The demand for fossil fuels, which has underpinned the modern economy since the Industrial Revolution, is approaching a turning point.
According to forecasts from the International Energy Agency (IEA), the consumption of the three major fossil fuels is set to decline in the next decade due to the rapid growth of renewable energy and the proliferation of electric vehicles. This prediction will be included in the upcoming 'World Energy Outlook' report scheduled for release next month.
Fatih Birol, the head of the IEA, commented on this forecast, saying:
"We are witnessing the beginning of the end of the fossil fuel era, and we must prepare for the next era."
"This demonstrates that climate policies are indeed effective."
Fossil fuel demand expected to peak by the end of 2030 In response to climate change and global energy challenges, governments worldwide have increased their investments in renewable energy. Initiatives such as the U.S. '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 toward a transition to green energy.
Last year, the IEA previously suggested that the total demand for fossil fuels might peak around 2030. As of now, renewable energy technologies have accelerated their development since this year began, effectively accelerating this turning point.
In their previous forecast, the IEA's 'World Energy Outlook' report estimated that clean energy investments would grow by approximately 50% by the end of this century, reaching around $2 trillion annually, more than double the 2022 investments in fossil fuels.
Birol remains cautious about the global climate outlook and believes that only by rapidly reducing emissions after reaching a peak around 2025 can there be a chance to limit global warming to within 1.5 degrees Celsius.
Is the market ready? In the report, Birol mentioned a "structural transformation" in the Chinese economy, shifting from heavy industries with lower energy intensity to industry and services.
"Over the past decade, China accounted for about one-third of the global growth in natural gas demand and two-thirds of oil demand growth."
He believes that solar, wind, and nuclear power will suppress potential growth in coal demand within the Chinese market. At the same time, he emphasizes that countries need to accelerate their energy transition through "stronger climate policies."
However, it seems that both the market and the public are not yet prepared to quickly adapt to this transition. Roberta Metsola, the President of the European Parliament, warned this month that Brussels' climate policies could drive voters towards a more radical alternative. Metsola also criticized the UK government's support for new oil and natural gas drilling projects.
The IEA's viewpoint also faces opposition from major fossil fuel producers. These producers argue that overly optimistic predictions about the peak in consumption could lead to an energy crisis due to insufficient investment in oil and gas supply.
The Organization of the Petroleum Exporting Countries (OPEC) openly expressed dissatisfaction in April this year with the IEA's call to stop investing in new oil development projects, citing that it caused a series of market "turbulence."
Nevertheless, Birol still insists on the need for "the right new policies" because, according to the IEA's forecasts, "global emissions will peak in the mid-2020s, but even with additional policies, we are far from reaching our climate goals.
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