Energy Watchdog Urges Deal on Climate

By GUY CHAZAN and SPENCER SWARTZ
The International Energy Agency used its annual World Energy Outlook as a platform to argue the case for a major international agreement on stemming global warming, saying it is needed to avoid sharply higher oil and gas importing costs as well as climate change.
The IEA suggested a strong agreement at a summit in Copenhagen next month could help make the difference between the Earth's temperatures rising as much as six degrees Celsius -- a figure at the high end of most experts' estimates -- and as little as two degrees. A deal on emissions could reduce world oil demand by 16 million barrels a day by 2030, the agency projects.
Failure to reach such a deal could raise the U.S.'s cost to import oil and gas from 1% to 2% of its gross domestic product, it said.
The IEA's energy-related forecasts generally carry weight with industrialized nations. But a grand agreement to slash global greenhouse-gas emissions to the extent the IEA is calling for appears unlikely. Countries from the U.S. to China are fighting over who should foot what share of the cleanup bill.
In the report, the IEA also scaled back its near-term forecast for global oil consumption, predicting it would grow to just 88 million barrels a day over the next five years instead of the 94 million barrels it was forecasting a year ago. That partly reflects increased energy-efficiency measures as well as the effects of the global recession.

IEA Chief Economist Fatih Birol said the agency expects oil prices to climb to more than $100 a barrel by 2015 and to $190 a barrel by 2030 because of the challenges the oil industry faces in finding new resources to meet rising demand.
The energy industry, responsible for two-thirds of all emissions, is divided over a climate-change pact. Some companies want to remove regulatory uncertainty that has slowed the shift to low-carbon technologies, while others say new mandates would prove too expensive.
U.S. Sen. John Kerry (D., Mass), said Tuesday that Democrats are planning to send a climate-legislation framework to Copenhagen to assure negotiators of Washington's commitment to a treaty.
The IEA's forecast on the effect of a deal depends on it limiting the concentration of greenhouse gases in the atmosphere to 450 parts per million of CO2 equivalent -- the "450 scenario." A number of climate-change activists say even that figure is too high -- because it is higher than the current level of about 380 parts per million. Countries including the U.S. back the 450 scenario on paper, but few analysts expect an agreement in Copenhagen to be that strict -- if agreement is reached at all.
To achieve that standard, demand for fossil fuels would have to peak by 2020, and a "revolution" occur in electricity generation, with a shift away from coal to natural gas and renewables, the IEA said. It said the price of carbon in Western countries would also have to rise -- to $50 for the right to emit one ton of carbon dioxide by 2020 and to $110 a ton by 2030, compared to less than $20 in the current European cap-and-trade market.
Big change would also be needed in transportation: The number of electric or hybrid cars would have to rise to 60 of every 100 sold by 2030, from just one in 100 currently, the IEA said.—Jeffrey Ball and Ian Talley contributed to this article.
Write to Guy Chazan at guy.chazan@wsj.com and Spencer Swartz at spencer.swartz@dowjones.com