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The International Energy Agency Anticipates a Decline in Fossil Fuel Demand After 2030

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In a recent outlook report, the International Energy Agency (IEA) predicts that the share of coal, oil, and natural gas in global energy supply will begin to decline after 2030. Currently hovering at around 80 percent, the share is projected to decrease to 73 percent by 2030, driven by the transition to renewables and other lower carbon fuels.

The decline in coal demand will be particularly sharp as countries switch from coal power to cleaner alternatives, including natural gas. However, the IEA also predicts that natural gasโ€™s days as a dominant energy source are numbered. While global natural gas use has been increasing at an average annual rate of almost 2 percent since 2011, growth is expected to slow to less than 0.4 percent per year from now until 2030.

fossil fuel peaks iea
Demand for coal to drop precipitously.

The outlook also highlights the emergence of Canada as a significant liquefied natural gas (LNG) exporter by 2025, thanks to projects like LNG Canada. However, the incremental increases in LNG exports from Canada are expected to be relatively small compared to the United States and Qatar, which are predicted to account for 60 percent of the new LNG volumes.

The surge in new LNG projects worldwide is projected to tip the balance of markets and create challenges for Russiaโ€™s diversification strategy towards Asia. As LNG production capacity increases, Russia will face limited opportunities to secure additional markets, leading to a significant decline in its share of internationally traded gas from 30 percent in 2021 to 15 percent by 2030.

lng projects pipeline iea
The US and Qatar account for 60% of new LNG volumes. | IEA

The energy crisis triggered by Russiaโ€™s invasion of Ukraine has accelerated the shift away from fossil fuels and towards renewables and lower carbon alternatives in Europe. Russia lost a significant European market for its natural gas, and the resulting turmoil has further hastened the decline of the fossil fuel era. The IEAโ€™s outlook suggests that the momentum behind clean energy transitions is now strong enough to bring global demand for coal, oil, and natural gas to a peak before 2030.

China, as a major energy consumer, will play a crucial role in determining the extent of the decline in global fossil fuel demand. If Chinaโ€™s economic growth remains below four percent per year, the IEA projects that Chinaโ€™s total energy demand will peak in the mid-2020s. The IEA has emphasized that a mere one percent decline in Chinaโ€™s annual economic growth would lead to a 20 percent reduction in Chinese LNG imports.

While the IEAโ€™s forecast may raise concerns about the viability of future liquefied natural gas (LNG) projects in British Columbia (B.C.), the outlook stresses the need for continued investment in fossil fuels to meet the rising demand until 2030. However, the report also cautions against excessive investment, as it could hinder the transition to cleaner energy systems and jeopardize the goal of achieving net-zero emissions by locking in fossil fuel use.

Investment decisions in oil and gas should be aligned with rigorous climate policy targets to ensure a sustainable energy transition. Striking the right balance between investment and divestment in fossil fuels is crucial for a secure and affordable transition to a clean energy future.

(This article first appeared in Business in Vancouver)

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