IEA: Has the Titanic Sighted the Iceberg?

(MoneyWatch)  The release of the International Energy Agency's latest annual World Energy Outlook has prompted a flood of attention for its unusually strong recommendations. Among other things, the IEA began a push to supply energy to 1.5 billion of the world's poor and, as covered by my colleague Kirsten Korosec, said that natural gas discoveries in the United States will change gas markets worldwide.

Much of the coverage, though, was buried beneath another headline: the Guardian reported on Monday that internal whistleblowers accuse the IEA of inflating oil reserve estimates.

The IEA has long been criticized for being overly optimistic; according to the whistleblowers, that optimism was actually a desire to please the U.S. But for this year's Outlook, the agency either had wind of the bad news, though, or is ready to change its tune, because it paints a sometimes bleak picture of the future.

Under the IEA's revised expectations, oil prices could soar high enough to disrupt the world economy. Further, it says that continued use of fossil fuels could lead to catastrophe.Here's a chunk from the IEA's Fact Sheet:

The world's energy resources are adequate to meet the projected demand increase through to 2030 and well beyond... [but] the continuation of current trends would have dire consequences for climate change. They would also exacerbate ambient air quality concerns, thus causing serious public health and environmental effects, particularly in developing countries...

Without a change in policy, the world is on a path for a rise in global temperature of up to 6°C, with catastrophic consequences for our climate. To avoid the most severe weather and sea-level rise and limit the temperature increase to about 2°C, the greenhouse-gas concentration needs to be stabilised at around 450 ppm CO2-equivalent... The 450 Scenario is achievable ?€" but very challenging.

What about oil? Earlier this year, agency head Fatih Birol seemed to implied that peak oil production is a serious concern for the IEA. In the Outlook, the IEA focuses on natural gas, and says less about oil.

Yet its oil-optimism of prior years is clearly showing cracks. The IEA not only bemoans the fact that renewable energy investment fell 20 percent in 2009, but also called for $10.5 trillion dollars of investment in low-carbon technologies by 2030. The desire for new energy technology sounds like it's about more than just climate change -- could it also be about replacing oil?

Nothing of what the IEA is saying now is new; other organizations have raised warnings for years. But that's exactly the problem. The IEA, as the whistleblowers suggest, is often a barometer for the feelings of its member countries.

Both the IEA and the governments that fund it bear much in common with ocean liners: their size and inertia breed overconfidence and make turning around difficult. The new Outlook says that the necessary changes will be hard. In large part, that's because it has taken the IEA so long to recognize that we're on a collision course.