean cooking facilities, relying instead on biomass, coal or kerosene as their primary cooking fuel. Progress towards clean cooking has been very limited compared to electrification efforts.

Population without access to clean cooking, 2000-2017

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Population without access to electricity, 2000-2017

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To achieve universal energy access by 2030, a total of 1.2 billion new electricity connections are needed over the period, and around 2.5 billion people will need to gain access to cleaner cooking fuels (replacing the traditional use of solid biomass) for the first time ever. By contrast, efforts measured in the New Policies Scenario fall short: the number of people without access to electricity declines to around 650 million in 2030 but rises to 720 million in 2040, amounting to about 8% of the global population. The population without clean cooking only decreases to 2.2 billion in 2030 and 1.8 billion in 2040.

Progress since 2000 and outlook to 2030 for clean cooking access in the New Policies Scenario

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Progress since 2000 and outlook to 2030 for electricity access in the New Policies Scenario

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Achieving universal energy access requires investment of $55 billion per year on average between 2018 and 2030. While this is almost double the investment for energy access projected under current plans, it represents only about 2% of the total energy-sector investment in the Sustainable Development Scenario. 82% of the additional investment needed in sub-Saharan Africa.

In both scenarios, renewables account for over 70% of new electricity connections until 2030, around half of which are via off- and mini-grid solar PV. In terms of clean cooking facilities, LPG is the most cost-effective solution in more than half of all cases, with most of the rest of the population moving to improved and more energy-efficient biomass cookstoves and others relying on electric stoves.

As most new electricity connections to date have been achieved through grid-connected electricity powered by coal, it is widely assumed that action on energy access comes at the expense of action on climate change. However, IEA analysis shows that pursuing a least-cost strategy for closing the energy access gap has no negative impact on the climate. Recent changes in technology costs and improvements in low-carbon technologies are set to make new electricity access connections less emissions-intensive than previously. Moreover, achieving universal access to clean cooking may actually create a net climate benefit, due to reduction in the methane emissions associated with the traditional use of biomass for cooking.

Air pollution

Air pollution is a major health and environmental issue. Outdoor air pollution is linked to 2.9 million premature deaths around the world each year. Household air pollution, mostly from the traditional use of biomass as a cooking fuel, leads to more than 2.6 million premature deaths a year.

In the New Policies Scenario, total emissions of all major pollutants are set to fall in absolute terms, even as energy demand continues to grow strongly. But the link between pollutant emissions and human health is complex, meaning that these declines are not sufficient to prevent continued severe health effects of air pollution. In fact, the number of premature deaths from outdoor air pollution actually rises in the NPS, rising to 4 million deaths a year by 2040. The impact of indoor air pollution also remains severe, with 2.2 million premature deaths seen in 2040, due in large part to particulate emissions from cooking smoke, a direct result of a lack of access to clean cooking facilities.

In the Sustainable Development Scenario, emissions of all major pollutants fall significantly. SO2 emissions from the power sector are almost eliminated, while emissions from industry are reduced to less than half of today’s level. Emissions of NOX, which come mainly from the transport sector, nearly drop by half by 2040. Universal access to clean cooking helps almost eliminate residential PM2.5 emissions, leaving industry as the largest direct source of these emissions by 2040, followed by transport.

Emissions of Nitrogen oxyde (NOx) by sector and scenario, 2015 and 2040

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Emissions of Sulfur dioxyde (SO2) by sector and scenario, 2015 and 2040

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Emissions of Fine Particules (PM 2.5) by sector and scenario, 2017 and 2040

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The fall in emissions in the Sustainable Development Scenario results in important health benefits. Half a million premature deaths linked to outdoor air pollution, and 1.9 million premature deaths from household air pollution are avoided relative to today. Far more people enjoy lower levels of fine particulates (PM2.5) in the air they breathe in 2040 than today. In China, India and Southeast Asia, for example, the number of people living with air quality worse than the lowest WHO interim target falls by 98% from today’s levels.

Exposure to fine particulate pollution (PM2.5) in selected regions, 2015, and in the Sustainable Development Scenario, 2040

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Actions taken to reduce CO2 emissions can also lead to strong improvements in air pollution emissions. In the Sustainable Development Scenario, measures taken primarily for low-carbon objectives, including renewables and efficiency, also have a strong effect on reduction of air pollution emissions, accounting for more than half of all reductions of NOx emissions and about 40% of SO2 emissions, relative to the New Policies Scenario.  The remaining reductions are mostly driven by pollution-specific measures. For PM2.5 emissions, energy access policies are an important driver of reductions, because indoor cooking smoke is currently the largest source of PM2.5 emissions globally.

In countries where reducing health impacts of air pollution is an urgent issue, low-carbon measures that reduce the overall quantity of fossil fuels being used – including energy efficiency measures on the demand side, and a shift to renewables on the supply side – are likely to be an important part of an action plan to tackle those health-related impacts.

Water and energy

More than 2.1 billion people lack access to safe drinking water today. More than half the global population lacks access to proper sanitation services. More than a third of the global population is affected by water scarcity. Roughly 80% of wastewater is discharged without being treated, adding to already problematic levels of water pollution.

Among the 17 Sustainable Development Goals adopted by the United Nations, SDG 6 seeks to address these challenges and provide clean water and sanitation for all and improve the efficiency of water use by 2030. As the World Energy Outlook has shown in the past, water and energy questions are fundamentally linked. With both water and energy needs set to increase, the interdependencies between energy and water are likely to intensify.

How the nexus between energy and water is managed will have significant implications for economic and social development, as well as reaching the objectives of the SDGs. Given this challenge, the IEA’s Sustainable Development Scenario has added a water dimension to its analysis for the first time, focusing both on the water needs of the energy sector and the energy needs of the water sector.

The analysis shows that achieving universal access to clean water and sanitation would add less than 1% to global energy demand in 2030 and highlights a range of potential synergies between SDG 6 and SDG 7 (ensure access to affordable, reliable, sustainable and modern energy for all). For instance, taking water supply needs into account when planning electricity provisions in rural areas can open different pathways for both, which in turn can bring down the cost of electricity for households. Another example: producing biogas from waste can facilitate cleaner cooking in households that currently rely on wood and charcoal for cooking.

Share of population without access to electricity or water in rural areas in selected countries, 2017

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Providing access to safely managed sanitation and halving the amount of wastewater released without being treated in the SDS could increase electricity consumption for urban municipal wastewater treatment by over 600 TWh over the period to 2030. Around 30% of this could be covered by the electricity generated from energy recovery. However, if all new capacity for SDG 6 were built to be energy neutral or positive, the urban municipal wastewater sector could become a net energy producer.

"Business as usual" equals the amount of electricity consumed (less 60 TWh from energy recovery) from municipal wastewater treatment excluding SDG 6 in 2030 in the SDS. "Sustainable Development Scenario" equals the total electricity consumption from urban municipal wastewater treatment plants in the SDS if SDG 6 were achieved. "Energy neutral/positive case" is equal to the total electricity consumption from urban municipal wastewater treatment plants in the SDS if all new capacity built to achieve SDG 6 was energy neutral or energy-positive. The negative values indicate that more energy is generated than needed and can be sold.

SDG 6 is not just about supplying water and sanitation, it is also about ensuring that water is used more efficiently. In 2016, the energy sector withdrew around 340 billion cubic meters (bcm) of water and consumed roughly 50 bcm. Withdrawal is the amount of water removed from a source; while consumption is the volume of water withdrawn but not returned to the source.

Among WEO scenarios, the SDS has the lowest water withdrawals in 2030 (275 bcm), making this pathway the best option of those assessed in the WEO for achieving SDG target 6.4 (increase water use efficiency), and for reducing the energy sector’s vulnerability to potential water disruptions, such as droughts, or the effects of climate change on water availability.

If not properly managed, however, the higher level of water consumption in the SDS (75 bcm)—10% higher than the New Policies Scenario —could constrain technology or fuel choices or increase the potential for competition over water resources in some regions. This underlines the importance of factoring water use into energy policy decisions.

Global water use for energy production by scenario, 2014-2040

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Investment

Global energy investment registered a slight decline in 2017 to $1.8 trillion, its third consecutive decline. Higher investment in several sectors, including energy efficiency and upstream oil and gas, were more than offset by lower power-sector investment. China was the main destination for energy investment, totalling more than a fifth of the total. As it did in 2016, the largest share of global investment went to the electricity sector, reflecting the growing role of electricity in the energy system.

In the New Policies Scenario, a pick-up in oil and gas investment to balance the near-term market, together with a slight rise in costs, mean that the share of spending on fossil fuels once again overtakes electricity in total supply investments. The United States accounts for almost 20% of total upstream oil and gas investment globally, followed by the Middle East with almost 15%.

Renewables continue to attract the largest share of investment in power generation. Continued declines in costs mean that a constant investment in dollar terms buys a steadily increasing amount of capacity.

Energy efficiency investment increases in all end-use sectors. The buildings sector accounts for almost 40% of cumulative investment in energy efficiency, nearly 60% of which supports more energy-efficient houses, appliances and equipment.

Average annual supply-side investment in the Sustainable Development Scenario through to 2040, including fuel supply and power supply, increases by about 15% from today’s level. However, this rise masks a significant reallocation away from fossil fuels towards renewables and other low-carbon sources, for both fuel supply and power generation. The story is different on the demand side. Annual demand-side investment needs are more than three-times higher than today’s level, driven in particular by investment in energy efficiency across end-use sectors and roll-out of EVs. This reflects the importance of energy efficiency in achieving energy transitions.

Energy policy in a time of transitions face a twin challenge: accelerate and broaden investment in cleaner, smarter and more efficient energy technologies, and ensure at the same time that all the key elements of energy supply, including electricity networks, remain reliable and robust through continued investment.

In the New Policies Scenario, energy investment amounts to $2.2 trillion on average each year between 2018 and 2025, and $2.8 trillion a year thereafter.

Average upstream oil and gas spending rises from $580 billion a year between today and 2025 to $740 billion a year from 2025 to 2040. Renewables continue to take the largest share of investment in power generation, with an average annual spend of $350 billion.

Cumulative investment needs by sector in the New Policies, 2018-2040

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Electricity demand follows a lower trajectory in the Sustainable Development Scenario owing to increased energy efficiency in all end-use sectors.

Continued investment in oil and gas supply, however, remains essential, as decline rates at existing fields leave a substantial gap that needs to be filled with new upstream projects.

Cumulative investment needs by sector in the Sustainable Development Scenario, 2018-2040

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Policies will determine which way investment flows.

In the power sector, for example, over 95% of global investment is made in areas where revenues are fully regulated or affected by mechanisms to manage the risk associated with variable prices on competitive wholesale markets.

Cumulative investment needs in the New Policies Scenario, 2018-2040

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