What's going on?
The International Energy Agency (IEA) might’ve killed off the fossil fuel industry on Tuesday: it warned that energy companies need to halt new oil and gas projects to keep climate change in check.
What does this mean?
The International Energy Agency (IEA) advises 30 member states – including eight of the world’s top ten economies – on all things energy-related. Its recommendations often help both the government and the industry to plan their next moves, which is why this week’s special report might’ve knocked them for six.
The IEA confirmed that countries’ current policy pledges fall well short of what’s needed to achieve global net-zero carbon emissions by 2050 – not to mention to meet the Paris Agreement’s key objective of keeping planetary warming within 1.5 degrees Celsius. The only solution, according to the agency, is to put an immediate stop to the sort of oil and gas exploration it was originally set up to promote.
Why should I care?
For markets: This wasn’t the plan.
The IEA’s roadmap is in contrast with Big Oil’s own projected path. While the likes of BP, Shell, and Total are working toward a similar timeline for net-zero emissions, they’re also planning to seek out new fossil fuel fields for years to come, arguing that the projects meet the needs of emerging economies in Asia and Africa. But the IEA doesn’t think producers are prepared for how much faster global use of fossil fuels needs to fall by 2050: coal demand by 90%, oil by 75%, and gas supply by 50%.
The bigger picture: Renewables just got lucky.
Energy majors might not have welcomed the IEA’s report, but its outlook should be a boon for the renewable energy industry. The agency’s plan calls for a huge rise in international spending on low-carbon technology – from $2 trillion in annual investment today to $5 trillion by 2030. Solar and wind would be the big winners from the proposal, together accounting for almost 70% of electricity generation by 2050.