Home > IEA’s net zero pathway confirms no room for expanding fossil fuel industry

IEA’s net zero pathway confirms no room for expanding fossil fuel industry

19 May 2021

19 May 2021

Yesterday the International Energy Agency (IEA), an autonomous policy adviser to the world’s governments, released a landmark new report, outlining a roadmap to achieve net zero emissions (NZE) within the global energy sector by 2050.

There are a number of highly significant findings in the report, particularly “There is no need for investment in new fossil fuel supply in our net zero pathway”.

While this finding is consistent with those published by various other organisations, and with comments made by the Executive Director of the IEA Dr. Fatih Birol in 2018, it marks the first time the IEA has put the findings in writing in an official report. Upon the report’s release, Dr. Birol told media that further investment in oil and gas projects may be “junk investments” that could derail the achievement of climate goals.

This report makes abundantly clear that pursuing new fossil fuel projects would spell the failure of net zero and the Paris Agreement. Financial institutions must immediately commit to no longer fund or invest in companies pursuing such projects, while investors in those companies must divest or demand the companies wind up fossil fuel assets in line with 1.5°C and return capital to shareholders.

This applies to each of Australia’s major banks, who all support the achievement of net zero by 2050. Take action: Tell Australia’s major banks that 1.5°C means no new fossil fuels.

Key findings and aspects of the report are analysed below.

No new coal, gas or oil supply

To achieve net zero by 2050, the IEA warns against any investment in new coal mining projects (including expansions), as well as new oil and gas fields:

  • Coal: “No new coal mines or extensions of existing ones are needed in the NZE as coal demand declines precipitously.”
  • Gas: “No new natural gas fields are needed in the NZE beyond those already under development. Also not needed are many of the liquefied natural gas (LNG) liquefaction facilities currently under construction or at the planning stage.”
  • Oil: “The trajectory of oil demand in the NZE means that no exploration for new resources is required and, other than fields already approved for development, no new oil fields are necessary.”

This makes clear that the likes of Whitehaven Coal’s Vickery coal mine, and New Hope’s New Acland Stage 3 coal project, fall well outside what could be considered aligned with the Paris Agreement. These projects are just two of the 72 coal new or expansionary coal projects planned in Australia that would cost at least $76 billion, according to data from the Office of the Chief Economist, none of which can proceed if we’re to limit warming in line with the Paris Agreement.

Meanwhile, huge new climate-wrecking gas developments such as Woodside’s Scarborough offshore gas field, Santos’s Narrabri Gas Project, Origin’s Beetaloo gas fracking and Oil Search’s Papua LNG.

Phase-out fossil fuel power generation

According to the IEA, achieving net zero by 2050 requires net zero emissions in the electricity sector by 2035 for advanced economies, and by 2040 globally.

This of course includes a “phase-out of unabated coal in advanced economies”, as was already established through research by other organisations including Climate Analytics.

However, it also means all gas-fired generation must be net zero by 2035 in OECD countries and by 2040 globally. That means any gas power project planning to operate in OECD countries beyond that date is relying on carbon capture and storage technology miraculously becoming viable, or potentially unattainable and/or spurious carbon offsetting.

This has stark consequences for the gas industry, particularly in light of research finding there’s no room for new fossil fuel power generation in a 1.5°C economy, and will require the retirement of a huge volume of gas-fired power. According to the IEA, unabated gas-fired power is expected to be “90% lower by 2040”.

Clearly, investors must stop funding companies pursuing new gas-fired power generation projects, including AGL and EnergyAustralia, and commit to phase out exposure to these assets in line with timeframes above.

In addition to gas-fired power, the IEA states “by 2040, all large-scale oil-fired power plants should be phased out”.

We must act now

The IEA’s report is clear that achieving net zero emissions “call[s] for nothing less than a complete transformation of how we produce, transport and consume energy”. 

While current government commitments fall well short of this level of ambition, momentum in the finance sector is clearly swinging in favour of clean energy and away from fossil fuels, giving hope that limiting global warming to 1.5ºC can still be achieved. 

However, there is no time to waste. Decisions made by governments and financial institutions in the next few years will be critical to whether the world can successfully transition to a zero emissions economy.