IEA’s Net Zero By 2050 Report: Credible Roadmap Or Unhinged Advocacy?

It is a month since the International Energy Agency – the rich world’s energy advisory body established in the wake of the oil price shock of 1973 — issued its astonishing report calling for the end to all new investments in oil and gas (let alone coal) from 2021. As expected, the IEA “road-map” elicited widespread media coverage and strong reactions, ranging from gushing support from those convinced of a “climate emergency” to outright dismissal, as in the case of the Saudi oil minister who called the report a sequel to “La La Land”. Commentators on the IEA’s radical call against fossil fuel investments doubtlessly have their own share of biases and diverging interests. Yet the question remains as to just how credible is the IAE’s call for a complete transformation of the global energy system within two or three decades, a system which developed over two centuries and today relies on fossil fuels for 85% of its needs.

The IEA Roadmap

The IEA calls its report “the world’s first comprehensive study of how to transition to a net zero energy system by 2050 while ensuring stable and affordable energy supplies, providing universal energy access and enabling robust economic growth”. Its road-map, we are told, sets out “a cost effective and economically productive pathway” to a “resilient energy economy dominated by renewables like solar and wind instead of fossil fuels”. “Our roadmap”, the IEA states, “shows that the enormous challenge of transforming our energy systems is also a huge opportunity for our economies, with the potential to create millions of new jobs and boost economic growth.”

This best of all possible worlds promised by IEA will come about only if policy makers around the world do just what the roadmap requires. The 200+ page report can be summarized by three key milestones requisite to its ‘net zero by 2050’ vision: an immediate end to investments in all new oil and gas developments (coal, of course, is beyond the pale); a ban on all internal combustion engine vehicles by 2035; and a zero-emission power sector by 2040. These are “sensational” milestones, as one commentator put it somewhat mildly. For others, these recommended policy diktats are more in keeping  with the agenda of the radical fringe of environmental activism.

Reactions to the IEA Report

The IEA’s report was met with some derision not only among policy makers in IEA member countries such as Japan and Australia but also by oil and gas industry executives and analysts. A day after the publication of the IEA Net Zero report, Reuters ran a widely-cited story headlined “Asia snubs IEA’s call to stop new fossil fuel investments”. Akihisa Matsuda, deputy director of international affairs at Japan’s Ministry of Economy, Trade and Industry (METI), said the government has no plans to immediately stop oil, gas and coal investments. In the Philippines, Energy Secretary Alfonso Cusi said the energy transition should be “fuel and technology-neutral”, fully aware that coal will be the dominant power source in his country for decades even after a ban on new coal plant proposals.

Even before the IEA report was published, the “net zero (carbon emissions) by 2050” mantra pushed by the EU and the US under the Biden administration was cast as “pie in the sky” by  Raj Kumar Singh, India’ s Minister of Power, New and Renewable Energy

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. Somewhat ironically, Mr. Singh’s views were expressed at a climate summit organized by the IEA. If the Saudi oil minister was outspoken in calling the IEA report “La La Land” fiction, the Russian Deputy Prime Minister Alexander Novak was a little more restrained but no less incredulous. If the world were to follow the International Energy Agency’s controversial road map, he said that “the price for oil will go to, what, $200? Gas prices will skyrocket”. Similarly, OPEC warned that the IEA’s net zero pathway would add to oil price volatility. The group remarked that “the claim that no new oil and gas investments are needed post-2021 stands in stark contrast with conclusions often expressed in other IEA reports”.

Real World Constraints and Credibility

Perhaps most damaging to the credibility of IEA’s net zero report is the logical question most objective analysts would pose: if indeed it is true that drastically cutting back on fossil fuels is consistent with higher economic growth and increased productive employment, why does the IEA require policy makers to force countries along the net-zero pathway? Surely, if replacing fossil fuels with wind and solar energy and electric vehicles promote growth and employment, then wouldn’t countries such as China and India naturally race towards this best of all possible worlds without expensive green subsidies and punitive anti-fossil fuel policies?

Equally questionable is the presumption that renewable energy is already cheaper than coal, oil and natural gas, and hence merely needs a level playing field in policy terms to compete. The fact remains that renewable energy businesses count on a significant part of their revenue streams from policy supports such as feed-in tariffs, production tax credits and mandatory renewable portfolio schemes. To date, renewable energy investments invariably depend on mandates, continued subsidies and other regulatory support, otherwise they fall.

If there is little in the IEA report that critically examines the real world constraints on replacing fossil fuels, equally concerning is the lack of any analysis on the impact of its draconian policy recommendations on the world’s poor who lack access to energy. The charge of climate imperialism on the part of the IEA is not lightly made. This was best put across by India’s Mr. Singh who commented “you have 800 million people who don’t have access to electricity. You can’t say that they have to go to net zero, they have the right to develop, they want to build skyscrapers and have a higher standard of living, you can’t stop it”.

All non-profit organizations reflect the needs of their funding members, and the IEA is no different. As the IEA’s growth in funding is primarily from the US and Europe, it is not surprising that it also reflects the “climate emergency” predilections of the Biden administration and Western European governments which see climate change as an existential threat and a national security priority. But in taking up the mantle of green advocacy on behalf of its paymasters, the IEA faces the prospect of losing all credibility as an objective advisor on energy security for its OECD members.