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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Net-Zero Targets Face Reality Check

  • Already in 2021, the assumptions in the IEA's net-zero 2050 report were looking unrealistic to many.
  • Factors such as inflation and borrowing costs, as well as technological challenges and competition, asserted themselves as valid for even the wind and solar industries.
  • The IEA also projected in its latest report that demand for oil and gas will peak before 2030—when demand has been breaking record after record.

Back in 2021, the International Energy Agency published what it called a landmark report titled “Net Zero by 2050: A Roadmap for the Global Energy Sector”. The report made quite a splash, not least because of the assumptions it involved about oil, gas, and coal use.

Many companies, however, especially in the financial services world, took the report at face value and made it a basis, or at least a reference point, for their net-zero plans. Now, they have to revise these. Because it turned out the IEA’s assumptions were quite far-fetched. And they weren’t the only ones.

Bloomberg reported this week that banks are among those busy adjusting their net-zero plans, which were based on assumption-rich forecasts such as the IEA’s original net-zero roadmap. And with good reason. That roadmap included statements such as an end to “investment in new fossil fuel supply projects, and no further final investment decisions for new unabated coal plants.”

Several months after the publication of the roadmap, the IEA was calling on the oil and gas industry to invest more in oil supply because a shortage was looming. And that was before the war in Ukraine even started, offering transition advocates a much-needed reality check and reasserting the primary importance of energy security.

“We can’t stay in the 2021 view of the world,” Celine Herweijer, HSBC chief sustainability officer, told Bloomberg. “We can’t choose a pathway that is several years out of date and just stick to it. We will need to keep looking at how the net zero-aligned scenarios are evolving.”

Indeed, HSBC’s chief sustainability officer is right. Just last year, the IEA was forced by energy realities to publish an update of its net-zero roadmap where coal and oil demand were revised significantly—upwards.

Even so, the IEA also projected in its latest report that demand for oil and gas will peak before 2030—when demand has been breaking record after record, contrary to the IEA’s and others’ regular forecasts of demand and supply trends. It’s not only oil demand, either. Coal demand is rising, driven by China and India. The latter recently said it would slash transition funding for state oil firms and double down on coal generation capacity.

Oddly enough, Germany is building new gas-power plants. The poster child of the transition, the country with some of the highest capacity of both wind and solar power that has recently boasted about breaking records in output, is building gas power plants. The motivation for that is to “guarantee electricity supply security as the share of intermittent renewable energy increases and coal is phased out,” per Clean Energy Wire.

Yet coal was phased in last year, rather than out after the ruling coalition in Germany closed the country’s last three remaining nuclear power plants—despite half of Germans being against it. Neither the IEA nor anyone else could have predicted that, perhaps. Yet it happened, along with other seemingly unpredictable things, such as the slowdown in EV demand in key markets. It happened right when sales were starting to take off, too.

Meanwhile, despite massive government support for wind and solar, both sectors are struggling in both Europe and North America. This was not supposed to happen, according to those upbeat transition scenarios that the IEA and other advocates fed the investor world. Indeed, wind and solar capacity were supposed to grow without restraint. Yet it has emerged recently that government support is not enough to ensure this unrestrained growth on its own.

Factors such as inflation and borrowing costs, as well as technological challenges and competition, asserted themselves as valid for even the wind and solar industries—as they are for all other industries. The upbeat forecasts and roadmaps ran headlong into reality. Now it’s time to rush to adjust those net-zero targets that so many companies based on those forecasts.


By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on February 09 2024 said:
    The notions of global energy transition from fossil fuels to renewables and net-zero emissions are illusions. They will never be achieved by 2050 or 2100 or ever for the following reasons:

    1- Renewables are incapable on their own of satisfying global demand for electricity without major contributions from natural gas, coal and nuclear energy because of the intermittent nature of solar and wind energy. Therefore, there can never ever be net-zero emissions.

    2- Today's technology doesn't allow yet a storing of energy in summer for use in winter.

    Moreover, the IEA's projection of a peak in oil and gas demand before 2030 which is based solely on EVs causing a precipitous decline in crude oil consumption is contradicted and totally undermined by two major realities.

    One is that despite almost non-stop media promotion for the last thirty years, generous government subsidies, an expenditure of trillions of dollars on EVs and claims of major sales around the world, the number of EVs on the riads worldwide is 26 million compared with 1.4 billion of ICEs.

    The second reality is that contrary to inaccurate claims by the IEA, global oil demand grew in 2023 by 2.3 million barrels a day (mbd) to 104.2 mbd and is projected to grow in 2024 by 2.2 mbd or 106.4 mbd reaching 110.0 by 2028 and 116.0 mbd by 2045 according to OPEC whose projections have overwhelmingly proven spot on so far.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • Ian St. John on February 09 2024 said:
    Nothing but ideological denial's.

    All current blocks to renewables have been political, not engineering.

    And look at how fast the petroleum era took over from whale oil.

    Fact is that there is no specific and objective reason given here for it to take longer. Just political will (or should I say political won't?)

Leave a comment

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