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21 April
Commodities & ShippingEnergyWorld Economy

Economic recovery from COVID19 is neither green nor sustainable

by Doğan Erbek 0 Comments

The International Energy Agency (IEA), which I consider to be the global gold standard for energy data, warns that in 2021 global carbon dioxide emissions are set for their second biggest increase in history.

This huge spike is second to the massive and carbon-intensive rebound after 2008 financial crisis.

Global Energy Report 2021 of IEA predicts a 1.5 billion tonnes rise in global energy related CO2 emissions, driven by a strong rebound in demand for fossil fuels and especially coal in electricity generation.

I would like to summarise the key findings of the report:

  • Global energy demand is set to increase by 4.6% in 2021, and nearly 70% of this projected increase is in emerging markets and developing economies.
  • Demand for all fossil fuels is set to grow significantly in 2021. Coal demand alone is projected to increase by 60% more than all renewables combined.
  • Despite an expected annual increase of 6.2% in 2021, global oil demand is set to remain around 3% below 2019 levels.
  • Coal demand is on course to rise 4.5% in 2021, with more than 80% of the growth concentrated in Asia.
  • Natural gas demand is set to grow by 3.2% in 2021, driven by increasing demand in Asia, the Middle East and Russia.
  • Electricity demand is due to increase by 4.5% in 2021, or over 1 000 TWh. This is almost five times greater than the decline in 2020, bolstering electricity’s share in final energy demand above 20%.
  • Demand for renewables grew by 3% in 2020 and is set to increase across all key sectors – power, heating, industry and transport – in 2021. Solar PV and wind are expected to contribute two-thirds of renewables’ growth. The share of renewables in electricity generation is projected to increase to almost 30% in 2021.
At the launch of the report Fatih Birol, the IEA Executive Director and a leading authority on energy and climate said “This is a dire warning that the economic recovery from the Covid crisis is currently anything but sustainable for our climate… Emissions need to be cut by 45% this decade, if the world is to limit global heating to 1.5C (2.7F), scientists have warned. That means the 2020s must be the decade when the world changes course, before the level of carbon in the atmosphere rises too high to avoid dangerous levels of heating. But the scale of the current emissions rebound from the Covid-19 crisis means our starting point is definitely not a good one”
In my opinion, the findings of the report are alarming and unsettling. On the one hand, governments around the world declare the climate change their priority, on the other hand they aim a recovery by more investment through fossil fuels. I believe the financial institutions should definitely take this point into account while drawing their medium term strategies.
I would like to conclude with Fatih Birol’s warning “Unless governments around the world move rapidly to start cutting emissions, we are likely to face an even worse situation in 2022. The Leaders Summit on Climate hosted by US President Joe Biden this week is a critical moment to commit to clear and immediate action ahead of COP26 in Glasgow”.

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07 November
Energy

IEA – WEO 2020 – Gov. role and scenarios

by Doğan Erbek 0 Comments

International Energy Agency (IEA) published its World Energy Outlook (WEO)2020 report on 13 October. The new report provides the latest IEA analysis of the pandemic’s impact: global energy demand is set to drop by 5% in 2020, energy-related CO2 emissions by 7%, and energy investment by 18%.

The report suggests that, although the pandemic and its aftermath can suppress emissions, low economic growth is not a low-emissions strategy. The report concludes that during this time of extraordinary uncertainty, only the governments have unique capacities to act and to guide the actions of others. I feel that the voices against more government intervention in every area increase everywhere.

The established methodology of the report is to put forward different scenarios, within which the probable developments in the energy sector are discussed. I think, these discussions are very useful especially during these turbulent times.

I would like to briefly summarize these scenarios from the outlook below:

  • The Stated Policies Scenario (STEPS), in which Covid-19 is gradually brought under control in 2021 and the global economy returns to pre-crisis levels the same year.  As I see it, this one is the least realistic scenario.
  • The Delayed Recovery Scenario (DRS) is designed with the same policy assumptions as in the STEPS, but a prolonged pandemic causes lasting damage to economic prospects. The global economy returns to its pre-crisis size only in 2023, and the pandemic ushers in a decade with the lowest rate of energy demand growth since the 1930s.
  • In the Sustainable Development Scenario (SDS), a surge in clean energy policies and investment puts the energy system on track to achieve sustainable energy objectives in full, including the Paris Agreement, energy access and air quality goals. The assumptions on public health and the economy are the same as in the STEPS. I think, this is a very optimistic scenario.
  • The new Net Zero Emissions by 2050 case (NZE2050) extends the SDS analysis. A rising number of countries and companies are targeting net-zero emissions, typically by mid-century. All of these are achieved in the SDS, putting global emissions on track for net zero by 2070.

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