Out-Law News 1 min. read

Renewables and natural gas to win race to meet energy demand growth

Major transformations in the global energy system will mean that renewables and natural gas are the "big winners" in meeting energy demand by 2040, the International Energy Agency (IEA) has said.

Looking at the pledges made under the Paris agreement on climate change it is clear that the use of fossil fuels is far from over, the IEA said as it published its World Energy Outlook 2016 report

However, government policies and cost reductions across the energy sector will allow a doubling in renewables use and improvements in energy efficiency over the next 25 years, the IEA said.

Fatih Birol, the IEA's executive director said: "We see clear winners for the next 25 years, with natural gas and especially wind and solar replacing the champion of the previous 25 years, coal."

Investment in oil and gas will remain essential to meet demand and replace declining production, but growth in renewables and energy efficiency will reduce demand for oil and gas imports in many countries. Increased LNG shipments will also change how gas security is perceived, the IEA said.

Global oil demand will continue to grow until 2040, mostly because of the lack of easy alternatives to oil in road freight, aviation and petrochemicals, the IEA said. However, oil demand from passenger cars will decline even as the number of vehicles doubles, due to improvements in efficiency, and to biofuels and rising ownership of electric cars.

Coal consumption will barely grow in the next 25 years as demand in China starts to fall back thanks to efforts to fight air pollution and diversify the fuel mix, it said.

"The gas market is also changing, with the share of LNG overtaking pipelines and growing to more than half of the global long-distance gas trade, up from a quarter in 2000.  In an already well-supplied market, new LNG from Australia, the United States and elsewhere triggers a shift to more competitive markets and changes in contractual terms and pricing," the IEA said.

The Paris Agreement, which entered into force on 4 November 2015, is "a major step forward in the fight against global warming. But meeting more ambitious climate goals will be extremely challenging and require a step change in the pace of decarbonisation and efficiency," the IEA said.

Current pledges will only limit the rise in average global temperatures to 2.7%, it said, when the overall aim is 2%. Reaching that 2% goal will be "tough, but can be achieved if policies to accelerate further low carbon technologies and energy efficiency are put in place across all sectors."

"It would require that carbon emissions peak in the next few years and that the global economy becomes carbon neutral by the end of the century. Ambitions to further limit temperature gains, beyond 2°C, would require even bigger efforts," the IEA said.

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