Report: Additional oil and gas capacity ‘incompatible’ with 1.5C future
New oil and gas fields will undermine global efforts to limit the temperature increase to 1.5C, unless they are matched by early closures elsewhere, a major new analysis has concluded.
Published today (24 October) by the International Institute for Sustainable Development (IISD), the analysis looks at the energy investments and energy transition approaches outlined in some of the world’s most commonly-used 1.5C temperature pathway scenarios. It includes the scenarios published by Bloomberg NEF (BNEF), the Intergovernmental Panel on Climate Change (IPCC) and IRENA, as well as the International Energy Agency (IEA).
The IEA’s scenario is perhaps the most widely known, but also the most hotly debated in mainstream media. It has also been the grounds for many a climate challenge to the UK Government. Published in May 2021 and intended to inform negotiations at COP26 last November, the scenario includes more than 400 milestones in the decarbonisation of global energy and transport systems through to mid-century. A headline finding was that no new oil and gas development, beyond what had already been agreed in 2021, could go ahead without the scenario being undermined.
The IISD has concluded that almost all other major 1.5C scenarios ultimately have the same conclusion on new oil and gas extraction and use capacity. Global production of these fuels, the report states, must be at least 65% lower in 2050 than in 2020. Developing new fields would undermine this, provided that they were genuinely additional and not making up for early closure elsewhere.
The think-tank also states that, at present, financial flows going into fossil fuels are more that sufficient to meet the funding gap for wind and solar in the 1.5C scenarios. According to the report, some $570bn is spent every year on new oil and gas exploration and development. In comparison, solar and wind energies are receiving $450bn less each year than they require to scale in line with a 1.5C scenario.
Removing investment barriers
The study does note that there are significant structural obstacles to moving finance out of fossil fuels and into renewables, beyond the fossil fuel industry’s lobbying powers and the need to develop comprehensive upskilling and reskilling schemes to ensure a just transition.
It explains that a more “concerted”, joined-up effort will be needed to coordinate public and private finance moving away from new oil and gas extraction and into new renewables. One vehicle for this would be investment treaties. Given that most major treaties were forged decades ago, when renewables played a far smaller role and coal a far larger role, they are broadly outdated, the report warns.
Without treaties, governments will potentially face skyrocketing legal claims from the private sector for cancelling or scaling back fossil projects, the report explains.
One of the largest treaties is the Energy Charter Treaty. France has this month confirmed its intention to withdraw from the treaty, claiming that participating was incompatible with its national climate commitments. Other nations set to withdraw include Poland, Spain and the Netherlands. This is despite ongoing efforts to modernise the Treaty.
Another recommendation from the IISD is tighter requirements on corporate net-zero accounting – especially from large and medium firms in the energy sector and related sectors. The report outlines how many large energy companies have stated long-term net-zero goals but are failing to back them with interim, science-based targets – or to invest accordingly. Governments, it is stated, could help reign these practices in with greater disclosure requirements. This is already underway in the UK; net-zero transition plans are set to become mandatory for some large emitters from 2023.
“Corporate net-zero targets become meaningless if they include only a fraction of a company’s emissions or remain unsubstantiated with concrete measures and implementation plans,” summarised report co-author Frederic Hans. “Corporate climate reporting and well-designed targets focusing on deep emissions reductions are essential to channel capital where it’s most needed to accelerate the energy transition.”
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