The Case for Complexity – All Fossil Fuels and Regions Are NOT the Same

In the space of less than a week, the International Energy Agency (IEA) released two major reports – their flagship ‘World Energy Outlook 2024 ’ (WEO), followed by the less heralded ‘Southeast Asia Energy Outlook 2024 ’ (SAEO). Both are incredibly rich in insight, contain fascinating nuggets of data and provide an invaluable service in driving informed debate among anyone who cares about how we can achieve a successful energy transition.

Less helpful, however, are some of the glaring contradictions between the high-level ‘takeaways’ and the press headlines that I have seen and endlessly re-hashed from the WEO over the past weeks, and the much more nuanced, regional detail that can be found when digging into the content of both reports.

A good place to start is the much-quoted headline on fossil fuel demand peaking later this decade. Allow me to be very clear: not all fossil fuels are the same. Natural gas is a much cleaner burning fuel than coal and oil and, therefore, is fundamental to the energy transition and the ongoing process of decarbonisation across power generation, heating, industry and transport.

The IEA always splits out coal, oil and gas in its data and graphics, and acknowledges how gas can increasingly displace higher-carbon fuels, particularly in the fast-growing, coal-dependent Asian economies. Yet in the catch-all headline, fossil fuels are dumped into one category and aggregated across vastly different regions of the globe.

As the IEA itself says, “advancing clean energy transitions requires tailored strategies that consider both regional and national contexts.”

The imperative for a region-by-region view is, indeed, perfectly illustrated by SAEO where we see how, unlike other regions, CO2 emissions are still rising in lockstep with gross domestic product (GDP) growth – largely due to the continuing dominance of coal in the energy mix. Thus it is not surprising, in its SAEO, that the IEA predicts that the regional gas demand will continue to rise to 150% of today’s levels by 2050 in its Stated Policies Scenario (STEPS) – with coal peaking around 2040.

The dramatic description – almost clickbait, if you wish - of “a wave of LNG supply” is another eye-catching WEO headline.

The WEO’s analysis which underpins this claim is, undoubtedly, based on credible and verifiable data, but it also needs to be seen as only one of a range of outlooks, dependent on a myriad of assumptions around individual commercial and project decisions.

Complicating this already uncertain supply picture is a hugely divergent set of global gas demand growth forecasts and scenarios – even across the various WEO scenarios themselves!

Looking regionally, Southeast Asia – for example - becomes a net gas importer later this decade in two of the IEA’s scenarios, with liquified natural gas (LNG) becoming increasingly important given the limited opportunities for pipeline connections.

Yet despite these great uncertainties on both the demand and supply side, the WEO then attempts to predict gas prices in the late 2020’s, territory onto which even hardened LNG traders and company CEOs would fear to tread. It does seem somewhat contradictory that the WEO places such repeated emphasis on the importance of energy security amid great geopolitical turmoil and fragile energy systems, yet then appears to overlook this complexity when making the statements that then make their way into its headline takeaways! ???

Against such a range of unknown future market, geopolitical and societal developments, I believe that the case for continued investment in gas and its infrastructure, far from being “weaker than ever”, is actually a critical down-payment on the robustness of our global energy systems. The flexibility afforded by the global LNG market, in particular, has recently proved once again its ability to give economies across the globe the resilience needed to keep energy flowing uninterrupted to households, industries and critical services.

Both IEA reports are absolutely right to emphasise the lack of basic access to energy for millions of people and to conclude that no global energy transition will be possible while so many lack access to secure and affordable energy.

There are, sadly, already too many individuals in our political sphere who prefer to pander with wishful thinking and simplified messages which we might want to hear, rather than explaining the messy and difficult trade-offs that we are likely to face as we navigate through a complex, regionally differentiated energy transition.

If IEA resists the temptation to join them, it will remain a true guide for policy makers and publics alike, and do full justice to the wonderful resources, analysis and creative insight their reports provide. ??

There comes a time, and I believe this has already arrived, to reject wishful thinking – irrespective of how difficult it may be for some to come to terms with it. Climate pledges and their associated energy scenarios are aspirational and largely dependent on the national legislators’ willingness and ability to enforce them. Energy consumption patterns and mixes are driven by market forces (industry and consumers) and by those legislators’ ability to ensure that their national socioeconomic priorities are aligned to the actual needs of the people they have a duty to serve.

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By Mark McCrory , Strategy and Advocacy Director, International Gas Union