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Comment on the International Energy Agency (IEA) Net Zero Pathway

This week the International Energy Agency (IEA) has released a landmark report - Net Zero by 2050: A Roadmap for the Global Energy Sector - which, for the first time, lays out the detail behind the required energy transition for a realistic 1.5°C scenario. This is important because the IEA is responsible for the modelling which governments and industry use to inform their energy investment plans. Until now, the IEA has not made available a scenario which meets the full ambition of the Paris Agreement, but it has come under increasing pressure from market participants, including Storebrand, to do so.

Published 21.05.2021 by Lauren Juliff and Henrik Wold Nilsen

IEA scenarios, due to their sector specific granularity in comparison to scenarios available for broader purposes such as the IPCC, also underpin the tools used for company climate strategy assessments, such as the Transition Pathway Initiative (TPI), PACTA and the Climate Action 100+ Benchmark.

We have previously raised concerns about the scenarios behind existing portfolio measurement tools and 'net zero' alignment trajectories. These tools often lack 1.5°C scenarios and use pathways that are reliant on unrealistic technology assumptions. The IIGCC also raised the lack of robust scenarios as a key finding in its recently launched Net Zero Investor Framework. The lack of these scenarios has meant reduced clarity on what the implications of net zero are for industries like oil & gas, but also for the financial sector. The IIGCC noted that the new IEA scenario is expected to become an industry standard for "assessing net zero alignment".

This new IEA NZE2050 pathway shines a light on what is required from governments and the energy industry in order to achieve net zero. Current climate pledges and targets are not ambitious enough, both by governments and the oil and gas majors. The report is mandatory reading for any organisation or investor that seeks to align with a net-zero future.

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