New oil and gas field development and extraction must end this year, while no new coal-fired power stations can be built if the Earth is to stay within safe limits of global warming, the world’s leading energy organisation has said today.
Halting developments is fundamental to meeting the net-zero emissions goal by 2050, to keep global temperatures to 1.5 degrees Celcius, the International Energy Agency (IEA) said.
The agency, in a report requested by the UK government, also called for no new fossil-fuel cars to be sold beyond 2035, and for global investment in energy to more than double from £1.42tn a year to £3.54tn.
Despite the eyewatering figure, the IEA has urged that this does not need to be an economic burden, but instead it can be a net benefit to the economy.
Big Four firm EY has also released an estimate today that future environmental development needs will require a further investment of $5.2t – stressing the importance of institutional investors in financing the energy transition.
However, very few global governments intend to freeze fossil-fuel exploration – but the IEA found that climate measures would create 30m new jobs and bolster global GDP growth by 0.4 per cent a year while around 5m jobs would be lost in sectors like coal.
The UK has begun licensing new oil and gas fields in the North Sea, meanwhile, China continues to build coal-fired power plants, but both have maintained pledges of net zero emissions by 2050 and 2060 respectively.
Last month, co-chief executive of TransitionZero, Matthew Gray, said: “If China fails on coal, the rest of the world will fail on containing dangerous climate change. But the stars are now somewhat aligning on breaking China’s addiction to coal.”
April also saw the IEA warn that emissions would surge in 2021, after a resurgence of coal following last year’s lockdowns. It echoes that of China’s statement last September that its emissions were likely to peak before 2030.
COP26, the UN’s flagship climate conference hosted by the UK in November, has spurred governments to make stronger commitments that are aligned with the 2015 Paris Agreement.
Ahead of the flagship conference in Glasgow, the energy watchdog has set out 400 milestones for governments to reach which includes the decarbonisation of global electricity generation by 2040.
The decarbonisation of global electricity, which accounted for a population rise of around two billion, would cost about $40bn a year, or one per cent of global annual energy sector investment.
Meanwhile, it would cut premature deaths from indoor air pollution by about 2.5m a year, the report said.
“We must act now to scale up clean technologies in all sectors and phase out both coal power and polluting vehicles in the coming decade. Our first goal for the UK as COP26 presidency is to put the world on a path to driving down emissions, until they reach net zero by the middle of this century,” president-designate of COP26 and a former UK business secretary, Alok Sharma, said.
EY’s Renewable Energy Country Attractiveness Index (RECAI) released today placed the UK in fourth place, one peg up from its seat in fifth place last year.
“The impact of Covid on economies across the globe seems to have refocused investors’ minds on the environmental, social and corporate governance agenda and there is a growing trend of considering the climate crisis and the energy transition when deploying capital,” EY global power & utilities corporate finance leader and RECAI chief editor, Ben Warren said.
“Increasing appetite for suitable investments is driving a number of new investment strategies amongst institutional capital to better align risk and return between sponsors and investors, or to help locate opportunities that satisfy their specific risk and return expectations.”
IEA’s focus on renewable energy, which defers from energy giant’s traditional practices, highlights the changes that are necessary for a low carbon future, lead analyst on energy at The Economist intelligence unit, Peter Kiernan, said.
“The IEA’s outline of a pathway to reach net-zero CO2 emissions by 2050 reflects the scale of what is required to limit the rise in the global temperature to 1.5 degrees. The world is not yet on this path, but the agency has now clearly outlined how the global energy system can be transformed to a net-zero emissions one.
“Deployment in low carbon technologies, especially solar and wind, will need to be ramped up, with non-fossil fuel sources reaching 80 per cent of energy supply by 2050, up from 20 per cent today.”
It is not just down to energy companies however, politicians should be aiding companies in making the switch towards a low carbon future, Kiernan added.
“There is still some way to go for policymakers to respond to the net-zero challenge at a global level. Nevertheless, the report’s recommendation that there be no new investment in fossil fuel supply or coal plant projects reflects that a paradigm shift regarding the energy transition is currently underway.”