JEREMY GRANTHAM: We're Headed For A Disaster Of Biblical Proportions

I have taken this from the Business Insider:

Legendary investor Jeremy Grantham of GMO has published a treatise on the root cause of exploding commodity prices.

He has also offered a startlingly depressing outlook for the future of humanity.

Grantham concludes that the world has undergone a permanent "paradigm shift" in which the number of people on planet Earth has finally and permanently outstripped the planet's ability to support us.

Specifically, Grantham says, the phenomenon of ever-more humans using a finite supply of natural resources cannot continue forever--and the prices of metals, hydrocarbons (oil), and food are now beginning to reflect that.

In other words, Grantham says, it is different this time.

Grantham believes that the trend of the last 100 years, in which the prices of almost all major commodities have steadily declined, is permanently over. And from here on in, humans will be competing more--and paying more--for ever-scarcer resources.

From an investment standpoint, this paradigm shift need not mean disaster: Grantham says the obvious play is to own "the stuff in the ground" (and the ground itself, as the huge boom in farmland prices illustrates). The less obvious but equally compelling play is to own companies and technologies that facilitate resource conservation.

From a societal standpoint, the news is far worse. Grantham believes that the planet can only sustainably support about 1.5 billion humans, versus the 7 billion on Earth right now (heading to 10-12 billion). For all of history except the last 200 years, the human population has been controlled via the limits of the food supply. Grantham thinks that, eventually, the same force will come into play again.

The hope of the optimists, of course, is that "science" will find a solution to this problem, the way it has for the past 150 years. But unless the world immediately wakes up to the severity of the problem--and makes fixing it a global priority--Grantham doesn't see that happening.

Graphs to summarize Grantham's argument are available here.

Jeremy Grantham is a British investor and Co-founder and Chief Investment Strategist of Grantham Mayo Van Otterloo (GMO), a Boston-based asset management firm.  Grantham is regarded as a highly knowledgeable investor in various stock, bond, and commodity markets, and is particularly noted for his prediction of various bubbles.

He has been a vocal critic of various governmental responses to the Global Financial Crisis. 

New Zealand's oil security. How dependent are we on oil imports?

By Denis Tagg

http://oilshockhorrorprobe.blogspot.com/

New Zealand imports 97% of its oil. Oil is the lifeblood of our economy. So a vital question must be -- how vulnerable is New Zealand to oil supply shocks? -- Whether from short term disruption, or due to an on-going and perhaps permanent decline in world oil exports?

You would think that discussion about this vital issue would be front and centre of political and economic debate, given the current high oil prices, unrest in the Middle East, and with the UK government developing and oil shock response plan.  Instead there is close to zero public discussion about New Zealand's oil security.

What are the key facts?

1. New Zealand imports 97% of its oil. About 37 million barrels is imported as crude oil each year and refined at the Marston Point refinery. The remaining 17 million barrels per ann is imported as already refined petroleum products. ( source -- New Zealand Energy Data Files 2010   -- for the 2009 calendar year.)

2. New Zealand’s oil fields produced 20 million barrels in 2009 but only 1 million barrels of this domestically produced oil (3% of our consumption) is refined in New Zealand. The remaining 19 million barrels is exported because of its high quality and therefore high value on international markets. Note : New Zealand's domestic oil production has started a steep decline so the oil production figure for 2011 will be substantially lower than it was in 2009. So where does this leave us in terms of oil import dependency? The blue line in the graph below is the official position government on oil dependency. This takes oil imports and deducts domestic oil production. On this basis the government rated New Zealand's oil import dependency at about 63% in 2009.

But should there be any disruption to oil imports could the Marsden Point refinery be re-engineered to accept New Zealand's domestic oil, and if so how quickly? 41% of New Zealand's oil consumer energy is diesel and 6% is aviation fuel. But according to the July 2010 report of the Parliamentary Commissioner for the Environment on Biofuels "New Zealand crude oils are generally too light and waxy to make good aviation and diesel fuel". If these limitations are correct then New Zealand's oil import dependency is closer to 97% -- as shown in the red line in the graph -- than the 63% official position. In the event of an oil supply shock, New Zealand’s almost 100% import dependency would remain unchanged for months, perhaps years, until the Marsden Point refinery could be transformed to accept New Zealand oil. The government has powers  to require New Zealand oil to be refined within New Zealand and prohibit its export in the Crown Minerals Act. Even then we would remain around 70% dependent on imported oil.

3. New Zealand's long supply chain is another vulnerability. Hale and Twomey prepared a report on oil security for the government in 2005. They pointed out..

“Whatever the level of New Zealand domestic production (current production has declined from historical levels), it is likely that NZRC would continue to source the majority of its feedstock from these international sources. Therefore the length of the supply chain will continue to be characterised by the time required to ship crude oil and feedstock from these regions.”

4. Unfriendly Sources.

Where does New Zealand’s oil import come from? Less than 20% of our crude oil imports come from "friendly" nations who might be sympathetic to New Zealand in an oil crisis -- Australia, Papua New Guinea, Korea, and Malaysia. The other 80% of oil suppliers are either politically unstable, run by despotic dictators, or are nation's decidedly unsympathetic to the West. Iran, Iraq, Saudi Arabia and other Middle East Nations supply 60% of our imports, and other contributors include Russia, Nigeria, and Indonesia.

5. Small is big. History tells us that a relatively small disruption to imports can cause chaos. The oil shocks of the 1970s reduced imports to New Zealand by about 7%-10% and lasted just a few months. Yet they plunged New Zealand into a deep recession and caused major disruption to our transport networks. -- carless days, lowered speed limits and "think big" energy projects.

6. What really matters is peak world net exports.  As an oil importer what is absolutely critical for New Zealand is how much oil is available for export from producers ie. net exports. Net exports are far more important to New Zealand then the level of world oil production per se. Why? Because net exports are the amount of oil left after deducting the internal consumption of oil producers. 
As Jeff Rubin points out, OPEC has an  "insatiable thirst for its own oil. With the price of gasoline less than bottled water, Saudi Arabia already burns 3 million barrels a day with internal demand claiming a third of its oil production. At the country’s current rate of growth in domestic oil consumption, Saudi Arabia would burn a staggering 8.3 million barrels a day of its own oil by 2028. That is almost its current level of production.”

Geoffrey Brown has studied world net export trends . He :-

1. calculated the rate of increase in domestic oil consumption of oil producers

2. calculated the rate at which China and India (Chindia) are taking an ever greater slice of world oil exports and

3. assumed a very modest decline in overall world oil production of 0.5% per year from 2005 to 2015.

His startling conclusion from these projections is that for every three barrels of oil non Chindai countries like New Zealand imported in 2005 they would have to make do with just two barrels in 2015.

Why the Kiwi "she'll be right" attitude?

The stark conclusion has to be drawn that New Zealand is almost totally dependent on imported oil, and that  we will become even more dependent as domestic production rapidly declines  Even if new oil fields were discovered off shore of New Zealand, it takes between 10 - 15 years to bring any such oil into production.

The kiwi "she'll be right" attitude pervades our response to our precarious oil security situation. Yet the reality is that we are a far worse position than other oil importers. The government commissioned Hale and Twomey Report sums it up like this -

"New Zealand has an unusual combination of supply vulnerabilities. It faces the same broad range of possible external supply disruptions as do all IEA members but these are exacerbated by such things as its current level of import dependency, remote geographical location at the furthest extent of the international supply chain and relative isolation from other countries from whom relief could be expected in some situations."

Violence in the United States? - CNN report

Michael Ruppert has been warning for some time about the breakout of violence in the United States; Gerald Celente and others have been warning of the same.

For those watching from afar and who think this is a little far-fetched and things aren't that bad, this item from CNN might make us think again perhaps.

Death By Debt - Chris Martenson

This article by Chris Martenson explains the connection between economic debt and resource depletion so well that I have reproduced it here.

For the second part you will have to go to his website and pay for it.

One of the conclusions that I try to coax, lead, and/or nudge people towards is acceptance of the fact that the economy can't be fixed.  By this I mean that the old regime of general economic stability and rising standards of living fueled by excessive credit are a thing of the past.  At least they are for the debt-encrusted developed nations over the short haul -- and, over the long haul, across the entire soon-to-be energy-starved globe.

The sooner we can accept that idea and make other plans the better.  To paraphrase a famous saying, Anything that can't be fixed, won't.

The basis for this view stems from understanding that debt-based money systems operate best when they can grow exponentially forever. Of course, nothing can, which means that even without natural limits, such systems are prone to increasingly chaotic behavior, until the money that undergirds them collapses into utter worthlessness, allowing the cycle to begin anew.

All economic depressions share the same root cause. Too much credit that does not lead to enhanced future cash flows is extended.  In other words, this means lending without regard for the ability of the loan to repay both the principal and interest from enhanced production; money is loaned for consumption, and poor investment decisions are made. Eventually gravity takes over, debts are defaulted upon, no more borrowers can be found, and the system is rather painfully scrubbed clean. It's a very normal and usual process.

When we bring in natural limits, however, (such as is the case for petroleum right now), what emerges is a forcing function that pushes a debt-based, exponential money system over the brink all that much faster and harder. 

But for the moment, let's ignore the imminent energy crisis.  On a pure debt, deficit, and liability basis, the US, much of Europe, and Japan are all well past the point of no return.  No matter what policy tweaks, tax and benefit adjustments, or spending cuts are made -- individually or in combination -- nothing really pencils out to anything that remotely resembles a solution that would allow us to return to business as usual.

At the heart of it all, the developed nations blew themselves a gigantic credit bubble, which fed all kinds of grotesque distortions, of which housing is perhaps the most visible poster child.  However, outsized government budgets and promises, overconsumption of nearly everything imaginable, bloated college tuition costs, and rising prices in healthcare utterly disconnected from economics are other symptoms, too.

This report will examine the deficits, debts, and liabilities in such a way as to make the case that there's no possibility of a return of generally rising living standards for most of the developed world.  A new era is upon us.  There's always a slight chance , should some transformative technology come along, like another Internet, or perhaps the equivalent of another Industrial Revolution, but no such catalysts are on the horizon, let alone at the ready.

At the end, we will tie this understanding of the debt predicament to the energy situation raised in my prior report to fully develop the conclusion that we can -- and really should -- seriously entertain the premise that there's just no way for all the debts to be paid back.  There are many implications  to this line of thinking, not the least of which is the risk that the debt-based, fiat money system itself is in danger of failing.

Too Little Debt! (or, Your One Chart That Explains Everything)

[Note: this next section is an excerpt from a recent Martenson Blog entry, so if this seems familiar to any site members, it's because you've seen it before.]

If I were to be given just one chart, by which I had to explain everything about why Bernanke's printed efforts have so far failed to actually cure anything and why I am pessimistic that further efforts will fall short, it is this one:

* 

There's a lot going on in this deceptively simple chart so let's take it one step at a time.  First, "Total Credit Market Debt" is everything - financial sector debt, government debt (federal, state, and local), household debt, and corporate debt - and that is the bold red line (data from the Federal Reserve).

Next, if we start in January 1970 and ask the question, "How long before that debt doubled and then doubled again?" we find that debt has doubled five times in four decades (blue triangles).

Then if we perform an exponential curve fit (blue line) and round up, we find a nearly perfect fit with a R2 of 0.99.  This means that debt has been growing in a nearly perfect exponential fashion through the 1970's, the 1980's, the 1990's and the 2000's.  In order for the 2010 decade to mirror, match, or in any way resemble the prior four decades, credit market debt will need to double again, from $52 trillion to $104 trillion.

Finally, note that the most serious departure between the idealized exponential curve fit and the data occurred beginning in 2008, and it has not yet even remotely begun to return to its former trajectory.

This explains everything.

It explains why Bernanke's $2 trillion has not created a spectacular party in anything other than a few select areas (banking, corporate profits), which were positioned to directly benefit from the money.  It explains why things don't feel right, or the same, and why most people are still feeling quite queasy about the state of the economy.  It explains why the massive disconnects between government pensions and promises, all developed and doled out during the prior four decades, cannot be met by current budget realities.

Our entire system of money, and by extension our sense of entitlement and expectations of future growth, were formed during and are utterly dependent on exponential credit growth.   Of course, as you know, money is loaned into existence and is therefore really just the other side of the credit coin.  This is why Bernanke can print a few trillion and not really accomplish all that much, because the main engine of growth expects, requires, and is otherwise dependent on credit doubling over the next decade.

To put this into perspective, a doubling will take us from $52 to $104 trillion, requiring close to $5 trillion in new credit creation each year of that decade.  Nearly three years has passed without any appreciable increase in total credit market debt, which puts us roughly $15 trillion behind the curve.

What will happen when credit cannot grow exponentially?  We already have our answers; it's been the reality for the past three years.  Debts cannot be serviced, the weaker and more highly leveraged participants get clobbered first (Lehman, Greece, Las Vegas housing, etc.), and the dominoes topple from the outside in towards the center.  Money is dumped in, but traction is weak.  What begins as a temporary program of providing liquidity becomes a permanent program of printing money needed in order for the system to merely function.

Debt and Europe

The debt situation in Europe is fairly typical of the developed world and mirrors the debt chart of the US seen above.  There's entirely too much debt, and most of the unserviceable amounts are concentrated in certain spots (i.e., PIIGS), while the amounts owed are concentrated in the German, French, and British banks.

This New York Times graphic did an excellent job of summing everything up:

(Source - click to view larger graphic at source) 

Here is a slightly less-complicated image that expresses the same dynamic:

If everybody owes everybody else, then kicking the can down the road only works if there's more wealth, more growth, and sufficient economic activity down that road to service the past debts. If any one participant drops the baton in the debt relay race, the absurdity of the situation becomes unavoidable and the cause is lost.

When we hold this view, it is abundantly clear that adding more debt along the way only increases the burdens and is therefore ultimately counterproductive, although it does grant the gift of additional time to avoid facing the truth.

When all of the most indebted countries are stacked up, we see that all but Russia carry a total indebtedness greater than 100% of GDP and that nine are carrying debt levels higher than any that have ever been repaid historically.

(Source) Note: 260% debt-to-GDP is the all time record for repayment, accomplished by England between 1815 and 1900, but required both massive cuts in spending and an industrial revolution.

Without mincing words, the world does not face a crisis of liquidity, nor a crisis of insufficient debt, but one of entirely too much debt.  That's the entire predicament in three words:  too much debt.

More debt is only going to compound the predicament, yet that is what the world's central banks and political structures are busy manufacturing.  More debt.

Of course, debt is only one component of the story; there are also liabilities to consider.  The above chart merely graphs the legally defined debts involved.  If we bother to add back in the liability components, which are pensions, social security and government medical plans, the predicament is seen to be three to six times larger: 

Whereas the prior chart showed all debts incurred by all sectors of each nation, the above chart only displays government debt and liabilities.  For reference, the red bars, above, are the amounts that you read about in the paper when commentators note that the US, for example, still has a debt-to-GDP ratio that is under 100%. It's a comforting tale, but not an accurate description of the situation.

Again, there are no historical examples of any country ever digging itself out from so deep a hole, and yet we find that the entire developed world has bravely pushed itself deep into unknown territory, seemingly without any serious discussions about whether or not this made sense.

Where We Are Now

So here we are, just a few weeks away from the end of the second round of quantitative easing (QE II) , with massive public debts and liabilities having only grown larger instead of shrinking during the Great Recession, everybody in nearly the same boat, and no clear plan for how all the sovereign debts will be funded from current productive cash flows (i.e., existing GDP).

This is why so many commentators, myself included, are convinced that more thin-air money printing is on the way. My thesis, laid out back in early March is that the Fed will stop QE II on schedule and that the financial markets will react exceptionally poorly to this loss of support. Commodities will tank first, then stocks, then bonds; from riskiest and most-leveraged to least.

It is time to face the music; the levels of indebtedness now require permanent support from thin-air money in order to avoid a deflationary collapse. Given this reality, we explore key questions in detail in Part II of this report: Understanding the Endgame:

• How will the global debt crisis play out?

• What does a world economy without growth look like?

• What steps should we, as individuals, need to take in preparation?

• How can investors safeguard their purchasing power during the coming rout in the finanical markets?

World energy consumption up 5.6% in 2010, biggest rise since 1973: BP

This article states that world energy consumption has increased in 2010: with oil production having peaked in 2006 and depletion rates 0f 5-8 per cent, what does that tell us?

Total global energy consumption growth was 5.6% in 2010, the highest rate since 1973, BP said Wednesday in its annual statistical review of world energy, adding that total consumption of energy last year "easily" surpassed the pre-recession peak reached in 2008.

"World primary energy consumption grew by 5.6% in 2010, the largest increase in percentage terms since 1973," BP said.

It said consumption in OECD countries grew by 3.5%, the strongest growth rate since 1984, though the level of OECD consumption remains roughly in line with that seen 10 years ago, it said.

Non-OECD consumption grew by 7.5% and was 63% above the 2000 level, demonstrating the rapid demand increase in emerging economies. 

"Consumption growth accelerated in 2010 for all regions, and growth was above average in all regions," BP said.

Chinese energy consumption grew by 11.2%, and China surpassed the US as the world's largest energy consumer, it said.

BP said oil remained the world's leading fuel, at 33.6% of global energy consumption, although it continued to lose market share for the 11th consecutive year.

Japan export crisis felt by Australian businesses; Fukushima update

If we needed conformation of the effects of the earthquake/tsunami and disaster at Fukushima here it is affecting businesses in Australia that are dependant on Japanese componentry.

Meanwhile confirmation is coming through that the Fukushima situation is more serious than previously admitted - it has gone from being a meltdown to a melt-through; confirmation of the worst fears of the alarmists.

Economic collapse in the USA

This item from Russia Today bears out everything I have heard about the way things are going in the United States.  This is not the picture that is being painted by the corporate media.

The late Matt Simmons on the oil crunch

I think it is always useful to go back and see what people were saying a couple of years ago.
Here is an interview that Matt Simmons gave a couple of years ago, in 2009.

Max Keiser: Blame the Peasants!

This latest edition of the Max Keiser Report has some fantastic stuff that parallels what I have been trying to alert people to.

I will give you Michael Ruppert's comments - he says it better than I can!

Comments on Saudi oil and on droughts throughout the world in the second half.

"Max Keiser cuts loose in this one and I'm glad that he did. Not only does he see and clearly understand that the world is out of time, he puts it directly in our faces about how much we are cooperating with a fundamentally evil system that is losing any possible image of being "benevolent". What Keiser sees is the same thing that I see and everyone else who truly understands collapse sees... It has now become all out war to destroy the incomes of working people everywhere on the planet. "It is clear that what must happen for these schemes to work is to reduce the average American income from $40,000 a year to $4,000 a year so that wages can be uniform across the globe."

That's what the banks do. They blame everything on us. And make no mistake about it, the banks want and need to kill us to maintain control for just a little while longer.

As long as ten years ago I saw and stated the obvious truth that as industrial civilization shuts down it would be necessary to destroy American incomes to provide a level playing field... for the banks.

My inner anger is rising daily. I have been sitting on it waiting for the time when its expression might bring a little benefit because all of us with our heads out of our butts are getting that angry. Keiser's venting is appropriate now for all of us because the time is here when civilization enters the Social Phase of collapse. We all need to get this angry.

If you are a Collapsenet member, save this one for after you have read the stories on the World News Desk. This is a bucket of real cold water, right in the face. And it will hopefully shock you into fully understanding how precarious these last few months of "business-as-usual" hypnotism really are... and what is waiting for us all when they vanish forever by the end of next month.

Bravo, Max Keiser - MCR"

The energy limit model

I have found the following article which illustrates well the relationship of energy to economic growth.  I have given the article (also available here) verbatim

The energy limit model to economic growth is working beautifully, having come into play prior to the 2008 crisis and now once again forcing another global slowdown.

As we can see, the relief from the 2007-2008 energy spike was short-lived. Whatever economic “recovery” the US was able to cobble together was built on the base of lower energy price levels in 2009. But by 2010, the energy expenditure percentage was right back up above 8.00%. More urgently, preliminary data shows that 2011?s level is back above 9.00%. Given the recovery in coal and oil prices, that’s no surprise. This Spring’s run of terrible economic data, showing the US economy turning back down again, now has an obvious cause.

But it’s not like Americans haven’t tried to reduce their use of the primary energy source–oil. In the chart below, we can see that US consumption of oil, expressed in BTU, has fallen dramatically from the highs of mid-decade. While the US consumption of coal and natural gas—and also wind and solar power—has rebounded more strongly since the 2009 lows, US consumption of oil is still down nearly 11.00% from peak. This aspect of the story contains both good news and bad news, which I will explain below. | see: US Annual Petroleum Consumption in Quadrillion BTU 1995-2010.

While it’s a positive that the US is reducing its demand for oil, it doesn’t necessarily mean we are becoming more efficient. More to the point, the US is no longer able to reduce its overall energy expenditures as an input to its GDP. Post 2008, some of the “gains” enjoyed by lower energy expenditures were simply made possible by a lower GDP. When the US reduces its use of oil, and switches over more to coal and natural gas, its GDP tends to fall. For an economy that structured itself towards oil-dependency the past 70 years, that should be expected. The US therefore can have a higher GDP or a lower GDP, but the Energy Limit model reveals that energy costs are becoming more stubborn on the upside. This is a structural change, that will not revert.

Industrialism in the US, and elsewhere in the OECD, is therefore no longer able to outrun energy costs. This means that in order to maintain production, prices for assets like housing, and input costs such as wages, are now under secular downward pressure. Alternately, we can produce less or measure “production” in non-industrial terms. Either way, this megatrend is simply the reverse of the dynamic which began 250 years ago when humanity moved from wood to coal, and the impact on wages and asset prices was revolutionary. The same model which explains that ascent, now explains our descent.

The reality-detached American (...or New Zealander)

Also available here:

Worst ever carbon emissions leave climate on the brink

This is more official bad news - again from Dr Fatih Birol of the IEA.  Straight from todays Guardian

Record rise, despite recession, means 2C target almost out of reach

Greenhouse gas emissions increased by a record amount last year, to the highest carbon output in history, putting hopes of holding global warming to safe levels all but out of reach, according to unpublished estimates from the International Energy Agency.

The shock rise means the goal of preventing a temperature rise of more than 2 degrees Celsius – which scientists say is the threshold for potentially "dangerous climate change" – is likely to be just "a nice Utopia", according to Fatih Birol, chief economist of the IEA. It also shows the most serious global recession for 80 years has had only a minimal effect on emissions, contrary to some predictions.

Last year, a record 30.6 gigatonnes of carbon dioxide poured into the atmosphere, mainly from burning fossil fuel – a rise of 1.6Gt on 2009, according to estimates from the IEA regarded as the gold standard for emissions data.

"I am very worried. This is the worst news on emissions," Birol told the Guardian. "It is becoming extremely challenging to remain below 2 degrees. The prospect is getting bleaker. That is what the numbers say."

Professor Lord Stern of the London School of Economics, the author of the influential Stern Report into the economics of climate change for the Treasury in 2006, warned that if the pattern continued, the results would be dire. "These figures indicate that [emissions] are now close to being back on a 'business as usual' path. According to the [Intergovernmental Panel on Climate Change's] projections, such a path ... would mean around a 50% chance of a rise in global average temperature of more than 4C by 2100," he said.

"Such warming would disrupt the lives and livelihoods of hundreds of millions of people across the planet, leading to widespread mass migration and conflict. That is a risk any sane person would seek to drastically reduce."

Birol said disaster could yet be averted, if governments heed the warning. "If we have bold, decisive and urgent action, very soon, we still have a chance of succeeding," he said.

The IEA has calculated that if the world is to escape the most damaging effects of global warming, annual energy-related emissions should be no more than 32Gt by 2020. If this year's emissions rise by as much as they did in 2010, that limit will be exceeded nine years ahead of schedule, making it all but impossible to hold warming to a manageable degree.

Emissions from energy fell slightly between 2008 and 2009, from 29.3Gt to 29Gt, due to the financial crisis. A small rise was predicted for 2010 as economies recovered, but the scale of the increase has shocked the IEA. "I was expecting a rebound, but not such a strong one," said Birol, who is widely regarded as one of the world's foremost experts on emissions.

John Sauven, the executive director of Greenpeace UK, said time was running out. "This news should shock the world. Yet even now politicians in each of the great powers are eyeing up extraordinary and risky ways to extract the world's last remaining reserves of fossil fuels – even from under the melting ice of the Arctic. You don't put out a fire with gasoline. It will now be up to us to stop them."

Most of the rise – about three-quarters – has come from developing countries, as rapidly emerging economies have weathered the financial crisis and the recession that has gripped most of the developed world.

But he added that, while the emissions data was bad enough news, there were other factors that made it even less likely that the world would meet its greenhouse gas targets.

• About 80% of the power stations likely to be in use in 2020 are either already built or under construction, the IEA found. Most of these are fossil fuel power stations unlikely to be taken out of service early, so they will continue to pour out carbon – possibly into the mid-century. The emissions from these stations amount to about 11.2Gt, out of a total of 13.7Gt from the electricity sector. These "locked-in" emissions mean savings must be found elsewhere.

"It means the room for manoeuvre is shrinking," warned Birol.

• Another factor that suggests emissions will continue their climb is the crisis in the nuclear power industry. Following the tsunami damage at Fukushima, Japan and Germany have called a halt to their reactor programmes, and other countries are reconsidering nuclear power.

"People may not like nuclear, but it is one of the major technologies for generating electricity without carbon dioxide," said Birol. The gap left by scaling back the world's nuclear ambitions is unlikely to be filled entirely by renewable energy, meaning an increased reliance on fossil fuels.

• Added to that, the United Nations-led negotiations on a new global treaty on climate change have stalled. "The significance of climate change in international policy debates is much less pronounced than it was a few years ago," said Birol.

He urged governments to take action urgently. "This should be a wake-up call. A chance [of staying below 2 degrees] would be if we had a legally binding international agreement or major moves on clean energy technologies, energy efficiency and other technologies."

Governments are to meet next week in Bonn for the next round of the UN talks, but little progress is expected.

Sir David King, former chief scientific adviser to the UK government, said the global emissions figures showed that the link between rising GDP and rising emissions had not been broken. "The only people who will be surprised by this are people who have not been reading the situation properly," he said.

Forthcoming research led by Sir David will show the west has only managed to reduce emissions by relying on imports from countries such as China.

Another telling message from the IEA's estimates is the relatively small effect that the recession – the worst since the 1930s – had on emissions. Initially, the agency had hoped the resulting reduction in emissions could be maintained, helping to give the world a "breathing space" and set countries on a low-carbon path. The new estimates suggest that opportunity may have been missed.