Highlights

Overview

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In the IEO2011 Reference case, which does not incorporate prospective legislation or policies that might affect energy markets, world marketed energy consumption grows by 53 percent from 2008 to 2035. Total world energy use rises from 505 quadrillion British thermal units (Btu) in 2008 to 619 quadrillion Btu in 2020 and 770 quadrillion Btu in 2035 (Figure 1). Much of the growth in energy consumption occurs in countries outside the Organization for Economic Cooperation and Development (non-OECD nations),² where demand is driven by strong long-term economic growth. Energy use in non-OECD nations increases by 85 percent in the Reference case, as compared with an increase of 18 percent for the OECD economies.

Although the world continues to recover from the 2008-2009 global recession, the recovery is uneven. In advanced economies, recovery has been slow in comparison with recoveries from past recessions. Unemployment is still high among the advanced economies, and real estate markets and household income growth remain weak. Debt levels in a number of small economies of the European Union—Greece, Ireland, and Portugal—required European Union intervention to avert defaults. Concerns about fiscal sustainability and financial turbulence suggest that economic recovery in the OECD countries will not be accompanied by the higher growth rates associated with past recoveries. In contrast, growth remains high in many emerging economies, in part driven by strong capital inflows and high commodity prices; however, inflation pressures remain a particular concern, along with the need to rebalance external trade in key developing economies.

Beyond the pace and timing of the world's economic recovery, other events have compounded the uncertainty associated with this year's energy outlook. Oil prices rose in 2010 as a result of growing demand associated with signs of economic recovery and a lack of a sufficient supply response. Prices were driven even higher at the end of 2010 and into 2011 as social and political unrest unfolded in several Middle Eastern and African economies. Oil prices increased from about $82 per barrel³ at the end of November 2010 to more than $112 per barrel in day trading on April 8, 2011. The impacts of quickly rising prices and possible regional supply disruptions add substantial uncertainty to the near-term outlook. In 2011, the price of light sweet crude oil in the United States (in real 2009 dollars) is expected to average $100 per barrel, and with prices expected to continue increasing in the long term, the price reaches $108 per barrel in 2020 and $125 per barrel in 2035 in the IEO2011 Reference case.

The aftermath of the devastating earthquake and tsunami that struck northeastern Japan on March 11, 2011—which resulted in extensive loss of life and infrastructure damage, including severe damage to several nuclear reactors at Fukushima Daiichi—provides another major source of uncertainty in IEO2011. The near-term outlook for Japan's economy is lower than the already sluggish growth that was projected before the events, but the impact on the rest of Asia and on world economic health as a whole probably will be relatively small, given that Japan has not been a major factor in regional economic growth in recent years. However, the event may have more profound implications for the future of world nuclear power. The IEO2011 projections do not reflect the possible ramifications of Fukushima for the long-term global development of nuclear power or the policies that some countries have already adopted in its aftermath with respect to the continued operation of existing nuclear plants.

World energy markets by fuel type

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In the long-term, the—Reference case projects increased world consumption of marketed energy from all fuel sources through 2035 (Figure 2). Fossil fuels are expected to continue supplying much of the energy used worldwide. Although liquid fuels—mostly petroleum based—remain the largest source of energy, the liquids share of world marketed energy consumption falls from 34 percent in 2008 to 29 percent in 2035, as projected high world oil prices lead many energy users to switch away from liquid fuels when feasible. Renewable energy is the world's fastest growing form of energy, and the renewable share of total energy use increases from 10 percent in 2008 to 14 percent in 2035 in the Reference case.

Liquid fuels

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World use of petroleum and other liquids⁴ grows from 85.7 million barrels per day in 2008 to 97.6 million barrels per day in 2020 and 112.2 million barrels per day in 2035. In the Reference case, most of the growth in liquids use is in the transportation sector, where, in the absence of significant technological advances, liquids continue to provide much of the energy consumed. Liquid fuels remain an important energy source for transportation and industrial sector processes. Despite rising fuel prices, use of liquids for transportation increases by an average of 1.4 percent per year, or 46 percent overall from 2008 to 2035. The transportation sector accounts for 82 percent of the total increase in liquid fuel use from 2008 to 2035, with the remaining portion of the growth attributable to the industrial sector (Figure 3). The use of liquids declines in the other end-use sectors and for electric power generation.

To meet the increase in world demand in the Reference case, liquids production (including both conventional and unconventional liquids supplies) increases by a total of 26.6 million barrels per day from 2008 to 2035. The Reference case assumes that OPEC countries will invest in incremental production capacity in order to maintain a share of approximately 40 percent of total world liquids production through 2035, consistent with their share over the past 15 years. Increasing volumes of conventional liquids (crude oil and lease condensate, natural gas plant liquids, and refinery gain) from OPEC producers contribute 10.3 million barrels per day to the total increase in world liquids production, and conventional supplies from non-OPEC countries add another 7.1 million barrels per day.

Unconventional resources (including oil sands, extra-heavy oil, biofuels, coal-to-liquids, gas-to-liquids, and shale oil) from both OPEC and non-OPEC sources grow on average by 4.6 percent per year over the projection period. Sustained high oil prices allow unconventional resources to become economically competitive, particularly when geopolitical or other "above ground" constraints⁵ limit access to prospective conventional resources. World production of unconventional liquid fuels, which totaled only 3.9 million barrels per day in 2008, increases to 13.1 million barrels per day and accounts for 12 percent of total world liquids supply in 2035. The largest components of future unconventional production are 4.8 million barrels per day of Canadian oil sands, 2.2 and 1.7 million barrels per day of U.S. and Brazilian biofuels, respectively, and 1.4 million barrels per day of Venezuelan extra-heavy oil. Those four contributors to unconventional liquids supply account for almost three-quarters of the increase over the projection period.

Natural gas

World natural gas consumption increases by 52 percent in the Reference case, from 111 trillion cubic feet in 2008 to 169 trillion cubic feet in 2035. Although the global recession resulted in an estimated decline of 2.0 trillion cubic feet in natural gas use in 2009, robust demand returned in 2010, and consumption exceeded the level recorded before the downturn. Natural gas continues to be the fuel of choice for many regions of the world in the electric power and industrial sectors, in part because its relatively low carbon intensity compared with oil and coal makes it an attractive option for nations interested in reducing greenhouse gas emissions. In the power sector, low capital costs and fuel efficiency also favor natural gas.

In the IEO2011 Reference case, the major projected increase in natural gas production occurs in non-OECD regions, with the largest increments coming from the Middle East (an increase of 15 trillion cubic feet between 2008 and 2035), Africa (7 trillion cubic feet), and non-OECD Europe and Eurasia, including Russia and the other former Soviet Republics (9 trillion cubic feet). Over the projection period, Iran and Qatar alone increase their natural gas production by a combined 11 trillion cubic feet, nearly 20 percent of the total increment in world gas production. A significant share of the increase is expected to come from a single offshore field, which is called North Field on the Qatari side and South Pars on the Iranian side.

Contributing to the strong competitive position of natural gas among other energy sources is a strong growth outlook for reserves and supplies. Significant changes in natural gas supplies and global markets occur with the expansion of liquefied natural gas (LNG) production capacity and as new drilling techniques and other efficiencies make production from many shale basins economical worldwide. The net impact is a significant increase in resource availability, which contributes to lower prices and higher demand for natural gas in the projection.

Although the extent of the world's unconventional natural gas resources—tight gas, shale gas, and coalbed methane—have not yet been assessed fully, the IEO2011 Reference case projects a substantial increase in those supplies, especially from the United States but also from Canada and China. An initial assessment of shale gas resources in 32 countries was released by EIA in April 2011.⁶ The report found that technically recoverable shale gas resources in the assessed shale gas basins and the United States amount to 6,622 trillion cubic feet. To put the shale gas resource estimate in perspective, according to the Oil & Gas Journal⁷ world proven reserves of natural gas as of January 1, 2011, are about 6,675 trillion cubic feet, and world technically recoverable gas resources—largely excluding shale gas—are roughly 16,000 trillion cubic feet.

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Rising estimates of shale gas resources have helped to increase total U.S. natural gas reserves by almost 50 percent over the past decade, and shale gas rises to 47 percent of U.S. natural gas production in 2035 in the IEO2011 Reference case. Adding production of tight gas and coalbed methane, U.S. unconventional natural gas production rises from 10.9 trillion cubic feet in 2008 to 19.8 trillion cubic feet in 2035. Unconventional natural gas resources are even more important for the future of domestic gas supplies in Canada and China, where they account for 50 percent and 72 percent of total domestic production, respectively, in 2035 in the Reference case (Figure 4).

World natural gas trade, both by pipeline and by shipment in the form of LNG, is poised to increase in the future. Most of the projected increase in LNG supply comes from the Middle East and Australia, where a number of new liquefaction projects are expected to become operational within the next decade. Additionally, several LNG export projects have been proposed for western Canada, and there are also proposals to convert underutilized LNG import facilities in the United States to liquefaction and export facilities for domestically sourced natural gas. In the IEO2011 Reference case, world liquefaction capacity more than doubles, from about 8 trillion cubic feet in 2008 to 19 trillion cubic feet in 2035. In addition, new pipelines currently under construction or planned will increase natural gas exports from Africa to European markets and from Eurasia to China.

Coal

In the absence of national policies and/or binding international agreements that would limit or reduce greenhouse gas emissions, world coal consumption is projected to increase from 139 quadrillion Btu in 2008 to 209 quadrillion Btu in 2035, at an average annual rate of 1.5 percent. Regional growth rates are uneven, with little growth in coal consumption in OECD nations but robust growth in non-OECD nations, particularly among the Asian economies (Figure 5).

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Strong economic growth and large domestic coal reserves in China and India lead to a substantial increase in their coal use for electric power and industrial processes. Installed coal-fired generating capacity in China nearly doubles in the Reference case from 2008 to 2035, and coal use in China's industrial sector grows by 67 percent. The development of China's electric power and industrial sectors will require not only large-scale infrastructure investments but also substantial investment in both coal mining and coal transportation infrastructure. In India, coal-fired generating capacity rises from 99 gigawatts in 2008 to 172 gigawatts in 2035, a 72-percent increase, while industrial sector coal use grows by 94 percent.

Electricity

World net electricity generation increases by 84 percent in the IEO2011 Reference case, from 19.1 trillion kilowatthours in 2008 to 25.5 trillion kilowatthours in 2020 and 35.2 trillion kilowatthours in 2035. Although the 2008-2009 global economic recession slowed the rate of growth in electricity use in 2008 and resulted in negligible change in electricity use in 2009, demand returned in 2010, led by strong recoveries in non-OECD economies. In general, in OECD countries, where electricity markets are well established and consumption patterns are mature, the growth of electricity demand is slower than in non-OECD countries, where a large amount of potential demand remains unmet. Total net electricity generation in non-OECD countries increases by an average of 3.3 percent per year in the Reference case, led by non-OECD Asia (including China and India), where annual increases average 4.0 percent from 2008 to 2035. In contrast, net generation among OECD nations grows by an average of 1.2 percent per year from 2008 to 2035.

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In many parts of the world, concerns about security of energy supplies and the environmental consequences of greenhouse gas emissions have spurred government policies that support a projected increase in renewable energy sources. As a result, renewable energy sources are the fastest growing sources of electricity generation in the IEO2011 Reference case at 3.1 percent per year from 2008 to 2035 (Figure 6). Natural gas is the second fastest growing generation source, increasing by 2.6 percent per year. An increase in unconventional natural gas resources, particularly in North America but elsewhere as well, helps keep global markets well supplied and prices competitive. Future generation from renewables, natural gas, and to a lesser extent nuclear power largely displaces coal-fired generation, although coal remains the largest source of world electricity through 2035.

More than 82 percent of the increase in renewable generation is in the form of hydroelectric power and wind power. The contribution of wind energy, in particular, has grown swiftly over the past decade, from 18 gigawatts of net installed capacity at the end of 2000 to 121 gigawatts at the end of 2008—a trend that continues into the future. Of the 4.6 trillion kilowatthours of new renewable generation added over the projection period, 2.5 trillion kilowatthours (55 percent) is attributed to hydroelectric power and 1.3 trillion kilowatthours (27percent) to wind. The majority of the hydroelectric growth (85 percent) occurs in the non-OECD countries, while a slight majority of wind generation growth (58 percent) occurs in the OECD. High construction costs can make the total cost to build and operate renewable generators higher than those for conventional plants. The intermittence of wind and solar, in particular, can further hinder the economic competitiveness of those resources, as they are not operator-controlled and are not necessarily available when they would be of greatest value to the system. However, improving battery storage technology and dispersing wind and solar generating facilities over wide geographic areas could mitigate many of the problems associated with intermittency over the projection period.

Electricity generation from nuclear power worldwide increases from 2.6 trillion kilowatthours in 2008 to 4.9 trillion kilowatthours in 2035 in the IEO2011 Reference case, as concerns about energy security and greenhouse gas emissions support the development of new nuclear generating capacity. In addition, world average capacity utilization rates have continued to rise over time, from about 65 percent in 1990 to about 80 percent today, with some increases still anticipated in the future.

There is still considerable uncertainty about the future of nuclear power, and a number of issues could slow the development of new nuclear power plants. Issues related to plant safety, radioactive waste disposal, and proliferation of nuclear materials continue to raise public concerns in many countries and may hinder plans for new installations. High capital and maintenance costs also may keep some countries from expanding their nuclear power programs. In addition, a lack of trained labor resources, as well as limited global manufacturing capacity for certain components, could keep national nuclear programs from advancing quickly. Finally, although the long-term implications of the disaster at Japan's Fukushima Daiichi nuclear power plant for world nuclear power development are unknown, Germany, Switzerland, and Italy have already announced plans to phase out or cancel all their existing and future reactors. Those plans, and new policies that other countries may adopt in response to the disaster at the Fukushima Daiichi plant, although not reflected in the IEO2011 projections, indicate that some reduction in the projection for nuclear power should be expected.

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In the Reference case, 75 percent of the world expansion in installed nuclear power capacity occurs in non-OECD countries (Figure 7). China, Russia, and India account for the largest increment in world net installed nuclear power from 2008 to 2035: China adds 106 gigawatts of nuclear capacity over the period, Russia 28 gigawatts, and India 24 gigawatts.

World delivered energy use by sector

This section discusses delivered energy use in the buildings, industrial, and transportation sectors; it does not include losses associated with electricity generation and transmission.

Residential and commercial buildings

World residential energy use increases by 1.1 percent per year, from 52 quadrillion Btu in 2008 to 69 quadrillion Btu in 2035 in the IEO2011 Reference case. Much of the growth in residential energy consumption occurs in non-OECD nations, where robust economic growth improves standards of living and increases demand for residential energy. One factor contributing to increased demand in non-OECD nations is the trend toward replacing nonmarketed energy sources (including wood and waste, which are not fully included in the energy demand totals shown in the IEO) with marketed fuels, such as propane and electricity, for cooking and heating. Non-OECD residential energy consumption rises by 1.9 percent per year, compared with the much slower rate of 0.3 percent per year for OECD countries, where patterns of residential energy use already are well established, and slower population growth and aging populations translate to smaller increases in energy demand.

Globally, IEO2011 projects average growth in commercial energy use of 1.5 percent per year through 2035, with the largest share of growth in non-OECD nations. OECD commercial energy use expands by 0.8 percent per year. Slow expansion of GDP and low or declining population growth in many OECD nations contribute to slower anticipated rates of growth in commercial energy demand. In addition, continued efficiency improvements moderate the growth of energy demand over time, as relatively inefficient equipment is replaced with newer, more efficient stock.

In non-OECD nations, economic activity and commerce increase rapidly over the 2008-2035 projection period, fueling additional demand for energy in the service sectors. Total delivered commercial energy use among non-OECD nations is projected to grow by 2.8 percent per year from 2008 to 2035. Population growth also is expected to be more rapid than in OECD countries, portending increases in the need for education, health care, and social services and the energy required to provide them. In addition, as developing nations mature, they are expected to transition to more service-related enterprises, which will increase demand for energy in the commercial sector.

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Industrial

Worldwide, industrial energy consumption grows from 191 quadrillion Btu in 2008 to 288 quadrillion Btu in 2035 in the Reference case. The industrial sector accounted for much of the recession-related reduction in energy use in 2009, primarily because of a substantial decline in manufacturing output that had a more pronounced impact on energy use in the industrial sector than in other sectors. In the Reference case, national economic growth rates and energy consumption patterns are projected to return to historical trends by 2015. Non-OECD economies account for about 89 percent of the world increase in industrial sector energy consumption in the Reference case (Figure 8). Rapid economic growth is projected for the non-OECD countries, accompanied by rapid growth in their combined total industrial energy consumption, averaging 2.0 percent per year from 2008 to 2035. Because OECD nations have been undergoing a transition from manufacturing economies to service economies in recent decades, and have relatively slow projected growth in economic output, industrial energy use in the OECD region as a whole grows by an average of only 0.5 percent per year from 2008 to 2035.

Transportation

Energy use in the transportation sector includes the energy consumed in moving people and goods by road, rail, air, water, and pipeline. The transportation sector is second only to the industrial sector in terms of total end-use energy consumption. The transportation share of world total liquids consumption increases from 54 percent in 2008 to 60 percent in 2035 in the IEO2011 Reference case, accounting for 82 percent of the total increase in world liquids consumption. Thus, understanding the development of transportation energy use is the most important factor in assessing future trends in demand for liquid fuels.

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World oil prices reached historically high levels in 2008, in part because of a strong increase in demand for transportation fuels, particularly in emerging non-OECD economies. Non-OECD energy use for transportation increased by 4.1 percent in 2007 and 6.4 percent in 2008, before the impact of the 2008-2009 global economic recession resulted in a slowdown in transportation sector activity. Even in 2009, non-OECD transportation energy use grew by an estimated 3.3 percent, in part because many non-OECD countries (in particular, but not limited to, the oil-rich nations) provide fuel subsidies to their citizens. With robust economic recovery expected to continue in China, India, and other non-OECD nations, growing demand for raw materials, manufactured goods, and business and personal travel is projected to support fast-paced growth in energy use for transportation both in the short term and over the long term. In the IEO2011 Reference case, non-OECD transportation energy use grows by 2.6 percent per year from 2008 to 2035 (Figure 9).

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High oil prices and the economic recession had more profound impacts in the OECD economies than in the non-OECD economies. OECD energy use for transportation declined by an estimated 1.6 percent in 2008, followed by a further decrease estimated at 1.8 percent in 2009, before recovering to 0.7-percent growth in 2010. Indications are that the return of high world oil prices and comparatively slow recovery from the recession in several key OECD nations will mean that transportation energy demand will continue to grow slowly in the near to mid-term. Moreover, the United States and some of the other OECD countries have instituted a number of policy measures to increase the fuel efficiency of their vehicle fleets. OECD transportation energy use grows by only 0.3 percent per year over the entire projection period.

World carbon dioxide emissions

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World energy-related carbon dioxide emissions rise from 30.2 billion metric tons in 2008 to 35.2 billion metric tons in 2020 and 43.2 billion metric tons in 2035—an increase of 43 percent over the projection period. With strong economic growth and continued heavy reliance on fossil fuels expected for most non-OECD economies under current policies, much of the projected increase in carbon dioxide emissions occurs among the developing non-OECD nations. In 2008, non-OECD emissions exceeded OECD emissions by 24 percent; in 2035, they are projected to exceed OECD emissions by more than 100 percent. Coal continues to account for the largest share of carbon dioxide emissions throughout the projection (Figure 10).

Carbon intensity of output—the amount of carbon dioxide emitted per unit of economic output—is a common measure used in analysis of changes in carbon dioxide emissions, and it is sometimes used as a standalone measure for tracking progress in relative emissions reductions. Energy-related carbon dioxide intensities improve (decline) in all IEO regions over the projection period, as economies continue to use energy more efficiently. Estimated carbon dioxide intensity declines by 1.8 percent per year in the OECD economies and by 2.4 percent per year in the non-OECD economies from 2008 to 2035.

Another measure of emissions intensity that can be useful for comparing emissions trends across countries is carbon dioxide emissions per capita. Carbon dioxide emissions per capita in OECD economies are significantly higher than those in non-OECD economies (Figure 11). OECD countries have higher levels of carbon dioxide emissions per capita, in part because of their higher levels of income and fossil fuel use per person. Among non-OECD countries, China has the highest percentage increase in emissions per capita in the Reference case, from 5.1 metric tons per person in 2008 to 9.3 metric tons per person in 2035, an average annual increase of 2.2 percent. In contrast, OECD emissions per capita fall over the projection period, from 11.1 metric tons per person in 2008 to 10.6 metric tons per person in 2035.