The International Energy Agency (IEA) has released its annual World Energy Outlook and, though the group took a different tack this year, the forecast remains distressing.

This year’s Outlook report, which projects global energy use to 2035, differs from previous years by assuming that governments will adhere to their stated energy policies. Even with these assumptions, the world’s efforts fall a long way short of what’s required to set the world on a path to a truly sustainable energy system, Nobuo Tanaka, the agency’s executive director, said in a press release.

Government energy policies would reduce the average annual increase in energy consumption to 1.2% between 2008 and 2035, down from 2% over the previous 27 years. Still, that means a cumulative 36% increase.

Here’s the problem: oil, coal and natural gas will remain the leading fuels. The agency projects that renewable energy will be a relatively small piece of the global energy system even a quarter of a century from now, doubling to 14% of energy demand.

Even more troubling, the price of oil will have a decreasing impact on demand. Oil will be the leading fuel despite nearly doubling in price to $113 a barrel by 2035, adjusted for inflation, according to the report.

One avenue for improving this scenario is subsidies. In 2009, global subsidies for renewable energy were $57 billion while global fossil fuel subsidies were $312 billion. Stated government policies will bring renewable energy subsidies to $205 billion by 2035, adjusted for inflation. This needs to be much higher, and more importantly, we need to end fossil fuel subsidies.

Getting the prices right by eliminating fossil-fuel subsidies is the single most effective measure to cut energy demand, according to Tanaka.

What will the projected global energy scenario mean for the planet’s climate?

Forget about the Copenhagen Accord goal of keeping the global temperature increase below 2°C by the end of the century. That would require holding carbon dioxide emissions to 450 parts per million (ppm). The report’s projections put us at 650 ppm, which is likely to result in a global temperature increase of over 3.5°C by 2100.

And that is one ugly outlook.