Scarcely a week passes without another handout to add to the pile.

Most of this work has involved undermining anything that promotes renewables and electric vehicles or puts regulatory constraints on large emitters. But the Trump regime has also surreptitiously opened up a somewhat unexpected front in its denialist war: the International Energy Agency’s annual modelling exercise, widely seen as the definitive prognosis for long-term power demand and its impact on the earth’s climate.

Recognizing that forward-looking scenarios help shape the futures they describe, fossil fuel lobbyists and their allies in government mounted a back-channel pressure campaign. They threatened to withhold the United States’ 14% contribution to the IEA’s budget unless the multi-lateral agency stopped talking about third-rail topics like peak oil and instead put out forecasts that muddied the energy transition waters. Their primary target: restoring the IEA’s reliance on an innocuously named energy model, known simply as the “current policies scenario” (CPS), which the Paris-based organization dropped back in 2021, at a radically different political moment.

Guerrilla warfare

When the IEA released its World Energy Outlook (WEO) in October 2021, the agency sketched out two versions of the future: the “stated policies scenario” (STEPS) and the more ambitious “announced pledges scenario.” Together, they provide a view of what 2050 would look like, either with modest progress or bolder ambition, respectively.

Yet in a move that channelled the spirit of that fleeting moment, the IEA added something new and exciting: the “net-zero emissions by 2050 scenario.” This model, it stated, “charts a narrow but achievable roadmap to a 1.5 °C stabilisation in rising global temperatures and the achievement of other energy-related sustainable development goals.” Climate advocates were thrilled by both the IEA’s big goal and its instructions for how to get there. Meanwhile, the Organization of the Petroleum Exporting Countries and U.S. oil and gas interests fumed about all these models forecasting their demise.

It took five years for the backlash to reach IEA’s analysts. For the 2025 edition of the WEO, released in November, the agency’s most ambitious scenario is now STEPS, which scoped out the least aggressive energy transition in 2021. The CPS scenario – which anticipates a catastrophic 3°C increase in global warming by 2050 – was back, while net-zero by 2050 had vanished without a trace. The NZE remains, for now, but Neil Grant, senior climate policy analyst at Climate Analytics, worries about whether it will be excised next year. “If the IEA caves there and gets rid of it, I think you will start seeing people saying, ‘what’s the point?’”

In a lengthy blog post accompanying the new WEO, two senior IEA officials explained the differences between STEPS and CPS with the example of vehicle efficiency standards in Japan. “Under CPS, these policies continue after their end-date but are assumed not to be strengthened,” they wrote. “The STEPS assumes they continue and are strengthened in line with the previous ambition.” The current Japanese policy aims to improve vehicle efficiency by 20% by 2030. Both scenarios reflect the bump, but STEPS predicts that efficiency will continue improving after 2030, while CPS doesn’t assume any more momentum.

“None of the scenarios in the WEO are a forecast,” the authors wrote in a commentary outlining their methods. Nor did the IEA’s use of CPS indicate the presence of a finger on the scale. The IEA’s aim, they said, is to rationally explore the consequences of different policy choices.

It’s clear that there’s been quite a lot of pressure this year in terms of their funding.

— Guy Prince, head of energy supply for Carbon Tracker

But critics didn’t buy the IEA’s wonky explanations about the renewal of empirical rigour, pointing out that CPS ignores the inevitability of continuing technological innovation, takes uninterrupted growth in oil and gas demand as a given, and foresees no drop in emissions. “What the CPS does is take that Trump administration worldview that we’re seeing implemented the U.S. and assumes its dominance across a whole range of other sectors and across the rest of the world,” adds Grant.

In effect, the CPS provides a road map to 2050, but with 2024 policies frozen in place. IEA watchers claimed that its presence is meant to deliver cover to the fossil fuel backers in and around Trump and MAGA congressional Republicans. Indeed, on the eve of the new WEO’s release, which coincided with COP30 in Brazil, a pair of senior congressional Republicans rewarded the embattled agency with a bit of mobbish praise. In a letter, they congratulated IEA executive director Fatih Birol for freeing the agency from the evils of “activism”: “This course correction, which U.S. House Committee on Energy & Commerce leadership has been requesting, will help restore the IEA’s credibility and impartiality.”

“It’s clear that there’s been quite a lot of pressure this year in terms of their funding,” says Guy Prince, head of energy supply for Carbon Tracker. He describes the return of CPS as “a subtle re-positioning” with enormous consequences.

Dave Jones, chief analyst at U.K.-based Ember Energy Research, says that by restoring CPS and situating it as the counterpart to STEPS, the energy agency is signalling a problematic equivalence to global policymakers and investors. “The biggest issue I have with it is that the IEA have used it as equal weighting to the STEPS scenario,” he observes. “I don’t think people expected that to happen.” Most analysts, policy experts and investors would have expected to see CPS offered as a secondary scenario, he says.

The realpolitik here is about buttressing the oil and gas industry’s ability to raise capital and continue operations in the face of an increasingly efficient and inexpensive clean-electricity industry dominated by China, explains Keith Stewart, Greenpeace Canada’s energy analyst. “Adding this scenario is part of that guerrilla warfare going on to try and support an oil and gas industry that is fighting for its life,” he says. “They’re not going to disappear tomorrow, but they can see the writing on the wall unless they can somehow get enough political muscle behind them to stop the transition.” (The Canadian Association of Petroleum Producers did not respond to a request for an interview.)

Slow-walking the energy transition

Trump’s targeted attack on the IEA’s long-range models operate in lockstep with his administration’s shocking assault on science. Since January, a series of moves across the U.S. government have hobbled environmental policy by choking off climate data and cancelling climate science. Agencies that gather and analyze empirical information – the Environmental Protection Agency, the National Oceanic and Atmospheric Administration (NOAA), the Department of Energy, as well as countless university scholars – have had their research budgets slashed, their websites raided and their data streams blocked.

A major concern is access, says Mark Winfield, a professor of environmental studies at York University. “If you were doing observational atmospheric science, for example, are you going to lose data from NOAA satellites and the kind of thing that they use on an ongoing basis? That applies to things like the Intergovernmental Panel on Climate Change, because U.S. science and data underlies an awful lot of that work.”

In the case of the IEA’s models, scenarios aren’t climate science, per se, but they involve complex economics, deep policy research and assumptions about how all sorts of industries will evolve over coming decades; the IEA even publishes a 143-page technical document showing how it builds its scenarios. Like so many other forms of climate data, these models become critical decision-making tools for government officials, investors and other stakeholders, including the fossil fuel industry itself. “They have significant weight,” says Grant. “They’re used a lot in the investment community to decide where we should be putting capital.”

The Trump administration is trying to pull every lever it can to help support its own narrative.

— Dave Jones, chief analyst at Ember Energy Research

Greenpeace’s Stewart points to the various scenarios developed by Suncor for investors back when it was more rhetorically engaged in energy transition debates. The energy giant’s 2022 ESG report talked about how it would adjust its capital investments based on high- or low-demand oil scenarios. “There was a section on how Suncor should change its business model depending on which scenario,” he says, noting that the company walked investors through both high- and low-carbon outlooks, as well as a business-as-usual version, to show their thinking about asset allocation. (Suncor didn’t respond to requests for an interview.)

The IEA’s use of the CPS assumes sluggish innovation in the clean-energy world, but all evidence points to the contrary. “CPS doesn’t reflect the reality of what is happening in terms of new technological deployment,” says Prince at Carbon Tracker. It’s a bit like someone in the 1950s imagining a long-range air pollution forecast that anticipates that leaded gasoline would always be the default vehicle fuel and that nothing like the 1963 Clean Air Act would ever become law. Indeed, CPS isn’t even a business-as-usual scenario; it’s more of a long look in the rear-view mirror at a world that is fast receding into the distance.

The IEA, which stresses that its scenarios aren’t forecasts, defends the reintroduction of the current policies scenario by arguing that as-yet-unforeseen constraints might drag on the current dynamic of change, such as “insufficient infrastructure, grid integration costs, a lack of institutional capacity or financing, or the absence of continued policy support.” As a result, its authors acknowledge, it projects a slower adoption of new technologies than recently seen.

The problem, as history has repeatedly shown, is that neither technological innovation nor economies of scale run in reverse, so CPS doesn’t even function as a bracing worst-case scenario. Stewart points out that Chinese-made solar panels now produce the cheapest energy on the planet, with extraordinary deployment rates, especially in Asia. (China is building an eight-gigawatt solar farm in inner Mongolia that will be 30 square kilometres larger than New York City.) Trump strong-armed constraints on U.S. renewables producers, even as the rest of the world’s nations beat a path to China’s doorstep to place their own mass orders for inexpensive panels and EVs. Such is economics: the evidence suggests that demand for renewables is growing, not slipping.

The bottom line is that the CPS may become the oil and gas sector’s aspirational anchor, a plausible version of the future that it can tout to fossil fuel investors. But the industry will eventually have to confront the implacable fact that it no longer produces a cost-competitive product, much less an environmentally friendly one – regardless of what the IEA’s dubious model envisions.

Jones at Ember Energy Research takes the wide view. The IEA’s decision to bring back CPS, he says, feeds into a broader push to put fossil fuels back to a place of energy primacy – a place the industry feared it had surrendered during the peak oil days. It’s about storytelling, not what’s actually going to happen, Jones observes. “The evidence is the Trump administration is trying to pull every lever it can to help support its own narrative.”

Like so many global institutions that have found themselves under siege from this president, the IEA may find its reputation as an honest information broker broken, which is a scenario no one wants to see.

John Lorinc is a journalist and author specializing in urban issues, business and culture.

The post Is the International Energy Agency bending to Big Oil? appeared first on Corporate Knights.

“The pathway to 1.5 ̊C has narrowed in the past two years, but clean energy technologies are keeping it open,” said IEA Executive Director Fatih Birol, in a release summarizing the 227-page document. That puts the onus on COP 28 negotiators in Dubai later this year to “commit to stronger ambition and implementation,” the IEA adds.

The report lands scarcely a week after Calgary hosted the World Petroleum Congress, the self-styled “Olympics of oil and gas”, where fossil industry delegates took the IEA and the Canadian government to task for stressing the opportunity and the urgency in the shift to carbon-free energy.

“Keeping alive the goal of limiting global warming to 1.5 ̊C requires the world to come together quickly,” Birol said. “The good news is we know what we need to do—and how to do it,” but “we also have a very clear message: Strong international cooperation is crucial to success. Governments need to separate climate from geopolitics, given the scale of the challenge at hand.”

‘Extraordinary Growth’ in Clean Energy Tech

The IEA roadmap is an update of the landmark Net Zero by 2050 scenario that the Paris-based agency first published in May, 2021. It factors in “significant changes” since then in the global energy landscape—the economic rebound after the COVID-19 pandemic, the “extraordinary growth” of some clean energy technologies, increased investment in fossil fuels, and “stubbornly high emissions”.

“In the updated net zero scenario, a huge policy-driven ramping up of clean energy capacity drives fossil fuel demand 25% lower by 2030, reducing emissions by 35% compared with the all-time high recorded in 2022,” the IEA writes. With fossil fuel demand falling 80% by 2050, “no new long-lead-time upstream oil and gas projects are needed, neither are new coal mines, mine extensions, or new unabated coal plants.”

The scenario also shows sharp increases in sales of electric vehicles and heat pumps.

The agency calls for continued investment in some oil and gas projects, with “sequencing” of clean energy investment to prevent price spikes or supply gluts. It also indicates potential for an “equitable transition that takes different national circumstances into account,” concluding that countries can meet the UN Sustainable Development Goal for energy—which the IEA frames as “full access to modern forms of energy for all by 2030”—for just $45 billion per year, just over 1% of the investment across the energy sector.

The IEA warns that failing to pick up the pace on the energy transition by 2030 will leave countries too reliant on carbon dioxide removal (CDR) technologies that are “expensive and unproven at scale.” Delaying action now would mean future generations can only keep a 1.5°C climate stabilization target alive by removing five billion tonnes of CO2 per year from the atmosphere in the second half of the century.

“Removing carbon from the atmosphere is very costly,” Birol said. “We must do everything possible to stop putting it there in the first place.”

‘Electricity is the New Oil’

Dave Jones, global insights lead at the Ember think tank, said the transformation envisioned in the IEA report “is not rocket science, but it does require the determination and urgency of a space race. Importantly, emerging economies need investment to enable them to enter the race, which ultimately will benefit us all.”

He added that the biggest change since the IEA’s 2021 energy outlook “is the downgrading of carbon capture, hydrogen, and bioenergy, and the upgrade awarded to renewables, efficiency, and electrification.” That shift shows that “electricity is the new oil,” requiring world leaders to “think big and build big.”

So far, however, the reductions in fossil extraction that the IEA is counting on have not materialized: last week, Global Energy Monitor (GEM) reported that plans for new fossil power plants, almost all of them burning gas, grew 13% last year, with the largest share of new demand coming from China and Southeast Asia.

“There is now 783 gigawatts (GW) of oil- and gas-power capacity under development—projects that are either announced or in the pre-construction and construction phases,” wrote Jenny Martos, project manager of GEM’s global gas tracker, and Julie Joly, the organization’s oil and gas programme director, in a post for Carbon Brief. “These represent a stranded asset risk of hundreds of billions of dollars and potentially locking in tens of billions of tonnes of carbon dioxide (CO2) emissions.”

So far, about one-quarter of the new plants are under construction, GEM reported. But if they’re all built and go into service, “they could divert resources from more cost-effective and lower-carbon alternatives,” the two authors warned.

A Fossil Industry Pathway

Those stubborn numbers helped fuel arguments for a slower transition and increased fossil fuel investment during the World Petroleum Conference September 17-21. While the conference theme was Energy Transition: The Path to Net Zero, the fossil delegates attending the show were mostly interested in the technologies the IEA is now largely dismissing.

“The reality on the ground is that despite concerted effort to move to alternatives, global coal consumption is at record levels… with demand still robust,” Saudi Aramco President and CEO Amin Nasser told participants. “As the recent energy crisis has shown, compounded by the conflict in Ukraine, the world wobbles if these realities are ignored or wished away, and the public anger we have already seen could ultimately derail climate ambition and action themselves.”

“If we really want to be faithful to the idea that we will be transitioning, we have to also make sure that transitioning happens whereby you end up attending to energy security, ensuring that energy is still affordable, and does not act as an impediment to economic prosperity and growth,” agreed Saudi Energy Minister Abdulaziz bin Salman Al Saud. “And if you don’t do all of the above, I’m sorry, but I don’t think you could attend to climate change issues.”

Natural Resources Minister Jonathan Wilkinson brought a different message to the conference, issuing a “call to action” for the industry to take more “substantive” steps to reduce its emissions, the Globe and Mail reported. “We need to see purchase orders for equipment that’s actually going to be put in the ground,” he said, adding that “countries that focus on producing ultra-low-carbon” fossil fuels “are likely to be the last producers standing” as global demand declines.

Alberta Premier Danielle Smith shot back that Wilkinson’s remarks were “tone deaf” and a “slap in the face” to conference participants. “This is not an industry that’s winding down,” she declared. “It’s an industry that’s transitioning away from emissions.”

That exchange unfolded just a day before former environment and climate minister Catherine McKenna, now CEO of Climate and Nature Solutions and chair of the UN Secretary General’s expert group on net-zero emissions, took companies like Suncor Energy to task for doubling down on oil sands production. She said companies like Suncor are sidelining their renewable energy strategies, devoting record profits to shareholder dividends and executive compensation, and demanding taxpayer subsidies for the carbon capture projects they say they want to build—all after a summer that “scorched the Earth”.

“These announcements are shameful, but at least we know what we’re dealing with. After years of pious corporate announcements and feel-good advertising, it’s magical thinking to believe the oil and gas sector has anything but its own profits at heart,” McKenna wrote for the Globe.

“This is why it’s time to do what a majority of Canadians—including in Alberta—believe is necessary and put a hard cap on emissions from Canada’s oil and gas industry.”

Declining Fossil Investment

But despite the bullish rhetoric at the “Olympics of oil and gas”, with oil prices above US$90 per barrel and some analysts predicting a high above $100 by year’s end, “government policies to fight climate change are discouraging oil companies from investing heavily in new production even as they turn in record profits,” Reuters reported last week, just as the conference was concluding. That had fossil delegates warning that a lack of investment in new extraction “could exacerbate energy shortages in poor countries and fuel inflation,” the news agency said.

“The current transition shortcomings are already causing mass confusion across industries that produce and/or rely on energy,” said Aramco CEO Nasser.

“If we don’t maintain some level of investment in the industry, you end up running short of supply, which leads to high prices,” said ExxonMobil CEO Darren Woods, who admitted his company’s oil reserves are declining by 5 to 7% per year.

But to commit to the “billions and billions of dollars” in new investment that it would take to increase oil production by 100,000 barrels per day, Cenovus Energy Executive Chair Alex Pourbaix said fossil companies would “have to wait for some more clarity on the government front.” When Pourbaix first started asking for “clarity” on carbon capture and storage, he was demanding about C$50 billion in taxpayer subsidies to get the technology in place.

But some of the companies’ biggest financial backers might have other ideas. Earlier this month, a study by management consultants at Deloitte said some big, institutional investors might be prepared to cut their dividends from oil and gas companies if it meant freeing up money for energy transition spending, the DayFR Euro newsletter reported.

“Investors who own $2.3 trillion in stocks in the global oil and gas industry are changing their expectations for growth markets more quickly than executives at energy companies,” the news story stated, citing a Deloitte study. “About 75% of investors surveyed said they would continue to hold stocks to accelerate investment in low-carbon technologies, even if returns fell by as much as 3%.”

This article was first published in The Energy Mix. Read the original article here. 

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To limit the long-term rise in global temperatures to 1.5°C, it said governments and industry must wean themselves off fossil fuels ASAP, push for energy efficiency in all walks of life, and invest trillions in renewable energy.

Coming from the Paris-based IEA, an intergovernmental body founded in the wake of the 1973/74 OPEC oil embargo to assure global energy supply, the report turned heads. Overseen by the energy ministers of 30 major economies, the IEA has generally defended fossil-fuel interests. But with most countries missing their emission-reduction targets and catastrophe looming, the IEA finally picked a side.

“This gap between rhetoric and action needs to close,” said IEA executive director Fatih Birol. “Doing so requires nothing short of a total transformation of the energy systems that underpin our economies.”

Nine days later, on May 26, calls to close that gap came fast and furious. Chevron shareholders voted 61% in favour of an activist proposal asking the oil company to cut its total greenhouse gas emissions, including those coming out of customers’ tailpipes, emissions known as Scope 3.

That same day, at least two ExxonMobil board members were unseated in a bid to, as Reuters put it, “force the company’s leadership to reckon with the risk of failing to adjust its business strategy to match global efforts to combat climate change.”

Eli Kasargod-Staub, the executive director of Majority Action, a shareholder group, told The Guardian, “For the first time in history, responsible shareholders have breached the walls protecting recalcitrant boards of directors.”

Also that day, a Dutch court ordered Shell to reduce its GHGs by 45% by 2030, based on 2019 levels, after determining that Shell’s climate plans were inadequate. Pundits began calling it Black Wednesday and ‘a day of reckoning’ for Big Oil as courtrooms and boardrooms turned on industry.

“For the first time in history, responsible shareholders have breached the walls protecting recalcitrant boards of directors.”

-Eli Kasargod-Staub, executive director of Majority Action

“This is a monumental victory for our planet, for our children and a big leap towards a livable future for everyone,” said Donald Pols, director of Friends of the Earth Netherlands.

Though Royal Dutch Shell said it will appeal the ruling, more good news was announced May 26: Canada’s largest oil company, Suncor, committed to going net-zero by 2050, adding it would slash emissions across its value chain by a third by 2030.

Luckily, the IEA’s report, Net Zero by 2050, “shows that there are still pathways to reach net-zero by 2050,” said Birol. He called the IEA’s prescribed course “the most technically feasible, cost‐effective and socially acceptable. Even so, that pathway remains narrow and extremely challenging, requiring all stakeholders – governments, businesses, investors and citizens – to take action this year and every year after.”

The report sets out 400 milestones necessary to achieve net-zero by 2050. Most important: ensuring that developing economies receive financing and technological aid to build their energy systems equitably and sustainably. Birol insists that a world powered by clean electricity means huge opportunities, “with the potential to create millions of new jobs and boost economic growth.”

“Big Oil and Gas has just lost a very powerful shield,” summed up David Tong, a senior campaigner with Washington, D.C.’s Oil Change International.

But the IEA’s shift doesn’t mean the path to 2050 will be smooth. The Canadian Association of Petroleum Producers dismissed the report as “unrealistic.” Alberta Energy Minister Sonya Savage predicted Alberta’s fossil-fuel sector “will continue to grow and thrive.” Large emitting countries such as Japan, Australia and the Philippines bucked the proposed ban on new development, claiming natural gas, oil and in some cases even coal still have roles to play.

It doesn’t help that the IEA has been sending out mixed messages. Weeks after the release, as OilPrice.com pointed out, “the agency called on OPEC+ to increase production as demand for oil rebounded faster and stronger than the agency had apparently expected.” By July, benchmark crude oil prices had surged to multi-year highs after a breakdown in negotiations with the Organization of the Petroleum Exporting Countries.

In its July oil market report, the IEA cautioned  that “while prices at these levels could increase the pace of electrification of the transport sector and help accelerate energy transitions, they could also put a drag on the economic recovery.” It added, “Volatility does not help ensure orderly and secure energy transitions.”

Meanwhile, back in Canada, oil industry advocates continue to suggest that the sector should be positioning itself to capitalize on the next oil boom. However, in a report released last month, Jeffrey Craig of Veritas Investment Research said, “Given the pressure to both cut emissions and invest in renewable energy, we expect the super majors to shed mostly upstream oil and gas assets [in the oil sands] to fund investments into renewables.”

Right on cue, when BP slashed its long-term oil price outlook in late June, the company’s oil sands investments were rendered “worthless,” Reuters reports. The fate of those stranded assets remains to be seen.

South of the border, oil majors are feeling the heat this week as Democratic senators proposed a climate pollution tax that could cost Exxon, Chevron and other big emitters billions annually while establishing a “Polluters Pay Climate Fund.” The draft bill could see US$500 billion raised over 10 years to be used toward investments in communities facing fossil-fuel-driven climate impacts, including extreme flooding, rising sea levels and a more severe wildfire season.

Corporate Knights director of research Ralph Torrie points out that “the smart money and long-game investors” have been pivoting from fossils to renewables for years. “If the IEA can get out in front of that parade, it can only help.” Torrie suggests that the right question to be asking is not “What will happen?” but “What must happen?” if we are to avert truly dangerous climate change.

While new technologies may help power the transition, he credits the agency for seeing energy efficiency as a resource: “We must thread the eye of a needle here, and there is only time now for one attempt at it.”

A version of this story appeared in the Summer Issue of Corporate Knights magazine.

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You know the equation, of course: [Country X]’s target is to reduce emissions to [Y%] below [year-in-the-past] levels by [year in the future].

This formulation dates to the Kyoto Protocol, from the early 1990s, but each iteration confuses a new generation of concerned humans, likely because the goalposts always seem to be shimmying around the field. If we were supposed to get to 20% below 1992 levels, but then the baseline got shifted to 2006 with some smaller reduction target, was there progress or did we all somehow fall for that old statistical trick that involves resizing the units on the y-axis?

The issue of the legibility of climate policy, always important, came into even starker relief this week with the release of the International Energy Agency’s hefty Net Zero by 2050 report. The Paris-based organization took direct aim at the global energy sector by laying out a “roadmap” for the magnitude of carbon reduction – about 420 gigatonnes (Gt) of carbon dioxide – that will be required to prevent average temperatures from rising by more than the 1.5°C threshold, beyond which damage to the atmosphere becomes irreversible. Current global emissions come to about 4.3 Gt. (One Gt is equivalent to 1 billion tonnes.) Canada emitted well over half a gigatonnes in 2019.

The IEA report calls for “nothing less than a complete transformation of how we produce, transport and consume energy.” Cleaving to the IEA’s 30-year-goal means a “massive expansion” in renewables, electric vehicles, battery storage, clean hydrogen, and an end, by as soon as 2021, of the approval and construction of any new oil, gas and coal production – a come-to-Jesus moment for Canada’s oil and gas industry. Aware of the risk of drifting priorities, the IEA also urges national governments to set “near-term milestones to get back on track.”

The particular challenge with these sorts of mega-targets is disaggregating the big numbers so individual countries and their governments know what they need to do. For years, of course, there have been fraught political and scientific battles about how to divvy up responsibility, what mitigation efforts look like, what gets measured, appropriate policy levers and so on. What has been mostly absent, however, are actionable benchmarks that clearly articulate whether government policies are actually making a difference. Instead, we fudge the way we account for progress and then wonder why we fail to make any.

In 2008, a Labour government in the United Kingdom came up with an elegant solution that was striking in its simplicity and has, in the 13 intervening years, illustrated why clarity of measurement leads to actual reductions in carbon emissions. In a pioneering piece of legislation, the Climate Change Act, the British Parliament decreed that the government must establish “carbon budget” – a precise accounting of how much carbon can be emitted each year over a specified period, with the caps stepping down annually until the country reaches its net-zero target. The act allows some flexibility, and also provides penalties. The U.K.’s sixth carbon budget was released last December, proposing accelerated reductions over the next 15 years.

A carbon budget is basically like a savings account or an annuity that will one day run out. You have a certain amount at your disposal. You can spend it on trips or a condo or appliances you don’t need. But once used, the money won’t come back. The approach is relatable to anyone who’s ever had to stretch their savings from one payday to the next. It is the climate-policy embodiment of the old accountant’s adage about not being able to manage what you don’t measure.

Some European Union countries have adopted a carbon budget, but Canada has been a holdout. While the Liberals have accelerated their national carbon pricing schedule through 2030 and introduced legislation establishing national carbon reduction targets through 2050, they don’t appear to be willing to impose the kind of rigour that has characterized British policy.

The so-called Canadian Net-Zero Emissions Accountability Act, tabled last November and currently moving through Parliament, “will establish a legally binding process to set five-year national emissions-reduction targets for 2030, 2035, 2040, and 2045, as well as develop credible, science-based emissions-reduction plans to achieve each target.” But instead of mandating a carbon budget, the law provides only for five-year “progress reports,” mostly geared at federal measures, and continues to invoke the fuzzy language of targets.

Since its first carbon budget, the U.K. has cut emissions consistently and will have achieved a 35% reduction relative to 1990 levels without wrecking its economy by 2020, according to a study commissioned by our federal government: “The United Kingdom (UK) Commission on Climate Change reports that the U.K.  carbon budget has had little or no negative impact on business competitiveness and carbon leakage, and that evidence shows that climate change policies increase the competitiveness of the U.K. in the long term by encouraging greater innovation and efficiency.” To get there, Britain has invested heavily in offshore wind to replace fossil-fuel-fired electrical generation, as well as transit, low-emission vehicles, green buildings and other high-return initiatives.

The U.K. has a few other advantages over Canada: no natural resources sector to speak of, mild climates and a unitary system of government that doesn’t require the kind of wrangling that has long characterized federal-provincial relations here. While the recent Supreme Court decision that upholds Ottawa’s right to regulate and price emissions is a giant step forward (thanks, Doug Ford!), the federal government is still limited in how far it can project its policy intentions (for instance, land-use planning, which is a major driver of emissions, is entirely under the control of the provinces).

But a 2015 brief advocating for a carbon budget, by lawyer Andrew Gage, of West Coast Environmental Law (WCEL), laid out a road map for the implementation of this approach in Canada, including measures such as regular reporting of government progress, independent audits and regulations requiring the disclosure of the impact of any new policies on a carbon budget. To circumvent the jurisdictional impasses, Gage proposed an approach based on the Canada Health Act, which offers up funding in exchange for provincial cooperation in meeting carbon budget targets.

WCEL isn’t the only group calling for this kind of accountability measure. Both the Green Party and the federal NDP favour carbon budgets, as do various environmental organizations and think tanks. “We know we have a limited carbon budget,” Mark Carney, central banker turned investor-focused climate advocate, said in an interview a few years ago.

If only Canadians could actually see it for themselves.

Related reading: Methane burning through global carbon budget

The post The case for carbon budgeting on the road to net-zero appeared first on Corporate Knights.

Fortunately, taxpayers won’t have to pick up the whole tab. The International Energy Agency, a policy think tank in Paris run by the world’s energy ministers, says the zero-carbon shift can be funded mainly by investors. A new IEA study finds that publicly traded renewable-energy companies are already outperforming fossil-fuel stocks – without exposing investors to additional risk.

The study, produced with the Centre for Climate Finance & Investment (CCFI) at London’s Imperial College Business School, compared the five- and 10-year investment performance of 545 oil, natural-gas and coal producers in 55 countries against a portfolio of 208 renewable-energy and equipment companies from 34 countries.

The result: in advanced economies, renewable power delivered a 10-year total return of 727%, compared to just 31.6% for fossil fuel companies. In riskier emerging markets and developing countries, the renewable companies still delivered, posting a 10-year return of 136%, versus 113.8% for fossil fuel firms.

The study also found that renewable-power portfolios are less driven by broader market trends than fossil fuel portfolios, a good sign for investors seeking diversification. It also discovered that renewable companies showed greater resilience when oil prices tumbled in 2014 and during the pandemic shock of early 2020.

“Overall, our analysis demonstrates a superior risk and returns profile for renewable power in both normal market conditions and amidst recent events,” notes the report, entitled Clean Energy Investing: Global Comparison of Investment Returns. The authors hope their findings will encourage investors and policy-makers alike to boost demand for renewable projects, in the confidence that the cleantech revolution is well underway.

CCFI executive director Charles Donovan noted there’s nothing new about the positive performance of renewable energy stocks – we just need decision-makers to pay attention. “It’s been the same story for more than a decade, yet total investment is still lagging,” he said in March on the report’s release. “National regulators, particularly in the United States, must get to work on the reforms needed to level the playing field for clean-energy investors.”

IEA official Tim Gould noted that showcasing the investment heft of clean energy is an important step in mobilizing international capital. “But much more still needs to be done to link sources of sustainable finance with the areas of greatest need, especially in emerging markets and developing economies.”

The report breaks new ground in demonstrating clean energy’s performance in developing markets, where clean energy faces greater uncertainty and higher costs of capital. But because all our futures depend so much on decisions now being made in China, the report also studied the performance of Chinese companies alone. The news is good: over 10 years, China’s portfolio of 105 fossil fuel companies offered investors a 41.1% return, while its 74 renewable-power companies delivered a 243% return.

The authors admit their report just scratches the surface of the clean energy sector; 90% of clean power is produced by non-listed organizations or by diversified companies that are not primarily energy producers. But that’s not a flaw, it’s a future. The study “points to the untapped potential of the listed capital markets as a source of funding for pure-play renewables companies and their investments.”

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The IEA’s Fatih Birol addressed the first Clean Energy Transitions Summit, a virtual meeting that drew energy ministers from 40 countries, leaders from business and non-government organizations, and 500,000 viewers worldwide.

Birol said the pandemic and the resulting global economic shutdown precipitated a sharp drop in energy demand this year, as well as in GHGs, though he did not offer a figure.

“Whether this decline will rebound or not is something you ministers will decide with the policies you put in place,” he told the online conference.

Backed by the International Monetary Fund, the IEA is urging governments to pursue large spending programs to spur economic recovery while speeding up investment in and adoption of zero-emission energy systems. The Paris-based agency recommends allocating funds to energy efficiency, renewable power generation, innovative nuclear technology, electrification of transportation and home heating, and both natural and technological means of capturing and storing carbon dioxide.

Canada’s Natural Resources Minister Seamus O’Regan told the conference that the Liberal government is determined to put the country on a path that will result in net-zero emissions by 2050 but must also ensure the transition doesn’t impose an undue burden on families that depend on the fossil fuel sector.

“As we lower our emissions, we want to resolve that those working in high-emitting, non-renewable energy sectors are not left behind,” said O’Regan, whose own home province, Newfoundland and Labrador, relies heavily on the offshore oil industry.

“Those who feel they have been left behind are going to cling to the familiar. They will choose governments and policies rooted in the status quo, resisting the urgency of climate change and resisting the change that is vital to confront it.”

O’Regan chaired a session on “inclusive and equitable recovery” in which he addressed the need for regions and workers who rely on the fossil fuel sector to be included in the clean-energy transition.

Christiana Figueres, a former United Nations climate chief, had a different take on diversity and inclusion. She said failure to confront global warming would “condemn those in poverty now to deeper poverty and pull millions more into that hole.”

A series of energy ministers from the 40 countries, which together represent 80% of global energy demand, proclaimed their intent to accelerate investments in clean energy systems, though many of those countries – especially in Asia and Africa – continue to build new coal-fired power plants. Few have taken the steps necessary to meet the Paris Agreement commitment of limiting global warming to 2 degrees Celsius, let alone the 1.5 degree limit that the Intergovernmental Panel on Climate Change says is necessary to avert more catastrophic impacts.

Birol said investment in developing and deploying clean energy technology must increase by fourfold to meet that goal.

China’s energy minister, Zhang Jianhua, said his country is ramping up investment in renewable power, electric vehicles and infrastructure, and battery storage, though critics have noted that Beijing is allowing some regions to approve new coal-fired power plants as part of its recovery program. The country – which is the world’s largest emitter of GHGs – is preparing its next five-year economic plan, covering 2021 to 2026, and, said Zhang, “stay focused on clean, low carbon energy.”

India’s minister of power, Raj Kumar Singh, said his country now has the fastest growing market for renewable electricity. He said renewable sources will grow from supplying 38.% of the country’s power currently to supplying 60% by 2030. But coal-fired power is also growing as the government seeks to provide electricity to all the country’s 1.4 billion citizens.

American Energy Secretary Dan Brouillette said the U.S. remains the world’s largest funder of clean energy research and development, noting his department has major programs for new nuclear technology, renewables and battery storage. He acknowledged, however, that spending has not increased in recent years.

Brouillette said the Trump administration opposes a carbon tax, regulations and mandatory rules for disclosing climate-related financial risk. The IEA has touted those policies as necessary to accelerate the adoption of clean technology and transition off fossil fuels.

A government-driven “top down” approach “vetoes the democratic choices of the marketplace,” Brouillette said. He said the Trump administration favours an “all fuels, all technology” strategy.

However, Joe Biden, the presumptive Democratic nominee for the November presidential election, is pledging a far more ambitious approach, including rejoining the Paris Agreement from which the Trump administration has withdrawn. Democrats in Congress have been touting a Green New Deal that aims to move the country off coal, oil and natural gas while ensuring that workers and poorer Americans receive support and training to participate in the transition.

Birol urged governments to work collaboratively on strategies to bring down the cost of leading-edge clean energy technologies so they can be adopted more rapidly. “We need to build back better, together,” he said.

Shawn McCarthy writes on sustainable finance and climate for Corporate Knights. He is also senior counsel for Sussex Strategy Group.

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