BREAKING: ‘Baby Steps’ in Annual Analysis Make International Energy Agency a ‘Threat to Climate Safety’
Opinion & Analysis
The International Energy Agency is taking intense criticism this morning for a set of energy futures scenarios that factor in the impact of the COVID-19 pandemic, recognize the transition taking hold in global energy production, but still guide governments, corporations, and investors toward decisions that will drive average global warming far above 1.5°C.
The IEA casts its annual World Energy Outlook (WEO) as “the gold standard of energy analysis”. But with the climate emergency deepening and the alternatives to fossil fuels now practical, affordable, and ready for prime time, a growing chorus of critics see the Paris-based agency undercutting its own, essential role in confronting the climate crisis by downplaying renewable energy options and driving future investment to more expensive, higher-carbon fossils.
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In its initial analysis of WEO 2020 released earlier today, Oil Change International says the IEA clearly acknowledges the threat posed by climate change, but responds with “baby steps” that fall short of the rapid decarbonization scenario that would give investors and other decision-makers the guidance they need.
It isn’t unusual for agencies, large companies, or governments to model two, three, or more modelling scenarios to think through what the future might hold for energy, climate, or the economy. The crux of the problem with the annual WEO, as Oil Change has been pointing out for years, is that “whichever scenario the IEA presents as the ‘norm’ and prioritizes in its analysis becomes the benchmark for investors and governments,” Senior Research Analyst Kelly Trout explained in a release this morning. “Until the IEA puts a 1.5ºC scenario front and centre, it will continue to provide cover for deadly levels of fossil fuel investment.”
The agency is allowing that to happen again, as it has in past years, even though its weak nod to a 1.5°C future recognizes the problem that Oil Change and other international climate organizations have been raising with its analysis.
In its overview of the WEO, the IEA cites two key themes: the impact of the pandemic and the “prospects for accelerated energy transitions”. It shows global energy demand falling by 5%, energy-related carbon dioxide emissions by 7%, and energy investment by 18% this year, with renewable energy “less affected than other fuels by the pandemic and its aftermath,” particularly in electricity production.
The IEA says its main projection, its Stated Policy Scenarios (STEPS), “is based on today’s policy settings and an assumption that the pandemic is brought under control in 2021”. It shows global energy demand recovering to 2019 levels in early 2023, renewables meeting 90% of electricity demand growth through the next two decades, but coal declining only 9% through 2030 and oil demand holding steady or rising slightly through 2040.
Its Delayed Recovery Scenario (DRS), which factors in “deeper and longer-lasting economic and social impacts” from the pandemic, shows global energy demand returning to 2019 levels in 2025 and oil demand holding just below a climate-busting 100 million barrels per day, rather than just above.
Neither scenario shows the moment when oil demand reaches “a real peak”, the IEA says, even though colossal fossil Royal Dutch Shell sees that happening in 2021, while BP and nearly two-thirds of U.S. fossil executives believe it already has.
“Today’s policy settings, as modelled in the STEPS and in the DRS, produce a much slower rebound in emissions than was seen after the 2008-09 financial crisis,” the IEA writes. “However, they do not deliver a decisive break in the trend for global CO2 emissions. A slightly lower trajectory for emissions in the DRS than in the STEPS is due to reduced economic activity, rather than structural changes in the way energy is consumed or produced. A higher carbon intensity of the economy in this scenario illustrates the peril of mistaking low growth for a solution to climate change.”
The Bloomberg news agency’s first take on the report echoes back the baked-in assumption that the future of energy, emissions, and climate impacts is something to be projected by international agencies but driven by business-as-usual economic forces, rather than shaped and directed by human alarm at the scope of the climate crisis and understanding of the solutions.
“Predictions of peak oil demand are very much in fashion, as even oil giants like BP plc say consumption may never again reach the heights seen in 2019,” Bloomberg writes. but “the IEA, formed in response to the oil shocks of the 1970s and duty-bound to preserve the security of energy supplies, has long resisted such predictions. The agency stuck to that position this year. Even its most pessimistic COVID-19 scenario showed petroleum consumption regaining pre-pandemic levels by the latter part of this decade, and plateauing there in the 2030s.”
Readers of the IEA overview have to get half-way down the page before discovering this year’s version of the IEA’s Sustainable Development Scenario, which envisions a “structural transformation of the energy sector” driven by “a near-term surge of investment in clean energy technologies over the next 10 years. Along with action to reduce emissions from existing infrastructure, this is enough to make 2019 the definitive peak year for global CO2 emissions.”
With annual emissions nearly 10 billion tonnes lower than the primary STEPS scenario by 2030, the IEA says, “reductions in air pollutant emissions produce significantly cleaner air than experienced during the 2020 lockdowns.”
And in what Oil Change calls a “footnote” to the main report, the IEA introduces its Net Zero Emissions by 2050 scenario, which “sets out what additional measures would be required over the next 10 years to put the world as a whole on track for net-zero emissions by mid-century. Achieving this goal would involve a significant further acceleration in the deployment of clean energy technologies together with wide-ranging behavioural changes.”
But once again, years of experience with the IEA’s annual Outlook show that decision-makers around the world treat the agency’s main scenario as prediction, rather than projection, and direct their fossil energy investments accordingly.
“WEO 2020 confirms: the IEA knows that it is facing an existential crisis and that they must step up on climate,” said Hannah McKinnon, director of Oil Change’s Energy Transitions and Futures Program. “A mini-1.5ºC scenario (NZE 2050) is a useful step, but until 1.5ºC is front and centre in the WEO and all IEA tools, the IEA remains a threat to climate safety.”
The “central scenario for governments and investors,” she added, “should be the one that avoids the most climate destruction and saves the most lives, not one that saves face for the fossil fuel industry.”
That would be the same global fossil industry with which IEA Executive Director Fatih Birol was happy to announce a “grand coalition” as recently as February 2020.