PARIS: Fossil fuel demand must fall by a quarter by the end of this decade if governments want to limit the rise in global warming to 1.5C since the pre-industrial period, the International Energy Agency has concluded.
But it also said the world would need need to invest nearly $4.5 trillion per year in the transition to cleaner energy from the start of the next decade, up from spending of $1.8 trillion expected in 2023.
Coal, oil and natural gas will all need to be replaced by clean energy at a rapid rate to keep the world on track to cut greenhouse gas emissions to net zero by 2050, the OECD-funded energy watchdog said in its annual assessment.
The projections are the latest warning for the oil and gas sector since the IEA stunned the industry in 2021 when it said there was no room for new exploration projects if global warming limits thresholds were to be met.
The agency’s latest projections come at a time of rising tensions with oil producers ahead of UN climate talks in the UAE in 10 weeks, with the Opec cartel accusing the IEA of stoking “volatility” and scaring off investors.
The oil and gas industry has also attempted to undermine the IEA projections, stepping up the rhetoric last week at a biennial conference in Calgary.
For its part, the agency reiterated its view that new oil and gasfields faced “major commercial risks” if the required cuts to demand were made, given supplies from existing projects.
But the IEA also warned that supplies of clean energy needed to expand in line with falls in fossil fuel supply, to avoid energy shortages and price jumps.
“Prolonged high prices would result if the decline in fossil fuel investment in this scenario were to precede the expansion of clean energy,” it said, noting that an “orderly” transition was “far from guaranteed”.
Fatih Birol, the IEA’s executive director, said some fossil fuels would still be required by 2030 and governments needed to “provide the framework” to ensure a smooth move to cleaner energy.
The IEA was founded in the aftermath of the 1970s Arab oil embargoes to advise on energy security. Its members are drawn from OECD countries and include the US, the UK and Japan.
The IEA remarks were delivered with its latest report setting out its assessment of the pathway for the world to cut emissions to net zero by 2050. This is considered crucial to limiting global warming to ideally 1.5C above pre-industrial levels by that time, and well below 2C, as set down under a commitment signed by almost 200 countries in the 2015 Paris Agreement.
The IEA said “stringent and effective policies” under its projections would “spur clean energy deployment and cut fossil fuel demand by more than 25 per cent by 2030 and 80 per cent in 2050”.
This would involve oil demand falling from 100mn barrels a day to 77mn b/d by 2030; and natural gas demand falling from 4,150bn cubic metres in 2022 to 3,400 bcm over the same period.
There had been “positive developments” over the past two years, the IEA said, including the rapid uptake of solar panels and electric vehicles.
However, it called for “bolder action”, with clean energy investment needed to climb from $1.8tn this year to $4.5tn each year by the early 2030s.
It cautioned that going too slowly could result in significant costs, potentially amounting to as much as $1.3tn a year to strip carbon dioxide emissions out of the air after 2050 rather than avoiding them in the first place.
This would be 50 per cent more than the total investment in fossil fuel supply in 2022, and result in “a major challenge requiring close international co-operation”, the agency said.
Birol also criticised UK prime minister Rishi Sunak’s decision to delay the ban on the sale of petrol and diesel cars to 2035, saying advanced economies should take the lead and “increase ambition rather than reducing it”.
“Keeping alive the goal of limiting global warming to 1.5C requires the world to come together quickly. The good news is we know what to do — and how to do it.”