How the IEA Embraced its Role as an Energy Oracle in the Climate Transition

(Bloomberg) --

This year the IEA confirmed a subtle but important shift in the way it defines and frames its different pathways, or scenarios, that it publishes in the WEO. Three of the four 2021 scenarios are based on pursuit of climate goals, and there’s no “business as usual” option. This changes the energy landscape immeasurably. 

To understand why, consider the role and reach of the WEO. Although it was founded as the watchdog for wealthy, oil-importing countries in the wake of the OPEC oil embargo in 1973, the IEA has carefully built a reputation as an authoritative source of international data and insights on all energy-related matters. The far-off numbers in the WEO are routinely cited in corporate investor presentations and government revenue forecasts.

Getting oil, gas and coal out of the ground is nearly always an expensive, multi-year endeavor. It requires a belief that big upfront costs will eventually pay off. It’s not surprising, then, that WEO numbers were often used to rationalize continued reliance on, or expansion of, fossil fuel supply.

None of that was set in stone, however. For years the IEA's choice of scenarios, and the names they were given, had adapted and shifted.

Back in 2010, the “central scenario” had, for years, assumed no policy change. This was called the “Current Policies Scenario.” By 2011, it was undeniable that emerging policies to constrain climate change would shape energy, and so the "New Policies Scenario" – which assumes that policies would be enacted – took the mantle of “central scenario.” 

In November 2019, months after investors and scientists wrote to the IEA, the organization changed the name of the New Policies Scenario to the “Stated Policies Scenario.” It was clunkier, but also more accurate: The deadly warming vision it described could no longer be characterized in slide decks and reports as “new.” The following year, amid the uncertainty of the pandemic, the even more inert Current Policies Scenario was dumped altogether.

The headline this year has been that the IEA developed a pathway for the world to limit warming to an increase of 1.5C, and that the world’s best authority on energy has declared that there is no room for new fossil fuel production in such a scenario. Birol has also identified that a rapidly expanded renewable energy base is necessary for securing stable energy supplies; something the IEA used to associate primarily with fossil fuels.

Less dramatic, but just as important, is that IEA seems to have conceded that the rest of the world will never see the WEO in the same way that its authors intend. Birol and his colleagues seem to have assumed they were a creating a thoughtful but entirely hypothetical set of numbers and charts each years. Policymakers, industry and investors saw instead a rationale for their decisions, and worse, a justification for their biases—particularly the ones that lock in fossil fuels. The combination of tweaks over the last three years has culminated in a WEO that no longer provides spurious support for fossil-fuel expansion. It hasn’t come a moment too soon.

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