According to a new report by the International Energy Agency (IEA), even without new government climate policies, the demand for fossil fuels globally will peak before 2030. The report, released on Tuesday, states that the rapid deployment of renewable power, electric vehicles, and heat pumps is happening so quickly that demand for coal, oil, and natural gas will reach its peak within the next decade. As a result, the IEA suggests that there is no need for new major oil and gas extraction projects, coal mines, mine extensions, or unabated coal plants worldwide.
The IEA also highlights that if the world successfully reduces fossil fuel demand quickly enough to achieve net-zero emissions by 2050, new projects would encounter significant commercial risks. However, the report emphasizes that more needs to be done to reach the 1.5-degree Celsius target agreed upon by the international community at the 2015 climate summit in Paris.
While achieving the 1.5-degree Celsius target is still possible, the IEA warns that the available paths to reach this goal are narrowing. In 2022, global carbon dioxide emissions from the energy sector reached a record high of 37 billion tonnes.
To achieve net-zero emissions by 2050, the IEA states that the world should invest a record $1.8 trillion in clean energy in 2023, which needs to increase to $4.5 trillion by the early 2030s. The report underlines that the energy sector is evolving faster than many people realize, but more action is required, and time is running out.
The IEA emphasizes that all countries must implement measures to ramp up renewables, improve energy efficiency, reduce methane emissions, and increase electrification to meet global climate targets. Fortunately, all of these actions are possible using existing and cost-effective technologies.
For instance, the IEA estimates that reducing methane emissions from oil and natural gas operations by 75% by 2030 would cost $75 billion, equivalent to just 2% of the net income generated by the industry in 2022.
Although significant investment in new oil production is not necessary, the IEA highlights that continued investment in existing oil and gas assets and approved fossil fuel projects is crucial to avoid disruptive price spikes or supply gluts during the energy transition. Additionally, the report emphasizes the need for rapid progress in carbon capture and storage before 2030 to limit global warming to 1.5 degrees Celsius. While there has been an increase in proposed carbon capture projects worldwide, only about 5% of announced projects have reached the final investment stage.
The IEA report also calls on governments to adopt a “build big” mentality. It states that electricity transmission and distribution grids need to expand by approximately two million kilometers each year by 2030 to achieve the IEA’s net-zero scenario. However, the organization notes that building grids can take more than a decade.
Overall, to limit global warming to 1.5 degrees Celsius and avoid the worst impacts of climate change, the IEA emphasizes that emissions need to decline by 80% from 2022 levels in developed countries and 60% in developing countries by 2035. Failure to make significant progress before 2035 would result in a steeper temperature increase and increased reliance on carbon removal technologies in the future.
The IEA concludes the report by emphasizing the importance of stopping carbon emissions to begin with, as removing carbon from the atmosphere is costly and uncertain.
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