Is the world truly ready to say goodbye to fossil fuels? IEA thinks so
The Paris-based International Energy Agency (IEA), the OECD energy watchdog, is facing serious questions about its credibility. While the IEA maintains that the world’s energy landscape is rapidly evolving, OPEC has bluntly raised concerns about its predictions of imminent peak oil demand threatening global energy security.
According to a report released last week by the IEA, even if no new government climate policies are introduced before 2030, global demand for fossil fuels will still peak before the end of the decade. The report, an update on the IEA’s 2021 plan to reach net zero global greenhouse emissions by 2050, maintains that this meant no new major oil and gas extraction projects are needed anywhere around the globe, nor any new coal mines, mine extensions or unabated coal plants. This is a huge projection.
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“If the world is successful in bringing down fossil demand quickly enough to reach net zero emissions by 2050, new projects would face major commercial risks,” the IEA underlined.
The world is set to invest a record US$1.8 trillion in clean energy in 2023, but the IEA argues that it needs to climb to US$4.5 trillion by the early 2030s to achieve net zero by 2050.
The IEA cautions that while the goal of limiting global warming to 1.5 degrees C remains achievable, the paths to achieving this are diminishing. In 2022, energy sector CO2 emissions surged to an all-time high of 37 billion tonnes.
Last Tuesday’s report highlighted that the rapid global adoption of technologies like renewable energy, electric vehicles, and heat pumps means the demand for coal, oil, and natural gas could top out within the upcoming decade.
Just a few weeks ago, the IEA faced scrutiny at the World Petroleum Congress in Calgary. The oil industry was skeptical of the IEA’s previous forecast which suggested oil demand would peak before 2030. The IEA had indicated that global oil consumption would begin to decline post-2027.
Prince Abdulaziz bin Salman, the Saudi Petroleum Minister, took the IEA to task on this projection: “They (the IEA) have moved from being a forecaster and assessor of the market to one practicing political advocacy”. He then emphasized: “None of the things that they (the IEA) were warning about have happened. And name me any time that their forecasts were as accurate as one would have hoped for,” he asked his audience in Calgary.
Despite that pointed criticism, the IEA continued to speak its mind on the issue. In its 2021 climate report update, the agency made it clear that oil is still needed. “While major investment in new oil production is not required, continued investment in existing oil and gas assets and already approved fossil fuel projects will be necessary to avoid damaging price spikes or supply gluts during the energy transition.”
Further, the IEA insisted that to meet climate targets, ‘rapid progress on carbon capture and storage will be required before 2030 to hold temperatures to 1.5 C.’
The IEA also noted that while the number of proposed carbon capture projects worldwide nearly tripled in 2021 and has doubled again since then – thanks to strong policy support, particularly in the U.S. – only about five percent of announced projects have reached the final investment stage.
“Although the recent surge of announced projects for CCUS and hydrogen is encouraging, the majority have yet to reach a final investment decision and need further policy support to boost demand and facilitate new enabling infrastructure,” the IEA stated.
The very admission by an organization such as the IEA that there is no need for any new major oil and gas extraction projects anywhere around the globe is refreshing and reassuring – from a climate viewpoint. But the debate is far from over. The two sides continue to battle it over.
Toronto-based Rashid Husain Syed is a highly-regarded analyst specializing in energy and politics, with a particular emphasis on the Middle East. Besides his contributions to both local and international newspapers, Rashid frequently lends his expertise as a speaker at global conferences. His insights on global energy matters have been sought after by organizations such as the Department of Energy in Washington and the International Energy Agency in Paris.
For interview requests, click here.
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