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Bloomberg Columnist Echoes Calls for 1.5°C Scenarios from IEA

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A Bloomberg News opinion columnist is turning to Google Maps as an analogy for an annual energy futures roadmap from the International Energy Agency (IEA) that has policy-makers presuming continuing high demand for fossil fuels, rather than giving serious consideration to off-fossil strategies that will help get climate change under control.

While Google Maps and the IEA’s annual World Energy Outlook (WEO) report both offer their users multiple options, Liam Denning says he usually picks the route Google Maps recommends, without giving the matter much thought. He contends that most energy analysts do the same with the range of scenarios in the WEO. The difference is that, while the wrong choice of Google Maps options might get you stuck in traffic for a few extra minutes, taking the IEA’s high-end scenarios as predictions of the future turns the possibility of increased fossil fuel demand into a reality that will drive global climate change out of control.

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In a letter to IEA Executive Director Fatih Birol released [2] earlier this month by Oil Change International, representatives of about 60 investment funds, scientific agencies, and think tanks are warning that the decision-makers who rely on the Outlook to anticipate future energy trends rarely look beyond its primary, higher-carbon scenario. Denning’s column elaborates on that conversation and brings it to a wider business audience.

“The WEO is structured around three scenarios: ‘New Policies,’ ‘Current Policies’, and ‘Sustainable Development,’” he explains. “The first is the de facto central case, the second is effectively a higher-emissions scenario, and the third models a world limiting global warming to ‘well below’ 2.0°C,” consistent with the main targets in the 2015 Paris Agreement.

But now, in line with last year’s urgent IPCC report [3] on 1.5°C pathways, “the group urges the IEA to make the Sustainable Development scenario the central case, make it fully transparent, and tighten it up,” he writes. “The current version implies a high probability of limiting the temperature increase to between 1.7 and 1.8°C  by the end of the century, partly by assuming an increase in carbon capture by many orders of magnitude, particularly after 2040. The group wants an updated scenario to target 1.5° and be more cautious in assuming carbon capture takes off. Meanwhile, it wants the IEA to stick the equivalent of a tobacco warning on the New Policies scenario, which implies warming of 2.7 to 3.0°C.”

Arguing about tenths of a degree in 2040 “may strike you as esoteric,” Denning concedes. “But when the author is the IEA, that projection doesn’t merely hold up a hypothetical reality, it helps create reality.”

That doesn’t mean the IEA “should be blamed for how its scenarios get used (and abused),” he adds. “Yet the WEO’s detail and provenance mean it is widely used as a road map for our energy future. Moreover, it’s 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.”

The IEA’s own analysis shows how much difference a tenth of a degree can make, Denning adds.

“Whereas the Sustainable Development scenario projects global oil demand dropping to 63 million barrels a day in 2040— more than a third below today’s level—the 1.5°C scenario takes it below 40 million, a level last seen in 1968,” he writes. “Natural gas demand, meanwhile, flips from being roughly flat with today’s level under Sustainable Development’s assumptions to dropping by more than a third, back to where it was in 1999. In some ways, that gas figure is even more shocking, given the widely held view that it will come into its own and act symbiotically with renewable energy. The IEA even touted a ‘Golden Age of Gas’ scenario in its 2011 outlook, and oil majors have invested billions in turning themselves into Big Gas.”

Birol says the immediate challenge is to move governments off their current 2.7°C pathway and toward the 1.7° in the New Policies scenario. But “the numbers show that incrementalism is a road to ruin, and the transformation in energy supply and consumption required for a better road is staggering,” Denning writes. With a massive bond offer from Saudi Aramco “reportedly generating overwhelming demand,” and financial markets still looking kindly on new coal plants across Asia, investors are still putting “money down on a future that looks very like our past, except with rising sea levels.”

At very least, Denning says those realities argue for the IEA to emphasize the “embedded risks” in its New Policies scenario, while expanding its 1.5°C analysis to show what it will take to mitigate those risks. “Even better would be an open version of the IEA’s model, helping investors, policy groups, and others run their own scenarios on the impact of such things as the cost of different energies; carbon pricing; the likely penetration of renewable and sequestration technologies; and, perhaps most difficult of all, feedback loops as climate change affects economic growth and other macro inputs.”