IEA: Fossil fuel emissions to peak soon, green transition must speed up

This article was licensed through Dow Jones Direct. The article was originally published on The Straits Times.

While some countries have been burning more fossil fuels such as coal in 2022 in response to natural gas shortages caused by the war in Ukraine, that effect is expected to be short-lived, the International Energy Agency (IEA) said on 27th October in its World Energy Outlook, which forecasts global energy trends to 2050.

And for the first time, the agency now predicts that worldwide demand for every type of fossil fuel will peak in the near future.

The report says the energy crisis sparked by Russia's invasion of Ukraine is likely to speed up rather than slow down the global transition away from fossil fuels and towards cleaner technologies such as wind, solar and electric vehicles.

One major reason for a peak in emissions is that countries have responded to soaring fossil fuel prices in 2022 by embracing wind turbines, solar panels, nuclear power plants, hydrogen fuels, electric vehicles and electric heat pumps.

In the United States, Congress approved more than US$370 billion (S$521 billion) in spending on such technologies under the recent Inflation Reduction Act. Japan is pursuing a new "green transformation" programme that will help fund nuclear power, hydrogen and other low-emission technologies. China, India and South Korea have all ratcheted up national targets for renewable and nuclear power.

And yet, the shift towards cleaner sources of energy still is not happening fast enough to avoid dangerous levels of global warming, the IEA said, not unless governments take stronger action to reduce their planet-warming carbon dioxide emissions over the next few years. Based on policies put in place by national governments, global coal use is expected to start falling in the next few years, natural gas demand is likely to hit a plateau by the end of this decade and oil use is projected to level off by the mid-2030s.

Meanwhile, global investment in clean energy is expected to rise from US$1.3 trillion in 2022 to over US$2 trillion annually by 2030, a significant shift, the IEA said.

"It is notable that many of these new clean energy targets are not being put in place solely for climate change reasons," said Dr Fatih Birol, the IEA's executive director. "Increasingly, the big drivers are energy security as well as industrial policy -- a lot of countries want to be at the leading edge of the energy industries of the future."

Current energy policies put the world on track to hit peak carbon dioxide emissions by 2025 and warm roughly 2.5 deg C by 2100 compared with pre-industrial levels, the IEA said. That is in line with projections released on 26th October by the United Nations, which analysed nations' stated promises to tackle emissions.

In contrast, many world leaders hope to limit average global warming to around 1.5 deg C to avoid some of the most dire and irreversible risks from climate change, such as crop failures and ecosystem collapse. That would require much steeper cuts in greenhouse gases, with emissions not just peaking in the next few years but falling nearly by half by the end of this decade, scientists said.

"If we want to hit those more ambitious climate targets, we'd likely need to see about US$4 trillion in clean energy investment by 2030," Dr Birol said, or double what the agency now projects. "In particular, there is not nearly enough investment going into the developing world."

In 2022, global carbon dioxide emissions from fossil fuels are expected to rise roughly 1 per cent and approach record highs, in part because of an uptick in coal use in places such as Europe as countries scramble to replace lost Russian gas. Coal is the most polluting of all fossil fuels.

Still, that is a far smaller increase than feared when war in Ukraine first broke out. The rise in emissions would have been three times as large had it not been for a rapid deployment of wind turbines, solar panels and electric vehicles worldwide, the IEA said. Soaring energy prices and weak economic growth in Europe and China also contributed to keep emissions down.

And the recent rise in coal use may prove fleeting. European nations are planning to install roughly 50 gigawatts worth of renewable power in 2023, which would be more than enough to supplant 2022's increase in coal generation. And globally, the agency does not expect investment in new coal plants to increase beyond what was already projected.

Russia, which had been the world's leading exporter of fossil fuels, is expected to be hit especially hard by the energy disruptions it has largely created.