IEA: The "End" of the Fossil Fuel Era in the World

The demand for fossil fuels that has supported the modern economy since the Industrial Revolution is approaching a turning point.

According to the International Energy Agency (IEA), the consumption of the three major fossil fuels is expected to decline in the next decade due to the rapid growth of renewable energy and the popularity of electric vehicles. This forecast will be mentioned in the upcoming "World Energy Outlook" report to be released next month.

Fatih Birol, the head of the IEA, commented on this forecast:

"We are witnessing the beginning of the end of the fossil fuel age, and we must prepare for the next era."

"This indicates that climate policies are indeed effective."

Fossil fuel demand to peak by the end of 2030

To address climate change and the global energy crisis, governments around the world have increased their investments in renewable energy. Initiatives such as the US "Inflation Reduction Act," the EU's Fit for 55 and REPowerEU plans, and China's carbon peak and carbon neutrality strategies are all driving the international community towards a transition to green energy.

Last year, the IEA stated that the total demand for fossil fuels could peak around 2030. Currently, renewable energy technologies have been accelerating their development since this year, which has also anticipated this turning point.

In its previous forecast, the IEA stated in its "World Energy Outlook" report that clean energy investments are expected to grow by about 50% by the end of this century, reaching $2 trillion per year, more than twice the amount invested in fossil fuels in 2022.

Birol holds a cautious view on the global climate outlook and believes that only by rapidly reducing emissions after reaching a peak around 2025, can the global warming be limited to within 1.5 degrees Celsius.

Is the market prepared?

In the report, Birol mentioned the "structural transformation" of the Chinese economy, specifically the shift from heavy industries with relatively low energy intensity to the industrial and service sectors.

"In the past decade, China accounted for about one-third of the global increase in natural gas demand and two-thirds of the increase in oil demand."

He believes that solar energy, wind energy, and nuclear power will curb the potential growth of coal demand in the Chinese market. At the same time, he believes that countries need to accelerate energy transition through "stronger climate policies."

However, the market and the public seem unprepared to adapt quickly to this transition. Roberta Metsola, the President of the European Parliament, warned this month that Brussels' climate policies could push voters towards a radical alternative. Additionally, Metsola criticized the UK government's support for new oil and gas drilling projects.

The views of the International Energy Agency also face criticism from major fossil fuel producers. These producers argue that if the current predictions about peak consumption are overly optimistic, it will lead to an energy crisis due to insufficient investment in oil and gas supply.

The Organization of the Petroleum Exporting Countries (OPEC) publicly expressed dissatisfaction with the IEA's call to stop investing in new oil development projects in April this year, as it triggered a series of market "volatility." Despite this, Birol still insists on the need to "develop the right new policies" because according to IEA's forecast, "global emissions will peak in the mid-2020s, but even with additional policies, we are still far from reaching our climate goals."