Report: 1.5C pledge set to be undermined by major fossil fuel expansion
The UN is warning that state-owned companies and energy giants are collectively set to produce more than double the level of fossil fuels in 2030 than the limit that would be needed to avoid the worst of the climate crisis.
The forecast is a headline finding of the UN Environment Programme’s (UNEP) new production gap report, out today (8 November).
UN Secretary-General Antonio Guterres has stated that many nations are “doubling down on fossil fuel production” just as they need to be phasing it down and out to “address the climate catastrophe by tackling its root cause”.
More than 150 national governments now have long-term net-zero targets, he highlighted, but most of them have not backed this up with a clear plan to end fossil fuel expansion and wind down existing production as needed. None of the 20 biggest fossil fuel producers have done so.
Some are even planning major expansion this decade. India is set to be the biggest coal production expander this decade while Saudi Arabia, the US and Brazil are primed to majorly increase oil production.
The production gap report concludes that the world is on track to produce 460% more coal, 83% more gas and 29% more oil in 2030 than it would be possible to burn if the global temperature increase is to be kept to 1.5C.
Beyond this level of warming, climate scientists have warned, billions of people will face an ‘unliveable’ future and key ecosystems will face widespread and irreversible damage.
UNEP executive director Inger Andersen said: “These plans throw humanity’s future into question. Governments must stop saying one thing and doing another.”
The report recommends that Governments work with the private sector to deliver a ‘near-total’ end to global coal production and use by 2040.
It also emphasises that keeping the Paris Agreement within reach will require a 75% reduction in oil and gas production and use by 2050, relative to a 2020 baseline.
These targets and calculations are broadly in line with those made by the International Energy Agency (IEA) in the development of its updated 1.5C aligned roadmap to a global net-zero energy system by 2050.
The roadmap, released in September, includes an immediate end to the development of all additional coal extraction capacity and all new coal-fired power plants without carbon capture. This would pave the way for all nations to be ready to end coal-fired power generation by 2040.
Also detailed in the roadmap is an immediate halt to all new upstream oil and gas projects with long lead times. Developed nations should prepare to bring unabated gas out of their power systems by 2035 and also end the sale of new petrol and diesel cars and vans at this point, cutting their oil reliance.
The roadmap explains how concerted efforts to improve energy efficiency and scale renewables and other clean energie generation, compounded by investment in grid infrastructure and flexibility, could ensure that there is no risk to energy security in the transition.
Climate risk and financial risk
In related news, financial think tank Carbon Tracker has published a new paper setting out the case for oil and gas companies to consider winding down production.
This paper reiterates the IEA’s forecast that global oil and gas demand is now likely to peak by 2030, due to the electrification of sectors such as heat and transport; the uptake of low-carbon power generation and concerted efforts to improve energy efficiency.
With that in mind, Carbon Tracker believes that there is a risk of oversupply from the end of this decade, which would drive prices down and threaten the profitability of fossil fuels.
Companies and investors are not yet properly planning for lower long-term commodity pricing, the report warns. Instead they are tending to rely on outdated OPEC forecasts which stipulate increased demand and strong pricing well into the 2040s.
The report implores energy majors to update and clarify demand and price forecasts before using this information to steer a new type of decision-making on future investments.
The paper sets out recommendations for only investing in short-cycle projects. It also sets out options for diversifying investments into other energy-related sectors – something most businesses are not doing at scale, instead preferring to pay shareholders.
“There is no one-size-fits-all all approach for what to do to with cash that would historically be reinvested,” said report author Mike Coffin. “With the right combination of technical and commercial advantage then some new areas may be attractive, but becoming a growth business in a new sector is not a simple transition.”
The only firm that was once an oil and gas major and now invests exclusively in renewables and related solutions is Orsted, formerly Danish Oil and Natural Gas.
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