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   Energy Policy

14 April 2004

Developing World Growth Will Drive Up Energy Use, Report Says, April, 14, 2004

(Fossil fuels expected to continue dominating energy use over next two decades)

The developing world's demand for energy is projected to roughly double over the next two decades as economies and populations in developing countries grow faster than those in industrialized countries, a U.S. government agency says.

Energy demand in the developing world is expected to increase by 91 percent between 2001 and 2025, with emerging economies of Asia driving demand growth, according to the International Energy Outlook 2004 released April 14 by the Energy Information Administration (EIA), the analytical agency in the Energy Department.

This increase compares with a 33 percent rise in energy demand projected for the industrialized world and a 54 percent for the entire global economy. The report projects the developing world's share of global energy demand reaching 43 percent by the end of the forecast period, only two percentage points below the developed world's share then.

Emerging Asian markets, particularly China and India, are projected to increase dramatically their consumption of coal and oil and expand their use of nuclear power.

Although natural gas is the fastest growing source of primary energy, oil will remain the dominant fuel type, with much of a 57 percent increase in demand expected to come from the United States and developing Asia, according to an EIA news release published along with the report. EIA said oil prices are expected to fall after 2004 to $25 per barrel -- not adjusted for inflation -- and then rise slowly.

Coal will continue to be the predominant source for electricity generation, particularly in China, which has abundant reserves of that fuel and limited access to alternative sources of energy, EIA said.

Much of a more than 50 percent projected rise in carbon dioxide emissions -- believed by many to contribute to global warming -- is expected to occur in the developing world, where large spikes in energy use are projected.

EIA said that because the developing world is projected to rely on coal and other fossil fuels, "substantial" increases in worldwide carbon dioxide emissions would likely occur even if the industrialized world made efforts to reduce its own emissions.

Following is the text of the EIA news release:
(begin text)

APRIL 14, 2004

Emerging Asia Drives World Energy Use in the International Energy Outlook 2004

Worldwide energy consumption is projected to grow by 54 percent by 2025, according to the reference case projection of the International Energy Outlook 2004 (IEO2004) released today by the Energy Information Administration (EIA). The IEO2004 shows strongest growth in energy consumption among the developing nations of the world, especially developing Asia (including China and India), where robust economic growth drives the increase in energy use over the projection period. Energy use in the developing world increases by 91 percent over the forecast period.

In contrast to the developing world, slower growth in energy demand is projected for the industrialized world, which experiences a 33-percent increase in energy use between 2001 and 2025. Generally, the nations of the industrialized world can be characterized as mature energy consumers with comparatively slow population growth. Gains in energy efficiency and movement away from energy-intensive manufacturing to service industries result in the slower growth in energy use. Energy use in the transitional economies of Eastern Europe and the former Soviet Union (EE/FSU) are expected to grow by 42 percent over the forecast period. Slow or declining population growth in this region, combined with strong projected gains in energy efficiency as old, inefficient equipment is replaced, leads to more modest growth in energy demand than in the developing world.

World oil prices rose by almost $10 per barrel over the course of 2002 and remained high throughout 2003. Oil prices are expected to fall after 2004 to $25 per barrel in 2002 dollars and then rise slowly to 2025, reaching $27 per barrel in 2002 dollars (in nominal dollars $51 per barrel). World oil use increases from 77 million barrels per day in 2001 to 121 million barrels per day in 2025 in the IEO2004 reference case. Much of the increase in oil demand is expected to occur in the United States and in developing Asia. The United States, China, and the rest of developing Asia account for nearly 60 percent of the projected growth in world oil use. Although OPEC producers are expected to be the major suppliers of increased production requirements, non-OPEC supply remains competitive, with major increments in supply coming from offshore resources, especially in the Caspian Basin, Latin America, and deepwater West Africa.

Other report highlights include:

-- Electric Power Use: World net electricity consumption nearly doubles over the projection period, from 13,290 billion kilowatthours in 2001 to 23,072 billion kilowatthours in 2025. Strong growth in electricity use, averaging 3.5 percent per year, is projected for the developing world, where robust economic expansion drives demand for electricity to run newly purchased home appliances for cooking, air conditioning, space and water heating and refrigeration. For the industrialized world and the EE/FSU, where electricity markets are more mature, slower average growth rates of 1.6 percent per year and 2.0 percent per year, respectively, are projected.

-- Natural Gas Demand: Natural gas is the fastest growing source of world primary energy in the IEO2004 reference case. Over the 2001-2025 forecast period, consumption of natural gas is projected to increase by 67 percent to 151 trillion cubic feet by 2025. The projection for natural gas use is lower than in last year's outlook, when gas demand was expected to climb to 176 trillion cubic feet in 2025. The lower forecast this year is the result of slightly lower assumptions for worldwide economic growth, a slower projected decline in the world's nuclear power generation, and concerns about the long-term ability of natural gas producers to bring sufficient resources to market at prices competitive with those of other fuels.

-- Coal Consumption: Coal remains an important component of the world's electricity markets and is expected to continue to dominate many national electricity markets in developing Asia. Currently, of the coal consumed worldwide, 64 percent is used for electricity generation; and in almost every region of the world, power generation accounts for most of the projected growth in coal consumption. Where coal is used in the industrial, residential, and commercial sectors, other energy sources-notably natural gas-are expected to gain market share. One exception is China. With abundant coal reserves and limited access to alternative fuels, coal continues to be the most widely used fuel in the country's rapidly growing industrial sector.

-- Nuclear Power Generation: Worldwide, electricity generation from nuclear power is projected to increase from 2,521 billion kilowatthours in 2001 to 3,032 billion kilowatthours in 2020, beforedeclining slightly to 2,906 billion kilowatthours in 2025. The nuclear power forecast is higher than in last year's outlook, because the prospects for nuclear power have been reassessed in light of higher capacity utilization rates reported for many existing nuclear facilities and the expectation that fewer retirements of existing plants will occur than previously projected. The largest increase in nuclear generation is projected for the developing world, where consumption of electricity from nuclear power increases by an average 4.1 percent per year over the forecast horizon. Developing Asia is expected to see the greatest increases in regional nuclear generating capacity, accounting for 96 percent of the total projected growth in capacity in the developing world.

-- Renewable Energy: Moderate growth in the world's consumption of renewable energy sources is projected in the IEO2004 reference case. Much of the growth is expected to result from the completion of large-scale hydroelectric facilities in the developing countries, especially in developing Asia. Among the industrialized counties, only Canada has plans to construct any sizeable hydroelectric projects over the forecast period. Much of the expected growth in renewable energy consumption in the industrialized world is projected to be nonhydropower renewables, especially wind energy in Western Europe and in the United States.

-- Carbon Dioxide Emissions: In the IEO2004 reference case, carbon dioxide emissions are projected to rise from 23.9 billion metric tons in 2001 to 27.7 billion metric tons in 2010 and 37.1 billion metric tons in 2025. Much of the projected increase in emissions is expected to occur in the developing world, accompanying the large increments in energy use projected for the region's emerging economies. Developing countries account for 61 percent of the projected increment in carbon dioxide emissions between 2001 and 2025. Continued reliance on coal and other fossil fuels, as projected for the developing world, would ensure that even if the industrialized world undertook efforts to reduce carbon dioxide emissions, there would still be substantial increases in worldwide carbon dioxide emissions over the forecast period.

International Energy Outlook 2004 is available on EIA's Web Site at: http://www.eia.doe.gov/oiaf/ieo/index.html

(end text)


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