IEA: Declining Investment Threatens Recovery

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"$1.1 trillion needs to be invested each year from now until 2030. . .just to meet energy demand on current growth trends"

Declining investment and a lack of progress on alternative energy development could lead to sharply higher oil prices in the decades ahead, the International Energy Agency (IEA) said in its 2009 World Energy Outlook.

The IEA for the past year has warned that the financial crisis was undermining investment in energy development. The advisor to 28 developed nations says the financial crisis is already responsible for a $90 billion drop in worldwide oil and natural gas investment, which is 19% below last year's levels.

"Falling energy investment will have far-reaching and, depending on how governments respond, potentially serious consequences for energy security, climate change and energy poverty," said the IEA.

The decline in energy supplies combined with a sharp rise in prices could "undermine the stability of the economic recovery," it added.

Investment in alternative energy has been particularly hard hit and the failure of governments to make progress on a comprehensive plan to cut global carbon emissions could exacerbate demand for traditional fuels.

Investment in renewable resources has fallen by about one-fifth this year, compared to 2008, the IEA said. Investment would have fallen as much as 30% had it not been propped up by government stimulus plans.

Officials from about 190 countries around the world are scheduled to meet in Copenhagen in December to discuss restrictions on carbon emissions in a deal that will succeed the Kyoto Protocol, which expires in 2012.

The IEA estimates that $1.1 trillion needs to be invested each year from now until 2030, for a total of $26 trillion, just to meet energy demand on current growth trends. If governments adopt plans to limit greenhouse gas concentrations in the atmosphere to 450 parts per million of carbon dioxide (CO2) equivalent, an additional $10.5 trillion needs to be invested over that time period.

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