Background paper by the IEA for the 12th IEF Ministerial meeting

Global energy trends and the challenge of transforming the global energy system

It has been a turbulent two years for the global energy sector since the last Ministerial meeting of the International Energy Forum (IEF) in April 2008. The crisis in financial markets and the economic recession reversed the growth in global energy demand and caused investment in the energy sector to plunge in 2009. While oil market volatility has subsequently receded, another roller-coaster for prices between September 2008 and June 2009, alongside a loss of public confidence in the functioning of financial markets, led to continuing concern about the relationship between physical and financial markets.

Against a difficult economic backdrop, international efforts to combat climate change and global warming have intensified: the Copenhagen Accord reached in December 2009 sets a goal of limiting the global temperature increase to 2°C and implies a transformation in the way that the world produces and uses energy, but the policy debate is still open on how – and how quickly – this transformation can be realised.

The resulting uncertainty over perspectives for energy markets has affected all countries, including both energy consumers and energy producers. Energy investment needs to pick up quickly now that the current recession is ending to ensure continued and broadened access to reliable and secure energy – and to avoid a renewed tightening in supply as economies recover. Yet at the same time, policies and price signals need to encourage investments in a sustainable energy mix for the future, so that we do not lock in high-emissions technologies now that will make the fight against climate change much harder in the future.

The 12th IEF meeting presents an opportunity for Ministers to focus on a number of these pressing energy issues, from the dynamics driving energy markets, through the challenge of climate change and on to the continuing problem of energy poverty. But first it is important to review the trends underlying these recent developments, understand their implications for the future and then identify what action needs to be taken.

You can read the short study here