The International Energy Agency (IEA) has just published a landmark report setting out it's roadmap to net zero carbon emissions and which pretty well signals the death knell for the fossil fuel industry (link to pdf report). They say the world needs a radical shift to renewable energy to reach net zero carbon emissions by 2050 and limit warming to 1.5C. We are currently at 1.2C compared to pre-industrial levels. The IEA have been regarded as captive to the oil and gas industry so this report is all the more significant and probably one of the strongest signals yet that the transition to a cleaner sustainable energy future is well underway.
The IEA is the world's most influential energy modelling agency. so when it calls for an immediate end to licensing and financing of all new fossil fuel extraction worldwide and instead a massive investment in clean energy, it is very BIG NEWS.
IEA pathway to net zero
The energy sector is responsible for 75% of global greenhouse gas emissions and therefore holds the key to tackling climate change "perhaps the greatest challenge humankind has faced". The number of countries that have pledged to reach net zero has increased significantly over the past year and now covers around 70% of emissions but sadly these pledges are not yet matched by near-term policies and measures. Therefore all countries must significantly strengthen and then implement their energy and climate policies. Further delays in action will push net zero by 2050 out of reach.
|The future is dominated by renewables |
(red line is renewables)
To achieve net zero by 2050, the report sets out 400 steps in it's roadmap. Here are some of the main points:
- From today, no new coal mines and an end to new oil or gas exploration
- No new gas-fired boilers after 2025 globally
- Sale of new petrol & diesel vehicles to end by 2035 globally
- EVs to increase from currently 5% of global sales to 60% by 2030
- Charging points for EVs to increase from 1 million today to 40m by 2030
- Hydrogen to become one of the 'pillars of decarbonisation'
- Wind and solar to overtake coal, oil and gas by 2030
- Renewables will drive the transition and increase from 29% now to 90% by 2050
“IEA analysis has been used to prop up the fossil fuel system,” said Kingsmill Bond, an energy strategist at Carbon Tracker, a London-based think tank that studies the financial impact of climate change. “The fact the IEA specifically has come out with this analysis suggesting that change is possible is extremely significant.”
Obviously I was pleased to see the report gives a big thumbs-up for hydrogen as I have quite a large proportion of my investments in this sector. The proportion of low carbon hydrogen will increase from 10% currently to 70% by 2030 and around half of this will be green hydrogen from electrolysis. Stored hydrogen will be used to balance fluctuating electricity demand. During the coming decade there will be a huge increase in the installation of end-use equipment for hydrogen including 15 million fuel-cell vehicles on the road by 2030. By 2050, hydrogen will account for one third of global fuel use in trucks and 60% of fuel used in shipping.
The IEA roadmap will be an important document to inform the COP 26 gathering of world climate leaders in Glasgow in November (postponed from 2020 due to Covid). The modelling assumes a huge increase in the investment into clean energy to $5 trillion per annum by 2030.
|40 million charging points by 2030|
These are critical times and the report shows that the energy landscape will need to change dramatically over the coming decade. Inevitably this will mean capital markets will also shift away from fossil fuel to renewables as the risks from continuing to finance and insure oil, gas and coal will become unacceptable.
However influential, it must be remembered that the publication of this report is merely a warning to global governments and big business. It outlines what is needed over the coming decade and beyond to limit global warming but does not predict what will actually happen. It will not stop the big oil majors drilling new fields or governments issuing licences for fossil fuel exploration and extraction. But it will be very influential in the court of public opinion and upon which the industry and governments are very dependent.
So, last orders have been called and the 10 minute drink-up bell sounded for big oil and coal...it's time to leave the saloon. The industry must quickly embrace the new world order of clean energy, reinvent itself and stop compromising the future for our children and grandchildren.
Shell, BP, Exxon...over to you.
Feel free to leave a comment below if you have any thoughts on this new report. How will it change the way you invest, if at all?