(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON, June 24 (Reuters) - Shale has killed climate policy. Now the International Energy Agency is trying to bring it back to life.
Following the shale revolution, policymakers can no longer count on peaking oil and gas supplies and soaring fuel prices to save the world from potentially catastrophic climate change.
As the peak-oil panic of 2008 recedes, it has become clear that there are more than enough fossil fuel reserves to cook the planet many times over.
"The world is drifting further and further from the track it needs to follow" if the rise in global temperatures is to be limited to no more than 2 degrees Celsius, the International Energy Agency (IEA) warned on June 10.
"Climate change has slipped down the policy agenda," the agency admitted in a special report on "Redrawing the energy-climate map" (link.reuters.com/byf29t).
The agency aims to push it back to the top by showing emissions can be reduced in the short term "at no net economic cost" using only technologies that have already proven successful in the field.
The IEA's report has been in preparation for many months, but it is best read as a response to a pair of bleak articles published last month by Martin Wolf, the influential chief economics commentator of the Financial Times.
"The world faces climate chaos," Wolf warned. "We will watch the rise in greenhouse gases until it is too late to do anything about it".
"Collectively, humanity has yawned and decided to let the dangers mount," he lamented. "The real and present dangers are too uncomfortable to confront."
The IEA report attempts to counter the sense of futility that has engulfed climate discussions by illustrating that it is not too late to do something and the costs can be kept to a tolerable level.
The report outlines four immediate policy measures that could keep the 2 degree target alive until 2020, when policymakers are due to reach a new international agreement on emissions, pushing through even deeper cuts.
These "four-for-two" policies include: stricter energy efficiency standards; limits on construction and use of sub-critical coal-fired power plants; action to minimise methane emissions from oil and gas production; and partially phasing out fossil fuel subsidies.
According to the agency, these together could keep the world on track to meet the 2 degree objective that governments around the world adopted in 2010.
Emissions would still peak at 34.9 billion tonnes of carbon dioxide equivalent (CO2e) a year in 2020, up from 33.3 billion tonnes in 2010, but they would be 3.1 billion tonnes (9 percent) lower than if these four policies are not implemented and they would then start falling.
Enforcing minimum energy performance standards (MEPS) for space and water heating in new buildings, as well as lighting systems and electrical appliances, accounts for half of the target reduction.
Efficiency measures could cut emissions by 1.5 billion tonnes per year (roughly the same as total emissions from Russia) by 2020, with 40 percent of that figure coming from China and another third from Europe and the United States.
Banning construction of new sub-critical coal-fired power plants, and limiting use of existing ones, by applying tough new standards on emissions or energy efficiency, could cut emissions another 640 million tonnes.
Stricter standards on venting and flaring methane from oil and gas wells, especially in Russia, the Middle East and Africa, could reduce fugitive methane emissions by the equivalent of 570 million tonnes of CO2.
Finally, partially phasing out fossil fuel subsidies, which currently cost more than $500 billion per year, could generate the remaining reductions, estimated at around 360 million tonnes.
Each of these policies would require large policy changes and capital investment. The high-level report tends to minimise the difficulty, cost and complexity of enacting them worldwide in favour of an optimistic assessment of the potential benefits.
But the real purpose is to provide a fillip to climate change policy and help build a consensus that the 2 degree target is still achievable and should not be ditched.
"It seems unlikely that national policymakers will implement actions that are challenging to their national economy given the economic situation ... Therefore, we set out to identify a set of pragmatic and achievable policy measures which, in net terms, do no harm to national economic growth," the IEA wrote.
Four-for-two policies would have a neutral impact on economic growth by 2020, according to the IEA, and beyond that would have a positive effect. Initial costs would be recovered through fuel savings. Fossil fuel prices would end up slightly lower, the agency claims.
"The value of economic activity in energy sub-sectors (comprising fossil fuel extraction and processing, transport fuel production and shipping) is slightly reduced," but this is more than offset by a big increase in investment in energy efficiency and clean technologies.
Implicity, the IEA has backed climate campaigners such as Bill McKibben's 350.org and the Carbon Tracker Initiative, which argue that large parts of the world's existing fossil fuel reserves must be considered "unburnable" and left in the ground.
Coal has emerged as a particular target while the agency has confirmed the role of natural gas as the fossil fuel of choice.
The report makes too many ambitious assumptions for its forecasts to be robust. It is very unlikely that the transformation of the energy system could be accomplished with as little cost and disruption as the report implies.
But if its real purpose is to inspire policymakers, it is a qualified success and likely to be the first of many such reports issued over the next year.
Writing in the Financial Times, Wolf warned: "most people today believe that a low-carbon economy would be one of universal privation." To give carbon curbs a chance of success, policymakers would have to sketch out a "politically sellable vision of a prosperous low-carbon economy."
"Redrawing the energy-climate map" is the IEA's attempt to do precisely that. (Editing by Anthony Barker)