The global energy sector is the most significant source of global greenhouse gas emissions and it is widely acknowledged that, to achieve the ambitions of the Paris Agreement and keep global temperature increases below 1.5° C, rapid decarbonisation of energy production is essential.

Last week, the International Energy Agency (IEA) published what could be a seminal report stressing the urgent policy actions required and which could shape discussions at COP26 later this year. Picking out some of the steps on the IEA’s pathway to 2050, we highlight the following ambitions over the next 15 years:

Now
No new oil and gas fields approved for development, no new coal mines or mine extensions.

2025
No new sales of fossil fuel boilers.

2030
60% of global car sales are electric; new clean technologies in heavy industry are demonstrated at scale.

2035
No new sales of internal combustion engine (ICE) cars.

Some countries have already taken steps to implement these policy ambitions - the UK for example is to ban the sale of new ICE cars from 2030 and the installation of gas boilers in new homes from 2025. Others will need to follow suit to follow the pathway set out by the IEA and, whilst this may seem ambitious, it needs to be. We can only expect the pace of change over the next ten years to increase.

Importantly, the IEA suggests that the changes that must be made over the next ten years need not depend on new, unproven technology, but that they can be achieved through the expansion and deployment of technologies which are already available within the market. For example, they see a 4-fold increase in the annual deployment of renewable energy capacity and an 18-fold increase in the sale of electric cars. Continued innovation and the deployment of emerging technology will address those more challenging areas of heavy industry and transport.

What is perhaps most encouraging is the IEA’s comment on the use of fossil fuels. Its statement that “there is no need for investment in new fossil fuel supply in our net zero pathway” is unequivocal; the IEA is presenting a future with minimal coal use (just 1% of total energy supply by 2050) and substantial reductions in gas and oil (55% and 75% respectively over the next 30 years). A change on this scale does not require new investment by fossil fuel companies, but for the managed decline of existing business.

We should be clear that the IEA’s pathway will require the implementation of policies that are supportive of decarbonisation at a global level. But this call for action can also be supported by investors who should continue to advocate for change. Whilst we recognise that there must be a transition and change will not happen overnight, investors can:

• Continue to reduce exposure to companies with high exposure to fossil fuels, especially those that are continuing to invest in the expansion of their production;
• Engage with asset managers to ensure that companies with high emissions have developed and are implementing plans for change, and those which aren’t are being held to account for their inaction; and
• Explore the opportunities available through more sustainability-oriented mandates biased towards the solutions that are likely to become commonplace over the near term.

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