“We are on track to see all fossil fuels peak before 2030.” That’s according to The International Energy Agency’s new World Energy Outlook 2023, their flagship annual report, which predicted that coal, oil, and gas are all due to begin their terminal decline earlier than previously predicted. Released last month, the report had some surprising – and hopeful – revelations about our changing energy landscape.
“Policies supporting clean energy are delivering as the projected pace of change picks up in key markets around the world,” the IEA report states. These projections are based on current policy scenarios and don’t consider any additional climate policies. With just the climate and energy policies that already exist today demand for coal, oil, and gas are each expected to peak within the decade. This is huge – the report marks the first time that demand for each fuel has been predicted within this decade. And while new fossil fuel additions wane, renewables are on track to represent 80% of new power capacity by 2030, and more than half of that 80% will come from photovoltaic solar power alone.
While decarbonization initiatives are playing a major role in the historic transition away from fossil fuels, they’re not the only thing nudging the world toward a phase-down and phase-out of coal, oil, and gas. In fact, they might be playing a more minor role than we even realize, as the green energy transition takes place against the backdrop of significant economic and development variables. Greater market forces are at play that all but guarantee waning energy demand regardless of renewable energy scenarios.
Population growth and economic development have caused worldwide energy demand to rise dramatically and ceaselessly for the last 150 years, and now, ironically, it is continued economic development that will make demand fall. As emerging economies advance in their development, their population growth tends to wane. There are a number of factors that lead to this inverse relationship – with an improved economy, for example, countries often see increases in education for girls and women and lower infant mortality rates, among other key drivers of declining population growth rates.
As economies develop, they follow a very predictable energy consumption trajectory. At first, their demand for energy skyrockets as they move away from agrarian livelihoods and primary materials markets to more industrial pursuits. But then, as their economies develop further, they tend to move away from these resource- and energy-intensive industrial sectors toward less intensive service sectors. Of course, many tech sectors are also major energy guzzlers, but in the bigger economic picture, the trend holds true. Plus, these developments are typically paired with strengthened energy efficiency programs that can help offset energy-hungry data centers and Bitcoin mining operations.
While the rapid approach of peak fossil fuel use is a huge step in the right direction, however, the current trends toward peak emissions and eventual decarbonization are still nowhere near where they need to be in order to meet climate goals. And if the last year has shown us anything, it’s that energy development is unpredictable. Conflict is a major driver of market volatility and can upset even the most confident energy projections. Conflict is expected to grow in frequency and intensity as climate change places a stress test on global environments, economies, and societies.
What’s more, the trend away from fossil fuels will have far-ranging implications for geopolitics, which are currently built on a 150-year foundation of petro-diplomacy. As more and more of the global energy mix is provided by solar and wind power, more nations will be capable of producing their own energy, will democratize energy production, and cause a dramatic shift in international trade. Already, a move away from global energy supply chains toward homeshoring and friendshoring is taking place in the wake of last year’s energy crisis.
By Haley Zaremba for Oilprice.com
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