Market and product

The plunge in oil prices risks undermining efforts to reduce the pollution blamed for global warming, especially projects designed to wring more from each barrel of oil, the International Energy Agency concluded in its annual assessment of markets.

If the cost of crude remains near $50 a barrel until the end of the decade, cheaper conventional fuels would hold back the development of electric cars and biofuels that are helping curb carbon emissions, IEA said. It also estimated about $800 billion of efficiency improvements in cars, trucks and airplanes would be lost.

The findings illustrate the complexity of the United Nations mission to secure a historic deal on reining in fossil-fuel emissions by the end of the year. While lower oil prices are helping the world recover from an economic slump, they’re also raising competitive pressures on technologies such as wind and solar power and making some projects take longer to pay off.

Lower Prices

“Lower prices are not all good news for consumers,” the Paris-based institution wrote in its annual World Energy Outlook released Tuesday.“Longer payback periods mean that the world misses out on almost 15 percent of energy savings.”

Oil’s drop from a peak of more than $140 a barrel in 2008 has been paired with drops in coal and natural gas prices, the main fuels for power generation that compete with wind and solar. Making gasoline cheaper at the pump favors oil over biofuels manufactured from crops such as sugarcane and corn, the IEA said.

The bigger impact is on measures to make energy consumption more efficient. Lower fossil-fuel prices extend the calculation of how long it takes projects to recoup their costs. The IEA said those measures are having a significant impact on total demand, and have provided a “tantalizing hint” of “a de-coupling in the relationship between CO2 emissions and economic activity.”

This year’s outlook envisioned energy demand rising by a third between 2013 and 2040, with a weaker link between growth and pollution levels. China and India have joined the U.S. and European Union in implementing efficiency rules, making more than a third of countries covered, up from 3 percent in 2005, the IEA said. It expects the policies to expand in the coming years.

Renewable Energy

“Lower oil prices alone do not have a large impact on the deployment of renewable energy technologies in the power sector, but only if policy makers remain steadfast in providing the necessary market rules, policies and subsidies,” the report said.

Renewables took almost half of the new investment in power generation last year and will overtake coal as the largest source of electricity by the early 2030s, taking a market share of 50 percent in the EU by 2040, 30 percent in China and Japan and 25 percent in the U.S. and India, the IEA estimated.

Those investments help hold the global increase in temperatures to 2.7 degrees Celsius (4.8 degrees Fahrenheit) by the end of the century, according to the IEA’s calculation. That’s more than the 2-degree target adopted by the UN but less than estimates of more than 4 degrees that scientists warned are likely if no action was taken.

“As the largest source of global greenhouse gas emissions, the energy sector must be at the heart of global action to tackle climate change,” IEA Executive Director Fatih Birol said in a statement.

“The coverage of mandatory energy efficiency regulation worldwide expanded to more than a quarter of global consumption.