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.
There are two major problems with recent World Energy Outlooks (WEO):
First, most of the IEA’s flagship report is devoted to a business as usual scenario*, 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 claims 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.
*Until recently, this was called the New Policies Scenario (NPS). The name has been changed to the Stated Policies Scenario (STEPS).
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.
Because the Stated Policy Scenario (STEPS) – a business as usual route – is given a primary focus in the WEO, 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 feeds 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.
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 doesn’t it do so? The influence of fossil fuel companies plays a role.
While formally an intergovernmental organization, in practice the IEA appears 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 undermines the IEA flagship publication’s reputation as a dispassionate source of energy analysis.
What the IEA needs to do to guide energy decisions towards climate safety.
1. Align the climate scenario with the Paris goal of limiting warming to 1.5°C.
2. Focus the WEO on this strengthened climate scenario, not business-as-usual.
The defenders of the current business-as-usual approach fall back on a similar set of arguments – all of which are debunked below.
No. It doesn’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 also says 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.
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.
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 risk becoming a self-fulfilling prophecy.
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.
The main scenario of the WEO should be guiding governments towards achieving their climate & energy goals.
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 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.