This article originally appeared in The Energy Mix on October 26, 2022.
Redirecting $570 billion per year from planned oil and gas investments could “fully finance” wind and solar expansion to meet a 1.5°C target, showing that oil and gas development must be halted to keep global warming within safe limits, a new report concludes.
“Preventing investments in any oil and gas fields beyond those already under development is essential to limiting temperature rise to 1.5°C, and could additionally free up a significant sum of capital required to fill the wind and solar investment gap,” says the International Institute for Sustainable Development (IISD).
“In other words, the problem is not a shortage of available capital, but rather that existing energy investment is going to the wrong places.”
The report aims to inform policy-makers and private stakeholders about what it will take to meet the Paris Agreement’s 1.5°C target, writes Carbon Brief. Its publication comes at a crucial time when many western countries are scrambling for energy sources—including fossil fuels—after Russia’s invasion of Ukraine disrupted the global oil market.
IISD conducted a comprehensive review of all published, “feasible” routes to staying below 1.5°C with at least 50% likelihood and considered what those pathways show for new oil and gas expansion. The Intergovernmental Panel on Climate Change (IPCC) called for greatly reducing fossil fuel use and warned that existing fossil fuel infrastructure alone could breach the target, but Carbon Brief says the IPCC stopped short of explicitly backing the International Energy Agency’s landmark conclusion last year that “beyond projects already committed as of 2021, there are no new oil and gas fields approved for development in our [1.5°C] pathway.”
The IISD’s new findings support the IEA report, which is widely referenced but has been sidestepped by companies and governments that “exploit nuances and caveats around climate action pathways created in computer models.” By showing that there is a large consensus across multiple projected pathways—including the IEA’s—the IISD leaves less wiggle room for the fossil industry to avoid the full implications of the Paris agreement target, Carbon Brief says.
But some important caveats come with these results, says Carbon Brief. For one thing, the finding that a 1.5°C can only be met with no new development is not true if new developments are allowed to become stranded assets that prematurely stop production, or if old fields are retired early. But though this is theoretically possible as an outcome, it is also unlikely.
“Early closure of fields already in production are extremely rare and we don’t see that happening unless the economics become unfavourable for fields with high extraction costs,” said the report’s lead author, Olivier Bois von Kursk. That’s why IISD and others are advocating for “preventing any new fields from opening up to avoid stranded assets or the risk of busting the carbon budget for 1.5°C.”
IISD also found that by 2050, global oil and gas production must decrease by at least 65% to align with 1.5°C-compatible scenarios. But stopping new oil and gas development is only achievable if alternative energy sources are available, and wind and solar capacity are not currently expanding rapidly enough for a viable 1.5°C pathway. That makes closing thew investment gap for clean energy an urgent priority.
But IISD says capital expenditure for new oil and gas development is expected to reach $570 billion annually by 2030, an amount that “would suffice to bridge the entire investment gap for wind and solar” over those years.
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