International Energy Agency touts COP28 global summit as opportunity to highlight climate, energy targets
In a new special report titled “The Oil and Gas Industry in Net Zero Transitions,” released ahead of the COP28 climate summit in Dubai, the International Energy Agency (IEA) wanted to show how industry could more responsibly contribute to a new energy economy and seize the moment to change.
Reports have been lackluster on the world’s progress toward climate goals in recent years despite big headlines, and the climate crisis has been worsening – in large part, the IEA noted, due to oil and gas producers’ core products. In its own report, the IEA claimed that the industry can and should take a more responsible approach to a new energy economy, and laid out the opportunities – and needs – for it to do so if COP28 brings stronger international efforts to meet the Paris Agreement’s climate goals.
This was, however, somewhat undercut by recent news reports of leaked briefing documents, which showed the UAE’s intentions to use the meeting to discuss fossil fuel deals with attending nations.
More generally, IEA noted that global demand for both oil and gas is set to peak by 2030. To take stronger climate change action, would mean to decrease demand for both oil and gas – if governments delivered in full on their existing pledges, the report found that demand would fall 45 percent below today’s levels by 2050. The oil and gas sector, in the agency’s words, have been a marginal force at best for transitioning to cleaner energy, accounting for a mere 1 percent of clean energy investment globally. Even 60 percent of that meager contribution came from a mere four companies, despite the fact that the oil and gas sector supplies more than half of the global energy supply.
“The oil and gas industry is facing a moment of truth at COP28 in Dubai,” Farith Birol, IEA executive director, said. “With the world suffering the impacts of a worsening climate crisis, continuing with business as usual is neither socially nor environmentally responsible. Oil and gas producers around the world need to make profound decisions about their future place in the global energy sector. The industry needs to commit to genuinely helping the world meet its energy needs and climate goals – which means letting go of the illusion that implausibly large amounts of carbon capture are the solution.”
In order to keep the world’s heating contained to a 1.5 degree Celsius rise, the oil and gas industry’s emissions would need to decline by 60 percent within seven years. Currently, their highest emissions sit five to 10 times above those with the lowest emissions, despite strategies to reduce emissions from methane – which accounts for half of the total emissions from oil and gas operations – being generally low-cost. At this point, the IEA noted, every company’s transition strategy can and should include a plan to reduce emissions from their operations.
“The fossil fuel sector must make tough decisions now, and their choices will have consequences for decades to come,” Birol said. “Clean energy progress will continue with or without oil and gas producers. However, the journey to net zero emissions will be more costly, and harder to navigate, if the sector is not on board.”
The agency did not advocate for a complete reversal of the industry. It fully reckoned that oil and gas supply will be continuously needed, in some fashion, to secure the energy supply and provide fuel for sectors in which emissions are harder to abate. Currently, $800 billion is invested into the sector each year – double what the IEA said would be required in 2030 to limit warming.
However, in convincing those companies to get on board with these changes and to do more than mere lip-service would mean asking them to abort exactly what companies exist to do: seek profit. If all national energy and climate goals are reached, the report noted that the current valuation of private oil and gas companies could fall by 25 percent today, and by as much as 60 percent if the world were to fully jump on the effort to limit global warming to 1.5 degrees Celsius.
Reallocating investments could help alleviate some of that pain, though, by shifting resources to items like hydrogen, carbon capture, offshore wind and liquid biofuels. Last year, the report found that the industry invested about 2.5 percent of its total capital spending – $20 billion – into clean energy, but would need to up that to 50 percent by 2030 to meet the Paris Agreement’s stipulations.
Even there, though, expectations need to be tailored. According to Birol, if oil and natural gas consumption were to grow as projected today, carbon capture could not be relied upon to maintain the status quo. It would require 32 billion tons of carbon captured for utilization or storage by 2050, requiring an amount of electricity greater than the whole world’s current demand – an inconceivable figure by the math, and by IEA’s reckoning.
