Exclusive: IEA head wants fossil fuel industry to set climate targets

By Justin Worland

In Paris last week I sat down with Fatih Birol, the executive director of the International Energy Agency (IEA). The IEA is the world’s premier collector and cruncher of energy data, and its work is used to inform policies and investment decisions around the world.

Birol and I had a wide ranging discussion, but one of the things that struck me most was his advice to companies and investors: “Give a close look at the clean energy investment trends.”

On May 25, the IEA released a?new energy investment report ?projecting that more than $1.7 trillion will be invested in clean energy technologies this year, a nearly 25% increase over the last two years. And, in Birol’s estimation, businesses and investors that don’t take notice will be left behind.

I’ll tackle the many different ways these trends will sweep across different sectors in the weeks and months to come. But for now I want to focus on the energy industry, which came up frequently during my conversation with Birol, who told me what he's pushing to see from energy execs.

Just two years ago, the IEA?called ?for a dramatic scale up in financing for renewable energy and warned that the world cannot afford investment in new fossil fuel supply. Last week, Birol told me he is “disappointed” in the energy industry’s lackluster response. “When they talk, they recognize the importance of climate change,” he said. “But when you look at the numbers there is a major gap.”

To address that gap, Birol is now using his position to call on oil and gas companies to commit to data-driven targets ahead of the upcoming U.N. climate conference known as COP28 to be held in Dubai this November. “Oil and gas companies need to make some commitments in order to be taken seriously,” he says.

Birol is an economist and he explains his analysis of this situation with a simple look at the numbers. Last year, the companies made $4 trillion in revenue, an enormous increase from pre-COVID numbers. That money could have been used to power the energy transition, but instead companies largely channeled it into dividends, share buybacks, and debt repayment.

To that end, Birol has identified two concrete goals that energy companies should take to align with the net zero ambition. First, oil and gas companies need to commit to cutting emissions from their operations and supply chains—so-called Scope 1 and Scope?2?emissions—by 60% by 2030. An?analysis ?from the IEA found that nearly 15% of global emissions come from the business of getting oil and gas out of the ground and transporting it to consumers.

Second, Birol says fossil fuel companies need to commit to ramping up their investment in clean energy technologies. Last year, oil and gas companies devoted about 5% of their spending to areas outside of their traditional fossil fuel supply business, according to an IEA?analysis . That low percentage not only means less capital is flowing into clean technologies but also that the companies aren’t fully utilizing their expertise in a way that could benefit the transition. “They have huge engineering experience, they know how to run major, complex projects,” says Birol. “If we can get them on board, they can really help us to reach our targets.”

Birol says the IEA is currently pushing “very strongly” for oil and gas companies to make those commitments in?time?for COP28. “There are people who say oil and gas companies have no seat on the table in the COP meeting,” he says. “I think we need to build a grand coalition of governments, energy industry, civil society, and investors who sincerely believe in the fight against climate change.”

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