THE IEA IS GETTING ON TRACK

For years, the International Energy Agency’s World Energy Outlook (WEO) guided the world towards climate chaos.

But WEO 2021 marked a step change the IEA – and set a challenge to governments and investors:

Will they stop approving and funding new oil and gas expansion?

The Problem

Governments, businesses, industry groups and investors rely on analysis by the International Energy Agency (IEA) to guide their energy decisions. Yet the IEA’s energy scenarios (aka descriptions of the future energy demand based on a set of assumptions) currently guide decision-makers towards failure in meeting the Paris climate agreement goals.

Until this year, there were two major problems with the World Energy Outlook (WEO):

First, most of the IEA’s flagship report was devoted to a business as usual scenario, the Stated Policies Scenario (STEPS), which would lead to between 2.7 and 3.3°C of warming.

Second, the WEO contains a climate scenario called the “Sustainable Development Scenario” (SDS), but it is not aligned with the Paris goal of striving to limit warming to 1.5°C.

The IEA’s SDS would exhaust the global 1.5°C carbon budget by the early 2030s. It assumes trillions of future fossil fuel investments will take place and pushes the world past 1.5°C, which would bring unacceptable harm to lives and livelihoods across the world. The IEA claimed that the SDS would deliver the Paris goals – but that’s only true if you assume major reliance on negative emissions from unproven technologies in the second half of this century.

Now, it 2021, the IEA has finally included a prominent, possibly 1.5ºC-aligned scenario, the Net Zero Emissions (NZE) scenario. This is a step change from the IEA, though it still contains risky modelling choices around fossil gas, carbon capture and storage, bioenergy, and nuclear energy. Importantly, the IEA has finally said what civil society has known for years: new oil, gas, and coal expansion and finance (beyond fields already under development) would blow our carbon budget for 1.5ºC.

A Self-Fulfilling Prophecy?

Published every November, the IEA’s flagship World Energy Outlook serves as a map of the future energy landscape. It guides decisions on energy investments and policies all over the world. But its highlighted route leads to climate disaster.

Until 2021, the Stated Policy Scenario (STEPS) – a business as usual route – was given primary focus in the WEO. So, it is routinely used by the media, investors, corporations, and governments as a prediction of future demand for fossil fuels.

As such, the STEPS shapes decisions about investments and policies, including on some of the world’s most polluting energy developments. The WEO has been used to:

  • Justify a massive expansion of thermal coal mining in Australia;
  • Make the case for opening U.S. Arctic waters to oil drilling;
  • Support greater investment in Canada’s tar sands, including approval of the Trans Mountain pipeline.

More indirectly, the IEA’s central focus on the STEPS fed a general expectation that fossil fuel demand will keep rising – something that can’t happen if we’re going to avoid the worst impacts of climate change.

The IEA states publicly that the STEPS is only a model’s projection, rather than a prediction. But the IEA must take responsibility for how its products are used in practice – in this case, being used to justify significant expansion of fossil fuel supply and endanger the climate.

Now the IEA has published a 1.5ºC-aligned scenario, NZE, and given it real focus and attention in WEO 2021. This is a step change. Governments and investors must  now stop relying on STEPS and SDS, and instead align with their finance and policies with what’s need for 1.5ºC. That means they need to at a minimum immediately stop approving and financing new fields and mines beyond those already under development now.

Energy Information for Whom?

The IEA is an advisory body to its 30 member countries, all of whom signed the Paris Agreement, committing to pursue efforts to limit warming to 1.5 degrees Celsius and to keep it well below 2°C. As such, the IEA ought to be advising its member countries on how to achieve these goals. Why has it taken so long to do so?

Part of the answer is in the IEA’s history. OECD member nations established it after the 1972 oil shock, with an explicit stated purpose of securing their supply of oil.

The influence of fossil fuel companies also plays a role. While formally an intergovernmental organization, in practice the IEA has often appeared to be a servant to two masters at the same time: its member countries, and multinational fossil fuel companies.

The IEA’s formal governance structure answers to its member countries, but most formal meetings also include an entity called the Energy Business Council (EBC) made up of companies with fossil fuel interests. The EBC’s stated purpose is to provide the IEA with a “reality check of its analysis” and to ensure its relevance to the industry. Energy companies are also regularly consulted by the IEA and participate in its working groups and in advisory bodies.

The IEA also encourages energy companies to provide staff on secondment, and at any time several IEA staff thus receive their salaries from energy companies, especially oil companies. Given the self-serving interests of these fossil fuel companies, their close role in influencing the WEO undermined the IEA flagship publication’s reputation as a dispassionate source of energy analysis.

The Challenge

What governments need to do to align their decisions with the IEA's 1.5ºC scenario.

1. Stop approving new oil, gas, and coal fields and mines beyond those already under development now.

2. Stop all finance and funding for new oil, gas, and coal fields and mines where a final investment decision (FID) has not already been made.

FAQ

For years, the defenders of the business-as-usual approach fell back on a similar set of arguments – all of which are debunked below.

Yes, now it does – but it still depends on risky modelling choices. Until 2021, it didn’t have a fully Paris-aligned scenario.

In light of the recent IPCC special report on 1.5°C and the Paris Agreement, IEA scenarios must include a reasonable chance at meeting this goal. As climate science has improved, the significant risks associated with exceeding 1.5°C are becoming increasingly clear. Influential institutions like the IEA must keep up to the changing science.

The IEA has said that the SDS sets a course for net zero by 2070. However, the IPCC 1.5°C report gives us a clear deadline of 2050 for achieving net-zero. Falling 20 years short on ambition is unacceptable. In contrast, the NZE scenario reaches net zero across the energy sector by 2050.

The IEA claims the SDS would lead to 1.7 to 1.8°C of warming, by comparing it with scenarios requiring new technologies to suck 10-20 Gt/yr of carbon dioxide out of the air. Models’ reliance on untested negative emissions technologies is increasingly controversial in the scientific community (see our Resources section); this level of deployment could require equivalent to 25-86% of the world’s arable and crop-growing land. The IEA itself considers this level unfeasible – yet still relies on high levels of negative emissions technologies in the NZE scenario as well.

Trillions of dollars of energy investment and countless political decisions are made based on the WEO scenarios. Shifting them will have a huge impact on global energy decision making and financial flows. 

Investors use the IEA’s WEO to guide their scenario analysis under recommendations from the Financial Stability Board.

Energy investors look at long-term demand and supply projections to inform capital expenditures such as exploration, infrastructure, and manufacturing – which are critical to meeting the Paris goals.

Policymakers use WEO scenarios to inform domestic energy policy, public financing and infrastructure decisions.   

Given the prominence of the WEO in decision making, unambitious scenarios risked becoming a self-fulfilling prophecy. Now, investors and policy makers should align their decisions with NZE not STEPS.

In an ideal world this might be true, but the IEA needs to recognize how its scenarios are used in practice: as a roadmap for decision-making. Governments and investors see the central WEO scenario as the most likely, and base decisions on it. This is partly because of how the IEA communicates it. By implying that fossil fuel use is going to keep increasing it becomes a self-fulfilling prophecy. Decision makers use the WEO to justify further oil & gas expansion despite the scientific reality. 

If the WEO has a central scenario, it should be guiding governments towards achieving their climate & energy goals.

Importantly, WEO 2021 no longer prioritizes STEPS as the central scenario. Instead, it describes it as exploring the impacts of current policies, but focuses on NZE as a normative scenario for what’s needed for 1.5ºC.

Overshooting 1.5°C could trigger a multi-meter sea level rise over hundreds of years due to instability in the Arctic and Antarctic; as well, the coral reefs and other marine and coastal ecosystems might face extinction. Getting back to lower levels of warming after an overshoot may also be politically, economically, and technically prohibitive. As a result we may never get back to safer levels.

Many climate scenarios, including those used by the IPCC, rely on significant use of bioenergy with carbon capture and storage (BECCS), among other negative emissions technologies. The IPCC acknowledges there could be significant negative side-effects and major governance challenges associated with deploying these technologies at a sufficient global scale. However, to date, the information from the IEA on NETs has not been transparent. The IEA appears to base its claims of “full Paris alignment” on the assumption that new technologies will grow rapidly over the coming decade, and ultimately pull hundreds of billions of tonnes of carbon dioxide out of the atmosphere in the second half of the century.

By taking a transparent and precautionary approach to the use of NETs, the IEA can help WEO users to better manage the risks associated with climate change and the transition away from fossil fuels.

Resources

Below are reports, briefings, blogs, and sign-on letters supporting the need for WEO reform at the IEA.

MEDIA RELEASE | OCTOBER 2021

In major shift, IEA World Energy Outlook mainstreams 1.5°C pathway, showing need to end oil, gas, and coal expansion

For the first time, the International Energy Agency (IEA)’s flagship annual report on global energy pathways, used worldwide to influence trillions of dollars in investment, details an achievable roadmap to keep global heating below 1.5 degrees Celsius (°C). By making a 1.5°C scenario the benchmark of this year’s World Energy Outlook (WEO), the IEA challenges governments and companies to back up lagging Paris pledges with immediate action to shift the energy system away from fossil fuels.

BRIEFING | MARCH 2021

Getting On Track to 1.5°C: The IEA’s Opportunity to Steer Investments towards Success in Meeting the Paris Goals

In 2021, the IEA has taken a critical, long overdue step towards reform by committing to produce an energy scenario compatible with limiting global warming to 1.5°C, to be published in a special report on 18 May. In this short briefing, we outline steps the IEA must take to ensure this new scenario has both scientific integrity and a transformative impact in shifting energy investment.

BLOG | OCTOBER 2020

WEO 2020: A small step when the world needs a giant leap

The International Energy Agency (IEA) has taken a small, crucial step towards fixing its flagship World Energy Outlook (WEO). For the first time, the IEA included a “case” (a sort of mini-scenario) that could be consistent with getting to net zero by 2050 and limiting warming to 1.5 degrees Celsius (ºC). This is a critical signal that the IEA is hearing our calls.
Now they have to finish the job.

COLUMN | OCTOBER 2020

Bill McKibben: The Most Important Global Forecast That You’ve Never Heard Of

Bill McKibben explores what a science-based World Energy Outlook for 1.5ºC could look like, in contrast to what a 'World Habitability Outlook' for 2070 (if one existed) would look like in the world the IEA forecasts.

BLOG | JUNE 2020

IEA report misses the mark on ‘Sustainable Recovery’ by sidelining 1.5°C

If the IEA is serious about helping governments sustainably tackle interlocking economic and climate crises, they have one more chance to prove it with their data: by making a 1.5-aligned energy pathway central to the 2020 World Energy Outlook.

OPEN LETTER | MAY 2020

Joint letter to IEA from 80+ climate leaders

On May 28, 2020 a letter was sent to Fatih Birol, Executive Director of the International Energy Agency (IEA) from over sixty leaders from within the climate community. Below is a copy of the letter along with the list of co-signatories. The letter was a follow up to one sent in November 2019.

QUIZ | MAY 2020

Who said what? Big oil, or the IEA?

The International Energy Agency (or IEA for short) advises governments on energy policy. The trouble is, at the exact same time, some of the things the IEA says sound exactly like Big Oil talking points. Don’t take our word for it, see if you can tell them apart!

REPORT | APRIL 2020

Still Off Track: How the IEA’s 2019 World Energy Outlook Undermines Global Climate Goals

This briefing provides a technical analysis of how the International Energy Agency’s (IEA) 2019 World Energy Outlook (WEO), released in November 2019, continues to steer governments and investors off track in tackling the climate crisis.

BLOG | APRIL 2020

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.

BLOG | FEBRUARY 2020

“Grand Coalitions” with Big Oil and Gas Won’t Solve the Climate Crisis

The IEA is calling for a "grand coalition" on climate – but the perspective that Big Oil and Gas are on board to plan their own necessary demise is either impressive cognitive dissonance, revisionist history, or simple denial.

ANALYSIS | NOVEMBER 2019

The IEA and WEO 2019: Still working for fossil fuels, not global climate goals

In its 2019 World Energy Outlook, used by governments and investors all over the world to guide energy decisions, the International Energy Agency is still centering a trajectory heading towards climate breakdown.

ANALYSIS | NOVEMBER 2019

Decoding the IEA’s Scenario Spin: Real reform or more of the same?

When it comes to the urgent need for a robust, central, 1.5°C-aligned energy scenario that doesn’t gamble our future on unproven technologies, the IEA unfortunately presents far more spin than substance.

BRIEFING | OCTOBER 2019

RISKY WAGER: The IEA’s Bet on Fossil Gas and the Need for WEO Reform

The latest climate science and rapidly changing energy markets indicate the need to rapidly shift away from fossil gas, yet the IEA mistakenly presents gas as compatible with a decarbonized future. This policy brief brings together the latest energy market research with the need for reform of the World Energy Outlook.

ANALYSIS | SEPTEMBER 2019

The IEA’s Hidden Negative Emissions Gamble

For the IEA, real scenario reform will require more than risky emissions accounting tricks that punt the burden and costs of reducing emissions to future generations.

SIGN-ON LETTER | APRIL 2019

Letter to the IEA

Over 60 influential corporate, government and civil society leaders sent to the IEA calling for increased WEO ambition, including alignment with the Paris 1.5°C goal.

BRIEFING | FEBRUARY 2019

The International Energy Agency and the Paris Goals: Q&A for Investors

Investors often use the WEO to assess energy investments. Using the SDS (or any other IEA scenario) to assess the climate-robustness of energy investments may understate the degree of transition risk.

REPORT | APRIL 2018

OFF TRACK: The IEA and Climate Change

The International Energy Agency guides energy decisions towards fossil fuel dependence and climate change. Here’s how.