End new oil, gas and coal funding to reach net zero emissions by 2050, says top global watchdog

 Any abrupt halt to new oil and gas projects by next year still appears unlikely, says the International Energy Agency.
Any abrupt halt to new oil and gas projects by next year still appears unlikely, says the International Energy Agency.PHOTO: REUTERS

LONDON (REUTERS) - 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 on Tuesday (May 18), in the top global watchdog's starkest warning yet to curb fossil fuels.

Any abrupt halt to new oil and gas projects by next year still appears unlikely, however, 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," Dr Fatih Birol, IEA executive director, told Reuters.

"It is up to investors to chose whatever portfolio they prefer but there are risks and rewards," he added.

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 biggest privately owned renewable energy group.

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

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

"(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 IEA, whose analysis and data underpin energy policies of governments and companies around the world, underestimated the role of renewable power in its reports.

Renewables

To achieve net zero, global investment in fossil fuel supply should fall from US$575 billion (S$765 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, IEA said.

Asked about IEA's finding about no new fossil fuel projects, White House domestic climate adviser Gina McCarthy, at a Columbia University Centre on Global Energy Policy virtual event, said: "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, IEA added.

Massive deployment of renewable energy will be needed.

Almost 90 per cent of electricity generation should come from renewables by 2050 and most of the rest from nuclear power.

Solar photovoltaic additions should reach 630 gigawatts (GW) 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 IEA, with around half of emissions reductions by mid-century compared with last year 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 United States 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. The company did not reply to a Reuters question on how IEA's analysis could affect its plans for exploration and development.

Exxon Mobil referred questions to industry group Oil and Gas Climate Initiative, which said it is working with IEA and continues to "support and scale the solutions that contribute to" a low carbon energy future.

Every month from 2030, 10 industrial plants will need to be fitted with carbon-capture technology, three new hydrogen-based industrial plants will need to be built and 2GW of electrolyser capacity for green hydrogen production needs to be added at industrial sites, the report said.

Energy investment will need to rise to US$5 trillion a year by 2030 to achieve net zero from US$2 trillion today, it said, that will provide a boost to global annual gross domestic product growth.

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