Concerns about the latest World Energy Outlook

Last week EiD published a blog that was critical of the IEA. This was but one of a series of blogs that have been concerned by the messages and analysis from the IEA. In the week that the IEA has published its most recent World Energy Outlook, Kelly Trout writes on the Price of Oil website about some of her concerns. What are your views? Let us know.

 

The IEA and WEO 2019: Still working for fossil fuels, not global climate goals

To be relevant in a time of climate crisis, the world’s top energy modelling agency should be charting a robust and credible pathway towards phasing out fossil fuels and achieving global climate goals. Instead, with the release of its 2019 World Energy Outlook, the International Energy Agency (IEA) is continuing to provide cover for fossil fuel investments that add up to climate disaster.

In this analysis, we’ll look at the real reform that investors, climate scientists and advocates, and business leaders have been demanding from the IEA – and unpack how the IEA has responded or not in 2019.

This is the short summary: A year following the release of the Intergovernmental Panel on Climate Change’s (IPCC) alarm-ringing report on Global Warming of 1.5 Degrees, the IEA has failed the most important test: It has failed to put a robust and realistic road map to staying within 1.5 degrees Celsius (°C) front and center in its flagship publication.

If the world is going to limit warming to 1.5°C – and limit the human suffering and economic damage that the escalating climate crisis is causing – then energy decisions need to line up with that goal right now. Yet, the World Energy Outlook (WEO), used by governments and investors all over the world to guide energy decisions, is still centering a trajectory heading towards climate breakdown.

In the following analysis we dig further into these questions:

  • Does WEO 2019 put climate ambition at its center instead of business as usual? (No.)
  • Does WEO 2019 model the full ambition of the Paris Agreement? (No.)
  • Does WEO 2019 embrace precaution on large-scale deployment of unproven technologies? (No.)
  • Does WEO 2019 point towards unsustainable levels of fossil fuel investment? (Yes.)

What’s needed: Center climate ambition, not business as usual

As Bloomberg columnist Liam Denning put it so well earlier this year: “When I use Google Maps, it gives me several options, but I usually take the one it highlights without thinking too much about it.”

The WEO, Denning explains, is like “a map used by the people, companies and institutions planning and building the roads. If its scenarios point a certain way, then investments will be made accordingly in such things as power plants, pipelines and oil and gas fields, facts on the ground with multi-decade lifespans.”

Unfortunately, for years, the IEA’s “highlighted route” has been a business-as-usual scenario that, in the IEA’s assessment, leads to 2.7 to 3.2°C of global warming.

The consequences are real. Because it gets the bulk of the spotlight, media, investors, corporations, and governments routinely use this “central” scenario as a prediction of future demand for fossil fuels, and it becomes a self-fulfilling prophecy. In fact, WEO projections of a future full of fossil fuels have been used to justify projects like the TransMountain tar sands pipeline in Canada and the Adani Carmichael coal mine in Australia.

What’s in WEO 2019: Business as usual

The IEA continues to give a pathway towards climate breakdown the central position in WEO 2019 rather than prioritize the shift towards renewable energy that we need.

The IEA has made some small, positive changes in 2019. The business-as-usual, 3°C scenario got a name change. Instead of the “New Policies Scenario,” which misleadingly made it sound like the scenario modelled new ambition, it is now called the “Stated Policies Scenario” or STEPS. The Sustainable Development Scenario (SDS), a secondary scenario that models greater ambition, receives incrementally more weight compared to previous years. And, in response to mounting calls for reform, the IEA discusses what an energy path towards stabilisation at 1.5°C might look like in a few pages at the very end of its Sustainable Development chapter.

However, a name change and brief exploration of 1.5°C scenarios do not deliver the fundamental shift in emphasis that’s needed: making a 1.5°C pathway the central scenario, and thus making the “default” path one of climate success, not failure. We do not have 10 years to wait for the IEA to gradually center greater ambition – that needs to happen immediately.

What’s needed: Model the full ambition of the Paris Agreement

In the Paris Agreement, governments committed to pursue efforts to limit warming to 1.5°C and hold it well below 2°C. The IPCC has since warned us that exceeding 1.5°C could severely escalate climate impacts like the flooding of coastal communities, rise of hunger and food shortages, and collapse of ecosystems, rightly refocusing attention on the more ambitious limit.

This will require a rapid rerouting of investments to drive a transformation of energy systems. IEA modelling, used all over the world to guide decision-making and justify investments, could play a highly influential role in steering energy investments in the direction that’s needed.

In WEO 2016, the IEA briefly sketched what it would take to limit warming to 1.5°C or 2°C without reliance on unproven, risky negative emissions technologies, admitting that its then-450 Scenario did not meet the ambition of the Paris Agreement. In 2017, it introduced the Sustainable Development Scenario, which is meant to reflect the goals of the Paris Agreement. However, as we’ve detailed previously, the SDS has not met that standard.

What’s in WEO 2019: Another sketch, not a 1.5°C scenario

As mentioned above, the IEA provides a sketch of a 1.5°C trajectory and discusses it in a few pages in WEO 2019. But a sketch is not a scenario equipped to steer investment decisions. The details are thin and are absent from the WEO’s data tables, a key resource used by governments and investors. The brief exploration of 1.5°C ambition – contained to roughly 7 out of more than 600 total pages of analysis – focuses more on how achieving this path would “be very difficult and very expensive” rather than on the human and economic benefits of avoiding significantly worse climate impacts.

Instead, the IEA again suggests that we should accept the SDS as “fully aligned” with the Paris goals. But the SDS does not fit that purpose. According to the IEA, the SDS would give a 66% chance of limiting warming to 1.8°C. The SDS is not a 1.5°C scenario.

In fact, the SDS has a 20-year ambition gap. The IPCC’s 1.5°C report finds that we need to reach net-zero carbon emissions globally by 2050 to have a reasonable chance at limiting warming to that level. By contrast, the 2019 SDS, just like the 2018 SDS, is on a track towards net-zero carbon emissions from energy by 2070.

As seen in the figure below, if you compare the SDS’s fossil fuel emissions trajectory to the IEA’s 2016 450 Scenario, it is still not significantly more ambitious by 2040. The SDS has significantly higher emissions than the 2°C scenario the IEA published in 2017, which it said would give a 66% chance of keeping warming below that level (the Faster Transitions Scenario).

What’s needed: Precaution on large-scale negative emissions

As we explained in a blog post about WEO 2018, the IEA’s previous claims about the full potential ambition of the SDS – that it is “within the envelope” of 1.5°C scenarios – have hinged on large-scale deployment of negative emissions technologies (NETs) beyond the scenario’s time frame. OCI has unpacked the dangers of this gamble in both 2018 and 2019.

Investors and climate advocates have called on the IEA to take a precautionary approach of not counting on large use of negative emissions technologies, because of the inherent risks that they add to the equation. NETs is a catch-all phrase for various methods that could remove carbon dioxide from the atmosphere, ranging from afforestation to bioenergy with carbon capture and storage (BECCS). In theory, these approaches could compensate for an overuse of fossil fuels or overshoot of carbon budget limits by sucking carbon back out of the atmosphere at a commensurate scale.

But this is just a theory. If carbon budgets are exceeded, and these technologies fail to materialize at scale or prove effective, then humanity’s chance at stabilizing the climate at agreed to levels would be gone. The IEA should be showing governments, investors, and businesses what it will take to meet our climate goals without large-scale reliance on the unknown.

What’s in WEO 2019: Misleading statements, not real precaution

In 2019, the IEA harkens back to some of its precautionary language from WEO 2016, when it warned that basing climate pathways on negative emissions “would imply relying, at scale, on yet unproven technology” and “also exacerbate the likelihood of adverse physical impacts arising from climate change.” WEO 2019 acknowledges that, “Many of the technologies or methods involved are unproven at scale, and could have negative consequences outside the energy system related to land use, biodiversity and food security.” But then the IEA appears to ignore its own advice.

Still looking to large-scale NETs, instead of increasing actual ambition

Rather than develop a precautionary 1.5°C scenario, the IEA continues to say that the SDS’s shortfall in ambition could be balanced out through massive reliance on NETs after 2050. Despite this being the IEA’s Sustainable Development Scenario, the IEA does not assess the potentially profound implications of such an approach for sustainable development.

The IPCC, on the other hand, warns that reliance on large-scale NETs is a “major risk in the ability to limit warming to 1.5°C.” It also cautions that certain scenarios may depend on levels of NETs that are not technically feasible or socially or ecologically sustainable. The IPCC included four illustrative pathways in its special report that show different levels of reliance on NETs and discuss the implications for sustainable development: two with low NETs (P1, P2), one with high NETs (P3), and one with very high NETs and a high overshoot of the 1.5°C threshold (P4). By 2050, the SDS’s emissions are higher than all four pathways, as shown in the figure below.

Glossing over the consequences

Even though the emissions of the SDS surpass those of other high-NETs pathways, the IEA uses misleading terminology to suggest that the SDS could be rerouted towards 1.5°C with relatively reasonable levels of NETs. The IEA states that the SDS could give a 50% chance at stabilising temperatures at 1.5°C, with a “level of net negative emissions significantly smaller than that used in most scenarios assessed by the IPCC.”

The IEA’s use of the word “net” hides a lot. It is the total (gross) deployment of negative emissions technologies, both annually and cumulatively, that matters for their technical feasibility and consequences to land use, biodiversity, and food security. A study by Smith et al. (2015) estimated that trapping 12 Gt of CO2 through BECCS in 2100 would require using 25 to 46 percent of the world’s arable plus permanent cropland. The IEA’s sketch of a post-2050 trajectory for the SDS, if it were to return temperatures to 1.5°C, involves sequestering more than that in 2100 – a net of 15 Gt of CO2 (the total amount could be higher).

n essence, the IEA is using misleading scenario comparisons – and ignoring the temperature overshoot and sustainability risks emphasized by the IPCC – to make it appear like the SDS is more ambitious and more precautionary than it is in reality.

What’s needed: Fewer fossil fuels

Who benefits when the IEA centers the WEO on business as usual rather than a credible 1.5°C energy scenario? The fossil fuel industry and its allies.

Oil companies and their lobby groups routinely point to IEA scenarios to justify why lots more investment in oil and gas is needed. The Canadian Association of Petroleum Producers routinely uses the WEO to justify the expansion of the tar sands. In its 2018 Financial and Operating Review, ExxonMobil cites the WEO as showing that $21 trillion in cumulative investment in oil and gas is needed from 2018 to 2040. Last year, Norway’s energy minister cited the SDS to justify Norway’s continued expansion of oil production, saying Norway will “be there as a stable producer of oil and gas for decades to come.” In the New York Times, BP CEO Bob Dudley also cited the SDS as a reason why the world needs more oil and gas.

But, as OCI analysis has shown, the fossil fuel industry already has more oil, gas, and coal under development – in already-producing or under-construction projects – than we can afford to burn. Governments should be urgently working towards a managed phase-out of the fossil fuel economy, not its expansion. Scenarios from the IPCC that model a precautionary path to 1.5°C with minimal reliance on NETs, such as the P1 pathway shown above, include sharper declines in fossil fuels compared to WEO scenarios.

What’s in WEO 2019: Calls for more fossil fuel investment

By retaining its emphasis on the 3°C Stated Policies Scenario, the IEA is continuing to focus the attention of governments and investors on a path we cannot afford to take. This path includes cumulative fossil fuel investment of USD 22.8 trillion through 2040.

WEO 2019 warns of the need to focus on “the emissions that are ‘locked in’ to existing systems.” The IEA acknowledges that its Sustainable Development Scenario would involve a “significant shift away from fossil fuels.” But the IEA then emphasizes decisions that would lock in more emissions – even under the SDS.

For example, the IEA focuses disproportionate attention on the need for “continued investment in both new and existing oil fields” as a “necessary part of the energy transition” under the SDS. (I can imagine BP’s CEO quoting these lines in the New York Times next year.) By charting declines in fossil fuels that are too slow for the full ambition of the Paris Agreement, the IEA leaves space for at least USD 11 trillion in cumulative upstream oil and gas investment under the SDS from 2021 to 2050, including more than USD 5 trillion developing new oil and gas fields.

In its SDS model, the IEA again projects that fossil gas use would increase to 2030 and not decline significantly until after 2040. As OCI and our partners detailed in a recent briefing, the IEA’s modelling of increased demand for fossil gas delays rapid decarbonization, contributing to the SDS’s ambition gap described above and ignoring the risks of locking in high-carbon infrastructure.

The IEA also continues to boost the expansion of U.S. fracking in WEO 2019, despite analysis that shows that development would unleash carbon emissions equivalent to building almost 1,000 new coal plants. After writing that, “our projections suggest that the shale race is not yet run,” the IEA encourages that the “rise of US tight oil and the increasing presence of the United States as an exporter” are “reasons for comfort on the outlook for oil security.” There is no concurrent mention of the potential trade-offs for climate security.

How would these projections shift if the IEA had fully modelled and focused on a 1.5°C scenario? Its brief exploration is telling. Under a 1.5°C pathway without large-scale NETs, the IEA notes that, “oil demand would fall sharply through to 2050, following a trajectory closer to the decline in supply from fields already producing today.” In other words, 1.5°C is consistent with stopping the expansion of oil extraction.

Looking forward: Will the IEA remain relevant?

As of 2019, we have roughly a decade left to fundamentally transform our energy system to align with climate safety. For the IEA to remain relevant, it needs to start developing and prioritising robust scenarios that show decision-makers how to meet the monumental challenge before us and achieve the full ambition of global climate goals. If the IEA cannot do this, it cannot be considered fit for purpose as an adviser on international energy – anybody using WEO scenarios to make energy decisions risks investing in climate catastrophe.

To deliver on true reform the IEA needs to break free from its fossil fuel roots. After all, the IEA was established in 1974 to protect the security of global oil supplies. As it stands, the world’s largest oil and gas producer – the United States – holds 25% of the voting shares, while the countries most vulnerable to climate impacts barely have a seat at the table. It isn’t hard to connect the dots between the IEA’s history of fossil fuel influence and the present-day dearth of climate ambition.

But in response to this year’s WEO, we can expect that pressure will only grow on the IEA to step up or risk irrelevance in an era of climate emergency. Learn more, stay updated, and take action at http://www.fixtheweo.org.

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2 thoughts on “Concerns about the latest World Energy Outlook

  1. As I have commented on this website before, sadly the IEA continues to face in several directions simultaneously.

    • This is unfortunate because we need some clear direction if we are serious about the low-carbon energy transition.

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