TABLE OF CONTENTS

PART A GLOBAL ENERGY PROSPECTS: IMPACT OF DEVELOPMENTS IN CHINA & INDIA
PART B CHINA’S ENERGY PROSPECTS
PART C INDIA’S ENERGY PROSPECTS
ANNEXES

GLOBAL ENERGY TRENDS 1
ENERGY TRENDS IN CHINA AND INDIA 2
INTERNATIONAL TRADE AND THE WORLD ECONOMY 3
THE WORLD'S ENERGY SECURITY 4
GLOBAL ENVIRONMENTAL REPERCUSSIONS 5
ENERGY POLICY RAMIFICATIONS 6

POLITICAL, ECONOMIC AND DEMOGRAPHIC CONTEXT 7
OVERVIEW OF THE ENERGY SECTOR 8
REFERENCE SCENARIO DEMAND PROJECTIONS 9
REFERENCE SCENARIO SUPPLY PROJECTIONS 10
ALTERNATIVE POLICY SCENARIO PROJECTIONS 11
HIGH GROWTH SCENARIO PROJECTIONS 12
FOCUS ON THE COASTAL REGION 13

POLITICAL, ECONOMIC AND DEMOGRAPHIC CONTEXT 14
OVERVIEW OF THE ENERGY SECTOR 15
REFERENCE SCENARIO DEMAND PROJECTIONS 16
REFERENCE SCENARIO SUPPLY PROJECTIONS 17
ALTERNATIVE POLICY SCENARIO PROJECTIONS 18
HIGH GROWTH SCENARIO PROJECTIONS 19
FOCUS ON ENERGY POVERTY 20

ANNEXES

Foreword 3
Acknowledgements 5
List of Figures 21
List of Tables 30
List of Boxes 35
List of Spotlights 37
Executive Summary 41
Introduction 53

Part A: Global Energy Prospects: Impact of Developments in India and China 71
Global Energy Trends 73
Highlights 73
Reference Scenario 74
　Global Energy Prospects 74
　Energy Investment 94
Alternative Policy Scenario 96
　Global Energy Prospects 96
　Energy Investment 105
High Growth Scenario 108
　Global Energy Prospects 108
　Energy Investment 114
Energy Trends in China and India 117
Highlights 117
Reference Scenario 118
　Energy Demand 118
　Energy Supply 123
　Investment Needs 129
Alternative Policy Scenario 130
High Growth Scenario 133
International Trade and the World Economy 135
Highlights 135
China and India in the Global Economy 136
Explaining China’s and India’s Economic Growth 136
International Trade and Financial Flows 140
Global Economic and Energy Market Linkages 145
Simulating the Impact of Faster Growth in China and India 149
　Energy and Other Commodity Prices and Expenditures 151
　International Trade 152
　Economic Growth and Structure in the Rest of the World 155
The World’s Energy Security 159
Highlights 159
Energy Security in a Global Market 160
　Defining Energy Security 160
　How Supply Disruptions Affect Consuming Countries 163
　Measuring Energy Security 164
The Role of China and India in International Energy Trade 165
　Oil 165
　Natural Gas 171
　Coal 174
The Energy Security Policies of China and India 175
Implications for Consuming Countries 181
　Impact of Rising Energy Demand 181
　Impact of China’s and India’s Energy Security Policies 187
Global Environmental Repercussions 191
Highlights 191
Energy-Related CO2 Emissions 192
　Global Trends 192
　Contribution of China and India to Global Emissions 196
　Implications for Climate Change 204
　The 450 Stabilisation Case 207
Focus on Prospects for Clean Coal Technology for Power
Generation 216
　CO2 Capture and Storage 216
　Power-Generation Technologies 220
Energy Policy Ramifications 225
Highlights 225
Addressing Energy Security and Climate Challenges 226
Policy Co-operation with China and India 230
Technology Co-operation and Collaboration 235
Role of the Clean Development Mechanism 238

Part B: China’s Energy Prospects 241
Political, Economic and Demographic Context 243
Highlights 243
The Political Context 244
The Economic Context 245
　Economic Structure and Growth 245
　Main Drivers of Growth 248
　Economic Challenges and Prospects 251
Demographic Trends and Prospects 255
　Urbanisation 257
　Ageing 258
Overview of the Energy Sector 261
Highlights 261
China’s Energy Sector 262
Energy Administration and Policy 268
Energy Policy Challenges and Uncertainties 271
　Security of Energy Supply 272
　Environmental Issues 273
　Energy Efficiency 275
　Market Reforms 278
　Access to Modern Energy 281
Reference Scenario Demand Projections 283
Highlights 283
Key Assumptions 284
Primary Energy Demand 286
Final Energy Consumption 289
　Industry 291
　Transport 296
　Residential 304
　Other Sectors 309
Environmental Implications 310
　Local Air Pollution 310
　Energy-Related CO2 Emissions 313
Reference Scenario Supply Projections 317
Highlights 317
Oil Supply 318
　Oil Resources and Reserves 318
　Oil Production 320
　Oil Refining 323
　Oil Trade 325
China’s Oil Security Policies 326
Natural Gas Supply 328
　Gas Resources and Reserves 328
　Gas Production 330
　Gas Imports 332
Coal Supply 334
　Coal Resources and Reserves 334
　Coal Production 336
　Coal Transport 339
　Coal Pricing 340
　Coal Trade 342
Electricity Supply 343
　Overview of the Power Sector 343
　Outlook 344
　Capacity Requirements 349
　Electricity Pricing 350
　Power Generation Economics 352
Renewables 354
　Policy Framework 356
Investment 358
Alternative Policy Scenario Projections 361
Highlights 361
Background and Assumptions 362
Key Results 363
　Energy Demand 363
　Implications for Energy Markets and Supply Security 366
　Environmental Implications 368
Results by Sector 372
　Power Generation 372
　Industry 374
　Transport 378
　Residential 380
Cost-Effectiveness of Policies 384
High Growth Scenario Projections 389
Highlights 389
Background and Assumptions 390
Energy Demand 391
Implications for Energy Markets and Supply Security 395
Implications for Investment 399
Environmental Implications 400
　Local Air Pollution 400
　Energy-Related CO2 Emissions 401
Focus on the Coastal Region 403
Highlights 403
Background and Assumptions 404
Energy Outlook 407
　Primary Energy Demand 407
　Energy Demand by Sector 411
　Power Generation 412
　Energy Supply 416
Energy-Related CO2 Emissions 418
Appendix: China Coastal Reference Scenario Projections 420

Part C: India’s Energy Prospects 423
Political, Economic and Demographic Context 425
Highlights 425
The Political Context 426
The Economic Context 427
　Economic Growth and Structure 427
　Drivers of Growth 431
　Economic Challenges 434
Demographic Trends 440
Overview of the Energy Sector 443
Highlights 443
India’s Energy Sector 444
Energy Administration and Policy 450
Energy Policy Challenges 458
　Price and Subsidy Reform 458
　Energy Efficiency 459
　Infrastructure Investment 460
　Energy Access 461
　Environment 461
Reference Scenario Demand Projections 463
Highlights 463
Key Assumptions 464
Primary Energy Demand 465
Final Energy Demand 466
Industry Sector 467
　Iron and Steel Industry 469
　Chemicals and Petrochemicals 470
　Other Industries 471
Transport Sector 472
　Road Transport 473
Residential Sector 476
Other Sectors 483
Energy-Related Emissions 484
　Pollutant Emissions 484
　CO2 Emissions 485
Reference Scenario Supply Projections 489
Highlights 489
Oil Supply 490
　Resources and Reserves 490
　Oil Production 491
　Oil Refining 493
　Oil Trade 495
Natural Gas Supply 497
　Resources and Reserves 497
　Production 500
　Gas Imports 501
Coal Supply 503
　Resources and Reserves 503
　Coal Production 504
　Coal Imports 509
Power Generation 510
　Overview of the Power Sector 510
　Power Generation Mix 511
　Power Generation Economics 517
Renewable Energy 518
Investment 520
　Oil and Gas 521
　Coal 521
　Electricity 521
　Focus on Investment Challenges in India’s Power Sector 522
Alternative Policy Scenario Projections 531
Highlights 531
Background and Assumptions 532
Key Results 533
　Energy Demand 533
　Implications for Energy Markets and Supply Security 535
　Environmental Implications 536
Results by Sector 540
　Power Generation 540
　Industry 545
　Transport 548
　Residential and Services 551
Cost-Effectiveness of Policies 554
High Growth Scenario Projections 559
Highlights 559
Background and Assumptions 560
Energy Demand 561
Implications for Energy Markets and Supply Security 565
　Coal 565
　Oil and Gas 566
　Electricity 568
　Energy Import Bills 568
Implications for Investment 568
Environmental Implications 569
Implications for Access to Energy 570
Implications for Policy 571
Focus on Energy Poverty 573
Highlights 573
Outlook for Clean Cooking Fuel and Electricity Access 574
Measuring Energy Poverty 576
Expanding Access to Electricity in India 580
Health and Energy Poverty 581
Subsidies on Kerosene and LPG, and the Poor 584
Energy Demand in Slums 585

ANNEXES 588
Annex A Tables for Reference and Alternative Policy Scenario Projections 591
Annex B Abbreviations, Definitions and Conversion Factors 633
Annex C Acronyms 643
Annex D References 647

List of Figures
Introduction
1. Share of China and India in Incremental Energy Demand, Imports and Energy-Related CO2 Emissions, 2000-2006 54
2. Assumed Ratio of Natural Gas and Implied Relation of Coal Prices to Oil Prices in the Reference Scenario 65
Part A: Global Energy Prospects: Impact of Developments in China and India
Chapter 1. Global Energy Trends
1.1 World Primary Energy Demand in the Reference Scenario 76
1.2 Increase in World Primary Energy Demand by Fuel in the Reference Scenario 77
1.3 Primary Energy Demand by Region in the Reference Scenario 78
1.4 Regional Shares in Incremental Primary Energy Demand by Fuel in the Reference Scenario, 2005-2030 78
1.5 Primary Energy Intensity in the Reference Scenario 79
1.6 Share of Transport in Primary Oil Demand by Region in the Reference Scenario 81
1.7 Net Oil Trade in the Reference Scenario 83
1.8 Incremental Primary Natural Gas Demand by Region in the Reference Scenario, 2005-2030 86
1.9 Net Imports of Natural Gas by Major Region in the Reference Scenario 88
1.10 World Coal Production by Type in the Reference Scenario 91
1.11 FOB Cash Costs and Prices of World Steam Coal from Major Exporters, 2005 91
1.12 Fuel Mix in Power Generation in the Reference Scenario 94
1.13 Cumulative Investment in Energy Infrastructure in the Reference Scenario by Fuel and Region, 2006-2030 96
1.14 Incremental World Primary Fossil-Energy Demand in the Alternative Policy Scenario, 2005-2030 99
1.15 Change in Primary Energy Intensity in the Reference and Alternative Policy Scenarios, 2005-2030 99
1.16 Oil Demand and Savings by Sector in the Alternative Policy Scenario 100
1.17 Increase in Net Oil Imports in the Reference and Alternative Policy Scenarios, 2006-2030 102
1.18 Coal Demand in the Reference and Alternative Policy Scenarios 104
1.19 Incremental Non-Fossil Energy Demand in the Reference and Alternative Policy Scenarios 105
1.20 Fuel Mix in World Power Generation in the Reference and Alternative Policy Scenarios 107
1.21 Change in World Primary Oil Demand by Region in 2030 in the High Growth Scenario Relative to the Reference Scenario 110
1.22 Incremental Oil Production by Region in 2030 in the High Growth Scenario Relative to the Reference Scenario 111
1.23 Change in Gas Imports in the High Growth Scenario Relative to the Reference Scenario 112
1.24 Change in Power Generation by Fuel in the High Growth Scenario Relative to the Reference Scenario 114
Chapter 2. Energy Trends in China and India
2.1 Shares of China and India in the Increase in World Primary Energy Demand by Fuel in the Reference Scenario, 2005-2030 118
2.2 Primary Oil Demand in China and India by Sector in the Reference Scenario 121
2.3 Fuel Mix in Power Generation in China and India in the Reference Scenario 122
2.4 Road Transport Fuel Consumption in China and India in the Reference Scenario 122
2.5 Net Oil Imports in China and India in the Reference Scenario 125
2.6 Coal Balance in China and India in the Reference Scenario 127
2.7 Cumulative Investment in Energy Supply in China and India by Fuel in the Reference Scenario, 2006-2030 129
2.8 Incremental Primary Fossil Fuel Demand in China and India in the Alternative Policy Scenario, 2005-2030 131
2.9 Primary Energy Demand in China and India in the Reference and High Growth Scenarios 134
Chapter 3. International Trade and the World Economy
3.1 Real Output in China, India, Other Asian and Newly Industrialised Economies 138
3.2 Share of Exports in GDP in Selected Countries, 2006 140
3.3 China’s and India’s Share in World Trade in Goods and Services Compared with Other Countries 141
3.4 Share of China, India and the United States in World Primary Commodity Consumption in 2005 142
3.5 Foreign and Overseas Direct Investment, 2005 145
3.6 International Prices of Major Commodities 147
3.7 Potential Economic Impact from High GDP Growth in China and India 149
3.8 Value of Worldwide Trade in Goods and Services 153
3.9 Share of Energy in World International Trade Value 154
3.10 Change in the Value of Imports in 2030 in the High Growth Scenario Compared with the Reference Scenario 154
3.11 Gross Domestic Product by Region 157
3.12 Regional Shares of World GDP at Market Exchange Rates 157
Chapter 4. The World’s Energy Security
4.1 Share of China and India in World Oil Demand 166
4.2 Net Oil Imports by Region and Scenario 167
4.3 Share of China and India in Total Inter-Regional Oil Trade 168
4.4 Oil Export Flows from the Middle East 170
4.5 Share of Natural Gas in Total Primary Energy Demand in China and India 171
4.6 Share of China and India in Total Inter-Regional Natural Gas Trade 172
4.7 Share of China and India in Natural Gas Exports by Source 173
4.8 Share of OPEC in World Oil Production 182
4.9 Average IEA Crude Oil Import Price in the Reference and High Growth Scenarios 184
4.10 Major World Oil Supply Disruptions 186
4.11 Cumulative Cost of Maintaining Oil Stocks to Ensure 45 Days of Net Imports in China and India, 2006-2030 189
Chapter 5. Global Environmental Repercussions
5.1 Energy-Related CO2 Emissions by Scenario 192
5.2 Incremental Energy-Related CO2 Emissions by Scenario, 2005-2030 193
5.3 Energy-Related CO2 Emissions by Fuel and Scenario 193
5.4 Average Annual Growth in World Energy-Related CO2 Emissions and Primary Energy Demand by Scenario 194
5.5 Share of Power Generation in World Energy-Related CO2 Emissions and in Primary Energy Demand, 1980-2030 194
5.6 Carbon Dioxide Intensity of Electricity Generation by Scenario 196
5.7 Incremental Energy-Related CO2 Emissions by Region and Scenario, 2005-2030 198
5.8 Energy-Related CO2 Emissions by Region, 1900-2005 201
5.9 Cumulative Energy-Related CO2 Emissions in Selected Countries/Regions in the Reference Scenario 201
5.10 Per-Capita Energy-Related CO2 Emissions and Population by Region in the Reference Scenario 203
5.11 Change in Carbon Intensity by Region and Scenario, 2005-2030 204
5.12 CO2 Emissions in the 450 Stabilisation Case 209
5.13 Electricity Generation by Type in the 450 Stabilisation Case 212
5.14 Fossil-Energy Generating Capacity in 2030 in the 450 Stabilisation Case Compared with the Reference and Alternative Policy Scenarios 212
5.15 Share of Cumulative Power-Generation Investment by Technology, 2006-2030 214
5.16 CO2 Capture, Transport and Storage Infrastructure 217
5.17 Thermal Efficiency of Coal-Fired Power Generation 221
5.18 OECD Coal-Fired Power Plant Investment Costs 223
Chapter 6. Energy Policy Ramifications
6.1 Public Energy Research and Development Funding in IEA Countries 236
Part B: China’s Energy Prospects
Chapter 7. Political, Economic and Demographic Context
7.1 Sectoral Share of GDP, 2004 245
7.2 Foreign Exchange Reserve Holdings at mid-2007 247
7.3 Source of Chinese Growth 249
7.4 Share of Chinese Investment in GDP by Source 250
7.5 Number of Poor 254
7.6 Distribution of Population and Major Cities in China 256
7.7 Ageing 259
Chapter 8. Overview of the Energy Sector
8.1 Total Primary Energy Demand in China, 2005 262
8.2 Per-Capita Primary Energy Demand in China, India and Other Selected Countries, 2005 266
8.3 China’s Energy Production and Consumption by Province, 2005 267
8.4 Organisation of Energy Policy Making and Administration in China 269
8.5 Number of “Top 1 000” Enterprises by Province 277
8.6 Energy Subsidies in China 279
Chapter 9. Reference Scenario Demand Projections
9.1 China’s Primary Energy Demand in the Reference Scenario 289
9.2 Total Final Consumption by Sector 290
9.3 China’s Industrial Energy Demand by Fuel 293
9.4 Global Ammonia Production by Feedstock, 2005 296
9.5 China’s Transport Energy Demand by Mode in the Reference Scenario 297
9.6 New Car Sales in China 300
9.7 International Comparison of Fleet Average Fuel Economy Standards as of July 2007 303
9.8 Residential Energy Consumption by Fuel, 2005 and 2030 305
9.9 Residential Floor Area per Capita and Household Size in China 307
9.10 Major Appliance Ownership in China, 1985-2030 308
9.11 SO2 Emissions by Sector in the Reference Scenario 311
9.12 China CDM CO2 Reduction by Project Type 316
9.13 Energy-Related CO2 Emissions by Fuel in the Reference Scenario 316
Chapter 10 . Reference Scenario Supply Projections
10.1 China’s Oil and Gas Resources and Supply Infrastructure 319
10.2 Oil Discoveries in China 319
10.3 Planned Refining Capacities in China 323
10.4 China’s Refining Distillation Capacity in the Reference Scenario 324
10.5 China’s Crude Oil Imports by Origin in 2006 325
10.6 China’s Oil Balance in the Reference Scenario 326
10.7 Natural Gas Discoveries in China since 1997 330
10.8 China’s Gas Balance in the Reference Scenario 332
10.9 China’s Natural Gas Imports in the Reference Scenario 334
10.10 China’s Coal Resources 335
10.11 China’s Coal Supply 336
10.12 Coal Prices in China Compared with International Markets 341
10.13 China’s Hard Coal Trade 343
10.14 Electricity Generation in China, 2005-2030 345
10.15 China’s Generating Capacity Additions in the Reference Scenario, 2006-2030 349
10.16 End-Use Prices by Region and Province, 2006 352
10.17 Plant Generating Costs in China 353
10.18 China’s Energy Investments in the Reference Scenario, 2006-2030 358
Chapter 11. Alternative Policy Scenario Projections
11.1 China’s Primary Energy Demand in the Alternative Policy Scenario and Savings Relative to the Reference Scenario 365
11.2 Savings in China’s Primary Coal Demand in the Alternative Policy Scenario Relative to the Reference Scenario, 2030 365
11.3 China’s Net Energy Imports in the Reference and Alternative Policy Scenarios, 2030 368
11.4 China’s Local Pollution Trends in the Reference and Alternative Policy Scenarios 369
11.5 China’s CO2 Emissions in the Alternative Policy Scenario Compared with the Reference Scenario 370
11.6 Changes in China’s Electricity Generation in the Alternative Policy Scenario and Savings Relative to the Reference Scenario, 2030 373
11.7 Industrial Energy Savings in China by Fuel and Industrial Sub-Sector in 2030 in the Alternative Policy Scenario Relative to the Reference Scenario 377
11.8 Savings in China’s Transport Oil Demand in the Alternative Policy Scenario Relative to the Reference Scenario 381
11.9 China’s Air Conditioner and Refrigerator Electricity Savings in the Alternative Policy Scenario 384
11.10 Payback Period of Selected Measures in China in the Alternative Policy Scenario 385
11.11 Cumulative Import Bill in the Reference and Alternative Policy Scenarios, 2007-2030 388
11.12 Change in Energy Investment in the Alternative Policy Scenario Compared with the Reference Scenario, 2006-2030 388
Chapter 12. High Growth Scenario Projections
12.1 Incremental Primary Energy Demand by Fuel in China in the Reference and High Growth Scenarios, 2005-2030 392
12.2 Incremental Final Energy Demand by Sector in China in the Reference and High Growth Scenarios, 2005-2030 393
12.3 Vehicle Stock in the Reference and High Growth Scenarios, Compared with Selected Countries 394
12.4 China’s Net Coal Imports in the Reference and High Growth Scenarios 395
12.5 China’s Oil Demand, Production and Net Imports in the Reference and High Growth Scenarios 397
12.6 China’s Cumulative Oil and Gas Import Bill in the Reference and High Growth Scenarios, 2006-2030 398
12.7 Cumulative Energy Supply Investment in China in the Reference and High Growth Scenarios, 2006-2030 399
12.8 China’s CO2 Emissions in the Reference and High Growth Scenarios 401
Chapter 13. Focus on the Coastal Region
13.1 Provinces and Regions of China 405
13.2 Share of the Coastal Region in China’s Economy and Energy Demand, 2005 408
13.3 Provincial Energy Intensity Targets, 2005-2010 410
13.4 Energy Intensity Reduction Target and Outcome by Province in China’s Coastal Region, 2005-2006 411
13.5 Contribution of the Coastal Region to China’s Incremental Final Energy Demand by Fuel in the Reference Scenario, 2005-2030 412
13.6 Power Generating Capacity in the Coastal Region 413
13.7 Car Ownership and GDP per Capita in Selected Provinces in China, 1994-2005 415
13.8 Share of the Population in China’s Coastal Provinces with Access to Natural Gas and Planned LNG 416
13.9 Power Generation Costs by Fuel and Distance, 2005 417
13.10 CO2 Emissions per Capita, 2005-2030 419
Part C: India’s Energy Prospects
Chapter 14. Political, Economic and Demographic Context
14.1 GDP per Capita by State 429
14.2 Economic Structure and Employment 430
14.3 Labour Productivity in Selected Countries Relative to the United States 431
14.4 Sources of Output Growth in India 432
14.5 Share of Fuel in Value of India’s Imports and Exports 435
14.6 Share of Gross Capital Formation in GDP in China, India and Japan 439
14.7 Percentage of Population Urbanised in India Compared to 2005 Urbanisation Level in Selected Countries 441
Chapter 15. Overview of the Energy Sector
15.1 India’s Fossil Fuel Production and Imports, 2005 446
15.2 Energy Policy Administration in India’s Energy Sector 451
Chapter 16. Reference Scenario Demand Projections
16.1 Primary Energy Demand in Selected Countries in the Reference Scenario 466
16.2 Sectoral Shares in Final Energy Demand in India in the Reference Scenario 467
16.3 Industrial Energy Demand by Fuel in India in the Reference Scenario 468
16.4 India’s Transport Energy Demand by Mode in the Reference Scenario 473
16.5 India’s Vehicle Stock in the Reference Scenario 474
16.6 Residential Fuel Mix in India in the Reference Scenario 477
16.7 Fuelwood and LPG Use for Cooking in India by Income Class, 2005 480
16.8 Fuel Shares in Household Energy Consumption for Cooking in India by Area in the Reference Scenario 481
16.9 Appliance Ownership in India Compared with the OECD, 2004 482
16.10 Prevalence of Personal Computers 483
16.11 Per-Capita Energy-Related CO2 Emissions in India, Compared with Developing Countries and the OECD in the Reference Scenario 486
16.12 Increase in India’s CO2 Emissions by Sector in the Reference Scenario 487
Chapter 17. Reference Scenario Supply Projections
17.1 Oil Discoveries in India since 1997 491
17.2 Distillation Capacity in India 494
17.3 Crude Oil Imports by Origin, Fiscal Year 2004/05 495
17.4 India’s Oil Balance in the Reference Scenario 496
17.5 Main Oil and Gas Infrastructure in India 498
17.6 Natural Gas Discoveries in India since 1997 499
17.7 India’s Natural Gas Balance in the Reference Scenario 502
17.8 Major Coal Fields and Mining Centres in India 505
17.9 Coal-Mining Productivity in Australia, China, India and the United States 508
17.10 India’s Coal Production and Imports in the Reference Scenario, 1990.2030 510
17.11 Changes in India’s Electricity Generation Mix in the Reference Scenario 511
17.12 India’s Capacity Additions by Fuel 517
17.13 Electricity Generating Costs in India 518
17.14 India’s Investment in Energy Infrastructure, 2006-2030 520
17.15 India’s Power Generation Capacity Increases 523
17.16 Comparison of Returns on Investment, India and OECD 524
17.17 Electricity Losses by State 526
17.18 Private Investment in India’s Electricity Sector, 1991-2005 527
Chapter 18. Alternative Policy Scenario Projections
18.1 India’s Energy Demand in the Reference and Alternative Policy Scenarios 534
18.2 India’s Fossil Fuel Imports in the Reference and Alternative Policy Scenarios in 2030 536
18.3 Local Air Pollutant Emissions in India in the Reference and Alternative Policy Scenarios 537
18.4 India’s CO2 Emissions in the Alternative Policy Scenario Compared with the Reference Scenario 538
18.5 CO2 Intensity of India’s Electricity Generation in the Reference and Alternative Policy Scenarios 538
18.6 India’s Power Generation Fuel Mix in the Reference and the Alternative Policy Scenarios 541
18.7 Average Coal-Fired Power Plant Efficiency in India Compared with the OECD in the Alternative Policy Scenario 543
18.8 India’s Energy Savings in Industry and Shares of Savings by Sub-Sector in 2030 in the Alternative Policy Scenario 547
18.9 Road Transport Energy Use in India in the Reference and Alternative Policy Scenarios 550
18.10 Reduction in Final Energy Consumption in the Residential and Services Sectors in the Alternative Policy Scenario by Fuel, 2005-2030 554
18.11 Change in Investment in the Alternative Policy Scenario, 2006-2030 555
18.12 Annual Energy-Related Expenditure per Household 555
18.13 Payback Periods for Various Household Appliances and Lighting 556
18.14 Payback Period for Electrical Pumps in Agriculture 556
Chapter 19. High Growth Scenario Projections
19.1 India's Energy Demand in the Reference and High Growth Scenarios 562
19.2 India’s Final Energy Demand by Sector in the Reference and High Growth Scenarios 563
19.3 India’s Vehicle Ownership and Stock in the Reference and High Growth Scenarios Compared with Selected Countries 564
19.4 India’s Coal Supply in the Reference and High Growth Scenarios 565
19.5 Oil and Gas Net Imports in the Reference and High Growth Scenarios 567
19.6 Cumulative Investment in India’s Energy-Supply Infrastructure in the Reference and High Growth Scenarios, 2006-2030 569
19.7 Energy-Related CO2 Emissions per Capita in the Reference and High Growth Scenarios Compared with Selected Countries 570
19.8 Change in India’s Residential Energy Demand in the High Growth Scenario Relative to the Reference Scenario in 2030 571
Chapter 20. Focus on Energy Poverty
20.1 Electricity Access and Reliance on Biomass in India 577
20.2 Annual Average Premature Deaths from Indoor Air Pollution 582

List of Tables
Introduction
1. World Population Growth 60
2. World Real GDP Growth in the Reference Scenario 62
3. Fossil-Fuel Price Assumptions in the Reference Scenario 64
Part A: Global Energy Prospects: Impact of Developments in India and China
Chapter 1. Global Energy Trends
1.1 World Primary Energy Demand in the Reference Scenario 74
1.2 World Primary Oil Demand in the Reference Scenario 80
1.3 World Oil Production in the Reference Scenario 82
1.4 World Primary Natural Gas Demand in the Reference Scenario 85
1.5 World Primary Natural Gas Production in the Reference Scenario 87
1.6 World Primary Coal Demand in the Reference Scenario 89
1.7 World Coal Production in the Reference Scenario 90
1.8 World Electricity Demand in the Reference Scenario 93
1.9 Cumulative Investment in Energy-Supply Infrastructure in the Reference Scenario, 2006-2030 95
1.10 World Primary Energy Demand in the Alternative Policy Scenario 97
1.11 Oil Production in the Alternative Policy Scenario 101
1.12 World Primary Natural Gas Demand in the Alternative Policy Scenario 102
1.13 Change in Cumulative Investment in Energy-Supply Infrastructure in the Alternative Policy Scenario, 2006-2030 107
1.14 World Primary Energy Demand by Region in the High Growth Scenario 109
1.15 World Primary Energy Demand by Fuel in the High Growth Scenario 109
1.16 Net Oil Imports by Major Importing Region in the High Growth Scenario 111
1.17 Net Inter-Regional Hard Coal Trade in Selected Regions in the High Growth Scenario 113
1.18 Change in Cumulative Investment in Energy-Supply Infrastructure in the High Growth Scenario, 2006-2030 114
Chapter 2. Energy Trends in China and India
2.1 Primary Energy Demand in China and India in the Reference Scenario 119
2.2 Sectoral Shares in Final Energy Consumption in China and India in the Reference Scenario 123
2.3 Oil Production in China and India in the Reference Scenario 125
2.4 Primary Energy Demand in China and India in the Alternative Policy Scenario 132
Chapter 3. International Trade and the World Economy
3.1 Share of China, India and the United States in World Trade in Goods and Services 141
3.2 Fossil-Fuel Prices in the High Growth Scenario 152
3.3 World Real GDP Growth in the High Growth Scenario 156
Chapter 4. The World’s Energy Security
4.1 Increase in World Primary Oil Demand by Region and Scenario, 2006-2030 166
4.2 Oil Net Imports in China and India 168
4.3 Net Natural Gas Imports in China and India 172
4.4 Natural Gas Imports into China and India by Source 173
4.5 Net Hard Coal Trade in China and India 174
4.6 Main Policy Responses in China and India to Rising Energy Insecurity 176
4.7 Volume of Oil Stocks to Ensure 45 Days of Net Imports in China and India 189
Chapter 5. Global Environmental Repercussions
5.1 Energy-Related CO2 Emissions by Region and Scenario 199
5.2 Top Five Countries for Energy-Related CO2 Emissions in the Reference Scenario 200
5.3 Per-Capita Energy-Related CO2 Emissions by Region and Scenario 202
5.4 CO2 Concentrations and Emissions 206
5.5 World Energy Demand in the 450 Stabilisation Case 209
5.6 Renewables-Based Electricity Generation 213
5.7 Share of Coal in CO2 Emissions in the Reference Scenario 216
Chapter 6. Energy Policy Ramifications
6.1 Status of CDM Projects in China and India, August 2007 240
Part B: China’s Energy Prospects
Chapter 7. Political, Economic and Demographic Context
7.1 China’s Importance in the World Economy 246
7.2 Populations of the Top 20 Urban Agglomerations in 2005 257
Chapter 8. Overview of the Energy Sector
8.1 Key Energy Indicators for China 263
8.2 Selected Targets for Improvements in Energy Efficiency in the 11th Five-Year Plan for Energy 276
Chapter 9. Reference Scenario Demand Projections
9.1 Key Assumptions for China’s Energy Projections in the Reference Scenario 285
9.2 Energy Intensity in Selected Power-Generation Technologies and End-Use Sectors in the Reference Scenario 286
9.3 China’s Primary Energy Demand in the Reference Scenario 287
9.4 Industrial Energy Demand in the Reference Scenario 292
9.5 Transport Energy Demand in the Reference Scenario 297
9.6 Evolution of Key Indicators for Transport in China 299
9.7 Vehicle Ownership by Province in China, 2005 302
9.8 Emissions of Major Pollutants in the Reference Scenario 313
9.9 China’s Energy-Related CO2 Emission Indicators in the Reference Scenario 313
9.10 Energy-Related CO2 Emissions by Sector in the Reference Scenario 314
Chapter 10. Reference Scenario Supply Projections
10.1 China’s Oil Reserves as of End-2005 318
10.2 China’s Oil Production in the Reference Scenario 321
10.3 Chinese Oil Companies’ Foreign Equity Oil Production, 2004 328
10.4 China’s Natural Gas Reserves as of End-2005 329
10.5 China’s Natural Gas Production in the Reference Scenario 331
10.6 LNG Regasification Terminals in China 333
10.7 China’s Coal Production by Type and Region 337
10.8 Coal-Based Power-Generation Technology in China 345
Chapter 11. Alternative Policy Scenario Projections
11.1 China’s Primary Energy Demand in the Alternative Policy Scenario 364
11.2 Key Policy Assumptions in China’s Power Sector in the Alternative Policy Scenario 372
11.3 China’s Renewable Electricity Capacity Targets 374
11.4 Key Policy Assumptions in China’s Industrial Sector in the Alternative Policy Scenario 375
11.5 China’s Industrial Energy Consumption and Related CO2 Emissions in the Alternative Policy Scenario 377
11.6 Key Policy Assumptions in China’s Transport Sector in the Alternative Policy Scenario 379
11.7 China’s Transport Energy Consumption and Related CO2 Emissions in the Alternative Policy Scenario 380
11.8 Policy Assumptions in China’s Residential Sector in the Alternative Policy Scenario 382
Chapter 12. High Growth Scenario Projections
12.1 China’s Energy Demand in the High Growth Scenario 392
12.2 Incremental Oil Production from the Deployment of Enhanced Oil Recovery in the High Growth Scenario 397
Chapter 13. Focus on the Coastal Region
13.1 Economic Indicators by Province in China, 2005 406
13.2 Key Macroeconomic and Population Assumptions for China’s Coastal Region 407
13.3 Primary Energy Demand in China’s Coastal Region in the Reference Scenario 409
13.4 Electricity Generation Fuel Mix in China’s Coastal Region 413
Part C: India’s Energy Prospects
Chapter 14. Political, Economic and Demographic Context
14.1 Demographic Indicators 440
Chapter 15. Overview of the Energy Sector
15.1 Key Energy Indicators for India 444
15.2 Private Participation in India’s Energy Sector, 2005 454
15.3 India’s Integrated Energy Policy: Priority Recommendations of the Expert Committee 456
Chapter 16. Reference Scenario Demand Projections
16.1 GDP and Population Growth Rates in India in the Reference Scenario 464
16.2 Indian Primary Energy Demand in the Reference Scenario 465
16.3 Four-Wheel Vehicle Emission Standards in India 476
16.4 Urban and Rural Household Energy Consumption in India in the Reference Scenario 479
16.5 Local Air Pollutant Emissions in India in the Reference Scenario 485
Chapter 17. Reference Scenario Supply Projections
17.1 India’s Oil Reserves, End-2005 490
17.2 India’s Crude Oil Production, 2006 492
17.3 India’s Oil Production in the Reference Scenario 492
17.4 Natural Gas Reserves in India, End-2005 499
17.5 India’s Gas Production by Field in the Reference Scenario 500
17.6 Existing and Planned LNG Regasification Terminals in India 502
17.7 Coal Resources and Reserves in India 503
17.8 Coal Production in India by Company, 2005/06 506
17.9 Performance Ratings of the State Power Sector, Selected States 525
Chapter 18. Alternative Policy Scenario Projections
18.1 India’s Primary Energy Demand in the Alternative Policy Scenario 533
18.2 Key Policies in India’s Power-Generation Sector in the Alternative Policy Scenario 540
18.3 Key Policies in India’s Industry Sector in the Alternative Policy Scenario 546
18.4 India’s Industrial Energy Consumption and Savings in the Alternative Policy Scenario 546
18.5 Key Policies in India’s Transport Sector in the Alternative Policy Scenario 548
18.6 Key Policies in India’s Residential and Services Sectors in the Alternative Policy Scenario 552
18.7 Payback Periods for Lighting in the Services Sector and Motors in Industry 557
18.8 Cumulative Fossil-Fuel Import Bills in the Reference and Alternative Policy Scenarios 557
Chapter 19. High Growth Scenario Projections
19.1 Key Assumptions in the High Growth Scenario 561
19.2 India’s Energy Demand in the High Growth Scenario 562
19.3 Incremental Oil Production from the Deployment of Enhanced Oil Recovery in the High Growth Scenario 566
19.4 Cumulative Fossil Fuel Import Bills in the Reference and High Growth Scenarios 568
Chapter 20. Focus on Energy Poverty
20.1 Number of People in India without Access to Electricity and Relying on Biomass in the Reference and High Growth Scenarios 575
20.2 Energy Development Index 578
20.3 Costs of Electrifying Households in India 581
20.4 Cities with More than One Million Inhabitants and Share of Population Living in Slums 587

List of Boxes
Introduction
1. Modelling Improvements for WEO-2007 58
Part A: Global Energy Prospects: Impact of Developments in India and China
Chapter 1. Global Energy Trends
1.1 Major Energy Developments since WEO-2006 75
1.2 Renewable Energy in the Alternative Policy Scenario 106
Chapter 3. International Trade and the World Economy
3.1 Measuring and Comparing Gross Domestic Product 137
3.2 Modelling Economic and Energy Interlinkages: the WEM-ECO Model 150
Chapter 4. The World’s Energy Security
4.1 IEA Emergency Response Mechanisms 162
4.2 Gas Exporting Countries Forum 187
Chapter 5. Global Environmental Repercussions
5.1 Regional Air Quality 197
5.2 Which Countries Emit the Most CO2? 200
5.3 IPCC Fourth Assessment Report 205
5.4 Major CO2 Capture and Storage Projects 219
Chapter 6. Energy Policy Ramifications
6.1 Co-operative Activities Between the IEA and India and China 232
6.2 Bilateral Co-operation between IEA Members and China and India: Three Examples 234
6.3 IEA Implementing Agreements and Technology Network 237
Part B: China’s Energy Prospects
Chapter 7. Political, Economic and Demographic Context
7.1 China’s 11th Five-Year Plan 248
Chapter 8. Overview of the Energy Sector
8.1 China’s Energy Statistics 264
8.2 Energy Goals in China’s 11th Five-Year Plan 271
8.3 Coal-Based Alternative Fuels 293
8.4 Access to Electricity in China 281
Chapter 9. Reference Scenario Demand Projections
9.1 Recent Energy Trends in China 287
9.2 Prospects for Alternative Transport Fuels in China 299
9.3 China’s Car Market 300
9.4 Natural Gas Use in Towns and Cities 306
9.5 Household Use of Biomass and Coal 312
9.6 China and the Clean Development Mechanism 314
Chapter 10. Reference Scenario Supply Projections
10.1 Restructuring of China’s Oil Sector 322
10.2 China’s Emergency Oil Stocks 327
10.3 Coal Mining Safety in China 338
10.4 CO2 Capture and Storage in China 347
Chapter 11. Alternative Policy Scenario Projections
11.1 Impact of Climate Change on China 371
11.2 Cost-Effectiveness of Improving Industrial Motor System Efficiency in China 386
Chapter 12. High Growth Scenario Projections
12.1 Prospects for Enhanced Oil Recovery in China 396
Chapter 13. Focus on the Coastal Region
13.1 Provincial Energy Statistics and Modelling of the Coastal Region 405
Part C: India’s Energy Prospects
Chapter 14. Political, Economic and Demographic Context
14.1 India’s Five-Year Plans 428
14.2 Special Economic Zones in India 438
Chapter 15. Overview of the Energy Sector
15.1 India’s Energy Statistics 447
15.2 India’s New Exploration Licensing Policy 453
15.3 Public-Private Partnerships 461
Chapter 16. Reference Scenario Demand Projections
16.1 Feedstock for India’s Fertilizer Industry 470
16.2 Recent Slow Growth in Transport Fuel Demand 472
16.3 Upside Potential of Transport Oil Demand in India 475
16.4 Rural and Urban Household Energy Demand Projections 477
16.5 Kerosene Use in Rural Areas of India 478
16.6 Energy and Water Use in the Agricultural Sector 484
Chapter 17. Reference Scenario Supply Projections
17.1 India’s Emergency Oil Stocks 496
17.2 Coal Mining Productivity 507
17.3 Coal-Fired Power Plant Technology in India 512
17.4 CO2 Capture and Storage 514
17.5 India’s Nuclear Power Generation Programme 515
Chapter 18. Alternative Policy Scenario Projections
18.1 The Impacts of Climate Change in India 539
18.2 Performance of India’s Coal-Fired Power Plants 542
18.3 Energy Savings in Cement Production 547
18.4 Delhi Transport Solutions 551
Chapter 19. High Growth Scenario Projections
19.1 The Vehicle Stock in the High Growth Scenario 564
Chapter 20. Focus on Energy Poverty
20.1 Energy Efficiency of Cooking Fuels and Technologies in India 575
20.2 Energy Poverty and Gender 583
20.3 Deepam LPG Scheme in Andhra Pradesh 585

List of Spotlights
Part A: Global Energy Prospects: Impact of Developments in India and China
Chapter 1. Global Energy Trends
What is Stopping Governments from Implementing New Policies? 98
Chapter 2. Energy Trends in India and China
Are China and India Following the Same Energy Development Path? 124
Chapter 3. International Trade and the World Economy
Which Countries Gain Most from Economic Growth in China and India? 147
Chapter 4. The World’s Energy Security
Do China’s and India’s Equity Oil Acquisitions Improve Energy Security? 179
Chapter 5. Global Environmental Repercussions
Can China and India Ever Mirror Western Lifestyles? 215
Part B: China’s Energy Prospects
Chapter 7. Political, Economic and Demographic Context
Will Government Efforts to Adjust China’s Economic Structure Work? 253
Chapter 8. Overview of the Energy Sector
How Big are China’s Energy Subsidies? 280
Chapter 9. Reference Scenario Demand Projections
How Much of China’s Energy Use Goes to Making Export Goods? 290
Chapter 11. Alternative Policy Scenario Projections
How Much Would More Coal-to-Liquids Increase China’s CO2 Emissions? 367
Part C: India’s Energy Prospects
Chapter 14. Political, Economic and Demographic Context
Will Economic Growth Solve India’s Problem of Rural Poverty? 433
Chapter 15. Overview of the Energy Sector
Why Does the Government Need to Reform Gas Prices? 448

World Energy Outlook Series World Energy Outlook 1993 World Energy Outlook 1994 World Energy Outlook 1995 World Energy Outlook 1996 World Energy Outlook 1998 World Energy Outlook: 1999 Insights 　Looking at Energy Subsidies: Getting the Prices Right World Energy Outlook 2000 World Energy Outlook: 2001 Insights 　Assessing Today’s Supplies to Fuel Tomorrow’s Growth World Energy Outlook 2002 World Energy Investment Outlook: 2003 Insights World Energy Outlook 2004 World Energy Outlook 2005 　Middle East and North Africa Insights World Energy Outlook 2006 World Energy Outlook 2007 　China and India Insights World Energy Outlook 2008 (forthcoming) More information available at www.worldenergyoutlook.org

EXECUTIVE SUMMARY

China and India are the emerging giants of the world economy and international energy markets. Energy developments in China and India are transforming the global energy system by dint of their sheer size and their growing weight in international fossil-fuel trade. Similarly, both countries are increasingly exposed to changes in world energy markets. The staggering pace of Chinese and Indian economic growth in the past few years, outstripping that of all other major countries, has pushed up sharply their energy needs, a growing share of which has to be imported. The momentum of economic development looks set to keep their energy demand growing strongly. As they become richer, the citizens of China and India are using more energy to run their offices and factories, and buying more electrical appliances and cars. These developments are contributing to a big improvement in their quality of life, a legitimate aspiration that needs to be accommodated and supported by the rest of the world.
The consequences for China, India, the OECD and the rest of the world of unfettered growth in global energy demand are, however, alarming. If governments around the world stick with current policies . the underlying premise of our Reference Scenario . the world’s energy needs would be well over 50% higher in 2030 than today. China and India together account for 45% of the increase in demand in this scenario. Globally, fossil fuels continue to dominate the fuel mix. These trends lead to continued growth in energyrelated emissions of arbon-dioxide (CO2) and to increased reliance of consuming countries on imports of oil and gas . much of them from the Middle East and Russia. Both developments would heighten concerns about climate change and energy security.
The challenge for all countries is to put in motion a transition to a more secure, lower-carbon energy system, without undermining economic and social development. Nowhere will this challenge be tougher, or of greater importance to the rest of the world, than in China and India. Vigorous, immediate and collective policy action by all governments is essential to move the world onto a more sustainable energy path. There has so far been more talk than action in most countries. Were all the policies that governments around the world are considering today to be implemented, as we assume in an Alternative Policy Scenario, the world’s energy demand and related emissions would be reduced substantially. Measures to improve energy efficiency stand out as the cheapest and fastest way to curb demand and emissions growth in
the near term. But even in this scenario, CO2 emissions are still one-quarter above current levels in 2030. To achieve a much bigger reduction in emissions would require immediate policy action and technological transformation on an unprecedented scale.
Both the Reference and Alternative Policy Scenario projections are based on what some might consider conservative assumptions about economic growth in the two giants. They envisage a progressive and marked slow-down in the rate of growth of output over the projection period. In a High Growth Scenario, which assumes that China’s and India’s economies grow on average 1.5 percentage points per year faster than in the Reference Scenario (though more slowly than of late), energy demand is 21% higher in 2030 in China and India combined. The global increase in energy demand amounts to 6%, making it all the more urgent for governments around the world to implement
policies, such as those taken into account in the Alternative Policy Scenario, to curb the growth in fossil-energy demand and related emissions.

The World Faces a Fossil Energy Future to 2030
The world’s primary energy needs in the Reference Scenario are projected to grow by 55% between 2005 and 2030, at an average annual rate of 1.8% per year. Demand reaches 17.7 billion tonnes of oil equivalent, compared with 11.4 billion toe in 2005. Fossil fuels remain the dominant source of primary energy, accounting for 84% of the overall increase in demand between 2005 and 2030. Oil remains the single largest fuel, though its share in global emand falls from 35% to 32%. Oil demand reaches 116 million barrels per day in 2030 . 32 mb/d, or 37%, up on 2006. In line with the spectacular growth of the past few years, coal sees the biggest increase in demand in absolute terms, jumping by 73% between 2005 and 2030 and pushing its share of total energy demand up from 25% to 28%. Most of the increase in coal use arises in China and India. The share of natural gas increases more modestly, from 21% to 22%. Electricity use doubles, its share of final energy consumption rising from 17% to 22%. Some $22 trillion of investment in supply infrastructure is needed to meet projected global demand. Mobilising all this investment will be challenging.
Developing countries, whose economies and populations are growing fastest, contribute 74% of the increase in global primary energy use in this scenario. China and India alone account for 45% of this increase. OECD countries account for one-fifth and the transition economies the remaining 6%. In aggregate, developing countries make up 47% of the global energy market in 2015 and more than half in 2030, compared with only 41% today. The developing countries’ share of global demand expands for all primary energy sources, except non-hydro renewables. About half of the increase in global demand goes to power generation and one-fifth to meeting transport needs . mostly in the form of petroleum-based fuels.
World oil resources are judged to be sufficient to meet the projected growth in demand to 2030, with output becoming more concentrated in OPEC countries - on the assumption that the necessary investment is forthcoming. Their collective output of conventional crude oil, natural gas liquids and non-conventional oil (mainly gas-to-liquids) is projected to climb from 36 mb/d in 2006 to 46 mb/d in 2015 and 61 mb/d in 2030 in the Reference Scenario. As a result, OPEC’s share of world oil supply jumps from 42% now to 52% by the end of the projection period. Non-OPEC production rises only slowly to 2030, with most of the increase coming from nonconventional sources . mainly Canadian oil sands . as conventional output levels off at around 47 mb/d by the middle of the 2010s. These projections are based on the assumption that the average IEA crude oil import price falls back from recent highs of over $75 per barrel to around $60 (in year-2006 dollars)
by 2015 and then recovers slowly, reaching $62 (or $108 in nominal terms) by 2030. Although new oil-production capacity additions from greenfield projects are expected to increase over the next five years, it is very uncertain whether they will be sufficient to compensate for the decline in output at existing fields and keep pace with the projected increase in demand. A supply-side crunch in the period to 2015, involving an abrupt escalation in oil prices, cannot be ruled out.
The resurgence of coal, driven primarily by booming power-sector demand in China and India, is a marked departure from past WEOs. Higher oil and gas prices are making coal more competitive as a fuel for baseload generation. China and India, which already account for 45% of world coal use, drive over four-fifths of the increase to 2030 in the Reference Scenario. In the OECD, coal use grows only very slowly, with most of the increase coming from the United States. In all regions, the outlook for coal use depends largely on relative fuel prices, government policies on fuel diversification, climate change and air pollution, and developments in clean coal technology in power generation. The widespread deployment of more efficient power-generation technology is expected to cut the amount of coal needed to generate a kWh of electricity, but
boost the attraction of coal over other fuels, thereby leading to higher demand.
In the Alternative Policy Scenario, global primary energy demand grows by 1.3% per year over 2005-2030 - 0.5 percentage points less than in the Reference Scenario. Global oil demand is 14 mb/d lower in 2030 . equal to the entire current output of the United States, Canada and Mexico combined. Coal use falls most in absolute and percentage terms. Energy-related CO2 emissions stabilise in the 2020s and, in 2030, are 19% lower than in the Reference Scenario. In the High Growth Scenario, faster economic growth in China and India, absent any policy changes, boosts their energy demand. The stimulus to demand provided by stronger economic growth more than offsets the dampening effect of the higher international energy prices that accompany stronger demand. Worldwide, the increase in primary energy demand amounts to
6% in 2030, compared with the Reference Scenario. Demand is higher in some regions and lower in others.

China’s Share of World Energy Demand will Continue to Expand
That China’s energy needs will continue to grow to fuel its economic development is scarcely in doubt. However, the rate of increase and how those needs are met are far from certain, as they depend on just how quickly the economy expands and on the economic and energy-policy landscape worldwide. In the Reference Scenario, China’s primary energy demand is projected to more than double from 1 742 million toe in 2005 to 3 819 Mtoe in 2030 . an average annual rate of growth of 3.2%. China, with four times as many people, overtakes the United States to become the world’s largest energy consumer soon after 2010. In 2005, US demand was more than one-third larger. In the period
to 2015, China’s demand grows by 5.1% per year, driven mainly by a continuing boom in heavy industry. In the longer term, demand slows, as the
economy matures, the structure of output shifts towards less energy-intensive activities and more energy-efficient technologies are introduced. Oil demand for transport almost quadruples between 2005 and 2030, contributing more than two-thirds of the overall increase in Chinese oil demand. The vehicle fleet expands seven-fold, reaching almost 270 million. New vehicle sales in China exceed those of the United States by around 2015. Fuel economy regulations, adopted in 2006, nonetheless temper oil-demand growth. Rising incomes underpin strong growth in housing, the use of electric appliances and space heating and cooling. Increased fossil-fuel use pushes up emissions of CO2 and local air pollutants, especially in the early years of the projection period: SO2 emissions, for example, rise from 26 million tonnes in 2005 to 30 Mt by 2030.
China’s energy resources - especially coal - are extensive, but will not meet all the growth in its energy needs. More than 90% of Chinese coal resources are located in inland provinces, but the biggest increase in demand is expected to occur in the coastal region. This adds to the pressure on internal coal transport and makes imports into coastal provinces more competitive. China became a net coal importer in the first half of 2007. In the Reference Scenario, net imports reach 3% of its demand and 7% of global coal trade in 2030. Conventional oil production in China is set to peak at 3.9 mb/d early in the next decade and then start to decline. Consequently, China’s oil imports jump from 3.5 mb/d in 2006 to 13.1 mb/d in 2030, while the share of imports in demand rises from 50% to 80%. Natural gas imports also increase quickly, as production growth lags demand over the projection period. China needs to add more than 1 300 GW to its electricity-generating capacity, more than the total
current installed capacity in the United States. Coal remains the dominant fuel in power generation. Projected cumulative investment in China’s energy-supply infrastructure amounts to $3.7 trillion (in year-2006 dollars) over the period 2006-2030, three-quarters of which goes to the power sector.
China is already making major efforts to address the causes and consequences of burgeoning energy use, but even stronger measures will be needed. China is seeking ways to enhance its energy-policy, regulatory and institutional framework to meet current and future challenges. In the Alternative Policy Scenario, a set of policies the government is currently considering would cut China’s primary energy use in 2030 by about 15% relative to the Reference Scenario. Energy-related emissions of CO2 and local pollutants fall even more. Energy demand, nonetheless, increases by almost 90% between 2005 and 2030 in the Alternative Policy Scenario. Energyefficiency improvements along the entire energy chain and fuel switching account for 60% of the energy saved. For example, policies that lead to more fuel-efficient vehicles produce big savings in consumption of oil-based fuels. Structural change in the economy accounts for all the other energy savings. Demand for coal and oil is reduced substantially. In contrast, demand for other fuels - natural gas, nuclear and renewables- increases. In this scenario, the government’s goal of lowering energy intensity - the amount of energy consumed per unit of GDP - by 20% between 2005 and 2010 is achieved soon after. The majority of the measures analysed have very short payback periods. In addition, each dollar invested in more efficient electrical appliances saves $3.50 of investment on the supply side. And China’s efforts to improve the efficiency of vehicles and electrical appliances contribute to improved efficiency in the rest of the world, as the country is a net exporter of these products. Such policies would be all the more critical were China’s
economy to grow more quickly than assumed in the Reference and Alternative Policy Scenarios. China’s primary energy demand is 23% higher in
2030, and coal use alone 21% higher, in the High Growth Scenario than in the Reference Scenario.

India’s Energy Use is Similarly Poised for Rapid Growth
Rapid economic expansion will also continue to drive up India’s energy demand, boosting the country’s share of global energy consumption. In the
Reference Scenario, primary energy demand in India more than doubles by 2030, growing on average by 3.6% per year. Coal remains India’s most
important fuel, its use nearly tripling between 2005 and 2030. Power generation accounts for much of the increase in primary energy demand, given surging electricity demand in industry and in residential and commercial buildings, with most new generating capacity fuelled by coal. Among end-use sectors, transport energy demand sees the fastest rate of growth as the vehicle stock expands rapidly with rising economic activity and household incomes. Residential demand grows much more slowly, largely as a result of switching from traditional biomass, which is used very inefficiently, to modern fuels. The number of Indians relying on biomass for cooking and heating drops from 668 million in 2005 to around 470 million in 2030, while the share of the population with access to electricity rises from 62% to 96%.
Much of India’s incremental energy needs to 2030 will have to be imported. It is certain that India will continue to rely on imported coal for reasons of quality in the steel sector and for economic reasons at power plants located a long way from mines but close to ports. In the Reference Scenario, hard coal imports are projected to rise almost seven-fold, their share of total Indian coal demand rising from 12% in 2005 to 28% in 2030. Net oil imports also grow steadily, to 6 mb/d in 2030, as proven reserves of indigenous oil are small. Before 2025, India overtakes Japan to become the world’s third-largest net importer of oil, after the United States and China. Yet India’s importance as a major exporter of refined oil products will also grow, assuming the necessary investments are forthcoming. Although recent discoveries are expected to boost gas production, it is projected to peak between 2020 and 2030, and then fall back. A growing share of India’s gas needs is, therefore, met by imports, entirely in the form of liquefied natural gas. Power-generation capacity, most of it coal-fired, more than triples between 2005 and 2030. Gross capacity additions exceed 400 GW - equal to today’s combined capacity of Japan, Korea and Australia. To meet demand in the Reference Scenario, India needs to invest about $1.25 trillion in energy infrastructure - three-quarters in the power sector - in 2006-2030. Attracting electricity investment in a timely manner . a huge challenge for India - will be crucial for sustaining economic growth.
Stronger policies that the Indian government is now considering could yield large energy savings. In the Alternative Policy Scenario, India’s primary energy demand is 17% lower than in the Reference Scenario in 2030. Coal savings . mainly in power generation . are the greatest in both absolute and percentage terms, thanks to lower electricity-demand growth, higher powergeneration efficiency and fuel-switching in the power sector and in industry. As a result, coal imports in 2030 are little more than half their Reference Scenario level. Oil imports are 1.1 mb/d lower in 2030 than in the Reference Scenario, but oil-import dependence remains high at 90%. Lower fossil-fuel use results in a 27% reduction in CO2 emissions in 2030, most of which stems from energy-efficiency improvements on the demand and supply sides. Lower energy demand in the power and transport sectors also reduces emissions of local pollutants: SO2 emissions fall by 27% and NOx emissions by 23% in 2030, compared with the Reference Scenario. The picture is markedly different in the High Growth Scenario. Primary demand is 16% higher than in the Reference Scenario, with coal and oil accounting for most of the difference. Faster economic growth accelerates the alleviation of energy poverty, but results in much higher energy imports, local pollution and CO2 emissions.

The World Benefits Economically from Growth in China and India
Rapid economic development in China and India will inevitably push up global energy demand, but it will also bring major economic benefits to the rest of the world. Economic expansion in China and India is generating opportunities for other countries to export to them, while increasing other countries’ access to a wider range of competitively priced imported products and services. But growing exports from China and India also increase competitive pressures on other countries, leading to structural adjustments, particularly in countries with competing export industries. Rising commodity needs risk driving up international prices for commodities, including energy - especially if supply-side investment is constrained.
Commodity exporters would gain most from even faster economic expansion in China and India than assumed in the Reference Scenario. In the High Growth Scenario, the Middle East, Russia and other energyexporting countries see a significant net increase in their gross domestic product in 2030, compared with the Reference Scenario. GDP growth in other developing Asian countries, the United States, the European Union and OECD Pacific slows marginally, mainly because of higher commodity import costs. Assuming there are no policy changes in major countries, the average IEA crude oil import price rises to $87 per barrel (in year-2006 dollars) in 2030 . 40% higher than in the Reference Scenario. Overall, world GDP grows by 4.3% per year on average, compared with 3.6% in the Reference Scenario.
Structural changes in China’s and India’s economies will affect their trade with the rest of the world, including their need to import energy. Light industry and services are expected to play a more important role in driving economic development in both countries in the longer term. The economic policies of all countries will be crucial to sustaining the pace of global economic growth and redressing current imbalances. Rising protectionism could radically change the positive global impact of economic growth in China and India. By contrast, faster implementation of energy and environmental policies to save energy and reduce emissions worldwide, such as those included in the Alternative Policy Scenario, would boost significantly the net global benefits, by reducing pressures on international commodity markets and lowering fuelimport
bills for all. More rapid economic development worldwide may also pave the way for faster development and deployment of emerging, clean energy
technologies, such as second-generation biofuels and CO2 capture and storage, given the right policy environment.

But Threats to the World’s Energy Security Must be Tackled
Rising global energy demand poses a real and growing threat to the world’s energy security. Oil and gas demand and the reliance of all consuming countries on oil and gas imports increase in all three scenarios presented in this Outlook. In the Reference Scenario, China’s and India’s combined oil imports surge, from 5.4 mb/d in 2006 to 19.1 mb/d in 2030 . more than the combined imports of Japan and the United States today. Ensuring reliable and affordable supply will be a formidable challenge. Inter-regional oil and gas trade grows rapidly over the projection period, with a widening of the gap between indigenous output and demand in every consuming region. The volume of oil trade expands from 41 mb/d in 2006 to 51 mb/d in 2015 and 65 mb/d in 2030. The Middle East, the transition economies, Africa and Latin America export more oil. All other regions - including China and India - have to import more oil. As refining capacity for export increases, a growing share of trade in oil is expected to be in the form of refined products, notably from refineries in the Middle East and India.
The consuming countries’ growing reliance on oil and gas imports from a small number of producing countries threatens to exacerbate short-term energy-security risks. Increasing import dependence in any country does not necessarily mean less secure energy supplies, any more than self-sufficiency guarantees uninterrupted supply. Indeed, increased trade could bring mutual economic benefits to all concerned. Yet it could carry a risk of heightened shortterm energy insecurity for all consuming countries, as geographic supply diversity is reduced and reliance grows on vulnerable supply routes. Much of the additional oil imports are likely to come from the Middle East, the scene of most past supply disruptions, and will transit vulnerable maritime routes to both eastern and western markets. The potential impact on international oil prices of a supply interruption is also likely to increase: oil demand is becoming less sensitive to changes in price as the share of transport demand . which is price-inelastic, relative to other energy services . in overall oil consumption rises worldwide.
Longer-term risks to energy security are also set to grow. With stronger global energy demand, all regions would be faced with higher energy prices in the medium to long term in the absence of concomitant increases in supply-side investment or stronger policy action to curb demand growth in all countries. The increasing concentration of the world’s remaining oil reserves in a small group of countries . notably Middle Eastern members of OPEC and Russia . will increase their market dominance and may put at risk the required rate of investment in production capacity. OPEC’s global market share increases in all scenarios . most of all in the Reference and High Growth Scenarios. The greater the increase in the call on oil and gas from these regions, the more likely it will be that they will seek to extract a higher rent from their exports and to impose higher prices in the longer term by deferring investment and constraining production. Higher prices would be especially burdensome for developing countries still seeking to protect their consumers through subsidies.
China’s and India’s growing participation in international trade heightens the importance of their contribution to collective efforts to enhance global energy security. How China and India respond to the rising threats to their energy security will also affect the rest of the world. Both countries are already taking action. The more effective their policies are to avert or handle a supply emergency, the more other consuming countries . including most IEA members . stand to benefit, and vice-versa. In addition, many policies to enhance energy security also directly support policies to address the environmental damage from energy production and use. Diversification of the energy mix, of the sources of imported oil and gas, and of supply routes, together with better emergency preparedness, especially through the establishment of emergency stockpiles and co-ordinated response mechanisms, will be necessary to safeguard their energy security. China and India are increasingly aware that overseas acquisitions of oil assets will do little to help protect them from the effects of supply emergencies. China’s and India’s oil security - like that of all consuming countries - is increasingly dependent on a well-functioning international oil market.

Unchecked Growth in Fossil Fuel Use will Hasten Climate Change
Rising CO2 and other greenhouse-gas concentrations in the atmosphere, resulting largely from fossil-energy combustion, are contributing to higher global temperatures and to changes in climate. Growing fossil-fuel use will continue to drive up global energy-related CO2 emissions over the projection period. In the Reference Scenario, emissions jump by 57% between 2005 and 2030. The United States, China, Russia and India contribute two-thirds of this increase. China is by far the biggest contributor to incremental emissions, overtaking the United States as the world’s biggest emitter in 2007. India becomes the third-largest emitter by around 2015. However, China’s per-capita emissions in 2030 are only 40% of those of the United States and about twothirds those of the OECD as a whole in the Reference Scenario. In India, they remain far lower than those of the OECD, even though they grow faster than in almost any other region.
Urgent action is needed if greenhouse-gas concentrations are to be stabilised at a level that would prevent dangerous interference with the climate system. The Alternative Policy Scenario shows that measures currently being considered by governments around the world could lead to a stabilisation of global emissions in the mid-2020s and cut their level in 2030 by 19% relative to the Reference Scenario. OECD emissions peak and begin to decline after 2015. Yet global emissions would still be 27% higher than in 2005. Assuming continued emissions reductions after 2030, the Alternative Policy Scenario projections are consistent with stabilisation of long-term CO2-equivalent concentration in the atmosphere at about 550 parts per million. According to the best estimates of the Intergovernmental Panel on Climate Change, this concentration would correspond to an increase in average temperature of around 3°C above pre-industrial levels. In order to limit the average increase in global temperatures to a maximum of 2.4°C, the smallest increase in any of the IPCC scenarios, the concentration of greenhouse gases in the atmosphere would need to be stabilised at around 450 ppm. To achieve this, CO2 emissions would need to peak by 2015 at the latest and to fall between 50% and 85% below 2000 levels by 2050. We estimate that this would require energy-related CO2 emissions to be cut to around 23 Gt in 2030 . 19 Gt less than in the Reference Scenario and 11 Gt less than in the Alternative Policy Scenario. In a “450 Stabilisation Case”, which describes a notional pathway to achieving this outcome, global emissions peak in 2012 at around 30 Gt. Emissions savings come from improved efficiency in fossil-fuel use in industry, buildings and transport, switching to nuclear power and renewables, and the widespread deployment of CO2 capture and storage (CCS) in power generation and industry. Exceptionally quick and vigorous policy action by all countries, and unprecedented technological advances, entailing substantial costs, would be needed to make this case a reality.
Government action must focus on curbing the rapid growth in CO2 emissions from coal-fired power stations . the primary cause of the surge in global emissions in the last few years. Energy efficiency and conservation will need to play a central role in curbing soaring electricity demand and reducing inputs to generation. Nuclear power and renewables can also make a major contribution to lowering emissions. Clean coal technology, notably CCS, is one of the most promising routes for mitigating emissions in the longer term - especially in China, India and the United States, where coal use is growing fastest. CCS could reconcile continued coal burning with the need to cut emissions in the longer term - if the technology can be demonstrated on a large scale and if adequate incentives to invest are put in place.

Collective Action is Needed to Address Global Energy Challenges
The emergence of China and India as major players in global energy markets makes it all the more important that all countries take decisive and urgent action to curb runaway energy demand. The primary scarcity facing the planet is not of natural resources nor money, but time. Investment now being made in energy-supply infrastructure will lock in technology for decades, especially in power generation. The next ten years will be crucial, as the pace of expansion in energy-supply infrastructure is expected to be particularly rapid. China’s and India’s energy challenges are the world’s energy challenges, which call for collective responses. No major energy consumer can be confident of secure supply if supplies to others are at risk. And there can be no effective long-term solution to the threat of climate change unless all major energy consumers contribute. The adoption and full implementation of policies by IEA countries to address their energy-security and climate-change concerns are essential, but far from sufficient.
Many of the policies available to alleviate energy insecurity can also help to mitigate local pollution and climate change, and vice-versa. As the Alternative Policy Scenario demonstrates, in many cases, those policies bring economic benefits too, by lowering energy costs . a “triple-win” outcome. An integrated approach to policy formulation is, therefore, essential. The right mix of policies to address both energy-security and climate concerns depends on the balance of costs and benefits, which vary among countries. We do not have the luxury of ruling out any of the options for moving the global energy system onto a more sustainable path. The most cost-effective approach will involve
market-based instruments, including those that place an explicit financial value on CO2 emissions. Regulatory measures, such as standards and mandates, will also be needed, together with government support for long-term research, development and demonstration of new technologies. In China and India, the urgent need to tackle local air pollution will undoubtedly continue to provide the primary rationale for further efforts to stem the growth in greenhouse-gas
There are large potential gains to IEA countries, on the one hand, and to China and India, on the other, from enhanced policy co-operation. IEA countries have long recognised the advantages of co-operation with China and India, reflected in a steady broadening of the range of co-operative activities through the IEA and other multilateral and bilateral agreements. These activities need to be stepped up, with China and India establishing a deeper relationship with the Agency. IEA co-operation with China and India on enhancing oil-emergency preparedness and on developing cleaner and more efficient technologies, especially for coal, remains a priority. Collaboration between IEA countries and developing countries, including China and India, is already accelerating deployment of new technologies . a development that
will yield big dividends in the longer term. Mechanisms need to be enhanced to facilitate and encourage the financing of such technologies in China, India and other developing countries. Given the scale of the energy challenge facing the world, a substantial increase is called for in public and private funding for energy technology research, development and demonstration, which remains well below levels reached in the early 1980s. The financial burden of supporting research efforts will continue to fall largely on IEA countries.