Putting clean energy stimulus at the heart of IEA analysis?

People all over the world are facing unprecedented health, social and economic crises from the ongoing COVID-19 pandemic. These tragic impacts will be the deepest in the world’s most vulnerable communities, regions and countries. In response, the International Energy Agency (IEA) director Dr. Fatih Birol has urged governments worldwide to place clean energy at the heart of any stimulus package.

We’ve been highly critical of the IEA’s analysis in the past, but here Dr. Birol is right. As trillions of dollars are mobilized around the world as part of recovery efforts, stimulus and investments must go towards building a resilient global economy rather than exacerbating the climate crisis. What our governments do now will shape the global energy system for years or decades to come.

In addition to clear calls to centre clean energy and not fossil fuels in recovery efforts, the IEA could make up for some of its climate failures in a few other ways:

Get the details right: Dr. Birol’s clean energy rallying message has some worrying loopholes, namely the calls for significant investment in unproven negative emissions technologies and little on the critical just transition needed to make this transformation work for workers.
Fix the WEO: A central 1.5C scenario in this year’s influential World Energy Outlook would give governments and decision makers the right tools to align recovery efforts with the critical Paris limits.
Provide an ambitious 2030 pathway: The IEA is promising new analysis in July charting out higher climate ambition. This must align with the best available science and chart out deep emissions reductions towards zero carbon by no later than 2050.

The ground is shifting beneath us all. It’s critical that governments don’t exacerbate one crisis on top of another in how they respond. To avoid this risk, the IEA must make sure that its recommendations to governments leave no one behind. Stimulus packages and other responses must include Indigenous peoples, people with disabilities, incarcerated people, people who are migrants and refugees, homeless people, LGBTQ+ people, and especially transgender folks, low-income workers, and independent contractors.

The IEA has an uphill battle to prove that Dr. Birol’s words are more than empty climate rhetoric designed to give cover to business as usual for Big Oil and Gas. Making this clean energy call count with real ambition is critical if the IEA wants to shake its reputation as a shill for the fossil fuel sector.

Peaking emissions, but no 1.5ºC scenario?

Birol argues that the decisions governments make now will decide whether 2019 becomes “the definitive peak” in global emissions. We agree. Governments are already introducing huge stimulus packages, with much more to come. The decisions made in shaping these stimulus packages will fundamentally reshape the global economy, energy system, and emissions profile – and will play a critical role in determining whether we succeed in meeting the Paris Agreement’s goal of keeping warming below 1.5 degrees Celsius this century.

That’s why it is even more important now that the IEA urgently admit that its own energy scenarios fall short of the ambition needed to limit warming to 1.5 degrees, include this in any advice it provides to governments, and commit to fixing the World Energy Outlook (WEO) for 2020. The scenarios contained in each year’s WEO significantly influence governments, businesses, industry groups and investors when they make decisions about energy production and use. Dr. Birol himself told Climate Home News that he is currently talking to “several governments and international financial institutions leaders” as they design stimulus programs.

The problem is the IEA continues to center business as usual in each year’s WEO, failing to fully account for the ambition of the Paris Agreement, and continuing to call for unsustainable investment in fossil fuel extraction. As pointed out in an open letter to Dr. Birol from a diverse group of investors, governments, academics, energy experts, and NGOs, even the most recent WEO’s central scenario amounts to at least 2.7 degrees of warming. Strikingly, the IEA’s most ambitious 2019 scenario would only give a 2-in-3 chance of limiting warming to 1.8 degrees – reaching net zero emissions by 2070, two decades too late.

At the same time as Dr. Birol urges governments to “keep clean energy transitions front of mind as they respond to this fast-evolving crisis”, the IEA continues to produce business as usual analysis – which has even been used by Shell to defend itself in court.

The combination of the crash in oil prices and the health and economic crises triggered by COVID-19 demand an urgent re-analysis of the assumptions underlying the WEO. For the IEA’s analysis to be useful for policymakers designing the “sustainable stimulus packages” that Birol calls for, it must align with the full ambition of the Paris Agreement. Only that will enable meaningful coherence between energy and climate policies.

Money for hypothetical techno-fixes?

Solving the climate crisis demands the “development, deployment and integration of clean energy technologies”, as Birol argues – but he then immediately calls carbon capture and storage (CCS) a clean energy technology, listing it alongside proven electricity generation methods like solar and wind energy.

As my colleague Lorne Stockman said in 2019: It is not clear it will ever make economic sense to deploy CCS at scale. One study found that it would need a carbon price above USD 140 per ton to be cost effective to retrofit existing gas power plants with CCS technology. Now, COVID-19 has pushed the EU carbon price down to EUR 16.11 per metric tonne – around USD 15.70 per ton. It’s no wonder that only (as the IEA admits) a handful of CCS plants exist.

These technologies may have a place in future to address hard-to-decarbonize industrial processes such as steel and cement, but they are no justification for growing gas production – and no place for governments to focus on in building clean energy stimulus packages, where getting the most, and most secure, bang for your buck is critical.

As Dr. Birol himself notes, the costs of solar and wind generation are far lower now than they were when governments previously devised large-scale stimulus packages. Solar and wind are price competitive now. Why, then, would a clean energy stimulus package include hypothetical techno-fixes that aren’t cost effective?

Importantly for a stimulus package, proven clean energy sources like wind and solar, and critical solutions like energy efficiency, create jobs. Studies have shown that investment in renewable energy and energy efficiency generate many more jobs than investment in fossil fuels.

In contrast, predictions about the job creation potential of CCS have been wildly overblown. In 2010, the UK government predicted that CCS could create 100,000 jobs by 2030. Now, halfway to 2030, there is only one CCS project at an early stage in the UK. Even if completed, it is predicted to generate only 300 to 600 jobs. To put that in perspective – clean energy and energy efficiency investment could generate over 160,000 new jobs by 2050.

Bailouts for business, but nothing for people?

In the face of these compounding crises, people and communities are vulnerable. Jobs are at risk, or even already vanishing. Structurally oppressed and disempowered people will be disproportionately impacted. Indigenous peoples are “extremely vulnerable”. People with pre-existing health conditions or disabilities face greater threats from COVID-19, directly and indirectly – and often have particular energy security needs.

It’s critical therefore that stimulus packages respond not just to the lobbying from businesses, but to the demands from people and communities. Yet Birol only refers to these impacts once – in the context of eliminating subsidies for fossil fuel consumption (while ignoring subsidies for fossil fuel production). Ending fossil fuel subsidies is important – but real measures to ensure a just transition are a critical part of any sustainable stimulus package.

We are in a once-in-a-generation moment. The decisions that governments make in 2020 will define what a rebuilt global economy looks like for this decade and beyond and have huge impacts on people and communities now.

Dr. Birol is right that clean energy must be at the heart of any stimulus. It is good to see this new urgent tone from the IEA. This is a real step forward for their analysis.

Ultimately though, the IEA still has a stark choice to make: rise to this crisis and provide the data that governments need to build stimulus packages that will help put the world on track to a 1.5ºC future, or continue to appease risky, polluting fossil fuel industries.

Image “India Bundled Wind” by Land Rover Our Planet is licensed under CC BY-ND 2.0.