In order to hit net-zero emissions by mid-century, the world needs to stop new fossil fuel projects immediately, the International Energy Agency (IEA) said in a new bombshell report.
The implications of the report could be profound. The IEA has long been a champion of increasing investment in fossil fuel supply, but now signals that an urgent energy transformation is needed in order to head off climate disaster.
Ratcheting down emissions
The global energy system accounts for three quarters of greenhouse gas emissions, and getting emissions to net-zero by 2050 is in line with the overarching goal of limiting global warming to 1.5-degress Celsius. “This calls for nothing less than a complete transformation of how we produce, transport and consume energy,” the IEA said in its report. The agency pointed to the growing number of net-zero commitments from governments and corporations, including oil companies, but there remains a massive gap between ambition and the policy reality. Most “goals” are still just words on paper.
“If we want to reach net zero by 2050 we do not need any more investments in new oil, gas and coal projects.”
The IEA offered a roadmap to get there. At over 200 pages, the new IEA report has a long list of conclusions, but the most eye-opening was the call to put an end to new fossil fuel development. “The pathway to net zero is narrow but still achievable. If we want to reach net zero by 2050 we do not need any more investments in new oil, gas and coal projects,” said Fatih Birol, the IEA’s executive director. In an interview with Sky News, he said that the industry risks putting money into “junk investments” if they proceed with new oil and gas projects.
“Beyond projects already committed as of 2021, there are no new oil and gas fields approved for development in our pathway,” the report stated. It is worth pointing out that environmental activists and climate scientists have been saying for years that fossil fuel supply needs to be capped and phased out. It now appears that the IEA has come around to the “keep it in the ground” mantra.
Even more significant is the fact that the IEA did not spare natural gas, which the industry has long championed as a bridge fuel. “No new natural gas fields are needed in the [net-zero scenario] beyond those already under development,” the agency stated.
That goes for LNG as well. “Also not needed are many of the liquefied natural gas (LNG) liquefaction facilities currently under construction or at the planning stage,” the report stated.
The agency said that global spending on fossil fuel supply should be ratcheted down from the $575 billion annually seen in the past few years, to $110 billion by 2050, with spending allocated only to maintaining existing supplies need during the transition phase. The only fossil fuels that remain online are for plastics and other industry, but facilities would need carbon capture technology.
There are a bunch of other substantial recommendations. The IEA said that sales of the internal combustion engine should be phased out by 2035. Also, new natural gas hookups used in residential and commercial buildings should be barred beginning in 2025. Methane emissions from oil and gas operations also need to decline by 75 percent by 2030.
Fossil fuel subsidies should be phased out, while carbon pricing phased in.
“Unprecedented” ramp up needed for renewables
Shutting the door on fossil fuels means there must be an “unprecedented” clean technology push. The agency says 90 percent of global electricity supply should come from renewables by 2050, with the remainder from nuclear power.
That implies global new capacity additions for solar at a rate of 630 GW per year by 2030, and 390 GW of wind, which would require a four-fold increase compared to 2020 levels. For context, that solar figure is equivalent to installing the world’s largest solar park every single day. Meanwhile, electric vehicle sales need to ramp up from 5 percent to 60 percent by 2030.
The IEA noted that today’s technologies are cost effective and readily available to achieve the necessary emissions reductions by 2030. But the next phase of emissions reductions – from 2030 to 2050 – depend on technologies not yet commercially viable, mainly around heavy industry and long-distance transport.
“This is a complete turnaround of the fossil-led IEA from five years ago.”
The sudden publication from the IEA is notable because it is an abrupt shift from what the position the agency has long held. Established in the 1970s in the wake of skyrocketing prices following the 1973 oil embargo, the IEA has over the years consistently called for more upstream oil and gas investment to ensure security of supply.
One of the criticisms from environmental groups is that the IEA has routinely underestimate the pace of growth for renewables. And because the oil industry, investors, and policymakers cite IEA figures as the gold standard for planning purposes, fossil fuel-friendly figures have stood in the way of change, the argument goes. That makes the about-face from the IEA, calling for a fossil fuel phaseout, all the more stunning and potentially impactful.
“(This is) a massive blow to the fossil fuel industry. This is a complete turnaround of the fossil-led IEA from five years ago,” Dave Jones, global programme lead at climate think tank Ember, told Reuters.
On the flip side, a criticism of such an outlook will surely be that calling for a supply phaseout ahead of demand-side curbs could lead to a supply crunch and price spike for oil and gas.
At the same time, despite the IEA’s monumental report, the oil industry has no plans to phase themselves out. Policy in many countries is woefully behind what the climate science says is needed. But the calls for a rapid transition are growing louder, which may steer capital away from new oil and gas projects, adding costs. It’s just a matter of time before oil and gas slip into structural decline, but the pace is important giving the dwindling time left on the climate clock.
“It is past time for governments to act, and act decisively to accelerate the clean energy transformation,” Fatih Birol wrote in the report.