The exploratory and normative scenarios of the IEA

In October 2021, the International Energy Agency (IEA) presented the World Energy Outlook 2021 (WEO-2021). The publica­tion was to be understood as a clear signal to the UNFCCC Conference of the Parties (COP26), which was held in Glasgow in November 2021. In presenting this compre­hensive study, the following points were highlighted by the IEA:

• The commitments made by states to lim­it greenhouse gas emissions must be tightened.
• The developing and emerging countries are crucial for the future development of the energy system. Their investments in clean energies must be increased – with the support of the industrialized coun­tries.
• Addressed to investors: Future invest­ments in fossil fuels harbor potential losses, while investments in clean ener­gies promise profits.

Four normative and exploratory scenarios

When these points are addressed in poli­cies, the transformation to a globally sus­tainable energy supply should be acceler­ated. The existing challenge of achieving the Paris climate goals is illustrated using two exploratory and two normative sce­narios.

These four scenarios can be charac­terized as follows:

The results obtained for the various sce­narios differ greatly. The developments up to the year 2050 are outlined below.

STEPS scenario: CO2 emissions fall insufficiently

In the Stated Policies Scenario (STEPS) there is a change in the energy supply sys­tem. Due to global population growth from 7.75 billion today to 9.7 billion in 2050 and an expected increase in economic output, especially in developing and emerging countries, global energy consumption may increase by 26 percent by 2050 compared to lev­els in 2020. The share of renewable ener­gies in global primary energy consumption will increase from 16 percent in 2020 to 28 percent in 2050. Nevertheless, fossil energies, i.e. coal, oil and natural gas, will still cover two thirds of global primary energy consump­tion in 2050 – compared to 79 percent in 2020. As in 2020, nuclear energy will then ac­count for 5 percent.

The capture and use or stor­age of CO2 (Carbon Capture and Usage / Storage – CCUS) makes only a very limited contribution to reducing CO2 emissions in this scenario. According to this scenario, the total CO2 emissions of 33.9 billion tonnes (billion t) in 2050 are just below 2020 with 34.2 billion t. As a consequence, global temperatures will rise by 2.6 de­grees Celsius by 2100 compared to pre-in­dustrial levels.

APS Szenario: Limited increase in primary energy consumption

According to the Announced Pledges Sce­nario (APS), global CO2 emissions will drop by around 40 percent to 20.8 billion t in 2050. But this path is still associated with a temperature increase of 2.1 degrees Celsi­us by 2100. In contrast to STEPS, the global increase in primary energy consumption will remain limited to 14 percent by 2050. Re­newable energies have a share of almost 40 percent . The contribution of nuclear energy increases to 7 percent .

Fossil energies account for 53 percent , with significantly greater role being assumed for CCUS compared to the STEPS. The currently announced commitments, however, only cover less than 20 percent of the gap in emissions reduction that must be closed by 2030 in order to keep the 1.5 de­gree target within reach. Even if the com­mitments announced by mid-2021 are met, there remains a clear ambition gap to the Paris climate targets.

The normative scenarios: SDS and NZE

In the two normative scenarios – these are the Sustainable Development Scenario (SDS) and the Net Zero Emissions by 2050 Scenario (NZE) – the IEA shows how this gap could be closed according to the model calculations carried out. In the report, the IEA identifies four crucial measures:

In order to get the world on the path to the 1.5 °C target, investments in clean energy projects and the necessary infrastructure amounting to nearly 4 trillion US $ per year are required. Most of the capital for the in­vestment needs to be financed by the pri­vate sector – based on market signals and the framework set by politics.

In addition, public financial institutions are also seen as necessary, such as international develop­ment banks, to trigger investments where private players do not see a sufficient bal­ance between risk and chance.

Development of fossil energy sources

The development of the individual energy sources is very different. The global con­sumption of coal decreases in all scenarios. But the difference between a 10 percent decrease in ASP by 2030 and a 55 percent decrease in NZE is determined by the speed at which coal is displaced in the electricity sector. The op­tions are shutting down existing capacities, retrofitting with CCUS and adding CO2- free or fuels with low-CO2 emissions such as biomass or ammonia.

The oil consumption will decrease in the future – and this for the first time in current model calculations of the IEA, even if there are strong deviations between the scenari­os with regard to the characteristics of the course. In STEPS, peak oil demand is ex­pected in the mid-2030s, in APS shortly after 2025. In order to achieve NZE, oil consumption must drop to 25 mb/d by the middle of the century. This corresponds to a decrease of around 75 percent.

Demand for natural gas will increase in all scenarios over the next five years. After that, however, the paths shown in the various scenarios differ greatly. In NZE, the devel­opment of new oil and gas fields is no longer considered necessary – beyond the projects that are already under development. In this scenario, global natural gas consumption will decrease by more than half by 2050 compared to the 2020 level.

Development of Renewable Energies

Renewable energies increase significantly in all scenarios – most strongly in the NZE. In this scenario, renewable energies ac­count for 67 percent of the primary energy con­sumption in 2050. Solar energy has in­creased twenty-three times compared to the level of 2020, and wind power has in­creased fifteen times. For hydropower and biomass – as well as for nuclear energy – a doubling of the absolute contribution is ex­pected. Nuclear energy then has a share of 11 percent in covering primary energy consump­tion. Fossil energies only retain a share of 22 percent.

In global power generation, the share of renewable energies in the NZE will even increase to 88 percent in 2050. 35 percentage points of this will be attributable to solar and wind, 12 percentage points to hydro­power, 5 percentage points to bio-energy and 1 percentage point to geothermal en­ergy. A share of 8 percent is reported for nuclear energy. Hydrogen and ammonia come to 2 percent. This also applies to coal and natural gas with CCUS.

Expansion of renewables in the NZE scenario

According to NZE, there will be 240 million PV roof top systems and 1.6 billion elec­tric vehicles worldwide in 2050. This re­quires battery storage, the expansion of power grids and controllable systems based on sources with low CO2 emissions, such as hydropower, geothermal energy, bio-ener­gy, hydrogen and ammonia as well as small modular nuclear energy reactors. Increas­ing digitization can support demand man­agement and the flow of data in general.

Rare earths and hydrogen-based fuels will in future become essential elements in in­ternational energy trading. Their com­bined share in energy trading will increase from 13 percent today by 2050 to 25 percent in the APS and more than 80 percent in the NZE.

The NZE sees great market opportunities for manufacturers of wind turbines, solar panels, lithium-ion batteries, electrolysers and fuel cells. With a volume of over US $ 1 trillion by 2050, an order of magnitude comparable to the current global oil mar­ket is expected.

IEA: Governments must react

The IEA sees governments in the driver’s seat in steering future developments, but municipalities, companies, investors and consumers also have an important role to play. What is decisive for the very different results in the four scenarios is the assumed pricing of CO2. In STEPS, an increase in CO2 prices by 2050 to up to US $ 90 (2020) per ton in industrialized countries (includ­ing for the EU) is set as a model input. In the ASP it is US $ 200 (2020) per ton in in­dustrialized countries with net zero emis­sion obligations, in China it is US $ 160 (2020) per ton and in developing and emerging countries with net zero pledges it is US $ 160 (2020) per ton.

In the SDS, the same CO2 price is set as the model input for all countries with net zero emission obliga­tions as in the APS, in other industrialized countries it is 160 US $ (2020) per ton and in emerging and developing countries 95 US $ (2020 ) per ton. The highest CO2 prices are set for the year 2050 in the NZE, namely 250 US $ (2020) per ton in the in­dustrialized countries, 200 US $ (2020) per ton in the larger emerging countries and 55 US $ (2020) per ton in other emerg­ing and developing countries. This shows that carbon pricing has a key role to play in meeting the Paris climate targets.