The International Energy Agency is out with its World Energy Outlook 2008. I wrote last week about the report’s stark conclusions on oil. The IEA’s conclusions on climate are even starker: “Without a change in policy, the world is on a path for a rise in global temperature of up to 6 degrees C.”

The report does a good job explaining the practical difference between pursuing 450 ppm and 550 ppm. Yes, I’m aware that 350 ppm is a superior long-term target to minimize the risk of an ice-free planet and that the countless amplifying carbon cycle feedbacks mean 550 probably takes you to 1000 ppm and 6 degrees C anyway, but the IEA is not so up on all the latest, depressing science, and it tends to temper its climate desperation with some practical short- and medium-term energy and political realities.

Reductions in energy-related CO2 emissions in the climate-policy scenarios

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[Click to enlarge: yellow is efficiency, green is renewables and biofuels, red is nuclear, blue is coal with carbon capture and storage.]

Yes, their CO2 numbers are low. The Global Carbon Project says we probably hit 8.5 GtC (or 31 Gt CO2) back in 2007. In any case, even if you are one of the 550-ers left over from the 1990s, you still need to cap total global emissions at 2020 levels, which is a 9-wedge job starting then, before sharply cutting emissions post-2030, which means yet more wedges. For 450-ers, you need the full 12 to 14 wedges starting closer to 2015.

The IEA pulls no punches in its Executive Summary [PDF], spelling out the high CO2 price needed:

Cap-and-trade systems are assumed to play an important role in the OECD regions. The carbon price there reaches $90/tonne of CO2 in 2030 in the 550 Policy Scenario and $180/tonne in the 450 Policy Scenario.

I think we might not need $180 per metric ton in 2030, based on some questions I have about the IEA’s assumption, but that will be the subject of a later post. The price is certainly going to have to be high for 450 ppm — and far higher for those who want 350 ppm, if, in fact, 350 can even be done through a price mechanism.

The EIA lays out the sobering energy and policy challenge to get to 450 ppm:

The 450 Policy Scenario assumes much stronger and broader policy action from 2020 onwards, inducing quicker development and deployment of low-carbon technologies. Global energy-related CO2 emissions are assumed to follow broadly the same trajectory as in the 550 Policy Scenario until 2020, and then to fall more quickly. They peak in 2020 at 32.5 Gt and then decline to 25.7 Gt in 2030. This scenario requires emissions in OECD countries to be reduced by almost 40 percent in 2030, compared with 2006 levels. Other major economies are required to limit their emissions growth to 20 percent. Participation in an international cap-and-trade system is assumed to be broader than in the 550 Policy Scenario, covering all major emitting countries from 2020 onwards.

In short, China must be in the international cap from 2020 onwards for us to have a shot at 450 ppm.

Hydropower, biomass, wind and other renewables see faster deployment in power generation, accounting for 40 percent of total generation worldwide in 2030. An additional 190 GW of CCS is deployed in the last decade of the projection period compared with the 550 Policy Scenario.

I think the IEA overestimates what is possible with CCS and perhaps underestimates what is possible with solar baseload (see here), but the task is staggering either way:

The scale of the challenge in the 450 Policy Scenario is immense: the 2030 emissions level for the world as a whole in this scenario is less than the level of projected emissions for non-OECD countries alone in the Reference Scenario. In other words, the OECD countries alone cannot put the world onto the path to 450-ppm trajectory, even if they were to reduce their emissions to zero. Even leaving aside any debate about the political feasibility of the 450 Policy Scenario, it is uncertain whether the scale of the transformation envisaged is even technically achievable, as the scenario assumes broad deployment of technologies that have not yet been proven. The technology shift, if achievable, would certainly be unprecedented in scale and speed of deployment. Increased public and private spending on research and development in the near term would be essential to develop the advanced technologies needed to make the 450 Policy Scenario a reality.

No argument here. I believe we will have successfully commercialized most of the rest of the relevant technologies by 2015, in particular plug-in hybrids and baseload solar, although we should certainly push big bucks at advanced geothermal, scalable cellulosic biofuels (if that isn’t an oxymoron) and CCS to see if at least one of those options could be a major player after 2015. The Obama election makes this all far more likely given his commitment to major investment in energy technology development and deployment.

And yet, while the costs of mitigation are high in absolute terms, the investments are quite small in comparison to our overall wealth — a conclusion every major independent study has reached:

The profound shifts in energy demand and supply in the two climate-policy scenarios call for huge increases in spending on new capital stock, especially in power plants and in more energy-efficient equipment and appliances. The 550 Policy Scenario requires $4.1 trillion more investment in total between 2010 and 2030 than in the Reference Scenario — equal on average to 0.24 percent of annual world GDP. Most of this goes to deploying and improving existing technologies. Investment in power plants is $1.2 trillion higher, with close to three-quarters of this additional capital going to OECD countries.

Additional expenditures on the demand side are even bigger. Most of the extra spending is by individuals, who have to pay more for more efficient cars, appliances and buildings. This extra cost amounts to $17 per person per year on average throughout the world. But these investments are accompanied by large savings on energy bills. Improved energy efficiency lowers fossil-fuel consumption by a cumulative amount of 22 billion tonnes of oil equivalent over 2010-2030, yielding cumulative savings of over $7 trillion.

The additional up front expenditures on energy-related capital are, unsurprisingly, considerably larger in the 450 Policy Scenario. An additional $2.4 trillion needs to be invested in low- or zero-carbon power-generation capacity and an additional $2.7 trillion invested in more energy-efficient equipment, appliances and buildings than in the 550 Policy Scenario. Together, these costs equal on average 0.55 percent of annual world GDP. These expenditures are particularly great during the last decade of the projection period, when CO2 emissions fall most rapidly and the marginal cost of abatement options rises sharply. Galvanizing these investments would require clear price signals (including through a broad-based, efficient carbon market), appropriate fiscal incentives and well-targeted regulation. At $5.8 trillion, the cumulative savings on fuel bills are smaller than in the 550 Policy Scenario, because higher electricity prices offset the bigger energy savings.

Again, it is important to remember that the investment costs are not “losses” but rather a shift in investment, some of which generates net savings. The actual reductions in GDP, even in fairly standard macroeconomic models, are far closer to 0.1 percent of GDP, as the IPCC and many others have concluded (see here).

And the investments yield huge benefits that are typically unmonetized in most macroeconomic models, such as tremendous improvements in clean air and reductions in healthcare costs.

Finally, of course, the investments spare the next generation and perhaps the next 50 generations after them up to 6 degrees C warming, an ice free planet, widespread desertification, the death of the oceans along with most species — and the incalculable misery needlessly suffered by billions of people. That has got to be worth something, no?

[You can get the key points from the executive summary here and the fact sheets here.]

This post was created for ClimateProgress.org, a project of the Center for American Progress Action Fund.