Investment Institute
Environmental

The IEA’s path to net zero

  • 25 June 2021 (5 min read)

A wake up call for the energy sector?

The energy industry lies at the centre of any attempt to deliver on the goals of the Paris Agreement on climate change. Huge changes in production and consumption are required if the world is to reach net zero emissions and to minimise the global temperature increase to +1.5°C of pre-industrial times, so the International Energy Agency’s (IEA) 18 May report setting out one potential pathway is of great interest. It is a complex, detailed assessment of how the world might press ahead – and it makes clear the immense challenge ahead for energy companies and their investors.

The report assumes that the desired outcomes of net zero and +1.5°C are indeed to be achieved by 2050 and then backtracks to 2020 to assess what should be done to succeed. This touches on supply and demand of energy, technologies, carbon pricing, social justice, the role of governments, and the role of investors. All the points are inter-related and interdependent. If some developments do not occur, more will have to be done elsewhere. Overall, the IEA has listed 400 milestones that underpin the trajectory to net zero.  See overleaf for sample milestones.

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