19 June 2020
Yesterday the International Energy Agency (IEA), an autonomous policy adviser to the world’s governments, released its ‘sustainable recovery plan‘ in response to COVID-19.
The plan focused on “quantify[ing] the economic and job-creation potential of building a more resilient and cleaner energy sector” and encouraged governments to take specific measures in the areas of electricity, transport, industry, buildings, fuels and ’emerging low-carbon technologies’ from 2021-2023.
The sustainable recovery plan would kick-start the reductions needed to achieve the goals of the Paris Agreement.‘Sustainable Recovery’, International Energy Agency (June 2020)
Despite the IEA’s reputation for promoting energy pathways consistent with the failure of the Paris Agreement, there was a certain level of anticipation the report would put us on the right path.
This was particularly the case given commentary from the IEA’s Executive Director leading up to the report’s release. In March, Dr. Fatih Birol argued we must “put clean energy at the heart of stimulus plans to counter the coronavirus crisis”. This is the same Dr. Birol who in 2018 told reporters “we have no room to build anything that emits CO2 emissions” if we’re to limit temperature rises to 2°C, let alone 1.5°C.
“We have no room to build anything that emits CO2 emissions.”Dr. Fatih Birol, Executive Director, International Energy Agency (13 Nov 2018)
However, it’s difficult to see how the report achieves this aim. While its recommendations contain a raft of sensible measures such as investment in wind and solar, it says very little about the declines in fossil fuel consumption and production needed to achieve the Paris Agreement’s climate goals. This is out of step with its Executive Director, whose rhetorical leadership on climate appears to be undermined by the report.
Coal and gas-fired electricity
Given the IPCC’s finding that the world must reduce coal power generation by 97% by 2050 to achieve 1.5°C, and previous comments from Dr. Birol suggesting that not a single coal or gas-fired power station should be built anywhere in the world from 2018 onwards, one might have thought the IEA could muster up some more pointed analysis for ensuring this happens than:
“The case for building this planned new coal capacity – without CCUS – needs to be carefully weighed against the implications for local air pollution and global climate goals.”‘Sustainable Recovery’, International Energy Agency (June 2020)
The report also gives significant attention to ‘coal-to-gas switching’, the notion that emissions can be reduced by replacing one highly emissions intensive source of electricity (coal-fired power) with another slightly less intensive source (gas-fired power).
To its credit the IEA identified a way to do this using only existing gas infrastructure (meaning there would be no need to build new gas), though this would only result in a 340 Mt CO2 reduction or approximately 24% of the decline required of the fossil fuel industry in a single year between 2020-2030 under the IPCC’s 1.5°C scenario.
Of course, switching from coal to renewables would reduce emissions significantly more. And given that most of the ‘cost-effective potential’ of the gas switching lies in the US and Europe, this measure does practically nothing to reduce emissions in countries with the largest operating coal fleets including China and India.
Despite its focus on using existing gas power so new gas infrastructure would not be needed, paradoxically, the IEA also entertains the notion that new gas-fired power would reduce emissions by supposedly replacing coal, despite its Executive Director implying that no gas-fired power should be built moving forward.
Perhaps instead of playing around the margins of what’s needed to achieve Paris, the IEA could have tackled the problem head on by putting forward necessary recovery measures to ensure gas infrastructure is wound down in line with 1.5°C.
Oil & gas production
“With average lifetimes of 20 years or longer for pipelines, terminals, wells, and platforms, the time to begin planning for a wind-down of gas production is, as with other fossil fuels, already upon us.”SEI, IISD, ODI, Climate Analytics, CICERO, and UNEP (2019)
Unfortunately, the IEA’s recommendations around oil and gas are just as disappointing as for electricity.
The IPCC models primary energy from gas declining 25% by 2030 and 74% by 2050 (from a 2010 baseline) under a 1.5°C scenario, while oil would decline 37% by 2030 and 87% by 2050.
Yet the IEA again avoided tackling the problem head on, preferring to fixate on the margins by recommending governments focus on reducing methane emissions from oil and gas operations, reform fossil fuel subsidies and support and expand the use of biofuels.
Make no mistake, some of these measures have genuine merit and are necessary to achieve the Paris Agreement, but they’re far from deserving of the most oxygen.
Given that “we have no room to build anything that emits CO2 emissions” and the use of oil and gas needs to decline to achieve Paris, where is the planning to ensure existing energy requirements are efficiently replaced by renewables, and ensure the 13 million workers employed in oil and gas can find stable employment in a low carbon economy with significantly reduced dependence on the products they currently help produce and deliver?
What next for Australia’s pariah fossil fuel companies?
Unfortunately, it’s difficult to see how these recommendations would significantly disrupt the climate-wrecking plans of the 22 Australian companies actively undermining climate action by pursuing new fossil fuel projects and business plans consistent with the failure of the Paris Agreement.
In this regard, perhaps the most consequential element of the IEA’s report is simply the acknowledgement of the dire situation in which these companies now find themselves, with demand for oil expected to drop by 8% on average in 2020, coal by 8% and gas by 4%.
We expect global upstream oil and gas investment to fall by almost one-third from 2019 levels‘Sustainable Recovery’, International Energy Agency (June 2020)
For BP, this has meant writing down the value of its oil and gas assets by a massive $17.5 billion, as analysts at Credit Suisse say Australian oil and gas companies could face similar devaluations.
Hopefully this draws attention to the fact that poor financial performance isn’t anything new for Australia’s fossil fuel industry. Over the past decade, while the Australian share market grew by 20%, Australia’s pure play fossil fuel companies almost halved in value.
Yet these companies are hell bent on spending even more money pursuing even more fossil fuels that we can’t burn if we’re serious about the Paris Agreement, while our banks and super funds continue to back them.