To advise on green stimulus, the IEA needs to upgrade its own climate toolbox

As we covered last month, the head of the International Energy Agency (IEA), Dr. Fatih Birol, is positioning the IEA as a key resource to help governments shape effective, climate-friendly economic responses to the escalating COVID-19 crisis. Just last week, he announced that the IEA is preparing a special report in its influential World Energy Outlook series on “actionable measures for governments to support economic recovery and job creation while achieving structural emissions reductions.”

Dr. Birol is right about this: Governments must prioritise stimulus investments that will accelerate the clean energy transition, rather than compounding the parallel, deadly climate crisis we face.

IEA chief Fatih Birol meets with former ExxonMobil CEO and U.S. Secretary of State Rex Tillerson in Washington, DC, 2017.

But is the IEA fit to advise governments on how to do this?

Oil Change International (OCI) has tracked how the IEA has historically hindered the bold climate ambition we need by normalizing and promoting fossil fuel-friendly scenarios and investments. In this post, we delve deeper into key shortcomings the IEA needs to correct in its own modelling toolbox in order to credibly advise governments on crafting ambitious, climate-proof economic recovery plans.

First and foremost, the IEA needs to align its short-term policy advice with a long-term energy scenario equipped to limit warming to 1.5 degrees Celsius (°C). That is, after all, the goal that IEA member governments agreed to pursue under the Paris Agreement. Without this shift, the IEA will continue to peddle inadequate solutions and tweaks around the edges – like “reducing the environmental impact of oil and gas supply” – while understating the scale and pace at which governments must manage the shift off of fossil fuels to renewable, resilient, and equitable energy systems.

A toolbox isn’t very helpful if even the best tool in it only gets you halfway to the repair you need to make. Here are key ways the IEA can and must close its own ambition gap in its forthcoming special report:

Align with a precautionary 2030 pathway to staying within 1.5°C
Get real about how fast we need to phase out oil & gas
Stop promoting “all technologies” and incremental tweaks as credible solutions

1. Align with a precautionary 2030 pathway to staying within 1.5°C

One of the most widely shared findings of the Intergovernmental Panel on Climate Change’s (IPCC) 2018 Special Report on Global Warming of 1.5°C was this near-term guide post: to give the world at least an even chance of staying within that critical threshold, we should aim to cut carbon-dioxide emissions (CO₂) in half globally by 2030.

As of November 2019, the IEA’s most ambitious scenario in its flagship annual World Energy Outlook (WEO), the Sustainable Development Scenario (SDS), fell far short of that benchmark. If the IEA bases its new special report on a pathway like the SDS, it will essentially be advising governments to plan to exceed the 1.5-degree limit, despite the severe, escalating human and economic costs that would likely cause.

Figure 1 illustrates the lag in ambition in reducing CO₂ pollution in the IEA’s model. The red line shows the CO₂ emissions trajectory of the SDS, including emissions from both energy and industrial processes. The blue line shows the CO₂ emissions trajectory of the most precautionary of four illustrative 1.5°C pathways featured in the IPCC’s special report (P1).

Figure 1: CO₂ pollution from energy & industry: SDS vs a precautionary 1.5°C pathway (P1)

Sources: IEA, IPCC/IAMC 1.5°C Scenario Explorer and Data hosted by IIASA
Compared to a baseline of this year, the SDS is on track to reduce CO₂ pollution by one quarter by 2030, compared to a 53% reduction in the P1 pathway. As a consequence, the SDS would exhaust a carbon budget for staying within 1.5°C before 2035 (after factoring in non-energy sources of CO₂ emissions). Rather than achieve net-zero carbon pollution by 2050, another guidepost from the IPCC report, the SDS would do so by 2070.

To be clear, the SDS exceeds not just the emissions of P1, but of all three IPCC illustrative pathways that model low overshoot of 1.5 degrees. We compare it to P1 because it is the pathway that does not rely on unproven negative emission technologies, namely bioenergy with carbon capture and storage (BECCS), to suck carbon-dioxide out of the air. The IEA itself recognized in WEO 2019 that, “Many of the [negative emissions] technologies or methods involved are unproven at scale, and could have negative consequences outside the energy system related to land use, biodiversity and food security.” The IEA should be showing governments, investors, and businesses what it will take to meet the full ambition of global climate goals without large-scale reliance on the unknown.

2. Get real about how fast we need to phase out oil & gas

The figures below show how the pace of oil, gas and coal decline under the SDS compares to the same P1 pathway. Given the emissions comparison above, it’s no surprise that the fossil fuel phase-out lags far behind that of the precautionary 1.5°C trajectory, particularly on oil and gas. The P1 pathway sees oil use declining by 46% by 2030 and gas use declining by 37%, compared to 2020 projections. If its even steeper decline in coal – 75% by 2030 – were to prove politically or socially infeasible, then oil and gas would need to decline faster.

Notably, in the case of gas, the IEA actually projects a 7% increase in its use to 2030, compared to 2018 levels (the IEA did not provide comparable 2020 projections for fuel use in the SDS). Fossil gas use has been the largest driver of growth in global carbon pollution in recent years, as shown by the Global Carbon Project. As OCI has analysed in depth, there is no need or justification, on climate, reliability, or cost grounds, for increasing global reliance on fossil gas. The IEA is making a political choice by modelling its expansion.

Figure 2: Fossil fuel demand under the SDS vs precautionary 1.5°C pathway (P1)

Sources: IEA, IPCC/IAMC 1.5°C Scenario Explorer and Data hosted by IIASA
This matters right now because, if governments are to make economic stimulus investments that align with climate stability, they need to have credible guidance on how quickly and at what scale to ramp down fossil fuels and ramp up renewable alternatives and energy efficiency investments within this decade.

This is true not only from a standpoint of climate ambition but also of planning for a just transition. The reflexive response in many wealthy fossil fuel-producing governments right now is to bail out fossil fuel corporations, putting a band-aid over their fundamentally unsustainable business model. The climate-smart alternative would be to mobilize the investments needed to replace the wages of laid off workers, pay for re-training and education, and invest in creating commensurately-paid, secure, union jobs in the industries we need as part of a livable future.

3. Stop promoting “all technologies” and incremental tweaks as credible solutions

The coronavirus crisis, coupled with sudden oil price crash, has laid bare the need for transformative change, not tweaks around the edges, to address the vulnerabilities in our economic and energy systems. For the IEA to provide sound advice on the policies needed to stabilise the economy and the climate into the future, it also needs to shed its antiquated “all fuels and all technologies” approach.

As the figure below from Global Carbon Project illustrates, oil, gas, and coal accounted for around 80% of CO₂ emissions in 2018 – emissions that need to zero out by 2050. A 2019 paper by R.B. Jackons et al., based on the same dataset, underscores that a structural decline in CO₂ emissions requires “additional gains in energy efficiency and new renewable capacities that replace fossil fuel use, not supplement it.” [emphasis added]

Figure 3: Annual global CO₂ emissions by source

Yet, in its analyses and communications, the IEA continues to suggest that continued investment in fossil fuels, and the oil and gas industry itself, are part of the solution to the climate crisis.

For example, the IEA touts “reducing the environmental impact of oil and gas supply” as a “pivotal element of global energy transitions.” It is important, but it’s not the “pivotal” action that needs to happen from a climate perspective. That would be rapidly declining the total amount of fossil fuels being extracted and burned.

Even if oil and gas companies avoided emitting carbon while producing fuels, that would tackle “a sliver of the carbon released when the fuel it sells is burned.” The oil and gas industry could actually increase its contribution to the climate crisis if it achieved “zero-carbon” production – a far-off concept – while still expanding total oil and gas extraction.

Meanwhile, in his call to “put clean energy at the heart of stimulus plans,” Dr. Birol lists carbon capture and storage (CCS) as one of the “clean energy technologies” that needs “large-scale investment,” as if it is an equal solution to scaling up wind, solar, and energy efficiency. Importantly, the SDS, would be even less ambitious if it didn’t assume that nearly 50 billion metric tonnes of CO₂ from fossil fuels is captured and stored between 2019 to 2050 (compared to zero reliance on CCS in the P1 pathway). Yet, as of 2019, CCS projects worldwide were storing less than 5 million tonnes of CO₂ (more is captured but not stored). It has not proven to be a viable technology at scale, does not eliminate other forms of toxic air pollution associated with burning fossil fuels, and, in the power sector, is quite expensive compared to switching to proven renewable technologies.

From a lens of climate action (or job creation), being “neutral” towards the fossil fuel industry is in itself a form of bias. Incremental steps would have been fruitful if launched in the 1990s, when the fossil fuel industry was instead busy derailing climate action. At present, as the IPCC writes, limiting global warming to 1.5°C requires “rapid and far-reaching transitions” across all sectors. Government action to cooperatively and equitably implement a managed phase-out of the fossil fuel sector is a key piece of the puzzle. Maintaining that all technologies and industries can be part of the climate solution, as the IEA continues to do, is like claiming that a torch and a water hose are equally useful tools for putting out a fire.

How the IEA can tackle its crisis of climate credibility

This is not a new challenge for the IEA. Investors, climate scientists and advocates, and business leaders have been urging the IEA to align its climate modelling with the 1.5°C aim over the past year.

A November 2019 letter to Dr. Birol, initiated by former UNFCCC chief Christiana Figueres and signed by more than 60 other leaders, emphasized that, “Any temperature rise beyond 1.5°C will exacerbate the devastation and injustice that is already too much to bear,” and that the IEA has a “major responsibility” given its scenarios are “used to inform significant investment and political decisions worldwide.”

As it prepares its timely special report on economic recovery, the IEA has a critical opportunity and responsibility to close its own climate credibility gap.

In WEO 2019, the IEA implied it did not see value in developing a 1.5-aligned energy scenario because meeting that goal would “be very difficult and very expensive.” On top of dismissing the vast human and economic benefits of avoiding significantly worse climate devastation, that reasoning is difficult to accept in the wake of the global mobilization we’re seeing now in response to the coronavirus. We’re seeing that governments can pivot in a matter of weeks and invest trillions of dollars to address a crisis – setting up the systems that enable behavior change – when they rally the political will to do so.

Ultimately, it should not be the IEA’s role to tell governments what may be too difficult. The IEA should be showing governments what’s possible if they confront the climate crisis with the seriousness it demands, and in line with the 1.5-degree limit they’ve agreed to pursue. That means focusing on the tools that will slash carbon pollution in half within this decade, while ensuring a just transition for workers. It means shedding an antiquated “all technologies” approach and modelling the actual pace of the clean energy transition we need.