International CO2 emissions from fossil fuels and business, billion tonnes, 1965-2050. Chart reveals historic emissions (black), pre-Paris coverage baseline (gray, 2015 “present insurance policies state of affairs”), coverage in 2021-2023 (blue, “acknowledged insurance policies eventualities”), in addition to pledges in 2023 (pink, “introduced pledges state of affairs”) and the IEA’s urged path to staying beneath 1.5°C (yellow, “net-zero emissions by 2050 state of affairs”). Supply: Carbon Transient evaluation by Simon Evans and Verner Viisainen of IEA world power outlooks 2015-2023. Chart by Tom Prater for Carbon Transient.
Regardless of the improved outlook for international emissions, the outlook reveals that present insurance policies stay massively inadequate to satisfy governments’ local weather pledges – together with their long-term net-zero targets. If met, these pledges would see emissions falling alongside the pink line within the determine above.
Furthermore, even assembly these local weather pledges would fall far wanting what could be wanted to restrict warming to lower than 1.5°C above pre-industrial temperatures (yellow line).
The IEA ascribes the altering outlook for international emissions – a minimum of partly – to the worldwide power disaster. Final yr’s report stated that Russia’s invasion of Ukraine had “turbo-charged” the shift away from fossil fuels. Opposite to some commentary, the IEA repeats this message once more:
“A legacy of the worldwide power disaster could also be to usher to start with of the tip of the fossil gas period; the momentum behind clear power transitions is now adequate for international demand for coal, oil and pure gasoline to all attain a excessive level earlier than 2030 within the STEPS.”
Though the company doesn’t put exact figures on these “excessive factors” for fossil fuels – presumably as a result of uncertainty across the actual timing – Carbon Transient evaluation of the IEA’s information reveals coal, oil and gasoline reaching peaks in 2022, 2028 and 2029, respectively.
This may see international demand for all three fossil fuels mixed peaking in 2025, as proven by the darkish blue line within the determine beneath. This 2023 coverage curve is in contrast towards historic demand for fossil fuels (black), the pre-Paris baseline (gray) and earlier coverage settings (shades of blue).
The influence of nations assembly all of their local weather pledges as of 2021, 2022 and 2023 are proven by the pink curves, whereas the IEA’s more and more slim pathway to 1.5°C is proven in yellow.
International use of fossil fuels, exajoules, 1965-2050. Chart reveals historic demand (black), the pre-Paris coverage baseline (gray, 2015 “present insurance policies state of affairs”), coverage in 2021-2023 (blue, “acknowledged insurance policies eventualities”), in addition to pledges in 2021-2023 (pink, “introduced pledges eventualities”) and the IEA’s urged paths to staying beneath 1.5°C in 2021-2023 (yellow, “net-zero emissions by 2050 eventualities”). Supply: Carbon Transient evaluation by Simon Evans and Verner Viisainen of IEA world power outlooks 2015-2023. Chart by Tom Prater for Carbon Transient.
The IEA’s assertion that coal, oil and gasoline will every see peaks in demand this decade has been met with sturdy pushback from the Opec oil producers’ cartel and a few US oil majors.
Nonetheless, the IEA refers to a spread of datapoints in assist of its findings, with the speed of recent fossil gas infrastructure being constructed having already peaked in key areas.
Development in coal-based metal, cement and electrical energy technology capability peaked in 2003, 2010 and 2012, respectively, for instance.
Equally, international gross sales of combustion-engine vehicles, motorbikes and vehicles peaked in 2017, 2018 and 2019, respectively. Additions of gasoline energy crops peaked in 2002 and gross sales of gasoline boilers in 2020.
These are all main indicators that “set the scene” for declines in coal, oil and gasoline use later this decade, the outlook says.
But the report notes that, beneath present coverage settings, demand for oil and gasoline would enter a chronic plateau after peaking this decade. As IEA power analyst Peter Zeniewski notes on Twitter, “[oil and gas would] nonetheless dangle round, stubbornly, for many years within the STEPS”.
Even so, the report factors to potential for vital “overinvestment” in oil and gasoline, with present ranges of spending “nearly double” the quantity wanted within the IEA’s 1.5°C pathway. It says this “creates the clear threat of locking in fossil gas use and placing the 1.5°C purpose out of attain”.
The outlook goes on to make a thinly veiled reference to sure nations and oil majors, saying their requires elevated oil and gasoline funding are at odds with the most recent market traits.
It says circumstances have modified lately, as a result of oil and gasoline funding has already grown, whereas the outlook for oil and gasoline demand has shrunk.
Because of this, the IEA says its personal warnings of oil and gasoline “underinvestment”, made in earlier editions of the outlook, are not legitimate. The report says:
“[T]he fears expressed by some giant resource-holders and sure oil and gasoline firms that the world is underinvesting in oil and gasoline provide are not based mostly on the most recent expertise and market traits.”
Regardless of these warnings, the IEA argues that “merely chopping spending on oil and gasoline is not going to get the world on observe for [1.5°C]”. As an alternative, it says the “key’s to scale up funding in all facets of a clear power system to assembly rising demand for power companies in a sustainable manner”.
It provides that dangers are “weighted extra in the direction of overinvestment”:
“Each overinvestment and underinvestment in fossil fuels carry dangers for safe and inexpensive power transitions…On the subject of the general adequacy of spending, nevertheless, our evaluation means that the dangers are weighted extra in the direction of overinvestment than the alternative.”
‘Unstoppable’ clear power
A significant driver of the diminished outlook for fossil gas progress is the “accelerating” shift to low-carbon applied sciences, which IEA government director Dr Fatih Birol says within the report foreword is “shifting sooner than many individuals realise”.
That is certainly one of a number of key distinctions that Birol attracts between the present international power disaster – which is constant amid heightened geopolitical tensions and battle within the Center East – as in contrast with the Seventies oil disaster 50 years earlier. Birol writes:
“A second distinction between the Seventies and in the present day is that we have already got the clear power applied sciences for the job in hand…At present, photo voltaic, wind, effectivity and electrical vehicles are all properly established and available – and their benefits are solely being bolstered by turbulence among the many conventional applied sciences.”
Whereas inflationary pressures have pushed up the price of low-carbon applied sciences after a few years of fast decline, the IEA notes that “the costs of all clear power applied sciences in the present day are considerably decrease than a decade in the past [and] they continue to be aggressive with fossil gas alternate options”.
It provides that there are indicators that price pressures are easing and that expertise prices will “proceed to pattern downward”, though larger borrowing prices “complicate venture economics” for now.
Total, regardless of all these challenges, the IEA sees a a lot brighter outlook for low-carbon applied sciences than it did final yr, attributable to extra beneficial insurance policies and different elements.
The report lays out the explanations for this brighter outlook, which it says “supplies hope for the best way ahead”. It explains:
“Funding in clear power has risen by 40 per cent since 2020. The push to convey down emissions is a key motive, however not the one one. The financial case for mature clear power applied sciences is robust. Vitality safety can be an necessary issue, significantly in fuel-importing nations, as are industrial methods and the will to create clear power jobs.”
Because of this, it has as soon as once more massively boosted its outlook for international photo voltaic progress, with capability now seen reaching greater than 4,000 gigawatts (GW) by 2030 and 12,000GW by 2050, as proven by the pink line within the determine beneath. That is up 56 per cent in 2030 and 69 per cent in 2050 on final yr’s outlooks.
Furthermore, the IEA’s pre-Paris outlook for international photo voltaic capability of some 1,405GW in 2050 (blue) is about to be handed in 2023, with installations having already reached a complete of 1,145GW final yr.
Previous and anticipated future international photo voltaic capability, gigawatts, 2010-2050, in IEA world power outlooks from 2015 (“new insurance policies state of affairs”), 2021, 2022 and 2023 (“acknowledged insurance policies state of affairs”). Chart by Simon Evans for Carbon Transient.
This yr’s outlook sees international photo voltaic capability rising by some 344GW in 2023 – greater than double the 163GW added in 2021 – with additions reaching practically 500GW in 2030.
These numbers characterize vital upgrades to anticipated photo voltaic progress, for which the IEA has been repeatedly criticised up to now. Nonetheless, the numbers stay properly wanting projections from BloombergNEF, which expects photo voltaic additions to achieve greater than 700GW in 2030.
This yr’s WEO appears at what would occur if photo voltaic grows much more rapidly – a state of affairs that it says is supported by ample manufacturing capability.
On this “NZE photo voltaic case”, capability additions would exceed 800GW in 2030, seen within the determine beneath. International use of coal and gasoline to generate electrical energy would every be 15 per cent decrease than anticipated beneath present coverage settings – and CO2 emissions within the energy sector would even be 15 per cent decrease.
Left panel: Annual international additions of photo voltaic (yellow columns) and battery capability (blue) in 2022 and in 2030 beneath the principle STEPS pathway versus the “NZE photo voltaic case”. Proper panel: International CO2 emissions from electrical energy technology in 2022 and 2030 beneath the identical eventualities. Supply: World Vitality Outlook 2023.
So as to combine such giant quantities of variable photo voltaic technology into electrical energy networks, the IEA says it might be “essential” to scale up battery storage capability to match. It provides:
“Measures to modernise and increase networks, facilitate demand response and increase energy system flexibility would even be crucial.”
In a press assertion summarising the modified circumstances mirrored on this yr’s outlook, Birol says the shift to low-carbon applied sciences is now “unstoppable”:
“The transition to scrub power is going on worldwide and it’s unstoppable. It’s not a query of ‘if’, it’s only a matter of ‘how quickly’ – and the earlier the higher for all of us.”
Birol goes on to criticise these calling for brand spanking new investments in oil and gasoline within the identify of power safety, saying such claims “look weaker than ever”. He says:
“Governments, firms and buyers have to get behind clear power transitions somewhat than hindering them. There are immense advantages on provide, together with new industrial alternatives and jobs, larger power safety, cleaner air, common power entry and a safer local weather for everybody. Making an allowance for the continuing strains and volatility in conventional power markets in the present day, claims that oil and gasoline characterize secure or safe selections for the world’s power and local weather future look weaker than ever.”
Along with boosting the outlook for photo voltaic in its important STEPS pathway, the IEA additionally sees 20 per cent extra electrical autos on the world’s roads and 13 per cent extra wind energy capability by 2030.
These modifications contribute to the decrease fossil gas demand seen within the previous part. The IEA sees coal demand in 2050 being 9 per cent decrease than anticipated final yr, oil down 6 per cent and gasoline 3 per cent.
The opposite main shift since final yr’s outlook is the structural modifications in China’s economic system, the place progress is slowing and shifting in the direction of much less carbon-intensive sectors.
The outlook offers particular consideration to this slowdown, which it says is the results of ongoing strains within the Chinese language property sector and long-term decline in its working-age inhabitants.
The press launch accompanying the outlook says these modifications will end in a peak after which decline in China’s power demand and a structural decline for fossil fuels and CO2 emissions:
“China, which has an outsize affect on international power traits, is present process a significant shift as its economic system slows and undergoes structural modifications. China’s whole power demand is about to peak across the center of this decade, the report initiatives, with continued dynamic progress in clear power placing the nation’s fossil gas demand and emissions into decline.”
These modifications level to a peak within the nation’s demand for fossil fuels in 2024, as proven by the purple columns turning unfavorable within the chart, beneath proper. After this level, the IEA sees progress in low-carbon sources of power (inexperienced columns) greater than protecting rising demand.
Left panel: Change in chosen financial indicators in China relative to their peak ranges. Proper panel: Annual change in China’s power demand and the contributions to progress from unabated fossil fuels (purple) and low-carbon sources (inexperienced). Supply: World Vitality Outlook 2023.
Along with this central case, the IEA additionally appears at what would occur if China’s financial slowdown goes even additional, with “slower however finally ‘larger high quality’ progress”. On this “low” case, China’s emissions would fall an extra 0.8GtCO2 in 2030 to almost 15 per cent beneath 2022 ranges.
In another “excessive” case, China’s emissions would nonetheless peak by 2030 – in keeping with the federal government’s worldwide local weather purpose – however at a degree 0.8GtCO2 larger than within the central STEPS state of affairs, due specifically to stronger coal demand.
Clear power outspending fossil fuels
International funding in “clear power”, at US$1.8tn in 2023, is already practically twice as excessive as fossil gas spending (US$1tn), the IEA says, as proven within the leftmost column within the determine beneath.
The IEA expects this disparity to develop over the approaching many years. Clear power would outspend fossil fuels by 2.5 occasions in 2030 beneath present coverage settings (STEPS).
If nations get on observe to remain beneath 1.5°C (NZE), then clear power spending would attain US$4.3tn in 2030, whereas fossil gas funding would fall 60 per cent to simply US$0.4tn, some 10 occasions decrease.
Funding in power, in $tn (columns, left axis) and as a share of worldwide GDP ( per cent, yellow circles, proper axis). Supply: World Vitality Outlook 2023.
Though the shift in the direction of net-zero would require vital upfront capital spending, the IEA figures present that the additional funding would solely quantity to round 1 per cent of worldwide GDP.
Furthermore, a lot of this additional funding could be paid again in decrease operating prices, with fossil gas importing nations such because the UK and China additionally benefiting from decrease commerce deficits and growing power safety. The report explains:
“The big enhance in capital funding within the NZE state of affairs is partly compensated for by decrease working prices that observe the shift away from fossil fuels in the direction of capital-intensive clear applied sciences. For fossil gas importing nations, the shift in the direction of clear power additionally improves commerce balances and enhances power safety because the share of power met by domestically sourced renewables begins to rise.”
‘Very troublesome’ path to 1.5°C
The IEA says present authorities insurance policies within the STEPS pathway would peak international CO2 emissions by 2025, adequate to maintain international warming to 2.4C by 2100.
This can be a vital enchancment on the three.5C of warming it anticipated beneath the insurance policies in place earlier than the Paris Settlement. Furthermore, warming could be restricted to 1.7C if all nations meet their near- and longer-term local weather pledges and net-zero targets, the company says.
But this is able to nonetheless depart a big hole to staying beneath 1.5°C, a path that the IEA says is “very troublesome – however stays open”.
The outlook reiterates the company’s 5 concepts for maintaining the door to 1.5°C open at COP28, which it has been selling all yr – and a few of which have been taken up by the COP28 presidency.
Its urged targets are that by 2030, the world ought to: triple the capability of renewable power sources to 11,000GW; double the annual price of power effectivity enhancements to 4 per cent; and reduce methane emissions from fossil gas extraction by 75 per cent, as proven within the determine beneath.
Left: International renewable power capability, gigawatts. Centre: Annual price of enchancment within the power depth of the worldwide economic system – the speed of power use per unit of GDP. Proper: International power sector methane emissions, million tonnes. Supply: World Vitality Outlook 2023.
These “mature, tried and examined, and typically very price efficient” actions would supply greater than 80 per cent of the emissions cuts wanted by 2030 to get on observe for 1.5°C, the IEA says.
So as to obtain these objectives, the IEA says there might be a necessity for “revolutionary, large-scale financing mechanisms” to assist low-carbon investments in rising and growing nations.
It additionally requires “measures to make sure an orderly decline in using fossil gas” comparable to ending the approval of recent unabated coal energy crops.
Lastly, the IEA notes that there’s “noticeably much less reliance on early-stage applied sciences to achieve net-zero emissions” on this yr’s outlook as in contrast with 2021. It explains:
“At the moment, applied sciences not accessible available on the market, ie at prototype or demonstration part, delivered practically 50 per cent of the emissions reductions wanted in 2050 to achieve net-zero. Now that quantity is round 35 per cent.”
Evaluation of the WEO was performed by Carbon Transient’s Simon Evans and Verner Viisainen.
