IEA Finds Oil and Gas Development Inconsistent with Climate
In its pathway to limit warming to below 1.5C, the IEA finds that there is no need for investment in new fossil fuel supply or for the development of new oil and gas fields. These findings set a clear standard for climate action that requires policymakers to phase down fossil fuel development as they mobilize their economies to deploy clean energy technologies and related infrastructure.
In its first comprehensive study of a global energy sector transition to net zero by 2050, the International Energy Agency (IEA) outlines a pathway that will generate an international economic expansion driven by an unparalleled investment in the deployment of clean energy technologies. In addition to avoiding catastrophic impacts of climate change, IEA’s report outlines a pathway that would result in significantly greater economic growth, create tens of millions of new jobs and prevent 2 million deaths each year from air pollution than the trajectory we are now on. However, this narrow pathway requires fossil fuel producing nations to take immediate action to cease new oil or gas development, implement all available pollution reducing technologies for existing projects and eliminate fossil fuel subsidies, while leveraging a significant increase in public and private investment in clean energy and energy infrastructure.
IEA’s report should send a strong signal to policymakers and investors alike that the pathway to securing a safe climate is one that will make our communities healthier and more prosperous, but requires urgent steps to reduce fossil fuel production—starting with the immediate cessation of new oil, gas and coal development.
Here are some of its findings in detail:
- Climate action increases economic growth and creates jobs. The IEA’s model finds that the surge in private and public spending on clean energy technologies require by a net zero pathway will result in annual global economic growth that is nearly 0.5% higher than the course we are currently on. Moreover, this pathway will generate 30 million jobs in clean energy, efficiency and low-emissions technologies by 2030.
- No new oil, gas or coal development. The IEA finds that the pathway to 1.5 °C requires an immediate cessation in the development of new oil and gas fields, as well as coal mines. Fossil fuel companies will need to focus on reducing emissions from their existing assets while policymakers will need to begin taking steps to manage a just transition for fossil fuel workers. While
- Oil and gas production must decline significantly. The IEA’s energy transition requires a major contraction of oil and gas production with significant implications for the industry and investors. In an orderly global transition consistent with this pathway, oil prices would decline to $35/barrel by 2030 and $25/barrel by 2050. The warns that if oil producing nations compete for greater share in a shrinking market, oil prices will plummet further, resulting in greater financial losses for oil companies and greater carbon emissions. The IEA analysis clearly shows that natural gas production is part of the problem—finding that liquified natural gas (LNG) will decline by 60% and natural gas deliveries by pipeline will decline by 65% over the next two decades, rendering many projects currently under construction unnecessary.
- Investors in oil and gas assets are exposed to significant potential losses. The IEA model projects that in addition to significantly curtailing financial returns from existing production, a net zero pathway will result in significant stranded assets and value in the oil and gas sector. Additional investments in new oil and gas development will both threaten our narrow pathway to 1.5C and are likely to result in additional losses.
- Methane emissions decline by 75% by 2030. The IEA’s Net Zero scenario will require the deployment of abatement measures to eliminate all technically avoidable methane emissions and reduce global methane emissions from fossil fuels by 75% by 2030.
- Governments must mobilize investments in clean energy and related infrastructure. The agency’s analysis requires governments to direct both public and private capital to support investments in clean energy and energy infrastructure. By 2030, global energy investment in clean energy should reach $5 trillion—or triple their current level—which would support additional economic growth and the creation of tens of millions of jobs in clean energy, energy efficiency, engineering, manufacturing and construction.
The IEA report sets both a roadmap for a 1.5 °C trajectory for the global energy sector and a clear standard to judge the credibility of climate action by both national and corporate leaders. It is simply no longer possible to claim that half measures focused on reducing incremental production emissions from oil, gas and coal can be part of a credible climate strategy. Credible climate action requires concrete steps to reduce production levels over the next decade and transition the fossil fuel industry from a core business model focused on the production and marketing of oil, gas and coal to ventures that will prosper in a clean energy economy. We still have an opportunity to limit warming to 1.5 °C—and in the process increase global economic prosperity while saving millions of lives. But we cannot succeed without pairing this plan with the immediate cessation of new fossil fuel development and the implementation of plans to ensure that workers and communities who are currently reliant on the fossil fuel industry have the tools to prosper in a clean energy economy.
In order to reap the enormous rewards that a transition to clear energy affords, global leaders must acknowledge that the era of fossil fuels is over.