The International Energy Agency, which has stepped up its efforts to become a major green energy supporter, appears to have forgotten the reason it was set up as an agency in the first place. In its new report “Net Zero in 2050”, the energy agency calls for no new investments in oil- and gas-related projects.
As stated by Fatih Birol, the IEA’s executive director, “new energy security challenges will emerge on the way to net zero by 2050 while longstanding ones will remain, even as the role of oil and gas diminishes”. The IEA also stated that the contraction of oil and natural gas production will have far-reaching implications for all the countries and companies that produce these fuels. In a very remarkable statement, Birol said that “no new oil and natural gas fields are needed in the net zero pathway”. While he admits that, within that pathway, oil and gas supplies (aka production) will become increasingly concentrated in a small number of low-cost producers. Based on its own assessments, the IEA predicts that OPEC’s share of a much-reduced global oil supply will increase from 37% at present to 52% in 2050, a level higher than at any point in the history of oil markets.
While the IEA’s new report focuses on the need to drastically reduce our use of fossil fuels in order to reduce CO2 and methane emission, there are some major underlying issues it fails to address. In its determination to reach Net Zero emissions by 2050, the IEA appears to have engaged in wishful thinking, ignoring the existing constraints and immense investments needed to achieve such a goal. In its report, the agency does admit that there are severe risks on the way to Net Zero, including geopolitical and economic risks related to an overdependency on critical minerals.
The fact that the main risks are not only geopolitical but also commercial appears to have been ignored. At present, demand for critical materials and minerals is already putting immense pressure on markets, suppliers, and overall costs. If you extrapolate this demand growth under the IEA’s net zero pathway, markets will not be able to keep up with supply, and risk levels will increase exponentially.