I have been reading IEA’s World Energy Outlook 2021 (WEO), issued a month earlier in October, specifically because of the COP26 Climate Change
Conference meeting in Glasgow in a few weeks time.
This is the IEA flagship report, a 380 plus page report has for this year’s edition of the WEO been designed, exceptionally, as a guidebook to COP26.
It spells out clearly what is at stake.
This COP – short for the Conference of the Parties, the main decision-making body of the United Nations Framework Convention on Climate Change – is particularly significant. This COP session is being held between 31st October to 12th November 2021 and perhaps is the most pivotal climate meeting to date. Why?
It is the first test of the readiness of countries to submit new and more ambitious commitments under the 2015 Paris Agreement. It is also an opportunity – as the WEO-2021 states – to provide an “unmistakable signal” that accelerates the transition to clean energy worldwide.
I wanted to “lift out” of the report a few very short but essential messages provided in this report that give the essential snapshot.
Top Line summary
- In 2020, even while economies bent under the weight of Covid-19 lockdowns, renewable sources of energy such as wind and solar PV continued to grow rapidly, and electric vehicles set new sales records.
- At the moment, however, every data point showing the speed of change in energy can be countered by another showing the stubbornness of the status quo.
- Pressures on the energy system are not going to relent in the coming decades. The energy sector is responsible for almost three-quarters of the emissions that have already pushed global average temperatures 1.1 °C higher since the pre-industrial age, with visible impacts on weather and climate extremes.
- The energy sector has to be at the heart of the solution to climate change. At the same time, modern energy is inseparable from the livelihoods and aspirations of a global population that is set to grow by some 2 billion people to 2050, with rising incomes pushing up demand for energy services
- Many developing economies navigating what has historically been energy- and emissions-intensive periods of urbanisation and industrialisation (are struggling).
Our present realities
- Today’s energy system is not capable of meeting these challenges; a low emissions revolution is long overdue.
- In the run-up to COP26, many countries have put new commitments on the table, detailing their contributions to the global effort to reach climate goals; more than 50 countries, as well as the entire European Union, have pledged to meet net-zero emissions targets.
- A lot more needs to be done by governments to fully deliver on their announced pledges.
- Today’s pledges cover less than 20% of the gap in emissions reductions that need to be closed by 2030 to keep a 1.5 °C path within reach
The recommendation from this report is to focus on four focal areas:
Focal Area One: A massive additional push for clean electrification that requires a doubling of solar PV and wind deployment relative to the APS; a major expansion of other low-emissions generation, including the use of nuclear power where acceptable; a huge build-out of electricity infrastructure and all forms of system flexibility, including from hydropower; a rapid phase-out of coal; and a drive to expand electricity use for transport and heating.
*Accelerating the decarbonisation of the electricity mix is the single most important lever available to policymakers
Focal Area Two: A relentless focus on energy efficiency, together with measures to temper energy service demand through materials efficiency and behavioural change.
Focal Area Three: A broad drive to cut methane emissions from fossil fuel operations. Rapid reductions in methane emissions are a key tool to limit near-term global warming, and the most cost-effective abatement opportunities are in the energy sector, particularly in oil and gas operations.
Focal Area Four A big boost to clean energy innovation. This is another crucial gap to be filled in the 2020s, even though most of the impacts on emissions are not felt until later. All the technologies needed to achieve deep emissions cuts to 2030 are available. But almost half of the emissions reductions need to come from technologies that today are at the demonstration or prototype stage, such as for the deployment of hydrogen-based and other low-carbon fuels, as well as carbon capture, utilisation and storage (CCUS).
Finance is the missing link to accelerate clean energy deployment
- An international catalyst is essential to accelerate flows of capital in support of energy transitions and allow developing economies to chart a new lower emissions path for development.
- Most transition-related energy investments will need to be carried out by private developers, consumers and financiers responding to market signals and policies set by governments.
- Alongside the necessary policy and regulatory reforms, public financial institutions – led by international development banks and larger climate finance commitments from advanced economies – play crucial roles to bring forward investment in areas where private players do not yet see the right balance of risk and reward.
The Big Issues that need addressing or recognizing post COP26
*There is a looming risk of more turbulence ahead for energy markets. The world is not investing enough to meet its future energy needs, and uncertainties over policies and demand trajectories create a strong risk of a volatile period ahead for energy markets.
*Transitions can offer some shelter for consumers against oil and gas price shocks Energy transitions can provide a cushion from the shock of commodity price spikes if consumers can get help to manage the upfront costs of change.
*As electricity takes up a progressively larger share of household energy bills, governments have to ensure that electricity markets are resilient by incentivising investments in flexibility, efficiency and demand-side response.
*A new energy system will need to operate very flexibly, enabled by adequate capacity, robust grids, battery storage and dispatchable low emissions sources of electricity (like hydropower, geothermal and bioenergy, as well as hydrogen and ammonia-fired plants, or small modular nuclear reactors).
*This kind of system will also require digital technologies that can support demand-side response and securely manage multi-directional flows of data and energy.
*Trade patterns, producer policies and geopolitical considerations remain critically important for energy security, even as the world shifts to an electrified, renewables-rich energy system. This relates in part to the way that energy transitions affect oil and gas as supplies become more concentrated in a smaller group of resource-rich countries – even as their economies simultaneously come under strain from lower export revenues.
*Higher or more volatile prices for critical minerals such as lithium, cobalt, nickel, copper and rare earth elements could slow global progress towards a clean energy future or make it more costly.
*The costs of inaction on climate are immense, and the energy sector is at risk Extreme weather events over the past year have highlighted the risks of unchecked climate change, and the energy sector will feel the impacts.
*Today, the world’s energy infrastructure is already facing increasing physical risks related to climate change, which emphasizes the urgent need to enhance the resilience of energy systems.
*A failure to accelerate clean energy transitions would continue to leave people exposed to air pollution. Today, 90% of the world’s population breathes polluted air, leading to over 5 million premature deaths a year.
The summary from the report in simple, stark terms
-The potential prize is huge for those who make the leap to the new energy
economy.
-This creates enormous prospects for companies that are well-positioned along with an expanding set of global supply chains.
-Employment in clean energy areas is set to become a very dynamic part of labour markets, with growth more than offsetting a decline in traditional fossil fuel supply sectors.
-Making the 2020s the decade of massive clean energy deployment will
require an unambiguous direction from COP26.
-Governments are in the driving seat: everyone from local communities to companies and investors needs to be on board.
-The way ahead is difficult and narrow, especially if investment continues to fall short of what is required, but the core message from the WEO-2021 is nonetheless a hopeful one.
-A wave of investment in a sustainable future must be driven by an unmistakable signal from Glasgow and the COP 26 meeting
The question is will it be unmistakable for the right reasons as politics are highly volatile at present?
***The report World Energy Outlook 2021 by the International Energy Agency, released in October 2021 can be downloaded here
