End new oil, gas and coal funding to reach net zero: IEA

LONDON • Investors should not fund new oil, gas and coal supply projects if the world wants to reach net zero emissions by mid-century, the International Energy Agency (IEA) said in the top global watchdog's starkest warning yet on curbing fossil fuels.

But any abrupt halt to new oil and gas projects by next year appears unlikely, as energy majors' spending plans still tilt heavily towards hydrocarbons, and oil-producing nations such as Norway plan new licensing rounds.

"The pathway to net zero is narrow but still achievable. If we want to reach net zero by 2050 we do not need any more investments in new oil, gas and coal projects," IEA executive director Fatih Birol told Reuters on Tuesday. "It is up to investors to chose whatever portfolio they prefer but there are risks and rewards," he added.

In its landmark "Net Zero by 2050" report released the same day, the IEA said energy investment will need to rise to US$5 trillion (S$6.65 trillion) a year by 2030 to achieve net zero, from US$2 trillion now. A surge in clean energy investment will create millions of new jobs and lift global economic growth, the report said.

The 2015 Paris Agreement on climate change aims to cap the rise in temperatures to as close as possible to 1.5 deg C above pre-industrial times to avoid the most devastating impacts of climate change, which requires net zero greenhouse gas emissions by 2050.

"This is an incredibly exciting study that indicates a direction of hope," said Mr Francesco Starace, chief executive at Rome-based Enel, the world's largest privately owned renewable energy group.

The number of countries which have pledged to reach net zero has grown, but even if all their commitments are achieved, there will still be 22 billion tonnes of carbon dioxide produced worldwide in 2050 which would lead to a temperature rise of around 2.1 deg C by 2100, the IEA said.

It sets out more than 400 milestones to achieving net zero in the report, intended to guide the next round of global climate talks - to be held in November in Scotland - and was requested by the British head of those talks.

"(This is) a massive blow to the fossil fuel industry. This is a complete turnaround of the fossil-led IEA from five years ago," said Mr Dave Jones, global programme lead at Ember think-tank.

Environmental activists had previously said the IEA, whose analysis and data underpin energy policies of governments and companies around the world, underestimated the role of renewable power in its reports.

To achieve net zero, global investment in fossil fuel supply should fall from US$575 billion on average over the past five years to US$110 billion in 2050, with upstream fossil fuel investment restricted to maintaining production at existing oil and natural gas fields, the IEA said.

Asked about the IEA's finding about no new fossil fuel projects, White House domestic climate adviser Gina McCarthy said at a Columbia University Centre on Global Energy Policy virtual event: "I think that's one of the things that we have to think about and struggle with."

There should be no sales of new internal combustion engine passenger cars and the global electricity sector must reach net zero emissions by 2040, the IEA added.

Almost 90 per cent of electricity generation should be from renewables by 2050 and most of the rest from nuclear power. Solar photovoltaic additions should reach 630 gigawatts a year by 2030 and wind power needs to rise to 390GW. Together, this is four times the annual record set last year for new capacity additions.

Annual emissions savings will depend heavily on investment and new technology such as direct air carbon capture and green hydrogen, according to the IEA, with around half of emissions reductions by mid-century compared to 2020 set to come from technologies currently under development.

"IEA itself regularly acknowledges that half the technology to reach net zero has not yet been invented. Any pathway to net zero must include continued innovation and use of natural gas and oil, which remains crucial to displacing coal in developing nations and enabling renewable energy," said Mr Stephen Comstock, vice-president of corporate policy at the American Petroleum Institute, the largest US industry group.

Norway's largest oil and gas firm, Equinor, said the report was an important contribution to its efforts to develop a business portfolio for a future where fossil-fuel demand declines significantly.

Behavioural changes by consumers will also be needed, along with replacing regional air travel with rail, as well more energy efficient building design.

REUTERS