The IEA (International Energy Agency) has been an authority in the world of energy for 49 years. The problem is that for some years it has followed the path of many international and even national institutions when it comes to building energy transition scenarios. Activism and voluntarism have taken precedence over reality, which has led to the development of increasingly improbable scenarios and hypotheses. As for example the fact, to achieve “net zero” greenhouse gas emissions in 2050, that the consumption and prices of fossil fuels will fall rapidly and naturally from 2030…
The International Energy Agency (IEA), based in Paris, is an international institution founded in 1974 within the OECD (Organisation for Economic Co-operation and Development) with the mission of working on the security of energy supply. energy. In a famous speech of December 1973, called Pilgrim Speech, Henry Kissinger, then Secretary of State of the United States, proposed to provide an answer to the oil shock which was “the guarantee of the supply of energy necessary for a reasonable cost”.
The AIE was a tool for this commitment. The institution has long been characterized by the particularly austere nature of its relations, by a certain reluctance towards the energy transition and an attachment to the security of oil supplies. What he was accused of. But in recent years, it has completely changed its doctrine to the point of becoming a spearhead of the transition and accelerated decarbonization objectives. The problem is that in going from one extreme to the other, the institution has sometimes lost its footing with reality. She now practices the Coué method quite often. Its roadmap for achieving the famous “net zero” emissions by 2050 (Net Zero by 2050: A Roadmap for the Global Energy Sector) published in 2021 and since several times updated presents very, too many methodological flaws. As if the hypotheses had been chosen according to the result to be achieved and not the reality.
“Unrealistic, inconsistent assumptions…”
These flaws are particularly detailed in a study recently published in the United States by the Energy Policy Research Foundation. An organization even older than the International Energy Agency, which was founded in 1944. Its document is final. “The IEA’s assumptions are unrealistic, inconsistent and often support arguments for increased hydrocarbon production. In reality, the IEA’s net zero roadmap is a green mirage that will dramatically increase energy costs, devastate Western economies, and increase human suffering.”
The fundamental assumption underlying the IEA’s net zero roadmap is that the superiority of alternatives to hydrocarbons, especially in terms of costs – mainly wind and solar (nuclear is barely considered) – will lead to a decrease in demand for coal, oil (peak oil) and natural gas.
A drop in demand and prices for hydrocarbons that in no way corresponds to reality
The problem is that the IEA’s assumption of a rapid decline in fossil fuel consumption does not match current reality at all. The demand for fossil fuels, including even coal, continues to grow. And yet, on the basis of this hypothesis, the IEA constructs a scenario of falling hydrocarbon prices. The barrel of oil would drop to 35 dollars in 2030 (less than half of its current price); and, for natural gas, at 2.1 dollars per million Btu (MMBtu) in the United States and 2.0 dollars in the European Union in 2030. These forecasts are all the more problematic as a sharp drop in investments in fossil fuels can only restrict supply and drive up prices. Which is not necessarily what the IEA wishes or anticipates.
Banning investments in hydrocarbons is the best way to avoid reaching net zero emissions in 2050.
Part of the problem stems from the fact that, according to the IEA, the proponents of the “net zero” scenario have misinterpreted, by design or not, its position that there should be no further investment in new oil and gas fields. This has led to many calls to simply ban all fossil fuel investment in order to gradually reduce the supply of oil and gas, drive up prices and thus restrict consumption by destroying demand. Which is not the Agency’s scenario at all.
It underlines, itself belatedly, the disastrous consequences that a too rapid reduction in the supply of oil and gas could have. “Reducing fossil fuel investment before, or instead of, political action and demand for clean energy would not achieve the same results as in the Net Zero Emission scenario,” warns the IEA in its World Energy Outlook 2022. “If supply were to move faster than demand, with a decline in fossil fuel investment preceding a rise in clean technology, this would lead to much higher prices, perhaps for an extended period”.
Economic inconsistency between massive investments, more expensive energy and strong economic growth
The IEA’s central thesis is that the relative cost of renewables, wind and solar, “gives electrification the edge in the race to net zero” because “renewable energy technologies are always cheaper”. Yet the IEA’s own figures demonstrate the problems with its all-renewable scenario, economic balance and funding. It requires the mobilization for three decades of considerable amounts of capital, labor and land to produce less energy.
No economic theory can demonstrate that increasing the need for land and sea, labor and capital for less production can lead to sustainable economic growth. On the contrary, it corresponds rather to the current macroeconomic difficulties, characterized by high inflation and weak growth.
Energy sovereignty and security of supply do not exist
Even more surprising, since the IEA was created precisely to take this dimension into account, the geopolitical question of energy sovereignty and security of supply is treated casually. The consequences of the invasion of Ukraine in February 2022 by Russia have nevertheless come to remind us of the need to ensure for States their security of energy supply. A question that almost does not exist for the AIE.
This is particularly obvious when in the “net zero” roadmap the share of the world oil market held by OPEC would increase from 37% to 52% in 2050. Which according to even the IEA would be a level of control market “higher than at any time in the history of oil markets”. Which, by the way, is totally inconsistent with a downward trend in oil prices, as the very existence of OPEC responds to the desire of producing countries to control oil prices and maintain them at a high level. And yet, there is an even more problematic scenario. If non-OPEC producers – under pressure from socially responsible investors – follow the “net zero” profile and sharply reduce their oil production while OPEC producers maintain their investment levels, the share of OPEC in global production could even reach a staggering 82% by 2050, a virtual monopoly held by a cartel.
The objective of the energy transition is simple to define. It consists of substituting low-carbon energies for fossil fuels. But to achieve this, it must still be done in a realistic and orderly way. Destroying the old economy before having built the new one and thus impoverishing the populations and the countries is the best way not to succeed in the transition. We must also not lose sight of the fact that for a few more decades, whether we like it or not, low-carbon energies will require a supply of fossil fuels at acceptable costs in order to be developed and for the manufacture, transport and installation of new equipment.
The problem with the energy transition is always the same: the voluntarism that is both popular and media-driven is understandable but dangerous. In particular, if it does not take reality into account because it creates illusions about the speed at which the transition can be carried out and its economic and social cost. Above all, it is not the mission of the AIE to fuel its illusions…
Internat Network Carbon-Free Envir.Efficient Econ. 