The World Energy Outlook holds a mirror up to climate policy

Camille Reynaud
Climate Intelligence
22 October 2021

Last week, the International Energy Agency published the World Energy Outlook . It is the most important guide for international energy policy and thus also for climate policy. The report comes to the sobering conclusion that current targets, plans and investments are far from sufficient to achieve the 1.5°C goal of the Paris Climate Agreement. The IEA calls on governments to use the upcoming COP26 climate conference to send an "unequivocal signal" with concrete policy plans.

Of course, you can read the whole 386-page report here. To save you some time, we have summarised everything you need to know about the International Energy Agency, the World Energy Outlook and the energy transition in this blog post. We also tell you why it is important to achieve the energy transition and how you can contribute to it.

 

What is the IEA?

The International Energy Agency (IEA) is an autonomous intergovernmental organisation within the OECD framework that works with governments and industries to ensure a secure and sustainable energy future for all.

The IEA was founded in the wake of the 1973 oil crisis and initially focused on responding to oil supply shortages and providing statistics on oil and energy markets. Today, it is best known for its flagship annual publication, the World Energy Outlook.

What is the World Energy Outlook?

The World Energy Outlook (WEO) is the world's most renowned and relevant analysis on energy and has been published every year since 1998. It contains extensive scientific data and analyses on scenarios of global energy production and use, as well as their impact on energy security, economic development and: climate targets.

This year's edition was specifically designed as a guide for the heads of states and governments who will be attending the UN Climate Change Conference COP26 in Glasgow in ten days' time.

Why is the World Energy Outlook important?

The report is important because it determines whether we are on the right track to decarbonise the energy industry and thus achieve the goals of the Paris Climate Agreement. To do this, the WEO compares four different scenarios ofCO2 emissions over time:

  1. STEPSScenario based on actual action by governments
  2. GSPScenario based on the Announced Climate Pledges
  3. SDS: Scenario "well below 2°C" with net zero emissions of all countries until 2070
  4. NZE: Scenario with net zero emissions until 2050

 

Figure 1: World Energy Outlook 2021 (IEA)

So are we "on track" to reach the 1.5°C target of the Paris climate agreement?

The short answer: No!

The following diagram shows the predicted average increase in global temperature over time under the above scenarios:

 

Figure 2: World Energy Outlook 2021 (IEA)

It goes without saying that we will not cope with climate change with "business as usual" (the STEPS scenario). But it is also clear that the climate targets are not yet ambitious enough to keep global warming below 1.5°C (the GSP scenario). This means that even if we meet the targets set by nations, we will miss the goals of the Paris Climate Agreement, and thus fail to "limit global warming to well below 2°C, preferably 1.5°C, compared to pre-industrial levels." The WEO predicts thatCO2 emissions will fall by only 40% by 2050 if countries meet their climate targets. This means that current plans to reduce global carbon emissions are 60% short of what they committed to in their 2050 Net Zero target.

"Today's climate pledges would result in only 20% of the emissions reductions by 2030 that are necessary to put the world on a path towards net zero by 2050".


Dr Fatih Birol
Executive Director of the International Energy Agency

 

But is it really so important that we achieve the goals of the Paris Agreement?

Yes, absolutely!

And the energy transition is fundamental to this.

What is the energy transition and why is it important?

To reach the 1.5°C target and avoid unprecedented consequences of global warming, we need to transform the global energy sector from fossil fuel energy production and consumption systems (oil, gas, coal) to renewable, carbon-free energy sources such as wind and solar. This transformation is commonly referred to as the energy transition .

Currently, about 73% of global greenhouse gas emissions come from energy:

Figure 3: Our World In Data - Emissions by Sector

The problem for the climate is that the energy sector is still predominantly dependent on fossil fuels (oil, gas, coal). Although one of the UN's 17 Sustainable Development Goals (SDGs) is to provide affordable and clean energy for all, more than 80% of the energy used worldwide is still generated with fossil fuels. Burning these fossil fuels releases greenhouse gases that contribute greatly to man-made global warming. And this global warming must be stopped to prevent increased heat waves, droughts, storms, melting glaciers, rising sea levels, and warming oceans that will ultimately destroy human livelihoods.

How can we still achieve the energy transition?

In the World Energy Outlook, the IEA concludes that there are three areas in particular that need to be tackled quickly:

1. decarbonisation of energy production

In 2019, only one-third of the world's electricity came from a low-carbon source (renewables: solar, wind, hydropower, wind and tidal power and some biomass; nuclear). To achieve net-zero emissions by 2050, countries must commit to increasing this share of clean energy generation by setting targets and promoting innovation (batteries, hydrogen, etc.). For example, the European Union has committed to generate 40% of its electricity from renewables in order to meet the targets of the European Green Deal and to reduce greenhouse gas emissions by at least 55% by 2030. Austria is one of the pioneers in this respect, as almost 80% of electricity in this country is generated from renewable sources (mainly hydropower), and the government has committed to switching 100% of the electricity supply to renewable energy by 2030.

 

2. clean electrification:

Electrification refers to the process of replacing technologies that use fossil fuels with technologies that use electricity as an energy source. Together with a cleaner way of generating electricity, this can reduce the demand for fossil fuels. Examples of electrification are the switch to electric vehicles in the transport sector or the use of heat pumps instead of natural gas heating in buildings.

 

3. improving energy efficiency:

Energy efficiency refers to the amount of energy required to achieve a certain benefit, for example heating a room. The IEA emphasises that improving energy efficiency is urgently needed to reduce energy demand and achieve the Net Zero emissions target.

The IEA estimates that current annual investments in clean energy alone will need to triple in the next decade - reaching a value of $4 trillion by 2030 - to meet the 2050 Net Zero Emissions target. To ensure this, decisive action and investment from the public sector is required. But the private sector will also have to do its part. Because the energy transition must not only not only reduce greenhouse gas emissions, but also ensure that all people have access to electricity, as more than 10% of the world's population still does not have access to electricity, let alone clean electricity as required by the UN SDGs. Extensive action plans are therefore necessary to tackle the energy transition project. And this is exactly what will be discussed (on the basis of the World Energy Outlook) at the COP26 climate conference in Glasgow. By the way, we will give you more details on the COP26 in a blog post next week.

What can your company contribute to the energy transition?

If the planet is not doing well, your company will not do well in the long run. The good news is that there are some simple yet very effective steps you can take to drive the energy transition in your own company and become part of the solution. What's more, you can be proud to have contributed to tackling humanity's greatest challenge.

So what actions can you take to contribute to the energy transition? Here are some effective suggestions on the priority areas proposed in the World Energy Outlook:

1. participate in the decarbonisation of energy production:
  • Switch to green electricity: If you are not yet using green electricity, the easiest and most effective step is to switch from your current electricity provider to a green electricity provider. But be careful: not all green electricity is good green electricity. When switching, make sure that the green electricity is UZ-46-certified!
  • Produce your own green electricity: Depending on the location of your business, it can be very efficient to produce your own electricity. For example, you can install a photovoltaic system on the roof of your building or install your own small wind turbine. Such investments often have a very short payback period and are therefore not only good for the climate, but also absolutely worthwhile from a financial perspective.

2. electrify the energy demand:
  • Change the heating system: If you heat with a fossil fuel-based system, then you should consider switching to an electric heating system. Of course, switching heating systems can be a major undertaking depending on the size of the business or building. For this reason, there are also various public subsidies that cover part of the necessary investment and make a conversion worthwhile. Here you can find out directly about the "Get out of oil" subsidies.
  • Conversion of the vehicle fleet to e-mobility: Go for e-mobility when a vehicle needs to be procured. E-cars are now not only on their way into the mainstream, but also very interesting from a tax perspective. In Austria, for example, a subsidy of up to € 5,000 can be claimed for every electric vehicle purchased. In addition, e-cars are not subject to NoVA and there is no motor-related insurance tax. If an employee uses an employer's e-car for private purposes, no benefit in kind is due and the employer does not incur any ancillary wage costs for the benefit in kind. You can find out more about the Austrian subsidies for electric vehicles here.

 3. improve the energy efficiency of the company:
  • Introduce energy monitoring: Install smart sensors or smart meters to understand the energy consumption patterns of appliances and identify inefficiencies. This way you can find out which appliances consume a lot of energy and replace them with a more efficient alternative.
  • Energy audit to optimise the infrastructure: If buildings are already a bit outdated, then it can make sense to carry out an energy audit of the infrastructure. In this way, you can determine how to optimise the energy demand and optimally reduce it efficiently. In addition, one becomes aware of weak points. The usual suspects here are often the thermal insulation of the walls, heat leaks at windows and the like.

So you see: it's not very complicated to contribute to the energy transition, but it absolutely pays off. Not only for the climate.

Conclusion

The World Energy Outlook 2021 does not paint a good picture of the current state of the energy transition and the path we have taken. But, and this is very important, it also gives clear statements on what should be done and what financial investments are needed to reach the 1.5°C target of the Paris Climate Agreement and to save the planet from irreversible developments. The path is not easy, but it is achievable if we act together quickly: Governments are the driving force, but companies and investors also have a responsibility. And every individual has an important role to play.

So let's get down to work and tackle the energy transition together with determination...

 

 

 

 

Sources:

Image & Copyright:
Photo by Sander Weeteling on Unsplash
"Early morning windmill sunrise in the mist".

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