A recent report by the International Energy Agency (IEA) asserts that even without the introduction of new government climate policies prior to 2030, global demand for fossil fuels is on track to peak within the next decade. The report, released on Tuesday, highlights the rapid adoption of key technologies such as renewable energy, electric vehicles, and heat pumps, which is expected to lead to the peak in demand for coal, oil, and natural gas within the next 10 years.
According to the IEA, this projected peak in fossil fuel demand implies that there is no need for new major oil and gas extraction projects, coal mines, mine extensions, or unabated coal plants globally. The report also emphasizes that if the world successfully reduces fossil fuel demand to reach net-zero emissions by 2050, new projects in these sectors would face substantial commercial risks.
However, the report underscores the urgency of further action to achieve the global warming target of limiting temperature increases to 1.5 degrees Celsius, as agreed upon at the 2015 climate summit in Paris. While the goal of 1.5 degrees Celsius remains attainable, the pathways to achieve it are narrowing. Carbon dioxide emissions from the energy sector reached a record high of 37 billion tonnes in 2022.
To meet global climate targets, the IEA emphasizes the need for all countries to implement measures such as increasing the use of renewables, enhancing energy efficiency, reducing methane emissions, and expanding electrification. These actions can be achieved using existing and cost-effective technologies. For instance, reducing methane emissions from oil and natural gas operations by 75 percent from current levels would require an estimated cumulative spending of $75 billion by 2030, equivalent to just two percent of the industry’s net income in 2022.
The IEA suggests that while major investments in new oil production are unnecessary, continued investment in existing oil and gas assets and approved fossil fuel projects is crucial to prevent disruptive price spikes or supply surpluses during the transition to clean energy. Additionally, rapid progress in carbon capture and storage (CCUS) is required before 2030 to meet the 1.5-degree Celsius target. Although there has been a surge in proposed CCUS and hydrogen projects, the majority have not reached the final investment stage and require further policy support.
The report urges governments to adopt a “build big” mindset, emphasizing the need for significant expansion of electricity transmission and distribution grids, battery energy storage, and low-emission capacity sources such as hydropower, biomass, nuclear, and hydrogen-based plants.
In summary, to limit global temperatures to 1.5 degrees Celsius and avoid the most severe consequences of climate change, emissions must decrease by 80 percent from 2022 levels in developed countries and by 60 percent in developing countries by 2035, according to the IEA. Failure to make substantial progress by 2035 would result in more pronounced temperature increases and a reliance on carbon removal technologies in the latter half of the century, which the report warns is costly and uncertain. The IEA underscores the importance of preventing further carbon emissions in the first place.
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