Oil demand to fall 50% by 2040, 75% by 2050 to meet net-zero emissions: IEA
London, (Quantum Commodity Intelligence) - New investments in oil, gas and coal must stop this year if the world is to become net-zero carbon by 2050 and meet its goal to cap global warming at 1.5C, the International Energy Agency (IEA) said Tuesday in a long-awaited report.
Oil demand must collapse by 75% to 24 million bpd, coal use without technology to capture emissions must fall by 90% to just 1% of energy use and gas demand must fall by 55% to 1.75 billion cm over the next three decades, the report said.
At the same time annual investment in new technology must increase by 150% to $5 trillion as the world shifts from oil liquids to electrons to power its cars, ships and planes.
"We need a historical surge in investment," said Fatih Birol, the head of the agency.
Specifically, annual investment in transmission and distribution grid needs to more than treble from $260 billion to $820 billion by the end of the decade to provide a 40-fold increase in public charge points for electric vehicles and the batteries to propel them.
As a result, the percentage share of wind and photovoltaic solar of electricity generation will need to rise from a little under 10% today to almost 70% by 2050.
With nuclear making up the remainder, oil consumption needs to halve by 2040 and halve again by 2050.
Influential
As the energy research centre of the OECD, IEA figures are used by governments in long-term planning decisions, making the report, environmentalists say, hugely influential.
Environmental groups have long called on the agency to publish a pathway to a net-zero target in a bid to encourage investment in clean technology and the phase out of fossil fuels now.
"Finally the IEA is starting to get it: If we're to have a fighting chance of meeting the objectives of the Paris Agreement, the world needs to phase out fossil fuels. We can't even burn – or afford to burn – all the reserves we've currently got," said Jennifer Morgan, executive director of Greenpeace in response to the report.
The report – called Net Zero by 2050 – said all governments would need to implement existing policies meant to achieve their commitments made under the 2015 Paris Agreement.
While it acknowledged countries that account for 70% of all GHG emissions have pledged to become net-zero by 2050, it said most of those pledges are not underpinned by policies to set those economies on such a pathway.
The IEA urged nations to implement mandates and standards to: drive consumer spending to lower-emissions goods and services; establish targets and competitive auctions in the power sector to incentivise wind and solar deployment; phase out fossil fuel subsidies and introduce carbon pricing on goods.
By pumping out billions of tonnes of carbon dioxide, the world's energy sector produces about 75% of global greenhouse gas emissions, placing a greater burden on energy companies to solve the climate change trilemma – how to provide clean, affordable and reliable energy.
OPEC role
Such a collapse in oil demand means that the share of oil supply controlled by countries that are members of OPEC will surge from 37% currently, to an all-time high of 52%, with production falling by 65% in those countries, according to Quantum calculations.
As a result, annual per capita income from oil and gas investments will fall by about 75% from $1,800 to $450 in a decade - a dynamic that will put pressure on society and the economy to find new sources of revenue.
"Those countries whose economies are relying on oil and gas revenues will face huge challenges," said the IEA's Birol.
"We came up with over 400 milestones, and one of them is — there is no need for new oil, gas and coal development, which includes no need for oil and gas exploration investments."
Oil-producing countries are already investing in energy transition technologies, with renewables set to take 40% of $245 billion of power generation investment in the MENA region in the next 5 years, according to a report released earlier this month by APICORP.
Countries across the region with favourable conditions for solar and wind power generation could benefit from a surge in global demand for green hydrogen, which is made using renewable electricity.
For example, Saudi Arabia is developing a $5bn plant with an annual capacity of 1.2 million mt of green ammonia, to be the world's largest, located in Neom, Saudi Arabia's $500bn Giga project.
Russia, an OPEC+ member, has also stated an aim to provide 20% of global hydrogen demand in 2030 and supply 33.4 million mt of the product by 2050, as part of its Energy Strategy 2035.
