The IEA's New Energy Outlook Comforts No One




  • In World
  • 2019-11-13 15:28:42Z
  • By Bloomberg

(Bloomberg Opinion) -- The International Energy Agency would like you to know it is not in the business of making predictions:

The WEO [World Energy Outlook] analyses the choices that will shape our energy use, our environment and our wellbeing. It is not, and has never been, a forecast of where the energy world will end up.

That the IEA feels the need to put that high in the foreword to its latest long-term energy outlook gets at the problem: To a large degree, it doesn't matter that it isn't prophesying. Because of the IEA's stature and the fact that not many institutions have the inclination or funding to maintain detailed models of global energy supply and demand - plus our species' preference to just reach for ready-made statistics - the World Energy Outlook tends to be treated as a reference work rather than a mere thinking aid. That isn't the IEA's fault; it's just what happens.

Hence, back in April, a group of investment funds, scientific institutions and think tanks wrote a letter to the IEA demanding the WEO more explicitly map out scenarios consistent with the Paris Agreement's goal of limiting the rise in temperature associated with climate change (see this). The IEA has met them partway. The old central scenario called "New Policies" has been renamed "Stated Policies," capturing the impact of policy makers' plans rather than assumed improvements. The more ambitious "Sustainable Development Scenario," or SDS, gets more weighting in this edition, while the "Current Policies Scenario" - the embrace-the-fires-and-floods scenario - gets demoted.

The central criticism of the WEO is that it doesn't make a scenario with a good chance of limiting the world's temperature increase from pre-industrial levels to 1.5 degrees Celsius (2.7 degrees Fahrenheit) its central case. The secondary SDS, which the IEA characterizes as being in line with the Paris Agreement, comes much closer than the Stated Policies case. However, while it is consistent with modeled pathways that limit warming below 2 degrees Celsius, it still implies overshooting the 1.5 degree target. Avoiding that would mean getting to net-zero emissions by 2050, according to last year's special report from the United Nations' Intergovernmental Panel on Climate Change.

The SDS instead effectively relies on the deployment of carbon sequestration beyond 2050 to correct the overshoot, with the IEA pointing out that many of the pathways surveyed by the IPCC do the same thing. As for getting to net-zero emissions by 2050 without relying on sequestration, the IEA's language is skeptical, to say the least:

The additional changes involved would pose challenges that would be very difficult and very expensive to surmount. This is not something that is within the power of the energy sector alone to deliver. It would be a task for society as a whole, and likely involve widespread behavioural changes.

The IEA is correct: Getting to a net-zero energy system without sucking enormous quantities of carbon dioxide out of the air within the next 30 years is a gargantuan task. Given this, however, surely it would be worthwhile spelling that out in detail rather than condensing it into a qualitative statement?

As I wrote here, we should reframe the way we think about dealing with climate change, away from pure "cost" toward a holistic view of investments and rewards - just as we do, in a flawed way, with our current energy systems. After all, the Stated Policies - and, especially, the Current Policies - scenarios would come with enormous costs of their own, in the form of a degraded environment. And both the IEA and the IPCC acknowledge that carbon sequestration technologies are, at scale, both unproven and potentially unsustainable in their own ways in terms of, for example, land requirements. Scenarios are, as the IEA reminds us up front, just that, so showing one that may seem unrealistic in a different way from the lack of realism informing our current path couldn't hurt.

It is tempting to view the WEO as a comfort blanket for fossil-fuel interests, but it would be shallow indeed for energy's incumbents to see it that way. Yes, the Stated Policies Scenario foresees continued dominance by fossil fuels through 2040 at least. However, the SDS effectively upends the current, growth-driven economic model of the coal and oil businesses in the 2020s and does the same to the natural gas business in the 2030s. Investment in oil and gas production stalls almost immediately and then declines, kicking away the central pillar for a broad-based recovery from the crash.

And this, after all, isn't even the more drastic scenario demanded by the IEA's critics. It shouldn't be lost on today's energy incumbents that the latest edition of the WEO represents a shift prompted by demands from a wide range of institutions, including those representing capital markets, to map out more-rapid pathways to slashing carbon emissions.

Even if it leaves some unsatisfied, the very fact that this document, of all things, has become a battleground speaks to the urgency of dealing with climate change and the way in which that sense of urgency is spreading beyond the confines of think tanks and laboratories - with all the potential that holds for sudden, disruptive changes in policy. As a metaphor for where we're at on dealing with climate change, an 800-odd-page report filled with tables populated by data nerds doesn't seem the obvious choice, but I'll take it.

To contact the author of this story: Liam Denning at ldenning1@bloomberg.net

To contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.

For more articles like this, please visit us at bloomberg.com/opinion

©2019 Bloomberg L.P.

COMMENTS

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: World