Peak Oil is coming. That won’t save the world

So says the International Energy Agency, which said in its global energy outlook released on Wednesday that more aggressive climate action will be needed as leaders prepare for the crucial COP26 summit in Glasgow in November.

“The world’s tremendously encouraging dynamic for clean energy clashes with the stubborn predominance of fossil fuels in our energy systems,” Managing Director Fatih Birol said in a statement. “Governments must resolve this at COP26 by sending a clear and unequivocal signal that they are committed to the rapid diffusion of the clean and resilient technologies of the future.”

More than 50 countries and the European Union are committed to meeting the net zero emissions targets. If they meet these commitments, fossil fuel demand will peak by 2025, but global carbon emissions would only decrease by 40% by 2050, well below zero.

In this scenario, the world would still be consuming 75 million barrels of oil a day by 2050 – just 25 million barrels a day less than it is today.

The energy sector has been supported by a sharp rise in prices in recent weeks.
Natural gas prices in Europe and Asia have skyrocketed, while coal prices in China have hit record levels. This has helped drive oil prices to their highest level since 2014 as some utility companies use oil to generate electricity.

But the IEA report contains a warning to the fossil fuel industry. The demand for oil spikes in every scenario the agency studied, and if countries deliver on their climate promises, that moment will happen in a few years.

What is needed

Investments in clean energy projects and infrastructure are currently falling short. The IEA has stated that the development of new oil fields or coal mining projects must be stopped if the world is to limit warming to 1.5 degrees Celsius.

“There is a risk of further turbulence for the global energy markets,” said Birol. “We are not investing enough to meet future energy needs, and the uncertainties are preparing the conditions for a volatile phase ahead of us.”

Birol said investments in clean energy must more than triple over the next decade to achieve net zero emissions. About 70% of this expenditure should be made in developing countries “where funding is scarce and capital remains up to seven times more expensive than in advanced economies”.

“The way forward is difficult and narrow, especially if investment continues to lag behind what is needed,” said its IEA report. However, it remains “hopeful” when the heads of government step on the table next month.

The investment boost required is largely “carried out by private property developers, consumers and financiers who respond to market signals and guidelines set by governments.” These actors need “an unmistakable signal from Glasgow”, where the heads of state and government will meet in November for international climate talks, stressed the IEA.

Before COP26, the momentum had built up to implement tougher measures such as ending the use of coal, the most carbon-intensive fuel. But talks have been hampered by the recent energy crisis, which is fueling fears that businesses will close and consumers face rising bills this winter.

Last month, China pledged not to build new coal-fired power plants overseas. However, to alleviate the worsening electricity crisis, Beijing recently ordered the mines to ramp up production.

The IEA projects that ask for coal decrease by 10% by 2030 if countries meet their climate commitments. In order to limit the warming to 1.5 degrees Celsius and to prevent a climate catastrophe, consumption must be reduced by 55%.

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