IEA: Russia’s war in Ukraine won’t save fossil fuels

By David Iaconangelo | 10/27/2022 07:11 AM EDT

The conflict in Europe has disrupted global energy trade and delivered an “unprecedented” shock, the head of the International Energy Agency said.

Fatih Birol, the executive director of the International Energy Agency, is seen in Germany in June.

Fatih Birol, the executive director of the International Energy Agency, is seen in Germany in June. Thomas Lohnes/Getty Images

The Russian invasion of Ukraine may have sparked the “first truly global energy crisis,” but it won’t stave off the decline of fossil fuels or create a need to tap new oil and gas fields, the International Energy Agency said Thursday.

In a new “World Energy Outlook,” IEA projected — for the first time — that current policies will be enough to force a peak or plateau in the use of fossil fuels. That follows the passage of several important climate laws in rich countries, including the Inflation Reduction Act in the United States, the agency said.

“No one should imagine that Russia’s invasion can justify a wave of new oil and gas infrastructure in a world that wants to reach net zero [greenhouse gas] emissions by 2050,” IEA wrote.


Over the next few years, demand for coal will hit its peak, while natural gas will plateau around 2030 and petroleum will reach its zenith in the mid-2030s, under current policy, according to the outlook.

Clean energy will rise to take the place of fossil fuels to a certain extent, IEA found. About $2 trillion in annual global financing for technologies like electric vehicles and renewables is due to flood in by 2030, in reaction to recent climate laws.

Yet that remains far short of what is needed for the world to comply with the 2050 net-zero emissions goal, as outlined in the Paris climate accord. At least twice as much clean energy investment, over $4 trillion per year, would be necessary by 2030 in order to comply, according to IEA’s modeling.

The agency underscored a major shortfall in investments for clean energy in emerging economies, calling for a “renewed international effort” to help finance clean projects in less wealthy countries.

“It is essential to bring everyone on board, especially at a time when geopolitical fractures on energy and climate are all the more visible,” said Fatih Birol, the IEA’s executive director, in a statement.

In a foreword to the new report, Birol said Russia’s invasion of Ukraine — and the subsequent passage of climate laws in the United States, Europe, Japan and other countries — suggested a possible “historic turning point towards a cleaner and more secure energy system.”

The war has disrupted the global trade in energy, delivering an “unprecedented energy shock” and amounting to the “first truly global energy crisis,” Birol wrote. Combined with the Covid-19 pandemic, the invasion will cause some 70 million people to lose access to electricity while 100 million people may no longer have clean fuels for cooking, he added.

“That is a global tragedy,” Birol said.

Such disruptions have prompted debate over whether nations might rethink their plans to move away from fossil fuels over the long run (Climatewire, March 2).

Birol dismissed that view — along with the idea that the crisis was spawned by an overreliance on clean energy — as “mistaken.”

“The world is struggling with too little clean energy, not too much,” Birol said in the foreword. “Faster clean energy transitions would have helped to moderate the impact of this crisis, and they represent the best way out of it.”

Oil, gas and coal

Many oil and gas trade groups and allies in Congress have argued the Russian conflict warrants a ramp-up of U.S. production, pointing in part to worries about higher energy costs for consumers.

Mike Sommers, CEO of the American Petroleum Institute, said in a recent statement that American policymakers “should be doing everything in their power to produce more energy here in America,” after Saudi Arabia, Russia and other oil-exporting nations decided to reduce production.

“Oil and natural gas will continue to play a leading role in the global energy mix well into the future, making continued investment in new production essential to addressing the current energy crisis and avoiding future scenarios where demand outstrips supply,” said Frank Macchiarola, a senior vice president at API, in a statement this week.

Macchiarola said the industry “shares the goal of a lower carbon future” and is working on options such as hydrogen and carbon capture, utilization and storage.

Sen. Joe Manchin (D-W.Va.) has said the United States should “ensure independence and security for ourselves and our allies” with permitting changes that would allow for greater production of fossil fuels and other energy resources (Energywire, Oct. 6).

Coal groups have argued the crisis should spark a reevaluation of their resource, meanwhile.

“Where is the recognition that the energy status quo has been turned on its head over the last year?” wrote Count on Coal, a group affiliated with the National Mining Association, in a newsletter Wednesday.

In Europe, countries like Germany decided to bring coal plants back into service in response to the energy crisis, the group noted. But in the United States, a similar approach is “glaringly absent,” Count on Coal said.

Emily Arthun, CEO of the American Coal Council, responded to questions about IEA’s report by placing blame on clean energy advocates.

“The energy crisis over the past year was triggered by a rush to go green accelerated by various political motivations without building out a proper infrastructure and insuring an economic reliable source of energy,” she said in a statement.

“In addition, investment in technology for the clean use of coal needs to be advanced at a pace equal to that of green energy to give the world affordable reliable options,” Arthun added.

But in its new outlook, IEA held fast to its conclusions — first unveiled last year — that exploration for new fossil fuel supplies should end if the world hopes to get on a net-zero pathway (Energywire, May 19, 2021).

That recommendation was greeted as a bombshell at the time. Defenders of oil and gas scoffed at the scale of transformation it implied. Environmentalists and clean energy advocates called it “momentous.” And Thursday’s outlook doubled down on it.

A sudden lack of Russian fossil fuel supplies, caused by the war, should be replaced partly by extended production from existing oil and gas fields, and by natural gas that would typically be flared and vented, IEA wrote.

And some new liquefied natural gas terminals may be necessary in order to ditch Russian supplies. Those terminals could later be repurposed for hydrogen, the agency said.

But new approvals of conventional oil and gas fields “would not help to meet” the immediate needs of energy supply, the authors noted.

That goes against the grain of what many oil and gas companies are planning, noted emissions researchers.

Mike Coffin, who heads oil, gas and mining research at think tank Carbon Tracker, said the world’s largest oil and gas companies have gone on to approve investments in greenfield projects since IEA’s net-zero scenario was brought out last year.

“We see all the majors planning on continued investment,” he told E&E News by email.

Yet Mark Campanale, Carbon Tracker’s founder, reacted to the latest IEA outlook by underscoring the finding that fossil fuel demand will peak in the coming years under the current policy scenario.

“Putin’s Ukraine war marks the beginning of the end for the Fossil Fuel sector,” he said in a statement, adding, “The writing is on the wall for investors, and there is no longer any doubt about the long-term prospects for fossil fuel production businesses, including new gas.”

Clean energy and inflation

IEA’s outlook became public a day after the United Nations warned about a lack of global ambition to address climate change.

In a report, the U.N. said the world is currently “nowhere near the scale and pace of emission reductions” needed to keep global warming within 1.5 degrees Celsius, as called for in the Paris Agreement (Greenwire, Oct. 26).

Just 24 out of 193 Paris Agreement signatory nations have updated their climate action plans since the time national governments met last November, the U.N. said. And current climate pledges would put the world on track for 2.5 C of global warming by the end of the century, it said.

Aside from modeling the future of energy resources under current policies and under a net-zero system, IEA’s analysts also looked at what would happen if nations lived up to the climate pledges they have already announced.

It found that electric cars would rise to 35 percent of global sales by 2030, as compared to 25 percent under current policies and 60 percent in a net-zero scenario.

Solar and wind power would provide 60 percent of the globe’s electricity by midcentury under current climate pledges, while demand for all types of fossil fuels — natural gas, coal and petroleum — would start falling by 2030, IEA found.

Already, global manufacturing capacity for key clean technologies such as batteries, solar photovoltaic equipment and hydrogen electrolyzers is expected to expand beyond the levels of adoption foreseen in national climate pledges, said IEA.

In the United States, annual solar and wind capacity additions are poised to expand 2.5 times the current rate by 2030, with electric car sales multiplying sevenfold, largely due to the Inflation Reduction Act, the agency said.

But the clean energy sector still needs to attract new investors, especially for less wealthy countries, according to the outlook.

By 2030, global clean energy investment needs to triple to meet the 2050 net-zero goal. And rising inflation could weaken policymakers’ power to direct investment toward clean energy, IEA said. That’s because inflation can reduce investors’ returns.

“If rising inflation is not contained, there is a risk it will put a brake on the willingness of companies to increase capital spending, despite strong price and policy signals,” IEA said.

Carlos Anchondo contributed reporting. This story also appears in Climatewire.