Renewable energy should be tripled globally by 2030. That is the first of five pillars of action from the International Energy Agency (IEA) for the COP28 climate summit starting on November 30 in Dubai.
There should also be a doubling of the rate of energy-efficiency improvements, said the agency.
Oil and gas companies should commit to advancing clean energy transitions and slashing emissions from their operations, including cutting methane by 75%, it said.
Fourthly, large-scale financing mechanisms should be established to support clean energy investments in emerging and developing economies.
And measures should be adopted to ensure an orderly decline in the use of fossil fuels, it said.
Executive Director Fatih Birol will lead an IEA delegation to COP28.
This comes as the head of OPEC, Secretary General Haitham al-Ghais, has accused the IEA of vilifying the oil-and-gas sector. The two agencies have clashed before over climate policy.
The comments by al-Ghais followed a new IEA note saying the fossil fuel industry was facing a "moment of truth" and that producers must choose between deepening the climate crisis or transitioning to clean energy.
"This presents an extremely narrow framing of challenges before us, and perhaps expediently plays down such issues as energy security, energy access and energy affordability," said al-Ghais, a Kuwaiti oil executive.
"It also unjustly vilifies the industry as being behind the climate crisis."
According to the UN, fossil fuels – oil, gas and coal – are “by far” the largest contributor to global climate change, accounting for more than 75% of global greenhouse gas (GHG) emissions and nearly 90% of all CO2 emissions.
The UAE will host COP28, starting on November 30. UAE is a major OPEC producer.
OPEC will send a delegation to the climate talks.
According to the Paris-based IEA’s World Energy Outlook 2023, fossil fuel use will peak globally by 2030, with major shifts underway such as a ramp up in renewable energy and a shift to electric vehicles (EVs).
OPEC says such predictions are counter-productive and are often accompanied by calls to halt oil-and-gas investment that would harm energy security.
Oil and gas producers face pivotal choices about their role in the global energy system amid a worsening climate crisis fuelled in large part by their core products, says the IEA’s new report, Oil and Gas Industry in Net Zero Transitions.
The oil and gas sector – which provides more than half of global energy supply and employs nearly 12mn workers worldwide – has been a “marginal force at best” in transitioning to an energy system with net-zero emissions, accounting for just 1% of clean energy investment globally, said the IEA.
The IEA report shows how the industry can take a “more responsible” approach and contribute positively to the new energy economy, highlighting that the UN's COP28 climate summit in Dubai is “a moment of truth” for the oil and gas sector.
Oil and gas companies must take decisive actions in addressing emissions stemming from their operational activities. To align with the Paris Agreement's objective of limiting global warming to 1.5 °C, these companies are urged to reduce their emissions by 60% by the year 2030, said IEA.
Furthermore, a substantial transformation in how these companies allocate their financial resources is imperative, said the report.
In 2022, investments in clean energy constituted a mere 2.5% of the industry's total capital expenditure. To align with the goals of the Paris Agreement, the report suggests that by 2030, companies should allocate 50% of their capital expenditure toward clean energy projects.
It is crucial for these companies to move away from the assumption that they can maintain "business as usual" by solely increasing the deployment of carbon capture technologies. According to the report, if oil and gas consumption continues on its projected trajectory under current policies, achieving the 1.5 °C warming limit would necessitate an unprecedented 32bn tonnes of carbon capture by 2050, with annual investments soaring from $4bn in 2022 to a staggering $3.5 trillion.
IEA notes that amidst geopolitical uncertainties, both oil demand and supply are on the rise. Global oil markets remain tight due to strong demand in the current year. In the agency’s most recent Oil Market Report, the forecast for global oil demand growth in 2023 has been slightly revised upward to 2.4mn barrels per day (bpd). This adjustment is attributed to record-high Chinese demand in September and greater resilience in US deliveries compared to initial data.
Nevertheless, the growth in oil supply is surpassing expectations, which has led to a decrease in prices. Countries such as the United States, Brazil and Guyana are experiencing significant increases in oil production. Concerns regarding the escalation of conflicts, such as the one between Israel and Hamas, affecting oil supply flows have yet to materialise.
Supply reductions by major oil producers such as Saudi Arabia and Russia are expected to maintain a significant deficit in the oil market until the end of the year. However, the market's balance remains susceptible to elevated economic and geopolitical risks. As global economic growth continues to slow down, there is a possibility that the market could shift into surplus at the beginning of 2024, according to the IEA analysis.