Urgent call for action: IEA’s 2023 update to Net Zero roadmap

The International Energy Agency (IEA) on September 26, 2023 released an update of its path-breaking 2021 report Net Zero Roadmap: A Global Pathway to Keep the 1.5°C Goal in Reach. 

The 2021 version was considered radical in its pronouncement that no new fossil fuel projects can be developed if the world is to achieve its climate goals. The 2023 report comes at a crucial time, with the 28th Conference of Parties (COP 28) to the United Nations Framework Convention on Climate Change geared to meet in Dubai, United Arab Emirates later this year to enter into the political discussion on the Global Stocktake Report. 

Emissions: Latest evaluation

The 2023 IEA report opens with a staggering statistic that in 2022, global carbon dioxide (CO2) from the energy sector emissions rose to 37 billion tonnes — 1 per cent higher than the pre-pandemic level. 

It stated that the economic recovery post-pandemic and energy insecurity due to geo-political tensions led to this record rise, along with increased investment in new fossil fuel projects. 

Global CO2 emissions from the energy sector are going to peak in this decade, as will the demand for coal, oil and natural gas, the energy agency predicted. Though this is encouraging, it is not nearly enough for the goal of restricting global warming to 1.5 degree Celsius over pre-industrial levels, the authors of the report noted.

The total energy sector CO2 emissions for 2030 in the Net Zero Emissions (NZE) scenario stood at 24 gigatonnes (Gt) — a three Gt increase from the projection in the 2021 report, the new analysis showed. IEA attributed this increase to the failure to act on the suggestions made in the 2021 report, the post-pandemic rebound in economic activity and energy insecurity. 

In line with the 2023 report’s goal for making pathways more equitable, it stated that “in the NZE scenario, advanced economies take the lead and reach net zero emissions by around 2045 in aggregate; China achieves net zero emissions around 2050; and other emerging market and developing economies do so only well after 2050”. 

“By 2035, emissions need to decline by 80 per cent in advanced economies and 60 per cent in emerging market and developing economies compared to the 2022 level,” it added.

Net Zero emissions: What is needed?

The 2023 report highlighted that large-scale, sustained clean energy expansion, coupled with reduced fossil fuel demand will eliminate the need for new coal, oil and natural gas projects. 

Further, it specified that “no new long-lead time upstream oil and gas projects are needed in the NZE Scenario, neither are new coal mines, mine extensions or new unabated coal plants”. 

At the same time, it stated that “continued investment is required in existing oil and gas assets and already approved projects”. 

There is a noticeable difference in the language on oil and gas in the 2021 and 2023 reports. In 2021, the report was straightforward in stating that there is no need for investment in any new oil and gas projects in the NZE scenario. But the 2023 report added a new caveat that there is no need for new “long-lead time upstream” oil and gas projects. 

‘Upstream’ typically refers to the exploration and production phases in the life cycles of oil and gas projects. ‘Midstream’ involves transportation and processing and ‘downstream’ involves the distribution and sale to end users. 

Thus, the 2023 report could leave room for other oil and gas activities, particularly existing large-scale projects, by limiting its scope to banning just new upstream activities, as opposed to a blanket call for no new fossil fuels as mentioned in the 2021 report.  

Differences between IEA NZE Roadmap 2021 and 2023 

Source: CSE elaboration

The 2023 report conveyed the following steps needed for the world to achieve NZE by 2050:

1. The largest contributor to emissions reductions is tripling global installed capacity of renewables to 11,000 gigawatts by 2030. This goal has been re-iterated or adopted in various summits such as by the G7 countries, G20 countries and in the Petersberg Climate Dialogue 2023 and is also backed by the European Union.

2. The NZE scenario requires a drop in the demand for oil from 97 million barrels per day (mb/d) in 2022 to 77 mb / d in 2030 and 24 mb / d in 2050. The 2021 report had projected similar figures for the NZE scenario, with oil demand falling to 72 mb / d in 2030 and 24 mb / d in 2050. IEA’s Executive Director Fatih Birol echoed a similar sentiment when he wrote that demand for oil and gas would peak by 2030.

3. Rapid and major reduction in methane emissions by 75 per cent by 2030 is needed. Such measures are described in the report to be the least costly mechanisms, especially in oil and natural gas operations, requiring $75 billion that is just 2 per cent of their net income in 2022.

4. In terms of clean energy investment for reaching NZE, the report calls for investment majorly in emerging markets and developing economies — $4.5 trillion by early 2030s and $4.7 trillion by 2050, compared with $1.6 trillion spent in 2022.

5. NZE scenario requires $80-100 billion in annual concessional funding by the early 2030s. Of this amount, Africa would require the largest chunk of 45 per cent, followed by India and Latin America, requiring 15 per cent each.

6. More ambitious Nationally Determined Contributions needed to align with the targets under the Paris Agreement and meet the net-zero goals by 2050. There is little reason for high-income, higher-emitting countries to fail to adopt an absolute reduction target.

7. Big investments in electricity infrastructure are required; transmission and distribution grids need to expand by around two million kilometers each year to 2030 to meet the needs of the NZE scenario.

8. Carbon capture, utilisation and storage (CCUS) — though an important technology for heavy industrial emissions reduction — has not yielded much progress. Therefore, the role of CCUS in climate mitigation scenarios has been revised downward in the 2023 report compared to the NZE scenario in the 2021 report.

Source: Launch presentation, IEA, Net Zero Roadmap: A Global Pathway to keep the 1.5°C Goal in Reach 2023 update

On finance

There was a change in the narrative on what constitutes “international cooperation” on the equitable front in the 2023 report. The previous report by IEA had concluded that “the pathway to net-zero emissions by 2050 will require an unprecedented level of international cooperation between governments”, without specifically outlining the financial barriers faced by developing countries. 

On the other hand, the 2023 report acknowledged that emerging markets and developing economies, other than China, are lagging extremely behind in the deployment of clean energy technologies. Half of the clean energy supplied is used by only 15 per cent of the global population living mostly in advanced economies, the report showed. It is an outcome of the disproportionately high cost of capital in emerging markets and developing economies for clean energy projects, the authors highlighted. 

The cost of capital is at least double in emerging markets and developing economies than in advanced economies. According to the report, this high cost of capital perpetuates highly uneven investments in clean energy projects, with more than 80 per cent of the investment taking place in advanced economies and China.

The ground is set for COP 28 with this report calling for an end to new fossil fuel development and increasing equitable clean energy investment, along with the Global Stocktake Report released by the UN earlier this month underscoring that the world is off-track in achieving the 1.5°C target.

However, it is ironic that just one day after this report, the United Kingdom approved the Rosebank oilfield development in the North Sea. It is the biggest untapped oilfield in the UK with the potential to produce 500 million barrels of oil in its lifetime. 

In light of this, COP28 ought to provide a clear signal and deliver language to phase out all fossil fuels and provide adequate low-cost finance required by developing countries to overcome disproportionate investment in clean energy. 

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