As members of the UN-convened Net-Zero Asset Owner Alliance (AoA), we welcome and commend important advancements in the recently released 2020 World Energy Outlook (WEO) – in particular, the first-ever inclusion of a net-zero by 2050 case to supplement the Sustainable Development Scenario. To help enable a rapid and smooth global transition to net-zero emissions by 2050 it is vital that this scenario is expanded into a more robust, comprehensive and central scenario in this year’s iteration of the WEO.
Many of the Alliance members have previously highlighted the urgency of developing a WEO that puts the Paris Agreement’s objectives at its centre. Robust 1.5°C scenarios are essential for enabling investors as well as companies, policymakers and other stakeholders to recalibrate for optimal resilience in the face of escalating climate-related risks and expanding climate solutions opportunities. Such tools are all the more important as global governments and the private sector continue to deploy pandemic recovery investments that hold potential to propel forward the transition to net zero emissions rather than locking in high-carbon business-as-usual during this pivotal decade.
Scenarios like the new NZE2050 are required to determine avenues for economies, sectors and companies for a net-zero future. Investors like us need detailed scenarios to judge financial risks and opportunities and in addition to derive potential scenario alignment. They also are foundational for corporate engagement as well as policy advocacy. For instance, as asset owners we are seeking information of how sectoral transitions like in oil and gas could play out and what the implications for capital expenditures could be.
The 2020 WEO makes important inroads in this regard and we are poised to put it to use. Taken together with other material shifts in the 2020 WEO as compared to prior iterations – in particular with regard to recognition of the dramatically reduced costs and improved competitiveness of renewable energy as well as the imperative to accelerate clean energy transition in this decade – the new NZE2050 supplemental scenario is expected to be a useful tool in shifting alignment to net zero by 2050. At the same time, in order to adequately serve the pressing needs of investors, companies and policymakers, it is essential to build out NZE2050 in WEO 2021 as a standalone scenario going out to 2050 (building from the current iteration that extends only to 2030) with a full set of accompanying data.
Specifically, we ask the IEA to incorporate the following recommendations:
- Make a 1.5℃-aligned NZE2050 scenario central to the WEO.
- This scenario should be calibrated for alignment with a halving of emissions by 2030, in line with the IPCC’s findings.
- The NZE2050 scenario should be extended out to 2050, and take a clear-eyed view of the risks of stranding of high-carbon infrastructure and reserves as well as the implications for oil and gas developments – specifically including the need for managed phase-down of production and use, in parallel with actions to support a just transition.
- The scenario should continue to take a precautionary approach to negative emissions technologies.
- It should build from WEO 2020 to incorporate increased investment into clean alternatives at a pace and scale commensurate with the need to halve emissions by 2030 and achieve net zero by 2050.
- The underlying NZE2050 data should be made available in full detail as with the other scenarios
The imperative to fully develop such tools never has been clearer than it is now. An ever-growing number of nations embrace net-zero targets, now notably including China, Japan and the Republic of Korea in addition to the European Union, United Kingdom and well over 100 others worldwide. With the incoming Biden-Harris Administration set to bring the United States back into the Paris Agreement and adopt a target of achieving net zero emissions “by 2050 at the latest,” the entire G7 and the majority of the G20’s emissions are soon expected to be subject to targets in line with similar ambition.
As you know, the scenarios and analyses crafted by the IEA carry considerable influence on global energy decision-making. As investors we are encouraged that the 2020 WEO includes a strong foundation for building out a truly robust and central Net-Zero Emissions by 2050 scenario in the 2021 WEO. We look forward to being able to deploy such a scenario to advance our objectives in alignment with the global imperative to achieve net zero emissions by 2050.
About the AoA
The United Nations-convened Net-Zero Asset Owner Alliance is a leading group of pension funds and insurance companies committed to reducing their portfolio emissions to net zero by 2050 as well publishing target for 2025 consistent with this longer-term goal. Further information about the Alliance and its member can be found here