According to the International Energy Agency the world is experiencing its “first global energy crisis.”
In its latest World Energy Outlook, the agency said global rising energy prices and the widespread economic pain caused by energy inflation due to Russia’s invasion of Ukraine has led to the current crisis.
But despite the energy crisis, the IEA finds a reason for optimism.
As we emerge from the crisis there are “profound and long-lasting changes that have the potential to hasten the transition to a more sustainable and secure energy system.”
These changes, in the United States, Europe, China, and India, such as energy policies could, over the long term, lead to greater sustainability and stability, including more renewable energy, the report concluded.
The report, released last Thursday, October 27, comes on the heels of another global authority’s prophecy. The day before WEO was released, the United Nations’ World Meteorological Organization (WMO) published its latest analysis, bleakly titled “More bad news for the planet: greenhouse gas levels hit new highs.”
In the report, WMO records the biggest increase in methane emissions ever since the organization began measuring 40 years ago. According to the report, carbon dioxide, methane, and nitrous oxide all reached new record highs in 2021.
“WMO’s Greenhouse Gas Bulletin has underlined, once again, the enormous challenge – and the vital necessity – of urgent action to cut greenhouse gas emissions and prevent global temperatures from rising even further in the future,” said WMO Secretary-General Prof. Petteri Taalas.
As COP27, the 27th Conference of the Parties under the United Nations Framework Convention on Climate Change, nears, WMO says it hopes to galvanize negotiators into more ambitious action to achieve the Paris Agreement goal to limit global warming to well below 2, preferably to 1.5 °C, compared to pre-industrial levels. The conference is set to begin on November 6 in Sharm El-Sheikh, Egypt.
The IEA’s report doesn’t contradict the WMO’s. Instead, the report explores three scenarios differentiated by assumptions made on government policies.
The three scenarios are 1) the Stated Policies Scenario (STEPS) which shows the trajectory implied by today’s policy settings; 2) the Announced Pledges Scenario (APS) which assumes all aspirational targets announced by governments are achieved on time and in full, including long-term net zero and energy access goals; and 3) the Net Zero Emissions by 2050 (NZE) Scenario which ambitiously maps out a way to pull off 1.5 °C stabilization in the rise in global average temperatures, alongside universal access to modern energy by 2030.
As found in STEPs, new policies are projected to propel annual clean energy investment to more than $2 trillion by 2030, a quarter of which will be in emerging and developing economies. That’s a rise of more than 50% from today. This stark surge in clean energy investment is due to large pushes by the world’s biggest emitters.
Thanks in large part to the Inflation Reduction Act, the report writes annual solar and wind capacity additions in the U.S. will grow two-and-a-half times over today’s levels, while electric car sales balloon by seven times.
In China, coal and oil consumption will both peak before the end of the decade, and embark on a downturn after 2030. New targets continue to spur the massive build-out of clean energy in the country.
In the EU projected deployment of renewables and efficiency improvements are expected to reduce the union’s natural gas and oil demand by 20% this decade, and coal demand by 50%. The push is due to additional urgency to find new sources of energy outside of Russian gas.
In Japan, Green Transformation (GX) program provides a major funding boost for technologies including nuclear, low-emissions hydrogen, and ammonia, and in Korea nuclear and renewables will likely play a larger role in its energy mix.
Lastly, the IEA’s STEPs prophecy sees India making further progress towards its domestic renewable capacity target of 500 gigawatts (GW) in 2030. By the end of the decade, renewables should meet nearly two-thirds of the country’s rapidly rising demand for electricity.
In many places, fossil fuels are expected to peak, and in the long term, renewable electricity generation will be sufficiently fast enough to outpace growth in our total electricity output.
But in spite of these leaps, it’s still not enough.
By 2030, fossil fuel shares would likely remain stubbornly high, sitting just below 75% compared to the decades-old average of 80%. By 2050, it would be about 60%, associated with a rise of 2.5 °C by 2100.
Even if the world fully achieved all climate pledges, IEA officials write that the world would move toward safer ground, “but there is still a large gap between today’s ambitions and a 1.5°C stabilization.”
In APS, emissions would reach a faster decline to 12 gigatons by 2050, reflecting additional pledges made over the past year, most notably by India and Indonesia. By 2100, the temperature would be around 1.7°C. While this is significantly better than the 2.5°C of warming projected in STEPs, it doesn’t meet the 1.5°C outcomes that would be achieved in the NZE Scenario.
Thus, while there are silver linings within our current achievements and pledges, they remain inadequate in reaching net zero by 2050 and less than 1.5 °C of warming. Still, there is hope. As the report puts it, the 2010s were likely the “golden age of gas.” While modernly, many sectors are poised for a clean energy transformation, rapid transitions will ultimately depend on investment. Today those investments are about $1.3 trillion, and by 2030 will amass $2 trillion. But in order to reach net zero by the same date, those investments will need to swell to $4 trillion.
The speed of investors jumping on the bandwagon hinges on a slew of granular issues, most notably permitting provisions. As exemplified by the United States’ desperate need for permitting reform, the IEA officials calculate that permitting and construction of a single overhead electricity transmission line can take up to 13 years, with some of the longest lead times in advanced economies. When the critical minerals needed for the clean energy transition are thrown into the mix, this time increases by 3 years.
Delays like this could have adverse effects on our clean energy transition. In the event that the transition doesn’t pick up to the speed of the NZE scenario, the world will likely see a higher investment in oil and gas to avoid fuel price volatility, despite the jeopardy it will put the 1.5 °C goal in.
In concluding the executive summary, the IEA writes “The energy crisis promises to be a historic turning point towards a cleaner and more secure energy system.” Economic, climate, and security priorities all align in the favor of clean energy, but in all scenarios, it is up to the coalition of countries and investors within them to make that happen, requiring, at least, a redoubling of efforts. In determining if this will happen, all eyes will be on the upcoming COP27.