THE IEA IS LOCKING US IN TO +3ºC GLOBAL WARMING
The IPCC (Intergovernmental Panel on Climate Change) is the leading international body for assessing climate change and determining the sector policies needed to limit global warming to 1.5ºC above pre-industrial levels.
But although the IPCC establishes realistic transition scenarios, most political and financial decisions regarding energy are made based on scenarios published by the IEA (International Energy Agency) —the reference institution for projecting national and international supply and energy demand.
Not all IEA scenarios have the same influence on decision-making processes. Only those put forward by the World Energy Outlook (WEO), IEA’s annual energy Bible, play a leading role in guiding investors. Today, however, the IEA’s World Energy Outlook mainly assumes a business-as-usual scenario. Such a scenario would lead to +3°C warming. By doing so, the IEA is guiding us on a path that we know we must be avoided.
Reclaim Finance calls on political and financial institutions to demand the IEA develop and integrate a 1.5°C scenario in the WEO that includes a precautionary approach to negative emissions technologies. In the meantime, Reclaim Finance calls on financial institutions to select the most realistic and ambitious 1.5°C scenarios of the IPCC.
The IEA aims for 3°C warming
The Paris Agreement aims to keep global warming “well below 2°C and as close as possible to 1.5°C.” The IPCC’s Special Report on Global Warming of 1.5 °C stresses the importance of aiming for this stricter threshold to avoid the worst social and environmental consequences of climate change.
Limiting global warming to 1.5ºC above pre-industrial levels means halving global emissions by 2030 and achieving net-zero by 2050 at the latest; this would only give us a 50% chance of succeeding.
Yet, rather than targeting a 1.5°C trajectory, the IEA World Energy Outlook focuses on a scenario called STEPS—Stated Policies Scenario (formerly the New Policies Scenario NPS). This scenario would cause a +3°C above pre-industrial levels. Though the IEA (International Energy Agency) also offers a marginally better scenario, the SDS—Sustainable Development Scenario—this also fails to limit global warming to 1.5ºC
The IEA gambles on non-existent technologies
The IEA tends to systematically underestimate the development of renewables. On the contrary, it bets on the development of nuclear power and as yet non-existent technologies. These include negative emission technologies that would allow us to temporarily overshoot the global warming target before returning to it. A very risky bet.
First of all, it should be recalled that there are still major uncertainties about the possible application of carbon capture and storage (CCS) in the oil and gas end-use sectors, e.g. power generation, transport, residential heating and cooling.
Moreover, most of the technologies under consideration, such as bioenergy with carbon capture and storage (BECCS) do not exist at all. Finally, scientists from Scientific Advisory Board of European Academies warn that while they “may have a useful role to play,” current information shows that they would not be sufficient to “compensate for inadequate mitigation measures”.
The best course of action is, therefore, to avoid GHG emissions in the first place.
Financial and political institutions must engage the IEA
By using the SDS to assess companies and establish climate stress tests, investors and financial institutions underestimate the transition risks associated with these companies.
Financial institutions and governments that are shareholders in the IEA, including France, must join efforts to demand the agency develop a realistic 1.5°C scenario, with a precautionary approach to negative emissions technologies. A 1.5ºC scenario must be the central reference for the World Energy Outlook.
In April 2019 and in May 2020, a large group of investors representing more than $33 trillion assets under management called on the IEA to adopt a 1.5ºC. According to signatories, this scenario should also include a reasonable probability—66%—of limiting warming to 1.5°C and a longer time horizon – beyond 2040.
Unfortunately, not a single French financial institution took part in this initiative—ironic given the IEA is based in Paris.
The silence of French financial institutions is even more problematic, as many, including Société Générale, are quick to refer to IEA scenarios to justify their climate inaction and massive financial services to fossil fuels.