Recently, the International Energy Agency (IEA) published a report sketching out a ‘net-zero-by-2050 scenario’ it deems still attainable. Clearly, this and similar proposal will not lead to any true change as long as growth relies on depletable resources. But last week has been an exciting one for energy analysts and environmental campaigners around the developed world. In a short period of time, green activists grew their ranks welcoming activist investors, national courts and international organisations. But is a revolution really in the making?
The IEA’s roadmap
In the last months, many governments vowed to make their economies net-zero, cumulating to a 70% reduction in global emissions. Yet, a number of experts believe limiting global warming to 1.5° by 2099 to be unfeasible as things stand now. In fact, the globe’s temperature has already raised by over 1° compared on preindustrial levels. existing commitments would allow enough CO2 emissions for the world’s temperature to rise by over 2° C.
Unexpectedly, the IEA’s latest report claims that the “a more contained increase of up to 1.5°” is not unreachable. Thus, with its news scenarios and recommendations, the agency has become epicentre of the energy markets’ ongoing seismic changes. Controversially, the IEA suggested that to achieve this goal, the world’s energy system needs an extensive, relentless transformation.
Cities, industries and mobility
According to the agency’s forecasts, the selling of internal combustion engine cars should come to a halt by 2035. Thus, electric vehicles need to jump from 5% of total sales to at least 60% of newly-purchased automobiles in 2030. Furthermore, cities’ landscapes will have to change massively, with 85% of all residential buildings becoming net-zero by 2050.
Nevertheless, the suggested overhaul of the industrial system is even more challenging. According to the IEA, all coal plants must shut down by 2040 if not equipped with carbon-capture technologies. In addition, renewable-energy production, now at about 280GW, must surpass the 1,000GW hit mark. Not to mention that energy efficiency should improve by 4% yearly — thrice as fast as now.
These changes have to go together with a massive growth in green investments from $2tln to $5tln annuum by 2030. The money will help develop experimental technologies like carbon capture, hydrogen electrolysers and high-performance biofuels for ships and airplanes. Moreover, governments should ban all further coal, gas, and oil exploration around the globe. In the words of a European sustainability strategist, at the EIA “they are calling time on the fossil fuel era.”
Meanwhile, the world should build 10 industrial plants equipped with carbon-capture technology, three that are hydrogen-fuelled and start to produce at least two gigawatts of electricity though electrolysis each month in 2030–2050. To put these figures in context, China built 12 industrial facilities a month between 2000 and 2015. Whereas electrolysis for energy and hydrogen production is still at the prototype stage.
Boards and courts turn green
Corporate boards, established investment funds and courts across Europe and in the US are turning greener after the IEA’s report. The first sign of such a shift came from Warren Buffet’s BlackRock, the world’s largest wealth manager, allocating $8.67tln worth of assets. The fund forced London-based British Petroleum to enhance its commitment to climate neutrality and reach net-zero emissions faster. Although rejected, the motion was “a signal that a growing number of investors” want BP to reach net-zero by 2050.
Another news that attracted much attention regards Royal Dutch Shell, a $140bln oil company based in the Netherlands. The eco-friendly group Milieudefensie filed against Shell in a Dutch court along with over 17,000 Dutch citizens. The action also involved other NGOs like Greenpeace Netherlands, ActionAid, Both ENDS, Fossielvrij NL, Jongeren Milieu Actief and the Waddenvereniging. Eventually, the judges decided that the company has until the end of 2030 to reduce its emissions by 45%. This is the first such a judgement worldwide deeming oil companies responsible for their suppliers’ and buyers’ emissions too.
Any recap of those events must mention Engine No. 1, a hedge fund holding a tiny equity in Exxon Mobil. Despite controlling little more than $50mln on the company’s total $250bln capitalisation, the hedge found elected three new board members. Engine No. 1’s nominees won their sears thank to the backing of institutional investors upset with Exxon’s disappointing financial performances. Amongst them stood also BlackRock, the company’s second-largest shareholder, which supported all three of Engine No. 1’s candidates.
Governments’ climate ambiguity
In the meantime, governments are doing their best to make it look like they are following the new green tide. Thus, serious hindrances seem to be hindering Big Oil’s resolve to keep exploiting fossil fuels around the world. Still, there are reasons to doubt the veracity of their commitments.
Between lip services …
Recently, the G7 – a group of affluent liberal democracies – announced that all “international investments in unabated coal must stop now”. This declaration followed previous commitments by almost every leader of the richest economies to keep global warming within 1.5°.
The US will have “a net-zero energy grid by 2035, and a net-zero economy by 2050,” President Biden promised. In the UK, Boris Johnson launched a 10-point plan creating “green jobs, whilst making strides towards net zero by 2050”. The European Commission is studying measures for a bloc-wide 2050 net zero emissions target, under the December 2019 Green Deal. Even China is prioritising green energies’ role in the post-pandemic recovery as the virus recedes.
… and prudence
Nevertheless, at best governments have paid lip services to green ideas and the perspective of going net zero by 2050. Nowadays, many of the well-educated, middle-class and wealthier youngsters who defend the energy transition seem not to understand this reticence. But governments’ generalised unwillingness to comply with mounting pressures to decarbonise and reduce their economies’ environmental impact is reasonable. After all, there are many other interests that decisionmakers cannot simply side-line. In fact, the energy transition will put growing scores of workers out of their well-paying, stable jobs in established industries. Since greener economies will provide a few such posts, many will transition to temporary, badly paid, low-skill occupations.
For instance, in the US many are making efforts to safeguard mining, refining and non-renewable electricity production. Most recently, 15 state treasuries across the US menaced to withdraw several billion dollars from institutions divesting hydrocarbon companies. Meanwhile, there are serious doubts on the UK’s plans, and China is building new coal power plants to support growth. And the same foes for the EU’s proposed Green Deal, which according to many “doesn’t live up to its name”.
Conclusion: Going green, but not so fast
That governments and private actors alike are seemingly getting on board a greener energy future is apparent. And, the IEA has just given a perfect assist to those who campaign against the continued use of fossil fuels.
However, some of the targets the report sets are virtually impossible to achieve unless States take on the costs. Boosting the sales of electric vehicles will require more and more localities to install massive recharging infrastructures. Meanwhile, residential buildings’ decarbonisation may be almost impossible in countries where the property registers are outdated — both developed and poor. Finally, the closure of mining, refining and other activities related to fossil-fuel production may come at immense social costs. In the US, the likes of Alaska, North Dakota, Texas, and West Virginia are greatly dependent on these labour-intensive sectors. Abroad, entire countries rely tremendously on oil and gas revenues: Saudi Arabia, Iran, Iraq, Nigeria, Russia, Venezuela, and many others. Even wealthy societies like Norway refuse to give up on their oil exports so easily.
The agency’s roadmap is especially important in that it does not rely on unproven negative-emission technologies compensating for polluting activities. Such an unabated sort of optimism had attracted a lot of well-founded criticisms to previous net-zero roadmaps. On the contrary, the IEA’s recommendations push mostly on the massive deployment of extant technologies such as wind and solar. Yet, governments’ lack the willingness and the ability to shoulder the financial and social costs of a green revolution. Therefore, energy markets will continue in this trendless fluctuation for quite a while.