This October, the International Energy Agency (IEA) published its World Energy Outlook 2023, forecasting the likely end-of-decade energy scenario given the current global pipeline and climate policies. While the world’s renewable energy capacity is growing rapidly, thanks to huge investments in recent years and greater support from governments worldwide, the IEA suggests that not enough is being done to achieve end-of-decade global climate goals. And while the IEA is optimistic in its energy outlook, other organisations are doubtful that the world will be able to make such a meaningful shift away from oil and gas in this time.
In its World Energy Outlook, the IEA stated, “Some of the immediate pressures from the global energy crisis have eased, but energy markets, geopolitics, and the global economy are unsettled and the risk of further disruption is ever-present.” The price of fossil fuels has fallen from its 2022 peak, but the Russia - Ukraine conflict continues, and other conflicts are being seen in the Middle East. Meanwhile, inflation remains high, and the world is battling against ever-stronger weather events, such as severe heatwaves, hurricanes and extreme freezes. Further, greenhouse gas emissions have not yet peaked, with air pollution still being linked with the death of millions each year.
Nevertheless, global investment in renewable energy projects and clean tech continues to soar, with a massive green energy pipeline across many areas of the world. The report states that investment in clean energy has increased by 40 percent since 2020, supporting the creation of clean energy jobs around the globe. Over $1 billion is being spent each day on solar deployment and more than 500 gigawatts of renewables generation capacity are expected to be added this year.
In the report, the IEA outlines its Stated Policies Scenario (STEPS), which provides an outlook based on the latest policy settings, including energy, climate and related industrial policies. Under this scenario, the end of the fossil fuel era is expected to begin at around the end of the decade. However, the global dependency on fossil fuels is expected to remain high – falling from around 80 percent in recent years to 73 percent by 2030 – and there are concerns that the acceleration of the green energy rollout will not be enough to meet global climate goals.
However, it states, “policies supporting clean energy are delivering as the projected pace of change picks up in key markets around the world.” This has largely been spurred by the creation of the U.S. Inflation Reduction Act, which has encouraged other regions of the world to develop far-reaching climate policies to compete with America’s potential green energy, tech and manufacturing dominance.
In addition, China’s massive energy demand is expected to wane following the huge infrastructure and manufacturing boom of the past decades. This will be further supported by its giant renewable energy industry, with China accounting for around half of wind and solar additions and well over half of global EV sales in 2022. However, this will be countered by a growing demand in markets such as India, which will require support from richer nations to develop its renewable energy capacity and reduce its fossil fuel dependency.
While the IEA has a strong reputation for predicting energy trends based on government policies and project pipelines, as well as several other factors, not everyone agrees with its outlook. For example, there has been great dispute in recent months over when the global demand for fossil fuel will begin to fall, with disagreements between the IEA and the Organisation of the Petroleum Exporting Countries (OPEC).
The IEA stated in September that it expects the global demand for fossil fuels to peak in 2030. The agency’s director, Fatih Birol, stated “this age of seemingly relentless growth is set to come to an end this decade, bringing with it significant implications for the global energy sector and the fight against climate change.” Meanwhile, OPEC Secretary General Haitham Al Ghais said “Such narratives only set the global energy system up to fail spectacularly.” He added, “It would lead to energy chaos on a potentially unprecedented scale, with dire consequences for economies and billions of people across the world.”
One thing seems certain, unless governments around the globe do more to shift their dependency on fossil fuels towards renewable alternatives, it will be impossible to meet global climate goals. In addition, significantly more funding is needed worldwide for green energy and related clean technologies to support a successful green transition, including financial support from the Global North to help developing countries increase their renewable energy capacity.
By Felicity Bradstock for Oilprice.com
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