Fossil fuel demand expected to peak within 15 years

Demand for fossil fuels is expected to peak within 15 years, according to the International Energy Agency (IEA), which says Russia’s invasion of Ukraine has accelerated the world’s transition to cleaner energy sources.

Even if efforts to phase out fossil fuels aren’t stepped up, demand for coal will start declining within a few years, and oil demand will level off by 2035, according to the IEA’s latest World Energy Outlook. Crucially, even gas demand is forecast to plateau from the end of this decade.

It marks the first time that influential IEA analysts have said demand for fossil fuels is set to peak or plateau under all their future scenarios, even with only current policies in place.

A peak in fossil fuel use would mark a historic turning point for the global economy, finally uncoupling GDP and fossil fuel use for the first time since the Industrial Revolution.

“It’s a pretty big announcement,” says Mike Coffin at Carbon Tracker, a think tank researching the impact of climate change on financial markets. “It’s ratcheting up the message to the oil and gas industry that hey, business as usual is not going to work long-term.”

It also spells good news for the climate: global emissions from the energy sector are now forecast to peak by 2025 as a result of slowing demand, the IEA says.

The IEA finds that Russia’s invasion of Ukraine has triggered turmoil in global energy markets. But over the longer term, it says the conflict will speed the world’s transition to lower carbon energy sources as countries seek to boost growth and bolster their energy security in response to the crisis.

The US Inflation Reduction Act, for example, will accelerate the rollout of wind and solar power in the country and increase the number of electric cars that hit roads over the next decade, the IEA says. Meanwhile, demand for natural gas and oil in the European Union is set to fall by 20 per cent by 2030 thanks to the trading bloc’s Fit for 55 package, which will drive the deployment of electric vehicles, heat pumps and renewables.

“Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come,” IEA executive director Fatih Birol said in a press release. “Even with today’s policy settings, the energy world is shifting dramatically before our eyes. Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable and more secure energy system.”

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Under all the IEA’s scenarios, demand for fossil fuels levels off as people drive more electric cars and nations rely on renewables, nuclear and other low carbon technologies for heat and power. Under current policies, the share of fossil fuels in the global energy mix is set to fall from around 80 per cent today to just above 60 per cent by mid-century.

But this pace of change isn’t fast enough to avert dangerous climate change. The IEA predicts that under current policies, the world is on course for about 2.5°C of warming by the end of the century, chiming with other assessments released by the UN this week. This level of warming poses a serious threat to the stability of ecological systems, scientists warn.

However, the pace of this transition could accelerate if countries do more to cut emissions. Under a scenario where countries fulfil all their climate targets in full and on time, demand for coal, oil and gas all peak by 2030 before gradually falling through to 2050. Under this scenario, climate-induced temperature rise is held to 1.7°C above pre-industrial levels.

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