Governments must rapidly create the conditions to rid the world of “stubborn” fossil fuels, International Energy Agency executive director Fatih Birol said at the launch of its latest annual World Energy Outlook (WEO) report.
“The world’s hugely encouraging clean-energy momentum is running up against the stubborn incumbency of fossil fuels in our energy systems,” he said.
Birol called on governments attending next month’s COP26 climate-change conference in Scotland “to resolve this [issue] by giving a clear and unmistakable signal that they are committed to rapidly scaling up the clean and resilient technologies of the future”.
“The social and economic benefits of accelerating clean-energy transitions are huge, and the costs of inaction are immense.”
Speaking in Paris on Wednesday at the launch of the WEO report, Birol said a new "global energy economy is emerging", but urged heads of state at COP26 to send investors a clear signal about a "clean-energy future" and the "handsome profits" that can be made in this burgeoning sector.
At the same time, he said investors must be made to understand that they "may well risk losing money" by continuing to fund dirty energy.
'Far too slow'
According to the IEA, progress in clean-energy developments “is still far too slow” to put global emissions into sustained decline towards net zero, and it believes COP26 offers a critical opportunity to accelerate climate-related actions and the clean-energy transition.
The new analysis“delivers stark warnings about the direction in which today’s policy settings are taking the world”, while offering pathways that would have a good chance of limiting global warming to 1.5 degrees Celsius by 2050 to avoid the worst effects of climate change.
The IEA predicts energy markets will become more volatile due to recent underinvestment in oil and gas projects and clean-energy solutions.
“There is a looming risk of more turbulence for global energy markets,” according to Birol.
“We are not investing enough to meet future energy needs and the uncertainties are setting the stage for a volatile period ahead.”
Birol said at this morning it is "wrong" to characterise the recent volatility of energy markets as the "first crisis of the clean-energy transition"
"I think the issue is not that we have too much clean energy, but we have too little clean energy."
He said the way to address this volatility is clear and called for a major boost in clean-energy investments across all technologies and in all markets but stressed “this needs to happen quickly”.
Gas industry warned
Discussing the huge spike in natural gas prices, particularly in Europe and Asia, Birol warned this "is not good news" for the natural gas industry, even though this fossil fuel "has been presented as a reliable, affordable energy source which could complement clean energy".
He said the current volatility in the gas market has not put the sector in a good light.
The industry "did not get good marks from millions of consumers around the world — and I think they should take note of this".
IEA’s WEO report estimates the extra investment needed to reach net zero by 2050 “is less burdensome than it might appear”, calculating more than 40% of the required emissions reductions could come from measures that pay for themselves.
Coal is a problem
The report also showed that even as deployments of solar and wind go from strength to strength, the world’s consumption of coal is growing strongly in this bounceback year, pushing carbon dioxide emissions towards their second largest annual increase in history.
As well as the net zero emissions by 2050 (NZE 2050) scenario, the IEA report explores two other scenarios to predict how the global energy sector may develop over the next 30 years.
The stated policies scenario (SPS) is based on measures governments have put in place to date, plus specific policy initiatives being developed.
This forecast would see almost all net growth in energy demand through to 2050 being met by low-emissions sources, although annual emissions would remain at today’s levels.
As a result, global average temperatures would still rise until hitting 2.6 degrees Celsius above pre-industrial levels in 2100.
The IEA’s announced pledges scenario (APS) lays out a path where net-zero emissions pledges announced by governments are implemented on time and in full.
In this framework, fossil-fuel demand peaks by 2025 and global CO2 emissions fall by 40% by 2050, with a global average temperature rise in 2100 to around 2.1 degrees Celsius.
Under all three scenarios, the IEA predicts that oil demand will go into eventual decline, although the timing and speed of the slump vary widely.
Under APS, the world would consume 75 million barrels per day of by 2050 — down from about 100 million bpd now, with consumption crashing to 25 million bpd under NZE 2050.
Natural gas demand increases in all scenarios over the next five years, but there are sharp divergences after this, the IEA said.
As for coal, its prospects “go downhill” under APS, said the agency, pointing out this decline could be accelerated by China’s recent announcement it would no longer support building coal plants abroad.
This decision could see many projects cancelled that would save some 20 billion tonnes in cumulative CO2 emissions through to 2050 — an amount similar to the total emissions savings from the European Union reaching net zero by 2050.
The differences in outcomes between APS and NZE 2050, said the IEA, highlight the need for more ambitious commitments if the world is to reach net zero by mid-century.
“Today’s climate pledges would result in only 20% of the emissions reductions by 2030 that are necessary to put the world on a path towards net zero by 2050,” Birol said.
“Reaching that path requires investment in clean-energy projects and infrastructure to more than triple over the next decade.”
Birol stressed that some 70% of this additional spending “needs to happen in emerging and developing economies where financing is scarce and capital remains up to seven times more expensive than in advanced economies”.
Laura Cozzi, IEA chief energy modeller, remarked that this issue "needs to be solved and solved quickly".
The WEO report estimates that successfully pursuing net zero would create a market for wind turbines, solar panels, lithium-ion batteries, electrolysers and fuel cells of well over $1 trillion per year by 2050, comparable in size to the current oil market.
According to the agency, under APS an additional 13 million workers could be employed in clean energy and related sectors by 2030, with that number doubling under NZE 2050.