IEA: Enormous restructuring is ahead of us, and the road ahead is narrow
In May, the IEA issued a special report on the path to net zero emissions in 2050. The report is specific to recommendations to governments up to the COP26 negotiations in Glasgow in November. It is based on previous analyzes that are also mentioned in reports such as World Energy Outlook 2020. The report indicates that the road ahead is narrow.
Immediate deployment of available climate technologies is required
In May, the IEA published a special report on the path to net zero emissions in 2050, which is specific to the recommendations of the governments leading up to the COP26 negotiations in Glasgow in November. The report is based on previous analyses that are also mentioned in reports such as World Energy Outlook 2020. The report points out that the road ahead is narrow, and to stay on it requires the immediate and massive roll-out of all available climate technologies in the energy sector. The analyses use social aspects whereby those who lose on the transformation are compensated by those who are winners. The IEA’s analysis assumes, among other things, a global agreement on the goal, the path and the instruments, which may seem unrealistic today.
The report describes more than 400 milestones across sectors and technology areas in terms of what and when. The IEA describes the challenge as enormous. Oil and gas production are projected to fall in absolute terms by 2/3 from 2020 to 2050 while oil prices will fall from $37 / barrel (2020) to $24 in 2050. Gas prices will be more stable, the IEA estimates. At the same time, the CO2 price will have to exceed US $200 in 2040 and reach US $250 in 2050 in developed economies. Annual investments needed to reach net zero emissions are estimated to have to grow from 2.5% of GDP today to 4.5% according to the IEA.
Greatest opportunity for innovation in battery technology, electrolysers and DACCS
In the process industry, the IEA points to an improvement in R&D until 2030, where every month, among other things, ten large industrial plants equipped with CCUS must be built and three new hydrogen-based industrial plants built. It is also said that the greatest opportunities for innovation lie in battery technology, electrolysers and CO2 capture from the atmosphere (DACCS).
The emissions in 2050 are assumed to be 1.3 Gt CO2, which must be compensated with various carbon-negative solutions. The total amount of CO2 captured by CCUS in 2050 is estimated at 7.6 Gt CO2, half of which is related to fossil energy, 20% from industrial processes and the rest from bio-CCS or DACCS. Of this, 0.5 Gt will be used for various purposes (CCU). For three areas with special criticality for meeting the climate goals, the IEA has conducted its own sensitivity analyses. This applies to the areas of ‘changed consumer behaviour’, ‘access to bioenergy’ and ‘CCUS linked to fossil energy’.
The sensitivity analysis for CCUS shows that if this is not used for fossil energy, investments in renewable energy will have to be increased so that the overall investment level measured against GDP increases from 4.5% to 5%. At the same time, significant projects related to fossil energy will have to be shut down ahead of schedule.
Prepared by Gassnova's analysis team.