2022年世界能源展望（英）-IEAVIP专享VIP免费

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World Energy

Outlook

2022

The IEA examines the

full spectrum

of energy issues

including oil, gas and

coal supply and

demand, renewable

energy technologies,

electricity markets,

energy efficiency,

access to energy,

demand side

management and

much more. Through

its work, the IEA

advocates policies

that will enhance the

reliability, affordability

and sustainability of

energy in its

31 member countries,

11 association

countries and

beyond.

Please note that this

publication is subject to

specific restrictions that limit

its use and distribution. The

terms and conditions are

available online at

www.iea.org/t&c/

This publication and any

map included herein are

without prejudice to the

status of or sovereignty over

any territory, to the

delimitation of international

frontiers and boundaries and

to the name of any territory,

city or area.

Source: IEA.

International Energy Agency

Website: www.iea.org

IEA member

countries:

Australia

Austria

Belgium

Canada

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Japan

Korea

Lithuania

Luxembourg

Mexico

Netherlands

New Zealand

Norway

Poland

Portugal

Slovak Republic

Spain

Sweden

Switzerland

Republic of Türkiye

United Kingdom

United States

The European

Commission also

participates in the

work of the IEA

IEA association

countries:

INTERNATIONAL ENERGY

AGENCY

Argentina

Brazil

China

Egypt

India

Indonesia

Morocco

Singapore

South Africa

Thailand

Ukraine

IEA. CC BY 4.0.



Foreword 3

Foreword

Today,theworldisinthemidstofthefirsttrulyglobalenergycrisis,withimpactsthatwill

befeltforyearstocome.Russia’sunprovokedinvasionofUkraineinFebruaryhashadfar‐

reachingimpactsontheglobalenergysystem,disruptingsupplyanddemandpatternsand

fracturinglong‐standingtradingrelationships.

Thecrisisisaffectingallcountries,butattheInternationalEnergyAgency(IEA),weare

particularlyconcernedabouttheeffectitishavingonthepeoplewhocanleastaffordit.One

ofthestrikingfindingsinthisyear’sWorldEnergyOutlook(WEO)isthatthecombinationof

theCovidpandemicandthecurrentenergycrisismeansthat70millionpeoplewhorecently

gainedaccesstoelectricitywilllikelylosetheabilitytoaffordthataccess–and100million

peoplemaynolongerbeabletocookwithcleanfuels,returningtounhealthyandunsafe

meansofcooking.Thatisaglobaltragedy.Anditisnotonlyanenergycrisiswithwhichwe

aredealing:manycountriesalsofaceafoodsecuritycrisisandincreasinglyvisibleimpactsof

climatechange.

Astheworldfacesthisunprecedentedenergyshockandtheotheroverlappingcrises,we

needtobeclearonhowwegothereandwhereweneedtogo.TheanalysisinthisOutlook

isparticularlyimportanttoshedlightonthesequestionsandtodispelsomeofthemistaken

andmisleadingideasthathavearisenaboutthisenergycrisis.

Forexample,thereisamistakenideathatthisissomehowacleanenergycrisis.Thatissimply

nottrue.Theworldisstrugglingwithtoolittlecleanenergy,nottoomuch.Fasterclean

energytransitionswouldhavehelpedtomoderatetheimpactofthiscrisis,andthey

representthebestwayoutofit.Whenpeoplemisleadinglyblameclimateandcleanenergy

fortoday’scrisis,whattheyaredoing–whethertheymeantoornot–isshiftingattention

awayfromtherealcause:Russia’sinvasionofUkraine.

Anothermistakenideaisthattoday’scrisisisahugesetbackforeffortstotackleclimate

change.TheanalysisinthisOutlookshowsthat,infact,thiscanbeahistoricturningpoint

towardsacleanerandmoresecureenergysystemthankstotheunprecedentedresponse

fromgovernmentsaroundtheworld,includingtheInflationReductionActintheUnited

States,theFitfor55packageandREPowerEUintheEuropeanUnion,Japan’sGreen

Transformation(GX)programme,Korea’saimtoincreasetheshareofnuclearand

renewablesinitsenergymix,andambitiouscleanenergytargetsinChinaandIndia.

Atthesametime,Iamworriedthattoday’smajorglobalenergyandclimatechallenges

increasetheriskofgeopoliticalfracturesandnewinternationaldividinglines–especially

betweenadvancedeconomiesandmanyemerginganddevelopingeconomies.Unityand

solidarityneedtobethehallmarksofourresponsetotoday’scrisis.Thatisthecasefor

Europeduringwhatpromisetobetoughwintersnotonlythisyearbutalsonext.Anditis

trueglobally.

ThisWEOunderscoresthatsuccessfulenergytransitionsmustbefairandinclusive,offering

ahelpinghandtothoseinneedandensuringthebenefitsofthenewenergyeconomyare

sharedwidely.Evenascountriesstruggletomanagethebrutalshocksfromthecrisis,the

IEA. CC BY 4.0.

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WorldEnergyOutlook2022TheIEAexaminesthefullspectrumofenergyissuesincludingoil,gasandcoalsupplyanddemand,renewableenergytechnologies,electricitymarkets,energyefficiency,accesstoenergy,demandsidemanagementandmuchmore.Throughitswork,theIEAadvocatespoliciesthatwillenhancethereliability,affordabilityandsustainabilityofenergyinits31membercountries,11associationcountriesandbeyond.Pleasenotethatthispublicationissubjecttospecificrestrictionsthatlimititsuseanddistribution.Thetermsandconditionsareavailableonlineatwww.iea.org/t&c/Thispublicationandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Source:IEA.InternationalEnergyAgencyWebsite:www.iea.orgIEAmembercountries:AustraliaAustriaBelgiumCanadaCzechRepublicDenmarkEstoniaFinlandFranceGermanyGreeceHungaryIrelandItalyJapanKoreaLithuaniaLuxembourgMexicoNetherlandsNewZealandNorwayPolandPortugalSlovakRepublicSpainSwedenSwitzerlandRepublicofTürkiyeUnitedKingdomUnitedStatesTheEuropeanCommissionalsoparticipatesintheworkoftheIEAIEAassociationcountries:INTERNATIONALENERGYAGENCYArgentinaBrazilChinaEgyptIndiaIndonesiaMoroccoSingaporeSouthAfricaThailandUkraineIEA.CCBY4.0.Foreword3ForewordToday,theworldisinthemidstofthefirsttrulyglobalenergycrisis,withimpactsthatwillbefeltforyearstocome.Russia’sunprovokedinvasionofUkraineinFebruaryhashadfar‐reachingimpactsontheglobalenergysystem,disruptingsupplyanddemandpatternsandfracturinglong‐standingtradingrelationships.Thecrisisisaffectingallcountries,butattheInternationalEnergyAgency(IEA),weareparticularlyconcernedabouttheeffectitishavingonthepeoplewhocanleastaffordit.Oneofthestrikingfindingsinthisyear’sWorldEnergyOutlook(WEO)isthatthecombinationoftheCovidpandemicandthecurrentenergycrisismeansthat70millionpeoplewhorecentlygainedaccesstoelectricitywilllikelylosetheabilitytoaffordthataccess–and100millionpeoplemaynolongerbeabletocookwithcleanfuels,returningtounhealthyandunsafemeansofcooking.Thatisaglobaltragedy.Anditisnotonlyanenergycrisiswithwhichwearedealing:manycountriesalsofaceafoodsecuritycrisisandincreasinglyvisibleimpactsofclimatechange.Astheworldfacesthisunprecedentedenergyshockandtheotheroverlappingcrises,weneedtobeclearonhowwegothereandwhereweneedtogo.TheanalysisinthisOutlookisparticularlyimportanttoshedlightonthesequestionsandtodispelsomeofthemistakenandmisleadingideasthathavearisenaboutthisenergycrisis.Forexample,thereisamistakenideathatthisissomehowacleanenergycrisis.Thatissimplynottrue.Theworldisstrugglingwithtoolittlecleanenergy,nottoomuch.Fastercleanenergytransitionswouldhavehelpedtomoderatetheimpactofthiscrisis,andtheyrepresentthebestwayoutofit.Whenpeoplemisleadinglyblameclimateandcleanenergyfortoday’scrisis,whattheyaredoing–whethertheymeantoornot–isshiftingattentionawayfromtherealcause:Russia’sinvasionofUkraine.Anothermistakenideaisthattoday’scrisisisahugesetbackforeffortstotackleclimatechange.TheanalysisinthisOutlookshowsthat,infact,thiscanbeahistoricturningpointtowardsacleanerandmoresecureenergysystemthankstotheunprecedentedresponsefromgovernmentsaroundtheworld,includingtheInflationReductionActintheUnitedStates,theFitfor55packageandREPowerEUintheEuropeanUnion,Japan’sGreenTransformation(GX)programme,Korea’saimtoincreasetheshareofnuclearandrenewablesinitsenergymix,andambitiouscleanenergytargetsinChinaandIndia.Atthesametime,Iamworriedthattoday’smajorglobalenergyandclimatechallengesincreasetheriskofgeopoliticalfracturesandnewinternationaldividinglines–especiallybetweenadvancedeconomiesandmanyemerginganddevelopingeconomies.Unityandsolidarityneedtobethehallmarksofourresponsetotoday’scrisis.ThatisthecaseforEuropeduringwhatpromisetobetoughwintersnotonlythisyearbutalsonext.Anditistrueglobally.ThisWEOunderscoresthatsuccessfulenergytransitionsmustbefairandinclusive,offeringahelpinghandtothoseinneedandensuringthebenefitsofthenewenergyeconomyaresharedwidely.Evenascountriesstruggletomanagethebrutalshocksfromthecrisis,theIEA.CCBY4.0.4InternationalEnergyAgencyWorldEnergyOutlook2022lastthingweshoulddoisturninwardsandawayfromsupportingeachother.Instead,weneedtoworktogethertobuildtrust.TheIEAiscommittedtocontinuingtoplayacentralroleinthisbyhelpinggovernmentstodefinetheactionsthatareneededtoenabletheworldtoconfrontoursharedenergyandclimatechallengestogether.Inthis,weareguidedbytheIEA’sworldclassenergymodellingandanalysis–underpinnedbyunparalleleddata–thatisexemplifiedbytheWorldEnergyOutlook.Forthis,IwouldliketowarmlythanktheexcellentIEAteamthathasworkedskilfullyandtirelesslyundertheoutstandingleadershipofmycolleaguesLauraCozziandTimGouldtoproduceanotheressentialandtimelyOutlookthatIhopewillhelpdecision‐makersgloballytonavigatethecurrentcrisisandmovetheworldtowardsamoresecureandsustainablefuture.DrFatihBirolExecutiveDirectorInternationalEnergyAgencyIEA.CCBY4.0.Acknowledgements5AcknowledgementsThisstudywaspreparedbytheWorldEnergyOutlook(WEO)teamintheDirectorateofSustainability,TechnologyandOutlooks(STO)inco‐operationwithotherdirectoratesandofficesoftheInternationalEnergyAgency(IEA).ThestudywasdesignedanddirectedbyLauraCozzi,ChiefEnergyModellerandHeadofDivisionforEnergyDemandOutlook,andTimGould,ChiefEnergyEconomistandHeadofDivisionforEnergySupplyandInvestmentOutlooks.ThemodellingandanalyticalteamsforthisWEO‐2022wereledbyStéphanieBouckaert(demand),JonathanCoppel(investmentandfinance),ChristopheMcGlade(supply),ThomasSpencer(climateandenvironment),BrentWanner(power)andDanielWetzel(sustainabletransitions).KeycontributionsfromacrosstheWEOteamwerefrom:OskarasAlšauskas(transport),LucilaArboleyaSarazola(investmentandfinance),YasmineArsalane(leadoneconomicoutlook,power),BlandineBarreau(recoveryplan),SimonBennett(co‐leadonhydrogen,energytechnologies),CharlèneBisch(datamanagement),JustinaBodláková(employment),OliviaChen(employment),YunyouChen(power),DanielCrow(leadonbehaviour,airpollution),DavideD'Ambrosio(leadondatascience,power),AmritaDasgupta(criticalminerals),TanguyDeBienassis(investmentandfinance),TomásdeOliveiraBredariol(leadoncoal,methane),MichaelDrtil(powerandelectricitynetworks),DarlainEdeme(Africa),MusaErdogan(fossilfuelsubsidies,datamanagement),EricFabozzi(powerandelectricitynetworks),VíctorGarcíaTapia(datascience,buildings),PabloGonzález(investmentandfinance),TimothyGoodson(leadonbuildings),EmmaGordon(investmentandfinance),JérômeHilaire(leadonoilandgassupplymodelling),PaulHugues(leadonindustry),JacobHyppoliteII(energyaccess),BrunoIdini(transport),GeorgeKamiya(energytechnologies,digitalisation),HyejiKim(transport),Tae‐YoonKim(leadonenergysecurityandcriticalminerals),MartinKueppers(industry),TobiasLechtenbohmer(industry),LauraMaiolo(oilandgassupply),OrlaMcAlinden(behaviour),YannickMonschauer(affordability),ToruMuta(leadonfossilfuelsubsidies),PawełOlejarnik(supplymodelling),DianaPerezSanchez(industry),ApostolosPetropoulos(leadontransport),MariachiaraPolisena(power),RyszardPospiech(leadoncoalsupplymodelling,datamanagement),ArthurRogé(buildings),MaxSchoenfisch(power),RebeccaSchulz(oilandgassupply),LeonieStaas(buildings,behaviour),GianlucaTonolo(leadonenergyaccess),WonjikYang(datavisualisation)andPeterZeniewski(leadongas).OthercontributionswerefromNiccolòHurstandCarloStarace.MarinaDosSantosandEleniTsoukalaprovidedessentialsupport.EdmundHoskercarriededitorialresponsibility.DebraJustuswasthecopy‐editor.ColleaguesfromtheEnergyTechnologyPolicy(ETP)DivisionledbyHeadofDivisionTimurGülco‐leadonmodellingandanalysis,withoverallguidancefromAraceliFernandezPalesandUweRemme.PeterLevi,TiffanyVass,AlexandreGouy,LeonardoCollinaandFaidonPapadimouliscontributedtotheanalysisonindustry.IEA.CCBY4.0.6InternationalEnergyAgencyWorldEnergyOutlook2022JacobTeter,LeonardoPaoli,ElizabethConnellyandEktaBibracontributedtotheanalysisontransport.ChiaraDelmastroandMartinHusekcontributedtotheanalysisonbuildings.StavroulaEvangelopoulou,FrancescoPavan,AmaliaPizarroandAmarBhardwajcontributedtotheanalysisonhydrogen.PraveenBainscontributedtotheanalysisonbiofuels.MathildeHuismanscontributedtodatascience.OtherkeycontributorsfromacrosstheIEAwere:AliAl‐Saffar,HeymiBahar,ChiaraD'Adamo,CarlosFernándezAlvarez,DavidFischer,InhoiHeo,JinsunLim,LucaLoRe,RebeccaMcKimm,JeremyMoorhouse,KristinePetrosyan,GabrielSaiveandTalyaVatman.ValuablecommentsandfeedbackwereprovidedbyotherseniormanagementandnumerousothercolleagueswithintheIEA.Inparticular,MaryWarlick,KeisukeSadamori,NickJohnstone,AmosBromhead,TorilBosoni,JoelCouse,PaoloFrankl,BrianMotherway,AadVanBohemen,RebeccaGaghen,AnFengquan,SaraMoarif,HiroSakaguchiandJacobMessing.ThanksgototheIEA’sCommunicationsandDigitalOfficefortheirhelpinproducingthereportandwebsitematerials,particularlytoJadMouawad,FabienBarau,CurtisBrainard,AdrienChorlet,JonCuster,ClaireDehouck,AstridDumond,TanyaDyhin,MerveErdem,GraceGordon,BarbaraMoure,JethroMullen,IsabelleNonain‐Semelin,JuliePuech,ClaraVallois,GregoryViscusiandThereseWalsh.IvoLetraandBenMcCullochprovidedessentialsupporttotheproductionprocess.IEA’sOfficeoftheLegalCounsel,OfficeofManagementandAdministrationandEnergyDataCentreprovidedassistancethroughoutthepreparationofthereport.Valuableinputtotheanalysiswasprovidedby:DavidWilkinson(independentconsultant).ValuableinputtothemodellingonairpollutionandassociatedhealthimpactswasprovidedbyPeterRafaj,GregorKiesewetter,WolfgangSchöpp,ChrisHeyes,PallavPurohit,LauraWarnecke,AdrianaGomez‐SanabriaandZbigniewKlimont(InternationalInstituteforAppliedSystemsAnalysis).ValuableinputtothemodellingandanalysisofgreenhousegasemissionsfromlanduseandbioenergyproductionwasprovidedbyNicklasForsell,AndreyLessa‐Derci‐Augustynczik,PekkaLauri,MykolaGusti,ZuelcladyAraujoGutierrezandPetrHavlík(InternationalInstituteforAppliedSystemsAnalysis).Theworkcouldnothavebeenachievedwithoutthesupportandco‐operationprovidedbymanygovernmentbodies,organisationsandcompaniesworldwide,notably:Enel;Eni;EuropeanUnion(GlobalPublicGoodsandChallengesProgramme);HitachiEnergy;Iberdrola;JupiterIntelligence;MinistryofEconomy,TradeandIndustry,Japan;MinistryofEconomicAffairsandClimatePolicy,theNetherlands;TheResearchInstituteofInnovativeTechnologyfortheEarth,Japan;Shell;SwissFederalOfficeofEnergy;andToshiba.TheIEACleanEnergyTransitionsProgramme(CETP),particularlythroughthecontributionsoftheAgenceFrançaisedeDéveloppement,Italy,Japan,theNetherlands,SwedenandtheUnitedKingdomsupportedthisanalysis.ThanksalsogototheIEAEnergyBusinessCouncil,IEACoalIndustryAdvisoryBoard,IEAEnergyEfficiencyIndustryAdvisoryBoardandtheIEARenewableIndustryAdvisoryBoard.IEA.CCBY4.0.Acknowledgements7PeerreviewersManyseniorgovernmentofficialsandinternationalexpertsprovidedinputandreviewedpreliminarydraftsofthereport.Theircommentsandsuggestionswereofgreatvalue.Theyinclude:KeigoAkimotoResearchInstituteofInnovativeTechnologyfortheEarth,JapanVenkatachalamAnbumozhiEconomicResearchInstituteforASEANandEastAsia(ERIA)DougArentNationalRenewableEnergyLaboratory(NREL),UnitedStatesNeilAtkinsonIndependentconsultantAndreyAugustynszikInternationalInstituteforAppliedSystemsAnalysis(IIASA)PeterBachDanishEnergyAgencyShanBaoguoStateGridEnergyResearchInstitute,ChinaManuelBaritaudEuropeanInvestmentBankPaulBaruyaWorldCoalAssociationTomBastinUKDepartmentforBusiness,EnergyandIndustrialStrategy(BEIS)HarmeetBawaHitachiEnergyLeeBeckCleanAirTaskForceChristianBessonIndependentconsultantSamaBilbaoyLeonWorldNuclearAssociationJorgeBlazquezBPJasonBordoffColumbiaUniversity,UnitedStatesMickBuffierGlencoreNickButlerKing’sCollegeLondonBenCahillCenterforStrategicandInternationalStudies(CSIS),UnitedStatesDianeCameronNuclearEnergyAgencyKimballChenGlobalLPGPartnershipDrewClarkeAustralianEnergyMarketOperatorRebeccaCollyerEuropeanClimateFoundationRussellConklinUSDepartmentofEnergyAnne‐SophieCorbeauColumbiaUniversityIanCronshawIndependentconsultantHelenCurrieConocoPhillipsFrancoisDassaEDFRalfDickelOxfordInstituteforEnergyStudies,UnitedKingdomGilesDicksonWindEuropeZuzanaDobrotkovaWorldBankLynetteDrayUniversityCollegeLondonCodyFinkeBrimstoneEnergyNikkiFisherThungelaIEA.CCBY4.0.8InternationalEnergyAgencyWorldEnergyOutlook2022JustinFloodDeltaElectricityNicklasForsellIIASADavidFritschUSEnergyInformationAdministrationHiroyukiFukuiToyotaMikeFulwoodNexantDavidG.HawkinsNaturalResourcesDefenseCouncil(NRDC)DolfGielenInternationalRenewableEnergyAgency(IRENA)AndriiGritsevskyiInternationalAtomicEnergyAgency(IAEA)MichaelHackethalMinistryforEconomicAffairsandIndustry,GermanyYuyaHasegawaMinistryofEconomy,TradeandIndustry,JapanSaraHastings‐SimonUniversityofCalgaryColinHendersonCleanCoalCentreJamesHendersonOxfordInstituteforEnergyStudies,UnitedKingdomMasazumiHironoTokyoGasTakashiHongoMitsuiGlobalStrategicStudiesInstitute,JapanJan‐HeinJesseJOSCOEnergyFinanceandStrategyConsultancySohbetKarbuzMediterraneanObservatoryforEnergyRafaelKaweckiSiemensEnergyMichaelKellyWorldLPGAssociationNobuyukiKikuchiMinistryofForeignAffairs,JapanKenKoyamaInstituteofEnergyEconomics,JapanJimKraneBakerInstituteforPublicPolicyAtsuhitoKurozumiKyotoUniversityofForeignStudies,JapanSarahLadislawRockyMountainInstituteFranciscoLaveronIberdrolaJoyceLeeGlobalWindEnergyCouncilLeeLevkowitzBHPLiJiangtaoStateGridEnergyResearchInstitute,ChinaLiuXiaoliEnergyResearchInstitute,NationalDevelopmentandReformCommission,ChinaPierre‐LaurentLucilleEngieMalteMeinshausenUniversityofMelbourne,AustraliaAntonioMerinoGarciaRepsolMichelleMichotFossBakerInstituteforPublicPolicyCristobalMillerDepartmentofNaturalResources,CanadaVincentMinierSchneiderElectricTatianaMitrovaSIPACenteronGlobalEnergyPolicySimoneMoriENELPeterMorrisMineralsCouncilofAustraliaSteveNadelAmericanCouncilforanEnergy‐EfficientEconomy,UnitedStatesIEA.CCBY4.0.Acknowledgements9JanPetterNoreNoradAndiNoviantoCoordinatingMinistryforEconomicAffairs,IndonesiaStefanNowakTechnologyCollaborationProgrammeonPhotovoltaicPowerThomasNowakEuropeanHeatPumpAssociationKentaroOePermanentDelegationofJapantotheOECDPakYongdukKoreaEnergyEconomicsInstituteIgnacioPerezArriagaComillasPontificalUniversity'sInstituteforResearchinTechnology,SpainStephaniePfeiferInstitutionalInvestorsGrouponClimateChangeCédricPhilibertFrenchInstituteofInternationalRelations,CentreforEnergy&ClimateElżbietaPiskorzMinistryofClimateandEnvironment,PolandVickiPollardDGforClimateAction,EuropeanCommissionAndrewPurvisWorldSteelJasonRandallDepartmentofNaturalResources,CanadaSethRobertsSaudiAramcoTonyRookeGlasgowFinancialAllianceforNetZeroAprilRossExxonMobilYaminaSahebOpenEXP,IPCCauthorJuanBautistaSánchez‐PeñuelaLejarragaPermanentRepresentationofSpaintotheEuropeanUnionHans‐WilhelmSchifferWorldEnergyCouncilSandroSchmidtPolarGeologyFederalInstituteforGeosciencesandNaturalResources,GermanyRobertSchwiersChevronAdnanShihabEldinIndependentexpertJesseScottDeutschesInstitutfürWirtschaftsforschung(GermanInstituteforEconomicResearch)SimonaSerafiniENIMariaSiciliaEnagásPaulSimonsYaleUniversityJimSkeaImperialCollegeLondon,IPCCCo‐ChairWorkingGroupIIIAshleySteelFoodandAgricultureOrganizationoftheUnitedNationsJonathanSternOxfordInstituteforEnergyStudies,UnitedKingdomWimThomasIndependentconsultantNikosTsafosGeneralSecretariatofthePrimeMinisteroftheHellenicRepublicJamesTurnureUSEnergyInformationAdministrationFridtjofFossumUnanderAkerHorizonsNoéVanHulstInternationalPartnershipforHydrogenandFuelCellsintheEconomyDavidVictorUniversityofCalifornia,SanDiego,UnitedStatesIEA.CCBY4.0.10InternationalEnergyAgencyWorldEnergyOutlook2022AndrewWalkerCheniereEnergyPeterWoodShellChristianZinglersenEuropeanUnionAgencyfortheCooperationofEnergyRegulatorsTheworkreflectstheviewsoftheInternationalEnergyAgencySecretariat,butdoesnotnecessarilyreflectthoseofindividualIEAmembercountriesorofanyparticularfunder,supporterorcollaborator.NoneoftheIEAoranyfunder,supporterorcollaboratorthatcontributedtothisworkmakesanyrepresentationorwarranty,expressorimplied,inrespectofthework’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thework.Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Commentsandquestionsarewelcomeandshouldbeaddressedto:LauraCozziandTimGouldDirectorateofSustainability,TechnologyandOutlooksInternationalEnergyAgency9,ruedelaFédération75739ParisCedex15FranceE‐mail:weo@iea.orgMoreinformationabouttheWorldEnergyOutlookisavailableatwww.iea.org/weo.IEA.CCBY4.0.TABLEOFCONTENTSTABLEOFCONTENTSIEA.CCBY4.0.PARTA:OVERVIEWANDCONTEXTOverviewandkeyfindingsSettingthescenePARTB:ROADMAPTONETZEROEMISSIONSAnupdatedroadmaptoNetZeroEmissionsby2050PARTC:KEYENERGYTRENDSEnergysecurityinenergytransitionsOutlookforenergydemandOutlookforelectricityOutlookforliquidfuelsOutlookforgaseousfuelsOutlookforsolidfuels2983121181233277325365409ANNEXES429IEA.CCBY4.0.14WorldEnergyOutlook2022Foreword3Acknowledgements5Executivesummary19PartA:Overviewandcontext27Overviewandkeyfindings291.1Introduction321.2Causesofthecrisisandimmediateconsequences331.2.1Causesofthecrisis331.2.2Immediateconsequences361.3Outlookforenergymarketsandsecurity421.3.1Trendsandvulnerabilitiesacrosstheenergymix441.3.2Isamessytransitionunavoidable?581.4Outlookforenergytransitions631.4.1Selectedcountryandregionaltrends661.4.2Keepingthedoorto1.5°Copen72Settingthescene832.1Introduction862.2Backgroundtotheglobalenergycrisis872.2.1Initialsignsofstrain872.2.2Russia’sinvasionofUkraine882.2.3Economicconsequences922.3Wheredowegofromhere?972.3.1Investmentandtraderesponses972.3.2Policyresponses1022.3.3WorldEnergyOutlook‐2022scenarios1052.4Inputstothescenarios1072.4.1Economicandpopulationassumptions1072.4.2Energy,mineralandcarbonprices1102.4.3Technologycosts115PartB:Roadtonetzeroemissions119AnupdatedroadmaptoNetZeroEmissionsby2050121Introduction124123IEA.CCBY4.0.TableofContents15NetZeroEmissionsScenario1253.1Emissionsandtemperaturetrends1253.2Energytrends1283.3Fuelsupply1333.4Electricitygeneration1363.5Industry1413.6Transport1463.7Buildings150Keythemes1553.8Avoidinggrowthinenergydemand1553.9Whatarethepublicandprivateinvestmentsneededto2030?1633.10Canwerampuplow‐emissionstechnologiesfastenough?1663.11Energyemployment:anopportunityandabottleneckintheNZEScenario175PartC:Keyenergytrends179Energysecurityinenergytransitions181Introduction184Tenessentialsforsecureenergytransitions1864.1Synchronisescalinguparangeofcleanenergytechnologieswithscalingbackoffossilfuels1864.2Tacklethedemandsideandprioritiseenergyefficiency1914.3Reversetheslideintoenergypovertyandgivepoorcommunitiesaliftintothenewenergyeconomy1954.4Collaboratetobringdownthecostofcapitalinemergingmarketanddevelopingeconomies2004.5Managetheretirementandreuseofexistinginfrastructurecarefully,someofitwillbeessentialforasecurejourneytonetzeroemissions2044.6Tacklethespecificrisksfacingproducereconomies2094.7Investinflexibility–anewwatchwordforelectricitysecurity2144.8Ensurediverseandresilientcleanenergysupplychains2174.9Fostertheclimateresilienceofenergyinfrastructure2234.10Providestrategicdirectionandaddressmarketfailures,butdonotdismantlemarkets228Conclusion2324IEA.CCBY4.0.16WorldEnergyOutlook2022Outlookforenergydemand233Introduction236Scenarios2365.1Overview2365.2Energydemand2415.3Emissions2495.4Airpollution2555.5Investment257Keythemes2595.6Energyaccess2595.7Efficientcoolingforawarmingworld2665.8Bringingforwardthepeakinoiluseforroadtransport272Outlookforelectricity277Introduction280Scenarios2816.1Overview2816.2Electricitydemand2836.3Electricitysupply2906.4CO₂emissionsfromelectricitygeneration3036.5Investment305Keythemes3076.6Powersystemflexibilityiskeytoelectricitysecurity3076.7Electricitynetworksarethebackboneofcleanpowersystems3126.8Criticalmineralsunderpinfuturecleanelectricitysystems318Outlookforliquidfuels325Introduction328Scenarios3297.1Overview3297.2Oildemandbyregionandsector3317.3Oilsupply3367.4Oiltrade3417.5Oilinvestment3427.6Liquidbiofuels3437.7Low‐emissionshydrogen‐basedliquidfuels345567IEA.CCBY4.0.TableofContents17Keythemes3477.8Oiluseinplastics3477.9Arenewconventionaloilprojectsananswertotoday’senergycrisis?3527.10Refining:immediateandlongertermchallenges357Outlookforgaseousfuels365Introduction368Scenarios3698.1Overview3698.2Gasdemand3728.3Gassupply3778.4Gastrade3818.5Investment383Keythemes3868.6OutlookfornaturalgasintheEuropeanUnionafterRussia’sinvasionofUkraine3868.7Scalinguphydrogen3958.8IsnaturalgasstillatransitionfuelinemergingmarketanddevelopingeconomiesinAsia?402Outlookforsolidfuels409Introduction411Scenarios4129.1Overview4129.2Coaldemand4149.3Coalsupply4189.4Coaltrade4219.5Coalinvestment4229.6Solidbioenergy423Annexes429AnnexA.Tablesforscenarioprojections431AnnexB.Designofthescenarios463AnnexC.Definitions485AnnexD.References505AnnexE.InputstotheGlobalEnergyandClimateModel51789IEA.CCBY4.0.ExecutiveSummary19ExecutiveSummaryRussia’sinvasionofUkrainehassparkedaglobalenergycrisisTheworldisinthemidstofitsfirstglobalenergycrisis–ashockofunprecedentedbreadthandcomplexity.PressuresinmarketspredatedRussia’sinvasionofUkraine,butRussia’sactionshaveturnedarapideconomicrecoveryfromthepandemic–whichstrainedallmannerofglobalsupplychains,includingenergy–intofull‐blownenergyturmoil.Russiahasbeenbyfartheworld’slargestexporteroffossilfuels,butitscurtailmentsofnaturalgassupplytoEuropeandEuropeansanctionsonimportsofoilandcoalfromRussiaareseveringoneofthemainarteriesofglobalenergytrade.Allfuelsareaffected,butgasmarketsaretheepicentreasRussiaseeksleveragebyexposingconsumerstohigherenergybillsandsupplyshortages.Pricesforspotpurchasesofnaturalgashavereachedlevelsneverseenbefore,regularlyexceedingtheequivalentofUSD250forabarrelofoil.Coalpriceshavealsohitrecordlevels,whileoilrosewellaboveUSD100perbarrelinmid‐2022beforefallingback.Highgasandcoalpricesaccountfor90%oftheupwardpressureonelectricitycostsaroundtheworld.TooffsetshortfallsinRussiangassupply,Europeissettoimportanextra50billioncubicmetres(bcm)ofliquefiednaturalgas(LNG)in2022comparedwiththepreviousyear.ThishasbeeneasedbylowerdemandfromChina,wheregasusewasheldbackbylockdownsandsubduedeconomicgrowth,buthigherEuropeanLNGdemandhasdivertedgasawayfromotherimportersinAsia.Thecrisishasstokedinflationarypressuresandcreatedaloomingriskofrecession,aswellasahugeUSD2trillionwindfallforfossilfuelproducersabovetheir2021netincome.Higherenergypricesarealsoincreasingfoodinsecurityinmanydevelopingeconomies,withtheheaviestburdenfallingonpoorerhouseholdswherealargershareofincomeisspentonenergyandfood.Some75millionpeoplewhorecentlygainedaccesstoelectricityarelikelytolosetheabilitytopayforit,meaningthatforthefirsttimesincewestartedtrackingit,thetotalnumberofpeopleworldwidewithoutelectricityaccesshasstartedtorise.Andalmost100millionpeoplemaybepushedbackintorelianceonfirewoodforcookinginsteadofcleaner,healthiersolutions.Facedwithenergyshortfallsandhighprices,governmentshavesofarcommittedwelloverUSD500billion,mainlyinadvancedeconomies,toshieldconsumersfromtheimmediateimpacts.Theyhaverushedtotryandsecurealternativefuelsuppliesandensureadequategasstorage.Othershort‐termactionshaveincludedincreasingoil‐andcoal‐firedelectricitygeneration,extendingthelifetimesofsomenuclearpowerplants,andacceleratingtheflowofnewrenewablesprojects.Demand‐sidemeasureshavegenerallyreceivedlessattention,butgreaterefficiencyisanessentialpartoftheshort‐andlonger‐termresponse.Isthecrisisaboost,orasetback,forenergytransitions?Withenergymarketsremainingextremelyvulnerable,today’senergyshockisareminderofthefragilityandunsustainabilityofourcurrentenergysystem.Akeyquestionforpolicymakers,andforthisOutlook,iswhetherthecrisiswillbeasetbackforcleanenergytransitionsorwillcatalysefasteraction.ClimatepoliciesandnetzerocommitmentswereIEA.CCBY4.0.20InternationalEnergyAgencyWorldEnergyOutlook2022blamedinsomequartersforcontributingtotherun‐upinenergyprices,butthereisscantevidenceforthis.Inthemostaffectedregions,highersharesofrenewableswerecorrelatedwithlowerelectricityprices,andmoreefficienthomesandelectrifiedheathaveprovidedanimportantbufferforsome–butfarfromenough–consumers.Timesofcrisisputthespotlightongovernments,andonhowtheyreact.Alongsideshort‐termmeasures,manygovernmentsarenowtakinglonger‐termsteps:someseekingtoincreaseordiversifyoilandgassupply;manylookingtoacceleratestructuralchange.ThethreescenariosexploredinthisWorldEnergyOutlook(WEO)aredifferentiatedprimarilybytheassumptionsmadeongovernmentpolicies.TheStatedPoliciesScenario(STEPS)showsthetrajectoryimpliedbytoday’spolicysettings.TheAnnouncedPledgesScenario(APS)assumesthatallaspirationaltargetsannouncedbygovernmentsaremetontimeandinfull,includingtheirlong‐termnetzeroandenergyaccessgoals.TheNetZeroEmissionsby2050(NZE)Scenariomapsoutawaytoachievea1.5°Cstabilisationintheriseinglobalaveragetemperatures,alongsideuniversalaccesstomodernenergyby2030.Policyresponsesarefast‐trackingtheemergenceofacleanenergyeconomyNewpoliciesinmajorenergymarketshelppropelannualcleanenergyinvestmenttomorethanUSD2trillionby2030intheSTEPS,ariseofmorethan50%fromtoday.Cleanenergybecomesahugeopportunityforgrowthandjobs,andamajorarenaforinternationaleconomiccompetition.By2030,thanksinlargeparttotheUSInflationReductionAct,annualsolarandwindcapacityadditionsintheUnitedStatesgrowtwo‐and‐a‐half‐timesovertoday’slevels,whileelectriccarsalesareseventimeslarger.Newtargetscontinuetospurthemassivebuild‐outofcleanenergyinChina,meaningthatitscoalandoilconsumptionbothpeakbeforetheendofthisdecade.FasterdeploymentofrenewablesandefficiencyimprovementsintheEuropeanUnionbringdownEUnaturalgasandoildemandby20%thisdecade,andcoaldemandby50%,apushgivenadditionalurgencybytheneedtofindnewsourcesofeconomicandindustrialadvantagebeyondRussiangas.Japan’sGreenTransformation(GX)programmeprovidesamajorfundingboostfortechnologiesincludingnuclear,low‐emissionshydrogenandammonia,whileKoreaisalsolookingtoincreasetheshareofnuclearandrenewablesinitsenergymix.Indiamakesfurtherprogresstowardsitsdomesticrenewablecapacitytargetof500gigawatts(GW)in2030,andrenewablesmeetnearlytwo‐thirdsofthecountry’srapidlyrisingdemandforelectricity.Asmarketsrebalance,renewables,supportedbynuclearpower,seesustainedgains;theupsideforcoalfromtoday’scrisisistemporary.Theincreaseinrenewableelectricitygenerationissufficientlyfasttooutpacegrowthintotalelectricitygeneration,drivingdownthecontributionoffossilfuelsforpower.Thecrisisbrieflypushesuputilisationratesforexistingcoal‐firedassets,butdoesnotbringhigherinvestmentinnewones.Strengthenedpolicies,asubduedeconomicoutlookandhighnear‐termpricescombinetomoderateoverallenergydemandgrowth.IncreasescomeprimarilyfromIndia,SoutheastAsia,AfricaandtheMiddleEast.However,theriseinChina’senergyuse,whichhasbeensuchanimportantdriverforglobalenergytrendsoverthepasttwodecades,slowsandthenhaltsaltogetherbefore2030asChinashiftstoamoreservices‐orientatedeconomy.IEA.CCBY4.0.ExecutiveSummary21Internationalenergytradeundergoesaprofoundreorientationinthe2020sascountriesadjusttotheruptureofRussia‐Europeflows,whichisassumedtobepermanent.NotallRussianflowsdisplacedfromEuropefindanewhomeinothermarkets,bringingdownRussianproductionandglobalsupply.Crudeoilandproductmarkets,especiallydiesel,faceaturbulentperiodasEUbansonRussianimportskickin.Naturalgastakeslongertoadjust.TheupcomingnorthernhemispherewinterpromisestobeaperilousmomentforgasmarketsandatestingtimeforEUsolidarity–andthewinterof2023‐24couldbeeventougher.MajornewadditionstoLNGsupply–mainlyfromNorthAmerica,QatarandAfrica–arriveonlyaroundthemid‐2020s.CompetitionforavailablecargoesisfierceinthemeantimeasChineseimportdemandpicksupagain.Today’sstrongerpolicysettingsbringafossilfuelpeakintoviewForthefirsttime,aWEOscenariobasedonprevailingpolicysettingshasglobaldemandforeachofthefossilfuelsexhibitingapeakorplateau.IntheSTEPS,coalusefallsbackwithinthenextfewyears,naturalgasdemandreachesaplateaubytheendofthedecade,andrisingsalesofelectricvehicles(EVs)meanthatoildemandlevelsoffinthemid‐2030sbeforeebbingslightlytomid‐century.Totaldemandforfossilfuelsdeclinessteadilyfromthemid‐2020sbyaround2exajoulesperyearonaverageto2050,anannualreductionroughlyequivalenttothelifetimeoutputofalargeoilfield.GlobalfossilfuelusehasrisenalongsideGDPsincethestartoftheIndustrialRevolutioninthe18thcentury:puttingthisriseintoreversewhilecontinuingtoexpandtheglobaleconomywillbeapivotalmomentinenergyhistory.Theshareoffossilfuelsintheglobalenergymixhasbeenstubbornlyhigh,ataround80%,fordecades.By2030intheSTEPS,thissharefallsbelow75%,andtojustabove60%by2050.Ahighpointforglobalenergy‐relatedCO2emissionsisreachedintheSTEPSin2025,at37billiontonnes(Gt)peryear,andtheyfallbackto32Gtby2050.Thiswouldbeassociatedwithariseofaround2.5°Cinglobalaveragetemperaturesby2100.Thisisabetteroutcomethanprojectedafewyearsago:renewedpolicymomentumandtechnologygainsmadesince2015haveshavedaround1°Coffthelong‐termtemperaturerise.However,areductionofonly13%inannualCO2emissionsto2050intheSTEPSisfarfromenoughtoavoidsevereimpactsfromachangingclimate.Fullachievementofallclimatepledgeswouldmovetheworldtowardssaferground,butthereisstillalargegapbetweentoday’sambitionsanda1.5°Cstabilisation.IntheAPS,anear‐termpeakinannualemissionsisfollowedbyafasterdeclineto12Gtby2050.ThisisabiggerreductionthanintheWEO‐2021APS,reflectingtheadditionalpledgesthathavebeenmadeoverthepastyear,notablybyIndiaandIndonesia.Ifimplementedontimeandinfull,theseadditionalnationalcommitments–aswellassectoralcommitmentsforspecificindustriesandcompanytargets(consideredforthefirsttimeinthisyear’sAPS)–keepthetemperatureriseintheAPSin2100ataround1.7°C.However,itiseasiertomakepledgesthantoimplementthemand,eveniftheyareachieved,thereisstillconsiderablyfurthertogotoalignwiththeNZEScenario,whichachievesthe1.5°Coutcomebyreducingannualemissionsto23Gtby2030andtonetzeroby2050.IEA.CCBY4.0.22InternationalEnergyAgencyWorldEnergyOutlook2022Ledbycleanelectricity,somesectorsarepoisedforafastertransformationTheworldisinacriticaldecadefordeliveringamoresecure,sustainableandaffordableenergysystem–thepotentialforfasterprogressisenormousifstrongactionistakenimmediately.Investmentsincleanelectricityandelectrification,alongwithexpandedandmodernisedgrids,offerclearandcost‐effectiveopportunitiestocutemissionsmorerapidlywhilebringingelectricitycostsdownfromtheircurrenthighs.Today’sgrowthratesfordeploymentofsolarPV,wind,EVsandbatteries,ifmaintained,wouldleadtoamuchfastertransformationthanprojectedintheSTEPS,althoughthiswouldrequiresupportivepoliciesnotjustintheleadingmarketsforthesetechnologiesbutacrosstheworld.By2030,ifcountriesdeliverontheirclimatepledges,everysecondcarsoldintheEuropeanUnion,ChinaandtheUnitedStatesiselectric.Supplychainsforsomekeytechnologies–includingbatteries,solarPVandelectrolysers–areexpandingatratesthatsupporthigherglobalambition.IfallannouncedmanufacturingexpansionplansforsolarPVseethelightofday,manufacturingcapacitywouldexceedthedeploymentlevelsintheAPSin2030byaround75%andapproachthelevelsrequiredintheNZEScenario.Inthecaseofelectrolysersforhydrogenproduction,thepotentialexcesscapacityofallannouncedprojectsrelativetoAPSdeploymentin2030isaround50%.IntheEVsector,theexpansionofbatterymanufacturingcapacityreflectstheshiftunderwayintheautomotiveindustry,whichattimeshasmovedfasterthangovernmentsinsettingtargetsforelectrifiedmobility.Thesecleanenergysupplychainsareahugesourceofemploymentgrowth,withcleanenergyjobsalreadyexceedingthoseinfossilfuelsworldwideandprojectedtogrowfromaround33milliontodaytoalmost55millionin2030intheAPS.EfficiencyandcleanfuelsgetacompetitiveboostToday’shighenergypricesunderscorethebenefitsofgreaterenergyefficiencyandarepromptingbehaviouralandtechnologychangesinsomecountriestoreduceenergyuse.Efficiencymeasurescanhavedramaticeffects–today’slightbulbsareatleastfourtimesmoreefficientthanthoseonsaletwodecadesago–butmuchmoreremainstobedone.Demandforcoolingneedstobeaparticularlyfocusforpolicymakers,asitmakesthesecond‐largestcontributiontotheoverallriseinglobalelectricitydemandoverthecomingdecades(afterEVs).Manyairconditionersusedtodayaresubjectonlytoweakefficiencystandardsandone‐fifthofelectricitydemandforcoolinginemerginganddevelopingeconomiesisnotcoveredbyanystandardsatall.IntheSTEPS,coolingdemandinemerginganddevelopingeconomiesrisesby2800terawatt‐hoursto2050,whichistheequivalentofaddinganotherEuropeanUniontotoday’sglobalelectricitydemand.ThisgrowthisreducedbyhalfintheAPSbecauseoftighterefficiencystandardsandbetterbuildingdesignandinsulation–andbyhalfagainintheNZEScenario.Concernsaboutfuelprices,energysecurityandemissions–bolsteredbystrongerpolicysupport–arebrighteningtheprospectsformanylow‐emissionsfuels.Investmentinlow‐emissionsgasesissettorisesharplyinthecomingyears.IntheAPS,globallow‐emissionshydrogenproductionrisesfromverylowlevelstodaytoreachover30milliontonnes(Mt)IEA.CCBY4.0.ExecutiveSummary23peryearin2030,equivalenttoover100bcmofnaturalgas(althoughnotalllow‐emissionshydrogenwouldreplacenaturalgas).Muchofthisisproducedclosetothepointofuse,butthereisgrowingmomentumbehindinternationaltradeinhydrogenandhydrogen‐basedfuels.Projectsrepresentingapotential12Mtofexportcapacityareinvariousstagesofplanning,althoughthesearemorenumerousandmoreadvancedthancorrespondingprojectstounderpinimportinfrastructureanddemand.Carboncapture,utilisationandstorageprojectsarealsoadvancingmorerapidlythanbefore,spurredbygreaterpolicysupporttoaidindustrialdecarbonisation,toproducelow‐orlower‐emissionsfuels,andtoallowfordirectaircaptureprojectsthatremovecarbonfromtheatmosphere.ButrapidtransitionsultimatelydependoninvestmentAhugeincreaseinenergyinvestmentisessentialtoreducetherisksoffuturepricespikesandvolatility,andtogetontrackfornetzeroemissionsby2050.FromUSD1.3trilliontoday,cleanenergyinvestmentrisesaboveUSD2trillionby2030intheSTEPS,butitwouldhavetobeaboveUSD4trillionbythesamedateintheNZEScenario,highlightingtheneedtoattractnewinvestorstotheenergysector.Governmentsshouldtaketheleadandprovidestrongstrategicdirection,buttheinvestmentsrequiredarefarbeyondthereachesofpublicfinance.Itisvitaltoharnessthevastresourcesofmarketsandincentiviseprivateactorstoplaytheirpart.Today,foreveryUSD1spentgloballyonfossilfuels,USD1.5isspentoncleanenergytechnologies.By2030,intheNZEScenario,everyUSD1spentonfossilfuelsisoutmatchedbyUSD5oncleanenergysupplyandanotherUSD4onefficiencyandend‐uses.Shortfallsincleanenergyinvestmentarelargestinemerginganddevelopingeconomies,aworryingsignalgiventheirrapidprojectedgrowthindemandforenergyservices.IfChinaisexcluded,thentheamountbeinginvestedincleanenergyeachyearinemerginganddevelopingeconomieshasremainedflatsincetheParisAgreementwasconcludedin2015.ThecostofcapitalforasolarPVplantin2021inkeyemergingeconomieswasbetweentwo‐andthree‐timeshigherthaninadvancedeconomiesandChina.Today’srisingborrowingcostscouldexacerbatethefinancingchallengesfacingsuchprojects,despitetheirfavourableunderlyingcosts.Arenewedinternationaleffortisneededtostepupclimatefinanceandtacklethevariouseconomy‐wideorproject‐specificrisksthatdeterinvestors.ThereisimmensevalueinbroadnationaltransitionstrategiessuchastheJustEnergyTransitionPartnershipswithIndonesia,SouthAfricaandothercountries,thatintegrateinternationalsupportandambitiousnationalpolicyactionswhilealsoprovidingsafeguardsforenergysecurityandthesocialconsequencesofchange.Thespeedatwhichinvestorsreacttobroadandcredibletransitionframeworksdependsinpracticeonahostofmoregranularissues.Supplychainsarefragile,andinfrastructureandskilledlabourarenotalwaysavailable.Permittingprovisionsanddeadlinesareoftencomplexandtime‐consuming.Clearproceduresforprojectapproval,supportedbyadequateadministrativecapacity,arevitaltoacceleratetheflowofviable,investableprojects–bothforcleanenergysupplyaswellasforefficiencyandelectrification.Ouranalysisfindsthatpermittingandconstructionofasingleoverheadelectricitytransmissionlinecantakeupto13years,withsomeofthelongestleadtimesinadvancedeconomies.DevelopingnewIEA.CCBY4.0.24InternationalEnergyAgencyWorldEnergyOutlook2022depositsofcriticalmineralshashistoricallytakenover16yearsonaverage,with12yearsspentliningupallaspectsofpermittingandfinancingand4‐5yearsforconstruction.Whatiftransitionsdon’tpickup?IfcleanenergyinvestmentdoesnotaccelerateasintheNZEScenariothenhigherinvestmentinoilandgaswouldbeneededtoavoidfurtherfuelpricevolatility,butthiswouldalsomeanputtingthe1.5°Cgoalinjeopardy.IntheSTEPS,anaverageofalmostUSD650billionperyearisspentonupstreamoilandnaturalgasinvestmentto2030,ariseofmorethan50%comparedwithrecentyears.Thisinvestmentcomeswithrisks,bothcommercialandenvironmental,andcannotbetakenforgranted.Despitehugewindfallsthisyear,someMiddleEastproducersaretheonlypartoftheupstreamindustryinvestingmoretodaythanpriortotheCovid‐19pandemic.Amidconcernsaboutcostinflation,capitaldisciplineratherthanproductiongrowthhasbecomethedefaultsettingfortheUSshaleindustry,meaningthatsomeofthewindhasgonefromthesailsofthemainsourceofrecentglobaloilandgasgrowth.ImmediateshortfallsinfossilfuelproductionfromRussiawillneedtobereplacedbyproductionelsewhere–eveninaworldworkingtowardsnetzeroemissionsby2050.Themostsuitablenear‐termsubstitutesareprojectswithshortleadtimesthatbringoilandgastomarketquickly,aswellascapturingsomeofthe260bcmofgasthatiswastedeachyearthroughflaringandmethaneleakstotheatmosphere.Butlastingsolutionstotoday’scrisislieinreducingfossilfueldemand.Manyfinancialorganisationshavesetgoalsandplanstoscaledowninvestmentinfossilfuels.Muchmoreemphasisisneededongoalsandplansforscalingupinvestmentincleanenergytransitions,andonwhatgovernmentscandotoincentivisethis.RussialosesoutinthereshufflingofinternationaltradeRussia’sinvasionofUkraineispromptingawholesalereorientationofglobalenergytrade,leavingRussiawithamuch‐diminishedposition.AllRussia’stradetieswithEuropebasedonfossilfuelshadultimatelybeenundercutinourpreviousscenariosbyEurope’snetzeroambitions,butRussia’sabilitytodeliveratrelativelylowcostmeantthatitlostgroundonlygradually.Nowtherupturehascomewithaspeedthatfewimaginedpossible.InthisOutlook,moreRussianresourcesaredrawneastwardstoAsianmarkets,butRussiaisunsuccessfulinfindingmarketsforalloftheflowsthatpreviouslywenttoEurope.In2025,Russia’soilproductionis2millionbarrelsadaylowerthanintheWEO‐2021andgasproductionisdownby200bcm.Longer‐termprospectsareweakenedbyuncertaintiesoverdemand,aswellasrestrictedaccesstointernationalcapitalandtechnologiestodevelopmorechallengingfieldsandLNGprojects.Russianfossilfuelexportsneverreturn–inanyofourscenarios–tothelevelsseenin2021,anditsshareofinternationallytradedoilandgasfallsbyhalfby2030intheSTEPS.Russia’sreorientationtoAsianmarketsisparticularlychallenginginthecaseofnaturalgas,asthemarketopportunityforlarge‐scaleadditionaldeliveriestoChinaislimited.RussiaistargetingnewpipelinelinkstoChina,notablythelarge‐capacityPowerofSiberia‐2pipelineIEA.CCBY4.0.ExecutiveSummary25throughMongolia.However,ourdemandprojectionsforChinaraiseconsiderabledoubtsabouttheviabilityofanotherlarge‐scalegaslinkwithRussia,oncetheexistingPowerofSiberialinerampsuptofullcapacity.IntheSTEPS,China’sgasdemandgrowthslowsto2%peryearbetween2021and2030,comparedwithanaveragegrowthrateof12%peryearsince2010,reflectingapolicypreferenceforrenewablesandelectrificationovergasuseforpowerandheat.Chineseimportershavebeenactivelycontractingfornewlong‐termLNGsupplies,andChinaalreadyhasadequatecontractedsupplytomeetprojecteddemandintheSTEPSuntilwellintothe2030s.Werethe2010sthe“goldenageofgas”?OneoftheeffectsofRussia’sactionsisthattheeraofrapidgrowthinnaturalgasdemanddrawstoaclose.IntheSTEPS,thescenariothatseesthehighestgasconsumption,globaldemandrisesbylessthan5%between2021and2030andthenremainsflatataround4400bcmthroughto2050.Theoutlookforgasisdampenedbyhighernear‐termprices;morerapiddeploymentofheatpumpsandotherefficiencymeasures;higherrenewablesdeploymentandafasteruptakeofotherflexibilityoptionsinthepowersector;and,insomecases,relianceoncoalforslightlylonger.TheInflationReductionActcutsprojectedUSnaturalgasdemandin2030intheSTEPSbymorethan40bcmcomparedwithlastyear’sprojections,freeingupgasforexport.StrongerclimatepoliciesaccelerateEurope’sstructuralshiftawayfromgas.Newsupplybringspricesdownbythemid‐2020s,andLNGbecomesevenmoreimportanttooverallgassecurity.Butmomentumbehindnaturalgasgrowthindevelopingeconomieshasslowed,notablyinSouthandSoutheastAsia,puttingadentinthecredentialsofgasasatransitionfuel.Mostofthedownwardrevisiontogasdemandto2030inthisyear’sSTEPSisduetoafasterswitchtocleanenergy,althougharoundone‐quarterisbecausegaslosesouttocoalandoil.Afocusonaffordable,securetransitionsbasedonresilientsupplychainsAnewenergysecurityparadigmisneededtomaintainreliabilityandaffordabilitywhilereducingemissions.ThisOutlookincludestenprinciplesthatcanhelpguidepolicymakersthroughtheperiodwhendecliningfossilfuelandexpandingcleanenergysystemsco‐exist.Duringenergytransitions,bothsystemsarerequiredtofunctionwellinordertodelivertheenergyservicesneededbyconsumers,evenastheirrespectivecontributionschangeovertime.Maintainingelectricitysecurityintomorrow’spowersystemscallsfornewtools,moreflexibleapproachesandmechanismstoensureadequatecapacities.Powergeneratorswillneedtobemoreresponsive,consumerswillneedtobemoreconnectedandadaptable,andgridinfrastructurewillneedtobestrengthenedanddigitalised.Inclusive,people‐centredapproachesareessentialtoallowvulnerablecommunitiestomanagetheupfrontcostsofcleanertechnologiesandensurethatthebenefitsoftransitionsarefeltwidelyacrosssocieties.Evenastransitionsreducefossilfueluse,therearepartsofthefossilfuelsystemthatremaincriticaltoenergysecurity,suchasgas‐firedpowerforpeakelectricityneeds,orrefineriestosupplyresidualusersoftransportfuels.Unplannedorprematureretirementofthisinfrastructurecouldhavenegativeconsequencesforenergysecurity.IEA.CCBY4.0.26InternationalEnergyAgencyWorldEnergyOutlook2022Astheworldmovesonfromtoday’senergycrisis,itneedstoavoidnewvulnerabilitiesarisingfromhighandvolatilecriticalmineralpricesorhighlyconcentratedcleanenergysupplychains.Ifnotadequatelyaddressed,theseissuescoulddelayenergytransitionsormakethemmorecostly.Demandforcriticalmineralsforcleanenergytechnologiesissettorisesharply,morethandoublingfromtoday’slevelby2030intheAPS.Copperseesthelargestincreaseintermsofabsolutevolumes,butothercriticalmineralsexperiencemuchfasterratesofdemandgrowth,notablysiliconandsilverforsolarPV,rareearthelementsforwindturbinemotorsandlithiumforbatteries.Continuedtechnologyinnovationandrecyclingarevitaloptionstoeasestrainsoncriticalmineralsmarkets.HighrelianceonindividualcountriessuchasChinaforcriticalmineralsuppliesandformanycleantechnologysupplychainsisariskfortransitions,butsotooarediversificationoptionsthatcloseoffthebenefitsoftrade.TheenergycrisispromisestobeahistoricturningpointtowardsacleanerandmoresecureenergysystemEnergymarketsandpolicieshavechangedasaresultofRussia’sinvasionofUkraine,notjustforthetimebeing,butfordecadestocome.Theenvironmentalcaseforcleanenergyneedednoreinforcement,buttheeconomicargumentsinfavourofcost‐competitiveandaffordablecleantechnologiesarenowstronger–andsotooistheenergysecuritycase.Thisalignmentofeconomic,climateandsecurityprioritieshasalreadystartedtomovethedialtowardsabetteroutcomefortheworld’speopleandfortheplanet.Muchmoreremainstobedone,andastheseeffortsgathermomentum,itisessentialtobringeveryoneonboard,especiallyatatimewhengeopoliticalfracturesonenergyandclimateareallthemorevisible.Thismeansredoublingeffortstoensurethatabroadcoalitionofcountrieshasastakeinthenewenergyeconomy.Thejourneytoamoresecureandsustainableenergysystemmaynotbeasmoothone.Buttoday’scrisismakesitcrystalclearwhyweneedtopressahead.IEA.CCBY4.0.PARTAOVERVIEWANDCONTEXTPartAoftheWorldEnergyOutlookprovidesthestartingpointforthisyear’senergyprojectionsandgivesanoverviewofsomeofthekeyfindings.Chapter1exploresthecausesoftoday’sglobalenergycrisisandtheconsequences.Itprovidesprojectionsforenergymarketsandenergysecuritythroughthreescenariosandexamineswhatthoseoutlooksimplyforenergy‐relatedemissionsandachievementoftheworld’ssustainabledevelopmentgoals.Chapter2examinesthevariousforcesthatareimpactingtheenergysectortodayandthepolicyresponses,andassessestheimplicationsforourOutlookin2022.Italsodetailsthebasisofeachofthethreemainscenariosandhowandwhytheydiffer.IEA.CCBY4.0.Chapter1Overviewandkeyfindings29Chapter1OverviewandkeyfindingsGlobalenergycrisis:causesandimplicationsTheglobalenergycrisissparkedbyRussia’sinvasionofUkraineishavingfar‐reachingimplicationsforhouseholds,businessesandentireeconomies,promptingshort‐termresponsesfromgovernmentsaswellasadeeperdebateaboutthewaystoreducetheriskoffuturedisruptionsandpromoteenergysecurity.Thisisaglobalcrisis,butEuropeisthemaintheatreinwhichitisplayingout,andnaturalgasiscentrestage–especiallyduringthecomingnorthernhemispherewinter.Highenergypricesarecausingahugetransferofwealthfromconsumerstoproducers,backtothelevelsseenin2014foroil,butentirelyunprecedentedfornaturalgas.Highfuelpricesaccountfor90%oftheriseintheaveragecostsofelectricitygenerationworldwide,naturalgasaloneformorethan50%.Thecostsofrenewablesandcarbondioxidehaveplayedonlyamarginalrole,underscoringthatthisisacrisiswhereenergytransitionsarethesolution,ratherthantheproblem.Priceandeconomicpressuresmeanthatthenumberofpeoplewithoutaccesstomodernenergyisrisingforthefirsttimeinadecade.Around75millionpeoplewhorecentlygainedaccesstoelectricityarelikelytolosetheabilitytopayforit,and100millionpeoplemayreverttotheuseoftraditionalbiomassforcooking.Thereremainhugeuncertaintiesoverhowthisenergycrisiswillevolveandforhowlongfossilfuelpriceswillremainelevated,andtherisksoffurtherenergydisruptionandgeopoliticalfragmentationarehigh.Inallourscenarios,pricepressuresandadimnear‐termoutlookfortheglobaleconomyfeedthroughintolowerenergydemandthaninlastyear’sOutlook.Thecrisisprovidesashort‐termboosttodemandforoilandcoalasconsumersscrambleforalternativestohighpricedgas.Butthelastinggainsfromthecrisisaccruetolow‐emissionssources,mainlyrenewables,butalsonuclearinsomecases,alongsidefasterprogresswithefficiencyandelectrification,e.g.electricvehicles.IntheStatedPoliciesScenario(STEPS),globalenergydemandgrowthofaround1%peryearto2030ismetinaggregatealmostentirelybyrenewables.Emergingmarketanddevelopingeconomies,suchasIndia,seeincreasesacrossabroaderrangeoffuelsandtechnologies,whiletheonlysourcestoshowgrowthinadvancedeconomiesto2030arelow‐emissions.Thecostadvantagesofmaturecleanenergytechnologiesandtheprospectsfornewones,suchaslow‐emissionshydrogen,areboostedbytheInflationReductionActintheUnitedStates,Europe’sincreasedpushforcleanenergy,andothermajornewpolicies.Theresultistoturbo‐chargetheemergingglobalcleanenergyeconomy.TheSTEPSinthisOutlookisthefirstWorldEnergyOutlook(WEO)scenariobasedonprevailingpolicysettingsthatseesadefinitivepeakinglobaldemandforfossilfuels.SUMMARYIEA.CCBY4.0.30InternationalEnergyAgencyWorldEnergyOutlook2022Coaldemandpeaksinthenextfewyears,naturalgasdemandreachesaplateaubytheendofthedecade,andoildemandreachesahighpointinthemid‐2030sbeforefallingslightly.From80%today–alevelthathasbeenconstantfordecades–theshareoffossilfuelsintheglobalenergymixfallstolessthan75%by2030andtojustabove60%bymid‐century.IntheAnnouncedPledgesScenario(APS),thedrivetomeetclimatepledgesinfullsendsdemandforallthefossilfuelsintodeclineby2030.WiththelossofitslargestexportmarketinEurope,Russiafacestheprospectofamuch‐diminishedroleininternationalenergyaffairs.2021provestobeahigh‐watermarkforRussianexportflows.Itsshareofinternationallytradedgas,whichstoodat30%in2021,fallsto15%by2030intheSTEPSandto10%intheAPS.ImportersinChinahavebeenactivelycontractingforliquefiednaturalgas,andthereisnoroominChina’sprojectedgasbalanceforanotherlarge‐scalepipelinefromRussia.Energy‐relatedCO2emissionsreboundedto36.6Gtin2021,thelargesteverannualriseinemissions.IntheSTEPS,theyreachaplateauaround37Gtbeforefallingslowlyto32Gtin2050,atrajectorythatwouldleadtoa2.5°Criseinglobalaveragetemperaturesby2100.Thisisaround1°ClowerthanimpliedbythebaselinetrajectorypriortotheParisAgreement,indicatingtheprogressthathasbeenmadesincethen.Butmuchmoreneedstobedone.IntheAPS,emissionspeakinthemid‐2020sandfallto12Gtin2050,resultinginaprojectedglobalmediantemperaturerisein2100of1.7°C.IntheNetZeroEmissionsby2050(NZE)Scenario,CO2emissionsfallto23Gtin2030andtozeroin2050,atrajectoryconsistentwithlimitingthetemperatureincreasetolessthan1.5°Cin2100.Plannedincreasesinglobalcleanenergymanufacturingcapacityprovidealeadingindicatorofthepotentialforrapidincreasesindeployment.Inthecaseofheatpumps,currentandplannedmanufacturingcapacityisbelowthedeploymentlevelsprojectedintheAPS.ButannouncedglobalmanufacturingcapacityforelectrolysersandsolarPVmodulesin2030issufficientnotonlytoreachAPSdeploymentlevelsbuttogobeyondthem.Onepointcommontoeachscenarioistherisingshareofelectricityinglobalfinalenergyconsumption.From20%today,thisincreasesineachscenario,reachingmorethan50%bymid‐centuryintheNZEScenario.Thisisassociatedwithahugeoverallincreaseinglobalelectricitydemand–withthebulkofthisgrowthcomingfromemergingmarketanddevelopingeconomies–andtheneedforconstantvigilancefrompolicymakerstoarangeofriskstoelectricitysecurity,inparticulartheeverincreasingneedforflexibleoperationofpowersystems.Theworldhasnotbeeninvestingenoughinenergyinrecentyears,afactthatlefttheenergysystemmuchmorevulnerabletothesortofshocksseenin2022.Asmoothandsecureenergytransitionwillrequireamajoruptickincleanenergyinvestmentflows.GettingontrackfortheNZEScenariowillrequireatriplinginspendingoncleanenergyandinfrastructureto2030,alongsideashifttowardsmuchhigherinvestmentinemergingmarketanddevelopingeconomies.-0.8Dec20Oct20Feb21Apr21Jun21Aug21Oct21Dec21Apr22Jun22Aug22Feb22GasimportersGasexporters202220062008201020122014201620182020240020001600AsianspotLNGEUimportedcoalGermanpowerNorthSeaBrentEuropenaturalgas(TTF)OtherEurasiaAfricaMiddleEastEuropeOtherCentralandSouthAmericaAsiaPaciic202120302040Emissions2050Mediantemperaturerisein210001234°CNetZero5336GtCO212.332Index(1September2020=100)TrillionUSD-0.400.40.8Pre-ParisAgreementAPSNZESTEPSHugetransfersfromconsumerstoproducers:Oilhasbeenexpensivebefore,butthereisnoprecedentfortheimportbillsfornaturalgasin2022.PolicyandtechnologychangessincetheParisAgreementin2015havereducedtheprojectedtemperaturerise,butthere’sstillalongwaytogotocapglobalwarmingat1.5°C.EmissionshavetocomedownAshocktothesystemRussia’sinvasionofUkrainehasledtoaperiodofextraordinaryturbulenceinenergymarkets,especiallyfornaturalgas.32InternationalEnergyAgencyWorldEnergyOutlook20221.1IntroductionEachenergycrisishasechoesofthepast,andtheacutestrainsonmarketstodayaredrawingcomparisonwiththemostsevereenergydisruptionsinmodernenergyhistory,mostnotablytheoilshocksofthe1970s.Then,asnow,therewerestronggeopoliticaldriversfortheriseinprices,whichledtohighinflationandeconomicdamage.Then,asnow,thecrisesbroughttothesurfacesomeunderlyingfragilitiesanddependenciesintheenergysystem.Then,asnow,highpricescreatedstrongeconomicincentivestoact,andthoseincentiveswerereinforcedbyconsiderationsofeconomicandenergysecurity.Buttoday’sglobalenergycrisisissignificantlybroaderandmorecomplexthanthosethatcamebefore.Theshocksinthe1970swereaboutoil,andthetaskfacingpolicymakerswasrelativelyclear(ifnotnecessarilysimpletoimplement):reducedependenceonoil,especiallyoilimports.Bycontrast,theenergycrisistodayhasmultipledimensions:naturalgas,butalsooil,coal,electricity,foodsecurityandclimate.Therefore,thesolutionsaresimilarlyallencompassing.Ultimatelywhatisrequiredisnotjusttodiversifyawayfromasingleenergycommodity,buttochangethenatureoftheenergysystemitself,andtodosowhilemaintainingtheaffordable,secureprovisionofenergyservices.ThisOutlookexploreshowthischangemightplayout,andwhatpitfallsandopportunitiesmaybeencounteredalongtheway.Eachscenarioisbasedonadifferentvisionofhowpolicymakersmightrespondtotoday’scrisis.IntheStatedPoliciesScenario(STEPS),weexplorehowtheenergysystemevolvesifweretaincurrentpolicysettings.Theseincludethelatestpolicymeasuresadoptedbygovernmentsaroundtheworld,suchastheInflationReductionActintheUnitedStates,butdonotassumethataspirationaloreconomy‐widetargetsaremetunlesstheyarebackedupwithdetailonhowtheyaretobeachieved.IntheAnnouncedPledgesScenario(APS),governmentsgetthebenefitofthedoubt.Inthisscenario,theirtargetsareachievedontimeandinfull,whethertheyrelatetoclimatechange,energysystemsornationalpledgesinotherareassuchasenergyaccess.Trendsinthisscenariorevealtheextentoftheworld’scollectiveambition,asitstandstoday,totackleclimatechangeandmeetothersustainabledevelopmentgoals.OnlyintheNetZeroEmissionsby2050(NZE)Scenario,doweworkbackfromspecificgoals–themainoneinthiscasebeingtocapglobalwarmingto1.5°C–andshowhowtheycanbeachieved.Eachscenariomeetscurrentenergysecurityandclimatechallengesindifferentwaysandtodifferentextents,butthestartingpointfortoday’sdecisionmakersisfundamentallydifferentfromthatfacingtheircounterpartsinthe1970s.Theclimateandenvironmentalchallengesaremuchmoreacute,duetoahalf‐centuryofrisingemissions.Butthecleantechnologychoicesavailabletodayarealsomuchmorematureandcostcompetitive,providingoptionsformuchmoreefficientenergyuse,cleanerenergyproductionandgeneration,andnewkindsofstorage.Asaresult,manyofthecomponentpartsofanewtypeofenergysystemareclearlyvisible.Thequestionishoweffectivelyandquicklytheycanbedeployedalongsidetraditionaltechnologies,andtheninplaceofthem.IEA.CCBY4.0.Chapter1Overviewandkeyfindings3311.2Causesofthecrisisandimmediateconsequences1.2.1CausesofthecrisisTheworldisfacingaglobalenergycrisisofunprecedenteddepthandcomplexity.Thisishavingfar‐reachingimplicationsformanyhouseholds,businessesandentireeconomies,promptingarangeofshort‐termresponsesfromgovernmentsaswellasadeeperdebateaboutthewaystoavoidsuchdisruptionsinthefuture.PressuresonmarketspredatedtheRussianFederation’s(hereinafterRussia)invasionofUkraine,butitsactionshavetippedwhatwasastrongrecoveryfromthepandemic–strongenoughtostrainweakenedsupplychainsandproductioncapacity–intofull‐blownturmoilinenergymarkets,causingseveredamagetotheglobaleconomy.Thisisaglobalcrisis,butEuropeisthemaintheatreinwhichitisplayingout,andnaturalgasiscentrestage.Russiaisseekingtogainpoliticalleveragebywithholdinggassuppliesandexposingconsumerstohigherenergybillsandsupplyshortagesoverthewinterheatingseason.AsofSeptember2022,Russia’sgasdeliveriestotheEuropeanUnionaredownby80%comparedtowheretheyhavebeeninrecentyears.ThishasnaturallycreatedsignificantpressureonEuropeanandglobalgasbalances.Duetodemandforheating,Europeangasdemandisroughlytwiceashighduringthewintermonthsasduringthesummer,andismetbyacombinationofdomesticproduction(whichhasbeenindecline),importsbypipelineandliquefiednaturalgas(LNG),andwithdrawalsfromstorage(Figure1.1).Figure1.1⊳EuropeanUnionandUnitedKingdomwinternaturalgassupplyandoptionstocompensateforacutinRussianpipelinegasIEA.CCBY4.0.Russianpipelineimportsmet20%ofgasdemandintheEuropeanUnioninwinter2021-22;managingwithoutthisgasrequiresalternativeimports,useofstorageandlowerdemandIEA.CCBY4.0.34InternationalEnergyAgencyWorldEnergyOutlook2022EUgasstoragefacilitiesweremorethan90%fullinearlyOctober2022,aconsiderableachievementgiventhecutstoRussiansupplyoverthecourseoftheyear.Incombinationwithlowerdemandandcontinuedstronginflowsfromnon‐Russiansources,thisopensanarrowbutpotentiallysafepathwayforEuropethroughthenorthernhemispherewintermonths,albeitathighlyelevatedprices,onconditionthattheweatherdoesnotturntoocold.However,thebalancesfor2023‐2024lookmorechallenging.TherearemanystrandstotheenergyrelationshipbetweenRussiaandEurope.Russiahasactedtoseverthegasrelationship.TheEuropeanUnionhashaltedcoalimportsfromRussia,meaningthatcoaldeliveriesfromEurope’slargestexternalsupplierfelltozeroasofAugust2022.Forthemoment,Russianoilproductionandexportsremainclosetopre‐warlevels,despitesomecountriessuchastheUnitedStatesandtheUnitedKingdomimposingimmediaterestrictionsonoiltrade.Somereorientationoftradeflowshasalreadytakenplace,withlowerflowsofoilfromRussiatotheEuropeanUnionandNorthAmericaoffsetbyhigherexportstoothermarkets,notablyIndia,ChinaandTürkiye.Butthemajorchangeslieahead:Russiaexported2.6millionbarrelsperday(mb/d)ofoiltotheEuropeanUnioninSeptember2022,andmostoftheseexportswillcometoanendwhenanEUbanonseabornecrudeoilimportsfromRussiaentersintoforceinDecember2022andonabanonoilproductsfromRussia(whicharemainlymiddledistillates)takeseffectinFebruary2023.TheproximatecauseofthecrisiswasRussia’sinvasionofUkraine,butpressureonmarketswasvisiblebeforeFebruary2022.Themainreasonwasthespeedoftheeconomicreboundfromthepandemic‐inducedslumpin2020;thisstretchedallmannerofsupplychains,includingthoseinfuelsupply.Therewerealsoweather‐relatedfactors,ahigherincidenceofoutagestosupply–oftenrelatedtomaintenancepostponedfrom2020asaresultofthepandemic–andwhattheIEAwascalling“artificialtightness”inmarkets.Innaturalgasmarkets,thisstemmedinlargepartfromGazprom’ssluggishnessinre‐fillingitsEuropeangasstorageinthethird‐quarterof2021,whichinretrospecthastobeseeninthecontextofRussia’sinvasionofUkrainesomemonthslaterandthepressuresubsequentlyappliedtoEuropebycuttingoffgassupplies.Thekeyunderlyingimbalance,whichhadbeensomeyearsinthemaking,relatestoinvestment(Figure1.2).ThishasbeenarecurrentthemeinIEAanalysisintheWorldEnergyOutlookandWorldEnergyInvestmentseries.ForfiveyearsaftertheconclusionoftheParisAgreement,theamountofinvestmentgoingintoenergytransitionsremainedflatataroundUSD1trillionperyear.Sincecleanenergytechnologycostscontinuedtodeclineduringthisperiod,thiswasenoughtogenerateyear‐on‐yearincreasesindeployment.Butitremainedfarshortoftheamountsneededtosupportathoroughgoingtransformationoftheenergysystem.Onlyinthelasttwoyears,2021and2022,didcleanenergyspendingseeanotableuptick.Theothersideoftheinvestmentcoinisspendingonfossilfuels.Thisdroppedrapidlyafterthefalloftheoilpricein2014‐15,reflectinglowerrevenuesandinvestorfrustrationatthepoorreturnsthatoilandgascompaniesweregenerating.Intheabsenceofamuch‐neededaccelerationtoenergytransitionstocurbfossilfueldemand,thedeclinesinoilandgasIEA.CCBY4.0.Chapter1Overviewandkeyfindings351investmentinthesecond‐halfofthe2010spresentedarisktomarketbalancesinthe2020s.IntheWEO‐2016ExecutiveSummary,forexample,wesaidthat“ifnewprojectapprovalsremainlowforathirdyearinarowin2017,thenitbecomesincreasinglyunlikelythatdemand(asprojectedinourthenNewPoliciesScenario)andsupplycanbematchedintheearly2020swithoutthestartofanewboom/bustcyclefortheindustry”.Naturalgasmarketsalsofacedthe“riskofahardlanding”(IEA,2016).Figure1.2⊳HistoricalenergyinvestmentandGDPtrendsIEA.CCBY4.0.Energyinvestmentwassubduedfrom2015to2020;fossilfuelinvestmentdroppedafterthe2014-2015oilpricefallandcleanenergyspendingdidnotstarttopickupuntilrecentlyAccelerationinnewapprovalsfailedtomaterialise,however,atleastinpartbecauseuncertaintyoverlong‐termdemandledtheindustrytoshyawayfromlargecapital‐intensiveprojects.Eventoday,despitehigherpricesandhugewindfallproductsfortheoilandgasindustryin2022,upstreamspendingistheonlysignificantsegmentoftheinvestmentpicturethatremainsbelowpre‐Covidlevels.TheotherunderlyingissuethathascontributedtothecrisisisEurope’scontinuedhighlevelofrelianceonRussianenergy.In2021,one‐out‐of‐fiveunitsofprimaryenergyconsumedintheEuropeanUnioncamefromRussia.ThisrelianceonRussiahadlongbeenidentifiedasastrategicweakness,especiallyaftertheannexationofCrimeain2014,andsomeinfrastructurewasbuilttodiversifysourcesofimports,butRussianflowsremainedhigh.Inthecaseofnaturalgas,Russia’sshareofEuropeangasdemandactuallyrosefrom30%onaveragein2005‐10toreach40%in2015‐20.Climatepoliciesandnetzeroemissionscommitmentswereblamedinsomequartersforcontributingtotherun‐upinprices,butitisdifficulttoarguethattheyplayedarole.Morerapiddeploymentofcleanenergysourcesandtechnologiesinpracticewouldhavehelpedtoprotectconsumersandmitigatesomeoftheupwardpressureonfuelprices.Itwouldalso0.5%1.0%1.5%2.0%2015201720192021CleanenergyFossilfuelsEnergyinvestmentGDPInvestmentasashareofGDP‐20%‐10%0%10%20%2015201720192021AnnualchangeinGDPandinvestmentIEA.CCBY4.0.36InternationalEnergyAgencyWorldEnergyOutlook2022havemitigatedthepost‐pandemicreboundinenergy‐relatedcarbondioxide(CO2)emissionswhichreached36.6gigatonnes(Gt)in2021.Theannualincreaseof1.9Gtwasthelargestinhistory,offsettingthepreviousyear’spandemic‐induceddecline.Moreover,thereisscantevidencetosupportthenotionthatnetzeroemissionspledgeshavestifledtraditionalinvestmentsinsupply,asthesepledgesarenotyetcorrelatedwithchangesinfossilfuelspending.Mostnetzeroemissionspledgesarerecent,andmanyhaveyettobetranslatedintospecificplansandpolicymeasures.Ouranalysisoffossilfuelinvestmentincountrieswithnetzeroemissionspledges(68countriesplustheEuropeanUnion)showsthattheyareatasimilarleveltowheretheywerein2016,andthatchangesininvestmentlevelsinthosecountriesinrecentyearsarenotnoticeablydifferentfromthosethathavetakenplaceincountrieswithoutnetzeroemissionspledges(Figure1.3).Figure1.3⊳Fossilfuelinvestmentincountrieswithandwithoutnetzeroemissionspledges,2015-22IEA.CCBY4.0.Thereare,asyet,fewsignsthatnetzeroemissionspledgesarecorrelatedwithlowerglobalspendingonfossilfuelsNotes:NZE=netzeroemissions.Investmentisbasedoncountrieswhereinvestmentoccursratherthanwhereitoriginates.StatusofNZEpledgesasof2022.1.2.2ImmediateconsequencesThemostvisibleconsequenceofthecrisiswasanexplosioninenergyprices.WhileoilpricesaboveUSD100/barrelhavebeenseenbefore,thereisnoprecedentforthepricelevelsseenin2022fornaturalgas,withpricesatEurope’sTitleTransferFacility(TTF)hubregularlyexceedingUSD50permillionBritishthermalunits(MBtu),theequivalentofmorethanUSD200/barrel.Highfuelpriceswerethemainreasonforupwardpressureonglobal2004006008001000120020152016201720182019202020212022WithNZEpledgesinlawWithNZEpledgesinpolicydocumentsWithoutaNZEpledgeBillionUSD(2021)IEA.CCBY4.0.Chapter1Overviewandkeyfindings371electricityprices,inourestimationaccountingfor90%oftheriseintheaveragecostsofelectricitygenerationworldwide(naturalgasaloneformorethan50%).Thecostsofcapitalrecoveryaddedonlyabout5%tothepricepressures,astheelectricitysectorcontinuestoshifttowardsrelativelycapital‐intensivetechnologieslikesolarPVandwind.Theremaining5%increaseincostswasduetohighercostsformaintenanceandthoserelatedtoCO2pricesinseveralmarkets.Figure1.4⊳Year-on-yearincreaseinaveragepowergenerationcostsbyselectedcountryandregion,2022IEA.CCBY4.0.Increasesinpowergenerationcostsweredrivenbyhigherfuelpricesandhavebeenparticularlysharpingas-importingcountriesandregionsThehighcostofnaturalgas‐firedpower–typicallythemarginalsourceofgeneration–wasthemainfactorbehindahugeriseinEUwholesaleelectricityprices,withtrendsalsoabettedbyhighercoal,oilandCO2prices,reducedavailabilityofnuclearpowerandapooryearforhydropower.WholesaleelectricitypricesintheEuropeanUniontripledinthefirst‐halfof2022,wellabovethe40%increaseintheunderlyingaveragecostsofgeneration(Figure1.4).Thisdivergence,whichproducedhugeexcessrevenuesforsomemarketparticipants,sparkedavigorousdebateovertheEUelectricitymarketdesignandwhethergasandelectricitypricesshouldsomehowbede‐linked.TherippleeffectsofhighernaturalgaspricesinEuropewerefeltaroundtheworld.OneofthemostimmediateconsequencesofRussia’scurtailmentofgasdeliverieswasasharpincreaseinEuropeandemandforLNGimports:inthefirsteightmonthsof2022,netLNGimportsinEuroperosebytwo‐thirds(by45billioncubicmetres[bcm])comparedwiththesameperiodayearearlier.ItfellmainlyonAsiatobalancethemarket;AsianLNGdemandhasfallenyear‐on‐yearin2022forthefirsttimesince2015.Relativelyweakdemandinthe10%20%30%40%50%MexicoChinaJapanKoreaIndiaEuropeanUnionIEA.CCBY4.0.38InternationalEnergyAgencyWorldEnergyOutlook2022People’sRepublicofChina(hereinafterChina),duetoslowereconomicgrowthandCovid‐relatedlockdowns,hasbeenafactorineasingmarketbalances(thesameistrueforoil),althoughthisraisesquestionsaboutwhatliesaheadwhendemandinChinastartstopickup.Elsewhere,highpricesandshortfallsinsupplyhaveledtosignificanthardshipfordevelopingcountriesthatrelyonLNG.Figure1.5⊳Valueofnaturalgastrade,2005-2022IEA.CCBY4.0.Thereisnoprecedentforthehugeincreaseinpaymentsfortradedgasin2022Oneeffectofthecurrenthighenergypricesisahugetransferofwealthfromconsumerstoproducers.Thesumsinvolvedarelargebutnotentirelyunprecedentedforoil,beingsimilartotheamountspaidduringtheearly2010s,andpriortothedeclineintheoilpriceinlate2014.Buttheyareextraordinaryfornaturalgas(Figure1.5).Naturalgasistypicallythejuniorpartnerintermsofrevenueforhydrocarbonexporters,withthevalueofinternationaltradeingasaveragingaround20%ofthetotalvalueoftradedoilandgasbetween2010and2021.Thispercentageisnowsettoincreaseto40%in2022.Theenergycrisisisfuellinginflationarypressures,increasingfoodinsecurityandsqueezinghouseholdbudgets,especiallyinpoorhouseholdswherearelativelyhighpercentageofincomeisspentonenergyandfood.TheeffectsofhighernaturalgasandelectricitypriceshavebeenfeltacutelyacrossmuchofEurope.Elsewhereintheworld,theconsequenceshavevariedaccordingtothetypeofeconomy,buttheyareclearlynegativeinoverallterms:theInternationalMonetaryFundcutitsexpectationsofglobalgrowthfor2022from4.9%inOctober2021to3.2%initsOctoberupdate(IMF,2022a).Overall,lowincomecountriesareparticularlyexposedtohigherfoodprices,towhichhigherenergyandfertilisercostscontribute(Figure1.6).Thecrisishasalsobeenafurthersetbackforeffortstoimproveenergyaccess(Box1.1).‐0.8‐0.400.40.82005201020152020MiddleEastEurasiaAfricaCentralandSouthAmericaAsiaPacificEuropeOtherTrillionUSD(2021)Importingregions2022ExportingregionsIEA.CCBY4.0.Chapter1Overviewandkeyfindings391Figure1.6⊳Contributionsofenergyandfoodtoinflationinselectedcountries,2022IEA.CCBY4.0.EnergyisbehindmanyoftheinflationaryimpactsofthecrisisinEurope,buthigherfoodprices–towhichenergycontributes–arethemaindriverinmanylowincomecountriesSource:IEAanalysisbasedonIMF(2022b).Box1.1⊳GettingenergyaccessbackontrackDuetothecombinationofthepandemicandthecurrentenergycrisis,theIEAestimatesthat75millionpeoplethatrecentlygainedaccesstoelectricityarelikelytolosetheabilitytopayforit,andthat100millionpeoplethathavegainedaccesstocookingwithcleanfuelsmayforgoitoncostgrounds,returninginsteadtotheuseoftraditionalbiomass.Gettingtheworldontrackforuniversalaccesstoelectricityandcleancookingwillrequirededicatedadditionaleffortfromawiderangeofnationalandinternationalactors.Onlyhalfofthe113countrieswithoutuniversalaccesstoelectricityhavetargetstoincreaseaccess,andfewerthanhalfofthoseaimtoreachuniversalaccessby2030.Anevensmallernumber,e.g.Côted'Ivoire,Kenya,Senegal,RwandaandMyanmar,havecomprehensivenationalelectrificationstrategiesinplace.Theachievementofnationaltargets–asmodelledintheAPS–isthereforenotenoughtoachievefulluniversalaccesstoelectricityby2030(theaimofSustainableDevelopmentGoal7).TheNZEScenario,bycontrast,buildsinachievementofthe2030target(Figure1.7).ThegapbetweentheSustainableDevelopmentGoal7(SDG7)targetandcurrentpolicyambitionsisevenwiderinthecaseofcleancookingfuels.Some128countriescurrentlylackuniversalaccesstocleancooking,butonly39ofthemhavecleancookingtargets,andfewerthanhalfofthesearetargetinguniversalaccessby2030.ChinaandIndonesiaIEA.CCBY4.0.40InternationalEnergyAgencyWorldEnergyOutlook2022areclosetobeingontracktoachievetheirtargetsbutinmanyothercountriesthereisaneedtoraisethecurrentlevelofambitionandtoimproveimplementation.Aswithaccesstoelectricity,universalaccesstocleancookingby2030isbuiltintotheNZEScenario.Figure1.7⊳Numberofpeoplewithoutaccesstoelectricityandcleancookingbyscenario,2021and2030IEA.CCBY4.0.Well-formulatednationalstrategiesandinternationalsupportarevitaltoregainmomentumonimprovingenergyaccessafterCovid-19andtoday’shighenergypricesNotes:Sub‐SaharanAfricaexcludesSouthAfrica.STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.Short‐termpolicyresponsestothecrisishavebeenfocusedonaffordabilityandsecurityofsupply,withmitigatingmeasuresthatcanbeimplementedquicklyatapremium,evenwhentheyareexpensiveorcomeatthecostoftemporarilyhigheremissions.Oneresponsehasbeentoseektoprotectconsumersfromsomeoralloftheincreaseinprices,withmassiveinterventionsinparticulartoshieldvulnerableconsumers.SinceSeptember2021,theIEAhastrackedaroundUSD550billioningovernmentinterventions,mostlyinEurope,toshieldconsumersfromtheworsteffectsofthepricespikes,withalargeamountofadditionalsupportalsounderconsiderationinseveralcountries.Therehavebeenmeasurestoallowforhighercoal‐firedgeneration,toextendthelifetimeofsomenuclearpowerplantsandtoacceleratetheflowofnewrenewableprojects.Demand‐sidemeasureshavegenerallyreceivedlessattention,buttherehavebeeninitiativestoencourageandincentivisecutsinenergyuse:attheEuropeanUnionlevel,theseincludeavoluntary15%reductioninnaturalgasdemandaswellasamandatoryreductiontargetof5%ofelectricityuseinpeakhours(demandwhichistypicallymetbygas‐firedgeneration).Therehavealsobeenvariousinterventionstocaptherevenuespaidforcheapersourcesofgeneration,whichwould200400600800100020212030STEPS2030APS2030NZESub‐SaharanAfricaDevelopingAsiaRestofworldWithoutaccesstoelectricityMillionpeople500100015002000250020212030STEPS2030APS2030NZEMillionpeopleWithoutaccesstocleancookingIEA.CCBY4.0.Chapter1Overviewandkeyfindings411otherwisebemakinghugegainsbecauseoftheprice‐settingroleofgas‐firedplants,alongsidetemporaryadditionaltaxesontheprofitsofoilandgascompanies,withtheproceedsusedtohelpeasethepressureonhouseholdandcompanyenergybills.Alongsidetheseshort‐termmeasures,somegovernmentshavetakenstepsthatwillplayoutoverthelongerterm.Someoftheseseektoincreaseoilandgassupply,viaannouncementsofnewincentivesorlicensingrounds,1orthroughsupportfornewinfrastructure,inparticularnewLNGterminalsinEuropetofacilitatethesupplyofnon‐Russiangas.Butmostofthenewpolicyinitiativesaimtoacceleratethestructuraltransformationoftheenergysector.TheEuropeanUnionisraisingitsrenewablesandenergyefficiencytargetsandputtingsignificantresourcesbehindachievingthem.TheadoptionoftheInflationReductionActintheUnitedStatesgivesaboosttoanarrayofcleanenergytechnologiesthroughtheprovisionofUSD370billionforenergysecurityandclimatechangeinvestments,withthepotentialtomobilisefarlargersumsfromtheprivatesector.TheJapanesegovernmentisseekingtorestartandbuildmorenuclearplantsandexpandotherlow‐emissionstechnologieswithitsGreenTransformation(GX)plan.Chinacontinuestobreakrecordsforinvestmentsinrenewablesandtoaddhugenumbersofelectricvehicles(EVs)toitsstockeachyear.Indiahastakenakeysteptowardsestablishingacarbonmarketandboostingtheenergyefficiencyofbuildingsandappliances.Thereremainhugeuncertaintiesoverhowthisenergycrisiswillevolve.ThebiggestconcernisthewarinUkraine–howitwillprogress,whenandhowitmightend.Othersrelatetothepossibilityoffurtherescalationinprices,theseverityofthe2022‐23winter,theextenttowhichRussianexportflowscanberedirectedtoothermarkets,andthewaythathighpricesinfluenceconsumerbehaviourorsocialattitudestowardscleanenergytransitions.Butthecurrentenergyshockhasalreadyhadaseismiceffect,providingavividreminder–ifonewasneeded–oftheimportanceofenergysecurityanddiversity.Insodoing,ithashighlightedthefragilityandunsustainabilityofmanyaspectsofourcurrentenergysystemandthewiderrisksthatthisposesforoureconomiesandwell‐being.Andithasplayedoutagainstabackdropofincreasinglyvisiblevulnerabilitiesandimpactsfromachangingclimate.Timesofcrisisputthespotlightongovernments,andthescenariosthatweincludeintheWorldEnergyOutlookaredifferentiatedprimarilybyhowpolicymakersrespond.1Thetypicalleadtimesforupstreamprojectsareconsiderable.Ouranalysisshowsthatforconventionalupstreamprojectsthathavestartedproductionsince2010,ittookonaveragearoundsixyearsfromtheawardofanexplorationlicencetodiscovery;nineyearsfromdiscoverytoprojectapproval;andjustoverfouryearsfromapprovaltofirstproduction.IEA.CCBY4.0.42InternationalEnergyAgencyWorldEnergyOutlook20221.3OutlookforenergymarketsandsecurityToday’shighenergypricesandgloomyeconomicoutlookleadtolowerenergydemandgrowthintheSTEPSandAPS,bothintheneartermandoutto2030,thanintheWEO‐2021(IEA,2021a).Facedwithmarketuncertaintyandhighprices,consumersareforgoingpurchasesandindustryisscalingbackproduction.Despiteastrongeconomicreboundfromthepandemicin2021,theassumedrateofaverageannualGDPgrowthfortherestofthedecadehasbeenreviseddownslightlyto3.3%(seeChapter2).EnergydemandrisesmoreslowlyinboththeSTEPSandAPSasaresult,andthemixtureoffuelsusedtomeetthisdemandgrowthchangessubstantiallyfrompreviousprojections(Figure1.8).Figure1.8⊳DifferenceintotalenergysupplyintheWEO-2022STEPSrelativetotheWEO-2021STEPSIEA.CCBY4.0.Gasdemandismarkedlylowerthaninlastyear’sSTEPSwhilelow-emissionssources–ledbyrenewables–seeevengreatergrowth.Theupsideforcoalprovesshort-lived.Notes:EJ=exajoule.PositivenumbersindicatetotalenergysupplyishigherintheSTEPSinthisOutlookthanintheWEO‐2021STEPS.Thetrendsto2030intheSTEPSareconsistentwithaworldthatisgrapplingwithahostofnear‐termvulnerabilities,concernedaboutthehighcostofimportedfuelsbutalsoaboutclimatechange,andawareoftheopportunitiesaffordedbycost‐effectivecleanenergytechnologies.Naturalgaspricesremainatveryhighlevelsbyhistoricalstandardsuntilthemiddleofthedecade,causinggastolosegroundasnewnaturalgaspowerplantconstructionsslows,withcountriesoptingforothersourcestomaintainsystemadequacyandflexibilitywhileacceleratingrenewables.Tradeflowsundergoaprofoundreorientationasimportingregionstendtoprioritisedomesticresourceswherepossibleinanattempttoensurereliablesuppliesofenergyandlimitexposuretovolatileinternationalmarkets,andastheimplicationsofEurope’sshiftawayfromRussianimportsreverberatearoundthesystem.Overall,energysecurityconcernsreinforcetheriseoflow‐emissionssourcesand‐15‐10‐50510152021202220232024202520262027202820292030OilNaturalgasCoalRenewablesNuclearEJIEA.CCBY4.0.Chapter1Overviewandkeyfindings431efficiency:energydemandgrowthofalmost1%ayearto2030islargelymetbyrenewables.Forthefirsttime,theSTEPSinthisOutlookshowsanoticeablepeakinoverallfossilfuelconsumptionwithinthisdecade(Box1.2).However,whileshowingdistinctsignsofchange,thetrendsintheSTEPSdonotyetamounttoaparadigmshift.Box1.2⊳EraoffossilfuelgrowthmaysoonbeoverTheStatedPoliciesScenariointhisOutlookisthefirstWEOscenariobasedonprevailingpolicysettingsthatseesglobaldemandforeachofthefossilfuelsexhibitapeakorplateau.Coaldemandpeakswithinthenextfewyears,naturalgasdemandreachesaplateaubytheendofthedecade,andoildemandreachesahighpointinthemid‐2030sbeforefalling.Theresultisthattotaldemandforfossilfuelsdeclinessteadilyfromthemid‐2020sbyaround2exajoules(EJ)(equivalentto1millionbarrelsofoilequivalentperday[mboe/d])everyyearonaverageto2050(Figure1.9).Figure1.9⊳FossilfueldemandintheSTEPS,1990-2050IEA.CCBY4.0.Totalfossilfueluseseesadefinitivepeakforthefirsttimeinthisyear’sSTEPS.Theshareoffossilfuelsintheenergymixfallstoaround60%in2050,aclearbreakfrompasttrendsNote:EJ=exajoule;TES=totalenergysupply.ChangesinfossilfuelusehavebroadlyfollowedchangesinGDPfordecades,andglobalfossilfueldemandhasremainedataround80%oftotaldemandfordecades.The2022STEPSprojectionsarenowputtingtheworldonapathtowardsasignificantbreakwiththesetrendswithinafewyears.By2030,fossilfuelsaccountforlessthanthree‐quartersoftotalenergysupply,andby2050theirsharefallstojustabove60%.ThesetrendsareemblematicofashiftintheenergylandscapesincetheParisAgreement.IntheWEO‐2015,forexample,thescenarioequivalenttotheSTEPS(thencalledtheNewPoliciesScenario)sawasteadyriseindemandforeachofthefossilfuelsto2040,andtotalfossilfuelusein2040wasprojectedtobenearly20%largerthanin2040inthis20%40%60%80%100%1002003004005001990200020102020203020402050OilCoalNaturalgasEJShareoffossilfuelsinTES(rightaxis)IEA.CCBY4.0.44InternationalEnergyAgencyWorldEnergyOutlook2022year’sSTEPSprojections(IEA,2015).Thebiggestsinglechangesincethenhasbeeninthepowersector:theSTEPSinthisOutlookseesamuchhigherlevelofrenewablesdeploymentto2030andbeyondthanitspredecessorscenariodidin2015,andthiscomesattheexpenseofcoalandnaturalgas.TheAPSbuildsonthesetrends,butassumesthatgovernments,companiesandcitizenstakefurthermeasurestoensurethattheresponsetothesetrendsisconsistentwithlong‐termclimategoals.ThesehavecollectivelybecomemoreambitioussincetheWEO‐2021asaresultofnewpledgesandtargetsannouncedsincethen,notablyinIndiaandIndonesia.IntheAPS,globalenergydemandissettoincreaseby0.2%peryearto2030,comparedwith0.8%peryearintheSTEPS,reflectingmoreactivemeasuresintheAPStocurbdemandthroughenergyefficiencygains.Thereisalsoamuchmoredramaticshiftinfavouroflow‐emissionssourcesofenergy.TheNZEScenariomapsoutacompleteandevenmorerapidtransformationwhichisconsistentwithapathtonetzeroCO2emissionsfromenergyandindustrialprocessesby2050.TherateatwhichtheenergyefficiencyofdifferenteconomiesimprovesisacrucialvariableinourOutlook.Between2017and2020,energyintensityhasimprovedonaverageby1.3%peryear–considerablylowerthanthe2.1%seenbetween2011and2016–andtherateofimprovementfurtherslowedto0.5%in2021.IntheSTEPS,energyintensityimprovesby2.4%peryearfrom2021to2030;asaresult,around44EJ(10%oftotalfinalconsumption)isavoidedby2030.However,thisstillleavesagreatdealofuntappedpotential:intheAPS,energyintensityimprovesby3%peryear,andevenmorerapidlyintheNZEScenario.1.3.1TrendsandvulnerabilitiesacrosstheenergymixElectricityTherearemanyuncertaintiesinourOutlook,butonepointwhichiscommontoallthescenariosistherisingshareofelectricityinglobalfinalenergyconsumption.From20%today,thisincreasesto22%by2030intheSTEPS,and28%in2050.IntheAPS,thesharerisesto24%in2030and39%in2050.IntheNZEScenario,thesharerisesfurtherto28%by2030and52%by2050.Thisisassociatedwithahugeoverallincreaseinglobalelectricitydemandoverthecomingdecades–bymid‐century,electricitydemandis75%higherthantodayintheSTEPS,120%higherinAPSand150%intheNZEScenario.Cleanelectricityandelectrificationareabsolutelycentraltotheshifttoanetzeroemissionssystem.Thebulkofthegrowthcomesfromemergingmarketanddevelopingeconomies,whereelectricitymeetsabroadrangeofresidential,commercialandindustrialneeds.Growingpopulations,higherincomesandrisingtemperaturesleadtorapidlyincreasingdemandforspacecooling,whichisoneofthebiggestcontributorstoelectricitydemandgrowth;anextra2800terawatt‐hours(TWh)globallyforspacecoolingto2050inemergingmarketanddevelopingeconomiesintheSTEPSistheequivalentofaddinganotherEuropeanUniontocurrentglobalelectricitydemand.ComparingthisdemandforspacecoolingacrosstheIEA.CCBY4.0.Chapter1Overviewandkeyfindings451scenariosprovidesausefulillustrationofthevalueofstringentefficiencypolicies:intheAPS,efficiencygainscutthegrowthincoolingdemandbyalmosthalf;evenmorestringentstandardsforairconditionersintheNZEScenario,togetherwithbetterinsulationinhomes,cutthisbyhalfagain.Asmodernlivesandeconomiesbecomeincreasinglyreliantonelectricity,sothereliabilityandaffordabilityofelectricitysupplytakecentrestageinanydiscussionaboutenergysecurity,anddecarbonisationofelectricitysupplybecomescentralinplanningfornetzeroemissionsgoals.Around65%ofthecoalusedgloballyin2021and40%ofthenaturalgaswereforpowergeneration.Coaluseforelectricitygenerationisrisinginmanycountries,atleasttemporarily,inresponsetotheenergycrisis.Thesharesofcoalandnaturalgasinpowergenerationaresettodecreaseto2030ineachscenario,buttovaryingdegrees(Figure1.10).Theglobalaveragecarbonintensityofelectricitygenerationiscurrently460grammesofcarbondioxideperkilowatt‐hour(gCO2/kWh),heavilyinfluencedbytheamountofcoalinthemix.Bymid‐century,unabatedcoalfallsto12%oftotalgenerationintheSTEPS,downfrom36%today,helpingtoreducethecarbonintensityofelectricitygenerationto160gCO2/kWh.Thispointisreached20yearsearlierintheNZEScenario,whichseescarbonintensitydipbelowzeroby2050asnegativeemissionsinthepowersectoroffsetresidualemissionsinindustryandtransport.Changingdemandpatternsandrisingsharesofsolarphotovoltaics(PV)andwindintheelectricitymixputapremiumonpowersystemflexibilityasacornerstoneofelectricitysecurity.Flexibilityneeds(measuredastheamounttherestofthesystemneedstoadjustonanhourlybasistoaccommodatedemandpatternsandthevariabilityofwindandsolaroutput)increaseinallscenarios;theydoubleintheAPSby2030,forexample,andthennearlydoubleagainby2050.Therearefourmainsourcesofflexibilityinpowersystems:generationplants,grids,demand‐sideresponseandenergystorage.Forthemoment,thermalpowerplantsperformmostoftheadjustmentstomatchenergydemandandsupply,butasotherformsofflexibilitydevelopandexpand,coalandthengas‐firedplantsseetheirroleasasourceofflexibilityprogressivelydiminishandeventuallydisappear.Removingexistingsourcesofflexibilitybeforeothersarescaleduprepresentsamajorrisktoelectricitysecurity.Adequateinvestmenttoexpandandmodernisegridinfrastructureisacaseinpoint.OurprojectionsintheSTEPSseeannualinvestmentofUSD770billionininfrastructureandstorageto2050asgridsincreaseinlengthbyabout90%overtheperiod.Investmentingridsandstorageis30%higheronaverageintheAPS,atclosetoUSD1trillionperyear.However,thereareobstaclesthatneedtobeaddressed.Inpractice,thepermittingandconstructionofasinglehighpoweroverheadline(>400kilovolts)cantakeasmuchas13years,dependingonthejurisdictionandlengthoftheline,withsomeofthelongestleadtimesfoundinadvancedeconomies.Transmissionbottlenecksarealreadycreatingnumerousinefficienciesandrisks.Forexample,authoritiesinVietNamannouncedinearly2022thattheywouldnotconnectanynewsolarPVorwindprojecttothegridfortherestoftheyear,whileinMongolia12%oftheelectricitygeneratedin2021couldnotbetransportedtoend‐users.IEA.CCBY4.0.46InternationalEnergyAgencyWorldEnergyOutlook2022Figure1.10⊳Globalenergysupplyanddemandbysector,scenarioandfuelIEA.CCBY4.0.Energyefficiency,electrificationandexpansionoflow-emissionssupplyarethehallmarksofrapidtransitionsto20301202403604806007202021STEPSAPSNZECoalOilNaturalgasTraditionaluseofbiomassNuclearModernbioenergyTotalenergysupply(EJ)2030501001502002503002021STEPSAPSNZE2021STEPSAPSNZE2021STEPSAPSNZE2021STEPSAPSNZEOtherrenewablesElectricityOtherElectricityandheat(EJ)2030Industry(EJ)Transport(EJ)Buildings(EJ)203020302030IEA.CCBY4.0.Chapter1Overviewandkeyfindings471CleanenergysupplyandcriticalmineralsCleanenergy,includingbothlow‐emissionselectricityandfuels,isthebiggrowthstoryofthisOutlook.Theextentofthatgrowthstillrestsinthehandsofpolicymakers,evenwhere–asinthecaseofwindandsolar–theyenjoylargecostadvantagesoverothertechnologies.Buttherearesignsthattheenergycrisisisgalvanisingincreasedpolicysupport,withtheInflationReductionActintheUnitedStatesbeingaparticularlystrikingexample.Low‐emissionssourcesnowaccountforaround40%ofelectricitygeneration,with30%comingfromrenewablesandanother10%fromnuclear.DeploymentofsolarPVandwindpoweracceleratesinallscenarios,settingnewrecordseveryyearto2030:bymid‐centurytheircombinedshareofthesetwotechnologiesintheelectricitymixreaches45%intheSTEPSand60%intheAPS.Withintenyears,ifcountriesaretakingthenecessaryactiontodeliverontheirclimatepledges,theworldwillbedeployingaround210gigawatts(GW)ofwindcapacityeachyearand370GWofsolar.Thebalanceofdeploymentvariesbyregionandcountry.IntheUnitedStatesandIndia,forexample,solarPVbecomestheleadingtechnology.Bycontrast,theEuropeanUnionmovestowardsanelectricitysystemdominatedbyonshoreandoffshorewind,withbothsourcescombinedaccountingformorethan40%oftotalgenerationin2050intheSTEPSandover50%intheAPSandNZEScenario.ThehugeriseintheshareofsolarPVandwindintotalgenerationinallscenariosfundamentallyreshapesthepowersystemandsignificantlyincreasesthedemandforpowersystemflexibilitytomaintainelectricitysecurity.Thisputsapremiumondispatchablelow‐emissionstechnologies,suchashydropower,bioenergyandgeothermal.Italsoencouragesnewapproachessuchastheco‐firingofammoniaincoalplantsandlow‐emissionshydrogeninnaturalgasplants,aswellassomeretrofitsofexistingpowerplantswithcarboncapture,utilisationandstorage(CCUS).RegionswithhighsharesofsolarPVrelativetowindtendtoseehigherrelativelevelsofbatterydeploymentthanregionsinwhichwindpredominates,suchasChinaortheEuropeanUnion,becausetheshort‐durationstoragethatbatteriesprovideiswellsuitedtosmoothoutthedailycycleofsolarPV‐basedelectricitygeneration.Regionswherewindistheleadingpowergenerationtechnologytendtorelyonawiderrangeofsourcesofflexibility.Investmentinnuclearpowerisalsocomingbackintofavourinsomecountries.Therehavebeenannouncementsoflifetimeextensionsforexistingreactors,oftenaspartoftheresponsetothecurrentcrisis,aswellasannouncementsofnewconstruction,forexampleinJapanandFrance.Worldwide,thelargestnewbuildnuclearprogrammeisinChinaasitworkstowardsitsgoalofcarbonneutralityby2060.Thereisgrowinginterestinthepotentialforsmallmodularreactorstocontributetoemissionsreductionsandpowersystemreliability.Theshareofnuclearinthegenerationmixremainsbroadlywhereitistoday–around10%–inallscenarios.Criticalmineralsareafundamentalpartoftheenergyandelectricitysecuritylandscape.Demandforcriticalmineralsforcleanenergytechnologiesissettorisetwotofourfoldby2030(dependingonthescenario)asaresultoftheexpandingdeploymentofrenewables,IEA.CCBY4.0.48InternationalEnergyAgencyWorldEnergyOutlook2022EVs,batterystorageandelectricitynetworks(Figure1.11).Copperuseseesthelargestincreaseintermsofabsolutevolumes,withcurrentdemandofaround6milliontonnes(Mt)peryearincreasingto11Mtby2030intheAPSand16MtintheNZEScenario,butothercriticalmineralsexperiencefasterratesofdemandgrowth,notablysilverandsiliconforsolarPV,rareearthelementsforwindturbinemotorsandlithiumforbatteries.Boththeextractionandprocessingofcriticalmineralsarehighlyconcentratedgeographically:unlesstheneedforstrongerresilienceanddiversityinsupplychainsisaddressed,thereisariskthattheincreasinguseandimportanceofcriticalmineralscouldbecomeabottleneckforcleanenergydeployment.Figure1.11⊳Mineralrequirementsforcleanenergytechnologiesbyscenario,2021and2030IEA.CCBY4.0.Mineralrequirementsforcleanenergytechnologiesquadrupleto2030intheNZEScenario,withparticularlyhighgrowthformaterialsforelectricvehiclesNotes:Mt=milliontonnes;EVs=electricvehicles.Includesmostofthemineralsusedinvariouscleanenergytechnologies,butdoesnotincludesteelandaluminium.SeeIEA(2021b)forafulllistofmineralsassessed.Recyclingisanimportantand–forthemoment–underutilisedoptiontoreducecriticalmineralsdemand:95%ofsolarpanelcomponentsbymassarerecyclable,andthepercentageforwindturbinesissimilar.IntheNZEScenario,annualcapacityretirementsforsolarPVrisefrom3GWin2030to400GWin2050,andforwindturbinesfrom16GWto240GWoverthesameperiod.Furtherpolicyeffortsareneededtoboostrecyclingandensurethatthesolarpanelsandwindturbinesreachingtheendoftheirlifedonotendupinlandfills.OtheruntappedopportunitiesforreuseandrecyclingincludespentEVbatteries,whichcanretainlargeamountsofunusedenergythatnolongermeetthestandardsforuseinavehicle;spentEVbatteriestypicallymaintainabout80%oftheirtotalusablecapacity.102030402021STEPSAPSNZEHydrogenElectricityEVsandNuclearWindSolarPVBytechnologyMt2030storageandotherrenewables102030402021STEPSAPSNZEMtOtherCobaltManganeseLithiumGraphiteNickelCopper2030BymineralIEA.CCBY4.0.Chapter1Overviewandkeyfindings491Whilenotincreasingatthescaleoflow‐emissionselectricity,theprospectsforlow‐emissionsfuelsarebrightening,withbiogasesandlow‐emissionshydrogeninparticulargettingaboostfromthecurrentenergycrisis.IntheAPS,globallow‐emissionshydrogenproductionrisesfromverylowlevelstodaytoreach30milliontonnesofhydrogen(MtH2)peryearin2030.Thisisequivalentto100bcmofnaturalgas(althoughnotalllow‐emissionshydrogenwouldreplacenaturalgasuse).Moreambitiousproductiontargetsarealsobeingsetinmanycountriesforbiogasesandbiomethane.EffortstopromotetheuseofhydrogenareconcentratedinEuropeandtheUnitedStates,butothercountriesarealsoactiveinthisfield:Japan,forexample,aimsfora20%rateofco‐firingimportedammoniaatitscoal‐firedpowerplantsby2030,andthiswillrequire0.5MtH2peryear.Liquidfuelsarederivinglessbenefitfromcurrentmarketconditions:disruptiontofoodsupplychainsandhighfertiliserpricesmeanliquidbiofuelcostshaverisensharply.Toavoidconflictsbetweenfoodproductionandaffordability,thereisageneralshiftinplanningforenergytransitionsawayfromconventionalbioenergysourcestowardsadvancedbiofuels,andaparticularfocusontwoinputs:sustainablewastestreamsthatdonotrequirespecificlanduseanddedicatedshortrotationwoodycropsgrownoncropland,pasturelandandmarginallandsthatarenotsuitedtofoodcrops.IntheNZEScenario,thereisnoincreaseincroplanduseforbioenergyandnobioenergycropsaregrownonexistingforestedland.Liquidbiofuelsincreasefrom2.2millionbarrelsofoilequivalentperday(mboe/d)in2021to3.4mboe/dintheSTEPS,5.5mboe/dintheAPSand5.7mboe/dintheNZEScenarioin2030.AviationandshippingarethelargestcontributorstotheriseinliquidbiofueldemandintheAPSandNZEScenarioasroadtransportisincreasinglyelectrified.NaturalgasTheeraofrapidgrowthinnaturalgasseemstobedrawingtoaclose.IntheSTEPS,demandrisesbylessthan5%between2021and2030andthenremainsflatataround4400bcmthroughto2050.Thisisabout750bcmlowerin2050thaninthecorrespondingscenariointheWEO‐2021(Figure1.12).Highernear‐termprices,morerapidelectrificationofheatdemand,fasteruptakeofotherflexibilityoptionsinthepowersector–andinsomecasesrelianceoncoalforslightlylonger–alldampentheoutlookforgas.Newpolicyinitiativesalsoplayanimportantpart:forexample,thesupportprovidedforavarietyofcleanenergytechnologiesbytheUSInflationReductionActisakeyreasonwhynaturalgasdemandintheUnitedStatesisaround250bcmlowerbymid‐century,comparedwiththeSTEPSintheWEO‐2021.Russia’sinvasionofUkraineanditscutsingassupplytotheEuropeanUnionalsoaccelerateEurope’sstructuralshiftawayfromnaturalgas.InboththeSTEPSandAPS,naturalgaspricesinimportingcountriesinEuropeandAsiaremainhighoverthenextfewyearsasEurope’sdrivetoreducerelianceonRussianimportskeepsglobalgasmarketstightduringarelativelybarrenperiodforlargenewgasexportprojects.Arebalancingcomeslaterinthe2020swhenslowerdemandgrowthcoincideswithnewsupplyprojectscomingonline.ButthiscrisishasundercutmomentumbehindnaturalgasexpansioninsomelargepotentialmarketsinsouthandsoutheastAsiaandputaIEA.CCBY4.0.50InternationalEnergyAgencyWorldEnergyOutlook2022significantdentintheideaofgasasatransitionfuel.Globally,aroundone‐quarterofthedownwardrevisiontogasdemandto2030inthisyear’sSTEPSisduetolessswitchingfromcoalandoiltonaturalgas,butmostofitreflectsacceleratedswitchingfromnaturalgastocleanenergy.IntheNZEScenario,naturalgasdemandfallsfurtherandfasterthanintheSTEPSandAPS,decliningto3300bcmin2030and1200bcmin2050.Around1900bcmequivalentoflow‐emissionsgases–hydrogen,biogasesandsyntheticmethane–areconsumedgloballyintheNZEScenarioin2050.Figure1.12⊳DriversofchangeinnaturalgasdemandintheWEO-2022STEPSrelativetotheWEO-2021STEPSIEA.CCBY4.0.Naturalgasdemandinthisyear’sSTEPSisaround750bcmlowerin2050thanintheWEO-2021,drivenmainlybyswitchingfromnaturalgastorenewablesNote:bcm=billioncubicmetres.Inallourscenarios,theEuropeanUnioncompensatesforthelossofRussianimportswithanacceleratedtransitionawayfromnaturalgasthroughasurgeinrenewablecapacityadditionsandapushtoretrofitbuildingsandinstallheatpumps,alongsideanincreasednear‐termcallonnon‐Russiansupply,notablyviaLNG.AdditionalannualcleanenergyinvestmentofsomeUSD65billionto2030intheAPSismorethanoffsetovertimebylowernaturalgasimportcosts.MeanwhiletherearenoeasydiversificationoptionsfortheRussiangastraditionallyexportedtoEurope.Thebroadergassecuritylandscapeisdefinedbythreekeyquestions.Firstconcernstheroleofgasintheelectricitymarket.Gasaccountedfor23%ofglobalelectricitygenerationin2021andthissharedeclinesinallscenarios,albeitnotasprecipitouslyasthatofcoal.Butdeclinesinthevolumeofgasconsumedforpowergenerationdonotimplyacommensuratereductioninthevalueofgastoelectricitysecurity:naturalgas‐firedcapacityremainsacriticalsourceofpowersystemflexibilityinmanymarkets,especiallytocoverforseasonal‐800‐600‐400‐200203020402050bcmMoregas‐to‐renewablesswitchingLesscoal‐andoil‐to‐gasswitchingAvoideddemandIEA.CCBY4.0.Chapter1Overviewandkeyfindings511variationsindemand.Europe’sgasstoragecontinuestoplayavitalrole:theshareofgasstoredtototalgasdemandin2030intheAPSissimilartothesharein2021.Secondconcernsthelevelofinvestment.Gasinfrastructureinvestmentsarecapitalintensiveandtypicallypaybackoverdecades;theyarethereforevulnerabletouncertaintiesconcerninglong‐termdemand.ThishasalreadybeenastumblingblockforgasdiversificationeffortsinEurope:mostpotentialsuppliersarelookingforlong‐termcommitments,whichEuropeanbuyersareunwillingtoprovidebecausestrongnear‐termneedsareunlikelytobesustainedintothe2030s.AndasimilardilemmamaycometoAsia.ThecommercialcasefornewLNGinvestmentsintheAPSisundercutbyfallingimportdemandinemergingmarketanddevelopingeconomiesinAsiainthe2040sandbeyond.Shorteningeconomiclifetimestotenyearswouldreducetheriskofnewcapacityadditionsturningintostrandedassets,butitwouldalsoincreasethebreak‐evengaspriceneededtofullyrecoupinvestmentcostsbyaround20%onaverage.Ashifttolow‐emissionshydrogenandhydrogen‐basedfuelscouldprovideapartialanswertothisdilemma,butisunlikelytoofferacompletesolution.Thethirdquestionconcernsflexibilityofdelivery.Around50%ofcurrentglobalLNGtrade,250bcm,isflexibleinthesenseofhavingitsenddestinationdeterminedcargo‐by‐cargobypricecompetitionatalatestage:therestisgovernedbyfixedpoint‐to‐pointdeliveryarrangements.Thecurrentenergycrisishasillustratedthisflexibilitywell,withhighpricesinEuropeincentivisingamajorinfluxofcargoestomeetthecontinent’sshortfallingas,albeitattheexpenseofgasimporterselsewhere,notablyamongdevelopingcountriesinAsia.However,whileflexibilityonthesupplysideislikelytobeunderpinnedbyafurtherriseinLNGexportsfromtheUnitedStates(facilitatedbythereductionsindomesticdemandarisingfromtheInflationReductionAct),thereareopenquestionsaboutflexibilityonthedemandside.Thepowersectoristypicallyanimportantproviderofflexibility,asutilitiesoftenhavetheabilitytoswitchtootherfuelsifgasbecomestoocostly.Butthephase‐outofcoalwillreducethisflexibility:asaresult,gasdemandinEuropeinparticularislikelytobecomelessresponsivetoprice,anddemand‐sideflexibilityislikelytobecomeconcentratedinothermarkets,notablyinChina.OilOildemandpeaksineachscenariointhisOutlook.IntheSTEPS,demandreachesahighpointinthemid‐2030sat103mb/dandthendeclinesverygentlyto2050.GlobalgasolinedemandpeaksintheneartermandfallsasEVsdeploy.Demandinadvancedeconomiesdeclinesby3mb/dto2030,mainlybecauseofreductionsinroadtransport,butthisismorethanoffsetbyincreasesinemergingmarketanddevelopingeconomieswheredemandrisesby8mb/dthisdecade.Globally,themainsectorsseeinganincreaseintheuseofoilareaviationandshipping,petrochemicals(whereoilisusedasfeedstock),andheavytrucks,whereoilisusedasafuelandnotdisplacedbytheriseofEVsinthesamewayasinotherroadtransportmodes.Thesesectorsseeariseindemandofaround16mb/dbetween2021and2050,butfromthemid‐2030sgrowthinthesesectorsismorethanoffsetbydecliningoiluseelsewhere,especiallyinpassengercars,buildingsandpowergeneration.IEA.CCBY4.0.52InternationalEnergyAgencyWorldEnergyOutlook2022ThereisnoshortageofoilresourcesworldwidetocoverthislevelofdemandintheSTEPSto2050;akeyuncertaintyforoilsecurityrelatestotheadequacyofinvestment.TheimpactoftheCovid‐19pandemicandthelowlevelofinvestmentinrecentyearsmeantherearerelativelyfewnewresourcesunderdevelopmentandadwindlingstockofdiscoveredresourcesinthenon‐OPECworldavailabletobedeveloped.Newoilresourcesdiscoveredin2021wereattheirlowestlevelsincethe1930s.Moreover,thereareconcernsinsomequartersinseveralnon‐OPECcountriesaboutthecommercialwisdomandsocialacceptabilityofembarkingonsignificanthighupstreamcapitalexpenditure.TheSTEPSseesnear‐termincreasesinoutputintheUnitedStates,GuyanaandBrazil,amongothers,butrelianceonmajorresource‐holdersintheMiddleEastgrowssteadily:theshareofOPECcountriesinglobaloilproductionrisesfrom35%in2021to36%in2030and43%in2050,implyinganincreasingdegreeofmarketpowerforthatgroupofproducers.Persistentunder‐productioninrecentyearsamongthisgroup,relativetothetargetedlevels,maybeaharbingeroftherisksthatlieahead.TheoutlookforoilisverydifferentintheAPS,wherestrongerpolicyactionleadsglobaloildemandtopeakinthemid‐2020sbeforedroppingto93mb/din2030(similartothelevelofdemandin2019).Oildemandinadvancedeconomiesfallsby7.5mb/dbetween2021and2030andincreasesby4mb/dinemergingmarketanddevelopingeconomies.ItisdifferentagainintheNZEScenario,whereglobaloildemandneverrecoverstoits2019levelandfallsbynearly20mb/dbetween2021and2030,ledbyasharpdeclineinoiluseinpassengercars(Figure1.13).Figure1.13⊳Energyuseintransportbyscenario,2000-2050IEA.CCBY4.0.Transporthaslongbeenthebedrockofoildemand,butitsroleweakensintheAPSandNZEScenarioaselectricitydisplacesverylargevolumesofoilNote:mboe/d=millionbarrelsofoilequivalentperday.10203040506070200020102020203020402050OilproductsElectricityBiofuelsHydrogenHydrogen‐basedfuelsNaturalgasSTEPSmboe/d2020203020402050APS2020203020402050NZEIEA.CCBY4.0.Chapter1Overviewandkeyfindings531ThesetwoscenarioseasetherisksonthesupplysidethatariseintheSTEPS,but,despitetoday’sscrambleforoilproducts,theyimplyseverelong‐termpressuresforrefiners.IntheAPS,morethanhalfofcurrentrefiningcapacityfacestheriskoflowerutilisationorclosureby2050,andtherearefewcapacityadditionsafterprojectscurrentlyunderconstructioncomeonline.Thoserefinersthatsurvive,investtoreduceemissionsfromrefiningoperations,notablyvialow‐emissionshydrogen,CCUSandefficiencyimprovements.Theyalsoviewintegrationwithpetrochemicaloperationsasamajorstrategicpriority,giventhattheuseofoilasapetrochemicalfeedstockisthemostdurableelementofdemand.Itwastheonlyuseofoilthatincreasedin2020amidthedisruptionoftheCovid‐19pandemic,anddemandremainsrelativelyrobusteveninveryrapidtransitions:intheNZEScenario,oiluseforpassengercarsfallsby98%betweentodayand2050,butoiluseforpetrochemicalsfallsbyonly10%,despitepoliciestobanorreducesingle‐useplastics,improverecyclingratesandpromotealternativefeedstocks.Thisisnottosaythatthesepolicieshavenoeffects:globalaveragerecyclingratesforplasticsincreasefromthecurrentlevelof17%to27%in2050intheSTEPS,50%intheAPS,and54%intheNZEScenario.2Manyrefinersarenowconsideringexpansionintoplasticsrecyclingasanotherwaytosecurenewrevenuestreams,alongsideareassuchasliquidbiofuelsandlow‐emissionshydrogen.CoalCoalconsumptionisprojectedtofallinallscenarios,decliningby10%to2030intheSTEPS,by20%intheAPSoverthesameperiod,andby45%intheNZEScenario.Inthenearterm,coaldemandincreasesastheenergycrisisleadstosomeswitchingawayfromnaturalgasbecauseofconcernsabouthighpricesandavailability.Asaresult,coaldemandintheSTEPSishigherin2030thaninthesamescenariointheWEO‐2021.Thisincreaseindemand,however,isrelativelyshort‐lived:intheSTEPS,coaldemandislowerin2030thanitistoday(althoughnotaslowasprojectedintheSTEPSintheWEO‐2021).Byandlarge,thecurrentcrisispushesuputilisationratesforexistingcoal‐firedassets,butdoesnotbringhigherinvestmentinnewones.Thisamountofadditionalcapacity,however,doesprolongtheperioduntilglobalcoal‐firedcapacitypeaks(2025intheSTEPS).Inadditiontoincreaseddemandinthepowersector,coalseesariseindemandinindustryinemergingmarketanddevelopingeconomies,whereitalreadyaccountsfor35%ofenergyusedbyindustry.Thesetrendsinpowerandindustrykeepcoaldemandaroundtoday’selevatedlevelstothemid‐2020s,butstructuraldeclinesetsinthereafter.Overallcoalconsumptionshowsamoresustainedriseonlyinafewfastgrowingcountriesandregions,notablyIndiaandSoutheastAsia.InIndia,coaldemandintheSTEPSdoesnotpeakuntiltheearly‐2030s,whenthedeploymentofrenewablesinthepowersectorspeedsup;intheAPS,thispeakoccursinthelate2020s,andthesubsequentdeclineincoaldemandisconsiderablysteeper.2Globally,17%ofplasticwasteiscollectedforrecyclingtodayalthoughtherearelargedifferencesbetweenregions:forexample,25%iscollectedforrecyclinginEuropeandlessthan10%intheUnitedStates.Recyclingratesforplasticsaremuchlowerthanrecyclingratesforsteel(80%),aluminium(80%)andpaper(60%).IEA.CCBY4.0.54InternationalEnergyAgencyWorldEnergyOutlook2022Advancedeconomiesconsumedaround1000milliontonnesofcoalequivalent(Mtce)ofcoalin2021,accountingforjustunder20%ofglobalcoaldemand(forcontext,coaldemandinChinaincreasedbyanaverageof100Mtceeachyearbetween2000and2020).Three‐quartersofadvancedeconomycoaluseisinthepowersector;intheAPS,wherecountriesmeettheirclimatetargets,unabatedcoalgenerationfallsbyaround80%to2030andisphasedoutcompletelyby2040.TheNZEScenarioincludesanevenmoreambitioustimetable:itseesanendtounabatedcoaluseforelectricitygenerationinadvancedeconomiesby2035andworldwideby2040.Focus:RussiaandthereshufflingofglobalenergytradeTheWorldEnergyOutlookhaslonghighlightedtheprospectofchangesinthegeography,scaleandcompositionofinternationalenergytrade,notablytheshiftinfossilfuelimportstowardsAsia,therisingimportanceoftradeincriticalmineralsandtheemergenceoftradeinhydrogenandhydrogen‐basedfuels.Someofthesechangesarenowbeingturbo‐chargedbyRussia’sinvasionofUkraine,whichhasledtotheabruptseveranceofthelargeandimportantinter‐regionalenergytraderelationshipbetweenRussiaandEurope.AlltradetieswithEuropebasedonfossilfuelsareultimatelyundercutinourscenariosbytheregion’snetzeroemissionsambitions,butRussia’sabilitytodeliveratrelativelylowcostmeantthatitlostgroundonlygraduallyinpreviouseditionsoftheOutlook.Nowtherupturehascomewithaspeedthatfewimaginedpossible,andourscenariosassumethatthereisnowayback.Thismeansamajorreshufflingofinternationaltrade,withinevitableimplicationsforthegeopoliticsofenergy.Figure1.14⊳CrudeoilandnaturalgasimportstotheEuropeanUnionandemergingmarketanddevelopingeconomiesinAsiabyoriginIEA.CCBY4.0.Russia’soilandgasexportsswitchfocustodevelopingAsiaintheSTEPSandAPS,butgainsinthesenewmarketsarelessthanlossesinexportstoEuropeNote:EJ=exajoule.102030405060RussiaNorthAmericaMiddleEastOtherEuropeanUnionEJSTEPSAPS201520212025203020252030DevelopingAsiaSTEPSAPS201520212025203020252030IEA.CCBY4.0.Chapter1Overviewandkeyfindings551ThelargestuncertaintyregardsRussia’sabilitytofindalternativeexportmarkets.Theprospectsvarybyfuel,withnaturalgaspresentingRussiawiththemostdifficultdilemma.Inourscenarios,RussiaattemptstopivottoAsiaandothernon‐Europeanmarkets,butisunsuccessfulinfindingmarketsforalloftheflowsthatpreviouslywenttoEurope,anditstrugglesinsomecasestodevelopnewresourcesandinfrastructure(Box1.3).TotalRussianexportlevelsareconsiderablylowerthaninpreviousWEOs,andRussianeverreturns–inanyofourscenarios–totheexportlevelsthatitsawin2021(Figure1.14).Box1.3⊳WhatnextforRussianoilandgas?TheoutlookforRussianoilandgaswasmarkedbyuncertaintywellbeforeitsinvasionofUkraine.MarketsforRussianexportswereshifting,butinfrastructurelinkswerestillconcentratedinEurope.Futureproductiongrowthwouldneedtocomefrommorechallengingandremotedeposits,yetsomeimportantupstreamtechnologiesweresubjecttosanctionsimposedaftertheannexationofCrimeain2014.Andoilandgasassetswerebeingconcentratedinthehandsofafewstate‐ownedchampionstothedetrimentoftheprivateorsemi‐privateplayers–bothdomesticandinternational–thatdrovemuchofRussia’soilandgasgrowthsince2000.TheinvasionofUkrainedeepenedallofthesedilemmas.Majorcompanies,ledbyRosneft,hadannouncedincreasesininvestmentfor2022,butthesearenowfarfromcertain.AlongwiththelossofkeyEuropeanmarkets,thesanctionsputinplacebytheEuropeanUnionandUnitedStatesareconsiderablytoughernowthanin2014.Theyincludewide‐rangingrestrictionsontheabilityofinternationalcompaniestoinvestinRussia,onthescopeforRussiancompaniestoraisefinanceinternationally,andonRussianaccesstowesterntechnology.Russiahadattemptedtoworkaroundtheearlierrestrictionsthroughaprogrammeofimportsubstitution,whichwasonlypartiallyeffective.Somefieldsareatriskofbeingshutin–ajoltfromwhicholderreservoirsinparticularmightstruggletorecover.Therearemanyuncertaintiesabouthowthisplaysout,butourprojectionsintheSTEPSandAPSsuggestthatthekeylong‐termchallengesforRussiaareconcentratedintheupstreamforoil,andinthemidstreamforgas(theissuesaremootintheNZEScenario,asnonewdevelopmentsarerequired).AgrowingshareofRussianoilproductionhadbeensettocomefromnewproductionareas,includingprojectsinEasternSiberia,theArcticandoffshore,aswellasotherhard‐to‐recoverresources.Riskstothetimingandcostofthesedevelopmentshavecompounded,andtheyareamplifiedbytheabsenceofwesterncompanies,technologiesandsomeserviceproviders(Figure1.15).PriortoitsinvasionofUkraine,RussiaplannedtouseLNGtodiversifyexportflowsawayfromEuropewithastatedaimtoexport170‐200bcmofLNGperyearby2035,upfromaround40bcmcurrently.Nowthisappearsadistantprospectwithoutinternationalpartnersandtechnologies,especiallyforliquefaction.Novatekhasdevelopedahome‐grownliquefactiontechnologycalledArcticCascade,usedforthefourthtrainofIEA.CCBY4.0.56InternationalEnergyAgencyWorldEnergyOutlook2022theYamalLNGproject,butimplementationwasbesetbydifficultiesanddelays.NowmostofRussia’sLNGexpansionplansarebackonthedrawingboard.Figure1.15⊳ChangesinRussianoilproductionandnaturalgasexportin2035intheWEO-2022STEPSrelativetotheWEO-2021STEPSIEA.CCBY4.0.Russia’soilandgasoutlookhasdeterioratedsincetheWEO-2021,itwillbetoughforittodevelopnewupstreamoilprojectsandtofindalternativemarketsforgasNotes:mb/d=millionbarrelsperday;mboe/d=millionbarrelsofoilequivalentperday;LNG=liquefiednaturalgas.Thefigureshowsthedifferencesinoilandnaturalgasproductionin2050betweentheSTEPSintheWEO‐2021andthesamescenariointhisOutlook.Overtime,moreRussianresourcesarelikelytobedrawneastwardstoAsianmarkets.Inthecaseofoil,increasedRussianflowstoAsiaarealreadyvisible.Fornaturalgas,thereorientationofflowswillrequiremoretimetotakeshapebecauseoftheneedformajornewinfrastructureinvestmentsifexportsaretoexpandbeyondthe38bcm/yearforeseenforthePowerofSiberiapipeline.Thesewillrequirenewagreementswithpartners,someofwhichhavefoundtheirconfidenceinnaturalgas–andinRussia–shakenbyrecentevents.Forthemoment,withnolinkstoalternativemarkets,muchofthenaturalgasthatwasintendedtoflowwestwardstoEuropehasnoplacetogo.Asaresult,Russia’sshareofinternationallytradedgas,whichstoodat30%in2021,fallsto15%by2030intheSTEPSandto10%intheAPS.Itsprojectednetincomefromgassales(revenueminuscosts)fallsfromUSD75billionin2021tolessthanUSD30billionin2030intheAPS.‐5‐4‐3‐2‐1mboe/dLNGPipelineNaturalgasexports‐5‐4‐3‐2‐1ExistingfieldsNewconventionalonshoreOffshore,ArcticandotherOilproductionmb/dIEA.CCBY4.0.Chapter1Overviewandkeyfindings571Russia’sshareofglobalfossilfuelexportsdeclinessubstantiallyasaresultofthecurrentcrisis(Figure1.16).Inthecaseofoil,Russiaexportedmorethan7mb/din2021;3thisfallsbyaround25%by2030intheSTEPSandby40%to2050.Bythemid‐2020s,NorthAmericaisexportingmoreoiltoglobalmarketsthanRussia,butthegapleftbyRussiaismainlyfilledbyhigherexportsfromtheMiddleEast.Incoalmarkets,morethan80%ofglobalexportsgotothePacificBasinin2030(upfromabout75%in2021).Russiahasplanstoswitchexportstothesemarkets,buttheabilitytodosorapidlyisconstrainedbybottlenecksintherailsystem.Figure1.16⊳ChangeinnettradepositionofselectedoilandgasexportersintheSTEPS,2021-2030IEA.CCBY4.0.Withthelossofitslargestexportmarket,Russiafacestheprospectofamuch-diminishedfutureroleininternationalenergytradeRussia’sreorientationtoAsianmarketsistrickiestinthecaseofnaturalgas.RussiaisdiscussingthepossibilityofnewpipelinelinkstoChina,notablythelargecapacityPowerofSiberia‐2pipelinethroughMongolia(alsosometimescalledSoyuz‐Vostok).However,ourdemandprojectionsforChinaraiseconsiderabledoubtabouttheviabilityofanotherlarge‐scalegaslinkwithRussia.TheSTEPSisthemostfavourablescenarioforsuchapipeline,andintheseprojectionsnaturalgasdemandgrowthinChinaslowsto2%peryearbetween2021and2030,comparedwithanaveragegrowthrateof12%peryearbetween2010and2021.ImportersinChinahavebeenactivelycontractingfornewlong‐termLNGsupplies,andChina’smostrecentfive‐yearplanfocussesonboostingdomesticproduction.Alongsidethe3ThisrepresentsvolumestradedbetweenregionsmodelledintheWEOanddoesnotincludeintra‐regionaltrade.Oiltradeincludesbothcrudeoilandoilproducts.‐20246UnitedStatesMiddleEastCentralandSouthAmericaRussiaOilNaturalgasmboe/dIEA.CCBY4.0.58InternationalEnergyAgencyWorldEnergyOutlook2022ramp‐upofimportsthroughexistingpipelines,China’salreadycontractedsuppliesmorethancoveritsrequirementsinthisscenariountilwellintothe2030s.Today’sgassecuritycrisishasalsoboostedmomentumbehindprojectsseekingtotradehydrogenandhydrogen‐basedfuels.However,ourtrackingofplannedprojectsrevealsasignificantimbalance:exportprojectsaremorenumerousandmoreadvancedthanthoseforthecorrespondingimportinfrastructure.Ofthe12MtH2peryearofproposedexports,only2MtH2peryearhavenamedpotentialoragreedoff‐takersandafurther3MtH2peryearciteexporttoaspecificregion.Theamountofinvestmentnecessarytosetupinternationalvaluechainsforhydrogenisenormous.Assetsthatcoulddeliver10MtH2peryeartotheEuropeanUnionin2030(inlinewiththeREPowerEUPlan)wouldcostsomeUSD700‐850billion,asumthatwouldmorethandoublewhenfinancingcostsareincluded.1.3.2Isamessytransitionunavoidable?Ourscenariosmodelorderlyprocessesofchangeinwhichmarketsarealwaysinequilibrium,withinvestmentrisingandfallingindifferentsectorstoallowforabalanceofsupplyanddemand.However,today’senergycrisishasunderscoredthat,inpractice,thefutureofenergymarketsislikelytobedisjointed,subjecttogeopoliticalfrictionandpronetoregularmarketimbalances.Inparticular,thecrisishasundercutthetrustandcollaborationthatareessentialtoeasethejourneytoanetzeroemissionssystem.Alackofsequencingandco‐ordination,bothwithincountriesandinternationally,wouldalsobeverydamagingtotheprospectsforapeople‐centredprocessofchange.Figure1.17⊳Fossilandnon-fossilenergysupplybyscenario,2020-2050IEA.CCBY4.0.ThereisanorderlyprocessofchangeintheglobalfuelmixinallWEOscenarios,withthemaindifferentiatingfeaturebeingtherapidityoftransitionfromfossilfuels10020030040050060020202050EJFossilNon‐fossilSTEPS20202050NZE20202050APSIEA.CCBY4.0.Chapter1Overviewandkeyfindings591Doesthismakeamessytransitionunavoidable?InthisOutlook,weexploreapproachesthatcanlessenthescopeforvolatilityandturbulenceahead.Thesearenotrelatedspecificallytothecurrentcrisis,althoughmanyofthemarerelevanttodiscussionsabouthowbesttocopewithitandmovebeyondit.Thetenguidelinesbelow,amplifiedinChapter4,aredesignedtoadvanceclimate,securityandaffordabilityobjectivesintandem,andrequireastrongroleforgovernmentstomanagetheprocessofchange–thoughwithoutgivingupthegainsthatcomefromwell‐functioningmarketmechanisms.Manyofthemaredesignedtoaddressspecificissuesthatariseinwhathasbeencalledthe“mid‐transition”,whencarbon‐emittingandcleanfuelsandtechnologiesneedtoco‐exist(Figure1.17).Synchronisescalinguparangeofcleanenergytechnologieswithscalingbackoffossilfuels.Manycompaniesandfinancialorganisationshavesetgoalsandplanstoscaledowninvestmentinfossilfuels.Muchmoreemphasisisneededontheirgoalsandplansforthescalingupofinvestmentincleanenergytechnologies,andonwhatgovernmentscandotoincentivisethis.Sequencingisimportant:continuinginvestmentinfossilfuelsisneededtokeepsupplyanddemandinbalancewhileenergytransitionsareinprogress,buttheextentofthisrequirementisentirelydependentonthespeedatwhichcleanenergyinvestmentscalesup.IntheNZEScenario,foreveryUSD1spentgloballyonfossilfuelsin2030,morethanUSD9isspentoncleanenergy(Spotlight).Tacklethedemandsideandprioritiseenergyefficiency.Theenergycrisishighlightsthecrucialroleofenergyefficiencyandbehaviouralmeasurestohelpavoidmismatchesbetweendemandandsupply.Since2000,efficiencymeasureshavereducedunitenergyconsumptionsignificantlyacrossvariousend‐uses,butthereismuchmorethatcanbedone.Thisisespeciallythecaseinemergingmarketanddevelopingeconomieswhereenergyperformancestandardsforappliancessuchasairconditionersandrefrigeratorsareoftenweakandsometimesnon‐existent.Stockturnoverisanothermajorchallenge,especiallyforlong‐livedassets,forexample,overhalfofthebuildingsthatwillbeinusein2050havealreadybeenbuilt.Thisunderlinesthecaseforpoliciesthatacceleratetherateofretrofits.Reversetheslideintoenergypovertyandgivepoorcommunitiesaliftintothenewenergyeconomy.Asaresultofthepandemicandtheenergycrisis,75millionpeoplehavelosttheabilitytopayforextendedelectricityservicesand100millionforcleancookingsolutions.Inemergingmarketanddevelopingeconomies,thepooresthouseholdsconsumenine‐timeslessenergythanthewealthiest,butspendafarhigherproportionoftheirincomeonenergy.Theleastwell‐offoftenliveinlessefficientbuildings,utiliseolderinefficientappliances,andrelyonmoreinefficientmeansforcookingandheating.Policyinterventionsareessentialtohelpthemcopewiththehigherupfrontcostsofcleanenergyinvestments(suchasefficiencyandelectrification).Ifclimatepoliciesdonotdothis,theyriskbeingsociallydivisive,especiallyinahighpriceenvironment.IEA.CCBY4.0.60InternationalEnergyAgencyWorldEnergyOutlook2022Collaboratetobringdownthecostofcapitalinemergingmarketanddevelopingeconomies.Thecostofcapitalisasignaloftherealandperceivedrisksassociatedwithinvestment,anditishigherinmanyemergingmarketanddevelopingeconomiesthanelsewhere.NewinvestorsurveysconductedforthenewIEA‐hostedCostofCapitalObservatorysuggestthatthecostofcapitalforasolarPVplantin2021inkeyemergingeconomieswasbetweentwo‐andthree‐timeshigherthaninadvancedeconomiesandChina.Tacklingthevariouseconomy‐wideorproject‐specificrisksthatpushupthecostofcapitalisessentialtobringinvestmenttowhereitismostneeded.Itwouldalsomakeahugedifferencetotheoverallcostsoftransition.A200basispointreductioninthecostofcapitalinallemergingmarketanddevelopingeconomieswouldreducethecumulativecleanenergyfinancingcoststoreachnetzeroemissionsbyUSD15trillionthroughto2050.Managetheretirementandreuseofexistinginfrastructurecarefully,bearinginmindthatsomeofitwillbeessentialforasecurejourneytonetzeroemissions.Somepartsoftheexistingfossilfuelinfrastructureperformfunctionsthatwillremaincriticalforsometime,eveninveryrapidenergytransitions.Forexample,theimportanceofgas‐firedpowerforelectricitysecurityactuallyincreasesinmanycountriesduringenergytransitionsbeforefalling–especiallyinsystemswithsignificantseasonalvariationsindemand.IntheEuropeanUnion,peakrequirementsfornaturalgasgoupthroughto2030eventhoughoveralloraggregatedemandgoesdown.Managingthedeclineinrefinerycapacityisalsoimportant:eveninmarketswhereinternalcombustionengine(ICE)vehiclesalesarebanned,oildemandfortransportdoesnotdisappearimmediately.Unplannedorprematureretirementofthisinfrastructurewillhavenegativeconsequencesforenergysecurityandforjobs.Tacklethespecificrisksfacingproducereconomies.Oilandgassecurityduringtransitionswilldependontheabilityofhydrocarbon‐dependenteconomiestodiversifyandfindothersourcesofeconomicadvantage.Thesemaywellcontinuetobeintheenergysector:manyresource‐richcountriesareinvestingapartofcurrentwindfalloilandgasprofitsinrenewablesandlow‐emissionshydrogen.Potentialexportearningsfromhydrogenarenosubstituteforthosefromoilandgas,butlowcostrenewables,naturalgasandCCUSstoragepotentialcouldprovideadurablefoundationforattractinginvestmentinenergy‐intensiveindustrialsectors.Investinflexibility–anewwatchwordforelectricitysecurity.Maintainingelectricitysecurityinthepowersystemsoftomorrowcallsfornewtoolsandapproaches.Powergeneratorswillneedtobemoreresponsive;consumerswillneedtobemoreconnectedandadaptable,andgridinfrastructurewillneedtobestrengthenedanddigitalised.Highervariabilityinelectricitysupplyanddemandmeansthattherequirementforflexibilityquadruplesbymid‐centuryinboththeAPSandtheNZEScenario,underscoringtheimportanceofpoliciesthatadequatelyremuneratetherelevanttechnologiesandinfrastructure.Batterystorageanddemand‐sideresponsebecomeincreasinglyimportant,eachprovidingaquarteroftheflexibilityneedsin2050intheAPS.IEA.CCBY4.0.Chapter1Overviewandkeyfindings611Ensurediverseandresilientcleanenergysupplychains.Highandvolatilecriticalmineralpricesandhighlyconcentratedsupplychainscoulddelayenergytransitionsormakethemmorecostly.Demandforcriticalmineralsissettoquadrupleby2050inboththeAPSandtheNZEScenario.At2021prices,thevalueofthemineralsusedincleanenergytechnologiesincreasesmorethanfivefold,reachingUSD400billionby2050inthesescenarios.Minimisingthisriskrequiresactiontoscaleupanddiversifysuppliesalongsiderecyclingandothermeasurestomoderatedemandgrowth.Technologicalinnovationhasalreadyshownitsabilitytorelievesomeofthepressureonprimarysupplies:newerlowcobaltEVbatteriescontain75–90%lesscobaltthanearliergenerationsofbatteries,althoughtheyusetwiceasmuchnickel.Fostertheclimateresilienceofenergyinfrastructure.Thegrowingfrequencyandintensityofextremeweathereventspresentsmajorriskstothesecurityofenergysupplies.IEAanalysisoftherisksfacingfourillustrativeassetsshowsthatthepotentialfinancialimpactfromfloodingcouldamountto0.3‐1.2%oftheirtotalassetvaluein2050,andinonecasewouldbefour‐timeshigherthanthiswithoutflooddefencesinplace.Governmentsneedtoanticipatetherisksandensurethatenergysystemshavetheabilitytoabsorbandrecoverfromadverseclimateimpacts.Providestrategicdirectionandaddressmarketfailures,butdonotdismantlemarkets.Theenergycrisishasbeenaccompaniedbylarge‐scaleinterventionsfromgovernments,oftentoprotectdifferenttypesofconsumersfrompricespikesandtoensureenergysecurity.Governmentsarealsotakingonincreasinglyexpansiverolestodriveandacceleratetransitions.However,transitionsareunlikelytobeefficientiftheyaremanagedonatop‐downbasisalone.Governmentsneedtoharnessthevastresourcesofmarketsandincentiviseprivateactorstoplaytheirpart.Around70%oftheinvestmentsrequiredintransitionsarelikelytoneedtocomefromprivatesources.Thismeanscorrectingformarketfailures–includingviasupportforinnovationandbythephaseoutofharmfulfossilfuelsubsidies–andprovidingthepolicysignalsandpublicfinancethatcancatalyseprivateinvestment.Cantheworldrightitsinvestmentimbalances?Cleanenergyinvestmenthaspickedupinrecentyears,butisstillwellshortofthelevelsrequiredtoprovidelastingsolutionstotoday’senergycrisis.Intheabsenceofacceleratedcleanenergytransitions,spendingontraditionalfuelsisalsoinsufficienttokeepthecurrentsystemoperatingeffectively.Somethinghastochangeinordertoavoidanenergy‐starvedworldcharacterisedbycontinuedpricevolatility.IEAanalysishasrepeatedlyhighlightedthatasurgeinspendingtoboostdeploymentofcleanenergytechnologiesandinfrastructureprovidesthewayforward,andthatthisneedstohappenquicklyorglobalenergymarketswillfaceaturbulentandvolatileperiodSPOTLIGHTIEA.CCBY4.0.62InternationalEnergyAgencyWorldEnergyOutlook2022ahead.However,thetaskaheadissometimesmischaracterisedandoversimplifiedasareallocationofexistingflowsfrom“dirty”to“clean”.Inpractice,comparingcurrentenergyinvestmentflowswithwhatwillberequiredintheNZEScenarioin2030highlightsatleastfourinter‐relatedtasks(Figure1.18).Noneofthesecanbeconsideredinisolationwithoutriskingnewimbalancesandmarketvolatility.Reductionsinfossilfuelinvestmentareaconsequenceofthesechanges.Figure1.18⊳EnergyinvestmentintheNZEScenario,2021and2030IEA.CCBY4.0.TherearemultipleimbalancesincurrentinvestmentflowsthatneedtobeaddressedinordertomeetrisingdemandforenergyserviceswhilereducingemissionsExcludesChina.Note:EMDE=emergingmarketanddevelopingeconomies;NZE=NZEScenario.Attractmoreinvestorstoenergy.Thereisnotenoughcapitalflowingtotheenergysector.Itwouldneedtodoubleoverthecomingdecadetogettheworldontrackfora1.5°Cstabilisationinglobalaveragetemperatures.Thismeanstappingnewsourcesoffinance,beyondthosealreadyengaged.Scaleuparangeofcleantechnologiesandinfrastructure.Theincreaseinglobalinvestmentneedstobeconcentratedacrossmultiplecleantechnologies,includingrenewablegeneration,efficiencyimprovements,cleanfuelsandCCUS,aswellastherequiredinfrastructureintheformofexpandedandmodernisedgridsandstorage.Totalcleanenergyinvestmentincreasesthreefoldbetween2021and2030andnine‐timesmoreenergyinvestmentflowstocleanenergythantofossilfuelsin2030.123452021NZE20302021NZE20302021NZE20302021NZE2030TrillionUSD(2021)3.2x2.1x3.6x2.7xTotalenergyCleanenergyEnd‐useandefficiencyEMDEIEA.CCBY4.0.Chapter1Overviewandkeyfindings631Donotunderweightthedemandside.Thetransformationoftheenergysectorrequiresarebalancingtowardsdemandandend‐usesectorstospurmuchhigherefficiencyandelectrification.Createalow‐emissionspathwayfordevelopingeconomies.WiththeexceptionofChina,investmentlevelsarelaggingmostsignificantlyinemergingmarketanddevelopingeconomies.Meetingrisingdemandforenergyservicesinasustainablewaywillonlybepossibleifdevelopmentmodelsareabletobypassthehighcarbonchoicesthatothereconomieshavepursuedinthepast.Thescaleofadditionalinvestmentrequiredmeansthatmostofitwillneedtocomefromprivatesources,butpublicfinancialinstitutionsplaycrucialrolestobringforwardinvestmentinareaswhereprivateplayersdonotyetseetherightbalanceofriskandreward.Aclearandunifiedfocusonenergytransitionsamongtheinternationaldevelopmentbanks,alongsidelargerclimatefinancecommitmentsfromadvancedeconomies,iscriticaltosupporttransitionsacrossthedevelopingworld.1.4OutlookforenergytransitionsEnergy‐relatedandindustrialprocessCO2emissionsreboundedby1.9Gtin2021–thelargesteverannualriseinemissions–withglobalCO2emissionsin2021totalling36.6Gt.IntheSTEPS,CO2emissionsreachaplateauinthemid‐2020sat37Gtandthereafterfallslowlyto32Gtby2050(Figure1.19).ThisdeclinerepresentsabreakintheclosehistoricalrelationshipbetweengrowthinGDPandgrowthinemissions.IthighlightstheprogressmadesincetheParisAgreementin2015.Priortothat,thetrajectorybasedoncurrentpolicieswasforCO2emissionstorisetomorethan50Gtby2050.Thiswouldhaveledtoamedianglobalaveragesurfacetemperatureriseofaround3.5°Cby2100.4TheSTEPSindicatesatrajectorythatwouldleadtoa2.5°Ctemperaturerisein2100.Inotherwords,thechangesinpoliciesandtechnologiesmadesince2015havealreadyreducedtheprojectedlong‐termtemperaturerisebyaround1°Cby2100.However,theSTEPStrajectoryisnotanadequateanswertothechallengeofclimatechange;itwouldnotbeenoughtoavoidsevereimpactsfromawarmingplanet.IntheAPS,CO2emissionspeakinthemid‐2020sandfalltoaround12Gtin2050.ThisisabiggeremissionsreductionthanintheWEO‐2021,reflectingtheneworupdatedNationallyDeterminedContributions(NDCs)andannouncednetzeroemissionspledgesthathavebeenmadeoverthelastyear,themostsignificantofwhichwasIndia’sannouncementofa2070netzeroemissionstarget(Figure1.20).Theseadditionalcommitmentshelptoreducethegapin2030betweenenergy‐relatedCO2emissionsintheAPSandtheNZEScenarioby2.1Gt.Therearelargedifferencesinemissionstrajectoriesbetweenregions,CO2emissions4Energy‐relatednon‐CO2emissions,includingmethaneandnitrogendioxide,aremodelledindetailforallscenarios;non‐energy‐relatedgreenhousegasemissionsareassumedtomoveinlinewiththeoverallemissionsreductioneffortsofeachscenario.IEA.CCBY4.0.64InternationalEnergyAgencyWorldEnergyOutlook2022in2030declineby40%inadvancedeconomiesbutbyonly5%inemergingmarketanddevelopingeconomies.Theprojectedglobalmediantemperaturerisein2100isabout1.7°C.ThisgetsclosetoachievingthegoaloftheParisAgreementtolimitthetemperatureriseto“wellbelow2°C”,anditmarksthefirsttimethatcollectivegovernmenttargetsandpledgeshavebeensufficient,ifdeliveredinfullandontime,toholdglobalwarmingtobelow2°C.However,astheIPCChasunderlined,warmingofcloseto2°Cwouldstillentailstrongnegativeimpactsforsocietiesaroundtheworld(IPCC,2022b).Figure1.19⊳Energy-relatedandprocessCO2emissions,2010-2050andtemperaturerisein2100byscenarioIEA.CCBY4.0.Policyandtechnologyadvancessince2015haveshaved1°Coffthetemperaturerisein2100butstatedpoliciesstillleadtoatemperaturerisewellabovetheParisAgreementgoalsNotes:Pre‐ParistrajectoryisbasedontheCurrentPoliciesScenariofromtheWEO‐2015(IEA,2015).Temperatureriseestimatesarerelativeto1850‐1900andmatchtheIPCCSixthAssessmentReportdefinitionofwarmingof0.85°Cbetween1995‐2014(IPCC,2022a).IntheNZEScenario,CO2emissionsdeclineto23Gtin2030andtozeroin2050,plusthereisa75%reductioninenergy‐relatedmethaneemissionsto2030.Theglobaltemperaturerisepeaksbelow1.6°Caround2040,beforedroppingtoaround1.4°Cin2100.Asaresult,theNZEScenariofallswithinthegroupofscenarioscategorisedbytheIPCCasa“noorlowovershoot”scenario,andalignswiththegoal,agreedagaininGlasgowatCOP26in2021,to“pursueeffortstolimitthetemperatureincreaseto1.5°C”(IPCC,2022b).Accesstocleanenergyisoneofthekeyindicatorsofsustainabledevelopmenttrackedinourscenariosalongwithenergy‐relatedemissions.Theoutlookforthefuturevarieswidelybyscenario.OnlyintheNZEScenarioisuniversalaccesstobothelectricityandcleancookingachievedby2030.Airqualityisanothercriticalindicatorofwell‐being.Outcomesarestronglycorrelatedwiththestrengthofclimateaction(Box1.4).10203040506020102020203020402050GtCO₂CO2emissionsPre‐ParisbaselineSTEPSAPSNZE123456NZEAPSSTEPSPre‐ParisTemperaturerisein21005th‐95thpercentile33rd‐67thpercentileMedian°CIEA.CCBY4.0.Chapter1Overviewandkeyfindings651Figure1.20⊳ChangeinCO2emissionsinthe2022APSrelativetotheWEO-2021APS,2025-2050IEA.CCBY4.0.Emissionsin2050inthisyear’sAPSare8GtCO2lowerthanlastyear’sOutlook,mainlyduetothenetzeroemissionspledgesmadebyIndiaandinSoutheastAsiaBox1.4⊳AirpollutionanditsnegativeimpactsonhumanhealthPollutedaircausesatleast19000excessdeathsadayaroundtheworld.5Italsoentailssignificantdirecteconomiccosts,suchasthoserelatedtotheprovisionofhealthcare,aswellasindirecteconomiccosts,suchasthosearisingfromlabourproductivitylossesorcropdamage.Airpollutantemissionsdeclineineachofthescenarios,butthetrajectoriesvaryconsiderably.IntheSTEPS,vehicleemissionsstandards,reducedcoaluseandalowerlevelofrelianceonfuelwoodandothersolidbiomassforheatingandcookinghelptobringaboutamodestdeclineinairpollutantemissionsfromcurrentlevels.However,theoveralleffectsofpollutedaironpublichealthcontinuetoworsenthroughto2050–especiallyinAsia–becauseofpopulationgrowthandurbanisationandbecauseofthetimelagbetweenexposuretopollutionandhealthproblemsandprematuredeath.Thehealthimpactsofairpollutioncontinuetorisethroughto2050intheAPS,despitetheachievementofallannouncedemissionsreductionsgoals.Thisisbecausefossilfueluseinmanyemergingmarketanddevelopingeconomiesdoesnotdramaticallydeclineuntilafter2030,leavingmanyexposedtohighlevelsofpollutionduringthisdecade.The5In2021,indoorairpollutioncausedanestimated3.6millionprematuredeaths,whileoutdoorairpollutioncaused4.2million.IndiaSoutheastAsiaMiddleEastAfricaAdvancedeconomiesOther‐10‐8‐6‐4‐202202520302035204020452050GtCO2IEA.CCBY4.0.66InternationalEnergyAgencyWorldEnergyOutlook2022SDG7goalofuniversalaccesstocleancookingby2030isnotachievedinthisscenario,whichhasasimilareffect.OnlyintheNZEScenariodoweseeamajordifferenceinoutcomes,withnearlytwobillionfewerpeoplebreathingheavilypollutedairin2050thantoday(Figure1.21).Figure1.21⊳Populationexposedtoheavilypollutedair,2021and2050IEA.CCBY4.0.TheAPSseesalowernumberofpeoplebreathingheavilypollutedairthanintheSTEPSbutonlyintheNZEScenariodoesthenumberin2050fallbelowcurrentlevelsNote:Heavilypollutedair=PM2.5concentrations≥35microgrammespercubicmetre.1.4.1SelectedcountryandregionaltrendsUnitedStatesTheInflationReductionActandtheBipartisanInfrastructureActcatalyseasharpriseinthepaceofenergytransitionsintheUnitedStatescomparedwiththeWEO‐2021(Box1.5).Stronggrowthinrenewablesmeansthatcoaldemandfallsbythree‐quartersto2030(Figure1.22).Gas‐firedgenerationpeaksbefore2030:overallnaturalgasdemandendsthedecadejustunderthelevelitreachedin2021,allowingforincreasedexportsofLNG.Oildemandfallsby1mb/dby2030fromnearly18mb/dtoday,largelyduetoanincreaseinEVsales(30%ofcarsalesin2030)andfueleconomyimprovements.Policychangesalsoprovidesupportforlifetimeextensionsfortheageingfleetofnuclearpowerplants.TheSTEPSprojectionsareconsistentwithanearly40%reductioninUSenergy‐relatedCO2emissionsto2030relativeto2005levels.IntheAPS,theUnitedStatesachievesitsstatedambitionofnetzeroemissionsfromtheelectricitysectoraround2035throughfasterdeploymentofrenewables,CCUS,hydrogenandammonia,andanexpansionofnuclearpowerincludingdevelopmentofsmallmodularreactors.SalesofEVsrisemorequicklythanintheSTEPS,andEVsaccountforone‐out‐of‐twocarssoldby2030.1232021STEPS2050APS2050NZE2050BillionpeopleEmergingmarketanddevelopingeconomiesAdvancedeconomiesIEA.CCBY4.0.Chapter1Overviewandkeyfindings671Figure1.22⊳Energydemandgrowthbyregionandscenario,2021-30IEA.CCBY4.0.Fastgrowingregionsseeenergydemandmetbyarangeoffuelsandtechnologies,whilegrowthinadvancedeconomiesismetexclusivelybylow-emissionssources‐4‐2024UnitedStatesEuropeanUnionJapanChinaIndiaSoutheastAsiaAfricaMiddleEastOil(mb/d)‐200‐1000100200UnitedStatesEuropeanUnionJapanChinaIndiaSoutheastAsiaAfricaMiddleEastNaturalgas(bcm)‐500‐2500250500UnitedStatesEuropeanUnionJapanChinaIndiaSoutheastAsiaAfricaMiddleEastCoal(Mtce)481216UnitedStatesEuropeanUnionJapanChinaIndiaSoutheastAsiaAfricaMiddleEastRenewables(EJ)‐2‐1012UnitedStatesEuropeanUnionJapanChinaIndiaSoutheastAsiaAfricaMiddleEastEmissions(GtCO2)2010‐19STEPSAPS2021‐30:IEA.CCBY4.0.68InternationalEnergyAgencyWorldEnergyOutlook2022Box1.5⊳TheInflationReductionAct:amajorlandmarkinUStransitionsTheUSInflationReductionActcommitsnearlyUSD370billiontoenergysecurityandclimatechangeprovisions,morethanone‐thirdofallgovernmentspendingearmarkedforcleanenergyinrecoverypackagessincetheoutbreakoftheCovid‐19pandemicin2020.ThiscomesontopofanadditionalUSD190billionforcleanenergyandmasstransitintheInfrastructureInvestmentandJobsAct,adoptedinNovember2021.Together,thesebolstereffortstoreducegreenhousegasemissionsintheUnitedStates,resultinginaround40%lessCO2emissionsin2030intheSTEPSrelativeto2005levels.ThelargestimpactoftheInflationReductionActisintheelectricitysector,whereCO2emissionsin2030arealmost50%lowerthantoday,duetotaxcreditsacceleratingthedeploymentofsolarPVandwind,combinedwithsupportfornuclearlifetimeextensionsandbatteries.Taxcreditsforelectriccarshelpliftannualsalesfrom0.6milliontoday(5%ofcarsales),tonearly4.5millionin2030(30%ofsales).Technologiesthataidemissionsreductionsinhard‐to‐abateindustrialsectors,suchasCCUSandlow‐emissionshydrogen,allareeligibleforsubstantialtaxcredits,whichlaythefoundationsforstronggrowth.Figure1.23⊳GovernmentfundingintheUSInflationReductionActandInfrastructureInvestmentandJobsActandtechnologydeploymentintheSTEPSintheUnitedStates,2021-30IEA.CCBY4.0.RecentUSlegislationprovidesnearlyUSD560billionforcleanenergy,significantlyboostingcleanpower,electriccars,andlow-emissionshydrogen20%40%60%80%100%Low‐emissionspowerLow‐emissionsvehiclesTechnologyinnovationOtherAllocationofgovernmentfundingTechnologydeploymentintheUnitedStatesintheSTEPS10203040506020212030Additions(GW)SolarPV20212030Wind12345620212030Sales(million)Electriccars0.51.01.52.02.53.020212030Low‐emissionshydrogen(Mt)IEA.CCBY4.0.Chapter1Overviewandkeyfindings691Theseincentivesmobilisesubstantialadditionalprivateinvestment.Withthetaxcredits,thelevelisedcostfornewsolarPVandwindintheUnitedStateswouldbelowerthannewrenewableprojectsinallotherregionsintheSTEPS.Whenstackedwiththelow‐emissionshydrogenproductiontaxcredits,hydrogenproducedusingsolarPVorwindcouldcoverupfrontinvestmentwithinthefirstyearofinvestmentwhensecuredagainstthefuturetaxcreditrevenues.Directaircaptureprojects,ifcapturingthefulltaxbenefits,couldbeinasimilarsituationbytheendofthisdecade.Thisremovesmanycriticalbarriersfortheseindustriesandtheiroff‐takers,andissettomovethesenewtechnologiesrapidlyalongthelearningcurvetowardslargerscalecommercialdeployment.HigherincentivesareavailableforprojectsandconsumersusinggoodsmanufacturedintheUnitedStates,whichcoupledwithtaxcreditsforinvestors,issettoprovideamajorboosttocleanenergymanufacturingintheUnitedStates.Overall,theInflationReductionActleadstoastronguptickofnewcleanenergyprojectsintheSTEPS.Inthepowersector,annualsolarandwindcapacityadditionsexpand2.5‐timesovercurrentlevelsby2030,whileelectriccarsalesexpandaroundseven‐fold(Figure1.23).Thesetrends,alongwithotherefficiencypoliciesandeffortstoreducemethaneemissions,increasetheavailabilityandvaluepropositionofUSoilandgasexports,whichhelptosubstituteforlowerexportsfromRussia.EuropeanUnionHighercoaluseduringtheenergycrisisprovestemporaryasenergytransitionsgatherpace.IntheSTEPS,strengthenedpolicytargetsandframeworks,highfossilfuelpricesandthedrivetoreduceimportdependencyonRussiameanthattheEuropeanUnionseesdemandforcoalfallbyaroundhalfby2030,anddemandfornaturalgasandforoilbyalmostafiftheach.DeploymentofwindandsolarPVgainsfurthermomentumandtheyrespectivelyaccountforalmostfor30%and15%ofelectricitygenerationby2030intheSTEPS,upfrom13%and5%in2021.Inend‐usesectors,reductionsinnaturalgasuseinbuildingsandindustryandtheuptakeofEVsinroadtransportcontributethemajorityofthereductionsinfossilfueluse.IntheAPS,targetsintheFitfor55packagearelargelymet–andinsomecasesexceeded–tofulfiltheNDCobjectivetoreducegreenhousegas(GHG)emissionsby55%by2030relativeto1990.ThismeansCO2emissionsdeclinebyaround45%relativeto2021levelsintheAPS,comparedto26%intheSTEPS.Rapidrenewablesdeployment,efficiencygainsandelectrificationdriveafasterreductionofnaturalgasuseinthepowerandbuildingssectorsthanintheSTEPS,aswellaslowerdemandforoil.TheEuropeanUnionmovestowardsanelectricitysystemdominatedbywind,withonshoreandoffshoresourcestogetheraccountingforjustover40%oftotalgenerationin2050intheSTEPSand50%intheAPS.JapanJapanseesa1%annualreductionintotalenergysupplyto2030intheSTEPS,inlinewithitsnewStrategicEnergyPlanapprovedinOctober2021.ThisplanforeseesrestartingnuclearreactorsthatareofflineandliftingboththesharesofnuclearandrenewablestoallowforaIEA.CCBY4.0.70InternationalEnergyAgencyWorldEnergyOutlook2022significantreductioninrelianceoncoal‐andgas‐firedplants.Japanisalsoseekingtoretrofitcoalplantstoco‐firewithammonia;itistheonlycountrydeployingthistechnologyatsignificantscaleintheSTEPS.IntheAPS,a36%decreaseinemissionsfrom2021to2030isachievedviafurtherelectrificationofindustryandtransport,andaccelerationofenergyefficiencyimprovements,forexamplethroughbuildingmaterialsstandardsfornewconstruction.AdditionalpolicyimpetuscomesfromthenewEnergyEfficientTechnologicalStrategiesandstrengtheningitsTopRunnerprogramme.FurtherdecarbonisationofthepowersectorintheAPSreflectsthenewGreenTransformationinitiative,whichwouldmakelarge‐scalefundingavailabletovariouslow‐emissionstechnologies,reinforcetheefforttorevivenuclearreactorsandintroducemeasurestosupportmanufacturersofnucleartechnology.ChinaGrowthinenergydemandinChinahasbeenamajordriverforallmannerofenergytrendsoverthepasttwodecades,yetitslowsintheSTEPSandstallsbefore2030,withemissionspeakingaroundthesametime(inlinewithitsNDCandnationaltargets).Renewablesaccountfornearly45%ofelectricitygenerationin2030andaccountforthemajorityoftheelectricitydemandgrowth,helpingunabatedcoalusetopeakbefore2030inalignmentwithgovernmenttargets.Oildemandalsopeaksinthesecond‐halfofthisdecade,reachingasimilarlevelofdemandastheUnitedStatesin2030atjustunder17mb/d(withapopulationfour‐timeslarger)beforedeclining.ThispeakanddeclinereflectrisingEVsales,andChinaremainstheworld’slargestEVmarket.IntheAPS,thepeakinemissionsoccursslightlyearlierandatalowerlevelasChinaacceleratesactiontoachievecarbonneutralitybefore2060.Electrificationvialow‐emissionssourcesiscentraltoitsemissionsreductionefforts:totalgenerationin2050risesbytwo‐thirdsintheSTEPSandnearlydoublesintheAPS.Theshareoflow‐emissionstechnologiesexceeds75%intheSTEPSand90%intheAPS,upfrom34%today.Theworld’slargestnewbuildnuclearprogrammemeansanexpandingrole:newprojectsaddmorethan120GWofnuclearcapacityintheSTEPS,and160GWintheAPS,ontopofthe50GWinoperationtoday.IndiaIndiabecomestheworld’smostpopulouscountryby2025and,combinedwiththetwinforcesofurbanisationandindustrialisation,thisunderpinsrapidgrowthinenergydemand,whichrisesbymorethan3%peryearintheSTEPSfrom2021to2030.Itseesthelargestincreaseinenergydemandofanycountry.EventhoughIndiacontinuestomakegreatstrideswithrenewablesdeploymentandefficiencypolicies,thesheerscaleofitsdevelopmentmeansthatthecombinedimportbillforfossilfuelsdoublesoverthenexttwodecadesintheSTEPS,withoilbyfarthelargestcomponent.Thispointstocontinuedriskstoenergysecurity.CoalgenerationisprojectedtocontinuetoexpandinabsolutetermsintheSTEPS,peakingaround2030,thoughitsshareofelectricitygenerationfallsfromjustbelow75%to55%overIEA.CCBY4.0.Chapter1Overviewandkeyfindings711thisperiod.Governmentprogrammes,suchastheGatiShaktiNationalMasterPlanandtheSelf‐ReliantIndiascheme,andstrongeconomicsunderpinrobustgrowthinrenewablesandelectricmobility,notablyfortwo/three‐wheelers.Renewablesmeetmorethan60%ofthegrowthindemandforpower,andaccountfor35%oftheelectricitymixby2030:solarPValoneaccountsformorethan15%.However,coalstillmeetsathirdofoverallenergydemandgrowthby2030,andoil,mainlyfortransport,anotherquarter.IntheAPS,morerapidprogressindeployinglow‐emissionsalternativesinpower,industryandtransportsectorsinparticularputsIndiaonatrajectoryinlinewithitsgoalofnetzeroemissionsby2070.SoutheastAsiaSoutheastAsiaisalsoprojectedtoseearapidriseinenergydemand,withannualaveragegrowthofmorethan3%from2021to2030intheSTEPS.Thisismetbyincreasesinallfuelsandtechnologies,ledbyoil.Coalcontinuestodominateintheelectricitysector,itssharedecliningonlyslightlyfrom42%todayto39%by2030intheSTEPS.Withtheimplementationinfullofannouncedpledges–notablyIndonesia’sgoaltohaltunabatedcoalgenerationbythe2050s–coaluseinthepowersectorfallsbymorethanhalfby2050intheAPS,andrenewablesquicklybecomethelargestsourceofelectricitygeneration.Electricityuseextendstonewend‐usesectors,drivenbytargetstohaltsalesofICEvehiclesinThailandby2035andinSingaporeby2040,andtheaimofIndonesiatoachieve2millionelectriccarsontheroadby2030.AfricaTheglobalenergycrisishasbeenasetbackformanyAfricancountries,withthepartialexceptionofenergyexporters.Highenergypriceshavecontributedtorisingcostsforbasicfoodstuffsbothdirectly(costofenergyforagriculturalequipment)andindirectly(throughhighernaturalgasinputcostsfornitrogenfertilisers).IntheSTEPS,lowcostrenewablepower,includingsolarPV,hydroandgeothermal,addssubstantiallytotheenergysupplyoverthecomingdecades,andrenewablesprovideone‐thirdoftotalgenerationby2030.Growthinoilintransportandforliquefiedpetroleumgas(LPG)forcookingpushdemandtoover5mb/dby2030;naturalgas,supportedbynewdiscoveries,fuelstheexpandingsteel,cement,waterdesalinationandfertiliserindustries.MiddleEastNaturalgasmeetsmorethan60%ofenergydemandgrowthintheMiddleEastto2030intheSTEPS,muchofwhichisduetoanincreaseintheuseofnaturalgasinwaterdesalinationplants.GasdemandremainsrelativelyresilientintheAPS,withasmallbutincreasingshareusedforhydrogenproduction.Renewablesmeethalfofrisingpowerdemand,thankstosomeofthelowestcostsolarintheworldandanincreasingpolicyfocusondiversifyingtheenergysectorandthebroadereconomy.Withlargehydrocarbonreservesandrenewablespotential,manyMiddleEastcountriesarealsoexploringthepotentialforhydrogenproductionandtrade,withEuropeandJapanthemainpotentialbuyers.IEA.CCBY4.0.72InternationalEnergyAgencyWorldEnergyOutlook20221.4.2Keepingthedoorto1.5°CopenToday’spolicysettingsfallshortofwhatisneededduringacriticaldecadetodeliverthecollectiveemissionsreductionscontainedintheNDCs,andevenfurthershortofwhatisrequiredtoalignwitha1.5°Cstabilisationinglobalaveragetemperatures.In2030,CO2emissionsintheAPSarearound5GtCO2lowerthanintheSTEPS,butnearly9GtCO2higherthanintheNZEScenario.ThegapbetweentheAPSandtheNZEScenarioto2030isnearlytwiceaslargeasthegapbetweentheSTEPSandtheAPS,highlightingtheneednotonlytoimplementexistingpledgesbutalsotoraisetheoveralllevelofambition.ClosingthegapbetweentheSTEPSandtheAPStrajectories,andthenwiththeNZEScenario,willdependontheworld’sabilitytoscaleupresilientcleanenergysupplychains,whichhasclearimplicationsfortheneedforinvestmentintraditionalelementsofsupply.Thisoverviewchapterconcludeswithareviewofourfindingsonthesecriticallyimportantandhighlyinterdependentquestions.PrioritymeasurestoclosethegapwiththeNZEScenarioto2030WhatarethekeypolicymeasuresandinstrumentsthatwillberequiredthisdecadetoimplementexistingpledgesandclosethegapbetweentheSTEPSandtheAPStrajectories,andthenwiththeNZEScenario?Themostrapidchangesandthelargestemissionsreductionsthisdecadewillneedtocomefromtheelectricitysector,andinparticularfromarapidexpansionofcleanelectricitygenerationandaconsequentdeclineinemissionsfromcoal(Figure1.24).6Theearlydecarbonisationofelectricitysupplyisacriticalelementtoenergytransitions,sincecleanelectricitynotonlycutspowersectoremissionsbutalsohelpsbringaboutemissionsreductionsinend‐usesectorsastheyincreasinglylooktoelectricitytomeetdemandforenergyservices.Asaresult,electricitybecomesthe“newoil”intermsofitsdominantroleinfinalenergyconsumption.Unlikeoil,however,itplaysaroleinallend‐usesectorsandalsodriveshugeimprovementsintheoverallefficiencyoftheenergysystem.By2050,electricityprovidestwo‐thirdsoftheusefulenergyenjoyedbyconsumers,muchhigherthanitsshareinfinalconsumption(slightlymorethanone‐half).Despiteitspositioninthevanguardofenergytransitions,theelectricitysectoremitted13GtCO₂in2021,morethanone‐thirdofglobalenergy‐relatedCO₂emissions.ElectricitysectorCO2emissionspeakinthecomingyearsineachscenarioandarefollowedbysteepreductions.AdditionalpledgesandannouncementsoverthepastyearhavehelpedclosetheprojectedgapinemissionsbetweentheAPSandNZEScenario,especiallyinadvancedeconomieswherethefullimplementationofcountrypledgeswouldnowbringtheoutlookclosetothatoftheNZEScenario.However,thereremainsahugeamounttobedonetocompletelyclosethisgap,particularlyinemergingmarketanddevelopingeconomies.6InNovember2022,theIEAwillreleaseCoalinNetZeroTransitions:Strategiesforrapid,secureandpeople‐centredchange.IEA.CCBY4.0.Chapter1Overviewandkeyfindings731Figure1.24⊳CO2emissionsreductionsinselectedsectors,2021-2030IEA.CCBY4.0.Reducingemissionsfromcoal-firedpower,energyintensiveindustries,carsandspaceheatingaccountsforthree-quartersoftotalemissionsreductionsto2030intheNZEScenarioThereductioninemissionsfromcoal‐firedpowergenerationcallforadramaticaccelerationindeploymentoflow‐emissionssources,mainlyrenewables,supportedbymeasurestoexpandandmodernisegridsandtoincentiviseinvestmentinvariousformsofflexibility,includingenergystorage.Thereisnowaytotackleclimatechangeeffectivelywithoutasurgeininvestmentincleanpowerandinfrastructurethatsignificantlyreducescoal‐firedgeneration.Iftheexistingfleetofcoal‐firedpowerplantsweretooperateastheyhaveinrecentyearsforthenext50years,thisalonewouldtakeuptwo‐thirdsoftheremainingCO2budgetconsistentwithlimitingtheglobalaveragetemperatureincreaseto1.5°C.Despitethehugeinvestmentrequired,therapidreplacementoffossilfuelgenerationbyrenewables,principallysolarPVandwind,helpstoreduceelectricitycostsaswellasemissions.IntheNZEScenario,electricitycostscomedownfromtheircurrenthighlevelsbythemiddleofthedecade,andtotalelectricitysupplycostsperunitofelectricitygenerationarethenbroadlystableto2030.After2030theystarttoreduce:by2050theaveragecostofelectricityisaround10%belowthelevelseenin2021.Twoothercriticalstrategiestoclosethegapwithclimateobjectivesareenergyefficiencyimprovementsandelectrificationofend‐uses.Efficiencyimprovements,combinedwithmorerobustmaterialsefficiencyandbehaviourchange,arefundamentalintheNZEScenariotofacilitateamuchfasterriseintheshareoflow‐emissionselectricitysupply.In2030,energysavingsfromthesemeasuresaswellasbehaviouralchangesamounttoaround110EJ,equivalenttototalfinalenergyconsumptionofChinatoday.Asaresult,totalenergysupplydeclinesby10%overthecomingdecadeintheNZEScenarioevenastheglobaleconomygrowsbynearlyathird.Thiscontrastswitha2%increaseintotalenergysupplyoverthesameperiodintheAPSandanear10%riseintheSTEPS.‐6‐5‐4‐3‐2‐101SpaceheatingCarsEnergy‐intensiveindustriesCoalpowerNZEAPSSTEPSGtCO₂IEA.CCBY4.0.74InternationalEnergyAgencyWorldEnergyOutlook2022ExpandingelectrificationandthewidespreaddeploymentofefficiencyandenergysavingsenablethebuildingssectortoalmosthalveitsemissionsintheNZEScenarioby2030,despitethecontinuedexpansionoffloorareaandapplianceownershipdrivenmainlybyemergingmarketanddevelopingeconomies.Theswitchfromtraditionalbiomasstomoreefficientcookstovesandfuelsisalsoanimportantdriverofoveralltrends.Electricitybecomestheprincipalsourceofenergyfordecarbonisedheating:homesusingelectricityforheatingrisefrom20%todayto30%in2030andtomorethan50%in2050,withhighefficiencyheatpumpsbecomingtheprimarytechnologychoice.Emissionstrendsinthetransportsectoraredeterminedbyhowquicklyoilcanbedisplaced;atpresentitaccountsfor90%ofenergyuseintransport.Bothpassengerandfreightactivityaresettomorethandoubleby2050,underpinnedbyhighermobilitydemandneedsinthedevelopingworldaseconomiesandpopulationsexpandandlivingstandardsrise.Reductionsinemissionsofaroundone‐quarterto2030intheNZEScenarioaredrivenbyincreasedelectrification,efficiencyimprovementsandbehaviourchange.Electricvehiclesofferthemostcost‐effectivelow‐emissionstechnologyinmostsegmentsinboththeshortandlongterm,andtheycometodominateroadtransport.By2030,60%ofallnewcarsalesareelectricintheNZEScenario(comparedwith35%intheAPSand25%intheSTEPS).Theelectrificationofheavyfreightsegmentsproceedsmoreslowly,whileemergingmarketanddevelopingeconomiesinitiallyfocusontheelectrificationoftwo/three‐wheelersandurbanbuses.Overthelongerterm,theblendinganddirectuseoflow‐emissionsfuelssuchasbiofuels,hydrogenandhydrogen‐basedfuelsincreasessignificantly,especiallyinaviationandshipping,andforlong‐haulroadfreight.Theoutlookforenergyuseinindustryisshapedbycontinuinggrowthindemandforindustrialmaterials.IntheSTEPS,worldoutputofcrudesteelincreasesbyaround10%by2030,andaround30%by2050,drivenbyIndia,SoutheastAsiaandAfrica.GlobaloutputofcementalsoexpandsasAfricaandIndiacontinuetheprocessofurbanisationandindustrialisation.AmuchstrongerfocusonmoreefficientuseofmaterialstempersthisgrowthintheNZEScenario,butitisnotenoughtopreventanoverallincreaseindemandforindustrialmaterials.Nonetheless,theindustrysectorseesareductionofnearlyaquarterinoverallemissionsby2030intheNZEScenario.Widespreadimplementationofmorestringentefficiencystandardsandpoliciesencouragingfuelswitchingarethekeymeasurestogeneratethesereductionsinthenearterm.Sometechnologiesrequiredforthetransitionofenergy‐intensiveindustrialbranchesarenotyetcommerciallyavailable.Progressinsomeareasthereforedependsonthefurtherdevelopmentofkeytechnologies.Thisunderscorestheimportanceofenhancedpublicsupportforinnovationanddemonstrationprojectsinthe2020ssothatthesetechnologiescanbedeployedatscaleinthe2030sandbeyond.Between2031and2040,thespeedofemissionsreductionsintheindustryandtransportsectorsacceleratestoalmost10%peryearintheNZEScenario,asIEA.CCBY4.0.Chapter1Overviewandkeyfindings751electrification,low‐emissionsfuelsandCCUStechnologiesstarttomakemoresignificantinroadsintotheexistingstockofassets.InadditiontorapidcutsinCO2,theNZEScenarioentailsasteepfallinotherenergy‐relatedgreenhousegases.Forexample,energy‐relatedmethaneemissionsdropby75%from125Mtin2021to30Mtin2030,ontrackforlessthan10Mtin2050.Someofthisoccursbecauseoftheoverallreductioninfossilfuelconsumption,butmostofitcomesfromahugeincreaseinthedeploymentofemissionsreductionmeasuresandtechnologiesacrosstheoil,naturalgasandcoalsupplychains.Thesemeasuresleadtotheeliminationofalltechnicallyavoidablemethaneemissionsby2030.Reducingmethaneleaksandarapidphaseoutinallnon‐emergencyflaringwouldbringadoubledividend:reliefforverytightgasmarketsandreducedgreenhousegasemissions.ScalingupcleanenergysupplychainsAcceleratingcleanenergytransitionsrequireslargeincreasesintheglobalmanufacturingcapacityofcleanenergytechnologiesandinrelatedinputssuchascriticalminerals.Meetingthisindustrialchallengeisessentialtoreduceemissionsinlinewithclimategoals,plusitwillcreatejobsinthecompaniesandcountriesthatarepositionedtotakeadvantageofthemarketopportunities(Box1.6).Currentdeploymenttrendsforkeycleanenergytechnologiesshowsomeencouragingsigns.Renewables‐basedelectricitygenerationrosebyarecord500TWhin2021toreachanall‐timehighanditlookssettomarkanewrecordin2022.Electriccarsalesreachedarecord6.6millionin2021,morethandoublethesalesin2020,andsalesin2022areindicatingparticularlystronggrowth,ledbyChina,UnitedStatesandEuropeanUnion.Plannedincreasesinglobalcleanenergymanufacturingcapacityforkeytechnologiesprovideacrucialleadingindicatorofthewaythatthingscouldevolve(Figure1.25).Therearesometechnologieswherealackofmanufacturingcapacityrisksbecomingabottleneck.Forexample,currentandplannedmanufacturingcapacityforheatpumpsisbelowthelevelsprojectedintheAPS.Therearealsosomeencouragingsigns.Increasingconfidenceinfuturedemand,boostedbymeasuressuchastheUSInflationReductionActthatencourageinvestmentinmoreresilientanddiversifiedsupplychains,meansthatcompaniesandcountriesarescalingupcleanenergymanufacturingcapacity.Forsometechnologies,announcedcapacityincreasesexceedtherequiredmanufacturingcapacityin2030intheAPS.Forexample,ifallannouncedexpansionsofelectrolysermanufacturingcapacityseethelightofday,itwouldleadtoglobalmanufacturingcapacityaround50%higherby2030thanprojectedintheAPS.InthecaseofsolarPV,thepotentialexcesscapacityifallannouncedprojectsareimplementedrelativetoAPSlevelswouldbeevenlarger,at80%.Thisprovidesimportantcomforttopolicymakersthattheircollectiveambitionsarenotonlyalignedwithglobalsupplychains,butthatevenmorerobustambitionwouldbepossible.IEA.CCBY4.0.76InternationalEnergyAgencyWorldEnergyOutlook2022Figure1.25⊳AnnouncedmanufacturingcapacityforselectedenergytechnologiesrelativetodeploymentintheAPS,2021and2030IEA.CCBY4.0.Announcedincreasesinmanufacturingcapacityforkeytechnologies,includingsolarPV,electrolysersandbatteries,wouldexceedprojecteddeploymentin2030intheAPSNote:Showsannualproductioncapacityin2030relativetothelevelofdemandprojectedintheAPSin2030.Thisoptimisticmessage,however,needstobetemperedwithcaveats.First,itisfarfromguaranteedthatalloftheannouncedprojectswillcometofruition.Forexample,ifweexcludemorespeculativeannouncementssuchasthosewithoutaclearstartdatefromthecalculationforelectrolysers,thentheannouncedmanufacturingcapacityfor2030wouldfallshortoftheneedsintheAPS.Therefore,itiscriticalthatpolicycontinuestoplayasupportiveroletohelpturntheseambitionsintoreality.Second,thefindingthatinsomeinstancesannouncedsupplycapacityexceedsourprojectionsfor2030demandintheAPSisalsoarisktomarketsandsuppliers.Insomecases,policymakersneedtodomoretoensurethatdemandactuallymaterialises.Forexample,inthecaseofsolarPV,policyactionisessentialtoaddresslocalbarrierstouptake,includingthoserelatingtolandacquisition,permitting,provisionoftimelygridconnectionsandsecureintegrationofthevariableresourceintoelectricitysystems.Third,notallpartsofanygivensupplychainaredevelopingnewcapacityatthesamerate.Forexample,eventhoughannouncedprojectsandpotentialnewprojectswouldseelithiumsupplycapacityexpandthree‐and‐a‐half‐timesto2030,thisisstillnotsufficienttomeetAPSneeds.Thesmoothgrowthofcleantechnologysupplychainsrequiresco‐ordinationandsequencingacrossallpartsofthevaluechain,frominputstomanufacturingcapacitythroughtodemand.Gooddataonprojects,capacitiesandprojecttimelinestogetherwithcrediblecommitmentstofuturelevelsofdeploymentareessentialtolimitfuturevolatility.50%100%150%200%2021AnnouncedpipelineExceedingAPSStillneededtoreachAPSBatteriesElectrolysersAPSdeploymentSolarPVLithiumCopper2030:IEA.CCBY4.0.Chapter1Overviewandkeyfindings771Fourth,today’scleantechnologysupplychainsareveryconcentratedgeographically.Chinaaccountsfor75%oftheworld’sproductioncapacityforbatterycells,andasmuchas97%ofglobalcapacityforwafermanufacturingforPVcells(14%ofglobalwaferproductionin2021wasatasinglefactoryinChina).Thisindustrialcapacityhasbeeninstrumentaltobringdowncostsworldwide,givingmuch‐neededmomentumtocleanenergytransitions,butthecurrentlevelofgeographicalconcentrationalsoposespotentialchallengesthatgovernmentsneedtoaddress.Maintainingtheeconomicefficiencybenefitsoftradewhilediversifyingsupplychainswillbecriticaltoensurethatcleanenergytransitionsarebothsecureandcosteffective.Inaddition,eveniftheprojectedgrowthofcleantechnologysupplychainsisencouragingwhenmeasuredagainstthebenchmarkssetbytheAPS,itisstillinsufficienttobringtheworldintolinewiththetrajectoryintheNZEScenario.NoneofthecleanenergytechnologiesorcriticalmineralsshowninFigure1.25currentlyhaveanannouncedsupplycapacitysufficienttomeetthemassiveramp‐upneededintheNZEScenarioby2030,althoughbatteriesandsolarPVgetclose(seeChapter3,Box3.6).Box1.6⊳Energyjobgrowth:opportunityorbottleneck?Energytransitionsarealreadystartingtotransformthelandscapeforenergyemployment,withmorethan50%oftheenergyworkforcenowemployedincleanenergy(IEA,2022).Thedevelopmentofnewenergy‐relatedprojects,includingthemanufactureoftheircomponents,isthelargestdriverofenergyemployment,accountingforover60%ofenergy‐relatedjobs.Theenergysector,whichisnotclearlydefinedbyindustrialcodes,includesworkersfromseveralindustrialsectors.Theirworkincludesconstructingnewpowergenerationfacilitiesandtransmissionlines,carryingoutefficiencyretrofits,installingheatpumps,completingnewoilandgaswells,anddesigningandconstructinginfrastructure.IntheNZEScenario,totalenergyinvestmentmorethandoublesto2030,drivingupthedemandforskilledworkersacrosstheenergysector.Energyemploymentexpandstoalmost90millionin2030fromaround65milliontoday(Figure1.26).JobgrowthintheAPSislessdramatic,butenergyemploymentstillreaches80millionin2030.Inallscenarios,thenumberofnewjobscreatedoutweighsthenumberofthoselostinfossilfuelindustries,althoughthejobsthatarecreatedmaynotbeinthesameplacesasthosethatarelost,andtherequiredskillsinmanycaseswillbedifferent.Recentlegislativeandpolicymeasures,suchastheUSInflationReductionAct,MakeinIndiaandJapan’sGreenTransformation(GX),includeprovisionstosupportthedevelopmentoflocalcleanenergymanufacturing.Thereisastrongcaseforbolsteringsuchprovisionswithstrategicandproactivelabourpoliciestoensurethattheirambitionsarenothamperedbyashortageofskilledworkers.Theenergysectordemands,asawhole,farmoreskilledworkersthaneconomy‐wideaverages–around45%ofenergyworkerstodayareinhighskilledoccupations,IEA.CCBY4.0.78InternationalEnergyAgencyWorldEnergyOutlook2022comparedtoonlyone‐quartereconomy‐wide.Thisshareisevenhigherforjobsinenergyresearchanddevelopment,andthenumberofsuchjobsissettoexpandrapidlyto2030andbeyond.Establishingmarketstrengthincleanenergytechnologiesislikelytobesignificantlyhelpedbytailoredtrainingandcertification,anareawherebusinessesshouldworkinclosecollaborationwithministriesofenergy,labourandeducation.Figure1.26⊳GlobalemploymentinfossilfuelsandcleanenergyIEA.CCBY4.0.CleanenergyemploymentmakesupjustoverhalfoftheenergyworkforcetodayandthissharerisessignificantlyinboththeAPSandtheNZEScenarioInordertoattractworkers,includingthosemovingfromotherpartsoftheenergysector,firmswillneedtotakeaccountofvariousfactors.Energysectorwagestypicallyhaveapremiumrelativetoeconomy‐wideaveragewages,thoughestablishedindustriessuchasnuclear,oilandgastypicallyofferthehighestwages,whichmaymakeitchallengingtoattractworkerstonewcleanenergyindustries.Newerindustries,suchassolar,oftendonothavethesamelabourprotectionsandunionrepresentationasestablishedfossilfuelindustries,especiallyinemergingmarketanddevelopingeconomies.Thepercentageofwomenintheenergyworkforceisconsistentlylowwhencomparedtoeconomy‐wideaverages:itaverages15%intraditionalenergysectorscomparedto39%intheeconomyasawhole.Astheenergyworkforceexpands,therewillbeopportunitiestoaddresstheselong‐standingimbalances.ImplicationsforinvestmentinoilandgasOurscenariosprojectwidelydifferentoutlooksforoilandgasdemand,andthereforealsofortheinvestmentsthatarerequired.Ifdemandincreasesinthefutureorremainsataconsistentlyhighlevel–asintheSTEPS–newupstreamconventionalprojectsarerequired20%40%60%80%100%20406080100201920202021APS2030NZE2030CleanenergyFossilfuelsShareofMillionemployeesemploymentincleanenergy(rightaxis)IEA.CCBY4.0.Chapter1Overviewandkeyfindings791tomeetthisdemandandtooffsetdeclinesinproductionfromexistingfields.NewupstreamprojectsareneededintheAPSaswell;eventhoughglobaldemandsoonpeaksandstartstofall,thereductionindemandisslowerthantherateatwhichproductionfromexistingfieldsdeclines.IntheIEA’sNetZeroby2050Roadmap,firstpublishedin2021(IEA,2021a),ahugesurgeincleanenergyinvestmentledtoalargeprojecteddropinoilandgasconsumption.Thetrajectoryoffallingdemandmatchedthedeclinesinsupplythatwouldbeseenwithcontinuedinvestmentinexistingsourcesofsupplybutwithoutanyneedfortheapprovalofnewlongleadtimeupstreamconventionalprojects.However,overtheyearsincethe2021Roadmapwaspublished,oilandgasdemandhasrisenandadditionaloilandgas(andcoal)projectshavereceivedfinalinvestmentdecisions;allthenewinvestmentsinfossilfuelinfrastructurenotincludedinthe2021NZEScenariowouldresultin25Gtofemissionsifoperatedtotheendoftheirlifetime(around5%oftheremainingcarbonbudgetfor1.5°C).Russia’sinvasionofUkraineaddsanadditionaldimensiontothisoutlook,asitcouldnowleadtoasubstantialandprolongedreductioninRussianenergysupplies.Againstthisbackdrop,doesthe2021findingthatnonewoilandgasfieldsareneededalongthejourneytonetzerobymid‐centurystillholdfortheupdatedNZEScenariointhisyear’sOutlook?Therearetwodimensionstothisquestion,whichneedtobetreatedseparately.First,howcancountriesreplacetheimmediateshortfallsinfossilfuelsupplyfromRussia?Andsecond,havecircumstanceschangedinawaythatcouldjustifyapprovalsofnewoilandgasfields,eveninaworldworkingtowardsnetzeroemissionsby2050?Onthefirstquestion,theimmediateshortfallsinRussianfossilfuelproductionneedtobereplacedinpartbyproductionelsewhere,inanyscenario.Thesizeoftheshortfalldependsinlargepartonthestrengthofactionstakentoreducedemand.Butnewconventionaloilandgasfieldapprovalstakentodaywouldnothelptomeettheseimmediateneeds,astheleadtimesforlargenewsupplyprojectsmeanthattheytakemanyyearstostartproducingmeaningfulvolumes.Themoresuitableoptionsareinvestmentswithshorterleadtimesandquickerpaybackperiods.Theseinclude,forexample,extendingproductionfromexistingfields,tightoilandshalegas(whichcanbebroughttomarketquickly),andmakinguseofnaturalgasthatiscurrentlyflaredandvented.SomenewinfrastructuremayalsobeneededtofacilitatethediversificationofsupplyawayfromRussia.Forexample,manyEuropeancountriesarelookingtoinstallLNGimportterminalsand,withcarefulinvestmentplanning,thereareopportunitiesforthesetofacilitatefutureimportsofhydrogenorhydrogen‐basedfuels.Onthesecondquestion,itisworthtakingastepbackandconsideringthesortofworldtheNZEScenarioisdescribing.Asthe2021Roadmapunderlined,thisisaworldthatisunitedinitsdeterminationtoachievethe1.5°Cgoal,andthatisworkingconsistentlyandcooperativelytowardsthatgoal.Inthewordsofthe2021SummaryforPolicymakers:“theunwaveringpolicyfocusonclimatechangeinthenetzeropathwayresultsinasharpdeclineIEA.CCBY4.0.80InternationalEnergyAgencyWorldEnergyOutlook2022infossilfueldemand,meaningthatthefocusforoilandgasproducersswitchesentirelytooutput–andemissionsreductions–fromtheoperationofexistingassets.”TheNZEScenariointhisOutlookreliesonasimilarvisionofthefuturetothatinthe2021Roadmap.And,asaresultitremainsthecasethat–withthesteepreductionsinfossilfueldemandintheNZEScenariointhisOutlook–fossilfueldemandcanbemetthroughcontinuedinvestmentinexistingassetsandalreadyapprovedprojects,butwithoutanynewlongleadtimeupstreamconventionalprojects.Meetingthiscondition,though,comeswithconsequencesthatcountriesneedtoconsidercarefully,especiallyinaworldmarkedbygeopoliticaltensions.Onecrucialaspect–alreadyhighlightedinthe2021Roadmap,andevenmorevisibleinthisyear’supdate–istheincreasedrelianceovertimeonasmallerconcentrationofsuppliers.Inthecaseofoil,theupdatedNZEScenariorequireshighernear‐termproductionfrommembersofOPECthanbeforetokeepmarketsinbalance,andacontinuinghighlevelofrelianceonthisproductiontomeetremainingoildemandthroughto2050.IntheNZEScenario,theshareofoilsupplycomingfromOPECmembersrisesfrom35%in2021to52%in2050.Eventhoughtheoilmarketismuchsmallerin2050thantoday,theshareofOPECbythenwouldbehigherthanatanypointinthehistoryofoilmarkets.Itcannotbetakenforgrantedthatimporterswillbecomfortablewithsuchaconcentrationinsupply.Inthecaseofnaturalgas,thereductioninRussiansupplytoEuropeinthisyear’sNZEScenarioisaccompaniedbylowerprojectedgasuse,ashigherpricescurbthecosteffectivenessofgashelpingtodisplacecoal.ButEuropeisstillleftinaprecarioussituation.Inlastyear’sNZEScenario,Europe’sdeclininggasimportneedsweremetinlargepartbycontractedgassupplyfromRussia.Inthisyear’sscenario,Europereliesonnaturalgasbecomingavailablefromelsewhereintheworld.ThisincludesgasthathasalreadybeencontractedtoAsianimporters–notablyinChina–thatissurplustotheirrequirementsasthesecountriesundertakeeffortstocutemissions.Inthiscase,Europemaywantgreatercertaintyoveritsgasimportrequirementsbyconcludingnewgassupplyarrangements,evenasitredoublesitseffortstoreducerelianceonallfossilfuels.Thepossibilityofadditionaloilandgasprojects,beyondthelevelsofsupplyneededintheNZEScenario,comeswithsomeimportantcaveatsandqualifications:Discussionofthesupplyandinvestmentaspectsofthetransitionshouldnotdistractfromtheneedforamassivesurgeininvestmentinrenewables,energyefficiencyandothercleanenergytechnologies.Thisisthenecessaryconditionthatneedstobemetinordertoreduceandthenremovetheneedfornewfielddevelopments.Anyemissionscomingfromnewprojectswouldneedtobecompensatedbyevenmorerobustemissionsreductionsinthelatteryearsofourprojectionstoachievenetzeroemissionsby2050;theydonotcomeforfreeinclimateterms.Thiswouldmakethelaterstagesofthetransitionevenmorechallenging,andcreatestheclearriskthatthistargetmovesoutofreach.NooneshouldimaginethatRussia’sinvasioncanjustifyawaveofnewoilandgasinfrastructureinaworldthatwantstoreachnetzeroemissionsby2050.IEA.CCBY4.0.Chapter1Overviewandkeyfindings811Anynewdevelopmentsthatdogoaheadwouldhavetoprioritiselow‐emissionstechnologiesacrossthefullsupplychainfromextraction,processingandtransporttoend‐use.Thismeansminimisingmethaneleaksandotherupstreamandmidstreamemissions,andintegratingtheuseofCCUSorofnon‐combustionusesofthehydrocarbons.FornewLNGliquefactionfacilities,projectswouldlikelyneedtohaveamuchshorterlifetimefordeliveringnaturalgasthanistraditionallythecase.Thiscouldmeanshorteningtheperiodofcapitalrecovery,makingthedeliveredgasmoreexpensive,andplanningfromtheoutsethowtoextendemissionsreductionsacrossthewholevaluechain,forexamplebymovingtodeliveryoflow‐emissionsgases.Iftheworldissuccessfulinbringingdownfossildemandquicklyenoughtoreachnetzeroemissionsby2050;anynewprojectswouldfacemajorcommercialrisks.Thecountriesorcompanieschoosingtoundertakethemneedtorecognisethatthesedevelopmentsmayfailtorecovertheirupfrontcosts.Theywouldalsoneedtoplanandjustifyforhowglobalproductionlevelswillbefurtherreducedinthefutureinasuccessfultransitiontonetzeroemissionsbymid‐century.Itisunderstandablewhysomecountriesandcompaniesarelookingtomoveaheadwiththeexplorationandapprovaloflargelonger‐termsupplyprojects.Butthehigheremissionsthattheseprojectsimplyhaveconsequencesforoureffortstomeeta1.5°C,anditisimperativethatdecisionmakerstodaymaketheadditionalburdenonfuturegenerationsaslightaspossible.Therearemanywaystorespondtotheimmediateenergycrisisthatcanpavethewaybothtoamoresecureandacleanerfuture.Thatiswherethelastingsolutionslie.IEA.CCBY4.0.Chapter2Settingthescene83Chapter2SettingthesceneContextandscenariodesignTherecoveryinglobalenergyconsumptionthatfollowedthepandemic‐induceddropin2020endedprematurelywithRussia’sinvasionofUkraineinearly2022,plungingglobalenergymarketsintoturmoil,stokinginflationarypressuresandslowingeconomicgrowth.ThestrainsonmarketsdidnotbeginwithRussia’sinvasionofUkraine,buttheyhavebeensharplyexacerbatedbyit.Thishasledtovolatilityandsteepspikesinenergyprices,particularlyfornaturalgasinEuropeanmarkets,andthemenaceoffurtherdisruptiontosupplyloomslarge.Amidthisturmoil,growthinrenewableshasheldupwell.ThecrisishasshatteredenergyrelationshipswithRussiabuiltontheassumptionoftrustandsecuresupplies,andledtoareappraisalofenergysecurityneedsinmanycountries.Thisisleadingtoarecastingoftheenergytradeandinvestmentlandscapeinprofoundways.Ithasalreadypromptedahostofmeasuresaimedatstrengtheningenergysecurity,includingsupporttobuilddomesticproductioncapabilityinkeysectors.Onekeyquestioniswhethertoday’scrisiswillleadtoaccelerationinenergytransitions,orwhetheracombinationofeconomicturmoilandshort‐termpolicychoiceswillslowmomentum.Ontheonehand,highfossilfuelpricesandrecordlevelsofemissionsofferstrongreasonstomoveawayfromrelianceonthesefuelsortousethemmoreefficiently.Ontheother,energysecurityconcernsmayspurrenewedinvestmentsinfossilfuelsupplyandinfrastructure.ThisOutlookconsiderstheimplicationsofdifferentpolicychoices.Today’senergycrisissharessomeparallelswiththe1970soilpriceshocks,buttherearealsoimportantdifferences.Thecrisesinthe1970swereconcentratedinoilmarketsandtheglobaleconomywasmuchmoredependentonoilthanitistoday.However,theintensityofuseofotherfossilfuelshasnotdeclinedtothesameextent;fornaturalgasithasriseninmanycases.Theglobalnatureofthecurrentcrisis,itsspreadacrossallfossilfuelsandtheknock‐oneffectsonelectricitypricesareallwarningsignsofbroadereconomicimpacts.Governmentsmadeahostofcommitmentstosustainabilityintherun‐uptotheCOP26meetinginGlasgowin2021,andtheseremainthebedrockformanyenergystrategies.Insomecases,theseambitionshavenowbeenreinforcedbynewmeasuresseekingtoreinforcelong‐termenergysecurityandaccelerateenergytransitions,includingtheUSInflationReductionActandtheREPowerEUPlan.ThetotalamountofgovernmentspendingcommittedtocleanenergytransitionssincethestartofthepandemicamountstoUSD1.1trillion.SUMMARYIEA.CCBY4.0.84InternationalEnergyAgencyWorldEnergyOutlook2022Near‐termborrowingcostsarelikelytoriseasmonetarypolicytightensinmanycountries.Thiscoulddisadvantagesomecleanenergyprojectsforwhichfinancingcostsplayamajorroleinlevelisedcosts.Nonetheless,cleantechnologiesremainthemostcost‐efficientoptionfornewpowergenerationinmanycountries,evenbeforetakingaccountoftheexceptionallyhighpricesseenin2022forcoalandgas.ThisOutlookexploresthreescenarios–fullyupdated–thatprovideaframeworkforthinkingaboutthefutureofenergyandexploringtheimplicationsofvariouspolicychoices,investmenttrendsandtechnologydynamics.Thescenarios,whichshouldnotbeconsideredasIEAforecasts,are:oStatedPoliciesScenario,whichlooksnotatwhatgovernmentssaytheywillachieve,butatwhattheyareactuallydoingtoachievethetargetsandobjectivestheyhavesetout,andassesseswherethisleadstheenergysector.oAnnouncedPledgesScenario,whichexamineswhereallcurrentannouncedenergyandclimatecommitments–includingnetzeroemissionspledgesaswellascommitmentsinareassuchasenergyaccess–wouldtaketheenergysectorifimplementedinfullandontime.oNetZeroEmissionsby2050Scenario,whichmapsoutawaytoachievea1.5°Cstabilisationinglobalaveragetemperatureandmeetkeyenergy‐relatedUNSustainableDevelopmentGoals.Risingdemandforenergyservicesto2040isunderpinnedbyeconomicgrowth,whichislowerto2030thaninlastyear’sOutlookbutwhichaverages2.8%peryearthroughto2050.Theworld’spopulationrisesfrom7.8billionpeoplein2021to9.7billionin2050,anincreaseofalmostone‐quarter.Theseeconomicanddemographicassumptionsarekeptconstantacrossthevariousscenarios,whileenergyandclimatepolicies,technologycostsandpricesvary.Costpressuresarebeingfeltacrosstheenergysectorfrompersistentstrainsonsupplychainsandfromhigherpricesforcriticalmineralsandessentialconstructionmaterialssuchascementandsteel.Weexpectrecentrisesincleantechnologycoststobetemporary,andtorecedeinthefaceoftheforcesofinnovationandimprovementsinmanufacturingandinstallationprocesses.Currenttrendsare,however,promptinggovernmentstopaycloserattentiontotheresilienceanddiversityofcleanenergysupplychains,whichcannotbetakenforgranted.Today’sexceptionallyhighfossilfuelpricesareprojectedtoeaseaseconomiesslowandmarketsrebalance,althoughnaturalgasmarketsremaintightforseveralyearsasEuropecompetesforavailableLNGcargoestocompensateforcurtailedRussiansupply.Thespeedofadjustmentandthelonger‐termpricetrajectoriesdifferbyscenario,dependingonthestrengthofpolicyactiontocurbdemand.IEA.CCBY4.0.COemissionsfromglobalfossilfuelcombustion...Russia’sinvasionofUkraineisreshapingtheenergyworldHighfossilfuelpricesarestokinginlationarypressures;thecombinationoffallingrealincomesandrisingpricesiscreatingaloomingriskofglobalrecession.EnergypolicyShort-termresponseshavefocusedonsecuringavailablesupplyandprotectingconsumers,butmanygovernmentsintheUS,EUandelsewherehaveadoptednewpoliciesthatgiveamajorboosttoinvestmentsincleanenergyandeiciency.EconomicimpactsHighandvolatileenergypricesarehurtinghouseholdsandbusinesses,shiftingthechoiceoffuelsandsettingbackprogresstowardsachievinguniversalaccesstoenergy.EnergymarketsEnergytradeEuropeansanctionsoncoalandoilimportsandGazprom’sdecisionstocutgassupplyaretriggeringaprofoundreshulingoftradelowsaroundtheworld.…totheEuropeanUnionbyaround80%sinceinvadingUkraine.…sawarecordrisein2021,butastrongexpansionofrenewablesandelectricvehiclesisexpectedtodampengrowthin2022.Russiahascutitsnaturalgaspipelinelows…100200300Jan22Feb242022Russia’sinvasionofUkraineOct22NordStreamOtherPolandTurkStreamUkrainemcm/dGDPgrowth(rightaxis)COemissionsAnnualchange:202020212022e012-1-20%3%6%-3%-6%GtCO86InternationalEnergyAgencyWorldEnergyOutlook20222.1IntroductionTheworldisinthemiddleofaglobalenergycrisisofunprecedenteddepthandcomplexity.Europeisatthecentreofthiscrisis,butitishavingmajorimplicationsformarkets,policiesandeconomiesworldwide.Assooftenisthecase,thepoorestandmostvulnerablearelikelytosuffermost.ThestrainsdidnotbeginwithRussia’sinvasionofUkraine,buttheyhavebeensharplyexacerbatedbyit.Extraordinarilyhighpricesaresparkingareappraisalofenergypoliciesandpriorities.TheEurope‐Russiaenergyrelationshipliesintatters,callingintoquestiontheviabilityofdecadesoffossilfuelinfrastructureandinvestmentdecisionsbuiltonthisfoundation.Aprofoundreorientationofinternationalenergytradeisunderway,bringingnewmarketrisksevenasitaddresseslongstandingvulnerabilities.Manyofthecontoursofthisnewworldarenotyetfullydefined,butthereisnogoingbacktothewaythingswere.Andweknowfrompastenergycrisesthattheprocessofadjustmentisunlikelytobeasmoothone.Thatadjustmentwillalsobetakingplaceinthecontextofcommitmentsmadebygovernmentstocleanenergytransitions.AcentralthemeofthisWorldEnergyOutlook2022ishowtheleversoftechnologicalchangeandinnovation,tradeandinvestmentandbehaviouralshiftsmightdriveasecuretransitiontowardsanetzeroemissionsenergysystem,whileminimisingthepotentialrisksandtrade‐offsbetweenvariouspolicyobjectives.Thischaptersetsthescene.Itstartswithanexplorationofhowthecrisishasnotjustupendedenergymarketsbutalsosouredtheeconomicoutlook,beforeconsideringtheunderlyingforcesbearingontoday’senergysector,thepolicyresponsesandwhatitallmeansforourstartingpointin2022.Europe’sscrambletoreducerelianceonRussianfossilfuelimportstakescentrestage,buttherepercussionsofRussia’sinvasionofUkrainearebeingfeltmuchmorebroadlyacrossadeeplyinterconnectedglobalenergysystem.ThechapterconcludesbyintroducingthescenariosusedinthisOutlook,explaininghowandwhytheydifferfromeachother,settingoutthemacroeconomicanddemographicassumptionsthatunderpinthemaswellastheoutlookforenergyandcarbonpricesandenergytechnologydevelopment.Thethreescenariosare:StatedPoliciesScenario(STEPS),whichmapsoutatrajectorythatreflectscurrentpolicysettings,basedonadetailedsector‐by‐sectorassessmentofwhatpoliciesareactuallyinplaceorareunderdevelopmentbygovernmentsaroundtheworld.AnnouncedPledgesScenario(APS),whichassumesthatalllong‐termemissionsandenergyaccesstargets,includingnetzerocommitments,willbemetontimeandinfull,evenwherepoliciesarenotyetinplacetodeliverthem.NetZeroEmissionsby2050(NZE)Scenario,whichsetsoutapathwayfortheglobalenergysectortoachievenetzeroCO2emissionsby2050,updatingthelandmarkIEAanalysisfirstpublishedin2021.Whilethefirsttwoscenariosareexploratory,theNZEScenarioisnormative,asitisdesignedtoachievethestatedobjectiveandshowsapathwaytothatgoal.IEA.CCBY4.0.Chapter2Settingthescene8722.2BackgroundtotheglobalenergycrisisThehistoricplungeinglobalenergyconsumptionintheearlymonthsoftheCovid‐19crisisin2020drovethepricesofmanyfossilfuelstotheirlowestlevelsindecades.However,thepricereboundssincemid‐2021havebeenbrutallyquick(Figure2.1).Oilpricesthatbrieflymovedintonegativeterritoryin2020havebeenbackaroundoraboveUSD100/barrel.Coalpriceshavereachedrecordlevels.SpotnaturalgaspricesinEuropehaveregularlybeenaboveUSD50permillionBritishthermalunits(MBtu),morethandoublethecrudeoilpriceonanenergy‐equivalentbasis.Tightgasandcoalmarketshavefedthroughintoexceptionallyhighelectricitypricesinmanymarkets.Theglobalenergycrisishashurthouseholds,industriesandentireeconomiesaroundtheworld,withthepoorestandmostvulnerablesufferingparticularhardship.Figure2.1⊳EvolutioninselectedenergypriceindicatorssinceSeptember2020IEA.CCBY4.0.Thishasbeenaperiodofextraordinaryturbulenceinenergymarkets,intensifiedbyRussia’sinvasionofUkraineinFebruary2022Note:TTFMA=TitleTransferFacilitymonth‐aheadprices;LNG=liquefiednaturalgas;Brent=Brentcrudeoilbenchmark.Sources:IEAanalysisbasedonArgusMedia(2022);ICIS(2022);BNEF(2022).2.2.1InitialsignsofstrainTherewasnosinglecausebehindtheinitialriseinpricesin2021,priortoRussia’sinvasionofUkraine.Manyfactorsplayedapart,chiefamongthembeing:Therapidityoftheeconomicrecoveryfromthepandemic‐inducedrecession.Thisstrainedmanyelementsofglobalsupplychains,includingthoseintheenergysector.In2021,demandforallthefossilfuelsgrewbyatleast5%.510152025Sep‐20Mar‐21Sep‐21Mar‐22Sep‐22TTFMAGermanpowerAsianspotLNGEUimportedcoalNorthSeaBrentIndex(1September2020=1)IEA.CCBY4.0.88InternationalEnergyAgencyWorldEnergyOutlook2022Theimpactofweather‐relatedeventsondemandandelectricitygenerationtrends.TheseeventsincludedroughtsthatcurtailedhydropoweroutputinBrazilandelsewhere(resultinginamorethanthreefoldyear‐on‐yearincreaseinBrazil’sliquefiednaturalgas[LNG]imports),heatwavesthatreducednuclearpoweravailabilityinFranceandelsewhere,lowerthanaveragewindspeedsthataffectedwindgenerationinEurope,andHurricaneIda’sinterruptionofUSoffshoreproduction.Plannedandunplannedoutagestosupply.Covidlockdownsin2020pushedsomemaintenanceworkinto2021,whichweighedonsupplyjustwhendemandwasrecovering.FloodinginAustraliainearly2022temporarilyinterruptedcoalproduction,andamonth‐longcoalexportbaninIndonesiatightenedtradingconditions,sendingpricesmuchhigher.NaturalgasmarketsweremeanwhileaffectedbyunplannedoutagesatLNGliquefactionplants,unforeseenrepairworksandavarietyofprojectdelays.Thestanceofmajorsuppliers.ThemostnotableexamplewasRussia’sGazprom,whichreduceditsshort‐termsalesanddidnotreplenishitsownstoragesitesinEuropetothelevelsseeninpreviousyearsorotherwiseincreasenaturalgasavailability.ThisamplifiedthemarketreactionwhenacoldspellhitEuropeinDecember2021.Underlyinginvestmentdynamics.Governmentshavenotbeenpursuingstrongenoughpoliciestogenerateamuch‐neededincreaseincleanenergyinvestment.Intheabsenceofsuchasurgeinenergyefficiencyimprovementsandcleanenergydeployment,investmentinthefossilfuelssectorhasalsobeenfallingshortofwhatisrequiredtomeetrisingdemand.Investmentinupstreamoilandgashalvedbetween2014and2021,dueprimarilytotwocommoditypricecollapsesin2014‐15andin2020.Climatepolicieswereblamedinsomequartersforcontributingtotheinitialrun‐upinprices,butitisdifficulttoarguethattheyplayedasignificantrole.Infact,morerapiddeploymentofcleanenergysourcesandtechnologieswouldhavehelpedtoprotectconsumersandmitigatesomeoftheupwardpressureonfuelprices.Theywouldalsohavemitigatedthepost‐pandemicreboundinenergy‐relatedcarbondioxide(CO2)emissionswhichreached36.6billiontonnesin2021.Theannualincreaseof1.9billiontonneswasthelargestinhistory,offsettingthepreviousyear’spandemic‐induceddecline.2.2.2Russia’sinvasionofUkraineRussia’sinvasionofUkraineinFebruary2022madethestrainsintheenergysectorfarworse.AlongsidehugedamagetoUkraine’senergysector(Box2.1),ithashadwiderimplicationsforenergythatwillbefeltformanyyearstocome.Russiahasbeenbysomedistancetheworld’slargestexporteroffossilfuels,andaparticularlyimportantsuppliertoEurope:in2021,one‐of‐fiveunitsofenergyconsumedintheEuropeanUnioncamefromRussia.ThisrelianceonRussiahadlongbeenidentifiedasastrategicweakness,andsomeinfrastructurewasbuilttodiversifysourcesofimports,butRussianflowsremainedhigh:inthecaseofnaturalgas,Russia’sshareofEuropeangasdemandactuallyrosefrom30%onaverageover2005‐10toreach40%inthe2015‐20period.IEA.CCBY4.0.Chapter2Settingthescene892Box2.1⊳MovingtowardsanewenergysectorinUkraineThewarinUkrainehastragicallyupendedthelivesofUkrainiansandcreatedhugeeconomicdifficulties.Thereareofcoursehugeuncertaintiesoverthefuturecourseoftheconflictanditsaftermath.However,intheenergysector,asinmanyothers,Russia’sinvasionislikelytomarkadecisivebreakwiththepastforUkraine.Althoughdiversificationeffortshaveacceleratedsince2014,UkrainehasremainedlargelydependentonRussiansourcesofenergytomeetdomesticdemand.Russiaoftenusedthisdependencytoitsadvantage.RussiaalsosoughttoreduceUkraine’simportancetoEuropeannaturalgassecuritybybuildingupalternativepipelineroutestoEuropeanconsumers,aftercuttingoffgassuppliestoUkrainein2006andinthewinterof2008‐09overpriceandpipelinetariffdisputes.In2015,UkrainedecidedtostopbuyingRussiangasandwasabletocontractwhatitneededfromitswesternneighboursinstead,althoughthesenewarrangementsstillreliedinpracticeonRussiantransitvolumesfortheirdelivery.Inaddition,UkrainecontinuedtodependheavilyonRussianandBelarusianoilproducts,whichmetroughly75%ofdomesticdemand.Ukraine’senergyinfrastructurehassufferedseverelysinceFebruary.Thesafetyofitsnuclearfacilitiesisaparticularareaofconcern:nearlyhalfofUkraine’snucleargenerationcapacityislocatedinoccupiedterritoryandZaporizhzhia–thelargestnuclearplantinEurope–isveryclosetothefrontlines.Nuclearsafetyshouldbeparamount.On‐goingmilitaryoperationsraisesignificantnuclearsafetyrisks.Morebroadly,theabilityofdecisionmakerstoassurepowerandheatforciviliansisbeingcompromisedbyRussianattacksoncriticalenergyinfrastructureandothertargets.Asofmid‐September2022,30%ofthermalandsolargenerationand90%ofwindgenerationcapacityhadbeendestroyedorwasunderRussianoccupation,andalloilrefiningcapacityiseitherofflineorhasbeendestroyed.ThesenumberspredateRussia’scoordinatedmissileattacksagainstUkraineinOctoberwhereelectricitygridfacilitiesandotherenergyassetswereamongthetargets.Fallingrevenues,driveninlargepartbydeterioratingcollectionratesfromutilities,alsopresentamajorchallengetothegovernment.Thewinterof2022‐23willbeaverydifficultoneforUkraine,particularlyifgastransitthroughUkraineisinterrupted.Ukrainehasbeenbuyingasmuchgasasitcantofillitsundergroundstorageinfrastructure,buthighpricesandfiscalconstraintshavelimitedhowmuchcanbeachieved.Domesticproductionlevelsarelikelytoreach16‐17billioncubicmetres(bcm),barringanyattacksonproductionfacilities.Gasdemandislikelytobesignificantlylowerthanthe27bcmconsumedin2021andmayevenfallto18bcmorlower:muchdependsonhowmuchterritoryisoccupiedandhowmuchinfrastructureislost.Thegovernmentislookingatpotentialdemand‐restraintmeasuressuchasloweringminimumtemperaturestandardsinresidentialbuildingsto16°C.IEA.CCBY4.0.90InternationalEnergyAgencyWorldEnergyOutlook2022Inthemediumandlongerterm,UkraineislookingtowardsintegrationwithEuropeanenergyinfrastructure.Thedaybeforetheinvasion,Ukraine’stransmissionserviceoperator,Ukrenergo,decidedtodisconnectfromtheIntegratedPowerSystem,whichlinkedUkraine’spowersystemtothatofRussiaandBelarus,andtodoatestrunin“islandmode”.Thesystemendeduprunninginthismodefor21daysuntilitwassynchronisedwiththeEuropeanUnion’sENTSO‐Epowersystem.Thegovernmenthasputtogetheranambitiousrecoveryandreconstructionplanwithastrongfocusonenergysecurityandgreaterself‐sufficiency.Ukraine’sEuropeanUnioncandidatestatusalsounderpinsitsambitiontobuilda“future‐proof”energysystem.Theplanaimstoincreasetheshareofrenewables,bringaboutthebuildingofmorenuclearreactors,increaseinvestmentinbiogasandrenewablehydrogen,andreconstructcitieswithenergyefficientbuildingsandtransportsystems.Balancingtheselong‐termgoalswithurgentshort‐termrepairs–forexample,tocombinedheatandpowerplantsseverelydamagedbyRussianbombing–willbeverychallenging.RebuildingUkraine’senergysectorwillbeexpensive:preliminarygovernmentestimatesputthetotalcostofreconstructingUkraine’senergysectorthroughto2032atUSD128billion.Thisfigureisobviouslyprovisional,givencontinuinghostilities,buttheworkofrebuildingwillprovideanopportunitytocreateadifferent,cleanerfutureforUkraine’senergysector.TheinvasiontriggeredmovesbymanyofRussia’sinternationalpartnerstolimitorcutties.EuropeanUnionleaders,meetinginVersailleson10‐11March,agreedto“phaseoutourdependencyonRussiangas,oilandcoalimportsassoonaspossible”.Inaddition,manyinternationalcompanies–especiallythosedomiciledinEuropeorNorthAmerica–haveleftRussiaorarewindingdowntheirbusinessoperationsthere.Someoftheseintentionshavebeenreinforcedbyfirmcommitments,includingsanctions.Overtime,thiswillfundamentallyreshapeRussia’spositionininternationalenergy.Forthemoment,Russianoilproductionandexportsremainclosetopre‐invasionlevels,buttherehavebeensomesizeableshiftsintradeflows,withexportstoEuropeandNorthAmericafalling,butbuyersinIndia,ChinaandTürkiyeattractedbythediscountedpricesonoffer.RussianUralscrudehasbeentradingatadiscounttoBrentcrudeoilonaverageofaroundUSD30/barrelsinceMarch(Figure2.2).AnimportanttestforglobalproductandcrudemarketswillcomewhentheEuropeanUnionbanonseaborneimportsofRussianoilentersintoforce(December2022forcrudeoilandFebruary2023foroilproducts).NotalloftheRussianexportsdisplacedfromtheEuropeanUnionarelikelytofindanewhomeinothermarkets.IEA.CCBY4.0.Chapter2Settingthescene912Figure2.2⊳PricesforBrentandUralscrudeoil,anddieselinNorthwestEuropesinceJanuary2021IEA.CCBY4.0.TheinvasionhasproduceddeepdiscountsforRussiancrudesandamajorriseinrefiningmarginsasproductmarketsrunupagainstashortageofglobalrefiningcapacitySource:IEAanalysisbasedonArgusMedia(2022).ThebreakdownofRussia’snaturalgasrelationshipwithEuropeisstillmorecomplicated.ItisnotpossibleintheneartermforRussiatoswitchitsEuropeanpipelineexportstoothermarkets,forexampletoAsia.However,Europe’sabilitytofindalternativesuppliesintheneartermisalsoconstrained.LNGistheclearestcandidate.EuropeincreaseditsLNGimportsbyaround45bcminthefirst8monthsof2022,comparedwiththesameperiodin2021.ItsabilitytodosowashelpedbyrelativelymuteddemandinChina(whichreduceditsspotpurchasesofLNGsignificantlyoverthisperiod)andbynewprojectsintheUnitedStatescomingonstream.ButincreasedLNGdeliveriesfromatightinternationalmarketcoveronlyasmallpartofthereductionsinRussiandeliveriesoverthecourseof2022,puttingthespotlightandtheburdenofadjustmentfirmlyonEuropeannaturalgasdemand(Figure2.3).Thenorthernhemispherewinterof2022‐23willbeaperilousmomentforEurope,internationalnaturalgasbalancesandglobalenergysecurity.Europehasmadeprogressinrefillingitsgasstoragesites,whichweremorethan90%fullbyearlyOctoberdespiteregularcurtailmentsofRussiansupplythatappearedtobeaimedatslowingtheprocess.Duringthewinterheatingseason,withdrawalsfromstorage–alongsidecontinuedimports–arevitaltomeettheseasonalupswingindemand,andthemarketmaybeverytightindeedifflowsfromRussiaremainloworceaseentirely.Early,co‐ordinatedactiontolimitgasuseandpeakelectricitydemand(whichistypicallymetbygas‐firedpowerplants)willbeessentialifEuropeistowardoffrisingenergysecuritythreats.50100150200Jan‐21May‐21Sep‐21Jan‐22May‐22Sep‐22USDperbarrelNorthwestEuropeDieselUralsNorthSeaBrentIEA.CCBY4.0.92InternationalEnergyAgencyWorldEnergyOutlook2022Figure2.3⊳NaturalgaspipelineflowsfromRussiatotheEuropeanUnionandTürkiyesinceJanuary2022IEA.CCBY4.0.BetweenMayandOctober2022,dailypipelineflowsfromRussiatotheEuropeanUniondroppedbyaround80%Note:mcm/d=millioncubicmetresperday.Source:IEAanalysisbasedonENTSOGTransparencyPlatform(2022).Russia’sinfluenceontheenergysectorextendsbeyondoilandgastoencompasscoal,uranium,fertiliserandmanyofthemineralsandmetalsthatarevitalforcleanenergytransitions.RussiahasbeenEurope’slargestsourceofimportedcoal,andareorderingoftradeflowsisunderwayasaresultofaEuropeanUnionbanonimportsofRussiancoalthatenteredintoforceinAugust2022.Russiaalsoproducesaround20%oftheworld’sClass1nickel(whichisthegradeneededforbatteries)andaccountsforover40%ofglobaluraniumenrichmentcapacity.Inaddition,itistheworld’ssecond‐largestglobalproducerofcobaltandaluminium,andthefourth‐largestproducerofgraphite.2.2.3EconomicconsequencesThemacroeconomicreverberationsfromtheglobalenergycrisis,comingontheheelsofthepandemic,arehavingfar‐reachingeconomicconsequences.Inemergingmarketanddevelopingeconomies,wheretheshareofenergyandfoodinhouseholdbudgetsisrelativelylarge,energypriceshavehadasignificantimpactoninflation,settingbackprogresstowardsachievingaffordableaccesstoenergyandcontributingtoasharpincreaseinextremepovertyinthemostvulnerablecountriesandcommunities.InSouthAsia,thecrisisisalreadyhavingdestabilisingeffects,withPakistanandSriLankainparticularsufferingwidespreadenergyshortages.InAfrica,thenumberofpeoplelivingwithoutelectricityincreasedbymorethan15million(or3%)between2019and2021,reversingalmostallthegainsmadeoverthepreviousfiveyears,andthisdiretrendissettobereinforcedin2022.100200300400Jan‐2022Apr‐2022Jul‐2022Oct‐2022mcm/dOtherPolandUkraineNordStreamTurkStreamRussia'sinvasionofUkraineIEA.CCBY4.0.Chapter2Settingthescene932Mostprojectionsofeconomicactivityhavebeenscaledbacksignificantlysincethestartoftheyear,withtheInternationalMonetaryFund(IMF)cuttingitsexpectationsofglobalgrowthfor2022from4.9%inOctober2021to3.2%initsOctober2022update(IMF,2022).Inenergyimportingeconomies,higherpricesforfuelsandelectricityreduceeconomicoutputbyloweringtherealincomesofhouseholdsandraisingtheproductioncostsofbusinesses.Someenergyexportingeconomiesstandtobenefitfromhigherenergyprices,withbettertermsoftradeboostingnationalincome,expandingproductionandmakinginvestmentopportunitiesmoreattractive.However,thisprovidesonlyapartialoffsettothedragonglobalgrowth,sinceenergyexportingeconomiestendtosavemoreandspendlessoftheirincomethanimportingeconomies(WorldBank,2022).Theextenttowhichhigherenergypricesultimatelyimpactindividualcountriesdependsonarangeoffactors,includingtheshareofenergyintheirexportsandimports,theenergyintensityoftheirindustrialproduction,theirrelianceontheenergysectorfortaxationrevenueandtheeffectofhigherenergypricesoninvestorandconsumerconfidence.Figure2.4⊳Changeinbaseinterestratesinselectedeconomies,year-to-August2022relativeto2021IEA.CCBY4.0.Inflationarypressures,linkedinparttohigherenergyprices,arepromptingashiftinmonetarypolicies;furtherinterestratehikesarelikelyNote:Eurozoneinthisfigureincludes19countriesthatusetheEuro:Belgium,Germany,Ireland,Spain,France,Italy,Luxembourg,Netherlands,Austria,Portugal,Finland,Greece,Slovenia,Cyprus,Malta,Slovakia,Estonia,LatviaandLithuania.Source:OxfordEconomics(2022).Withinflationinmanycountrieswellabovetargetlevel,theabilityofauthoritiestocushiontheimpactofhigherenergypricesonactivitywithaccommodativemacroeconomicpolicymaybemorelimitedthanitwaswhentheCovidshockhitinearly2020.Inadvancedeconomies,higherpricesandrisinginflationhavealreadybroughtforwardthenormalisation‐0.60.00.61.21.82.43.0BrazilUnitedStatesUnitedKingdomCanadaSouthAfricaIndiaEurozoneIndonesiaJapanChinaPercentagepoints8.0IEA.CCBY4.0.94InternationalEnergyAgencyWorldEnergyOutlook2022ofmonetarypolicy.ThebaserateofcentralbanksinCanada,UnitedKingdomandUnitedStateshasrisenbycloseto200basispointssince2021(Figure2.4).TheEuropeanCentralBankstartedtotightenlater,raisingitsbaserateforthefirsttimeinoveradecadeby50basispointsinJuly2022,andbyafurther75basispointsinSeptember.Japanhasthusfarbeenanexceptiontothistighteningtrend.Monetarypolicyvariesmoreamongemergingmarketanddevelopingeconomies,reflectingtheirdifferingcyclicalpositions.Thetighteningofmonetarypolicyinmanycountriescomesatatimewhenpublicandprivatedebtareatahighlevel,particularlyforthispointofthecycle,meaningthatanychangeininterestrateshasalargercontractionaryandpotentiallydestabilisingeffectthanjustafewyearsago.Figure2.5⊳Changeinhouseholdsavingsrateinselectedeconomies,year-to-August2022relativeto2021IEA.CCBY4.0.Drawingdownsavingsaccumulatedduringthepandemicprovidesasafetynetforsomehouseholds,butthebroadereconomicrisksareclearlyskewedtothedownsideNote:Eurozoneinthisfigureincludes19countriesthatusetheEuro:Belgium,Germany,Ireland,Spain,France,Italy,Luxembourg,Netherlands,Austria,Portugal,Finland,Greece,Slovenia,Cyprus,Malta,Slovakia,Estonia,LatviaandLithuania.Source:OxfordEconomics(2022).Somepartialbuffersfortheeconomicoutlook–especiallyinadvancedeconomies–havecomefromhouseholdbalancesheetsthatwerebuoyedbysavingsduringthepandemic,stronglabourmarketconditionsandfiscalsupportmeasures(Figure2.5).Thishasprovidedsomesupporttoeconomicactivityinthefaceofheadwindsfromtheenergycrisis,andascentralbankstightenmonetarypolicy.However,therisksareclearlyskewedtothedownside.ThewarinUkraineshowsfewsignsofending,curtailmentofRussiangasflowsandhighpricesareforcingpainfulcurtailmentsofindustrialoutputinpartsofEurope,geopoliticalstrainscontinuetodivideandfragmenttradeandinvestmentflows,andpossiblenewCovidvariantscannotbeexcluded.Inthisfebrileandlargelyunchartedenvironment,‐7‐6‐5‐4‐3‐2‐1012UnitedStatesCanadaUnitedKingdomJapanEurozoneBrazilIndiaSouthAfricaIndonesiaChinaPercentagepointsIEA.CCBY4.0.Chapter2Settingthescene952additionalshockshavethepotentialtocausesignificanteconomicharm.Pricepressurescouldalsomount,makingstagflationagenuinethreat.Overall,theabilityofdifferenteconomiestowithstandthecrisisvarieswidely.Europeancountriesaredirectlyexposedtoshortfallsinenergysupplybutalsohavegreaterpossibilitiestoadjust.Higherborrowingcosts,alongsideastrongdollar,arehurtingmanyemerginganddevelopingeconomies–especiallythosewithpre‐existingeconomicweaknesses.Ultimately,thecombinationoffallingrealincomesandrisingpricesisbeingwidelyfelt,invitingcomparisonswiththemostseriousenergyshocksofthepast(Box2.2).Box2.2⊳Howdoesthisenergycrisisdifferfrompreviouspriceshocks?Today’senergycrisishassomefeaturesincommonwiththeoilpriceshocksofthe1970s,notablythecombinationofslowinggrowthandrisinginflationlinkedtohighcommoditypricesandtightlabourmarkets.Buttherearealsoimportantdifferences.Oneisthatrecentoilpricemovementshavebeenrelativelymodestbycomparisonwiththe1970s,whenpricesroseswiftlyfromlessthanUSD10/barrel(expressedincurrentUSdollars)beforetheembargoin1973tomorethanUSD40/barrelatthestartof1974.HigherpricespersistedaftertheembargowasliftedandthenroseagaintotheequivalentofUSD80‐90/barrelasoilproductioninIranfellaftertheIranianrevolution.Anotheristhattheglobaleconomyismuchlessdependentonoilthanitwasinthe1970s(Figure2.6).In1973,USD10000ofvalueaddedtotheglobaleconomyrequired5.6barrelsofoil;thefiguretodayiscloserto2.4barrels.In1973,oilwaswidelyusednotjustfortransportation,butalsoformorethanaquarteroftheworld’selectricitygeneration–ahighersharethanrenewables.Today,oilgenerateslessthan3%oftheworld’spower(andrenewablesclosetoone‐third).However,tofocusonoilinthecurrentenergycrisismissesthelargercontext.Theworldisexperiencingaglobalenergycrisis,withlargepriceincreasesforallfossilfuelsand,inturn,substantialupwardpressureonelectricitypricesaswell.Coalandnaturalgaspriceshavereachedrecordlevelsinmanymarkets.Theeffectsoftoday’scrisisarefeltverywidelyacrossarangeofeconomicactivitiesandcountries.Atthesametime,thecurrentcrisisleavesEuropeuniquelyexposed.Europeisunusualinbeingamajorgas‐consumingregionthatisheavilydependentonimports–virtuallyallothercountriesorregionswithcomparablelevelsofdependenceongasaremajorproducers.AlthoughitiswealthyenoughtooutbidsomeotherpartsoftheworldforavailableLNGcargoes,thisisfarfromenoughtocushionthecontinentfromtheeffectsofreducedRussiansupplies.Searchingforsilverliningsinthecurrentcrisisisnoteasy,buttherearetworeasonsforguardedoptimism.First,macroeconomicpolicymakersandinstitutionshavelearnedimportantlessonsonhowtorespondtocommoditypriceshocks.Monetarypolicyhaslargelyfocusedoncalmingdemand‐sidepricepressureswhilelettingsupply‐sideshocksIEA.CCBY4.0.96InternationalEnergyAgencyWorldEnergyOutlook2022flowthrough,andpolicyframeworksinmanycountriesarefirmlybasedontheobjectiveofpricestability.Labourbargainingarrangementsgenerallyalsotakemoreaccountthaninthepastoftheriskofcost‐pushinflation,withfewerautomaticwageindexationprovisionsthanusedtobethecase.Second,the1970sarenowrememberednotonlyforthesocialandeconomicpaincausedbyhighenergypricesbutalsoforrapidenergyinnovationanddiversification.Low‐emissionsoptionsgotamajorboost,notablyintheformofinvestmentinnuclearpower.Energyefficiencytookcentrestage:thefueleconomyofanaveragenewcarsoldintheUnitedStateswentfrom18litres/100kmatthestartofthe1970sto15litres/100kmbytheendofthedecade.Figure2.6⊳OilandgasuserelativetoGDPpercapitainselectedcountries/regionssince1971IEA.CCBY4.0.Startingatamuchlowerlevelfornaturalgas,trendsinoilandgasintensityformostcountrieshavemovedinoppositedirectionssincetheearly1970sNote:MJ=megajoule;MER=marketexchangerate.246020000400006000080000GDPpercapita(USD[2021,MER])EuropeanUnionIndiaUnitedStatesChinaJapanWorldOilintensity(MJperUSD[2021,MER])UnitedKingdomOil19712021246020000400006000080000GDPpercapita(USD[2021,MER])EuropeanUnionIndiaUnitedStatesChinaJapanWorldNaturalgasintensity(MJperUSD[2021,MER])UnitedKingdomNaturalgas19712021IEA.CCBY4.0.Chapter2Settingthescene972Thereismuchmorescopetodaytodeploynewtechnologiesanddiversifythantherewasinthe1970s.Backthen,windandsolarphotovoltaics(PV)werejustenteringthemarket,whereasnowtheyarematuretechnologieswhoseeconomicadvantagesareonlybeingreinforcedbysky‐highpricesforfossilfuels.Therehasalsobeenrapidprogressinrecentyearsinthedevelopmentoftechnologiesthatsupportandenabledemand‐sidemanagementaswellasthosethatsupporttheuseandstorageofcleanelectricityfromvariablesources.Asaresult,thereareopportunitiesinmanycountriestopursueadramaticandimmediatescaleupofcleanenergyinvestmentanddeploymentinwaysthatwerenotpossibleinthe1970s.2.3Wheredowegofromhere?2.3.1InvestmentandtraderesponsesEnergyinvestmentandtradeflowsarebeingreshapedbythecurrentcrisisinwaysthatwillhaveasignificantbearingonthefutureofenergy.Periodsofhighfossilfuelpricesofferstrongincentivestomoveawayfromrelianceonthesefuelsortousethemmoreefficiently,reinforcingthemomentumbehindenergytransitions.However,today’scrisiscouldalsospurrenewedinvestmentsinfossilfuelsupplyinthenameofenergysecurity.Therelativeweightoftheseresponseswillbedeterminedbypolicypriorities,includinglong‐termclimatecommitmentsaswellasenergysecurityimperatives,anddifferentprioritiesmaynotbewellaligned.Governments,companies,investorsandfinancialinstitutionsallfaceacomplexandfast‐evolvingsituationastheydecidewhichenergyprojectstoback.Ourlatestestimatessuggestthatthebulkofadditionalinvestmentin2022isbeingdrawntowardscleanenergy(Figure2.7).Overallglobalenergyinvestmentisanticipatedtoriseby8%in2022toreachUSD2.4trillion,withalmostthree‐quartersoftheincreaseforcleanenergy,includingnotjustrenewablepower,butalsootherlow‐emissionsfuelsandtechnologiesaswellasgrids,storageandenergyefficiency.However,thisshifttowardscleanenergyinvestmentcomeswithsomeimportantcaveats.First,thetotalisstillwellshortoftheamountthatisrequiredtomeetrisingdemandforenergyservicesinaclimatesustainableway.Totalinvestmentincleanenergy,estimatedatUSD1.4trillionin2022,wouldneedtodoubleby2030tobeconsistentwithnationalclimatepledgesasreflectedintheAPS,andtotripleoverthesameperiodtobealignedwiththeNZEScenario.Second,theimpactontheenergysystemfromhigherspendingispartlyabsorbedbyhighercostsandinflationarypressures.Investorsfretaboutinflationbecauseitcanreducetheirreturnoninvestmentinwaysthatarebeyondtheircontrol.Ifrisinginflationisnotcontained,thereisariskitwillputabrakeonthewillingnessofcompaniestoincreasecapitalspending,despitestrongpriceandpolicysignals.Equally,tightermonetaryconditionsincreasethecostofborrowingandthusputatriskcapital‐intensiveprojects,includingmanycleanenergyprojects.IEA.CCBY4.0.98InternationalEnergyAgencyWorldEnergyOutlook2022Figure2.7⊳GlobalenergyinvestmentbyregionIEA.CCBY4.0.Emergingmarketanddevelopingeconomies,otherthanChina,accountfortwo-thirdsoftheglobalpopulation,buttheirshareofcleanenergyinvestmentisbothlowanddecliningNote:EMDE=emergingmarketanddevelopingeconomies;MER=marketexchangerate;2015‐19indicatesaverageannualfigure;2022e=estimatedvaluesfor2022.Aswell,thereistheconcentrationofcleanenergyinvestmentinadvancedeconomiesandChina.Virtuallyalloftheglobalincreaseinspendingonrenewables,gridsandstoragesince2020hastakenplaceintheseeconomies,andmorethan80%ofelectricvehiclesalesareconcentratedinChinaandEurope.Despitesomesuccessstories,suchassolarinvestmentsinIndia,otheremergingmarketanddevelopingeconomiesriskbeingleftbehind.Thisdivergenceunderlinesthematerialriskofnewdividinglinesincollectiveeffortstoaddressclimatechangeandtoreachothersustainabledevelopmentgoals.Today’shighfossilfuelpriceshavegeneratedanunprecedentedwindfallforproducers.Netincomefortheworld’soilandgasproducers,forexample,issettodoublein2022toanunprecedentedUSD4trillion.Forthemoment,however,thisisonlygeneratingamodestpick‐upinoverallspendingonfossilfuels,withalmosthalfofthecashgeneratedbythemajorsbeingusedtopaydowntheirdebt.Investmentinupstreamoilandgasisnowrising,althoughthelevelofinvestmentremains17%belowwhereitwasin2019,andisaroundhalftheinvestmentpeakrecordedinthesectorin2014(Figure2.8).Policyuncertaintyishigh,intermediatedfinancingcanbedifficulttosecure,andcompaniesaregenerallyshyingawayfromlargecommitmentsofcapitalthatmaytakeyearstopayback.However,investmentsincoalsupplyhavebeenpickingup,risingby10%in2021withafurther10%riseexpectedfor2022.TheincreaseisbeingledbyminingcompaniesinChinaandIndia,thedominantplayersinglobalcoalmarkets.200400600800100012002015‐19202020212022e2015‐19202020212022e2015‐19202020212022eFossilfuelsCleanenergyBillionUSD(2021,MER)AdvancedeconomiesChinaOtherEMDEIEA.CCBY4.0.Chapter2Settingthescene992Figure2.8⊳Globalinvestmentinupstreamoil,gasandcoalsupplyIEA.CCBY4.0.Investmentincoalsupplyisrisingataround10%peryear,butoilandgasspendingremainsbelowpre-Covidlevels,despitesky-highpricesNote:2015‐19indicatesaverageannualfigure;2022e=estimatedvaluesfor2022;MER=marketexchangerate.Russia’sinvasionofUkraineisclosingoffoneofthemainarteriesofinternationalenergycommerce,bothbecauseofEuropeansanctionsoncoalandoilimportsandGazprom’sdecisionstocutgassupply.ThisissettogenerateareductioninRussianoutputaswellasaprofoundreshufflingoftradeflowsaroundtheworld.Thelogicalexpectationisthat,overtime,moreRussianresourceswillfloweastwardstoAsianmarkets,ratherthanwestwardstoEurope.Therearesomesignsofthisalreadywithcrudeoil,althoughthereorientationofoilproductflowswillinvolveawidersetofactors,giventhatbothChinaandIndiaareoilproductexporters.AneastwardfocusforRussia’scrudeexportssetsupabattleformarketsharewithMiddleEastoilexporters,whichhaveinvestedbothpoliticallyandfinanciallyintheirrelationshipswithkeyAsianoilconsumers.Reconfiguringglobalgasflowswillbeamuchmorechallengingandlengthyprocess.ThedistancesfromtheRussiangasfieldsofwesternSiberiaandtheYamalpeninsulatoalternativenon‐Europeanmarketsarehuge,andtheinfrastructureneededforthisisnotinplace.Russianenergystrategyhaslongsoughttoincreasethediversityofgasexportflows,buttherehasbeennocontingencyplanningforacompletebreakdownoftieswithitsprimaryexportmarket.TheEuropeanUnionremainsveryvulnerabletonear‐termshortfallsinRussiansupply,especiallyfornaturalgas,butthekeyelementsofamedium‐termstrategytoreducerelianceonRussianimportshavetakenshaperelativelyquickly.Mostoftheworkwillneedtobedoneonthedemandside,asthereislittleprospectoflargevolumesofadditionalnon‐1002003004005002015‐19202020212022e2015‐19202020212022eUpstreamoilandgasCoalsupplyBillionUSD(2021,MER)IEA.CCBY4.0.100InternationalEnergyAgencyWorldEnergyOutlook2022Russiansupplybecomingquicklyavailable.MoreLNGfromtheUnitedStateswillhelp,butitwilltaketimetofindothermajornewsourcesofLNG:forexample,largenewexportfacilitiesinQatararenotexpectedtostartoperationsuntilthemiddleofthedecade.Inthemeantime,tightmarketsandfiercecompetitionforavailableLNGcargoescouldleavealastingreluctanceamongmanyprice‐sensitivedevelopingeconomiestorelyonlarge‐scalegasimports.AsdiscussedinChapter8,thedownsideforgasdoesnotautomaticallytranslateintoanupsideforcleanenergy;coaloroilcouldalsostandtogain.Evenbeforetheenergycrisis,underlyingforcesandeventswerereshapingthebroaderenvironmentforinternationaltradeandforeigninvestment(Box2.3).Forexample,shortagesofpersonalprotectiveequipmentandvaccinesuppliesduringtheearlyphaseoftheCovidpandemicpromptednationalexportrestrictions,highlightingthevulnerabilitiesofjust‐in‐timeinventorymanagement.Frustrationwiththeslowpaceofchangeinupdatingthemultilateraltradingsystemisleadingtoanincreasingnumberofbilateralandplurilateraltradeandinvestmentagreements.Geopoliticalrivalriesandnewnationalsecurityconcernsmayinthefuturefavourmultipletradingblocscentredontrustedpartners.Box2.3⊳Hastheworldreachedpeakglobalisation?Tradeisbothapropagatorandanabsorberofeconomicshocks,butinrecentyearsattentionhasfocussedmoreontheformerthanthelatter.Naturaldisasters,Covidlockdownsandgeopoliticaltensionshaveexposedvulnerabilitiesincross‐bordersupplychains,andRussia’suseofnaturalgasinthecurrentconflicttoexertpressureonEuropeanconsumersanddecisionmakersprovidesavividexampleofthehazardsthatsuchsupplychainscaninvolve.Areassessmentoftrade‐relatedeconomicandsecurityrisksinmanycountrieshaspromptedahostofmeasuresaimedatstrengtheningsupplychainresilience,includingsupporttobuilddomesticproductioncapabilityinkeysectors,the“re‐shoring”anddiversificationofsuppliersandcallstoupdateWorldTradeOrganizationagreements.Thishasledsometoaskwhetherwehavereached“peak”globalisation.Globalisationisnotapreciselydefinedconcept,butiswidelyinterpretedasthecloserintegrationofeconomies,especiallythroughinternationaltradeandinvestment.Theintensityoftrade,measuredbythevalueofimportsandexportsofgoodsandservicesrelativetoGDP,isastandardindicatorusedtomeasureglobalisation(Figure2.9).Followingmultipleroundsoftradeliberalisation,andreductionsinshippingandcommunicationcosts,globaltradeintensityroseprogressivelytoreachitshighestlevelintheyearsbeforethefinancialcrisisin2008.Sincethen,apartfromcyclicalfluctuations,tradeintensityhasbeenbroadlysteady.Itisstilltooearlytojudgehowrecenteventswillaffectthisindicator.TheplateauinglobalisationseemstohavebegunbeforetheCovidpandemic.Atthesametime,theplateaudoesnotnecessarilypresageafall:infact,globaltradereboundedstronglyin2021toabovepre‐pandemiclevelsaslockdownseasedandtravelrestrictionswerelifted.IEA.CCBY4.0.Chapter2Settingthescene1012Figure2.9⊳RatioofglobaltradetoGDPIEA.CCBY4.0.Cyclicalfluctuationsapart,tradeintensityhasbeensteadyatahighlevelforthepast15yearsNotes:GlobaltradesumofimportsandexportstothenominalvalueofGDP.WTO=WorldTradeOrganization;2021e=estimatedvaluesfor2021.Sources:WorldBanknationalaccountsdata;OECDNationalAccountsdatafiles;IEAcalculations.Thecapacityoftradetoplayaroleasanabsorberofeconomicshocksisweakenedbytradefrictions.Anillustrationofthiscameatthestartofthepandemicwhentheglobalsurgeindemandforpersonalprotectiveequipment(PPE)couldnotbemet.ManyPPE‐producingeconomiesputinplaceexportrestrictions,whichassurednationalsupplies,butdidnothelptomeetthespikeinglobaldemand.Therestrictionsdidnotlastlongandwerereplacedbymeasurestofacilitatetrade,notablystreamlinedcertificationprocedures:theseledtoasurgeinglobalproductionthathelpedtomeetworldwidedemandandeasedlocalcapacityconstraints.Therestrictionsneverthelessservedasareminderofthepotentialfortradetobecurtailedattimesofcrisis.ThepossibilityofgasshortagesinthecomingmonthswillprovideanotherimportanttestoftheresilienceofopenmarketsinEuropeandbeyond.Cleanenergytransitionswillaffectinternationaltradeinsignificantways,andbythesametokenchangesininternationaltradearrangementscouldprofoundlyaffectthecourseofthosetransitions.Tradeinfuelswilleventuallydiminishastheshareofoil,gasandcoalintheenergymixfalls.However,thistrademaybecomesteadilymoreconcentratedasitdiminishes.Atthesametime,internationalcleanenergysupplychainsmightincreaseinvolumeandinstrategicimportance.Tradeenablesbusinessestobuyfromthemostgloballycost‐competitivesuppliersofcleanenergytechnologies,withsolarpanelsfromChinabeingaparticularlynotableexample.Thishasacceleratedtheuptakeofrenewableenergy,buttheconcentrationofsolarpanelproductioninonecountryposespotentialchallengesthatgovernmentsneedtoaddress(IEA,2022a).Overtime,economieswitha20406019711976198119861991199620012006201120162021ePercentofGDPGlobalfinancialcrisisTokyotraderoundChinajoinsWTOUruguaytraderoundCOVIDpandemicIEA.CCBY4.0.102InternationalEnergyAgencyWorldEnergyOutlook2022costadvantageinrenewableenergymaysecurealargershareofinternationalvaluechains,justasaluminiumsmelteroperatorsweredrawntocountrieswithlowcosthydropower.Thechallengeistoharnessthepositiverolethattradehasplayedinreducingthecostandexpandingthedeploymentofrenewableenergytechnologies,suchassolarPVandwind,whileincreasingtheresilienceanddiversityofsupplychains–includingthoseforthecriticalmineralsthatarevitalinputstomanycleantechnologies.Ratherthanmountingnewobstaclestotrade,thisrequiresadeterminedefforttoupdatetherulesofinternationaltrade,forexampletoprovideclarityonwhenandhowtraderestrictionsmaylegitimatelybedeployed,toremoveremainingtariffbarriersoncleanenergytechnologiesandthecomponentsneededtomakethem,andtomakeuseoftradefacilitationmechanisms,suchasmutualrecognition,tolowerthecostsofworkingwithdifferentproductstandards.2.3.2PolicyresponsesThepolicyactionstakenbygovernmentsareacrucialvariableindeterminingwherewegofromhere;theyrepresentthemainreasonsforthedifferencesinoutcomesacrossthevariousscenariosinthisOutlook.In2021,governmentsmadeanumberofcommitmentstosustainabilityintherun‐uptothecrucialmeetingofCOP26atGlasgow,someofwhichtooktheformofneworupdatedNationallyDeterminedContributions(NDCs)undertheParisAgreement–typicallyfor2030–oroflongertermstrategiesandtargets.BytheendoftheCOP26meeting,countriesrepresentingmorethan80%oftoday’sCO2emissionshadpledgedtoreachnetzeroemissions.Therewereothercommitmentstoo,notablythe30%reductioninworldwidemethaneemissionsby2030includedintheGlobalMethanePledge.Lessthanayearlater,however,theglobalenergycrisisandmarkettumulttriggeredbyRussia’sinvasionofUkrainehaveintroducedahostofnewpressures.Akeyquestion,exploredintheWorldEnergyOutlook(WEO)scenarios,iswhethertoday’scrisiswillleadtoanaccelerationinenergytransitions,orwhetheritismorelikelytoslowmomentum.GovernmentsinEuropeandelsewherearediscussingstepstosimplifypermittingfornewcleanenergyprojectsandtoredoublepolicysupport.However,Europeisalsoseeinganincreaseincoalconsumption,aswellasincreasedreadinesstosupportnewoilandgasprojectsandinfrastructure,anditisnotaloneinthis.ThefollowingmajorpoliciesandtargetsareincorporatedintothescenariosinthisWEO,eitherintheSTEPSorAPS,reflectingthedegreeofconcretepolicyandlegislativedevelopmentsbackingthetargets:USInflationReductionAct,signedintolawinAugust2022,givesamajorboosttoahugearrayofcleanenergytechnologiesfromsolar,windandelectricvehiclestocarboncaptureandhydrogen.ThenewlegislationprovidesforalmostUSD370billioninenergysecurityandclimatechangeresilienceinvestments,whichareincludedintheSTEPS.IEA.CCBY4.0.Chapter2Settingthescene1032TheEuropeanCommissionREPowerEUplansetsouthowtheEuropeanUnioncanreducerelianceonRussiannaturalgasthroughenergysavings,diversificationofenergysuppliesandanacceleratedrolloutofrenewableenergy.ThisbuildsonmanyofthetargetsintheFitfor55plan,whicharelargelymet–andinsomecasesexceeded–intheAPS,allowingthefulfilmentofGHGreductionscommittedintheEUanditsmembercountries’NDCswhilealsomeetingimportantenergysecuritygoals.Theaccelerationofkeymeasures,inparticularpowersectorrenewablesandfuelswitching,meansthatEUimportsofRussiannaturalgasendwellbefore2030intheAPS,thekeyobjectiveoftheREPowerEUPlan.IndiapassedamendmentsinAugust2022toitsEnergyConservationActthatallowfortheestablishmentofacarbonmarket,makeiteasierforthegovernmenttoimproveenergy‐relatedstandardsforappliancesandfortheenvironmentalperformanceofbuildings.Japan’s6thStrategicEnergyPlanwaspassedintolaw,layingouttargetsto2030reflectedintheSTEPS.Additionally,JapanannounceditsGreenTransformation(GX)plan,whichrestartsapartofitsnuclearpowerfleet,andalsolaysoutalonger‐termvisionforefficiency,renewables,storage,andadvancednucleartoreachJapan’scarbonneutralitytargetfor2050.Nationalrecoveryplans,designedtohelpcountriesbouncebackafterthepandemic‐inducedslump,continuetoexertastrongnear‐terminfluenceonenergymarketsandinvestment,asdoadditionalmeasurespromptedbythecurrentenergycrisis.Sincethestartofthepandemic,governmentshaveearmarkedoverUSD1.1trillionforpoliciesandincentivesinsupportofcleanenergy,farexceedingthefinancialcommitmentsmadetogreenrecoverymeasuresafterthe2008‐10financialcrisis.However,thesefiguresrevealworryingglobalimbalances.Over90%ofgovernmentsustainablerecoveryspendingisinadvancedeconomies.Manyemergingmarketanddevelopingeconomiesaremorereliantonpublicfundingforenergyinvestmentthanadvancedeconomies,butatthesametimeareincreasinglyconstrainedbyrisingdebtlevelsandlimitedfiscalleeway.Countriesarealsorespondingtorecentdevelopmentsbygivinghighprioritytoenergysecurity,andarehavingtofindwaystobalancethiswithbroaderenergyandemissionsreductionpolicies,includinginmanycasestheachievementofnetzeroemissionsgoals.Chinaprovidesanimportantexampleofanear‐termrebalancinginenergypolicyinresponsetoenergysecurityconcerns(Box2.4).Box2.4⊳CoalandtheroadtocarbonneutralityinChinaFewmomentshavebeenasimportantforenergypolicyinChinaasthepledgebythepresidentinSeptember2020thatitsemissionswouldpeakbefore2030andthatitwouldachievecarbonneutralitybefore2060.Theannouncementsetinmotionnationwideeffortstoformulatemid‐andlong‐termpolicyframeworksfordecarbonisation,andtoidentifypromisingcleanenergytechnologiesthatwouldhelpdeliverthegoals.TheseIEA.CCBY4.0.104InternationalEnergyAgencyWorldEnergyOutlook2022effortswerereflectedinChina’supdatedNDC,issuedshortlybeforeCOP26.ChinaalsocommittedwiththeUnitedStatesintheJointGlasgowDeclarationtocurbinternationalunabatedcoalpowerprojectsandlimitCO2emissionsinthe2020s.Sincethen,therehasbeenastrongeremphasisonthestrategicimportanceofenergysecurityinChina,accompaniedbyhighernear‐termuseofcoaltoensurereliableelectricitysupply.Thisshiftinemphasispre‐datedRussia’sinvasionofUkraine:itwaspromptedbypoweroutagesandaspikeinenergypricesinmanyprovincesduringthesecond‐halfof2021,amidrapideconomicrecoveryandcoalsupplyissues.Restrictionsondomesticcoaloutputwereeased,andcoal‐producingprovinceswereencouragedtorampupproduction.SourcingenergycheaplyandreliablyhasbeenaconstantpriorityforChina’senergypolicy.Bysomedistance,Chinaisnowtheleadingglobalinvestorinsolar,onshoreandoffshorewind,hydropowerandnucleargenerationtechnologies.China’ssupportforcleanenergytechnologiesreflectsnotonlyenvironmentalandindustrialstrategyconsiderations,butalsoadesiretoreduceitsincreasingrelianceonimportedfuels.Nonetheless,China’senergysectorremainsreliantonfossilfuelsfor85%ofitsprimaryenergy,withcoalthelargestsinglecontributor:Chinaaccountsformorethanhalfofboththeworld’sproductionandconsumptionofcoal.Counteringrisksfromvolatileinternationalenergymarketsmeansredoublingeffortstodevelopanddeploycleantechnologies;forthemoment,italsomeansturningmoretodomesticcoal.Thisapproachisvisibleinasuccessionofrecentpolicystatements,startinginDecember2021withtheCentralEconomicWorkConference,whichre‐emphasisedtheimportanceofcoalforChina’senergysystem,whilealsorecognisingtheneedtomoveaway,overtime,fromtraditionalenergysourcesinordertoachievecarbonneutrality.The14thFive‐YearPlanforaModernEnergySystem,releasedinMarch2022,callsforeffortstojointlypromoteenergysupplysecurityandlow‐carbontransitions,whileunderliningthecentralimportanceofenergysecurity,andframingitasanaspectofnationalsecurity.InMarch,duringamajorannualmacroeconomicmeeting,theNationalDevelopmentandReformCommissionreleasedthePlanonNationalEconomicandSocialDevelopment,thedetailsofwhichunderscoreChina’sbalancingact.Ontheonehand,itrelaxescoalconstraints,indicatingsomeflexibilityinrespectoftheenergyconsumptionandintensitytargetssetoutinthemacroeconomicFive‐YearPlanin2021,andcallsfortheexploitationofdomesticcoal,oilandgasresources.Ontheother,itcontinuestoemphasiseemissionsreduction,nuclearpower,feed‐intariffpricingmechanismsandimprovedwindandsolarpowergenerationpricingmechanismstoacceleratebroaderpowermarketreformefforts.Highpriceshavealsobroughtforwardarangeofinterventionsbygovernmentstoprovidesomeprotectionforconsumersfromtheirimpact.ThevalueofemergencygovernmentspendingorforegonerevenueprovidedtocushionconsumersandbusinessesfromhighIEA.CCBY4.0.Chapter2Settingthescene1052energypricesisnearingUSD550billionasofSeptember2022(Figure2.10).Thisissettoincreasefurther,withpackagescurrentlyunderconsideration,notablyintheUnitedKingdomandGermany.Inemergingmarketanddevelopingeconomies,short‐termconsumersupportnowoutweighsthesupportprovidedforcleanenergyinvestmentssinceMarch2020.Figure2.10⊳TotalgovernmentoutlaysonsustainablerecoveryspendingandenergyaffordabilitysupportIEA.CCBY4.0.EmergencygovernmentspendingtohelpkeepenergyaffordableisgrowingandalreadyhalfthetotalallocatedtosupportcleanenergyinvestmentsincethepandemicNotes:Cleanenergyinvestmentsupportencompassessustainablerecoveryspending(fiscalspendingbynationalgovernmentsinfavourofcleanenergymeasures,enactedintheframeworkoftheirCovid‐19recoveryplans)andcleanenergyspendingfromenergycrisispackages,aimedatboostingenergyefficiencyand/orlow‐emissionsproductioncapacity.Short‐termenergyaffordabilitysupportaremeasuresenactedinresponsetotheenergypricecrisisfromSeptember2021toearlySeptember2022,intheformofemergencyconsumersupport(e.g.temporaryenergypricesubsidiesortaxalleviation,state‐backedloans).2.3.3WorldEnergyOutlook‐2022scenariosThisOutlookexploresthreemainscenariosforthefuture,allofwhicharefullyupdatedtoincludethelatestenergymarketandcostdata.Commontoeachisrisingdemandforenergyservices,drivenbypowerfulunderlyingeconomicanddemographicforces.Howthisdemandismet,however,variessubstantiallyacrossthescenarios.Thesedifferencesdependlargelyonthepolicychoicesmadebygovernments,which,inturn,shapeinvestmentdecisionsmadebypublicandprivateactors,andthewaysinwhichindividualconsumersmeettheirenergyneeds.Themodellingframeworkthatproducesthesescenariosisadynamicone,coveringallfuelsandtechnologies,reflectingthereal‐worldinterplaybetweenpolicies,costsandinvestmentchoices,andprovidinginsightsintohowchangesinoneareamayhave(oftenunintended)consequencesforothers.0.5%1.0%3006009001200BillionUSD(2020,MER)Cleanenergyinvestmentsupport(March2020‐September2022)Short‐termenergyaffordabilitysupport(September2021‐September2022)Short‐termenergyaffordabilitysupportasshareofGDP(rightaxis)AdvancedeconomiesEmergingmarketanddevelopingeconomiesIEA.CCBY4.0.106InternationalEnergyAgencyWorldEnergyOutlook2022Theintentionofthesescenariosistoprovideaframeworkforthinkingaboutthefutureofenergy,ratherthanadefinitiveviewonhowthatfuturewilllook.Eachscenariomodelsadifferentsetofresponsestothecurrentglobalenergycrisis.Bycomparingthem,thereaderisabletoassesswhatdrivesthevariousoutcomes,andtheopportunitiesandpitfallsthatliealongtheway.TheIEAdoesnothaveasingleviewonhowtheenergysystemmightevolve,sononeofthesescenariosshouldbeconsideredasaforecast.TheNetZeroEmissionsby2050Scenarioisanormativescenario,inthatitworksbackwardsfromadefinedoutcome.Theothertwo,theStatedPoliciesandAnnouncedPledgesscenarios,areexploratory,inthattheydonottargetaspecificoutcomebutratherestablishdifferentsetsofstartingconditionsandconsiderwheretheymaylead.Thesescenariosaremodelledfor26countriesandregionsfordemand,powerandfueltransformation,andforallthemajorproducersonthesupplyside.ThescenariosassumethatthereisnoquickorstableendtothewarinUkraine,andthatinternationalsanctionsonRussiaremaininplaceforaprolongedperiod.However,theyassumeagradualnormalisationoftheinternationalsituationofothermajorresource‐holderssubjecttosanctions,notablyIranandVenezuela.Thescenariosare:NetZeroEmissionsby2050(NZE)Scenario:Thisnormativescenariosetsoutapathwaytothestabilisationofglobalaveragetemperaturesat1.5°Cabovepre‐industriallevels.IthasbeenfullyupdatedforthisOutlook,soitstartsfromahigherleveloffossilfueldemandandemissionsthantheversionpublishedintheWEO‐2021.ItalsohasoneyearlessinwhichtoachieveglobalnetzeroCO2emissionsby2050.Asaresult,reachingthisgoalrequiresmorerobusteffortsthaninthe2021analysis.TheNZEScenariodoesthiswithoutrelyingonemissionsreductionsfromoutsidetheenergysector.Asinthepreviousanalysis,advancedeconomiesreachnetzeroemissionsbeforedevelopingeconomiesdo.TheNZEScenarioalsomeetsthekeyenergy‐relatedUNSustainableDevelopmentGoals,achievinguniversalaccesstoenergyby2030andsecuringmajorimprovementsinairquality.TheresultsfortheNZEScenarioarepresentedatthegloballevel,withsomeseparateindicatorsforadvancedandforemergingmarketanddevelopingeconomies.AnnouncedPledgesScenario(APS):Thisscenarioassumesthatgovernmentswillmeet,infullandontime,alloftheclimate‐relatedcommitmentsthattheyhaveannounced,includinglongertermnetzeroemissionstargetsandpledgesinNDCs,aswellascommitmentsinrelatedareassuchasenergyaccess.Itdoessoirrespectiveofwhetherornotthosecommitmentsareunderpinnedbyspecificpoliciestosecuretheirimplementation.Pledgesmadeininternationalforaandinitiativesonthepartofbusinessesandothernon‐governmentalorganisationsarealsotakenintoaccountwherevertheyaddtotheambitionofgovernments.TheAPS,firstintroducedintheWEO‐2021,buildsontheanalysisreleasedduringtheGlasgowCOP26,whichdemonstratedthatthecombinedimplementationofallnetzeroemissionspledgesandtheGlobalMethanePledgewouldleadtoatemperatureriseofaround1.8°Cin2100(witha50%probability).InthisOutlook,theanalysisisextendedIEA.CCBY4.0.Chapter2Settingthescene1072toconsidertheimplicationsforcountriesthathavenotmadeambitiouslong‐termpledges,butnonethelessbenefitinthisscenariofromtheacceleratedcostreductionsforarangeofcleanenergytechnologies.TheseadditionalabatementeffortsmeanthattheAPSisnowassociatedwithatemperatureriseof1.7°Cin2100(witha50%probability).StatedPoliciesScenario(STEPS):Thisscenariolooksnotatwhatgovernmentssaytheywillachieve,butatwhattheyareactuallydoingtoreachthetargetsandobjectivesthattheyhavesetout.Assuch,itisbasedonadetailedsector‐by‐sectorreviewofthepoliciesandmeasuresthatareactuallyinplaceorunderdevelopmentinavarietyofareas.Thisanalysisassessesrelevantregulatory,market,infrastructureandfinancialconstraints.TheSTEPSreflectsapragmaticexplorationofthecurrentpolicylandscape,andgivesaviewonwheretheenergysystemmightbeheadingintheabsenceofspecificnewpolicyinitiatives.AswiththeAPS,thisscenarioisnotdesignedtoachieveaparticularoutcome.EmissionsdonotreachnetzeroandtheriseinaveragetemperaturesassociatedwiththeSTEPSisaround2.5°Cin2100(witha50%probability).WerefertothegapinoutcomesbetweentheSTEPSandAPSasthe“implementationgap”,i.e.thegapthatneedstobefilledtorealisecommitmentsinfull.ThegapbetweentheAPSandtheNZEScenarioiscalledthe“ambitiongap”becauseitreflectsthosepledgesmadetodatecollectivelyarenotambitiousenoughtomatchthegoalofa1.5°Cstabilisationinglobalaveragetemperatures.ThiseditionoftheWorldEnergyOutlookdoesnotincludetheSustainableDevelopmentScenario,whichisanothernormativescenariousedinpreviouseditionstomodela“wellbelow2°C”pathway(theupperboundaryofthetemperatureoutcomestargetedbytheParisAgreement)aswellastheachievementofothersustainabledevelopmentgoals.TheAPSoutcomesinthiseditionareclose,insomerespects,tothoseintheSustainableDevelopmentScenario,inparticularintermsofthetemperatureoutcome.ButtheyaretheproductofadifferentmodellingapproachandsotheAPSfallsshortofachievingtheoutcomestargetedintheSustainableDevelopmentScenario.2.4Inputstothescenarios2.4.1EconomicandpopulationassumptionsTheglobaleconomyisassumedtogrowonaverageatclosetotrend–nearly3%peryear–overtheperiodtothemiddleofthecentury(Table2.1).Therearelargedifferencesbycountryandbyregion,reflectingtheexposureandresiliencetoshocksaswellasvariationsingrowthpotentialofeachgeographicarea.Theassumedratesofeconomicgrowthareheldconstantacrossthescenarios.Thisallowsforacomparisonoftheeffectsofdifferentenergyandclimatechoicesagainstacommonmacroeconomicbackdrop,butitdoesnotcapturefeedbackloopsbetweenclimateaction,IEA.CCBY4.0.108InternationalEnergyAgencyWorldEnergyOutlook2022climatechangeandeconomicgrowth.Thatsaid,werecognisethatthepace,natureandchoiceofmechanismsusedtodrivechangeintheenergysystemwillhavebroadereconomicrepercussionsfordifferentcountriesandregions,bothpositiveandnegative.Overthenearterm,thegrowthtrajectoryremainspositive,butmuchlesssothanayearagowhenglobalaggregatedemandwasexperiencingnearrecordgrowthinresponsetotheremovalofpandemiclockdownsandrestrictionsbeingeasedinmanycountries.Asexcesscapacityunwindsandmacroeconomicsupportiswithdrawn,worldGDPgrowthovertheperiodto2030isprojectedtoaverage3.3%,andthecompositionofgrowthislikelytoshiftbacktowardsservices,suchastravelandtourism,followingtheremovalofremainingpandemic‐relatedhealthandmobilityrestrictionsinmostcountries.Thereare,however,significantdownsiderisksfortheoutlookto2030.Possibledragsongrowthincludenegativeeffectsfromhigherinterestrates,amoodofinsecurityholdingbackinvestmentdecisionsandspendingonhouseholddurables,anduncertaintyastowhethermacroeconomicauthoritiesareabletocontaininflationandavoidaprice‐wagespiral.Ifaprice‐wagespiralweretobreakout,itwouldbelikelytodamagegrowththroughtheremainderofthedecadeandriskinflationbecomingstuckatanelevatedlevel,otherwiseknownasstagflation.Table2.1⊳GDPaveragegrowthassumptionsbyregionCompoundaverageannualgrowthrate2010‐20212021‐20302030‐20502021‐2050NorthAmerica1.9%2.0%2.0%2.0%UnitedStates2.0%2.0%2.0%2.0%CentralandSouthAmerica0.9%2.4%2.4%2.4%Brazil0.7%1.8%2.5%2.3%Europe1.6%2.0%1.4%1.6%EuropeanUnion1.2%1.9%1.2%1.4%Africa2.7%4.1%4.2%4.1%SouthAfrica1.1%1.6%2.8%2.4%MiddleEast2.0%3.2%3.2%3.2%Eurasia2.1%0.1%1.4%1.0%Russia1.7%‐1.1%0.7%0.1%AsiaPacific4.9%4.7%3.1%3.6%China6.8%4.7%2.8%3.4%India5.5%7.2%4.4%5.2%Japan0.5%0.9%0.6%0.7%SoutheastAsia4.1%5.0%3.3%3.8%World2.9%3.3%2.6%2.8%Note:CalculatedbasedonGDPexpressedinyear‐2021USdollarsinpurchasingpowerparityterms.Sources:IEAanalysisbasedonOxfordEconomics(2022)andIMF(2022).IEA.CCBY4.0.Chapter2Settingthescene1092Overthelongerterm,GDPpercapitainemergingmarketanddevelopingeconomiescontinuesgraduallytomovetowardsthelevelsinadvancedeconomies,withemergingmarketanddevelopingeconomiesaccountingforalargershareofglobalGDPin2050(66%)thantheydotoday(53%).Russiamaybeanotableexception,withGDPdroppingasmanycountriesseektoendtheirdependenceonRussianexportsofenergyandresources;RussianGDPisprojectedtoonlyrecoverits2021levelby2040.Themainenergy‐relateduncertaintiesfortheeconomicoutlookrelatetotheimpactofhigherenergypricesandinputcostsonenergyinvestment(especiallythemixbetweeninvestmentincleanenergyandintraditionalfuels),thedegreetowhichhigherpricessetbackprogresstowardsachievingaffordableaccesstoenergy,andtheextentofproductivitygainsassociatedwiththedeploymentofnewenergytechnologies.Thereisanimportantquestioninthiscontextaboutthedeploymentofhowthewindfallgainscurrentlyaccruingtomajoroilandgascompaniesintheprivatesectorandlargegovernment‐ownedentities.Theycouldencouragethesteppingupoffossilfuelinvestment,ortheycouldbeusedtodiversifytheeconomicbaseofhydrocarbon‐richeconomies.Whicheverpathisfollowedwillhavealargeandcontinuingimpactonthecompositionoffuelsupplyandonthepaceofprogresstowardsachievingclimatecommitments.Theglobalpopulationisassumedtorisefrom7.8billionpeoplein2021to8.5billionin2030and9.7billionin2050,anincreaseofalmostone‐quarterin29years.1Thisbringsaboutasizeableincreaseinthenumberofthoserequiringenergyservices,butitalsorepresentsaslowingofannualpopulationgrowth,whichhalvesfromcloseto1%in2020to0.5%in2050.Whilethepaceofpopulationgrowthslowsinallregions,itstartsfromahighbaseinsub‐SaharanAfrica,wherehighfertilityratesandlengtheninglifeexpectancydrivealmostadoublingofthepopulationby2050.Insomecountries,notablyItaly,Germany,JapanandChina,fertilityratesbelowreplacementleveltranslateintofallingandageingpopulationsovertheperiodto2050.TheCovid‐19pandemicislikelytohavehadonlyasmallimpactonthesedemographicprojections.Thenumberofliveslostdirectlyattributedtotheillnessisnearly6.5million(WHO,2022),howeverthenumberofexcessdeathscouldbemuchhigher,especiallyincountrieswherereportingislimited.Strictpublichealthrules,andpromptdevelopmentanddeploymentofvaccinesinmanycountriesnodoubthelpedtoavoidasituationthatcouldhavebeenalotworse.Therearetwootherfactorsrelatedtodemographythathaveimportantimplicationsforpatternsofenergyuse.Thefirstisthewayinwhichimprovementsinhealth,dietandlivingconditionshavegraduallyliftedlifeexpectancyoftheglobalpopulationbyadecadeoverthepast40years.Coupledwithdecliningfertilityrates,thistranslatesintoarisingshareofolder1The2022RevisionofUNDESA'sWorldPopulationProspectscouldnotbeincorporatedinthismodellingcycleasthemodellingwasalreadyadvancedbyitspublicationtime.IEA.CCBY4.0.110InternationalEnergyAgencyWorldEnergyOutlook2022peopleintheglobalpopulation,agroupthatusesmoreenergythantheaverageathome,butlessfortransport.Thesecondisurbandevelopment,wheretheshareoftheglobalpopulationlivingintownsandcitiesisexpectedtorisetoalmost70%by2050.Inthepast,urbanisationhasbeenassociatedwitharisingoverallpopulationandeconomicdevelopment.InChina,however,theprojectionsanticipatethatanadditional215millionpeoplewillbelivingintownsandcitiesby2050,apositivedriverforenergydemand,whileoverthesameperiodthetotalpopulationisprojectedtodeclinebyaround40million,anegativedriverforenergydemand.2.4.2Energy,mineralandcarbonpricesOurscenariosmodelanenergysysteminequilibrium,inwhichenergypricesfollowarelativelysmoothtrajectorytobalancesupplyanddemand,andwhereenergymarkets,investment,technologiesandpoliciesallevolveinamutuallyconsistentdirection(Table2.2).Thepricetrajectoriesdonotattempttotrackthefluctuationsandpricecyclesthatcharacterisecommoditymarketsinpractice.Thepotentialforvolatilityiseverpresent,especiallyinsystemsthatareundergoinganecessaryandprofoundtransformation(seeChapter4).Table2.2⊳FossilfuelpricesbyscenarioNetZeroEmissionsby2050AnnouncedPledgesStatedPoliciesRealterms(USD2021)20102021203020502030205020302050IEAcrudeoil(USD/barrel)9669352464608295Naturalgas(USD/MBtu)UnitedStates5.33.91.91.83.72.64.04.7EuropeanUnion9.09.54.63.87.96.38.59.2China8.010.16.15.18.87.49.810.2Japan13.310.26.05.19.17.410.910.6Steamcoal(USD/tonne)UnitedStates6344221742244644EuropeanUnion113120524262536064Japan132153594674599172CoastalChina142164584873628974Notes:MBtu=millionBritishthermalunits.TheIEAcrudeoilpriceisaweightedaverageimportpriceamongIEAmembercountries.Naturalgaspricesareweightedaveragesexpressedonagrosscalorific‐valuebasis.TheUSnaturalgaspricereflectsthewholesalepriceprevailingonthedomesticmarket.TheEuropeanUnionandChinanaturalgaspricesreflectabalanceofpipelineandLNGimports,whiletheJapangaspricesolelyreflectsLNGimports.TheLNGpricesusedarethoseatthecustomsborder,priortoregasification.Steamcoalpricesareweightedaveragesadjustedto6000kilocaloriesperkilogramme.TheUSsteamcoalpricereflectsminemouthpricesplustransportandhandlingcosts.CoastalChinasteamcoalpricereflectsabalanceofimportsanddomesticsales,whiletheEuropeanUnionandJapanesesteamcoalpricesaresolelyforimports.IEA.CCBY4.0.Chapter2Settingthescene1112OilToday’smarkettightnessisassumedtoeaseinthecomingyears,althoughpricescouldremainhighandvolatileforaperiodasthemarketabsorbsareductioninRussianproduction,onceEuropeanUnionimportrestrictionsenterintoforce.Theoilmarketreturnstoamorestablebalancebetweensupplyanddemandbythelate2020s,althoughthelevelsvarywidelybetweenscenarios(Figure2.11).IntheSTEPS,long‐termdemandisbroadlysimilartolastyear’sWEO,andthiscontinuestoputarelativelyhighfloorunderpricelevels,withthepost‐2030priceonarisingtrendaboveUSD80/barrel.Near‐termhigherpricesbringforwardadditionalsupply,includingtightoil;thesedevelopmentscontinueforanumberofyears,andthisexertssomedownwardpricepressure.However,long‐termpricesarehigherthanintheWEO‐2021asaresultofuncertainprospectsforinvestment(notably,butnotonly,inRussia),combinedwithastrategicshiftamongsomelargeoilandgascompaniesawayfromhydrocarbons.Figure2.11⊳AverageIEAcrudeimportpricebyscenarioIEA.CCBY4.0.Equilibriumoilpricesvarysubstantiallybyscenario,reflectingthewaythatpolicies,costsandresourcesaffectthesupply-demandbalanceNote:STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.IntheAPS,amuchstrongerpolicyfocusoncurbingoildemandbringsdownthepriceatwhichthemarketfindsequilibrium,withtheinternationaloilpricestabilisingataroundUSD60/barrel.MaintainingpricesaroundthislevelwilldependtoalargedegreeonthestancetakenbymembersoftheOrganisationofPetroleumExportingCountries(OPEC),andwhethertheyarereadytomoderatelong‐termproductioninthenameofpricestability,eveninamarketthatisshrinkinginsize.Aswehavesetoutelsewhere(IEA,2020),ifmajorresource‐holdersweretooptinsteadtomaximisetheirownmarketshare,thenthiswould306090120150200020102020203020402050USDperbarrel(2021)STEPSAPSNZEIEA.CCBY4.0.112InternationalEnergyAgencyWorldEnergyOutlook2022resultinmuchlowerpricesandthusreduceinoveralltermstherevenuesuponwhichmanyoftheseeconomiesarehighlyreliant.IntheNZEScenario,anyimmediatemarkettightnessisquicklyrelievedbystrongeffortstoreducedemand,althoughsomecontinuedinvestmentisalsorequiredtoreplaceRussiansupplies.Overtime,pricesareincreasinglysetbytheoperatingcostsofthemarginalprojectrequiredtomeetfallingdemand.Costshereincludetheusualcostsofextraction,theremedialworknecessarytoreducetheemissionsintensityofexistingfields,andtheCO2priceappliedtoanyresidualemissions.Itisassumedthatsomecountriesatthemarginreducetaxesonoilandgasextractiontoallowdomesticproductiontocontinue.Additionalnear‐termoiluse–andemissions–comparedwithlastyear’sNZEScenarioneedtobecompensatedforbyanevenfasterreductionindemandinthe2030sandbeyondinordertokeepwithinaverylimitedemissionsbudget.NaturalgasUnlikeoil,thereisnosingleglobalpricefornaturalgas,butinsteadasetofregionalpricesthatareincreasinglyinterlinkedbytheabilityofLNGtankerstoseekoutthemostadvantageouscommercialdestination.Duringthecurrentcrisis,highgaspricesinEuropemeanthatithasattractedmostoftheavailableLNGcargoestocompensateforcutsinRussiansupply.IntheSTEPS,EUgaspricesaremuchhigherthroughthemid‐2020sthananticipatedintheWEO‐2021.RussianexportstotheEuropeanUnionareassumedtofallfurtherinlinewiththeexpiryofthosecontractsthathaveyettobecutunilaterally,whileadditionstogloballiquefactioncapacityarerelativelymodestoverthecomingyears(withonlyaround60bcminexportcapacitycomingonlinebetween2022‐24,comparedwith105bcmbetween2019‐21).Near‐termpricesinEuropearehigherthaninJapanorotherAsianmarketsduringthistime,areversaloftheusualstateofaffairsinnaturalgasmarkets.Bythemiddleofthedecade,however,theEUgaspricereturnstoaroundUSD8.50/MBtuasnewsupplycomesonlineandmarketconditionsease.TheHenryHubprice,themarkerfornaturalgasintheUnitedStates,isslightlyhigherthanintheWEO‐2021,afunctionofhigherdemandforUSLNGexports.TheAPShasslightlylowerequilibriumgaspricesinEuropeandAsiathanintheSTEPSby2030.ThisisbecausethereisamorerapiddecreaseingasdemandintheAPSthanintheSTEPS,duetoincreasedefficiency,electrificationandaccelerateddeploymentofrenewables.ButtheEuropeanUnionstillneedstoattractadditionalnon‐Russiangasinthisscenario,keepingnear‐termgaspriceselevated.2Thishasknock‐oneffectsonpricesinother2TheSTEPSandAPSpricetrajectoriesbothassumereadinessbyRussiatocontinuesomelevelofnaturalgasdeliveriestotheEuropeanUnion,buttheAPSincorporatesastrongerdrivewithinEuropetoreducetheseimports,inlinewiththeoverallaimofthisscenariotoreflectannouncedpolicyobjectivesevenwheretheyarenotbackedbyspecificmeasurestoachievethem.However,thereisalsothedistinctpossibilitythatRussiansupplycurtailmentswillbringaboutamuchfasterdeclineinEuropeanuseofRussiangasthanEuropeaneffortstodiversifyortoreducedemand.RussiamayevensimplystopsupplyinganygastoEurope.IEA.CCBY4.0.Chapter2Settingthescene1132importingregions,althoughtheeffectsinAsiaaremutedbythelinktooilpricesinmanylong‐termcontracts.Theadditionalcostsofdiversificationeffortsincurredupto2030wouldbeoffsetthereafterbylowerpricesandloweroverallgasdemand,bothintheEuropeanUnionandJapan.IntheNZEScenario,thedeclineinnaturalgasconsumptionisevenmoreprecipitous,although,aswithoil,someadditionalinvestmentisneededtocompensateforRussiansuppliesthathavenoobviousroutetomarketafterthebreakdownoftheenergyrelationshipwithEurope.Bytheendofthisdecade,naturalgaspricesinproducingregionsfalltotheshort‐runmarginalcostofexistingprojects.CoalInternationalcoalpricesreachedrecordlevelsinthefirst‐halfof2022.Coalproductionfailedtokeeppacewithreboundingcoaldemandin2021,especiallyduringthefirst‐halfoftheyear,andthiscutintostocklevelsandpushedupprices.Majorcoalproducers,ledbyChinaandIndia,introducedpoliciestorampupproductionandreducedomesticcoalshortages,facilitatedbythelargepresenceofstate‐ownedcompaniesinproduction.However,themaincoalexportingcountriesweresupplyconstrained,partlyasaresultofvariousweather‐relatedoutages,suchasfloodinginIndonesianminesandinfrastructureissues.Inourscenarios,thecoalmarketsbalanceatlowerprices,butthesepricesvaryconsiderablydependingonoveralllevelsofdemand.RelativelyrobustcoalconsumptiontrendsintheSTEPSoffersomesupporttopricelevels,particularlygivenconstrainedaccesstofinancefornewcoalsupplyprojectsandinfrastructureoutsideChinaandIndia.However,pricesdeclinetowardstheoperatingcostsofexistingminesintheAPS,andtheydothesameintheNZEScenario,butfaster.CriticalmineralsIn2021,manyimportantmineralsandmetalsthatareessentialforcleanenergytechnologiesregisteredbroad‐basedpriceincreasesduetoacombinationofrisingdemand,disruptedsupplychainsandconcernsaroundtighteningsupply(Figure2.12).Pricesforlithiumandpolysiliconmorethantripledin2021,andthoseforcopper,nickelandaluminiumallrosebyaround25‐40%.Theseelevatedpricescontinuedintothefirstfewmonthsof2022.Theincreaseinthecostoflithiumhasbeenastonishing,withpricesgoingupanothertwo‐and‐a‐half‐timesbetweenJanuaryandApril.Pricesfornickelandaluminiumalsosoared,driveninpartbyRussia’sinvasionofUkraineandashortsqueezeonnickel.PricesformanymaterialshavestartedtomoderatesinceAprilasadditionalsupplieshavebecomeavailableandasweakeningeconomicgrowthhasbeguntoaffectdemand.Thishasnotbeenasmoothprocess:forexample,inAugust2022thereweresupplydisruptionsinChina,whichaccountsforaround60%ofgloballithiumchemicalsupply,whenextremeheatandtherecordlowwaterlevelontheYangtzeRivertriggeredpowershortagesinSichuanandreducedproductioncapacity.Evenaftertakingaccountofthewaypriceshavecomedowninrecentmonths,priceincreasessincethestartof2021haveoutpacedorbeencomparabletothelargestannualincreasesseeninthe2010s.IEA.CCBY4.0.114InternationalEnergyAgencyWorldEnergyOutlook2022Figure2.12⊳PricedevelopmentsforselectedcriticalmineralsandmetalsIEA.CCBY4.0.Pricesforimportantenergytransitionmineralsandmetalshavebeenonarapidupwardmarchsincethestartof2021,althoughpricerisesmoderatedinsecond-half2022Note:AssessmentbasedonLithiumCarbonateGlobalAverage,LondonMetalExchange(LME)CobaltCash,LMENickelCashandLMEAluminium99.7%Cashprices.Sources:S&PGlobal(2022);BNEF(2022)forpolysiliconprices.Severalmajorprojectsareexpectedtostartbringingnewsuppliesintothemarketinthelatterpartof2022andin2023,andthismayhelptomoderateprices,especiallyifmacroeconomicheadwindsintensify.Investmentlevelsarerising:thankstotherecentriseinprices,theprofitsandcashflowsofminingcompanieshaveincreasedsignificantlyandcapitalspendingonnon‐ferrousmetalproductionroseby20%in2021.However,currentinvestmenttrendsstillfallshortofmeetingtheprojectedincreasesindemandintheIEAclimate‐drivenscenarios,includingtheAPSandtheNZEScenario.Wedonotyetmodelthesupply‐demandbalancesorpricetrajectoriesforcriticalmineralsinthesamewayasforfuels,andtakethe2021averagepricesasabaselineassumptionforthecalculationoffuturerevenues.Withoutafurtherscalingupofinvestmentinnewsupplies,togetherwitheffortstoimprovematerialefficiencyandfindsubstitutesforexistingmetalsandminerals,thereisariskinthefutureofhigherpricesandhighpricevolatility,andthiscouldhampercleanenergytransitions.CarbonpricesTheadoptionofcarbonpricinginstrumentscontinuesworldwide,withabout23%ofglobalemissionsnowcoveredbyacarbonpriceofsomedescription.ThemaindevelopmentsincetheWEO‐2021hasbeentheincreaseinpricelevelsinmultiplemarket‐basedcarbonpricingsystems.Overthecourseof2021,thepriceofcarbontripledintheEuropeanUnionEmissionsTradingSystem(ETS)anddoubledinKorea,NewZealandand2004006008001000Jan2021Aug2022Index(100=Jan2021)Pricedevelopmentsince2021Largestannualincreaseinthe2010sLithium100200300400500Jan2021Aug2022PolysiliconJan2021Aug2022NickelJan2021Aug2022AluminiumIEA.CCBY4.0.Chapter2Settingthescene1152state‐levelschemesintheUnitedStates.FollowingRussia’sinvasionofUkraine,pricesinsomejurisdictionshavefallenbelowtheirall‐timehighs,buttheyarestillathistoricallyhighlevels.HighercarbonpricesledtoasharpincreaseinglobalcarbonpricingrevenuetoUSD84billionin2021,whichisnearly60%higherthanin2020.Otherdevelopmentsincludetheincreasinguseofcarbonpricing,withthelaunchofschemesinAustria,CanadaandUruguayandatthestatelevelintheUnitedStates.Indonesia’scarbonpricingschemeisscheduledtostartthisyear.Indiahasannouncedplansforthephasedlaunchofacarbonmarket.SouthAfricahasannouncedplansforsteadyincreasesinitscarbontaxto2030andbeyond.Attheinternationallevel,governmentsreachedanagreementatCOP26ontherulesgoverninginternationalcarbonmarkets(Article6oftheParisAgreement).Around85%ofneworupdatedNDCsindicatethatthecountriessubmittingthemwillormayusethesemarketstohelpdelivertheircommitments.Voluntarycarbonmarkets,mostlyusedbycompaniesasameanstofulfiltheirvoluntarycommitments,havealsobeengrowingfastinthelasttwoyears.Globalissuanceofcarboncreditsin2021wasaround480milliontonnesofcarbon‐dioxideequivalent(MtCO2‐eq),withamarketvaluationexceedingUSD1billionforthefirsttime.Inourscenarios,theSTEPSincorporatesexistingandannouncedcarbonpricinginitiatives,whereastheAPSandtheNZEScenarioincludeadditionalmeasuresofvaryingstringencyandscope.IntheNZEScenario,forexample,carbonpricesarequicklyestablishedinallregions,risingby2050toanaverageofUSD250/tonneCO2inadvancedeconomies,toUSD200/tonneCO2inothermajoreconomies(e.g.China,Brazil,RussiaandSouthAfrica),andtolowerlevelselsewhere.Aswithotherpolicymeasures,CO2pricesneedtobeintroducedcarefully,withaviewtothelikelyconsequencesanddistributionalimpacts.ThelevelofCO2pricesincludedinthescenariosshouldbeinterpretedwithcaution.Thescenariosincludeanumberofotherenergypoliciesandaccompanyingmeasuresdesignedtoreduceemissions,andthismeansthattheCO2pricesshownarenotthemarginalcostsofabatement(asisoftenthecaseinothermodellingapproaches).2.4.3TechnologycostsTechnologycostsarecrucialindetermininghowdemandforenergyservicesismetinagivensectororcountry.TheGlobalEnergyandClimateModel(GEC‐M)thatisnowusedforourprojectionscontainsaveryrichrepresentationofenergytechnologies,includingnotonlythosethatarewidelyavailable,butalsothosethatarejudgedtobeapproachingcommercialisation.WedonotassumeanymajornewtechnologybreakthroughsintheWEOscenarios(onthegroundsthattheseareinherentlydifficulttoanticipate),butacontinuousprocessoftechnologyimprovementandlearningisbuiltintothemodelling.Thisappliestoappliancesandvehiclespurchasedbyend‐users;infrastructurefortransportingenergyproducts,includingsmartgrids;andstorageandothertechnologiesforenergyextraction,generationandtransformation.IEA.CCBY4.0.116InternationalEnergyAgencyWorldEnergyOutlook2022Thestartingpointisarisingtrendincostsformostfuelsandtechnologies.Costpressuresarebeingfeltacrossmuchoftheenergysector,duetopersistentsupplychainpressures,tightmarketsforspecialisedlabourandservices,bottlenecksincriticalmineralsupply,andhigherpricesforessentialconstructionmaterialslikesteelandcement.Ebbsandflowsinunderlyingcostsforfossilfuelproductionarenotunusualandhavebeenobservedmanytimes.Recentrisesincostsforcleanenergytechnologies,however,markadistinctivebreakwiththesteady,andsometimesdramatic,reductionsseeninrecentyears.Oilandgasresourcesgenerallybecomemoreexpensivetoextractovertimeinourscenarios,ascontinuedupstreaminnovationandtechnologyimprovementsaremorethanoffsetbytheeffectsofdepletion,meaningthatresourcesbecomemoredifficultandgeologicallychallengingtodevelop.Asaresult,thesefuelsfaceincreasinglystiffcompetitioninagrowingnumberofareasfromcleanenergytechnologies.Figure2.13⊳ChangesinlevelisedcostsforabenchmarkprojectinEuropeandNorthAmerica,2020,2022and2030IEA.CCBY4.0.Tightsupplychainsandhigherfinancingcostsareputtingupwardpressureonrenewablescosts,buttheyremaintheleast-costoptionfornewgenerationinmostcountriesNotes:2022e=estimatedvaluesfor2022.AssumptionsbasedontheAPSandtheIEAWorldEnergyInvestment2022report(IEA,2022b).Withregardtocosttrendsforthesecleantechnologies,thekeyquestioniswhethertoday’selevatedcostsaresimplyabumpinadownhilljourneyorwhethertheyrepresentamoreprofoundchangeinthedirectionoftravel.Formanytechnologies,thisputsthespotlightfirmlyonrawmaterialinputs,whichnowaccountforalargerproportionofoverallcoststhantheydidbefore.Increasesinthepricesofpolysilicon(tripledin2021),steel(upby70%overthesameperiod)andaluminium(up40%)nowfeedmuchmoredirectlyintothecostsofsolarpanelsandwindturbines,whichareupbybetween10%and20%since2020.Financing50%100%150%20202022eAPS203020202022eAPS2030OperationandmaintenanceFinancingcostsCapitalcostUtility‐scalesolarPVOnshorewindIEA.CCBY4.0.Chapter2Settingthescene1172costsalsoplayamajorroleinlevelisedcosts,andarelikelytoriseasmonetarypolicytightensinmanycountries(Figure2.13).Nonetheless,cleantechnologiesinthepowersectorremainthemostcost‐efficientoptionfornewpowergenerationinmanycountries,evenbeforetakingaccountoftheexceptionallyhighpricesseenin2022forcoalandgas.Wedonotassumethatcurrentpressureswillresultinalastingupticktothecostofcleanenergytechnologies.Pressuresfromhighercommoditypricesarereal,buttheydonotruleoutfurthercostreductionsforcleanenergytechnologies.Thereisscopetoreduceothercostelementsviatechnologyinnovation,efficiencyimprovementsandeconomiesofscale.Materialcostscouldalsobereducedastechnologiesadapttoreducerelianceoncriticalmaterials.Asaresult,cleantechnologycostscontinuetocomedowninourscenarios,albeitwithvariationsacrossthedifferentscenarios,dependingonthelevelofpolicysupportandtheextentofdeployment.However,thecurrentpressuresoncostsprovideareminderthatcosttrajectoriesmaynotbesmoothandlinear,andthatgovernmentsneedtopaycloseattentiontopotentialvulnerabilitiesandimbalancesincleanenergysupplychains(seeChapter4).Forexample,thescaleofChina’sinvestmentinsolarPVmanufacturinghasbeeninstrumentalinbringingdowncostsworldwide,withmultiplebenefitsforenergytransitions.Atthesametime,IEAanalysishashighlightedthatChina’sshareinallthekeymanufacturingstagesofsolarpanelsalreadyexceeds80%todayandthat,forkeyelementsincludingpolysiliconandwafers,thisissettorisetomorethan95%inthecomingyears,basedonmanufacturingcapacityunderconstruction(IEA,2022c).Thereisaclearneedforcountriesandregionstohelpdiversifycleanenergysupplychainsandmakethemmoreresilient.IEA.CCBY4.0.PARTBROADMAPTONETZEROEMISSIONSPartBofthisWEOfocussesonthepathwayfortheglobalenergysectortoreachnetzeroemissionsby2050,whileaddressingenergysecurityandaffordabilityconcerns.In2021,theIEApublishedNetZeroby2050:ARoadmapfortheGlobalEnergySector.Intheshorttimesincethen,muchhaschanged.Totakeintoaccountthenewlandscape,Chapter3presentsanupdatedNetZeroEmissionsby2050(NZE)Scenario.ItemphasisesthekeyresultsoftheNZEScenarioforenergysupply,demandandemissions,andfocussesontheactionsneededbysectortoachievedeepreductionsinenergy‐relatedemissions.Itexaminesthemeasuresneededtocurbgrowthindemandincludingenergyandmaterialsefficiency,electrificationandbehaviouralchange.ThechallengesofscalingupcleantechnologysupplychainstomeetthesurgeindeploymentprojectedintheNZEScenarioareassessed.ThisincludesareviewoftheannouncedandunderdevelopmentmanufacturingcapacityforsolarPV,electrolysersforhydrogenproduction,batteries,aswellasforcarbon,capture,utilisationandstorage,anddirectaircaptureandstorageprojects.Chapter3includesaspecialfocusontheNZEScenariorelativetothescenariosassessedbytheIntergovernmentalPanelonClimateChange.Plus,itlooksatthefutureofflyinginthecontextoftheNZEScenario.IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby2050121Chapter3AnupdatedroadmaptoNetZeroEmissionsby2050Energytransitionfor1.5°CIn2021,theIEApublisheditsreportNetZeroby2050:ARoadmapfortheGlobalEnergySector.However,intheshorttimesincethenmuchhaschanged.TheglobaleconomyhasreboundedfromtheCovid‐19pandemic,andthefirstglobalenergycrisishasseenworldenergypricestouchingrecordlevelsinmanymarkets,bringingenergysecurityconcernstothefore.In2021,emissionsrosebyarecord1.9Gttoreach36.6Gt,drivenbyextraordinarilyrapidpost‐pandemiceconomicgrowth,slowprogressinimprovingenergyintensity,andasurgeincoaldemandevenasrenewablescapacityadditionsscaledrecordheights.Recentinvestmentinfossilfuelinfrastructurenotincludedinour2021NZEScenariowouldresultin25Gtofemissionsifruntotheendofitslifetime(around5%oftheremainingcarbonbudgetfor1.5°C).Despitethesemostlydiscouragingdevelopments,thepathwaydetailedintheNetZeroEmissionsby2050(NZE)Scenarioremainsnarrowbutstillachievable.ThisupdatetotheNZEScenariooffersacomprehensiveaccountofhowpolicymakersandotherscouldrespondcoherentlytothechallengesofclimatechange,energyaffordabilityandenergysecurity.Between2021and2030,lowemissionssourcesofsupplygrowbyaround125EJintheNZEScenario.Thisisequivalenttothegrowthofworldenergysupplyfromallsourcesoverthelastfifteenyears.Amonglowemissionssources,modernbioenergyandsolarincreasethemost,risingbyaround35EJand28EJrespectivelyto2030.Overtheperiodto2050,however,thelargestgrowthinlow‐emissionsenergysupplycomesfromsolarandwind.By2050,unabatedfossilfuelsforenergyusesaccountforjust5%oftotalenergysupply:addingfossilfuelsusedwithCCUSandfornon‐energyusesraisesthistoslightlylessthan20%.IntheNZEScenario,electricitybecomesthenewlinchpinoftheglobalenergysystem,providingmorethanhalfoftotalfinalconsumptionandtwo‐thirdsofusefulenergyby2050.Totalelectricitygenerationgrowsby3.3%peryearto2050,whichisfasterthantheglobalrateofeconomicgrowthacrosstheperiod.Annualcapacityadditionsofallrenewablesquadruplefrom290GWin2021toaround1200GWin2030.Withrenewablesreachingover60%oftotalgenerationin2030,nonewunabatedcoal‐firedplantsareneeded.Annualnuclearcapacityadditionsto2050arenearlyfour‐timestheirrecenthistoricalaverage.IncreasedsuppliesofcleanenergyarecomplementedintheNZEScenariobymeasurestosaveenergy,bringingbenefitsintermsofemissionsreductions,affordabilityandenergysecurity.IntheNZEScenario,energyintensityimprovementsSUMMARYIEA.CCBY4.0.122InternationalEnergyAgencyWorldEnergyOutlook2022to2030arenearlythreetimesfasterthanoverthepastdecade.In2030,energysavingsfromenergyefficiency,materialefficiency,andbehaviouralchangeamounttoaround110EJ,equivalenttothetotalfinalconsumptionofChinatoday.End‐usesectorsallachieveemissionsreductionsofover90%by2050.Hydrogenandhydrogen‐basedfuelsaredeployedinheavyindustryandlong‐distancetransport,andtheirshareintotalfinalconsumptionreachesaround10%in2050.Bioenergyuseiskepttoaround100EJintheinterestsofsustainabilityandreachesaround15%oftotalfinalconsumptionin2050.CO2capturetotals1.2Gtin2030,risingto6.2Gtin2050,andmorethan60%ofthisoccursinindustryandotherfueltransformationsectors.TheNZEScenariorequiresalargeincreaseininvestmentincleanenergy.Energyinvestmentaccountedforjustover2%ofglobalGDPannuallybetween2017and2021,andthisrisestonearly4%by2030intheNZEScenario.Electricitygenerationfromrenewablesseesoneofthelargestincreases,risingfromUSD390billioninrecentyearstoUSD1300billionby2030.Thislevelofspendingin2030isequaltothehighestleveleverspentonfossilfuelsupply(USD1.3trillionspentonfossilfuelsin2014).Therearesomepositiveindicationsthatcleanenergytechnologyisnowrapidlyscalingup.AnnouncedEVbatteryproductioncapacityfor2030isonly15%lowerthanthelevelofbatterydemandunderpinningtheNZEScenariointhesameyear,whileannouncedexpansionsofsolarPVproductioncapacitywouldbeessentiallysufficienttoachievethelevelofdeploymentenvisagedintheNZEScenario,iftheyaresuccessfullydeliveredontime.Assumingfullimplementationofallannouncedmanufacturingcapacityexpansionsincludingspeculativeprojects,thecumulativeoutputofelectrolysermanufacturingcapacitycouldreach380GWby2030,whichisstilllittlemorethanhalfof2030needsintheNZEScenario.TherearehowevermanyareaswhereprogressiswellshortofwhatisenvisagedintheNZEScenario.Thepathtosuccessrequirespolicymakerstodomuchmoretoprovidesignalsonthedemandside,todevelopthecleantechnologysupplychainasawhole,toensurethatsupplychainsarediverseandresilient,andtopromotethecoordinatedgrowthofdifferentpartsofparticularsupplychains.Totalenergysectoremploymentincreasesfromjustover65milliontodayto90millionin2030intheNZEScenario.Newjobsincleanenergyindustriesreach40millionby2030,outweighingjoblossesinthefossilfuel‐relatedindustries.Fossilfuelsupplyjobsdecreaseby7millionby2030intheNZEScenario,withcoalsupplyseeingthesharpestdeclineasmechanisationanddecarbonisationeffortsleadtofurtherdownsizingoftheindustry.Shortagesofskilledlabourincleanenergyconstructionprojectsarealreadystartingtobeseen,underliningtheimportanceofstrategicandproactivelabourpoliciestobuilduptheworkforceneededfortherapidexpansionofcleanenergytechnologies.IEA.CCBY4.0.FossilfuelsupplyScalingupproductioncapacityAdemand-ledtransitionElectrolysersLithiumCopperSolarPVBatteries202520212030203520402045205037GtCOemissions23Gt5GtBuildingsNegativeemissionsElectricityTransportIndustryOtherNetzero100%0%16%17%38%45%Keymilestonesonthepathwaytonetzeroemissionsby2050Advancedeconomies:netzeroemissionsintheelectricitysector8%ofemissionsfromcementproductioncapturedandstoredNonewICEcarsales720GWelectrolysercapacity60%ofglobalcarsalesareelectricNearly50%ofelectricityfromlow-emissionssourcesNonewsalesoffossilfuelboilersElectricityaccountsfor40%ofindustrialenergyconsumptionNearly90%ofelectricityfromrenewables50%ofexistingbuildingsretroittedtozerocarbon-readylevels3GtCO2capturedNonewICEheavytrucksales50%ofheatingdemandmetbyheatpumps3670GWelectrolyserKeydemand-sidemeasurestodrivetransitionCleanandeicientindustrySolarandwindEicientbuildingsandheatpumpsBehaviourElectricvehiclesOtherAllannouncedexpansionto2030Stillneededtoreach2030NZE2021productioncapacity400500300EJSTEPS2030NZE2030OilCoalGas124InternationalEnergyAgencyWorldEnergyOutlook2022IntroductionIn2021,theIEApublisheditsNetZeroby2050:ARoadmapfortheGlobalEnergySector(IEA,2021),whichsetsoutanarrowbutachievablepathwayfortheglobalenergysectortoreachnetzeroemissionsby2050.However,muchhaschangedintheshorttimesincethatreportwaspublished.Theglobaleconomyreboundedatrecordspeedin2021fromtheCOVID‐19pandemic,withGDPgrowthreaching5.9%.Asenergyintensityimprovementsstalled,globalenergydemandincreasedby5.4%.Surgingenergydemandwasinpartmetbyincreaseduseofcoal,resultingina1.9gigatonnes(Gt)jumpinemissionsin2021,thelargestannualincreaseinglobalCO2emissionsfromtheenergysectoreverrecorded.ThisbroughttotalCO2emissionsfromtheenergysectorto36.6Gtin2021.Recentinvestmentinfossilfuelinfrastructurenotincludedinthe2021NetZeroEmissionsby2050Scenariowouldresultin25Gtofemissionsifruntotheendofitslifetime(around5%oftheremainingcarbonbudgetfor1.5°C).Atthesametime,2021alsosawrenewables‐basedelectricitygenerationreachanall‐timehigh,arecordmorethan500terawatt‐hours(TWh)abovethelevelin2020.Asaconsequenceofthesurgeindemand,bottlenecksinsupply,andaboveallRussia’sinvasionofUkraine,theworldiscurrentlyexperiencingtheworstenergyshocksincethe1970s,withpricesoffuelsandcommoditieshittingrecordlevelsinmanymarkets.Inthefaceofthisshock,somegovernmentsareannouncingnewtargetsforthedeploymentofcleanenergytechnologies,ortemporarilyincreasingtheuseofcoal,andinsomecasesdoingbothatthesametime.Howenergysecurityandclimateobjectivescanbealignedisthereforeacriticalquestionforpolicymakers(seeChapter4).TheIntergovernmentalPanelonClimateChange(IPCC)publishedthefirstvolumeofitsSixthAssessmentreportinAugust2021,aftertheIEApublisheditsNetZeroby2050report.TheIPCCreportconfirmsthatrapidanddeepreductionsinCO2emissionsarenecessarytolimitwarmingto1.5°C(IPCC,2021).Inscenariosthatachievethisobjectivewithnoorlimitedtemperatureovershoot,netemissionsofgreenhousegases(GHGs)needtobereducedby43%by2030comparedwith2019levels,andCO2emissionsneedtoreachnetzerobyaround2050(IPCC,2022a).TheGlasgowClimatePactwhichwasadoptedatCOP26reinforcedtheParisAgreementobjectiveoflimitingwarmingto1.5°CbyachievingnetzeroCO2emissionsbyaroundmid‐centuryaswellasdeepreductionsinotherGHGs.Inthiscontext,thischapterpresentsa2022updatetotheIEANetZeroEmissionsby2050(NZE)Scenario.Itscentralpurposeisstilltoreachnetzeroemissionsfromtheenergysectorby2050,butthisupdatedversiontakesintoaccountthelatestinformationaboutenergymarketsandtechnologies,andreflectsconcernsaboutenergysecurity.TheNZEScenarioissupportedbynewmodellingusingtheclimatemodelMAGICCwhichiswidelyusedintheIPCCanalysesandmakespossiblearicherassessmentoftheimplicationsoftheNZEScenariofortheglobaltemperature.IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501253ThedesignapproachfortheupdatedNZEScenariostickscloselytotheapproachfollowedintheIEA2021report:TheNZEScenarioisbasedonthedeploymentofawideportfolioofcleanenergytechnologies,withdecisionsaboutdeploymentdrivenbycosts,technologymaturity,marketconditionsandpolicypreferences.Thepathwayreflectstheparticularcircumstancesofvariouscountriesintermsofresourceandinfrastructureendowments,developmentpathwaysandpolicypreferences.TheNZEScenarioseesallcountriescontributetothepathwaytonetzeroemissionsby2050,withadvancedeconomiestakingtheleadandreachingnetzeroemissionswellbeforeemergingmarketanddevelopingeconomies.Rapidtransitionissupportedbyglobalcollaborationtofacilitateambitiouspolicies,drivedownthecostsofcleanenergytechnologies,createbiggerandmoreinternationalmarketsforthosetechnologies,andsupportemergingmarketanddevelopingeconomiestoachieveemissionsreductionsandtheenergy‐relatedUnitedNationsSustainableDevelopmentGoals(SDGs).TheNZEScenarioaimstosafeguardenergysecuritythroughrapiddeploymentofcleanenergytechnologies,energyefficiencyanddemandreductionwhileminimisingenergymarketvolatilityandstrandedassetstotheextentpossible.Ittargetsasmoothtransitionthroughstrongandco‐ordinatedpoliciesandincentivesthatenableallactors–governments,investors,companiesandworkers–toanticipatetherapidchangerequired.TheNZEScenarioisapathwaytoreachnetzeroemissionsby2050,notthepathway.Itsetsoutacomprehensiveanddetailedviewofhowtheenergysectorcouldrespondcoherentlytothechallengesofclimatechangewhiletakingaccountofconcernsaboutenergysecurityandaffordability.NetZeroEmissionsScenario3.1EmissionsandtemperaturetrendsBetween2021and2030,CO2emissionsfromtheenergysectordecreasebymorethanone‐thirdintheNZEScenario,fallingfrom36.6Gttodaytolessthan23Gtin2030.1Theelectricitysectorleadstheway:emissionsfromelectricitygenerationhalvebetween2021and2030,accountingformorethanhalfoftheoverallemissionsreductionsfromtheenergysector.Growingelectrificationandthewidespreaddeploymentofefficiencyandenergysavingsmeasuresenablethebuildingssectortoalmosthalveitsemissionsby2030.Rapidreductionsarealsoseeninthetransportsector,withemissionsfallingbyone‐quarterby2030,thankstoelectrification,efficiencyimprovementsandbehaviouralchange.Theindustrysectoralsoseesareductionofnearlyaquarterby2030from2021levels,driveninparticularbyeffectivepoliciesonmaterialsefficiency,energyefficiencyandfuelswitching.1Hereandhenceforthunlessotherwisespecified,CO2emissionsfromtheenergysectorincludeindustrialprocesses.IEA.CCBY4.0.126InternationalEnergyAgencyWorldEnergyOutlook2022Between2031and2040,thespeedofemissionsreductionsintheindustryandtransportsectorsacceleratestoalmost10%peryear,aselectrification,low‐emissionsfuels,andcarboncapture,utilisationandstorage(CCUS)technologiesstarttomakebiggerinroadsintotheexistingstockofassets.Theelectricitysectorreacheszeronetemissionsinadvancedeconomiesby2035,andinemergingmarketanddevelopingeconomiesby2040.Therapiddropinemissionsinelectricityhelpstobringaboutcontinuedreductionsinemissionsinthetransportandbuildingssectorsastheyelectrify.By2040,mostoftheremaining5.8Gtofenergysectoremissionsarefromthetransportsector(40%ofthetotal,mainlyfromships,planesandheavytrucks),andtheindustrysector(55%).By2050,allend‐usesectorsachieveemissionsreductionsofmorethan90%comparedtocurrentlevels,althoughresidualCO2emissionsareabout0.5Gtintransportand0.4Gtinindustry.These,andnetresidualemissionsfromothersectors,arecounterbalancedbycarbondioxideremoval(CDR)fromtheatmospherethroughbioenergywithcarboncaptureandstorage(BECCS)inelectricitygenerationandbiofuelsproduction,andthroughdirectaircaptureandstorage(DACS).By2050,CDRreaches1.4Gtperyear(Figure3.1).Figure3.1⊳Energy-relatedCO2emissionsbysectorandgrossandnetemissionsintheNZEScenario,2010-2050IEA.CCBY4.0.Thepowersectorleadsemissionsreductionsto2030,butallsectorscontributetothenetzeroemissionsgoal,withresidualemissionsin2050balancedbyatmosphericremovalsNotes:BECCS=bioenergyequippedwithCCUS;DACS=directaircaptureandstorage.Otherincludesagricultureandotherenergytransformationsectors.InadditiontorapidcutsinCO2,theNZEScenarioentailsasteepfallinotherenergy‐relatedGHGs.Forexample,energy‐relatedmethaneemissionsdropby75%from120milliontonnes(Mt)in2021to30Mtin2030,ontrackforlessthan10Mtin2050.Therearealsoreductionsinenergy‐relatednitrogendioxideemissions.‐4048121620102020203020402050GtCO₂EmissionsbysectorElectricityIndustryTransportOtherBuildings‐1001020304020102020203020402050GtCO₂GrossandnetemissionsGrossemissionsNetemissionsBECCSandDACSIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501273Ourmodellingofland‐usechangeandbioenergyproductionindicatesthat,takingaccountofthelevelofbioenergyproductionintheNZEScenarioandassumingparallelactiontohaltandreversedeforestation,CO2emissionsfromagriculture,forestryandotherlanduse(AFOLU)woulddroptobecomeanetCO2sinkbefore2030.(SeeChapter9)ThesteepreductionsinGHGintheNZEScenariowouldachievethegoaloftheParisAgreementtolimitthelong‐termglobaltemperatureriseto“...wellbelow2°Cabovepre‐industriallevels...pursuingeffortstolimitthetemperatureincreaseto1.5°Cabovepre‐industriallevels”.TheglobaltemperatureriseintheNZEScenariopeaksunder1.6°Caround2040beforedroppingtoaround1.4°Cin2100(Figure3.2).2IntheStatedPoliciesScenario(STEPS),bycontrast,temperaturesreach2°Caround2060,andcontinuetorisethereafter.DuetouncertaintiesaboutthephysicalresponseoftheclimatetoGHGemissions,itshouldbenotedthatsuchprojectionsoffuturelevelsofwarmingareprobabilisticinnature:forexample,intheSTEPSthereisan10%chanceofatemperatureriseabove3.2°Cin2100.Suchanincreasewouldposeaseverethreattothewellbeingofhumansandglobalecosystems,withsomeofthestarkestconsequencesmanifestingthemselvesintheleastwealthypartsoftheworld(IPCC,2022bandIEA,2022a).Figure3.2⊳Temperaturerisein2050and2100intheWEO-2022scenariosIEA.CCBY4.0.Temperaturerisepeaksatlessthan1.6°Cin2050intheNZEScenarioandfallstoaround1.4°Cby2100.IntheSTEPS,itexceeds2°Caround2060andcontinuesrisingNotes:NZE=NetZeroEmissionsby2050Scenario;APS=AnnouncedPledgesScenario;STEPS=StatedPoliciesScenario.Temperatureriseestimatesinthissectionarerelativeto1850‐1900andmatchtheIPCCSixthAssessmentReportdefinitionofwarmingof0.85°Cbetween1995‐2014(IPCC,2021).2Temperatureriseestimatesquotedinthissectionrefertothemediantemperaturerise,meaningthereisa50%probabilityofremainingbelowagiventemperaturerise.1234NZEAPSSTEPSNZEAPSSTEPS33rd‐67thpercentile5th‐95thpercentileMedian2050°C2100IEA.CCBY4.0.128InternationalEnergyAgencyWorldEnergyOutlook20223.2EnergytrendsIntheNZEScenario,theglobalenergymixundergoesaprofoundtransformationaslow‐emissionssourcesrampupdramaticallyanddisplaceunabatedsourcesacrossthewholeenergysector.Between2021and2030,low‐emissionssourcesofsupplyincreasebyaround125exajoules(EJ)(Figure3.3).Thetraditionaluseofbiomassisphasedoutasenergyaccessgoalsareachieved.Amonglow‐emissionssources,modernbioenergyandsolarincreasethemostto2030byaround35EJand28EJrespectively.Thankstoelectrification,improvementsinenergyefficiencyandbehaviouralchangestotalenergysupplydeclinesby10%between2021and2030evenastheglobaleconomygrowsbynearlyathird.Theannualrateofenergyintensityimprovementnearlytriplesasitrisestomorethan4%peryear(seesection3.8).Unabatedsourcesofsupplydeclinebynearlyathird,withunabatedcoalfallingbynearlyone‐halfandunabatednaturalgasbymorethanone‐quarterby2030.ThiscontrastswiththeNZEScenariointheWorldEnergyOutlook2021(WEO‐2021),inwhichnaturalgasheldontoalargershareoftheglobalenergymixforalittlelonger:thechangereflectsheightenedenergysecurityconcernsaroundnaturalgasprecipitatedbyRussia’sinvasionofUkraine(seeChapter2).Oilalsodeclinesbyaroundone‐fifthto2030asaresultofenergyefficiencygains,behaviouralchangeandincreasingelectrificationintransport.Figure3.3⊳Totalenergysupplyofunabatedfossilfuelsandlow-emissionssourcesintheNZEScenario,2010-2050IEA.CCBY4.0.AprofoundchangeinglobalenergysupplyunderpinstheNZEScenario,withlow-emissionssourcesincreasingbyaround125EJby2030Notes:UnabatedfossilfuelsarethoseusedforenergypurposeswithoutCCUS.Low‐emissionsfossilfuelsourcesarethoseequippedwithCCUSorthosefornon‐energyuses.Hydrogenandhydrogen‐basedfuelsarenotshowndirectlyinthisfigureasthesearenotprimarysourcesofenergysupply.1002003004005006002010202120302040205020102021203020402050EJTraditionaluseofbiomassOtherrenewablesGeothermalSolarWindModernbioenergyHydroNuclearNaturalgasOilCoalUnabatedfossilfuelsLow‐emissionssourcesIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501293Thetransformationofenergysupplyismatchedbyachangeinenergyconsumption(Figure3.4).Totalfinalconsumptionin2021amountedtoaround440EJ,anincreaseof5.2%overthe2020level.By2030,totalfinalconsumptionintheNZEScenarioisdownbyalmost10%onthe2021level,despiterapidgrowthofglobalGDP.Overthisperiod,thetotalfinalconsumptionintensityofGDPimprovesmorethantwo‐and‐a‐half‐timesfasterthantheaverageoverthelastdecade.Fourfactorsdrivethisimprovement:efficiencybenefitsofswitchingfromthetraditionaluseofbiomass;technicalgainsinenergyconsumingequipmentandbuildingenvelopes;efficiencybenefitsofelectrification;andbehaviouralchangeandavoideddemand(seesection3.8).Figure3.4⊳TotalfinalconsumptionbysourceintheNZEScenario,2010-2050IEA.CCBY4.0.End-usesectorscometobedominatedbyelectricity,whichprovidesmorethanhalfoftotalfinalconsumptionby2050Note:Otherrenewablesincludesolarthermalandgeothermaluseddirectlyinend‐usesectors.Unabatedfossilfuelsdirectlyprovidednearly60%oftotalfinalconsumptionin2021,excludingfossilfuelusefornon‐energypurposessuchaschemicalfeedstocks.IntheNZEScenario,thisfallstoaround45%in2030,andtoonly5%by2050(Box3.1).Electricitybecomesthe“newoil”intermsofitsdominanceoffinalconsumption;unlikeoil,however,itplaysakeyroleinallend‐usesectors.Theshareofelectricityintotalfinalconsumptionrisesfrom20%todaytoslightlylessthan30%by2030andmorethan50%by2050.Hydrogenandhydrogen‐basedfuelstakeoffafter2030andaccountfor10%oftotalfinalconsumptionby2050.3Inabsoluteterms,theconsumptionofbioenergyinend‐usesectorsremainsbroadlystablefromtodayto2050,risingfrom46EJtoslightlylessthan50EJ.However,this3Excludingtheonsiteproductionofhydrogeninindustry.InIEAenergybalancestheonsiteproductionofhydrogeninindustryappearsaselectricityconsumption,raisingtheshareofelectricityinfinalenergyconsumption.50100150200201020212030204020502010202120302040205020102021203020402050EJTraditionaluseofbiomassOtherHydrogen‐basedOtherrenewablesModernbioenergyElectricityFossilfuelswithCCUSUnabatedfossilfuelsIndustryTransportBuildingsIEA.CCBY4.0.130InternationalEnergyAgencyWorldEnergyOutlook2022masksashiftincomposition:theuseofmodernbioenergyrisessharplywhilethetraditionaluseofbioenergydeclinesandthenendsasfullaccesstomodernformsofenergyisachievedinallcountriesby2030(Box3.3).Box3.1⊳Whydoesn’telectricityreachahighershareofTFC?IntheNZEScenario,electricityaccountsformorethan50%oftotalfinalconsumptionby2050,higherthanthehighestevershareofoilproductsintheglobalfinalconsumptionmix(i.e.around47%in1973).However,giventheefficiencybenefitsofelectricity,whyisitsshareinalow‐emissionsconsumptionmixnotevenhigher?Theanswertothisquestionhastwoparts.Figure3.5⊳Finalconsumption,usefulenergyandnon-electricitydemandbysectoranduseintheNZEScenario,2021and2050IEA.CCBY4.0.Electricityprovidesmorethanhalfoffinalconsumptionby2050,buttwo-thirdsofusefulenergyNotes:TFC=totalfinalconsumption;BUILD=buildingssector;IND=industrysector;TRA=transportationsector.NZE2050=NetZeroEmissionsby2050Scenario.Inindustry,intensiveandlightrefertoenergy‐intensiveandlightindustrysub‐sectors.Trucks=mediumandheavyfreighttrucks.First,theefficiencyofelectricitymeansthatitsshareinusefulenergysuppliedtotheend‐userishigherthanitsshareinfinalconsumption.4TheefficiencyofanEVisthree‐timeshigherthanthatofagasolinecar,forexample,whiletheefficiencyofaheatpumpcanbesubstantiallymorethanone,soitcandelivermoreusefulenergytotheconsumer4Usefulenergyreferstotheportionoffinalenergyavailabletotheend‐userafterthefinalconversion.Forexample,aninternalcombustionengineconvertsthechemicalenergyingasoline(finalenergy)intokineticenergy,i.e.themotionofthecar(usefulenergy).1%22%34%20%47%28%33%32%50%100%TRAINDBUILDTFCShareofelectricity2021NZE2050shareofelectricityNZE2050usefulenergydemandFinalconsumptionandusefulenergyBUILDINDIntensiveLight50%100%Non‐electricitydemandNZE2050HeatingTRAPlanesTrucksShipsCookingFeedstockCarsIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501313thanitconsumesinfinalenergy(efficienciesofbetween2and5areprevalentinavailablemodelstoday).Theefficiencyofelectricitymeansthatitsshareinusefulenergyenjoyedbyconsumers(two‐thirds)ismuchhigherthanitsshareinfinalconsumption(morethanhalf)(Figure3.5).Second,thereareend‐usesforwhichitisnotfeasibleorcosteffectivetoelectrifydirectlywiththetechnologiescurrentlyavailableonthemarketorlikelytobecommercialisedincomingdecades.Aroundhalfofenergydemandinenergy‐intensiveindustriesisforhigh‐gradeprocessheat(above400°C),whichischallengingtoelectrifywithcurrenttechnologies.Ships,planesandheavytrucksmakeuparound85%oftransportnon‐electricitydemandin2050;atpresentitisverydifficulttoseehowmostoftheenergytheyusecouldbeelectrified,althoughtheNZEScenariodoesseeanincreasingamountofelectricityusedeveninthesesegments,particularlyinthecaseofheavytrucks(seesection3.6).Inthebuildingssector,existingdistrictheatingnetworksarestrategicassets,andareinpartdecarbonisedwithnon‐electricalenergysourcesintheNZEScenario,notablymodernsolidbioenergy.Inaddition,industryfeedstocksbydefinitioncannotbeelectrified,andaccountfornearlyone‐thirdofnon‐electricaldemandinindustryin2050intheNZEScenario.ComparisonwiththenewscenariosassessedbytheIPCCThethirdvolumeoftheIPCCSixthAssessmentReportdealswithclimatemitigation(IPCC,2022a).PublishedinApril2022,itincludesanewscenariodatabase(IIASA,2022).Amongthemorethan1000scenariosvettedbytheIPCC,only16achievednetzeroemissionsfromtheenergysectorin2050,andthereforearecomparableintermsofenergysectorambitionwiththeIEANZEScenario.HerewehighlightacomparisonbetweenthoseIPCCassessedscenariosandtheIEANZEScenario(Figure3.6).TheIEANZEScenarioentailsveryambitiouspoliciesandmeasurestoimproveenergyefficiencyandreduceenergydemand,includingthroughbehaviouralchange(seesection3.8).Asaconsequenceofthisandthebenefitsofelectrification,totalfinalconsumptionisaround340EJin2050,comparedtoaround460EJinthemedianIPCCscenario.TheNZEScenarioseestheshareofwindandsolarinelectricitygenerationreachover70%in2050,comparedtoaround55%inthemedianIPCCscenario.TheNZEScenarioseestotalenergysupplyfrombioenergyofaround100EJ,reflectingtheimportanceofremainingwithinidentifiedsustainablelimitsforglobalbioenergysupply.ThemedianIPCCscenarioreachingnetzeroemissionsby2050seesaround235EJofbioenergydemand,morethandoubletheleveloftheNZEScenarioandthree‐and‐a‐half‐timesthecurrentlevel.SPOTLIGHTIEA.CCBY4.0.132InternationalEnergyAgencyWorldEnergyOutlook2022TheNZEScenarioseesabout30EJofhydrogenandhydrogen‐basedfuelsusedtodecarboniseend‐usesectorsthataredifficulttoelectrify.ThemedianIPCCscenariousesabout18EJofhydrogenandhydrogen‐basedfuels.TheNZEScenariouses6.2GtofCCUSin2050whilethemedianoftheIPCCscenariosseeabout17Gt.TheNZEScenarioreliesonaround1.4GtofenergysectorCDRfrombothBECCSandDACS,whilethemedianIPCCscenariosees12GtofenergysectorCDRin2050,largelyfromBECCSandmostlytooffsetcontinueduseofoilinthetransportsector.Figure3.6⊳ComparisonofkeyindicatorsfortheselectedIPCCscenariosandtheIEANZEScenarioin2050IEA.CCBY4.0.IEANZEScenariorequireslessCCUSandCDRthancomparableIPCCscenarios,anditreliesmoreonenergyefficiency,renewablesandhydrogenNotes:TFC=totalfinalconsumption;TES=totalenergysupply;CCUS=carboncapture,storageandutilisation;CDR=carbondioxideremoval.IPCCScenariosreferstothe16vettedC1IPCCscenariosthatreachnetzeroenergysectoremissionsby2050(IIASA,2022).10203040EJIPCCScenariosNZEHydrogeninTFC25%50%75%100%Windandsolarshare100200300EJBioenergyTES102030GtCO2CCUS51015GtCO₂Energy‐relatedCDR150300450600EJTFCIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby205013333.3FuelsupplyFossilfuelsupplyOil,naturalgasandcoalaccountedforaroundfour‐fifthsoftotalenergysupplyworldwidein2021.IntheNZEScenario,thissharefallstoaroundtwo‐thirdsin2030andlessthanone‐fifthin2050,aproportionofwhichisusedwithCCUSandfornon‐energyuses.Between2021and2050,coaldemanddeclinesby90%,oildeclinesbyaround80%,andnaturalgasdeclinesbymorethan70%.Justunder100EJoffossilfuelsareconsumedin2050intheNZEScenario.Justover40%ofthis,including65%ofnaturalgasand90%ofcoal,isconsumedinfacilitiesequippedwithCCUS.Afurther40%–includingmorethan70%oftheoilstillbeingused–isconsumedinapplicationswherethecarbonisembodiedintheproductandtherearenodirectCO2emissions(examplesincludechemicalfeedstocks,lubricants,paraffinwaxesandasphalt).Theremaining20%isusedinsectorswherecleanenergytechnologiesareleastfeasibleandcosteffective:forexample,oilstillaccountsforaround20%offueluseinaviationin2050intheNZEScenario.Theunabatedcombustionoffossilfuelsresultsin1.2GtCO2emissionsin2050,andthesearefullyoffsetbyBECCSandDACS.Figure3.7⊳Oil,naturalgasandcoalsupplybyregionintheNZEScenarioIEA.CCBY4.0.Declinesindemandcanbemetwithoutapprovingnewlongleadtimeupstreamconventionaloilandgasprojects,newcoalminesorminelifetimeextensionsNote:C&SAmerica=CentralandSouthAmerica.Coalusedeclinesfrom5600milliontonnesofcoalequivalent(Mtce)in2021to3000Mtcein2030andtolessthan600Mtcein2050(Figure3.7).Supplydeclinesonaveragebymorethan10%everyyearduringthe2030s.Naturalgasdemanddropsfromaround4200bcmin2021to3300bcmin2030,and1200bcmin2050.Ratesofdeclineare5010015020020102050EJAsiaPacificMiddleEastNorthAmericaEurasiaAfricaC&SAmericaEuropeOil20102050Naturalgas20102050CoalIEA.CCBY4.0.134InternationalEnergyAgencyWorldEnergyOutlook2022fastestinthe2030s,whennaturalgasusefallsby7%peryearonaverage.Naturalgasusecontinuestofallinthe2040s,butataslowerrate(around3%peryear)asreductionsingasuseinpowergeneration,industryandbuildingsarepartlyoffsetbyincreasesinthevolumesofgasbeingconvertedtolow‐emissionshydrogen.Oildemanddeclinesfrom95millionbarrelsperday(mb/d)in2021to75mb/din2030,andtolessthan25mb/din2050,withanannualdeclinerateof6%onaveragefrom2030onwards.ThedeclinesinfossilfueldemandintheNZEScenariostemprimarilyfromamajorsurgeincleanenergyinvestment(fromaroundUSD1.2trillioninrecentyearstoUSD4.2trillionin2030).SomeinvestmentinexistingsupplyprojectscontinuesintheNZEScenariotoensuresupplydoesnotfallfasterthanthedeclineindemand.Otherinvestmentisundertakentoreducetheemissionsintensityofremainingfossilfueloperations.IntheNZEScenario,thisleadstoa50%reductionintheglobalaverageemissionsintensityofoilandgasproductionbetween2021and2030.IfdemandweretofallattheratesprojectedintheNZEScenario,itcouldbemetwithoutapprovingthedevelopmentofanynewlonglead‐timeupstreamconventionaloilandgasprojectsandwithoutanynewcoalminesorcoalminelifetimeextensionsworldwide.Reducingfossilfuelinvestmentinadvanceof,orinsteadof,policyactionandcleanenergyinvestmenttoreduceenergydemandwouldnotleadtothesameoutcomesasintheNZEScenario.Ifsupplyweretotransitionfasterthandemand,withadropinfossilfuelinvestmentprecedingasurgeincleanenergytechnologies,thiswouldleadtomuchhigherprices–possiblyforaprolongedperiod–eveniftheworldmovestowardsnetzeroemissions.Thescopeforreductionsinfossilfuelexpenditureiscloselylinkedtothescaleandspeedofincreasesincleanenergyexpenditure,andtothesuccessofeffortstoreduceenergydemand:itdoesnotmakesensetolookatanyoneofthesefactorsinisolationfromtheothers.Russia’sinvasionofUkraineaddsanadditionaldimensiontothisanalysisbecauseitcouldleadtoasubstantialandprolongedreductioninRussianenergysupplies.ThisisreflectedintheupdatedNZEScenario.Turningfirsttooil,Russianproductionislowerinthe2022NZEScenariothanitwasinlastyear’sNZEScenario.Thefailuretoensureasustainablerecoveryfromthepandemicmeansthatprojectedoildemandisatthesametimehigherinthemid‐2020sinthisNZEScenario.Themoresuitableoptionstofillthiscombinedgapareinvestmentswithshorterleadtimesandquickerpaybackperiods,includingextendingproductionfromexistingfieldsandtightoil.TheupdatedNZEScenarioalsorequireshighernear‐termproductionfrommembersofOPECthanbeforetokeepmarketsinbalance,andacontinuinghighlevelofrelianceonthisproductiontomeetremainingoildemandthroughto2050.TheshareofoilsupplycomingfromOPECmembersrisesfrom35%in2021to52%in2050.Eventhoughtheoilmarketismuchsmallerin2050thantoday,theshareofOPECbythenwouldbehigherthanatanypointinthehistoryofoilmarkets.IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501353Fornaturalgas,Russianproductioninthemid‐2020sislowerthanitwasinthe2021NetZeroRoadmap.However,incontrasttooil,near‐termgasconsumptionhasbeenreviseddownwardsinthisyear’sNZEScenarioashigherpricescurbthecosteffectivenessofgashelpingtodisplacecoal.SomenewinfrastructuremaybeneededtofacilitatethediversificationofsupplyawayfromRussia,and,withcarefulinvestmentplanning,thereareopportunitiesforthesetofacilitatefutureimportsofhydrogenorhydrogen‐basedfuels.Nonetheless,naturalgasdemandintheNZEScenariocanbemetthroughcontinuedinvestmentinexistingassetsandalreadyapprovedprojectsbutwithoutanynewlongleadtimeupstreamconventionalprojects.Low‐emissionsfuelsNetzeroemissionsdoesnotmeanthetotalphaseoutoffuels.Fossilfuelusedeclines,butthereisrapidgrowthinlow‐emissionsfuels(includingsolid,liquidandgaseousmodernbioenergy,hydrogenandhydrogen‐basedfuels)(Figure3.8).Theseplayakeyroleinreducingemissionsfromlong‐distancetransportandhigh‐temperatureindustrialprocesses.IntheNZEScenario,low‐emissionsfuelscomprise20%ofallliquid,solidandgaseousfuelsusedworldwidein2030and65%by2050.Figure3.8⊳BioenergysupplyandhydrogenproductionbysourceintheNZEScenario,2021-2050IEA.CCBY4.0.Hydrogenproductionrisesnearlyfivefoldfromtodayto2050,butmodernbioenergysupply,limitedbysustainablepotentials,increasesbytwo-and-a-half-timesNote:Forhydrogenproduction,otherincludesrefineryby‐products.255075100202120302050202120302050ModernsolidbioenergyLiquidbiofuelsBiogasesConversionlossesTraditionaluseofbiomassFossilfuelswithoutCCUSFossilfuelswithCCUSOffsiteelectrolysisOnsiteelectrolysisOtherBioenergysupplyEJHydrogenproductionIEA.CCBY4.0.136InternationalEnergyAgencyWorldEnergyOutlook2022Forbioenergy,around24EJofcurrentconsumptioncomesfromthetraditionaluseofbiomass;thisdropstozeroasfullaccesstomoderncookingsolutionsisachievedby2030intheNZEScenario.Modernbioenergyuseincreasesfromaround41EJtodaytomorethan75EJin2030andto100EJin2050.In2050,aroundone‐thirdofthisisusedinthepowersector,providinganimportantsourceoflow‐emissionsdispatchablegeneration,andmorethanone‐thirdisusedinindustryandbuildings.Slightlylessthan6millionbarrelsofoilequivalentperday(mboe/d)ofliquidbiofuelsand400billioncubicmetresequivalentofbiogasesareconsumedin2050.Toavoidconflictsbetweenfoodproductionandaffordability,thereisageneralshiftintheNZEScenarioawayfromconventionalbioenergysourcestowardsadvancedbioenergy,witharound50%ofbioenergysupplycomingfromorganicwastestreamsandforestryresiduesthatdonotrequirededicatedlanduse.Mostoftheremainingsupplyisprovidedbydedicatedshortrotationwoodycropsgrownoncropland,pasturelandandmarginallandsthatarenotsuitedtofoodcrops.Thereisnonetincreaseincroplanduseforbioenergy,andnobioenergycropsaregrownonexistingforestedlandintheNZEScenario(seeChapter9).Thesupplyoflow‐emissionshydrogenincreasesfrom0.3Mt(45petajoules)todayto90Mtin2030and450Mtin2050.5Morethan95%oftotalhydrogenandhydrogen‐basedfuelusein2050isintransport,powerandindustry.Ofthelow‐emissionshydrogenproducedin2050,alittlelessthanthree‐quartersisproducedviawaterelectrolysis,andabitmorethanone‐quarterisproducedfromfossilfuelswithCCUS.Theinstalledcapacityofelectrolysersreaches720gigawatts(GW)in2030and3670GWin2050(existingelectrolysercapacityisaround510MW).In2050,morethan14800TWhofelectricityisusedtoproducelow‐emissionshydrogen,equivalenttomorethanhalfoftoday’sglobalelectricitydemandfromallsources.Around25%oftotallow‐emissionshydrogenin2050isconvertedtolow‐emissionshydrogen‐basedfuels.Synthetickeroseneproducedfromhydrogen(andcombinedwithanon‐fossilfuelsourceofCO2)providesaround25%ofenergyuseintheaviationsector,andammoniaandhydrogenprovidemorethan40%ofenergyuseinshipping.3.4ElectricitygenerationGlobalelectricitygenerationincreasesovertwo‐and‐a‐half‐timesintheNZEScenariofrom2021to2050.Totalelectricitygenerationincreasesby3.2%peryearto2030andthenby3.4%peryearfrom2030to2050,comparedwith2.5%peryearfrom2010to2021.Theelectrificationofend‐usesrangingfromEVstospaceheatingtoindustrialproductionraisestheshareelectricityinfinalconsumptionfrom20%in2021toalmost30%in2030,andmorethan50%in2050.Therapidgrowthoflow‐emissionshydrogenaddsalmost3000TWhofdemandgrowthby2030,andmorethan14800TWhby2050.5Thisincludesbothlow‐emissionshydrogenandthehydrogencontainedinhydrogen‐basedfuels.SeeChapter5andAnnexCfordefinitions.IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501373Low‐emissionssourcesofelectricity–renewables,nuclearpower,fossilfuelpowerplantswithCCUS,hydrogenandammonia–expandrapidlyintheNZEScenario,overtakingunabatedfossilfuelsjustafter2025andreachingthree‐quartersoftotalgenerationby2030,almosttwicethesharein2021.Electricitysectorsinadvancedeconomiesreachnetzeroemissionsby2035intheNZEScenario,andgloballyby2040,atwhichpointlow‐emissionssourcesprovidenearlyallelectricitygeneration(Figure3.9).ThismakeselectricitythefirstenergysectortoreachnetzeroemissionsintheNZEScenario,andthathelpsbringaboutemissionsreductionsinothersectorsastheyincreasinglylooktoelectricitytomeetrisingdemandforenergyservices.Figure3.9⊳CO2emissionsbysourceandkeymilestonesintheelectricitysectorintheNZEScenario,2020to2050IEA.CCBY4.0.Electricityisthefirstsectortoreachnetzeroemissionsin2040,tappingawidesetoflow-emissionssourcesandenablingothersectorstocutemissionsthroughelectrificationNotes:TWh=terawatt‐hour;CCUS=carboncapture,utilisationandstorage.Wastenon‐renewablerepresentsanynon‐biogenicwastecombustedforenergypurposes.RenewablesrapidlybecomethefoundationoftheglobalelectricitysectorintheNZEScenario.Theshareofrenewablesinelectricitygenerationrisesfrom28%in2021toover‐202468101214162020202520302035204020452050GtCO₂CoalNaturalgasOilWastenon‐renewableBioenergywithCCUS20222035Globalnetzeroemissionsintheelectricitysector20501.5GtCO2capturedatpowerplantsannuallyPhaseoutofallunabatedcoal203020252040Windandsolarannualcapacityadditionspass1050GWUnabatednaturalgasbelow5%ofelectricitygenerationOver40%oftotalfinalconsumptionmetbyelectricityAlmost70%ofelectricityfromwindandsolarPVOver40%ofelectricityfromwindandsolarPVOver14800TWhusedtoproducehydrogenNonewunabatedcoalpowerplantsapprovedfordevelopmentNearly50%ofelectricityfromlow‐emissionssourcesHydrogenandammoniastarttoco‐firewithnaturalgasandcoalPhaseoutsubcriticalcoal27%oftotalfinalconsumptionmetbyelectricityAdvancedeconomiesnetzeroemissionsintheelectricitysectorOver50%increaseinnuclearpowercapacityNearly90%ofelectricityfromrenewablesIEA.CCBY4.0.138InternationalEnergyAgencyWorldEnergyOutlook202260%in2030,andnearly90%in2050.Thetotalinstalledcapacityofrenewablestriplesto2030andrisessevenfoldto2050.Annualrenewablescapacityadditionsquadruplefrom290GWin2021tonearly1200GWin2030,andaverageabove1050GWfrom2031to2050.SolarPVandwindaretheleadingmeansofcuttingelectricitysectoremissions:theirglobalshareofelectricitygenerationincreasesfrom10%in2021to40%by2030,and70%by2050(Figure3.10).SolarPVadditionsexpandmorethanfourfoldto650GWby2030,andwindadditionstoover400GW,withmorethan20%ofthisfromthedevelopingoffshorewindindustry.Capacityadditionsofhydropowerandotherdispatchablerenewablestripleby2030toover125GW,helpingtocutemissionsandprovidinglow‐emissionsmeansofintegratingthegrowingamountsofsolarPVandwind.Figure3.10⊳TotalinstalledcapacityandelectricitygenerationbysourceintheNZEScenario,2010-2050IEA.CCBY4.0.Totalelectricitygenerationnearlytriplesto2050,witharapidshiftawayfromunabatedcoalandnaturalgastolow-emissionssources,ledbysolarPVandwindNuclearpowergenerationmorethandoublesintheNZEScenarioby2050,althoughitssharefallsfrom10%in2021to8%in2050,astotalgenerationexpandsrapidly.Morethan30countries,wherenuclearpowerisaccepted,increasetheiruseofnuclearpower.Widespreadlifetimeextensionsinadvancedeconomiesprovideafoundation.Anannualaverageof30GWofnewnuclearcapacitycomesonlineinthe2030s,markingamajorcomebackforthenuclearindustry,andinnovativetechnologiesincludingsmallmodularreactorsbecomeavailableonthemarket.Theuseoflow‐emissionshydrogenandammoniainnaturalgas‐andcoal‐firedpowerplantsandtheadditionofcarboncapturetechnologiesbothprovideimportantmeansofcutting1020304020102021203020402050SolarPVWindHydroBioenergyandwasteOtherrenewablesNuclearHydrogenandammoniaFossilfuelswithCCUSCoalunabatedNaturalgasunabatedOilBatteriesInstalledcapacityThousandGW10203020102020203020402050ThousandTWhElectricitygenerationIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501393emissionsfromexistingpowerplantswhilesupportingelectricitysecurity.Theuseofhydrogenandammoniablendedwithnaturalgasandcoalscalesupinthelate2020s,andatotalof410GWofnaturalgas‐firedpowerplantsand160GWofcoal‐firedplantsareretrofittedby2050toco‐fireammoniaandhydrogen,providing2‐3%ofglobalelectricitygenerationfrom2030to2050.Atotalofover60GWofcoal‐andgas‐firedpowerplantsareretrofittedwithCCUSby2030,andthisrisestoover330GWby2050.FossilfuelswithCCUSprovide1‐2%ofglobalelectricitygenerationfrom2030to2050PhasingoutunabateduseofcoaltogenerateelectricityisacentralpillaroftheNZEScenarioascoalisanemissions‐intensivefossilfuelstillinwidespreaduse.Emissionsfromunabatedcoalwere9.7GtCO2in2021,accountingfor74%oftheelectricitysectortotaland26%oftotalenergysectoremissions.Despiteatemporaryboostfromthecurrentenergycrisisasconsumersswitchfromnaturalgasbecauseofconcernsabouthighpricesandsecurityofsupply,theshareofunabatedcoalinglobalelectricitygenerationfallsrapidlyfrom36%in2021to12%in2030,andtozeropercentby2040andbeyond.Low‐emissionssourcesofgenerationgrowsorapidlythatnonewunabatedcoalplantsbeyondthosealreadyunderconstructionarebuiltintheNZEScenario.Phasingoutunabatedcoalemissionsfrompowergenerationby2040worldwidedependsoncurrentpowerplantsceasingtoprovideregularbaseloadpower.Iftheexistingfleetofcoal‐firedpowerplantsweretooperateastheyhaveinrecentyears,thisalonewouldtakeupmorethanhalfoftheremainingcarbonbudgetconsistentwithlimitingtheglobalaveragetemperatureriseto1.5°C.However,suchphasingoutisnotaneasypropositionwithanexistingfleetofover8000coalplantsoperatinginsome90countriesandproviding2millionjobs.Againstthisbackground,itisimportantfortheretobearangeofoptionsfromwhichpolicy‐makerscanchoose,whichshouldincluderepurposingplantstofocusonflexibility,retrofittingwithcarboncapturetechnologies,retrofittingtoco‐fireammoniaorbiomass,andretiringthemearly.NaturalgasintheNZEScenariofacesareducedroleinthisupdatecomparedwiththe2021version.Thisreflectscurrentmarketconditionsandchangingperceptionsoftheaffordabilityandsecurityofnaturalgas.InthisupdatedNZEScenario,naturalgas‐firedgenerationpeaksby2025beforestartingalong‐termdecline.Bythetimetheglobalelectricitysectorreachesnetzeroemissionsin2040,theunabateduseofnaturalgasis97%lowerthanitwasin2021.Evenasoutputfalls,however,naturalgas‐firedcapacityremainsacriticalsourceofpowersystemflexibilityinmanymarkets,particularlytoaddressseasonalflexibilityneeds.BatterystoragetakesoffintheNZEScenario,expanding30‐foldfrom2021to2030.ThisgrowthreflectsitsincreasinglyimportantroleinhelpingtointegraterisingsharesofsolarPVandwindbyregularlychargingattimesofplentifulrenewablessupplyanddischargingwhenmostneededinthesystem.Batterystorageisalsoabletobolsterthestabilityandreliabilityofelectricitynetworks,forexamplebyprovidingfastfrequencyresponse.By2030,globalbatterycapacityreaches780GWintheNZEScenarioandaccountsforabout15%ofalldispatchablepowercapacity.By2035,batterycapacitysurpassesnaturalgas‐firedcapacityastheprincipalsourceofflexibilityinmanymarkets.Otherformsofstorage,suchasheatorIEA.CCBY4.0.140InternationalEnergyAgencyWorldEnergyOutlook2022gravity‐basedsystems,areunderdevelopmentandmayemergetocomplementorcompetewithbatterystorage.Electricitytransmissionanddistributiongridsexpandtomeetthegrowingdemandsofelectrification,connectthousandsofnewrenewableenergyprojects,andreinforcesystemsthatneedtoadapttochangingsystemdynamics.Globalinvestmentingridsto2030reachesclosetoUSD750billionperyearintheNZEScenario,anditremainsatahighlevelthroughto2050.Closeto70%ofthisinvestmentisfordistributiongridswiththeaimofexpanding,strengtheninganddigitalisingnetworks.ElectricitysecurityisofparamountimportanceintheNZEScenarioastheglobaleconomybecomesmoreandmoredependentonreliableandstableelectricitysupply.Securitydependsongridsbeingmodernisedanddigitalisedtofacilitatemoreadvancedandsmarteroperationsasthenumberofusersandusesofelectricityexpandsandasthenatureofelectricitysupplyevolves.Italsodependsonsystemflexibility,whichisfastbecomingthecornerstoneofelectricitysecurity.IntheNZEScenario,powersystemflexibilityneedsquadruplebetweentodayand2050,drivenbythefast‐risingshareofvariablerenewablesandchangesinelectricitydemandpatterns.Unabatedcoalandnaturalgaspowerplantsandhydrohavetraditionallyprovidedthelion’sshareofflexibilitytopowersystems.ThischangesdramaticallyintheNZEScenarioaselectricityshiftstolow‐emissionssourcesofgeneration.Batteriesanddemand‐sideresponsemeetmorethanhalfoftheflexibilityneedsin2050,withanotherquartercomingfromhydropowerandmostoftherestfromlow‐emissionsthermalpowerplants,includingnuclear,fossilfuelsequippedwithCCUSandplantsthatco‐firehydrogenorammonia.Around5%isstillprovidedbyunabatednaturalgas.Theaffordabilityofelectricityisacriticalconcernforconsumersandpolicymakersinenergytransitions,anditwillbecomemorecriticalstillaselectricitycomestorepresentaneverlargershareoffinalconsumptionandtotalenergybills.Inabsoluteterms,globalelectricitysupplycosts–includinggeneration,storageandgrids‐morethandoublefromtoday’sleveltoUSD4.7trillionannuallyin2050.However,thisincreaseinsupplycostsislessthanthegrowthinelectricitydemandoverthesameperiod.IntheNZEScenario,electricitycostscomedownfromtheircurrenthighlevelsascost‐effectivesolarPVandwindarescaledup,andtotalelectricitysupplycostsperunitofelectricitygenerationarebroadlystableto2030.By2050,theaveragecostofelectricityis10%belowthelevelin2021.Massiveinvestmentinrenewablesandotherlow‐emissionssourcesmeansthatelectricitysupplybecomesmorecapitalintensive.Capitalrecoveryrisesfromabout40%ofelectricitysupplycoststodaytoalmost80%in2050intheNZEScenario,whilefuelcostsfallfromone‐thirdtojust5%in2050.Asaresult,electricitysystemcostsbecomemorepredictableandenergymarketvolatilitydeclines.Bothadvancedeconomiesandemergingmarketanddevelopingeconomiesseelowerelectricitysystemcostsby2050.ThecostsoftransitionsinemergingmarketanddevelopingeconomiesarekeptdownbyparticularlylowsolarPVandwindcosts,linkedtolowertechnologycostsandhighqualitysolarresourcesinmanycountries.IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby205014133.5IndustryIn2021,theindustrysectorworldwideaccountedforalmost170EJofenergyconsumption,whichisslightlymorethanthetotalenergysupplyofChina.Industryrepresentsmorethanone‐thirdoftotalfinalenergyconsumption,andits9GtCO2emissionsmakeup45%oftotaldirectemissionsfromend‐usesectors.Thereisnowaytoreachnetzeroemissionswithoutstrongandco‐ordinatedactiononemissionsreductionintheindustrysector.Figure3.11⊳EmissionsreductionsandkeymilestonesintheindustrysectorintheNZEScenariorelativetotheSTEPS,2020-2050IEA.CCBY4.0.Industryrequiresaportfoliooftechnologiesandmeasurestoreachnetzeroemissions,suchasenergyandmaterialefficiency,electrification,hydrogenandCCUSNotes:VA=valueadded;TFC=totalfinalconsumption.Innovativeroutesforironandsteelincludehydrogen‐basedandCCUS‐basedroutes.Milestonesingreenrelatetothewholeoftheindustrysector.2468102020202520302035204020452050GtCO₂40%electricityinTFC53%near‐zerocarbonprimarysteelproduction50%electricityinTFCEnergyintensity:1.7GJ/USD1000VA8%ofCO2storedEnergyintensity:2.9GJ/USD1000VAEnergyintensity:2.2GJ/USD1000VA8%near‐zerocarbonprimarysteelproductionClinkertocementratio:0.6947%ofplasticscollectedforrecycling72%ofelectricityRestofindustryLightindustriesCementIronandsteelChemicalsSTEPSNZE20252030203520402045Allelectricmotorsalesarebestinclass26%ofplasticscollectedforrecycling29%electricityinTFC22%electricityinTFCClinkertocementratio:0.5695%ofCO2stored96%near‐zerocarbonprimarysteelproduction2050Energyintensity:3.9GJ/USD1000VAIEA.CCBY4.0.142InternationalEnergyAgencyWorldEnergyOutlook2022Theworldhasnotyetreachedpeakmaterialsdemandinindustry.IntheSTEPS,worldoutputofcrudesteelincreasesbyaround10%by2030,andaround30%by2050,drivenbyIndia,SoutheastAsia,andAfrica.GlobaloutputofcementalsoincreasesasAfricaandIndiacontinuetheprocessesofurbanisationandindustrialisation.AmuchstrongerfocusonmoreefficientuseofmaterialstempersthisgrowthintheNZEScenario,butitisnotenoughtopreventanoverallincreaseindemandforindustrialmaterials.Severalotherchallengesstandinthewayofindustrysectordecarbonisation.First,manytechnologiesrequiredforthetransitionintheindustrysectorarestillatprototypeordemonstrationstageandnotyetreadyfordeploymentatscale.Second,inanumberofcasesnewproductionprocesseswithsubstantiallyloweremissionsintensitieswill–atleastinitially–havehighercosts.Third,manyheavyindustrysectorproducts,suchassteel,aretradedinternationallyincompetitivemarkets,withmarginsthataretooslimtoabsorbelevatedproductioncostsortoencouragefirstmoverstoadoptnewtechnologies.Inaddition,heavyindustrialfacilitiesarelong‐livedandcapitalintensive.Thesechallengescallforamulti‐prongedapproachtodecarbonisationinindustryintheNZEScenario.Centraltothepathwayfortheindustrysectoraremeasurestoavoidenergydemandgrowththroughimprovedenergyandmaterialsefficiency.IntheNZEScenario,totalfinalconsumptioninthesectorisnearly10%lowerthanintheSTEPSby2030(Figure3.12).EnergyefficiencycontributesnearlyhalfoftheadditionalenergysavingsachievedintheNZEScenario.Policiestospeedthedeploymentofbestavailabletechnologiesinelectricmotorsystems,andthermalandmechanicalequipmentarecentraltotheachievementofthesesavings,togetherwithprocessintegrationstrategies.Materialsefficiencyreducesdemandformaterialsandaccountsfornearlyone‐fifthoftheadditionalenergysavings.Significantmeasuresincludetoincreaselight‐weightingandlifeextensionsofequipmentandinfrastructureandtosupportproductreuseandrecycling.Thesemeasuresareespeciallyimportantintheneartermtohelpavoidgrowthinunabatedproductioncapacitywhilelow‐emissionstechnologiesarereachingmarketmaturityandscalingup.However,changesintheindustrysectorfuelmixarealreadyclearlyvisibleby2030intheNZEScenario(Figure3.12).Insteel,nearlythree‐quartersoftotalfinalconsumptioniscurrentlyprovidedbycoal,ahighersharethaninanyothersub‐sector.Coke,producedfromcokingcoal,provideshigh‐temperatureprocessheatandservesasareducingagentforthereductionofironoreintheblastfurnaceroute.IntheNZEScenario,theshareofunabatedcoalintotalsectordemandfallstoslightlymorethan60%by2030,whiletheshareofelectricityrisesbyeightpercentagepoints.By2050,theshareofelectricityreachesnearly60%,drivenbyincreasedsecondarysteelproduction(onlylimitedbyscrapavailability)andbyincreasingdemandforonsiteelectrolytichydrogenproduction.Thistransitionisfacilitatedbyhigherrecyclingratesglobally,whichenablesecondarysteelproductiontorisefromaround20%todaytomorethan25%by2030.Hydrogen‐baseddirectreducediron(DRI)becomesakeytechnologyforChapter3AnupdatedroadmaptoNetZeroEmissionsby20501433primarysteelproductioninthelongterm:theelectricityrequiredfortheonsiteproductionanduseofhydrogenaccountsfor3%oftotalsteelmakingfinalenergyconsumptionin2030,andthissurgestomorethan25%in2050.Figure3.12⊳Finalenergyconsumptionbysourceinindustrysub-sectorsintheNZEScenario,2021-2050IEA.CCBY4.0.Electricitymakesinroadsinallindustrysub-sectors;insomeitisusedtoproducehydrogenonsite.In2050,theshareofunabatedfossilfuelsislessthan5%,fromaround50%today.Notes:EJ=exajoules;CCUS=carboncapture,utilisationandstorage;STEPS=StatedPoliciesScenario.Onsiteelectrolytichydrogenuseisreportedaselectricitydemandratherthanashydrogendemand.Otherindustryincludeslightindustriesandnon‐specifiedindustry.Electricityiscomplementedbyarangeofadditionallow‐emissionsfuels.Fromalmostzerotoday,theuseofcoalandnaturalgaswithCCUSincreasestomeet2%ofsteelsectordemandby2030andmorethan20%by2050.CCUSisdeployedinparticularinregionswherethereisstockofveryyoungblastfurnaces,notablyinChina,andwherethereislimitedaccesstohighqualityrenewableresourcesbuteasyaccesstocompetitivecoalandnaturalgas.Theshareofmodernbioenergy,mainlysolidbioenergy,reachesaround10%andmerchanthydrogen,i.e.notproducedonsite,accountsforaround5%.Thesetransformationsintheironandsteelsectorrequirestrongpolicies,linkingdemandpullandsupplypullmeasures.Commondefinitionsofnearzeroemissionsmaterialproductionareanessentialfoundationforsuchpolicies(Box3.2).20406080202120302050202120302050202120302050202120302050Coal:unabatedCoal:withCCUSCoal:feedstockOil:unabatedOil:withCCUSOil:feedstockNaturalgas:unabatedNaturalgas:withCCUSNaturalgas:feedstockElectricityHeatHydrogenModernsolidbioenergyNonrenewablewasteOtherrenewablesIronandsteelSTEPSOtherindustryChemicalsCementEJIEA.CCBY4.0.144InternationalEnergyAgencyWorldEnergyOutlook2022Box3.2⊳Nearzeroemissionsmaterialproduction:movingtowardscommondefinitionsTheIEAtracksthedeploymentofEVsintransport,heatpumpsinbuildings,andsolarandwindgenerationinelectricity.Butwhatistheequivalentforindustrialsub‐sectorssuchassteelandcement?Definingwhatlevelofemissionsintensity“makesthecut”forthetransitiontonetzeroemissionsiscritical,particularlyformeasuresdesignedtocreateleadingmarketsfornearzeroemissionsproducts(demandpull)andtohelpdirectinvestmentfordeployment(supplypush).Forexample,withcommonlyunderstooddefinitionsinplace,privateandpublicsectoractorscouldcommittoprocurenearzeroemissionssteelandcementatapremium,incentivisingindustrytoscaleupproduction.TheIEAundertookananalysisinthelastyear,attherequestoftheGermanG7Presidency,todevelopdefinitionsfornearzeroemissionssteelandcementproduction.Incorporatinginputfromadiversegroupofstakeholders,thedefinitionswereproposedinAchievingNetZeroHeavyIndustrySectorsinG7Members(IEA,2022a).Theobjectiveistoworktowardsinternationallyagreeddefinitionsthatcanhelptoaccelerateprogress.Thenearzeroemissionsdefinitionsaredesignedtobestable,absoluteandambitious,andtobecompatiblewithaglobalenergysystemtrajectorythatachievesnetzeroemissionsbymid‐century.Thethresholdsare:Steel:Thethresholdisafunctionoftheproportionofscrapuseintotalmetallicinputs–themorescrapused,thelowerthethreshold–astheuseofscrapinsteelmakinginherentlyreducesemissionsintensityanditsuseisalreadywellincentivised.Forsteelwithnoscrapuse,theproposedthresholdis400kilogrammesCO2‐equivalentpertonne(kgCO2‐eq/t)ofcrudesteel,andfor100%scrapuseitis50kgCO2‐eq/t.Cement:Similarly,thethresholdforcementisafunctionoftheproportionofclinkeruse–themoreclinkerused,thehigherthethreshold–giventhatuseofsupplementarycementitiousmaterials(SCMs)leadstoloweremissionsintensityandisalreadywellincentivised.Forcementwith100%clinkeruse,theproposedthresholdis125kgCO2‐eq/tcement,whileforfulluseofSCMsthethresholdis40kgCO2‐eq/t(notingthatformostapplications,theminimumpracticallyachievableclinkercontentofcementisthoughttobeabout50%).Interimmeasuresthatsubstantiallylowertheemissionsintensityofmaterialsproduction,butfallshortofthenearzeroemissionsthresholds,shouldalsoberecognised.Assuch,complementarydefinitionsfor“lowemissionsproduction”ofsteelandcementhavebeenproposedinordertorecognisetheimportantinterimstepstakenalongaclearpathtowardsnearzeroemissionsintensity.TheIEAanalysiswasrecognisedbyG7ministersinthe2022Climate,EnergyandEnvironmentmeetingcommuniqué,andisalreadybeingputtouse.Forexample,theyareusedintheCleanEnergyMinisterial(CEM)IndustrialDeepDecarbonisationIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501453Initiative’sGreenPublicProcurementPledgeannouncedattheCEMinPittsburgh,Pennsylvania(UnitedStates)inSeptember2022.Furthereffortstoexpandtheuseandrecognitionofagreedthresholdsanddefinitionswillbeimportanttoenableacceleratedcleanenergytransitionsforindustry.Cementproductiontodayisfuelledbyabroaderrangeofsourcesthansteel,althoughcoalstillaccountsforaroundhalfoftotalenergyconsumptioninthesub‐sector.Inthenearterm,reducingtheamountofclinkerincementisakeystrategythatpreventsmorethan250MtCO2ofprocessandenergy‐relatedemissionsby2030intheNZEScenariocomparedwiththeSTEPS.CCUSistheonlyothermeasurethatsimultaneouslyavoidsbothenergy‐relatedandprocessemissionsfromcementproduction.TheintegrationofCCUSincementkilnsisthereforecentraltothedecarbonisationofthecementsub‐sector.IntheNZEScenario,theuseofCCUSresultsin1.3GtCO2beingcapturedandstoredfromcementproductionby2050,oralmost95%oftheemissionsgeneratedinthesub‐sector.Thereisalsosomeswitchingtotheuseoflow‐emissionsfuelsincementkilns.Thisisdominatedbymodernsolidbioenergy,whoseshareincreasesfromslightlymorethan5%todaytonearly15%by2030,andalmostone‐thirdby2050.Electricity,currentlylargelyusedformechanicalenergyinusessuchasclinkergrinding,increasesitsshareofthecementproductionmarketfrom12%todaytomorethan20%by2050aselectrickilnsstarttobedeployedafter2040.Merchanthydrogenisalsodeployedincementproduction,reachingaround5%oftotalconsumptionby2050.Thechemicalssub‐sectorislessemissionsintensivethansteelandcement.Thisispartlybecauseoilandnaturalgasarethedominantfuelsinsteadofcoal,butmuchmorebecause90%ofoilconsumptionisfornon‐energyusesasfeedstock.IntheNZEScenario,materialsefficiencystrategiessuchassingle‐useplasticsbans,plasticreuseandrecyclingarepursuedthroughtargetedandstringentpolicies,whichby2050resultinthesavingofaround30%oftheoilfeedstockusedintheSTEPS.Electricitymakesinroadsby2030,increasingitsshareinthechemicalsub‐sector’senergyconsumptionfromabitmorethan10%todaytoaround15%by2030,and35%by2050.Thisismostlydrivenbytheincreasingproductionofonsiteelectrolytichydrogeninplaceoffossilfeedstockforammoniaandmethanolproductioninparticular.Directuseofrenewables,suchasbioenergy,solarthermalandgeothermal,providesaround10%ofthesub‐sector’sconsumptionby2050,whilemerchanthydrogenusedasafuelprovidesaround5%.Theotherindustrysub‐sectorincludesawidevarietyofindustrialbranches,mostofwhichhavelowerenergyintensityneedsthansteel,cementandchemicals.Thissub‐sectorisalmostcompletelydecarbonisedby2050intheNZEScenario.Electricityalreadyprovidesnearly35%oftotalfinalconsumption,andthisrisestonearly50%by2030,andtotwo‐thirdsby2050.Electricityiscomplementedbyincreasinguseofmodernsolidbioenergyandbiomethane,andotherrenewablesincludingsolarthermalandgeothermalforlow‐temperatureneeds.IEA.CCBY4.0.146InternationalEnergyAgencyWorldEnergyOutlook20223.6TransportTheglobaltransportsectorconsumesaquarteroftotalfinalenergyconsumptiontodayandisresponsiblefornearly40%oftheemissionsfromend‐usesectors.Oildominatesintransport,accountingfor90%ofconsumption.From2010to2019,increasingdemandforpassengerandgoodsmobilityresultedinthetransportsectorseeingthelargestgrowthinemissionsofallend‐usesectors.In2021,globalCO2emissionsfromthesectorreboundedto7.7GtCO2,from7.1GtCO2in2020asmobilitydemandrecoveredfromthepandemic.Figure3.13⊳EmissionsreductionsandkeymilestonesintransportintheNZEScenariorelativetotheSTEPS,2020-2050IEA.CCBY4.0.Electrificationofroadtransportandrailbringsrapidandmassiveemissionsreductions;behaviouralchangesandlow-emissionsfuelsarekeyinaviationandshippingNotes:ICE=internalcombustionengine.Light‐dutyvehiclesincludepassengerlight‐dutyvehiclesandlightcommercialvehicles.Otherincludestwo/three‐wheelers,buses,rail,pipelineandnon‐specified.Non‐roadincludesaviation,shippingandrailmodes.Low‐emissionsfuelsincludebiofuelsandlow‐emissionshydrogenandhydrogen‐basedfuels.2468102020202520302035204020452050GtCO₂NonewICElight‐dutyvehiclessalesUSD40billionpubliccharginginvestment2035NonewICEheavytrucksales2045203065%ofrailiselectric204060%ofshippingisbasedonlow‐emissionsfuels2050Regionalflightsshiftedtohigh‐speedrailwherefeasibleNonewICEtwo/three‐wheelersalesUSD120billionpubliccharginginvestmentUSD170billionpubliccharginginvestment20%low‐emissionsfuelsinnon‐road55%low‐emissionsfuelsinnon‐road85%low‐emissionsfuelsinnon‐roadUSD6billionpubliccharginginvestment5%low‐emissionsfuelsinnon‐roadLight‐dutyvehiclesHeavytrucksShippingandaviationOtherSTEPSNZE60%EVsalesforlight‐dutyvehiclesIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501473Bothpassengerandfreightactivityaresettomorethandoubleby2050intheNZEScenario,drivenbyhighermobilityneedsinemergingmarketanddevelopingeconomiesastheireconomiesandpopulationsgrowandlivingstandardsincrease.EnergydemandgrowthistemperedintheNZEScenariobyimprovementsintechnicalandoperationalefficiencyacrossallmodes–road,aviation,shippingandrail–aswellasbythedeploymentofhighlyefficientvehicles,i.e.electricvehicles(EVs),andpoliciestopromotemodalandbehaviouralshifts(Figure3.13).DecarbonisingthetransportsectorintheNZEScenariodependsprimarilyontwochanges.Firstisaswitchtoelectricity,especiallytotheuseofEVs6andhydrogenfuelcellelectricvehiclesinroadtransport.Secondisamovetobothblendinganddirectuseoflow‐emissionsfuelssuchasbiofuels,hydrogenandhydrogen‐basedfuels,especiallyinaviationandshipping.Figure3.14⊳FinalenergyconsumptionintransportbysourceandmodeintheNZEScenario,2021-2050IEA.CCBY4.0.Directelectricityuseiskeytodecarbonisingroadtransportandrail;hydrogenandhydrogen-basedfuelsplayamajorroleinaviationandshippingNote:Light‐dutyvehiclesincludepassengerlight‐dutyvehiclesandlightcommercialvehicles.Otherincludestwo/three‐wheelers,buses,rail,pipelineandnon‐specified.STEPS=StatedPoliciesScenario.IntheNZEScenario,theshareofoilintransportfinalconsumptiondropstoaround75%by2030andto10%by2050.Electricityisthekeysubstituteforoil,accountingfornearly50%oftransportfinalenergyconsumptionby2050,buthydrogenandhydrogen‐basedfuels(30%offinalconsumptionin2050)andbiofuels(almost15%)alsoplayimportantroles.Light‐dutyvehiclessuchascars,vansandtwo/three‐wheelersaswellasmostrailoperationselectrifyrapidly,andheavy‐dutyvehiclesincludingmediumandheavytrucksfollowsuitonalonger6EVsrefertofullbatteryelectricvehiclesandplug‐inhybridelectricvehicles.204060202120302050202120302050202120302050202120302050OilNaturalgasCoalElectricityBioenergyHydrogenandhydrogen‐basedfuelsEJLight‐dutyvehiclesHeavytrucksAviationandshippingOtherSTEPSIEA.CCBY4.0.148InternationalEnergyAgencyWorldEnergyOutlook2022timescale.Biofuelsareblendedintootherfuelsingrowingquantitiesinroadtransportthroughto2030,butareincreasinglyusedinsteadinaviationandshippingbeyond2030aselectrificationbecomesthemostcost‐effectiveoptionfordecarbonisingtheroadsector.Directuseofhydrogen,andoflow‐emissionssyntheticfuelssuchassynthetickeroseneandammonia,increasesrapidlytomeetdemandinlong‐distancemodesoftransport,mainlyaviationandshipping(Figure3.14).Despitethehighcostsoftheseenergycarriersandtheconsiderableenergylossesincurredintheirproduction,hydrogenandlow‐emissionssyntheticfuelsplayakeyroleinreducingcarbonemissionsfromlong‐distancemodesthankstotheirhighenergydensity.Globallyroadvehiclesemitted5.9GtCO2in2021–morethantheentireenergy‐relatedcarbonemissionsofNorthAmerica.Oilproductsaccountedforaround90%ofroadtransportenergyconsumption,withbiofuelsandnaturalgasaccountingforalmostallremainingdemand.Theshareofelectricityinroadtransportdemandin2021waslessthan1%.IntheNZEScenario,theshareofoilproductsinroadtransportdemanddecreasesto75%by2030,withelectricityaccountingfor10%,biofuelsformorethan10%,andhydrogen,hydrogen‐basedfuelsandnaturalgasfortherest.Newsalesofinternalcombustionengine(ICE)cars,vans,two/three‐wheelersandurbanbusescometoanendby2035,intercitybusesby2040,andnewsalesofICEheavy‐dutyvehicles(heavyandmediumtrucks)ceaseby2045.EVsofferthemostcost‐effectivelow‐emissionstechnologyinmostsegmentsinboththeshortandlongterm,andtheycometodominateinroadtransport.By2030,60%ofallnewcarsalesareelectric,butICEvehiclesstillaccountfornearly80%ofthestockofcars,meaningthatfueleconomyimprovementsandbehaviouralchangeremaincriticallyimportant.Theelectrificationofheavy‐dutyvehiclesproceedsataslowerpace,withEVsaccountingforalmost30%ofsalesby2030.Hydrogenalsoplaysarole,mainlyforlong‐distanceheavyfreighttrucks.Emergingmarketanddevelopingeconomiesinitiallyfocusontheelectrificationoftwo/three‐wheelersandurbanbuses.TherapidrolloutofrecharginginfrastructureisessentialtounderpintheshifttoEVs.IntheNZEScenario,aroundUSD35billionofinvestmentgoestosupportpublicEVchargerseveryyearonaveragefrom2022‐30,andeffortsarealsomadetoscaleuptheavailabilityofhydrogenrefuellingstationsinlocationsthataresuitableforlong‐distancetruckingsuchasindustrialhubs.Thisrequirestacklingthefinancinggapsthatexistinemergingmarketanddevelopingeconomiesforthedeploymentofcharginginfrastructure.By2050,theroadtransportsectorisalmostentirelydecarbonised.Residualemissionsamounttoaround200MtCO2(3%of2021emissions)andareallattributabletooilproductconsumptionintheremainingICEheavytrucksontheroad.Electricityisthemainfuelforroadtransport,accountingforovertwo‐thirdsoftotalenergyconsumptionandnearly90%oftotalroadactivityby2050.Hydrogenalsoplaysanimportantpart,andisresponsibleforalmostone‐quarterofenergyconsumptioninthesector.IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501493Aviation7isalmostentirelyreliantonoiltoday.Aspandemic‐relatedtravelrestrictionswereliftedinmostregions,surgingdemandforflightsledCO2emissionsfromaviationtorisebyover20%year‐on‐yearto700Mtin2021,althoughtheyremainedbelow2019levels.TheNZEScenarioseeslowergrowthofaviationactivity(expressedinrevenue‐passengerkilometres)thantheSTEPSaspoliciestopromotebehaviouralchangesleadtoshiftstohigh‐speedrailandtoareductioninbusinesstrips(seesection3.8).Growthinaviationactivityiskeptdowntoaround2.5%peryearto2050relativeto2019,andemissionsfallto200Mtbythen.Globaluseofjetkerosenedecreasestoaround90%oftotalaviationenergydemandby2030andtoaround20%by2050.Theuseofsustainableaviationfuel(SAF)startstoaccelerateinthe2030s.By2030,over10%offuelconsumptioninaviationisSAF,mostofwhichisbiojetkerosene.By2050,biojetkerosenemeetsalmost45%ofdemandandsynthetichydrogen‐basedfuelsmeetafurther25%.InvestmentsinSAFproductionfacilitiesscaleuprapidlywithsupportfromgovernmentsintheformofblendingmandates,low‐emissionsfuelstandardsandtaxcredits,whileprioritisingsustainabilitycriteria.TheNZEScenarioseescommercialisationofhydrogenaircraftfrom2035.By2050,halfofallregionalandnarrowbodyaircraftsoldarehydrogenaircraftmainlyservingshort‐tomid‐haulroutes,anddirectuseofhydrogenaccountsfor8%oftotalenergydemandinaviation.Growinguseofhydrogenpoweredaircraftdependsontechnologicaladvancementsinstoragetanks,on‐boardfueldeliverysystems,andcombustionenginesorfuelcelltechnologies,aswellasoninvestmentsinairportinfrastructureforthestorageanddeliveryofhydrogen.TheNZEScenarioalsoseesaroleforbatteryelectricaircraft.Currentbatterydensityandweightsignificantlyrestricttherangeandsizeofsuchaircraft.However,advancesinbatterytechnologiesareexpectedtoopenregionalflightstobatteryelectricaircraft.Theymeet3%ofaviationenergydemandby2050intheNZEScenario.Maritimeshippingisheavilyreliantonoil,whichmeetsvirtuallyallitsenergydemandtoday.IntheNZEScenario,thefuelmixforthesub‐sectorundergoesamajortransformation,anditsglobalCO2emissionsfallfrom840MtCO2todayto110MtCO2by2050.Anumberoffuelscontributetothisdecarbonisationprogress.By2050,ammoniameetsaround45%ofdemandforshippingfuel.Bioenergyandhydrogeneachmeetafurther20%ofdemand,withtheuseofhydrogeninparticularfocussedonshort‐tomid‐rangeoperations.Electricityplaysaminorrolefocussedonmeetingdemandfromsmallshipsandcruiseferriesusedforshort‐distanceoperations.Shipshavealifetimeof20‐35years,whichinhibitstheuptakeofnewlow‐emissionstechnologiesandcontributestooilstillconstitutingalmost15%ofshippingfueldemandby2050.Althoughitispossibletoretrofitshipstorunonlow‐emissionshydrogen‐basedfuels,7Aviationinthisreportincludesbothdomesticandinternationalflights.Whilethefocushereisoncommercialpassengeraviation,otherdedicatedfreightandgeneral(militaryandprivate)aviation,whichcollectivelyaccountformorethan10%offueluseandemissions,arealsoincludedintheenergyandemissionsaccounting.IEA.CCBY4.0.150InternationalEnergyAgencyWorldEnergyOutlook2022thisiscomplicatedbytheneedformajorinvestmentsandco‐ordinatedeffortsamongfuelsuppliers,ports,shipbuildersandshippers,especiallywhenitcomestolargetransoceanicvessels.Efficiencymeasuressuchaswindkitesandrotorsailsalsohaveanimportantroletoplay,sincetheyhelptoreducetheneedforfuelofanykind.Railisthemostenergy‐efficientandleastemissions‐intensivemodeofpassengertransport,eventhoughoilcurrentlymeetsoverhalfofallrailenergyneeds,andtwo‐thirdsofenergyneedsinfreightrail.IntheNZEScenario,passengerraildemandexpandssignificantly,inparticularforurbanmetrorailandhigh‐speedrailtravelwhichmainlyreliesonelectricity.Passengeractivityonhigh‐speedrailincreasesmorethanthree‐timesby2030astraveldemandisincreasinglyshiftedfromshort‐haulflightstorailasaloweremissionsoption.Railfreightdemandalsoincreasessignificantly.Despitethis,globalCO2emissionsfromrailfallfrom90MtCO2in2021toalmostzeroby2050asallnewtracksonhighthroughputcorridorsareelectrifiedfromnowonandaselectricity’sshareofrailenergydemandrisesfromaround45%todayto65%by2030,andalmost90%by2050.Biodieselaccountsforafurther5%ofdemandin2050,andhydrogenforanadditional2%,whileconventionaldieseluseisreducedtoonly3%.Fuelcelltrainscouldpotentiallyservelong‐distancerailtravelwithoutrefuelling,butarecurrentlyatademonstrationstage.3.7BuildingsThebuildingssectoraccountedfor132EJofenergyconsumptionin2021,or30%oftotalglobalfinalenergyconsumption.Thesector’s3GtCO2emissionsaccountedfor15%oftotalemissionsfromend‐usesectorsin2021,butthissharedoublesifindirectemissionsfromelectricityandheatproductionareincluded.Despiteagradualshiftawayfromfossilfuels,directemissionsfromthebuildingssectorhaverisenby0.5%peryearsince2010,drivenbyrisingdemandforenergyservices.Activitylevelsinthebuildingssectorcontinuetorise.Accesstoelectricityandcleancookingisimprovinginemergingmarketanddevelopingeconomies,albeittooslowlytomeetSDGgoalsandwithrecentreversals(seeChapter5,section5.6),andtheownershipanduseofappliancesisexpandingasincomesriseandpopulationsexpand.Floorareainthebuildingssectorworldwideisexpectedtoincrease20%between2021and2030,ofwhich80%isinemergingmarketanddevelopingeconomies.Thenumberofairconditionersintheglobalstockissettoincreaseby50%by2030,compoundedbytheincreasingeffectsofclimatechange.Inemergingmarketanddevelopingeconomiesalone,590millionairconditionersareaddedby2030intheNZEScenario.Giventhatbuildingsareresponsibleformorethanhalfoftotalelectricityconsumptionalreadytoday,temperingtheimpactofincreasingequipmentandapplianceuseonfutureelectricitydemandgrowthisofmajorimportancetothedecarbonisationofelectricitygeneration.Atthesametime,expandingtheroleofelectricityincooking,waterheatingandspaceheatingiskeytothedecarbonisationofthebuildingssector.Improvingenergyefficiencyandincreasingelectrificationandrenewablesuseinbuildings,however,iscomplicatedbytheIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501513longlifetimesofbuildingsandrelatedinfrastructuresuchasheatandelectricitynetworks.Muchalsodependsonthedecisionsofindividualconsumers.IntheNZEScenario,despitetheprojectedgrowthinservicedemand,directCO2emissionsfromthebuildingssectordeclineby45%to2030andmorethan98%by2050(Figure3.15).Takentogether,energyefficiency,electrificationandbehaviouralchangeprovide80%oftheemissionsreductionsinthebuildingssectorby2030,and70%by2050.Figure3.15⊳EmissionsreductionsandkeymilestonesinthebuildingssectorintheNZEScenariorelativetotheSTEPS,2020-2050IEA.CCBY4.0.Spaceheatingdelivers50%ofemissionsreductionsinbuildings,drivenbyelectrificationanddemandreductionsfromefficiencyandbehaviouralchangesNotes:TFC=totalfinalconsumption;LEDs=light‐emittingdiodes.Azerocarbon‐readybuildingishighlyenergyefficientanduseseitherrenewableenergydirectlyoranenergysupplythatwillbefullydecarbonisedby2050intheNZEScenario(suchaselectricityordistrictheat).By2025intheNZEScenario,anygasboilersthataresoldarecompatiblewith100%low‐emissionsgasesandinareaswherefuelsupplywillbecompletelydecarbonisedbefore2050.0.51.01.52.02.53.02020202520302035204020452050Nonewsalesoffossilfuelboilers40%electricityinTFCNaturalgasusereducedby98%UniversalenergyaccessAllnewbuildingsarezerocarbon‐ready50%ofheatingdemandmetbyheatpumps50%ofexistingbuildingsretrofittedtozerocarbon‐readylevels202520302045Mostappliancesandcoolingsystemssoldarebestinclass2035100%ofsalesforlightingareLEDsGtCO234%electricityinTFC90%accesstoelectricitySTEPSNZEDesalinationCookingWaterheatingSpaceheatingOtherIEA.CCBY4.0.152InternationalEnergyAgencyWorldEnergyOutlook2022Energyefficiencyisthefirstpillarofthetransitioninthebuildingssector;intheNZEScenarioitbringssubstantialbenefitsforaffordabilityandconsumerwelfare.Thereisenormousscopeforefficiencygainsfromimprovedenvelopesfornewandexistingbuildings,heatpumps,energy‐efficientappliances,andenergyandmaterials‐efficientbuildingdesign.Mostofthesetechnologiesareavailableonthemarket,andsomearealreadyeconomicallycompetitive,oroncoursetobecomecompetitiveastechnologycostsdecline.IntheNZEScenario,efficiencymeasuresarefront‐loaded,playingtheirlargestroleincurbingenergydemandandemissionsintheperiodto2030.IntheNZEScenario,theenergyintensityofthebuildingssectorneedstodropalmostten‐timesmorequicklyoverthecurrentdecadethanitdidinthepast.Thismeanstheenergyconsumedpersquaremetrein2030is45%lessthanin2021.Thelifetimeofthestockofbuildingsistypicallyverylong,andthestockisexpandingrapidly,particularlyinemergingmarketanddevelopingeconomies.Inadvancedeconomies,almostthree‐quartersofthebuildingsthatwillbeinusein2050havealreadybeenbuilt.Inemergingmarketanddevelopingeconomiestheequivalentfigureismuchlower:13%ofthe2050buildingsstockwillbeconstructedbetweentodayand2030,andalmost40%inthe2030sand2040s.Therefore,theNZEScenariorequiresactionstosimultaneouslyaddressemissionsfromboththeexistingandnewbuildingsstock.Forallnewbuildings,mandatoryzerocarbon‐readybuildingenergycodesareintroducedinallregionsintheNZEScenarionolaterthan2030toavoidlockedinemissions.Forexistingbuildings,retrofitratesincreasefromlessthan1%peryeartodaytonearly2.5%peryearby2030inadvancedeconomies,whichmeansthataround10milliondwellingsareretrofittedeveryyear.Thisnumberrisesto20milliondwellingsperyearinemergingmarketanddevelopingeconomies.Strongretrofitratesresultin20%oftheexistingbuildingstockbeingzerocarbon‐readyassoonas2030,andmorethan85%by2050.8Toachievesavingsatthelowestcostandtominimisedisruption,retrofitsshouldbecomprehensive.Deeprenovationscanbedeliveredthroughpoliciesthatrequireagradualincreaseinrenovationrates,startingwiththeworstperformingbuildings.BuildingenvelopeimprovementsinexistingandnewbuildingsaccountforthemajorityofheatingandcoolingenergyintensityreductionsintheNZEScenario.Energydemandinthesectordependsontheefficiencyofenergyconsumingequipment,aswellasontheefficiencyofthebuildingenvelope.IntheNZEScenario,over80%ofallappliancesandairconditionerssoldarethemostefficientmodelsby2025inadvancedeconomies,andbythemid‐2030sworldwide.Nonetheless,theupfrontcostsofkeytechnologiestoreducedirectemissionsandimproveenergyefficiency,suchasheatpumps,insulationandretrofits,createeconomicbarrierstotheiradoption.8Azerocarbon‐readybuildingishighlyenergyefficientandeitherusesrenewableenergydirectlyoranenergysupplythatcanbefullydecarbonised,suchaselectricityordistrictheat.IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501533BehaviouralchangesarealsoimportantintheNZEScenario,reducingenergydemandby8EJin2030throughactionssuchasmakingtemperatureadjustmentstospaceheatingandcooling.Theabilityofbehaviouralchangestoachievedemandreductionsrapidlyandatnocostmeansthattheycanhelpprovideanemergencyresponsetothecurrentenergycrisisintheshorttermandfacilitatethenetzeroemissionstransitioninthelongterm.Electrificationandswitchingtolow‐emissionsfuelsisthesecondpillarofthetransitioninthebuildingssector.Todayelectricitymakesup34%oftotalfinalenergyconsumptioninthebuildingssector,makingitthelargestfuelinitsenergymix,followedbynaturalgaswith23%.Allend‐usesdominatedtodaybyfossilfuelsareincreasinglyelectrifiedintheNZEScenario.Liquefiedpetroleumgas(LPG)stillplaysalimitedroleforcookinginsomeemergingmarketanddevelopingeconomiesin2050,but95%ofcookingenergyneedsaremetbyelectricityandmodernbioenergybythen.Coal,oilandgasceasetobeusedforspaceandwaterheatingalmostentirelyby2050.Some30%ofhomesareheatedbynaturalgastoday,butthisdropstoalmostzero.Figure3.16⊳Totalfinalconsumptioninbuildingsbysourceandend-useintheNZEScenario,2021-2050IEA.CCBY4.0.Efficiency,fuelswitchingandbehaviouralchangereduceenergyconsumptioninbuildingssignificantlycomparedtotheSTEPS,andthemixshiftstoelectricityandrenewablesNote:Otherincludesenergydemandfromappliances,lighting,spacecoolinganddesalination.STEPS=StatedPoliciesScenario.Nonewfossilfuelboilersaresoldfrom2025intheNZEScenario,exceptwheretheyaretobeoperatedwith100%hydrogenorsynthetichydrogen‐basedfuels,oraretobeconnectedtofullydecarbonisedgasnetworksusinglow‐emissionsgasessuchasbiomethane.Hybridheatpumps,combiningastandardair‐to‐waterheatpumpwithahighefficiencygasboiler,playalimitedroleintheshortterm:inthelongerterm,theyareusedonlywherenaturalgas20406080202120302050202120302050202120302050202120302050CoalNaturalgasOilTraditionalElectricityHydrogenDistrictheatRenewablesSTEPSEJSpaceheatingCookingOtherWaterheatinguseofbiomassIEA.CCBY4.0.154InternationalEnergyAgencyWorldEnergyOutlook2022networksaremaintainedanduselow‐emissionsgases.Electricitybecomestheprincipalsourceofenergyfordecarbonisedheating:homesusingelectricityforheatingrisefrom20%ofthetotaltodayto30%in2030,andmorethan50%in2050,withhighefficiencyelectricheatpumpsbecomingtheprimarytechnologychoice.9Worldwide,theinstallationofheatpumpsincreasesfrom1millionpermonthtodaytoaround8millionpermonthby2030,and14millionpermonthby2050.Overall,theshareofelectricityinthebuildingssectorenergymixreachesalmost50%by2030and67%by2050,makingitthemostelectrifiedofallend‐usesectors.RenewablesusedinbuildingsaremainlyforwaterandspaceheatingintheNZEScenario,withsolarthermalseeingthebiggestincrease.Renewablesarealsousedforcooking,withvariousformsofmodernbioenergymeeting40%ofcookingenergydemandin2050(Figure3.16).Overall,thedirectuseofrenewableenergyrisesfromabout6%ofbuildingsenergydemandin2021toalmost30%in2050,withabouttwo‐thirdsoftheincreasetakingtheformofsolarthermalandgeothermalenergy.Districtheatingnetworksandlow‐emissionsgasessuchasbiomethane,hydrogen,andsynthetichydrogen‐basedfuelsplayabiggerrolein2050inregionswithhighheatingneeds,denseurbanpopulationsandexistingnaturalgasordistrictheatnetworks.Box3.3⊳CleancookingaccessintheNZEScenarioIn2021,2.4billionpeopleworldwidehadnoaccesstocleancookingtechnologies,downfrom2.9billionin2010.ThenetdecreasewasmainlyduetorapidimprovementsindevelopingAsia(inparticularinChina10,IndiaandIndonesia).Theseoutweighedanincreaseof200millioninthenumberofpeoplewithoutaccessinsub‐SaharanAfricaduringthesameperiod.Improvementshaveslowedsignificantlysince2019becauseoftheCovid‐19pandemicandthecurrentenergycrisis(seeChapter5).Inemergingmarketanddevelopingeconomies,therateofimprovementinaccesswasonaverage1.7percentagepointseachyearbetween2015and2019.IntheNZEScenario,thisrateimprovesby2.7‐timesonaveragebetween2022and2030(Figure3.17).However,therearemajorregionaldivergences:tomakeprogressasrapidlyasprojectedintheNZEScenario,sub‐SaharanAfricaneedstoimproveitshistoricalrateofprogressby15‐timesandindevelopingAsiabyonly1.5‐times,mainlyreflectingstrongimprovementsalreadyseeninChina,IndonesiaandIndia.TheNZEScenarioprovidesapathwaytoreachtheSDG7.1goals,butitrequiresdeterminedactionbetakenquickly.Improvedbiomasscookstoves(ICS)provideaccessto35%ofthosewhogainitintheNZEScenarioandplayamajorroleinensuringthatthe9TheIEAwillreleaseareportonheatpumpsandtheirroleinenergysecurityandtransitionsinNovember2022.10TheWorldHealthOrganisationrecentlypublishedrevisedhistoricaldataforcleancookingaccessinChinabasedoninformationfromrecentsurveys(WHO,2022).ThissuggeststhatprogressinChinahasbeenfasterthanestimatedinpreviousreports.IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501553poorest(mainlyinruralareas)areabletomakeuseofanaffordableandreadilyavailablefuel.Liquefiedpetroleumgasprovidesaccesstoalmost40%ofthosethatgainitwiththerestofthegapbeingclosedbyelectricity(14%),biodigesters(8%)andethanol(3%).Figure3.17⊳AnnualimprovementinaccessratetocleancookingandbytechnologyintheNZEScenario,2015-2030IEA.CCBY4.0.Cleancookingaccessinemergingmarketanddevelopingeconomiesneedstoimprove2.7-timesfasterbetween2022and2030thanonaverageinrecentyearsNotes:EMDE=emergingmarketanddevelopingeconomies;ICS=improvedbiomasscookstoves(ISOTier>1);LPG=liquefiedpetroleumgas.Keythemes3.8AvoidinggrowthinenergydemandOverviewofmeasuresThedecarbonisationpathwayintheNZEScenariocannotbeachievedwithouttherapidandlarge‐scaleadoptionofmeasuresthatlimitgrowthinenergydemand.Absentsuchmeasures,deploymentofcleanenergysourceswouldbeoutpacedbyfastrisingdemandforenergyservices.Measuresincludeenergyefficiency,fuelswitching(notablyelectrification)andbehaviouralchanges,andtogethertheycutdemandby110EJrelativetotheSTEPSin2030(Figure3.18).TheyensurethattheenergyintensityofGDPfallsby4%peryearonaverageoverthenexteightyears.Reductionsinenergydemandalsoplayanimportantroleinenergysecurityandaffordability.Inindustry,aroundhalfofthereductionsinenergyusein2030areduetomeasureswhichavoiddemandintheNZEScenariocomparedtotheSTEPS,suchasgainsinmaterialsefficiency.Mostoftheremainingreductionscomefromenergyefficiencymeasuressupportedbyamixtureoftechnicalinnovation,standardsandregulations,includinga5%10%IndonesiaChinaIndiaOtherSoutheastAsiaOtherAsiaSub‐SaharanAfricaEMDE2015‐192022‐30AnnualimprovementinaccessrateICS35%LPG40%Electricity14%Biogas8%Ethanol3%Peoplegainingaccessbytechnology2022‐302.6billionIEA.CCBY4.0.156InternationalEnergyAgencyWorldEnergyOutlook2022systematicpreferenceforbest‐in‐classelectricmotorsandotherequipment,anddigitalenergymanagementsystems.Thereisalsoaroleforchangesinbehaviourbyconsumerstoconsumelessandrecyclemore,therebyreducingdemandforindustrialproducts,especiallyprimarysteelandplastics.Figure3.18⊳TotalfinalconsumptionintheSTEPSanddemandavoidedbymeasureintheNZEScenarioIEA.CCBY4.0.Energyefficiency,behaviouralchangesandothermitigationmeasuresintheNZEScenariocuttotalfinalenergydemandbyalmost40%comparedtotheSTEPSin2050Notes:Fuelswitchingincludeselectrification.Avoideddemandincludesmaterialsefficiencygains,circulareconomyeffects,andstructuralandeconomiceffects,suchastheresponseofconsumerstohigherprices.Inbuildings,energyefficiencymeasuresintheNZEScenarioavoidaroundone‐quarteroftheexcessenergydemandintheSTEPSin2030andjustoverone‐halfofthisin2050.Fuelswitching,largelyfromfossilfuelspaceheatingtoelectricheatpumps,shavesafurtherone‐fifthfromthisenergydemandgap.Theremainderisavoidedbybehaviouralchangesthatmoderatedemand,notablyforspaceheatingandairconditioning.Intransport,behaviouralchangeshaveabiggerimpactthananyothermeasurein2030,accountingforone‐thirdofthedifferenceinenergydemandbetweentheSTEPSandtheNZEScenario.Thesechangesareparticularlyimportantinaviation,wherethereislittletechnicalpotentialforfuelswitchingandlimitedroomintheneartermforenergyefficiencygainsbeyondthoseintheSTEPS.Forroadtransport,fuelswitchingmeasures(mainlytoEVs)andenergyefficiencyimprovementsunderpinnedbystringentfueleconomystandardsplayanimportantroletocurbgrowthinenergydemandin2030.Butenergysavingsfromelectrificationreallycomeintotheirownafter2030,andthereisamorethanfourfoldimprovementintheaveragefueleconomyofacarontheroadin2050relativetotoday.50100150200202120302050202120302050202120302050EJSTEPSNZEEnergyefficiencyFuelswitchingAvoideddemandBehaviourIndustryBuildingsTransportAvoideddueto:TFC:IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501573FocusonbehaviouralchangesTheNZEScenarioincorporatesanumberofbehaviouralchangesinthewayconsumersuseenergyservices.11Inpartthesefunctioninthesamewayasenergyefficiencyandothertechnicaloptionstoreduceenergydemand.Yettherearealsoimportantdistinctions.Behaviouralchangescantackleemissionsfromtheexistingstockofemissions‐intensiveassetswithouttheneedtowaitforstockturnoverandtheadvanceofcleanenergytechnologies.Forexample,whileover60%ofcarssoldintheNZEScenarioareEVsin2030,almost80%ofcarsontheroadarestillICEvehiclesbythattimeandmanyofthemwillcontinuetobedrivenforyearstocome.Bycontrast,behaviouralchangesthatleadpeopletodrivelessorinamorefuel‐efficientmanner,e.g.moreslowly,cutemissionsfromallvehicleswithoutanytransitionalperiod.Forthatreasonbehaviouralchangescanalsoproviderapidresponseswhennecessarytoenergysecurityconcerns(IEA,2022b).Insomeareassuchasaviation,technicaloptionsareunlikelytoexistatthescalerequiredtoreduceemissionstonetzeroby2050.Behaviouralchangeswhichcurbactivitythereforehaveacriticalparttoplayinreducingdemandandminimisingtheneedtorelyonnegativeemissionstechnologies,whichmaybecostlyorfailtomaterialiseattherequisitescale.In2050,thebehaviouralchangesintheNZEScenarioreducetherequirementfornegativeemissionstechnologiesbyaroundone‐third,or820MtCO2.Figure3.19⊳CO2emissionsreductionsduetobehaviouralchangesintheNZEScenarioIEA.CCBY4.0.BehaviouralchangescutCO2emissions,butmostdependontargetedpoliciesandsomerequirenewinfrastructure11Behaviouralchangesareactivechangesbyend‐usersofenergy‐relatedservicesthatreduceexcessiveorwastefulenergyconsumption.Thismeans,forexample,thatthepurchaseofcleanenergytechnologies,suchasanEV,isnotconsideredasabehaviouralchange.FuelefficientdrivingLowcarcitiesCleanercarsWorkfromhomeReducedflyingSpaceheatingSpacecoolingEco‐householdReuseandrecyclingReductionsbymeasure,20301152MtCO₂Transport760MtCO₂Buildings390MtCO₂Industry2MtCO₂Influencedormandatedbypolicy75%OfwhichdonotrequireinfrastructureOfwhichrequireinfrastructureDiscretionary25%Reductionsbymeasuretype,2021‐50IEA.CCBY4.0.158InternationalEnergyAgencyWorldEnergyOutlook2022By2030,behaviouralchangesintheNZEScenarioreduceCO2emissionsbyaround1150Mt(or9%oftotalemissionsreductions)comparedtolevelsintheSTEPS(Figure3.19).Between2021‐50aroundthree‐quartersofcumulativeemissionsreductionsfrombehaviouralchangesstemfrommeasuresdirectlyshapedormandatedbygovernmentpolicies,suchascongestionchargingorspeedlimitreductions;aroundone‐halfoftheserequirethesupportofinfrastructure,suchashigh‐speedrailnetworks.Theremainingreductionsareassociatedwithdiscretionarybehaviouralchangeswhichcouldbeencouragedbyinformationandawarenesscampaigns,suchasproductlabellingandhomeenergyconsumptionreports.Buildingsaccountforjustoverone‐thirdofthetotalCO2emissionsreductionsfrombehaviouralchangesin2030.Forexample,adjustingthermostatsto19‐20°Cinwinterandairconditioningtoamaximumof24°CinsummerreducesCO2emissionsbyalmost300Mt(whenincludingtheindirectCO2emissionsassociatedwithelectricitygenerationandheatproduction).Transportaccountsforjustundertwo‐thirdsofthereductionsinCO2emissionsfrombehaviouralchangesin2030intheNZEScenario.Forroadtransport,measurestopromotefuel‐efficientdriving,includingreducingspeedlimitsonmotorwaysto100kilometresperhour(km/hour)andeco‐driving,12reduceCO2emissionsby170Mtin2030.Othermeasuresencourageworkingfromhomethreedaysperweekinjobswhereitispossibletodosoandincreasedcarpooling.13ActionistakentophaseouttheuseofICEcarsinlargecitycentres,andreducespeedlimitsto20km/hourtodiscouragecaruseandmakeiteasierandmoreenjoyabletocycleorwalk.AshifttowardscleanercarsisbroughtaboutbycorporatetargetstoendtheuseofICEcarsincommercialride‐hailingfleets,e.g.Uber,andbypoliciestodiscourageownershipofsportutilityvehicles(SUV)includingbybanningtheiruseincitycentres.Inaviation,acombinationoffrequentflyerlevies,a50%reductioninbusiness‐relatedlong‐haultripsinfavourofteleconferencingandashifttohigh‐speedrailforregionalflightscutsCO2emissionsby110Mtin2030intheNZEScenariorelativetothelevelinSTEPS.FutureofflyingintheNZEScenarioTechnicaloptionstodecarboniseaviationaredeployedatunprecedentedspeedintheNZEScenario.Forexample,theshareofsustainableaviationfuelsrisestoover10%in2030fromnexttonothingtoday,reaching70%in2050,andtheenergyefficiencyofnewaircraftimprovesby2%eachyearonaverageto2050.Despitetheseefforts,rapiddemandgrowthmeansthataviationwouldbeoneofthelargestemittersofresidualCO2in2050absentadditionalmeasurestolimitdemandgrowth(Figure3.20).Asaresultof12Note:Eco‐drivinginvolvespre‐emptivestoppingandstartingandearlyup‐shifting.13Weestimatethataroundone‐fifthofjobsworldwidecanbedoneathome(IEA,2020).SPOTLIGHTIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501593theuseofcleanertechnologiescoupledwiththeseadditionalmeasures,demandinemergingmarketanddevelopingeconomiesincreasesby3.5%peryearonaveragebetween2019‐50intheNZEScenario(comparedwith4.1%intheSTEPS),andinadvancedeconomiesby1.1%peryear(comparedwith2.2%intheSTEPS).Figure3.20⊳AviationactivitygrowthpercapitaandemissionsreductionsduetobehaviouralchangesintheSTEPSandNZEScenarioIEA.CCBY4.0.PoliciesareintroducedintheNZEScenariotocurbthegrowthinaviationdemandseenintheSTEPS.Withoutthese,emissionsfromaviationwouldbetwiceashighin2050Notes:RPK=revenuepassengerkilometres,i.e.kilometrestravelledbypayingcustomers.AnumberofleversmitigatedemandgrowthintheNZEScenario:Frequentflyers.Thereareverylargevariationsinaviationdemandbetweencountriesandincomegroups.Itisestimatedthat1%oftheglobalpopulationaccountedforoverhalfofallemissionsfromcommercialaviationin2018(GösslingandHumpe,2020).Ournewanalysisindicatesthataround90%oftheglobalpopulationfliesonlyonceperyearornotatall,whereasaround6%flymorethantwiceperyearandjust1%flymorethanfive‐timesperyear.Frequentflyerleviesaimtoreduceaviationdemandinanequitableway(BüchsandMattioli,2022).Theyworkbyprogressivelytaxingfrequentflying,therebycurbingoveralldemand,whilenotmakingaviationunaffordableforthelesswell‐off.Awelldesignedlevycouldreduceaviationdemandfromthewealthiest20%ofthepopulationbyaround30%,whilehavinglittleimpactonthosewhoflyonceortwiceayear(Chapmanetal.,2021).Ouranalysisshowsthatthiswouldreducedemandin2050byaround17%inadvancedeconomiesand6%inemergingmarketanddevelopingeconomies.IntheNZEScenario,frequentflyerleviesreduceCO2emissionsbyaround90Mtin2050.12320152050STEPSNZERPKpercapitaIndex(Advancedeconomies2015=1)AdvancedeconomiesEmergingmarketanddevelopingeconomies100200300AdvancedeconomiesEMDEHigh‐speedrailLessbusinesstravelFrequentflyerlevyNZEMtCO2CO2Emissionsin2050AvoidedduetobehaviourIEA.CCBY4.0.160InternationalEnergyAgencyWorldEnergyOutlook2022Businesstrips.Basedonanalysisofpassengersurveydata,weestimatethataround20%ofairtravelinadvancedeconomiesisforbusinesspurposes.Thisrisestoaround30%inemergingmarketanddevelopingeconomies.InresponsetotheCovid‐19pandemic,virtualbusinessinteractionshavebecomemorecommon,andmanycompanieshaveinvestedheavilyinenhancingtheexperienceofremotemeetings.IntheNZEScenario,teleconferencingsubstitutesforaroundone‐in‐twolong‐haulbusinesstripsin2050,cuttingCO2emissionsbymorethan100Mt.High‐speedrail.Theopportunitytotakehigh‐speedrailinsteadofflyingvariesstronglybyregion.14Globally,intheNZEScenario,sustainedinvestmentinnewhigh‐speedrailinfrastructurecombinedwithexistingtracksenablesaround17%offlightsthatserveroutesshorterthan800kmtobeshiftedby2050,savingaround30MtCO2.Sustainedinvestmentinnewhigh‐speedrailinfrastructureiscriticaltounlockthepotentialforrailtodisplaceregionalflightswherepossible.Someoftheadditionalfundingrequiredtobuildthisinfrastructurecouldcomefromreductionsinthefundingneededforotherinfrastructuredevelopment,suchasairportcapacityexpansionsinadvancedeconomies.ManyofthebehaviouralchangesintheNZEScenariotargetwastefulorexcessiveenergyconsumption,predominantlyinwealthierpartsoftheworld.Theirmainpurposeistoreduceemissions,butsomealsoacttoreduceglobalinequalitiesinpercapitaenergyconsumptionandCO2emissions,makingthecleanenergytransitionmoreequitable.Policiesthatdiscouragecaruseincitiesareoneexample.Suchpolicieshaveanimpactonprivatecarownershiplevels,particularlyinwealthyhouseholdsthatownmultiplecars.15IntheNZEScenario,carsalesarearoundone‐quarterabove2021levelsin2030,butarearound10%lowerthanintheSTEPSinthatyear(Figure3.21).PoliciesthatdiscourageownershipanduseofSUVsisanotherexample,andwithastarkereffect.AlmosthalfofcarssoldtodayareSUVs,andthisrisesto55%intheSTEPSby2030.SUVownershipishighlyconcentrated:in2021,almostfive‐timesmoreSUVsweresoldpercapitainadvancedeconomiesthaninemergingmarketanddevelopingeconomies.IntheNZEScenario,thegrowingtrendinSUVsalesreversesandtheirmarketsharefallstoaround35%in2030andaround25%by2050.BecauseSUVsarearoundone‐quarterlessfuelefficientthanastandardcar,thereductionintheirpopularitysavesalmost60MtCO2in2030intheNZEScenario.About95%ofthesavingsareassociatedwithreduceddirectemissions(tailpipe),withtheremainderfromreducedemissionsinindustryduetoadropindemandforsteel.ThebenefitsofdiscouragingSUVsalesremainevenascarfleetselectrifyintheNZE14Airtravelisassumedtobesubstitutedbyhigh‐speedrailonexistingorpotentialrouteswheretrainscanprovideasimilartraveltime,andwhendemandissufficientlylargetoenableeconomicallyviableoperation,whilenewrailroutesavoidwaterbodiesandtunnellingthroughelevatedterrains(IEA,2021).15Studiesindicatethattheprovisionofgoodpublictransportnetworksandaccesstoride‐hailingservicesandsharedmobilityschemescanreduceownershiplevelsby35%,withthebiggestimpactsontheownershipofmultiplecarsbythesamehousehold(IEA,2021).IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501613Scenario,notleastbecauseastrongerpreferenceforsmallerandlightervehiclesreducestheneedforcriticalmineralsforbatteries,easingtheburdenonsupplychainsastheyscaleuptomeetrapidlyincreasingEVdemand(seesection3.10).Figure3.21⊳EnergyconsumptionpercapitaintheNZEScenarioandcarsalesandSUVshareintheSTEPSandNZEScenario,2030IEA.CCBY4.0.BehaviouralchangesintheNZEreduceemissionsandmakepercapitaenergyconsumptionmoreequitablebytacklingexcessiveenergyconsumptionsuchasSUVsNote:GJ=gigajoule;SUV=sportutilityvehicle.ThebehaviouralchangesintheNZEScenarioreflectregionaldifferencesinsocialnormsandculturalvalues,aswellasdifferencesingeography,climate,urbanisationandtheabilityofexistinginfrastructuretosupportthechanges.However,thespeedandscaleofbehaviouralchangesisarguablymoreuncertainthanthatwhichcharacterisessomeotherpartsofthecleanenergytransition(forinstancethedeploymentofsolarPV,forwhichacleartrendhasemergedinrecentyears).Consumerchoicesandhabitsoftendependontrendsthatare204060NZE2030MtCO2AvoidedsteelproductionReducedtailpipeemissionsEmissionsreductionsduetolowerSUVsales20%40%60%40801202021STEPSNZEMillionunitsCarsalesSUVshare(rightaxis)GlobalcarsalesandSUVshare203005101520253035GJpercapitaNZENobehaviouralchangesCarsAviationBuildingsEnergyconsumptionbysectorin2030inNZEEmergingmarketanddevelopingeconomies10EJAdvancedeconomiesIEA.CCBY4.0.162InternationalEnergyAgencyWorldEnergyOutlook2022hardtoanticipateandcanbesubjecttotheinfluenceofcompaniesviamarketingandadvertising.IntheNZEScenario,governmentsintroduceboldandconsistentpoliciestoencourageandmakecommerciallyviablethosecorporatestrategiesandbusinessmodelswhichdivertconsumerdemandawayfromwastefulorhigh‐emittingconsumptiontowardssustainableandlow‐emissionsenergy‐relatedgoodsandservices,forexamplebymandatingthephasingoutoffrequentflyerprogrammesandpromotingtheimplementationofsimilarschemesforrailtravel.Therewouldalsobearoleforpoliciestotackleactivitieslinkedtoexcessiveandhighlyunequitableemissions,suchastheuseofprivatejets,whichemituptotwenty‐timesmoreCO2thananaveragecommercialflightforeverypassenger‐kilometreflown(MumbowerandSobieralski,2022;GösslingandHumpe,2020).Box3.4⊳Keepingthetemperaturerisebelow1.5°C:RoleofdietsTheNZEScenarioachievesnetzeroCO2emissionsfortheenergysectorin2050withoutrelyingonoffsetsfromothersectors.However,asaboutone‐quarteroftoday’sGHGemissionsoriginatefromoutsidetheenergysector,mainlyfromagriculture,forestryandotherlanduse(AFOLU),cuttingtheseotheremissionsquicklyisessentialtohaveareasonablechanceoflimitingthetemperaturerisetobelow1.5°C(IPCC,2021).Aroundone‐thirdofallfoodproducediscurrentlywastedratherthaneaten(WFP,2020).Itisnotrealistictothinkthatallfoodwastecouldbeeliminated,butasignificantreductioninfoodwasteneverthelesscouldsignificantlyreduceemissionsfromagricultureproduction.Socouldamovetohealthierandmoresustainabledietsinvolvinglessmeat,theglobalproductionofwhichhasmorethantripledsince1961,reachingaround340Mtin2018(RitchieandRoser,2017).Plant‐basedfoodstendtohaveamuchsmalleremissionsfootprintthanmeat:forexample,thevolumeofGHGreleasedpergrammeofproteinfrompeasisonaveragearound17‐timeslessthanforagrammeofproteinfrompork,and110‐timeslessthanforbeef(RitchieandRoser,2020).IncollaborationwiththeInternationalInstituteforAppliedSystemsAnalysis(IIASA),wehaveexploredthepossibleconsequencesforGHGemissionsofreducingfoodwasteandshiftingaportionofproteinintake.Weestimatethat,ifsustainableandhealthydietswereadoptedworldwide16andfoodwastehalved,GHGemissionswouldbereducedbyaround700milliontonnesofcarbon‐dioxideequivalent(MtCO2‐eq)annually.Around90%ofthisreductionwouldcomefromlowernitrousoxideandmethaneemissionsinagriculture,withtheremainderfromreduceddeforestationandtheplantingofnewforestsonagriculturallandnolongerneededforlivestockfeedproduction.About240millionhectares(one‐thirdthesizeofAustralia)ofpastureandcroplandwouldbefreedup,andfertiliserdemandwouldbearoundone‐fifthlowerin2050thanwouldotherwisebethecase.16Thisimpliesthatanimalcalorieintakewouldnotexceed430kilocaloriespercapitaperdayby2030followingUSDepartmentofAgriculturerecommendationsforahealthydietandthatconsumptioninhouseholdswiththehighestlevelsofpercapitaconsumptiontodaywouldbereducedovertime.Localsocietalandculturalpreferenceswoulddeterminewhatconstitutesaso‐calledsustainableandhealthydietindifferentpartsoftheworld.IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby205016333.9Whatarethepublicandprivateinvestmentsneededto2030?TheNZEScenariorequiresalargeincreaseininvestmentincleanenergy.Energyinvestmentaccountedforjustover2%ofglobalGDPannuallybetween2017and2021,andthisrisestonearly4%by2030intheNZEScenario.Thisgrowthininvestmentisdrivenprimarilybyspendingoncleanenergytechnologies,whichincreasesmorethanafactorofthreeoverthisperiod(Figure3.22).Recenttrendsdonotreflecttheneedforanincreaseofthismagnitude:cleanenergyinvestmentisexpectedtoreacharecordhighin2022butthiswasonly25%largerthanthe2017‐21average(IEA,2022c).Figure3.22⊳GlobalaverageannualenergyinvestmentbysectorandtechnologyintheNZEScenarioIEA.CCBY4.0.Investmentincreasesrapidlyinelectricity,infrastructureandend-usesectors;fossilfuelinvestmentsdecreaseandlow-emissionsfuelinvestmentsincrease0.51.01.52.02.52017‐212030204020502017‐212030204020502017‐212030204020502017‐21203020402050OilNaturalgasCoalLow‐emissionsfuelsFossilfuelswithoutCCUSFossilfuelswithCCUSNuclearRenewablesBatterystorageOtherElectricitygridsEVchargersHydrogeninfrastructureDirectaircaptureRenewablesHydrogenEfficiencyElectrificationFossilfuelswithCCUSElectricityandheatTrillionUSD(2021)FuelsEnd‐useInfrastructureIEA.CCBY4.0.164InternationalEnergyAgencyWorldEnergyOutlook2022DecliningfossilfueldemandcanbemetintheNZEScenariothroughcontinuedinvestmentinexistingproductionassetswithouttheneedforanynewlongleadtimeprojects.AnnualspendingonfossilfuelsfallsfromitscurrentlevelofaroundUSD830billiontoaroundUSD455billionin2030.Thisinvestmentisneededtoensurethatsupplyfromexistingfossilfuelprojectsdoesnotfallfasterthanthedeclineindemand,andtoreducetheemissionsthatoccuralongthesupplychain.Theriseincleanenergyspending,includingonlow‐emissionsfuels,meansthattheshareoffossilfuelsintotalenergyinvestmentfallsfromitscurrentlevelof35%to10%in2030.Investmentinlow‐emissionsfuels,includingbiofuels,low‐emissionshydrogenandhydrogen‐basedfuels,increasesfromitscurrentlevelofUSD18billiontoUSD235billionin2030.By2050,low‐emissionsfuelsaccountforover65%oftotalinvestmentinfuels,upfrom1%inrecentyears.Investmentinelectricityandinfrastructuremorethandoubles,whileinvestmentinend‐usesectorsincreasemorethanfourfoldto2030intheNZEScenario.Electricitygenerationfromrenewablesseesoneofthelargestincreases,risingfromUSD390billiontodaytoaroundUSD1300billionby2030.Thislevelofspendingin2030isequaltothehighestleveleverspentonfossilfuelsupply(USD1.3trillionspentonfossilfuelsin2014).Inordertosupporttheincreaseinrenewablesdeployment,spendingonelectricitygridsincreasesfromUSD320billiontodaytojustoverUSD740billionin2030.Spendingonrenewablesforuseinbuildingsandindustryincreasesnearlythreefoldto2030.Reachingnetzeroemissionsrequiresanunprecedentedaccelerationinefficiencyimprovementsandasignificantreductioninenergyintensity.IntheNZEScenario,thisisachievedthroughtherapidelectrificationoftransport,heating,coolingandindustrialproductionandamassivewaveofretrofitsandspendingonnewenergy‐efficientbuildings.Asaresult,theshareofinvestmentdirectedtoenergyefficiencyandelectrificationmovesfrom17%ofthetotaltodayto32%in2030and40%in2050.Investmenttrendsvarysignificantlybetweencountriesandregions.Thelevelofcleanenergyinvestmentisatpresentsignificantlylowerinemergingmarketanddevelopingeconomiesthanitisinadvancedeconomies.Asaresult,cleanenergyinvestmentlevelsinemergingmarketanddevelopingeconomiesseeanearlyfourfoldincreaseby2030intheNZEScenario,comparedwithalessthanthreefoldincreaseinadvancedeconomies(Figure3.23).Thisdramaticgrowthisnecessarytosupporteconomicdevelopmentandindustrialisationaswellasprovideaccesstoelectricityandcleancookingtothe774millionand2.4billionpeoplerespectivelythatstilllackit.Investmentalsopeakslaterinemergingmarketanddevelopingeconomiesthaninadvancedeconomiesasaresultoftheneedtomeetrisingdemandoveralongerperiod.IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501653Figure3.23⊳EnergyinvestmenttrendsbyregionintheNZEScenario,2017-2050IEA.CCBY4.0.Cleanenergyinvestmentincreasesfour-timesinemergingmarketanddevelopingeconomiesby2030andlessthanthree-timesinadvancedeconomiesNote:Otherend‐useincludesinvestmentinelectrificationanddirectuseofrenewablesorlow‐emissionstechnologiesinend‐usesectors.Box3.5⊳SourcesoffinanceFinancingtheUSD4.2trillionofcleanenergyinvestmentneededintheNZEScenarioin2030willinvolveredirectingexistingcapitalfromfossilfuelstowardscleanenergytechnologies.However,thatwillnotbeenoughonitsown:therealsoneedstobeasubstantialincreaseintheoveralllevelofinvestmentinenergy.PrivatesourcescontributearoundUSD3trilliontocleanenergyinvestmentin2030intheNZEScenario(anoverthreefoldincreasefromrecentlevels).Thisismobilisedbypublicpoliciesthatcreateincentives,setappropriateregulatoryframeworks,andsendmarketsignalsthatunlocknewbusinessmodels.Reducingrisksforinvestorswillbeessentialtoensuresuccessfulandaffordablecleanenergytransitions.Publicspendingincleanenergytechnologiesalsorises,byslightlylessthanUSD800billionfromrecentlevelsby2030.Thisisneededtoboostthedevelopmentofnewinfrastructureprojects,accelerateinnovationintechnologiesthatareinthedemonstrationorprototypephasetoday,andprovidede‐riskingmeasuresthatmobiliseprivatecapitalandreducefinancingcosts.Publicspendingcurrentlyplaysalargerroleinemergingmarketanddevelopingeconomiesthanelsewhere,accountingfornearly60%ofcleanenergyinvestmentinrecentyears.IntheNZEScenario,policyreformsthatensureapipelineofbankable1000200030002017‐20212030204020502017‐2021203020402050BillionUSD(2021)Otherend‐useEnergyefficiencyCleanfuelsNetworksandstorageCleanpowerFossilfuelsAdvancedeconomiesEmergingmarketsanddevelopingeconomiesIEA.CCBY4.0.166InternationalEnergyAgencyWorldEnergyOutlook2022projects,combinedwithanincreaseintargetedconcessionalpublicfinance,helptoreducecapitalcostsandincentiviseprivateinvestors.By2030,privatecapitalaccountsfornearly60%ofcleanenergyspending–behindthelevelofaround85%seeninadvancedeconomies(Figure3.24).Figure3.24⊳CleanenergyinvestmentandsourcesoffinanceintheNZEScenarioto2030IEA.CCBY4.0.ReachingtheNZEScenarioinvestmentlevelsrequiresalargercontributionfromprivatefinancethanseentoday,particularlyinemergingmarketanddevelopingeconomiesNote:AE=advancedeconomies,EMDE=emergingmarketanddevelopingeconomies.3.10Canwerampuplow‐emissionstechnologiesfastenough?TheNZEScenariorequiresanextraordinarilyrapiddeploymentofcleanenergytechnologies.Thehugeincreaseintheirdeploymentinthisscenariocallsforrapidgrowthinthemanufacturingofthesetechnologies,aswellastheproductionofessentialmaterialandmineralinputs.Therearesignsofrecentprogress,particularlyinthecaseofthosetechnologiesthatbenefitfrommassmanufacturingandeconomiesofscale,andmanygovernmentshavecommittedduringthecurrentenergycrisistofasterdeploymentofcleanenergytechnologies.ThereismuchmoretodotoreachthescaleofdeploymentrequiredbytheNZEScenario,however,andthenextfewyearswillbecrucial.Inthissectionweexaminecurrentandannouncedproductioncapacityandprojectpipelinesforfourcleanenergytechnologies:batteriesfortransport,solarPV,electrolysersforhydrogenproduction,andCCUS.WealsoassesshowprojectedproductioncapacityandannouncedprojectpipelinesmatchwiththelevelsofdeploymentrequiredintheNZEScenario.1500300045002017‐21202520302017‐2120252030EMDEAEPublicinEMDEPrivateinEMDEPublicinAEPrivateinAECleanenergyinvestmentBillionUSD(2021)SourcesoffinanceInvestmentSourcesoffinanceIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501673BatteriesAutomotivelithium‐ionbatterydemandwas340gigawatt‐hours(GWh)in2021—morethantwicethelevelin2020.Thisincreasewasdrivenbythe120%increaseinelectricpassengercarregistrationsin2021.Batterydemandforothertransportmodes,includingmedium‐andheavy‐dutytrucksandtwo/three‐wheelers,rosebymorethan50%,lessthantheincreaseforpassengercars,butstillhuge.Chinaaccountedforthelargestshareofglobalautomotivebatterydemandin2021withalmost200GWhofbatterydemand,up140%from2020.TheUnitedStatessawdemandmorethandoublein2021,albeitfromalowerbase.DemandgrowthinEuropewasslightlyslowerthanlastyear,butitstillincreasedmorethan70%.Pricesforbatterieshavefallenby86%overthelastdecadethankstoeconomiesofscaleandcontinuousinnovationthroughoutthesupplychain.Despitetherecentcommoditypricesurge,batterypricesdeclinedfurtherin2021,withtheBloombergNewEnergyFinanceannualbatterypricesurveyrecordinga6%decreasefrom2020.However,theimpactofrisingcommoditypriceshasyettofullymaterialise.IfmetalpricesremainatthelevelsseenfromJanuarytoSeptemberin2022,thenthiscouldposeupwardcostpressureonlithium‐ionbatterypacksestimatedataround35%comparedwith2021levels.Annualbatterydemandincreasesfrom340GWhin2021to5600GWhby2030intheNZEScenario.Batterydemandisdrivenbyelectriccarswhichaccountforthree‐quartersoftheprojectedtotalby2030.Achievingsuchproductionlevelsrequirestheadditionaloutputofaround150gigafactoriesof35GWhannualproductioncapacityoperatingatfullcapacity.Figure3.25⊳BatterydemandgrowthintransportintheNZEScenarioandannouncedbatterymanufacturingcapacityexpansion,2010-2030IEA.CCBY4.0.Announcedbatterymanufacturingcapacitiesfor2030arecloseto–butstillinsufficient–tomeetthesurgeinbatterydemandby2030Sources:IEAanalysisandBenchmarkMineralIntelligence(2022).10002000300040005000600020102015202020252030NZEtransportbatterydemandAnnouncedbatterycapacityGWhIEA.CCBY4.0.168InternationalEnergyAgencyWorldEnergyOutlook2022However,theindustryiswellplacedtorespondtothissurgeindemand,havingundertakenstrategicearlyinvestmentsinbatteryplantcapacitytoprepareforprojecteddemandgrowth(Figure3.25).AccordingtoarecentstudybyBenchmarkMineralIntelligence,thebatteryproductioncapacityannouncedbyprivatecompaniesforEVsin2030amountstoover4700GWh(BenchmarkMineralIntelligence,2022).Thiswouldbeabout15%lowerthanthelevelofbatterydemandseenintheNZEScenarioin2030.BatteryproductioncapacitywillstillbeconcentratedinChina(70%),althoughmoreinvestmentsarenowbeingplannedinotherregions,withaquarterofbatteryproductioncapacityexpectedtobeinEuropeandtheUnitedStatesby2030.Whilebatteryproductionfactoriescanbebuiltinundertwoyears,rawmaterialextractionrequiresinvestmentlongbeforeproductionreachesscale.Investmentsinnewmineswillneedtoincreasequicklyandsignificantlyifsupplyistokeepupwiththerapidpaceofdemandgrowth(Box3.6).Thereisscopefornewinvestmenttobesupplementedbyadditionalstepstominimisebatterymetalsdemand.Averagebatterysizesincreasedby60%between2015and2021,and–ifcurrenttrendscontinue–theymayincreasebyafurther45%by2030.IntheNZEScenario,thistrendiscurbedbypoliciesthatdiscouragetheproductionofvehicleswithextremelylargebatteries,forexamplebylinkingpurchasingincentivestovehicleweight.Robustdeploymentofsuchpoliciesreducesbatterydemandbyaround7%by2030intheNZEScenario.Thereisalsoscopeforinnovativebatterychemistriestohelpminimisebatterymetalsdemand.InnovationsaredevelopedandcommercialisedmorerapidlyintheNZEScenariothanintheSTEPS,andnovelextractionandprocessingtechnologiesarealsobroughtforward.Moreover,ifthecurrentcontextofhighcommoditypricesfocussesinnovationeffortsonminimisingthematerialfootprintofbatteries,preferencesforbatterychemistriescouldadaptaccordingly,movingawayfromhigh‐nickelcathodechemistries.Intime,thiscouldresultinafurtherdecreaseindemandforkeybatterymetalsofaroundone‐quartercomparedtothatintheNZEScenario.ElectrolysersforhydrogenproductionAlmostallhydrogentodayisproducedfromunabatedfossilfuels.Withglobalinstalledcapacityof510megawatt(MW),electrolyserssuppliedonly0.1%ofatotalhydrogendemandof94Mtin2021.Butnowtheindustryisexperiencingverydynamicgrowth(Figure3.26).Globalinstalledelectrolysercapacityincreased70%in2021,albeitfromalowbase.Around460electrolyserprojectsarecurrentlyunderdevelopment.Bytheendof2022,globalinstalledcapacitycouldreach1.4gigawatts(GW).By2030,currentcapacityandannouncedprojectswouldresultinaninstalledcapacityofaround134GW.Takingintoaccountmoreuncertain,veryearlystageprojects,globalinstalledcapacitycouldreach240GWby2030.IEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501693Figure3.26⊳AnnouncedmanufacturingcapacityandinstalledelectrolysercapacityprojectedonthebasisofmanufacturingcapacityrelativetotheNZEScenario,2021-2030IEA.CCBY4.0.Plansintheelectrolyserindustryaretorampuphydrogenproductionveryrapidly,butadditionaleffortsareneededtoreachtheNZEScenario2030levelNotes:PMO=Potentialmanufacturingoutput.Unspecifiedregionincludesmanufacturingfacilitiesforwhichthegeographicallocationisunknown.Unspecifiedyearincludesmanufacturingfacilitiesforwhichthestartyearisunknown.Theprospectsforarapidscalingupofdeploymentarealsoreflectedinthesizeofelectrolyserprojects.Whiletheaverageplantsizeofnewelectrolysersstartingoperationin2021was5MW,theaveragesizeofnewplantscouldbearound260MWin2025andover1GWby2030.Oftheprojectsunderconstructionordevelopmenttoday,22(5%)areabove1GW.Globaldemandreaches180Mthydrogenby2030and475Mthydrogenby2050intheNZEScenario(ofwhich90Mtin2030and450Mtin2050arelow‐emissions).Electrolysersmeetathirdofthisdemandin2030and70%in2050.Thisrequiresinstalledelectrolysercapacityof720GWby2030and3670GWby2050.Electricitygenerationcapacityisalsoneededtoprovideelectricityfortheelectrolysers:over1000GWofwindandsolarPVareneededby2030forelectrolytichydrogenproductionintheNZEScenario.Alongsidetheexpandingpipelineofprojectsforelectrolysers,electrolysermanufacturersarealreadyexpandingtheirmanufacturingcapacityinanticipationoffuturegrowth.By2030,globalmanufacturingcapacitycouldreach65GWannually,andthatcouldriseto105GWannuallyifplanswithunknownstartyearsarealsotakenintoaccount.Thecumulativeoutputofprojectedmanufacturingcapacitywithknownstartyearswouldreach270GWby2030–anenormousincreaseoverthecurrentlevelofaround7GW–butonlyalittlemorethanone‐thirdoftherequirementintheNZEScenariofor2030.Assumingthatmanufacturingcapacitywithanunknownstartyearbecomesoperationalby2030,the306090120202120222023202420252030EuropeNorthAmericaChinaIndiaOceaniaROWUnspecifiedUnspecifiedyearAnnouncedmanufacturingcapacityGW200400600800202120252030NZEProjectAllNoInstalledelectrolysercapacityGWpipelinestartyearsPMO:IEA.CCBY4.0.170InternationalEnergyAgencyWorldEnergyOutlook2022cumulativeoutputcouldreach380GW,whichisstilllittlemorethanhalfof2030needsintheNZEScenario.Electrolysersalsorequiremineralsfortheirproduction,inparticularnickelandplatinumgroupmetals,dependingonthetechnologytype.Keymetalinputsforalkalineelectrolysersarenickel(800kilogrammepermegawatt[kg/MW]),steel(10000kg/MW)andaluminium(500kg/MW).Withcurrentmetalprices,thisresultsincostsofaroundUSD25perkilowatt(kW),representingaround3.5%oftotalalkalineelectrolysercosts.Forprotonexchangemembrane(PEM)electrolysers,whichuseplatinum(0.3kg/MW)andiridium(0.7kg/MW),thesituationissomewhatdifferent.Takingintoaccountdemandsforsteel,aluminiumandtitanium,themetalcostsforPEMelectrolysers,atUSD125/kW,currentlyaccountforaround12%oftotalelectrolyserequipmentcosts,largelyduetothecostofplatinumandiridium.Whileitishardtopredicthowfuturepricesforthesemetalswillevolve,effortsareunderwaytoreducetherequirementforplatinumgroupmetalsinPEMelectrolysers.AreductionofspecificiridiumneedsperMWbyafactoroftenseemsfeasibleinthenextdecade.SolarPVSolarPVprovidedover3%ofglobalelectricitygenerationin2021.AnnualPVcapacityadditionsreached150GW,making2021anotherrecordyear.Ofthis,95%wasintheformofcrystallinesiliconmodules,whilethin‐filmPVtechnologyaccountedfortheremainder.PricesforPVmoduleshavefallenby80%overthelastdecadethankstoeconomiesofscaleandcontinuousinnovationthroughoutthesupplychain.Asaresult,solarPVhasbecomethemostaffordableelectricitygenerationtechnologyinmanypartsoftheworld.In2021,theaveragesellingpriceofmodulesincreasedforthefirsttime–byaround20%comparedwith2020–duetohigherfreightandcommodityprices,inparticularforpolysilicon.Whilemodulepricesremainedathighlevelsinthefirst‐halfof2022,continuousinnovationtofurtherimprovematerialandenergyefficiencyisexpectedtodrivefurthercostreductions.Rawmaterialsaccountfor35‐50%ofthetotalcostofasolarPVmodule.Forexample,forcrystallinesiliconmodules,silverandpolysilicontogethermakeuplessthan5%ofthemoduleweight,butrepresentnearlytwo‐thirdsofmaterialcostsat2021prices.Materialintensityimprovementshavealreadybeenrealisedinthepast.Forexample,thepolysiliconintensityforcrystallinesiliconmoduleswasreducedbyafactorofsixbetween2004and2020;silverintensityfellbyone‐thirdbetween2009and2018.Furthermaterialintensityimprovementsareexpectedoverthenextdecade,thoughataslowerpace.AnnualsolarPVcapacityadditionsmorethanquadruplefrom150GWin2021to650GWby2030intheNZEScenario.Similargrowthinrelativetermshasoccurredinthepast:solarPVcapacityadditionsquadrupledineightyearsfrom37GWin2013to150GWin2021.GlobalmanufacturingcapacityforsolarPVmodulesstoodat250GWin2021.Chinadominatestheglobalmarkettodaywithashareofatleast80%acrossallstepsofthesupplychain.Thissharemaysoonrisefurtherto95%forpolysilicon,ingotandwaferproduction(IEA,2022d).ProductioncapacitydiffersacrossthevariouspartsofthePVsupplychain.InIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby205017132021,therewasmuchmorecapacitythanneededformanufacturingwafersandcells(360GWmanufacturingcapacityforwafersand410GWforcells),whilepolysiliconproductioncapacityof250GWwasthetightestalongthesupplychain:thismeantthatineffectitdeterminedoverallmanufacturingcapacity.Figure3.27⊳SolarPVcapacityadditionsandmineraldemandintheNZEScenario,2021and2030IEA.CCBY4.0.SolarPVcapacityadditionsexpandbymorethanfour-timesfromthe2021levelby2030,whiletechnologyimprovementsmitigategrowthincriticalmineralsdemandNote:kt=kilotonnes;CM=criticalminerals.ToreachthedeploymentlevelsprojectedintheNZEScenario,overallproductioncapacitiesneedtoexpandfortheentirevaluechaintoreachmanufacturingcapacityofmorethan800GWby2030(Figure3.27).Takingintoaccountexpectedmanufacturingcapacityadditionsof150GW,globalpolysiliconproductioncapacitycouldreach400GWbytheendof2022,whichisroughlyhalfofthemanufacturingcapacityneededby2030intheNZEScenario.Significantfurthermanufacturingcapacityadditionsareneededintheyearsto2030ifdeploymentistoincreasetothelevelsprojectedintheNZEScenario.EstimatessuggestthatannouncedexpansionplanscouldreachthelevelsofdeploymentseenintheNZEScenario,althoughthereismuchuncertaintysurroundingtheseannouncements.Materialsupplieswillneedtoexpandaswell.In2021,solarPVdemandaccountedfor11%ofglobalsilverproduction,over6%ofmetallurgical‐gradesiliconandover40%ofallrefinedtellurium.IntheNZEScenario,demandforcriticalmaterialsrisesby200‐300%by2030comparedto2021,dependingonthematerial.Forsilver,forexample,thismeansthatdemandforsolarPVmanufacturingtriplesbetween2021and2030,reachinglevelsin2030equivalentto35%ofglobalsilverproductionin2021,despiteaprojectedone‐quarterdeclineinsilverintensity.200400600800100020212030AnnualcapacityadditionsRequiredmanufacturingcapacityPVcapacityadditionsGW5101520255001000150020002500CopperSiliconSilverTelluriumZincOtherCMkt20212030PVcriticalmineraldemandktIEA.CCBY4.0.172InternationalEnergyAgencyWorldEnergyOutlook2022CCUStechnologiesArapidaccelerationinthedeploymentofcarboncapture,utilisationandstorageisneededintheNZEScenariotodeliverdeepemissionsreductionsacrosstheindustry,powerandfueltransformationsectorsandtoremoveCO2fromtheatmospherethroughdirectaircapture(DAC)andbioenergyequippedwithCCUS(BECCS).Around35commercialCCUSfacilitiesareinoperationtodaywiththecollectivecapacitytocapturealmost45MtCO2eachyear.Thisneedstoincreaseto1.2Gtperyearin2030and6.2Gtperyearin2050intheNZEScenario.In2030,annualCO2capturefrombothnewconstructionandretrofitsamountstoaround270Mtfromhydrogenproduction,300Mtfromcoal‐,gas‐andbiomass‐firedpowerplants,and300Mtfromindustrialfacilities,e.g.cement,steel,chemicals.Onaverage,theNZEScenariorequiresmorethantennewCCUS‐equippedfacilitiestobecommissionedeachmonthbetweennowand2030.Figure3.28⊳GlobalCO2capturebyoperatingandplannedsourcerelativetotheNZEScenario,2030IEA.CCBY4.0.DespitetheprogressbeingmadeonCCUS,currentlyplannedcapacityfor2030representsjust20%oftheCCUSrequiredintheNZEScenarioNote:DAC=directaircapture.RecentmomentumprovidescauseforoptimismthatthenextdecadewillseemeaningfulprogressindeployingCCUStechnologies.In2021,governmentsaroundtheworldannouncedinitiativeswitharoundUSD20billioninnewfundsspecificallytargetingCCUS,andfurtherfundshavebeenannouncedin2022.TheUSInfrastructureInvestmentandJobsActprovidesapproximatelyUSD12billionacrosstheCCUSvaluechainoverthenextfiveyearsandtheUSInflationReductionActexpandedtheexisting45Qtaxcredit.17The202217Section45QoftheUSInternalRevenueCodeprovidesataxcreditforcertaintypesofCO2useandforCO2injectedforenhancedoilrecoveryorpermanentgeologicalstorage.200400600800100012001400OperationalPlannedby2030NZE2030MtCO₂DirectaircaptureOtherfuelsupplyHydrogenproductionBiofuelsproductionIndustryBioenergyNaturalgasCoalElectricitysectorIndustryFuelsupplyDACIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501733federalbudgetinCanadaintroducedaninvestmenttaxcreditforCCUSprojectsfrom2022to2030thatcoversindustrialCCUSapplications,hydrogenandDACprojects.InEurope,countriescontinuedcompetitivefundingopportunitiesforCCUSprojectsthroughregionalfundingprogrammes,suchastheConnectingEuropeFacilityandtheInnovationFund,aswellasnationalsubsidyschemes,suchasthoseinDenmarkandtheSDE++intheNetherlands.Drivenbynetzeroemissionscommitments,policyprogressandanimprovedinvestmentenvironment,thenumberofplannedCCUSfacilitieshasincreasedmorethanninefoldsince2018,whenonlyaround30newfacilitieswereintheearlystagesofdevelopment.Plansformorethan130newCCUSfacilitieswereannouncedin2021,andatotalof260facilitiesarenowinvariousstagesofplanninganddevelopmentworldwide.Ifalloftheseprojectsproceedtooperation,around260MtCO2wouldbecapturedin2030(Figure3.28).Thisrepresentsasixfoldincreaseoncurrentdeploymentyetonlyaround20%ofwhatisrequiredintheNZEScenario.InterestincapturingCO2directlyfromtheatmosphereisexpandingasgovernmentsandindustrylookforwaystomeettheirnetzeroemissionscommitments.Sincethestartof2020,almostUSD5billioninpublicfundinghasbeenearmarkedforDACtechnologies,includingUSD3.5billiontoestablishDAChubsintheUnitedStates,whileleadingDACtechnologyprovidershaveraisedoverUSD1billioninprivatecapital.DACtechnologiesplayagrowingroleintheNZEScenario,capturingaround70MtCO2in2030andaround600MtCO2in2050.TheirabilitytocaptureCO2fromtheatmospherethatcanthenbepermanentlystoredgivescarbondioxideremovaltechnologieslikeDACSandBECCSavitalroleinbalancingemissionsthataredifficulttoavoid.AnalternativetopermanentstorageisforCO2capturedbyDACorfromBECCtechnologiestobeusedasaclimate‐neutralfeedstockforarangeofproductsthatrequireasourceofcarbon,includingsyntheticaviationfuels.IntheNZEScenario,over85%ofBECCandDACCO2ispermanentlystored,andunder15%isusedasfeedstock.The18DACplantscurrentlyoperatingworldwideareallsmallscale,withacombinedCO2capturecapacityoflessthan0.01MtCO2peryear.Thefirstlarge‐scaleDACplantofupto1MtCO2peryearisinadvanceddevelopmentandisexpectedtobeoperatingintheUnitedStatesbythemid‐2020s.Plansforatotalof11facilitiesarenowindevelopment,includinginNorthAmerica,NorwayandtheUnitedKingdom.Ifallplannedprojectsgoahead,DACdeploymentcouldreachmorethan5MtCO2by2030.18Thisisaround700‐timestoday’scapturerate,yetonlylessthan10%ofthelevelprojectedintheNZEScenarioin2030.18Thisdoesnotincludearecentannouncementbycompanies1PointFiveandCarbonEngineeringtodeploy70DACfacilities(eachwithacapturecapacityofupto1MtCO2peryear)by2035,whichcouldsignificantlyincreaseDACdeploymentplans.IEA.CCBY4.0.174InternationalEnergyAgencyWorldEnergyOutlook2022Box3.6⊳ScalingupsupplychainsacrosssectorsandregionsThissectionhighlightstheprospectsforarapidscaling‐upofanumberofcleantechnologysupplychains,whilealsodrawingattentiontothegapsthatneedtobebridgedtoreachthelevelsofdeploymentseenintheNZEScenario.SomecleantechnologyvaluechainshaveannouncedexpansionplanswhichwouldseethemgetclosetothelevelofdeploymentintheNZEScenarioby2030:themainexamplesarebatteriesandsolarPV(Figure3.29).Someareslatedtoseehugeexpansion,butstillfallshortoftherequiredlevelby2030:theseincludeelectrolysers.Figure3.29⊳Productionorthroughputcapacityin2021,assumingfullimplementationofannouncedprojectpipelinesandNZEScenariodeploymentlevelsin2030IEA.CCBY4.0.AnumberofcleantechnologyvaluechainshaveannouncedsupplycapacitythatapproachesthelevelrequiredintheNZEScenarioby2030Note:Thisfigureassumesfullimplementationofannouncedprojectpipelines,includingspeculativeprojects.Foralltechnologies,thefigureshowsannualproductioncapacityin2030relativetothelevelofannualdemandorcapacityadditionintheNZEinthesameyear.Cleantechnologysupplychainsneedtobedevelopedwithdiversity,co‐ordinationandefficiencyinmind:Diversity:Currently,manycleantechnologysupplychainsaregeographicallyconcentrated,particularlyinChina.Forexample,75%ofglobalproductioncapacityforbatterycellsislocatedinChina,andasmuchas97%ofglobalcapacityforwafermanufacturingforPVcells(witharound14%ofglobalwaferproductiontakingplaceinasingleChinesefactory).Suchconcentrationraisestherisksofsupplychaindisruptions.Maintainingtheeconomicefficiencybenefitsoftradewhilediversifyingsupplychainswillbecriticaltoacceleratecleanenergytransitions.20%40%60%80%100%BatteriesSolarPVElectrolysersLithiumCopper20212030announcedpipelineStillneededtoreach2030NZENZEdeploymentIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501753Co‐ordination:Cleanenergytechnologiesaredeliveredviahighlycomplexsupplychainswithnumerousinputsandmanufacturingsteps.WhilesomepartsofthechainaremovingaheadalmostinlinewiththeNZEScenario,othersarelagging.Forexample,whilealmost85%ofthebatterymanufacturingcapacityneededintheNZEScenarioin2030isalreadyinplaceorinthepipeline,thelithiumsupplychainfacesamuchbiggerstretch.Announcedcapacityexpansionsandpotentialnewprojectswouldincreasecurrentproductioncapacitythree‐and‐a‐half‐times,butanothertriplingofcurrentcapacitywouldberequiredtomeetthelevelseenintheNZEScenarioin2030.Similarly,eventhoughannouncedsolarPVcapacitygrowthisessentiallysufficienttomeettheNZEScenariodemandin2030,achievingthisrateofcapacityadditionsmayfacebottlenecksonissuessuchaslandacquisition,gridconnections(notablealsointhecontextoftheprojectedshortfallincoppersupply),andsecuregridintegrationofthisvariablerenewableenergysource.Efficiency:Afocusonsupplychainsdoesnotimplythatallsolutionstobottlenecksmustcomefromsupply.Forexample,whilecurrentandannouncedproductioncapacityforcoppermightbeabletocoveraround80%oftheprojecteddemandintheNZEScenario,meetingtheadditionaldemandcouldbeverychallenginggiventhelongleadtimesofprojectsanddepletionofthosereservesthatareeasiesttoexploit.Insuchcases,measurestoenhancerecycling,reducematerialusewherepossibleandacceleratethedeploymentofsubstitutescouldreducepressureonthesupplysidetomeetthehugeincreaseindemandseenintheNZEScenario.Thecomplexityof–andcurrenttensionsin–globalcleanenergysupplychainsisonereasonthattheIEAisplacingincreasedfocusonthisissue,whichwillbeattheheartofthenextEnergyTechnologyPerspectivesreportforthcomingin2023.3.11Energyemployment:anopportunityandabottleneckintheNZEScenarioRapidexpansionofcleanenergytechnologiesintheNZEScenarioisaccompaniedbyacommensurateexpansionoftheenergysectorworkforce.Energysectoremploymentincreasesfromjustover65milliontodayto90millionin2030,takingintoaccountbothdirectjobsinenergysectorsandindirectjobsinthemanufacturingofessentialcomponentsforenergytechnologiesandinfrastructure.Therearealmost40millionnewjobsincleanenergyby2030,outweighingjoblossesinfossilfuel‐relatedindustries,andtheshareofenergysectoremploymentrelatedtocleanenergyincreasesfromaroundhalftodayto80%by2030.Achievingthisgrowthincleanenergyjobswithinthedecadewillrequirestrategicandproactiveplanningbyindustry,governments,andeducationalandtraininginstitutionsinordertopreventshortagesofskilledlabourfrombecomingabottleneckforenergytransitions.Despitesomegrowthinbioenergyandhydrogensupplyjobs,employmentintheNZEScenarioshiftsawayfromfuelsupplyandbecomesmoreheavilyconcentratedinthepowerIEA.CCBY4.0.176InternationalEnergyAgencyWorldEnergyOutlook2022andend‐usesectors(Figure3.30).Fossilfuelsupplyjobsdecreaseby7millionby2030intheNZEScenario,withcoalsupplyseeingthesharpestdeclineasmechanisationanddecarbonisationeffortsleadtofurtherdownsizingofthecoalindustry.Manyskilledworkersinthefossilfuelindustry,inparticularthoseintheoilandgasindustries,haveskillsthatarehighlyapplicabletoemergingcleanenergysectors,thoughsomewillalsostillbeneededtooperateoilandgasassetsthatpersistbeyond2030.Coalminers,particularlythoseinmodern,mechanisedminingoperations,mayhaveskillsthatwouldbeusefulincriticalmineralsproduction,althoughthescopeforthistransitionmaybelimitedbytherelativelysmallervolumesofmineralsneededandbythedifferentgeographiclocationsofcoalandmineraldeposits.People‐centredandjusttransitionspolicieswillbevitaltoprovidesupportforfossilfuelworkerswithlimitedtransitionprospectsinenergyorparallelindustries.Figure3.30⊳EnergyemploymentbytechnologyintheNZEScenario,2019and2030IEA.CCBY4.0.Theshareofenergysectoremploymentrelatedtocleanenergyincreasesfromaroundhalftodayto80%by2030Note:EVs=electricvehicles;ICEs=internalcombustionengines.ThepowersectorleadsthewayintheNZEScenariointermsofjobgrowthto2030,witharound9millionadditionaljobsinpowergenerationcomplementedby4millionnewjobsinpowergridsandelectricitystorage.EmploymentopportunitiesrelatedtosolarPVandwindpowerincreasebyaround10%eachyeartokeeppacewithsteadygrowthincapacityadditions,whilepowergridsmaintain4%annualemploymentgrowththankstorisingelectrificationratesandnewinvestmentingridupgradesandexpansion.Employmentalsoincreasessubstantiallyinvehiclemanufacturingandinbusinessesconcernedwithimprovingtheefficiencyofequipment,industryandbuildings.10203040201920302019203020192030MillionemployeesCriticalmineralsLow‐emissionsfuelsOilandgasCoalGridsandstorageLow‐emissionsUnabatedfossilfuelsEnd‐useefficiencyVehicles:EVsandbatteriesVehicles:ICEsFuelsupplyPowerEnd‐usesFuelsupplyPowerEnd‐usesIEA.CCBY4.0.Chapter3AnupdatedroadmaptoNetZeroEmissionsby20501773Invehiclemanufacturing,three‐fifthsofcurrentjobsshifttoEVsandtheirbatteries.WhileEVshavefewercomponentsandarelesslabour‐intensivetoassemble,additionaljobswillbeneededalongtherelatedbatterysupplychain,althoughtheymaynotbeinthesamelocationascurrentmanufacturingjobs.Efficiencyimprovementsintheindustryandbuildingssectorsrequireanadditional8millionworkerstoretrofitbuildings,installmoreefficientheatingandcoolingandimproveindustrialprocessefficiency.Energysectoremploymentspansseveralvaluechainsegments.19Projectconstructionandmanufacturingareofparticularimportanceforthedeliveryofnewenergyinfrastructure,seeingthecreationofover10millionnewjobsby2030intheNZEScenario.Constructionjobsaretypicallylocatedwherenewprojectsaredeployed.Bycontrast,manufacturingjobsarecurrentlyconcentratedintheAsiaPacificregion,whereactiveindustrialpoliciesandwell‐establishedmanufacturingcompetitivenessareenablingtheemergenceofsignificantcleanenergymanufacturinghubsthatsupplyprojectsworldwide(IEA,2022e).However,severalcountriesincludingtheUnitedStatesandIndiaaremakingeffortstobringcriticalsupplychainsonshoreastheyacceleratecleanenergyinvestment,andothersmayfollowsuit.Theglobaldistributionofmanufacturingjobgainsinthecomingdecadedependsonhowcountriesbalancediversity,resilienceandaffordabilityascleantechnologysupplychainsdevelopandgrow.Shortagesofskilledlabourincleanenergyconstructionprojectsarealreadystartingtobeseen,underliningtheimportanceofstrategicandproactivelabourpoliciestobuildtheworkforceneededfortherapidexpansionofcleanenergytechnologies.Trainingandreskillingtaketime,andclosecollaborationbetweengovernments,companies,labourorganisations,academiaandtraininginstitutionswouldhelptopreventhiringbottlenecks.Thosewithjobsthatareedgedoutasdecarbonisationproceedsshouldbeofferedretrainingtoenablethemtoworkinfastgrowinglow‐emissionssectorsoftheeconomy.Effortstoimprovethequality,inclusivityandwagesofcleanenergyjobswouldhelptoattractmoreworkers,aswouldrecognisedqualificationsorthecertificationofskillstailoredtoparticularcleantechnologysectors.19AsgroupedintheISICInternationalStandardIndustrialClassificationrevision4structure:https://unstats.un.org/unsd/publication/seriesm/seriesm_4rev4e.pdf.IEA.CCBY4.0.PARTCKEYENERGYTRENDSPartCoftheWorldEnergyOutlooktakesanin‐depthlookattheimpactofthecurrentenergycrisisandhowpolicyresponsesandtechnologyandinvestmentchoicesmaychangethefutureofenergy.Itdoesthisforallenergysources,sectorsandregionsto2050,usingthemostup‐to‐datedata.Italsoprovidessomeguidelinesforpolicymakersandotherstakeholdersthatcanhelptosafeguardenergysecurityinaneraofrapidchange.Thesechaptersutilisescenarioanalysistoexplorevariouspotentialpathwaysthattheenergysectorcouldtake,howtheymaybeachieved,andwhatmaybetheimplicationsforenergysecurity,energydemandandelectricity,oil,gas,andcoalmarketsaswellasforlow‐emissionsfuels.IEA.CCBY4.0.OVERVIEWBYCHAPTERChapter4presentstenelementsofapragmaticagendatoensureenergysecurityduringcleanenergytransitionsandcoversarangeofrisksthatmayarise.Itincludestraditionalenergysecurityconcernsastheglobalenergysectorevolvesaswellasnewvulnerabilitiesthatmayemerge,andhighlightsthepoliciesandapproachesthatcanmitigatetheserisks.Chapter5examinestheoutlookforenergydemand.Alongsideupdatedprojectionsbyscenario,itexaminesindetailtheoutlookforenergyaccessaswellastheincreasingdemandforspacecooling.Inaddition,itdetailstheprospectsforoiluseinroadtransportinlightoftherapidriseinelectricvehicles.Chapter6focussesonthepowersector.Itlooksindepthattheimportanceofsystemflexibilityforelectricitysecurity,theessentialroleofnetworkstoaccelerateemissionsreductionsfromelectricitygeneration,andtheincreasingneedsofcriticalmineralsforcleanelectricitysystems.Chapter7assessestheoutlookforliquidfuels.Itlooksindetailattheuseofoilinplastics,theextenttowhichnewconventionaloilprojectsareneededtobalanceoilmarketsinthescenarios,andtheimmediateandlongertermchallengesfacingtherefiningsector.Chapter8tacklestheoutlookforgaseousfuels.ItconsidersindetailthecurrentcrisisanditspotentialimpactsondomesticproductionandonpipelineandLNGflowsinEuropeandbeyond.Italsoconsiderstheprospectsforlow‐emissionshydrogen,andthefutureroleofnaturalgasinemergingmarketanddevelopingeconomiesinAsia.Chapter9explorestheoutlookforsolidfuels.IthighlightssomekeyfindingsoftheupdatedprojectionsforcoalandsolidbioenergyasaprecursortotheforthcomingWorldEnergyOutlookSpecialReport,CoalintheGlobalNetZeroTransition.IEA.CCBY4.0.Chapter4Energysecurityinenergytransitions181Chapter4EnergysecurityinenergytransitionsApragmaticagendaforsecureandrapidchangeHighandvolatilefossilfuelpricesinthewakeofRussia’sinvasionofUkraineunderscoretherisksinherentintoday’senergysystemandtheimportanceofenergysecuritytooureconomiesanddailylives.Energytransitionsofferthechancetobuildasaferandmoresustainableenergysystemthatreducesexposuretofuelpricevolatilityandbringsdownenergybills,butthereisnoguaranteethatthejourneywillbeasmoothone.Traditionalsecuritythreatsremain,evenasnewpotentialvulnerabilitiesemerge.Thischapterproposesthefollowingtenguidelinestohelpbuttressenergysecurityinthe“mid‐transition”,whenthecleanenergyandfossilfuelsystemsco‐existandarebothrequiredtodeliverreliableenergyservices.Synchronisescalinguparangeofcleanenergytechnologieswithscalingbackoffossilfuels.Investingincleanenergyiskeytoavoidfuturecriseswhilereducingemissions.IntheNetZeroEmissionsby2050(NZE)Scenario,aroundUSD9isspentoncleanenergyby2030foreveryUSD1spentonfossilfuels.Cuttinginvestmentinfossilfuelsaheadofscalingupinvestmentincleanenergypushesuppricesbutdoesnotnecessarilyadvancesecuretransitions.Highfossilfuelpricescouldmakeit10‐25%moreexpensiveforfossilfuelimporterstomeetclimategoals.Tacklethedemandsideandprioritiseenergyefficiency.Theenergycrisishighlightsthecrucialroleofenergyefficiencyandbehaviouralmeasuresinhelpingtoavoidmismatchesbetweendemandandsupply.Since2000,efficiencymeasureshavereducedunitenergyconsumptionsignificantly,butthepaceofimprovementhasslowedinrecentyears.Policiesthatacceleratetherateofretrofitsarecrucialasoverhalfofthebuildingsthatwillbeinusein2050havealreadybeenbuilt.Reversetheslideintoenergypovertyandgivepoorcommunitiesaliftintothenewenergyeconomy.Asaresultofthepandemicandtheenergycrisis,75millionpeoplehavelosttheabilitytopayforextendedelectricityservicesand100millionforcleancookingsolutions.Inemergingmarketanddevelopingeconomies,thepooresthouseholdsconsumenine‐timeslessenergythanthewealthiestbutspendafargreaterproportionoftheirincomeonenergy.Turningtheseworseningenergypovertytrendsaroundisessentialforsecure,people‐centredenergytransitions.Collaboratetobringdownthecostofcapitalinemergingmarketanddevelopingeconomies.Thecostofcapitalforasolarphotovoltaics(PV)plantin2021inkeyemergingeconomieswasbetweentwo‐andthree‐timeshigherthaninadvancedeconomiesandChina.Tacklingrelatedrisksandloweringthecostofcapitalinemerginganddevelopingeconomiesby200basispointsreducesthecumulativefinancingcostsofgettingtonetzeroemissionsbyUSD15trillionthroughto2050.SUMMARYIEA.CCBY4.0.182InternationalEnergyAgencyWorldEnergyOutlook2022Managetheretirementandreuseofexistinginfrastructurecarefully.Somepartsoftheexistingfossilfuelinfrastructureperformfunctionsthatwillremaincriticalforsometime,eveninrapidenergytransitions.Theyincludegas‐firedplantsforelectricitysecurity‐intheEuropeanUnionpeakrequirementsfornaturalgasriseto2030evenasoveralldemandgoesdownby50%‐orrefineriestofueltheresidualinternalcombustionenginecarfleet.Unplannedorprematureretirementofthisinfrastructurecanhavenegativeconsequencesforenergysecurity.Tacklethespecificrisksfacingproducereconomies.Diversificationwillbecrucialtomitigaterisks.Somecountriesareinvestingpartoftheircurrentwindfalloilandgasprofitsinrenewablesandlow‐emissionshydrogen.Potentialexportearningsfromhydrogenarenosubstituteforthosefromoilandgas,butlowcostrenewablesandcarboncapture,storageandutilisation(CCUS)canprovideadurablesourceofeconomicadvantagebyattractinginvestmentinenergy‐intensivesectors.Investinflexibility–anewwatchwordforelectricitysecurity.Reliableelectricityiscentraltotransitionsasitsshareinfinalconsumptionrisesfrom20%todayto40%intheAnnouncedPledgesScenario(APS)in2050and50%intheNZEScenario.Increasingvariabilityinelectricitysupplyanddemandmeansthattherequirementforflexibilityquadruplesbymid‐centuryinbothscenarios.Batterystorageanddemand‐sideresponsebecomeincreasinglyimportant,eachprovidingaquarteroftheflexibilityneedsin2050intheAPS.Ensurediverseandresilientcleanenergysupplychains.Mineraldemandforcleanenergytechnologiesissettoquadrupleby2050inboththeAPSandNZEScenario,withannualrevenuesreachingUSD400billion.Highandvolatilecriticalmineralpricesandhighlyconcentratedsupplychainscoulddelayenergytransitionsormakethemmorecostly.Minimisingthisriskrequiresactiontoscaleupanddiversifysuppliesalongsiderecyclingandothermeasurestomoderatedemandgrowth.Fostertheclimateresilienceofenergyinfrastructure.Thegrowingfrequencyandintensityofextremeweathereventspresentsmajorriskstothesecurityofenergysupplies.IEAanalysisoftherisksfacingfourillustrativeassetsshowsthatthepotentialfinancialimpactfromfloodingcouldamountto1.2%oftheirtotalassetvaluein2050,andinonecasewouldbefour‐timeshigherthanthiswithoutflooddefencesinplace.Governmentsneedtoanticipatetherisksandensurethatenergysystemshavetheabilitytoabsorbandrecoverfromadverseclimateimpacts.Providestrategicdirectionandaddressmarketfailures,butdonotdismantlemarkets.Governmentsneedtotaketheleadinensuringsecureenergytransitionsbytacklingmarketdistortions–notablyfossilfuelsubsidies–aswellascorrectingformarketfailures.However,transitionsareunlikelytobeefficientiftheyaremanagedonatop‐downbasisalone.Governmentsneedtoharnessthevastresourcesofmarketsandincentiviseprivateactorstoplaytheirpart.Some70%oftheinvestmentsrequiredintransitionsneedtocomefromprivatesources.IEA.CCBY4.0.10guidelinesforsecureenergytransitionsGlobalenergysecuritycannotbeachievedwithouteveryoneonboardReversetheslideintoenergypovertyandgivepoorcommunitiesaliftintothenewenergyeconomy3Collaboratetobringdownthecostofcapitalinemergingmarketanddevelopingeconomies4Cleanenergyinvestmentandenergyeiciencyarekeytoasecureexitfromtoday’scrisisSynchronisescalinguparangeofcleanenergytechnologieswithscalingbackoffossilfuels1Tacklethedemandsideandprioritiseenergyeiciency2Governmentshavetotakethelead,butcost-eectivetransitionsalsoneedwell-functioningmarketsProvidestrategicdirectionandaddressmarketfailures,butdonotdismantlemarkets10ThetransitionawayfromoilandgasneedstobehandledwithcareManagetheretirementandreuseofexistinginfrastructurecarefully,someofitwillbeessentialforasecurejourneytonetzero5Tacklethespeciicrisksfacingproducereconomies6NewvulnerabilitiesemergeastheworldbuildsanewcleanenergysystemInvestinlexibility,anewwatchwordforelectricitysecurity7Ensurediverseandresilientcleanenergysupplychains8Fostertheclimateresilienceofenergyinfrastructure9184InternationalEnergyAgencyWorldEnergyOutlook2022IntroductionEnergysecurityisnotjustabouthavinguninterruptedaccesstoenergy,butalsoaboutsecuringenergysuppliesatanaffordableprice.Itisatopicofperennialimportance,andisonceagainhighonthepolicyagendaasaresultoftheglobalenergycrisissparkedbyRussia’sinvasionofUkraine.Thesurgeinenergypriceshasbeenonalargeenoughscaletoworsenconsiderablytheglobaleconomicoutlook,causingdifficultiesforhouseholdsandindustrialoperationsalike,andleadingmanygovernmentstorecalibratetheirpolicypriorities(seeChapter2,Box2.4).Theimmediatepolicyfocusisunderstandablyondealingwiththeimpactsofhighenergypricesonconsumersandcopingwiththedisruptionofenergysupplies.Manycountriesaretakingactionto:makethemostofexistingpowerplants,e.g.Japan’srestartofnuclearreactors;diversifysourcesofsupply,e.g.Europeanimportsofliquefiednaturalgas(LNG);acceleratethedeploymentofcleanenergytechnologies,e.g.throughtheEuropeanUnionREPowerEUPlanandtheUSInflationReductionAct;orenactprogrammestoprotectconsumersfromhighprices,e.g.bysettingpricecaps,expandingtargetedsupportorcuttingfueltaxes.Insomecases,actionshaveinvolvedtrade‐offsbetweenshort‐termsecuritybenefitsandemissionsreductiongoals,forexamplewhenrelyingmoreoncoal‐firedpowerplantsforelectricitygeneration.Nonetheless,theneedtomovetowardsnetzeroemissionstowardoffcatastrophicclimatechangeremainsasimportantasever.IntheNetZeroEmissionsby2050(NZE)Scenario,traditionalriskssurroundingoilandgassupplieseaseasdemandforfossilfuelsfalls,buttheydonotvanish.Hugeadditionalinvestmentsarerequiredtoscaleupcleanenergyprovision,andtheyareaccompaniedbylargereductionsinfossilfuelimportbillsinmanyregions(Figure4.1).Efficiencygainsalsomeanthathouseholdenergybillsin2030inthisscenarioarealsolowerthanintheStatedPoliciesScenario(STEPS).AshighlightedintheIEA10‐PointPlantoReducetheEuropeanUnionRelianceonRussianNaturalGas,movingtowardsamoresustainableenergysystemprovidesaclearanswertopredicamentssuchasthecurrentcrisis(IEA,2022a).Whileachievingnetzeroemissionsgoalsultimatelybringsenergysecuritybenefits,itshouldnotbetakenforgrantedthatpathwaystogettherewillbesmooth.Energytransitionsrequireaddingnewcleanenergyinfrastructurewhilereducingrelianceonexistingcarbonemittinginfrastructure,andmanagingtheco‐existenceofthesesystemsischallenging(GrubertandHastings‐Simon,2022).Norshoulditbeassumedthattherewillbenonewenergysecurityrisksinanetzeroemissionsworld.Newareasofconcernmayemergeasmassivedeploymentofcleanenergytechnologiesputsstrainsonsupplychains,notablyforcriticalminerals,whileareorientationofglobalenergytradeflowscouldbringaboutnewgeopoliticaltensions.Risingrelianceonelectricitygeneratedfromvariablerenewablescallsforaneverhigherdegreeofpowersystemflexibilitythatcouldposerisksifnotcarefullymanaged.Alackofpreparationforthechallengesstemmingfromachangingclimate,inadequateenergysystemsresilienceandloomingcyberthreatscouldexposeconsumerstomorefrequentsupplydisruptionsandpricespikes.IEA.CCBY4.0.Chapter4Energysecurityinenergytransitions1854Figure4.1⊳CleanenergyinvestmentandreductioninfossilfuelimportbillsindevelopingeconomiesinAsiaintheNZEScenariorelativetotheSTEPSIEA.CCBY4.0.SignificantadditionalinvestmentincleanenergyisrequiredintheNZEScenario,butthisdeliverssteadilylowerimportbillsovertimeNote:NZE=NetZeroEmissionsby2050Scenario;STEPS=StatedPoliciesScenario;MER=marketexchangerate.TheneedtolookatabroadrangeofenergysecurityissuesduringenergytransitionswasacorepillarofnewmandatesgiventotheIEAatitsMinisterialmeetinginMarch2022.TheMinisterialCommuniquérecognisedtheneedfortheIEAtoremainvigilantinanincreasinglycomplexenergysecurityenvironment.Buildingoncoreprinciples,notablythebenefitsofdiversifiedenergysources,supplies,routesandmeansoftransport,thecommuniquéreflectsonevolvingsecurityissuesforoil,gasandelectricitymarketsandinfrastructureaswellasnewareassuchasclimateresilience,cleanenergysupplychainsandcriticalminerals.Inthischapter,wepresenttenkeyelementsofapragmaticagendatosafeguardenergysecurityduringenergytransitions.Thisagendaisnotfocusedonthecurrentenergycrisis,althoughmanyoftheitemsarerelevanttoit.Norisitdesignedtoprovideacomprehensiveoverviewofallaspectsofenergysecurity,althoughitcoversawiderangeofpotentialhazards.Rather,theintentionistoexplorespecificenergysecurityrisksthatariseastheworldmovesthroughamuchneededtransformationoftheenergysector,andtoexaminepoliciesandapproachesthatmitigatetheserisks.Assuch,wefocusonhowsometraditionalenergysecurityconcernsmightevolveaswemovethroughtransitionsandonnewvulnerabilitiesthatmightemerge.Theoverarchingaimistomapwaystoavoidcleanenergytransitionsrunningintoproblemsthatcouldleadtoextremepricevolatility,socialdisruptions,consumerdiscontentorsupplychainbottlenecks.‐600‐30003006009002022203020402050BillionUSD(2021,MER)AdditionalcleanenergyinvestmentReductioninfossilfuelimportbillsIEA.CCBY4.0.186InternationalEnergyAgencyWorldEnergyOutlook2022TenessentialsforsecureenergytransitionsAmajorpushonscalingupinvestmentincleanenergytechnologies(section4.1)andreducingdemandandimprovingenergyefficiency(section4.2)arefundamentaltoachievingsecureenergytransitions,andalsoofferthelastingsolutionstotheimmediateenergycrisis.Energytransitionsrequireaninclusiveapproachiftheyaretobesecure.Thismeansreversingtheslideintoenergypovertyandgivingpoorcommunitiesaliftintothenewenergyeconomy(section4.3).Italsomeansavoidingtheemergenceofnewdividinglinesinenergybyfacilitatingfasterchangeinemergingmarketanddevelopingeconomies.Collaboratingtobringdownthecostofcapitalinthedevelopingworldisessentialtounlocktimely,cost‐effectivecleanenergyinvestment(section4.4).Theenergytransitioninvolvesbuildingacleanenergysystemwhilewindingdownexistingfossilfuelsupplyandemissions,butsomepartsofthefossilfuelsystemremainvitalforenergysecurity,andthereisaneedtomanagetheretirementandreuseofexistinginfrastructurecarefully(section4.5).Producereconomiesthatexportoilorgas(andthatrelyheavilyonhydrocarbonincome)remainimportanttoglobalenergysecurityevenasrelianceonthesefuelsdiminishes;theirlong‐termstabilityrequiresthattheydiversifytheireconomiesandadapttheirenergysystemstothenewmarketandpolicyenvironment(section4.6).Newvulnerabilitiesmayalsoemergeastheworldbuildsanewcleanenergysystem.Theincreasingroleofelectricityinfinalconsumptionputsapremiumoninvestinginsystemflexibility(section4.7).Diverseandresilientcleanenergysupplychains,includingthoseforcriticalmineralsandmetals,areessentialtoavoidcostlyordelayedenergytransitions(section4.8).Sincetheclimateisalreadychanging,bothexistingandnewinfrastructurewillneedtofactorinclimateresilience(section4.9).Allthisimpliesacrucialroleforgovernments,whoaretakingonincreasinglyexpansiverolestoacceleratetransitionsbutalsoneedtoretainthebenefitsofcompetitive,reliableenergymarketsbasedontransparentrules(section4.10).4.1SynchronisescalinguparangeofcleanenergytechnologieswithscalingbackoffossilfuelsBoostinginvestmentincleanenergyratherthannewlongleadtimefossilfuelsupplyprovidesamorelastingsolutiontotoday’senergycrisiswhilecuttingemissions.Reductionsinfossilfuelinvestmentneedtobesequencedcarefullytoavoidsharpspikesinfuelprices.Theworldhasnotbeeninvestingenoughinenergy.Since2017,annualcleanenergyinvestmenthasaveragedUSD1.2trillion,wellbelowtheinvestmentlevelsforcleanenergyseenintheSTEPSin2030,andannualinvestmentinfossilfuelshasaveragedUSD0.8trillion,similartotheinvestmentlevelsthatfeatureintheAnnouncedPledgesScenario(APS)in2030(Figure4.2).Inotherwords,recentinvestmentlevelsincleanenergytechnologieshavebeenIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions1874farbelowwhatisneededtobringaboutapeakanddeclineinfossilfueldemand,yetinvestmentinfossilfuelsupplyhasbeengearedtowardsaworldofstagnantorevendecliningdemandforthesefuels.Thisunderlyingmismatchhasmadetheenergysystemmorevulnerabletothesortsofshocksthatcamein2022withRussia’sinvasionofUkraine.Figure4.2⊳Annualaverageinvestmentinfossilfuelsupply,cleanpower,infrastructure,end-usesandlow-emissionsfuelsbyscenarioIEA.CCBY4.0.Theworldisnotinvestingenoughinenergy.Fossilfuelinvestmentisgearedtostagnantorfallingdemand,whilecleanenergyinvestmentisnotrisingfastenough.Note:MER=marketexchangerate;APS=AnnouncedPledgesScenario.IntheSTEPS,fossilfueldemandrisesinthecomingyears,requiringnewupstreamconventionalprojectstoavoidashortfallinsupplyinthemid‐2020s(seeChapter7).IntheAPS,globaldemandforfossilfuelssoonpeaksandstartstodecline.Thismeansthatthereislessneedfornewconventionalupstreamprojects,butsomeremainessentialtoensureasmoothmatchbetweensupplyanddemandbythelate‐2020s.IntheNZEScenario,governmentsrapidlyintroducepoliciestoreduceemissionsfromexistingfossilfuelinfrastructureandtoscaleupinvestmentincleanenergytechnologiesbyafactorofthreeby2030.ThecleanenergyinvestmentsurgeintheNZEScenariomeansthatdemandforfossilfuelsdeclineswithsufficientspeedthatitispossibletosatisfyoilandgasdemandwithoutapprovingnewlongleadtimeupstreamconventionalprojects,althoughcontinuedinvestmentinexistingassetsisstillnecessary(seeChapter1).AnnualfossilfuelinvestmentintheNZEScenarioin2030fallstoaroundUSD450billion,halfofthelevelsseenoverthepastfiveyears.Reducingfossilfuelinvestmenttotheselevelsinadvanceof–orinsteadof–thethreefoldscaleupincleanenergyspendingwouldnotleadtothesameoutcomesasintheNZEScenario.Itwouldinsteadleadtohighandvolatilefossilfuelpricesduringenergytransitions(Spotlight).5001000150020002017‐21STEPSAPSNZE2017‐21STEPSAPSNZE2017‐21STEPSAPSNZE2017‐21STEPSAPSNZE2030BillionUSD(2021,MER)2030Fossilfuelsupply20302030PowerGridsEnd‐use501001502002017‐21STEPSAPSNZELow‐emissionsfuels2030IEA.CCBY4.0.188InternationalEnergyAgencyWorldEnergyOutlook2022Russia’sinvasionofUkrainecouldleadtoasubstantialandprolongedreductioninenergysuppliesfromRussia,andanyimmediateshortfallsinfossilfuelproductionfromRussianeedtobereplacedbyproductionelsewhere,eveninaworldworkingtowardsnetzeroemissionsby2050.Butgovernmentslookingtoprotectagainstthecurrentdisruptioninenergymarketscandosoinwaysthatdonotriskunderminingorslowingtheenergytransition.Adramaticscalingupofenergyefficiencyandcleanenergyiskeytolastingstructuralsolutionstotheenergycrisis.Itisalsokeytogettingontracktowardsnetzeroemissions.Governmentshaveauniqueabilitytoactinthisregard:theycanprovidestrategicvision;policysignals;incentivesforconsumers;andpublicfinancethatcatalysesprivateinvestmentandcanspurinnovation.Figure4.3⊳Investmentincleanenergyandfossilfuelsbyscenario,2025and2030IEA.CCBY4.0.AroundUSD9isinvestedincleanenergyforeveryUSD1investedinfossilfuelsin2030intheNZEScenarioNote:MER=marketexchangerate.Reductionsinfossilfuelinvestmentneedtobesequencedsotheydonotrunaheadofthehugescalingupincleanenergytechnologiesthatisrequiredtogettonetzeroemissions.Manycompaniesandfinancialorganisationshavesetgoalsandplanstoscaledowninvestmentinfossilfuels,butitmakeslittlesensetoconsidertheseinisolation:muchmoreemphasisisneededontheirgoalsandplansforthescaling‐upofinvestmentincleanenergytechnologies,andonwhatgovernmentscandotoincentivisethis.ForeveryUSD1spentgloballyonfossilfuelsintheNZEScenarioin2030,USD5isspentoncleanenergysupplyandanotherUSD4onefficiencyandend‐use.(Figure4.3).Thisprovidesausefulguidelineforunderstandingthealignmentoffinancialflowsofinvestorandcompanyportfolioswithachievingnetzeroemissionsgloballyby2050.24681012345CoalNaturalgasOilTrillionUSD(2021,MER)2021STEPSAPSNZE20252030Ratioofcleanenergytofossilfuels(rightaxis)Fossilfuels:PowerandfuelsCleanenergy:Efficiencyandend‐use2025203020252030IEA.CCBY4.0.Chapter4Energysecurityinenergytransitions1894Emissionsfromfossilfuelextraction,processingandtransportaccountformorethan15%ofenergy‐relatedgreenhousegas(GHG)emissionstodayandneedtobeminimisedasquicklyaspossible.Reducingtheseemissionsisalsotheprimarywayinwhichfossilfuelindustriescanlimitthepotentialimpactoffutureclimatepoliciesontheiroperations.Oilandnaturalgaswithloweremissionsintensitieswillbebetterpositionedthanhigheremittingsourcesascleanenergytransitionsspeedup,mayincurlowertaxburdens,andarelikelytobeincreasinglypreferredforcontinuedproductionduringtransitions.Theextraordinaryfinancialwindfallfortheoilandgassectorfromtoday’shighpricescouldprovideamajorboosttocleanenergyinvestment.GlobalnetincomefromoilandgasproductionisanticipatedtoreachnearlyUSD4trillionin2022,whichisdoublethelevelin2021.Iftheglobaloilandgasindustryweretoinvestthisadditionalincomeinlow‐emissionsfuels,suchashydrogenandbiofuels,itwouldfundalloftheinvestmentneededinthesefuelsfortheremainderofthisdecadeintheNZEScenario.Itwouldgoevenfurtherifusedtocatalysespendingbybothprivateandpublicsourcesoncleanenergymorebroadly.Foroilandgasproducingeconomies,thiscouldbeaonce‐in‐a‐generationopportunitytodiversifytheireconomicstructurestoadapttothenewglobalenergyeconomythatisemerging.Dohighfuelpriceshelporhindertheprocessofchange?InvestmentincleanenergytechnologiesandfossilfuelsintheNZEScenarioiscalibratedtominimisestrandedassetsandavoidenergymarketvolatility.Wholesalefossilfuelpricesfalltolowlevelsastheyareincreasinglysetbytheoperatingcostsofthemarginalproject.1Ifsupplyweretotransitionfasterthandemand,withadropinfossilfuelinvestmentprecedingasurgeincleanenergytechnologies,thiswouldleadtomuchhigherprices–possiblyforaprolongedperiod–eveniftheworldismovingtowardsnetzeroemissions.Thereareparallelswiththesituationinmarketstoday,andresponsestothecurrentcrisisprovideusefulinsightsintowhathighfossilfuelpricescouldmeanforenergytransitions.Economics:Increasesinthepricesofthemostpollutingfuelsimprovetheeconomicadvantagesofcleaneralternatives(includingenergyefficiencymeasures).Theyactinasimilarwaytoacarbondioxide(CO2)priceinthisrespect.2Theoilpriceincreasebetween2021andthefirstsixmonthsof2022isequivalenttoaUSD70pertonneofCO2priceonoiluse;thenaturalgaspriceincreaseseeninEuropeisequivalenttoapriceofUSD350/tCO2.Buthighfossilfuelpricesarenosubstituteforclimatepolicies.Fuelprices1Ongoingoperatingcostsincludethecostofextraction,extractiontaxes,costtoreducescope1and2emissions,andCO2taxesfromanyresidualemissions.2Akeydifference,however,isthattheincreasedrevenuesfromhigherfossilfuelpricesarecollectedbytheproducingcountryorcompany,whilerevenuesfromhigherCO2pricesarecollectedbytheconsumingcountry.SPOTLIGHTIEA.CCBY4.0.190InternationalEnergyAgencyWorldEnergyOutlook2022donotreflectthecarboncontentofthefuelsandtheycanincentiviseshiftstowardsmorepollutingfuels,e.g.fromnaturalgastocoal.Inresponsetothecurrentcrisis,forexample,somecountrieshavedelayedplannedcoalpowerplantclosurestoreducerelianceonnaturalgas,andnewinvestmentsincoalsupplyhavebeenannouncedinChinaandIndia.Politicaleconomyoftransitions:Countriesmayseehighfuelpricesasaspurtoacceleratetransitions,asforexampleseenintheEuropeanUnionREPowerEUPlanandtheUSInflationReductionAct,andapowerfulboosttoinnovation,ashappenedduringthe1970soilpricecrises.However,highfuelpricesalsocreatetheriskthataffordabilityandsecurityconcernsreducetheattentionandmoneythatpolicymakersdevotetoemissionsreductions.Ifimportingcountriesendupspendingmuchmoreontheirfuelimportbills,thiscouldsqueezefundingtosupportcleanenergytransitions(Figure4.4).Fossilfuelexporterswouldreceivewindfallsasaresultofsuchextraspending,butthereisnoguaranteethatthesewouldbeanetboostfortransitions.Thismightreinforcehydrocarbon‐dependentdevelopmentmodelsratherthanpromotetheneedforreform.Figure4.4⊳AnnualaverageinvestmentandfossilfuelimportsintheAPSwithprojectedpricesandwithhighfossilfuelprices,2021-30IEA.CCBY4.0.Highfossilfuelpriceswouldsqueezefundsavailabletosupporttransitionsandmakeit10-25%moreexpensiveforfossilfuelimporterstoachievetheirclimatetargetsNotes:MER=marketexchangerate.APS+=APSwithhighfossilfuelprices,whichassumesthatcountriesreducefossilfueluseandemissionsinlinewiththeAPS,butwithfossilfuelpricesremainingaroundcurrentlevels(oil‐USD100/barrel;naturalgas‐USD15‐25permillionBritishthermalunits;coal‐USD170‐250pertonneofcoalequivalent).Socialimplications:Highfossilfuelpricesareregressiveandhitthepoorhardest.TheyoftenleadtopriceinterventionssuchasfossilfuelsubsidiesthatarerarelywelldesignedIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions1914ortargetedtothemostvulnerable.Thisunderlinestheimportanceofensuringthatclimatepolicieshelppoorhouseholds,includingwiththehigherupfrontcostsofcleanenergyinvestments(suchasefficiencyandcleanelectrification).Ifclimatepoliciesdonotdothis,theyriskbeingsociallydivisive,especiallyinahighpriceenvironment,withrichersegmentsofthepopulationabletoadjusttochangingcircumstancesandthepoorleftbehind.Thiswouldmakejusttransitionsverydifficulttoachieve,anditwouldalsoriskunderminingsupportforclimatepolicies.Thenetimpactofhighfossilfuelpricesandpolicychangesmadeinresponsetothecurrentenergycrisisistoincreasenear‐termemissionsintheSTEPSslightlycomparedwiththeprojectionsintheWEO‐2021.Thisdemonstratesthatwhilehighpricescanreducedemandandemissions,theywillnotnecessarilydoso,andshouldnotbeviewedasaviableordesirablesubstituteforclimatepolicy.4.2TacklethedemandsideandprioritiseenergyefficiencyEfficiencyisanindispensabletoolformultiplepolicyaims,easingpressuresonconsumersandtheirvulnerabilitytohighandvolatilefuelprices,cuttingrelianceonfuelimportsanddrivingprogresstowardsclimategoalswhilesupportingjobsandgrowth.Thecurrentenergycrisishasputthespotlightonenergydemandforbothgovernmentsandthepublic,notleastofallinEurope.Bydampeningenergydemand,energyefficiencyplaysanindispensableroleinloweringenergybillsforhouseholdsandbusinessesandshieldingconsumersfromvolatilefuelprices.Italsobringsenergysecuritybenefits,especiallyatatimewhentheworldismovingtowardsadecarbonisedenergysystem,byreducingstrainsonfuelmarketsandtheneedforcostlyanduncertaininvestmentsinnewsupply.Theuncertaintiesaroundlong‐termfossilfueldemandandsupply‐sidefossilfuelinvestmentsmeanthatdemand‐sideresponsesarenowmoreimportantthanevertokeeptheenergysysteminbalance.Today’stightoilproductmarkets,especiallyfordieselandkerosene,provideagoodexampleoftheenergysecuritygainsfromimprovedefficiency.Tightmarketsusuallypushuppricesfortheseproductsandtriggerinvestmentinnewrefiningcapacity,whichthenstabilisespricelevels.Somenewrefiningfacilitiesareslatedtobeaddedinthecomingyears,mostofwhichwereplannedwellbeforetheCovid‐19pandemic.However,withcleanenergytransitionsposinguncertaintyaboutlong‐termoildemand,furthernewinvestmentmightnottakeplaceasithasinthepast.IfdemandfortheseproductsfollowsthetrajectoryintheSTEPS,itcouldleadtotightsuppliesformanyyearstocome.IntheAPS,however,plannednewcapacityadditionsinthenextfewyearsmatchthelevelofdemandgrowthpartlybecausemorerobusteffortsonenergyefficiencydampendemand(seeChapter7,section7.3).IEA.CCBY4.0.192InternationalEnergyAgencyWorldEnergyOutlook2022Inthe1970s,energyefficiencyplayedamajorroleintheresponsetooilpriceshocks.Countriesadoptedabroadportfolioofefficiencypoliciesthatnotonlyreduceddemandbutalsospurredtechnologyimprovementsinallend‐usesectors,resultinginlong‐termefficiencygains.IntheUnitedStates,forexample,theaveragefuelconsumptionofnewcarsdeclinedfrom18litresper100kilometres(km)intheearly1970sto11litresper100kmtenyearslater.Buildingcodesstartedtoincludeenergytargets/mandatesduringthecrisis:FranceandNewZealandaddedmandatoryinsulationmeasuresin1974and1977respectively,whilein1978CaliforniapavedthewayforotherUSstateswiththeintroductionofminimumenergyefficiencyrequirementsforappliances.Sincethen,technologyhascontinuouslyimprovedinallsectors,withnotabledemandreductionsinthebuildingssectorforlightingandrefrigeration(Figure4.5).Forexample,thephase‐outofincandescentlightbulbsinalmostallcountriesandtherapiduptakeoflight‐emittingdiodes(LEDs)(withpaybackperiodsoflessthanayearinmostregions)meansthattheenergyconsumptionforalightbulbusedin2021wasonaveragebetweenfour‐toeight‐timeslessthanoneusedin2000.Figure4.5⊳Unitenergyconsumptionforselectedequipmentin2021relativeto2000IEA.CCBY4.0.Thankstoenergyefficiency,unitenergyconsumptionhasdeclinedsignificantlysince2000,butthereisplentyofscopetodomoreNote:Unitenergyconsumptionrefersto:fueleconomyforcarsandheavyfreighttrucksmeasuredinlitresperkilometretravelled;annualelectricityconsumptionforrefrigeratorsinkilowatt‐hours;lumensperwattforlighting;averageefficiencyoftheelectricmotorfleetinindustry;energyintensityofclinkerproduction(akeycomponentincementandconcrete).Energyefficiencymeasuresadoptedsince2000savedatotalof125exajoules(EJ)upto2021,oraround30%ofcurrenttotalfinalconsumption.Around45%ofthesesavingsareattributabletoenergyefficiencygainsinindustry,largelyaresultofstrictminimumenergy0.20.40.60.81.0CarTruckRefri‐geratorLightingIndustrialelectricmotorClinkerproduction2021BestavailabletechnologyIndex(2000=1)IEA.CCBY4.0.Chapter4Energysecurityinenergytransitions1934performancestandards(MEPS)forelectricmotors.Afurther35%ofthesavingswerefromtransport,withthefueleconomyofcarshavingimprovedby20%since2000andoftrucksby5%.Electrificationisrisingrapidlyintransportleadingtoadditionalefficiencygains.Almostallrefrigerators,freezersandairconditionersarenowsubjecttoMEPSinadvancedeconomies,whichhavecontributedinamajorwaytoimproveenergyefficiencyinend‐uses.Emergingmarketanddevelopingeconomiesaremakingprogresswithabout80%ofrefrigeratorsandairconditioners–arapidlyexpandingend‐use–coveredbyMEPS.Whereineffect,thesestandardsalsohadmajorimpactstoreduceconsumerenergybillscomparedtowhattheywouldhavebeenwithoutenergyefficiencyimprovements.Recently,however,thepaceofefficiencyimprovementshasslowed.Between2017and2020,energyintensityhasimprovedonaverageby1%peryear,downfrom2.1%between2011and2016(IEA,2022b).Therateofimprovementfurtherslowedto0.5%in2021.Reversingthetrendsseenoverthepastfewyearsiskeytoensuringsecureenergysupplieswhilereducingemissions.IntheSTEPS,energyintensityimprovesby2%peryearfrom2021to2030,aroundtwicetheaveragerateachievedoverthelasttwodecades.IntheAPS,itimprovesby3%peryear.3By2030,around44EJ(10%oftotalfinalconsumption)isavoidedintheSTEPSduetoenergyefficiencyandelectrificationmeasures.IntheAPS,thisrisesto59EJ(13%oftotalfinalconsumption),withnotableimprovementsinemergingmarketanddevelopingeconomies.Stockturnoverremainsaprimarychallengeinimprovingenergyefficiencyacrossallend‐uses(Figure4.6).Morethanathirdofthecars,trucksandheavyindustrialfacilitiesthatwillbeinusein2050areexpectedtobeaddedinthenexttwodecades.Sohowtheseassetsaremadeorbuiltwillhaveenduringimplicationsforfutureenergyintensity,CO2emissionsandenergysecurity.Thisunderscoresthevalueofeffectivepolicyinterventionstoensurethatenergyefficiencyisfoundationalinnewassets.Inaddition,itisalsonecessarytotakeactiontoimprovetheenergyefficiencyoftheexistingstock,particularlyinsomekeysectors.Buildingsareacaseinpoint,withsome55%ofthebuildingsthatwillbeinusein2050alreadyinplace.RecentIEAanalysisofwhatworkswellhasledtotheidentificationofbestpracticesthatincludeputtinginplace“one‐stop”renovationofficesandfreeauditprogrammes(IEA,2022c).Behaviouralmeasuresalsohaveanimportantparttoplayintandemwithenergyefficiencymeasures,notleastbecausetheycanmakeasignificantimpactintheshortterm.Inresponsetoapossiblecut‐offofRussiangas,Europeancountriesareimplementingmeasurestoencourageconsumerstosaveenergy.TheIEA10‐PointPlans,publishedintheimmediateaftermathofRussia’sinvasionofUkraine,highlightsenergyefficiencyandspecificbehaviourchangesaskeytoreduceEurope’srelianceonfossilfuelimportsfromRussia(IEA,2022a;IEA,2022d).SeveraloftheIEArecommendationshavefoundstrongsupportintheEuropean3EnergyintensityiscalculatedusingGDPinpurchasingpowerparity(PPP)termstoenabledifferencesinpricelevelsamongcountriestobetakenintoaccount.IntheIEAscenarios,PPPfactorsareadjustedasdevelopingcountriesbecomericher.IEA.CCBY4.0.194InternationalEnergyAgencyWorldEnergyOutlook2022Unionmemberstates.Forexample,Germany,Belgium,LuxembourgandDenmarkimplementedregulationstoacceleratereplacementofnaturalgasboilerswithheatpumps.Germany,Austria,France,Portugal,IrelandandSpainimplementedmeasurestomakepublictransportcheaper,inlinewiththeIEArecommendationtoreducetransportoildemand(IEA,2022d).Figure4.6⊳Globalstockbyvintageforselectedsectors,2050IEA.CCBY4.0.EfficiencypoliciesoverthenextfewyearswillplayacrucialpartindeterminingfutureenergyintensityandGHGemissionsFindingwaystoencourageenergyuserstochangebehaviourisnotalwayseasy,andwhatworksinoneplacemaynotbeeffectiveinanother,sinceculturalnormsandconsumptionpatternsvarywidely.Nevertheless,therearemanypotentialapproachesandamplescopeforwelltargetedmessagesandeffectivecommunication.Policymakerscanlearnfrombehaviouralscienceandemploydigitaltools,nudgesandincentivestostimulateenergysavingbehaviour.Goodcommunicationisvitalasconsumersoftenhavelimitedvisibilityaboutpressuresonthesystem.Forexample,SouthAfricahasprovidedrealtimeinformationaboutelectricityshortfallsviaa“poweralert”message,whichiscommunicatedviatheinternetandtelevisionbetween17:30and20:30,toinformthepublicofimmediatemeasurestoreducepeakloads.Providingactionabledatacanhelpconsumerstakeinformeddecisions.InCalifornia,forexample,communicationwithcitizensviaapps,SMSandemailisusedtolowerenergydemandatpeaktimes,whenthesystemisunderthemoststrain.Settingenergysavingdefaultsisalsoaneffectivewaytoencourageefficiencywhileminimisingconsumerresistance.Forexample,Indiahasmandateda24°Cdefaultcoolingtemperatureforallnewairconditionerstoreduceovercoolingbehaviour.ConsumerscanIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions1954adjustthesettings,butmanystayatthedefault,leadingtosignificantenergysavings.Bringingallexistingenergyefficiencyprogrammesandrelevantsubsidiesunderoneadministrativeagencycanhelpovercomeinertia.Ireland'sReduceYourUsecampaignandtheUKSimpleEnergyAdvicearecasesinpoint.Bothofferaclearlistofexistinggrants,incentivesandtaxrebatesinoneplace(IEA,2022e).Anenergycrisisprovidesanopportunitytorampupandtakenewactionstopromptenergyefficiencyandbehaviouralchanges.ExperienceinJapansuggeststhatsuchactionscanyieldsustainedbenefits.Acombinationofpublicawarenesscampaignsandtechnicalassistanceprogrammesintheaftermathofadevastatingearthquakein2011reducedpeakelectricitydemandthatsummerby15%comparedwiththepreviousyear.Thankstothecontinuedfocusonenergyefficiency,thisreductionhaslargelybeensustainedtodate.Electricitydemandhasstayedbelowpre‐earthquakelevelswhichhelpedavoidoutageswhentherewerestrainsontheelectricitysystem.4.3ReversetheslideintoenergypovertyandgivepoorcommunitiesaliftintothenewenergyeconomyAsaresultofsoaringenergyprices,millionsofpeoplerisklosingthemostfundamentalformofenergysecuritybybecomingunabletoaffordbasicenergyservices.Targetedpolicysupportisvitaltoensurethatdisadvantagedandvulnerablecommunitieshaveimprovedaccesstoaffordable,secureandsustainablemodernenergy.Thesurgeinenergypriceshasputadisproportionateburdenonlowincomehouseholdsandexacerbatedenergyinsecurity.Asaglobalaverage,householdstypicallyspendaround7%ofincomeonenergy,halfforenergyusedinthehomeforavarietyofend‐usessuchasheating,cooling,lightingandcooking.However,thisdoesnotcapturetherealitythatpoorhouseholdsspendafarhighershareoftheirincomeonenergythanwealthyones,eventhoughthepooreronesconsumelessenergy.NewIEAanalysisforthisOutlookfindsthatthelowestquintileofhouseholdsbyincomeinadvancedeconomiesconsumeonaveragejustathirdoftheenergyusedinhouseholdsinthehighestquintile(Figure4.7).Inemergingmarketanddevelopingeconomies,thepooresthouseholdsconsumenine‐timeslessmodernenergythanthewealthiesthouseholds,withmillionsofpoorhouseholdsstilllackinganyaccesstomodernenergy.Thesedifferenceswouldbeevenwiderifoilusefortransportwereincluded.Theleastwell‐offoftenliveinlessefficientbuildingsanduseolder,inefficientappliancesandequipmentforservicessuchascookingandheating.Improvingtheefficiencyofsuchhomestendstobedifficult,astheymayberentalsandfacethelandlord/tenantbarrieraswellasdifficultyinmakingtheupfrontinvestmentinretrofitsandotherefficiencymeasures.Therefore,achievingasimilarlevelofcomfortandbasicenergyservicestypicallyrequiresIEA.CCBY4.0.196InternationalEnergyAgencyWorldEnergyOutlook2022moreenergyinpoorhouseholds,drivingupcostsorobligingthemtoforegotheseservices.Moreover,thepooresthouseholdsinemergingmarketanddevelopingeconomiesoftenhavenochoicebuttouselowqualityandpollutingfuelscombinedwithinefficientequipmenttomeetenergyneeds,inflatingtheirenergybills.Insomecasestheymaypurchasecharcoal(andothercookingfuels)ininformalmarkets,whichexposethemtolowgradeproductsandseasonalpricevolatility.Figure4.7⊳Residentialconsumptionofmodernenergyperhouseholdbyincomequintile,2021IEA.CCBY4.0.Thepooresthouseholdsusenine-timeslessenergythanthewealthiestones,butspendamuchlargershareofhouseholdincomeonenergyNotes:GJ=gigajoules.Quintilesaresequencedbytotalhouseholdincomewithinalladvancedeconomiesorallemergingmarketanddevelopingeconomies.Countriesonthewealthierendofthesecategoriestendtobeconcentratedinthehigherquintiles,andsimilarlylowerincomecountrieswithinthesebroadcategoriesareconcentratedinlowerquintiles.Excludesoilusefortransportation.Source:IEAanalysisbasedonWorldInequalityDatabase(2022).Thesefactorsdisproportionatelyexposethepooresthouseholdstoenergypricespikes.Weestimatethatworldwidethenumberofpeoplelivinginhouseholdsspendingatleast10%oftheirincomeonenergyusedinthehomeincreasedby160millionbetween2019and2022(assumingsimilarlevelsofhouseholdenergyuseinbothyears).Whileoilusefortransportisnotconsideredinthisestimate,highandvolatileoilpricesarealsotriggeringrapidrisesinretailprices,andthismayleadtohouseholdsthatalreadyhavelowpercapitaenergyconsumptionlevelsbeingforcedtoreduceenergyconsumptionevenfurther.Thisisalreadycausingproblemsforpeoplethatrecentlyacquiredaccesstoelectricityandmodernsourcesofenergyforcooking(seeChapter5,section5.6).Anestimated75millionpeoplethatwereabletoaffordanextendedbundleofelectricityservicesarelikelyto1st2nd3rd4th5th1st2nd3rd4th5th204060801001000100001000001000000Householdincome(USD)AdvancedeconomiesEmergingmarketanddevelopingeconomiesEnergyconsumptionperhousehold(GJ)IEA.CCBY4.0.Chapter4Energysecurityinenergytransitions1974substantiallycutenergyuseasaresultofstrainsonhouseholdincomes.Asaresultofhigherpricesforliquefiedpetroleumgases(LPG),anestimated100millionpeoplehavehadtoswitchfromLPGforcookingtotraditionalstoves(Figure4.8).ThisisaclearmanifestationofextremeenergyinsecuritycausedbytheCovid‐19pandemicandtheenergycrisis.Figure4.8⊳Numberofpeoplewithoutaccesstomodernenergyandlosingtheabilitytoaffordmodernenergyinsub-SaharanAfricaanddevelopingAsia,2022IEA.CCBY4.0.75millionpeoplerecentlylosttheabilitytopayforanextendedbundleofelectricityservicesand100millionpeoplecannolongeraffordtocookwithLPGNotes:PeoplelosingtheabilitytoaffordmodernenergyisdefinedhereasthosewithaccessthatarereducingtheiruseofmodernfuelsduetothecombinedeffectsonhouseholdincomeandenergypricesresultingfromtheCovid‐19pandemicandthecurrentenergypricespikes.Forelectricity,thisisthenumberofpeopleinhouseholdswherethecostofanextendedbundleofelectricityserviceshasrisenabovearegion‐specificthresholdoftheirincome.Anextendedbundleofelectricityservicesincludesfourlightbulbsoperatingforfourhoursperday,afanforsixhoursperday,aradioortelevisionforfourhoursperdayandarefrigerator.Forcleancooking,thisisthenumberofpeoplethatcookwithLPGwhoseexpenditureonfuelhasrisenabovearegion‐specificthresholdasapercentageoftheirincomebasedoninternationalLPGpricesinJune2022.Thesethresholdsvarybetween5%and10%ofhouseholdincomedependingontheregionforbothelectricityandLPGcooking.Inthetransitiontocleanerenergy,ensuringaffordabilityforpoorhouseholdswillbecriticaltogainingwidespreadpublicacceptanceandavoidingasocialbacklash.Duringthecurrentcrisis,governmentshaveintervenedinavarietyofwaystotryandprotectconsumersfromtheimpactofhighprices.Theleastefficientinterventioniswheredirectfossilfuelconsumptionsubsidies,belowmarketenergyprices,areofferedindiscriminatelytoallconsumers.Thesesubsidiesdiminishorremoveentirelytheincentivestoimproveefficiency,anddisproportionatelybenefitwealthierhouseholdsandbusinesses.Theyalsoburdengovernmentfinancesatatimewhenfiscalleewayisimportanttoacceleratecleanenergy5001000150020002500ElectricityCleancookingPeoplewithaccesslosingabilitytoaffordPeoplewithoutaccessMillionpeopleIEA.CCBY4.0.198InternationalEnergyAgencyWorldEnergyOutlook2022transitions.IntheSTEPS,afailuretopushaheadwithdirectfossilfuelsubsidyreformcouldseesubsidiesforhouseholdenergyuseandpersonalmobilityriseby15%toUSD370billionby2030(Figure4.9).Figure4.9⊳Consumerenergyspending,subsidiesandend-userinvestmentforefficient,low-emissionsequipmentinthebuildingsandtransportsectorsintheSTEPSandNZEScenarioby2030IEA.CCBY4.0.Poorlytargetedsubsidiesinthebuildingsandtransportsectorscomeattheexpenseofmuch-neededstructuralchangesinenergyuseNote:MER=marketexchangerate.IntheNZEScenario,moreemphasisonenergyefficiencyandfuelswitchinglowersconsumerenergyspendingin2030comparedtotheSTEPS.However,poorhouseholdsstillrequirefinancialsupportiftheyaretospendlessthan10%oftheirincomeonhouseholdenergy.Thisscenarioseesdirectfossilfuelsubsidieseliminated.Howevertargetedformsofaffordabilitysupportmayplayarole,suchasenergyrebates,socialtariffsorbillrepaymentassistance.Energy‐orcarbon‐basedtaxesmorethanoffsetthevalueofthesesupportsintheNZEScenario.Thishelpstochannelgovernmentfinancialsupporttothosemostinneedwhilereducingoverallenergysubsidyburdenssubstantially.Italsofreesfiscalresourcestosupporttheupfrontcostsrequiredtoimproveend‐useenergyefficiency.Thereductioninsubsidyburdensin2030intheNZEScenariorelativetotheSTEPScouldsupporthouseholdsbearuptohalfoftheadditionalupfrontinvestmentcostsforefficiencyandfuelswitching.10002000300040002021STEPS2030NZE20302021STEPS2030NZE2030DirectfossilfuelsubsidiesEnergyspendingEnd‐useinvestmentBillionUSD(2021,MER)SpendingandsubsidiesEnd‐useinvestmentIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions1994Table4.1⊳SelectedaffordabilityandsupportmeasuresspecifictolowincomehouseholdsTargetedProgressiveEffectiveImplementableAffordabilitysupportforenergyusePricecaps,discountsordirectfuelsubsidies●●●●Lowincometariffs●●●●Energyrebatesanddirecttransfers●●●●FinancialsupporttomanageupfrontcostsTaxcreditsforretrofits/upgrades●●●●On‐billrepaymentorESCOmodels●●●●Lowincomerebates●●●●ShiftingonustoreduceenergycostMinimumefficiencylevelrequirementsforrenting●●●●Transferringrepaymentforupgradeswiththeproperty●●●●InvestinginenablinginfrastructurePublic,multi‐unitEVcharging●●●●Improvingmasstransitaccess●●●●Efficientnewconstructionoflowincomehousing●●●●●Strong●Moderate●LowNotes:ESCO=energyservicecompany;EV=electricvehicle.Targetedreferstotheabilityofthepolicymeasuretobedirectedtoaselectedsubsetofthepopulation.Progressiveimpliesthatthepricesupportbenefitslowincomeindividualsmorethanothers.Effectivereferstotheabilityofthepolicymeasuretoenablelowincomeindividualstousetheenergyneededandbenefitfromenergycost‐savingmeasures.Implementablereferstotheeasewithwhichthesepolicymeasurescanbeputinplace,aswellastothecostsincurredbygovernments.Thistransformationiseasiersaidthandone,andprogresshasbeenmixedinrecentyears.Onechallengeisgarneringpublicsupportinthefaceofoppositionfromthosewhostandtoloseaccesstodirectfuelsubsidies.Anotherisdevelopingthecapacitytotargetwelfarepayments.Insomecasesthisdependsonbettersocialsecurityinfrastructureaswellasimproveddataonenergyuseandhouseholdincome.Asthesechallengesareovercome,energysubsidiescanshiftovertimetowardsbetterfocusedsupport,whichideallyshouldbetargeted,progressive,effectiveandimplementable(Table4.1).IEA.CCBY4.0.200InternationalEnergyAgencyWorldEnergyOutlook20224.4CollaboratetobringdownthecostofcapitalinemergingmarketanddevelopingeconomiesThehighcostofcapitalisamajorobstacletodeployingcleanenergyinfrastructureinmanyemerginganddevelopingeconomies.Mitigatingeconomy‐wideandsector‐specificrisksisessentialtounlocktimely,cost‐effectiveinvestment.ThemostrecentevidencepresentedintheWorldEnergyInvestment2022(IEA,2022f)showsthat,afterremainingflatforseveralyears,globalcleanenergyspendingisfinallypickingupandisexpectedtoexceedUSD1.4trillionin2022.However,almostallofthegrowthistakingplaceinadvancedeconomiesandChina.Moreover,over90%oftheUSD1.1trillionearmarkedforcleanenergyaspartofpost‐pandemicstimuluspackagesiscontainedintheplansofadvancedeconomies.Despitehavingtwo‐thirdsoftheglobalpopulation,cleanenergyinvestmentinemergingmarketanddevelopingeconomies,excludingChina4,accountforlessthanone‐fifthofthetotal.Thisshortfallininvestmentinemergingmarketanddevelopingeconomiesiscauseforalarm.Ifthereisnoaccessiblepathwaytowardslow‐emissionsinclusivegrowthfortheseeconomies,theneithergrowthwillbehighcarbon,oritwillbeconstrainedbyalackofenergy.Bothofthesepossibilitiesareassociatedwithimmenserisks.Cleanenergyinvestmentisattractivefromaneconomicperspective,especiallyduringthecurrentperiodofhighandvolatilefossilfuelprices.Itisalsothemostcost‐effectivewayfortheworldtoavoidfutureemissions:IEAanalysishasshownthattheaveragecostofemissionsavoidanceinemergingmarketanddevelopingeconomiesisaroundhalfthelevelinadvancedeconomies(IEA,2021a).Sowhyaretheseinvestmentsnottakingplace?Oneofthekeybarriershamperingcleanenergyinvestmentinemergingmarketanddevelopingeconomiesisthehighcostofcapital.Thecostofcapitalisameasureoftheriskassociatedwithprojectsindifferentjurisdictions;itexpressestheexpectedfinancialreturn,ortheminimumrequiredrate,forinvestinginacompanyoraproject.Thisexpectedreturniscloselylinkedwiththedegreeofriskassociatedwithacompanyorprojectcashflows(IEA,2021b).Ahighcostofcapitalhampersprospectsforinvestment,particularlyforcapital‐intensiveinvestments,includingrenewablesthatrequirelargeupfrontcapitalcostsbuthaveverylowoperatingexpenditures.Oneobstacletoassessingthisissuehasbeenalackofavailabledataonthecostofcapitalattheprojectandcorporatelevel,especiallyforemergingmarketanddevelopingeconomies.Thisactsasabarriertoinvestorslookingtodirectcapitalintotheseregions,andalsoundercutsthepossibilitiesofevidence‐basedconversationswithpolicymakersonthemainperceivedrisksandwaystomitigatethem.Inrecognitionofwidedatagaps,aCostofCapital4EmergingmarketanddevelopingeconomiesinthissectionexcludeChina.IEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2014ObservatorywaslaunchedinSeptember2022bytheIEA,theWorldEconomicForum,ETHZurichandImperialCollegeLondontoincreasethevisibilityandavailabilityofdataonfinancingcostsintheenergysectorandtoinspireinvestorconfidence.Table4.2⊳Indicativeweightedaveragecostofcapitalofutility-scalesolarPVprojects,2021Costofdebt(aftertax)CostofequityShareofprojectdebtWACC(nominal,aftertax)Europe2.5%‐3.0%6.0%‐11.0%75%‐85%3.0%‐5.0%UnitedStates3.0%‐3.5%5.0%‐7.0%55%‐70%3.5%‐5.0%China3.5%‐4.0%7.0%‐9.0%70%‐80%4.0%‐5.5%Brazil11.5%‐12.0%15.0%‐15.5%55%‐65%12.5%‐13.5%India8.0%‐9.0%12.5%‐13.5%65%‐75%9.0%‐10.5%Indonesia8.5%‐9.5%12.0%‐12.5%60%‐70%9.5%‐10.5%Mexico8.0%‐8.5%12.0%‐12.5%60%‐70%9.5%‐10.0%SouthAfrica8.0%‐9.0%12.0%‐14.0%65%‐70%9.5%‐11.0%Notes:WACC=weightedaveragecostofcapital.Valuesareexpressedinlocalcurrency.ThevaluesforBrazil,India,Indonesia,MexicoandSouthAfricaarebasedonthesurveyoftheCostofCapitalObservatory,https://www.iea.org/data‐and‐statistics/data‐tools/cost‐of‐capital‐observatory.Ouranalysis,basedonasurveyofinvestmentpractitionersandexpertsinvariouscountries,revealedthatthecostofcapitalforatypicalsolarPVplantin2021wasbetweentwo‐andthree‐timeshigherinemergingmarketanddevelopingeconomiesthaninadvancedeconomiesandChina(Table4.2).Thiswasdrivennotonlybyhighercountryrisk,whichisreflectedinhigherratesforsovereignbonds,butalsobyhighersectoralrisksthattranslateintohigherpremiafordebtandequity,andbyalackofbankableprojects.Therisksincluderegulatoryrisk,off‐takerriskandlandacquisitionrisk.Regulatoryriskarisesfromasuboptimalorunpredictableenergypolicy,thelackofrobustinfrastructureplanningorinefficientmarketdesigns.Off‐takerriskstemsfromthefinanciallydistressedpositionofdistributioncompanies,whichareoftentheprincipaloff‐takersfordevelopers:thiscanleadtodelaysinthesignatureofpowerpurchaseagreementsandinpaymentsunderthoseagreements,weighingonfinancingcosts.Landacquisitionriskcomesfromlengthyandcomplexpermittingprocessesandtheabsenceofavailablegridinfrastructure.Thelackofbankableprojectsisoftenassociatedwithlowermarketdepthandexperienceinfinancingcleanenergyprojects.Highercostsofcapitalandrisingborrowingcoststhreatentoundercuttheeconomicattractivenessofcleanenergyinvestmentinemergingmarketanddevelopingeconomies,evenincountriesthatpossessrichrenewableresources.FinancingcostsaccountedforaroundhalfofthetotallevelisedcostsofasolarPVplantthatreachedfinalinvestmentdecisionintheseregionsin2021,notablyhigherthanthe25‐30%equivalentinadvancedeconomiesandChina(Figure4.10).Thisinevitablyaffectsinwardinvestmentlevels.IEA.CCBY4.0.202InternationalEnergyAgencyWorldEnergyOutlook2022Figure4.10⊳Compositionoflevelisedcostforautility-scalesolarPVplantwithfinalinvestmentdecisionsecuredin2021IEA.CCBY4.0.Financingcostsarearoundhalfoftotallevelisedcostsinemergingmarketanddevelopingeconomies,whichissignificantlymorethaninadvancedeconomiesandChinaThecurrentmacro‐economiccontextweighsfurtherontheprospectsforloweringthecostsofcapital.Agrowingnumberofcentralbanksarecurrentlyoptingforcontractionarymonetarypoliciestotackleinflation,andtheUSdollarislookingstrong.Inthiskindofenvironment,borrowingcoststendtorisefasterinemergingmarketanddevelopingeconomiesthaninadvancedeconomiesbecauseofhighereconomicuncertaintyandinvestorpreferenceforcreditworthyissuersagainstprojectswithhigherreturnandriskprofiles.Concertedeffortstolowerthecostsofcapitalinemergingmarketanddevelopingeconomiescouldbringmajorenergysecuritybenefitsbyunlockingcapitalflowstosupportcleanenergyprojectsinthosecountries.TheIEA,togetherwiththeWorldBankandtheWorldEconomicForum,proposedaseriesofpriorityactionsbasedonmorethan40on‐the‐groundcasestudies(IEA,2021a).Additionalfinancialandtechnicalsupport,includingconcessionalcapital,privatesectorcapitalandinflowsfrominternationalcarbonmarkets,willallbecrucial.Forexample,financialsupportfromBrazil’snationaldevelopmentbank(NDB)waskeytotheprovisionoflowcost,locallydenominatedloanstorenewablepowerprojects,atatimewhenmarket‐basedinterestrateswererelativelyhigh.Asthesectormatured,thebondmarketrosetooandtheroleoftheNDBshiftedfromdirectfinancingtocatalysingcapital.Improvingaccesstodomesticcapitalthroughmorerobustbankingandcapitalmarketsisasimportantasinternationalmeasures.Governmentsandregulatorshaveanimportantroleinmitigatingrisksbyprovidingrevenuestabilityorotherguaranteestoenhancethecashflows20%40%60%80%100%EuropeUnitedStatesChinaSouthAfricaMexicoIndiaIndonesiaBrazilFinancingcostsCapitalcostOperationandmaintenanceIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2034ofcleanenergyprojects,incentivisingtheparticipationofprivatecapitalandputtingstate‐ownedenterprisesonasoundfinancialfooting.Thisappliesespeciallytoprojectstoexpandandmoderniseelectricitygrids.Theissueoflimitedbankabilityprojectscouldbetackledwithdetailedleast‐costplansforinfrastructuredeploymentandregionalintegration.Figure4.11⊳CumulativereductionincleanenergyfinancingcostsinemergingmarketanddevelopingeconomiesbyloweringcostsofcapitalintheAPSandNZEScenario,2023-2050IEA.CCBY4.0.Loweringcostsofcapitalby200basispointscouldreducethecumulativecleanenergyfinancingcostsinemerginganddevelopingeconomiesbyuptoUSD15trillionto2050Note:MER=marketexchangerate.Ifthecostsofcapitalweretobeloweredby200basispoints5inemergingmarketanddevelopingeconomies,thiswouldreducethefinancingcostsforcleanenergybyacumulativeUSD11trillionovertheperiodto2050intheAPSandbyUSD15trillionintheNZEScenario(Figure4.11).Thesereductionscorrespondto20%oftotalcleanenergyinvestmentrequirements,includingfinancingcosts.5Onebasispointisequalto1/100thof1%,or0.01%.200basispointsareequalto2%.200basispointscorrespondtoroughly15‐20%ofcurrentcostofcapitalonanafter‐taxbasis.5101520APSNZEEnd‐useSupplyPowerTrillionUSD(2021,MER)IEA.CCBY4.0.204InternationalEnergyAgencyWorldEnergyOutlook20224.5Managetheretirementandreuseofexistinginfrastructurecarefully,someofitwillbeessentialforasecurejourneytonetzeroemissionsUnplanned,chaoticorprematureretirementofexistingfossilfuelinfrastructurecouldhavenegativeconsequencesforenergysecurityaswellasforpeople.Newandoldsystemswillexistside‐by‐sideduringthetransition,andeffectivemanagementoftheirinteractionsisessential.Shuttingdownfossilfuelinfrastructureasquicklyaspossibleisoftenassumedtobeaprimarytaskofcleanenergytransitions,butthisassumptionneedssomequalifications.Thespeedatwhichfossilfuelinfrastructurecansafelyberetireddependscruciallyonthespeedatwhichcleanenergytechnologiesaredeployedandfossilfueldemanddeclines.Moreover,evenintheNZEScenarioin2050,whennoCO2isemittedonanetbasis,fossilfuelusedoesnotfalltozero.Around100EJoffossilfuelsperyeararestillconsumedin2050inthisscenario,eitherinconjunctionwithCCUS,orinsectorswherecleantechnologyoptionsarescarce,orfornon‐energypurposes,notablyasfeedstockforthechemicalindustry.Anotherkeypointisthatsomeexistinginfrastructurecanbereusedandrepurposedtosupportthecleanenergyeconomy.Whilemuchoftheinfrastructureforthecleanenergyeconomyhastobebuiltanew,electricitygridsremainthebackboneofelectricitysecurity,andnaturalgasnetworkscouldbeusedtotransportbiomethane(withoutanymodification)andhydrogen(withmodifications).Partsofoilrefineriescouldberecastasbio‐refineries.Somesitespreviouslyusedtostorenaturalgas,notablysaltcaverns,couldberepurposedtostorehydrogen.Theenergysecurityperspectiveisimportant,asconsumershaveverylowtoleranceforunreliableorveryexpensiveenergy.Eveninveryrapidenergytransitions,fossilfuelsandtheirinfrastructureperformcertainfunctionsthatwillremaincriticaltothereliableoperationoftheenergysystemasawhole,andtheinfrastructureinquestionwillneedtobemaintained.Thetaskforpolicymakersistoidentifywhatneedstobemaintainedandmanaged,andwhy,andthentoensurethatthenecessaryworkiscarriedout.Prematureorunplannedremovaloftheseassetscouldbedisruptive:threeexamplesarehighlighted.Roleofnaturalgas‐firedpowerinprovidingflexibilityInenergytransitions,theroleofnaturalgas‐firedpowerinmanyenergysystemshastoadapt.Averageutilisationratesfallovertimeandthemaintaskforgas‐firedpowerplantsbecomestheprovisionofflexibility,rampingoutputupanddowninresponsetotheneedsofthesystem,ratherthanprovidinglargevolumesofelectricityonamoreconsistentbasis.Theaverageutilisationofgas‐firedplantsintheAPSworldwidefallsfrom40%todayto31%by2035,andto18%intheNZEScenario.Therearealreadysignsthatinvestorsarereadyinggasforthisrole.Open‐cyclegasturbinesarebettersuitedthanclosed‐cyclegasturbinestobusinesscasescallingforflexibilityandfirmcapacityprocurement,despitebeinglessefficient.Amongthegas‐firedplantsthatIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2054reachedfinalinvestmentdecisionsin2021,theshareofopen‐cyclegasturbinesincreasedto22%,twicethelevelin2016.Astransitionsprogresstowardsnetzeroemissions,thisroleforgas‐firedpowerneedseventuallytobesupplantedbyotherformsofflexibilitythatdonotresultinemissions.Theseincludesupply‐sideoptionssuchaslow‐emissionsgases(biogasesandhydrogen)aswellasdemand‐sidemeasures,longdurationenergystorageandhigherlevelsofinterconnectionbetweensystems.However,thesealternativestaketimetobeavailableatscale.Meanwhilesomeotherexistingformsofflexibility–notablycoal‐firedpower–declinequickly,andtherequirementforflexibilityrisesrapidlyasvariabilityincreasesonboththesupplyanddemandsides(seesection4.7).Moreextremevariationsinweatherpatternsmayaddtothisvariabilityintheyearsahead,andthustotherequirementforflexibility.Forthesereasons,theimportanceofgas‐firedpowerforelectricitysecurityactuallyincreasesinmanycountriesbeforefallingagain,especiallyinsystemswithsignificantseasonalvariationsindemand.IntheEuropeanUnion,naturalgasdemandforpowergenerationhalvesto70bcmin2030intheAPS.However,peakrequirementsfornaturalgasgoupoverthesameperiodeventhoughoveralloraggregatedemandgoesdown(Figure4.12).Figure4.12⊳Loaddurationcurvefornaturalgas-firedpowergenerationintheEuropeanUnionintheAPSIEA.CCBY4.0.Sortinggas-firedgenerationfromthehighesttolowestutilisationratesoverayearrevealsavitalbalancingrole,evenastheannualcontributionofgastopowerdemanddeclinesAgainstthisbackdrop,maintainingreliableelectricitysystemsrequiresthatnaturalgaswillbedeliverableandgas‐firedpowerplantsremainavailableintimesofstressforthesystem,notablywhenhighelectricityandgasdemandcoincideswithlowavailabilityofvariablerenewables.Thiscannotbetakenforgranted.20%40%60%80%100%Days(peak→trough)Capacityfactor202120252030IEA.CCBY4.0.206InternationalEnergyAgencyWorldEnergyOutlook2022Lowerutilisationcanmeanlowerprofitability,andgas‐firedpowerplantsmaycloseifmarketsdonotappropriatelyremuneratetheflexibilityandotherservicesthattheyprovide.Pressureonoperatorshasbeenexacerbatedbyextremelyhighandvolatileprices,whichhaveledtodiscussionsaboutcappingrevenuesforgas‐firedcapacity,andraisedbroaderquestionsabouttheroleofgasintransitions(seeChapter8).Deliverabilityrequiresthatnetworksandstoragearestillcapableofmanagingpeaklevelsofgasdemand(seediscussionongasinfrastructure).Againstthisbackdrop,itisvitalforgovernmentstoensurethatthedesignofelectricitymarketsrecognisesthevalueofflexibilityfromgas‐firedplantsaswellasothersourcesofflexibility,andthatgas‐relatedcontingenciesareincludedinregularadequacyassessmentsconductedbycountriesrelyingonthissourceofflexibility.RefiningandproductsupplyfortheresidualICEvehiclefleetTheriseofelectricmobilitynecessarilyinvolvesanextendedperiodduringwhichvehiclesusinggasolineordieselwillbeoperatingside‐by‐sidewithelectricvehicles(EVs),witheachrequiringwell‐functioninginfrastructuretodeliverthefuelandelectricitytheyneed.AnalysisofchangesinthetransportsectorunderstandablyfocusesontheshifttoEVsinnewcarsales,whichisproceedingrapidlyinsomemarkets.Eveninthosemarkets,however,itwilltaketimefortheentirestockofvehiclestochange(Figure4.13).Figure4.13⊳StockandflowofpassengercarsbytypeintheAPSIEA.CCBY4.0.EveninscenariosthatfeaturerapidreductionsinsalesofICEcars,oiluseinroadtransportdoesnotdisappearquicklyNotes:FCEV=fuelcellelectricvehicle;ICE=internalcombustionengine;EV=electricvehicle,whichincludesbatteryelectricandplug‐inhybridmodels.3060901201502021203020402050NaturalgasICEGasoline/dieselICEFCEVEVSalesMillionvehicles50010001500200025002021203020402050StockIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2074InmarketswhereICEvehiclessalesarebanned,oildemandfortransportdoesnotdisappearimmediately.Forexample,theEuropeanUnionconsumesjustunder5millionbarrelsperday(mb/d)ofoilproductstodayforroadtransport.IntheAPS,thisfallstojustover2mb/din2035,theyearwhenICEvehiclesalesceaseforpassengercarsandlightcommercialvehicles.Tenyearslateritstandsat0.6mb/d,withfreightmakingupanincreasingshareofresidualconsumption.AsimilarpatternisvisibleatthegloballevelintheNZEScenario,whereallsalesofICEpassengercarsandtwo/three‐wheelersceasein2035,butthereisstillasizeabletailofthesevehiclesontheroadbymid‐century.Aswithgas‐firedpower,thesetransitionsworsentheeconomicsoftraditionalrefineryoperations(seeChapter7).Refinersdonotjusthavetocopewithachangeinoveralllevelsofdemand,butalsowithchangesinthecompositionofdemand,andbothhavemajorimplicationsforbusinessmodels.Ourtransitionscenariosallshowanincreaseintheshareoflighterproducts(oftenusedinpetrochemicals,asectorwheredemandisrelativelyrobust)alongsideareductionintheoutputoftraditionalrefinedproductsusedinthetransportsector,suchasgasolineanddiesel.Today,refinerstypicallyearnmostoftheirprofitfromsellinggasoline,dieselandjetfuel.Pricesforpetrochemicalfeedstocks–themainsourcesofdemandgrowth–oftentrendlowerthancrudeoilprices.Intheory,lowerprofitsinoneareacouldbecompensatedbyhigherpricesforproductsinhighdemandsuchasnaphthaandLPG.Whileitisconceivablethattherevenuesoftheseproductsmayincreasetosomedegree,itishardtoenvisagearisethatfullycompensatesforthereductioninroadtransportfuelssales.Aswehaveseeninrecentyears(andalsointhemid‐1980s),lowmarginspromptrationalisationofrefinerycapacityandclosures.Thisisanaturalresponsetochangingmarketconditions,butitcomeswithriskstosecurityofsupply:theretirementofrefineriesmayleavegapsinproductsupplyorresultinmorevulnerablesupplychainsforthedeliveryofcertainproductstoconsumers.Thereisaneedfordialoguebetweengovernmentsandrefinersonhowtomanagethisreductionintraditionalrefiningactivity,andforstepstobetakentomonitornationalandinternationalsupplychainsforvulnerabilitiesthatmayrequireattentionoraction.Theremaybeacaseinsomeinstancesforgovernmentstoworkwithrefinerstochartawayforwardintheinterestsofenergysecurity.Australia,forexample,isprovidingsupporttoitslasttworefineriestostayopen,inreturnforacceleratedcommitmentstoswitchtoproducinglowsulphurfuels.RightsizingandrepurposinggasnetworksAthirdarearequiringcloseattentionisnaturalgasnetworks.Thisisaparticularlydifficultarea,becausethenetworkssitattheintersectionofdifferentvisionsofhowtransitionsshouldplayout.Ononesidethereisthe“electrifyeverything”approach,inwhichelectricitynotonlyincreasesitssharesubstantiallyinfinalconsumption(asitdoesinallourscenarios)butbecomesthedominantoreventhesolevectorformostconsumers.Thisrouterequiresamassivebuild‐outofcleanelectricitygenerationandinfrastructure,andtheroleofexistinggasnetworksinthisvisionismarginal–themainpolicyissueishowtomanagetheirdecline.IEA.CCBY4.0.208InternationalEnergyAgencyWorldEnergyOutlook2022Ontheothersidearethosearguingthatmostcurrentnaturalgaspipelinescaneventuallyberepurposedtocarrylow‐emissionsgases,whetherbiogasesorlow‐emissionshydrogen,sogridsneedtobemaintained(andinsomecasesexpanded).Startingpointsforthisdebatediffer.Nearlyallcountrieshaveanextensiveelectricitygridfordeliveringpowertoconsumers,buttheextentofgasinfrastructurevariesconsiderably.6Whereithasbeenbuilt,inmanycasesthegasnetworkprovidesalargerandmoreflexibleenergydeliverymechanismthantheelectricitynetwork.InEuropeandtheUnitedStates,gasnetworksdeliverbetween50‐100%moreenergyonaveragetoend‐consumersthanelectricitygrids.Switchingfromgastoelectricitybringsmajorefficiencygains,butreplacinggasentirelywithelectricitywouldbringpracticalchallenges,especiallyifitprovesdifficulttoexpandtheelectricitynetworkquicklyduetopermittingissuesorpublicopposition.Thereisanenergysecurityrationaleformaintainingoverlappinginfrastructureand,indeed,mostcountriesthathaveconsideredhowtorealiserapidandwholesaleemissionsreductionsarelookingatafutureinwhichelectricityandgasnetworksplaycomplementaryroles.However,theserolesareoftennotwelldefinedinpractice,andthiscreatesrisks.Withoutawellco‐ordinatedapproachtotheprovisionofpower,gasesandheat,thedifferentnetworksareunlikelytoevolveinaharmoniousway.Forexample,thereisadistinctpossibilityofgasinfrastructuresuffering“deathbyathousandcuts”asindividualconsumersmigratetousingelectricity.Thosemakingthemovearelikelytobebetter‐offhouseholdsinapositiontomaketheupfrontinvestmentinelectrifiedheatingsystems.Thiscouldinturnhavedistributionalimplicationsaspoorerconsumers,alongwithsomeindustries,wouldcontinuetorelyonexistinginfrastructureand,underexistingtariffstructures,wouldneedtoshoulderahighershareofitsfixedcosts.Toavoidthesekindsofoutcomes,thereisaneedforearlyandco‐operativeresourceplanningamongelectricandgasutilitiesandnetworkoperators,mediatedbygovernmentstoensurethattheoutcomesareconsistentwithrapid,securetransitionsthatminimisecoststoconsumers.Thiskindofongoingdialogue,informedbychangingtechnologyanddeploymenttrends,cancontributetodevelopingacoherentvisionofwheregasnetworkshavelong‐termviability(andwheretheyneedtobedecommissioned),andhowgasandelectricitygridscanworktogethertocontributetorapidreductionsinemissions.6Theroleofgasnetworksisdeterminedinmanycasesbytheneedforwinterheating;incountrieswhereseasonalfluctuationsindemandarelower(includingmanydevelopingeconomies),gasnetworkstendtobesmallerinsize.IEA.CCBY4.0.Chapter4Energysecurityinenergytransitions20944.6TacklethespecificrisksfacingproducereconomiesCountriesthatrelyheavilyonfossilfuelrevenuesfaceparticularchallengesandpotentialstrainsinenergytransitions,withmajorpotentialknock‐oneffectsforenergysecurity–andemissions–iftheyareunsuccessfulinmovingtothenewenergyeconomy.Producereconomiestodayfaceacomplexsetofstrategicchoices.Theneedforchangeisunavoidable,anddevelopmentprospectsforanycountryorcompanypursuingbusiness‐as‐usualwillbebleak,buttherearealsodownsidesforthosethatmoveawayfromcurrentbusinessmodelswithoutaclearstrategyforwhatcomesnext.Theworld’shydrocarbonproducersandexportershavefacedmanyperiodsofvolatilityinthepast,butfewthathavematchedthewildswingsseeninpricessince2019.Inthepast,thesefluctuationshavetypicallybeencorrelatedcloselywithchangesingovernmentspendinginoilandgasdependenteconomies,withaboominspendingwhenpricesarehigh,andabustwhentheyfall.Thesepro‐cyclicalpatternsofspendinghavehaddestabilisingeffectsondomesticconsumption,privateinvestmentandtheeconomyasawhole.Inrecentyears,therehasbeenaslewofannouncementsofnewstrategiesthataimtobreakthiscycleandpromotemoreresilienteconomies,sometakingtheformofroadmapsfordiversification,suchastheVision2030inSaudiArabialaunchedin2016,andothersfocusingonreformstosmoothspendingcycles,suchasthedecisionbytheUnitedArabEmiratestointroducefive‐yearbudgets.Thesurgeinoilpricesandrevenuesin2022providesanopportunitytotakestockandaskthequestion:isthistimedifferent?Itislikelytoosoontotelldefinitively,andtheanswermaydependonhowlongoilandgaspricesstayathighlevelsandwhetherwindfallrevenuesintroduceacomplacencythatstiflesreform.However,thereareanumberofprovisionallypositivesigns.Forinstance,SaudiArabia’s2022budgetisbasedonanoilpriceofaroundUSD75/barrel,belowtheprevailingprice.Thisiscoupledontheexpendituresidebya6%decreaseinplannedspending,reflectingacautiousapproachthatisgearedtoreplenishingitsfinancialbuffers.InIraq,whereoilrevenueshavebrokenhistoricalrecordsthisyear,windfallsarelikewisebeingsaved,thoughthismostlyreflectsthepoliticalimpassethathaspreventedthecountryfrompassingabudget,andhasthereforeforcedittoconstrainexpendituretothesamelevelaslastyear.Therearesomesignsofchangetoointhewaythatincreasedrevenuesarebeingspentintheenergysector.Spendingonoilandgasinfrastructurehasincreased,withupstreaminvestmentabove2019levels.Butsotoohasspendingonrenewables,evenamongthemorefiscallyconstrainedproducers:in2021,renewablesinvestmentintheMiddleEastandNorthAfricaroseby60%from2019levels,and2022islikelytoseeafurtherrise.Algeria,forinstance,launchedatenderfor1gigawatt(GW)ofsolarPVcapacityinmid‐2022,whileIraqannouncedanambitioustargettoproduceathirdofitselectricitywithrenewablesby2030IEA.CCBY4.0.210InternationalEnergyAgencyWorldEnergyOutlook2022andisconductingtalkswithEuropean,MiddleEasternandChinesepartnersonrenewablesprojectswithacombinedcapacityof5GW.InSaudiArabia,aUSD5billionprojecttodeveloparenewablehydrogensectorwasagreedinmid‐2020.Omanhasmadeclearitsintentiontousethecurrentperiodofincreasedexportrevenuetoboostinvestmentinitszero‐carbonhydrogensector,whichitseesasessentialtoitseffortstodecarboniseexistingenergy‐intensiveindustries.Box4.1⊳CouldhydrogenexportsreplacehydrocarbonincomeintheMiddleEast?Energytransitionspresentobviouschallengestodevelopmentmodelsdependentonoilandgas,andthereforehavehugeimplicationsforthehydrocarbon‐richeconomiesoftheMiddleEast(Figure4.14).Butcouldthesecountrieshavecomparativeadvantagesinprovidingthefuelsofthefutureaswell?Theideaisattractingalotofattention,withlow‐emissionshydrogenprovidingabeguilingvisionofcontinuityforsomeproducers,basedonamplereservesofnaturalgas,plentyofoptionsforgeologicalstorageofCO2,andoutstandingpotentialforrenewablestoproducehydrogenbyelectrolysis.Figure4.14⊳ExportrevenuefromoilandgasversushydrogenintheMiddleEastintheAPSandNZEScenario,2021-2050IEA.CCBY4.0.Exportsofhydrogenandhydrogen-richfuelsarenosubstitutefortherevenuescomingfromfossilfuels,thoughtheycouldprovideadurablesourceofeconomicadvantageIEAanalysisconfirmsthecompetitiveedgethatmanyMiddleEastcountrieshaveasproducersofhydrogen,butalsothathydrogenexportsarenotgoingtobemorethanapartialsubstituteforcurrenthydrocarbonrevenues.IntheSTEPS,hydrogenisprojectedtoearnaroundUSD15billioninrevenuesbymid‐century,whichisonlyaround1%ofcombinedoilandgasrevenuesinthesamescenario.IntheAPS,hydrogenexport10020030040050060020212030205020302050BillionUSD(2021,MER)CoalNaturalgasOilSynfuelsAmmoniaHydrogenFossilfuelsHydrogenAPSNZEIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2114revenuesareexpectedtorisetolevelsequivalenttoone‐fifthoftherevenuesfromoilandgasoverthesameperiod.ItisonlyintheNZEScenariothatrevenuescrossoverandhydrogenbecomesmorelucrativefortheMiddleEast–albeitatsignificantlylowerlevelsthanthoseseenhistoricallyforhydrocarbons.Exportearningsforhydrogenasafuelarenotlikelytobemorethanaverypartialreplacementforoilandgasexports(Box4.1).Thisishardlysurprising,giventhatmanycountrieshavethepotentialtoproducehydrogenandthattherearethereforeverylimitedresourcerentsonoffer;theprojectedmarketsizeforhydrogenalsoremainswellbelowthatofoilandgastoday.Nonethelessthereareverygoodreasonsforcountrieswithacomparativeadvantageinlow‐emissionshydrogentomoveinthatdirection.Exportearningsforfuels,however,arenotthebigprizeonoffer.Themajorlong‐termopportunityisrathertheabilityoftoday’shydrocarbonexporterstobecomegloballeadersinthemanufacture–andexport–oflow‐emissionsindustrialproductsandchemicals.Severalproducersarestudyingwaystoensurethattheirenergytransitioneffortsareintegratedintotheireconomicdiversificationstrategies,includingbyassessinghowexistingsupplychains,expertiseandsupportindustriesmightberepurposedforcleanenergytechnologiessuchaslow‐emissionshydrogen.Firstmoversstandtobenefitnotonlyfromexportsofcleanenergybutalsofromthevaluecreateddomesticallybytheestablishmentofnewcleanenergyindustries.Oman,forexample,isworkingtoidentifythepotentialtouselow‐emissionshydrogeninindustry,whichcurrentlyaccountsforhalfofitsnaturalgasconsumption.7Aswellaspotentiallycreatinganchorconsumersforlow‐emissionshydrogen,thisapproachcouldallowOmaniindustriestobecomecompetitiveinmarketswherecarbonborderadjustmentmechanismsbegintorewardthelowestemittingproducers.Suchmechanismsincludingthosethatimposeapricebasedontheemissionsintensityofproduction,orconsumerpressureforlow‐emissionsgoods,mayleadotherprominentproducereconomiesthathavefocusseddiversificationeffortsonencouragingenergy‐intensiveindustriestofollowOman’sexample(Spotlight).Newcriteriaforthelocationofenergy-intensiveindustries?Energy‐intensiveindustriessuchasrefining,chemicals,steelandiron,cementandaluminiumproductioncouldbedeeplyaffectedbyenergytransitionsandpossibleaccompanyingpricevolatility.InEurope,highnaturalgasandelectricitypricessinceSeptember2021havealreadyreducedtheregion’saluminiumproductioncapacitybynearlyhalf(Eurometaux,2022).Thefinancialpositionofcompaniescouldbefurtheraffectedbyavarietyofcarbonpricingschemes,includingcarbonborderadjustment7Includingchemicalfeedstockandenergysectorownuse.SPOTLIGHTIEA.CCBY4.0.212InternationalEnergyAgencyWorldEnergyOutlook2022mechanisms.Allthisisputtingrisingpressureonenergy‐intensiveindustriestofindwaystoreducetheiremissions.Eachenergy‐intensivesectorandtechnologiesvary,butdeepemissionsreductionsaretypicallyassociatedwithswitchingtolow‐emissionselectricity,usinglow‐emissionsfuels(whichcouldbeproducedwithrenewables,aswithelectrolyticlow‐emissionshydrogen)oradoptingCCUS.Factorsthatinfluencedecisionsaboutthelocationofaplanttraditionallyincludeproximitytoconsumers,accesstorawmaterialsandaskilledworkforce,andtaxandotherfinancialincentives.Theseelementsremainimportant,butadditionalcriteriamayemergeinaworldtransitioningtocleanenergy.Thesecouldincludeaccesstolow‐emissionselectricity,scopetomakeuseofrenewableresourcesandproximitytoCO2storagesites.Futureinvestmentinenergy‐intensiveindustriesislikelytofavourregionswithoutstandingcleanelectricityandCCUSpotentialinparticular.Ourdetailedgeospatialanalysissuggeststhatsustainabilityandcarbonconsiderationshavenotfeaturedprominentlyinpastdecisionsregardingthelocationofenergy‐intensiveindustries.Todaysome40‐70%ofplantsarelocatedinregionswherethecarbonintensityofthegridisveryhigh(above600tonnesofcarbondioxideper‐gigawatt‐hour[tCO2/GWh]).OnlyaroundathirdofplantsarelocatedinregionswithhighsolarPVpotential8(theshareislowerfortheironandsteelsector).Around70%ofcapacityinkeyregions,e.g.China,theEuropeanUnionandtheUnitedStates,however,islocatedwithin100kmofpotentialstorageforCO2(and35%islocatedwithin10km)althoughitdoesnotnecessarilymeanthatCCUSwillbetechnicallyandcommerciallyfeasibleinanygivenlocation(Figure4.15).Toputthesedistancesintocontext,theaveragedistanceoverwhichCO2iscurrentlytransportedbypipelinebetweenexistingCCUSfacilitiesisaround180km.WhiletheendowmentofrenewableresourcesandpotentialsitesforCO2storagearemoreorlessfixed,thereisstillalotthatindividualcountriescandotofosteranattractivelow‐emissionsenvironmentforenergy‐intensiveindustries.Thecarbonintensityofthegridcouldbereducedsignificantlybyscalingupthedeploymentoflow‐emissionspowergenerationsources.Technologyinnovationmeansthatsolarpowergenerationisnowaffordableeveninregionswithlessfavourableresourcepotential,andwindpowerisalsobecomingmoreaffordableinanumberofcountries.TheviabilityofCCUScouldbeboostedthrougharangeoftargetedmeasures,e.g.regulatorylevers,publicprocurement,low‐emissionsproductincentivesandtaxcredits.SupportingindustrialclusterswithsharedCO2transportandstorageinfrastructureisalsoprovingtobeaneffectivedevelopmentstrategy.NewbusinessmodelsseparatingthecomponentsoftheCCUSvaluechainanddevelopingmulti‐usertransportandstoragenetworksthatindustrialfacilitiescanaccess(CCUShubs)couldalsohelp.Otherpossiblemeasuresincludeensuringaccessibilitytorenewables‐basedelectricity,forexampleviapower8Above4.2kilowatt‐hourperkilowattpeak.IEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2134purchaseagreementcontracts,andnurturinginnovativetechnologies.Asglobaleffortstoreduceemissionsexpand,buildinganenvironmentconducivetodecarbonisationislikelytoemergeasakeystrategytoattractlarge‐scaleindustrialinvestment.Figure4.15⊳Currentdistributionofenergy-intensiveindustriesbygridcarbonintensity,solarpotentialandproximitytoCO2storageIEA.CCBY4.0.Proximitytocheaprenewablesandgeologicalstoragearesettoemergeaskeyfactorsindeterminingthefuturelocationofenergy-intensiveindustriesNotes:tCO2/GWh=tonnecarbondioxidepergigawatt‐hour;kWh/kWp=kilowatt‐hourperkilowattpeak.TheproximityassessmentforCO2storagesiteshasbeendoneforselectedregionsonly,i.e.China,EuropeanUnionandUnitedStates.Somefacilities,suchasaluminiumsmelters,havededicatedpowersupplyfacilitiesseparatefromthegridandarethuslessaffectedbygridcarbonintensity.Sources:IEAanalysisbasedonEuropeanCommission(2022);GlobalSolarAtlas(2022);USDOE(2018);S&PGlobal(2022).SolarPVpotentialGridcarbonintensity>600464‐600250‐464<250<3.63.6‐4.24.2‐4.8>4.8>100km50‐100km10‐50km<10kmRefiningGridcarbonintensity(tCO2/GWh)SolarPVpotential(kWh/kWp)ProximitytoCO2storageProximitytoCO2storageShareofcapacitySolarPVpotentialGridcarbonintensityChemicalsProximitytoCO2storageSolarPVpotentialGridcarbonintensityIronandsteelProximitytoCO2storageSolarPVpotentialGridcarbonintensityCementProximitytoCO2storageSolarPVpotentialGridcarbonintensityAluminiumsmelterProximitytoCO2storage20%40%60%80%100%IEA.CCBY4.0.214InternationalEnergyAgencyWorldEnergyOutlook20224.7Investinflexibility–anewwatchwordforelectricitysecurityModerneconomiesdependonelectricity,puttingthespotlightonmeasurestoensurethereliableandflexibleoperationofasystemthatfeatureshighervariabilityinbothsupplyanddemand,andonstepstoensureresilienceagainstnewcybersecuritythreats.Electricityisattheheartofmoderneconomies,supportingmanyfundamentalaspectsofdailylifeacrosstheeconomy.Itaccountsforabout20%oftotalfinalconsumptiontoday,andthisissettoincreaseinallscenarios,reaching28%intheSTEPSin2050,40%intheAPSandabout50%intheNZEScenario.Therisingshareofelectricityinfinalconsumptionputselectricitysecurityfirmlyintheoverallenergysecuritypicture,alongwithoilandnaturalgas.Electricitysecuritymeanshavingareliableandstablesupplyofelectricitywhichisabletomeetdemandsatanaffordableprice.Electricitysupplyhasalwaysrequiredthecapabilitytomeetdemandcontinuously,downtothescaleofsecondsorless,inordertomaintainsystemstability.Thisiscurrentlyachievedbymeansofasetofmanagedpowergeneratorsconnectedtodemandcentresthroughgridlines.However,powersystemsarebecomingmorecomplex,andvariabilityisincreasingintermsofbothsupplyanddemand.Electricity’scentralroleinmodernlifemeansthatshortagesoroutageshavethepotentialtodoimmensedamageandimposebillionsofdollarsofcostsperdayonnationaleconomies;thesecostswillonlyincreaseaselectricitycomestoaccountforaneverlargershareofoverallenergyconsumption.Maintainingelectricitysecurityinthepowersystemsoftomorrowcallsfornewtoolsandapproaches.Powergeneratorswillneedtobemoreresponsiveandagile,consumerswillneedtobemoreconnectedandadaptable,andgridinfrastructurewillneedtobestrengthenedanddigitalisedtosupportmoredynamicflowsofelectricityandinformation.Powersystemswillalsoneedtoadapttobothchangingclimateandweatherpatternsandchangingconsumerbehaviour.Theexpansionofelectricityintonewsectorsisoneofthechangesmakingthetaskofmaintainingelectricitysecuritymorechallenging.Theprogressiveelectrificationofroadtransport,heating,industrialprocessesandelectrolytichydrogenproductionwillreshapeloadcurvesandhasthepotentialtomakedemandmorevariable.Theincreasinguseofelectricheatpumpsandairconditioners,forexample,willmakedemandmoretemperature‐sensitive,whiletheproliferationofEVsincreasestheriskofrapidvariationsindemandcausedbyuncontrolledcharging(althoughitalsocreatesadditionalopportunitiesfordemand‐sideresponseviasmartchargingorvehicle‐to‐gridtechnology).Thevariabilityofelectricitydemandissettoincreaseinallcountriesandinallscenarios,withthelevelofvariationbeinghigherintheAPSthanintheSTEPS,andmostofallintheNZEScenario.TherisingshareofvariablewindandsolarPVelectricitygenerationaddstotheneedforfutureflexibilityonthesupplyside.ChangesinelectricitydemandandsupplyprofilesIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2154togetheraresettoincreasethecallontheprovidersofpowersystemflexibility.9Allthesefactorsindicatethatflexibilitywillbeanewwatchwordforelectricitysecurity.IntheSTEPS,globalpowersystemflexibilityneedsmorethantripleby2050.10IntheAPS,theydoubleintheperiodto2030andincrease3.5‐foldby2050,whileintheNZEScenario,theymorethanquadruplebetweentodayand2050(Figure4.16).Figure4.16⊳FlexibilityneedsandsupplybyregionandscenarioIEA.CCBY4.0.Flexibilityneedsriseinallscenariosandvarysubstantiallybycountry;abroadrangeoftechnologiesandapproachesisrequiredtoensureelectricitysecurityMostoftheflexibilityrequiredtomaintainpowersystemreliabilitytodayisprovidedbydispatchablethermalpowerplantsandhydropower.Sharplyrisingflexibilityneedsandchangesinthecompositionofthepowerplantfleet–withthephase‐outoflargeunabatedcoal‐firedthermalpowerstationsinmanyregions–seetheshareofflexibilitydemandservedbythermalpowerplantsdroptoroughlyathirdintheSTEPSandaquarterintheAPS,downfromaroundtwo‐thirdstoday.Thisincreasestheneedforalternativesourcesofflexibilitytomaintaingridstabilityandsecurityofsupply.Reinforcedpowergridsandadditionalinterconnectionscanhelpevenoutfluctuationsinthesupplyofweather‐dependentvariablerenewables,withinandbetweencountriesandregions;theycanalsoconnectadditionalprovidersofflexibilitytothesystem.Certaingridassets,suchashighvoltagedirectcurrentinterconnections,canalsoprovideflexibilityserviceslikefastrampingorvoltagecontroldirectly.9Flexibilityisdefinedastheabilityofapowersystemtoreliablyandcosteffectivelymanagethevariabilityofdemandandsupplyacrossallrelevanttimescales.Itrangesfromensuringtheinstantaneousstabilityofthepowersystemtosupportinglong‐termsecurityofsupply.10Flexibilityneedsarerepresentedbythehour‐to‐hourrampingrequirementsafterremovinghourlywindandsolarPVproductionfromhourlyelectricitydemand,dividedbytheaveragehourlydemandfortheyear.20%40%60%80%100%2021STEPSAPSDemandresponseBatteriesOtherlowemissionsOtherrenewablesHydroNuclearUnabatedfossilfuelsFlexibilitysupply205024620302050203020502030205020302050FlexibilityneedsIndex(2021=1)UnitedStatesChinaIndiaAPSSTEPSEuropeanUnionIEA.CCBY4.0.216InternationalEnergyAgencyWorldEnergyOutlook2022Allthreescenariosshowbatterystorageemergingasanimportantflexibilityoptioninpowersystemscharacterisedbyhighsharesofvariablerenewables.Thepaceofdeploymentspicksupdramatically:globalbatterystoragecapacityincreasesnearly50‐foldintheSTEPS,risingtomorethanabout1000GWby2050.IntheAPSthisis80%higher,reachingabout2300GWby2050,withover420GWalreadyinstalledby2030.IntheAPS,batteriesprovideclosetoaquarteroftheflexibilityneededin2050inadvancedeconomiesandonlyslightlylessthanthatinemergingmarketanddevelopingeconomies.Otherstoragetechnologiesalsoplayimportantroles:pumpedhydroisthelargestsourceofelectricitystoragetodayandissettoincreasefurtheroverthenexttenyears(IEA,2021c).Hydrogenandammoniaareemergingassolutionsfortheseasonalstorageofrenewableelectricity(IEA,2021d).Demand‐sideresponseisanotheremergingoptionfortheprovisionofelectricitysystemflexibility.Ithelpstoalignconsumptionwiththeavailablesupply,reducingtheneedforothersourcesofflexibility.Theprogressiveelectrificationoffurtherend‐usesissettoprovideadditionalopportunitiesforloadshifting,withEVsandelectricheatingplayingamajorpart.In2050,demand‐sideresponseprovidesroughlyaquarterofpowersystemflexibilityinbothadvancedeconomiesandemergingmarketanddevelopingeconomiesintheSTEPSandAPS.Tappingthispotential,however,willrequirefurtherchangestoregulatoryframeworksandsignificantinvestmentsindigitalinfrastructure(Box4.2).Box4.2⊳EnhancingresilienceinthefaceofincreasingcybersecurityrisksElectricitysystemsarebecomingincreasinglydigitalised,bringingmanybenefitstoelectricityconsumers,utilitiesandthesystemasawhole.However,increasingconnectivityandautomationandtherisingnumberofconnecteddevicesanddistributedenergyresourcesareraisingriskstocybersecurity.Threatactorsarealsobecomingincreasinglysophisticatedbothintermsoftheirdestructivecapabilitiesandabilitytoidentifyvulnerabilities.Althoughelectricutilitiesandcybersecurityexpertsnotethehighandgrowingthreatofcyberattacks,quantitativeindicatorsofthisgrowingthreatarenotavailablesincemostcybersecurityincidentsareneverpubliclyreported(orevenreportedtoauthorities).Severalcyberattacksonelectricitysystemshavebeendocumentedoverthepastdecade,includingattacksonthepowergridintheUkrainein2015and2016thatresultedinmajoroutages(IEA,2021e).RecentattacksonelectricutilitiesinIndiaandUkrainewerethwartedanddidnotresultinoutages.Whiledisruptionstoelectricitysystemsasaresultofcyberattackshavesofarbeenrelativelysmallcomparedtoothercauses,asuccessfulcyberattackcouldtriggeranoperator’slossofcontroloverdevicesandprocesses,causingphysicaldamage,servicedisruptionandmillionsofdollarsindamages.Electricutilitiesfaceseveralchallengestoaddressgrowingcybersecurityrisks,includingalackofstrategicattention,atendencytoharbourinstitutionalsilos,alimitedsetofresourcesandpersonnel,andalackofinformationsharingbetweenorganisations.Whilepreventingallcyberattacksisnotpossible,electricitysystemscanandmustbecomeIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2174moreresilienttocyberattacks.Thismeansdesigningsystemsinwaysthatenablethemtowithstandattacksandquicklyabsorb,recoveroradapt,whilepreservingthecontinuityofcriticalinfrastructureoperations.Policymakers,regulators,utilitiesandequipmentprovidersallhaveimportantpartstoplayinensuringthecyberresilienceoftheentireelectricityvaluechain.Theroleofpolicymakers,however,isparticularlycentral.Theyarebestplacedtotaketheleadinraisingawarenessoftheissues,andworkingcontinuouslywithstakeholderstoidentify,manageandcommunicateemergingvulnerabilitiesandrisks.Policymakersarealsoideallyplacedtofacilitatepartnershipsandsector‐widecollaboration,developinformationexchangeprogrammesandsupportresearchinitiativesacrosstheelectricitysectorandbeyond.Effectivecollaborationcanhelptoimproveunderstandingoftherisksthateachstakeholderposestotheelectricitysystemandvice‐versa.Differentcountrieshavetakenvariouspolicyandregulatoryapproaches:somehaveadoptedhighlyprescriptiveapproacheswhileothershavechosenframework‐oriented,performance‐basedmodels.Regardlessoftheapproachtaken,cyberresiliencepoliciesneedcontinuousreviewandadaptation,particularlyasfurtherdecentralisationanddigitalisationoftheelectricitysectorshiftstheriskexposuretothegridedge.Effectivepoliciesnowneedtolookbeyondbulkutilitiesandconsidertheentireelectricitychain,includingsupplychains.4.8EnsurediverseandresilientcleanenergysupplychainsHighandvolatilecriticalmaterialpricesandhighlyconcentratedcleanenergysupplychainscoulddelayenergytransitionsandmakethemmorecostly.Policiestopromotediversifiedsupplyaswellasdemand‐sideinnovationareessential.Cleanenergytransitionsrequireastrongfocusnotonlyontraditionalelementsofinternationalenergysecurityrelatingtothesupplyoffossilfuels,butalsoonthesupplyoftheminerals,materialsandmanufacturingcapacityneededtodelivercleanenergytechnologies.Ascleanenergytransitionsaccelerate,demandforcriticalmineralsfromtheenergysectorissettosoar.IntheAPS,demandforcriticalmineralsforcleanenergytechnologiesis2.5‐timeshigherby2030andquadruplesby2050(Figure4.17).IntheNZEScenario,anevenfasterdeploymentofcleanenergytechnologiesimpliesfour‐timehigherdemandforcriticalmineralsin2030and2050thantoday.IntheNZEScenario,lithiumseesthefastestriseamongthekeyminerals,withdemandsurgingby26‐timesbetweentodayand2050whiledemandforcobalt(6‐times),nickel(12‐times)andgraphite(9‐times)alsorisesrapidly.At2021prices,thevalueofthemineralsusedincleanenergytechnologiesincreasesoverfivefold,reachingaroundUSD400billionby2050intheAPSandintheNZEScenario.IEA.CCBY4.0.218InternationalEnergyAgencyWorldEnergyOutlook2022Figure4.17⊳CriticalmineraldemandbyweightandvalueforcleanenergytechnologiesbyscenarioIEA.CCBY4.0.Criticalmineraldemandforcleanenergytechnologiesquadruplesalreadyby2050intheNZEScenario,withparticularlyhighgrowthforEV-relatedmineralsNotes:Mt=milliontonnes.2021pricesareusedtocalculatethemonetaryvalueofcriticalminerals.Asenergysectordependenceonmineralsgrows,sotoowilltheimportanceofsecuringadequatesuppliesofsustainableandaffordablecriticalminerals.Thereareimportantdistinctionstobemadebetweencriticalmineralsecurityandoilorgassecurity:apricespikeforoilaffectsallconsumersdrivingoil‐fuelledcars;ashortageorpricespikeincriticalmineralsaffectsonlytheproductionofnewEVsorsolarpanelsforthemarket.Asrecentpriceincreasesmakeclear,however,supplychaindisruptionsandrisingmineralcoststhreatentoincreasethecostofcleanenergytechnologiesandslowtheirdeployment.Highermineralpricesmeanthatcriticalmineralsnowaccountforasignificantandrisingshareofthetotalcostofcleanenergytechnologies,contributingtoanuptickincostssince2020,whichreversedalongstandingtrendofcostreductions(seeChapter2).Gettingthesecostsbackonacontinueddownwardtrajectoryrequiresmorerobustandresilientmineralsupplies,alongsidearedoublingofeffortstoreducecostsbyothermeans,includingthroughtechnologicalinnovation,recycling,efficiencyimprovementsandeconomiesofscale.Theriskofsupplychaindisruptionsandvolatilepricesisexacerbatedbythefactthatcleanenergytechnologysupplychainsarehighlyconcentrated.Criticalmineralsextractionisgeographicallyconcentrated,withasinglecountryaccountingforoverhalfofglobalproductionofseveralkeyminerals,notablygraphite(China,79%),cobalt(DemocraticRepublicoftheCongo[DRC],70%),rareearthelements(China,60%)andlithium(Australia,55%).Thelevelofconcentrationisevenhigherforprocessingoperations,withChinadominatingacrosstheboard.102030402021APSNZEAPSNZEOtherCobaltManganeseLithiumGraphiteNickelCopperByweightMt203020501002003004002021APSNZEAPSNZEBillionUSD(2021,MER)20302050Byvalue(at2021prices)IEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2194Figure4.18⊳IndicativesupplychainsforoilandgasandselectedcleanenergytechnologiesIEA.CCBY4.0.Transitiontoacleanenergysystembringsnewenergytradepatterns,countriesandgeopoliticalconsiderationsintoplayNotes:DRC=DemocraticRepublicoftheCongo.Largestproducersandconsumersarenotedineachcasetoprovideanindication,ratherthanacompleteaccount.IEA.CCBY4.0.220InternationalEnergyAgencyWorldEnergyOutlook2022Cleanenergytechnologymanufacturingandassemblyarealsohighlyconcentrated,withChinaaccountingforthree‐quartersofthemanufacturingandassemblyofsolarPVmodulesandEVbatteries(Figure4.18).Thecapital‐intensivenatureofmanufacturinganditstechnicalcomplexitiesalsomeanthatitalsotendstobedominatedbyasmallnumberofcompanies.Justthreecompaniesaccountedfor65%ofglobalbatterycellproductionin2021,forexample.Alongsiderisksfromhighpricesandsupplychainissues,therearealsosignificantrisksassociatedwiththeenvironmental,socialandgovernance(ESG)impactsofminingprojects.EnsuringanadequatesupplyofmineralsforcleanenergytransitionsrequiresconcertedeffortstoaddressandminimisetheESGimpactsofminingandmineralprocessing,suchashumanrightsviolations,briberyandcorruption,tailingsmanagement,wateruse,airpollution,CO2emissionsandlossofbiodiversity.Cleanenergytransitionsmustbecarriedforwardusingmineralsthatprioritisethemitigationoftheseimpactstoalignwithsustainableandpeople‐centredtransitionsthatpolicymakersandthepublicareincreasinglydemanding.Figure4.19⊳Publicreportsofgovernance-relatedrisksbymineralsupplychainandregion,2017-2019IEA.CCBY4.0.ESGriskscouldimpactmineralsupplychainsacrosseveryregion,particularlyforcobaltandcopperNotes:CM=criticalminerals;DRC=DemocraticRepublicoftheCongo;C&SAmerica=CentralandSouthAmerica.Othercriticalmineralsincludechromium,graphite,lead,manganese,molybdenum,niobium,platinum,silicon,silver,tantalum,tin,titanium,tungsten,uranium,vanadium,zincandzirconium.Source:IEAanalysisbasedonOECD(2021).ESG‐relatedincidentsmayalsogiverisetoshort‐termmineralsupplydisruptionswithimplicationsforsupplychainsandprices(Figure4.19).Afterspecificincidentsofcorruptionorhumanrightsabusescometolight,governmentsmayintervenetostopproductionat50100150200250300350CobaltCopperLithiumNickelAluminiumOtherCMDRCRestofAfricaAsiaPacificC&SAmericaRestofworldNumberofreportsChildlabourCorruptionForcedlaborHumanrightsabusesNon‐statearmedgroupsAbuseofforcebysecurityforcesNon‐paymentoftaxesOtherMineralRegionIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2214projectswhereillegalactivitiesaregoingon.Effortstobringsuchsitesintocompliancemayalsoleadtotemporaryshutdownsthatimpactproduction.ThesetypesofrisksareespeciallyprominentinthecobaltsupplychainintheDRC,whereartisanalandsmall‐scaleminingisprevalentandwheresignificantallegationsofchildlabour,forcedlabourandotherhumanrightsabuseshavebeenmade(OECD,2019).Investinginprojectswithhighstandardsoftreatmentforcommunitiesandtheenvironmentisessentialtoimprovetheresilienceofsupplychains,asiscrediblyandtransparentlyaddressingconcernswithhigherriskprojects.Inaworldwithambitionstoreachnetzeroemissionsbymid‐century,thedemandforethicallysourcedandsustainablyproducedmaterialsislikelytogrowrapidly,alongwithincreasingdemandforsupplychaintransparencyandtraceability.Ifsupplyisunabletokeeppacewiththisgrowingdemandthencompaniesmayendupcompetingforalimitedpoolofthese“greenmaterials”,leadingtobottlenecksinsupplychains.Therearealsorisksinothervaluechains.Far‐reachingenergytransitionsimplyburgeoningdemandforlow‐emissionsindustrialproductssuchasgreensteel,greenaluminium,greenplasticsandnear‐zerocement.However,asthingsstand,thereisuncertaintyoverhowquicklythisdemandwillmaterialiseandatwhatscale,andnoguaranteethattheseambitionswillbematchedbyadequatesupply.Productioncostsformanyoftheselow‐emissionsproductsgenerallyarenotcompetitivewiththeirtraditionalcounterparts,andsometechnologiessuchasgreensteelornear‐zerocementarestillatthedemonstrationstage.Ifdemandmaterialisesandindustryambitiondoesnotscaleupintime,thetightsupplyofgreenmaterialscouldpushuptheirpricesinthecomingdecades.Earlydemandsignalsalongwithcomprehensivepolicysupportareimportanttosendaclearmarketsignaltosuppliers.Incentivisinginvestmentingreenmaterialswillhelptoboostsupplyandpreventconsumersfromswitchingtohighemittingmaterials.Thisisamatterforcompaniesaswellasgovernments,andagrowingnumberofjointgovernmentalandcorporatesectoralinitiativesarenowseekingtoincreasetheuseofgreenmaterials.Forexample,theFirstMoverCoalition,includingmorethan50participatingcompaniessuchasVolvo,EiffageandMoller‐Maersk,issendingademandsignalfornear‐zeroaluminium,chemicals,concreteandsteel.TheseinitiativesarealsoestablishingastronglinkbetweenimprovingtheoverallemissionsintensityofheavyindustriesandtheESGperformanceofrawmaterialminingandsupply.Fromapolicyperspective,acomprehensiveandco‐ordinatedapproachisrequiredtodevelopandexpandglobalcleanenergytechnologysupplychainsthataresecure,resilientandsustainable.Thisrequiresboththescaling‐upanddiversificationofsuppliesaswellastheimplementationofmeasurestomoderategrowthindemand.Anincreasingnumberofprojectshaverecentlybeenannouncedtodevelopdomesticsupplychainsforcriticalmineralsandcleanenergyequipment.Whilethesewouldhelpdiversifysupplychains,internationaltradealsohasavitalparttoplaytoenablecostreductionsandpromoteefficiency.IEA.CCBY4.0.222InternationalEnergyAgencyWorldEnergyOutlook2022Policyshouldalsosupportfurthertechnologicalinnovation,whichhasalreadyshownitsabilitytorelievesomeofthepressureonprimarysupplieswhilealsoreducingcosts.Forinstance,silverandsiliconuseinsolarcellsoverthepastdecadehasbeenreducedby40‐50%,whilerecentlowcobaltEVbatteriescontain75‐90%lesscobaltthanearlierversions,althoughtheyusetwiceasmuchnickel.Reuseandrecyclingalsohaveaparttoplayinreducingtheneedforprimarysupplies,whileshiftingconsumerpreferencesandbehaviourcouldplayasignificantroleinreducingmineraldemandfromEVs(Box4.3).FollowinganewmandatefromIEAmembergovernmentsinMarch2022,theIEAisexpandingitsworktohelpensurereliableandsustainableinternationalsuppliesofcriticalmineralsthroughmarketmonitoring,policytrackingandfacilitatinginternationalcollaborationontechnologyinnovation,supplychainresilience,recycling,andenvironmentalandsocialstandards.Box4.3⊳SecuritybenefitsofshiftingconsumerpreferencesandbehaviourShiftsinconsumerpreferencesandbehaviourcouldplayanimportantroleinreachingnetzeroemissionsby2050,whilealsoofferingopportunitiestoreducemineraldemand,particularlyintransport.Forexample,consumerstendtopreferlargerbatteriesinEVsthantheyactuallyneed,reflectingbothrangeanxietyandagrowingpreferenceforlargerandmorepowerfulvehiclessuchassportutilityvehicles.Between2015and2021,averagebatterysizesinlight‐dutyEVsincreasedby60%.Ifthesetrendscontinue,batterysizescouldincreasebyuptoafurther30%by2030.TargetedmeasurestopromoteEVswithsmallerbatteries(includingplug‐inhybridelectricvehicles[PHEVs])couldhelptoreducemineralrequirements,whilelightervehiclescouldimproveoperationalenergyefficiencyandyieldsafetybenefits(Shaffer,AuffhammerandSamaras,2021).Measurescouldincludedifferentiatingsubsidiesbybatterysize(ortaxingheaviervehiclesinthelongerterm),acceleratingthedeploymentofchargingpointstoreducerangeanxietyandpromotingtechnologyinnovationaimedatincreasingtheenergydensityofbatteries.Ifthecurrentaveragerangeofelectriccarsismaintained–resultingin20‐25%smallerbatteriesthanourbasecaseassumptionsbetween2030and2050–mineraldemandfromEVbatteriescouldbearound20%lowerin2030intheNZEScenario,equivalenttotwoyearsofcurrentdemandfromEVbatteries.IncreasingtheutilisationofeachEVcouldalsoreducemineraldemandbyreducingtheneedforadditionalnewEVswhileprovidingthesamelevelofmobility.WhileconventionalmantrapositsthatthemoreEVssold,thebetterfortheclimate,inreality,theemissionsbenefitsofEVsareaccruedthroughitsutilisation,notsimplyitspurchase.Thismeansthatattentionalsoneedstobegiventotheutilisationrateofvehicles(andforPHEVs,itselectricusefactor).EncouraginghigherandmoreefficientutilisationofeachEVcouldachievethesame(orlarger)emissionsreductionswithfewernewEVs,helpingtoalleviatestrainsonmaterialsupplyinthenearterm.Supportforcar‐sharingcouldpaydividendshere:vehiclesusedforcar‐andride‐sharingtypicallyhavemuchhigherutilisationratesthanprivatelyownedvehicles,andasinglesharedcarcouldpotentiallydisplaceupto20privatecars(Jochemetal.,2020).PolicymeasuresandIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2234investmentsinpublictransportandinfrastructurecouldatthesametimeencourageashiftawayfromprivatecarstosharedmobilityservices,activetransportandpublictransport(seeChapter3,section3.8).IntheNZEScenario,thesemeasuresresultinareductionofalmost20%innewpassengercarsalesin2050comparedwiththeSTEPS,avoidingnearly3milliontonnes(Mt)ofmaterialdemandforbatteries,equivalenttoaroundthreeyearsofcurrentdemand.4.9FostertheclimateresilienceofenergyinfrastructureThegrowingfrequencyandintensityofextremeweathereventspresentsmajorriskstoenergyinfrastructureandsupply,sogovernmentsneedtoacttoensurethatthesystemhastheabilitytoanticipate,absorb,accommodateandrecoverfromadverseimpacts.Therearegrowingsignsthatclimatechangeisdrivingmorefrequentextremeweathereventsaswellassystemicchangesinclimaticconditions.Averageglobaltemperatureshavecontinuedtoriseoverthepastfewdecades,andheatwaveshavebecomearegularfeatureduringthesummerperiodinavarietyofregions.Manycountriesareexperiencingmarkedchangesinrainfall,whiletropicalcyclonesandwindstormsaregettingmoreintense.Ouranalysissuggeststhatover85%ofIEAmemberandassociationcountries11arealreadyexposedtoamediumorhighlevelofclimatehazardrisks.Ifemissionsremainunabated,theworldislikelytoexperiencemorefrequentandintenseclimate‐relatedanomalies.Thisposesseriousriskstoenergyinfrastructureandthreatensreliableenergysupplies.Forexample,awarmerclimatereducestheefficiencyofpowerplants.Maximumelectricityoutputfromanaturalgas‐firedplant(combinedcycle)beginstodeclineaboveatemperatureof15°C,whiletheefficiencyofasolarpanelgenerallydegradesby0.3‐0.5%perdegreeaboveatemperatureof25°C.Standardwindpowerinstallationsareusuallydesignedfora25°Cenvironmentandmaybeshutdownabove45°Ctoprotectcriticalcomponentsfromadditionalwearandtear.ThermalpowergenerationhastobecurtailedifwatertemperaturesriseaboveregulatorythresholdsincountriessuchastheUnitedStates,FranceandGermany.IntheUnitedStates,13outof18incidentsinvolvingpowercurtailmentatcoal‐firedpowerplantsbetween2000and2015wererelatedtowatertemperatureneededforcoolingpurposes.InanIntergovernmentalPanelonClimateChange(IPCC)scenariothatleadstoahigherlong‐termtemperatureoutcome,thenumberofthermalpowerplantsexposedtotemperaturelevelsexceedingthesethresholdsismateriallyhigherthaninascenariowithlow‐temperatureoutcomes(Figure4.20)(IPCC,2021).11IEAAssociationcountriesincludeArgentina,Brazil,China,Egypt,India,Indonesia,Morocco,Singapore,SouthAfrica,ThailandandUkraine.UkrainejoinedasanAssociationcountryon19July2022,andsoisnotincludedinthisanalysis.IEA.CCBY4.0.224InternationalEnergyAgencyWorldEnergyOutlook2022Figure4.20⊳ShareofinstalledpowerplantcapacityexposedtoglobaltemperatureriseundervariousIPCCAR6scenariosIEA.CCBY4.0.FailuretoreduceGHGemissionscouldexposealargenumberoffossilfuelandnuclearplantstosevereheatstress,endangeringreliableelectricitysupplyNote:Resultsshowlong‐termclimateprojections(2080‐2100)comparedtopreindustriallevelsbasedontwoIPCCscenariosrepresentingdifferenttemperatureoutcomes(SSP1:2.6‐2oCandSSP2:4.5‐3oC).Source:IPCC(2021).Increasingwatershortagesindryregionsareanothersourceofconcern.Theproductionofmanyfuelsandmineralssuchasshaleresources,coalmining,copperandlithiummining,biofuels,andhydrogenproduction,currentlyrequireaconsiderableamountofwater.Aprojecteddecreaseinwateravailabilityatmajorproductionsitescoulddisruptsupply.Hydropowerisalsoverysensitivetowateravailability.Hydrogenerationcoulddeclinesignificantlyinregionswherewaterflowsarelikelytodecrease,suchassouthernEurope,NorthAfricaandtheMiddleEast.Thermalpowerplantscouldbeinterruptedbyshortagesthataffectthewatertheyrelyonforcooling.InFrance,theChooznuclearpowerplantwasclosedforaroundtwomonthswhenaseveredroughthitin2020,andseveralotherplantshadtoreducetheiroutputin2022duetothelackofcoolingwater.IncreasingwaterstresscouldalsohinderthedeploymentofCCUStechnology:aplantequippedwithCCUSrequiresover50%morewaterthanonewithoutit.Extremedroughtsalsoposeriskstoenergysupplychainsthatrelyonthetransportoffuelsandmaterials.In2022,forexample,droughtscausedbysevereheatwavesinEuropeexacerbatedlowwaterlevelsinkeyriverssuchastheRhineRiverthattransportsignificantvolumesofcoal,chemicalsandothermaterials.Changesinwindpatternsmayreducetheoutputfromwindfarmsandcauseelectricitygridfailures.ThelatestIPCCreportsuggeststhatglobalmeanwindspeedislikelytodecrease,withthepotentialdeclinebeinghighestintheregionswherecurrentmajorwindpowergeneratorsarelocated,e.g.westernUnitedStates,northernEuropeandEastAsia(IPCC,25%50%75%100%<20days20‐40days40‐60days>60daysMaximumtemperatureabove35°C25%50%75%100%SSP2‐4.5SSP1‐2.6SSP2‐4.5SSP1‐2.6SSP2‐4.5SSP1‐2.6<2°C2‐3°C3‐4°C>4°CSurfacetemperatureCoalGasNuclearIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions22542021).Windpowergenerationisproportionaltothecubeofthewindspeed,whichmeansthata10%decreaseinwindspeedleadstoarounda27%reductioninwindpoweroutput.12Lowermeanwindspeedsaresettoco‐existwiththeprojectedintensificationoftropicalcyclones.Tropicalcyclonesthatexceedthelimitofwindpowerplantscouldtemporarilyhalttheiroperationandmaycausephysicaldamagetoturbines.Theyalsoriskcausingelectricitygridfailuresbydamagingtransmissionanddistributionlines,polesandtransformers.ItisworthnotinginthiscontextthattheactivestormseasonthathittheUnitedStatesin2020ledtohistoricalhighsinthefrequencyandlengthofpoweroutages.Floodscausedbystormsandheavyrainfallscouldwellbeanothercauseofdisruptiontoenergysupplieseventhoughthermalpowerplantsaregenerallyequippedwithfloodprotectionstructures.InBangladesh,forexample,morethanfivegas‐firedpowerstationsinSylhetwereshutdownpre‐emptivelywhenfloodwaterengulfedtheminJune2022.IntheUnitedStates,floodingalongtheMissouriRiverinJune2011causedtheFortCalhounnuclearpowerstationtoclosefornearlythreeyearsafterwaterleakedintotheturbinebuilding.Floodsandheavyrainfallmayalsoleadtodisruptionsincoalminingandcoal‐firedpowerplants.WhenaseverefloodhittheRhenishligniteminingareainGermanyin2021,theconnected2GWWeisweilerpowerstationwassuspendedforseveraldays.Similarly,three‐out‐of‐fourunitsincoalpowerplantsatYallourninAustraliawereshutforafewdaysin2021whenthecoalminesupplyingthemstoppedoperationsasaresultofflooding.Giventhatheavyrainfallandfloodsarelikelytoincreaseinmanypartsoftheworld,disruptionsofthiskindmaybecomemorefrequent.Whatisthefinancialimpactonenergyassetsfromclimaterisks?Theincreaseinfrequencyandseverityofclimatehazardssuchasfloodsordroughtswillhaveanincreasingimpactonenergyinfrastructureassetsandtheirfinancialviability.Bycausingdamagetoassetssuchaspowerplantsandrefineriesandinterruptingtheirnormalbusinessoperations,climateriskscanimpairthevalueofassetsandinturnnegativelyimpactcompanybalancesheets.Weconductedanillustrativeanalysisoffloodriskatfourenergyinfrastructuresites:acoalpowerplantinSoutheastIndia;agas‐firedplantinsouthernVietNam,andrefineriesinnorthernEuropeandthesouthernUnitedStates(Figure4.21).ArefineryinthesouthernUnitedStatescurrentlysuffersthehighestannualaveragelossfromfloodingat1.1%ofitsassetvalue,butthisincreasesonlymarginallyby2100.ArefineryinnorthernEuropeisalsoprojectedtofacerelativelysmallincreasesinannualaveragelosses.ThetwopowerplantsinIndiaandVietNamhavelowerannualaveragelossestodaythanthetworefineries,butthoselossesareprojectedtoincreasemuchmorerapidly.Bothplants12Whenthewindspeediswithintherangebetweencut‐inspeedandratedspeed.SPOTLIGHTIEA.CCBY4.0.226InternationalEnergyAgencyWorldEnergyOutlook2022couldexperienceaverageannuallossesthatincreaseto0.3‐0.6%ofassetvalueby2050andreachupto1.2%by2100.Thisreflectsthesignificantprojectedincreaseinmoresevereandfrequentfloodsattheselocations.Thefinancialimpactanalysisalsoshowsthebenefitsofinvestinginflooddefences.TheUSrefineryusedinouranalysishasflooddefencesinstalled:wereitnotforthis,itsannualaveragelosswouldbearoundfour‐timeshigher.Figure4.21⊳AnnualaveragelossofassetvaluefromfloodingatfourindicativeenergysupplyinfrastructuresitesbasedontwoIPCCscenariosIEA.CCBY4.0.Theaverageannualfinancialimpactoffloodscouldamountto0.3-1.2%oftotalassetvalueby2050Notes:Annualaveragelossisthemeanexpectedlossperyearwithchangesinseverityandfrequency(includingtheprobabilityofhazardeventsofdifferentscalesoccurring)takenintoaccount.Inanyoneyear,alarge‐scalehazardeventsuchasafloodthathappensevery100yearscouldcausemuchhigherlossthantheannualaverage.Forthepurposeofthisillustrativeanalysis,fourassetsindistinctlocationsthathaveatleastsomefloodrisksbasedonhistoricaldatawereselected.ProjectedflooddataisbasedontheIPCCscenarios:SSP1‐2.6andSSP2‐4.5representingdifferenttemperatureoutcomes(SSP1:2.6‐2°C,SSP2:4.5‐3°C).Sources:IEAanalysisbasedondatafromJupiterIntelligence(2022);IPCC(2021);EuropeanCommissionJRC(2017).Performingfull‐fledgedandforward‐lookingclimateriskassessmentsandcalculatingthepotentialfinancialimpactcausedbyclimatehazardsisstillanovelexerciseformostgovernmentsandenergysuppliers.However,assessmentsofthiskindcansupportenergyinfrastructureplanning,identifyworthwhileadaptationinvestments,helpprotectthevalueofenergyassetsandsafeguardtheirnormaloperation.Governmentsshouldconsiderincentivisingtheuptakeandimprovementofclimateriskassessmentsbyincludingtheminplanningandcorporatedisclosureregulationsaswellasinclimaterisk0.5%1.0%1.5%SSP1‐2.6SSP2‐4.5SSP1‐2.6SSP2‐4.5SSP1‐2.6SSP2‐4.5SSP1‐2.6SSP2‐4.52021203020502100Coal‐firedplantinsoutheastIndiaGas‐firedplantinsouthernVietNamRefineryinnorthernEuropeRefineryinUSGulfCoastIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2274stresstests.Regulators,centralbanksandmarketauthoritiesinjurisdictionssuchasBrazil,Canada,EuropeanUnion,Singapore,UnitedKingdomandUnitedStateshaveeitheralreadyimplementedmandatoryclimateriskassessmentsorannouncedtheirsupportforthem.Agrowingcatalogueofextremeweathereventscouldalsohavedirectimpactsonenergydemandinkeyend‐usesectors.RisingglobaltemperaturesarelikelytoincreaseenergydemandforcoolinginregionssuchassouthernEurope,southandsoutheastAsiaandtheMiddleEast,andairconditionerownershipissettoexpandrapidlyasaresult.Thismayputextrastrainonelectricitygridsattimesofpeakdemand.Coolingdemandinbuildingsalreadyaccountsforasmuchas30%ofpeakelectricityloadsinsomemajormarkets.Hightemperaturestendtoincreaseit,andthepowergridoperatorinTexas(UnitedStates)hadtotakeemergencymeasurestoavoidblackoutsduringaheatwavein2022.Periodsofintensecoldalsotendtoincreaseelectricitydemand.In2022,acoldsnapinAustralialedtoincreasedelectricitydemandthatstrainedthegridsystemandtriggeredthefirstevercurtailmentofgasexportsandactionstocapenergyprices.Governmentsneedtoacttoensurethatelectricitysystemshavetheabilitytoaccommodateandrecoverfromadverseimpactscausedbyextremeweatherevents.Makingreliableclimateandweatherdatapubliclyavailablecouldhelpenergysuppliersbetterunderstandpotentialclimaterisksandimpacts,andacombinationofregulationsandfinancialsupportcouldfacilitateprivateinvestmentinresiliencemeasures.Thereisalsoscopetoincentiviseswitchingtomoreresilienttechnologiessuchasdrycoolingsystemsforthermalpowerplants,newdesignswithenhancedventilationtoenablewindturbinestooperateattemperaturesofupto45°Candstate‐of‐artsolarPVcoolingtechnologies.Physicalsystemhardeninghasaparttoplaytoo,forexamplebyimprovingfloodwallsanddikesaroundpowerplantsandrelocatingsubstationstohighergroundandincreasingthespillwaycapacityathydropowerfacilities.Deployingwindpowerplantswithstrongertowers,customisedrotorsizesandreinforcedfoundationsinareaspronetotropicalcyclonescanalsohelp.Improvementofelectricitynetworkswithundergroundlines,upgradedtowersandhighlymeshedsystemscanalsoreducepotentialphysicaldamagesfromextremeweatherevents.Ouranalysissuggeststhatthebenefitsofthesemeasureswouldgenerallyoutweighthecostsoverthelongerterm.Nonetheless,itneedstobenotedthatreducingemissionsisoneofthemostpowerfulmeasurestolimittheexposureofenergyinfrastructuretovariousclimaterisks.IEA.CCBY4.0.228InternationalEnergyAgencyWorldEnergyOutlook20224.10Providestrategicdirectionandaddressmarketfailures,butdonotdismantlemarketsGovernmentshavetotaketheleadinensuringsecureenergytransitions,buttheycanbesignificantlyassistedbywell‐functioningmarketsandmarketmechanismsthatreflectthecostsofpollution,bybringinginprivatecapitalandallocatingitefficiently.Howshouldgovernmentsviewtheroleofmarketsindeliveringreliableandsecureenergytransitions?Forsome,theurgencyoftacklingclimatechangepointstowardsastronglyinterventionistroleforpolicyandregulationindeterminingwheretheenergysectorneedstogo;theseverityoftoday’senergysecuritycrisisarguablysupportsthatview.Interventionisundoubtedlyrequiredtodeliveremissionsreductionsandsecurityofsupply.Yetthemuchneededtransformationoftheenergysystemisunlikelytobeefficientifitismanagedonatop‐downbasisalone,especiallygiventhescaleoftheinvestmentrequired.Onewayoranother,governmentsneedtoharnessthevastresourcesofmarketsandincentiviseprivateactorstoplaytheirpart.Todothiseffectivelytheyneedtoputinplacestable,predictablelong‐termmarketframeworksdesignedtosupporttheachievementoftheirgoals.Oneearlytaskforgovernmentsistoeliminatedistortionsandbarriersthatactivelyhinderenergytransitionssuchaslengthypermittingprocedures,unnecessarytradebarriers,inefficientfossilfuelsubsidies,andoutdatedmarketarrangementsthatfavourincumbentproducersandtechnologies.Fossilfuelsubsidiesremainpervasive,despitelongstandingeffortstophasethemout,includingacommitmentintheGlasgowClimatePacttoaccelerateeffortsfortheirremoval(Box4.4).Box4.4⊳FossilfuelsubsidiesarebackontheriseFossilfuelsubsidiesarearoadblocktoamoresustainablefuture,butthedifficultythatgovernmentsfaceinremovingthemisunderscoredattimesofhighandvolatilefuelprices.Consumersdemandprotectionfromarisingcostofliving,andthereisasocialimperativetoprotectthemostvulnerableinsociety.Intheshortterm,governmentshavefewinstrumentsattheirdisposaltorespondsotheytendtointervenetofixpricesortemporarilysuspendleviesorothertaxes.Inadditiontotheseshort‐termmeasures,somegovernmentshabituallykeepthepricesforcertaincategoriesoffuelsatlowlevels.Whentheseinterventionsholdend‐userpricesbelowareferencepricethatreflectsthemarketvalueoftheenergysourceinquestion,thenweconsiderthesetobeafossilfuelconsumptionsubsidy.TheIEAhastrackedthesesubsidiesformanyyearsand,afteranoticeabledipin2020,theywereontheriseagainin2021(Figure4.22).Theglobalenergycrisiswillcertainlypromptanothersharpincreaseintheestimatefor2022.Oneofthemostvisiblecostsoffossilfuelconsumptionsubsidiesisthefiscalburdenthatitimposesoncountries.ThishasbeenparticularlysevereamongfuelimportingcountriesIEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2294in2022.Forexample,inMalaysia,thegovernmentestimatesthatthebudgetforfuelsubsidieswillreachMYR30billion(aroundUSD7billion)in2022,whichisequivalentto12%ofnationalfiscalrevenue;MYR5billion(aboutUSD1billion)wasspentinJunealone.InIndonesia,statesubsidyspendingin2021surpassedthebudgetallocationby40%,andissettodothesameagainin2022.Infuelexportingcountries,thesubsidyistheopportunitycostofforegonerevenue,ratherthananexplicitbudgetitem.Thelessvisiblecostsarefeltinthewaythatsubsidiesencourageexcessconsumptionoffossilfuels,andthedistortedincentivesthattheyintroduceforinvestment.Pricingreformisessential,butpoliticallydifficult;lowcostfuelsareoftenpartoftheimplicitsocialcontractinmanydevelopingeconomies,especiallythosewithlargehydrocarbonresources.Subsidyremoval,onitsown,isablunttool,soeffortsinthisareaneedtobepartofabroaderstrategythatincludesefficiencypoliciestoimprovethesupplyofmoreenergy‐efficientgoodsandservicesaswellasmeasurestoprotectvulnerablegroups.Thereareanumberofexamplesofsuccessfulreformforcountriestodrawupon.Forexample,theUnitedArabEmiratesstartedtograduallyphaseoutgasolineanddieselsubsidiesin2015,whenglobaloilpriceswererelativelylow,thussmoothingtheimpactoncitizensaffectedbythereform.By2022,gasolineanddieselpricesinthecountrywereneartheglobalaverage.Figure4.22⊳FossilfuelconsumptionsubsidiesinselectedcountriesIEA.CCBY4.0.Highfossilfuelpricesandadditionalmeasurestoprotectconsumersduringtheenergycrisisaresettoleadtoafurthersharpincreaseinfossilfuelsubsidiesin2022Notes:MER=marketexchangerate.Fossilfuelconsumptionsubsidiesinthefollowingcountriesareincludedinthisanalysis:Algeria,Angola,Argentina,Azerbaijan,Bahrain,Bangladesh,Bolivia,Brunei,China,Colombia,Ecuador,Egypt,ElSalvador,Gabon,Ghana,India,Indonesia,Iran,Iraq,Kazakhstan,Korea,Kuwait,Libya,Malaysia,Mexico,Nigeria,Pakistan,Qatar,Russia,SaudiArabia,SouthAfrica,SriLanka,ChineseTaipei,Thailand,TrinidadandTobago,Turkmenistan,UnitedArabEmirates,Ukraine,Uzbekistan,VenezuelaandVietNam.200400600800201020112012201320142015201620172018201920202021BillionUSD(2021,MER)IEA.CCBY4.0.230InternationalEnergyAgencyWorldEnergyOutlook2022Improvingmarketfunctioningrequiresattentiontobepaidtothechangingnatureofenergymarkets,especiallyinelectricitywheremoreandmorevariablerenewablesarebeingaddedtosystems,complementedbymoreexpensivebutdispatchablesourcesofgenerationtoensurereliability.Mostofthelatterarecurrentlynaturalgas‐firedplants,andthecurrentenergycrisishassparkedadebateinmanycountriesaboutthemeritsofamarketdesigninwhichexpensivegas‐firedpowerhaspushedwholesalepricestoveryhighlevels.AstheenergyregulatoryauthorityintheUnitedKingdomrecentlyconcluded,currentwholesaleelectricitymarkets“maynotbeconfiguredtodelivernetzeroatlowestcosttoconsumers”(Ofgem,2022).Anotherimportantjobforgovernmentsistointervenetocorrectformarketfailures.Theoverconsumptionoffossilfuelsthatcauseclimatechangeisatextbookexample.Ineffect,theabsenceofapriceforcarbonmakescleanenergytechnologieslesscompetitive,slowingthetransitionfromfossilfuels,accentuatingenergysecurityvulnerabilitiesandultimatelyaddingtothedamagedonebyclimatechange.Puttingapriceoncarbonisonewaytointernalisetheseexternalcosts;forthemoment,however,lessthanone‐quarterofglobalenergyconsumptioniscoveredbyacarbonpriceofsomedescription.Carbonpricinghasprovedpoliticallydifficulttoimplementinmanycountriesandsectorsand,whereitexists,inmostcasesitplaysasupplementaryroleamongabroadersuiteofregulatorymeasuresandtargets.Technologyinnovationandearlystagedeploymentisanareawheremarketstendtounderinvestbecauseofhighcostsandrisks.Deployingpublicfundsorprovidingtaxincentiveshelpstocounteracttheseobstacles;inordertogettonetzeroemissionsby2050,innovationcyclesforearlystagecleanenergytechnologiesneedtobemorerapidthanhastypicallybeenachievedhistorically.Bringingearlystagecleanenergytechnologiestomarketby2030requiresgoingfromfirstprototypetomarketaround20%fasteronaveragethanthequickestenergytechnologydevelopmentsinthepast,andaround40%fasterthanwasthecaseforsolarPV.Demonstrationprojectsinsectorswhereeconomiesofscalefavourlargeinstallations,suchasforsustainablefuelsandindustrialdecarbonisation,aregenerallythehardesttofundwithoutpublicsupport(IEA,2022g).Theoverallscaleofinvestmentrequiredtogettoanetzeroemissionsenergysystemiswellbeyondthecapacityofgovernmentstomobilisedirectly.Overthecourseofthecurrentdecade,investmentinkeyelementsofenergytransitionsneedsto–atleasttriple–inordertogetontrackfornetzeroemissionsby2050.Privatecapitalwillhavetoprovidethebulkoftheinvestment,althoughpublicfinanceinstitutionswillbeessentialinanumberofmarketstocatalysethisspendingandhelpimprovethebankabilityofcleanenergyprojectswheretheprivatesectordoesnotyetseetherightbalanceofriskandreward(Figure4.23).Overall,weestimatethat70%oftheinvestmentrequiredinenergytransitionsneedstocomefromprivatesources.Thisdoesnotmeanleavingeverythingtothemarket:over95%ofcurrentinvestmentsintheelectricitysectorworldwiderelyonregulatedrevenuesormechanismstomanagepricerisks.Butcompetitiveprocurement,suchasauctions,isvitaltodeliverefficientinvestmentonthisscale,andtokeepcostsdownforconsumers.IEA.CCBY4.0.Chapter4Energysecurityinenergytransitions2314Figure4.23⊳SourcesoffinancebysectorintheNZEScenario,2026-2030IEA.CCBY4.0.Publicfinance,thoughitsrolevariesbysector,cannotcovermorethanafractionoftotalinvestmentrequirements,yetitneedstoactasacatalystforprivatecapitalProceedingwithenergytransitionsinasecurewayalsorequiresworkbygovernmentstosetframeworksandtoco‐ordinateactions.Theenergysectorinmostcountriesconsistofamixofregulatedmonopolies,state‐ownedenterprisesandmarket‐drivenprivateplayers,whiletransitionsrequireinvolvementfromvariouslevelsofgovernmentandbuy‐infromconsumers.Marketswillneedtobeguidedbyoverallgovernmentstrategyandtooperatewithinregulatoryframeworksinformedbythisstrategyinordertoensurecoherentandwell‐sequencedactionsacrossmultipleareas(seesection4.5).Well‐functioninginternationalmarketsarealsovaluabletoenergysecuritybecausetheyallowtradeflowstorespondtopricesignalsandscarcity.Thiswasdemonstratedin2022whenhighernaturalgaspricesinEuropewereabletoattractadditionaldestination‐flexibleLNGcargoes,albeitattheexpenseofbuyerselsewhere.Therearealsohopesthatinternationalcarbonmarketsmayplayapositiveroleinadvancingenergytransitions,nowthatgovernmentshavereachedanagreementontherulesgoverninginternationalcarbonmarkets(Article6oftheParisAgreement)atCOP26.Around85%ofneworupdatedNationallyDeterminedContributions(NDCs)haveindicatedthattheyplantouseorwillpossiblyusethesemarketstoreachandgobeyondNDCsambition,andvoluntarymarkets–mostlyusedbycorporateentities–havealsobeenexpandingrapidly.Thesemarketsarestilldeveloping,andwillneedmoretransparencytocounterscepticismabouttheirenvironmentalintegrityiftheyaretoflourish,butcouldplayausefulroleincomplementinglarge‐scaledirectmitigation.20%40%60%80%100%EnergyefficiencyLow‐emissionsfuelsSolarPVWindElectricitynetworksPrivatePublicIEA.CCBY4.0.232InternationalEnergyAgencyWorldEnergyOutlook2022ConclusionTheglobalenergysectorisgoingthroughafundamentaltransformation.Whilemovingtowardsnetzeroemissionsbringsclearandsustainedsecuritybenefits,theprocessoftransitionalsoentailsrisks.Asenergysystemsbecomemoreinterconnected,complexanddiverse,newsecurityconsiderationsareemergingalongsidetraditionalenergysecurityrisks.Thetraditionalwatchwordsforenergysecurity–notablytheimportanceofdiverseenergysources,suppliesandroutes–remainasrelevantasever,buttheyarejoinedbynewconsiderationsandchallenges.Tacklingnewpotentialhazardsmaylookdauntinginlightofthecurrentcrisis,butignoringthemwouldbeinfinitelyworse.Itisworthrememberingthat,althoughthecrisisinthe1970sbroughtagreatdealofeconomicdifficultyandhardship,italsoactedasatriggerforenergydiversificationandrapidtechnologicalinnovation.Itshouldalsobenotedthatasecureenergysystemcanonlybeachievedwithproperinvestmentinsecuritymechanismsthatprovideappropriatebuffersinthesystem.Sincetheoilcrisisinthe1970s,theworldhaslonginvestedintraditionalaspectsofenergysecurity,includingthefoundationoftheIEA,whichprovidedabackboneoftoday’senergysecurityframework.Thecurrentenergycrisisreaffirmstheneedtoinvestintheframeworkthatanticipatesnewenergysecurityrisksinaneraofdecarbonisation.IEA.CCBY4.0.Chapter5Outlookforenergydemand233Chapter5OutlookforenergydemandOldhabitshardtokick?AgloomyeconomicoutlookleadstolowerprojectionsofenergydemandgrowthinthisOutlookthaninlastyear’sedition.Highenergyprices,heightenedenergysecurityconcernsandstrengthenedclimatepoliciesareputtinganendtoadecadeofrapidprogressionfornaturalgas;itsannualdemandgrowthslowsto0.4%fromnowto2030intheStatedPoliciesScenario(STEPS),downfrom2.3%from2010to2019.Coalseesatemporarysurgeindemandinsomeregionsfromthepowerandindustrysectorsinresponsetoincreasesinnaturalgasprices,buteffortstoreduceemissionssoonputcoalintodeclineagain,endingthedecadewithdemand9%lowerthantoday.Renewables,notablysolarPVandwind,gainthemostgroundofanyenergysourcethisdecade,accountingfor43%ofelectricitygenerationworldwidein2030,upfrom28%today.Oildemandrises0.8%peryearto2030,butpeakssoonafterataround103millionbarrelsperdayaselectricvehicles(EVs)andefficiencygainsundermineitsprospects.Thetoneforacceleratedcleanenergydevelopmentthisdecadeinadvancedeconomiesisbeingsetbynewpolicypackagesandgovernmentplansandtargets,notablythosesetoutin:InflationReductionAct(UnitedStates);RePowerEUplanandFitfor55package(EuropeanUnion);ClimateChangeBill(Australia);andGXGreenTransformation(Japan).WhilenotallnationalenergyandemissionstargetsarereachedintheSTEPS,advancedeconomiesstillseedecliningdemandforallfossilfuelsby2030–afirstintheSTEPS.However,thesemeasurestaketimetorollout.Short‐termactionsareneededtoreducedependencyonfossilfuelimportsthiswinter,especiallyinEurope,whichincludesanimportantroleforconsumersintermsofbehaviourchange.Inemergingmarketanddevelopingeconomies,demandforfossilfuelrisesmoreslowlythaninpreviousversionsoftheSTEPS,notablyfornaturalgasinAsia.TheslowdowninfossilfueldemandgrowthisledbyChina,whereslowingeconomicgrowthandpolicyeffortsleadtoapeakinemissionsduringthisdecade.IntheAnnouncedPledgesScenario(APS),fossilfuelusedeclinesfurtherby2030thanintheSTEPSontheassumptionthatcountriesmeettheirnationalnetzeroemissionspledges,includingthoseannouncedbyIndiaandIndonesiasincetheWorldEnergyOutlook2021(WEO‐2021).AllsectorsaccelerateprogressonelectrificationandenergyefficiencycomparedtotheSTEPS,withnotableaccelerationofEVsandelectricheatinginthetransportandbuildingssectors.Renewablesmeanwhileriserapidlyinthepowersectorandaccountfornearly50%ofelectricitygenerationby2030.Theseoutcomesrequireend‐userstospendmoreupfrontintheAPSonefficientandlow‐emissionsequipment,butthecostofthisequipmentdeclinesfasterintheAPSthanintheSTEPSduetoeconomiesofscale.SUMMARYIEA.CCBY4.0.234InternationalEnergyAgencyWorldEnergyOutlook2022Energy‐relatedemissionsintheSTEPScontinuetoincreaseinthenexttwoyearsbeforestartingtodeclineinthemid‐2020s.Theyfallto36.2gigatonnesofcarbondioxide(GtCO2)in2030–slightlybelowcurrentlevels.IntheAPS,theyaredownfurtherto31.5GtCO2by2030asgovernmentstakeearlyandambitiousactionwiththeaimofdeliveringsignificantreductionsinemissionsinthisdecade,togetherwithimprovementsinairquality.TheprivatesectorplaysanimportantroleintheAPS,withalmost800companiespledgedtoreachnetzeroemissions,includingthroughsector‐wideinitiativesforsteel,cement,aviationandshipping.However,eventheactionsintheAPSarewellshortofwhatisneededintheNetZeroEmissionsby2050(NZE)Scenario.Inthedevelopingworld,highpricesandinflationareslowingprogresstowardsuniversalaccesstomodernenergy.Thenumberofpeoplewithoutelectricityislikelytorisein2022forthefirsttimeindecades.Setbacksinsub‐SaharanAfricathreatentoerasenearlyalltheprogressmadetheresince2013.Meanwhilesurgingpricesforliquefiedpetroleumgas(LPG)maydriveupto100millionpeoplethatuseitforcookingtoreverttotraditionalfuels.Theseheadwindsmeanthattheprojectednumberofpeoplewithoutaccessin2030ishigherintheSTEPSthisyearthanitwasintheWEO‐2021.TheAPSprojectsmoreprogress,butachievingallrelevantcountry‐levelaccesstargetsstillonlygetshalfwaytouniversalaccessforbothelectricityandcleancookingby2030.Fullachievementofuniversalaccessby2030willrequiremoreambitioustargets,effectiveimplementationmeasuresandhigherlevelsofinvestment.Around5billionpeoplelivetodayinareaswithsubstantialneedsforspacecooling.However,onlyone‐thirdofhouseholdshaveanairconditioner,mostlyinadvancedeconomies.By2050,climatechangeandpopulationgrowthincreasethenumberofpeoplewithsubstantialcoolingneedsto7billion.Electricitydemandforspacecoolingapproaches5200terawatt‐hours(TWh)intheSTEPSasthenumberofairconditionersrisesfromthecurrent1.5billionto4.4billionby2050,with90%oftheincreaseinemergingmarketanddevelopingeconomies.Growthindemandiscutbymorethan50%intheAPSasaresultofdeterminedeffortstoimprovetheefficiencyofairconditionersandwiththeuseofpassivecoolingmeasuresinbuildings.Peakoildemandmovesforwardfromthemid‐2030sintheSTEPStothemid‐2020sintheAPS,largelyasaresultofthefasteradoptionofEVs.IntheAPS,EVsaccountforover35%ofglobalcarsalesby2030,andformorethan50%ofsalesinChina,theEuropeanUnionandtheUnitedStates.Asaresult,theelectriccarmarketin2030issix‐timesitssizein2021.Thisreflectstargetstophaseoutinternalcombustionengine(ICE)vehiclesin36countriesaswellasplansbymajormanufacturerstopivottoEVproduction.IEA.CCBY4.0.InternationalaviationandshippingEuropeanUnionUnitedStatesOtheradvancedeconomiesSoutheastAsiaMiddleEastIndiaChinaAfricaOtheremergingmarketanddevelopingeconomiesEJ0-20-402040GtCO20-2-424DecouplingemissionsfromgrowingdemandRenewablesarethefastestgrowingenergysourceinmanyregions,andCO2emissionsfallto36.2GtintheSTEPS–slightlybelowcurrentlevels,andto31.5GtintheAPS,a14%reductioncomparedtocurrentlevels.CleancookingElectricity0.750.660.29Billionpeoplewithoutaccessto...APS20300.78STEPS20301.8820212.38UniversalaccessinNZE2030201019STEPS202130APS202130CoalOilNaturalgasRenewablesCO2emissionsProgressingtowardsuniversalaccesstomodernenergyProgressmadeintheSTEPSby2030fallsshortofcountries’targetsintheAPS.TheAPSisalittleoverhalfwaytoreachingSDG7.1:universalaccesstocleancookingandelectricity.236InternationalEnergyAgencyWorldEnergyOutlook2022IntroductionThecurrentenergycrisisisreshapingpreviouslywell‐establisheddemandtrends.Industriesexposedtoglobalpricesarefacingrealthreatsofrationingandarecurbingtheirproduction.Consumersareadjustingtheirpatternsofenergyuseinresponsetohighpricesand,insomecases,emergencydemandreductioncampaigns.Policyresponsesvary,butinmanyinstancestheyincludedeterminedeffortstoacceleratecleanenergyinvestment.Thismeansanevenstrongerpushforrenewablesinthepowersectorandfasterelectrificationofindustrialprocesses,vehiclesandheating.1Asmanyofthesolutionstothecurrentcrisiscoincidewiththoseneededtomeetglobalclimategoals,thecrisismayendupbeingseeninretrospectasmarkingacriticalturningpointinthedriveforbothenergysecurityandemissionsreductions.Thischapterexploreshowthesedevelopmentscometogethertoreshapeenergydemandtrends.Inthefirstpart,projectionsintheStatedPoliciesScenario(STEPS)andAnnouncedPledgesScenario(APS)areexaminedbyfuel,byregionandbysector,withaparticularfocusontheperiodto2030,andarecomparedtothosefromtheNetZeroEmissionsby2050(NZE)Scenario.ThechapteralsoanalyseshowCO2emissions,airpollutionandinvestmentarebeingaffectedbynewdevelopments,andlooksatwhatfurtheractionisneededtomeetnationalnetzeroemissionspledges.Inthesecondpartofthechapter,threekeythemesareexplored:howthecurrentcrisisisaffectingthedrivetoachieveuniversalaccesstoelectricityandcleancooking;howenergyefficiencypoliciescantemperelectricitydemandforcooling;andhowtherapiduptakeofEVsisleadingtoanearlierpeakinoildemand.Scenarios5.1OverviewHighenergyprices,asoberingeconomicoutlookandpolicyresponsestoenergysecurityconcernsleadtolowerprojectedenergydemandgrowthto2030inthisSTEPSandAPSthanintheWEO‐2021.Consumersareforgoingpurchasesinthefaceofmarketuncertaintyandhighprices,andindustryisscalingbackproduction.Thedurationoftheenergycrisisremainshighlyuncertain,butthereislikelytobeacorrelationbetweenitsdurationandthedamageitdoestolong‐termeconomicprospects.Economicgrowthto2030isslowerthanpreviouslyprojected,whichmeanslowerlevelsofactivityinallsectorsandinturnlowerenergydemandgrowth.DespiteastrongeconomicreboundfromtheCovid‐19pandemicin2021,thecurrentcrisishasreducedprojectionsofglobalGDPgrowthto3.3%peryearthroughto2030(seeChapter2).EnergydemandrisesmoreslowlyinboththeSTEPSandAPSasaresult,andtheenergysourcesusedtomeetthisdemandchangesubstantiallyfrompreviousprojections.IntheSTEPS,theworldgrappleswithtoday’senergypriceshocks,withsomeregionsrevertingtoprevioustrendswhileotherswithstrongerdecarbonisationpoliciesseeafastershifttorenewablesandend‐use1TheFutureofHeatPumps,aforthcomingWorldEnergyOutlookSpecialReportwillbepublishedinlate2022.IEA.CCBY4.0.Chapter5Outlookforenergydemand2375electrification.PrimaryenergydemandissettoincreaseintheSTEPSbyaround1%ayearto2030,whichislargelymetthroughincreaseduseofrenewables(Figure5.1).TheAPSseesthesametrends,butgovernments,companiesandcitizenstakeadditionalmeasurestoensurethattheresponsetothesetrendsisconsistentwithlong‐termclimateambitions,whichhavebeenstrengthenedbynewcommitmentssincetheWEO‐2021(seesection5.3).IntheAPS,energydemandissettoincreaseby0.2%ayearto2030.Figure5.1⊳TotalenergysupplybyfuelandCO2emissionsbyscenarioIEA.CCBY4.0.Renewableenergyincreasesmorethananyotherenergysourceineachscenario;CO2emissionsholdatcurrentlevelsintheSTEPSto2030,butdrop14%intheAPSNotes:EJ=exajoule;GtCO2=gigatonnesofcarbondioxide;STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.NaturalgasseesthelargestslowdownofanyfuelintheSTEPScomparedtotheWEO‐2021,withannualgrowthfallingtoaround0.4%from2021to2030,endingthedecadewithdemandataround4400billioncubicmetres(bcm)peryear.Concernsaboutenduringhighpriceshavelastingeffectsacrossallsectors.Newgaspowerplantconstructionslows,withcountriesoptingforothersourcestomaintainsystemadequacyandflexibilitywhileacceleratingrenewablesinparallel.Energydemandinindustryalsoslowsinthefaceofastrongerpushfortheelectrificationofnewindustrialcapacity.Policyinterestincompressednaturalgas(CNG)vehicleswanes,andglobaleffortstoreducenaturalgasuseacceleratetheelectrificationofheatinginbuildings.IntheAPS,naturalgasusebeginstodeclinethisdecadeanddemandfallstolessthan3900bcmin2030,an8%reductionfromcurrentlevels.Emergingmarketanddevelopingeconomiesstillseegrowth,butthisismorethanoutweighedbyadvancedeconomiesusing460bcmlessnaturalgasin2030thantoday,withthedecreasesprimarilyinthepowerandbuildingssectors.IntheNZEScenario,naturalgasdeclinestounder3300bcmby2030aspoliciesrestrictthesaleoffossilfuelboilersinbuildingsafter2025andastheuseofrenewablesinpowergenerationaccelerates.102030402004006008002021STEPSAPS2030NZESTEPSAPS2050NZEGtCO₂OtherRenewablesNuclearNaturalgasOilCoalCO₂emissionsEJ(rightaxis)IEA.CCBY4.0.238InternationalEnergyAgencyWorldEnergyOutlook2022Coaldemandreboundedstronglyin2021toover5600milliontonnesofcoalequivalent(Mtce)aseconomiesrecoveredfromthepandemicandassomecountries–notablyIndiaandChina–turnedtodomesticallyproducedfuelsourcesintheinterestsofaffordabilityandenergysecurity.Thissurgeisnotalong‐termoneinanyofourscenarios.IntheSTEPS,coaldemandremainsnearitshistoricpeakforthefirst‐halfofthedecade,butreturnstostructuraldeclineinthesecond‐halfofthisdecade.Increaseddemandinindustryto2030isconcentratedinemergingmarketanddevelopingeconomies,wherecoalalreadyaccountsfor35%ofenergyuseinindustry.IntheAPS,coaldemanddeclinesmorerapidly,fallingby175Mtceeachyearfrom2025to2030to4540Mtcein2030,comparedwith5150MtceintheSTEPS.Coalusefallsinpowergenerationastheuseofrenewablesincreases.Italsodeclinesinindustry,wherethereisanaccelerationofgreensteelproduction,ageneralshiftawayfromcoalincementkilnsandasharpreductionintheuseofcoalfortheprovisionoflow‐temperatureheatinlightindustries.IntheNZEScenario,coaldemandfallstoaround3000Mtcein2030andallcoalsubcriticalpowerplantsarephasedoutbythatdate.Oildemandissettoincreaseby0.8%peryearthisdecadeintheSTEPS,buttheuptakeofEVscausesoildemandtopeakataround103millionbarrelsperday(mb/d)inthemid‐2030sasdecliningdemandinadvancedeconomiesoutweighscontinuingdemandgrowthinemergingmarketanddevelopingeconomies.IntheAPS,oildemandreachesapeakinthemid‐2020sassalesofpassengerEVsrisereflectingnationalandcorporatetargets,withcurrentoilpricesandpolicysupportincreasingconsumerappetiteforall‐electricorplug‐inhybridvehicles.EVsaccountfor20%ofglobalcarsalesby2025,upfrom9%today(seesection5.8).IntheNZEScenario,oildemanddeclinesto75mb/din2030astheroadtransportsectorundergoesrapidelectrification,andelectriccarsaccountfor60%ofglobalcarsalesby2030.RenewablescontinuetheirrapidascentintheSTEPS,expandingfasterthananyothersourceofenergy.Acceleratedelectrificationcreatesmoreheadroomforrenewablesandtheyincreasinglyout‐competeothersourcesofgenerationinmostregions.Theshareofrenewablesinelectricitygenerationrisesfrom28%in2021to43%in2030,withwindandsolarPValoneaccountingfornearly90%oftheincreaseinelectricitygenerationto2030.IntheAPS,renewablesdelivernearly50%ofpowergenerationgloballyby2030astheG7countriesmakeprogresstowardsachievingtheircommitmenttodecarbonisepowerby2035.Theincreaseofrenewablesworldwideoutpaceselectricitydemandgrowthto2030intheAPS,decreasingtheshareoffossilfuelgeneration.WindandsolarPVcontinuetodominatethegrowthinrenewableelectricity,complementedmainlybyhydropower,bioenergyandgeothermal.Theuseofbiofuelsalsoincreasesto5.5millionbarrelsofoilequivalent(mboe/d)in2030from2.2mboe/dtoday,aidedbywideradoptionofblendingrequirements.IntheNZEScenario,windandsolarPVexpandevenmorerapidly;by2030annualcapacityadditionsexceed1050gigawatts(GW).Nuclearpowergenerationincreasesby2030inboththeSTEPSandAPS,withChinaaccountingforthelargestgrowth.(SeeChapter6,section6.3andIEA,2022a).Theuseoflow‐emissionshydrogenandhydrogenbased‐fuelsalsoincreaseby2030,thankstoearlyIEA.CCBY4.0.Chapter5Outlookforenergydemand2395commercial‐scaleprojectsinindustryinitiatedbyemergingpublic‐privatepartnerships(Box5.1).IntheNZEScenario,theuseoflow‐emissionshydrogenandhydrogen‐basedfuelsisthree‐timeshigherin2030thanintheAPS.Inaggregate,thesetrendsareprojectedtoincreaseenergy‐relatedCO2emissionsintheSTEPSinthecomingyears,althoughemissionsarestillsettopeakby2025.Emissionsthenfallto36GtCO2by2030,0.4GtCO2lowerthantoday(Table5.1).IntheAPS,annualCO2emissionspeakbefore2025andthenfallto32GtCO2by2030.ProgressismadeonaccesstoelectricityandcleancookingintheAPSasthepledgesmadebyvariouscountriesaremetinfull,butstillfallsshortofachievinguniversalaccessby2030(seesection5.6).Table5.1⊳Keyenergyindicatorsbyscenario,2010-2050STEPSAPSNZE20102021203020502030205020302050Access(millionpeople)Populationwithoutaccesstoelectricity139275466372729211200Populationwithoutaccesstocleancooking291623861880160178353500Prematuredeathsfrom(millionpeople):Ambientairpollutionn.a.4.24.87.14.66.53.32.9Householdairpollutionn.a.3.62.93.01.61.91.01.2Energy‐relatedCO2emissions(Gt)32.936.636.232.031.512.422.80CO2capturedviaCCUS00.040.10.40.54.31.26.2Primaryenergysupply(EJ)542624673740636629561532Shareofunabatedfossilfuels81%79%74%61%69%34%59%10%EnergyintensityofGDP(GJperUSD1000,PPP)5.14.33.42.23.21.92.91.6Electricitygeneration(1000TWh)2228355036613873CO2intensityofgeneration(gCO2/kWh)52445932515828041165‐5Shareoflow‐emissionsgeneration32%38%53%74%59%91%74%100%Totalfinalconsumption(EJ)383439485544451433398337Shareofunabatedfossilfuels69%66%64%57%61%36%56%15%ShareofelectricityinTFC17%20%22%28%24%39%28%52%Notes:Gt=gigatonnes;CCUS=carboncapture,utilisationandstorage;EJ=exajoule;GJ=gigajoule;PPP=purchasingpowerparity;TWh=terawatt‐hour;kWh=kilowatt‐hour;TFC=totalfinalconsumption.STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.Box5.1⊳Reportingvolumesoflow-emissionshydrogenNearlyallhydrogenproducedtodaycomesfromfossilfuelsconvertedwithinindustrialfacilitiessuchasrefineriesandchemicalplants.Muchofthisisonsiteproduction,whichmeanstheenergybalancesforthesesectorsreportonlythepurchasedfuelinput,suchasnaturalgas,andnothowmuchhydrogenisproducedorused.Theincreasinginterestinnewmethodsofproducingandconsuminghydrogenmeansthatalternativereportingprocessesareneededtoenableafullunderstandingoftherolesthathydrogenplaysintheglobalenergyeconomyinvariousscenarios.IEA.CCBY4.0.240InternationalEnergyAgencyWorldEnergyOutlook2022ThisOutlookonlyreportsvolumesoflow‐emissionshydrogen(Table5.2).Thistypeofhydrogenisproducedfromelectricitygeneratedbyrenewablesornuclear,frombioenergy,orfromfossilfuelswithminimalmethaneemissionsandusedwithcarboncapture,utilisationandstorage(CCUS)orproducedviapyrolysis.Itcanbeusedasafuelorchemicalfeedstock,ortransformedintootherenergycarriers,includingelectricity,oilproducts,biofuelsandlow‐emissionshydrogen‐basedfuels(ammonia,methanol,synthetickeroseneandsyntheticmethane).Low‐emissionsammoniaistreatedasaliquidfuel.Low‐emissionshydrogenreportedinfinalenergyconsumptionincludesthosevolumesproducedinonefacilityandtransportedtoanother,typicallyunderamerchantcontract.Totallow‐emissionshydrogenproductioniscalculatedbyaddingthevolumesoflow‐emissionshydrogeninfinalenergyconsumptiontovolumesproducedonsiteandthevolumesusedtoproduceotherenergycarriers.Reportedtradevolumesincludebothlow‐emissionshydrogenandlow‐emissionshydrogen‐basedfuels.Table5.2⊳Supplyanddemandoflow-emissionshydrogenandfuelsSTEPSAPSNZEMthydrogenequivalent(energybasis)203020502030205020302050Totallow‐emissionshydrogenproduction6243022590452Waterelectrolysis4172116758329FossilfuelswithCCUS2895731122Bioenergy000102Transformation310149550186Topowergeneration014192760Tohydrogen‐basedfuels0366918118Tooilrefining253624Tobiofuels111133Demandbyend‐usesector3151613140266Totalfinalconsumption110128031174Onsiteproduction24451992Low‐emissionshydrogen‐basedfuels033551596Totalfinalconsumption01339768Powergeneration02016828Trade154441873IEA.CCBY4.0.Notes:Mt=milliontonnes.1Mthydrogen=120petajoules.Transformationtohydrogen‐basedfuelsincursenergylossesthatarethedifferencebetweenhydrogeninputstohydrogen‐basedfuelsandthedemandforthesefuels.IEA.CCBY4.0.Chapter5Outlookforenergydemand24155.2EnergydemandRegionaltrendsEnergydemandinadvancedeconomiesdeclinesovertherestofthisdecadebyaround0.5%peryearintheSTEPS.IntheAPS,renewablesandelectrificationincreasefaster,andfossilfueldemandis17%lowerin2030thanintheSTEPS.Energydemandisprojectedtocontinuetoincreaseinemergingmarketanddevelopingeconomiesbyover1.4%peryearintheSTEPSthroughto2030:ChinaandIndiaaloneaccountingfornearlyhalfofthisgrowth.Renewables,onaverage,meetoverhalfoftheoverallincreaseinenergydemand.DemandalsoincreasesintheAPS,althoughatthelowerrateof0.7%peryear.ThesedivergenttrendsinadvancedeconomiesandinemergingmarketanddevelopingeconomiesleadtopercapitaenergydemandinChinarisingabovethelevelinEuropeinboththeSTEPSandtheAPSby2030,butthechangesarenotlargeenoughtobringanyothermajoralterationsinexistingregionalpatternsofenergyuse(Figure5.2).IntheUnitedStates,theInflationReductionActandtheBipartisanInfrastructureActtogetheraresettoprovidenearlyUSD560billioninpublicsupportforcleanenergy,withtheInflationReductionActalonecontributingroughlyUSD370billion,mobilisingmuchmoreinprivateinvestment.Thishelpstospurprogress.IntheSTEPS,coaldemandfallsbythree‐quartersto2030,largelydrivenoutbyincreasingsharesofsolarPVandwind(Figure5.3).Naturalgasdemandincreasesforafewyears,butpeaksbefore2030,andendsthedecadejustunderthelevelitreachedin2021.Oildemandfallsby1mb/dfromnearly18mb/dtodaytonearly17mb/din2030,drivenlargelybyrisingEVsales(EVsaccountfor30%ofcarsalesin2030)andfueleconomyimprovements.IntheAPS,amorerapiduptakeofEVs–accountingfor50%ofcarsalesin2030–bringsaboutareductioninoildemandofover1mb/dbytheendofthedecade.IntheEuropeanUnion,climatepolicies,highfossilfuelpricesandeffortstoreduceimportdependencyonRussiacombinetoreducefossilfueldemand,despiteatemporaryresurgenceofcoalinthecurrentcrisis(Spotlight).GovernmentspendinginfavourofcleanenergytransitionsenactedintheframeworkofnationalCovid‐19recoveryplansandenergycrisispackagescontributearoundUSD389billiontocleanenergyby2030,helpingspurthisreduction.IntheSTEPS,demandforcoaldeclinesbyaroundhalfbefore2030,anddemandfornaturalgasandforoilbyalmostafifth.WindandsolarPVexpandrapidly,andaccountforalmost30%and15%ofelectricitygenerationrespectivelyby2030,upfrom13%and5%in2021.NuclearpoweroutputintheSTEPSisconsistentwiththelatestannouncementsonclosuresandextensions.Reductionsinnaturalgasuseinbuildingsandindustryarealsoresponsibleforthedeclineinfossilfueldemand,togetherwithreductionsinoilusethatreflecttheriseinEVsales.IntheAPS,targetsintheFitfor55planarelargelymet–andinsomecasesexceeded–fulfillingtheEU'sNDCtoreduceGHGemissionsby55%by2030relativeto1990.IntheAPS,theuptakeofrenewablesaccelerates,andthecombinedshareofwindandsolarPVinpowergenerationintheEuropeanUnionrisesto50%in2030.EVsalesalsoriseatafasterratethanintheSTEPS.IEA.CCBY4.0.242InternationalEnergyAgencyWorldEnergyOutlook2022Figure5.2⊳TotalmodernenergysupplypercapitabyregionintheSTEPSandAPS,2021and2030IEA.CCBY4.0.Energysupplypercapitadeclinesinadvancedeconomiesto2030whileincreasingelsewhereasincomesrise,buttheshiftsaremodestandexistingregionalpatternsremainNotes:GJ=gigajoule;C&S=CentralandSouthAmerica.Modernprimaryenergydemandexcludestraditionaluseofsolidbiomass.Thecountry/regionalblocksshowonlypeoplewithaccesstomodernenergy.Japanisworkingtoreduceitsenergysecurityriskswhilepushingforwardwithitsclimateagendathroughmeasurestodecreaseexposuretoimportedfossilfuels,increaseitsshareofnuclearandrenewables,andimproveenergyefficiency.IntheSTEPS,thesepoliciesleadtoanannualdeclineintotalenergysupplyof1%inlinewiththetargetslaidoutintheStrategicEnergyPlanapprovedinOctober2021.IntheAPS,furtherelectrificationofindustryandboostedenergyefficiencyimprovementsbasedonthenewEnergyEfficientTechnologicalStrategiesandstrengtheningoftheTopRunnerprogrammereducedemand100200100020003000400050006000700080009000GJpercapitaMillionpeopleAfricaOtherdevelopingAsiaIndiaSoutheastAsiaC&SAmericaEuropeChinaMiddleEastEurasiaOtherAsiaPacificNorthAmericaNoaccesstomodernenergy100200100020003000400050006000700080009000GJpercapitaMillionpeopleNoaccesstomodernenergy2021100200100020003000400050006000700080009000GJpercapitaMillionpeopleSTEPS2030NoaccesstomodernenergyAPS2030IEA.CCBY4.0.Chapter5Outlookforenergydemand2435further,asdonewmaterialsstandardsforbuildingconstructionandfurtherelectrificationofthetransportsector,inlinewithnationaldecarbonisationpledges.DecarbonisationofthepowersectorintheAPSreflectstherecentGreenTransformationPlanthataimstostepuptherestartofitsnuclearreactorsandtointroducefurthermeasurestosupportmanufacturersofnucleartechnology.Figure5.3⊳Changeintotalenergysupplybyregion,fuelandscenario,2010-2019and2021-2030IEA.CCBY4.0.Advancedeconomiesshiftsignificantlyfromfossilfuelstorenewablesthisdecade,whiledemandforallsourcesrisesinmostemergingmarketanddevelopingeconomies‐20020402010‐192021‐30STEPS2021‐30APS2010‐192021‐30STEPS2021‐30APS2010‐192021‐30STEPS2021‐30APS2010‐192021‐30STEPS2021‐30APS2010‐192021‐30STEPS2021‐30APS2010‐192021‐30STEPS2021‐30APS2010‐192021‐30STEPS2021‐30APS2010‐192021‐30STEPS2021‐30APSCoalNaturalgasOilRenewablesNuclearOtherEJAfricaChinaIndiaEuropeanUnionSoutheastAsiaUnitedStatesMiddleEastJapanIEA.CCBY4.0.244InternationalEnergyAgencyWorldEnergyOutlook2022Isave,yousave,wesaveEnergysavingsattheleveloftheindividualorhouseholdcanmakeasizeabledifferencetoreductionsinenergydemandandrelatedemissions,providedthatpoliciesareputinplacetoenableandsupportindividualstochangebehaviour.InthewakeofRussia’sinvasionofUkraine,theIEAreleasedA10‐PointPlantoReducetheEuropeanUnion’sRelianceonRussianNaturalGasandA10‐PointPlantoCutOilUseinMarchandApril2022(IEA,2022b,IEA,2022c).Drawingonthese,theIEAalsoreleasedPlayingMyPartinApril2022,whichidentifiesactionsthatnationalandlocalgovernmentscantaketosupportconsumerstoreducedemandandunlockmoreenergysavings(IEA,2022d).IfallthePlayingMyPartrecommendationsweretobeimplementedinfull,itwouldsave220millionbarrelsofoilayearandaround17bcmofnaturalgas,cuttinghouseholdsenergybillsonaveragebymorethanEUR450peryear(Figure5.4).2Figure5.4⊳Oil,naturalgasandelectricitydemandreductionsfromEUcitizenactionsbasedonthePlayingMyPartrecommendationsIEA.CCBY4.0.Behaviouralchangescouldimmediatelysave0.6mb/dofoil,17bcmofgasand30TWhofelectricityayearNotes:mb/d=millionbarrelsperday;bcm=billioncubicmetres;TWh=terawatt‐hour.Thehashedareafornaturalgasshowstheamountofgasthatcouldbedisplacedfromthereductionofelectricityconsumption.Energyimpactsofworkingfromhomeandshiftingshortflightstorailarenetnegativeandrepresentenergysavings.InthePlayingMyPartreport,0.6mb/dofoilsavingsand17bcmofnaturalgassavingswerecalculatedincludingindirectfuelsavingsfromlowerelectricityconsumption,whichisshownseparatelyinthisfigure.2AnalysisbasedonanaverageacrossallEUhouseholdswhichwillvarybetweenindividualhouseholds.Energybillsavingscorrespondtothesavingsthatcanbeachievedforrepresentativehouseholds,i.e.forhouseholdsthatcanapplythesemeasures,forexample,workingfromhomecannotbedoneforalljobs,thussavingsrelatedtothismeasureonlyapplytohouseholdsforwhichitispossible.‐40‐30‐20‐10010‐20‐15‐10‐505‐0.8‐0.6‐0.4‐0.200.2SpaceheatingandcoolingBoilertemperatureWorkingfromhomeUsingcarseconomicallyReducinghighwayspeedsCar‐freeSundaysWalkingandbikingPublictransportationShiftingshortflightstorailNetchangeOil(mb/d)temperatureNaturalgas(bcm)Electricity(TWh)SPOTLIGHTIEA.CCBY4.0.Chapter5Outlookforenergydemand2455Citizenscanplayamajorpartinrealisingthesereductions.AmajorityoftherecommendationsinPlayingMyPartareconcernedwithbehaviouralchange.Seekingbehaviouralchangeaspartofcrisisresponseisnotanoveltyandhassuccessfullybeendoneinthepast,notablyduringthe1970soilcrisesandaspartoftheresponseinJapantotheFukushimadisaster.TencountriesintheEuropeanUnionhavealreadyimplementedsomeformofpolicytosupportthebehaviourchangeslaidoutinPlayingMyPart.Forexample,GermanyandAustriahavereducedpublictransportfares,Belgiumispromotingcar‐sharing,andtheNetherlandsandItalyareencouraginghouseholdstoturndowntheirthermostatsandatthesametimerequiringtemperaturestobemoderatedinpublicbuildings.Continuedpolicysupportformeasuresofthiskindthroughto2030andbeyondwouldhelptobringtheworldclosertotheNZEScenariotrajectory.Around15%ofthesavingsinoildemandareemergencyresponsemeasurestocushiontheimpactofthecurrentcrisis,suchascar‐freeSundays.Theseemergencymeasureswouldtemporarilyinconveniencecitizensandinsomecasesposerealchallengestotheireverydaylives,buttheyhavethepotentialtocontribute0.1mb/dofoilsavingsintheEuropeanUnion.However,mostbehaviouralmeasuresproposedwouldreducetheday‐to‐dayenergyusedbycitizenswithoutmateriallyreducingenergyservice.Theseso‐calledsustainablebehaviouralchangescouldbecomeingrainedandcontributelastingenergyreductionsbeyondthepresentcrisis.TheimportanceofbehaviouralchangewashighlightedintheIPCCSixthAssessmentReport(AR6)inmanyofthescenarioswhichlimitglobalwarmingtobelow1.5°C(IPCC,2022).ManyofthebehaviouralchangesproposedinthisanalysisplayalastingroleintheNZEScenario(seeChapter3).EnergydemandgrowthinChinabeginstoslowthisdecadeintheSTEPS.Itpeaksjustbefore2030,asdoemissions,inlinewithitsNationallyDeterminedContribution(NDC)andnationaltargets.CoalremainsChina’slargestenergysource,butitsdominanceinthepowersectorisincreasinglysqueezedbyrenewables,whichareresponsiblefornearly45%ofelectricitygenerationin2030intheSTEPS.Meanwhile,thecoal‐basedchemicalindustryinChinareachesaplateau.Oildemandpeaksinthesecond‐halfofthisdecade,reachingaround16.5mb/d(thesamelevelofdemandasintheUnitedStatesin2030)andthenbeginstodecline.Thisdeclinereflectsexpandingelectrificationoftransport,withEVsaccountingformorethan50%ofcarsalesby2030.Theseoutcomesareconsistentwiththe14thFive‐YearPlan(2021‐25).IntheAPS,thepeakinemissionsoccursslightlyearlierandataslightlylowerlevelasdemandforrenewablesrisesfaster,particularlyinthepowersector.ThisfastergrowthputsrenewablesontracktoplaytheirpartintheachievementofcarbonneutralityinChinabefore2060.EnergydemandinIndiacontinuestoriseatover3%peryearintheSTEPSfrom2021to2030,spurredbyGDPgrowthofmorethan7%peryearinthesameperiod.Coalmeetsathirdofthisgrowthwithdemandrisingabove770Mtceby2030,andcontinuingthereafterbeforeIEA.CCBY4.0.246InternationalEnergyAgencyWorldEnergyOutlook2022peakingintheearly2030s.Oildemandmeetsafurtherquarteroftheenergydemandgrowthandrisestonearly7mb/dby2030.Governmentprogrammes,suchastheGatiShaktiNationalMasterPlanandtheSelf‐ReliantIndiascheme,leadtoincreasesinrenewablesandsalesofEVsintheSTEPS.Helpedbytheseprogrammes,renewablesmeet30%ofdemandgrowthto2030,notablythrougharapidincreaseinsolarPVdeployment.By2030,renewablesaccountfor35%ofgeneration,andsolaraloneaccountsfor15%.IntheAPS,bothelectrificationandrenewablesincreasefasterinlinewiththeprogressneededforIndiatoitsreachnetzeroemissionstargetby2070.SoutheastAsiaalsoseesrapidgrowthinenergydemand.IntheSTEPS,demandrisesover3%peryearfrom2021to2030,surpassingthelevelofgrowthoverthelastdecade.Oilisthebiggestcomponentofthisincreaseindemandwithconsumptionrisingto6.7mb/dby2030.Renewables,naturalgasandcoaldemandallrisequicklytoo.Coalcontinuestodominatetheelectricitysector,thoughitsshareofgenerationdeclinesfrom42%todayto39%by2030intheSTEPS.IntheAPS,renewablesbecomethedominantsourceaccountingforcloseto40%whilecoaldeclinestoathirdby2030.EVsalesrisesharply,thanksinparttoprogresstowardsThailand’scommitmenttoendthesaleofnewinternalcombustionengine(ICE)carsby2035,Singapore’scommitmenttodothesameby2040,andIndonesia’stargetof2millionelectriccarfleetby2030.AfricaseesamodestimprovementinthenumberofpeoplewithoutaccesstoelectricityintheSTEPSby2030,however,currentenergypricesurgesthreatennear‐termprogress.By2030,thenumberofpeoplewithoutaccesstocleancookingreachesalmost1billionfrom965millionin2021.Percapitaenergyuseremainslowandthishinderseconomicgrowth.However,increasesinlowcostrenewablepowerresourcesaddsubstantiallyandaccountformorethan35%ofAfrica’spowersupplyby2030.MostoftheincreaseinrenewablesisfromhydropowerandsolarPV,butsomealsoderivesfromwindandgeothermalresources.GrowthindemandforoilintransportandforLPGincookingpushesdemandtoover5mb/dby2030.Aswell,naturalgasexperiencesanuptickindemand,supportedbythediscoveryofnewreserves:itisusedinparticularintheexpandingsteel,cement,desalinationandfertiliserindustries.TheeffectsofclimatepledgesbyAfricancountriesandofreachinguniversalaccessareexploredindetailinAfricaEnergyOutlook2022(IEA,2022e).TheMiddleEastseesincreasingdemandfornaturalgas,whichmeetsover60%oftheoveralldemandgrowthto2030intheSTEPS,butrenewablesemergeasanotablecontributorinthepowersector,thankstosomeofthelowestcostsolarintheworldandtoincreasinginterestineconomicdiversification.SectoraltrendsPrimaryenergyintensityimprovesby2.4%ayearovertheperiodto2030.TheshareofelectricityintotalfinalconsumptionintheSTEPSrisesfrom20%in2021to22%by2030,andelectrificationdrivesimprovementsinenergyefficiency,notablyviathefasteradoptionofEVsandheatpumpsthataremoreefficientthantheirfossilfuelcounterparts.Newindustrialfacilitiesbecomemoreefficientthroughtheelectrificationoflow‐temperatureheatIEA.CCBY4.0.Chapter5Outlookforenergydemand2475applications,theuseofbest‐in‐classelectricmotorsinlightindustryandanincreaseinthenumberofelectricarcfurnacesinthesteelindustry.Insulationinbuildingsimproves,andnewappliancesmeethigherenergyefficiencystandards.Thesechangesarereinforcedbyunprecedentedlevelsoffinancialsupportforenergyefficiencyingovernmentrecoverypackages,notablyforbuildingretrofitsinadvancedeconomies.End‐useefficiencyimprovementsandelectrificationaretogetherabletocurbtheeffectsofactivitygrowth,resultingintotalfinalconsumptionby2030intheSTEPSbeing10%higherthancurrentlevels,wellbelowthe20%increaseinactivitygrowthovertheperiod(Figure5.5).IntheAPS,themorerapidgainsfromend‐useefficiencyandelectrificationresultintotalfinalconsumptionbeinglowerby2030thanintheSTEPS.Theshareofelectricityintotalfinalconsumptionincreasesto24%in2030intheAPS,withfasterelectrificationinallsectors.InnovationalsomakesabiggerdifferenceintheAPS,withnewtargetsandincreasedcommitmentsreducingtherisksofinvestingindemonstrationprojectsfornearzeroemissionstechnologies.Thisplaysalargepartindrivingdowncostsandincreasingthedeploymentofcleanenergytechnologiesinhard‐to‐abatesectors.Figure5.5⊳ChangesinglobalfinalenergyconsumptionbyleverandsectorintheSTEPSandAPS,2021-2030IEA.CCBY4.0.EfficiencyimprovementsandelectrificationmoderatetheimpactofincreasingdemandforservicesonfinalenergyconsumptionintheSTEPS,andalmosteliminateitintheAPSEnergyuseinbuildingscontinuestoriseintheSTEPS,endingthedecade3%higherthanin2021,drivenbyanoverallexpansionoffloorareaandgrowthintheownershipofappliancesinemergingmarketanddevelopingeconomies.Electricitydominatesdemandgrowth,increasingby10exajoules(EJ)to2030(Figure5.6).Mostoftheincreasingdemandforelectricityisforappliancesandairconditioners,butdemandforelectricheatingandcookingincreasesby2.7EJ,displacingfossilfueluseinsomeregions.Improvementsinbuildingcodes4004505005502021ActivityLeverSector20302021ActivityLeverSector2030TotalfinalconsumptionIndustryBuildingsTransportOtherEnergyefficiencyElectrificationOtherfuelshiftsEJSTEPSSectorLeverAPSIEA.CCBY4.0.248InternationalEnergyAgencyWorldEnergyOutlook2022andstrongersupportforbuildingretrofitsundertheUSInflationReductionActandtheEUEnergyPerformanceBuildingsDirective,applianceefficiencystandardsandfuelswitchingincentivesinforceorannouncedbygovernmentsaresufficienttoimprovetheenergyintensityofthebuildingstockbyabout20%persquaremetreby2030intheSTEPS.Thiscorrespondstoenergyefficiencysavingsintheglobalbuildingssectorofaround14EJby2030,andoffsetsmorethan60%ofactivitygrowth.IntheAPS,energydemandinthebuildingssectordeclinesby8%fromcurrentlevelsby2030,andisabout10%lowerthanintheSTEPSby2030.ThedivergencefromtheSTEPSisdrivenmostlybyglobaladvancesinaccesstocleancooking;aspeopleswitchtocookingwithmoreefficientfuelsandstoves,thetraditionaluseofbiomassdropsby15EJto2030.ItisalsodrivenbyeffortstocutnaturalgasdemandinEuropebyimprovingtheefficiencyofbuildingenvelopes,switchingtoheatpumpsandplacingmorerelianceonbuildingsmanagementsystems(BMS).Emergingmarketanddevelopingeconomiesmakenotablestridestoimproveefficiencyinbuildingsandincreaseelectrification.Thenetresultisthatefficiencyandelectrificationinbuildingsoffsetalmost1.5‐timestheenergydemandgrowthstimulatedbyactivitygrowthby2030intheAPS.Figure5.6⊳Changeintotalfinalconsumptionbysector,fuelandscenario,2010-2019and2021-2030IEA.CCBY4.0.ElectricitygrowsthemostintheSTEPSasbuildings,industryandincreasinglytransportareelectrified.IntheAPSdeeperelectrificationandrenewablesuptaketransformsthemix.Note:EJ=exajoule.Intransport,energydemandintheSTEPSisprojectedtobe15%higherby2030than2021,mostofwhichismetbyoil.AcceleratinguptakeofEVstempersthisboostinoildemand,asdomorehybridvehiclesandenergyefficiencygainsinICEroadvehicles,shipsandplanes.Between2021and2030,efficiencyinroadvehiclessavesaround3.5mb/d,while‐30‐20‐1001020302010‐19STEPSAPS2010‐19STEPSAPS2010‐19STEPSAPSOtherRenewablesOilNaturalgasElectricityCoalNetchangeEJBuildingsIndustryTransport2021‐302021‐302021‐30IEA.CCBY4.0.Chapter5Outlookforenergydemand2495electrificationofroadtransport(includinghybridisation)savesaround4mb/d.Togethertheseeffectsimprovetheenergyintensityoftheglobalroadfleetbyaround15%by2030intheSTEPS.Oildemandforroadtransportisalreadyonthedeclineinadvancedeconomies,butisprojectedtocontinuetoriseinemergingmarketanddevelopingeconomies,exceptinChina.Inemergingmarketanddevelopingeconomies(excludingChina),ICEvehiclesmaintainadominantshareofsalesintheSTEPS,especiallywherethesecond‐handvehiclemarketplaysaprominentrole.Althoughaviationandshippingseeshiftsindemand,theirtotalenergyconsumptioncontinuestorise,withfewcost‐effectivelow‐emissionsalternativesbeyondimprovingefficiencyavailableoutto2030.IntheAPS,EVsalesexpandfastinallregions;in2030over35%ofcarssoldareelectric.Overalloildemandanddemandforoilintransportbothpeakinthemid‐2020sandthelatterreturnstoits2021levelby2030,around51mb/d(seesection5.8).Energydemandinindustrygrowsby1.4%peryearto2030intheSTEPS.Thisistheonlyend‐usesectorwherebothadvancedandemergingmarketanddevelopingeconomiesexperiencedemandgrowth.Energyefficiencyreducesdemandbyaround15EJfrom2021to2030;theinstallationofmoreefficientequipmentinindustrialfacilitieshelpsreducedemand,asdoesphasingoutinefficientproductioncapacityinheavyindustryandshiftingtonew,moreefficientlines.Inaggregate,energyintensityinindustryimprovesbyaround15%to2030.Thefuelmixdoesnotchangemuchoverthecourseofthedecade.Electricitygainssomeground,especiallyinlightindustriesinadvancedeconomies,butfossilfuelscontinuetodominate,especiallyforhigh‐temperatureheatapplicationsandforchemicalfeedstock.IntheAPS,industrialdemandincreasesmuchmoreslowly,byaround0.7%peryearto2030.ElectrificationproceedsmorebrisklythanintheSTEPS,withelectricityincreasinglybeingusedtoprovidelow‐temperatureheatinlightindustries.TheAPSalsoseesfasterdeploymentoflarge‐scalenearzeroemissionsplantsinenergy‐intensiveindustries.Demandforlow‐emissionshydrogen–bothproducedonsiteandoffsite–risesto11milliontonnes(Mt)in2030foruseintheproductionofammonia,steelandmethanol.5.3EmissionsIn2021,energy‐relatedCO2emissionsreached36.6GtCO2,withthelargestannualincreaseinhistory(IEA,2022f).ThisreflectsstrongeconomicreboundfromtheCovid‐19pandemic,amplifiedbyadverseweather,butitalsoindicatesthatglobalenergysystemshaveyettomakesignificantstructuralchangestodecoupleenergyusefromemissions.Thisriseinemissionstonewrecordlevelisatoddswithwhatisneededtomeetcountries’NDCsby2030andtheirpledgestoreachnetzeroemissions.33TheParisAgreementrequestseachcountrytooutlineandcommunicatetheirpost‐2020climateactions,knownasNationallyDeterminedContributions.NDCsembodyeffortsbythecountrytoreducetheirgreenhousegasemissionsandadapttotheimpactsofclimatechange.IEA.CCBY4.0.250InternationalEnergyAgencyWorldEnergyOutlook2022EmissionsreductionstargetsBySeptember2022,194countrieshadsubmittedtheirfirstNDC,and162hadformallyupdatedtheirNDCinlinewiththeParisAgreement(2015),whichrequestscountriestoupdatetheirNDCsorsubmitnewoneseveryfiveyears(Table5.3).Manycountries,amongthemtwelveG20countriesandtheEuropeanUnion,havesubmittedupdatedNDCswithmoreambitiousemissionsreductiontargetsthanintheirfirstNDCs(Figure5.7).Table5.3⊳SelectedupdatedNDCsundertheParisAgreementCountry2030reductiontargetBaseyearTargettypeEconomy‐widegreenhousegasemissionsAustralia43%2005BaseyearCanada40‐45%2005BaseyearEuropeanUnionAtleast55%1990BaseyearJapan46%2013BaseyearIndia45%2005EmissionsintensityKenya32%2030Business‐as‐usualKorea40%2018BaseyearMorocco45.5%2030Business‐as‐usualNigeria47%2030Business‐as‐usualPeru40%2030Business‐as‐usualUnitedArabEmirates31%2030Business‐as‐usualUnitedKingdom68%1990BaseyearUnitedStates50‐52%2005BaseyearEconomy‐wideCO2onlyChinaPeakbefore20302005EmissionsintensityConditionaloncollectiveambitionorinternationalfinancialandtechnicalsupport.IntheSTEPS,onlysomeregionsmeettheirstatedambitions;thosewhereNDCsarereflectedinlaworwherecrediblepolicieshavebeenputinplacetomeetorexceedtheirtargets.TheAPSassumesthatallNDCsandnetzeroemissionspledgesaredeliveredinfullandontime.For2030,theAPSprojectsthatCO2emissionstobemorethan2gigatonnes(Gt)lowerthanthesamescenariointheWEO‐2021.ThisreflectsmoreambitioustargetsstatedintheupdatedNDCssubmittedsincethepublicationofthelastOutlook.However,thisreductionwouldhavetobeaboutfive‐timeslarger–around10Gt–tobeconsistentwiththeNZEScenariowhichisbasedonkeepingglobaltemperatureincreasetobelow1.5°Cby2100.TheIntergovernmentalPanelonClimateChange(IPCC)hasreinforcedthescientificunderstandingoftheimpactsofawarmingworld,andtheneedtokeepglobaltemperaturerisebelow1.5°Cbytheendofthiscentury(IPCC,2022;IPCC,2021;IPCC,2018).IntheNZEScenario,thisisachievedbyreducingenergy‐relatedemissionsby1.3gigatonnesofcarbon‐dioxideequivalent(GtCO2‐eq)onaverageeveryyearuntil2050.IEA.CCBY4.0.Chapter5Outlookforenergydemand2515Figure5.7⊳CountrieswithNDCs,long-termstrategiesandnetzeroemissionspledges,andtheirsharesofglobalCO2emissionsIEA.CCBY4.0.NeworupdatedNDCsandadditionalnetzeroemissionspledgesinmanycountriesunderpinmorepronounceddecarbonisationinthisyear’sAPSNotes:NDC=NationallyDeterminedContributions;NZE=netzeroemissions.Anincreasingnumberofcountriesaresettinglong‐termnetzeroemissionstargets.BySeptember2022,84countriesandtheEuropeanUnionhadpledgedtomeetnetzeroemissionstargets,togetheraccountingforaround85%ofcurrentglobalGDP,aboutthesamepercentageofglobalenergy‐relatedCO2emissions,andmorethanhalfofenergy‐relatedmethaneemissions.Amongthenewannouncementssubmitted,India’snetzeroemissionspledgeandIndonesia’snetzeroemissionstargetwithits2021Long‐TermLowEmissionsStrategyarethemostsignificant,andaccountforahighproportionofthereducedlevelofemissionsin2030inthisOutlookcomparedwiththeAPSintheWEO‐2021.SomeoftheannouncedtargetsrelyonCO2removaltechnologiessuchasremovalfromtheatmospherethroughCCUS,ordirectaircapture(DAC),orthroughnature‐basedsolutionswhichinvolvetheabsorptionofatmosphericCO2emissionsinvegetation,soilandrocks.4Iftheworldistokeeptheglobaltemperaturerisebelow1.5°Cbytheendofthiscentury,itmustkeeptoveryexactinglimitsoncumulativeemissions,asintheNZEScenario.ThesecumulativeCO2emissionsarecurrentlybeingexhaustedinahighlyunequalmannerbypeopleinvariousagegroups,locationsandincomesegments,andclimatejusticeandequityissuesarebecomingcentralthemesinthediscussionsleadinguptotheCOP27inEgyptinNovember2022.Inadvancedeconomies,averageannualenergy‐relatedpercapita4AnetzeropledgeforallGHGemissionsdoesnotnecessarilymeanthatCO2emissionsfromtheenergysectorneedtoreachnetzero.Acountry’snetzeroplansmayenvisagesomeremainingenergy‐relatedemissionsareoffsetbytheabsorptionofemissionsfromtheagriculture,forestryandotherlanduse(AFOLU)sink.25%50%75%100%50100150200FirstNDCNeworupdatedNDCNZEpledgesLong‐termstrategyNZEtargetsinlawAdditionalinWEO‐2022IncludedinWEO‐2021Shareofglobal2021CO₂emissionsNumberofcountriesSubmissions(rightaxis)IEA.CCBY4.0.252InternationalEnergyAgencyWorldEnergyOutlook2022emissionsare8tonnesofcarbon‐dioxideequivalent(tCO2‐eq),whileinsub‐SaharanAfricatheyarelessthan1tCO2‐eq.5Ifallcountriesweretoproducethesamelevelofcarbonemissionspercapitaasadvancedeconomies,thecumulativeCO2emissionsuntil2050intheNZEScenariowouldbeexhaustedby2028(Figure5.8).Iftheworldaimstostaywithin1.5°Climit,theaveragepersonborninthe2020swillbeabletoemitonlyone‐tenthofthelifetimeemissionsproducedbytheirparents(IEA,2022g).Figure5.8⊳YearwhenthecumulativeCO2emissionsuntil2050intheNZEScenariowouldbeexhaustediftheglobalpopulationhadthesamepercapitaemissionsas…IEA.CCBY4.0.Atthecurrentlevelofemissionspercapita,theglobalcumulativeCO2emissionsuntil2050intheNZEScenariowouldbeexhaustedby2033EmissionsoutlookCurrentpoliciesfallfarshortofwhatisneededduringthecriticalperiodforclimateactionbetweennowand2030tomeetthecollectiveemissionsreductioncommitmentsintheNDCs.IntheSTEPS,energy‐relatedemissionspeakinthemid‐2020sandthendecline:by2030,theyfallslightlybelowtheleveltheywereatin2021(36.2GtCO2).IntheAPS,thecommitmentsintheNDCsbringaboutafasterreductioninemissions:globalemissionspeakbefore2025andfallto31.5GtCO2in2030,whichisaround15%lowerthanintheSTEPS.MorethanhalfoftheadditionalCO2emissionsreductionsintheAPScomparedwiththeSTEPSoccurinChina,theUnitedStatesandtheEuropeanUnion(Figure5.9).5Percapitaemissionsareassessedonaterritorialratherthanaconsumptionbasis.AfricaIndiaBrazilSoutheastAsiaSouthAfricaMiddleEastChinaRussiaEmergingmarketanddevelopingeconomiesAdvancedeconomiesWorld202020302040205020602070IEA.CCBY4.0.Chapter5Outlookforenergydemand2535Figure5.9⊳CO2emissionsbyscenarioandbyregion,2021and2030IEA.CCBY4.0.WhileglobalemissionsstaybroadlyflatintheSTEPSto2030,theyfallbyalmost5GtintheAPS,withmorethanhalfofthedifferencefromChina,UnitedStatesandEuropeanUnionNotes:GtCO2=gigatonnesofcarbondioxide;EMDE=emergingmarketanddevelopingeconomies.ThegapinCO2emissionsreductionsbetweentheAPSandtheNZEScenarioin2030isalmosttwiceaslargeastheamountbetweentheSTEPSandtheAPS,highlightingthesizeoftheremainingglobalambitiongap.In2030,CO2emissionsintheAPSarealmost5GtCO2lowerthanintheSTEPS,butaround9GtCO2higherthanintheNZEScenario.WithouttheneworupdatedNDCsandnetzeroemissionspledgesannouncedin2022,thegapbetweenenergy‐relatedCO2emissionsin2030intheAPSandtheNZEScenariowouldbe2Gtbigger.Inallscenarios,thelargestcontributiontoreducingemissionsisreplacingcoal‐firedpowergenerationwithrenewableenergysources(Figure5.10).6AlmosthalfofthedifferenceinemissionsreductionsbetweentheSTEPSandtheAPSin2030isdeliveredbyfasterdeploymentofrenewablesintheAPS.Mostoftherestisfrommorerapidenergyefficiencyimprovementsandelectrificationofend‐usesintheAPS.Inindustry,biggeremissionsreductionsintheAPSreflectmorestringentefficiencystandardsthanintheSTEPSandwiderdeploymentoflarge‐scalenearzeroemissionsplantsinenergy‐intensiveindustries.Inroadtransport,acceleratedrolloutofEVsandsupportinginfrastructuredelivertheemissionsreductions.Inhard‐to‐abatesectors,therisksassociatedwithbeingafirstmoverdetersomefirmsfromadoptinginnovativelow‐emissionstechnologiesduringthisdecade.Newsectoralnetzeroinitiativesaimtoaddressthisbarrier.AsofSeptember2022,firmsparticipatinginsuchinitiativesandtop‐20companieswithindividualpledgescoveraroundone‐thirdofemissionsfromshippingandaviationaswellassteelandcementproduction(Box5.2).6TheIEAwillreleaseCoalinNetZeroTransitions:Strategiesforrapid,secureandpeople‐centredchangeinNovember2022.1020304020212030CO₂emissionsbyscenarioGtCO₂NZEAPSSTEPS20212030STEPS2030APSBunkersOtherEMDEIndiaChinaOtheradvancedEuropeanUnionUnitedStatesCO₂emissionsbyregioneconomiesIEA.CCBY4.0.254InternationalEnergyAgencyWorldEnergyOutlook2022Figure5.10⊳CO2emissionsreductionsbysectorandscenario,2021-2030IEA.CCBY4.0.Acrossscenarios,aroundhalfoftotalemissionsreductionsto2030arefromrenewablesreplacingcoalpower;industrydeliversreductionsfromfuelswitchingandefficiencyNote:GtCO2=gigatonnesofcarbondioxide.Box5.2⊳Sectoralinitiativesfornetzeroemissionspledgesinhard-to-abatesectorsgainmomentumAsofJuly2022,almost800companiesworldwidehadmadenetzeroemissionspledges(NetZeroTracker,2022).Increasingly,companiesinhard‐to‐abatesectorsarejoiningsectoralinitiatives,notablyinthesteel,cement,aviationandshippingindustries.Todate,roughlyone‐thirdofcurrentemissionsfromthesesub‐sectorsarecoveredbymajorinitiativesandpledgesoftop‐20companies.Themajorityofthetop‐20companiesineachsub‐sectorareeitherpartofsuchinitiativesorhaveindividualnetzeroemissionscommitments(Figure5.11).TheInternationalAirTransportAuthority(IATA)NetZeroCarbonEmissionsfromtheGlobalAirTransportIndustryby2050strategycoversaround80%ofworldwideaviationactivityandemissions.Sofar,otherindustrieshavemuchlowerlevelsofcoverage,withinitiativesandtop‐20companypledgesinthesteel,cementandshippingsub‐sectorseachcoveringaround25%oftheirglobalemissions.Morethanhalfofthecompaniesparticipatinginsectoralinitiativesforemissionsreductionshavetheirheadquartersinadvancedeconomies.Theseinitiativesoftenbringtogetherpublicandprivateactorswiththeaimofreducingtheperceivedrisksofbeinganearlyadopterofinnovativelow‐emissionstechnologies.Theyhavethepotentialtoaccelerateadoptionandsecureoff‐takeagreementsforlow‐emissionsofferingswithinthisdecade,buttheydependuponconsistentstandardsandtransparentreportingtoensurethatallparticipatingcompaniesaremakingprogressconsistentwithsectoralambitions:unevenprogressbetweenfirmscanunderminethe‐6‐5‐4‐3‐2‐101CoalpowerIntensiveindustriesOtherpowerCarsSpaceheatingOthertransportOtherindustryOtherbuildingsNZEAPSSTEPSGtCO₂IEA.CCBY4.0.Chapter5Outlookforenergydemand2555effectivenessofsuchcollectiveagreements.Itisalsoimportantthatcompaniesprioritisereducingtheirownemissionsindecarbonisationstrategies,andthatwheretheyrelyontheuseofcarboncreditstocompensatefortheirresidualemissions,theyuseonlyhighqualitycarboncreditsthatresultinpermanent,additionalandverifiedemissionreductionsorremovals.TransparentdataaboutcompanycurrentandprojectedScope1,2and3emissions,aswellasplanneduseofcarboncreditstoachievetargets,shouldhelptoimproveaccountabilityandtofasttrackprogress.Figure5.11⊳Coverageofinitiativesandadditionalcorporatenetzeroemissionspledgesinselectedsub-sectorsIEA.CCBY4.0.Sectoralinitiativesandpledgesmadebytop-20companiesinselectedhard-to-abatesub-sectorscoveraboutone-thirdoftheircollectiveCO2emissionsNotes:Initiativesanalysedinclude:NetZeroSteelInitiative(steel);ConcreteActionforClimate(cement);NetZeroCarbonEmissionsfromtheGlobalAirTransportIndustryby2050(aviation);FirstMoversCoalitiononShipping(privateshipping);andtheDeclarationonZeroEmissionsShippingby2050(publicshipping).AllsectoralinitiativesareconsideredintheAPSexceptfortheIATAaviationinitiativeforwhichgovernmentsupportforinternationalaviationtoreachnetzeroemissionsby2050wasannouncedinOctober2022.5.4AirpollutionPollutedairhascausedatleast19000excessdeathsperdayinrecentyears.In2021,indoorairpollutioncausedaround3.6millionprematuredeaths,whileoutdoorairpollutionwasresponsiblefor4.2million.Airpollutionalsocomeswithsignificanteconomiccosts.Somearedirectcosts,suchasthoseduetotheprovisionofhealthcare,andsomeareindirect,suchasthoseincurredasaresultoflabourproductivitylossesorcropdamage.Itisestimatedthattheglobalhealthcostofmortalityandmorbiditycausedbyexposuretofineparticulatematterairpollutionaloneisequivalenttoaround6%ofglobalGDPandtomorethan10%incertaincountries,mostnotablyinIndiaandChina(WorldBank,2022).20%40%60%80%100%SteelCementAviationPrivateshippingPublicshippingWithoutpledgesWithpledgesandnotmemberofinitativesSectoralinitiativesShareofglobalsectoralemissionscoveredbypledgesTop‐20companies:Sectoralcoverage:IEA.CCBY4.0.256InternationalEnergyAgencyWorldEnergyOutlook2022Figure5.12⊳Populationexposedtoheavilypollutedairandchangeinprematuredeathsfromairpollutionbyregionandscenario,2021and2050IEA.CCBY4.0.Thenumberofpeopleexposedtoheavilypollutedairin2050intheSTEPSandAPSishigherthantoday,butintheNZEScenarioitisreducedbyalmost2billionpeopleNotes:Heavilypollutedair=PM2.5concentrations≥35microgrammespercubicmetre.AAP=ambientairpollution;HAP=householdairpollution.IntheSTEPS,acombinationofminimumstandardsfortailpipeemissionsfromroadtransport,reduceduseofcoalforelectricitygenerationandreduceduseoffuelwoodforheatingandcooking,togetherresultinamodestfallinglobalemissionsofmajorairpollutants7between2021and2050.However,populationgrowthandurbanisation,particularlyinpartsoftheworldwhereemissionsreductionsarelesspronounced,orevenabsent,meanthat640millionmorepeopleareexposedtohighconcentrationsoffineparticulatematter(PM2.5)pollutionin2050thanin2021(Figure5.12).8Asaresult,thereare7Fineparticulatematter(PM2.5),nitrogenoxides(NOX)andsulphurdioxide(SO2)arethemainenergy‐relatedairpollutantsassociatedwithprematuremorbidityandmortality.8Inthissection,highconcentrationcorrespondstoaPM2.5densitygreaterthan35microgrammespercubicmetre,inaccordancewiththeWorldHealthOrganisationInterimTarget1(WHO,2021).1232021STEPSAPSNZEBillionpeopleEmergingmarketanddevelopingeconomiesAdvancedeconomiesExposuretoheavilypollutedair2050HAPAAPHAPAAPHAPAAP‐3‐2‐10123MillionpeopleChinaIndiaSoutheastAsiaAfricaRestofworldNetchangeChangeinprematuredeathsSTEPSAPSNZEIEA.CCBY4.0.Chapter5Outlookforenergydemand2575almost3millionmoreprematuredeathsduetoambientairpollutionworldwidein2050thantherewerein2021,despiteanoveralldecreaseinairpollutants(Rafaj,KiesewetterandKrey,2021).Three‐fifthsoftheseexcessprematuredeathsoccurinChina,IndiaandSoutheastAsia.Owingtoashifttowardscleanercookingfuels,prematuredeathsfromhouseholdairpollutionfallbyaround650000peryearoverthesameperiod.ThisreflectsareductioninIndiaandChina,althoughthereareincreasesinprematuredeathsfromdirtyhouseholdairinAfricaandelsewherein2050comparedtotodayduetopopulationgrowthandinsufficientprogressonaccesstocleancookingintheSTEPS.IntheAPS,thenumberofpeopleexposedtohighconcentrationsofPM2.5risesmarginallybetween2021and2050,butisalmost20%belowthelevelintheSTEPSby2050.Justover2millionmoreprematuredeathsperyeararecausedbyambientairpollutionin2050thantoday,whichis560000fewerthanintheSTEPS.Fossilfueluseinemergingmarketanddevelopingeconomiesdoesnotdramaticallydeclineinthisscenariountilafter2030,leavingmanyexposedtohighlevelsofpollutioninthemeantime.Togetherwiththefailuretoachieveuniversalaccesstocleancookingby2030,thisaccountsforthemajorityofthedifferencebetweenexcessdeathsintheAPSandintheNZEScenario.IntheNZEScenario,exposuretohighconcentrationsofPM2.5declinesdramaticallyfromtoday’slevel:by2050almost2billionfewerpeoplebreatheheavilypollutedair.Thisresultsinaround1.4millionfewerprematuredeathsfromambientairpollutionin2050comparedto2021,some3.7millionfewerthanintheAPSScenariointhatyear.Universalaccesstocleancookingsolutionscutsexposuretodirtyhouseholdair,resultinginaround2.3millionfewerprematuredeathsfromhouseholdairpollutionin2050thantoday,animprovementofaround650000comparedtotheAPSScenario.5.5InvestmentCleanenergyinvestmentwasaroundUSD1.3trillionperyearin2021.Thisincreasesbymorethan50%fromcurrentlevelsby2030intheSTEPS,morethandoublesintheAPS,andtriplesintheNZEScenario(Figure5.13).InvestmentinfossilfuelsfallsinboththeAPSandNZEScenario,butincreasesintheSTEPS(seeChapters6‐9forfuelspecificinvestments).End‐useinvestmentisamajorcomponentofcleanenergyinvestment.Itincludesthecostofenergyefficiencyupgradesandfuelswitchinginbuildings,appliances,industryandvehicles.Energyefficiencyandend‐useinvestmentwereaboutUSD500billionin2021.Thisissettoincreasein2022,partlyasaresultofpost‐pandemicgovernmentstimuluspackagesthatareprovidingsupportforretrofits,heatpumpsandEVs.Inparticular,salesofEVshaverisenwithspectacularspeed.IntheSTEPS,end‐useinvestmentsrepresenthalfoftheUSD700billionincreaseinannualcleaninvestmentovertoday’slevels,andareprimarilydrivenbycontinuedgrowthinEVsalesandinvestmentsinthebuildingssector.End‐usesarenottheprimarydriverofinvestmentincreasesintheAPSandNZE,butmovingfromtheSTEPStotheNZEScenariorequiresanadditionalUSD900billionperyearby2030,whichismorethandoubletheIEA.CCBY4.0.258InternationalEnergyAgencyWorldEnergyOutlook2022growthinannualend‐useinvestmentneededbetweentodayand2030intheSTEPS.EVsandheatpumpsaremuchmorewidelyadoptedintheAPSandNZEthanintheSTEPSby2030,buttheinvestmentcostsaremuchreducedbythefallingcostsofthesetechnologies.Figure5.13⊳Annualcleanenergyinvestmentbysectorandscenario,2021and2030IEA.CCBY4.0.Investmentinend-useswouldneedtoalmostquadrupleby2030toreachthelevelsrequiredintheNZEScenario;EVsalesarealreadyprojectedtoquadrupleintheSTEPSNote:EVs=electricvehicles;MER=marketexchangerate.Risinginterestratesandinflationcouldsourthenear‐termoutlookforend‐useinvestment,notablyinthebuildingsandtransportsectors,whicharestronglytiedtodisposableincomeandtheabilityofconsumerstoaccessaffordablefinancing.RecoverypackageshavecommittedaroundUSD440billiontotheend‐usesegmentsoverthe2020‐50period,andthatmayhelptosupportinvestmentlevels.Thissupport,however,isconcentratedinadvancedeconomies,andmuchofitisfront‐loaded.Asstimulusfundingfadesinthefuture,itwillbenecessarytoreinforceenablingconditionsandsupportfornewinvestment.Thiswilldependontheglobaleconomicoutlook,thespeedoftechnologycostreductionsandthepaceofadoptionofnew,moreefficienttechnologies.Somebanksarestartingtodesigndedicatedfinancingpackagesforenergyefficiencyandend‐useinvestment,whichcouldhelpboostprivatesectorfinancing.IntheNZEScenario,renewablesbecomethefoundationofanelectricitysystemthatisfour‐timeslargerin2050thanitistoday.By2030intheNZEScenario,capitalspendingoncleanpowerdoublescomparedtotheSTEPSandisthree‐timeshigherthanin2021,withinvestmentsacrossawiderangeofoptionsforlow‐emissionselectricitygeneration,includingwind,solar,nuclear,hydrogen,CCUS,storageandnetworks.100020003000400050002021STEPS2030APS2030NZE2030Efficiencyandend‐useLow‐emissionsfuelsPowerBillionUSD(2021,MER)IEA.CCBY4.0.Chapter5Outlookforenergydemand2595Keythemes5.6EnergyaccessThecurrentenergycrisisiscausingfuelprices,foodpricesandinflationtosurge,pushingupthenumberofpeoplelivinginextremepoverty,especiallyinsub‐SaharanAfrica.Thisissettoslowprogresstowardsuniversalaccesstoelectricityandcleancooking,compoundingtwoprioryearsofsetbacksduetotheCovid‐19pandemic.Itisalsoexacerbatinganaffordabilitycrisisthatmaypushmanyintoforgoingtheuseofmodernenergy.Thissection:Provides2022estimatesforelectricityandcleancookingaccessbasedonacountry‐by‐countryassessment.QuantifieshowtheeffectsoftheCovid‐19pandemicandtheenergycrisischangethetrajectoryforglobalprogresstowardsthegoalofuniversalaccesstocleancookingandelectricityby2030(SustainableDevelopmentGoal[SDG]7.1)intheSTEPS.Assessesforthefirsttimehowcountry‐levelaccesstargets,ifimplementedontimeandinfull,measureupagainsttheSDG7.1targetofuniversalaccessrealisedintheNZEScenario.ElectricityaccessForthefirsttimeindecades,thenumberofpeoplearoundtheworldwithoutaccesstoelectricityissettorisein2022.Itislikelytoreach774million,whichwouldmeananincreaseof20millionpeoplefrom2021,andcomingafterthepandemic‐relatedslowdowninboth2020and2021wouldtakethenumberofthosewithoutaccesstoelectricitytolevelslastseenin2019(Figure5.14).Theriseinthenumberofthosewithoutaccessoccurslargelyinsub‐SaharanAfrica,wherethenumberofpeoplewithoutaccessisnearlybacktothehighestlevelseenin2013,andwherealmost80%ofthosewithoutaccesslive.Consumersarenowfacingrisinginflationlevelsthatmakegettingandmaintainingaccesstoelectricitylessaffordable(seeChapter4).Atthesametime,investmentinexpansionofdistributionsystemsandnewconnectionsisslowingdownasaresultofthemountingburdenofdebtthatmostutilitiesarefacingrelatedtothepandemic.Duringthepandemic,utilityelectrificationprogrammescontinuedinsomepartsofdevelopingAsia,notablyinMyanmar(where5%ofthepopulationhasbeenconnectedannually).However,evenfront‐runnercountriesonelectricityaccess,suchasGhanaandEthiopia,aresettoseeadifficultyearforaccessgainsagainstabackgroundofrisinginflationrates(30%inflationinGhanaand35%inEthiopiabytheendofthesecond‐quarterof20229)(EthiopianStatisticsService,2022;GhanaStatisticalService,2022).9Theseareyear‐on‐yearinflationrates.IEA.CCBY4.0.260InternationalEnergyAgencyWorldEnergyOutlook2022Figure5.14⊳Numberofpeoplewithoutaccesstoelectricityinsub-SaharanAfricaandtheworld,2012-2022IEA.CCBY4.0.OntheheelsoftheCovid-19pandemic,the2022energycrisisisleadingtoareversalofglobalprogressonelectricityaccessforthefirsttimeinmorethanadecadeNote:2022e=estimatedvaluesfor2022.Gridconnectionsprovedresilientin2020and2021,buttherateofnewconnectionsissettoslowfor2022.Projectsinthepipelinefrombeforethepandemichavelargelybeencompleted,butnewprocurementhasslowed.Thebudgetsofmanyutilitieswererefocussedduringthepandemic,reducingfundsavailableforenergyaccessprojects.UtilitiesinAfricawerealreadyinaperilousfinancialsituationheadingintothepandemic.Operationallossesclimbedsubstantiallyduringthepandemic,andmanyutilitiesarestillbeingaskedtoextendlifelinetariffswhilefacinghigheroperationalcosts(Balabanyan,2021).Cost‐reflectivetariffreformswerealsopausedinmanyregionstoavoidpotentiallyexacerbatingtheaffordabilitycrisisforthepooresthouseholds,furthersettingbackinstitutionaleffortstomakeutilitiesmoreattractivetoinvestors.Thecurrentinflationaryenvironmentisalsoaffectingthealreadyrisingcostsofoff‐gridaccesscomponents,especiallysolarPVmodules,batteriesandotherelectroniccomponentssuchasinverters.Thecostsofsolarandhybridmini‐gridsareestimatedtohaveincreasedonaveragebyatleast20%in2022comparedtopre‐pandemiclevels.10Combinedwiththestrongdepreciationoflocalcurrenciesindevelopingcountries,thisismakingnewprojectslessappealingforinvestors,especiallyinruralareas.Itisalsocausingproblemswithrespecttocontractsfornewprojectsthathavealreadybeensignedincaseswherethecontractslacktheflexibilitytopermitadjustmentsinlightofcurrenteconomicconditions.10BasedonpersonalcommunicationwithAfricaMinigridDeveloperAssociation(AMDA)officials,July2022.30060090012001500201220142016201820202022eMillionpeopleCovid‐19pandemicWorldSub‐SaharanAfricaIEA.CCBY4.0.Chapter5Outlookforenergydemand2615Solarhomesystem(SHS)costsarealsoontherise,withaveragemarketpricesforanewSHSincreasingby28‐36%since2020(LightingGlobal/ESMAP,GOGLA,2022).Thisisleadingtohouseholdsoptingforsmallerorlowerqualitysystems.SalesoflargeSHSwere25%belowtheir2019peakin2020and33%belowitin2021(GOGLA,2022).11IntheSTEPS,thenumberofpeoplewithoutaccesstoelectricityisprojectedtoreach660millionby2030,upbyaround10millionfromtheSTEPSprojectionintheWEO‐2021.About85%ofthosewithoutaccessin2030willbeinsub‐SaharanAfrica,upbyaroundsixpercentagepointsfrom2021.Table5.4⊳CountrieswithtargetsforaccesstoelectricityandcleancookingAfricaDevelopingAsiaCentralandSouthAmericaAccesstoelectricityUniversalaccessby2030Angola,Benin,Botswana,Cameroon,Côted’Ivoire,Eritrea,Ethiopia,Gambia,Ghana,Guinea,Kenya,Mauritania,Mozambique,Nigeria,Rwanda,Senegal,Sudan,TogoBangladesh,Myanmar,PakistanBolivia,Guatemala,Honduras,PanamaOthertargetsBurkinaFaso,Burundi,CentralAfricanRepublic,Chad,RepublicoftheCongo,Djibouti,DRC,Guinea‐Bissau,Lesotho,Liberia,Madagascar,Malawi,Mali,Namibia,Niger,SierraLeone,Somalia,Tanzania,Uganda,Zambia,ZimbabwePapuaNewGuineaHaitiAccesstocleancookingUniversalaccessby2030Angola,Kenya,Malawi,Mali,Mozambique,Rwanda,SierraLeone,SudanBangladesh,China,Fiji,India,Indonesia,Nepal,Myanmar,Mongolia,VietNamPeruOthertargetsBurkinaFaso,Cameroon,Côted’Ivoire,DRC,Ethiopia,Ghana,Liberia,Mauritania,Nigeria,Niger,Senegal,Tanzania,Uganda,ZimbabweBhutan,Pakistan,ThailandHonduras,Guatemala,NicaraguaNotes:DRC=DemocraticRepublicoftheCongo.Universalaccessby2030includescountriesthathavetargetstoreach100%accessratesby2030orbefore.Othertargetsincludecountrieswithotherlessambitioustargets.Includesonlytargetsforcountrieswithaccessrateslowerthan95%.Source:IEAanalysisbasedonofficialcountryandthird‐partypublications.IntheAPS,itisassumedthatalltargets,includingthosefocussedonaccesstoelectricity,aremetontimeandinfull.Outofthe113countrieswithoutuniversalaccess,54havetargetsforaccesstoelectricity,ofwhich25havetargetstoreachuniversalaccesspriortoorby2030(Table5.4andFigure5.15).Meetingallthesetargetsreducesthenumberofpeoplewithoutaccesstoelectricityto290millionin2030.However,only20%ofthecountrieswithtargets,e.g.Côted’Ivoire,Kenya,Senegal,Rwanda,Myanmar,havecomprehensivenationalelectrificationstrategiesinplace,havereasonably‐staffednationalagenciesresponsiblefor11Solarhomesystemslargerthan20Watts,whichifcoupledwithhighefficiencyappliancescanpowermultiplelights,atelevisionandafan.IEA.CCBY4.0.262InternationalEnergyAgencyWorldEnergyOutlook2022electrification,strongandtimelytrackingprocedures,andtheinclusionofoff‐gridsolutionsandaffordabilitymeasures,e.g.socialorlifelinetariffs.(TheIEAhasprogrammesforAfricanaccessinstitutionswiththeobjectivetohelpbuildcapacityforsettinganddeliveringaccesstargets[Box5.3]).Figure5.15⊳Numberofpeoplewithoutaccesstoelectricityin2021and2030byscenario,andcoveragewithtargetsintheAPSIEA.CCBY4.0.Achievingnationaltargetsforelectricityaccessreducesthenumberofpeoplewithoutaccessby60%by2030,whilestatedpoliciesreducethisnumberbyjust12%Notes:SSA=sub‐SaharanAfrica(excludesSouthAfrica).Thetargetforfullaccessby2030categoryincludescountrieswith100%accesstoelectricitytargetsby2030.Theothertargetcategoryincludescountrieswithtargetslessambitiousthanfullaccessby2030.Theshareofcountrieswithandwithouttargetsandthenumberofpeoplewithoutaccesslivinginthosecountriesisbasedontheirstatusasof2021.Box5.3⊳IEAactivitiesfocussedonAfricaTheIEAhasworkedfortwodecadestoadvancethedevelopmentofenergydataandanalysisinAfrica.TheIEAcollectsenergyandaccessdataforallAfricancountriesandhasdevelopedauthoritativeoutlooksforvariousregionsacrossAfrica.TheIEAcountsthreeAfricancountriesasAssociationmembers–Morocco,EgyptandSouthAfrica–andhasanin‐depthpartnershipwithSenegal.Acontinent‐wideoutlookwaspublishedrecently–AfricaEnergyOutlook2022–incollaborationwiththeAfricanUnionCommissionandtheUnitedNationsEconomicCommissionforAfrica(IEA,2022e).Inaddition,theIEAprovidescapacitybuildingprogrammesonenergystatisticsandenergysystemplanning.TheIEAenergystatisticsandmodellingtraining,inpartnershipwiththeEuropeanUnionDirectorateGeneralforInternationalPartnerships,focussesonimprovingenergydataandsupportingwholesystemenergymodellingprocesseswithinAfricanministries.Thistraininghasbeendeliveredtotencountriesandwillbeextendedtomoreinthefuture.10%45%45%2004006008002021STEPSAPS2030NZESSADevelopingAsiaRestofworldMillionpeoplePeoplewithoutaccessCoverageoftargetsAPSNumberofcountriesPeoplewithoutaccess52%22%26%NotargetTargetforfullaccessby2030OthertargetIEA.CCBY4.0.Chapter5Outlookforenergydemand2635TheIEAdata‐drivenelectrificationinAfricaprogramme,inpartnershipwiththeUnitedStatesAgencyforInternationalDevelopmentandPowerAfrica,addresseselectricityaccessdatagapstoenhancestrategicaccessplanning.Thisprogrammeprovidesdatacollectionguidelines,aswellassupportforimplementingthoseguidelinesinsixcountriesandforintegratingtheuseofgeospatialtoolsforelectrificationplanninginthreepilotcountries.TheIEACleanEnergyTransitionreports,withsupportfromtheMinistryofForeignTradeandDevelopmentCooperationoftheNetherlands,developsregion‐specificcleanenergytransitionroadmaps.TheseroadmapsincludeNorthAfrica(IEA,2020a),theSahel(IEA,2021)andGreaterHornofAfrica(IEA,2022h).TheIEACleanEnergyTransitionProgrammesupportsanenergyefficiencypolicycapacitybuildingprogrammewithAfricanregulatorsandanalyticalsupportforlow‐emissionshydrogeninAfrica,supportedbyparticipatingmembercountriesincludingBelgiumandJapan.Reachinguniversalaccesstoelectricityby2030–thetargetmetintheNZEScenario–wouldrequirealmost110millionpeopletogainaccesseveryyearfrom2022,andover30countriesinsub‐SaharanAfricatoconnectmorethan5%oftheirpopulationeveryyear.Thisisatallorder,butprogressonthisscalehasbeenachievedinothercountriesinthepast.IntheNZEScenario,45%ofpeoplegainingelectricityaccessforthefirsttimedosowithgridconnections,30%withmini‐gridsand25%withstand‐alonesystems.Almost90%ofnewconnectionsarebasedonrenewables.Theseprojectionsarebasedonacountry‐by‐countrygeospatialleast‐costanalysis,whichconsideredtechnicalbarriers,commercialviability,historicinstallationrates,andspeedtomarkettodevelopafeasiblerouteforachievinguniversalaccesstoelectricityinthenexteightyears.CleancookingIn2021,2.4billionpeoplegloballylackedaccesstocleancooking,40%oftheminsub‐SaharanAfricaand55%indevelopingAsia.Weestimatethatthenumberofpeoplestillcookingwithtraditionalbiomass,coalandkerosenein2022iscontinuingtoincrease,asithassince2020duetothepandemic.Thesetbacksthisyearareprimarilydrivenbysurgingfuelprices,particularlyforLPG.InternationalLPGpricesaretwiceashighin2022astheywereonaveragein2019.Togetherwithsoaringpricesforfoodandotherbasicgoods,thehighcostofLPGmaypushupto100millionpeoplebacktotheuseoftraditionalfuelsforcookingabsenteffectiveinterventions.MostofthepeopleatthisriskareindevelopingAsiawhereLPGuseishigh,andwhereprogrammeswhichprovidedLPGcanisterstothepoorhavebeguntocutsubsidies.InAfrica,thisaddstosubstantialmark‐upsondeliveredLPGprices,owingtounder‐developedfueldeliveryinfrastructureandalackoftransparent,competitivefuelmarkets.IEA.CCBY4.0.264InternationalEnergyAgencyWorldEnergyOutlook2022ThefinancialburdenofprovidingsubsidisedLPGisballooning,pushinganumberofcountriestoremoveorreducefinancialsupport,includingKenyaandIndia.Theremaybescopeinsomecasestomovefrombroad‐based,fuelspecificsubsidiesforLPGtomoretargetedsupportsoastoreducesubsidyburdenswithoutsacrificingaffordabilityforthosewithoutcleancookingaccess.InIndia,forexample,LPGsubsidieswereremovedinJune2020,butwerethenreintroducedinMay2022foratargetednumberofhouseholdsundertheUjjwalascheme.Othercountries,e.g.Indonesia,KenyaandNepal,arecontinuingwithprogrammestopromoteelectriccookinginordertoreduceimportdependencyonLPGandthecostsofprovidingLPGsubsidies.Around1.9billionpeopleremainwithoutaccesstocleancookingin2030intheSTEPS.12Halfofthoseareinsub‐SaharanAfrica,upfrom40%in2021.IntheAPS,itisassumedthatallcleancookingtargetsaremetontimeandinfull.Around128countrieslackuniversalaccesstocleancooking,butonly39countrieshavecleancookingtargets,ofwhichonly19aimtoachieveuniversalaccessby2030inlinewiththeSDG7.1(Table5.4).Ifallthetargetsareachieved,asassumedintheAPS,780millionpeoplewouldremainwithoutaccessby2030,about60%fewerthanintheSTEPS(Figure5.16).ChinaandIndonesiaareclosetobeingontracktoachievetheirtargets,whereasmanyothercountrieswithtargetsarecurrentlyfallingwellshortofthem,underliningthatthereisaneedtoimproveimplementationaswellastoraisethecurrentlevelofambition.IntheNZEScenario,around290millionpeoplegainaccesstocleancookingeachyear,anduniversalaccessisachievedby2030.Ofthose,40%gainaccesswithLPG,35%withimprovedcookstoves13(especiallyinruralareas),15%withelectricityandtheremaining10%withbiogasorethanol.Electriccookingisbecomingamoreattractiveoptionasthecostsofelectricappliancesdecline,andasthecurrentpricecrisisleadstoeffortstoreducedependenceonimportedfuels.Electriccookingmaynotimmediatelymeetallhouseholdcookingneeds,butitplaysanimportantroleinreducingdemandforotherfuelsthroughcleanfuelstacking.1412ThisnumberissignificantlylowerthanpreviouseditionsoftheWorldEnergyOutlook,duetoadownwardrevisioninthehistoricnumberofpeoplecookingwithtraditionalbiomassinChina.ThisrevisionbytheWorldHealthOrganisationisbasedonrecentsurveys,whichsuggestthataround200millionfewerpeopleinChinawerecookingwiththetraditionaluseofbiomassorcharcoalin2021,changingtheaccessratefromaround65%in2021toalmost80%(WHO,2022).Thisislargelydrivenbynationalprogrammestoeliminatepollutingsourcesofcookingtoimproveairqualityinurbancentres.Manyofthosetransitioningfromtraditionalfuelsarereportedtouseelectriccooking,butitislikelyacombinationofelectricandLPGornaturalgaswokcooking.Theserevisionsimpactaccessratesforallyearsbetween2000and2020.Basedonthenewdata,Chinareachesuniversalaccessby2030intheSTEPSwhileinpreviousestimatesthiswasprojectedbythelate2040s.13Improvedcookstovesincludeintermediateandadvancedimprovedbiomasscookstoves(ISOtier>1).Itexcludesbasicimprovedstoves(ISOtier0‐1).14Cleanfuelstackingreferstohouseholdsusingmultiplecookingsolutions,e.g.LPGstoveandamicrowaveandkettle.IEA.CCBY4.0.Chapter5Outlookforenergydemand2655Figure5.16⊳Numberofpeoplewithoutaccesstocleancookingin2021and2030byscenario,andcoveragewithtargetsintheAPSIEA.CCBY4.0.Universalcleancookingaccessstrugglestofindaplaceonthepoliticalagenda,thoughstatedpoliciescutthenumberwithoutaccesstocleancookingby500millionby2030Notes:SSA=sub‐SaharanAfrica(excludesSouthAfrica).Thetargetforfullaccesscategoryby2030includescountrieswith100%accesstocleancookingtargetsby2030.Theothertargetcategoryincludescountrieswithtargetslessambitiousthanfullaccessby2030.Theshareofcountrieswithandwithouttargetsandthenumberofpeoplewithoutaccesslivinginthosecountriesisbasedontheirstatusasof2021.InvestmentInvestmentneededtoachieveuniversalaccesstoelectricityandcleancookingintheNZEScenarioamountstoaroundUSD36billionperyear,equivalentto10%ofwhatisspentinayearbytheupstreamoilandgassector(Figure5.17).ThiscompareswithinvestmentofUSD23billionperyearintheAPSinordertodeliverstatedtargets.However,investmenttoimproveelectricityaccessin2019wasonlyaroundUSD10billion,whichisabout45%oftheannualinvestmentrequiredintheAPS,andlessthan30%ofwhatisneededintheNZEScenario.Investmentlevelsforcleancookingarealsowellbelowwhatisneededtomeetthetargetofuniversalaccessby2030.ThebulkofcurrentinvestmentisconcentratedindevelopingAsia,andinvestmentinAfricarepresentsonlyaround6%ofwhatisnecessarytoachieveuniversalcleancookingaccessby2030.Internationalsupportisessentialtocatalysehigherinvestment,especiallyintoday’sdifficultfinancialconditions.Concessionalfinancehasakeyroletoplayinhelpingtode‐riskcommercialparticipation.ThisincludessupportinglegalframeworkstoopenclimatefinanceflowsfromorganisationssuchastheGreenClimateFund,whichhasdonemuchtoadvancecleancookingprogrammesinsomecountriesinAfrica.Regionalinstitutionsandlocalgovernmentsalsohaveakeyroletoplayinallocatingcapitaltoaccessprojectsandincreatingahealthierinvestmentenvironmentbydevelopinglocalaccessagenciesand18%50%32%69%15%16%NotargetTargetforfullaccessby2030Othertarget50010001500200025002021STEPSAPS2030NZESSADevelopingAsiaRestofworldMillionpeoplePeoplewithoutaccessCoverageoftargetsAPSNumberofcountriesPeoplewithoutaccessIEA.CCBY4.0.266InternationalEnergyAgencyWorldEnergyOutlook2022programmes,improvingregulatoryandlegalframeworks,reducingadministrativeburdensanddelays,decreasingtaxesonaccesscomponents,andimplementingcost‐reflectivereforms.Anemergingareaofinterestistheprovisionofupfrontsupportforthepurchaseofefficientappliances,particularlyforproductiveusessuchasirrigationpumps(RMI,2018).Figure5.17⊳Annualinvestmentsforaccesstoelectricityandcleancookingbyscenariorelativetotracked2019investmentsIEA.CCBY4.0.Currentinvestmentinaccesstoelectricityislessthan30%ofwhatisneededtoachieveuniversalaccessby2030,whileinvestmentincleancookinglagsevenfurtherbehindNotes:MER=marketexchangerate.Sub‐SaharanAfricaexcludesSouthAfrica.Sources:IEAanalysis;SEforALLandCPI(2021).5.7EfficientcoolingforawarmingworldThesevenyearsuptoandincluding2021rankastheworld’ssevenhottestyearsonrecord;globalaveragemeantemperaturesin2021werearound1.1°Cabovepre‐industriallevels(NASAGoddardInstituteforSpaceStudies,2022).Thistrendissettocontinuefor2022.August2022wasoneofthewarmestAugustmonthsever,withheatwavesovercentralandeasternChinaandwesternregionsofNorthAmerica,whileEuropeexperienceditshottestsummeronrecord,withtemperaturesthatwere1.34°Cabovethehistorical1991‐2020average(CopernicusClimateChangeService,2022).Astemperatureshaverisen,thosewithaccesstoairconditionershavebeenusingthemmorefrequently.Manyothershavepurchasedcoolingequipment.However,billionsofpeoplelivinginhotareasdonothaveaccesstosuchequipment.Spacecoolingisalreadyoneofthefastestgrowingsourcesofelectricitydemand,andrapidlyincreasingairconditionerownershipanduseislikelytocauseittoriseevenfaster.Againstthisbackground,the2462019APSNZERestofworldDevelopingAsiaSub‐SaharanAfrica1020302019APSNZEBillionUSD(2021,MER)ElectricityCleancooking2022‐302022‐30IEA.CCBY4.0.Chapter5Outlookforenergydemand2675efficiencyofcoolingappliancesandbuildingsenvelopeswillhavemajorimpactsonelectricitydemand,emissionsfromelectricitygenerationandhouseholdelectricitybills.HouseholdspacecoolingneedsandaccesstodayTodayaround7.5billionpeopleworldwideliveinareaswithsomespacecoolingneeds,ofwhich5billionliveinclimateswithsubstantialcoolingneeds.15Spacecoolingneedstendtovarysubstantiallybetweenadvancedeconomiesandemergingmarketanddevelopingeconomies.Inadvancedeconomies,whichtendtoberelativelynortherly,energyuseforspaceheatingisabouteight‐timeshigherthandemandforspacecooling.Thisratioisreducingrapidlyasclimatechangeandurbanisationpushtemperatureshigher,butadvancedeconomiesnonethelessexperiencedanaverageofonly700coolingdegreedays(CDDs)16peryearbetween2016and2021.Thiscontrastswith2300CDDsperyearinAfrica.Onaverage,emergingmarketanddevelopingeconomiesexperiencearound2150CDDsperyear.Themajorityofthepopulationwithspacecoolingneedsremainwithoutaccesstoadequatemeanstocooltheirhomes.Around35%ofhouseholdshaveatleastoneairconditioner(upfrom20%in2000).Around55%ofhouseholdshaveaccesstoafan,providingatleastsomeformofrespite.Despitehighercoolingneedsinemergingmarketanddevelopingeconomies,theseregionshavesignificantlyloweraccesstocoolingthanadvancedeconomies,withonly30%ofhouseholdshavinganairconditioner,andasfewas11%ofhouseholdsinIndiaand7%inAfrica.Thiscomparesto50%inadvancedeconomies.Onaveragethereare1.3airconditionersperhouseholdinadvancedeconomies,andownershipiscloseto100%intheUnitedStates,withanaverageof2.4unitsperhousehold.DemandforcoolingservicessetforgrowthHeatwavesandwidercoolingneedsareexpectedtoincreaseinfrequencyandintensityasaveragetemperaturesriseandpopulationsgrowandbecomeincreasinglyurbanised.Thenumberofpeoplelivinginareasoftheworldwithatleastsomecoolingneedisprojectedtoincreaseto9.4billionby2050(morethan95%oftheglobalpopulation),whichisalmost2billionmorethantoday(Figure5.18).Asourclimatechanges,manymorecountrieswillexperiencedaysinwhichtemperaturesposeapublichealthriskby2050.Accesstospacecoolingservicesofonekindoranotherwillbecomeincreasinglyessentialforpublichealth,comfortandproductivity,andbythesametokenlackofaccesstocoolingserviceswillincreasinglybeseenasahallmarkofenergypoverty.15Substantialcoolingneedsrefertoareasthatarehotandhumideveryday,orareaswithhighorveryhighcoolingneeds,asshowninFigure5.18.16Coolingdegreedaysareameasureofcoolingneeds.Thisrecognisedstandardmetricallowscomparisonofcoolingneedsbetweenregions.ACDDmeasureshowwarmagivenlocationisbycomparingactualtemperatureswithastandardbasetemperature.Forthisanalysis,CDDsarecalculatedwithabasetemperatureof18°Candintegratetheimpactofhumidity.IEA.CCBY4.0.268InternationalEnergyAgencyWorldEnergyOutlook2022Figure5.18⊳SpacecoolingneedsandhouseholdairconditionerstockintheSTEPS,2021-2050IEA.CCBY4.0.Thenumberofpeoplelivinginareaswithcoolingneedsexpandsby25%to2050,akeydriverinrisingenergyneedsforcoolingNotes:EMDE=emergingmarketanddevelopingeconomies.FormoreinformationoncoolingneedsclassificationseeIEA(2020b).IEA.CCBY4.0.Chapter5Outlookforenergydemand2695IntheSTEPS,theglobalstockofhouseholdairconditionersincreasesfrom1.5billionunitstodayto2.2billionin2030and4.4billionin2050.Risingincomesandcoolingneedsinemergingmarketanddevelopingeconomiesaccountforalmost90%oftheincreaseintheairconditionerstockto2050.AverageratesofairconditionerownershipinIndiaincreasefrom11%todayto85%in2050;inAfricatheyincreasefrom7%todayto20%by2050(Figure5.19).Two‐thirdsofhouseholdsinChinatodayhaveanairconditioner,andalmostallhouseholdswillhaveoneby2050,broadlyinlinewithcurrentlevelsintheUnitedStates.HigherlevelsofelectricityaccessintheAPSanduniversalaccesstoelectricityby2030intheNZEScenariopushtheglobalstockslightlyhigherthanintheSTEPSin2030,butby2050thisisoffsetbyslightlylowercoolingneedsintheAPSandespeciallytheNZEScenarioasaresultofglobaltemperaturesbeingalittlelowerthanintheSTEPS.Figure5.19⊳HouseholdairconditionerownershipinselectedregionsintheSTEPS,2021-2050IEA.CCBY4.0.Almost90%ofthegrowthofhouseholdairconditionersto2050isinemergingmarketanddevelopingeconomies,adding2.4billionunitsasincomesandtemperaturesriseNote:C&SAmerica=CentralandSouthAmerica.Outlookforbuildingcooling‐relatedelectricitydemandSpacecoolingtodayisresponsibleforslightlymorethan5%offinalenergyconsumptionfromresidentialandcommercialbuildings,or15%oftheirelectricityconsumption.Energydemandforspacecoolinghasexpandedrapidlyoverthelast20years,morethandoublingtoreach2000terawatt‐hours(TWh)in2021.Growthwouldhavebeenhigherwithouttheprogressiveimplementationofminimumenergyperformancestandards(MEPS)forcoolingequipment.Todaysuchstandardsareinplacein86countries.1232004006008001000120020212030204020502021203020402050202120302040205020212030204020502021203020402050202120302040205020212030204020502021203020402050MillionunitsAirconditionerstockAirconditionersperhousehold(rightaxis)ChinaIndiaSoutheastAsiaUnitedStatesAfricaC&SAmericaEuropeanUnionJapanIEA.CCBY4.0.270InternationalEnergyAgencyWorldEnergyOutlook2022SpacecoolingdemandcontinuestoincreaseonasimilartrajectoryintheSTEPS,withglobaldemandrisingtoabout2800TWhin2030,a40%increasefrom2021(Figure5.20).Coolingdemandapproaches5200TWhin2050,doubletotalelectricitydemandintheEuropeanUniontoday.Nearly90%ofthetotalincreaseinspacecoolingelectricitydemandto2050occursinemergingmarketanddevelopingmarkets,whereMEPSareweakerthaninadvancedeconomies.Figure5.20⊳SpacecoolingdemandbyregionintheSTEPSandAPS,2021-2050IEA.CCBY4.0.Electricitydemandforcoolingrisesby3200TWhto2050intheSTEPS;growthiscutbymorethan50%intheAPSthankstoairconditionerandbuildingenvelopeefficiencygainsNote:TWh=terawatt‐hour;C&SAmerica=CentralandSouthAmerica.SpacecoolingelectricitydemandintheAPSiskeptincheckbyfurtherefficiencyimprovements,notablyanincreaseinthescopeandstringencyofMEPSandbuildingenergycodesincountrieswithnetzeroemissionstargets.Nonetheless,electricitydemandforcoolingstillincreasesto2600TWhin2030andover3400TWhby2050.TheimpactofenergyefficiencyimprovementsoncoolingelectricitydemandintheAPSismostsignificantintheAsiaPacificregion,whereover500millionadditionalresidentialairconditionersareprojectedtobeinusein2030comparedwithtoday.HalfofthedifferenceinelectricitydemandforcoolingbetweentheAPSandtheSTEPSreflectsdifferingassumptionsaboutwhathappensinjusttwocountries–IndiaandChina.IntheNZEScenario,spacecoolingenergydemandiskeptdownto2500TWhin2050,lessthanhalfthelevelintheSTEPS.Energyefficiencyandbehaviouralchangesmeanthatcoolingelectricitydemandisonly25%higherthantoday,despiteanadditional2.5billionairconditionersbeinginoperation(seeChapter3).4%8%12%2000400060002021STEPSAPSSTEPSAPSRestofworldJapanAfricaEuropeanUnionC&SAmericaMiddleEastSoutheastAsiaUnitedStatesChinaIndiaShareofelectricityTWh20302050demand(rightaxis)IEA.CCBY4.0.Chapter5Outlookforenergydemand2715EnergyefficiencyisthekeytocoolingcomfortthatiscompatiblewithnetzeroemissionsambitionsTheenergyefficiencyofspacecoolinghasmajorimplicationsnotonlyforelectricitydemandandCO2emissionsfromelectricitygenerationbutalsoforhouseholdenergybillsandelectricitysystemoperations.HouseholdsspentatotalofUSD90billiononelectricityforspacecoolingin2021;thisrisestoUSD130billionby2030andUSD300billionby2050intheSTEPS.IntheAPS,energyefficiencyoffsetstheimpactofhigherelectricitypricesintheshorttermandreducescostsinthelongerterm:householdspendingoncoolingin2050isUSD120billionlowerthanintheSTEPS,withtwo‐thirdsofthesavingscominginemergingmarketanddevelopingeconomies.Improvingtheenergyefficiencyofcoolingalsoreducesenergyrequirementsattimesofpeakdemandformanyelectricitysystems,whichhelpstokeepdowntheneedforinvestmentinelectricitysystemflexibility,additionalpeakingcapacityanddistributionnetworks.IntheSTEPS,theefficiencyoftheairconditionerstockby2030isalmost10%higherthantoday,andMEPSinmostmajormarketstogetherwithmandatoryefficiencylabellingboostsalesofhighefficiencyairconditioners.However,risingaveragetemperaturesandincreasingwealthmeanthatunitsareusedmoreoften,resultinginhigheraverageelectricityconsumptionperunitin2030thantoday,andenergyefficiencyimprovementsareinsufficienttooffsetthiscompletely.TheoutlookisdifferentintheAPS,wheretheuseofairconditionersrisesasitdoesintheSTEPS,butmorerapidenergyefficiencyimprovementsmeanthattheaverageelectricityconsumptionofanairconditionerdropsby5%to2030.Today,best‐in‐classairconditionersaremorethantwiceasefficientastheaverageequipmentsold(IEA,2022i).Inseveralmarketstheefficiencyoftheaverageequipmentsoldisthree‐timeslessthanthebestavailabletechnologiesinthesamemarket(IEA,2022j).ProgressiveincreasesinMEPSandmandatoryenergyefficiencylabellingofapplianceswouldincreasetheenergyefficiencyofunitswithoutmajorincreasesinproductcostsforconsumers.MEPSandmandatorylabellingmightalsohelptodiscouragethesaleofportablepackagedairconditioners,whichareoftenpurchasedduringheatwavesandaretypicallymuchlessefficientthansplitairconditioningsystems.Effortscouldalsobemadetoconveythemessagethatalternativesolutionstorefrigerant‐cycleairconditionersmaybebestsuitedtoprovidecoolingcomfortincertaincontexts.17Inhouseholds,thiscouldincludedehumidifiers,anddesiccantandevaporativecooling.Indenselypopulatedareas,districtcoolingcouldmeetneedsmoreefficientlythanindividualcoolingsystems.Improvementsinbuildingenvelopesandpassivecoolingmeasurescouldalsosubstantiallyreducecoolingdemand,aswellasmakingbuildingsmorecomfortableandresilientinthefaceofheatwavesandelectricityoutages.Passivecoolingmeasuresincludeshading,low17Refrigerantsareanessentialcomponenttothefunctioningofmostairconditioners.Whilerefrigerantsoperateinaclosedloop,leaksmayoccurduringtheoperationandmaintenanceofequipment.Duetotheirhighglobalwarmingpotential(GWP),138countrieshaveratifiedtheKigaliAmendmenttotheMontrealProtocol,whichaimstophaseouttheuseofhydrofluorocarbonsandtorelyonalternativesassafeandstableastheirpredecessorsbutwithlowerGWPs.IEA.CCBY4.0.272InternationalEnergyAgencyWorldEnergyOutlook2022emissivityglass(low‐E)windows,naturalventilationandreflectiveroofingmaterials.Passivecoolingandimprovementstotheenergyperformanceofbuildingscouldreducetheuseofairconditioners,andinsomemoretemperateregionstheycouldmakethemunnecessary.TheAPSassumesthatpassivemeasuresareencouragedbycountry‐specificzerocarbon‐readybuildingenergycodesincountrieswithbuildingenergyefficiencytargetsintheirNDCorwithbroadernetzeroemissionstargets.5.8BringingforwardthepeakinoiluseforroadtransportGlobaloildemandgrowsatlessthan1%peryearthisdecadebeforepeakinginthemid‐2030sataround103mb/dintheSTEPS.IntheAPS,globaloildemandpeaksinthemid‐2020sandreturnstocurrentlevelsbytheendofthisdecade.Roadtransportisresponsibleforover40%ofoildemandtoday.Vehicleelectrificationiskeytoreducingoildemandintheroadtransportsector.InaspecialEVcase,basedontheSTEPStrajectoryaugmentedwiththeassumedEVpenetrationlevelsintheAPS,theoilpeakfortheroadsectorisbroughtforwardalmostonedecadesoonerthanintheSTEPSandtheoildemandwouldbeover1.5mb/dlowerin2030relativetotheSTEPS(seeEVcaseinFigure5.21)Figure5.21⊳Globalroadtransportoildemandbyscenario,2010-2030,andEVsalesbyscenario,2021-2030IEA.CCBY4.0.Oildemandinroadtransportincreasesslightlyto2030intheSTEPSdespitethegrowthofEVs,withfastergrowthforelectricLDVsandheavytrucksitwouldpeakadecadeearlierNotes:EV=electricvehicle;LDVs=light‐dutyvehicleswhichincludepassengercarsandlighttrucks.Heavytrucksincludemedium‐andheavy‐freightvehicles.Electricreferstobatteryelectricvehiclesaswellasplug‐inhybridvehicles.TheEVcaseshowstheSTEPStrajectorywiththepenetrationofEVsatsimilarlevelsoftheAPS.10%20%30%40%202120252030202120252030MarketshareSTEPSAdditionalinAPSElectricLDVsElectricheavytrucks3035404550201020202030STEPSAPSEVCaseRoadoildemandmb/dIEA.CCBY4.0.Chapter5Outlookforenergydemand2735Over10millionelectriccarsaresettobesoldin2022.Chinaremainsthegloballeader,withone‐out‐of‐fournewcarssoldbeinganEVin2022.TheUnitedStatesisalsoontrackforrapidelectrificationofitscarfleet:amongothermeasures,theprovisionsoftherecentInflationReductionActandthetargetsetinCaliforniatophaseoutICEcarsalesby2035willboostelectriccarregistrationsandmanufacturingcapacity.TheEuropeanUnionhasalsotakenstepstopromoteEVsandelectrificationofthecarfleetissettoproceedbrisklytheretoo.TheSTEPSonlytakesaccountofpoliciesfortheroadtransportsectorwhicharebackedbyexistinglegislation,whereastheAPSassumesthatalltargetsandpledgesaremetontimeandinfull.Currently,36countriesandseveralUSstateshaveannouncedcommitmentstohaltthesalesofICEcarsbyaspecifieddate,somealsotargetlighttrucks.MajorautomobilemanufacturershaveannouncedtargetsforproductionofEVsasaproportionoftheirtotalproductionoutput,notablyinEurope(Table5.5).Table5.5⊳SelectedpoliciesandtargetstophaseoutsalesofICELDVsbycountry/stateandautomakerCountry/statesincludedbasedontheirmembershipintheInternationalZeroEmissionsVehicleAlliance.Notes:LDVs=light‐dutyvehicleswhichincludepassengercarsandlighttrucks.Thistablecoversthosecountriesandstateswithlegislation,atargetorstatedambitioninplacetophaseoutthesalesofICELDVs.OnlyautomakerswhichhaveannouncedacompletephaseoutofICEvehiclesareincluded.WestEuropeincludesEuropeanUnion,EuropeanFreeTradeAssociationcountriesandtheUnitedKingdom.YearCountry/stateTypeofvehicle2025NorwayLDVs2030Austria,Slovenia,Washington(UnitedStates)LDVsDenmark,Iceland,Ireland,Netherlands,SingaporePassengercars2035EuropeanUnion,CapeVerde,Canada,Chile,UnitedKingdom,California,MassachusettsandNewYork(UnitedStates)LDVs2050CostaRica,NewZealand,Connecticut,Maryland,NewJersey,Oregon,RhodeIsland,Vermont(UnitedStates)PassengercarsYearAutomakerAnnouncement(passengercars)2025Jaguar100%EVsales2027AlfaRomeo100%EVsales2028Opel100%EVsalesinEurope2030Bentley,Cadillac,Fiat,Mini,Rolls‐Royce,Volvo100%EVsalesFord,Stellantis100%EVsalesinEuropeHonda100%EVsalesinChina2033Audi100%EVsales2035GeneralMotors,Lexus100%EVsalesHyundai,Volkswagen100%EVsalesinEuropeToyota100%EVsalesinWestEuropeIEA.CCBY4.0.274InternationalEnergyAgencyWorldEnergyOutlook2022ThesetargetsarereflectedintheAPS,andasaresult,salesofEVsrisefasterintheAPSthanintheSTEPS.By2030,EVsaccountforover35%oftotalcarsalesintheAPS,andfor8%oftotalheavytrucksales.Morethan40millionelectriccarsarebeingsoldeveryyearby2030,six‐timesmorethanin2021.IntheUnitedStates,theEuropeanUnionandChina,one‐of‐every‐twonewcarssoldiselectric(Figure5.22).TheshifttoproduceEVsmeansthateventuallyfewerICEvehiclesaresoldontodevelopingeconomies,andthatincreasesEVsalesinthosecountries.China,theEuropeanUnionandtheUnitedStatesarecurrentlyresponsiblefornearly90%ofelectriccarsalesworldwide.Thisfallstojustover60%by2030asglobalelectriccarsalesmultiplyintheAPS.Figure5.22⊳Marketshareofelectriccarsinkeymarketsbyscenarioto2030IEA.CCBY4.0.Halfofallthecarssoldintheworld'slargestcarmarketsareelectricby2030intheAPS,buildingonrecentmomentumNote:2022e=estimatedvaluesfor2022.Source:IEAanalysisbasedondatafromEVVolumes(2022).Efficiencyimprovementshaveoffsetnearly3.5mb/dofgrowthinoildemandsince2015,andfuelswitching–mostlytobiofuels–avoidedafurther1mb/d.Overthenextdecade,however,mostoftheavoidedoildemandcomesfromtheelectrificationofthevehiclefleet.IntheSTEPS,energyefficiency,hybridisationandelectrificationallplaysignificantrolesintemperingoildemandgrowthintheroadtransportsectorto2030withelectrification(includinghybridisation)helpingtoreduceoildemandbyaround4mb/d.IntheAPS,electrificationproceedsatafasterpaceasnationaltargetsandtargetsannouncedbymanufacturersaremet,andsavingsreachover5mb/dby2030(Figure5.23).Medium‐andheavy‐dutytruckscontributetwiceasmuchtosavingsthroughelectrificationintheAPSastheydointheSTEPSby2040.10%20%30%40%50%60%2019202020212022e20302019202020212022e20302019202020212022e2030AdditionalinAPSSTEPSUnitedStatesEuropeanUnionChinaIEA.CCBY4.0.Chapter5Outlookforenergydemand2755Figure5.23⊳ChangeinroadtransportoilconsumptionbyregionandeffectintheSTEPSandAPS,2021-2030IEA.CCBY4.0.Electrification,efficiencyimprovements,hybridisationandshiftingtoalternativefuelscurboildemandgrowthby8mb/dintheSTEPSandbyover10mb/dintheAPSNotes:mb/d=millionbarrelsperday;EMDE=emergingmarketanddevelopingeconomies.Alternativefuelsincludenaturalgas,hydrogen,hydrogen‐basedfuelsandbiofuels.DespiterapidexpansioninEVsales,aslowturnoverofstocklimitsreductionsinoildemandinroadtransport.ICEcarsremaininuselongaftertheirsalesceaseintheregionswheregovernmentsandcarmanufacturershaveannouncedphase‐outdates.Despitebeingresponsiblefortwo‐thirdsoftotalnewcarsalesby2040intheAPS,EVsdonotaccountfortwo‐thirdsofpassengercarsontheroaduntiladecadelater.ThebrakeonoildemandreductionduetoslowstockturnoverreinforcesthecaseformovingasfastaspossibletoencouragetheuptakeofEVs.Whileveryfewofthecarsmanufacturedtodaywillstillbeontheroadin2050,thissmallcarfleetneverthelesswillcontribute9%ofcumulativeemissionsfromtheroadtransportsectorbetweennowand2050.Carssoldinthenextdecadecontribute24GtCO2ofcumulativeemissionsto2050intheSTEPS,butonly12GtCO2intheAPS(Figure5.24).Intheroadmaptonetzeroemissions,oneofthekeymilestonesisendingnewICEcarsalesbynolaterthan2035worldwide.Thiswouldreducethecumulativeemissionsto2050fromcarssoldinthenextdecadeto1.7GtCO2.ThereadyavailabilityofpubliccharginginfrastructureiscrucialtoovercomerangeanxietyonthepartofEVownersandpotentialowners,andtopavethewayfortheelectrificationoflong‐distancetrucking.Fromnowto2030,investmentofaroundUSD150billionisdevotedtopubliccharginginfrastructureintheSTEPS,andalmostUSD190billionintheAPS.IntheUnitedStates,togethertheInflationReductionActandtheInfrastructureandJobsActhaveearmarkednearlyUSD11billionfortheestablishmentofanetworkofEVchargers.InEurope,anumberofgovernmentsaretakingaction,whileautomotivecompanieshave10203040502021203020212030AdvancedeconomiesEmergingmarketandAvoidandshiftEfficiencyHybridisationElectricityAlternativefuelsEffectmb/dSTEPSAPSdevelopingeconomiesIEA.CCBY4.0.276InternationalEnergyAgencyWorldEnergyOutlook2022createdjointventures,e.g.Daimler,TratonandVolvo,toinstallhighpowerchargingpointsnearhighwaysandlogisticshubs.Figure5.24⊳Cumulativeemissionsfromcarsandtrucksbyagebandandscenario,2021-2050IEA.CCBY4.0.TimelyrestrictionsonnewICEvehiclesarekey:carsandtrucksyettobepurchasedrisklockingin120GtofCO2to2050intheSTEPS,morethantriplethelockinfromtoday’sfleetsNotes:GtCO2=gigatonnesofcarbondioxide.Trucks=lightcommercialvehicles,medium‐freighttrucksandheavy‐freighttrucks;ICE=internalcombustionengine.FurthereffortstoscaleupEVproductionarealsoneededtoachievetheambitioustargetsthatmanycountrieshaveset.ThecurrentdelaysindeliverytimesforelectriccarsreflectnotonlythepopularityofEVsbutalsothesupplychallengesthathaveemerged.Muchofthisisbestlefttotheindustrytoworkout,butgovernmentscouldhaveaparttoplayheretoo,forexampletohelpcreatemoreresilientbatterysupplychainstominimisefutureenergysecurityrisks.Additionalinvestmentsinresearchanddevelopmentcouldhelptobringdownbatterycostsandincentivisebatteryrecycling,fuelcelldevelopmentandadvancedbiofuelproduction.Progressintheseareaswouldalsohelptheshippingandaviationindustriestomakeprogressondecarbonisation,aswellasthevehicleindustry.20406080100STEPSAPSNZESTEPSAPSNZE2041‐502031‐402021‐30Existingbefore2021GtCO₂CarsTrucksIEA.CCBY4.0.Chapter6Outlookforelectricity277Chapter6OutlookforelectricityBrightasthesun?Globalelectricitydemandrisesby5900terawatt‐hours(TWh)intheStatedPoliciesScenario(STEPS)andover7000TWhintheAnnouncedPledgesScenario(APS)by2030,equivalenttoaddingthecurrentlevelofdemandintheUnitedStatesandtheEuropeanUnion.Inadvancedeconomies,transportisthelargestcontributortoincreasedelectricitydemandasthemarketshareofelectriccarsrisesfromabout8%in2021to32%intheSTEPSandalmost50%intheAPSby2030.Inemergingmarketanddevelopingeconomies,populationgrowthandrisingdemandforcoolingcontributetoincreasingelectricitydemand.InChina,airconditionerownershipexpandsbyaround40%fromcurrentlevelsintheSTEPSandAPSby2030.Electricityprovidesarisingshareoftotalfinalenergyconsumptioninalleconomies.Globalelectricitydemandin2050isover75%higherintheSTEPSthanitistoday,120%higherintheAPSand150%higherintheNetZeroEmissionsby2050(NZE)Scenario.Recently,coaluseintheelectricitysectorhasseenanuptickinmanycountriesinresponsetostrongdemand,highnaturalgaspricesandenergysecurityconcerns,butthisisexpectedtobetemporary.EvenintheSTEPS,unabatedcoalfallsfrom36%ofgenerationin2021to26%in2030and12%in2050,reflectingrenewablesgrowth,ledbysolarPVandwind.IntheAPS,pledgesincludingnetzeroemissionstargetsin83countriesandtheEuropeanUnion,aremetontimeandinfull.Thisacceleratescleanenergytransitions.Renewablesinelectricitygenerationrisefrom28%in2021toabout50%by2030and80%by2050.Unabatedcoalfallstojust3%in2050.SolarPVcapacityadditionsexpandfrom151gigawatts(GW)in2021to370GWin2030andalmost600GWin2050,whilewindcapacityadditionsdoubleto210GWin2030andriseto275GWin2050.Recentevents,marketconditionsandpoliciesareshiftingviewsonnaturalgasandlimitingitsrole,whileunderliningthepotentialfornuclearpowertocutemissionsandstrengthenelectricitysecurity.Electricitysystemsfacedanumberofchallengestoaffordabilityandsecurityoverthelastyear.Weestimatethatmarketconditionsandtheenergycrisisareraisingtheglobalaveragecostofelectricitysupplybyalmost30%in2022.TheEuropeanUnionisfacingparticularpressuresfollowingatriplingofwholesaleelectricitypricesinthefirst‐halfof2022relativetothepreviousyear.Thisismainlyaconsequenceofrecordhighnaturalgasprices,butitalsoreflectshighercoal,oilandCO2prices,exacerbatedbyreducedavailabilityofnuclearandhydropower.Actionstoreduceenergyuse,projectedreductionsinfuelprices,plannednuclearrestartsandpossiblemarketdesignreformsallofferpotentialfuturerelief.Climate‐relatedrisks,includingheatwaves,droughts,extremecoldandextremeweatherevents,havestrainedelectricitygridsandcausedoutagesaroundtheworld.Theevolvingelectricitymixislikelytoimprovesomeaspectsofclimateresiliencebutexacerbateothers.SUMMARYIEA.CCBY4.0.278InternationalEnergyAgencyWorldEnergyOutlook2022Theelectricitysectoremitted13gigatonnesofcarbondioxide(GtCO₂)in2021,accountingforoverone‐thirdofglobalenergy‐relatedCO₂emissions.ElectricitysectorCO2emissionspeakinthenearfutureinallourscenarios,withsteepreductionsof40%intheSTEPSandover80%intheAPSby2050.IntheNZEScenario,netemissionsfromelectricityreachzeroby2040.Inadvancedeconomies,electricitysectoremissionshavebeendecliningsince2007,withatemporaryrisein2021duetotherecoveryfromCovid‐19,andfallby5%peryearintheSTEPSand14%intheAPS.Inemergingmarketanddevelopingeconomies,emissionspeaksoonandthendeclinebyover1%annuallyintheSTEPSto2050and6%intheAPS.Higherelectricitysectorinvestmentenablesthesereductions,risingfromanannualaverageofUSD860billionin2017‐2021toaboutUSD1.2trillionin2022‐2050intheSTEPS,USD1.6trillionintheAPSandUSD2.1trillionintheNZEScenario.Systemflexibilityisthecornerstoneofelectricitysecurity.ChangingdemandpatternsandrisingsolarPVandwindsharesdoubleflexibilityneedsintheAPSby2030andincreasethemalmostfourfoldby2050.FlexibilityneedsalsoriserapidlyintheSTEPS,wheretheymorethantripleby2050.Today,powersystemflexibilityismainlyprovidedbyunabatedcoal,naturalgasandhydro,buttomorrow’ssystemswillrelyincreasinglyonbatteries,demandresponse,bioenergyandotherdispatchablerenewables,fossilfuelswithcarboncapture,hydrogenandammonia.Electricitynetworksarethebackboneofelectricitysystems,andneedtoexpandandmodernisetosupportenergytransitions.Totalgridlengthsincreasebyabout90%from2021to2050intheSTEPS,andanother30%intheAPS.AnnualinvestmentrisesintheSTEPSfromaroundUSD300billioninrecentyearstoUSD550billionby2030andaveragesUSD580billionperyearto2050.IntheAPS,investmentrisesfurthertoUSD630billionin2030andUSD830billionin2050.However,complexprojectscantakeadecadeormoretodeliver,whichistwiceaslonginmostcasesasdevelopingsolarPV,windorelectricvehiclecharginginfrastructure.Long‐termplanningisvitalandmustaccountfor,amongotherthings,demandgrowth,increasingamountsofvariablerenewables,aswellasopportunitiesfordigitalisation.Criticalmineraldemandlinkedtotheelectricitysectorissettorisefrom7Mtperyearin2021toreach11Mtin2030and13Mtin2050intheSTEPSasaresultofincreasingdeploymentofrenewables,batterystorageandnetworks.ItgrowsmuchfasterintheAPSandNZEScenario,reaching20Mtperyearby2050.Copperforgrids,siliconforsolarPV,rareearthelementsforwindturbinemotorsandlithiumforbatterystoragewillbepivotal;criticalmineralsareakeycomponentoftheenergyandelectricitysecuritylandscape.AdditionalR&Disneededtoreducemineralintensityandenablemineralsubstitutioninkeyapplications,alongwithrecycling,reuseofelectricvehiclebatteriesandend‐userenergyefficiencymeasures.IEA.CCBY4.0.SolarPVRenewablesNuclearWindOtherrenewables3860519064606920340187046005820301000401048402760278033503550423080601507017570HowtoreadCoalunabatedNaturalgasunabatedOther486010207405205806550685061001020080809040867020102021TWhAPSSTEPS2030Whatnewpowercapacitywillbebuilt?Renewablesaresettodominateglobalcapacityadditions,accountingfor7580%ofallnewcapacityto2050intheSTEPSandAPS,ledbysolarPVandwind.Whatdriveselectricitydemandgrowth?Globalelectricitydemandrisesby2530%to2030intheSTEPSandAPSduetomoreelectricmotors,EVs,heatpumpsandhydrogen.EuropeanUnionCentralandSouthAmericaAfricaSoutheastAsiaKoreaJapanChinaIndiaWorldUnitedStatesMiddleEastWindSolarPVBioenergyHydroAPS2050Otherrenewables0%40%80%OtherNuclearRenewablesUnabatedfossilfuels20102021STEPS20302021APS203067%13%20%62%10%28%47%10%43%10%1%49%41%ShareHowistheelectricitymixchanging?Low-emissionssourcesofelectricity,ledbyrenewables,arepoisedtoovertakefossilfuelsby2030intheSTEPSandAPS,endingdecadesofgrowthforcoal.2010Change201021STEPS202130APS202130+17+167+214MillionunitsElectriccarsSpacecoolingChemicalsSpaceheatingAluminiumHydrogen300015002250750020000unitsin2010TWh280InternationalEnergyAgencyWorldEnergyOutlook2022IntroductionElectricityaccountsforabout20%oftheworld’stotalfinalconsumptionofenergy,butitsshareofenergyservicesishigherduetoitsefficiency.Itiscentraltomanyaspectsofdailylifeandbecomesmoresoaselectricityspreadstonewend‐uses,suchaselectricvehicles(EVs)andheatpumps.Theelectricitysectoraccountedfor59%ofallthecoalusedgloballyin2021,togetherwith34%ofnaturalgas,4%ofoil,52%ofallrenewablesandnearly100%ofnuclearpower.Italsoaccountedforoverone‐thirdofallenergy‐relatedCO2emissionsin2021.Thischaptermainlydrawsontwoscenarios,theStatedPoliciesScenario(STEPS)andtheAnnouncedPledgesScenario(APS).AsdescribedinChapter2,theSTEPSmapsoutatrajectorythatreflectscurrentpolicies,whiletheAPSassumesthatalllong‐termemissionsandenergyaccesspledgesandtargetsaremetontimeandinfull.ThischapteralsodrawsontheupdatedNetZeroEmissionsby2050(NZE)Scenario,whichdescribesacost‐effectivepathwayfortheworldtoachievenetzeroemissionsbymid‐centuryintheenergysectorthatalsolimitscumulativeemissionsinlinewitha50%chanceoflimitingtheglobalaveragetemperatureincreaseto1.5°Cby2100.ThisoutlookforelectricityisproducedthroughsimulationsintheGlobalEnergyandClimateModel(GEC‐M),whichassessesenergydemandsectorsattheend‐uselevelin26regions.Ittakesaccountofover100electricitygenerationtechnologies,plusenergystorageandnetworkinfrastructure,andmakesuseofanhourlymodelofelectricitydemandandsupplybyend‐useandtechnologyformajormarkets.Section6.1providesanoverviewoftheoutlookforsupplyanddemandintheglobalelectricitysector.Section6.2takesadeeperlookatelectricitydemandbyregion,sectorandend‐useacrossthescenarios.Italsoexaminestheimportanceofenergyefficiencyincleanenergytransitions.Section6.3highlightskeytrendsinelectricitysupply,includingthespeedoftheshiftfromunabatedfossilfuelstorenewables,nuclearandotherlow‐emissionsoptions.Italsoprovidesaregionalviewofmajorsupplytrends.Sections6.4dealswithCO2emissionsfromelectricitygeneration.Section6.5considerstheinvestmentneedsoftheelectricitysectorineachscenario.Sections6.6to6.8exploresthreekeythemesfortheelectricityoutlook:Powersystemflexibilityneedsandhowtomeetthem,withafocusonbatterystorage.Gridexpansionandthechallengeoftimelydevelopmenttosupporttransitions.Risingdemandforcriticalmineralsinelectricityandoptionstomoderatedemand.IEA.CCBY4.0.Chapter6Outlookforelectricity2816Scenarios6.1OverviewGlobalelectricitydemandincreasessignificantlyinallthethreescenariosby2050.Itrisesfrom24700terawatt‐hours(TWh)in2021byabout80%intheSTEPS,by120%intheAPSandby150%intheNZEScenario(Table6.1).Electricitydemandgrowthto2030is2.4%peryearintheSTEPS,whichisbelowtheannualaverageof2.6%from2010to2021,butis2.8%intheAPSand3.5%intheNZEScenario,reflectingfasterelectrificationofend‐uses.From2030to2050,electricitydemandgrowthslowsintheSTEPS,butintheAPSandNZEScenariorobustgrowthcontinuesuntil2040beforeslowing.ThebuildingssectoristhelargestconsumingelectricitysectortodayandremainssointheSTEPSandAPSthroughto2050,withindustrythesecond‐largest.Otherusesofelectricityriserapidly,especiallyintheAPSandNZEScenario,asmoreEVs(batteryelectricvehiclesandplug‐inhybrids)hittheroadandastheuseofcleanhydrogenrampsup.Table6.1⊳Globalelectricitydemandandsupplybyscenario(TWh)STEPSAPSNZE20102021203020502030205020302050Buildings963712594153832194014889196231329315850Industry745010166120361507312471183321377621697Transport2954411169360715707845223610243Hydrogenproduction‐21596638795714246411433Globalelectricitydemand1854824700306214367231752538103373362159Unabatedcoal867010201904458928076158046660Unabatednaturalgas485565526848665861003577497782Unabatedoil9696824323123631751803FossilfuelswithCCUS‐151337513382821317Nuclear27562776335142603547510338965810Hydropower34494327507868095213754357258251Wind3421870460410691581617416784023486SolarPV321003401112118483818761755127006Otherrenewables411859138028331707515319485762Hydrogenandammonia‐‐944795676031467Globalelectricitysupply2153928334348344984535878612683772373232Renewablesshare20%28%43%65%49%80%61%88%Notes:TWh=terawatt‐hours;CCUS=carboncapture,utilisationandstorage;PV=photovoltaics.STEPS=StatedPoliciesScenario,APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.Electricitydemandisdefinedastotalgrosselectricitygeneratedlessownusegeneration,plusimports,lessexportsandtransmissionanddistributionlosses.Othersourcesareincludedinelectricitysupply.IEA.CCBY4.0.282InternationalEnergyAgencyWorldEnergyOutlook2022Globalelectricitysupplyisprojectedtoshiftawayfromunabatedfossilfuelsafterrecoveringfromcurrentmarketdisruptions.Anumberofcountriesmarkedareturntocoal‐firedpowerin2022astheeconomicrecoveryfromCovid‐19pushedupelectricitydemandandasconcernsriseabouthighnaturalgaspricesandenergysecurity.IntheSTEPS,theshareofunabatedcoalinglobalelectricitygenerationdeclinesfrom36%in2021to26%in2030and12%in2050,whiletheshareofunabatednaturalgasfallsfrom23%in2021to20%in2030and13%in2050.EmissionspledgesandgoalsdrivefasterreductionsintheAPS,whereunabatedcoalfallsto23%ofgenerationin2030andjust3%in2050,andunabatednaturalgasdropsto17%in2030andjust6%by2050–thelowestsharein50years.Oilmakesup2%ofelectricitysupplytoday,andismainlyusedinremoteareasornearoilproductionsites:itsuseissettodeclinefurtherinallscenariosasgeneratorsturntocheaperandlow‐emissionsalternatives.Unabatedcoal,naturalgasandoildeclineevenfasterintheNZEScenario,withelectricityreachingnetzeroemissionsgloballyby2040.Figure6.1⊳Globalgrowthinrenewableelectricityrelativetototalelectricitygenerationgrowthbyscenario,2021-2050IEA.CCBY4.0.RenewablesoutpacetheincreaseoftotalgenerationintheSTEPS,whiletheygrowfasterintheAPSanddisplacemoreunabatedfossilfuelsNote:TWh=terawatt‐hours;STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.Renewableenergytechnologiescurrentlyprovidecloseto30%ofelectricitygenerationandaresetforrapidgrowthinallscenarios,ledbysolarphotovoltaics(PV)andwind.Whilerenewablesnowrepresentthecheapestsourceofnewelectricityinmostmarkets,thepaceoftheirexpansiondependsontheretirementorreuseofexistingsourcesofelectricitygenerationaswellasonnewcapacity,andthereforestillrestslargelyinthehandsofpolicymakers.IntheSTEPS,thegrowthofrenewablesgenerationexceedstheincreaseintotalgenerationto2030andto2050(Figure6.1),reducingtheneedforunabatedfossilfuels.10203040502030‐50STEPSAPSNZE510152025SolarPVWindHydroBioenergyandotherrenewablesTotalelectricitygeneration2021‐30ThousandTWhSTEPSAPSNZEIEA.CCBY4.0.Chapter6Outlookforelectricity2836IntheAPS,solarPVandwindaloneoutpaceevenhigherdemandgrowthto2030and2050,unlockingdeeperemissionsreductions.IntheNZEScenario,renewablesgrowthis40%fasterto2030and20%fasterto2050thanintheAPS,andthisleadstoelectricitybeingrapidlydecarbonised.6.2ElectricitydemandGlobalelectricitydemandclimbedto24700TWhin2021–anincreaseof6%fromthepreviousyearandthebiggestannualincreasesince2010–reflectingareboundinmanyeconomiesfollowingthepandemic.Nearlythree‐quartersoftheglobalincreaseinelectricitydemandin2021wasinemergingmarketanddevelopingeconomies,withChinaaloneaccountingforabout700TWh,or50%oftheglobalincrease,anamountequivalenttototalelectricitydemandinAfricatoday.Worldwidethecurrentshareofelectricityintotalfinalenergyconsumptionis20%.ThelargestelectricityconsumersareChina,UnitedStatesandEurope;togethertheyaccountforover60%ofglobalelectricitydemand(Table6.2).Table6.2⊳Electricitydemandbyregionandscenario,2010-2050(TWh)STEPSAPS201020212030205020302050NorthAmerica463248525266683055448786UnitedStates388040044281548245297187CentralandSouthAmerica93210971308216814472940Brazil4515416229856371138Europe356736454182506046396561EuropeanUnion257426082922332732714348Africa570707994204111283355SouthAfrica214194229365248494MiddleEast70910641372243013432878Eurasia98511811291166912801652AsiaPacific71541216416208234751637127638China36597556996912868994014504India71712732117429321075314Japan10719348939229521153SoutheastAsia60710371537284815803214Globalelectricitydemand185482470030621436723175253810Note:TWh=terawatt‐hours.Electricitydemandincreasesat2.4%peryearintheSTEPSovertherestofthisdecadetoreachmorethan30600TWhby2030.DemandgrowsfasterintheAPS,reachingaround31750TWhin2030.Between2030and2050,electricitydemandgrowthintheSTEPSslowsto1.8%peryeartoreacharound43700TWhby2050.IntheAPS,annualdemandgrowthis2.7%after2030toreachnearly54000TWhby2050.IEA.CCBY4.0.284InternationalEnergyAgencyWorldEnergyOutlook2022Today’sunfoldingglobalenergycrisishasledtosoaringelectricitypricesforconsumers.Forexample,theaverageresidentialelectricitypriceintheEuropeanUnionwasabout30%higherinthefirst‐halfof2022thanduringthesameperiodin2021(IEA,2022a;Energie‐ControlAustria,MEKHandVaasaETT,2022).Totacklethecrisisintheshort‐termandlimittheimpactofhighwholesaleelectricityprices,someEuropeangovernmentshaveintroducedmeasuressuchaspricecapsonretailelectricityprices,subsidiesforfossilfuelpowergenerators,windfalltaxesonprofitsandpaymentstoshieldend‐usersfromrisingelectricitybills(Spotlight).Actiontocushiontheimpactonend‐usersisunderstandable,nevertheless,thereisariskthatmutedelectricitypricesignalsmaydiscouragetheessentialbehaviourchangesandefficiencyimprovementsthatreducedemandand,bydoingso,helpreduceprices.Inasearchforlongertermsolutions,theEuropeanUnionisexploringwhetherthecurrentelectricitymarketdesignneedstobeoverhauled.Despitetheturbulenceintoday’selectricitymarkets,themomentumforfurtherelectrificationisstrongacrosstheworld,withthedeploymentofelectriccarsandtheinstallationofheatpumpssettoincrease,andwithelectricitybeingusedtomeetnewend‐uses.Electricitypriceshaverisendramatically,butsohavepricesforoil,naturalgasandcoal.Electricitygenerationmoreoverissettoreduceitsdependenceonfossilfuelsintheyearsahead,thusreducingemissionsandenhancingitsattractiveness.Reduceddependenceonfossilfuelscouldalsobringenergysecuritybenefits,providedthatelectricitygridsareenhancedtohelpensureresilience.IntheSTEPS,theshareofelectricityintotalfinalconsumptionreaches22%in2030and28%in2050.IntheAPS,thesesharesriseto24%andnearly40%respectively,andintheNZEScenariotheyrisefurtherto28%andover50%by2050.ElectricitydemandbyregionAmoregranularlookatregionaltrendsrevealsimportantdifferencesintheevolutionofelectricitydemandaroundtheworld.OneofthemostrapidincreasesinelectricityconsumptioninrecentyearshasbeeninChina,whereitdoubledbetween2010and2021asaresultofrapideconomicandindustrialgrowth(Figure6.2).Byfar,Chinaisnowtheworld’slargestconsumerofelectricity:itaccountsfor30%oftheglobaltotal,almosttwiceasmuchastheUnitedStates,thesecond‐largestconsumerwith16%oftheglobaltotal.Advancedeconomieshaveseenadeclineofovertenpercentagepointsintheirshareofglobalelectricitydemandsince2010asdemandhassurgedinemergingmarketanddevelopingeconomies.ThistrendcontinuesinboththeSTEPSandAPSascontinuingrapidenergydemandgrowthandelectrificationtakeplaceinChina,India,MiddleEastandAfrica,especiallyintheindustryandbuildingssectors.Inadvancedeconomies,averageelectricitydemandpercapitadeclinedby0.2%peryearsince2010,butisprojectedtoincreaseby0.8%peryearby2030intheSTEPSandtwiceasfastintheAPS.Transportemergesasthelargestcontributortoelectricitydemandgrowthinbothscenarios,mainlyduetotherapidlyincreasingnumberofEVs.IntheUnitedStates,themarketshareofelectriccarsincreasesfromlessthan5%in2021to30%intheSTEPSandIEA.CCBY4.0.Chapter6Outlookforelectricity285650%intheAPSby2030,withtheincreasestemmingpredominantlyfromthelnflationReductionActandstate‐leveltargets.TheshareofelectricityintotalfinalconsumptionintheUnitedStatesincreasesfrom21%in2021to23%intheSTEPSandto24%intheAPSby2030.IntheEuropeanUnion,theaccelerateddeploymentofheatpumpsinbuildingsandindustryandtheexpansionoftheelectriccarfleetbyaround35millionhelptoincreasetheshareofelectricityintotalfinalconsumptionfrom21%in2021to25%intheSTEPSand29%intheAPSby2030.Efficiencygainsfrommodernappliancesandheatingandcoolingsystemstemperthegrowthindemandandtherelativelyhighlevelsofelectricitydemandpercapita.Figure6.2⊳Electricitydemandinkeyregionsbyscenario,2010-2030IEA.CCBY4.0.Electricitydemandreboundsinmostadvancedeconomiesafteradecadeofflatdemand,whileitcontinuestogrowstronglyinemergingmarketanddevelopingeconomiesInemergingmarketanddevelopingeconomies,averageannualelectricitydemandpercapitaincreasedby3.5%between2010and2021.Itcontinuestogrowatanannualaveragerateof2.2%intheSTEPSand2.3%intheAPSthroughto2030.ElectricitydemandinChinaincreasesinbothscenariosbyover30%to2030,anditsshareinglobalelectricitydemandrisesinbothscenariosin2030asitseconomyshiftstowardsservicesandhigh‐techindustries.EconomicgrowthandrisingstandardsoflivinginIndiaincreasehouseholdapplianceownershipandincreaseelectricitydemandbytwo‐thirdsby2030inbothscenarios.AsimilarlevelofgrowthisprojectedinIndonesia:buildingsaccountforthemajorityofthis,driveninlargepartbyanincreaseinthenumberofpeoplewithairconditionersasthecountrymovesfromanaverageof0.1unitsperhouseholdtodayto0.4perhouseholdby2030.OntheAfricancontinent,around150millionpeoplegainaccesstomodernelectricityservicesintheSTEPSby2030andnearly480millionintheAPS;thereisalsoariseinownershipofappliancessuchasrefrigeratorsandfans.Thesedevelopmentsleadtoincreasesinelectricitydemandofmorethan40%intheSTEPSandaround60%inthe0.40.81.21.6201020202030STEPSUnitedStatesEuropeanUnionJapanAPSChinaIndiaAfricaAdvancedeconomiesIndex(2021=1)201020202030EmergingmarketanddevelopingeconomiesIEA.CCBY4.0.286InternationalEnergyAgencyWorldEnergyOutlook2022APSbytheendofthisdecade.TheprogressmadeinimprovingaccesstoelectricityinAfricaby2030accountsfornearly70%oftheprogressmadeworldwideintheSTEPS:thisrisestoover80%intheAPS.Globalelectricitydemandincreasesbyaround5900TWhbetween2021and2030intheSTEPS,whichmeansanannualrateofgrowthslightlylowerthanoverthelastdecade.DemandgrowthisfasterintheAPS,whichseesanincreaseindemandofover7000TWhbetween2021and2030,equivalenttonearly70%ofcurrentelectricitydemandinadvancedeconomies(Figure6.3).AnnouncedpledgesleadintheAPStoamorerapiddeploymentofEVsacrossallvehiclecategories,andofheatpumpsinbuildingsandforindustrialprocesses.IntheNZEScenario,electrificationgoesevenfurtherthantheAPSaselectricitydemandsurpasses62000TWhby2050,40%higherthantheSTEPSlevels.By2030,theincreaseintheNZErelativetotheSTEPSissimilarinbothadvancedeconomiesandemergingmarketanddevelopingeconomies.Figure6.3⊳Electricitydemandgrowthbyregionandscenario,2012-2030IEA.CCBY4.0.Globalelectricitydemandgrowthpicksupoverthenextdecade,asaslowinginChinaismorethancounterbalancedbystrongincreasesinmanyothermarketsNote:EMDE=emergingmarketanddevelopingeconomies.Therapidpenetrationofelectricmotorsinindustrialprocessesandhigherlevelsofownershipofappliancesandairconditionersbringaboutasharpriseinelectricitydemandinanumberofemergingmarketanddevelopingeconomies,notablyinIndiaandotheremergingAsianeconomies.China’sdemandforelectricityincreasestoo,butataslowerrate.Thischangesthelandscapeofelectricitydemandovertime.Betweentodayand2030,China’sshareofglobalelectricitydemandgrowthinemergingmarketanddevelopingeconomiesdeclinesfromtheleveloftwo‐thirdsseenoverthelastdecadetoabouthalfinboththeSTEPSandtheAPS.20004000600080002012‐212021‐30STEPS2021‐30APSOtherEMDEIndiaChinaOtheradvancedeconomiesEuropeanUnionNorthAmericaTWhIEA.CCBY4.0.Chapter6Outlookforelectricity2876ElectricitydemandbysectorThebiggestconsumersofelectricitytodayarethebuildingsandindustrysectors,whichtogetheraccountforover90%ofglobalelectricityconsumptionandhavecontributedover90%(around5700TWh)ofglobalelectricitydemandgrowthsince2010.Inbuildings,electricityisconsumedlargelybyappliances(45%)andbyspacecoolingandheating(nearly30%).By2030,electricitydemandforheatinginbuildingsissmallerintheAPSthanintheSTEPSasahigherlevelofefficiencyimprovementsintheAPSmorethancompensatesthehigherrateofelectrification(Figure6.4).Inindustry,electricityismainlyusedforelectricmotors,butalsoforaluminiumsmeltingandelectricarcfurnaces.Industryistheend‐usesectorthataccountsforone‐thirdofthetotalelectricitydemandincreaseintheSTEPSandtheAPSby2030:economicgrowthdrivesindustrialoutputinemergingmarketanddevelopingeconomies,andpoliciestoreduceemissionsspurtheelectrificationofindustrialequipment.Figure6.4⊳Globalelectricitydemandandshareofelectricityinenergyconsumptioninselectedapplicationsbyscenario,2021and2030IEA.CCBY4.0.Theelectrificationofmanyend-usesmovesforward,thoughtovaryingdegrees,raisingelectricitydemandfromestablishedusesandnewones,likeEVsandhydrogenproductionNotes:Hydrogencorrespondstoelectricityneedsforitsproductionandtheshareofelectricityinthetotalenergyconsumedduringtheprocessofhydrogenproduction.Appliancesincluderefrigerators,washinganddishwashingmachines,dryers,brownappliances(relativelylightelectronicappliancessuchascomputersortelevisions)andotherelectricappliances(excludingcooking,lighting,cooling,cleaninganddesalination).Coolingandheatingincludespaceandwaterheatingaswellasspacecoolinginbuildings.Intensiveindustries(Energy‐intensiveindustries)includeironandsteel,chemicals,non‐metallicminerals,non‐ferrousmetals,andpaper,pulpandprintingindustries.Otherindustryincludestheremainingindustrialsub‐sectors,i.e.construction,miningandtextiles.20%40%60%80%100%15003000450060007500HydrogenOtherindustryAppliancesCoolingandheatingLight‐dutyvehiclesTWh20212030:STEPSAPS20212030STEPSAPSElectricityshareinconsumption(rightaxis):Electricitydemand:IntensiveindustriesIEA.CCBY4.0.288InternationalEnergyAgencyWorldEnergyOutlook2022Transportistheoneoftheleadingcontributorstoelectricitydemandgrowthintheprojections,especiallyinadvancedeconomies.ThenumberofEVshasincreasedrapidlyinrecentyears;thecurrentglobalEVfleetconsumesnearly100TWhofelectricityperyear.Electriccarsalesreached6.6millionin2021andareexpectedtosurpass10millionin2022.IntheSTEPS,electriccarsgainamarketshareof25%by2030;intheAPS,thisrisestoover35%.Thisrapidelectrificationofmobilityisbroughtaboutbynationalandregionalpoliciesaswellasambitioustargetsfromvehiclemanufacturers(seeChapter5).Byfar,railwasthelargestconsumerofelectricityintransportoverthelastdecade,butelectricitydemandinroadtransportsurpassesrailby2027intheSTEPSandayearearlierintheAPS.IntheSTEPS,theglobalelectriccarfleetexpandseleven‐foldinthecomingdecade,addingover380TWhtocurrentglobalelectricitydemand(andboostingthescopefortheuseofEVstobalancegridsanddemand‐sidemanagementalleviatingpotentialintegrationchallenges).Electrificationismainlyfocusedonpassengervehicles(passengercars,urbanbusesandtwo/three‐wheelers),withprogressonheavytrucksslowedbymorecomplicatedinfrastructureneedssuchasdeploymentofhighpowerchargers.Figure6.5⊳ElectricitydemandgrowthbyapplicationintheAPS,2021-2050IEA.CCBY4.0.Industry,hydrogenproductionandlight-dutyvehiclescontributesignificantlytoelectricitydemandgrowthineconomiesaroundtheworldNotes:EMDE=emergingmarketanddevelopingeconomies;LDVs=light‐dutyvehicles.Energyaccessrepresentstheelectricitydemandthatsatisfiesbasicenergyneedsofpeoplegainingenergyaccessforthefirsttime.Coolingandheatingcorrespondstoelectricitydemandforspacecoolingandheatingneeds.Therapidlyrisingdemandforcoolinginemergingmarketanddevelopingeconomiesmakesitalargecontributortoelectricitydemandgrowth,withclimatechangecompoundingthedemandforcooling(seeChapter5).Inemergingmarketanddevelopingeconomies,coolingneedsrise,addinganother2800TWhtoglobalelectricitydemandby2050intheSTEPS.Forexample,theownershipofairconditionersisprojectedtoincreaseby40%fromthecurrent‐10000100020003000400050006000AdvancedeconomiesEMDEAdvancedeconomiesEMDETWhIndustryAppliancesLDVsEnergyaccessCoolingandheating2021‐30:2030‐50:HydrogenIEA.CCBY4.0.Chapter6Outlookforelectricity2896levelinChinaby2030.Energyefficiencypoliciesareeffectiveintemperingelectricitydemand(Box6.1),thereforekeepingthisincreasedownto1400TWhintheAPS.Evenmorestringentefficiencystandardsforairconditioners,togetherwithbetterinsulationinhomes,helptorestrictadditionalelectricitydemandtoonly765TWhintheNZEScenario,despiteadditionalaccelerationofelectrificationinthisscenario.Energyaccessconstitutesaminorpartoftheincreaseinelectricitydemand,eventhoughcumulativelyover580millionpeoplegainaccessfromtodayto2030andover1billionby2050intheAPS.Thisreflectsthelowaverageelectricityconsumptionofapersongainingaccesstoelectricityforthefirsttime,anditshowsthatenergypovertyreductioncanbeachievedwithonlyarelativelysmallincreaseinglobalelectricitydemand(Figure6.5).Box6.1⊳EnergyefficiencytemperselectricitydemandgrowthandreducesrawmaterialneedsAmajorshifttowardsEVsandheatpumpstakesplaceacrosstheworldintheSTEPS.Increasingcoolingandheatingneeds,especiallyinemergingmarketanddevelopingeconomies,alsoincreaseelectricityconsumption.Globaltotalelectricityconsumptionrisesbynearly18000TWhby2050,whichisroughlyequivalenttocurrentelectricitydemandinChinaandadvancedeconomiescombined.Thisimpliesaneedtoexpandglobalelectricitygenerationbythree‐quartersby2050.Withoutenergyefficiencygains,however,thislevelwouldbearound10000TWhhigher(Figure6.6).Figure6.6⊳GlobaltotalelectricityconsumptionwithandwithoutenergyefficiencygainsintheSTEPS,2015-2050IEA.CCBY4.0.Energyefficiencygainscutelectricityconsumptiongrowthbyaround10000TWhintheSTEPSby2050Note:Efficiencygainsaremainlyduetostricterfueleconomystandardsinroadtransport;minimumenergyperformancestandardsandlabelsinthebuildingssector;technologicalimprovementsandmaterialrecyclinginindustry.2000030000400005000020152020202520302035204020452050TWhElectricitydemandElectricitydemandwithoutefficiencysavingsOtherindustrySpacecoolingSpaceheatingAppliancesRoadtransportOtherEnergy‐intensiveindustriesIEA.CCBY4.0.290InternationalEnergyAgencyWorldEnergyOutlook2022IntheSTEPS,improvedefficiencystandardsforappliancesandmotors,betterinsulationinbuildings,optimisedlogisticsandenergyefficiencyimprovementsinvehiclestogetherleadtoglobalelectricitydemandbeingabout10%lowerthanitotherwisewouldbein2030andaround20%lowertwodecadeslater.Thesegainshighlightthehugepartthatenergyefficiencyhastoplaytomoderateelectricitydemand,reducerequirementsforadditionalpowercapacityandtemperdemandforthecriticalmineralsneededinlow‐emissionspowersystems,grids,EVsandstoragebatteries(seesection6.8).6.3ElectricitysupplyTheglobalshareoffossilfuelsinelectricitygenerationdeclinedfromaround65%in2018to62%in2021reflectingtherapidriseofsolarPVandwindinpowergenerationoverthepastdecade.Currentmarketconditionsarealsodrivingchange.Globalpricesforoilandnaturalgasbeganrisingrapidlyinlate2020asdemandrecoveredwiththeeasingofCovid‐19restrictions.Thistrendwashugelyexacerbatedinearly2022byRussia’sinvasionofUkraine.Concernsaboutthepriceofnaturalgasandenergysecurityhaveledtoatemporaryreturntocoal‐firedgenerationinsomecases,buttheyhavealsosparkedanambitioninsomecountriestomakefasterprogressonreachingnetzeroemissionsthroughenhancedsupportforcombinationsofrenewables,nuclearpower,carboncapture,hydrogenandammonia,aswellasearliercoalphaseouts.Thisambitionbuildsontechnologyinnovationandprogress,includingdecliningcostsforsolarPV,windandbatteries,togetherwithadvancesinthedevelopmentofsmallmodularnuclearreactorsandtheuseofhydrogenandammoniainfossilfuelledpowerplants.RecentpolicydevelopmentsThepolicylandscapeisakeydeterminantoftheoutlookfortheelectricitysectoranditcontinuestoevolveinthelightofmarketconditionsandworldevents.Therehavebeenanumberofrecentpolicydevelopmentsthatwillhaveanimpactontheelectricitysupplyoutlook(Table6.3).DuringoraftertheCOP26inNovember2021,severaladditionalcountriespledgedtoreachnetzeroemissions,e.g.Indonesiain2060orearlierandIndiaby2070.AsofSeptember2022,83countriesandtheEuropeanUnionhadestablishednetzeroemissionstargets.G7membershavealsocommittedtoensuringthattheirpowersectorsarefullyorpredominantlydecarbonisedby2035,andthemeasurestheytaketothisendmayhelptoclearapathforothercountries(IEA,2022b).Thenumberofcountrieswithrenewablepowerpoliciesrosefrom145in2020to156in2021,continuingamulti‐yeartrend.Bytheendof2021,mostcountriesworldwidehadarenewableenergysupportpolicyinplace,withmostsupportcontinuingtofocusonthepowersectorandlesseffortbeingmadetoacceleraterenewablesinthebuildings,transportandindustrysectors.Thetotalnumberofcountrieswitheconomy‐widetargetsfor100%renewablesincreasedto36bytheendof2021,upfrom32thepreviousyear(REN21,2022).IEA.CCBY4.0.Chapter6Outlookforelectricity2916Table6.3⊳RecentpolicychangesandannouncementsregardingelectricitysupplyPolicychangeAuthorityEuropeanUnionPhaseoutcoal‐firedpowerplantsinCzechRepublic,SloveniaandRomania(emergencylaw).Governments(JanuaryandJune2022)UnitedStatesInflationReductionActprovidesfundingforenergyandclimateprogrammes,includingexpandingandextendingtaxcreditsandincentivestopromotecleanenergytechnologies.Federalgovernment(inlawAugust2022)Fivestatesupdatedtheirrenewableportfoliostandardpolicies.VariousstategovernmentsChinaNewPlanforRenewableEnergyDevelopment:highertargetsforrenewables.NationalDevelopmentandReformCommission(June2022)Canada2030EmissionsReductionPlanoutlinesasector‐by‐sectorpathtoreachitsemissionsreductiontargetof40%below2005levelsby2030andnetzeroemissionsby2050.Federalgovernment(June2022)KoreaIncreaserenewablesinelectricitygenerationtoover20%andnuclearpowertoover30%,anddecreasecoal‐firedpowerby2030undertheNewEnergyPolicyDirection.StateCouncil(July2022)AustraliaClimateChangeBill2022enshrinesinlawtwonationalgreenhousegasemissionstargets:43%cutbelow2005levelsby2030andachievenetzeroemissionsby2050.Federalgovernment(inlawJuly2022)JapanRestartnuclearpowerplantsalignedwiththe6thStrategicEnergyPlanandtheGreenTransformation(GX)policyinitiative.MinistryofEconomy,TradeandIndustry(Aug2022)AnnouncedpolicyAuthorityG7membersAchievepredominantlydecarbonisedelectricitysectorsby2035.G7MinistersofClimate,EnergyandtheEnvironment(May2022)EuropeanUnionFitfor55:Councilagreesonbinding40%EU‐leveltargetforrenewablesinoverallenergymix.CounciloftheEuropeanUnion(June2022)GermanyGreenenergylawreformssethighertargetsforwindandsolar.Government(July2022)Australia,Côted’Ivoire,Israel,Nauru,UnitedArabEmirates,VietNamNetzeroemissionstargetsby2050.VariousnationalgovernmentsBahrain,Indonesia,Nigeria,SaudiArabiaNetzeroemissionstargetsby2060.VariousnationalgovernmentsIndiaNetzeroemissionstargetby2070.PrimeMinister(Nov2021)UnitedKingdomEnergySecurityStrategysetsnewambitionsforoffshorewind,nuclearandhydrogen.PrimeMinister(April2022)JapanAcceleratednuclearexpansion,includingSMRs,envisionedintheGXinitiative.(June2022)IEA.CCBY4.0.292InternationalEnergyAgencyWorldEnergyOutlook2022Inadditiontoactiononrenewables,GermanyandseveralotherEuropeancountriesarerevertingtocoal‐firedpowerplantstocuttheirrelianceonnaturalgasimportedfromRussiaandtobolsterenergysecurity.Thisisatemporarymeasure:thecurrentnaturalgascrisislookslikelyinthemediumtermtoleadtoadeterminationtoreducerelianceonimportedfossilfuelsinthenameofenergysecurity.Moreover,allG7Memberscommittedto“prioritisingconcreteandtimelystepstowardsthegoalofacceleratingphase‐outofdomesticunabatedcoalpower”(EuropeanCouncil,2022).Arisingnumberofcountrieshaveannouncedplanstosupportnewnuclearinvestment.Forexample,inFebruary2022,Franceannouncedplanstobuildsixnewlargereactorsstartingin2028atacostofaboutEUR50billion,withanoptiontobuildeightmoreby2050.Chinaplanstocontinueitscurrentpaceofconstructionofnuclearreactorsinordertohelpmeetitsgoalofcarbonneutralityby2060.Koreahasrecentlyreverseditsnuclearphase‐outpolicyandnowsupportslifetimeextensionsofexistingfacilities,therestartingofconstructionattwositesandanincreaseintheshareofnuclearinelectricitygeneration.Otherrecentpolicydevelopmentsaffectarangeoflow‐emissionsenergysources.IntheUnitedStates,theInflationReductionActprovidesadditionalfundingandtaxcreditstoincentivisemultiplesourcesofcleanenergy,includingenergystorage,nuclearpower,cleanenergyvehicles,hydrogenandcarboncapture,utilisationandstorage(CCUS),whiletheUSBipartisanInfrastructureLawwillhelpfundnewtransmissionlinestofacilitatetheexpansionofrenewablesandcleanenergy.CanadarecentlyannouncedataxcreditforcapitalinvestedinnewCCUSprojects.Planstousehydrogenandammoniainthepowersectorhaveadvanced,withstrengthenedpoliciesortargetsinmanycountries,includinginEurope,Japan,KoreaandIndia(IEA,2022c).ElectricitysupplybysourceRenewablesaresettobecomethedominantsourceofelectricityworldwideinthelongterm.Totalelectricitygenerationfromrenewablesincreasedbymorethan500TWhfromits2020leveltoreacharecordhighofover8000TWhin2021,drivenmostlybyrisingsolarPVandwindgeneration(Figure6.7).Asaresult,theshareofrenewablesinglobalelectricitygenerationroseby0.2percentagepointstoreachnearly29%forthefirsttime.RenewablescontinuetoscaleuprapidlyintheSTEPS,withtheirshareofgenerationrisingto43%by2030and65%by2050.TheAPSseesanevenfastertransitiontorenewables,with35%highergrowththanintheSTEPSto2030.Renewablesareprojectedtoaccountforthemajorityofcapacityadditionsineveryregionovertheoutlookperiod(Figure6.8).Byfar,windandsolarPVarethelargestcontributorstothisdevelopment,andtotalinstalledsolarPVcapacityinparticularisprojectedtofaroutstripthatofanyothersourceinboththeSTEPSandtheAPSfromthe2030sonwards.IntheSTEPS,windandsolarPVtogethersetnewrecordseveryyearto2030andthencontinuerobustannualgrowththroughto2050.Inallregions,theyaccountforbetween45%and85%ofallcapacityadditionsovertheperiodto2050.BothsolarPVandwindassumeanevenlargerIEA.CCBY4.0.Chapter6Outlookforelectricity2936roleintheAPS:annualwindcapacityadditionsincreasefrom95GWin2021to210GWin2030and270GWin2050,whilesolarPVcapacityadditionsrisefrom151GWin2021to370GWin2030andnearly600GWin2050.IntheNZEScenario,renewablesincreaseevenmorerapidly,withtheirshareoftotalgenerationincreasingfrom29%in2021toover60%in2030andnearly90%in2050.ThehugeriseintheshareofsolarPVandwindintotalgenerationinallscenariosfundamentallyreshapespowersystemsandsignificantlyincreasesthedemandforpowersystemflexibility(seesection6.6).Figure6.7⊳Globalelectricitygenerationbysourceandscenario,2010-2050IEA.CCBY4.0.Electricitygenerationfromunabatedfossilfuelspeakby2030,aslow-emissionssourcesrampupandrenewablesdominateelectricitysupplyinallscenariosby2050Note:Otherrenewablesincludebioenergyandrenewablewaste,geothermal,concentratingsolarpowerandmarinepower.Hydropowerandotherdispatchablerenewablescontinuetoplayanimportantroleinallthescenarios.IntheSTEPS,hydropowerremainsthelargestsourceofrenewableelectricityuntilafter2030,whenitissurpassedbybothwindandsolarPV.IntheAPS,hydropowerandotherdispatchablerenewablessuchasbioenergy,geothermalandconcentratingsolarpower(CSP)increasefastertohelpcutelectricitysectoremissionsmorequicklyandintegratethefastrisingshareofvariablewindandsolarPVelectricitygeneration.Theroleofhydropowertohelpprovidepowersystembalanceandstability,however,maybeaffectedbyclimate‐relatedevents,whichhavereduceditsavailabilityinmanyregionsoverthelastyear,strainingpowergridsandraisingquestionsabouttheresilienceofelectricitysystems(Box6.2).2040608020502030205020302050203020212010ThousandTWhUnabatedcoalUnabatednaturalgasFossilfuelswithCCUSNuclearHydroWindSolarPVOtherrenewablesHydrogenandammoniaOtherSTEPSAPSNZEIEA.CCBY4.0.294InternationalEnergyAgencyWorldEnergyOutlook2022Figure6.8⊳ShareofrenewablesintotalpowercapacityadditionsbyregionintheSTEPS,2022-2050IEA.CCBY4.0.Renewablesaccountforthemajorityofcapacityadditionsinallregions,withmassivegrowthforsolarPVandwindinallmarkets,followedbyhydroinmanyNote:C&S=CentralandSouthAmerica.Thecontinuedroleofnuclearpowerintheelectricitysectorreliesondecisionstoextendthelifetimeofexistingreactorsandthesuccessofprogrammestobuildnewones.IntheSTEPS,nuclearmaintainsitsshareofabout10%intotalelectricitygeneration.Thisrequiresthecompletionof120GWofnewnuclearcapacityoverthe2022‐30period,aswellastheadditionofanother300GWworthofnewreactors(theequivalentofalmostthree‐quartersofthecurrentglobalfleet)between2030and2050inover30countries.IntheAPS,around18GWofnewnuclearcapacityisaddedperyearovertheoutlookperiod,overaquartermorethanintheSTEPS,butthehigherlevelofelectricitydemandinthisscenariomeansthatthenuclearshareoftheelectricitysupplymixremainsatcloseto10%.IntheNZEScenario,awaveoflifetimeextensionsinadvancedeconomiesinthe2020shelpslimitglobalemissions,andanaverageof24GWofcapacityaddedeachyearbetween2022and2050morethandoublesnuclearpowercapacityby2050.Thenuclearshareoftheelectricitymix,however,fallsto8%in2050duetoverystronggrowthinelectricitydemandintheNZEScenario.Moreinformationonthepotentialandchallengesfornuclearenergy,includingnew,smallmodularreactors,isprovidedintheIEAspecialreportNuclearPowerandSecureEnergyTransitions(IEA,2022d).Otherdispatchablelow‐emissionstechnologiesincludefossilfuelswithCCUS,andco‐firingwithammoniaincoalplantsandhydrogeningas‐firedpowerplants.1Thesetechnologiesarecurrentlyatthepre‐commercialstageofdevelopmentandsignificanteffortswouldbe1Hydrogeningas‐firedpowerplantsincludesbothco‐firingandfullconversions.20%40%60%80%100%MiddleEastSoutheastAsiaAfricaUnitedStatesKoreaWorldIndiaJapanEuropeanUnionC&SAmericaChinaSolarPVWindHydroBioenergyOtherrenewablesAPSIEA.CCBY4.0.Chapter6Outlookforelectricity2956requiredforthemtostartbeingdeployedatscalebefore2030.IntheSTEPS,CCUStechnologiesgainalimitedamountoftractionovertheoutlookperiod,asthecommitmentstodeepCO₂emissionreductionsthatprovidetheimpetusforthedeploymentofCCUShavenotyetbeenconvertedintoconcreteimplementationplansinmostcountries.IntheAPS,bycontrast,thefirstCCUSretrofitsarecompletedbefore2030,andover200GWofcoal‐firedcapacityandover80GWofgas‐firedplantsequippedwithCCUSareinoperationby2050(Figure6.9),togetheraccountingfor2%oftotalglobalelectricitygeneration.MostCCUSdeploymentstakeplaceinChina;othersignificantapplicationsareinIndonesia,JapanandtheUnitedStates.Figure6.9⊳Globalinstalledelectricitycapacitybysourceandscenario,2010-2050IEA.CCBY4.0.SolarPVandwindinstalledcapacitymoveswellbeyondanyothersourceby2050,takingtheleadfromcoal-andnaturalgas-firedpowertodaySimilarly,theco‐firingofammoniaorhydrogenremainsverylimitedintheSTEPS,andaccountsforlessthan0.1%oftotalelectricitygenerationin2050.ThenotableexceptionisJapan,whereplanstoco‐fireammoniaincoalplantsareunderdevelopmentandwhereco‐firedammoniaandhydrogenareprojectedtoreachashareofcloseto5%ofelectricitygenerationin2050.IntheAPS,co‐firingmakesstronginroadsfrom2030onwardsinotheradvancedeconomiestoo,andinparticularinEuropeanUnion,KoreaandUnitedStates,withhydrogenseenasatooltohelpachieveemissionsreductiongoals.IntheNZEScenario,nearly190GWisretrofittedtoco‐firehydrogenorammoniaby2030,risingto580GWby2050.However,duetohighcost,thesefuelsareprimarilyusedasasourceofflexibilitytobalancevariablewindandsolarPVoutput.Theiroverallcontributiontotheglobalelectricity2000400060008000100001200020102021205020212050GWUnabatedcoalSolarPVNuclearUnabatednaturalgasWindHydrogenandammoniaOilHydroBatteryFossilfuelswithCCUSOtherrenewablesStatedPoliciesAnnouncedPledgesIEA.CCBY4.0.296InternationalEnergyAgencyWorldEnergyOutlook2022supplymixthusremainslimitedevenintheAPS(lessthan1%in2050)andNZEScenario(closeto2%in2050).Theenormoussizeoftheelectricitysectorneverthelessmakesitoneoftheprimarydriversofglobalhydrogendemand.Unabatednaturalgassupplied23%ofglobalelectricityin2021.Afterashort‐termdecline,gas‐firedgenerationreboundsintheSTEPS,withincreaseddemandinemergingmarketanddevelopingeconomiesmorethanoffsettingreductionsinadvancedeconomies,inparticularinEurope.However,unlikeintheWorldEnergyOutlook(WEO)‐2021(IEA,2021a),whichprojectedgrowth,gas‐firedgenerationisnowexpectedtostayatbroadlythesameleveluntil2050.Thisistheresultofashiftinperceptionsabouttheroleofnaturalgasthatstemsfromthecurrentenergycrisisandrecordpricesfornaturalgasinallmajormarkets.IntheNZEScenario,naturalgas‐firedgenerationincreasesslightlyintheneartermasaresultofcoal‐to‐gasswitching,butpeaksby2025.Evenasoutputfalls,however,naturalgas‐firedcapacityremainsacriticalsourceofpowersystemflexibilityinmanymarkets.Unabatedcoalmetalmosthalfoftheincreaseinelectricitydemandin2021,withitsshareoftotalelectricitygenerationexceeding36%.Coal‐firedpowerplantsunderconstructionatthestartof2022representedover175GWofcapacitywithmanymoreplantsintheplanningstage.IntheSTEPS,coal‐firedpowerplantcapacityreflectsthisandcontinuestogrow,peakingby2025.Coal‐firedgeneration,however,isprojectedtoenteradeclineandfallsmorerapidlyas2030approaches.Unabatedcoalaccountsfor26%ofglobalelectricitygenerationin2030,decliningto12%by2050.Mostadvancedeconomiesarepursuingcoalphase‐outpoliciesandtheycutunabatedcoaluseinthepowersectorby60%from2021to2030.Coaluseincreasesby3%to2030inemergingmarketanddevelopingeconomies,butitthenalsoentersalong‐termdecline.Coalseesthelargestimpactamongallfuelsfromthefulfilmentofannouncedpledgesbygovernments.IntheAPS,unabatedcoaldeclinessteeplyfrom2025onwards,withitsshareinelectricitygenerationdroppingto23%by2030andjust3%in2050.Inadvancedeconomies,unabatedcoalgenerationfallsnearly80%by2030andisphasedoutcompletelyby2050.Inemergingmarketanddevelopingeconomies,unabatedcoalusecontinuestoriseuntil2025beforedecliningsignificantly,drivenmostlybynetzeroemissionspledgesinChina,IndiaandIndonesia.IntheNZEScenario,nounabatedcoalplantsbeyondtheonesalreadyunderconstructionarecommissioned.Theshareofunabatedcoalinglobalelectricitygenerationdeclinesrapidlyto12%in2030andfallstozeroby2040.CCUSretrofitsplayanimportantroleinmitigatingemissionsfromtherelativelyyoungcoalfleetinemergingmarketanddevelopingeconomies.Box6.2⊳Willelectricitysystemsbemoreresilienttoclimaterisksinthefuture?Inadditiontootherthreatstoelectricitysecurity,globalpowersystemsfacedanumberofclimate‐relatedchallengesoverthelastyear.Heatwavesanddroughtsweresignificantinmanypartsoftheworld,e.g.China,Europe,India,Myanmar,Pakistan,SriLanka,SouthAfricaandtheUnitedStates.Asaresult,theavailabilityofhydropowerandcoolingwaterIEA.CCBY4.0.Chapter6Outlookforelectricity2976forthermalpowerplantswasreduced,strainingtheabilityofelectricitysystemstomeetdemand,includingforspacecooling.VerycoldtemperaturesalsoaffectednaturalgasinfrastructureandcausedelectricityoutagesincountriesincludingtheUnitedStates.Otherextremeweathereventscauseddamagetoelectricityinfrastructureandextendedoutages.Forexample,the2021Atlantichurricaneseasonbroughtthethird‐highestnumberofnamedstormsonrecord,impactingLatinAmericaandtheCaribbeaninparticular,whiledevastatingfloodingfromheavyrainsin2022affectedmillionsofpeople,notablyinBangladesh,India,NigeriaandPakistan.Climaterisksaresettoincreaseinallscenariosduetorisingglobaltemperatures,changingrainfallpatterns,risingsealevelsandextremeweatherevents.Changesintheelectricitysectorwillreduceexposuretosomeoftheserisks,butincreaseexposuretoothers.Theelectrificationofheatingandcoolinginallscenarioswillplacemorestrainonelectricitygridsduringextremelyhotorcoldperiods.Electricitydemandforcoolingissettoincreasestronglyinemergingmarketanddevelopingeconomiesinparticular,risingnearlyfourfoldfrom2021to2050intheSTEPS.Electricheatingexpandsfastestinemergingmarketanddevelopingeconomiestoo,wheretherelatedconsumptionofelectricitymorethandoublesto2050intheSTEPS.Inbothcases,energyefficiencyeffortsintheAPScuttheelectricitydemandgrowthforheatingandcoolingto2050seenintheSTEPS,reducingthestrainonelectricitynetworksduringpeakdemandperiods.Whileaddingtooverallelectricitydemand,theexpansionofEVshasthepotentialtohelpalleviatetheimpactsofextremehotandcoldweatherbyhelpingtosmoothdemandpatternsthroughsmartchargingandvehicle‐to‐gridarrangements.Inelectricitysupply,theresilienceoffossilfuelinfrastructure,particularlyfornaturalgas,remainscriticalforelectricitysecurityevenastheuseoffossilfuelsdeclines(seeChapter4).However,theshiftawayfromunabatedfossilfuelsinallthescenariosislikelytoincreaseresiliencebyreducingtheiruseofcoolingwater.Theincreaseinnuclearpowerinallscenariospartlyoffsetsthisreductionincoolingwaterdemand,butitalsoreducesdependenceonimportedfossilfuels.TheexpansionofsolarPVandwindinallscenariosimprovestheresilienceofelectricitysystemstosomeclimateimpacts,butitalsoincreasestheirexposuretoseasonalweatherpatternssuchaslongperiodsofcoldandlowwindinEurope.Electricitysecuritywilldependonhavingsufficientflexibilityavailableatalltimes.FlexibilitywillbeespeciallyimportantintheAPSandNZEScenario,wheresolarPVandwindplayamuchlargerrolethanintheSTEPS(seesection6.6).Thereareanumberofeffectivestepsthatcanbetakentoimprovetheclimateresilienceofelectricitysystems,andthustoavoidoutages,minimiserepaircostsandfacilitatecleanenergytransitions.Theseincludestepstoassessrisks,incorporateclimateresilienceinenergyandclimateplans,identifycost‐effectivemeasures,incentiviseutilitiestotakeaction,implementresiliencemeasuresandevaluateandadjustthemtocontinuouslyimprovesystemresilience(IEA,2021b).IEA.CCBY4.0.298InternationalEnergyAgencyWorldEnergyOutlook2022ElectricitysupplybyregionTheelectricitysupplymixdiffersfromregiontoregion,reflectingavailableresources,policychoicesandtherelativeeconomiccompetitivenessofvariouspowergenerationtechnologies.Mostpowersectorinvestmenttodayisdrivenbypolicies,whichplayamajorroleinshapingthedevelopmentofregionalpowermixesovertheoutlookperiod.AcommontrendacrossallregionsistheexpandingcontributionfromwindandsolarPVgeneration,drivenmainlybydecliningcostsandrobustpolicysupportinmanycountries(Figure6.10).Figure6.10⊳Electricitygenerationbysource,keyregionandscenario,2021and2050IEA.CCBY4.0.Electricitysupplyissettoshiftawayfromunabatedfossilfuelsinallmajormarkets,asrenewables,nuclear,hydrogen,ammoniaandcarboncapturescaleupNote:Otherrenewablesincludesbioenergyandrenewablewastes,concentratingsolarpowerandmarinepower.Otherincludesnon‐renewablewasteandothersources.InChina,unabatedcoal‐firedelectricitygenerationaccountsformorethan60%ofelectricitysupplyandisstillexpanding,butthepeakisapproachinginallscenarios.IntheSTEPS,unabatedcoalstartstodeclinebefore2030andfallsbyover40%fromitspeakby2050.IntheAPS,coalusefallsfaster,withitsshareofthegeneratingmixdecliningto9%by2050,40008000120001600020212050STEPS2050APSTWhChina200040006000800020212050STEPS2050APS20212050STEPS2050APS20212050STEPS2050APS20212050STEPS2050APSUnabatedcoalUnabatednaturalgasFossilfuelswithCCUSNuclearHydroWindSolarPVOtherrenewablesHydrogenandammoniaOtherJapanIndiaEuropeanUnionUnitedStatesIEA.CCBY4.0.Chapter6Outlookforelectricity2996nearlyhalfofitfromplantsequippedwithCCUS.Overall,Chinaseesaprofoundtransformationofitselectricitysupplymixovertheperiodto2050,withstepstowardsthissetoutin14thFive‐YearPlanto2025.Whiletotalgenerationin2050risesbytwo‐thirdsintheSTEPSandnearlydoublesintheAPS,theshareoflow‐emissionssourcesincreasesto76%intheSTEPSandcloseto95%intheAPS,upfrom34%today.Byfar,themostsignificantgrowthisfromwindandsolarPV.IntheSTEPS,thesetwotechnologiesaccountfor80%ofalladditionalcapacityinstalledbetween2021and2050.Withtheworld’slargestnewbuildprogramme,nuclearpowertooissettorisesignificantly:theSTEPSprojectstheconstructionofmorethan120GWofadditionalnuclearcapacityontopofthemorethan50GWwhichisoperationaltoday.InIndia,theprimarychallengeishowtomeetrisingelectricitydemandwithrenewablesandnuclearonalargeenoughscaletoreducetheuseofunabatedcoal‐firedgeneration,whichprovidesnearlythree‐quartersofelectricitysupplytoday.InboththeSTEPSandtheAPS,coalgenerationisprojectedtocontinueriseinabsoluteterms,peakingaround2030,thoughitsshareofelectricitygenerationdeclines.Expandingrenewablesisthecentralmeansofmeetingdemandgrowthandlimitingcoaluse,withsolarPVleadingthewayandwindalsoplayinganimportantpart.TheAPSshowsthatmeetingcurrentpledgesinfullcallsforcontinuedexpansionofrenewablesandascalingupIndia’snuclearfleetsoastoenableanalmostcompletephase‐downofunabatedcoal‐firedelectricitygenerationby2050,whilealsomaintaininggridreliability.IntheUnitedStates,theelectricitysectoriscontinuingitstransitionawayfromcoal.TheInflationReductionActsupportstheaccelerateddeploymentofwindandsolarPV,amongothertechnologies,whichleadstoalong‐termreductioninnaturalgasuseaswell.IntheSTEPS,unabatedcoalalmostdisappearsfromtheelectricitygeneratingmixby2050,withitssharedroppingtobelow1%fromnearly23%today.Atthesametime,stronggrowthinrenewablesleadstogas‐firedgenerationpeakingbefore2030andthenfallingrapidly:itisnearlytwo‐thirdslowerthantodayby2050.Recentpolicychangesalsoprovidesupportforlifetimeextensionsfortheageingfleetofnuclearpowerplants.IntheAPS,theUnitedStatespursuesitsambitionofnetzeroemissionselectricityaround2035throughaccelerateddeploymentofrenewables,CCUS,hydrogenandammoniatogetherwithanexpansionofnuclearpower,includingsmallmodularreactors.IntheEuropeanUnion,anemphasisonenergysecurityandreducingrelianceonimportednaturalgasisexpectedtospeedupthedeploymentofrenewables.IntheSTEPS,thecombinedshareofwindandsolarPVinthegenerationmixrisesfrom18%todayto42%in2030and56%in2050,withwindandsolarPVaccountingformorethan70%ofallnewpowercapacityinstalledbetween2021and2050.TheexpansionofsolarPVandwindcouldofferadegreeofprotectionforconsumersfrommarketfuelpricevolatilityofthekindcurrentlybeingexperienced(Spotlight).IntheAPS,theneartermandmedium‐termexpansionofrenewablesisevenmorerapid.Inthelong‐run,theEuropeanUnionmovestowardsanelectricitysystemdominatedbyonshoreandoffshorewind,withbothaccountingformorethan40%oftotalgenerationin2050intheSTEPSandover50%intheAPSandNZEScenario.IEA.CCBY4.0.300InternationalEnergyAgencyWorldEnergyOutlook2022ArehighelectricitypricesheretostayintheEuropeanUnion?RetailelectricitypricesintheEuropeanUnionwereabout30%higheronaverageforresidentialconsumersinthefirst‐halfof2022thantheywereayearbefore.ThisincreasereflectshighwholesaleelectricitymarketpricesintheEuropeanUnion,whichsoaredtoEUR200permegawatt‐hour(MWh)onaverageduringthefirst‐halfof2022‐morethanthree‐timestheaverageinthefirst‐halfof2021.Thisisoneofthemostextremenear‐termimpactsofthecurrentenergycrisis,anditisnotconfinedtotheEuropeanUnion,althoughitisstarkestthere:coststogenerateelectricityaresettorisebyanestimatedone‐thirdworldwidein2022(seeChapter1).Figure6.11⊳HourlywholesaleelectricitypricedurationcurveandpricesettingtechnologyintheEuropeanUnion,first-halfof2022IEA.CCBY4.0.AverageEUwholesaleelectricitypricesinthefirst-halfof2022wereoverthree-timeshigherthaninthefirst-halfof2021,withhourlypricessetbygas,oilandcoalplantsNote:MWh=megawatt‐hour;CCGT=combined‐cyclegasturbine;GT=gasturbine.WehavecarriedoutananalysisofwholesaleelectricitypricesintheEuropeanUnioninthefirsthalfof2022.Wecombinedelectricitymarketpricedata,CO2prices,fossilfuelprices,powerplantcapacitiesandefficienciesintheGlobalEnergyandClimateModeltodeterminethepricesettingtechnologyineachhour.Ouranalysisindicatesthathigherfossilfuelpricesaccountforover70%oftheoverallwholesaleelectricitypriceincrease.Highernaturalgaspricesalonemakeupabouthalfoftheincrease,withnaturalgas‐firedpowerplantssettingthepriceinclosetohalfofhoursfromJanuarythroughJune(Figure6.11).Coalandoilprices,whichhavealsobeenhigh,setthewholesaleelectricitypriceinabout25%and10%ofthehoursrespectively.100200300400500600NuclearCoalLigniteGasCCGTGasGTOilCO₂costEURperMWh11000200030004344First‐half2021pricesRankedhours(highestprice=1)SPOTLIGHTIEA.CCBY4.0.Chapter6Outlookforelectricity3016Besideshigherfossilfuelprices,wefoundtwootherimportantfactorsthatdroveupthepriceofwholesaleelectricityintheEuropeanUnion.First,weestimatethatCO2prices–atanaverageofEUR85/tonneduringthefirst‐halfof2022comparedwithEUR45/tonnethepreviousyear–ledtoabout20%oftheincrease.Second,wefindthatthereducedavailabilityofnuclearpower,hydropowerandotherfactorsaccountedfornearly10%oftheincrease.Inthefirst‐halfof2022,nuclearpowerproduced17%(62TWh)lesselectricityintheEuropeanUnionthanthesameperiodin2021.InFrance,inMay2022,29outof56reactorswereofflineforregularmaintenance,repairsorsafetychecks.InGermany,3reactorsoperatedin2022,followingtheclosureof3reactorsattheendof2021.Hydropoweroutputwasmeanwhile24%(47TWh)lowerinthefirst‐halfof2022comparedwiththefirst‐halfof2021.Increasedgridcongestionalsocontributedtohigherprices.Figure6.12⊳EUhourlywholesaleelectricitypricesbysharesofrenewablesandnaturalgasinelectricitygeneration,first-halfof2022IEA.CCBY4.0.Highsharesofrenewablesinelectricitysupplydrovedownwholesaleelectricitypricesin2022,whilehighsharesofnaturalgaspushedthemupWindandsolarPVreducedtheimpactofhigherwholesaleelectricitypricesonconsumers.Theyprovided23%oftotalEUelectricitygenerationinthefirst‐halfof2022,mostlyunderlong‐termfixed‐pricecontracts,suchasfeed‐intariffsorpowerpurchaseagreements(PPAs).HighersharesofwindandsolarPVingenerationhaveputdownwardpressureonwholesaleprices.Whentheshareofrenewableswasabove40%–innearlyhalfofthehoursfromJanuarythroughJune2022–theaveragewholesaleelectricitywasaboutEUR170/MWh,15%belowtheaverageofthefirst‐halfof2022(Figure6.12).WeestimatethatthecostofelectricitysupplywouldhavebeenEUR40billionlowerifthecontributionofrenewableshadbeenatleast40%throughoutthefirst‐halfoftheyear.0%20%40%60%Shareofnaturalgas1002003004005000%20%40%60%EURperMWhShareofrenewablesIEA.CCBY4.0.302InternationalEnergyAgencyWorldEnergyOutlook2022Severalsupply‐sidefactorsofferpotentialfuturerelieffromsuchhighwholesaleelectricityprices.Somewillmakeadifferenceveryquickly.TheavailabilityofEUnuclearpowerisanticipatedtoimprovesignificantly,notablyasaresultofFrance’sintentiontorestartallitsreactorsduringthecomingwinter.WindandsolarPVaresettoexpandsignificantlyoverthecourseof2023,adding45GWofnewcapacity–anearly10%increase.Otherfactorswillmakeadifferenceoverthenextfewyears.Inparticular,fossilfuelprices,andespeciallynaturalgasprices,areprojectedtomovelowerinthemediumtermasmarkettightnessmoderates.WindandsolarPVaremeanwhileexpectedtocontinuetogrowsteadilyyearafteryear.Inaddition,EuropeanUnionmemberstatesformallyadoptedemergencymeasuresinOctober2022tomitigatetheimpactofhighelectricitypricesonconsumerswhilenotimpairingfutureinvestmentinlow‐emissionstechnologies.Alongsideeffortstoreducedemand,theEuropeanCommissionhasputforwardaproposalfortwotemporarymeasures.Thefirstistointroducerevenuecapsforlowmarginalcostpowergeneration,suchasnuclearpower,ligniteandrenewables.Thesecondistoseekcontributionsfromsurplusprofitsthathavearisenduringperiodsofhighpricesinupstreamoil,gasandcoalactivitiesandrefining.Together,thesemeasurescouldgenerateoverEUR140billionthatcouldprovidefinancialsupportmeasurestohouseholds,especiallyvulnerableones,andhard‐hitcompaniestomitigatetheimpactsofhighenergypricesandhelpthereductionofenergyconsumption(EuropeanCommission,2022).Consumerscantakeanumberofactionstomitigatewholesaleelectricitypricesandtheirimpacts.Totheextentthatcustomersareabletoreducetheirelectricitydemand,itwillreducetheirenergybills.Itwillalsohelpindirectlytoreducepricesforeveryone:loweroveralldemandmeanslessneedtocallonthemostexpensivepowerplants.TheEuropeanCommissionhasproposedavoluntarytargetofreducingoverallelectricitydemandby10%ormore,andamandatoryreductionofdemandduringpeakpricehoursbyatleast5%.WeestimatethatthisscaleofreductionswouldhavesavedatleastEUR30billioninthefirst‐halfof2022.Otheractionsbyconsumerscanalsomakeadifference.Energyefficiencymeasures,suchasimprovinghomeinsulationorpurchasingmoreefficientappliances,offerpermanentreductionsindemand.Behaviouralchanges,e.g.moderatingtheuseofspaceheating,canofferpermanentortemporaryreductions.Majorindustrialconsumersmayalsobeabletomitigatetheimpactsofhighwholesaleelectricitypricesthroughtheuseoflong‐termPPAswithproducersandthroughhedgingstrategies.JapanapproveditsSixthStrategicEnergyPlaninOctober2021,outliningitselectricitymixplansfor2030anditsambitiontoachievecarbonneutralityby2050.Akeyelementistorestartitsnuclearreactorsandlifttheshareofnuclearintheelectricitymixbackto20%by2030.Raisingtheshareofrenewablesinthemixisalsoimportant,from23%in2021uptoIEA.CCBY4.0.Chapter6Outlookforelectricity303636‐38%in2030.Anotherelementisretrofittingcoalplantstoco‐firewithammonia;JapanistheonlycountrydeployingthistechnologyatsignificantscaleintheSTEPS.Otheremergingmarketanddevelopingeconomiesalsofacethechallengeofmeetingrapidlyrisingelectricitydemandwhilelimitingtheuseoffossilfuels,particularlywhentheyareimported.InSoutheastAsia,unabatedcoal‐firedgenerationcontinuestoexpandintheSTEPS,althoughitsshareintheelectricitymixslowlydeclines.Withtheimplementationofannouncedpledgesinfull,unabatedcoalgenerationfalls60%by2050intheAPS,anditsshareofgenerationdropsfrommorethan40%todayto6%in2050.Africaexperiencesextremelyrapidgrowthinelectricityproductionovertheperiod,withgenerationalmosttriplingby2050intheSTEPSandquadruplingintheAPS.Renewablesaccountformostoftheincrementalgeneration.IntheAPS,solarPVmakesthebiggestcontribution,thoughwindandhydropoweralsoseesignificantgrowth.In‐depthanalysesandprojectionsforAfricaareprovidedintherecentAfricaEnergyOutlook2022(IEA,2022e).ThepowersystemsofmanycountriesinCentralandSouthAmericaaredominatedbyhydropower.InboththeSTEPSandtheAPS,risingsharesofwindandsolarPVaccountformostofthenewcapacityaddedovertheoutlookperiod.6.4CO₂emissionsfromelectricitygenerationTheelectricitysectoremitted13GtCO₂emissionsin2021,oroverone‐thirdoftheglobalenergy‐relatedtotal,butitsemissionsaresettodeclineoverthecomingdecadesinallthreescenarios.IntheSTEPS,globalannualCO₂emissionsfromelectricitygenerationfallmorethan10%by2030andaround40%by2050.IntheAPS,emissionsdroparound80%by2050.EmissionsfallfasterintheAPSbecauseofmorerapidreductionsintheuseofcoalandnaturalgas.Emissionsfromcoal‐firedpowerplantsdecreasebyalmost85%from2021to2050intheAPScomparedwithover45%intheSTEPS(Table6.4).CO₂emissionsfromtheuseofnaturalgasintheelectricitysectoroverthesameperiodfallbymorethan50%intheAPS,whereastheyremainbroadlystableintheSTEPS.IntheNZEScenario,annualCO₂emissionsfallrapidlyandreachzeroby2040.Table6.4⊳CO₂emissionsfromelectricitygenerationbysourceandscenario,2010-2050(Mt)STEPSAPSNZE20102021203020502030205020302050Coal834296708324524274231442417927Naturalgas218627982678240723801278196936Oil7515233332422861401352Bioenergyandwaste5448‐31‐362‐65‐434Total(net)11285129961133878991005724986218‐369TotalCO2captured‐17968114843041479Notes:Mt=milliontonnes.CO2emissionsincludeCO2removalssuchascapturedandstoredemissionsfromthecombustionofbioenergyandrenewablewastes.IEA.CCBY4.0.304InternationalEnergyAgencyWorldEnergyOutlook2022Inadvancedeconomies,effortstophaseoutcoalinelectricitygenerationreflectnationalandsub‐nationalpolicies,aswellascollectiveinitiativessuchasthePoweringPastCoalAllianceandtheGlobalCoaltoCleanPowerTransitionStatement.AnnualCO₂emissionsfromcoal‐firedpowerplantsinadvancedeconomiesdecreasefrom2021levelsbymorethan60%in2030intheSTEPS,andby80%intheAPS.Asaresultofthisshiftawayfromcoal,naturalgasbecomesthemainsourceofCO₂emissionsfrom2030inboththeSTEPSandtheAPS.After2030,netelectricitysectoremissionscontinuetofallwiththefulfilmentofannouncedpledgesbringingthetotalintheAPSdownto40MtCO₂in2050.Formostemergingmarketanddevelopingeconomies,thereisabigandgrowinggapinfutureyearsbetweenemissionsreductionsbasedonstatedpoliciesintheSTEPSandthosewhichfulfilallannouncedpledgesontimeintheAPS.TheAPSleadstonearly60GtCO₂emissionsavoidedcumulativelyfrom2021to2050comparedtotheSTEPS,althoughthisisstillfarshortofwhatisneededintheNZEScenario(Figure6.13).Figure6.13⊳AnnualCO₂emissionsfromelectricitygenerationforregionalgroupingsbyscenario,2010-2050IEA.CCBY4.0.ElectricitysectorCO₂emissionsfallinallscenarios,butthedifferentpathwaysintheSTEPSandAPSillustratetheimportanceofcountriesfulfillingtheirpledgesontimeandinfullAdditionalpledgesandannouncementsoverthelastyearhavehelpedclosetheelectricitysectoremissionsgapbetweentheAPSandNZEScenario.Inadvancedeconomies,theWEO‐2021estimatedthattheAPSwouldcover70%ofthegapbetweentheSTEPSandtheNZEScenariointermsofcumulativeemissionsto2050.OurupdatedassessmentindicatesthatnowthegapbetweentheSTEPSandNZEScenariohasnarrowedduetostrongeractionintheSTEPS,anddeeperreductionsintheAPSstillcloseabout70%oftheremaininggaptotheNZEScenario.Inemergingmarketanddevelopingeconomies,thepledgesintheAPS‐20246810201020302050STEPSAPSNZEAdvancedeconomiesGtCO₂201020302050EmergingmarketanddevelopingeconomiesIEA.CCBY4.0.Chapter6Outlookforelectricity3056nowclosealmost40%ofthegapbetweentheSTEPSandNZEScenario,upfrom15%intheWEO‐2021.TheglobalaverageCO₂intensityofelectricitygenerationdeclinesinallscenariosfromitslevelof459grammesofcarbondioxideperkilowatt‐hour(gCO2/kWh)in2021,fallingby2030to330gCO2/kWhintheSTEPS,280gCO2/kWhintheAPSand165gCO2/kWhintheNZEScenario.By2050,theaverageintensityofelectricitygenerationrangesfrom160gCO2/kWhinSTEPStoslightlybelowzerointheNZEScenario.However,countriesstartfromdifferentplacesin2021andtheirpathwaysvary.Ingeneral,therapidgrowthofpowersystemsinemergingmarketanddevelopingeconomiesandhigheruseofunabatedcoalresultinanaverageCO2intensityofelectricitygenerationthatis70%higherthantheaverageinadvancedeconomies(Figure6.14).Inadvancedeconomies,whilestatedpoliciesleadtosignificantreductionsinannualemissions,announcedpledgesleadtofasterreductions,withtheUnitedStatesandtheEuropeanUnionreachingnetzeroemissionselectricityby2040,andJapanandKoreaby2050.Anumberofemergingmarketanddevelopingeconomieshavealsopledgedtoreachnetzeroemissions,andthisleadsintheAPStodeepreductionsintheCO2intensityofelectricityby2050inAfrica,China,India,MiddleEastandSoutheastAsia.Figure6.14⊳AverageCO₂intensityofelectricitygenerationforselectedregionsbyscenario,2020-2050IEA.CCBY4.0.CO₂intensityofelectricitygenerationvarieswidelytoday,butallregionsseeadeclineinfutureyearsandmanyhavedeclarednetzeroemissionsambitionsbyaround20506.5InvestmentGlobalpowersectorinvestmentrose7%in2021aseconomiesreboundinthewakeoftheCovid‐19pandemic.Suchinvestmentisexpectedtoriseanadditional6%in2022tonearlyUSD1trillion.Investmentcontinuestoriseinallthreescenarios.IntheSTEPS,anaverageof2004006008002020203020402050UnitedStatesEuropeanUnionKoreaJapanAfricaMiddleEastChinaIndiaSoutheastAsiaSTEPSAPSAdvancedeconomiesgCO2/kWh2020203020402050EmergingmarketanddevelopingIEA.CCBY4.0.306InternationalEnergyAgencyWorldEnergyOutlook2022aroundUSD1trillionperyearisinvestedoverthenextdecade,whichrepresentsanincreaseofmorethan10%overthe2017‐21period(Figure6.15).By2050,annualinvestmentinthepowersectornearsUSD1.1trillion.Investmentisconcentratedinregionswhereenergytransitionsareatamoreadvancedstage,andmorethan70%ofpowersectorinvestmentsareinadvancedeconomiesandChina.Asenergytransitionsinemergingmarketanddevelopingeconomiesgatherpace,thebalancestartstochange.Emergingmarketanddevelopingeconomiesrepresentaround50%ofglobalpowersectorinvestmentby2030.IntheAPS,investmentincreasesbyaround30%fromcurrentlevelstoreachanannualaverageofUSD1.2trillionoverthenextdecadeandUSD1.8trillionby2050.IntheNZEScenario,investmentsrisetoUSD1.7trillionperyearoverthenextdecade.Figure6.15⊳Averageannualinvestmentinthepowersectorbytypeandscenario,2017-2050IEA.CCBY4.0.Powersectorinvestmentissettoincrease;upfromanannualaverageofUSD860billioninthe2017-21period,withrenewablesandgridsrepresentingthelargestsharesNote:MER=marketexchangerates;EMDE=emergingmarketanddevelopingeconomies.Despiteariseincostsinrecentmonths,renewableenergytechnologiessuchaswindandsolarPVremainthecheapestoptionfornewpowercapacityinmanycountries,evenwithouttakingintoaccounttheexceptionallyhighpricesseenin2022forcoalandgas.Accordingly,thesetechnologiesattractalargeshareofmoneybeingcommitted.InvestmentinrenewablesamountstoanaverageofUSD480billionperyearfrom2022to2030intheSTEPSandaroundUSD630billionperyearintheAPS.AnnualglobalinvestmentinnuclearpoweralsoincreasesfromUSD30billionduringthe2010stooverUSD60billionby2030intheSTEPSandUSD80billionintheAPS.Infastertransitions,otherlow‐emissionsfuelsandtechnologiessuchasCCUStakeaprogressivelylargershareofinvestmentinthepowersector,reachinganannualaverageofUSD7billionby2050intheAPS.Investmentin25%50%75%100%4008001200160020002017‐212026‐302046‐502026‐302046‐50BillionUSD(2021,MER)BatterystorageOtherlowemissionsNuclearRenewablesFossilfuelsunabatedElectricitygridsEMDEshareSTEPSAPS(rightaxis)IEA.CCBY4.0.Chapter6Outlookforelectricity3076unabatedfossilfuelpowerplantsdropstoaroundUSD50billion2030intheSTEPSandaroundUSD40billionintheAPS.Transmissionanddistributiongridscapturearisingshareoftotalpowersectorinvestmentinrecognitionoftheircriticalroleinsupportingmodernelectricitysystemsandcleanenergytransitions.Thisinvestmentsupportstheexpansion,modernisationandfurtherdigitalisationoftransmissionanddistributionnetworks.Batterystoragegainsgroundasasourceofpowersystemflexibility,withannualinvestmentincreasingmorethanthreefoldtoUSD33billionby2030.Keythemes6.6PowersystemflexibilityiskeytoelectricitysecurityFlexibilityneedsPowersystemflexibility2needsaredrivenprimarilybytherisingshareofvariablewindandsolarPVinelectricitygenerationandchangesinelectricitydemandprofiles.Risingsharesofnon‐dispatchablewindandsolarPVincreasethevariabilityofthenetload(theloadthatremainsafterremovingwindandsolarproductionfromelectricitydemand),whiletheelectrificationofadditionalend‐uses,e.g.electricheating,roadtransportorindustrialprocesses,raisespeaksandincreasesthehourly,dailyandseasonalvariabilityofelectricitydemand.3Althoughseasonalvariationsplayanincreasinglyimportantroleinsystemscharacterisedbyrisingsharesofvariablerenewables,thechangeinnetloadfromonehourtothenextremainsausefulindicatorforflexibilityneedsandisusedinthisanalysis.Allthreescenariosseeasignificantriseintheshareofvariablerenewablesinpowersystemsworldwide.IntheSTEPS,thecombinedshareofwindandsolarPVintheelectricitymixdoublesby2030andexceeds40%by2050.IntheAPS,whereallannouncedemissionsreductionpledgesandrenewableenergytargetsaremetinfull,itrisestonearly30%by2030andcloseto60%by2050.Thissignificantlyraisesthedemandforadditionalsystemflexibilitytobalanceelectricitysupplyanddemandcontinuouslyandtomaintaingridstability.IntheSTEPS,hour‐to‐hourflexibilityneedsmorethantripleby2050.IntheAPS,theneedsdoubleby2030andincreasemorethan3.5‐timesby2050,whiletheymorethanquadruplebetweentodayand2050intheNZEScenario.Therelativechangeisbiggestinsystemswhichstartfromalowbasebutseetherapidintroductionofvariablerenewables.InIndia,forexample,flexibilityrequirementsrisethreefoldintheAPSby2030andsixfoldby2050,whileinChinatheydoubleby2030andrise3.5‐foldby2050(Figure6.16).TheUnitedStatesandtheEuropeanUnionalsoseedramatic2Flexibilityisdefinedastheabilityofapowersystemtoreliablyandcosteffectivelymanagethenearinstantaneous,hourly,daily,weeklyandseasonalvariabilityofdemandandsupply.Itrangesfromensuringtheinstantaneousstabilityofthepowersystemtosupportinglong‐termsecurityofsupply.3Theelectrificationofadditionalend‐usesalsoraisesthepotentialtoprovideflexibilitythroughdemand‐sideresponsemeasures.IEA.CCBY4.0.308InternationalEnergyAgencyWorldEnergyOutlook2022increasesintheneedforflexibilityto2030astheshareofvariablerenewablesinthepowermixrisestoalmost45%intheformerand50%inthelatter.Figure6.16⊳Hour-to-hourflexibilityneedsintheUnitedStates,EuropeanUnion,ChinaandIndiaintheAPS,2021and2030IEA.CCBY4.0.Hour-to-hourflexibilityneedsrisesignificantlyby2030inmajormarkets,drivenbyincreasingsharesofvariablerenewablesandchangesindemandpatternsNote:Flexibilityneedsarerepresentedbythehour‐to‐hourrampingrequirementsafterremovinghourlywindandsolarPVproductionfromhourlyelectricitydemand,dividedbytheaveragehourlydemandfortheyear.FlexibilitysupplyTheprovisionofflexibilityinpowersystemsisacornerstoneofelectricitysecuritytodayandinthefuture.Therearefourmainsourcesofflexibility:powerplants,grids,demand‐sideresponseandenergystorage.4Thermalpowerplantsprovidemostoftheflexibilityrequiredtomaintainthereliabilityofpowersystemstoday,withtheremaindersuppliedmainlybyhydropower(includingpumpedstorage).By2050,theriseofrenewablesmeansthattheshareofthermalpowerplantsintheoverallsupplyofflexibilitydeclinesfromaroundtwo‐thirdstodaytoaroundathirdintheSTEPSandaquarterintheAPS(Figure6.17).Thetechnologymixoftheremainingfleetofthermalpowerplantschangesconsiderablyovertheoutlookperiod,especiallyinadvancedeconomies.Thereisamoveawayfromlessflexible,baseloadthermalgenerationsuchascoal‐firedpowerplantstomoreflexibletechnologiessuchasgasturbines,whichareabletostartandrampupordownmuchfaster,makingthemamoresuitablematchwithhighsharesofvariablerenewables.Incountrieswithnucleargeneration,itremainsanimportant,low‐emissionssourceofflexibilityandprovidesstabilitytopowergrids.IntheAPS,plantsthat4WhilesolarPVandwindareabletoprovidesomeflexibilitythroughcurtailment,doingsoraisestheirlevelisedcostandcouldnegativelyimpacttheirprofitabilitydependingoncompensation.‐50%‐25%0%25%50%20212030EuropeanUnionUnitedStatesChinaIndiaIEA.CCBY4.0.Chapter6Outlookforelectricity3096co‐firehydrogenorammoniaandfossilfuelpowerplantswithCCUSalsoentertheflexibilitysupplymix,mostlyinadvancedeconomies.WhileunabatedcoalcontinuestoplayasignificantroleasaproviderofsystemflexibilityinemergingmarketanddevelopingeconomiesintheSTEPS,itisalmostcompletelyphasedoutinadvancedeconomies.Figure6.17⊳Flexibilitysupplybysource,regionandscenario,2021and2050IEA.CCBY4.0.Theprovisionofpowersystemflexibilitybecomeslessreliantonunabatedfossilfuelsovertime,movingtowardslow-emissionssources,batterystorageanddemandresponsePowergridsandinterconnectionscanhelpevenoutfluctuationsindemandandinthesupplyofweather‐dependentvariablerenewablessuchaswind.Theydosobyconnectinggeneratorsdispersedoverawideareawithinandbetweencountriesandregions.Theythushelpreducethedemandforflexibilityfromothersourceswhileatthesametimeconnectingfurtherpotentialprovidersofflexibility.Certaingridassets,suchashighvoltagedirectcurrent(HVDC)interconnections,canalsoprovideflexibilityservices,includingfastactiveandreactivepowerandvoltagecontrol(seesection6.7).Demand‐sideresponsehelpstoalignconsumptionwithavailablesupply,thusreducingtheneedforothersourcesofflexibility.Withtheprojectedincreaseintheuseofelectricitybyairconditioners,heatpumps,EVs,electrolysersandotherpotentiallyflexiblesourcesofdemand,thereispotentialforsignificantloadshiftinginallthreescenarios.In2050,demand‐sideresponseprovidesroughlyaquarterofpowersystemflexibilityinbothadvancedeconomiesandemergingmarketanddevelopingeconomiesintheSTEPSandAPS.Tappingthispotential,however,willrequiresignificantinvestmentindigitalinfrastructure,aswellasintechnologiessuchasthermalstoragethathelpdecoupleelectricityconsumptionfromfinaldemand.Regulatoryframeworkswillalsoneedtoevolveinordertoenablesupplierstooffertariffsthatrewarddemandresponsetoend‐users,andtopermitaggregators,industrial0%25%50%75%100%APSSTEPS2021APSSTEPS2021UnabatedcoalUnabatednaturalgasOilFossilfuelswithCCUSHydrogenandammoniaNuclearHydroOtherrenewablesBatteriesDemandresponse20502050AdvancedeconomiesEmergingmarketanddevelopingeconomiesIEA.CCBY4.0.310InternationalEnergyAgencyWorldEnergyOutlook2022consumersandotherpotentialprovidersofdemand‐sideresponsetoofferflexibilityinelectricity,capacityandancillaryservicemarkets.Energystorage,inparticularbatteryenergystorage,issettoplayanincreasinglyimportantroleinsystemflexibility.Batterystorageisprojectedtobethefastestgrowingsourceofpowersystemflexibilityinallscenariosovertheoutlookperiod.Batterysystemsaremodular,whichallowsthemtobedeployedandscaleduprapidlyinalmostanylocation.Inadditiontoenergystorage,utility‐scalebatteriescanofferimportantsystemservices,forexamplebyhelpingwiththerestorationofgridoperationsfollowingablackout,supportingshort‐termbalancingorprovidingoperatingreserves.Theirprovisionoflocalisedflexibilitymayalsoreducetheneedforinvestmentinnewtransmissionanddistributioninfrastructure.Althoughdwarfedbytheprojectedincreaseinbatterystoragecapacity,otherstoragetechnologiesplaycontributingrolesinsystemflexibilityaswell.Witharound160GWofinstalledcapacityglobally,pumpedstoragehydroisthelargestsourceofelectricitystoragetoday,anditissettoexpandfurtheroverthenexttenyears(IEA,2021c).Othergrid‐levelstorageoptionsincludecompressedandliquidairenergystorage,gravitystorage,andhydrogenandammonia.Hydrogenandammoniainparticularholdsignificantpromiseassourcesofseasonalstorageforlargeamountsofrenewableenergy(IEA,2021d).Asthepowergenerationmixevolves,ensuringanadequatesupplyofflexibilitywillbecritical.However,currentmarketdesignsaresendingweaksignalsforinvestmentinflexibility,andthiscouldpresentarisktoelectricitysecurityincleanpowersystemscharacterisedbyhighsharesofvariablerenewables.PoliciesandregulatoryframeworksneedtoevolveinordertobringaboutthelevelsofinvestmentinnewsourcesofflexibilityseenintheAPSandNZEScenario.Legacyregulationsthatcouldpotentiallydiminishtheeconomiccaseforvarioustypesofflexibilityshouldbereviewedandreformedifnecessary.Incountrieswithliberalisedelectricitymarkets,severaloptionscouldhelpbetterincentiviseinvestmentinsourcesofflexibility.Theseincludedecreasingthemarketsettlementperiod,i.e.theintervalinwhichelectricityistraded;reformingmarketgate‐closure,i.e.thetimebetweenthelasttradeandthephysicaldeliveryoftheelectricity,tobringitclosertorealtime;introducingcapacityremunerationmechanisms;andfurtheropeningofancillaryservicemarkets.ArecentIEAreportprovidesmoreinformationondesignchoicestotailorpowermarketsfortomorrow’selectricitysystems(IEA,2022f).Inadditiontoadaptingmarketdesigns,thereisastrongcaseforconsideringflexibilityinlong‐rangeenergyplanningandconsideringoptionstoincentivisethedeploymentofflexiblecapacitythroughinstrumentsthatimprovelong‐termrevenuevisibility.Forexample,so‐calledhybridauctionsforrenewablesandstoragecouldprovidethenecessaryrevenuestabilityforinvestmentinstorage.IEA.CCBY4.0.Chapter6Outlookforelectricity3116FocusonbatterystorageInstalledbatterystoragecapacity,includingbothutility‐scaleandbehind‐the‐metersystems,totalledmorethan27GWattheendof2021.Forthesecondyearinarow,capacityadditionsincreasedstronglyin2021,risingtomorethan9GW(nearly90%highercomparedto2020).Thepaceofdeploymentissettopickupsignificantly:globalbatterystoragecapacityincreasesnearly50‐foldintheSTEPS,risingtomorethan1000GWby2050.IntheAPS,thisdoublestomorethan2000GW,withmorethan400GWinstalledby2030.ThestrongestgrowthoccursintheNZEScenario,whichseesabout780GWinstalledin2030andmorethan3500GWby2050.Theincreaseinbatterystoragecapacityisunderpinnedbyasteadydeclineintheircostswhichisbroughtaboutbycontinuinginnovationinbatterychemistryandeconomiesofscale.Thereissomeriskintheshortandmediumtermthatdifficultiesrelatedtoavailabilityandaffordabilityofspecificcriticalmineralsneededtoproducebatteriescouldslowthedeclineincost,butthereareoptionstomitigatetheseconcerns(seesection6.8).Figure6.18⊳Shareofbatteriesintotaldispatchablecapacityandshareofvariablerenewablesinelectricitygenerationforselectedregionsbyscenario,2021-2050IEA.CCBY4.0.BatterystoragecapacityrisesintandemwiththeshareofwindandsolarPV,helpingtoprovideflexibilityandsecurityforpowersystemsBatterystoragecapacityexpansioniscloselycorrelatedwiththerisingshareofvariablerenewablesinpowersystems.Thishighlightsitsroleasanimportantsourceofadditionalflexibilityasrenewablesarescaledupandtraditionalprovidersofflexibilitysuchascoal‐firedpowerplantsareretired.Sincebatteriesareprimarilyforshortdurationstorage,theyarewellsuitedtosmooththedailycycleofsolarPV‐basedelectricitygeneration(batterystorage10%20%30%40%50%60%0%20%40%60%80%100%ShareofbatteriesintotaldispatchablecapacityShareofwindandsolarPV205020302021EuropeanUnionUnitedStatesChinaIndia205020302021STEPSAPSIEA.CCBY4.0.312InternationalEnergyAgencyWorldEnergyOutlook2022volumescommonlyrangefromonetoeighthoursofstorageatfullcapacity,withmostsystemscurrentlyatthelowerendoftherange).Behind‐the‐meterbatterysystemsareoftenpairedwithrooftopsolar,forexample.RegionswithhighsharesofsolarPVrelativetowind,suchastheUnitedStatesorIndia,thustendtoseehigherrelativelevelsofbatterydeploymentthanregionsinwhichwindpowerpredominates,suchasChinaortheEuropeanUnion(Figure6.18).IntheSTEPS,theUnitedStatesmaintainsitspositionastheleadingmarketforbatterystorage,withinstalledcapacityrisingfrommorethan7GWin2021tonearly370GWby2050.IntheAPS,Chinabecomesthelargestmarketforbatterystoragewithinstalledcapacityrisingfromcloseto6GWtodayto570GWin2050.China’sshareofbatteriesintotaldispatchablecapacityremainslowinrelativetermscomparedtootherregions,butitsmarketishugeinabsoluteterms.TheinstalledcapacityofbatterystoragerisesfasterrelativetorenewablescapacityintheAPSthanintheSTEPS.ThisreflectsthegreaterurgencyshownintheAPSoutlooktoprovideadditionalflexibilitytothegridandlowerbatterystoragecoststhatcomewiththat:ashighernumbersofbatteriesaredeployed,learningeffectsandimprovedeconomiesofscaledrivedownthecostofbatterypacksandtheothercomponentsconstitutingthebalanceofsystem.SpillovereffectsfromtheEVindustry,whichisbyfarthelargestuserofbatteries,alsoplayanimportantrole.TogetontrackforthelevelsofbatterystoragecapacityintheAPSorNZEScenario,policiesandregulatoryframeworkswillhavetoevolvetoreflecttheimportanceofthecontributionmadebybatterystoragetodifferentsystemservices.Forstorageassets,ownershipisoftenanimportantquestion:typically,storageisconsideredagenerationassetandgridoperatorsarenotallowedtoownit.Thiscouldimpedeprogress.Apotentialsolutionmightbetoallowtransmissionordistributionsystemoperatorstoprocurestorageservicesfromthirdparties,forexamplethroughtendersorlocalflexibilitymarkets.6.7ElectricitynetworksarethebackboneofcleanpowersystemsElectricitytransmissionanddistributionsystemscurrentlyincludearound80millionkilometres(km)oflines.Thewayinwhichthesearedevelopedandoperatedwilldeterminetheeconomicviabilityandreliabilityoftheentireelectricitysystemasdemandgrowsandasenergytransitionsaccelerateinthecomingyears.Mostelectricitysystemswereoriginallydesignedandoperatedbyverticallyintegratedutilitieswithafocusonmaintainingreliablelocalsupply.Theliberalisationofmanyelectricitymarketschangedthisarrangementbysplittingtheintegratedutilitiesintoseparategridandgenerationservices.Therisingshareofvariablerenewablesinthegenerationmixandalterationsinthewaythatelectricitysystemsoperate,e.g.intermsofdemandmanagement,howeverarenowchangingrequirementsfortheinterfacebetweenthedistributionandtransmissiongrids,raisingquestionsabouthowbesttomeetthechallengesahead.IEA.CCBY4.0.Chapter6Outlookforelectricity3136GridinfrastructuredevelopmentTheelectricitynetwork–theessentiallinkbetweengenerationanddemand–continuestoexpandinallthreescenarios.IntheSTEPS,13millionkmofdistributionlinesandabout1.6millionkmoftransmissionlinesareconstructedby2030(Figure6.19).By2050,morethan45millionkmofdistributionlinesandafurther4millionkmoftransmissionlinesareaddedalongwithprimaryequipment,powertransformersandassociatedcontrolandprotectionequipment,increasingtheexistinggridbymorethan80%.IntheAPS,theexpansionofthenetworkproceedsevenmorerapidly,with14millionkmofdistributionlinesand1.8millionkmoftransmissionlinesaddedby2030.Figure6.19⊳Griddevelopmentbytype,regionandscenario,2022-2050IEA.CCBY4.0.Electricitynetworksneedtobeexpandedandreplacedinallregions,providingopportunitiesformodernisationtoaccommodatetomorrow'spowersystemsNote:Adv.=advanced;EMDE=emergingmarketanddevelopingeconomies.Theneedfornewcapacityinthetransmissiongridhastwomaincauses.Firstisrapidgrowthinelectricitydemand,whichincreasesbyone‐quarterbefore2030intheAPSandmorethandoublesby2050.Secondistherapidriseinnewsourcesofgenerationanddemand.Thestronggrowthofrenewables,oftenmoredistantfromexistinggridstotaphighqualityresources,addtothegrowthoftransmissionaroundtheworld.Inemergingmarketanddevelopingeconomies,over14millionkmofnewlinesarebuiltintheSTEPSby2030.Risingdemandaccountsforover90%ofthisenlargement.AlmostathirdofthetotalexpansiontakesplaceinChina(5.3millionkm).Someofthesenewlinestaketheformoflarge‐scaleultra‐highvoltageelectricitytransmissionlinksoverdistancesofupto3300kmtoconnectremotesolarPVandwindpowerinstallations.Manyemergingmarket1234OtherEMDEChinaAfricaIndiaSoutheastAsiaOtheradv.economiesUnitedStatesEuropeanUnionJapanRemainsin2050Replacedin2022‐50STEPS2022‐30STEPS2031‐50AdditionalinAPSto2050TransmissionMillionkmNewExisting102030DistributionMillionkmIEA.CCBY4.0.314InternationalEnergyAgencyWorldEnergyOutlook2022anddevelopingeconomiesmakesignificantprogressinexpandingaccesstoelectricity,notablyinAfrica(IEA,2022e)andSoutheastAsia(IEA,2022g).Indonesiahasalreadyraisedaccessratesfromtwo‐thirdsofthepopulationadecadeagotonearly100%today.Inadvancedeconomies,whereelectricitynetworksarewelldevelopedandgenerallyolder,thereismorefocusonreplacementandlessonnewlines.Almost21millionkmofgridlineshavetoberenewedinadvancedeconomiesuntil2050,includingover7millionkmintheEuropeanUnionandmorethan8millionkmintheUnitedStates.Thiscorrespondstotwo‐thirdsofthosenetworksinplacetoday.Lines,cablesandtransformercapacitywillremainthemainstaysofelectricitynetworks,butinvestmentindigitaltechnologiesisalsocriticallyimportant.Mostoperationaldecisionstodayarebasedonloadflowanalysisinlocalmonitoringsystems.Thisapproachtosystemoperationsworkswellwhenthepowerflowsfromcentralisedgenerationcapacitytoconsumersarelargelypredictablewithinalocalornationalframework.Integrationofenergyflowsoverlongerdistancesandtheriseofvariablegenerationsourcesischangingthelevelofpredictabilityofelectricityflowsthroughthesystem.Dependingontheequipment,thesepowerflowscanleadtosystemconditionsthataremoredynamic,leadingtolocallineoverloads.Digitaltechnologieshaveakeyparttoplayinmeetingthechallengesthatarisefromthesechanges.Newmonitoringandcontroldevicesandthecorrespondingsoftwarecanprovidesysteminformationinrealtime.Dynamiclineassessmentsensorsplacedthroughoutthenetworkcanhelptransformthestationaryassessmentoflargerpowersupplyregionsintoreal‐timemeasurementsanduncoverthedynamicsofpowerflowsinabroaderandmeshedsystem,whilesmartmeterscanimprovethevisibilityofloadflows.Real‐timeknowledgeofsystemhealthallowsfullerutilisationofexistingresources,enablesnetworkstooperateclosertotheirtruelimitswithoutsacrificingreliability,andmakesiteasiertocontainsystemfailuresintosmallerareasandpreventcascadingpoweroutages.Higherlevelsofco‐operationandknowledgesharingbetweentransmissionanddistributiongridoperatorswillhelptoenhanceenergysecurity,aswillthesharingofbestpracticesrelatingtotheco‐ordinatedoperationandplanningoftransmissionanddistributionsystemsanddataexchangebetweenoperators.TheabilitytoactonthebasisofadetailedviewofabroadnetworkareadependsondigitaltechnologiessuchasStaticSynchronousCompensatorandThyristorControlledSeriesCompensation,bothofwhicharepartofthefamilyofflexiblealternatingcurrenttransmissiondevices.Theseallowcontrolofpowerflows,voltagelevelsandotherstabilitycharacteristicsnearlyinrealtime,whilegeneratingcorrespondingreactivepowerthatfurtherincreasespowertransmissioncapacityandstabilisesthegrid.HVDCisanotherimportanttechnologyinthiscontextthatcanhelpsystemoperationsbytransportinglargeamountsofelectricitywhileofferingfullbi‐directionalloadflowcontrolandblackstartcapabilities.IEA.CCBY4.0.Chapter6Outlookforelectricity3156GridssupportsecureenergytransitionsSuccessfulcleanenergytransitionsdependonmodernelectricitynetworks,andtheirdevelopmentrequireslong‐termvisionandplanning.Forexample,largeprojectsinvolvingtransmissionsystemscanoftentakeadecadeorlongertocomplete.Suchlongleadtimesputapremiumonstrategicthinkingandaccurateestimatesoffuturesupplyanddemandsothattomorrow'snetworksarereadytomeettherequirementsplacedonthemanddonotactasabottleneckincleanenergytransitions.Toensuresecurityofsupply,griddevelopmentmustbeconsideredatthesystemlevel,takingaccountofincreasingelectricitydemandandrisinglevelsofvariablerenewables.Energyfromutility‐scalewindorsolarPVinstallations,whichareoftenlocatedfarfromdenselypopulatedcitiesandotherdemandcentres,willneedtobetransferredoverlongdistancesthroughanetworkthatmayhavebeendesignedforadifferenttypeofoperation.Networksarecomplexsystemswithmanyvariables;keepingthemup‐to‐dateisanever‐endingchallenge.Forexample,whenthenetworkplaninGermanywasupdatedin2019,justtwoyearsafteritspreviousrevision,theneedformorethan100newreinforcementmeasureswasidentified.Failuretoplanaheadsufficientlycanleadtotransmissionbottlenecks.ThiswasexperiencedrecentlyinVietNam,whichannouncedinearly2022thatitwouldnotconnectanynewsolarPVorwindprojectsfortherestoftheyear,andalsoinMongolia,where12%oftheelectricitygeneratedbywindturbinesin2021couldnotbetransportedtoend‐users.Electricitynetworkprojects,especiallyhighvoltageinterconnections,areverycomplexintermsofbothpermittingandconstruction.Linerouteplansandreportshavetobedrawnupcoveringtheentirelength,conditionsandspecificationshavetobeassessed,andstakeholdersmustbeengaged.Peoplelivingnearproposedlineroutesmayopposetheirdevelopment.Typicalpermittingandconstructiontimesforpowerlinesvarywidely.Thevisualimpactofhighvoltagepowerlinesoftenproducesaconcertedleveloflocalresistance.Itisnotunusualforthepermittingandconstructionofasingleextra‐highvoltageoverheadpowerline(>220kilovolt[kV])totake5‐13years,dependingonthelengthofthelineandotherfactors,especiallyinadvancedeconomies(Figure6.20).Lowervoltagelevelprojectsoftentake4‐7years.Distributiongridprojectsareusuallycompletedwithinfouryears.Asanexampleforanadvancedeconomy,inGermany,outofthe1655kmoflineprojectsapprovedina2009networkdevelopmentplan,lessthan50%wereoperationaladecadelater.Theuseofundergroundcablesinsteadofoverheadpowerlinescanhelpdealwithconcernsaboutvisualandenvironmentalimpacts,especiallyinadvancedeconomies,butcablesaddsignificantlytocosts.Theygenerallyhavebeenusedprimarilyforlowvoltagepowerlines,butarenowincreasinglybeingdeployedforhighvoltagelinesofupto525kV.Thereareanumberofwaystoaddressthechallengeofelectricitynetworkdevelopment.Thelikelihoodofsuccessisincreasedwherethereiseffectivelong‐termgridplanningIEA.CCBY4.0.316InternationalEnergyAgencyWorldEnergyOutlook2022incorporatingforwardplanninginsupplyanddemand,wherethereisclarityabouttherolesandresponsibilitiesofregulatoryauthorities,networkoperatorsandinvestors,andwherethenumberofpermitsrequiredisreducedtotheminimumnecessarythroughintegratedprocedureswhichsettheclearrequirementsforsubstationsinallregionsofthecountry.Effectiveandbindingdeadlinesareimportantinordertogivenetworkoperatorsandinvestorslegalcertaintywithregardtothetimelycompletionofapprovalprocedures.Thisimpliesadequatestaffinglevelsandprofessionalcompetenceonthepartoftheregulatoryauthorities.Highpriorityprojectscanbeacceleratedbythedesignationofso‐called"infrastructurecorridors"withprovisionforquickinitialpermittingdecisions.Theimportanceofnetwork‐wideco‐ordinationhasalreadybeenrecognisedincountriessuchasAustralia,JapanandUnitedStates,whiletheEuropeanUnionhasagreedonanewTrans‐EuropeanNetworksforEnergyRegulationthatofferstheprospectofacceleratedpermittingproceduresandfundingsupportforover150powertransmissionandstorageprojectsofcommoninterest.Figure6.20⊳Typicaldeploymenttimeforelectricitygrids,solarPV,windandEVchargingstationsIEA.CCBY4.0.Electricitygriddeploymentiscomplex,involvesmanystakeholdersandcantakemanyyears,whichmakesadvancedplanningcriticaltosupportcleanenergytransitionsNotes:Rangesreflecttypicalprojectscommissionedinthelastthreeyears.Distributionline=1‐36kVoverheadline;transmissionissplitbetweenhighvoltageline=36‐220kVoverheadlineandextra‐highvoltageline=220‐765kVoverheadline.Todate,Indiahasnotdevelopedoffshorewindprojects.Source:IEAanalysis.36912Extra‐highvoltagelineHighvoltagelineDistributionlineTruckcharginghubCarcharginghubOffshorewindOnshorewindUtilitysolarPVChinaIndiaEuropeanUnionUnitedStatesYearsIEA.CCBY4.0.Chapter6Outlookforelectricity3176GridinvestmentIntheSTEPS,annualgridinvestmentrisestoUSD550billionby2030comparedwithUSD300billionperyearfrom2012to2021,andtoaboutUSD580billioninthe2030sand2040s(Figure6.21).Thisincreasereflectsrisinglevelsofelectricitydemand,theneedforsystemstoadjusttoexpandinglevelsofvariablerenewablesgenerationcapacity,andthedevelopmentofsmartgrids.Gridinvestmentsinadvancedeconomiesrisetill2040toaboutUSD250billionperyearwheretheyremainstableandarelargelyfocussedonensuringgridreliabilityduringthetransitiontoadecarbonisedpowersectorthatneedstobeincreasinglyflexiblewhilemeetingrisinglevelsofdemandandmaintainingaffordabilityandresilience.Inemergingmarketanddevelopingeconomies,investmentsrisefromaboutUSD135billiontoover330billionby2030,andstabiliseataboutthislevelthrough2050,asdemandforenergygrowsrapidlyandmoreofthatdemandisservedbyelectricityaswellasextendingaccesstomillionsofpeopleforfirsttime.Mostgridinvestmentinemergingmarketanddevelopingeconomiestodayismadebythepublicsector,andtherisinglevelsofinvestmentrequiredinthefutureunderlinethecaseforfindingwaysofattractingsomeproportionofthisinvestmentfromtheprivatesector.5Figure6.21⊳Averageannualelectricitygridinvestmentbytypeandscenario,2012-2050IEA.CCBY4.0.AnnualgridinvestmentrampsupfromtherecentaverageofUSD300billionperyeartoanaverageofUSD580billioninthe2030sintheSTEPSandUSD770billionintheAPSNote:MER=marketexchangerates;EMDE=emergingmarketanddevelopingeconomies.5Forfurtherinformationconcerningattractingprivateinvestmentinemergingmarketanddevelopingeconomies,seeAfricaEnergyOutlook2022(IEA,2022e).20040060080010002012‐212022‐302031‐402041‐502022‐302031‐402041‐50TransmissionDistributionTransmissionDistributionBillionUSD(2021,MER)STEPSAPSAdvancedeconomiesEMDEIEA.CCBY4.0.318InternationalEnergyAgencyWorldEnergyOutlook2022IntheAPS,gridinvestmentrisestoUSD630billionby2030andUSD830billionby2050,withdistributiongridsaccountingforthelargestshare.ThisrepresentsamarkedstepupfromthelevelsseenintheSTEPS.Investmentinadvancedeconomiesfallsafter2040asfulldecarbonisationisnearlyachievedandelectricitydemandgrowthslowsandefficiencymeasurestakeeffect.Meanwhileitcontinuestoriseinemergingmarketanddevelopingeconomies,drivenbyelectricitydemandmorethandoublingfrom2021to2050intheSTEPSandAPS.Largeinterconnectionsremainamajorinvestmentfocus,withprojectsunderconstructionorplannedinAfrica,Australia,China,Europe,IndiaandNorthAmerica.Regulatorsandpolicymakersfacethetaskofensuringthatthenecessarygridinvestmenttakesplacewhilemanagingcostsandmaintainingsystemstability.Costallocationframeworksneedtoensurefairremunerationforgridoperatorsandinvestorswhileprotectingconsumeraffordability.Theintegrationofrisingsharesofrenewablesincreasesthecomplexityofgridoperationsandmayraisenewquestionsaboutassetownershipandthedistributionofresponsibilities.Whatevertheoverallframework,however,clearvision,long‐termenergyplanningandtransparencycanhelpreduceuncertaintyforgridoperatorsandinvestors,facilitatingtimelyandefficientinvestmentingridinfrastructure.Wheretheyexist,regionalbodiescanalsohelpregulatorsbypromotingbetterunderstandingaboutregionalpowersystems,sharinglessonslearnedandsupportingthedevelopmentofinnovativecollaborationmodelsandjointtraininginitiatives.6.8CriticalmineralsunderpinfuturecleanelectricitysystemsAlow‐emissionselectricitysystemdiffersprofoundlyfromonefuelledbytraditionalfossilfuelresources.Amongothers,itdependsmuchmoreoncriticalminerals.AsolarPVinstallationrequiresaroundsix‐timesmorecriticalmineralinputs(7000kilogrammespermegawatt[kg/MW]ofinstalledpowercapacity)thananaturalgas‐firedpowerplant.Anonshorewindinstallationrequiresnine‐timesmorecriticalmineralinputs(10000kg/MW),andanoffshorewindinstallationrequires13‐timesmorecriticalmineralinputs(15000kg/MW)(IEA,2021b).Atjustover5000kg/MW,nuclearpoweristheleastcriticalmineral‐intensivetechnologyamongthesuiteoflow‐emissionspowergenerationtechnologies(IEA,2021b).Thisimpliesthatatransformationoftheelectricitysystemwillbeinevitablyaccompaniedbyexpandingdemandforthesecriticalminerals.Ascleanenergytransitionsgatherpace,thereaccordinglywillbeashiftoffocusfromthesupplyoftraditionalfuelstothesupplyofcriticalminerals(seeChapter4).Risingmineralpricesandvolatilesupplychainswhichcouldbeaffectedbygeopoliticaleventsshouldbeseenaswarningsignstopolicymakerstopaycloserattentiontotheimportanceofthesemineralsforasecureandsustainableenergytransition(IEA,2022h).SystemtransitioncomeswithnewchallengesTherapiddeploymentoflow‐emissionspower,electricitygridsandgridstorageintheAPSandNZEScenarioimpliesrapidlygrowingdemandforcriticalmineralfromtheelectricitysector.Despitetechnologyinnovationleadingtomaterialintensityimprovementsovertime,IEA.CCBY4.0.Chapter6Outlookforelectricity3196criticalmineraldemandrisesfrom7Mtin2021toreach11Mtin2030and13Mtin2050intheSTEPS.ItgrowsmuchfasterintheAPSandNZEScenario,reachingover18Mtin2050intheAPSand20MtintheNZEScenario(Figure6.22).EvenintheSTEPS,thetransitionstolow‐emissionspower,gridsandstorageleadtocumulativedemandforcriticalmineralsthisdecadebeing20%higherthanbetween2010and2020,andcumulativedemandafter2030untilmid‐centuryisnearlyfour‐timesaslargeasthedemandofthelastdecade.Figure6.22⊳Annualdemandforcriticalmineralsforlow-emissionselectricitysupply,storageandnetworksbyscenario,2021-2050IEA.CCBY4.0.Annualdemandforcriticalmineralsinlow-emissionselectricitygeneration,batterystorageandnetworksincreasesalmost200%from7Mttodayto20Mtby2050intheNZEScenarioNote:CSP=concentratingsolarpower.Amongthemineralswhicharecrucialforthefutureofpowersystemsarecopper,rareearthelements,siliconandlithium.Copperisusedextensivelyintheelectricitytransmissionanddistributiongrids,butitsconductivepropertiesalsomakeitanessentialcomponentforlow‐emissionspowergenerationtechnologiessuchassolarPVpanels,windturbinesandbatteries.Rareearthelements(REEs)areusedtomanufacturethepermanentmagnetsforthemotorsofdirectdriveandhybridwindturbines(accountingfor30%ofwindpowerinstallationsin2021).Siliconisusedtomanufacturesolarpanels.Asdeploymentofvariablerenewabletechnologiesincreases,theneedforstoragetechnologiestocomplementrenewableelectricityalsorisesrapidly.Lithium‐ionbatteriesarethefastestgrowingstoragetechnologyintheworld,makinglithiumindispensableforfutureelectricitysystems.Intermsofabsolutevolumes,copperdominatestotaldemandforcriticalmineralsfromtheelectricitysector:currentdemandofover5Mtperyearrisesto10Mtby2030intheAPSand13MtintheNZEScenario(Figure6.23).Relativetocurrentlevels,demandforlithiumforbatterystoragesystemsrisesmostsharply,byover20‐foldby2030andalmost50‐fold481216202021STEPSAPSNZESTEPSAPSNZEWindSolarPVGeothermalBioenergyCSPNuclearHydroTransformersElectricitytransmissionElectricitydistributionGridbatterystorageMt20302050IEA.CCBY4.0.320InternationalEnergyAgencyWorldEnergyOutlook2022by2050intheNZEScenario.Demandforcopper,siliconandREEsnearlydoublesto2030intheAPS,andrisesbyaroundthree‐timesintheNZEScenariorelativeto2021.Figure6.23⊳Annualdemandforselectedcriticalmineralsusedinlow-emissionselectricitysupply,storageandnetworksbyscenario,2021-2050IEA.CCBY4.0.Morecopperforgrids,rareearthelementsforwindturbinemotors,siliconforsolarpanelsandlithiumforbatterystoragearerequiredtotransitiontolow-emissionspowersystemsNotes:Mt=milliontonnes;kt=kilotonnes.Inthisfigure,batterystorageislimitedtoutility‐scaleandhomeenergystorageanddoesnotincludedemandforEVbatteries.CopperdemandexcludesdemandforEVmotors.LithiumdemandexcludesdemandforEVbatteries.SupportforR&DiscrucialtoachievemineralintensityimprovementsandmineralalternativesCopperandaluminiumcurrentlyaccountforaround16%and4%respectivelyoftotalgridinvestmentcosts(IEA,2021b).Toreducerawmaterialcosts,gridoperatorscouldswitchfromcopperinundergroundcablestousealuminium,whichislessexpensive.Increaseduseofaluminiuminundergroundcablescouldreducecopperdemandnearly45%.Recent123202120302050MtSilicon51015202120302050CopperMt10203040202120302050STEPSAPSNZERareearthelementskt20406080202120302050ktLithiumIEA.CCBY4.0.Chapter6Outlookforelectricity3216developmentsincableinsulationtechnologyalsowidenthepossibilityofhighertransmissioncapacityusingthesameamountofconductingmaterials.Today’selectricitynetworksarelargelyoperatedusinganalternatingcurrent(AC)system,whichrequireaminimumofthreewirespercabletotransmitelectricity.HVDCsystemsusetwowires,whichimpliesadirectsavingonmetaldemandofatleastone‐thirdcomparedtoACsystems.HVDCsystemsarealsocapableoftransportingmoreelectricitythanACsystems,whichcouldreducecopperandaluminiumdemandaswellastheextentofaneedforgridexpansion.WideradoptionofHVDCsystemscouldraisecosts,butwouldreducebothaluminiumandcopperdemandbyaround10%eachby2050intheNZEScenario.Crystallinesilicon(c‐Si)modulesdominatethesolarPVmarkettoday,accountingforaround95%ofglobalcapacityadditions.AslowdowninproductionofcrystallinepolysiliconinChinaoverthelastyearhascreatedabottleneckinthesolarPVsupplychain,leadingtoaquadruplingofpolysiliconprices(IEA,2022i).Nevertheless,innovationinthemanufacturinganddesignofc‐Sisolarpanelsoverthepastdecadehascontributedtomajorimprovementsinmaterialintensity;since2008,siliconintensityhasmorethanhalvedaswaferthicknesshasdiminishedsubstantially,andsilverusehasbeencutby80%.Duringthesameperiod,modulecostshavedeclinedby80%,leadingtospectaculargrowthinsolarPVdeploymentworldwide.Whilec‐Simodulesareexpectedtocontinuetodominatethemarket,furtherR&Dworkonalternativetechnologiessuchascadmiumtelluride(CdTe),perovskiteorgalliumarsenide(GaAs)solarcellscouldseethesetechnologiesachieveincreasingmarketsharesto2050.Globalinstalledwindpowercapacityhasnearlyquadrupledoverthepastdecade,spurredbyanaverage40%reductionincostsandstrongpolicysupportinmorethan130countries.Averageratedcapacityforwindturbineshasalsoincreasedconsiderablyoverthelastdecade,almostdoublingforonshorewindturbinesandshootingupevenmorerapidlyforoffshorewindturbines:themostrecentoffshorewindturbinedesignsare10‐14MW,andplansforupto20MWturbinesareinthepipeline.Thesechangeshaveimportantimplicationsfortheuseofmaterials.Onakilogrammepermegawattbasis,aturbineof3.45MWcontainsaround15%lessconcrete,50%lessfibreglass,50%lesscopperand60%lessaluminiumthana2MWturbine(Elia,2020).Materialintensitydependsnotonlyonturbinesize,butalsoonturbinetype.Therapidexpansionofwindpowergenerationbringswithitmoredemandfortherareearthelementsrequiredtomanufacturethepermanentmagnetsformanyofthemotors.IntheNZEScenario,demandforREEsinwind,neodymiumandpraseodymiuminparticular,isprojectedtotripleby2050,drivenbyashiftfromtechnologiesusinginductiongeneratorsinfavourofthoseusingpermanentmagnetgenerators.GivenconcernsaboutcompetingforREEsupplywithEVmotors,risingpricesandgeopoliticalevents,furtherR&Deffortsareneededtodevelopnon‐magnettechnologiesorhybridconfigurationswithsmallermagnetsorpermanentmagnetswithoutREEstoreduceoverallREEdemand(IEA,2021b).SuccessfulR&DcouldleadtosignificantreductionsindemandforREEs(Figure6.24).IEA.CCBY4.0.322InternationalEnergyAgencyWorldEnergyOutlook2022Figure6.24⊳Demandforselectedmineralsusedinelectricitynetworks,solarPVandwindrelativeto2021inalternativetechnologycasesintheNZEScenario,2050IEA.CCBY4.0.EnhancedR&DeffortscouldhelpcommercialisetechnologiesthatprovidesubstitutesforcertaincriticalmineralsorreducetheamountofmineralsrequiredperunitofpowerNote:Al=aluminium;CdTe=cadmiumtelluride;GaAs=galliumarsenide;REE=rareearthelement;HVDC=highvoltagedirectcurrentsystems.RecyclingandreusecouldreducetheburdenonprimarysupplytomeetdemandMetalrecyclinghasthepotentialtobeasignificantsourceofsecondarysupplytomeetthegrowingdemandforcriticalminerals,althoughitcomeswithitsownsetofchallenges.Recyclingcomprisesthephysicalcollectionandseparationofmetalsandthemetallurgicalprocessestorecoverthem.Itincludesmultiplepathwaysandawiderangeoftechnologiesandpractices.Recyclingmetalsusedintheenergytransitionwillnotonlyeasetheburdenontheirprimarysupplyviamining,butbettertreatmentofwastestreamswillreducetheriskofseveralhazardousmaterialsenteringtheenvironmentandpollutinglandandwaterresources.Althoughrecyclingwillnoteliminatetheneedforsignificantinvestmentinprimarysupply,aslightlyreducedburdenonminingthroughrecyclingwilleventuallyleadtolowersocialandenvironmentalimpactsfrommining.Bymass,95%ofsolarpanelcomponentsarerecyclable,butonlyaround10%ofend‐of‐lifesolarpanelsarecurrentlybeingrecycled.Withaveragelifespansofabout25years,manysolarpanelsworldwidearenowapproachingtheendoftheirlives.IntheNZEScenario,capacityretirementsforsolarPVincreasealmost150‐foldfrom3GWin2030toaround400GWin2050.Bymass,90%ofthecomponentsofawindturbinearerecyclable,andlikesolarpanelstheirlifespanisabout25years.IntheNZEScenario,capacityretirementsfor123456Index(2021=1)BasecaseHigherAlingridsRiseofHVDCgridsBasecaseComebackofCdTeRiseofGaAssolarcellRiseofperovskiteBasecaseConstrainedREEsupplyGridsSolarPVWindGridsSolarPVWindSiliconAluminiumCopperREEIEA.CCBY4.0.Chapter6Outlookforelectricity3236windturbinesincreasefrom16GWin2030to240GWin2050.Furtherpolicyeffortsareneededtoboostrecyclingofmetalsandtoensurethatattheendoftheirusefullifethatsolarpanelsandwindturbinesdonotendupinlandfills.Ithasprovedpossibletoachievehighratesofrecyclingformetalssuchasaluminium,ironandnickeland,insomecases,copperwhensimple,bulkproductsareinvolvedorwhentherawmaterialisrelativelyeasytocollectfromindustrialapplications.Thissuggeststhatthesemetalshaverelativelyhighpotentialforcontinuousrecycling,includingfromcleanenergytechnologywastestreams.ThesameisnottrueforotherenergytransitionmineralssuchasREEs,lithiumandcobalt.HighlevelsofrecyclingfocusedonthemetalsneededforcleanenergytechnologiesdependonfurtherinvestmentandR&D,aswellasoninternationalcollaborationandco‐operationbetweenvariousmanufacturers.Targetedpoliciesinsupportofrecyclingofsolarpanels,windturbinesandbatteries,includingminimumrecycledcontentrequirements,tradeablerecyclingcreditsandvirginmaterialtaxeshavethepotentialtoincentivisetherecyclingofenergytransitionmineralsandtodrivetheriseofsecondarysupplies(Söderholm,2020).PolicyinterventionandinvestmentinR&Dbothneedtobesteppedupconsiderablyinordertoensureacirculareconomyiscreatedforlow‐emissionselectricitygenerationtechnologies.TheimmenselyrapidprogressininnovationandcorrespondingcostdeclinesforEVlithium‐ionbatteriesoverthelastdecadehavebroughtspilloverbenefitsforgrid‐scalebatterystoragesystems.Thereisnowscopefortheautomotiveindustrytoprovideasecondtypeofbenefitforgridstorage.ThisstemsfromthegrowingpoolofEVbatterieswhichcouldhavesecond‐lifeapplicationsinenergystorage.SpentEVbatteriestendtohaveterawatt‐hoursofunusedenergythatnolongermeetthestandardsforuseinanEVbutcanbeusedforotherapplications(Söderholm,2020).Theamountsofunusedenergyinvolvedaresignificant:thesespentbatteriestypicallymaintainabout80%oftheirtotalusablecapacity.Initialtrialsforsecond‐lifebatterieshavealreadybegun,butanumberoftechnologicalandregulatorychallengesremainfortheirapplicationtogrowatscale.Clearguidanceontherepackaging,certification,standardisationandwarrantyliabilityofusedEVbatterieswillbeneededtoovercomethesechallenges.TheproposedupdateoftheEuropeanUnionBatteryDirectiveisattemptingtotacklesomeoftheseissues,forexamplethroughrequirementsforminimumlevelsofrecycledmetalsinbatteries,newtargetsforrecyclingandopeninformationrequirementsthatenhancebatterytraceability.IEA.CCBY4.0.Chapter7Outlookforliquidfuels325Chapter7OutlookforliquidfuelsAcombustiblemixTheoilmarkettodayisgrapplingwithhugenear‐termandlong‐termuncertainties.Fearsofrecessionloomlargeovertheimmediateprospectsfordemand,althoughChinacouldboostoiluseasitemergesfromrenewedlockdowns.SanctionsonRussiaanddwindlingsparecapacitycastashadowovertheadequacyofsupply.Highpricesaregeneratingahistoricwindfallfortheoilandgasindustry,accompaniedbyhesitationonhowthiscanbestbeinvestedgiventhelikelihoodofstructuralshiftsinoiluseinthedecadestocome.Ourscenariosprovidedifferentperspectivesonthestrengthoftheseshiftsandtheirimplications.IntheStatedPoliciesScenario(STEPS),globaloildemandreboundsandsurpasses2019levelsby2023,despitehighprices;demandpeaksinthemid‐2030sat103millionbarrelsperday(mb/d).IntheAnnouncedPledgesScenario(APS),strongerpolicyactionbringsforwardthepeakinoildemandtothemid‐2020s.IntheNetZeroEmissionsby2050(NZE)Scenario,fasterglobalactiontocutemissionsmeansoildemandneverreturnstoits2019levelandfallsto75mb/dby2030.Around10%ofcarssoldin2021wereelectric.Thisrisesto25%intheSTEPSandto60%intheNZEScenarioby2030.ElectricandfuelcellheavytrucksstruggletogainmarketshareintheSTEPS,buttheycomprise35%oftruckssoldin2030intheNZEScenario.Roadtransportoildemandincreasesby1.5mb/dbetween2021and2030intheSTEPS,butfallsby13mb/dintheNZEScenario.Aviationandshippingconsumed10mb/dofoilin2021,whichis20%lessthanbeforetheCovid‐19pandemic.IntheSTEPS,economicgrowthdrivesuptradeandtravel,anddemandgrowsby4mb/dbetween2021and2030.IntheAPS,actionistakentoincreasetheuseofalternativefuelsandcutemissionstoachievetheclimategoalsofgovernmentsandtargetssetbyindustryorganisations,anddemandincreasesby3mb/dto2030.IntheNZEScenario,behaviourchangesandincreasesinlow‐emissionsliquidfuelsmeanoildemandbarelyincreasesto2030.Thechemicalsectorwastheonlysectorinwhichoiluseincreasedin2020,anditissettoaccountforarisingshareofoiluseineachscenario.Around70%ofoilusedasapetrochemicalfeedstockiscurrentlyusedtoproduceplastics.Anumberofcountriesareannouncingpoliciestobanorreducesingle‐useplastics,improverecyclingratesandpromotealternativefeedstocks.Globalaveragerecyclingratesforplasticsincreasefromthecurrentlevelof17%to27%in2050intheSTEPS,50%intheAPS,and54%intheNZEScenario.IntheSTEPS,risingdemandanddecliningoutputfromexistingsourcesofproductionmeanthatnewconventionalupstreamprojectsarerequiredtoensurethatsupplyanddemandstayinbalance.AroundUSD470billionannualupstreaminvestmentisSUMMARYIEA.CCBY4.0.326InternationalEnergyAgencyWorldEnergyOutlook2022spentonaverageto2030,whichis50%morethanhasbeeninvestedinrecentyears.IntheAPS,demandislower,butthereisstillaneedfornewconventionalprojects,andUSD380billionisinvestedannuallyonaverageto2030.IntheNZEScenario,decliningfossilfueldemandcanbemetwithouttheneedforthedevelopmentofnewoilfields,butwithcontinuedinvestmentinexistingassets,andthisrequiresUSD300billionannualaverageupstreaminvestmentto2030.TheimpactoftheCovid‐19pandemicandthelowlevelofinvestmentinrecentyearsmeantherearefewnewresourcesunderdevelopmentandfewdiscoveredresourcesavailabletobedeveloped.Newoilresourcesdiscoveredin2021wereattheirlowestlevelsincethe1930s.Theimplicationsofthisvarybyscenario.IntheSTEPS,thelargestincreasesinproductionto2030comefromUStightoil,MiddleEastmembersofOPEC,GuyanaandBrazil.Highoilpricesandenergysecurityconcernsareencouragingsomecountriestorevisitthecaseforissuingexplorationlicencesfornewdomesticoilprojects.Suchlicencesareunlikelytoprovideanyreliefintheshortterm:inthepastithastaken20yearsonaveragetomovefromanewexplorationlicencetothestartofproduction.Projectswithshorterleadtimesandquickpaybackperiods–suchastightoilandprojectstoextendproductionfromexistingfields–arebettercandidatesformakinggoodanyshort‐termshortfallsinsupply.Theyplayanimportantroleinallourscenarios.Globalrefiningcapacityfellin2021forthefirsttimeinmorethan30years.Asdemandreboundedin2022andoilproductexportsfromRussiaandChinahavefallen,refiningmarginssurgedtorecordhighs.IntheSTEPS,risingdemandfordieselandkerosenemeansmarketsarelikelytoremainverytightforanumberofyears.IntheAPS,strongpolicymeasurestocurbdemandsignificantlyreducethistightness.TheAPSandtheNZEScenarioseemajorchangesinthecompositionofproductdemand,requiringrefinerstoadaptrefineryconfigurationsandbusinessmodels,andtoinvestmoreheavilyinemissionsreductions,hydrogenandbiofuels.Disruptiontofoodsupplychainsandhighfertiliserpricesmeanliquidbiofuelcostshavesoared.Agrowingfocusonensuringsustainabilitymeanwhilehasledtoincreasingattentionbeingpaidtoadvancedliquidbiofuelsthatdonotdirectlycompetewithfoodandfeedcrops,andthatavoidadversesustainabilityimpacts.Liquidbiofuelsgrowfrom2.2millionbarrelsofoilequivalentperday(mboe/d)in2021to3.4mboe/dintheSTEPS,5.5mboe/dintheAPSand5.7mboe/dintheNZEScenarioin2030.Low‐emissionshydrogen‐basedliquidfuelsofferanalternativetooil,buttheycurrentlyhavehighcostsofproductionandsufferfromlimitedenablinginfrastructure.Thedevelopmentanddeploymentofnewprojectsoverthenextdecadewillbeessentialtolowercostsandimproveperformancesothatthesefuelscanplayasignificantroleinthefuture.IEA.CCBY4.0.APSSTEPSWhendoesoildemandpeak…98.1mb/dAPSNZEAPSSTEPS2024103.2mb/dSTEPS20352015202120212050STEPSAPSNZEAviationandshipping1018102RoadpassengerRoadfreight18811521160.425Peaksinoildemandrestonchangesintransport.Oiluseinpetrochemicalsishardertoshift.Petrochemicals19151413mb/dTightoilNewapprovalsAlreadyapprovedNGLs2.31.05.77.63.5142.75.725.916.5mb/d…andwhatnewsuppliesareneededOildemandincreasesby8mb/dintheSTEPSandfallsby1.5mb/dintheAPSbetween2021and2030.Productionfromexistingieldsdropsby18mb/doverthisperiod,leavingalargegapin2030thatneedstobeilledbynewsourcesofsupply.328InternationalEnergyAgencyWorldEnergyOutlook2022IntroductionThesituationforoilmarketstodaycouldhardlybemoredifferentfromwhatitwasin2020.Twoyearsago,lockdownsimposedinresponsetotheCovid‐19pandemiccausedahugeoversupplyofoil,leadingpricestocollapsetoanaverageofUSD44/barrel.Today,globalsupplyisstrugglingtokeeppacewithdemand,withmanyproducersbumpingupagainstcapacityconstraintsandRussia’sinvasionofUkrainesharplyaccentuatingmarkettightness.PriceshavesoaredtoanaverageofUSD105/barrelsofarin2022.Globaloiluseissubjecttosharplyconflictingpressures.Somesectors,notablyaviation,arestillrecoveringfromtheshockofthepandemic.Others,suchasthechemicalsector,haveremainedrobustthroughout.Roadtransport,whichhastraditionallybeentheheartlandofoilconsumption,isundergoingstructuralchanges,especiallyforpersonalmobility;nearlyone‐in‐tenpassengercarssoldworldwidein2021wasanelectricvehicle.Andnowhighprices–andtheireconomicimpacts–arecontributingfurthertonear‐termuncertainty.Onthesupplyside,themajornear‐termquestionregardsRussiaandtheextenttowhichtightersanctionswillforceareductioninoutput.Behindthatliesahostofstrategicquestionsforotherproducers,includingmembersoftheOrganizationofPetroleumExportingCountries(OPEC),overhowmuchofcurrentwindfallrevenuestheywillinvestinlarge‐scalenewproductionassets.Forthemoment,thereactionofproducerstohigherpriceshasbeenrelativelymuted.Upstreaminvestmentisexpectedtorisebyaround10%in2022,butthisremainswellbelowthepre‐pandemiclevelofinvestmentin2019,andmostoftherisestemsfromcostinflationratherthananincreaseinactivity.Theglobalenergycrisishasalsoputthespotlightonrefining,whereadeficitofavailablecapacityledtooilproductpricesin2022risingevenmorethancrudeoilprices;andonthebiofuelssector,wherehigheroilpriceswouldnormallyencouragenewproduction,butdisruptiontofoodsupplychainsandhighfertiliserpricesarecomplicatingthepicture.Wheredowegofromhere?Thischapterlooksatthreescenariosforguidance.Asever,theyprovidedifferentanswerstothisquestion.IntheStatedPoliciesScenario(STEPS),robustoildemandgrowthleadstodemandin2030of102millionbarrelsperday(mb/d).IntheAnnouncedPledgesScenario(APS),demandsoonpeaksanddropsto93mb/din2030.IntheNetZeroEmissionsby2050(NZE)Scenario,demanddropsrapidlyto75mb/din2030.Againstthisbackdrop,thischapteralsoexaminesindetailthreekeyissuesthatwillshapethefutureofoilmarkets:Whatdorecentbansandrecyclingpoliciesmeanforplastics?Oildemandforpetrochemicalshasbeenstrong,butmightthisbeundercutbynewpolicyinitiatives?Arenewconventionaloilprojectspartoftheanswertotoday’senergycrisis?Isthereaneedfornewconventionaloilprojectstobalancemarkets?Whatdotightoilproductmarketsmeanforrefining?Howmuchofabufferdoesthesystemhaveandhowmightsanctionsandembargoesaffectoiltrade?IEA.CCBY4.0.Chapter7Outlookforliquidfuels3297Scenarios7.1OverviewTable7.1⊳Globalliquidsdemandandsupplybyscenario(mb/d)STEPSAPSNZE20102021203020502030205020302050Roadtransport36.540.541.939.037.817.327.51.3Aviationandshipping9.99.914.018.112.89.510.02.0Industryandpetrochemicals17.220.523.725.521.518.120.113.4Buildingsandpower12.411.49.37.08.33.76.50.6Othersectors11.212.213.612.512.68.611.15.6Worldoildemand87.294.5102.4102.193.057.275.322.8Liquidbiofuels1.22.23.45.35.59.25.75.7Low‐emissionshydrogen‐basedfuels‐‐0.00.20.23.20.95.6Worldliquidsdemand88.496.7105.8107.698.769.581.934.1Conventionalcrudeoil66.860.162.562.656.831.044.212.6Tightoil0.77.410.99.99.76.79.21.6Naturalgasliquids12.718.220.919.319.213.916.46.1Extra‐heavyoilandbitumen2.63.74.46.24.13.43.32.0Otherproduction0.60.91.21.41.00.30.30.0Worldoilproduction83.490.399.999.390.755.373.522.2OPECshare40%35%36%43%36%43%36%52%Worldprocessinggains2.22.32.52.82.31.91.80.6Worldoilsupply85.592.6102.4102.193.057.275.422.8IEAcrudeoilprice(USD[2021]/barrel)9669829564603524Notes:mb/d=millionbarrelsperday;STEPS=StatedPoliciesScenario,APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.Otherproductionincludescoal‐to‐liquids,gas‐to‐liquids,additivesandkerogenoil.Historicalsupplyanddemandvolumesdifferduetochangesinstocks.Liquidbiofuelsandlow‐emissionshydrogen‐basedliquidfuelsareexpressedinenergyequivalentvolumesofgasolineanddiesel,reportedinmillionbarrelsofoilequivalentperday.SeeAnnexCfordefinitions.IntheSTEPS,globaloildemandsurpasses2019levelsby2023,undeterredbyhighoilprices.Demandpeaksinthemid‐2030sat103mb/dandthendeclinesslightlyto2050(Table7.1).Thereiscontinuedgrowthintheuseofoilforaviationandshipping,asapetrochemicalfeedstock,andasfuelinheavytrucks,butfromthemid‐2030sthisismorethanoffsetbydecliningoiluseinothersectors,especiallyinpassengercars,buildings,andpowergeneration.ItisassumedthatproductionfromRussiaintheneartermfallsby2mb/dduetoEuropeanandUSsanctions,andthatinthelongtermitremainswellbelowprojectionsmadepriortoitsinvasionofUkraine.Thelargestincreasesinproductionto2030comefromtheUnitedStates,MiddleEastmembersofOPEC,GuyanaandBrazil.TheOPECshareofoilproductionrisesfrom35%in2021to36%in2030and43%in2050.Thesupplyofliquidbiofuelsmorethandoublesto2050,andthereisalsoasmallincreaseinlow‐emissionsIEA.CCBY4.0.330InternationalEnergyAgencyWorldEnergyOutlook2022hydrogen‐basedfuels.Upstreamoilinvestmentrisesfromcurrentlevelstooffsetlossesinsupplyandmeetrisingdemandand,asmarketsrebalance,theoilpricefallsfromtheveryhighlevelsin2022toaroundUSD82/barrelin2030.IntheAPS,strongerpolicyactionleadsglobaloildemandtopeakinthemid‐2020s,justabovethelevelofdemandin2019,beforedroppingto93mb/din2030(Figure7.1).Demandthenfallsbyaround40%between2030and2050,withpassengercars,roadfreightandindustryresponsibleforthelargestreductions.Theuseofoilasapetrochemicalfeedstockincreasesby0.9mb/dbetween2021and2050,andthisisoneofthefewareaswhereoildemandrisesinthisscenario.Lowerdemandeasesthetaskofoffsettingthenear‐termreductionsinRussianoilproduction,butfrom2030onwardsitleadsinexorablytofallsinproductioninnearlyallproducercountries.TheoilpricefallstojustunderUSD65/barrelin2030andcontinuestodeclineslowlythereafterasdemandfalls.Figure7.1⊳GlobaloildemandandcrudeoilpricebyscenarioIEA.CCBY4.0.Demandpeaksinthemid-2030sintheSTEPS,inthemid-2020sintheAPS,andpolicy-leddeclinesindemandintheNZEScenariomeanaradicallydifferentfutureforoilmarketsNotes:STEPS=StatedPoliciesScenario,APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario;mb/d=millionbarrelsperday.IntheNZEScenario,oildemandneverreturnstoits2019level.Demandfallsby2.5%eachyearonaveragebetween2021and2030,andbyjustunder6%eachyearfrom2030to2050.Reductionsinoiluseinroadtransportareparticularlysignificant,andassumethatpolicymakersmandateastrongglobalpushtowardscleaneralternatives:nonewcarswithinternalcombustionenginesaresoldafter2035andnearlyalltruckssoldfrom2040useelectricityorhydrogen.Theglobalefforttoincreaserecyclingofplasticspushestheratefrom17%in2021to54%in2050.Around11millionbarrelsofoilequivalent(mboe/d)oflow‐emissions255075100125200020102020203020402050STEPSAPSNZEOildemandmb/d306090120150200020102020203020402050USD/barrelOilpriceIEA.CCBY4.0.Chapter7Outlookforliquidfuels3317liquidfuelsareconsumedin2050,mainlyinaviationandshipping.1EvenwiththerapiddeclineinoildemandintheNZEScenario,thereisaneedforcontinuedinvestmentinexistingproductionassets,butthedeclinesaresufficientlysteeptoavoidtheneedforanynewlongleadtimeconventionalfields.TheoilpriceisincreasinglysetbytheoperatingcostofthemarginalprojectanditfallstoaroundUSD35/barrelin2030andtoUSD24/barrelin2050.7.2OildemandbyregionandsectorTable7.2⊳Liquidsdemandbyregionandscenario(mb/d)STEPSAPS20102021203020402050203020402050NorthAmerica22.221.420.517.816.218.210.86.9UnitedStates17.817.716.714.112.615.08.45.0CentralandSouthAmerica5.55.35.55.85.84.83.52.4Brazil2.32.42.42.52.42.01.40.9Europe13.912.410.98.67.19.24.72.7EuropeanUnion10.69.27.75.84.56.53.11.7Africa3.33.85.06.78.54.95.86.1SouthAfrica0.50.50.60.70.70.50.40.3MiddleEast7.17.78.910.410.98.08.47.9Eurasia3.24.14.24.54.54.14.03.9AsiaPacific25.033.338.238.736.735.128.120.6China8.815.116.214.312.515.211.07.6India3.34.76.78.48.35.95.43.9Japan4.23.32.72.11.72.41.30.7SoutheastAsia4.04.96.77.47.46.05.23.9Internationalbunkers7.16.69.310.412.48.67.56.8Worldoil87.294.5102.4102.8102.193.072.957.2Liquidbiofuels1.22.23.44.65.35.58.79.2Low‐emissionshydrogen‐basedfuels0.00.00.00.10.20.21.23.2Worldliquids88.496.7105.8107.5107.698.782.869.5Notes:Liquidbiofuelsandlow‐emissionshydrogen‐basedliquidfuelsarereportedinmillionbarrelsofoilequivalentperday.SeeAnnexCfordefinitions.Thelastfewyearshavebeenveryvolatileonesforoilmarkets.Oildemandfellbynearly9mb/din2020androsebyaround5.5mb/din2021.Demandin2021surpassed2019levelsinonlyafewcountries,includingChina,Poland,SwedenandKazakhstan.Oiluseinpassengercarsin2021wasabout5%lowerthanpre‐pandemiclevelsglobally,andinaviationitwasaround30%lower.1Low‐emissionsliquidfuelsincludeliquidbiofuelsandlow‐emissionshydrogen‐basedliquidfuels,includingammonia,methanolandothersyntheticliquidhydrocarbons.IEA.CCBY4.0.332InternationalEnergyAgencyWorldEnergyOutlook2022Oilpricesincreasedsteadilyduring2021andjumpedtoUSD105/barrelinthefirst‐halfof2022followingRussia’sinvasionofUkraine.Anumberofcountries,includingtheUnitedStatesandIndonesia,haveseengasolinepricesincreasebymorethan30%between2019andthefirst‐halfof2022,andgasolinepricesatthepumphavesurpassedUSD2/litreinmorethan20countries(equivalenttomorethanUSD7.5/USgallon).Severalgovernmentshaveintroducedmeasurestoreducepricesatthepump,forexamplebyreducingtaxesandexciseduties(Chapter2).TheIEAsetouta10‐PointPlantoCutOilUse(IEA,2022a)forconsumersinadvancedeconomiesthatcouldquicklyreduceoildemandbyaround2.7mb/dinordertohelpalleviatesomeofthecurrentmarkettightness(Chapter5).Despitegrowingpressuresanduncertainties,globaloildemandissettoincreaseby1.7mb/din2022aseconomicandtransportactivityrebounds.IntheSTEPS,oildemandsurpasses2019levelsby2023andincreasesto102mb/din2030(Table7.2),withChina,IndiaandSoutheastAsiatogetheraccountingformorethan60%oftheincreaseinglobaldemand.Inadvancedeconomies,demandfallsby3mb/dto2030,mainlybecauseofreductionsinroadtransport,andonlyafewcountriesseedemandexceed2019levels.Inemergingmarketanddevelopingeconomies,demandincreasesby8mb/dto2030ascarfleetsexpandandtheuseofoiluseasapetrochemicalfeedstockrisesrapidly.Demandpeaksgloballyinthemid‐2030sasreductionsinadvancedeconomies(adropfrom2030to2050of10mb/d)justoutweighgrowthinemergingmarketanddevelopingeconomies(6mb/dincrease)andinternationalbunkers(3mb/dincrease).IntheAPS,globaloildemandpeaksinthemid‐2020sat98mb/d.Fasterelectrificationinthetransportandbuildingssectorshelpsgovernmentstodeliverontheirclimatepledges,whiletheuseofoilforpetrochemicalfeedstocksgrowsmoreslowlythanintheSTEPS.Oildemandinadvancedeconomiesfallsbyaround7.5mb/dbetween2021and2030andincreasesby4mb/dinemergingmarketanddevelopingeconomies.IntheNZEScenario,strongpolicyactionworldwidemeansglobaloildemandneverrecoverstoits2019levelanditfallsbynearly20mb/dbetween2021and2030.Thereisa15mb/ddecreaseindemandinadvancedeconomiesto2030anda5mb/ddecreaseinemergingmarketanddevelopingeconomies.Demandtrendsto2030Thereare1.3billionpassengercarsontheroadtodayandtheyaccountedfornearly25%ofglobaloildemandin2021(Figure7.2).Despitehighgasolineanddieselprices,demandissettoincreaseslightlyin2022astheworldeconomyrecoversfromtheCovid‐19pandemic.Theoutlookto2030variesbyscenario:demandisbroadlyflatintheSTEPSandfallsbynearly3mb/dintheAPS.ElectriccarsalesgrowfasterintheAPSthanintheSTEPSandthisisresponsibleforaround50%ofthedifferencebetweenthetwoscenariosin2030;strongerfueleconomyimprovementsintheAPSaccountforanother25%ofthedifference(seeChapter5).IntheNZEScenario,60%ofcarssoldworldwideareelectricin2030andoildemandfallsbyaround9.5mb/d.IEA.CCBY4.0.Chapter7Outlookforliquidfuels3337Figure7.2⊳Oildemandbysectorandscenarioto2030IEA.CCBY4.0.Roadtransportremainsbyfarthemostimportantsectorforoildemand,anditseesthebiggestchangesto2030Notes:Passengervehicles=cars,busesandtwo/three‐wheelers.Roadfreightaccountsformorethan15%ofglobaloildemandtoday.Risingdemandforfreighttransportcausesoildemandtoriseby1.5mb/dto2030intheSTEPSandby0.3mb/dintheAPSdespiteincreasesintheuptakeofelectricandfuelcellheavy‐dutytrucksandliquidbiofuels.TheNZEScenarioseesa3mb/dreductionindemandto2030.Aviationandshippingbothexperiencedincreasedoildemandin2021.Inaviation,oiluseroseto5mb/d,butthiswasstill30%lowerthanin2019.Inshipping,maritimetradereboundedstronglyfromthelowsin2020andoiluserosetoaround5mb/din2021,meaningthatbothsectorsusedbroadlyequivalentamountsofoilin2021.Allthescenariostakeaccountofexpectedincreasesintradeandtravelstemmingfromthe35%growthinthesizeoftheglobaleconomyto2030.IntheSTEPS,thisleadstoa4mb/dincreaseinoiluseinaviationandshippingto2030.IntheAPS,variouspolicies–includingtheEuropeanUnionReFuelEUPlanandtargetstoincreasetheuseofsustainableaviationfuelsintheUnitedStates–reducethisincreaseto3mb/dto2030.IntheNZEScenario,demandonlyincreasesmarginallyto2030asbehaviourchangesslowactivitygrowthinaviation(seeChapter3)andtheuptakeoflow‐emissionsliquidfuelsincreases(Figure7.3).1020304050602021STEPSAPSNZE2021STEPSAPSNZE2021STEPSAPSNZEPassengervehiclesRoadfreightAviationandshippingChemicalsandpetrochemicalsOilrefineriesBuildingsPowerOthermb/dTransportIndustryandenergyproductionOthersectors203020302030IEA.CCBY4.0.334InternationalEnergyAgencyWorldEnergyOutlook2022Figure7.3⊳Growthinalternativestooilintransportbyscenarioto2030IEA.CCBY4.0.MovesawayfromoiluseinalltransportmodesareevidentintheSTEPSandAPS,butthesefallfarshortofwhatisneededtomeettheclimategoalsembodiedintheNZEScenarioNotes:EV=electricvehicle;FCEV=fuelcellvehicle;heavytrucks=medium‐andheavy‐freighttrucks.Low‐emissionsfuelsincludebiofuels,low‐emissionshydrogenandhydrogen‐basedfuels.Thechemicalsectorwastheonlysectorinwhichoiluseincreasedin2020,anditnowaccountsforaround15%ofglobaloildemand.Anincreasingnumberofcountrieshaveintroducedorannouncedpoliciestoreducesingle‐useplasticsandimproverecyclinglevels,butdemandneverthelessgrowsbymorethan2mb/dintheSTEPSbetween2021and2030,andbymorethan1mb/dintheAPS.IntheNZEScenario,demandonlyrisesmarginallyto2030thankstostrengthenedreuseandrecyclingstrategiesforplasticsglobally,backedbytargetedpoliciesthatleadtomuchlowerplasticdemandpercapitalevels(seesection7.8).Thebuildingssectoraccountsforjustunder10%ofoilusetoday.Demandfallsinadvancedeconomiesasanincreasingnumberofcountriesandjurisdictionshavebannedsalesofnewfossilfuelboilers.Itishoweversettogrowinemergingmarketanddevelopingeconomiesasaresultofincreasingdemandforliquefiedpetroleumgas(LPG),especiallyforcookinginAsiaandAfrica.Netoiluseinbuildingsdecreasesgloballybyalmost1mb/dintheSTEPS,by1.5mb/dintheAPS,andbynearly2.5mb/dintheNZEScenario.ThedecreaseintheNZEScenariooccurseventhoughitincorporatesuniversalaccesstocleancookingby2030.Oiluseforpowergenerationhasfallenbyaround30%since2010andcurrentlystandsataround3.5mb/d,withMiddleEastcountriesaccountingfor40%ofthistotal.Withstronggrowthinrenewables,demandto2030fallsbyone‐thirdintheSTEPS,by45%intheAPS,andby70%intheNZEScenario.20%40%60%20212030ShareofEVandFCEVsales5%10%15%20212030Low‐emissionsfuelshare20%40%60%20212030ShareofEVsalesSTEPSAPSNZEPassengercarsAviationandshippingHeavytrucksIEA.CCBY4.0.Chapter7Outlookforliquidfuels3357Demandtrendsafter2030Figure7.4⊳Changeinoildemandbyscenario,2030-2050IEA.CCBY4.0.OildemandintheSTEPSfallsonlymarginallyfromitspeakin2035;itfallsmuchmoresharplyintheAPSascurrentclimatepledgesaremetontimeandinfullNotes:Other=rail,pipelinetransport,non‐specifiedtransport,agriculture,oilandgasextraction,non‐energyuseandindustryapartfromuseinthechemicalsector.IntheSTEPS,globaloildemandlevelsoffin2035ataround103mb/dandthendropsbyaround1mb/dto2050(Figure7.4).Demandreductionsinroadtransport,buildingsandpowerafter2030areoffsetbygrowthinfeedstocks,aviationandshipping.By2050,policysupportandfallingbatterycostsmeanthataround40%ofcarsand10%ofheavytrucksontheroadareelectricorfuelcellvehicles.Efficiencymeasuresandtheuseofalternativefuelscurtailthegrowthofoiluseinshippingandaviation.Between2030and2050,globalinternationalshippingactivitydoubleswhileoiluseincreasesby25%,andinternationalaviationactivityincreasesbytwo‐thirdswhileoiluseincreasesby40%.Oiluseasapetrochemicalfeedstockincreasesby2.5mb/dbetween2030and2050asgrowthinemergingmarketanddevelopingeconomiesoutweighseffortstoreduceandrecycleplastics.IntheAPS,oildemandfallsbynearly40%between2030and2050to57mb/din2050.Achievingnationalclimatepledgesleadstoastrongreductioninoiluseintransportandthisissupportedbytheelectricvehicletargetsofmanufacturers.Over70%ofpassengercarsontheroadin2050areelectricorfuelcellvehicles,andsoare40%ofheavytrucks.Intheaviationandshippingsectors,theInternationalCivilAviationOrganizationrequiresinternationalairlinestooffsetemissionsgrowthabove2019levels(ICAO,2020),andtheInternationalMaritimeOrganisationhasatargettocutemissionsfrommaritimetransportbyatleasthalfby2050(relativeto2008levels)(IMO,2018).AchievingthesegoalsintheAPSleadstoa25%reductioninoiluseinaviationandshippingbetween2030and2050.Oiluse‐60‐50‐40‐30‐20‐10010STEPSAPSNZESTEPSAPSNZEOtherPowerBuildingsChemicalOilrefineriesAviationandshippingRoadfreightPassengervehiclesAdvancedeconomiesEmergingmarketanddevelopingeconomiesNetchangeSectorsmb/dRegionsSectorsRegionsIEA.CCBY4.0.336InternationalEnergyAgencyWorldEnergyOutlook2022asapetrochemicalfeedstockalsofallsslightlybetween2030and2050asaresultofstrongereffortstoreuseandrecycleplastics.IntheNZEScenario,strenuouspolicyeffortstoreduceemissionsleadtoa6%averageannualreductioninoildemandbetween2030and2050,anddemandin2050fallstolessthan25mb/d.Three‐quartersofthisisusedasapetrochemicalfeedstockandinotherprocessesinwhichtheoilisnotcombusted,suchasinlubricants,paraffinwaxesandasphalt;afurther10%isusedinaviationandshipping.Around10mboe/doflow‐emissionsliquidfuelsareconsumedin2050.Mostofthisisusedinaviationandshippingwherelow‐emissionsliquidfuelsaccountfor80%ofallliquidfuelsusedin2050;theshareofoilintotalfinalconsumptionfallsto20%inaviationand15%inshipping.7.3OilsupplyTable7.3⊳Oilproductionbyscenario(mb/d)STEPSAPS20102021203020402050203020402050NorthAmerica14.224.428.627.024.625.819.214.7Canada3.55.66.26.45.55.44.13.2UnitedStates7.816.820.718.616.718.814.010.7CentralandSouthAmerica7.45.99.010.111.48.37.76.5Brazil2.23.04.54.35.14.43.83.3Guyana0.00.11.62.01.11.41.51.0Venezuela2.80.60.81.42.70.71.21.3Europe4.43.63.12.21.32.71.30.6Norway2.12.02.01.30.61.91.00.5UnitedKingdom1.40.90.60.40.30.50.20.1Africa10.27.47.06.46.15.84.02.9Angola1.81.20.90.80.90.80.60.5Nigeria2.51.71.31.31.31.20.90.7MiddleEast25.427.933.938.240.431.227.522.9Iraq2.44.14.65.56.24.63.72.7Iran4.23.43.94.65.03.74.02.8Kuwait2.52.73.33.43.53.02.62.3SaudiArabia10.011.013.514.815.912.310.910.0UnitedArabEmirates2.83.64.85.45.54.13.22.5Eurasia13.413.711.910.810.611.27.65.4Russia10.410.98.87.77.78.55.53.9AsiaPacific8.47.46.35.44.85.73.52.2China4.04.03.63.12.73.31.91.1Conventionalcrudeoil66.860.162.562.562.656.841.931.0Tightoil0.77.410.911.39.99.78.36.7UnitedStates0.66.99.99.78.68.87.86.2Naturalgasliquids12.718.220.919.919.319.215.913.9Canadaoilsands1.63.43.93.83.73.52.82.2Otherproduction1.61.31.72.63.81.61.81.6Total83.490.399.9100.199.390.770.755.3OPECshare(%)40%35%36%40%43%40%40%43%Note:SeeAnnexCfordefinitions.IEA.CCBY4.0.Chapter7Outlookforliquidfuels3377Supplytrendsto2030Figure7.5⊳OilproductionintheSTEPSandchangebyscenario,2021-2030IEA.CCBY4.0.UStightoil,oilproducedbyOPECmembers,andnewBrazilandGuyanadeepwateroilallplayamajorpartinmeetingthenear-termincreasesindemandintheSTEPSandAPSNotes:EHOB=extra‐heavyoilandbitumen.Other=enhancedoilrecovery,Arcticcrude,gas‐to‐liquids,coal‐to‐liquids,additivesandoilshale.Highoilpricesandconcernsaboutenergysecurityhaveledcountriesaroundtheworldtoreassesstheeconomic,politicalandclimateimpactsofbringingonnewsourcesofdomesticoilsupply.Inthewakeofthepandemicandlowinvestmentlevelsinrecentyears,thereishoweveralimitedpipelineofnewresourcesunderdevelopmentandofdiscoveredresourcesavailabletobedeveloped.Newoilresourcesdiscoveredin2021wereattheirlowestlevelsincethe1930s.Accesstofinancinghasprovedchallenging,supplychainshavebecomestretched,andcostsarerisingacrosstheindustry.IntheSTEPS,thereis8mb/dofdemandgrowthto2030and6mb/dofproductiondeclinesinmatureproducers(Table7.3).Morethan80%ofthisgapismetthroughincreasesinproductioninMiddleEastOPECmembercountries,UStightoil,andBrazilandGuyanadeepwaterdevelopments(Figure7.5).ProductionfromRussiaisassumedtofallbyaround2mb/dasEuropeanandUSsanctionstakehold,butdeclinesstabiliseasnewroutesaredevelopedtomarketsoutsideEurope,despitecontinuationofthesanctions.Thereisagradualnormalisationoftheinternationalsituationinanumberofothermajorresource‐holderssubjecttosanctions,notablyIranandVenezuela,andproductionfromthesecountriesrisesto2030.2550751002015202020252030ConventionalonshoreOffshoreTightoilEHOBOtherOPECNon‐OPECSTEPSmb/d‐20‐10010Change2021‐2030STEPSAPSNZEIEA.CCBY4.0.338InternationalEnergyAgencyWorldEnergyOutlook2022IntheAPS,globaloildemandfallsbackto2021levelsby2030,butdeclinesinmatureproducersmeansjustover8mb/dofproductionincreaseselsewhereareneededto2030.Countrieswithnetzeroemissionspledgesmakeeffortstominimiseemissionsfromtheirdomesticoilandgasoperationsandthistendstoincreasetheirfinancingandproductioncosts.Countrieswithoutnetzeroemissionspledgesalsocomeunderpressuretoreduceoil‐andgas‐relatedemissionsasconsumersinexportmarketsstarttodifferentiateimportsbytheemissionsintensityofproduction.Thisleadstoa25%reductionintheglobalaverageemissionsintensityofoilproductionby2030intheAPS,comparedwitha15%reductionintheSTEPS.IntheNZEScenario,fallingdemandismetwithoutanyneedtoapprovethedevelopmentofnewlongleadtimeprojects.Thereiscontinuedinvestmentinexistingfields,andthisincludessomelowcostextensionsofexistingfields,e.g.forexamplethroughtheuseofin‐filldrilling,enhancedoilrecoveryandtightoildrilling,toensurethatsupplydoesnotfallfasterthanthedeclineindemand.Thereisalsoinvestmenttoreduceemissionsfromoilandgasproduction,andtheglobalaverageemissionsintensityofoilproductionfallsbymorethan50%to2030.IntheUnitedStates,oilproductionincreasesbyjustunder4mb/dto2030intheSTEPS,andtotalUSproductionin2030isaround50%higherthaninthenextlargestproducercountry(SaudiArabia).Tightoiloperatorschoosetoprioritisereturnsoveraggressiveproductiongrowthbuthighpricesintheneartermencourageincreaseddrilling.Tightoilandnaturalgasliquids(NGLs)fromshaleplaysaccountfornearlyalloftheincreaseinUSproductionto2030.IntheAPS,loweroilandgaspricesmeanasmallerincreaseintightoilandNGLsfromshaleplaysbutUSproductionstillincreasesby2mb/dto2030.InRussia,oilproductionintheSTEPSisassumedtodeclineby2mb/dto2030assanctionstakehold.Russiahasbeenundersanctionssince2014butthefinancialandtechnologyrestrictionsbitemuchhardernow.Asaccesstotechnologies,oilfieldserviceexpertise,equipmentandassetsisremoved,RussiastrugglestomaintainproductioninexistingfieldsandtodeveloplargenewfieldsintheArctic,tightoilandotheroffshoreareas.IntheAPS,lowerpricesandfewerexportopportunitiesmeanRussianproductionin2030isaround2.5mb/dlowerthanin2021.InCanada,oilproductionrisesby0.6mb/dto2030intheSTEPS.Theincreasecomesfromextra‐heavyoilandbitumen(EHOB)projectscurrentlyunderdevelopmentandfromincreasedtightoilproduction.Nonewlarge‐scaleEHOBprojectsareapprovedfordevelopmentintheSTEPS,buttherearesomesmallerscaleextensionsofexistingprojects.IntheAPS,thereareincreasedeffortstoreducedomesticemissionsfromoilandgasoperationsandtotalproductionfallsslightlyto2030.InEurope,productiondeclinesby0.5mb/dintheSTEPSandby0.8mb/dintheAPSin2030.NewfieldsbroughtonlineinNorwaymeanitsproductionrisestothemid‐2020sbeforedecliningtocurrentlevelsby2030.TheUnitedKingdomseessomeinwardinvestment,butproductionin2030is0.2mb/dlowerthanitisnowinboththeSTEPSandtheAPS.IEA.CCBY4.0.Chapter7Outlookforliquidfuels3397SaudiArabiahasrecentlyinvestedmorethanUSD18billiontoraisecapacityatitsBerriandMarjanfields,andissettomakefurtherinvestments.Togetherwithmeasurestoremovebottlenecks,thisspendingleadstoproductionrisingfromaround11mb/din2021to13mb/dintheSTEPS(ofwhich11mb/discrudeoil)andto12mb/dintheAPSby2030.Iraqroughlydoubleditsproductionduringthe2010sbuthassufferedfromlowcapitalinvestmentsincethe2014oilpricedrop,difficultiesinensuringsufficientwaterforinjection,andpoliticaldisagreements.Asaresult,ithasbeenunabletoexpandproductionfurtherinlinewithitslargeresourcebase.Ourscenariosassumethatinternalrelationshipsarenormalised,thatprogressismadeonprovidingwaterforoilrecovery,andthatproductionrisesbyaround0.5mb/dto2030inboththeSTEPSandtheAPS.UnitedArabEmiratesincreasedinvestmenttoUSD20billionin2022againstabackdropofmultiplelargediscoveries.Productionincreasesby1.2mb/dto2030intheSTEPSfrombothonshoreandoffshorefields(includinganexpansionoftheUpperZakumoilfield).Iranfaceslimitationsonitsproductionasaresultofinternationalsanctions.Ourscenariosassumeagradualnormalisationinrelationsovertimeandariseinproductionof0.3‐0.5mb/dby2030intheSTEPSandAPS.Venezuelafacespoliticaluncertaintyandeconomicdifficulties.Ourscenariosassumeagradualnormalisationoftheinternationalsituation,andaslightriseinoutputinboththeSTEPSandAPS.Brazilhasinvestedheavilyinrecentyearsinitslargepre‐saltdeepwaterfieldsandithasannouncedplanstonearlydoubleannualinvestmentbetween2021and2026.Anumberofitsdevelopmentprojectshavesufferedfromdelaysandcostoverruns,buttheseprojectscomesteadilyonlineinboththeSTEPSandAPS,andtotalproductiongrowsby1.4mb/dtoaround4.4mb/din2030.Asaresult,Brazilaccountsforaround45%ofglobaldeepwaterproductionin2030inbothscenarios.Guyanahasseenanumberofmajordeepwaterdiscoveriesinrecentyearsandcompanieshavebeenlookingtodevelopthesequickly.ProductionbeganatitsLizafieldin2019onlyfouryearsafteritwasdiscoveredandiscontinuingtorampup.Overallproductionincreasesbyaround1.5mb/dto2030intheSTEPSandAPS.Argentinahasbeenlookingtoexpandproductionfromitstightoilplaysandthegovernmenthaseasedcapitalcontrolrestrictionstoencourageinwardinvestment.TotalproductionincreasesmarginallyintheSTEPSandAPSasincreasesintightoilproductionareoffsetbydeclinesinconventionaloilproduction.AfricanmembersofOPEChaveseena30%dropinproductionsince2010,withoutputinbothAngolaandNigeriabesetbytechnicalandoperationaldifficulties.Bothcountriesarenowdevelopingnewdeepwaterfields,butcompensatingfordeclinesfromexistingfieldslooksunlikelyasinvestmentinsupplyhasbeen45%lowersince2016comparedtothe2010‐15period.Accordingly,productionbyAfricanmembersofOPECbetween2021and2030fallsby1mb/dintheSTEPSandby2mb/dintheAPS.IEA.CCBY4.0.340InternationalEnergyAgencyWorldEnergyOutlook2022Supplytrendsafter2030Figure7.6⊳Changesinoilproductionbyregionandscenario,2021-2050IEA.CCBY4.0.IncreasesintheMiddleEastandCentralandSouthAmericaoffsetdeclineselsewhereintheSTEPSafter2030;boththeAPSandNZEScenarioseedeclinesinallregionsIntheSTEPS,demandremainslargelyflatbetween2030and2050.Asaresult,investmentinnewsupplyisneededchieflytocompensateforunderlyingdeclinesinexistingsourcesofproduction.Thelargestdeclinesinproductionto2050areinNorthAmerica(Figure7.6).AsthemostproductiveUStightoilareasbecomedepleted,USproductiondropsby4mb/dbetween2030and2050.Withoutnewlarge‐scaleprojects,EHOBproductioninCanadastartstodeclineoverthisperiod.Globaldeepwaterproductiongrowsto9.5mb/din2035,supportedbynewoutputfromBrazilandGuyana,beforedecliningtoaround7.5mb/din2050.ProductioninRussiadeclinesbyjustover1mb/dbetween2030and2050.OPECmembersincreasetheirproductionby7mb/dbetween2030and2050tooffsetdecliningoutputelsewhere.OnethirdoftheincreaseinOPECproductioncomesfromSaudiArabia,withVenezuelaprovidingafurther25%andIraq10%;therearedeclinesinproductionfromAfricanmembersofOPEC.OPEC’sshareoftheglobaloilmarketincreasesto43%,itshighestlevelsince1979.IntheAPS,demanddeclinesbyaround2.5%eachyearonaveragebetween2030and2050,andthismeansthatmuchlowerlevelsofnewproductionarerequiredthanintheSTEPS.ThebiggestfallinproductiontakesplaceintheUnitedStatesoverthisperiod(8.5mb/d)asconventionalfieldsmatureandlowerpricesmeanlessinvestmentintightoilandshalegas.TherearealsodeclinesinRussia(4.5mb/d)andCanada(2mb/d).AmongmembersofOPEC,IraqandSaudiArabiaseesomeofthelargestdeclines.OverallOPECproductionfallsbyjustunder9mb/d,butitsshareofthemarketstillincreasesto43%in2050.1020304050MiddleEastNorthAmericaEurasiaAsiaPacificAfricaC&SAmericaEuropemb/d20212030STEPSAPSNZE2050STEPSAPSNZEIEA.CCBY4.0.Chapter7Outlookforliquidfuels3417IntheNZEScenario,demanddeclinesbyaround6%onaverageeachyearbetween2030and2050.Productionaccordinglyfallsinallregionsandtheoilpricedropstoverylowlevels(USD25/barrelin2050).Oilproductionisincreasinglyconcentratedinresource‐richcountriesduetothelargesizeandslowdeclineratesoftheirexistingfields.OPEC’sshareofamuchsmalleroilmarketincreasesto52%in2050,higherthanatanypointinthehistoryofoilmarkets.ThecombinationoffallingdemandandalowoilpriceresultsinasharpdropinincomeandGDPinmanyfossilfuelproducers,includingsomewhererevenuesfromoilandgassalesoftencoveralargeshareofpublicspendingonessentialservices.TheoilpriceintheNZEScenariowouldinprinciplebesufficientforsomeofthelowestcostproducerstocoverthecostofdevelopingnewfields,butweassumethattheydonotdosoasthiswouldleadtoevenlowerpricesandmightheraldgreatermarketvolatilitydependingontheresilienceofthesecountriestosuchasharpcontractioninincome.7.4Oiltrade2Table7.4⊳OiltradebyregionandscenarioSTEPSAPSNetimports(mb/d)ShareofdemandNetimports(mb/d)ShareofdemandNetimporterin20212021203020502021203020502030205020302050China12.313.010.678%75%76%12.26.975%82%EuropeanUnion9.78.95.793%95%92%7.62.095%93%OtherAsiaPacific6.410.013.570%82%87%9.37.983%87%JapanandKorea5.85.54.196%98%98%5.02.398%97%India4.16.28.087%89%92%5.43.890%90%OtherEurope0.30.92.27%25%67%0.70.921%60%Netexports(mb/d)ShareofproductionNetexports(mb/d)ShareofproductionNetexporterin20212021203020502021203020502030205020302050MiddleEast19.624.328.570%72%71%22.414.472%63%Russia7.25.34.466%61%58%5.11.060%27%Africa3.41.7n.a.46%25%n.a.0.6n.a.11%n.a.NorthAmerica2.57.97.710%27%31%7.37.528%51%Caspian2.02.01.472%66%49%1.80.464%26%Central&SouthAmerica0.43.15.08%34%44%3.13.837%59%Note:n.a.=notapplicable.2TradefiguresreflectvolumestradedbetweenregionsmodelledintheWorldEnergyOutlookanddonotincludeintra‐regionaltrade.Oiltradeincludesbothcrudeoilandoilproducts.IEA.CCBY4.0.342InternationalEnergyAgencyWorldEnergyOutlook2022IntheSTEPS,theEuropeanUnionbanonimportsfromRussiaandthesanctionsimposedonRussiatogetherresultinamajorreorientationofoiltrade.Russiannetoilexportsdropby25%to2030andbymorethan40%to2050(Table7.4).TheMiddleEastincreasesexportstohelpoffsetthisreductionanditsshareofglobalexportmarketsrisesfrom52%in2021to60%in2050.NorthAmericaovertakesRussiatobecometheworld’ssecond‐largestoilexportingregioninthemid‐2020s.Chinaremainstheworld’slargestoilimporterto2050althoughitsimportspeakandfallslightlyfrom2030onwards.India’soilimportsdoublebetween2021and2050.Despiteamplecrudesupply,countriesinCentralandSouthAmericaandAfricaincreasinglyimportoilproductsduetoalackofdomesticrefiningcapacity.IntheAPS,anumberofcountriesincludinglargeproducerssuchastheUnitedStatesandBrazilcutdemandfasterthansupply,andthisenablesthemtoincreaseexportsbymorethanintheSTEPS.ThismeansasmallershareofthemarketforproducersintheMiddleEast,andtheirshareofexportmarketsin2050islowerthanintheSTEPS.China’simportsin2050arearoundone‐thirdlowerthanintheSTEPS;India’simportspeakinthe2030sandfallbelowthecurrentlevelby2050.IntheNZEScenario,oilimportsfallacrosstheboard.Around10mb/dofoilisstilltradedgloballyin2050,mostofwhichtakestheformofexportsfromtheMiddleEastandNorthAmericatodemandcentresintheAsiaPacificregion.7.5OilinvestmentFigure7.7⊳AverageannualinvestmentinoilbyscenarioIEA.CCBY4.0.Oilinvestmentto2030intheAPSisbroadlyinlinewiththelevelsseeninrecentyears;muchlowerdemandintheNZEScenariocanbemetwithoutnewlongleadtimeprojectsNote:2022e=estimatedvaluefor2022basedonIEA(2022b).20040060020182019202020212022e202320312023203120232031UpstreamRefiningTransportBillionUSD(2021)STEPSAPSNZE‐2030‐2050‐2030‐2050‐2030‐2050IEA.CCBY4.0.Chapter7Outlookforliquidfuels3437TotaloilinvestmentisexpectedtoincreasetoaroundUSD450billionin2022,around25%morethanin2020.Afteryearsofrelativestability,costinflationhasraisedupstreamcostssharply,largelyasaresultofincreasedmaterialcosts,andthishassignificantlydiminishedtheimpactofhigherspendingonactivitylevels.IntheSTEPS,averageannualoilinvestmentto2030isUSD580billion,whichis30%higherthantheaveragesince2018(Figure7.7).Meetingtheincreaseinoildemandto2030whilealsooffsettingdeclinesfromexistingsourcesofsupplyrequiresannualaverageupstreamoilinvestmentofUSD470billionto2030.Between2022and2050,cumulativeupstreamoilinvestmentisUSD12trillion,andthereisafurtherUSD2.5trillionofinvestmentintransportandrefining.Cumulativecleanenergyinvestmentto2050meanwhilereachesUSD60trillion.IntheAPS,aggregateaverageannualoilinvestmentto2030isUSD470billion,whichisbroadlysimilartolevelsoverthepastfiveyears.Althoughdemandpeaksinthemid‐2020s,decliningproductioninexistingsourcesofsupplymeansthatinvestmentisneededatbothnewandexistingfields,andaverageannualupstreamoilinvestmentisUSD380billion.Cumulativeupstreamoilinvestmentbetween2022and2050isUSD7.5trillion,andafurtherUSD1.5trillionisinvestedinoiltransportandrefining.Theselevelsofinvestmentaredwarfedbycumulativecleanenergyinvestmentto2050,whichtotalsUSD95trillion.IntheNZEScenario,annualoilinvestmentaveragesaboutUSD350billionto2030.Thesurgeincleanenergytechnologydeploymentmeansthatoildemandfallsatarapidrate,andthatmakesitpossibletomeetdemandwithoutanynewoilexplorationordevelopmentoflongleadtimeprojects(seesection7.9).Reducingoilinvestmenttothislevelwouldleadtoaverydifferentoutcomeifdoneinadvanceof–orinsteadof–thehugescalingupincleanenergyspendingandconsequentreductioninoildemandthatfeaturesinthisscenario(seeChapter4).7.6LiquidbiofuelsOver80countrieshaveliquidbiofuelblendingmandatesinplacetoday.Thedropintheoilpricein2020andchangesingovernmentprioritiesfollowingthepandemicmeananumberoftargetsandplanshavebeendelayedorscaledback,includinginIndonesia,Malaysia,ThailandandBrazil(IEA,2021).Pricesforbiofuelshavedoubledsince2020asaresultofincreasesinfeedstockandenergycostsstemmingfromRussia’sinvasionofUkraineandotherdisruptionstoglobalcropproduction.Duringthefirst‐halfof2022,thepriceofconventionalbiofuelsaveragedUSD270perbarrelofoilequivalent(boe)intheUnitedStates(aroundUSD70/boehigherthanaverageUSgasolinepricesatthepump)andUSD335/boeinEurope(similartoEuropeanaveragegasolinepricesatthepump).Pricesofadvancedbiofuelshaveincreasedby70%since2020andhavesofaraveragedbetweenUSD350‐400/boein2022.IEA.CCBY4.0.344InternationalEnergyAgencyWorldEnergyOutlook2022Figure7.8⊳LiquidbiofueldemandandsupplybyscenarioIEA.CCBY4.0.Liquidbiofueluseincreasesinallscenarios,morethandoublingto2030intheAPSandNZEScenario,withincreasingsharesproducedfromnon-foodcropfeedstocksNote:Otherincludesothertransport,industry,buildingsandagriculture.IntheSTEPS,demandforliquidbiofuelsgrowsfrom2.2mboe/din2021to3.4mboe/din2030and5.3mboe/din2050(Figure7.8).Thiscomesmainlyfromblendingmandatesforpassengercarsthatleadtoanincreaseintheuseofethanol,whichisproducedusingadvancedfeedstocks.Passengercarsconsume50%oftotalliquidbiofuelsin2030andalmost40%in2050.Ethanolcomprises55%oftotalbiofuelsproductionin2030,downfrom60%today.IntheAPS,demandforliquidbiofuelsincreasesto5.5mboe/din2030withmuchhigheruseofliquidbiofuelsinroadtransportintheUnitedStates,China,IndiaandCanada.After2030,increasingsalesofelectriccarsmeanthatliquidbiofuelsdemandplateausinroadtransport,andamuchhighershareisusedinaviationandshipping.In2050,totalliquidbiofuelsconsumptionisover9mboe/d,75%ofwhichconsistsofadvancedbiofuels.Around40%ofthistotalisconsumedinaviationandshipping,andliquidbiofuelsprovidejustover25%oftotalfueluseinaviation.IntheNZEScenario,demandforliquidbiofuelsincreasesto5.7mboe/din2030andthenremainsaroundthislevelto2050.Thehighpenetrationofelectriccarsandtrucksleadstoasignificantreductioninbiofuelsconsumptioninroadtransportafter2030,andmoreofthelimitedsupplyofsustainablebioenergyavailableisusedintheformofsolidbioenergyinpowergenerationandinindustrialapplicationswhereelectrificationischallenging.Asaresult,demandforliquidbiofuelsin2050is40%lowerthanintheAPS.IntheNZEScenario,around90%ofliquidbiofuelsproducedin2050areadvancedbiofuelsand75%areconsumedinaviationandshipping.Morethan40%ofthefuelusedinaviationin2050takestheformofliquidbiofuels(Box7.1).2468102021203020502030205020302050mboe/dPassengercarsTrucksAviationandshippingOtherDemand2021203020502030205020302050EthanolBiodieselBiojetfuelEthanolBiodieselSupplyAdvanced:Conventional:STEPSAPSNZESTEPSAPSNZEIEA.CCBY4.0.Chapter7Outlookforliquidfuels3457Box7.1⊳PolicysupportneededforadvancedliquidbiofuelsOver90%ofliquidbiofuelsproducedtodayare“conventional”biofuelsproducedfromfoodcropfeedstocks.Thesefeedstocksincludesugarcaneethanol,starch‐basedethanol,fattyacidmethylester,straightvegetableoilandhydrotreatedvegetableoilproducedfrompalm,rapeseedorsoybeanoil.Thereisgrowinginterestintheuseofalternativefeedstocksthatcanavoidthepotentialsustainabilityconcernsassociatedwithsomeconventionalbiofuels.Theseadvancedbiofuelsareproducedfromnon‐foodcropfeedstocks,providealargereductioninlifecyclegreenhousegas(GHG)emissionscomparedwithfossilfuels,anddonotdirectlycompetewithfoodandfeedcropsforagriculturallandorcauseadversesustainabilityimpacts.Theproductionofadvancedliquidbiofuelsincreasesinallscenarios,butiscriticallydependenton:Developingsufficientquantitiesofsustainablefeedstockssuchasmunicipalsolidwaste,wheatstrawandnon‐foodcrops.Thisimpliescomprehensivewastemanagementpoliciesandregulationstoenhancecollection,sortingandpre-treatment,togetherwitharobustcertificationsystemtoensurethatfeedstocksaresustainable.Demonstratingandscalingupwaysofderivingsustainablefeedstocksfromnon‐foodenergycropproductiononnon‐arableanddegradedland.Sisal,forexample,growsonsemi‐aridlandsandisoftenusedinthetextileindustryinprocessesthatproducelargeamountsoforganicwaste.Thiswastecouldbeturnedintoliquidbiofuelsandcouldgenerateadditionalstreamsofincomefortextilecompanies.Regulatorystabilitytosupportthelong‐terminvestmentsneededtoscaleupproduction.Thenumberofproducersofadvancedbiofuelsissmalltoday,andnewinvestorsneedvisibilityonpoliciesandplanssothattheycanassessmarketpotential.7.7Low‐emissionshydrogen‐basedliquidfuelsLow‐emissionshydrogen‐basedliquidfuelsincludeammonia,methanolandothersyntheticliquidhydrocarbonsmadefromhydrogenwithverylow‐emissionsintensity.3Theyofferanalternativetotheuseofoil,canoftenuseexistinginfrastructureandcombustionequipment,andareexpectedtogainmarketshareinsectorssuchasaviationandshippingthatwillotherwisestruggletoreduceoildemand.However,theycurrentlyhavehighcostsofproduction,sufferfromlimitedenablinginfrastructure,caninvolvelargeenergylossesfromproductiontoconsumption,andinsomecasesneedtobehandledmorecarefullythantraditionalliquidfuels.3Hydrogen‐basedsynthetichydrocarbonsneedtobemadeusinganon‐fossilsourceofCO2,suchasbiogenicoratmosphericCO2,tobealow‐emissionsfuel.SourcingthisCO2canaddconsiderablytooverallcosts.IEA.CCBY4.0.346InternationalEnergyAgencyWorldEnergyOutlook2022Thefutureuptakeoflow‐emissionshydrogen‐basedliquidfuelsdependscruciallyonfindingwaystoreduceproductioncosts.Cheaperrenewableenergyandcarboncapture,utilisationandstorage(CCUS)willmakeabigdifference,butdedicatedprojectsarealsoneededtoimprovelow‐emissionshydrogenandammoniaproductiontechnologiesandtoreduceefficiencylossesacrossthevaluechain.Therehasbeenrecentprogressonthisfront.ThelargestpowergenerationcompanyinJapan,JERA,issuedatenderin2022forupto0.5Mtoflow‐emissionsammonia(around5thousandbarrelsofoilequivalentperday[kboe/d])toreplace20%ofthecoalatalargepowerplantunitfrom2027.Maersk,aleadingshippingcompany,hascommissioned19methanol‐fuelledcontainershipsanditisstudyinghowtoensurethatthemethanoltheyuseisproducedfromsustainablebiomass.InGermany,a350tonneperyearplantfortheproductionofsynthetickeroseneopenedin2022nexttoanexistingsyntheticmethaneplantandasourceofCO2frombiogasupgrading.Figure7.9⊳Low-emissionshydrogen-basedliquidfueldemandbyscenarioandthedecliningcostgapwithoilproductsintheNZEScenarioIEA.CCBY4.0.Rapidlyrisingdemandforhydrogen-basedliquidfuelshelpsbringdowncoststhrougheconomiesofscaleandinnovation,whilepricesofoilproductsriseNotes:mboe/day=millionbarrelsofoilequivalentperday;toe=tonneofoilequivalent.Synth.kerosene=synthetickerosene.AmmoniaandsynthetickerosenecostsaretheaveragelevelisedproductioncostsfortheMiddleEastandChina.FinalpricesofmarinefuelandkeroseneincludeCO2pricesandotherlevies.IntheSTEPS,thereislimiteduptakeofhydrogen‐basedfuelsgloballyto2030,reflectingthelowlevelofcurrentpolicysupportfortheiruse(Figure7.9).IntheAPS,moreprogressismade,with0.2mboe/doflow‐emissionshydrogen‐basedfuelsbeingusedgloballyfortransportin2030.IntheNZEScenario,thisfigurerisesto0.4mboe/d,mostofwhichisusedinshipping.AchievingthelevelsofuseseenintheAPSandtheNZEScenariowillrequire246STEPSAPSNZESTEPSAPSNZEShippingAviationPowergenerationDemandmboe/d203020505001000150020302050USD/toeMarinefuelKeroseneAmmoniaSynth.keroseneEnd‐userpricesandcostsIEA.CCBY4.0.Chapter7Outlookforliquidfuels3477rapidprogressonstandards,notablyforthesafetransportanduseofammonia.Therearelikelytobelargeregionalvariationsinproductioncostsforlow‐emissionshydrogen‐basedfuels,andinternationaltradewilldependoninternationalco‐operationonstandards.Progressbetween2030and2050obviouslydependscruciallyonwhatisachievedby2030,includingondeployment,innovationandeconomiesofscalethathelptonarrowthecostgapwithoilproducts,aswellasonstandards.IntheNZEScenario,thestepstakenby2030layasolidfoundationforthefuture.TakingintoaccountthecostofCO2,thecostofproducinglow‐emissionshydrogen‐basedfuelsintheNZEScenarioislowerthanthepriceofmaritimefuelinthe2030sinanumberofregions,andlowerthanthepriceofaviationfuelinthe2040s.Nearly6mboe/doflow‐emissionshydrogen‐basedliquidfuelsareconsumedin2050,roughlyevenlysplitbetweenaviation,powergenerationandshipping.Thisrestsontheproductionof120milliontonnesoflow‐emissionshydrogenfedby1.2terawattsofrenewablepowercapacity(equivalentto70%oftoday’sglobalinstalledsolarandwindcapacity)aswellas0.5gigatonnes(Gt)CO2peryearofCCUScapacity.Keythemes7.8OiluseinplasticsPetrochemicalsareintegraltomodernsocieties.Theyareusedforplastics,fertilisers,packaging,clothing,digitaldevices,medicalequipment,detergentsandtyres,amongmanyotherthings.Theyalsofeatureinmanypartsofthemodernenergysystem,includingsolarPVpanels,windturbineblades,batteries,thermalinsulationforbuildingsandelectricvehicleparts.Thechemicalsectortodayusesaround15mb/dofoilandissettobeamajorsourceoffuturedemandgrowth.Inthissection,welookatthedriversofpetrochemicalfeedstockdemand–withaparticularfocusonplastics–andatrecentpolicyandtechnologydevelopmentsthatcouldreduceoiluseinpetrochemicals.Around90%oftheoilconsumedinthechemicalsectortodayisusedasafeedstock:theremainderprovidesheatandenergyforproductionprocesses.Oilthatisusedasapetrochemicalfeedstockisconvertedintochemicalproducts:thislimitsdirectCO2emissionsfromitsuse,althoughinsomeinstancesthefinalproductsareeventuallycombustedandthiscanresultinahigherlevelofemissions.Around70%ofoilfeedstock(10mb/d)isusedtoproduceplastics,demandforwhichhasgrownrapidlyinrecentyears.Demandforplasticsvariessignificantlybetweencountries:forexample,morethan250kilogrammes(kg)ofplasticisusedpercapitaeveryyearintheUnitedStatesandlessthan25kgofplasticpercapitaisusedeachyearinIndia(Figure7.10).Around30%oftheuseofplasticstodayisforpackaging.Plasticsareveryuseful.However,theydohavedownsidesintermsofemissionsfromtheirproduction,theyaccountforasignificantshareofoveralloiluseinanumberofcountries,andresultinlargeamountsofwaste,forexample,plasticwastecanendupinwaterstreamsintheformofmicroplastics.Theuseoffeedstockbasedonlow‐emissionshydrogen‐basedIEA.CCBY4.0.348InternationalEnergyAgencyWorldEnergyOutlook2022fuelsandbioenergy,forexampleproducedbyconvertingbioethanoltoethylene,couldhelpreduceemissionsandoildependency,buttheyarecurrentlyexpensive,requirelargequantitiesofsustainablebioenergy,anddonotsolveissuesrelatedtoplasticwaste.Figure7.10⊳Plasticdemandpercapitaandrecyclingcollectionrates,2019IEA.CCBY4.0.Packagingrepresentsthebiggestuseofplasticsinnearlyallregions;plasticdemandpercapitaandplasticrecyclingcollectionratesvarywidelyThereisgrowingmomentumbehindpoliciesandinitiativesthataimtoreduceplasticuse.Particularattentionisbeingpaidtosingle‐useplastics,whicharecommonlyusedforpackagingandfoodutensils,andmorethan60countriessofarhavetakenrelevantaction.ThisincludesChina,whichhasrestrictedtheproduction,saleanduseofplasticbagsaswellassomeotherdisposableplasticproducts,andIndia,whichhasbannedtheproduction,saleanduseof19single‐useplasticitems.Recyclingofplasticsisanotheroptiontocutdownonwasteandemissions.Globally,17%ofplasticwaste4iscollectedforrecyclingtodayalthoughtherearelargedifferencesbetweenregions:forexample,25%iscollectedforrecyclinginEuropeandlessthan10%intheUnitedStates.Recyclingratesforplasticsaremuchlowerthanrecyclingratesforsteel(80%),aluminium(80%)andpaper(60%).Thisisbecauseofthecomplexprocessesrequiredtoremoveimpuritiesandavoiddiscolourationofrecycledplasticmaterialandbecauseprocessingfacilitiesarecapitalintensive.Advancedsortingandrecyclingtechniquesarebeingdevelopedtohelpsolvethesechallenges,includingchemicalrecyclingandpyrolysis‐basedwaste‐to‐feedstock.Policymakersarealsolookingtoboostrecyclingratesthroughtaxes,subsidies,landfillregulationsandcharges,andinternationaltreaties(Table7.5).4Plasticwasteincludesallpost‐consumerplasticwastewithalifespanofmorethanoneyear.5%10%15%20%25%50100150200250UnitedStatesEuropeanUnionChinaIndiaWorldOtherTextileConsumerandinstitutionalproductsTransportBuildingandconstructionPackagingRecyclingcollectionkgplastic/capitarate(rightaxis)IEA.CCBY4.0.Chapter7Outlookforliquidfuels3497Table7.5⊳SelectedrecentpoliciesaddressingconsumptionandrecyclingofplasticsRegionPolicynameDescriptionYearGlobalpledgesandtreatiesUnitedNationsEndPlasticPollution:TowardsaninternationallegallybindinginstrumentEstablishesanIntergovernmentalNegotiatingCommitteetodevelopaninternationallegallybindinginstrumentonplasticpollution,includinginthemarineenvironment.AnnouncedMarch2022,targetingend‐2024G7andbeyondOceanPlasticsCharterSetsgoalsonplasticsrelatedtoproductdesign,recycling,educationandinnovation,whichhavebeenendorsedbymultiplecountriesandcompanies.Launchedin2018BansChinaLawofthePeople’sRepublicofChinaonthePreventionandControlofEnvironmentalPollutionbySolidWastesProhibitsandrestrictstheproduction,saleanduseofnon‐degradableplasticbagsandotherdisposableplasticproducts.InforcesinceSeptember2020IndiaPlasticWasteManagementAmendmentRulesProhibitsthemanufacture,import,stocking,distribution,saleanduseofidentifiedsingle‐useplasticitems,includingcutlery,foodserviceware,stirrers,plasticflags,candysticks,etc.InforcesinceJuly2022EuropeanUnionDirectiveonsingle‐useplasticsProhibitscertainsingle‐useplastics(cottonbudsticks,cutlery,plates,straws,stirrers,sticksforballoonsandsomefoodandbeveragecontainers)andlimitstheuseofothers.InforcesinceJuly2021CanadaSingle‐useplasticsprohibitionregulationsProhibitsthemanufacture,import,saleandexportofsixcategoriesofsingle‐useplastics:checkoutbags,cutlery,foodservicewaremadefromorcontainingproblematicplastics,ringcarriers,stirrersandstraws.InforceinstagesfromDecember2022toJune2026RecyclingtargetsEuropeanUnionPackagingDirectiveTargetsaplasticpackagingrecyclingrateof50%by2025and55%by2030.Announced2018InvestmentinrecyclingofplasticsJapanAdvancedplasticrecyclinginNationalBudget2021USD55millionallocatedtosupportthedevelopmentofadvancedplasticrecyclingequipment.Announced2021UnitedStatesDepartmentofEnergyR&DfundingforplasticsUSD13.4millionawardedinR&Dfundingtosevenprojectsfornext‐generationplastictechnologies.Aimsincludemoreupcyclingofrecycledplasticsandthedevelopmentofnewplasticsthataremorerecyclableandbiodegradable.Announced2022DenmarkInnovationFundGreenMission:CirculareconomywithfocusonplasticsandtextilesCo‐financinginresearchandinnovationrelatedtoreuse,recyclingandreducedconsumptionofplastics.Callforfundingin2022IEA.CCBY4.0.350InternationalEnergyAgencyWorldEnergyOutlook2022Figure7.11⊳OiluseinthechemicalsectorbyscenarioIEA.CCBY4.0.OiluseaspetrochemicalfeedstockfallsintheNZEScenarioduetoalternativefeedstocksandmorerecycling,butstillaccountsformorethanhalfofglobaloildemandin2050IntheSTEPS,policiestoscaleuprecycling,limitsingle‐useplastics,andinvestinwastemanagementandrecyclingfacilitiesresultinanincreaseinrecyclingcollectionratesfrom17%in2021,to20%in2030and27%in2050(Figure7.11).Thisisnotenoughtocounterbalancethestronggrowthindemandforprimaryplastics;oiluseasapetrochemicalfeedstockforplasticsrisesby3mb/dbetween2021and2050.IntheAPS,thereisamuchstrongerpushforrecyclingofplasticsinfulfilmentofcountries’netzeroemissionspledges,andtheglobalaveragerecyclingcollectionrateincreasesto25%in2030and50%in2050.Demandforoilasapetrochemicalfeedstocktoproduceplasticsnonethelessrisesbyaround0.5mb/dbetween2021and2050.IntheNZEScenario,theglobalaveragerecyclingcollectionrateincreasesto26%in2030and54%in2050;oiluseasapetrochemicalfeedstockfallsby1mb/dbetween2021and2050.Totaloiluseinthechemicalsector,includingoilthatiscurrentlyusedforprocessenergy,fallsbyjustover20%between2021and2050.Thisisamuchshallowerdeclinethaninallothersectors:oiluseinpassengercarsfallsby98%overthisperiod,forexample.Asaresult,thechemicalsectorendsupaccountingformorethanhalfofglobaloildemandintheNZEScenarioin2050.15%30%45%60%51015202021STEPSAPSNZESTEPSAPSNZEPlasticsOtherpetrochemicalsProcessenergyPlasticsrecyclingcollectionrate(rightaxis)mb/d20502030IEA.CCBY4.0.Chapter7Outlookforliquidfuels3517Box7.2⊳What’sthesustainablechoiceforpackagingdrinks?Mostdrinkscomeinplasticbottles,aluminiumcans,paper‐basedpackagingorglassbottles.WeexploreherehowthedifferentoptionscompareonthebasisofalifecycleassessmentofenergyandemissionsofeachoftheseoptionsintheEuropeanUnion(SamuelSchlecht,2020)(CarmenFerrara,2021).Intheabsenceofrecycling,theanswersarefairlysimple.Paper‐basedpackagingandplasticbottlesrequireabout3‐4MJ/litreandaretheleastenergy‐intensivetomanufacture(Figure7.12);glassbottlesarenext,requiringabout70%moreenergytoproduce;andaluminiumcansrequirethehighestamountofenergytoproduce.TheassociatedCO2emissionsfollowthesamehierarchy,butvarydependingonthebalanceoffuelsandelectricityusedineachprocessaswellasonthelocationofthemanufacturingfacilities.Theproductionofaluminium,forexample,iselectricity‐intensive.AcanproducedinFrancegenerateslessthanhalfoftheemissionsofacanproducedinPolandbecauseofthedifferentemissionsintensityofelectricityineachcountry.Figure7.12⊳EnergycontentofvariouspackagingtypesintheEuropeanUnionIEA.CCBY4.0.Plasticbottlesandpaper-basedpackagingoptionsuse35-75%lessenergyperlitreofpackageddrinkthanaluminiumcansandglassbottlesNotes:MJ/L=megajouleperlitre;reuseistheenergyrequiredtotransport,wash,steriliseanddryanexistingglassbottle.Introducingrecyclingandreusemakescomparisonsmuchmorecomplex.Aluminiumisoneofthemostrecycledofallmaterialsworldwide.Usingrecycledaluminiumbringsdowntheenergyrequiredtoproduceanewcanbyaroundone‐quarter.Glassbottlescanberecycled,whichrequiresaround15%lessenergythanmakinganewone,or2468NoRecyclingRecyclingNoRecyclingRecyclingNoRecyclingRecyclingNoRecyclingRecyclingReuseFossilfuelsElectricityandheatRenewablesMJ/LAluminiumPlasticPaperGlassIEA.CCBY4.0.352InternationalEnergyAgencyWorldEnergyOutlook2022reused,whichrequireslessthanhalftheenergyofmakinganewbottle.Ouranalysisindicatesthatreusingaglassbottlefivetimesrequireslessenergythanproducingfivenewplasticbottles,whilereusingaglassbottletentimesrequireslessenergythanproducingpaper‐basedpackagingfortendrinks.Pricenaturallyplaysasignificantroleindeterminingthechoicesmadebymanufacturersandconsumers.Plasticsbottlesarefour‐tofive‐timescheaperthanglassbottlesandtheyretainacostadvantageevenwithreuseschemes.Manyglassreuseschemeshavedeclinedorbeendiscontinuedforthisreason.Taxesorincentivestoreduceplasticuseandpollutioncouldhelpreversethistrend.ApushformoreglassreuseschemesinEuropeorasingleschemeacrossEurope,aidedbybroaderstandardisationinbottledesign,wouldalsoimproveresourceuseandcutwaste.Thiswouldneedtobecombinedwitheffortsinvolvingretailersandconsumergroupstoincreasetheuseofreusablebottlesandtheirreturn.7.9Arenewconventionaloilprojectsananswertotoday’senergycrisis?Inrecentyears,oilsupplyhasincreasedrelativelyquicklywhenmarketconditionshavewarranted,largelybecauseoftheabilityofUStightoilproductiontorampuprelativelyfast,aswellastheexistenceofOPECsparecapacity–thetraditionalbufferfortheoilmarket.Butquestionsarenowbeingaskedaboutwhetherrecenttrendsfortheseavenueswillproveagoodguidetothefuture.Tightoiloperatorsarenowmorefocussedonreturnsthannear‐termproductiongrowth,andoilfieldserviceprovidersarehesitanttoreinvestintightoilsupplychains.ManymembersofOPECarestrugglingtoincreaseproduction,andsomeofthenotionalOPECsparecapacitybufferisalsosubjecttopoliticalconstraints.Herewelookatwhatcombinationoffactorscouldfillanygapbetweensupplyanddemandandhelptheglobaloilmarkettostayinbalance.Wefindthatthelongleadtimeofconventionalprojectsandthedepletedexistingpipelineofpotentialprojectsmeanthatnewconventionalprojectsareunlikelytoprovidelarge‐scalerelieftotheimmediateenergycrisis.Lookingbeyondthenextfewyears,theneedfornewconventionalprojectstobalancethemarketiscontingentonthedemandoutlook,whichvarieswidelybyscenario.IntheSTEPS,thecombinationofunderlyingdeclinesinexistingsourcesofproductionandrisingdemandmeansnewconventionalprojectsareneededtoensureasmoothmatchbetweensupplyanddemand.IntheAPS,demandislowerandthereislessneedfornewconventionalprojects.IntheNZEScenario,decliningfossilfueldemandcanbemetthroughcontinuedinvestmentinexistingproductionassetswithoutanyneedfornewlongleadtimeoilfields.LeadtimesforconventionalprojectsThedevelopmentofatypicalnewconventionalupstreamoilprojectoccursinanumberofstages.Ahostcountryorlandownerfirstannouncesanintentiontoallowcompaniestobidforexplorationlicences.Aninterestedcompany(orgroupofcompanies)conductssubsurfacestudiesandchooseswhethertobidforalicence.AfteranexplorationlicenceisIEA.CCBY4.0.Chapter7Outlookforliquidfuels3537awarded,thelicenceholderhastosecurefurtherregulatoryapprovalsbeforeexplorationactivitiescantakeplace.Ifresourcesarediscovered,additionalanalysisisconductedtodecidewhethertheresourcescanbeproducedeconomicallyandhowbesttodeveloptheproject.Aftersecuringregulatoryapprovalfordevelopment,afinalinvestmentdecision(FID)istakentodeveloptheproject.5Physicaldevelopmentworkcommencesandlatertheprojectstartsproducing.Mostconventionalprojectsincreaseproductiongraduallyfromthispoint.Productioneventuallypeaksandstartstodecline.Figure7.13⊳Yearsneededtodiscover,approveanddevelopnewconventionalupstreamoilprojectssince2010IEA.CCBY4.0.Ittakesaround20yearsonaveragefromthegrantingofanexplorationlicenceforanewconventionalprojecttobeginproductionNote:Includesprojectsawardedexplorationlicencessince1980thatstartedproductionbetween2010‐20,weightedbytechnicallyrecoverableresources.Source:IEAanalysisbasedonRystadEnergydata.Thetimerequiredtodevelopanewconventionaloilprojectcanvarysubstantiallyanddependsonfactorssuchasregulatoryoversightandmanagement,politicalstability,subsurfacecomplexityandwhethernewfacilitiesandexportconnectionsneedtobeconstructed.Forconventionalupstreamprojectsthathavestartedproductionsince2010,ittookonaveragearoundsixyearsfromtheawardofanexplorationlicencetodiscovery;nineyearsfromdiscoverytoprojectapproval;andjustoverfouryearsfromapprovaltofirstproduction(Figure7.13).Itthentookafurtherthreetofiveyearsforprojectstorampuptotheirmaximumlevelofproductionaftertheystartedproducing.Companieshaverecentlytriedtofocusonprojectsthatcanbebroughttomarketrelativelyquickly.Forexample,5ThepointatwhichaprojectundergoesitsFIDisalsoknownastheproject“receivingdevelopmentapproval”.24681012ExplorationawardtodiscoveryDiscoverytoapprovalApprovaltostart‐upOffshoreOnshoreYearsIEA.CCBY4.0.354InternationalEnergyAgencyWorldEnergyOutlook2022offshoreprojectsthatstartedoperationsince2019havetakenlessthanfiveyearstogofromapprovaltostartupcomparedwitheightyearsforsimilarprojectsthatstartedupin2016.Sincetheoilpricecrashin2014,explorationactivityandlevelsofdiscoverieshavebeenathistoriclows,andrelativelyfewconventionaloilprojectsarenowavailabletobedeveloped(Figure7.14).Anyalready‐discoveredresourcesthatareapprovedfordevelopmentcouldbringsomeoiltothemarketwithinthenextfewyears,buttheyareunlikelytomakeanimmediatemajorcontributiontotheglobaloilbalance.Resourcesthathavenotyetbeendiscoveredareunlikelytomakeameaningfulcontributiontoalleviatingthecurrentenergycrisis.Figure7.14⊳Annualaverageresourcesdiscovered,approvedfordevelopmentandconsumedsince1970IEA.CCBY4.0.ResourcediscoveriesandnewapprovalshavebeenathistoriclowsinrecentyearsandthepipelineofprojectsavailabletobedevelopedisnowsmallTightoilandOPECsparecapacityTightoilhasbeenakeysourceofnewproductioninrecentyears,anditmetaround85%oftheoverallincreaseinglobaloilsupplybetween2015and2019.Itcantakeaslittleasthreemonthsforatightoiloperatortomovefromsecuringdevelopmentapprovaltothestartofproductionandtightoilwellsproducearound80%oftheircumulativeproductioninthefirsttwoyearsofproduction(comparedwithlessthan10%forconventionalwells).However,annualproductiondippedin2020andonlyroseslightlyin2021asoperatorsfocussedonprofitabilityandcapitaldisciplineratherthanproductiongrowth(Figure7.15).IntheSTEPS,UStightoilproductionincreasesbyaround3mb/doverthenextfiveyearsandannualaverageinvestmentisaroundUSD65billion,whichisbroadlysimilartoinvestmentlevelsbetween2015and2020.IfpricesweretobehigherthanintheSTEPSoroperators102030401970‐741975‐791980‐841985‐891990‐941995‐992000‐042005‐092010‐142015‐192020‐21BillionbarrelsDiscoveredApprovedConsumptionIEA.CCBY4.0.Chapter7Outlookforliquidfuels3557weretofocusmoreongrowth,thiscouldleadtoahigherlevelofspending.Withoutsomeeasingofcurrenttightsupplychains,however,anysuchincreasesinactivitycouldexacerbatethecostinflationcurrentlybeingexperiencedbytheindustryintheUnitedStates.6IfannualinvestmentweretoaverageUSD100billionovertheperiodto2030–whichwouldbethehighestannuallevelofinvestmentseeninrecentyears–weestimatethatUStightoilproductioncouldincreasebyaround5mb/dto2030.Figure7.15⊳UStightoilproductionatdifferentlevelsofinvestmentIEA.CCBY4.0.Increasesintightoilwillbeessentialtobalancedemandto2030:higherinvestmentlevelsthanintheSTEPScouldleadtomoregrowth,butrisksexacerbatingcostinflationNotes:Includestightcrudeoilandtightcondensatevolumes.Tightoilinothercountriesalsohassomescopeforgrowth,butitislimitedinscale.Canadianshaleplaysaregenerallymoresuitedtonaturalgasthanoilproduction,thoughthesectorcouldscaleupoilproductionfromplayssuchastheDuvernay‐Montney.Argentinaalsohasscopetoincreasetightoiloutput:intheSTEPS,itsproductionrisesbyjustunder150kb/dwithinthenextfiveyears.Tightoilresourcesalsoexistinanumberofothercountries,includingSaudiArabia,UnitedArabEmiratesandChina,butnewproductionfromthesecountriesisunlikelytocontributemeaningfulvolumesintheimmediatefuture.OPEChassustainablecrudeoilproductioncapacityofaround34mb/dandproduced28.5mb/dinthefirsthalfof2022(autilisationrateof84%).ProductionbyOPEChasnotexceeded94%ofitscapacitysince2000,andanumberofcountriesmightstruggleto6Costsfortightoilproductionincreasedbyaround15%between2019and2022,mainlybecauseofincreasesinsteel,steelproducts,aluminiumandotherrawmaterialsprices(IEA,2022b).246USD65billion(STEPS)USD80billionUSD90billionUSD100billionProductionincreasefrom2021‐2030510152015202020252030Productionmb/dAnnuallevelofinvestmentintightoil(2022‐2030):IEA.CCBY4.0.356InternationalEnergyAgencyWorldEnergyOutlook2022produceasmuchoilastheyaresupposedtobecapableofdelivering(nameplatecapacity).Inaddition,politicalunrestinLibyaandlong‐termsanctionsonVenezuelaandIranhaveseverelyimpactedtheabilityofthosecountriestomaintainproductionlevelsoverthelastdecade.ItmightthereforebeastruggleformembersofOPECtoproduceconsiderablymorethancurrentvolumes.Howmuchnewoilsupplyisneeded?Inassessingfuturesupplyneeds,akeyconsiderationisthelevelofprojecteddeclineinproductionfromexistingsourcesofsupply.Asfieldsmatureandprojectsreachtheendoftheirlives,existingsourcesofoilsupplyareexpectedtodeclinebyaround18mb/dto2030.Someofthisdropislikelytobeoffsetbyconventionalprojectsapprovedfordevelopmentinrecentyears,includinginBrazil,SaudiArabiaandUnitedStates,andthesearesettoprovidearound6mb/dofnewproductionby2030.SomeincreasesinNGLsarealsolikelyasaresultofchangesinnaturalgasproduction.Figure7.16⊳ContributionofincreasedproductionoftightoilandNGLs,andnewandapprovedprojectsintheSTEPSandAPSIEA.CCBY4.0.Althoughtightoilissettogrowstrongly,decliningoutputfromexistingsourcesofproductionmeansnewconventionalprojectsareessentialinboththeSTEPSandAPSNote:Alreadyapproved=fieldsthathavereceivedanFID,butwerenotproducingatthebeginningof2022.Thetrajectoryofoildemandisthefinalelementindeterminingnewsupplyneeds.IntheSTEPS,oildemandrisesby8mb/dto2030.Withoutnewlongleadtimeconventionalprojects,thiswouldmeanamajorshortfallinsupplyfromthemid‐2020s(Figure7.16).IntheAPS,globaldemandpeaksinthenearfutureandstartstodecline.Conventionalupstreamprojectsremainessentialtoensureasmoothmatchbetweensupplyanddemand:without7080901001102015202020252030TightoilAlreadyapprovedNGLsNewapprovalsmb/dIncreasedproductionSTEPSProjects2015202020252030DemandDeclinesfromexistingAPSIEA.CCBY4.0.Chapter7Outlookforliquidfuels3577them,asignificantshortfallinsupplywouldemergebythelate‐2020s.IntheNZEScenario,demandfallsbynearly20mb/dto2030andnonewconventionaloilprojectsneedtobeapprovedfordevelopment(Table7.6).Table7.6⊳AverageannualupstreamoilinvestmentbyscenarioSTEPSAPSNZE20212022‐302031‐502022‐302031‐502022‐302031‐50Existingfields142216191212137243120Newfields9418917111762180Tightoil7062505325425Total305466411382225302126Notes:NewfieldsincludefieldsthathavereceivedanFIDbutwerenotproducingatthebeginningof2022,andnewapprovals.Newlongleadtimeandlong‐livedconventionalprojectsstillcarryanumberofrisks,eveniftheyareneededintheSTEPSandAPS.Theycouldlockinfossilfuelusethatwouldpreventtheworldfrommeetingitsclimategoalsortheycouldfailtorecovertheirupfrontdevelopmentcostsiftheworldissuccessfulatbringingdowndemandquicklyenoughtoreachnetzeroemissionsbymid‐century.Governmentsanddeveloperscanmitigatesomeoftheserisksbyensuringthatnewprojectsresultinasfewdirectemissionsaspossible,forexamplebyensuringtherearenomethaneleaks,thatthereisnoflaring,thatlow‐emissionsoptionsareusedtopoweroperations,andthatnewprojectdevelopmentsarelinkedtoCCUS.7.10Refining:immediateandlongertermchallengesImmediatechallenges:TightnessinproductmarketsandreducedRussianexportsAstrongreboundinoilconsumptionin2021followingtheglobalCovidpandemiccoincidedwiththefirstnetreductionincapacityin30yearsintherefiningsector.NewcapacitywasaddedinChinaandtheMiddleEast,butthiswassurpassedby1.8mb/dofcapacityretirements.TherehavealsobeenreducedproductexportsfromRussiaandChina.Refiningmarginshavesurgedtorecordhighsinthewakeofthesedevelopments.Twootherimportantdevelopmentsarecurrentlyintrain.First,oilproductexportsfromRussia,whichdecreasedby600kb/dbetweenFebruaryandJune2022asaresultofsanctions,aresettodeclinefurtherwhentherecentlyagreedEuropeanUnionimportbancomesintoforcein2023.Russiadoesnotplayasignificantroleingasolineandkerosenemarketsbutitiscurrentlyoneofthelargestexportersofdiesel,naphtha,fueloil,andrefineryfeedstocks.Second,Chinahassetanexplicitgoalofphasingoutrefinedproductexportsby2025toreduceemissionsfromtherefiningsector.Chineserefinedproductexportssofarin2022are45%belowpre‐pandemiclevels.IEA.CCBY4.0.358InternationalEnergyAgencyWorldEnergyOutlook2022Figure7.17⊳RegionalrefiningmarginsandcrackspreadsbyproductIEA.CCBY4.0.AstrongreboundindemandandareductioninglobalrefiningcapacitycontributedtotherecentextraordinaryriseinrefiningmarginsandcrackspreadsfortransportfuelsNotes:USGC=USGulfCoast;NWE=northwestEurope.JetKero=jetkerosene;HSFO=highsulphurfueloil.ProductcrackspreadsarebasedonnorthwestEuropeindices.Togetherwithmuchlowerinventories,thesefactorshavecombinedtocreateaverytightmarket.Oilproductdifferentialshaverisentorecordhighsacrosspremiumtransportfuelssuchasdiesel,gasolineandkerosene(naphthaandhighsulphurfueloilhavenotexhibitedthesametrendsduetoweakindustrialgrowth)(Figure7.17).ProductcrackspreadsfellslightlyinJuly2022,buttheystillremainmuchhigherthaninthepast,especiallyformiddledistillatessuchasdieselandkerosene.Asthingsstand,therearefewsupply‐sidemeasuresthatcouldtackletheimmediatetightnessinproductmarkets.OneoptionwouldbetobringbackmothballedrefiningcapacitylocatedintheAtlanticBasin,butthiswouldrequiremajorfinancialcommitmentsandasignificantamountoftimeforrepairwork.Supply‐sidetensionsmaystarteasingin2023asnewrefineriesinMexicoandNigeriacomeonline7andexpansionprojectsintheUnitedStatesandtheMiddleEastarecompleted.However,withreducedChineseandRussianproductexports,theglobalrefiningsystemislikelytoremaintightforseveralyearstocomeifmiddledistillatesdemand(dieselandkerosene)keepsrisingatthecurrentrapidrate.IntheSTEPS,middledistillatesdemand(excludingbiodiesel,renewablefuels,coal‐to‐liquidsandgas‐to‐liquids)increasesby2.6mb/dbetween2022and2025.Withoutyieldadjustments,thiswouldrequiremorethan6mb/dofrefinerythroughputgrowth(on7MexicoandNigeriahavealsoinitiatedrehabilitationprogrammestorestartmothballedrefiningassetsandincreaseutilisationrates,althoughsecuringfinancingremainsamajorhurdle.‐40‐200204060Jan‐2021Jul‐2022USD/barrelCrackspreadsbyproductGasolineDieselJetKeroHSFONaphtha‐40‐200204060Jan‐2015Jul‐2022USD/barrelRegionalrefiningmarginsNWElightsweetcrackingSingaporemediumsourcrackingUSGCmediumsourcrackingIEA.CCBY4.0.Chapter7Outlookforliquidfuels3597average,onebarrelofincrementalrefinerythroughputcanproduceupto0.3‐0.5barrelsofmiddledistillates).Thiscompareswithalikelynetcapacityincreaseof4.2mb/doverthenextthreeyears.Refineriesthatarecurrentlyoperatinghavelargelymaximisedtheircapacityutilisation,implyingthatrefineryprocessingmaylagbehinddemandgrowth.Thereissomeflexibilityintherefiningsystemtoshiftyieldsfromotherproductstodieselandkeroseneasgasolinedemandflattensbutthismaynotbeenoughtoplugtheremaininggapinmiddledistillatessupply.Thisbringsintosharpfocustheimportanceofdemand‐sidemeasurestoeaseproductsupplytensions.IntheAPS,strongpolicymeasurestoreducetheuseofdieselandkeroseneandtorevampidledcapacitybringaboutasignificantreductionofthetightnessinthemiddledistillatemarket(Figure7.18).Figure7.18⊳Expectedrefiningthroughputgrowthandrequiredthroughputincreasetomeetmiddledistillatedemand,2022-2025IEA.CCBY4.0.ReductionsindemandformiddledistillatesareneededtoeaseproductsupplytensionsinthecomingyearsNote:Projectedcapacityandthroughputincreasedonotincludeadditionalyieldadjustments.Refineriesareassumedtoyield42%ofmiddledistillates.TheeffectsofsanctionsandembargoesonRussianoiltradeflowsareakeyvariablethatcouldaffectglobaloilmarketsinthecomingyears.EvenbeforeRussia’sinvasionofUkraine,globaloilmarketswereinahighlyvolatilephase.Inventorieswerelowafterdrawssincethesecond‐halfof2020,andcapacityconstraintsintherefiningsectormagnifiedtheimpactofsupply‐demandfundamentalsonproductprices.Russiaaccountedforaround12%ofglobalcrudeoiland15%ofoilproductstradein2021.Sincetheinvasion,oilmarketshavehadtodealwithmajorchangestoglobalcrudeoilandproductflowsinaveryshortperiodoftime.TheUnitedStates,Canada,Australiaandthe2468ThroughputincreaseSTEPSAPSRequiredinAPSRequiredinSTEPSPotentialrestartsPlannedmb/dIEA.CCBY4.0.360InternationalEnergyAgencyWorldEnergyOutlook2022UnitedKingdomannouncedplanstobanimportsofcrudeoilandcertainoilproductsfromRussia.TheEuropeanUnion,whichlastyeartook35%ofitsnetoilimportsfromRussia,hasalsoimposedaban,buthasallowedforasix‐monthphase‐inperiodforcrudeoil(expiringinDecember2022)andeightmonthsforoilproductsimports(expiringinFebruary2023).CrudeoilimportsintoHungary,SlovakiaandtheCzechRepublicviatheDruzhbapipeline,seabornecrudeoilimportsintoBulgariaandrefineryfeedstockimportsintoCroatiaweregivenexceptions.Theseaccountfor10%ofpre‐sanctionimportvolumesfromRussia.TheEuropeanUnionisalsointheprocessofbanningmaritimeinsuranceforvesselstransportingRussianoiltothirdcountries.Despitethesanctionsalreadyinplace,andafallinRussianexportstotheEuropeanUnioninadvanceofsanctionstherecomingintoeffect,overallRussiancrudeoilexportvolumeshavenotyetdroppedsignificantly.Thispointstoareallocationoftradeflows.BetweenFebruaryandAugust2022,IndiaincreasedRussiancrudeoilpurchasesfrom0.1mb/dto1mb/dandChinaincreasedimportsofRussianoilfromabout1.6mb/dtocloseto2mb/d.Giventhattheircombinedcrudeoilimportrequirementsamountto15mb/d,thereisfurtherscopeforbothIndiaandChinatoincreaseimportsofRussiancrudeoiliftheychoosetodoso.WhetherIndiaandChinawillchoosetocontinuetodosodependsonseveralfactors,includinggeopoliticalconsiderations.SmallerAsianimportersmayalsochoosetoimportsomeRussiancrudeoil.AcompletecessationofRussiancrudeoilimportsbytheEuropeanUnionwouldmeanthatitneedstofindaround1.6mb/dofcrudeoilfromalternativesourcesinadditiontovolumesthathavealreadybeenreplaced.Anyreallocationoftradeinoilproductsislikelytobemorechallengingthanforcrudeoil,notleastbecauseoilproductstradeinvolvescomplexoperationsincludingstorageandblending.Nomeaningfulgeographicalreallocationofoilproductflowshasyettakenplace.ChinaandIndiaarebothoilproductexportersandthereforeareunlikelytobeinterestedinRussianproductimports,whilemanysmallerproductimportersarelikelytofinditdifficulttonegotiate,financeandmanagethelogisticsoflong‐distanceproductstrade.Russiawasalsoundertakingarefinerymodernisationprogrammetoincreaseyieldsofgasolineanddiesel,butthiscouldseesignificantdelaysassanctionsontheprovisionofrefinerytechnology,catalystsandmaintenanceservicescomeintoeffect.MeanwhiletheEuropeanUnionwillneedtorampuppurchasesfromalternativeproviderswhenitsbanonRussianproductimportscomesintoforce,anditislikelytoturntotheUnitedStates,theMiddleEastandIndiaforthesepurchases.ThiswillreduceoilproductflowstoLatinAmericaandAfricaandpotentiallyredirectRussianvolumestowardstheseregions.Thebanonmaritimeinsurancecouldalsohaveamajorimpactonoilproductstrade.MostmaritimetradeinsurersandreinsurersaredomiciledintheEuropeanUnion,sothebancouldineffectpreventRussiancargocarriersfromobtaininginsurance.Inthepast,ChinaandIndiahaveprovidedsovereigninsuranceforothersanctionedcrudeoilimports,notablyofIranianoil.However,thereareunlikelytobeothercounterpartiesinproductstradewiththesameleveloffinancialandoperationalstrengthasChinaandIndia.IfthebancausesthecessationofRussianseaborneoilproductexports,thiscouldfurtherstrainglobalproductmarkets.IEA.CCBY4.0.Chapter7Outlookforliquidfuels3617WesterngovernmentsarecurrentlyconsideringwhethertorelaxthemaritimeinsurancebanforRussianoilaslongasthedealsareconcludedunderapricecapmechanismthataimstocurbRussianrevenueswhileallowingoiltoflowtointernationalmarkets.Longertermchallenges:AdaptingbusinessmodelsinadecarbonisingworldTable7.7⊳Worldliquidsdemandbyscenario(mb/d)STEPSAPS20202021203020402050203020402050Totalliquids90.996.7105.8107.5107.698.782.869.6Biofuels2.02.23.44.65.35.58.79.2Low‐emissionshydrogen‐basedfuels0.00.00.00.10.20.21.23.2Totaloil88.994.5102.4102.8102.193.072.957.2CTL,GTLandadditives0.80.91.11.31.31.00.70.3Directuseofcrudeoil1.00.80.50.40.30.40.30.2Oilproducts87.192.8100.8101.1100.591.671.956.7LPGandethane13.313.615.616.215.814.412.410.4Naphtha6.46.97.78.69.57.37.47.4Gasoline21.923.623.221.419.320.613.18.2Kerosene4.75.79.210.311.88.78.07.6Diesel25.026.528.228.428.225.018.312.6Fueloil5.75.95.55.66.34.83.42.5Otherproducts10.110.611.410.69.610.89.38.0FractionatedproductsfromNGLs11.311.513.412.111.612.710.18.8Refineryproducts75.881.387.489.088.978.961.847.9Refinerymarketshare83%84%83%83%83%80%75%69%Notes:CTL=coal‐to‐liquids;GTL=gas‐to‐liquids;NGLs=naturalgasliquids;LPG=liquefiedpetroleumgas.SeeAnnexCfordefinitions.Whiletherefiningsectorhasseenrecordmarginsandhighutilisationratesin2022,recenttrendsmaynotbeagoodguidetothefuture.Gasoline,dieselandkeroseneaccountedforaroundthree‐quartersoftotaloildemandgrowthbetween2020and2022aseconomiesrecoveredfromtheCovid‐19pandemic,whiledemandforpetrochemicalfeedstocksremainedsubdued.However,theAPSandtheNZEScenarioseemajorchangesinthecompositionofoilproductdemandintheyearsahead,andtheserequirerefinerstoadapttheirconfigurationandbusinessmodels(Table7.7).Theshareofpetrochemicalfeedstockssuchasethane,LPGandnaphtharisesfromaround20%oftotaloildemandtodayto30%in2050intheAPSandto55%intheNZEScenario.TheshareofmiddledistillatesremainsaroundthecurrentlevelintheAPSandhalvesto15%by2050intheNZEScenarioaselectrificationandalternativefuelsareincreasinglyadoptedintrucks,shipsandplanes.Theshareofgasolinefallsinbothscenarios.AmericanandEuropeanrefinerieshaverecentlybeenoperatingathighutilisationratesandaccountedfor45%ofthegrowthinrefinerythroughputbetween2020and2022.IntheAPSIEA.CCBY4.0.362InternationalEnergyAgencyWorldEnergyOutlook2022andNZEScenario,however,theylosemarketsharetonewrefinersindevelopingeconomiesinAsiaandtheMiddleEast.Theshareoftheglobalrefiningmarketaccountedforbytraditionalrefiningcentres(NorthAmerica,EuropeandadvancedeconomiesinAsia)shrinksfromover40%todaytoaround30%by2050intheAPSandtoaquarterintheNZEScenario(Table7.8).Table7.8⊳Refiningcapacityandrunsbyregionandscenario(mb/d)RefiningcapacityRefineryrunsSTEPSAPSSTEPSAPS2021203020502030205020212030205020302050NorthAmerica21.621.120.820.111.117.618.518.116.57.5Europe15.814.513.314.06.912.011.49.410.23.9AsiaPacific37.140.341.539.428.329.233.134.730.518.9JapanandKorea6.96.35.86.23.55.25.04.64.62.2China17.519.019.018.511.114.214.514.113.46.4India5.36.67.86.45.44.86.47.65.74.0SoutheastAsia5.36.36.86.36.33.75.56.45.14.7MiddleEast9.611.212.011.09.77.69.610.68.56.6Russia6.96.56.36.14.65.64.03.53.62.4Africa3.44.54.84.24.21.83.13.92.72.6Brazil2.22.32.32.01.61.82.12.21.71.2Other4.64.84.84.74.22.32.93.52.82.6World101.2105.2105.8101.570.677.984.785.976.545.7AtlanticBasin54.153.652.251.032.540.941.940.437.320.1EastofSuez47.151.653.650.538.137.042.945.539.125.6Note:CapacityatriskcanbefoundintheonlineAnnex.Despitetoday’sscrambleforoilproducts,theAPSandtheNZEScenarioimplylongertermpressuresforrefiners.IntheAPS,morethanhalfofcurrentrefiningcapacityfacestheriskoflowerutilisationorclosureby2050,andtherearefewnewcapacityadditionsafterprojectsunderconstructioncomeonline.Thoserefinersthatsurviveinvesttoreduceemissionsfromrefiningoperations,notablyvialow‐emissionshydrogen,CCUSandefficiencyimprovements.Manyrefinersarelookingtoexpandintoliquidbiofuels,plasticrecyclingandlow‐emissionshydrogentosecurenewrevenuestreams.Somerefinershavealsobeenactivelyparticipatingintheproductionofrenewabledieselthroughco‐processing,facilityconversionorbuildingnewfacilities.Traditionalrefiners,suchasTotalEnergies,Eni,NesteandValero,currentlyownthemajorityofoperatingcapacityforrenewablediesel,andtheyalsoaccountforasizeableshareofplannedcapacity(Figure7.19).Thisisthecaseforsustainableaviationfuelsaswell,althoughtherearenowagrowingnumberofdedicatedproducers.Theinterestshownbyrefinersinproducingthesefuelshasbeendrivenbypolicymeasures,includingtheEURenewableEnergyDirectiveandtheUSBlendersTaxCredit,andbythelowercapitalrequirementsinvolved.Forexample,TotalEnergiesisnowconvertingitsGrandpuitsrefineryIEA.CCBY4.0.Chapter7Outlookforliquidfuels3637inFrancetoabio‐refinerybecausethisrequireslesscapitalthanwouldbeneededtomaintainandrepairtheexistingfacility.Thereisalsogrowinginterestinchemicalplasticrecyclingandwaste‐to‐feedstocktechnologies.Forexample,OMVtookafinalinvestmentdecisionattheendof2021toexpanditspilotplasticwaste‐to‐cruderecyclingplantatitsSchwechatrefineryinAustria.Figure7.19⊳OperatingandplannedproductioncapacityforrenewablebiodieselandbiojetfuelsbycompanytypeIEA.CCBY4.0.Refinersareincreasinglyexpandingintothebiofuelssupplychain,representingaround80%oftoday’sproductioncapacityandoverhalfofplannedrenewabledieselprojectsToday,mostinvestmentbyrefinersisformaintenance,upgradesandexpansionintothechemicalsector.IntheAPSandtheNZEScenario,however,emissionsreductions,hydrogen,biofuelsandplasticrecyclingaccountforanincreasingshareofoverallinvestment.Thefeedstocklandscapeisalsolikelytobemorediverse,asanexclusivefocusoncrudeoilwidenstoencompassbiomassandwastes.Lookingbeyondimmediatemarketconditions,therearegrowingsignsthatrefinersaregoingtohavetoredefinetheirbusinessmodelbeforetoolong.102030OperatingcapacityPlannedprojectsOperatingcapacityPlannedprojectsOthersDedicatedbiofuelproducersRefinersRenewabledieselBillionlitresperyearBiojetIEA.CCBY4.0.Chapter8Outlookforgaseousfuels365Chapter8OutlookforgaseousfuelsIsnaturalgaslosingsteam?Thetraditionalargumentsinfavourofnaturalgashavefocusedonitsroleasareliablepartnerforthecleanenergytransitionanditsabilitytostepintofillthegapleftbydecliningcoalandoil.ThesearecurrentlybeingtestedbytheglobalrepercussionsofRussia’sactionsinEurope.Inthemidstofaglobalenergycrisis,fundamentalquestionsarenowbeingaskedaboutnaturalgas:howcansupplybeassured,nowandinthefuture,andatwhatprice?Thedepthandintensityoftoday’scrisishaveledtoconcernsaboutthefuturecostandavailabilityofnaturalgaswhichhavedamagedconfidenceinitsreliabilityandputamajordentintheideaofitservingasatransitionfuel.Asaresult,theeraofrapidglobalgrowthinnaturalgasdemandisdrawingtoaclose.IntheStatedPoliciesScenario(STEPS),demandrisesbylessthan5%between2021and2030,comparedwitha20%risebetween2011and2020.Itthenremainsflatfrom2030ataround4400billioncubicmetres(bcm)throughto2050,withgrowthinemergingmarketanddevelopingeconomiesoffsetbydeclinesinadvancedeconomies.IntheAnnouncedPledgesScenario(APS),demandsoonpeaksandis10%lowerthan2021levelsby2030.IntheNetZeroEmissionsby2050(NZE)Scenario,demandfallsby20%to2030,andis75%lowerthantodayby2050.Globalnaturalgasdemandin2050inthisyear’sversionoftheSTEPSis750bcmlowerthanprojectedinlastyear’sversion.Halfofthisdownwardrevisioncomesfrommorerapidmovesawayfromunabatednaturalgasconsumptioninadvancedeconomies.TheUnitedStatesaloneaccountsforone‐thirdofthetotaldownwardrevision:itsrecentInflationReductionActissettospeedupthedeploymentofrenewablesinthepowersectorandtoprovidestrongersupportforefficiencyandheatpumpsinbuildings.Theothermajordownwardrevisioncomesfromprice‐sensitiveemergingmarketanddevelopingeconomies,wherehighnaturalgaspricesmeanthatprospectsforcoal‐to‐gasswitchingarenowmoremuted.RussianpipelinegasexportstotheEuropeanUnionmorethanhalvedoverthelastyeartoanestimatedtotalof60bcmin2022.Theydeclinebyanadditional45bcmintheSTEPSby2030,andfalltozerointheAPS.Additionalliquefiednaturalgas(LNG)andnon‐Russianpipelinegasplayimportantrolesinmakinguptheshortfallinbothscenarios,buttheAPSseesastrongersurgeinwindandsolarcapacityadditionsandabiggerpushtoretrofitbuildingsandinstallheatpumps:thesehelptobringEUnaturalgasdemanddownby40%,or180bcm,between2021and2030.TheannualinvestmentcostofUSD65billionisoffsetovertimebylowergasimportcosts.Europe’sdrivetoreducerelianceonRussianimportsandadearthofnewgasexportprojectsmeanthatnaturalgaspricesinimportingregionsremainhighoverthenextfewyearsintheSTEPSandAPS,especiallyinEurope.IntheNZEScenario,rapidSUMMARYIEA.CCBY4.0.366InternationalEnergyAgencyWorldEnergyOutlook2022demandreductionsinallregionseasethestrainsonglobalsupplies,andgasimportpricesfallquickly.PricescomedownmoregraduallyintheSTEPSandAPSfromthemid‐2020sasgasdemandflattensandnewsupplyprojectscurrentlyunderconstructioncomeonstream.DeclinesindomesticdemandintheUnitedStatesopenopportunitiesforhigherLNGexports;inboththeSTEPSandAPS,theUnitedStatessoonovertakesRussiatobecometheworld’slargestnaturalgasexporter.NaturalgasdemandgrowthinChinaslowsconsiderablyintheSTEPS,fallingto2%peryearbetween2021and2030,comparedwithanaveragegrowthrateof12%peryearbetween2010and2021.LargevolumesofLNGhavebeencontractedforthenextfifteenyears:togetherwithexpectedsupplyfromexistingpipelinesandnewdomesticprojects,thesemorethancoverChina’sdemandrequirementsintheSTEPSto2035.Highgaspriceshavedampenedprospectsforcoal‐to‐gasswitching,buttheyhavenotextinguishedthem.InemerginganddevelopingmarketsinAsia,long‐termgasimportcontractswithpricesindexedtooilofferpartialprotectiontoconsumersfromhighandvolatilegasprices,andinsomecasesthisisbuttressedbydomesticsubsidies.Agrowingpopulationandrobusteconomicdevelopmentprovideastrongfoundationforgrowth:gasdemandintheAPSintheseemergingmarketsinAsiarisesby20%to120bcmin2030.Around70%ofthisgrowthismetbyimportedLNG.RisingnaturalgasdemandinpartsofAsiaalongsideEuropeanUnioneffortstoimportnon‐RussiangasunderpinLNGdemandgrowthinallscenariosuntilthemid‐2020s,buttherearesharpdivergencesthereafter.IntheSTEPS,anadditional240bcmperyearofexportcapacityisneededby2050overandaboveprojectsalreadyunderconstruction.IntheAPS,onlyprojectscurrentlyunderconstructionarerequired.IntheNZEScenario,asharpdecreaseinnaturalgasdemandgloballymeansthateventheseprojectsareinmanycasesnolongernecessary.Thishighlightsakeydilemmaforinvestorsconsideringlarge,capital‐intensiveLNGprojects:howtoreconcilestrongnear‐termdemandgrowthwithuncertainbutpossiblydeclininglongertermdemand.TherearenoeasyoptionsforRussiainitssearchfornewmarketsforthegasitwasexportingtoEurope.SanctionsundercuttheprospectsforlargenewRussianLNGprojects,andlongdistancestoalternativemarketsmakenewpipelinelinksdifficult.IntheAPS,Russia’sshareofinternationallytradedgas,whichstoodat30%in2021,fallsby2030tolessthan15%,anditsnetincomefromgasexports(revenueminuscosts)fallsfromUSD75billionin2021toUSD25billionin2030.Prospectsforlow‐emissionsgaseslookbright.IntheAPS,low‐emissionshydrogenproductionrisesfromlowlevelstodaytoover30milliontonnes(Mt)peryearin2030.Thisisequivalenttoover100bcmofnaturalgas.TheAPSalsoseesariseinbiomethaneproductionthatreflectstheambitioustargetsnowbeingestablished.Governmentshaveakeyco‐ordinatingroletoplayinthegrowthoflow‐emissionsgases,inparticularinsettingstandardsandensuringreliable,long‐termdemand.Atthemoment,the24Mtperyearofprojectsseekingtoexporthydrogenorhydrogen‐basedfuelsarerunningaheadofplansforthecorrespondingimportinfrastructure.IEA.CCBY4.0.HowwillglobalnaturalgastradeevolveintheAPS?Today’sturbulenceingasmarketsreshapesglobalgastrade.Russia’sexportsdwindleandtheEuropeanUnioncompeteswithcountriesinAsiaforLNGsupplies.DemandforLNGinEuropethenfallssteadilyasitmovesawayfromgastomeetitsclimategoals.DevelopingAsiaisthemaindestinationforexportsin2050.880830500NorthAmericaRussiaAfricaRestofworldMiddleEastEuropeanUnionJapanandKoreaDevelopingAsiaRestofworldEuropeanUnionJapanandKoreaDevelopingAsiaRestofworldExport2030Import2030Import2050Export2021Import2021bcmIntheAPS,theEuropeanUniondoublesdownoncleanenergy,spendingUSD65billionperyeartobringnaturalgasdemanddownby60%by2030.Theseinvestmentsareosetovertimebymuchlowergasimportcosts.Naturalgasmayberunningoutofsteam…WhatpricetagforreducedEUdependenceonnaturalgas?Theeraofrapidgrowthinnaturalgasdemandisdrawingtoaclose,butdoorsareopeningforlow-emissionsgases,whichgetaboostintheAPSandlourishintheNZEscenario.BiogasesUnabatedWithCCUSNaturalgasLow-emissionshydrogenproductionWithCCUSLossesElectrolysisandbioenergySTEPSAPSNZE202142504660bcm-equivalent356026802050BillionUSDSTEPSAPS060120201621202230203150202230203150GasimportcostsRussiaNon-RussiaCleanenergyinvestmenttoreducenaturalgasdemandLow-emissionsfuelsEiciencyElectrificationRenewables368InternationalEnergyAgencyWorldEnergyOutlook2022IntroductionGlobaldemandfornaturalgasheldupbetterthandemandforotherfossilfuelsduringthefirstyearoftheCovid‐19pandemic,andthenincreasedby5%in2021,doubleitsaveragegrowthrateoverthepastdecade.Adearthofnewprojects,weather‐relatedincreasesindemand,LNGoutagesandreducedRussianexportstightenedtheglobalgassupplybalancefrommid‐2021andputupwardpressureonprices,especiallyinEuropewheretheTitleTransferFacility(TTF)benchmarkrosefromlessthanUSD10permillionBritishthermalunits(MBtu)inthefirst‐halfof2021toover30USD/MBtubyDecember2021.Russia’sinvasionofUkraineinFebruary2022hadahugeimpactonanalreadyfragileglobalgasbalance.EuropeanUnioneffortstofillgasstorageaheadofthewinterhaverunupagainstRussia’sstrategicwithholdingofgassupplyandtheprospectofpossiblesupplyshortagesbringinghighlevelsofmarketvolatilityandexceptionallyhighprices.Europe’sTTFbenchmarkpricesawpeaksexceedingUSD90/MBtuin2022,evenastheEuropeanUnionanditspartnersdebatewaystoreducerelianceonRussiangasandcurtailitsrevenuefromenergysales.Thestrainsongassupplyhavealsoledtoenergyshortagesinseveralpartsofthedevelopingworldthatrelyonimportedgas,notablyPakistanandBangladesh.MajorgrowthmarketsforgassuchasIndiaandChinahavemeanwhilesharplyreducedtheirLNGimportsin2022.Amidascrambletosqueezesupplyoutofexistingfieldsandmaximisetheuseofexportandimportfacilities,thecrisishaspromptedpolicydiscussionsaboutreforminggasmarkets,bettermanagingsupplyshortfallsandshieldingcustomersfromhighandvolatileprices.Suchissuesinevitablyinvolveconsiderationoftheroleofnaturalgasinenergytransitionsandthecontractualstructuresthatmightaccommodatevariousvisionsofthefutureroleofgas.Thischapterexamineswhatourscenariosimplyforthefutureofnaturalgas.Allthescenariostakeaccountofthecurrentgascrisis,whilealsolookingaheadtothelongerterm.IntheStatedPoliciesScenario,naturalgasdemandgrowslessthan5%overtheremainderofthedecade,reaching4400bcmin2030.IntheAnnouncedPledgesScenario,demandplateausanddropsbelow4000bcmin2030.IntheNetZeroEmissionsby2050Scenario,demanddropsrapidlytoaround3300bcmin2030.Againstthebackdropofthesethreeverydifferentviewsofthefuture,thischapteralsoexaminesthreekeyissuesthatwillshapethefuturenotjustofnaturalgas,butallgaseousfuels:WhatnowforthenaturalgasbalanceintheEuropeanUnion?WhatimpactwillthecurrentcrisishaveonpipelineandLNGflows,anddomesticproductioninEuropeandbeyond?Whataretheprospectsforhydrogen?Interestinlow‐emissionshydrogenishigherthanever,butwhatneedstohappentogetinternationalhydrogentradeupandrunning?Howlongatransitionrolefornaturalgas?HowhasthecrisisaffectedtheprospectsforgasinemergingmarketanddevelopingeconomiesinAsia?IEA.CCBY4.0.Chapter8Outlookforgaseousfuels3698Scenarios8.1OverviewTable8.1⊳Globalgasesbyscenario(bcme)STEPSAPSNZE20102021203020502030205020302050Totalgasdemand33514248445646614069356836662681Naturalgasdemand33294213437243573874266132681159Power134516331590146914228801177119Industry70188210031116891644802213Buildings757886890852737372486‐Transport108147159172126589912Low‐emissionsH2productioninputs‐1103241266145566Other417664720717658441559248NaturalgasabatedwithCCUS2122474103420223738Lossesfromlow‐emissionsH2production‐‐310138245175Naturalgasproduction32744149437243553878266032641178Conventionalgas2768296429623025273120162292827Unconventionalgas5061185141013291147644972351Naturalgastrade641878944991833497667224LNG275450559649545324443153Pipeline36642838534228817322471Low‐emissionsH2demand‐121811007522991509Power‐‐12146391200Industry‐‐7203624884451Buildings‐‐‐36301040Transport‐‐2251115838396InputforH2basedfuels‐‐1111922960395Other‐1102015241627Low‐emissionsH2production.121811007522991509Fossilfuel‐based(withCCUS)‐182529192103406Electrolytic‐‐1356705571951097Bioenergy‐based‐‐‐‐1417Biogasdemand223570244123339199404Biogas2127461025814259138Biomethane182414365197140267Notes:bcme=billioncubicmetresequivalent;H2=hydrogen;CCUS=carboncapture,utilisationandstorage;STEPS=StatedPoliciesScenario,APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.Valuesarereportedinbcmequivalent(bcme)accountingforenergyperunitofvolumeoflow‐emissionsgases.Totalgasdemandincludesthetotaldemandforgaseousfuelsbyusers,includingpowerandothertransformationsectors,netofanyconversionsbetweendifferentgaseousfuels,suchasfromnaturalgastolow‐emissionshydrogenorlow‐emissionshydrogentosyntheticmethane.Naturalgasuseinindustryincludesonsitehydrogenproduction.Productionanddemandvolumesdifferduetostockchangesandinternationalbunkers.WorldtradereflectsnettradebetweenregionsmodelledintheWorldEnergyOutlookandthereforeexcludesintra‐regionaltrade.Otherfornaturalgasdemandincludesothernon‐energyuse,agricultureandotherenergysector.Otherforhydrogendemandincludesuseinrefineries,agricultureandbiofuelsproduction.SeeAnnexCfordefinitions.IEA.CCBY4.0.370InternationalEnergyAgencyWorldEnergyOutlook2022IntheStatedPoliciesScenario(STEPS),naturalgasdemandrisesatanaveragerateof0.4%peryearbetween2021and2030,wellbelowthe2.2%averagerateofgrowthseenbetween2010and2021(Table8.1).Demandreaches4400bcmin2030andstaysatthatlevelto2050.Avarietyofdrivershaveledtothedownwardrevisioninthisyear’sSTEPScomparedtotheWorldEnergyOutlook2021(WEO‐2021);theglobalsupplysqueezehasledtorecordhighpricesinseveralgasmarketsaroundtheworldandthebalanceisnotexpectedtoeaseuntilmid‐decade,whenlargenewLNGexportscomeonstream.ThishasdampenedprospectsfordemandgrowthinseveralemerginggasmarketsinAsia,andacceleratesEuropeaneffortstoreducegasdemand.Thereisafasterincreaseinrenewablesdeployment,alargeruptakeofotherflexibilityoptionsinthepowersector,andanaccelerationinefficiency,allboostedinparticularbythepassageoftheInflationReductionActintheUnitedStates.CoupledwithadownwardadjustmenttoGDPgrowth,globalgasdemandis750bcmlowerby2050thanprojectedintheWEO‐2021.IntheAnnouncedPledgesScenario(APS),globalnaturalgasdemandsoonpeaks,andby2030isnearly10%lowerthanitwasin2021.Amodestnetincreaseindemandinemergingmarketanddevelopingeconomiesbetween2021and2030ismorethanoffsetbyreductionsinadvancedeconomies,wheregasisgraduallyreplacedbyrenewablesandoffsetbyefficiencygains,notablyinthebuildingssector.TheEuropeanUnionreducesitsnaturalgasdemandbynearly45%to2030,easingthetaskofreducingdependenceonRussianimports.By2050,globalnaturalgasdemandis40%below2021levels.Low‐emissionsgases–hydrogen,biogasesandsyntheticmethane–reachmorethan1000billioncubicmetreequivalent(bcme)1by2050,accountingforalmostone‐thirdoftotalgaseousfueldemand.IntheNetZeroEmissionsby2050(NZE)Scenario,naturalgasdemandisover900bcmlowerin2030thanin2021,adropofaround20%.By2050,unabatednaturalgasmeetslessthan15%oftotaldemandforgaseousfuels;low‐emissionsgasesaccountforover70%oftotalgaseousfueldemandandnaturalgasusedeitherfornon‐combustionpurposesorequippedwithcarboncapture,utilisationandstorage(CCUS)fortheremainder.Around500bcmofnaturalgasisusedwithCCUStoproducelow‐emissionshydrogenin2050,providingaround25%oftotalhydrogendemand(withmostoftherestproducedfromelectrolysis).Inter‐regionalnaturalgastradeincreasesby65bcmintheSTEPSbetween2021and2030,arateofgrowthwhichisone‐fifthofthelevelsofthelastfiveyears.Anaverageof20bcmperyearofnewLNGexportcapacitycomesonlinebetween2022and2024,wellbelowhistoricalratesofaround35bcmperyear.LNGimportstotheEuropeanUniondoubletoover150bcmby2025,helpingtooffsetareductionbyover100bcmofRussianpipelinesupplytotheEuropeanUnion.LNGincreasesby90bcmbetween2030and2050,evenastotalglobalgasdemandcontractsslightlyoverthesameperiod.IntheAPS,globalgastradepeaksinthemid‐2020sandfallsto470bcmin2050,halfof2021levels.IntheNZEScenario,globalgastrademuchpeakssooner,andfallstolessthan300bcmin2050.1Billioncubicmetreequivalent(bcme)representsenergycontentexpressedinstandardisedunitsofnaturalgasvolume.Forhydrogen,biogasandbiomethaneitiscalculatedfromtheenergycontentofthesefuelsandnottheirvolume.Aconversionfactorof36petajoulesperbcmeisused.IEA.CCBY4.0.Chapter8Outlookforgaseousfuels3718PricesIntheSTEPS,theweightedaverageimportpriceofnaturalgasintheEuropeanUnion,whichiscalculatedasacompositeofpricesreportedatmajorEUgashubs,e.g.theTTF,nationallyreportedimportpricesandacalculatedoil‐indexedreferenceprice,isprojectedtoremainbetweenUSD20‐30/MBtutothemid‐2020s.ItthengraduallyfallsasmoreLNGcomesonlinetoeaseinternationalgasmarkettightness;pricessettleatUSD8.50/MBtuby2030.NaturalgaspricesintheUnitedStatesareprojectedtocomedownfromrecenthighsasadditionalshalegasproductioncomesonline.AveragepricesinimportingcountriesinAsiarangebetweenUSD12‐17/MBtuthroughto2025,withbuyersinnortheastAsiapartlyshieldedfromhigherspotmarketpricesbytheiruseoflong‐termgascontractsinwhichthegaspriceislinkedtothepriceofoil(Figure8.1).IntheAPS,robustactiontomoveawayfromRussiangasexportsinlinewiththeVersaillesDeclarationmeansthatpricesintheEuropeanUnionareslightlyhigherto2025thanintheSTEPS,butsharperreductionsindemandbringthembelowthelevelintheSTEPSbefore2030.Asthemarketrebalances,pricesinAsiafalltoaUSD9‐11/MBturange.Figure8.1⊳NaturalgaspricesbyregionandscenarioIEA.CCBY4.0.Thespeedatwhichthenaturalgaspriceshockrecedesvariesbyscenario,anddependsinparticularondemandlevelsandLNGsupplydynamicsNote:MBtu=millionBritishthermalunits;STEPS=StatedPoliciesScenario,APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.IntheNZEScenario,asharpdropinnaturalgasdemandgloballyquicklyeasesthestrainsonglobalsupply,leadingtogasimportpricesfallingacrosstheboardtoaroundUSD7/MBtuonaverageby2025.Pricesingas‐importingregionssubsequentlyfallfurthertoafloorsetbytheshort‐runmarginalcostofdeliveringgasfromexistingexportprojects,andaveragearoundUSD5/MBtuby2030.51015202530201020302050STEPSAPSNZEUSD/MBtuUnitedStates201020302050Japan201020302050EuropeanUnionIEA.CCBY4.0.372InternationalEnergyAgencyWorldEnergyOutlook20228.2GasdemandTable8.2⊳GasdemandbyregionintheSTEPSandAPS(bcme)STEPSAPS201020212030205020302050NorthAmerica83511061118820933396UnitedStates678871864575716252CentralandSouthAmerica14716115917914196Brazil294234372817Europe698625511395394122EuropeanUnion44642134023524245Africa105172215292189193NorthAfrica85132155182137120MiddleEast391567689833638582Eurasia578662626635587532Russia472543498470470424AsiaPacific57692010431173983731China110368443442406238India6466115170110102Japan9510364435717SoutheastAsia150162203272194177Internationalbunkers00113088Worldnaturalgas332942134372435738742661Worldlow‐emissionsgases2236913262231091Worldtotalgases335142484456466140693568Notes:Worldnaturalgasandworldlow‐emissionsgasesdonotsumtoworldtotalgasesbecausenaturalgasincludesinputstoproducelow‐emissionshydrogenandlow‐emissionsgasesincludesthehydrogenasanoutput.SeeAnnexCfordefinitions.Demandtrendsto2030TheindustrysectordrivestotalnaturalgasdemandgrowthintheSTEPSandaccountsfor90%ofoverallgrowthbetween2021and2030.However,manyindustrialsectorsaresensitivetochangesingasprices,andhigherequilibriumgaspricescontributetoanearly30%downwardrevisiontoindustrialnaturalgasdemandgrowthbetween2021and2030comparedtotheSTEPSprojectionsintheWEO‐2021.Naturalgasdemandinindustryfallsby2%between2021and2030intheAPSand7%intheNZEScenario.Around35bcmofcoal‐to‐gasswitchingpropsupindustrydemandintheAPS,duetohighercarbonpricesandpolicypressuretoshifttolesspollutingtechnologies.Thebuildingssectorseesfallingdemandfornaturalgasinadvancedeconomiesacrossallthescenarios.IntheSTEPS,arapidaccelerationinefficiencyimprovementsandbroad‐basedadoptionofheatpumpsreducesnaturalgasdemandby65bcminadvancedeconomiesbetween2021and2030.IntheAPS,therateofdeclinetriples,withgasuseinbuildingsIEA.CCBY4.0.Chapter8Outlookforgaseousfuels3738fallingby170bcmbetween2021and2030,or30%ofdemandin2021.Thesereductionshoweverarepartlyoffsetbyincreasesinemergingmarketanddevelopingeconomies.Globally,naturalgasuseinthebuildingssectorstaysflatintheSTEPSto2030,declinesby17%intheAPS,andfallsby45%intheNZEScenario.Thepowersectorseesnaturalgasdemanddeclineslightly,byabout3%,intheSTEPSbetween2021and2030.Thereisageographicalredistributionofdemand;inadvancedeconomies,gasuseinthepowersectorfallsover100bcm,whileinemergingmarketanddevelopingeconomiesitrisesbyabout65bcm.IntheAPS,fastergrowthinrenewablesmeansthatmorenaturalgas‐firedpowerplantsmovefrombaseloadtoflexibleprovidersofelectricitygeneration,meaninglessgasisconsumedinthepowersectorevenasadditionalcapacityisaddedforflexibilitypurposes;thereislimitedcoal‐to‐gasswitchingasdemandshiftsdirectlytorenewablesorotherlow‐emissionsoptions.ThiseffectismorepronouncedintheNZEScenario,wherepowersectorgasdemandfallsby450bcm,or25%of2021levels,by2030(Figure8.2).Figure8.2⊳Changeinnaturalgasdemandbysector,regionandscenario,2021-2030IEA.CCBY4.0.Gasuseinindustryismoreresilienttoincreasedclimateambitionthaninbuildingsandthepowersector.GasdemanddoesnotincreaseinadvancedeconomiesinanyscenarioThetransportsectorcurrentlyaccountsfor3.5%ofglobalnaturalgasdemand,ofwhichabouthalf,70bcm,isforroadvehicles.Volatilenaturalgasmarketshavedampenedthepolicymomentumbehinditsuseasafuelinroadtransport(Box8.1);nonetheless,severalcountriesareexploringtheuseofbiomethaneasatransportfuel.Naturalgasuseintransportissettoincreaseby12bcmby2030intheSTEPS,mainlyduetoincreaseddemandinshipping.‐1000‐5000500STEPSAPSNZESTEPSAPSNZEbcmOtherTransportIndustryPowersectorinputsBuildingsAdvancedeconomiesEmergingmarketanddevelopingeconomiesSector:Region:NetchangeIEA.CCBY4.0.374InternationalEnergyAgencyWorldEnergyOutlook2022Box8.1⊳AforkintheroadforcompressednaturalgasvehiclesHistorically,thepriceadvantageofnaturalgascomparedtooil‐basedfuelshasbeenthemainfactorbehindrisinguseofcompressednaturalgas(CNG)invehicles,thoughenergysecurityandairpollutionconcernshavealsoplayedapart.Today90%oftheCNGfleetconsistsoflight‐dutyvehicles.However,therisingpopularityofelectricvehicles(EVs),whicharemoreefficientandmoreeffectiveatavoidingairpollution,hasdampenedthepolicymomentumforCNG,leadingtoadownwardrevisionofover20bcminnaturalgasdemandforroadvehiclesby2030intheSTEPScomparedtotheWEO‐2021.InChina,thestockofCNGvehiclesshrankin2020forthefirsttimeasincentivesforitsusecametoanend,whilegrowthintheuseofLNGfortruckslostmomentumin2021.ThelargeCNGfleetinPakistanhasbeenchallengedbynaturalgaspriceincreasesandsupplyshortages;thegovernmenthasrespondedbybanningnewCNGfillingstations.Gas‐basedvehiclesmayalsofallfoulofbansoninternalcombustionenginevehiclesplannedintheEuropeanUnionaswellasinThailand,unlesstheyarepoweredbybiomethaneratherthannaturalgas.IntheUnitedStates,theCNGcarmarkethasbeenstagnantfornearlyadecadedespitepolicyincentivesdesignedtohelpit.Figure8.3⊳Naturalgasdemandinthevehiclefleetrelatedtopolicysupportin2019andtheoutlookbyscenarioIEA.CCBY4.0.Exceptinmarketswithreliableaccesstoamplegassupplies,widespreadadoptionofCNGvehiclesischallengedbyhighpricesandthecompetitivenessofEVsGrowth,however,isprojectedtoremainstronginthoseemergingmarketanddevelopingeconomiesthatpossesssignificantnaturalgasreservesorhaveaccesstorelativelycheapsourcesofsupply.InIran–hometo4millionCNGvehicles–supplyinfrastructurecapacityisstrugglingtokeeppacewiththepopularityofsubsidisedCNG.RussiahasalsoseenCNGdemandrise,anditputinplacenewtargetsandsubsidiesin2020toincentivisetheuseofnaturalgasasatransportfuel.CNGvehiclesalesinIndia5101520WithpolicysupportNoordecliningsupportIranIndiaArgentinaChinaPakistanBrazilEuropeanUnionUzbekistanOtherCNGvehiclesfleetin2019Millionvehicles204060802021STEPSAPSEmergingmarketanddevelopingeconomiesAdvancedeconomiesRoadsectornaturalgasdemandbcm2030IEA.CCBY4.0.Chapter8Outlookforgaseousfuels3758andpartsofSouthAmericaarestillrisingthankstogovernmentsupport,includinginsomecasesforbio‐CNG.Severalothercountries,suchasEgypt,IsraelandNigeria,areplanningCNGsupportschemes.IntheSTEPS,roadvehiclegasdemandissettoincreasebyaround10bcm,toreachalmost80bcmby2030,withIndiaaccountingfornearlytwo‐thirdsoftheincrease(Figure8.3).IntheAPS,naturalgasconsumptionintheroadsectordeclinesby6bcm,mostlyduetoashifttowardstheuseofEVstohelpmeetnetzeroemissionstargets.TheMiddleEaststandsoutforthesizeofitspercapitagrowthinnaturalgasconsumptionbetween2021and2030intheSTEPS,ofaround130cubicmetrespercapita,drivenbygrowthintheuseofgasinpower,industryanddesalinationplants.ThisoffsetsabroadlyequivalentdeclineingasconsumptionpercapitainEurope,whichisdrivenbyanearly20%reductioningasuseinbuildingsanda30%reductioninthepowersector.DemandintheMiddleEastremainsrelativelyresilientintheAPS,risingby70bcmbetween2021and2030comparedto120bcmintheSTEPS.IntheUnitedStates–theworld’slargestnaturalgasconsumer–thereismodestgrowthinnaturalgasdemandtothemid‐2020s,thereafterdemandbeginstodecline.TheInflationReductionActspursincreaseddeploymentofrenewables,improvedenergyefficiencymeasuresandcostdeclinesforheatpumps,leavingnaturalgasdemandinthepowerandbuildingssectorslowerbyaround45bcm.Naturalgasuseinindustryandothersectorsincreasesoverthesameperiod,leavingoveralldemandroughlyatthesamelevelin2030astoday.IntheAPS,totalnaturalgasdemandfallsatarateofaround2%peryearbetween2021and2030,withgasuseinpowerfallingbynearly90bcm.InChina,naturalgasdemandintheSTEPSincreasesby2%peryearbetween2021and2030,wellbelowtheaveragegrowthrateofaround12%peryearbetween2010and2021.Thecoal‐to‐gasswitchingwhichstartedinthe2010scontinuesintothe2020s,butatamoremoderatepace.Theshareofgasintheresidentialsectorrisesfrom12%in2021to16%by2030,contributingtoareductionincoaluse.Themajorityofindustrialdemandgrowthismetbyelectricity,butnaturalgasuseinindustrystillincreasesbyaround35bcm(comparedwith75bcmfrom2011to2020).IntheAPS,naturalgasdemandinChinariseslessthan1%peryearbetween2021and2030.InIndia,naturalgasdemandintheSTEPSreaches115bcmby2030.Mostofthegrowthcomesfrommanufacturingandotherindustry,helpedbytheexpansionofcitygasdistributionnetworks.Gassatisfieslessthan5%oftheincreaseintotalpowergeneration,butthisisenoughtoraisedemandby10bcm.Theuseofgasintransport,includingbothnaturalgasandbiomethane,increasemorethantwofold,toreachover10bcmby2030.GasdemandtrendsintheAPSarebroadlysimilartothoseintheSTEPS.InSoutheastAsia,naturalgasdemandrisesinboththeSTEPSandAPSataratearound2%peryear,toreacharound200bcmby2030.Powergenerationaccountsformorethanhalfofdemandincreaseswhileindustryaccountsformostoftheremainder.IEA.CCBY4.0.376InternationalEnergyAgencyWorldEnergyOutlook2022Demandtrendsafter2030IntheSTEPS,naturalgasdemanddeclinesslowlyfromabout22%ofglobalenergydemandin2030to20%in2050.Growthfornaturalgasinindustry,about120bcm,offsetsmorethan90%ofthedeclineindemandarisingfromgrowthinrenewablesandreducedcoal‐to‐gasswitching.Naturalgasalsolosesmarketshareafter2030inresidentialspaceheating,cedinggroundtodistrictheatingandelectricityintheformofheatpumpsand,insomecases,electricheaters.Solarthermalheatingalsogainsgroundinthe2030s,displacingtheuseofgastoprovidehotwater.By2050,globalnaturalgasdemandisabout4400bcm,orroughlythesamelevelofdemandasin2030.IntheAPS,theshareofnaturalgasintheglobalenergymixfallsfrom23%in2021to15%by2050.Mostofthedeclineoccursafter2030,andthe2%declineinnaturalgasdemandperyearbetween2030and2040iscomparabletothatofcoalbetween2021and2030.Low‐emissionsgasesintheAPSmeetaround35%oftotalgaseousfueldemandinindustryby2050aswellasaround20%oftotalgaseousfueldemandinthepowerandbuildingssectors.Around80bcmofthenaturalgasthatisconsumedinindustrialplantsisequippedwithCCUS,mainlyintheproductionofpetrochemicalsandnon‐metallicminerals.Around250bcmeofhydrogenisconsumedinindustry.Around340bcmeofbiogasesareusedin2050acrossallsectors(Figure8.4).Figure8.4⊳Gasflowstomeetdemandforlow-emissionsfuelsbysectorintheAPSandtheNZEScenario,2050IEA.CCBY4.0.Low-emissionsgasesandCCUSincreaserapidlyfromalowbaseinbothscenariosandareessentialtoloweremissionsinsectorswhereelectrificationoptionsarechallengingNotes:TFC=totalfinalconsumption.Otherhydrogen‐basedfuelsincludehydrogenusedinrefineriesandforbiofuelproduction.Otherforbiogasesincludesagriculture,othernon‐energyuseandtheotherenergysector.Toavoiddoublecounting,theenergyoriginatingfromnaturalgasthatistransferredtolow‐emissionshydrogenisshownonlyonce,asdemandforlow‐emissionshydrogen.Thelossesfromthehydrogenconversionareestimatedonlyforthemerchanthydrogenproduction.250500750InputstoammoniaproductionInputstootherhydrogen‐basedfuelsOtherbcmeNZE250500TFCTransformationTFCTransformationTFCTransformationIndustryBuildingsTransportPowerLossesfromhydrogenconversionBiogasesHydrogenNaturalgaswithCCUSAPSbcmeIEA.CCBY4.0.Chapter8Outlookforgaseousfuels3778IntheNZEScenario,naturalgasdemandis70%lowerin2050than2021.Demandfallsatarateofaround5%peryearafter2030(coaldeclines8%peryearoverthesameperiod).In2050,190bcmofnaturalgasisusedinnon‐combustionsectorssuchaschemicals,100bcmisusedinpowerplantsequippedwithcarboncaptureandstorage,over560bcmisusedwithCCUStoproducehydrogenandafurther150bcmisusedwithCCUSinindustry.Totalhydrogenproductionreachesover1500bcmeby2050.Over25%ofthehydrogenproducedin2050isconvertedtohydrogen‐basedfuelssuchasammonia,methanolandsynthetichydrocarbons.Theremainderisuseddirectlyinindustry,transportandbuildings.Biogasesreachmorethan400bcmby2050;around65%isbiomethane,whichismostlyinjectedintogasnetworksorotherwiseincontainersasbio‐CNGmainlyforuseinthetransportsector.Theoverallshareoflow‐emissionsgasesintotalgaseousfuelsreachesover70%,fromlessthan1%today.8.3GassupplyTable8.3⊳NaturalgasproductionintheSTEPSandAPS(bcm)STEPSAPS201020212030205020302050NorthAmerica8111189128310171098485Canada15618918920015487Mexico513131343134UnitedStates6049691063784913364CentralandSouthAmerica16015114919513395Argentina4141531075160Brazil162525381911Europe34123924720817765EuropeanUnion148513934172Norway110119126788020Africa203265313369285239Algeria85103103659739Egypt577274587450Mozambique3423831443Nigeria334451574841MiddleEast4636608531030798690Iran144236248319245154Iraq51232442928Qatar121169247326236225SaudiArabia73100150191148189Eurasia807998831857751654Azerbaijan173335243529Russia657793633612584483Turkmenistan45909115573100AsiaPacific488648694678636432Australia53151165150154121China96200250285228120India513248784753Indonesia865857385033RestofAsiaPacific203206174126156106World327441494372435538782660Note:SeeAnnexCfordefinitions.IEA.CCBY4.0.378InternationalEnergyAgencyWorldEnergyOutlook2022Supplytrendsto2030Figure8.5⊳Changeinnaturalgasproductionbyscenario,2021-2030IEA.CCBY4.0.TherearesharpreductionsinRussiangasproductioninallscenarios,whiletheMiddleEastleadssupplygrowth.NorthAmericaseesthelargestvariationbetweenscenarios.Note:C&SAmerica=CentralandSouthAmerica.IntheSTEPS,theMiddleEastisthelargestnear‐termsourceofsupplygrowth(Table8.3).NewsuppliesareunderpinnedbytheNorthFieldexpansioninQatar,wherevolumesareprimarilyearmarkedforexport,aswellasa60bcmriseinnon‐associatedgasproductionthatmeetsdomesticdemandgrowthinIran,SaudiArabiaandtheUnitedArabEmirates.IntheAPS,naturalgasproductionisunderpinnedbyresilientdomesticdemandgrowthandbyincreasedLNGtrade.IntheUnitedStates,totalgasproductionrisesintheSTEPSfrom970bcmin2021tojustover1050bcmby2030;thisgrowthrateof1%peryearismuchlowerthanthe5%seeninthepreviousdecade.Around120bcmofadditionalsupplycomesfromunconventionaldrygasproductionledbytheMarcellusandUticaplays,andassociatedgasinthePermianBasinaddsanadditional30bcm.Theseadditionalsuppliesmorethanoffsetdeclinesinconventionalgasoutput.Around55bcm,oroverhalfofnetproductiongrowth,isexportedintheformofLNG.IntheAPS,evenasgasproductionfalls7%below2021levelsduetodecliningdomesticdemand,LNGexportsincreaseby45bcmfromtoday,almostasmuchasintheSTEPS.InCanada,unconventionalgasproductionincreasesbymorethan50bcmbetween2021to2030intheSTEPS,withover40%exportedasLNG.Overall,NorthAmericangasproductionseesthebiggestdifferencesbetweenscenarios;supplyincreasesbymorethan90bcmto2030intheSTEPS,butcontractsby340bcmintheNZEScenario(Figure8.5).InRussia,gasproductionfallsinallscenarios.IntheSTEPS,itis155bcmperyearlowerin2030thanitwasin2021.IntheAPSitis210bcmlower,takingproductionbackto590bcmSTEPSAPSNZE203030060090012001500NorthAmericaEurasiaMiddleEastAsiaPacificAfricaEuropeC&SAmericabcm2021IEA.CCBY4.0.Chapter8Outlookforgaseousfuels3798peryear,alevellastseenin2002.TheupstreamprojectsdesignedtoserveNordStreamII–KharasaveyandtheBovanenkovoexpansion–struggleintheneartermtofindalternativeoutlets.TheTambeyfieldexpansiontounderpinnewLNGprojectsisunlikelytorampuptoitsoriginalcapacity.Theflaringofassociatedgashasrecentlyincreased,andthereisashort‐termriskinallscenariosoflarge‐scaleflaringorventingtoeasesystempipelinepressures.Russia’seffortstodiversifyitsexportmarketshavemixedsuccess.DeliveriestoChinaintheSTEPSrisefrom10bcmin2021to50bcmby2030.ThisislargelyachievedthroughtherampingupofthePowerofSiberiapipeline,whichdeliversabout38bcmperyearandissuppliedbytheChayandinskoyeandKovyktinskoyefieldsinEasternSiberia.RussiaandChinaagreedearlyin2022toanewpipelineroutingupto10bcmofproductionfromSakhalinintonortheastChina.Overall,however,Russia’sincreasedpipelinenaturalgasdeliveriestoChinacoverlessthanhalfofthedropinexportstoEuropeby2030.InsomeofthemorematurefieldsinWesternSiberiawhichcurrentlyserveEurope,suchasUrengoyandYamburg,productionisgraduallyshutin.Reducedgasextractionreducesfieldproductivityandthepipelinepressuresneededtosupportnaturalgasflowsoverlongdistances.IntheAPSandNZEScenario,lowerlevelsofdemandfornaturalgasintensifythesedifficulties.Europe’seffortstosecuresuppliestodisplaceRussiangasunlocksnear‐termgrowthinEgyptandinpartsofsub‐SaharanAfrica,notablyintheRepublicoftheCongo,wherea4.5bcmperyearLNGprojectisexpectedtostartin2023.Bythemid‐2020s,Norwayexpandsitssecond‐largestgasfield,OrmenLangePhase3,whichhasupto40bcmofrecoverablegas,alongwithsmallernewfieldsincludingTommelitenA.However,decliningproductionfrommaturebasinsmeansthatNorwegiangasproductionpeaksbefore2030ineachscenario.China’smostrecentFive‐YearPlan(2021‐2025)isfocussedonboostingdomesticproductionofnaturalgasincludingshalegas,coalbedmethane,tightgasandotherunconventionalresources.By2030,Chinaemergesineachscenariointhetop‐fivelargestnaturalgasproducers,alongwiththeUnitedStates,Russia,IranandQatar.InIndia,thegovernmentrecentlyannouncedadoublingofitslicenceareaforoilandgasexploration;however,thisisunlikelytocontributesignificantvolumesinthisdecade.IntheSTEPS,gasproductionrisesbyover15bcm,withincrementalvolumemostlyfromtheoffshoreKrishnaGodavaribasin,coveringaroundone‐thirdofdomesticdemandgrowth.Productiongrowthto2030issimilarintheAPS.ElsewhereinAsia,gasproductioninIndonesiaandMalaysiaremainsflatto2030intheSTEPSanddropbymorethan10%intheAPS,withrecentupstreaminvestmentslargelyoffsetbydecliningproductionfrommaturingfields.InAustralia,gasproductionincreasesby8%to2030intheSTEPSandremainsflatintheAPSwithincrementalcontributionsfromconventional,coalbedmethaneandshalegas.InAfrica,productionrisesbyabout20%intheSTEPSbetween2021and2030,withmostoftheincrementalvolumecomingfromMozambique.IntheAPS,gasproductionincreasesbylessthan10%;thereisverylittlegrowthinnettradeandamoremodestincreaseindomesticdemandrelativetotheSTEPS.IEA.CCBY4.0.380InternationalEnergyAgencyWorldEnergyOutlook2022GasproductioninCentralandSouthAmericaremainslargelyflatintheSTEPS,withsupplyrisingfromTrinidadandTobago(MatapalandColibri,around3bcm)andArgentina(VacaMuerta,12bcm).ThesearelargelyoffsetbydeclineselsewhereincountriessuchasBolivia,VenezuelaandPeru.IntheAPS,gasproductionfalls12%below2021levelsby2030.Supplytrendsafter2030Figure8.6⊳TotalgaseousfuelsupplybyscenarioIEA.CCBY4.0.TotalgasesincreaseintheSTEPS,whileintheAPSandtheNZEScenariothedropinsupplyforunabatedusesispartlyoffsetbyariseinhydrogen,biogasandgasusewithCCUSNotes:H2=hydrogen.Includesallgasessuppliedtothesystemfortransformation(toelectricity,heatorhydrogen‐basedliquidfuels)orfinalconsumption.Theenergycontentoflow‐emissionshydrogenproducedfromnaturalgasissubtractedfromnaturalgasusewithCCUS.Lossesfromhydrogenconversionareformerchantproduction.IntheSTEPS,naturalgasproductionstaysflatbetween2030to2050.ShalegasproductionremainslargelyunchangedinNorthAmerica,andthereissomegrowthintheMiddleEastandCentralandSouthAmerica.NewgasproducersinAfrica,suchasMozambique,TanzaniaandSenegal,seealatesurgeinexport‐ledproduction,underpinning110bcmofgrowth.OverallproductioninRussiadeclinesbyanadditional25bcmbetween2030and2050.GlobalnaturalgassupplyintheAPSdeclinesbyover1200bcmbetween2030and2050,tolevelsseenbeforetheshalegasrevolution.IntheNZEScenario,globalgasproductiondeclinesatarateof5%peryear,andisjustunder1100bcmby2050.Theproductionoflow‐emissionsgasesrampsupinboththeAPSandtheNZEScenario(Figure8.6).IntheAPS,low‐emissionsgasesreachnearly1100bcmeby2050,equivalenttomorethan25%ofglobalnaturalgasdemandin2021.Biogasrisestonearly340bcmeby2050fromabout35bcmetoday.Over40%ofbiomethaneandbiogasaredevelopedintheAsiaPacificregion.Low‐emissionshydrogensupplyreachesabout750bcmeby2050inthe1000200030004000500020202050UnabatedWithCCUSElectrolysisandbioenergyFossilfuelswithCCUSLossesfromH₂conversionBiogasesNaturalgasLow‐emissionshydrogen(bysource)STEPSbcme20202050NZE20202050APSIEA.CCBY4.0.Chapter8Outlookforgaseousfuels3818APSandover1500bcmintheNZEScenario.Mostlow‐emissionshydrogenisproducedanduseddomestically,butglobaltradeinlow‐emissionshydrogen‐basedgasesbeginstoriseintheNZEScenariofromthemid‐2020s,toreacharound240bcmeby2050.8.4GastradeFigure8.7⊳ChangeinnaturalgasnettradeinselectedregionsintheSTEPSandAPSIEA.CCBY4.0.Europe’snear-termneedfornon-RussiangasimportsleadstoarebalancingofglobalgasflowsandtoincreasedcompetitionforLNGwithemerginggasmarketsinAsiaIntheSTEPS,globalnaturalgastradeincreasesatanannualaveragerateoflessthan1%peryearfrom2021to2030,comparedto3%between2010and2021.LNGrapidlygainsmarketsharefromlong‐distancepipelinetradeandsogrowsatafasterratethanoveralltrade,atmorethan2%peryear.WithRussianpipelinegastotheEuropeanUnionfallingbynearly90%,or130bcmbetween2021and2030,competitionheatsupbetweenEuropeandAsiaforLNG,overturningtheconventionalwisdomthatEuropeactsasabalancingmarketforglobalLNGsupply(Figure8.7).Around85%ofthegrowthinglobalLNGsupplyto2030intheSTEPSoriginatesintheUnitedStatesandtheMiddleEast.TheUnitedStatessoonovertakesRussiatobecometheworld’slargestnaturalgasexporter.USLNGexportsincreaseby60%from2021levelstoreachnearly150bcmby2030,ofwhichabout60bcmistransportedtotheEuropeanUnion.In2030,theEuropeanUnionimportsanadditional65bcmofLNGintheSTEPScomparedto2021,whilethereisa50bcmdeclineinLNGimportsinKoreaandJapan.EmergingmarketanddevelopingeconomiesinAsiaimportanadditional80bcmofLNG,withimportsmostlyflatelsewhere.100200300400202120302050202120302050202120302050202120302050202120302050bcmOtherAfricaNorthAmericaMiddleEastAustraliaRussiaAPSChinaEuropeanUnionOtherdevelopingAsiaJapanandKoreaIndiaIEA.CCBY4.0.382InternationalEnergyAgencyWorldEnergyOutlook2022Russia’sshareofgloballytradedgasfallsfromalmostone‐thirdin2021tolessthan15%intheSTEPSby2030.TheincreaseinRussianpipelineflowstoChinacoverlessthanathirdofthedropindeliveriestotheEuropeanUnion.SinceChinahasminimaladditionalimportrequirementsbeyondwhatiscurrentlycontracted,Russiaisonlyabletoredirectaround25bcmperyearby2040fromitsWesternSiberiangasfieldstoChinathroughanadditionalpipeline.ExpansioninLNGcapacityinRussiaisconstrainedbysanctions;someprojectsareshelved,whileothersseesignificantdelaystocommissioningdates.Around10bcmofnewLNGexportcapacityisaddedinRussiaby2030,takingtotalexportcapacityto45bcmperyear,butthisfallsfarshortofwhatRussianeedsbythatdatetobeoncoursetoachieveitsstatedaimof200bcmperyearofcapacityby2035.China–currentlytheworld’slargestnaturalgasimporter–seesimportsmeet35%ofdemandgrowthbetween2021and2030intheSTEPS.Theshareofpipelinegasinitstotalgasimportsincreasesfrom25%in2021to45%in2030asdeliveriesfromRussiathroughthePowerofSiberiapipelineandtheplanned10bcmFarEastpipelinearerampedup.By2050,Chinaaccountsfornearlyaquarterofalllong‐distancepipelinegastrade.Around65bcmperyearofLNGregasificationcapacityisunderconstructioninChina,addingtotheexistingcapacityof100bcmperyear.Sincethestartof2021,Chinahasalsocontractedforaround75bcmperyearofadditionalLNGovertheperiodto2030.Allthiscontractingandinfrastructureexpansionhingesonexpectationsofstrongdemandgrowth,whereasintheSTEPSdemandmoderatestoaround2%peryearbetween2021and2030.Withcontinuedgrowthindomesticproduction,LNGdemandgrowsslowerthancontractedsupply,andsosomeofChina’sflexibleLNGimportcontracts(around45bcmperyear)aredivertedtoothermarkets,easingsomeoftheglobalLNGsupplytightnessinthemid‐2020s.InIndia,gasimportsdoubleandreachnearly70bcmby2030;growthmoderatesthereafterandimportsreach90bcmby2050.TheremainingmajorgasmarketsinemergingmarketanddevelopingeconomiesinAsia,primarilyinSoutheastAsia,PakistanandBangladesh,growbyover250bcmbetween2021and2050.IntheSTEPS,anadditional240bcmperyearofLNGexportcapacityisneededby2050abovewhatcurrentlyexistsorisunderconstruction(Figure8.8).Inter‐regionalLNGtradeintheSTEPSexpandsanadditional15%from2030to2050,toreach650bcmby2050.EastAfricaisthemainsourceofLNGsupplygrowth,withexportsrisingbynearly80bcmbetween2030and2050,morethanoffsettingdeclinesinotherpartsofAfrica.IntheAPS,globalgastradefallsslightlybetween2021and2030,drivenbyfasterdeclinesinpipelinegasandslowergrowthinLNGdemandinemergingmarketanddevelopingeconomiesinAsia.GlobalLNGtradepeaksataround550bcmbefore2030andthenfallsto320bcmby2050,about30%below2021levels.Inter‐regionalpipelinetradedeclinesfromabout430bcmtodaytolessthan200bcmby2050,meaningoverallnaturalgastradeis45%lowerthanin2021.InemergingnaturalgasmarketsinAsia,importvolumesintheAPSby2050areabout40%lowercomparedwiththeSTEPS,astheroleofgasasatransitionfuelislargelylimitedtothisdecade(seesection8.8).IEA.CCBY4.0.Chapter8Outlookforgaseousfuels3838IntheNZEScenario,globalLNGtradepeaksinthemid‐2020sandthenfallsto2021levelsby2030,beforedecliningsharplyto150bcmby2050.Inthisscenario,thereisnofurtherneedforadditionalcapacitybeyondwhatexistsorisunderconstruction.Figure8.8⊳ExistingandunderconstructionLNGcapacityandtotalinter-regionalLNGtradebyscenario,2015-2050IEA.CCBY4.0.Thereisnear-termgrowthinLNGtradeinallscenarios,butsharpdivergencesthereafterNote:LNGcapacityisadjustedtoreflectinter‐regionaltradebetweenregionsmodelledintheGlobalEnergyandClimateModel,andde‐ratedto80%ofnameplatecapacity.8.5InvestmentIntheSTEPS,aroundUSD300billionincapitalperyearisspentonnaturalgasbetween2022and2050.AroundafurtherUSD30billionisspentonLNGinfrastructure,mainlyonnewliquefactioncapacity.IntheAPS,growthintotalinvestmentspendingisslower,andinvestmentfallstohalfof2021levelsby2050.IntheNZEScenario,upstreaminvestmentinnaturalgasislimitedtomaintainingsupplyatexistingfieldsandminimisingtheemissionsintensityofproduction.Totalspendingonnaturalgastransportbetween2022and2030issimilarbetweentheSTEPSandNZEScenario,andthelevelofspendingontransportmeanstheaverageoftotalinvestmentinnaturalgasintheNZEScenarioin2022‐30arebroadlysimilartolevelsin2021(Figure8.9).ThesharpdeclineinnaturalgasinvestmentintheNZEScenarioafter2030isaccompaniedbyaparallelrampupininvestmentinlow‐emissionshydrogen.ThisincreasestooverUSD220billionintheNZEScenarioby2050,whichisbroadlyequivalenttothereductionininvestmentinnaturalgasoverthesameperiod.Themajorityofinvestmentinlow‐emissionshydrogensupportstheproductionofhydrogenfromelectrolysers(USD150billiononaveragebetween2030‐50,whichincludesinvestmentindedicatedlow‐emissionselectricity20040060080020152020202520302035204020452050bcmSTEPSAPSNZEExistingLNGcapacityUnderconstructionTradeIEA.CCBY4.0.384InternationalEnergyAgencyWorldEnergyOutlook2022supply),butitalsoincludesspendingonfossilfuelsequippedwithCCUS(USD20billionayearonaverage).Theremaininginvestmentisinnewpipelines,shippingandportinfrastructure.IntheNZEScenario,around15%ofhydrogenisblendedintonaturalgasnetworksby2050,andthisrequiresrelativelyminorinvestmentinnaturalgasinfrastructure.HydrogenproductionintheNZEScenarioisrelativelycapitalintensivecomparedwithnaturalgas,requiringdoublethelevelofinvestmentperunitofequivalentenergy.Figure8.9⊳AverageannualnaturalgasandhydrogeninvestmentbyscenarioIEA.CCBY4.0.IntheNZEScenario,theamountinvestedannuallyforlow-emissionshydrogenbecomesaslargeaswhatisspentonnaturalgastodayNotes:Productionforhydrogenincludesmerchanthydrogenandonsiteproductionfromelectrolysers.Transportationincludesliquefactionandregasificationterminals,ships,pipelinesandstorage.Onlythecostsofdedicatedrenewablesforoffsitehydrogenproductionareincluded;itexcludescostsassociatedwiththeuseofgrid‐basedelectricity.Someoftheinvestmentinnaturalgasproductionresultsinsupplyfornaturalgas‐basedlow‐emissionshydrogenproduction.Box8.2⊳WhataretheimplicationsfornaturalgasoftheEuropeanUniontaxonomyofsustainablefinancialinvestments?TheEuropeanUniontaxonomyofsustainablefinancialinvestmentssetsouttheconditionsthatactivitiessuchasnaturalgasinvestmentmustmeetinordertobeconsideredsustainable.Tomeettheseconditions,anactivitymustproducelessthan270kilogrammesofcarbon‐dioxideequivalentpermegawatt‐hour(kgCO2‐eq/MWh)ofoutputenergy,andannualdirectemissionsmustnotexceedanaverageof550kgCO2‐eq/kWofthefacility’scapacityover20years.Weassessedthelifecycleemissionsassociatedwithnaturalgasextraction,processing,transportandconsumptionforbothheat(inbuildingsandindustry)andelectricity1002003002016‐21STEPSAPSNZESTEPSAPSNZEProductionTransportationNaturalgas2022‐302031‐50USDbillion100200300USDbillionHydrogenIEA.CCBY4.0.Chapter8Outlookforgaseousfuels3858generationinordertoevaluatehowthetaxonomythresholdswouldaffectnaturalgas‐relatedinvestmentsworldwide.Thisassessmenttakesaccountoftheflaringandmethaneemissionsassociatedwiththeproductionandtransportofnaturalgasin2021.Anupwardslopeinthesupplycurvereflectshigheremittingsourcesofsupply.Figure8.10⊳EuropeanUniongastaxonomythresholdscomparedwithgloballifecycleemissionsofnaturalgas,2021IEA.CCBY4.0.Naturalgastoproduceheatforbuildingsandindustrymostlyfallsbelowthetaxonomythresholds,butunabatedpowerplantsexceedthemNote:Valuesonthex‐axisshow,inpercentageterms,allthenaturalgasconsumedworldwideforheat(1400bcm)andelectricity(1650bcm)in2021.Thetaxonomythresholdsimplythatmostofthenaturalgasusetogenerateheatinbuildingsandindustrycanstilltechnicallyqualifyasasustainableactivity,aslongasmethaneleaksandotherupstreamemissionsareminimised.However,theuseofnaturalgastogenerateelectricityinvolvesefficiencylossesthatincreaseitscombustionemissionsintensity,meaningunabatedgas‐firedpowerplantswouldexceedthethresholdbyasignificantmargin.Thereareprovisionsinthetaxonomyforunabatedplantstobedesignatedsustainableaslongasthetotalemissionsdonotexceed550kgCO2/kWofinstalledcapacityeachyearover20years.Inpractice,thiswouldmeanflexiblegasgenerators,withanaveragecombustionintensityof500kgCO2/MWh,couldoperateataloadfactorofaround10%onaverageperyearbeforeexceedingthesenorms.Manypowerproducersandthefinancialsectormightconsidersuchrestrictionstobetoosignificantabarriertoinvestment.20040060080010000%50%100%kgCO2‐eq/MWhNaturalgasemissionsTaxonomythresholdHeatinindustryandbuildings0%50%100%PowergenerationIEA.CCBY4.0.386InternationalEnergyAgencyWorldEnergyOutlook2022Keythemes8.6OutlookfornaturalgasintheEuropeanUnionafterRussia’sinvasionofUkraineCurtailmentsofsupplyafterRussia'sinvasionofUkrainehaveleftthenaturalgassectorintheEuropeanUnionindisarray.DeliveriesfromRussiatotheEuropeanUnionfellbynearly40%inthefirst‐halfof2022,withRussiaterminatingsupplycontractsformultipleEUcountriesduetobuyerrefusaltoacceptaunilateralchangeinthepaymentsystem.ExportstoformersubsidiariesofGazprominGermanyhaveceased,andlargeimporterssuchasGermanyandItalyareplanningaphaseoutofRussiangasoverthecourseofthe2020s.WithitsRePowerEUPlan,theEuropeanUnionissettinginmotionaprocesstodismantleastructuraldependenceonenergyimportsfromRussiabuiltoverseveraldecades.Duringthewinterahead,theamountofRussiangassuppliedtoEuropemaywellbedictatedbyRussia’sownpoliticalendsratherthanbyEuropeanpolicies,raisingtheriskofpossiblesupplyshortfallsandrationing.Inthissection,however,welookbeyondimmediateeventstoexplorethelongertermchallengesanduncertaintiesfortheEuropeanUnionasitseekstoreducetheroleofnaturalgasintheenergymixwhilediversifyingitssupplies.Theroleofnaturalgas,andthelevelofdependenceonRussiangasinparticular,varyconsiderablyacrosstheEuropeanUnion(Table8.4).Around40%oftheEuropeanUnion’stotalresidentialspaceandwaterheatingdemandand30%ofitscookingfueldemandiscurrentlymetbynaturalgas.Gasalsopowers20%oftotalelectricitygenerationandmeets25%ofitsindustrialenergydemand,playinganoutsizedroleinsectorssuchaschemicals,textilesandfoodproduction.Optionstosubstitutefornaturalgasareacrucialdeterminantofthenear‐termabilityoftheEuropeanUniontoadjusttopotentialsupplyshortages.Naturalgasuseisembodiedingoodsandservicesderivedfrommultipleindustries,meaningtheeffectsofacessationofsupplycouldaffectvariousindustrialandservicessectorvaluechains.Thismakesitverydifficulttoassesssubstitutabilityinastraightforwardway.IntheAPS,theEuropeanUniontargetsintheFitfor55packagearefullymet,andinsomecasesexceeded.Theaccelerationofkeymeasures,suchasrapiddeploymentofrenewablesinthepowersectorandenergyefficiency,meansthatgreenhousegas(GHG)emissionsreductionstargetsaremetandthatEUimportsofRussiannaturalgasendwellbefore2030–thekeyobjectiveoftheREPowerEUPlan(Figure8.11).NaturalgasdemandintheEuropeanUniondeclinesby180bcmfrom2021to2030intheAPS,anaveragefallof6%peryear.GasuseinthepowersectoroverthisperioddropsatafasterpacethancoalusedidintheEuropeanUnionfrom2010to2020.Thereisaparallelrampupofrenewables,especiallywindandsolarcapacity,whichincreaseby600gigawatts(GW)to2030,whilecoaldeclinesby100GW.Buildingretrofitsnearlytriplefromthecurrentrateoflessthan1%peryearand40millionheatpumpsaredeployed(equivalenttoinstallationsinnearlyone‐thirdoftheEUbuildingstock).Togethertheseactionshelpreducetheuseofgasinbuildingsby45%from2021to2030,orroughlydoublethepaceofthereductioninoiluseintheEUresidentialheatingsectorinthe1980s.NaturalgasdemandinIEA.CCBY4.0.Chapter8Outlookforgaseousfuels3878industryfallsaround4bcmperyear,fasterthanthedeclineseenin2020immediatelyaftertheonsetoftheCovid‐19pandemic.Mostofthisisinenergy‐intensiveindustrysuchassteelandchemicals,offsetbyhigherratesofelectrification.Table8.4⊳ShareofRussiangasintotalnaturalgasdemandandshareofgasinsectoraldemandbyEuropeanUnionmemberstatesandtheUnitedKingdom,2021MarketsizeCountryRussianshareShareofgasinsectoraldemandPowerIndustryBuildings>20bcmGermany46%20%31%38%UnitedKingdom3%43%32%55%Italy41%51%31%50%France20%9%31%29%Netherlands36%58%30%59%Spain11%31%38%22%10‐20bcmPoland46%9%28%19%Belgium7%30%28%41%Romania6%28%37%34%5‐10bcmHungary78%37%30%50%Austria74%21%34%20%CzechRepublic67%13%24%30%Portugal10%40%23%12%<5bcmSlovakRepublic76%20%28%40%Ireland0%52%42%22%Denmark60%11%30%13%Greece39%29%23%9%Bulgaria100%15%34%5%Croatia0%32%51%22%Finland68%8%6%1%Lithuania50%17%59%11%Latvia100%48%11%13%Sweden14%1%5%1%Slovenia12%7%34%9%Luxembourg25%27%44%36%Estonia46%9%21%9%Denotesapartialcut.Denotesafullcut.Notes:AsterisksdenotecountriesthatstoppedreceivingnaturalgasfromRussiain2022.Tableisorderedfromhighesttolowestnaturalgasdemand.Source:ShareofRussiaintotalnaturalgasdemandcalculatedusingtradedatafromACER(2022);Cedigaz(2022);Eurostat(2022).IEA.CCBY4.0.388InternationalEnergyAgencyWorldEnergyOutlook2022Figure8.11⊳DriversofreducednaturalgassupplyfromRussiatotheEuropeanUnionintheAPSIEA.CCBY4.0.Amixofsupply-anddemand-sidemeasuresarerequiredfortheEuropeanUniontoreducerelianceonRussiangastozerobefore2030Note:Otherincludesreductionsinindustrialnaturalgasdemandandgas‐to‐coalswitching.Onthesupplyside,deliveriesfromRussiagraduallyfalltozerobefore2030intheAPS.Inparallel,EuropeangasbuyersmaximiseLNGshipmentstoexistingfacilitieswhilealsodevelopingnewfacilitiesforLNGimports(announcedplanstotalanextra120bcmperyearofnewcapacity,ofwhicharound40bcmperyeararefloatingstorageandregasificationunits).LNGimportsaverage140bcmperyearoverthe2022‐27period,meetingalmost60%oftheEUnon‐Russianimportrequirements.Around40bcmperyearofLNGonaverageisimportedfromtheUnitedStates.GasimportsfromNorwaydroptoaround60bcmperyear.TherearesomeadditionalpipelinesuppliesfromAlgeriaandAzerbaijan.PartoftheEUsuppliesinsummertimeareusedtobuildupstoragecapacity.IntheAPS,thevolumesrequiredbytheEUgasstorageinjectionandwithdrawalcyclereduceasseasonalvariationsindemanddiminishandasLNGmeetsahighershareofdemand:anetof40bcmofstorageiswithdrawnduringthewinterin2030intheAPScomparedtoanaveragenetwithdrawalof65bcmbetween2016and2021(Figure8.12).However,theamountofgasstoredandultimatelywithdrawnin2030issimilarasashareofremaininggasdemandasin2021,meaningthatstoragestillplaysavitalroleinsecurityofsupply.Andunexpectedeventscouldstillcauseproblems.Forexample,colderthanexpectedwintersorfailuretodeliverthetargetedreductioninnaturalgasdemandinbuildingswouldincreasetheseasonalityofdemand:intheabsenceofadequatestorage,thiswouldincreaserelianceonLNG,whichwouldbelikelytopushupprices.40801201602021DemandSupply2027bcmHydrogenWindandsolarBuildingefficiencyOtherPipelineimportsLNG‐MiddleEastLNG‐AfricaLNG‐NorthAmericaBioenergyIEA.CCBY4.0.Chapter8Outlookforgaseousfuels3898Figure8.12⊳EuropeanUnionmonthlynaturalgassupplybalanceintheAPSIEA.CCBY4.0.RussiangasisgraduallyphasedoutinfavourofLNG.TheseasonalityofEUgasdemandfalls,butgasstorageremainsacrucialassetforsecurityofsupplyNotes:ValuesmatchEUannualnaturalgasdemandintheAPS.Gasvolumesusedtofillstoragearenettedoffandincludedinstoragewithdrawal.CuttingflaringandmethaneleakscanprovideadoubledividendforenvironmentandenergysecurityOver260bcmofnaturalgaswasflared,ventedorlosttoleaksin2021.Ofthis,weestimatethatnearly210bcmcouldbemadeavailabletogasmarketsbyaglobalefforttoeliminatenon‐emergencyflaringandreducemethaneemissionsfromoilandgasoperations(IEA,2022a).Thiswouldbringadoubledividend:reliefforverytightgasmarketsalongwithreducedGHGemissions.AstheflaringintensityofoilimportedbytheEuropeanUnionisfive‐and‐a‐half‐timeslargerthanthatproducedintheregion(Capterio,2021),theEuropeanUnionhasaclearincentivetoact.ReducingimportsfromRussiawilllowerthisintensityasRussiaflaresmoregasthananyothercountry,withanestimatedtotalofmorethan20bcmin2021(Zhizhinetal.,2021).IfcountriesthatarecurrentorpotentialexportersofnaturalgastotheEuropeanUnionweretoimplementflaringandmethanereductionmeasures,thegassavedwouldmeanthattheycouldincreasegasexportsbymorethan53bcmusingexistingandplannedinfrastructure.Thisisequivalenttoaboutone‐thirdofRussiangasexportstotheEuropeanUnionin2021orthefulluseoftheNordStream1pipelineannualcapacity(Figure8.13).Rapidactiontodeployallavailableflaringandmethaneabatementtechnologiesoverthenextdecadewouldhavethesameeffectontheglobaltemperaturerisebymid‐centuryasimmediatelyeliminatingtheGHGemissionsfromalloftheworld’scars,trucks,busesandtwo/three‐wheelers.10203040506020172018201920202021202220232024202520262027202820292030bcmStoragewithdrawalLNGOtherpipeNorwayRussiaProductionSPOTLIGHTIEA.CCBY4.0.390InternationalEnergyAgencyWorldEnergyOutlook2022Figure8.13⊳PotentialforflaringandmethaneabatementtosatisfyEUgasimportdemandcomparedwiththecapacityofNordStreamIIEA.CCBY4.0.Flaring,ventingandleaksarewastinggasthatcouldbeexportedtotheEuropeanUnionatalevelequivalenttothefullcapacityoftheNordStreamIpipelineSomeofthelargestflaringreductionopportunitiesareinNorthAfrica:AlgeriaandEgyptlostabout12bcmofnaturalgasfromtheirupstreamassetsin2021asaresultofflaringandrelatedcombustioninefficiencylosses.AccordingtosatelliteimaginganalysiscarriedoutbyanalyticsfirmCapterio,closeto80%offlaringinAlgeriaandEgyptoccurswithin20kilometres(km)ofexistinggaspipelineswithreadyaccesstoanexistingexportpipelineorLNGterminal(Davisetal.2022).Mostflaresoperatecontinuouslyandmanyarecandidatesforcost‐effectiveabatementoptions.Thelogisticalandeconomicchallengesinvolvedincapturinglargequantitiesofflaredgasincludemultiplepointsources,varyinglevelsofpotentialnaturalgascaptureandcomplicatedownershipstructuresacrossthesupplychain.InNorthAfricathereareseveralrecentexamplesofflarecaptureprojectsthathavereducedemissions,contributedtoemissionsreductiontargetsandcreatedvalue.KuwaitEnergyandUnitedOilandGasbuiltadedicatedgaspipelineinlessthanoneyearinEgypttomoveupto0.05bcmofnaturalgasperyeartoanexistinggasprocessingfacilitysome20kmawayratherthanflaringit.Inanotherexample,ApacheandShell(andpartnersincludingBAPETCO)recentlyinstalledgas‐firedplantstopoweroperationsthatpreviouslyflaredgas:thisreducedflaringby0.04bcmyearwhilealsocuttingdieselconsumptionbyupto3millionlitrespermonth.Arisingnumberofcountrieshavesettargetstocutflaringandmethaneemissions.Achievementofthetargetswillrelyongovernmentsestablishingflaringandmethane102030405060NordstreamIcapacity(bcm/year)SavingsfromflaringandmethaneabatementRussiaUnitedStatesAlgeriaNigeriaLibyaEgyptOtherbcmcurrentandpotentialexportersIEA.CCBY4.0.Chapter8Outlookforgaseousfuels3918reductionplansunderpinnedbyrobustandtransparentdata.Governmentscouldimprovetheinvestmentclimatebyamendingexistingcommercialcontractstoincentiviseoperatorstotakeaction,e.g.bygrantingthemownershipofthegas.Foritspart,theEuropeanUnioncouldencouragesupplieractionbyprovidingpreferentialfundingforflaringabatementandrelatedinfrastructuretohelpovercomethelogisticalandeconomichurdlescommontotheseemissionsreductionopportunities,orcontractingforthesavedgas.ContractingdilemmasDemandforimportednaturalgasintheEuropeanUnionisprojectedtofallfrom370bcmperyearin2021to230bcmperyearby2030beforedecliningto140bcmperyearin2035andthen40bcmperyearby2050intheAPS.Russiandeliveriesareassumedtofallatarapidpace,irrespectiveoftheconstraintsofthetake‐or‐paysupplycontractsthatremaininforce.Onthatbasis,amaximumof170bcmperyearofadditionalnaturalgasisrequiredto2030abovetheexistingfirmnon‐Russiangascontracts;thisrequirementfallsto70bcmperyearby2035(Figure8.14).Figure8.14⊳EuropeanUnionnaturalgascontractbalancecomparedwithimportrequirementsintheAPS,2022-2035IEA.CCBY4.0.AssumingdemandfallsinlinewiththeAPS,gasbuyersintheEuropeanUnionneedanywherefrom70-170bcmofadditionalsupplyto2030,dependingonRussianimportsThedilemmaforEUgasbuyersiswhethertocontractfornewcapacityorrelyonthespotmarkettofillthegap.Inprinciple,theEUsupplygaptoalargeextentcanbefilledbyattractingLNGcargoesfromthespotmarket,throughpayingapremiumthatdivertsthemfromothermarkets.Around50%ofcurrentglobalLNGtrade,or250bcm,canbeconsidered10020030040020222023202420252026202720282029203020312032203320342035bcmRussiancontractsNon‐RussianpipelineNon‐RussianLNGAPSimportMaximumcontractedTakeorpayrequirementsIEA.CCBY4.0.392InternationalEnergyAgencyWorldEnergyOutlook2022contractuallyflexible,andthereforeopentocompetitiontodetermineitsenddestination.Therestisgovernedbyfixedpoint‐to‐pointdeliveryarrangements.Thisproportionincreasesslightlyoverthecomingyears,asexistingcontractsexpireandaround55%ofthe200bcmperyearofLNGexportcapacitycomingonlinebetween2022and2026isalsoflexible.However,ahighlevelofexposuretoshort‐termmarketsmayputEuropeangasbuyersatthemercyofvolatileglobalLNGsupplydynamics,especiallyinthenearterm.Flexiblevolumesmayalsobeconvertedtofirm,long‐termcontractsbyotherbuyersseekingassuredsupply.AnothersolutionistosponsornewLNGexportprojects,therebysecuringfirmoff‐take.However,thisrequireslong‐termcommitment,ascapital‐intensiveLNGprojectsrequirelongleadtimestoconstruct,aminimumtake‐or‐payvolumecommitmentlastingaround20years,andanoperationallifetimeofatleast30years.ManygasbuyersintheEuropeanUnionmeanwhilewouldbelookingtophaseoutgasdemandwellbefore2050.Toillustrateapotentialwayofresolvingthisdifficulty,weconductedanassessmentof200bcmworthofrecentlycommissionedandunderconstructionLNGprojectsaroundtheworldtocalculatethegaspricerequirediftheyweretorecoupinvestmentcostswith10‐yearcontractsratherthan20‐yearcontracts.Theweightedaveragebreak‐evenpriceofgasovera20‐yearcontractlifetimeisaroundUSD7.50/MBtu,withanaveragerateofreturnofnearly20%.AtthelowerendofthecostscaleareprojectsliketheNorthFieldexpansioninQatar,whichenjoyslowcostgasandassociatedliquidssuppliesthatimproveprojecteconomics.AttheupperendofthescalearegreenfieldprojectssuchasLNGCanada,whichrequiresadditionalinfrastructuretoconnectupstreamgasfieldstotheliquefactionterminal.Figure8.15⊳Contractpricesrequiredtocoverbreak-evencostsofLNGsupplyforrecentlyapprovedprojectsIEA.CCBY4.0.ShorteningthecontractlengthforLNGsuppliestoEuropetoimprovealignmentwithnetzeroemissionstargetswouldmeansignificantlyhigherdeliveredcostsIEA.CCBY4.0.Chapter8Outlookforgaseousfuels3938Shorteningthecontracttenuretotenyearswouldincreasethebreak‐evengaspriceneededtofullyrecoupinvestmentcostsforrecentlyapprovedprojectsbyaround20%onaverage(Figure8.15).ThisillustratesthemagnitudeofcontractpriceincreasesthatcouldberequiredforthenextcropofLNGexportprojects:iftheadditionaluncontractedLNGrequirementsofEUmembersintheAPSoverthe2022‐30periodweretobefilledbynewprojectsfinancedunderten‐yearcontractsinsteadoftwenty‐yearcontracts,theadditionalcosttonaturalgasimportersintheEuropeanUnionwouldbearoundUSD140billion.AnalternativeapproachwouldbeforbuyersintheEuropeanUniontocontractflexiblevolumesfor20years,forexamplefromtheUnitedStates,toensureprojectsarepermittedandtoaimtosellthegastheydonotneedinlateryearstoAsia.ThisisplausibleintheSTEPS,whereLNGdemandcontinuestoincreaseto2050,butglobalLNGdemandpeaksbefore2030inboththeAPSandNZEScenario.Indeed,therapidfallinLNGafter2030intheNZEScenarioimpliesnoneedforadditionalcapacitybeyondwhatisexistingorunderconstruction;anynewLNGprojectsapprovedafter2022areatriskofnotrecoveringtheirinvestedcapitalintheNZEScenario.AssessingtheinvestmentcostsoftransitioningawayfromRussiangasTheRePowerEUPlansetsouttheinvestmentsrequiredtoreducetheEuropeanUnionrelianceonRussianenergyimports.ManyofthemeasuresbuildontheFitfor55package,whichalsocontainsambitiousinvestmenttargets.IntheAPS,investmentincleanenergyintheEuropeanUnionaveragesaroundUSD360billionperyearbetween2022and2030,an80%increaseonaveragelevelsoverthepastfiveyears.Throughadetailedsectoraldecompositionofspending,wehaveassessedthecontributionofcleanenergyinvestmenttoreducenaturalgasdemand(asdistinctfromreducingdemandforoilorcoal,ormeetingnewdemandforenergyarisingfrompopulationoreconomicgrowth).Ourcalculationsindicatethataroundone‐fifthoftotalinvestmentincleanenergyintheEuropeanUnionyieldsareductioninnaturalgasdemandintheAPS.Themaininvestmentcategoriesthatcontributetothisreductionarebuildingretrofits,electrificationofenergyservicesthatwouldotherwiseusenaturalgas(mainlythroughwidescalepurchasingofheatpumpsforuseinbuildings),andmeasuresthatleadtothereplacementofgaswithrenewablesinthepowersectororboostinvestmentinlow‐emissionsfuelssuchasbiomethaneandhydrogen.ThecombinedcostofthesemeasuresisUSD65billionperyearonaverageoverthe2022‐30period,arounddoublethesumsspentintheSTEPS.However,theadditionalinvestmentstotransitionawayfromnaturalgasintheAPSresultinmuchlowerimportcostsinthelongterm,whicharenearlyUSD45billionlowerperyearthanintheSTEPSfrom2031to2050(Figure8.16).Moreover,alargeportionofthetransitioncostsgotowarddomesticjobsandserviceindustries.RussiangasexportearningstotheEuropeanUnionoverthe2016‐21periodofaroundUSD30billionperyeararereducedtozerobefore2030intheAPS;RussiafailstorecovermostoftheincomelosttoreducedgassupplytoEurope.IEA.CCBY4.0.394InternationalEnergyAgencyWorldEnergyOutlook2022Figure8.16⊳AverageannualinvestmentincleanenergytotransitionfromnaturalgasintheEuropeanUnionandgasimportcosts,2016-50IEA.CCBY4.0.IntheAPS,USD65billionofinvestmentperyearisrequiredtocutnaturalgasdemandintheEuropeanUnionby180bcmby2030,asumoffsetovertimebylowergasimportcostsNote:MER=marketexchangerate.ScalingupbiomethaneTheEuropeanUnionissupportingthescaling‐upofbiomethane,wherethereissignificantpotentialacrosstheregion(Figure8.17).Around3bcmofbiomethaneand9bcmeofbiogasiscurrentlyproduced(mostofthelatterisdirectlyconsumedinlocalproductionofelectricityandheat).ThegrowthinbiomethaneproductionenvisionedintheRePowerEUPlanimpliesa35%averageannualgrowthratefrom2022‐30comparedto20%in2015‐21.IEAanalysissuggeststhat35bcmofbiomethanecouldbeproducedintheEuropeanUnionforlessthanUSD20/MBtu.ThisisbelowtheaveragepriceseensinceJuly2021,butwellabovetheaverageofthepastdecade.However,itdoesnotincludeinjectioncostsintopipelines,orcompressionandliquefactioncosts.Factorsthatcouldacceleratecostreductionandproductiongrowthincludestreamlinedpermittingprocedures,factory‐stylefabricationofstandardisedbiodigestersandrelatedequipment,poolingoffeedstocks,dedicatedbiogasfinancingfacilities,andpolicymeasuressuchasquotas,feed‐intariffsandcontractsfordifference.Biomethanecanalsoyieldasignificantquantityofdigestate,aby‐productwhichcanbeusedasabiofertiliser.Digestateyieldsvarydependingonthevolatilesolidscontentandmethanepotentialofdifferentfeedstocks;35bcmofbiomethaneproductioncouldyieldsignificantquantitiesofnitrogenbiofertiliser,reducingmineralfertiliseruse.Inaddition,itcouldavoidmethaneemissionsifthedigestateisresponsiblyhandledandstored.ThereisalsopotentialtousetherelativelypurestreamofCO2associatedwiththebiogasupgradingprocesstoproducesyntheticmethane.306090120150BillionUSD(2021,MER)Low‐emissionsfuelsElectrificationEfficiencyRenewablesNon‐RussiaRussia2022‐302031‐50ImportcostsCleaninvestment2016‐21APSSTEPSAPSSTEPSIEA.CCBY4.0.Chapter8Outlookforgaseousfuels3958Figure8.17⊳BiomethanepotentialintheEuropeanUnionby2030comparedwithshareofnaturalgasdemandin2021IEA.CCBY4.0.Upto80bcmofbiomethanecouldbeproducedsustainablyintheEuropeanUnionby2030;somecountrieshavepotentialexceedingtheircurrentnaturalgasdemandNotes:EU=EuropeanUnion;RestofEU=averageofthe17memberstatesnotshownindividually.8.7ScalinguphydrogenMomentumbehindthegloballow‐emissionshydrogensectorhasbeengivenamajorboostbyRussia’sinvasionofUkraine.By2021thesectorwasalreadyconvertingmoreofitsbulgingprojectpipelineintoinvestmentdecisions,andhydrogen‐focussedcompanieswereraisingmoremoneythaneverbefore.WithEUmemberstatesnowaimingtoreducenaturalgasandoildemandbyincreasinglow‐emissionshydrogenuse,andhigherformaltargetsintheUnitedKingdomandelsewhere,itseemslikelythatmajorprojectsaroundtheworldwillstartconstructioninthenearterm.Capitalflowsindicatewhereinvestorsandcompaniesseeopportunitiesinthecomingyears.Twooftheworld’slargestelectrolysersstartedoperationsin2022.InChina,thecapacityofacaptiveelectrolysersupplyingamethanolandchemicalplantwasexpandedfivefoldto150MW.InSpain,asolar‐powered20MWelectrolyserwascommissionedatanexistingfertiliserplant.Twolargeelectrolyserprojectsreceivedfinalinvestmentdecisions.Firstisa260MWelectrolyserthataimstostartsupplyingarefineryinChinafrom2023.Secondisa200MWplantoperatingonwindpowerintheNetherlands,whichisduetostartin2025,andiscoupledwithanexistingrefinerywithhighhydrogendemand.Overall,capitalspendingin2021onhydrogenelectrolyserprojectsstartingoperationorunderconstructionwasaroundUSD1.5billion,morethanthree‐timesasmuchasin2020.Ineachproject,theinvestmentcasewassupportedbythesimplicityofthevaluechain.CropresiduesMunicipalwasteManureForestryByfeedstock80bcm25%50%75%100%5101520GermanyFranceSpainItalyPolandSwedenFinlandRomaniaNetherlandsDenmarkRestofEUbcmePotentialShareofnaturalgasdemand(topaxis)BycountryIEA.CCBY4.0.396InternationalEnergyAgencyWorldEnergyOutlook2022Thelargepipelineofprojectsonwhichinvestmentdecisionsareduetobetakenintheneartermdependsonthescaling‐upofcompaniesacrossthevaluechain.Investorshavetakennoteandaredirectingmoneytocompaniesallalongthehydrogenvaluechain.The33“pureplay”hydrogencompaniestrackedbytheIEAhaveincreasedtheircapitalisationbyaroundUSD20billionsincemid‐2020.InvestorslookingevenfurtheraheadallocatedUSD700millionin2021ofearlystageventurecapitaltostart‐upsthataredevelopinghydrogentechnologies,whichisnearlyfive‐timestheamountinvestedin2020.Thisincreasewasdrivenbyinvestorconfidenceinstart‐upsthatofferprojectdevelopmentservices,whichreinforcestheperceptionthatprojectswillsoonbebuilt,andininnovativetechnologiesforhydrogenend‐usesaswellasforpotentialnon‐electrolysisroutestolow‐emissionshydrogenproduction,suchasmethanepyrolysis.Figure8.18⊳Domesticsupplyandtradeoflow-emissionshydrogenforkeyregionsintheAPSby2050IEA.CCBY4.0.Low-emissionshydrogenproductionexceeds50bcmofnaturalgasequivalentinseveralregions,withexportsasthemaindriverinAustralia,MiddleEastandNorthAfricaNotes:bcme=billioncubicmetresofnaturalgasequivalent.Low‐emissionshydrogentradeincludestradeinhydrogen‐basedfuelsasameansofexportingcleanenergyviaitstransformationtohydrogen.Inclusioninthisfiguredoesnotimplythatthetradedproductsareallusedintheformofgaseoushydrogeninimportingcountries.Valuesaregiveninbcmebasedonaconversionfactorof36petajoulesoftradedenergyproductperbcme.Globallow‐emissionshydrogenproductionreaches30Mtofhydrogenperyear(MtH2/year)in2030intheAPS,includinghydrogenproducedonsiteinindustryandrefineriesaswellasthatusedtoproducehydrogen‐basedliquidfuels.Thisisequivalenttotheenergycontentof100bcmofnaturalgasandwouldrepresentanenormousrampupfrommuchlessthan1Mtoflow‐emissionshydrogentoday.Producinganddeliveringthisvolumeofhydrogenby2030intheAPSwouldrequirecumulativeinvestmentofUSD170billioninelectrolysersandCCUS‐50050100150NorthAfricaJapanKoreaAustraliaCanadaMiddleEastLatinAmericaEuropeanUnionUnitedStatesChinabcmeDomesticsupplyNetexportsNetimportsIEA.CCBY4.0.Chapter8Outlookforgaseousfuels3978equipment,andnearlythree‐timesthissumfornewrenewableelectricitycapacity,infrastructureandplantsforconversiontohydrogen‐basedfuels.Installedelectrolysercapacityin2030reaches260GWintheAPS,fedbyover1000terawatt‐hours(TWh)oflow‐emissionselectricity.WhilemuchofthedemandisinitiallyconcentratedinChina,Europe,JapanandNorthAmerica,investmentbecomesmoreevenlyspreadastradebetweencountriesgetsunderwaylaterthisdecade.By2050,tradepatternsbecomewellestablished,withAustraliaandtheMiddleEastasthelargestexportingregions(Figure8.18).2030investmentchallengeforhydrogenAmajordriverofhydrogen‐relatedactivityisthepoliticaldeterminationoftheEuropeanUniontodevelopandusehydrogen.In2021,theEuropeanCommissionproposedthatby2030theindustrialandtransportsectorsintheEuropeanUnionshoulduseapproximately11MtH2/yearmadefromtheelectrolysisofwaterbyrenewableelectricity.InMay2022,theEuropeanCommissionproposednearlydoublingthisto20MtH2/yearacrossallend‐useandtransformationsectors,withhalfofthetotalimportedintotheEuropeanUnionfromothercountries.2Toputthisincontext,EUindustrycurrentlyproducesandusesaround7MtH2/yearofhydrogen,nearlyallofitfromnaturalgas,anditstransportsectoruseslessthan1thousandtonnesperyear.Theproposal,whichiscalculatedtodisplace27bcmofnaturalgasand80thousandbarrelsperday(kb/d)ofoil,istoolargeascaletorealisticallybemetsolelybyreplacingexistinghydrogensourceswithelectrolysis.Newsourcesofdemandwillalsoberequired.Basedonapossibleconfigurationofassetsthatcouldproduce10MtH2/yearwithintheEuropeanUnionanddeliveranadditional10MtH2/yeartotheEuropeanUnionin2030,weestimatethetotalcapitalinvestmentatUSD700‐850billion,almosthalfofitrelatedtoassetsoutsidetheEuropeanUnion(Figure8.19).3Thismorethandoubleswhenthecostofcapitalisincluded.Thelargestsinglecostcomponentwouldbethepurchaseandinstallationofaround440GWofrenewableelectricitygeneration,mostlysolarPVandwind,topowertheelectrolysisprocess.Thepurchaseandinstallationof290GWofelectrolysersaccountsfor15%oftheestimatedtotal,lessthaninfrastructuresuchaspipelines,portterminals,shipsandhydrogenstorage.Repurposingexistingnaturalgaspipelinescouldcostlessthanhalfasmuchasbuildingnewonesforhydrogen,butthiswouldhavetobealignedwiththephasingoutofnaturalgas.IntheAPS,repurposednaturalgaspipelinesaccountforaround50%ofnewinstalledhydrogenpipelinecapacityinthe2030s.2TheseproposalsareyettobeofficiallyadoptedbytheEuropeanUnionortranslatedintoenablinglegislation.3Thelowerendoftherangeofestimatesassumesthatby20305MtH2/yearcouldbeimportedbyunderseapipelines,whilethehigherendassumesthatthepipelinescannotbecommissionedinthistimeframeandthevastmajorityofimportedhydrogenwillbeshippedintheformofammonia,buildingonexistingammoniainfrastructure.Shippingofliquefiedhydrogenisnotexpectedtomakeasignificantcontributionby2030.Itassumesthathydrogenwillbeproducedfromrenewableelectricityinstallationsconstructedforthepurposeofelectrolysis,whichisbroadlyinlinewithproposedEUregulationsbutmayleadtoaslightoverestimationofcosts.Capitalrequirementsforpipelines,hydrogenstorage,newships,ammoniaproductionandsomeammoniacrackingareincluded.IEA.CCBY4.0.398InternationalEnergyAgencyWorldEnergyOutlook2022Figure8.19⊳Costsharesofapossibleinvestmentpackagetosecure20MtH2fortheEuropeanUnionfromlocalandimportedsuppliesby2030IEA.CCBY4.0.InvestmentstosupplyhydrogentoreduceoilandgasdemandintheEuropeanUnionaremostlyneededinrenewableelectricityprojectsandhalfwouldfundnon-EUassetsNotes:CCUS=carboncapture,storageandutilisation;EU=EuropeanUnion.ShipsandpipelinesenteringtheEuropeanUnionareconsideredasassetsoutsidetheEuropeanUnion.TheEuropeanUnionisnotaloneinpursuinghydrogenandhydrogen‐basedfuelimports.Japanisaimingfora20%rateofco‐firingimportedammoniaatitscoal‐firedpowerplantsin2030,andthisisestimatedtorequire0.5MtH2/year.Tobackthisup,JERA,Japan'slargestelectricitygeneratorandamajorgastrader,issuedatenderforsupplyupto0.5Mtoflow‐emissionsammonia(requiringalmost0.1MtH2)toJapan’slargestcoal‐firedpowerplantfrom2027.Koreaaimstocommercialise20%ammoniaco‐firedpowergenerationby2030.Bothcountriesareactivelydevelopingpartnershipswitharangeofpotentialexportercountriesandtechnologyproviders.InJune2022,BPtooka40%stakeinaprojectthatcouldproduce9Mt/yearoflow‐emissionsammonia(or1.6MtH2/year)inAustralia,withJapanandKorealistedastheprimaryinitialexporttargets.Tobesuccessful,thedevelopersanticipatethattheywillneedtoraiseoverUSD35billion.PipelineofhydrogentradingprojectshasswelledIfallprojectsunderdevelopmentaresuccessfulatraisingfundsandmeetingtheirschedules,therewouldbeenoughglobalcapacitytoexport12MtH2/yearoflow‐emissionshydrogenoritsequivalentinhydrogen‐basedfuelsby2030,ofwhich11MtH2/yearwouldcomefromoutsidetheEuropeanUnion(IEA,2022b).MuchofthisproposedcapacitywouldbeinChile,ArgentinaandBrazil,buttherewouldalsobesignificantamountsinAustralia,Denmark,MauritaniaandUnitedStates.AmongMiddleEastandAfricancountries,thelargestproposedprojectsareinEgypt,Mauritania,Oman,SaudiArabiaandUnitedArabEmirates.54%46%Costsbylocation40%25%19%14%2%RenewablesInfrastructure(incl.storage)ElectrolysersAmmoniaconversionsCCUSEuropeanUnionassetsAssetsoutsidetheEUCostsbyvaluechaincomponentIEA.CCBY4.0.Chapter8Outlookforgaseousfuels3998Figure8.20⊳Capacityofproposedinternationalhydrogentradeprojectstargetingoperationby2030byexporterorimportercountryIEA.CCBY4.0.Ifallexportprojectsunderdevelopmentproceed,theycouldsupply12Mtoflow-emissionshydrogenequivalentby2030,subjecttotheavailabilityofimportinfrastructureNotes:Projectsincludedarethosewithanamedlocationfortheplannedimportorexportfacility,suchasanexistingport.Proposedexportswithinregions,suchasEurope,areincluded.Projectsseekingtoexporthydrogenorhydrogen‐basedfuelsaremorenumerousandmoreadvancedthanthoseforthecorrespondingimportinfrastructure(Figure8.20).Ofthe12MtH2/yearofproposedexports,projectsaccountingfor2MtH2/yearhavenamedpotentialoragreedoff‐takersandafurther3MtH2/yearciteexporttoaspecificregion.However,therearecurrentlyonlyfiveportsaroundtheworlddevelopinghydrogenimportplans.TheseareforAmsterdam,Brünsbuttel,RotterdamandWilhelmshaveninEuropeandKobeinJapan.Ammoniaisemergingasthemostcommonformfortheexportandimportofhydrogenbyseain2030.Whilearoundhalfofannouncedprojectshavenotyetstatedaclearpreference,ammoniarepresentsover85%ofplannedcapacityforthosethathaveexpressedanintentiontodate.Liquefiedhydrogenandliquidorganichydrogencarriersarenotexpectedtotakeahighshareduringthisdecade.WhileEuropehasexistinginfrastructurewhichmakesitpossibletoimportseveralmilliontonnesofammoniaeachyearforchemicaluses,significantadditionalcapacityisneededifmeaningfulamountsoflow‐emissionshydrogenaretobeexportedtoEuropeasammonia.Expandingexistingfacilitieswouldbeamuchlowercostoptionforprovidingcapacityexpansionthangreenfielddevelopments.UnderseapipelinesfortransportinghydrogentotheEuropeanUnionarealsounderdiscussion,withGermanyandNorwayexploringhowsoonsuchinfrastructurecouldconnecttheircountries.1234567AsiaMiddleEastNorthAmericaAfricaEuropeAustraliaLatinAmericaImportsExportsMilliontonnesofhydrogenequivalentcapacityIEA.CCBY4.0.400InternationalEnergyAgencyWorldEnergyOutlook2022Unlockingprojectinvestmentrequiresglobalco‐ordinationNewcontractualrelationshipsneedtobeestablishedthroughoutthelow‐emissionshydrogenvaluechainifthechallengeofscalingupistobemet.Robustcontractsthatcanremaininplacefor10‐20yearsormoreareessentialtounlocktheinvestmentrequired.Thereareveryfewprecedentsorstandardsforthesekindsofcontracts,buttheywillneedtobeputinplaceandalignedtoenablemultiplebilliondollarprojectstoproceedinparallelandtoavoidmismatchesbetweensupply,distributionanddemand.Launchinganewhydrogenvaluechainmayneedaslittleasthreecontractualrelationships(twopurchaseagreementsandoneengineering,procurementandconstruction[EPC]contract)orasmanyas20(sevenpurchaseagreementsand13EPCcontracts),dependingontheneedfornewenergyinputsandtheintermediariesinvolvedintrade.Mostofthelargestintegratedprojectstodatehavesimplevaluechains,forexamplewithprojectsbeingdevelopedatfertiliserorrefinerysiteswithexistinghydrogendemand,whichsuggeststhatitmaybedesirabletominimisethenumberofcontractsasfaraspossible.Atoneendofthisvaluechainisthemanufactureofelectrolysers,equipmentforCO2captureanddevicesforhydrogentransportandstorage.Investorsinthecompaniesandprojectsthatwilldelivertherequiredfactoryoutput,includingthesupplyofrawmaterialssuchasplatinumforcatalysts,haveshowninterestintheinitialprospectsofthisbusiness,butmuchmorecapitalwillbeneededtoachievethe260GWofelectrolyserinstallationsin2030intheAPS,giventhatmanufacturingcapacityiscurrentlyaround8GWperyear.Thevaluechainincludestheinstallationofhydrogenproductioncapacityandupstreamcontractualrelationshipswithrenewableelectricitysuppliers,powergridoperators,electricitymarkets,gassuppliers,CO2storagecompaniesandEPCfirms.Forhydrogentrade,thevaluechainexpandstoincludetheconstructionandoperationofnewportinfrastructure,bufferstorage,pipelines,ships,refuellingstationsandplantstoconvertthehydrogenintoamorereadilytransportablecommodity(andpotentiallybacktohydrogen).Attheotherendofthevaluechainaretheoff‐takecontractsagreedwiththeusersoflow‐emissionshydrogenthatguaranteerevenue:alltheprecedingstepsultimatelydependonthese.Manyuserswillalsoneedtomakesignificantinvestmentsinnewequipmentandprocedurestoswitchfromotherfuels,forwhichtheywillbereliantonnewmanufacturingfacilitiesfortanks,meters,burners,turbinesandotherhydrogen‐specificapparatus.Governmentsaroundtheworldhavecriticalrolestoplayinfacilitatingco‐ordinatedandtimelyinvestments,andthismeansinparticularsettingclearpolicyframeworksthatarecompatibleacrossborders.Thisdoesnotmeanthatgovernmentshavetodictatethepreciseformatofthetradedhydrogenproducts,butratherthatagreedstandardsareneededforenvironmentalcriteria,andthatpoliciesareneededtoincentiviseend‐userstocommittolong‐termpurchasesandmanageoff‐takerisk.Inbothareas,internationalco‐ordinationisessentialifcross‐bordertradeistoemergeasimpliedbygovernmentpledges.Standardsforguaranteeingthathydrogen‐basedcommoditiesmeetenvironmentalcriteriahaveemergedasanespeciallyimportantissueforprojectdevelopers.Investorsseekupfrontcertaintythatoutputfromaprojectwillbevaluedbyhydrogenusers,butthevaluetousersIEA.CCBY4.0.Chapter8Outlookforgaseousfuels4018dependsonwhethertheproductmeetstheirregulatoryobligationsandmarketincentives.Regulatoryobligationscouldincluderequirementstomeetashareoftotalhydrogendemandwithlow‐emissionshydrogen,somethingthatisenvisagedbythedraftEURenewableEnergyDirective.Marketincentivescouldcome,forexample,frommanufacturersthatanticipatechargingapremiumforacarmadefromlow‐emissionssteelorwhichhavesetemissionstargetsforfinancialorethicalreasons,orfromgovernmentcontractsorCO2pricing.Table8.5⊳EmissionsrequirementsforselectedhydrogenlabelsandprogrammesJurisdictionLabelPublicationyearRequirementsPurposeEuropeanUnionRenewablefuelofnon‐biologicalorigin2022(proposalnotyetadopted)70%lowerlifecycleGHGemissionsthananequivalentfossilfuel(3.4kgCO2‐eq/kgH2)deliveredtoacustomer,or80%after2026ifusedforelectricityorheat.Onlyelectrolysishydrogenfromrenewablesiseligible,andmustproveadditionality.Eligiblefuels(includinghydrogen‐basedfuels)cancontributetonationalrenewablestargets.EuropeanUnionEUtaxonomy‐alignedhydrogen202273.4%lowerlifecycleGHGemissionsthananequivalentfossilfuel(3kgCO2‐eq/kgH2lifecycleemissionsatthepointofproduction,or70%forahydrogen‐basedfuel).Guideinvestmentsintoclimatechangemitigation.UnitedStatesCleanhydrogen2022Lessthan4kgCO2‐eq/kgH2lifecycleGHGemissionsuptothepointofproduction.Eligibilityforfundinginstruments,withloweremissionseligibleformoresupport.Victoria,AustraliainpartnershipwithGermanyZero‐carbonhydrogen2020Hydrogencomessolelyfromrenewablesources.ToreceiveguaranteesoforiginfromtheSmartEnergyCouncilandHydrogenAustralia.IndependentCarbon‐neutralhydrogen2020Zeroemissions,includingupstream,netofoffsets.Forhydrogenproducedfromfossilfuels,50%ormoreoftheCO2mustbestoredandanysolidcarbonpermanentlysecured.AccreditationundervoluntaryTÜVRheinlandStandardH2.21.Independent(originallyfundedbytheEuropeanCommission)Low‐carbonhydrogen201760%lowerlifecycleGHGemissionsthanhydrogenfromnaturalgas,excludingemissionsfromequipmentmanufacturers(4.4kgCO2‐eq/kgH2).AccreditationundervoluntaryCertifHysystem.Thereisstillalongwaytogoonthedevelopmentandagreementofinternationallyrecognisedstandards.Severalgovernmentsandcommercialentitieshaveproposedlabelsforvariouspurposes,buttheyarenotconsistentwithoneanother(Table8.5).NotallofthemethodologiesforthesestandardsandlabelstakealifecycleapproachtoemissionsIEA.CCBY4.0.402InternationalEnergyAgencyWorldEnergyOutlook2022accounting.Moreover,nonehavesofartackledthequestionofhowtoaccountforthepotentialleakageofhydrogenitself.Thismayemergeasanimportantpoint:thereissomeevidencethatfugitiveemissionsofhydrogenandotherpollutantswillneedtobecarefullyavoidedifthedesiredclimatebenefitsoflow‐emissionshydrogenorammoniaatlargescalearetoberealised(BEIS,2022;Wolframetal.,2022).Investmentsthatwillleadtotradeoflow‐emissionshydrogenandhydrogen‐basedfuelsbetweencountriesthisdecadewillrelyoninternationalrecognitionofstandards.Regionsthatexpecttobefirst‐moversinimportinglargevolumeswillhavesomeflexibilitytodeterminestandards,butdialoguewithexporterswillbeessential:aprojectdeveloperdecidingwhethertocontractwithoff‐takersintheEuropeanUnion,JapanorKoreawillbeinfluencedbytherisksrelatedtomeetingemissionscriteria.Importershavetheopportunityintheneartermtoworkonensuringcompatibilitybetweenregimes.Reliablelong‐termdemandforlow‐emissionshydrogenwillbethemaindriverofinvestmentforscalingup.Inthefirstdecadeofhydrogensectorscaleup,thisdemandislikelytobeunderpinnedtoasignificantextentbygovernmentfundingsupport.Inthelongerterm,thefocusislikelytoshifttoregulatorystandardsandfiscalpenalties.TwoinstrumentsinparticulararecurrentlybeingexploredinEurope:carboncontractsfordifference(CCfD)andso‐calleddoubleauctions.IntheNetherlands,thefirstCCfDforanelectrolyserprojectwasawardedin2021:itguaranteesthatthegovernmentwilltopupanydifferencebetweenthemarketpriceandthecostofproducingthelow‐emissionsproductfor15years.InGermany,theH2Globaldoubleauctionplatform,fundedbythegovernment,waslaunchedin2021:itwillofferten‐yearcontractstothecheapestsuppliersofhydrogenfromrenewableelectricityandthebuyerswiththehighestwillingnesstopay.AspartoftheREPowerEUPlan,theEuropeanCommissionisexploringadoptingthesetwotypesofmechanismsattheEUlevel.Inadditiontostandardsanddemandcreation,arangeofothermeasureswillbeneededtostimulateinvestment.Theseincludesafetyregulations,infrastructurefunds,permittingprocessesandriskmanagementtoolssuchasconcessionaldebtandinsurance.Inallcases,reachinginternationalagreementislikelytotakeseveralyearsandtheremaybeaneedforriskmanagementprovisionsforfinalinvestmentdecisionsbeforesuchagreementsarereached.Forexample,thehydrogenprovisionsintheproposedrevisionoftheEURenewableEnergyDirective,whichincludesectoraltargets,maynotmaterialiseinfullor,ifagreed,maynotbetransposedintonationallawbefore2025.8.8IsnaturalgasstillatransitionfuelinemergingmarketanddevelopingeconomiesinAsia?Thetraditionalcasefornaturalgasinemergingmarketanddevelopingeconomiesisthatitisaflexibleandversatilesourceofdispatchableenergy,supportingtherapidbuildupofrenewableswhileunderpinningatransitionawayfromcoal.Gascanbeemployedinthepowersectorasaback‐upforrenewablesandhelptobalancegridsinrealtime.Thecoal,oilorbiomassforprocessheatusedbysmall‐andmedium‐scaleindustriescanalsobeprogressivelyreplacedbynaturalgas,whichbringswithitadvantagessuchasimprovedIEA.CCBY4.0.Chapter8Outlookforgaseousfuels4038efficiencyandcleanerair,whilereducingthecostofoperatingflexibly.Investmentsintransmissionanddistributiongridscanallowgastomeetdemandforcookingfuelandwaterheating.Inmoretemperatepartsofthedevelopingworld,naturalgascanalsohelpmeetseasonalenergydemand.Thestrainsonglobalnaturalgassupplythathavebeenemergingsince2021castdoubtonthesepropositions.ThesurgeinLNGpricesarisingfromhighdemandinEuropehaspulledsupplyawayfromprice‐sensitivemarketssuchasPakistanandBangladesh,leadingtoshortfallsinthepowersectorandindustrialdemanddestructioninthosecountries.Althoughsomemarketshavebeensomewhatshieldedfromvolatilitythankstolong‐termsupplycontractswithfixedvolumecommitmentsandpricesthatarelinkedtooil,thepriceofgasforend‐usersinemergingmarketsinAsiacanbeexpectedtorisebyabout55%in2022comparedwiththefive‐yearaverage(Figure8.21).Thereislimitedfiscalheadroominemergingmarketstosustaininterventionsthatshieldconsumersfromhigherprices,suchascapsontariffincreasesorsubsidiesforbillstargetedatlowerincomehouseholds,andsothepriceincreasesseenin2022havepushedupthecostsofelectricityaswellasawiderangeofindustrialproductsandprocesses,stokinginflationandaggravatingacost‐of‐livingcrisis.IncreasedclimateambitioninsomeemergingmarketanddevelopingcountriesinAsiaimpliesthatnaturalgasnowfacesexistentialquestionsaboutitslong‐termfuture.InthissectionweexploretheroleofnaturalgasinthisregionintheAPS,ascenariowhichreflectsrecentnetzeroemissionspledgesannouncedinsomeofthemajorgrowthmarketsinAsia–China,India,Malaysia,Singapore,ThailandandVietNam.Figure8.21⊳End-userpricesfornaturalgasbysectoremergingmarketanddevelopingeconomiesinAsiaIEA.CCBY4.0.End-userpricesfornaturalgasareestimatedtoincreasebymorethan55%in2022,challengingtheaffordabilityofgasinprice-sensitiveregions48121620IndustryPowerBuildingsIndustryPowerBuildingsIndustryPowerBuildingsIndustryPowerBuildingsUSD/MBtuAdditionalin2022Average,2016‐21ChinaIndiaRestofdevelopingAsiaSoutheastAsiaIEA.CCBY4.0.404InternationalEnergyAgencyWorldEnergyOutlook2022CanemerginggasmarketsinAsiacontinuetothriveonimports?In2010,emergingmarketanddevelopingeconomiesinAsiawere,inaggregate,netgasexporters.FlatordecliningproductioninmaturegasfieldsincountriessuchasIndonesiaandMalaysia,alongwithstrongdemandgrowthinChinaandIndia,meantgasimportsrosequicklytocover30%oftotalgasdemandby2021.IntheAPS,importdependenceincreasesfurthertoover40%by2030(Figure8.22).Figure8.22⊳NaturalgassupplybalanceinemergingmarketanddevelopingeconomiesinAsiaintheAPS,2010-2050IEA.CCBY4.0.DemandgrowthinemergingmarketanddevelopingeconomiesinAsiarequiresalargeincreaseingasimportsandassociatedinvestmentinLNGterminalsanddomesticgasnetworksThisincreasingrelianceonnaturalgasimports–especiallyLNG–hasrecentlybeenchallengedbyhighprices.Thereisaround200bcmperyearofexistingLNGimportcapacityintheregion(ofwhich45%isinChina).Afurther120bcmperyearisunderconstruction.TomeettherequirementsoftheAPS,afurther85bcmperyearofimportcapacityisrequiredby2030.Todate,however,potentialnewentrantstotheLNGmarket,suchasthePhilippinesandVietNam,haveyettosecurelong‐termcontractsforsupplythatcouldunderpintheconstructionofLNGregasificationterminals.Utilitiesintheregionhavelowcreditratingsandthelimitedabilityofoff‐takerstoabsorbhigherpricesbringswithitsignificantcommoditypricerisk,particularlyagainstthebackgroundofastrongerUSdollar.CountriessuchasIndonesia,MyanmarandVietNamareattemptingtocontractfloatingstorageandregasificationunits,whicharecheaperandquickertobuildthanland‐basedterminalsandcanbeflexiblyredirectedtoareasinneedofshort‐termgassupply.However,Europe’scallontheseunitstomeetnear‐termLNGsupplyhastightenedsupplychainsandincreasedcompetition.‐100010020030040020102050201020502010205020102050ProductionfordomesticuseRemainingsupplybalance(nettrade)bcmChinaIndiaOtherAsiaSoutheastAsiaIEA.CCBY4.0.Chapter8Outlookforgaseousfuels4058Howresilientisnaturalgasdemand?ItispossibletolookpastthecurrentmarketturbulenceandmakeacasethatnaturalgasdemandinemerginganddevelopingeconomiesinAsiamightturnouttobequiteresilient,atleastforthenextdecade.IntheAPS,naturalgassatisfiesnearly20%oftotalenergydemandgrowthintheseeconomiesbetween2021and2030–ahigherpercentagethaninthepreviousdecade.AlthoughcoaliswidelyviewedasacheaperandmorereadilyavailablealternativetonaturalgasinseveralpartsofAsia,itsownsupplydynamicsarechallengedbyalackofupstreaminvestmentandconstraintsonaccesstofinance.Priceshavealsomovedhigher:thermalcoalimportpricesaveragedaroundUSD60/tonnein2020,butdoubledin2021andthenroseagaintoanaverageofaroundUSD200/tonneinthefirst‐halfof2022.Theextenttowhichconsumersfeeltheeffectsofnaturalgaspriceincreasesalsovarieswidelybetweencountriesandsectors.Cheaperdomesticgasissometimesallocatedtospecificconsumergroups,asinIndia,orregulatedatapricethatiscappedatamaximumlevelregardlessofchangesinwholesaleprices,asinIndonesia.Throughtariffdecisionsanddifferenttaxregimes,thepricechargedfornaturalgascanfallbelowthecostofimportorproduction,keepingdemandresilientincertainsegments,asinpartsofIndia’scitygasdistributionsector.Despitegas‐firedpowerplantsbeingmoreexposedtochangesinwholesalegasprices,theyremainarelativelycheapthermalplanttypetobuildandareabletooperateflexibly.In2021,finalinvestmentdecisionsfornewgas‐firedcapacityreached20GW,15%abovethefive‐yearaverage,andgrowthremainedstronginto2022.Althoughtheprospectsforcoal‐to‐gasswitchinghavebeenadverselyaffectedbyhighergasprices,itwouldbetechnicallypossible,forexample,forone‐thirdofcoal‐firedpoweroutputinSoutheastAsiatobesubstitutedbyexistinggas‐firedpowercapacity(whichtotalsaround100GWandcurrentlyoperatesata45%annualloadfactor).Doingthiswouldavoidaround120MtCO2emissions,equivalentto22%ofemissionsfromcoal‐firedpowerplantsinSoutheastAsia(IEA,2022c).IntheAPS,around90GWofnewnaturalgas‐firedpowergenerationcapacitycomesonlineinemergingmarketanddevelopingeconomiesinAsiabetween2021and2030,anincreaseofover20%.Naturalgas‐firedgenerationincreasesataslightlyslowerpacethangenerationcapacity,reaching1200TWhby2030,or25%morethanin2021.Thisreflectsincreasinguseofnaturalgascapacityasaflexibletooltobalanceelectricitygridsratherthanasabaseloadsourceofpowersupply(seeChapter4,section4.5).UsingnaturalgasinthiswayrequiresflexiblecontractingarrangementsforLNGsuppliesandadditionalinvestmentingasstorage.InChina,the15bcmofstoragecapacityequatestolessthan5%ofannualgasconsumption,despitegrowingseasonalityofdemand(althoughthereareambitiousplanstoincreasestoragecapacityto50‐60bcmby2025).Large‐scalegasstoragefacilitiesarevirtuallynon‐existentinmostotherpartsofAsia.AnincreasingpopulationandstrongeconomicgrowthsustaintheincreaseinnaturalgasconsumptioninemergingmarketanddevelopingeconomiesinAsiaoverthenextdecade,notablyinindustry,despitethenear‐termrisksbroughtaboutbytherecentsupplysqueeze.Aspricescomedownfromthemid‐2020s,thesemarketsseeabigincreaseinnaturalgasIEA.CCBY4.0.406InternationalEnergyAgencyWorldEnergyOutlook2022useby2030asaresultofcoal‐to‐gasswitching,andthishelpscountrieswithnetzeroemissionstargetstorapidlytransitionawayfromcoal.Withacloudedoutlookfortheuseofnaturalgasintransport(Box8.1),industryremainstheanchorfordemandgrowthandthefocalpointforlarge‐scaleinfrastructureinvestmentinLNGimportcapacity,storageandonshoretransmissionanddistributiongrids.IntheAPS,gasdemandinindustryinemerginggasmarketsinAsia,notincludingChina,isover60%higherin2050thanin2021.Figure8.23⊳NaturalgasdemandinemergingmarketanddevelopingeconomiesinAsiaintheAPSIEA.CCBY4.0.IntheAPS,naturalgasdemandpeaksbefore2040inemergingmarketanddevelopingeconomiesinAsiaUltimately,however,theprospectsfornaturalgasinemergingmarketanddevelopingeconomiesinAsiahavealimitedduration.Althoughthetrajectoryvaries,demandpeaksinallemerginggasmarketsinAsiabefore2040intheAPS(Figure8.23).Theshareofnaturalgasintotalpowergenerationremainsflatintheyearsahead,butthenfallstolessthan5%by2050asothersourcesofpowersystemflexibilitydropinpriceandstepintoreplacegas.Thelevelisedcostofelectricity(LCOE)ofbatterystoragecombinedwithutility‐scalesolar–abenchmarkofthecompetitivenessofrenewablesagainstdispatchablethermalcapacity–dropsbyaround50%between2021and2050,fallingbelowtheLCOEofanewcombined‐cyclegasturbine.After2030,naturalgasdemandgrowthslowsintheAPSforanumberofreasons(Figure8.24).Renewablesmeetallofthegrowthinpowergenerationbetween2030and2050,whileelectricityandthedirectuseofrenewablesmeetallofthegrowthinbuildingssectorenergydemand.WiththeexceptionofnorthernChina,growthmarketsforgasinAsiadonothavesignificantneedforseasonalheatinginbuildings,andelectricityandsolar‐basedheatingoffersacost‐competitivealternativetotheuseofgasinhouseholdsforcookingandhotwater.Between2030to2050inindustry,thegrowthofelectricityandlow‐emissionsfuelssuchashydrogenhelpstopushtheshareofnaturalgasintotaldemandtobelow9%.10020030040020102050201020502010205020102050PowergenerationIndustryBuildingsOtherbcmChinaOtherAsiaSoutheastAsiaIndiaIEA.CCBY4.0.Chapter8Outlookforgaseousfuels4078Figure8.24⊳DriversofchangeinnaturalgasdemandinemergingmarketanddevelopingeconomiesinAsiaintheAPSIEA.CCBY4.0.Populationandeconomicgrowthincreasenaturalgasdemandforawhile,butrenewables,low-emissionsfuelsandelectrificationdiminishgasdemandinthelongtermBox8.3⊳Isthegoldenageofnaturalgasover?TheIEAreleasedaspecialreportin2011,AreWeEnteringaGoldenAgeofGas?,whichexploredthepotentialforagoldenageofnaturalgasbasedonsupportiveassumptionsabouttheavailabilityandpriceofnaturalgasandaboutdemand‐sidepoliciesthatcouldsupportitsuseintheemergingworld(IEA,2011).Morethanadecadelater,thegrowthinglobalnaturalgasconsumptionto2021turnsouttohavebeenverymuchinlinewiththeprojectionsmadeinthatreport.IndevelopingAsia,naturalgasdemandfrom2010‐21endedupbeing8%higherthanprojectedinthereport.However,currentlongertermprojectionsindicateadiminishedrolefornaturalgasoverallandparticularlyindevelopingAsia.ThekeypillarsforgrowthintheGoldenAgescenariowerethecompetitivenessofnaturalgasaslargevolumesofshalegasweredevelopedintheUnitedStates,strongeconomicgrowthacrossAsia,andsupportivepolicieswhichvaluedtheadvantagesthatnaturalgashadcomparedwithalternativefuelssuchascoal,oilortraditionalbiomass,notablyintermsofloweremissionsandcleanerair.Thecompetitivenessofnaturalgas,however,hascomeunderpressure,andcompetitionfromlowcostrenewablessuchassolarPVandwindhasnownarrowedthespaceforgrowthinnaturalgas.Therearealsoreasonstothinkthattheageofsupportivepoliciesfornaturalgasmaybedrawingtoaclose.Near‐termsupplyscarcityandenergysecurityconcernshavenotonlydrivenupnaturalgaspricesbuthavealsosparkedlong‐termgasaffordabilityconcerns,andnetzeroemissionspledgeshavefocussedmindsonaneventualphaseoutofunabatednaturalgas.‐300‐200‐10001002002021‐302031‐402041‐50bcmActivityCoal/oiltogasGastoelectricityGastolow‐emissionsfuelsGastorenewablesNetchangeSwitching:IEA.CCBY4.0.408InternationalEnergyAgencyWorldEnergyOutlook2022TheoutlookfornaturalgasinemergingmarketanddevelopingeconomiesinAsiaby2035isabout310bcmlowerintheSTEPSthisyearthanitwasintheGoldenAgeofGasScenarioin2011(Figure8.25).IntheAPS,itislowerby420bcm.Thischangeintheoutlookto2035isnotconfinedtodevelopingAsianmarkets.Forexample,theprojectionofcombinedEuropeanUnionandUnitedKingdomnaturalgasdemandby2035intheAPSis45%lowerthanitwasintheGoldenAgeofGasreportin2011,reflectingcurrentmarketconcerns,increasedclimateambitionsandrevisedassumptionsabouteconomicgrowth.Figure8.25⊳NaturalgasdemandinemergingmarketanddevelopingeconomiesinAsiabyWEO-2022scenarioandoutlookoftheGoldenAgeofGasScenarioin2011IEA.CCBY4.0.ThecontributionofnaturalgastomeetenergydemandindevelopingAsiafromnowto2035appearslesssignificantthanprojectedadecadeagoWhilesomemaycheerthecloudedoutlookfornaturalgas,itremainsanimportantpartoftheenergysystemindevelopingAsia.ThereisalsoariskthatdecliningprospectsforgasmaymeanthatemergingmarketanddevelopingeconomiesinAsiaholdontotheircoal‐firedpowergenerationforlonger,resultinginunfavourableemissionsoutcomes(unlessthereisahistoricaccelerationininvestmentinCCUS).Thishashappenedbefore.Inenergy‐hungryIndiaandSoutheastAsia,forexample,achallengingenvironmentfordomesticgasproductionbetween2010and2021meantnaturalgasbecamelesscompetitivewithcoal.Theresultwasaround30bcmofnaturalgasdemandlosttogas‐to‐coalswitching,leadingtoa50MtCO2increaseinemissionswhichwouldhavebeenavoidedifnaturalgashadbeenusedinstead.2004006008001000120020102035GoldenAgeofGasSTEPSAPSbcm2021WEO‐2011WEO‐2022IEA.CCBY4.0.Chapter9Outlookforsolidfuels409Chapter9OutlookforsolidfuelsPhasedownpostponed?Globalcoaldemandreboundedstronglyin2021to5640milliontonnesofcoalequivalent(Mtce)aseconomiesrecoveredfromthepandemicandcoal‐firedpowergenerationreachedahistorichighin2021.BothChinaandIndiahaveboostedinvestmentindomesticcoalproduction,butglobalproductionstruggledtokeeppacewithdemandincreases,causingcoalpricestosurge.Russia–theworld’sthird‐largestcoalexporter–anditsinvasionofUkrainecomplicatedcoalmarketdynamicsandbroughtadditionalpressureonprices.Theoutlookforcoalisheavilydependentonthestrengthoftheworld’sresolvetoaddressclimatechange.IntheStatedPoliciesScenario(STEPS),coaldemanddeclinesgradually.IntheAnnouncedPledgesScenario(APS),itdeclinesabout20%belowcurrentlevelsby2030,and70%by2050;coaldemandpeaksinChinaintheearly2020sandinIndiainthelate2020s.IntheNetZeroEmissionsby2050(NZE)Scenario,demandfalls45%by2030and90%by2050.Thereisverylimiteduseofcarboncapture,utilisationandstorage(CCUS)withcoalintheSTEPS.Around500Mtceofcoalconsumedin2050isequippedwithCCUSinboththeAPSandNZEScenario,correspondingtoaround30%ofcoaldemandintheAPSandmorethan80%intheNZEScenarioin2050.Unabatedcoalusedropsby99%between2021and2050intheNZEScenario.FollowingtheEuropeanUnionbanonRussianimports,ashort‐livedincreaseincoalconsumptioninEuropeissuppliedfromavarietyofsourcesincludingSouthAfricaandColombia.TheAsiaPacificregionaccountedformorethanthree‐quartersofglobalcoalimportsin2021andthisshareissettorise.Despiteeffortstoincreasedomesticproduction,Indiabecomestheworld’slargestcoalimporterintheSTEPSinthemid‐2020s,while,byfar,Chinaremainsthelargestproducerandconsumer.IntheAPS,coaltradefallsby60%to2050;intheNZEScenario,itfallsby90%.Nearly25exajoules(EJ)ofbiomass(equivalentto830Mtce)wasusedfortraditionalcookingandheatingin2021,mainlyindevelopingeconomiesinAfricaandAsia.Thisfallsby20%to2030intheSTEPS,whichstillleavesaround2billionpeoplewithoutaccesstocleancooking.IntheAPS,thetraditionaluseofbiomassfallsbymorethan60%to2030.IntheNZEScenario,universalaccesstocleancookingisachievedby2030andthetraditionaluseofbiomassisfullyphasedout.Around35EJofmodernsolidbioenergywasconsumedin2021,mainlyforheat,powergeneration,andconversionintoliquidandgaseousbiofuels.Thisincreasesby2030ineachscenario,risingby30%intheSTEPS,by50%intheAPS,andbyjustover60%intheNZEScenario.SUMMARYIEA.CCBY4.0.2021STEPS2050APS2050NZE20505640Mtce38301610540FuturecoalusedependsheavilyoneortstoaddressclimatechangeSteamcoalismainlyusedforheatandelectricitywhereitisincreasinglyreplacedbyrenewables.Cokingcoalismainlyusedinsteelmakingwheretherearefewerreadilyavailablealternatives.SteamcoaldeclinesfurtherandfasterthancokingcoalTraditionaluseofbiomassfallsaspeoplegainaccesstocleancooking,whilemodernbioenergygrows,mainlyinthepowersectorandforbiofuelproduction.IntheNZEScenario,bioenergyresourcesareresponsiblymanagedanddonotcompetewithotherlanduses.Traditionaluseofbiomassgiveswaytomodernsolidbioenergy1030MtceCoking4560MtceSteamNZE2030APS2030STEPS2030ChinaEmergingmarketanddevelopingeconomiesAdvancedeconomiesCoaldemanddeclinesinallscenarios,withafasterphase-downinadvancedeconomiesthaninemergingmarketanddevelopingeconomies.Chinaremainsbyfarthemostinluentialmarketforcoalthroughouttheoutlook.56%49%49%61%ConversionlossesPowerIndustryTraditionaluseofbiomassBuildingsandagricultureSTEPS202120302050APSNZE60EJ587462876680-50%-12%-9%-30%-22%-17%Chapter9Outlookforsolidfuels4119IntroductionRecentdevelopmentshavedealtablowtotheideathatglobalcoaldemandmightsoonsubside.Thedropincoaldemandin2020wasmorethanoffsetbyastrongreboundin2021,takingitveryclosetoitsall‐timehigh.Inadvancedeconomies,wherecoalusehadbeendeclining,demandincreasedbynearly10%.Inemergingmarketanddevelopingeconomies,whichaccountforjustover80%ofglobalcoalusetoday,demandroseby5%.Coalproductionin2021struggledtokeeppacewithoneofthelargesteverannualincreasesindemand.MarketshavebeenfurtherupendedbyRussia’sinvasionofUkraine.RussiawasresponsibleforaroundhalfofthecoalimportsintheEuropeanUnionin2021,butthattradingrelationshipendedwiththeEUbanonRussiancoalimports.Meanwhiletherehavebeenlimitedshort‐termfuelswitchingopportunitiestoeasedemandpressures.Theoverallresultisthatglobalcoalpricesreachedhistorichighsinthefirst‐halfof2022.Coal‐firedpowergenerationreachedahistorichighin2021,withChina,IndiaandSoutheastAsiaallsettingnewrecords.Sofarin2022,recordhighnaturalgaspriceshaveledtogas‐to‐coalswitchinginanumberofmarkets,includingintheEuropeanUnion,andanumberofcoalpowerplantshaveincreasedutilisationorbeengrantedlifetimeextensions.Globalcoalsupplyincreasedbyover5%in2021,eventhoughproductionwashamperedforanumberofproducersbysupplychaindisruptions,Covid‐19containmentmeasuresandadverseweatherconditions.ThelargestincreasewasinChina,whereproductionrosebyaround160milliontonnesofcoalequivalent(Mtce)(a6%increase),followedbytheUnitedStateswith65Mtce(18%)andIndiawith50Mtce(13%).ChinaandIndiaarelookingtoincreaseinvestmentindomesticsupply,butdifficultiessecuringfinancingandinsuranceareincreasinglyrestrictinginvestmentinnewcoalminesinothercountries.Solidbioenergyaccountsfor10%ofglobalenergysupplytoday.Justover40%,around25exajoules(EJ),istraditionalbiomassforcookingandheating,whichisusedbyaround2.4billionpeopleworldwidethatdonothaveaccesstocleancookingfacilities.Theremainder,around35EJ,ismodernsolidbioenergy,whichismainlyusedtogenerateelectricity,provideheatforindustryandbuildings,andasfeedstockforbiofuels.Theoutlookforcoalandothersolidfuelsdependsongovernmentpoliciesanddifferentassumptionsabouthowthesewilldevelop.Thisyieldsverywidevariationsintheoutlookforsolidfueldemand.Coalconsumptionfallsineachofourscenarios;itdeclinesbyaround10%to2030intheStatedPoliciesScenario(STEPS),by20%intheAnnouncedPledgesScenario(APS),andby45%intheNetZeroEmissionsby2050(NZE)Scenario.Thechapterhighlightsthekeyfindingsofourupdatedprojections.MuchmoredetailisincludedinaforthcomingWorldEnergyOutlookSpecialReport,CoalinNetZeroTransitions:Strategiesforrapid,secureandpeople‐centredchangetobereleasedinNovember2022.Againstthebackdropofcurrentstrongcoalconsumptionandareappraisalofenergysecurityconcerns,thereportexamineshowpolicymakersandotherstakeholderscanimplementandfinanceareductionincoalemissionswithoutcompromisingelectricitysecurityoreconomicgrowth,whiletakingintoaccountthesocialconsequencesofchange.IEA.CCBY4.0.412InternationalEnergyAgencyWorldEnergyOutlook2022Scenarios9.1OverviewTable9.1⊳Globalcoaldemand,productionandtrade,andsolidbioenergyusebyscenario(Mtce)STEPSAPSNZE20102021203020502030205020302050Worldcoaldemand5220564451493828453916133024539Power310836423174208628529381685306Industry169016291684152014266401159206Othersectors4233732912222613618028ShareofdemandwithCCUS0%0%0%1%1%31%3%89%Advancedeconomies1585102452629737512726784Emergingmarketanddevelopingeconomies3636462046233532416414862762455Worldcoalproduction5235582551493829453916133024539Steamcoal4069456040262954353811772271407Cokingcoal8661030936736855381716120Peatandlignite300235187139146563812Advancedeconomies1512112472959052218636299Emergingmarketanddevelopingeconomies3723470244203239401714272662443Worldcoaltrade9481135999958859470539137Tradeasshareofproduction18%19%19%25%19%29%18%25%CoastalChinasteamcoalprice142155816766565244Solidbioenergy(EJ)4960668062875874Traditionaluseofbiomass2524201896‐‐Modernbioenergyandlosses2436466253815874Notes:STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.CoastalChinasteamcoalpricereportedinUSD(2021)/tonneadjustedto6000kcal/kg.SeeAnnexCfordefinitions.Solidbioenergylossesareconversionlossesforsolid,liquidandgaseousbiofuelsproduction.Globalcoaldemandissettoriseslightlyin2022ascountrieslooktomeetrisingenergydemandwhilestrugglingwithlowereconomicgrowth.Thespeedofthecoaldeclineinsubsequentyearsdependsonthestringencywithwhichcountriespursueclimateandenvironmentaltargets.IntheSTEPS,globalcoaldemandfallsbyaround10%from2021to2030,withanear50%declineinadvancedeconomiesandaslightincreaseinemergingmarketanddevelopingeconomies(Figure9.1).Steamcoalproductionfallsbymorethan10%to2030(Table9.1);declinesincokingcoalaresmaller,mainlybecauseofincreasesinsteelproductioninIndia.11Steamcoalismainlyusedforheatproductionorsteam‐raisinginpowerplantsand,toalesserextent,inindustry;cokingcoalismainlyforsteelmakingasachemicalreductantandasourceofheat.IEA.CCBY4.0.Chapter9Outlookforsolidfuels4139TheEuropeanUnionhaltscoalimportsfromRussiaandreplacesthemwithimportsfromavarietyofsourcesincludingSouthAfricaandColombia.Thischangeinthesourceofimportstakesplaceamidabackdropofabouta50%cutintotalcoalimportsbytheEuropeanUnionintheperiodto2030.By2030,morethan80%ofglobalcoaltradetakesplaceinthePacificBasin(upfromabout75%in2021).Thetraditionaluseofbiomassfallsby20%to2030asaresultofeffortstomovetocleanercookingfuels,butnearly2billionpeopleworldwidestillrelyonitforcookingandheatingin2030.Theuseofmodernsolidbioenergyincreasesby30%to2030.Between2030and2050,theuseofcoalinindustryfallsbylessthan10%,butitsuseinthepowersectordropsby35%asoldercoal‐firedpowerplantsareretiredandnewrenewablescapacityispreferredinmanycasestonewcoal‐firedpowerplants.Figure9.1⊳CoalandsolidbioenergydemandbyscenarioIEA.CCBY4.0.Coaldemandfallsandmodernsolidbioenergyincreasesinallscenarios,butthepaceandscaleofchangedifferdramaticallyNote:EJ=exajoule;STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario;NZE=NetZeroEmissionsby2050Scenario.IntheAPS,globalcoaldemandfallsby20%to2030andby70%to2050.Demandinadvancedeconomiesdeclinesby65%to2030ascoaluseinthepowerandindustrysectorsfallsrapidly.CoaldemandpeaksinChinaintheearly2020sandinIndiainthelate2020s.Thetraditionaluseofbiomassfallsbymorethan60%to2030,mainlyasaresultofreductionsinChina,India,KenyaandNigeria.Theuseofmodernsolidbioenergyincreasesby50%to2030andby130%to2050,withlargeincreasesinthepowerandindustrysectors,andinbiofuelsconversion.IntheNZEScenario,globalcoaldemandfallsby45%to2030,witha75%declineinadvancedeconomiesanda40%declineinemergingmarketanddevelopingeconomies.Somecoal‐firedpowerplantsareretrofittedwithcarboncapture,utilisationandstorage(CCUS)or5010015020025020102021STEPSAPSNZESTEPSAPSNZESTEPSAPSNZEUnabatedcoalAbatedcoalModernsolidbioenergyTraditionaluseofbiomassEJ203020402050IEA.CCBY4.0.414InternationalEnergyAgencyWorldEnergyOutlook2022firecoalwithlow‐emissionsfuels,suchasbioenergyorammonia,tocutemissionsandreducetheneedtoretireexistingplantsbeforetheendoftheirlifetimes.Unabatedcoalusedropsby99%between2021and2050,andin2050justunder90%ofremainingcoalpowergenerationcomesfromplantsequippedwithCCUS.Universalaccesstocleancookingisachievedin2030,andthisbringstoanendtothetraditionaluseofbiomass.ModernbioenergydemandincreasesatasimilarratetotheAPS,butahighershareisusedinthepowersectorandlessistransformedintobiofuels.9.2CoaldemandTable9.2⊳Coaldemandbyregionandscenario(Mtce)STEPSAPS20102021203020402050203020402050NorthAmerica7683891075042803730UnitedStates716363913226642417CentralandSouthAmerica3746405260282520Brazil2125232729161412Europe5393692291761671579972EuropeanUnion3602381256956793520Africa1561521481321311195930SouthAfrica144129113877895346MiddleEast5581112789Eurasia203222172158160162131121Russia15116611410410211310095AsiaPacific35134460444438163258398624491332China2565315729742342186626911603789India399614773738671704420243Indonesia451021361641601249041Japan1651431038762975835RestofSoutheastAsia76166201243263171138110World52205644514943943828453928081613Note:SeeAnnexCfordefinitions.Chinaistheworld’slargestcoalconsumingcountrytoday.Itaccountsforabout55%ofglobalcoalconsumption(Table9.2).CoaldemandinChinaincreasedbyanaverageof100Mtceeachyearbetween2000and2020asitrapidlyexpandeditspowerandindustrysectors.ThiswasequivalenttoaddingthecurrentcoalconsumptionofIndonesiaeveryyear.CoaldemandinChinaroseagainbyaround2%in2020,despitetheimpactsoftheCovid‐19pandemic,andbyafurther4%in2021.Indiaistheworld’ssecond‐largestcoalconsumertoday.Itaccountsforjustover10%ofglobalcoalconsumption.CoaldemandinIndiaroserapidlybetweenIEA.CCBY4.0.Chapter9Outlookforsolidfuels41592010and2019,mainlyasincreasesinelectricitydemandwerelargelymetthroughcoal‐firedpower.CoaluseinIndiadroppedby7%in2020duetothepandemic,butincreasedby13%in2021,thereforealreadysurpassing2019levels.Advancedeconomiesconsumedaround1000Mtceofcoalin2021,accountingforjustunder20%ofglobalcoaldemand.Three‐quartersofthiswasusedinthepowersector.Demandfellbyaround15%in2020:itthenincreasedby10%in2021aseconomiesreboundafterthepandemic,butitremainsbelow2019levels.In2022,Russia’sinvasionofUkrainehasledanumberofEuropeancountriestodelaytheretirementofcoal‐firedpowerplants,reconnectpreviouslyretiredunitstothegrid,andtotemporarilyexpandcoalusetoreducenaturalgasconsumption.Demandtrendsto2030Figure9.2⊳Changeincoaldemandbyscenario,2021-2030IEA.CCBY4.0.OutlookforcoalinemergingmarketanddevelopingeconomiesvariesmuchmorebyscenariothaninadvancedeconomiesNotes:Mtce=milliontonnesofcoalequivalent.Otherincludesbuildings,agricultureandotherenergysector.Inadvancedeconomies,solarPVandwindreplacealargeshareofcoal‐firedpowergenerationintheSTEPS.Coaluseinpowergenerationdeclinesby60%between2021and2030(Figure9.2).Morethan200Mtceofcoalisconsumedinindustrytodayinadvancedeconomies,andthisremainsbroadlyconstantthroughto2030.IntheAPS,demandforcoalinthepowersectorinadvancedeconomiesfallsby80%to2030asmorerenewablesaredeployed,mostlysolarPVandwind.Coal‐firedgenerationcapacitydropsfrom520gigawatts(GW)in2021to210GWin2030,andcoalplantsin2030aremainlyusedtoprovideflexibility:theiraverageutilisationdropsfrom50%to30%.Around25GWofcoal‐firedcapacityisretrofittedandrepurposedtoco‐fireammoniaandbioenergyby‐2000‐1500‐1000‐5000500STEPSAPSNZESTEPSAPSNZEPowerIndustryOtherNetchangeMtceAdvancedeconomiesEmergingmarketanddevelopingeconomiesIEA.CCBY4.0.416InternationalEnergyAgencyWorldEnergyOutlook20222030.Coaluseinindustryfallsby20%to2030,inpartreflectinganincreaseintheproductionofnearzeroemissionsprimarysteelandnearzeroemissionsclinkerforuseincement.InChina,around60%ofthe3150Mtceofcoalconsumedtodayisinthepowersectorand30%inindustry.IntheSTEPS,thereisasmallincreaseincoaldemandtothelate2020sfollowedbyadeclinetoaround3000Mtcein2030.Coaluseinpowergenerationandintheironandsteelsub‐sectorspeaksinthelate2020saselectricitygenerationfromrenewablesincreasesandasmoreelectricarcfurnacesaredeployed.Thesereductionsarepartlyoffsetbyincreasesincoaluseinthechemicalsindustryandintheproductionofsyntheticfuels.Coaluseinthebuildingssector,whichaccountsforjustunder5%oftotaldemandtoday,fallsby80%to2030inresponsetopoliciestoreduceairpollution.IntheAPS,coaldemandinChinapeaksinthemid‐2020sanddeclinesto2700Mtcein2030.Coaluseinindustryfallsby20%to2030(comparedwitha5%reductionintheSTEPS)asaresultoffuelswitchingtonaturalgas,moreelectrificationandenergyefficiencyimprovements.Therearealsoenhancedeffortstoreducecoaluseinthepowersector,whichfallsby10%to2030.InIndia,coaldemandintheSTEPSrisesby25%to2030.Strongeconomicgrowth–theeconomyexpands90%between2021and2030–bringswithitmoredemandforcoal‐firedpowergenerationandintheuseofcoaltoproduceironandsteelandcement.Coal‐firedpowercapacityincreasesfrom240GWin2021to275GWin2030,whilethereislimiteduseofelectricarcfurnacesinindustry.IntheAPS,coaldemandinIndiaincreasesbyjustunder15%between2021and2030,reflectingincreaseddeploymentofrenewables,improvementsinenergyefficiency,andtheinstallationofgasandelectricity‐basedequipmentinindustry.TheincreaseincoaldemandintheindustrysectorisaroundhalfofthatseeninSTEPS,andtheincreaseinthepowersectorisabout20%less.InSoutheastAsia,coaldemandincreasesbynearly30%to2030intheSTEPSandbyjustunder10%intheAPS.Growthisdrivenbyincreasesinelectricitydemandfromtheindustryandbuildingssectors.InAfrica,coaldemandremainsbroadlyconstantto2030intheSTEPS:adecreaseindemandinSouthAfrica,ledbyfuelswitchingtolesspollutingalternatives,islargelyoffsetbyincreaseselsewhere.IntheAPS,muchwiderdeploymentofrenewablesacrossthecontinentleadstoa20%fallintotalcoaldemandby2030.InRussia,coaldemanddropsby30%to2030inboththeSTEPSandAPSasnaturalgasandrenewablesreplacecoaluseinpowergenerationandindustry.IntheCaspianregion,coaldemandremainsrelativelyflatintheSTEPSandfallsbyonly10%throughto2030intheAPS.IEA.CCBY4.0.Chapter9Outlookforsolidfuels4179Demandtrendsafter2030Figure9.3⊳Globalcoaldemandbyregionandscenarioto2050IEA.CCBY4.0.Globalcoaldemanddecreasesto2050ineachscenario,butatverydifferentspeeds.Nearly90%ofcoaluseisequippedwithCCUSby2050intheNZEScenarioNotes:Mtce=milliontonnesofcoalequivalent;CCUS=carboncapture,utilisationandstorage.IntheSTEPS,globalcoaldemandfallsto4000Mtce(a25%drop)between2030and2050(Figure9.3).Demandfallsby45%inadvancedeconomiesoverthisperiodandby40%inChina.Coal‐firedpowerplantcapacityinChinashrinksfrom1140GWtodayto890GWin2050,andutilisationdropsfrom50%to40%.InIndia,coaldemandpeaksintheearly2030sandthendeclinesgradually,mainlyduetorapiddeploymentofrenewablesinthepowersector.However,totalcoaldemandinIndiain2050isstillaround10%higherthanin2021.CoaldemandinSoutheastAsiaincreasesby60%between2021and2050,drivenmainlybyincreasesinthepower,andironandsteelsectors.IntheAPS,coaldemanddeclinesrapidlyafter2030,witha65%reductioninthepowersectorto2050anda55%declineinindustryuse.DemandinChinafallsbymorethan1000Mtceinthe2030s,arateofdeclinethatmirrorsitsrateofincreasebetween2000and2020.China’scoal‐firedpowerplantcapacitydropsto850GWin2050,anditsutilisationratedeclinesto20%asplantsareincreasinglyusedforflexibilityratherthanbaseloadgeneration.InIndia,coaldemandpeaksinthelate2020sandfallsby65%between2030and2050.CCUSisincreasinglyusedinawiderangeofsectorsandregionsacrosstheworld:around10%ofcoalpowerplantsworldwideareequippedwithCCUSin2040andalmost20%in2050.Bythen,morethan120GWofplantsworldwideco‐fireammoniaorbioenergywithcoal.IntheNZEScenario,coaldemanddropsto540Mtcein2050,around90%belowthecurrentlevel.Unabatedcoalusedropsby99%overthisperiod;aroundhalfoftheremaining60Mtceofunabatedcoalconsumptionin2050isusedintheironandsteelindustry.25%50%75%100%15003000450060002021203020402050203020402050203020402050AdvancedeconomiesEmergingmarketanddevelopingeconomiesShareofcoalwithCCUS(rightaxis)MtceSTEPSAPSNZEIEA.CCBY4.0.418InternationalEnergyAgencyWorldEnergyOutlook20229.3CoalsupplyTable9.3⊳Coalproductionbyregionandscenario(Mtce)STEPSAPS20102021203020402050203020402050NorthAmerica8184781881051061385732UnitedStates75843315679801155029CentralandSouthAmerica796241424124103Colombia735837383722103Europe3312001268059792720EuropeanUnion22013871291046108Africa2102121881581711628747SouthAfrica2061991621141091385819MiddleEast11111000Eurasia309444323307274292245216Russia238371265250215239212187AsiaPacific34874428428237013177384323821295Australia352421408425419304255138China2461300428082228177625541522733India304447546508436509251109Indonesia266438393405402364247210RestofSoutheastAsia5260677072595253World52355826514943953829453928081613Notes:Mtce=milliontonnesofcoalequivalent.SeeAnnexCfordefinitions.Coalproductionin2021struggledtomeetrisingdemand,especiallyduringthefirst‐halfoftheyear,cuttingintostocklevelsandpushingupprices.InChinaandIndia,coalshortagescausedinpartbytransportbottlenecksledtopoweroutagesandfactoryshutdowns.Policiestorampupdomesticproductionandreducecoalshortageshavebeenimplemented,facilitatedbytheexistenceoflargestate‐ownedproductioncompanies.OutsideChinaandIndia,mostoftheadditionalcoalproductionin2021camefromexistingminesorreopenedminesthathadceasedtooperateduringperiodsoflowprices:thisisareflectionofthelimitedinvestmentinnewminesthathastakenplaceinrecentyears.IEA.CCBY4.0.Chapter9Outlookforsolidfuels4199Supplytrendsto2030Figure9.4⊳CoalsupplyintheSTEPSto2030andchangebyscenarioIEA.CCBY4.0.Globalcoaldemandfallsby45%to2030intheNZEScenarioandthismeansthereisnoneedforsupplyfromnewcoalminesorminelifetimeextensionsNote:Mtce=milliontonnesofcoalequivalent.Chinakeepscoalproductionaroundthecurrentlevelof3000Mtceforanumberofyearsbutwithcoaldemandfallingasrenewablesaccountforanincreasingshareofpowergeneration,productiondeclinestoaround2800Mtcein2030(Figure9.4).IntheAPS,coalproductiondeclinesmorerapidlyfromthemid‐2020sandsupplyin2030isaround15%below2021levels(Table9.3).Indiabecametheworld’ssecond‐largestcoalproducerin2021(inenergyterms),overtakingAustraliaandIndonesia,anditplanstoincreasedomesticproductionbymorethan100Mtcefromcurrentlevelsto2025.Coalsupplyincreasesfromabout450Mtcein2021to550Mtcein2030intheSTEPSandjustover500MtceintheAPS.Indonesiaseescoalproductionfallby10%intheperiodto2030intheSTEPSandby20%intheAPS.Indonesiacurrentlyexportscloseto80%ofitscoaloutput,whichisalmost100%steamcoal,andexportsfallsignificantlyintheyearsto2030inboththeSTEPSandAPS.IntheUnitedStates,decliningdomesticdemandforcoalandlimitedopportunitiestotapintoexportmarketsmeansproductionin2030isaround65%lowerthanin2021intheSTEPS,andaround75%lowerintheAPS.InAustralia,coalproductionplateausbetween2021and2030intheSTEPS,withaslightfallindomesticdemandbeingpartiallyoffsetbyanincreaseinexports.IntheAPS,itscoalproductionfallsoverthisperiodbyabout25%.Cokingcoalproductionremainssteady,andAustraliaexportsabout190Mtcecokingcoaleachyearthroughto2030.Steamcoal20004000600020102015202020252030AdvancedeconomiesChinaOtheremergingmarketanddevelopingeconomiesSTEPSMtce‐3000‐2000‐1000STEPSAPSNZEChange2021‐30MtceIEA.CCBY4.0.420InternationalEnergyAgencyWorldEnergyOutlook2022productionfallsbyabout40%overthesameperiodasdemanddeclinesquicklyinkeyimportingcountriessuchasJapanandKorea.EuropeislookingtoreplaceRussianimports,buttherearelimitedopportunitiestoboostindigenouscoalproductioninwaysthatareconsistentwithlong‐termemissionsreductiongoals.Supplydeclinesbroadlyinlinewithdecreasingdemand,fallingbyaround40%to2030intheSTEPSandbyover55%intheAPS.Colombiasawcoalproductionreboundin2021asexistingoperationsrampedupandasminesthathadclosedduringtheCovid‐19pandemicwerereopened.Morethan80%ofitsproductionissteamcoalforexports,withEuropeasitsmainmarket.AscountriesinEuropetransitionfromcoal‐firedgeneration,coalproductioninColombiato2030fallsbyabout35%intheSTEPS,andby60%intheAPS.IntheNZEScenario,thereisnoneedforanynewcoalminesorminelifetimeextensions.Steamcoalproductionfallsby50%to2030ascoalisrapidlyeliminatedfromthepowersectorinallcountries.Cokingcoalproductionfallsbyabout30%to2030,asmallerdeclinethanforsteamcoalsincethesteelindustryhasfewerreadilyavailablealternatives.Supplytrendsafter2030Figure9.5⊳Coalsupplybyscenario,2010-2050IEA.CCBY4.0.Coalproductionfallsbyabout30%between2021and2050intheSTEPS,70%intheAPSand90%intheNZEScenario;cokingcoalproductiondeclinesmuchlessthansteamcoalNote:Mtce=milliontonnesofcoalequivalent.IntheSTEPS,globalcoalsupplyfallsbyabout25%from2030to2050(Figure9.5).Chinacutsitsproductionbyaround35%,andIndiaandadvancedeconomiesbyalmost20%.ProductioninIndonesiaisbroadlyconstantbetween2030and2050.2021STEPSAPSNZELigniteandpeatCokingcoalSteamcoalCoaltype205010002000300040005000600020102020203020402050MtceNZECoalsupplySTEPSAPSIEA.CCBY4.0.Chapter9Outlookforsolidfuels4219IntheAPS,globalcoalsupplydeclinesby65%between2030and2050.Steamcoalfallsby2400Mtce(70%reduction)asaresultofeffortstoreduceemissionsfromthepowersector,whilecokingcoalfallsby470Mtce(55%reduction)reflectingfuelswitchingandenergyefficiencyimprovements.ProductioninChinafallsby1800Mtce(70%reduction):thisaccountsforclosetotwo‐thirdsoftheglobaldeclineinsupply.ProductioninIndiafallsby400Mtce(80%reduction).Theleadingexporters,AustraliaandIndonesia,seeproductionfallbyaround55%and40%respectivelybetween2030and2050.IntheNZEScenario,globalcoalproductiondeclinesby80%between2030and2050toaround10%ofthelevelin2021,withproductionin2050downtoaround410Mtceofsteamcoaland120Mtceofcokingcoal.9.4CoaltradeFigure9.6⊳Topcoalimportersandexportersbyscenario,2021,2030and2050IEA.CCBY4.0.FallingdemandinadvancedeconomiesandChinareducescoaltradeintheAPSby25%to2030andby60%to2050from2021levelsNote:Mtce=milliontonnesofcoalequivalent.TheAsiaPacificregionisthemaindriverofinternationalcoaltrade,accountingformorethanthree‐quartersofglobalcoalimportsin2021(Figure9.6).Chinawasthelargestimporterin2021(around250Mtce),followedbyIndia(around165Mtce).AustraliaandIndonesiaarethetwomaincoalexporters,togetheraccountingfor60%ofcoalexportsin2021.Australiaaloneprovidedmorethanhalfofallcokingcoalexports.Russiaisthethird‐largestcoalexporter.ItprovidedaroundhalfofthecoalimportstotheEuropeanUnionin2021(about20%oftotalEUcoaldemand).However,itsinvasionofUkraineledtheEuropeanUniontointroduceabanfromAugust2022onallformsofcoalimportsfromRussia.‐1200‐600060012002021STEPSAPSSTEPSAPSChinaIndiaJapanKoreaEuropeOtherimportersAustraliaIndonesiaRussiaOtherexportersMtce20302050ImportersExportersImportersExportersIEA.CCBY4.0.422InternationalEnergyAgencyWorldEnergyOutlook2022IntheSTEPS,thereisashort‐termincreaseinimportstotheEuropeanUnionfromSouthAfrica,UnitedStatesandColombiatoreplaceimportsfromRussia.However,theamountofcoalimportedbytheEuropeanUniondropsbyaround50%between2021and2030,andexportsfromSouthAfricaandColombiafallbyover30%overthisperiod.Indiabecomestheworld’slargestimporterinthemid‐2020s:itsimportsriseby35%to2030whileChina’sdecreaseby35%.In2050,Indiaimports40%morecoalthanin2021,mostofwhichiscokingcoal.Thischangesthedynamicsofexportingeconomies:Australianexports,whicharemainlycokingcoal,increaseby10%to2050,whileIndonesia,mainlyasteamcoalexporter,seesexportsfallby30%.IntheAPS,globalcoaltradefallsby25%to2030andby60%to2050.Thereis470Mtceofcoalimportedin2050,mainlybycountrieswithlargedistancesbetweendomesticproductionandconsumptionhubsandwheredifferencesincoalqualityrequiredomesticproductiontobesupplementedwithimports.ImportsofcokingcoalinIndiaincreaseby40%to2030asitexpandssteelproduction.Indonesianexportsdropby30%to2030asthemarketforsteamcoalshrinks.Australiafaresbetter,withcoalexportsfallingbylessthan20%to2030,althoughitsexportsfallbyabout50%between2030and2050astheuseofcleanenergytechnologiesincreases.IntheNZEScenario,globalcoaltradedeclinesby90%between2021and2050ascleanenergytechnologiesprogressivelyandspeedilydisplacecoalacrosstheenergysystem.9.5CoalinvestmentFigure9.7⊳Averageannualinvestmentincoalsupplyandcoal-firedelectricitygenerationbyscenarioIEA.CCBY4.0.Investmentincoalfallsinallscenariosthisdecade:investmentto2030is30%lowerthanrecentyearsintheSTEPS,50%lowerintheAPS,andtwo-thirdslowerintheNZEScenario501001502002019202020212022‐302031‐502022‐302031‐502022‐302031‐50ChinaOtheremergingmarketanddevelopingeconomiesAdvancedeconomiesBillionUSD(2021)STEPSAPSNZEIEA.CCBY4.0.Chapter9Outlookforsolidfuels4239Investmentincoalsupplyandcoal‐firedpowergenerationworldwidehasfallenbymorethan20%since2015.MostinvestmentinrecentyearshasbeeninChinaandIndia,togetheraccountingforabout70%ofglobalinvestmentincoal‐firedpowerplantsandsupplyin2021.InvestmentincoalsupplyissettoriseintheimmediatefutureinresponsetoenergysecurityconcernstriggeredbyRussia’sinvasionofUkraine,recentreboundineconomicactivity,andrisingindustrialoutputinemergingmarketanddevelopingeconomies.IntheSTEPS,bansbysomecountriesonfinancingnewcoal‐firedpowerplantsandsupplyprojectsabroadtogetherwithcoalphase‐outpoliciescauseaverageannualinvestmentto2030tofallby30%fromrecentlevelswithcontinueddeclinesthereafter(Figure9.7).IntheAPS,thereisalargerdropinspending,especiallyinadvancedeconomies.By2030,thereisvirtuallynocoalinvestmentintheEuropeanUnion,andadvancedeconomiesinAsiasignificantlyreduceinvestmentsincoal.ThereisabigincreaseininvestmentinCCUS,whichby2030accountsforhalfofthetotalcoal‐relatedinvestmentinpowergeneration.IntheNZEScenario,thereisnoneedfornewcoalminesorminelifetimeextensions,andnonewcoal‐firedpowerplantsareapproved.Averageannualinvestmentincoalto2030istwo‐thirdslowerthaninrecentyears,andtheremainingcoal‐relatedinvestmentisfocussedonmaintainingproductionatexistingminesastheywinddownandonreducingtheiremissionsintensityasmuchaspossible,forexamplethroughreducingcoalminemethaneemissions.9.6SolidbioenergyFigure9.8⊳SolidbioenergydemandbyscenarioIEA.CCBY4.0.Modernsolidbioenergyplaysakeyroleinmeetingnetzeroemissionspledges;traditionaluseofbiomassdecreasessubstantiallyintheAPSandiseliminatedintheNZEScenarioNotes:EJ=exajoule.Conversionlossesoccurduringtheproductionofsolid,liquidandgaseousbiofuels.204060801002021203020502030205020302050EJTraditionaluseofbiomassConversionlossesBuildingsandagricultureIndustryPowerSTEPSNZEAPSIEA.CCBY4.0.424InternationalEnergyAgencyWorldEnergyOutlook2022Worldwide,around60EJ(2000Mtce)ofsolidbioenergywasusedin2021(Figure9.8).Theinefficienttraditionaluseofbiomassforcookingandheatingindevelopingcountriesaccountedforaround25EJ,mainlyinAfrica(50%ofthetotal)andAsia(45%).2Thetraditionaluseofbiomassisthemaincauseofthe3.6millionprematuredeathscausedbyhouseholdairpollutioneveryyear,isasourceofgreenhousegas(GHG)emissions,andisamajorbarriertowomenbeingabletopursueeducationandparticipateintheworkforce(seeChapter5).Around25EJofmodernsolidbioenergywasusedin2021forpowergenerationandinend‐usesectors:40%ofthisprovidedheatforindustry,40%wasconsumedinthepowersector(generating670terawatt‐hoursofelectricityand1EJofcommercialheat),and20%wasusedinthebuildingsandagriculturesectors.Theremaining10EJofsolidbioenergywaslostduringconversiontosolid,liquidandgaseousbiofuels.IntheSTEPS,thereislimitedprogressonuniversalaccesstocleancookingandthetraditionaluseofbiomassfallsbyonly20%to2030.In2050,thereisstillnearly20EJofthetraditionaluseofbiomassglobally,75%ofwhichisusedinAfrica.Modernsolidbioenergyuseinpowergenerationandfinalconsumptionincreasesby30%to2030,withlargeincreasesinChinaandEuropeforuseinpowergeneration.IntheAPS,commitmentsmadebygovernmentsoncleancookingtargetsareachievedontimeandinfull.Thetraditionaluseofbiomassfallsby60%from2021levelsto2030andbyaround75%to2050.Theremaining6EJoftraditionalbiomassin2050isconsumedmainlyincountriesinAfrica.Modernsolidbioenergyuseinpowergenerationandfinalconsumptionincreasesby50%to2030andmorethandoublesto2050.Around1.1gigatonnes(Gt)CO2peryeariscapturedthroughtheuseofbioenergywithcarboncapture,utilisationandstorage(BECCS)by2050.3Intotal,modernbioenergyavoidsaround1GtCO2by2030and4.5GtCO2by2050throughthedisplacementoffossilfuelsanduseofBECCS.IntheNZEScenario,thetraditionaluseofbiomassisphasedoutworldwideby2030(Box9.1).OverallmodernsolidbioenergylevelsarebroadlysimilartothoseintheAPSand1.2GtCO2peryeariscapturedthroughBECCSin2050.Modernsolidbioenergyavoids1.8GtCO2emissionsby2030and5GtCO2emissionsby2050throughthedisplacementoffossilfuelsandBECCS,andisthusresponsibleforjustover10%oftotalemissionsreductionsintheNZEScenario.2Thetraditionaluseofbiomassisthecombustionofsolidbiomassinbasicstovesthatareinefficientandpolluting.Thisincludestheuseofwood,woodwaste,charcoal,agriculturalresiduesandotherbio‐sourcedfuelssuchasanimaldung.Modernsolidbioenergyistheuseofsolidbioenergyinimprovedcookstovesandmoderntechnologieswithhighercombustionefficiencies,oftenusingprocessedbiomasssuchaspellets.3BECCSleadstonetnegativeemissionswhenthebioenergyissustainablysourcedandthecarbonemissionsresultingfromitsusearecapturedandstoredonapermanentbasis.IEA.CCBY4.0.Chapter9Outlookforsolidfuels4259Box9.1⊳WhatwouldachievinguniversalenergyaccessmeanforGHGemissions?IntheNZEScenario,around40%ofpeoplethatgainaccesstocleancookingintheperiodto2030dosothroughtheuseofliquefiedpetroleumgas(LPG),35%throughimprovedbiomasscookstovesand15%viaelectricity.IncreaseduseofLPGandelectricitybringsaboutanoverallincreaseinfossilfueluseandCO2emissions.However,thetraditionaluseofbiomasscurrentlyresultsinmethaneandnitrousoxideemissionsandshiftingtoalternativefuelsavoidstheseemissions.AchievinguniversalaccesstocleancookingintheNZEScenarioresultsinanoverall870MtCO2‐eqreductionofGHGemissionsin2030(Figure9.9).Thesereductionscouldbeevenlarger.Someofthesolidbiomassusedforcookingorconvertedintocharcoalindevelopingcountriesiscurrentlyharvestedunsustainably,leadingtodeforestationandrelatedCO2emissions.Thetraditionaluseofbiomassisalsoamajorsourceofblackcarbonemissions,ashort‐livedaerosolwithhighglobalwarmingpotential.Figure9.9⊳NetGHGemissionssavingsfromcleancookingaccessintheAPSandNZEScenarioby2030IEA.CCBY4.0.AchievingcleancookingtargetsintheAPSreducesGHGemissionsby580MtCO2-eqin2030,whileuniversalaccessintheNZEScenarioreducesemissionsby870MtCO2-eqNotes:GtCO2‐eq=gigatonnesofcarbon‐dioxideequivalent.Methaneisassumedtobeequivalentto30tonnesCO2andnitrousoxideequivalentto273tonnesCO2.BlackcarbonemissionsandavoidedCO2emissionsfromthecombustionofunsustainablyharvestedbiomassarenotincluded.Inadditiontothe75EJofmodernsolidbioenergyusedin2050intheNZEScenario,afurther25EJofmodernbioenergyisusedintheformofbiogasorliquidbiofuels.Morethanhalfoftotalbioenergysupplyin2050intheNZEScenarioisfromsourcesthatdonotrequire‐1.0‐0.500.5IncreaseAvoidedNetsavingsIncreaseAvoidedNetsavingsGtCO₂‐eqAPSNZEIEA.CCBY4.0.426InternationalEnergyAgencyWorldEnergyOutlook2022dedicatedlanduse(Box9.2).Totalbioenergysupplyof100EJisatthebottom‐endoftherangeofestimates(100‐170EJ)ofglobalsustainablebioenergypotentialin2050,andismuchlowerthanthelevelofbioenergyuseincomparable1.5°CscenariosassessedintheSixthAssessmentReportoftheIntergovernmentalPanelonClimateChange,whichhaveamedianof240EJofbioenergyusein2050(IPCC,2021).TheNZEScenariodoesnotrelyonoffsetsfromoutsidetheenergysectortoachievenetzeroemissionsin2050.Butcommensurateactiononreducingemissionsfromagriculture,forestryandotherlanduses(AFOLU)wouldhelplimitclimatechangeandprovideotherbenefits.Suchactioncouldincludemeasuresto:haltdeforestation;improveforestmanagementpractices;institutefarmingpracticesthatincreasesoilcarbonlevels;andsupportafforestation.Anumberofcompaniesandcountrieshaverecentlyexpressedinterestinsuch“nature‐basedsolutions”tooffsetemissionsfromtheiroperations.Theuseofoffsetscanbeacost‐effectivemechanismtoreduceemissionsfrompartsofvaluechainswheredirectemissionsreductionsarechallenging,providedthatschemestogenerateemissionscreditsresultinpermanent,additionalandverifiedemissionsreductions.However,thereislikelytobealimitedsupplyofemissionscreditsconsistentwithnetzeroemissionsglobally.Box9.2⊳WheredoesbioenergycomefromintheNZEScenario?Thereareanumberofsustainabilityconcernslinkedtotheuseoflandforbioenergyproduction.IntheNZEScenario,bioenergyresourcesareresponsiblymanagedanddonotcompetewithotherlanduses.Ofthe100EJoftotalmodernbioenergysupplyin2050intheNZEScenario,justoverhalfisfromsustainablewastestreamsthatdonotrequireanyspecificlanduse.Thisincludesagricultureresidues,forestandwoodresiduesandotherorganicwastestreams.Theremaining45EJofmodernbioenergydemandrequireslandtobededicatedtobioenergysupply.Toavoidconflictsbetweenfoodproductionandaffordability,thereisageneralshiftintheNZEScenarioawayfromconventionalbioenergysourcestowardsadvancedbioenergy(seeChapter7).Thefocusisontheproductionofbioenergyfromdedicatedshortrotationwoodycropsgrownoncropland,pasturelandandmarginallandsthatarenotsuitedtofoodcrops.4IntheNZEScenario,thereisnonetincreaseincroplanduseforbioenergy,andnobioenergycropsaregrownonexistingforestedland.Shortrotationwoodycropsprovidejustover40EJofbioenergysupplyin2050intheNZEScenario(Figure9.10).ThesecanproducetwiceasmuchbioenergyperhectareasmanyconventionalbioenergycropsandcanleadtoadditionalCO2removalfromtheatmosphere.Bioenergysupplyfromconventionalcropsfallsfromaround6EJtodaytolessthan1EJin2050intheNZEScenario.4Croplandherereferstoagriculturallandusedforfood,animalfeedandbioenergyproductionbutexcludesshort‐rotationwoodycropsnotestablishedonexistingagriculturalcropland.IEA.CCBY4.0.Chapter9Outlookforsolidfuels4279Theremainingmodernbioenergycomesfromsustainablymanagedforestryplantationsandtreeplantingintegratedwithagriculturalproductionviaagroforestrysystems.Thesedonotconflictwithfoodproductionorbiodiversity.SuchplantationscanreduceCO2emissionsintheatmosphere,producebiomassinasustainablewayandincreaseagricultureandforestryincomes.BasedonlandareamodellingusingtheGLOBIOMmodel(Havlíketal.,2014),theareaoflandestimatedtobeavailableismuchlargerthantheareaoflandusedtoproducebioenergyintheNZEScenario.ThisisevenaftertakingintoaccountsustainabilityconsiderationssuchastheneedtoprotectbiodiversityandtomeettheUNSustainableDevelopmentGoal15onbiodiversityandlanduse.Nevertheless,itiscriticaltoensurethatbioenergyfeedstocksarecertifiedandthattherearestrictcontrolsinplacetoavoidland‐useconflicts.Figure9.10⊳BioenergysupplyintheNZEScenarioIEA.CCBY4.0.ThereisnoincreaseincroplanduseforbioenergyintheNZEScenarioandnobioenergycropsaredevelopedonexistingforestedlandNote:EJ=exajoule.2040608010020102021203020402050EJForestryplantingShort‐rotationwoodycropsForestandwoodresiduesOrganicwastestreamsTraditionaluseofbiomassConventionalbioenergycropsIEA.CCBY4.0.ANNEXESIEA.CCBY4.0.BoxA.1⊳WorldEnergyOutlooklinksWEOhomepageGeneralinformationiea.org/weoWEO‐2022informationiea.li/weo22WEO‐2022datasetsDatainAnnexAisavailabletodownloadfreeinelectronicformatat:iea.li/weo2022‐freedataAnextendeddataset,includingthedatabehindfigures,tablesandtheWEO‐2022slidedeckisavailabletopurchaseat:iea.li/weo2022‐extendeddataModellingDocumentationandmethodology/Investmentcostsiea.li/modelRecentanalysisAnEnergySectorRoadmaptoNetZeroEmissionsinIndonesiaiea.li/indonesiaWorldEnergyEmploymentiea.li/employmentNuclearPowerandSecureEnergyTransitionsiea.li/nuclear‐powerWorldEnergyInvestment2022iea.li/wei22AfricaEnergyOutlook2022iea.li/africa‐outlook22SoutheastAsiaEnergyOutlook2022iea.li/se‐asia22SustainableRecoveryTrackeriea.li/recoverytrackerPlayingmypartiea.li/my‐partA10‐PointPlantoCutOilUseiea.li/oil‐useA10‐PointPlantoReducetheEuropeanUnion’sRelianceonRussianNaturalGasiea.li/gas‐relianceGlobalMethaneTracker2022iea.li/methane‐tracker22TheRoleofCriticalMineralsiea.li/mineralsNetZeroby2050iea.li/netzeroDatabasesPolicyDatabasesiea.li/policies‐databaseSustainableDevelopmentGoal7iea.li/SDGEnergysubsidies:Trackingtheimpactoffossil‐fuelsubsidiesiea.li/subsidiesCCBY-NC-SA4.0.AnnexATablesforscenarioprojections431AnnexATablesforscenarioprojectionsGeneralnotetothetablesThisannexincludesglobalhistoricalandprojecteddatabyscenarioforthefollowingfourdatasets:A.1:Energysupply.A.2:Totalfinalconsumption.A.3:Electricitysector:grosselectricitygenerationandelectricalcapacity.A.4:CO₂emissions:carbondioxide(CO2)emissionsfromfossilfuelcombustionandindustrialprocesses.Eachdatasetisgivenforthefollowingscenarios:(a)StatedPoliciesScenario(STEPS)[TablesA.1a.toA.4a];(b)AnnouncedPledgesScenario(APS)[TablesA.1b.toA.4b];and(c)NetZeroEmissionsby2050(NZE)Scenario[TablesA.1c.toA.4c].ThisannexalsoincludesregionalhistoricalandprojecteddataforSTEPSandAPSforthefollowingdatasets:TablesA.5–A.6:Totalenergysupply,renewablesenergysupplyinexajoules(EJ).TablesA.7–A.10:Oilproduction,oildemand,worldliquidsdemand,and,refiningcapacityandrunsinmillionbarrelsperday(mb/d).TablesA.11–A.12:Naturalgasproduction,naturalgasdemandinbillioncubicmetres(bcm).TablesA.13–A.14:Coalproduction,coaldemandinmilliontonnesofcoalequivalent(Mtce).TablesA.15–A.21:Electricitygenerationbytotalandbysource(renewables,solarphotovoltaics[PV],wind,nuclear,naturalgas,coal)interawatt‐hours(TWh).TablesA.22–A.25:Totalfinalconsumptionandconsumptionbysector(industry,transportandbuildings)inexajoules(EJ).TablesA.26–A.27:Hydrogendemand(PJ)andthehydrogenbalanceinmilliontonnesofhydrogenequivalent(MtH2equivalent).1TablesA.28–A.30:TotalCO₂emissions,electricityandheatsectorsCO₂emissions,finalconsumptioninmilliontonnesofCO₂emissions(MtCO₂).TablesA.5toA.30cover:World,NorthAmerica,UnitedStates,CentralandSouthAmerica,Brazil,Europe,EuropeanUnion,Africa,MiddleEast,Eurasia,Russia,AsiaPacific,China,India,JapanandSoutheastAsia.Thedefinitionsforregions,fuelsandsectorsareinAnnexC.1ThehydrogenbalancetablealsoincludestheNZEScenario.CCBY-NC-SA4.0.432InternationalEnergyAgencyWorldEnergyOutlook2022Commonabbreviationsusedinthetablesinclude:CAAGR=compoundaverageannualgrowthrate;CCUS=carboncapture,utilisationandstorage.CombustionoffossilfuelsinfacilitieswithoutCCUSisclassifiedas“unabated”.Bothinthetextofthisreportandintheseannextables,roundingmayleadtominordifferencesbetweentotalsandthesumoftheirindividualcomponents.Growthratesarecalculatedonacompoundaverageannualbasisandaremarked“n.a.”whenthebaseyeariszeroorthevalueexceeds200%.Nilvaluesaremarked“‐”.PleaseseeBoxA.1fordetailsonwheretodownloadtheWorldEnergyOutlook(WEO)tablesinExcelformat.Inaddition,BoxA.1liststhelinksrelatingtothemainWEOwebsite,documentationandmethodologyoftheGlobalEnergyandClimate(GEC)Model,investmentcosts,policydatabasesandrecentWEOspecialreports.DatasourcesTheGlobalEnergyandClimate(GEC)Modelisaverydata‐intensivemodelcoveringthewholeglobalenergysystem.DetailedreferencesondatabasesandpublicationsusedinthemodellingandanalysismaybefoundinAnnexE.Theformalbaseyearforthisyear’sprojectionsis2020,asthisisthelastyearforwhichacompletepictureofenergydemandandproductionisinplace.However,wehaveusedmorerecentdatawhereveravailable,andweincludeour2021estimatesforenergyproductionanddemandinthisannex(TablesA.1toA.3).Estimatesfortheyear2021arebasedonupdatesoftheGlobalEnergyReviewreportswhicharederivedfromanumberofsources,includingthelatestmonthlydatasubmissionstotheIEAEnergyDataCentre,otherstatisticalreleasesfromnationaladministrations,andrecentmarketdatafromtheIEAMarketReportSeriesthatcovercoal,oil,naturalgas,renewablesandpower.Investmentestimatesincludetheyear2021,basedontheIEAWorldEnergyInvestment2022report.Historicaldataforgrosspowergenerationcapacity(TablesA.2andA.3)aredrawnfromtheS&PGlobalMarketIntelligenceWorldElectricPowerPlantsDatabase(March2022version)andtheInternationalAtomicEnergyAgencyPRISdatabase.Definitionalnote:EnergysupplyandtransformationtablesTotalenergysupply(TES)isequivalenttoelectricityandheatgenerationplustheotherenergysector,excludingelectricity,heatandhydrogen,plustotalfinalconsumption(TFC),excludingelectricity,heatandhydrogen.TESdoesnotincludeambientheatfromheatpumpsorelectricitytrade.SolarinTESincludessolarPVgeneration,concentratingsolarpowerandfinalconsumptionofsolarthermal.OtherrenewablesinTESincludegeothermalandmarine(tideandwave)energyforelectricityandheatgeneration.Biofuelsconversionlossesaretheconversionlossestoproducebiofuels(mainlyfrommodernsolidbioenergy)usedintheenergysector.Low‐emissionshydrogenproductionismerchantlow‐emissionshydrogenproduction(excludingonsiteproductionatindustrialfacilitiesandrefineries),CCBY-NC-SA4.0.AnnexATablesforscenarioprojections433Awithinputsreferringtototalfuelinputsandoutputstoproducedhydrogen.Whilenotitemisedseparately,non‐renewablewasteandothersourcesareincludedinTES.Definitionalnote:FossilfuelproductionanddemandtablesOilproductionanddemandisexpressedinmillionbarrelsperday(mb/d).TightoilincludestightcrudeoilandcondensateproductionexceptfortheUnitedStates,whichincludestightcrudeoilonly(UStightcondensatevolumesareincludedinnaturalgasliquids).Processinggainscovervolumeincreasesthatoccurduringcrudeoilrefining.Biofuelsandtheirinclusioninliquidsdemandisexpressedinenergy‐equivalentvolumesofgasolineanddiesel.Naturalgasproductionanddemandisexpressedinbillioncubicmetres(bcm).Coalproductionanddemandisexpressedinmilliontonnesofcoalequivalent(Mtce).Differencesbetweenhistoricalproductionanddemandvolumesforoil,gasandcoalareduetochangesinstocks.Bunkersincludebothinternationalmarineandaviationfuels.Refiningcapacityatriskisdefinedasthedifferencebetweenrefinerycapacityandrefineryruns,withthelatterincludinga14%allowancefordowntime.Projectedshutdownsbeyondthosepubliclyannouncedarealsocountedascapacityatrisk.Definitionalnote:ElectricitytablesElectricitygenerationexpressedinterawatt‐hours(TWh)andinstalledelectricalcapacitydataexpressedingigawatts(GW)arebothprovidedonagrossbasis(i.e.includesownusebythegenerator).Projectedgrosselectricalcapacityisthesumofexistingcapacityandadditions,lessretirements.Whilenotitemisedseparately,othersourcesareincludedintotalelectricitygeneration.Installedcapacityforhydrogenandammoniareferstofullconversiononly,notincludingco‐firingwithnaturalgasorcoal.Definitionalnote:EnergydemandtablesSectorscomprisingtotalfinalconsumption(TFC)includeindustry(energyuseandfeedstock),transport,buildings(residential,servicesandnon‐specifiedother)andother(agricultureandothernon‐energyuse).Energydemandfrominternationalmarineandaviationbunkersareincludedinglobaltransporttotals.Definitionalnote:HydrogentablesTotalhydrogendemandincludesmerchant(oroffsite)hydrogendemandandhydrogendemandinindustryandrefineriescoveredbyonsiteproduction.Italsoincludeshydrogenusedintheproductionofhydrogen‐basedfuels(ammonia,synthetichydrocarbonfuels).ThehydrogenbalancetableA.27isexpressedinhydrogen‐equivalentterms,whichmeansforhydrogen‐basedfuelsthehydrogeninputtoproducethesefuelsisreported.Hydrogendemandinend‐usesectorsincludestotalfinalconsumptionofhydrogenandhydrogen‐basedfuelsaswellashydrogendemandinindustrycoveredbyonsiteproductionwithinindustrialfacilities.CCBY-NC-SA4.0.434InternationalEnergyAgencyWorldEnergyOutlook2022Definitionalnote:CO2emissionstablesTotalCO2includescarbondioxideemissions:fromthecombustionoffossilfuelsandnon‐renewablewastes,fromindustrialandfueltransformationprocesses(processemissions);andCO2emissionsfromflaringandCO2removal.CO2removalincludes:capturedandstoredemissionsfromthecombustionofbioenergyandrenewablewastes;frombiofuelsproduction;andfromdirectaircapture(DAC).Thefirsttwoentriesareoftenreportedasbioenergywithcarboncaptureandstorage(BECCS).NotethatsomeoftheCO2capturedfrombiofuelsproductionanddirectaircaptureisusedtoproducesyntheticfuels,whichisnotincludedasCO2removal.TotalCO2capturedincludesthecarbondioxidecapturedfromCCUSfacilities(suchaselectricitygenerationorindustry)andatmosphericCO2capturedthroughdirectaircapture,butexcludesthatcapturedandusedforureaproduction.AnnexAlicencingSubjecttotheIEA’sNoticeforCC‐licencedContent,thisAnnexAoftheWorldEnergyOutlook2022islicencedunderaCreativeCommonsAttribution‐NonCommercial‐ShareAlike4.0InternationalLicence.CCBY-NC-SA4.0.AnnexATablesforscenarioprojections435ATableA.1a:WorldenergysupplyEnergysupply:WorldSTEPSSTEPSSTEPSSTEPSSTEPSSTEPS929Energysupply:World20102020202120302040205020212030205020302050Totalenergysupply5425926246737087401001001000.80.6Renewables4569741161692151217295.23.8Solar155183652137148.1Wind167172938125116.2Hydro1216161821252331.81.6Modernsolidbioenergy2433364654626783.01.9Modernliquidbioenergy24479111115.23.2Moderngaseousbioenergy1113590018.17.0Otherrenewables345814191136.44.9Traditionaluseofbiomass252424201918432‐2.3‐1.1Nuclear3029303743465562.11.5Unabatednaturalgas1151391461501471472322200.30.0NaturalgaswithCCUS0001230008.16.5Oil1731721831971981972929270.80.2ofwhichnon‐energyuse2529313741425662.11.0Unabatedcoal153157165151128111262215‐1.0‐1.4CoalwithCCUS‐000110003317Electricityandheatsectors2002282422612873121001001000.90.9Renewables213740711131491727486.64.6SolarPV0341430441614179.0Wind1671729383612116.2Hydro1216161821256781.81.6Bioenergy59101519234674.12.8Otherrenewables244713192367.35.8Hydrogen‐‐‐000‐00n.a.n.a.Ammonia‐‐‐000‐00n.a.n.a.Nuclear3029303743461314152.11.5Unabatednaturalgas475557555150242116‐0.3‐0.4NaturalgaswithCCUS‐‐‐‐01‐‐0n.a.n.a.Oil1178543321‐4.7‐2.7Unabatedcoal9199107937460443619‐1.5‐1.9CoalwithCCUS‐000110002517Otherenergysector5159616872771001001001.20.8Biofuelsconversionlosses‐56810121001001004.42.5Low‐emissionshydrogenProductioninputs‐001231001001006423Productionoutputs‐001121001001006824Forhydrogen‐basedfuels‐‐‐000‐617n.a.n.a.Forotherenergysector‐‐‐011‐5928n.a.n.a.CAAGR(%)2021to:StatedPoliciesScenario(EJ)Shares(%)CCBY-NC-SA4.0.436InternationalEnergyAgencyWorldEnergyOutlook2022TableA.2a:WorldfinalconsumptionTotalfinalconsumption:WorldSTEPSSTEPSSTEPSSTEPSSTEPSSTEPS929Totalfinalconsumption:World20102020202120302040205020212030205020302050Totalfinalconsumption3834174394855185441001001001.10.7Electricity6482871071301512022282.31.9Liquidfuels1541591701891941963939361.20.5Biofuels24479111125.23.2Ammonia‐‐‐000‐00n.a.n.a.Syntheticoil‐‐‐‐‐‐‐‐‐n.a.n.a.Oil1511551661831851853838341.10.4Gaseousfuels5868727984881716160.90.7Biomethane0001240011311Hydrogen‐000110004821Syntheticmethane‐‐‐‐‐‐‐‐‐n.a.n.a.Naturalgas5768727781811616150.80.4Solidfuels959293918986211916‐0.3‐0.3Solidbioenergy383940394041987‐0.40.0Coal56525352494612118‐0.2‐0.5Heat1213131414143330.50.2Other1335791124.43.4Industry1431601671892022091001001001.40.8Electricity2734374349542223261.91.4Liquidfuels2932334044442021212.10.9Oil2932334043442021212.10.9Gaseousfuels2429313539421819201.61.1Biomethane0000120011613Hydrogen‐‐‐000‐00n.a.n.a.Unabatednaturalgas2126273133341616161.50.7NaturalgaswithCCUS0000000001711Solidfuels5858596363613633290.70.1Solidbioenergy810111315167782.01.3Unabatedcoal4845464745422725200.3‐0.3CoalwithCCUS‐‐‐000‐00n.a.n.a.Heat5677774440.90.4Other0000000003.44.8Ironandsteel3135363838382220180.60.1Chemicals3746485863652930312.01.0Cement1012121313127760.5‐0.0StatedPoliciesScenario(EJ)Shares(%)CAAGR(%)2021to:CCBY-NC-SA4.0.AnnexATablesforscenarioprojections437ATableA.2a:Worldfinalconsumption(continued)Totalfinalconsumption:WorldTotalfinalconsumption:World20102020202120302040205020212030205020302050Transport1021051131301391471001001001.50.9Electricity1124913139117.5Liquidfuels97991071201231269492861.30.6Biofuels24469104575.03.1Oil95951031131141169087791.10.4Gaseousfuels4556785451.31.4Biomethane000001001118.7Hydrogen‐000010014021Naturalgas4556665440.90.5Road76818794981007773680.90.5Passengercars3942454747464036310.40.1Heavy‐dutytrucks2125263136392324271.91.4Aviation11810182125914176.73.2Shipping101011121416109111.21.4Buildings1171281321361471581001001000.30.6Electricity3543455568793441502.21.9Liquidfuels131314121091096‐1.6‐1.5Biofuels0000000003.92.3Oil131314121091096‐1.6‐1.5Gaseousfuels2730313232322423200.10.1Biomethane0000110011210Hydrogen‐‐‐000‐00n.a.n.a.Naturalgas2629313130302323190.0‐0.1Solidfuels353333272524252015‐2.2‐1.0Modernbiomass4445663442.31.3Traditionaluseofbiomass252424201918181511‐2.3‐1.1Coal644210310‐10‐8.6Heat6777775540.20.1Other1234672354.83.6Residential8391949298106716767‐0.20.4Services3337394449522933331.51.0Other2224262930291001001000.90.4StatedPoliciesScenario(EJ)Shares(%)CAAGR(%)2021to:CCBY-NC-SA4.0.438InternationalEnergyAgencyWorldEnergyOutlook2022TableA.3a:WorldelectricitysectorElectricitysector:WorldSTEPSSTEPSSTEPSSTEPSSTEPSSTEPS929Electricitysector:World20102020202120302040205020212030205020302050Totalgeneration2153926708283343483442642498451001001002.32.0Renewables4234753980601507324442324522843657.24.9SolarPV328241003401183561211841224179.0Wind34215971870460481071069171321116.2Hydro3449434343275078589068091515141.81.6Bioenergy3416667461145154019513344.93.4ofwhichBECCS‐‐‐455‐00n.a.n.a.CSP21415451663290011311Geothermal6895971833354580117.25.5Marine111847960002417Nuclear275626732776335138974260101092.11.5Hydrogenandammonia‐‐‐93244‐00n.a.n.a.FossilfuelswithCCUS‐1151121330002119CoalwithCCUS‐11551610002116NaturalgaswithCCUS‐‐‐‐6172‐‐0n.a.n.a.Unabatedfossilfuels144941643517436163241407412862624726‐0.7‐1.0Coal8670943910201904472115892362612‐1.3‐1.9Naturalgas4855633365526848650166582320130.50.1Oil969664682432362312211‐5.0‐2.720102020202120302040205020212030205020302050Totalcapacity5198784981851195416468197921001001004.33.1Renewables134329893278670710666136534056698.35.0SolarPV39741892302055737464112538157.6Wind1817378321830285335641015189.25.1Hydro1027132913581563179520271713101.61.4Bioenergy831601732463274062224.03.0ofwhichBECCS‐‐‐111‐00n.a.n.a.CSP167174990000109.2Geothermal1115162850660007.05.1Marine011419370001814Nuclear4034154134715455905431.51.2Hydrogenandammonia‐‐‐31313‐00n.a.n.a.FossilfuelswithCCUS‐00126330002821CoalwithCCUS‐00110130002818NaturalgaswithCCUS‐‐‐‐1620‐‐0n.a.n.a.Unabatedfossilfuels3448442144624495444141965538210.1‐0.2Coal16212161218421291936158327188‐0.3‐1.1Naturalgas1389183018502074226824222317121.30.9Oil438430427292237192521‐4.1‐2.7Batterystorage1182727076812960272914StatedPoliciesScenario(GW)Shares(%)CAAGR(%)2021to:StatedPoliciesScenario(TWh)Shares(%)CAAGR(%)2021to:CCBY-NC-SA4.0.AnnexATablesforscenarioprojections439ATableA.4a:WorldCO2emissionsCO₂emissions:WorldSTEPSSTEPSSTEPSSTEPSSTEPSSTEPS929CO₂emissions:World20102020202120302040205020302050TotalCO2328933477936639362113386131979‐0.1‐0.5Combustionactivities(+)306433190433680331353080028946‐0.2‐0.5Coal13855143351510613695115539863‐1.1‐1.5Oil1057610194108501141211248110940.60.1Naturalgas6067716275207774767576290.40.0Bioenergyandwaste1462132042543243602.52.0Industryremovals(‐)‐12828581813Biofuelsproduction‐111110.00.0Directaircapture‐‐1827582715Electricityandheatsectors12474135021437812759106769308‐1.3‐1.5Coal8946975010507912872825938‐1.6‐1.9Oil828557574372309260‐4.7‐2.7Naturalgas262330953195310528632842‐0.3‐0.4Bioenergyandwaste78991011542232674.83.4Otherenergysector1438148715221698169516591.20.3Finalconsumption1872019522204682162721501210560.60.1Coal470744744499445841703830‐0.1‐0.6Oil9117908097041045610388103310.80.2Naturalgas2859332135613800392939040.70.3Bioenergyandwaste6711410210010194‐0.3‐0.3Industry837991329316100371006196690.80.1Ironandsteel1900245124732630250623590.7‐0.2Chemicals920944986108510659871.10.0Cement4742832933113153120.70.2Transport7011711376708472857187001.10.4Road5214548558586065592556670.4‐0.1Passengercars262228033018296227612470‐0.2‐0.7Heavy‐dutytrucks1468168817912070227424351.61.1Aviation7535867131259144016756.53.0Shipping79679683890597911450.91.1Buildings289228513045268024462293‐1.4‐1.0Residential196319832066174715281415‐1.8‐1.3Services929868979934919878‐0.5‐0.4TotalCO2removals‐121135702213TotalCO2captured44243922723968.98.0Includesemissionsfromindustrialprocessesandflaring.Includesemissionsfromindustrialprocesses.StatedPoliciesScenario(MtCO2)CAAGR(%)2021to:CCBY-NC-SA4.0.440InternationalEnergyAgencyWorldEnergyOutlook2022TableA.1b:WorldenergysupplyEnergysupply:WorldSTEPSSTEPSSTEPSAPSAPSAPS929Energysupply:World20102020202120302040205020212030205020302050Totalenergysupply5425926246366266291001001000.20.0Renewables4569741412393191222517.55.2Solar15523568914141710Wind1672144631310138.0Hydro1216161923272342.11.9Modernsolidbioenergy24333653708168134.62.9Modernliquidbioenergy244111819123115.3Moderngaseousbioenergy1114812012158.2Otherrenewables3451020281249.26.4Traditionaluseofbiomass252424976411‐10‐4.8Nuclear3029303949565692.82.1Unabatednaturalgas1151391461309977232012‐1.3‐2.2NaturalgaswithCCUS000410150122713Oil173172183179139108292817‐0.3‐1.8ofwhichnon‐energyuse2529313636355661.70.4Unabatedcoal153157165132733326215‐2.5‐5.4CoalwithCCUS‐0019150026429Electricityandheatsectors2002282422603023491001001000.81.3Renewables213740831602291732668.56.2SolarPV03417426817191911Wind1672144633818138.0Hydro1216161923276782.11.9Bioenergy591017283747115.84.5Otherrenewables244922352410118.0Hydrogen‐‐‐022‐01n.a.n.a.Ammonia‐‐‐012‐01n.a.n.a.Nuclear3029303949561315162.82.1Unabatednaturalgas47555749362824198‐1.6‐2.4NaturalgaswithCCUS‐‐‐022‐01n.a.n.a.Oil1178432321‐6.2‐4.4Unabatedcoal919910783431744325‐2.7‐6.1CoalwithCCUS‐0007100035429Otherenergysector5159616972781001001001.30.8Biofuelsconversionlosses‐561319191001001009.34.3Low‐emissionshydrogenProductioninputs‐00415281001001009932Productionoutputs‐003112010010010010333Forhydrogen‐basedfuels‐‐‐138‐2340n.a.n.a.Forotherenergysector‐‐‐000‐131n.a.n.a.AnnouncedPledgesScenario(EJ)Shares(%)CAAGR(%)2021to:CCBY-NC-SA4.0.AnnexATablesforscenarioprojections441ATableA.2b:WorldfinalconsumptionTotalfinalconsumption:WorldSTEPSSTEPSSTEPSAPSAPSAPS929Totalfinalconsumption:World20102020202120302040205020212030205020302050Totalfinalconsumption3834174394514394331001001000.3‐0.1Electricity6482871081401692024392.52.3Liquidfuels1541591701771491253939290.4‐1.1Biofuels244111819124115.3Ammonia‐‐‐013‐01n.a.n.a.Syntheticoil‐‐‐012‐00n.a.n.a.Oil151155166165129101383723‐0.0‐1.7Gaseousfuels586872716561171614‐0.3‐0.6Biomethane0002350012511Hydrogen‐0015100028730Syntheticmethane‐‐‐‐‐‐‐‐‐n.a.n.a.Naturalgas576872675545161510‐0.8‐1.6Solidfuels959293756253211712‐2.3‐1.9Solidbioenergy383940323234978‐2.6‐0.6Coal56525344301912104‐2.1‐3.4Heat121313131210332‐0.1‐1.0Other133711151138.35.3Industry1431601671781781741001001000.70.1Electricity2734374556662225382.32.1Liquidfuels2932333735322021181.0‐0.2Oil2932333634302020170.9‐0.3Gaseousfuels2429313232291818170.6‐0.2Biomethane0001230022813Hydrogen‐‐‐123‐02n.a.n.a.Unabatednaturalgas2126272723171615100.0‐1.6NaturalgaswithCCUS0000130022917Solidfuels585859564739363222‐0.6‐1.5Solidbioenergy8101114172078112.82.0Unabatedcoal48454639251427228‐1.6‐4.0CoalwithCCUS‐‐‐024‐02n.a.n.a.Heat567754442‐0.0‐1.5Other0001340133113Ironandsteel313536353331222018‐0.3‐0.5Chemicals3746485556552931321.40.4Cement101212121212777‐0.2‐0.2AnnouncedPledgesScenario(EJ)Shares(%)CAAGR(%)2021to:CCBY-NC-SA4.0.442InternationalEnergyAgencyWorldEnergyOutlook2022TableA.2b:Worldfinalconsumption(continued)Totalfinalconsumption:WorldTotalfinalconsumption:World20102020202120302040205020212030205020302050Transport1021051131241151121001001001.0‐0.0Electricity1126172815251510Liquidfuels979910711393769491670.6‐1.2Biofuels2441016174815115.0Oil95951031027554908348‐0.0‐2.2Gaseousfuels455568547‐0.31.6Biomethane000000000156.7Hydrogen‐000260056728Naturalgas455432542‐1.7‐3.2Road7681879080737773650.3‐0.6Passengercars394245433530403527‐0.4‐1.4Heavy‐dutytrucks2125263031312324271.50.5Aviation11810182024914216.53.0Shipping10101111101110990.4‐0.1Buildings117128132121118122100100100‐1.0‐0.3Electricity3543455463713444581.91.5Liquidfuels13131411651094‐2.8‐3.7Biofuels000000000115.4Oil13131411641094‐2.8‐3.8Gaseousfuels273031272117242214‐1.5‐2.1Biomethane0001120112811Hydrogen‐‐‐011‐01n.a.n.a.Naturalgas262931261813232111‐2.0‐3.0Solidfuels353333181414251511‐6.3‐3.0Modernbiomass4448783666.82.0Traditionaluseofbiomass2524249761875‐10‐4.8Coal644100310‐12‐13Heat677766555‐0.3‐0.5Other12358112497.85.0Residential839194807780716666‐1.7‐0.5Services3337394141422934340.60.3Other2224262827241001001000.5‐0.3AnnouncedPledgesScenario(EJ)Shares(%)CAAGR(%)2021to:CCBY-NC-SA4.0.AnnexATablesforscenarioprojections443ATableA.3b:WorldelectricitysectorElectricitysector:WorldSTEPSSTEPSSTEPSAPSAPSAPS929Electricitysector:World20102020202120302040205020212030205020302050Totalgeneration2153926708283343587848654612681001001002.72.7Renewables4234753980601757533971488732849809.06.4SolarPV32824100348381176718761413311911Wind342159718705816123001741671628138.0Hydro3449434343275213646075431515122.11.9Bioenergy3416667461355228831793456.95.1ofwhichBECCS‐‐‐46304532‐01n.a.n.a.CSP2141510061411660022316Geothermal689597237479686011107.0Marine11115641220003418Nuclear275626732776354744715103101082.82.1Hydrogenandammonia‐‐‐79336567‐01n.a.n.a.FossilfuelswithCCUS‐117589013380026629CoalwithCCUS‐113464210130025128NaturalgaswithCCUS‐‐‐42249325‐01n.a.n.a.Unabatedfossilfuels144941643517436145398935533262419‐2.0‐4.0Coal867094391020180764219158036233‐2.6‐6.2Naturalgas48556333655261004461357723176‐0.8‐2.1Oil969664682364254175210‐6.8‐4.620102020202120302040205020212030205020302050Totalcapacity5198784981851293220258265411001001005.24.1Renewables13432989327877441451020290406076106.5SolarPV397418923498747111065112742169.1Wind181737832225142465727101722126.9Hydro102713291358160919882325171291.91.9Bioenergy831601733075297072236.65.0ofwhichBECCS‐‐‐115794‐00n.a.n.a.CSP167351773180012014Geothermal1115163772102000106.7Marine011726470002715Nuclear4034154134876227165431.91.9Hydrogenandammonia‐‐‐30180228‐01n.a.n.a.FossilfuelswithCCUS‐00181922880017431CoalwithCCUS‐0061302070015429NaturalgaswithCCUS‐‐‐126281‐00n.a.n.a.Unabatedfossilfuels344844214462422335062729553310‐0.6‐1.7Coal1621216121841988153594227154‐1.0‐2.9Naturalgas138918301850194917541623231560.6‐0.5Oil438430427286217164521‐4.4‐3.3Batterystorage11827425124622860393617AnnouncedPledgesScenario(TWh)Shares(%)CAAGR(%)2021to:AnnouncedPledgesScenario(GW)Shares(%)CAAGR(%)2021to:CCBY-NC-SA4.0.444InternationalEnergyAgencyWorldEnergyOutlook2022TableA.4b:WorldCO2emissionsCO₂emissions:WorldSTEPSSTEPSSTEPSAPSAPSAPS929CO₂emissions:World20102020202120302040205020302050TotalCO2328933477936639315112053912399‐1.7‐3.7Combustionactivities(+)306433190433680288031855411347‐1.7‐3.7Coal1385514335151061188165942973‐2.6‐5.5Oil1057610194108501009371695078‐0.8‐2.6Naturalgas606771627520668049673758‐1.3‐2.4Bioenergyandwaste146213204149‐176‐463‐3.4n.a.Industryremovals(‐)‐12501644064521Biofuelsproduction‐11421363465523Directaircapture‐‐1828602615Electricityandheatsectors1247413502143781133063893138‐2.6‐5.1Coal8946975010507816342921713‐2.8‐6.1Oil828557574322230156‐6.2‐4.4Naturalgas262330953195275920221598‐1.6‐2.4Bioenergyandwaste789910185‐155‐329‐1.9n.a.Otherenergysector1438148715221334730191‐1.5‐6.9Finalconsumption18720195222046818785134389124‐0.9‐2.7Coal470744744499362122391239‐2.4‐4.3Oil911790809704930266704755‐0.5‐2.4Naturalgas285933213561322524651803‐1.1‐2.3Bioenergyandwaste6711410264‐21‐125‐5.0n.a.Industry837991329316856962343946‐0.9‐2.9Ironandsteel19002451247322491603969‐1.0‐3.2Chemicals920944986947657382‐0.5‐3.2Cement474283293250170113‐1.7‐3.2Transport701171137670761655574025‐0.1‐2.2Road521454855858545937732509‐0.8‐2.9Passengercars26222803301825891598997‐1.7‐3.7Heavy‐dutytrucks1468168817911909154911370.7‐1.6Aviation7535867131197113610745.91.4Shipping796796838778525362‐0.8‐2.9Buildings289228513045226714341029‐3.2‐3.7Residential19631983206615591002748‐3.1‐3.4Services929868979708432282‐3.5‐4.2TotalCO2removals‐12864319185324TotalCO2captured44243517242842993217Includesemissionsfromindustrialprocessesandflaring.Includesemissionsfromindustrialprocesses.AnnouncedPledgesScenario(MtCO2)CAAGR(%)2021to:CCBY-NC-SA4.0.AnnexATablesforscenarioprojections445ATableA.1c:WorldenergysupplyEnergysupply:WorldSTEPSSTEPSSTEPSNZENZENZE929Energysupply:World20102020202120302040205020212030205020302050Totalenergysupply542592624561524532100100100‐1.2‐0.5Renewables4569741723073731231709.95.8Solar155348712416232311Wind1672867851516179.1Hydro1216162127302463.22.3Modernsolidbioenergy243336587374610145.52.6Modernliquidbioenergy244121412122123.6Moderngaseousbioenergy11171215013218.8Otherrenewables345132634126127.1Traditionaluseofbiomass252424‐‐‐4‐‐n.a.n.a.Nuclear30293043596358123.82.6Unabatednaturalgas115139146105341423193‐3.6‐7.8NaturalgaswithCCUS000821270153815Oil173172183143764029267‐2.7‐5.1ofwhichnon‐energyuse2529313432295651.1‐0.2Unabatedcoal1531571658615226150‐7.1‐14CoalwithCCUS‐00313140139129Electricityandheatsectors2002282422463113811001001000.21.6Renewables213740107228293174377127.1SolarPV034276997111262512Wind16728678531122179.1Hydro1216162127306883.22.3Bioenergy591018333847106.54.6Otherrenewables2441331442512158.9Hydrogen‐‐‐377‐12n.a.n.a.Ammonia‐‐‐133‐01n.a.n.a.Nuclear3029304359631317173.82.6Unabatednaturalgas475557401124160‐3.8‐14NaturalgaswithCCUS‐‐‐134‐01n.a.n.a.Oil1178200310‐13‐17Unabatedcoal9199107470044190‐8.6‐33CoalwithCCUS‐002890128928Otherenergysector5159616572751001001000.60.7Biofuelsconversionlosses‐56141613100100100102.7Low‐emissionshydrogenProductioninputs‐0014415810010010012635Productionoutputs‐009284210010010013137Forhydrogen‐basedfuels‐‐‐2914‐2334n.a.n.a.Forotherenergysector‐‐‐000‐51n.a.n.a.NetZeroEmissionsby2050Scenario(EJ)Shares(%)CAAGR(%)2021to:CCBY-NC-SA4.0.446InternationalEnergyAgencyWorldEnergyOutlook2022TableA.2c:WorldfinalconsumptionTotalfinalconsumption:WorldSTEPSSTEPSSTEPSNZENZENZE929Totalfinalconsumption:World20102020202120302040205020212030205020302050Totalfinalconsumption383417439398356337100100100‐1.1‐0.9Electricity6482871101491762028522.62.5Liquidfuels1541591701469159393717‐1.7‐3.6Biofuels244121412134123.6Ammonia‐‐‐124‐01n.a.n.a.Syntheticoil‐‐‐024‐01n.a.n.a.Oil1511551661347239383411‐2.4‐4.9Gaseousfuels586872645346171614‐1.4‐1.6Biomethane0005770124013Hydrogen‐004122101610933Syntheticmethane‐‐‐‐‐‐‐‐‐n.a.n.a.Naturalgas57687254321616145‐3.1‐5.1Solidfuels959293624434211610‐4.5‐3.4Solidbioenergy383940262628968‐4.8‐1.2Coal565253351761292‐4.4‐7.1Heat1213131075332‐2.9‐3.2Other133713171258.55.8Industry1431601671721651551001001000.3‐0.2Electricity2734375066782229503.42.6Liquidfuels2932333428232020150.2‐1.3Oil2932333427222020140.1‐1.5Gaseousfuels2429313227201818130.3‐1.5Biomethane0002350134216Hydrogen‐‐‐245‐13n.a.n.a.Unabatednaturalgas2126272414416142‐1.4‐6.8NaturalgaswithCCUS0001350134720Solidfuels585859503627362917‐1.9‐2.7Solidbioenergy8101115192079133.72.2Unabatedcoal4845463212127181‐4.0‐13CoalwithCCUS‐‐‐145‐03n.a.n.a.Heat567531431‐3.6‐5.6Other0002570143915Ironandsteel313536333127221917‐0.9‐1.1Chemicals3746485352492931311.00.0Cement101212121110777‐0.5‐0.7NetZeroEmissionsby2050Scenario(EJ)Shares(%)CAAGR(%)2021to:CCBY-NC-SA4.0.AnnexATablesforscenarioprojections447ATableA.2c:Worldfinalconsumption(continued)Totalfinalconsumption:WorldTotalfinalconsumption:World20102020202120302040205020212030205020302050Transport1021051131018077100100100‐1.3‐1.3Electricity1128243718482011Liquidfuels9799107884625948732‐2.1‐4.9Biofuels24411121041113113.0Oil95951037630790769‐3.2‐8.8Gaseousfuels45559155520‐0.43.8Biomethane000000001116.6Hydrogen‐00171401189133Naturalgas455320531‐4.3‐8.2Road768187725248777162‐2.1‐2.1Passengercars394245311917403122‐4.2‐3.3Heavy‐dutytrucks2125262724212327280.4‐0.7Aviation11810141314914193.71.3Shipping1010111110101011130.1‐0.3Buildings117128132998885100100100‐3.2‐1.5Electricity3543454854573448670.60.8Liquidfuels1313149411091‐4.3‐8.0Biofuels000000000169.9Oil1313149311091‐4.4‐9.1Gaseousfuels2730312110524215‐4.4‐6.4Biomethane0003310324911Hydrogen‐‐‐011‐02n.a.n.a.Naturalgas262931174‐2317‐‐6.5n.a.Solidfuels353333117725118‐12‐5.3Modernbiomass444107731089.81.6Traditionaluseofbiomass252424‐‐‐18‐‐n.a.n.a.Coal644100310‐17‐21Heat677554555‐2.2‐1.8Other123591125137.55.1Residential839194655756716566‐4.0‐1.8Services333739343229293534‐1.3‐1.0Other222426262320100100100‐0.2‐1.0NetZeroEmissionsby2050Scenario(EJ)Shares(%)CAAGR(%)2021to:CCBY-NC-SA4.0.448InternationalEnergyAgencyWorldEnergyOutlook2022TableA.3c:WorldelectricitysectorElectricitysector:WorldSTEPSSTEPSSTEPSNZENZENZE929Electricitysector:World20102020202120302040205020212030205020302050Totalgeneration2153926708283343772357924732311001001003.23.3Renewables423475398060230644967564506286188127.4SolarPV32824100375521923927006420372512Wind342159718707840185552348672132179.1Hydro3449434343275725763782511515113.22.3Bioenergy3416667461442261032803447.65.2ofwhichBECCS‐‐‐96510639‐01n.a.n.a.CSP2141517591115000023117Geothermal689597312655857011147.8Marine11120691250003818Nuclear275626732776389654135810101083.82.6Hydrogenandammonia‐‐‐60314151467‐22n.a.n.a.FossilfuelswithCCUS‐11282121113170129229CoalwithCCUS‐111987658270118427NaturalgaswithCCUS‐‐‐84446490‐01n.a.n.a.Unabatedfossilfuels14494164351743698241688562260‐6.2‐17Coal867094391020146660036120‐8.3‐32Naturalgas48556333655249771648223130‐3.0‐14Oil96966468218043200‐14‐1720102020202120302040205020212030205020302050Totalcapacity5198784981851530626870338781001001007.25.0Renewables134329893278103492139827304406881147.6SolarPV39741892505211620154681133462110Wind181737832307264357795102023168.0Hydro102713291358178223492685171283.12.4Bioenergy831601733205857442227.15.2ofwhichBECCS‐‐‐2298119‐00n.a.n.a.CSP167642834370012815Geothermal1115165098126000147.5Marine011928490003015Nuclear4034154135357778715332.92.6Hydrogenandammonia‐‐‐189640573‐12n.a.n.a.FossilfuelswithCCUS‐006226633500110031CoalwithCCUS‐00441682010019229NaturalgaswithCCUS‐‐‐1898134‐00n.a.n.a.Unabatedfossilfuels3448442144623389147693255223‐3.0‐5.3Coal16212161218414524011842791‐4.4‐8.2Naturalgas1389183018501724100471123112‐0.8‐3.2Oil4384304272137138510‐7.5‐8.0Batterystorage118277782311386005114519NetZeroEmissionsby2050Scenario(TWh)Shares(%)CAAGR(%)2021to:NetZeroEmissionsby2050Scenario(GW)Shares(%)CAAGR(%)2021to:CCBY-NC-SA4.0.AnnexATablesforscenarioprojections449ATableA.4c:WorldCO2emissionsCO₂emissions:WorldSTEPSSTEPSSTEPSNZENZENZE929CO₂emissions:World20102020202120302040205020302050TotalCO2328933477936639228465799‐‐5.1n.a.Combustionactivities(+)306433190433680205905103510‐5.3‐13Coal13855143351510675781140114‐7.4‐16Oil10576101941085077103030722‐3.7‐8.9Naturalgas60677162752052821391405‐3.8‐9.6Bioenergyandwaste14621320419‐458‐731‐23n.a.Industryremovals(‐)‐121565307876523Biofuelsproduction‐111023083947124Directaircapture‐‐1542223935723Electricityandheatsectors1247413502143787076‐189‐351‐7.6‐188Coal894697501050746534927‐8.7‐19Oil828557574167182‐13‐17Naturalgas26233095319522648042‐3.8‐14Bioenergyandwaste7899101‐9‐335‐421‐176n.a.Otherenergysector143814871522966112‐266‐4.9‐194Finalconsumption1872019522204681476560921005‐3.6‐9.9Coal4707447444992835104373‐5.0‐13Oil91179080970471622865651‐3.3‐8.9Naturalgas28593321356124911094213‐3.9‐9.3Bioenergyandwaste6711410229‐96‐205‐13n.a.Industry83799132931671683246396‐2.9‐10Ironandsteel1900245124731854819100‐3.1‐10Chemicals92094498681840020‐2.1‐13Cement47428329318662‐11‐5.0‐189Transport70117113767056872258535‐3.3‐8.8Road52145485585839881370195‐4.2‐11Passengercars262228033018169142245‐6.2‐13Heavy‐dutytrucks1468168817911574746136‐1.4‐8.5Aviation7535867138845111992.4‐4.3Shipping796796838673304107‐2.4‐6.8Buildings289228513045163247555‐6.7‐13Residential196319832066119736955‐5.9‐12Services9298689794351061‐8.6‐22TotalCO2removals‐1224099414387126TotalCO2captured442431230441361534519Includesemissionsfromindustrialprocessesandflaring.Includesemissionsfromindustrialprocesses.NetZeroEmissionsby2050Scenario(MtCO2)CAAGR(%)2021to:CCBY-NC-SA4.0.450InternationalEnergyAgencyWorldEnergyOutlook2022TableA.5:Totalenergysupply(EJ)TableA.6:Renewablesenergysupply(EJ)450InternationalEnergyAgencyWorldEnergyOutlook2022TableA.5:Totalenergysupply(EJ)TableA.6:Renewablesenergysupply(EJ)TableA.6:Renewablesenergysupply(EJ)Totalenergysupply(EJ)2010202020212030205020302050World542.0592.3624.2673.3740.0635.6629.1NorthAmerica112.5106.7111.4108.8103.3103.888.0UnitedStates94.187.291.487.380.483.269.1CentralandSouthAmerica26.726.828.532.241.132.837.0Brazil12.113.314.116.019.816.717.6Europe89.477.982.376.470.072.359.7EuropeanUnion64.555.659.353.245.249.938.7Africa28.935.136.444.064.737.053.0MiddleEast27.033.634.841.855.039.547.9Eurasia35.438.941.139.142.037.537.9Russia28.731.833.630.731.029.628.9AsiaPacific207.0260.9275.6310.7335.6293.5286.4China107.3147.7156.8166.4156.5158.3133.3India27.936.639.553.370.248.156.3Japan20.916.116.514.912.314.610.9SoutheastAsia22.829.230.240.053.738.245.2HistoricalStatedPoliciesAnnouncedPledgesRenewablesenergysupply(EJ)2010202020212030205020302050World44.568.773.6116.2214.9141.5319.0NorthAmerica9.212.112.819.733.526.149.8UnitedStates6.89.39.915.827.920.841.6CentralandSouthAmerica7.99.710.013.320.716.527.3Brazil5.66.96.99.012.610.914.2Europe10.114.214.920.628.125.639.2EuropeanUnion7.910.511.115.119.918.627.0Africa3.75.15.49.320.59.727.9MiddleEast0.10.20.31.05.22.012.2Eurasia1.11.41.51.83.42.15.1Russia0.91.21.31.42.61.42.9AsiaPacific12.425.828.650.3102.358.7152.8China4.712.414.025.849.728.670.9India2.85.35.59.623.610.934.2Japan0.91.31.42.13.32.65.0SoutheastAsia2.85.15.48.716.210.325.1HistoricalStatedPoliciesAnnouncedPledgesCCBY-NC-SA4.0.AnnexATablesforscenarioprojections451ATableA.7:Oilproduction(mb/d)TableA.8:Oildemand(mb/d)AnnexATablesforscenarioprojections451ATableA.7:Oilproduction(mb/d)TableA.8:Oildemand(mb/d)TableA.8:Oildemand(mb/d)Oilproduction(mb/d)2010202020212030205020302050Worldsupply85.591.292.6102.4102.193.057.2Processinggains2.22.12.32.52.82.31.9Worldproduction83.489.190.399.999.390.755.3Conventionalcrudeoil66.859.760.162.562.656.831.0Tightoil0.77.37.410.99.99.76.7Naturalgasliquids12.717.918.220.919.319.213.9Extra‐heavyoil&bitumen2.63.43.74.46.24.13.4Other0.60.80.91.21.30.90.3Non‐OPEC50.058.358.864.056.258.231.6OPEC33.330.831.535.943.132.523.7NorthAmerica14.223.924.428.624.625.814.7CentralandSouthAmerica7.45.95.99.011.48.36.5Europe4.43.83.63.11.32.70.6EuropeanUnion0.70.50.50.40.30.30.1Africa10.27.07.47.06.15.82.9MiddleEast25.427.627.933.940.431.222.9Eurasia13.413.413.711.910.611.25.4AsiaPacific8.47.57.46.34.85.72.2SoutheastAsia2.62.11.91.50.91.30.5HistoricalStatedPoliciesAnnouncedPledgesOildemand(mb/d)2010202020212030205020302050World87.288.994.5102.4102.193.057.2NorthAmerica22.220.121.420.516.218.26.9UnitedStates17.816.517.716.712.615.05.0CentralandSouthAmerica5.54.95.35.55.84.82.4Brazil2.32.22.42.42.42.00.9Europe13.911.912.410.97.19.22.7EuropeanUnion10.68.99.27.74.56.51.7Africa3.33.63.85.08.54.96.1MiddleEast7.17.47.78.910.98.07.9Eurasia3.23.84.14.24.54.13.9Russia2.63.13.33.23.13.12.8AsiaPacific25.031.433.338.236.735.120.6China8.813.915.116.212.515.27.6India3.34.54.76.78.35.93.9Japan4.23.23.32.71.72.40.7SoutheastAsia4.04.74.96.77.46.03.9Internationalbunkers7.15.86.69.312.48.66.8HistoricalStatedPoliciesAnnouncedPledgesCCBY-NC-SA4.0.452InternationalEnergyAgencyWorldEnergyOutlook2022TableA.9:Worldliquidsdemand(mb/d)TableA.10:Refiningcapacityandruns(mb/d)452InternationalEnergyAgencyWorldEnergyOutlook2022TableA.9:Worldliquidsdemand(mb/d)TableA.10:Refiningcapacityandruns(mb/d)Worldliquidsdemand(mb/d)202020212030205020302050Totalliquids90.996.7105.8107.698.769.6Biofuels2.02.23.45.35.59.2Hydrogenbasedfuels‐‐‐0.20.23.2Totaloil88.994.5102.4102.193.057.2CTL,GTLandadditives0.80.91.11.31.00.3Directuseofcrudeoil1.00.80.50.30.40.2Oilproducts87.192.8100.8100.591.656.7LPGandethane13.313.615.615.814.410.4Naphtha6.46.97.79.57.37.4Gasoline21.923.623.219.320.68.2Kerosene4.75.79.211.88.77.6Diesel25.026.528.228.225.012.6Fueloil5.75.95.56.34.82.5Otherproducts10.110.611.49.610.88.0ProductsfromNGLs11.311.513.411.612.78.8Refineryproducts75.881.387.488.978.947.9Refinerymarketshare83%84%83%83%80%69%HistoricalStatedPoliciesAnnouncedPledgesNote:CTL=coal‐to‐liquids;GTL=gas‐to‐liquids;LPG=liquefiedpetroleumgas;NGLs=naturalgasliquids.2021203020502030205020212030205020302050NorthAmerica21.621.120.820.111.117.618.518.116.57.5Europe15.814.513.314.06.912.011.49.410.23.9AsiaPacific37.140.341.539.428.329.233.134.730.518.9JapanandKorea7.06.35.86.23.55.15.04.64.62.2China17.519.019.018.511.114.214.514.113.46.4India5.36.67.86.45.44.86.47.65.74.0SoutheastAsia5.36.36.86.36.33.75.56.45.14.7MiddleEast9.611.212.011.09.77.69.610.68.56.6Russia6.96.56.36.14.65.64.03.53.62.4Africa3.44.54.84.24.21.83.13.92.72.6Brazil2.22.32.32.01.61.82.12.21.71.2Other4.64.84.84.74.22.32.93.52.82.6World101.2105.2105.8101.570.677.984.785.976.545.7AtlanticBasin54.153.652.251.032.540.941.940.437.320.1EastofSuez47.151.653.650.538.137.042.945.539.125.6Refiningcapacityandrefineryruns(mb/d)RefiningcapacityRefineryrunsSTEPSAPSSTEPSAPSTableA.10:Refiningcapacityandruns(mb/d)CCBY-NC-SA4.0.AnnexATablesforscenarioprojections453ATableA.11:Naturalgasproduction(bcm)TableA.12:Naturalgasdemand(bcm)AnnexATablesforscenarioprojections453ATableA.11:Naturalgasproduction(bcm)TableA.12:Naturalgasdemand(bcm)Naturalgasproduction(bcm)2010202020212030205020302050World3274399641494372435538742660Conventionalgas2768285429642962302527272016Tightgas27431130631713919137Shalegas1557477909951091874557Coalbedmethane77808274755850Other‐47242524‐NorthAmerica81111641189128310171098485CentralandSouthAmerica16015415114919513395Europe34124523924720817665EuropeanUnion14856513934162Africa203237265313369281239MiddleEast4636466608531030798690Eurasia807911998831857751654AsiaPacific488639648694678636432SoutheastAsia216194195183129162109HistoricalStatedPoliciesAnnouncedPledgesNaturalgasdemand(bcm)2010202020212030205020302050World3329402742134372435738742661NorthAmerica835109611061118820933396UnitedStates678867871864575716252CentralandSouthAmerica14714916115917914196Brazil29344234372817Europe698594625511395394122EuropeanUnion44639742134023524245Africa105164172215292189193MiddleEast391554567689833638582Eurasia578611662626635587532Russia472501543498470470424AsiaPacific57685992010431173983731China110324368443442406238India646166115170110102Japan9510410364435717SoutheastAsia150160162203272194177Internationalbunkers‐‐‐113088HistoricalStatedPoliciesAnnouncedPledgesTableA.12:Naturalgasdemand(bcm)CCBY-NC-SA4.0.454InternationalEnergyAgencyWorldEnergyOutlook2022TableA.13:Coalproduction(Mtce)TableA.14:Coaldemand(Mtce)454InternationalEnergyAgencyWorldEnergyOutlook2022TableA.13:Coalproduction(Mtce)TableA.14:Coaldemand(Mtce)Coalproduction(Mtce)2010202020212030205020302050World5235545958265149382945391613Steamcoal4069429345604026295435381177Cokingcoal8669391030936736855381Ligniteandpeat30022723518713914656NorthAmerica81840947818810613832CentralandSouthAmerica7953624141243Europe331185200126597920EuropeanUnion2201251387110468Africa21021121218817116247MiddleEast11111‐‐Eurasia309400444323274292216AsiaPacific3487420044284282317738431295SoutheastAsia318481499460474423262HistoricalStatedPoliciesAnnouncedPledgesTableA.14:Coaldemand(Mtce)Coaldemand(Mtce)2010202020212030205020302050World5220534756445149382845391613NorthAmerica768342389107428030UnitedStates71631736391266417CentralandSouthAmerica37414640602820Brazil21202523291612Europe53933436922916715772EuropeanUnion360206238125567920Africa15615315214813111930MiddleEast55581279Eurasia203218222172160162121Russia15116416611410211395AsiaPacific3513425444604444325839861332China256530373157297418662691789India399542614773671704243Japan165146143103629735SoutheastAsia122258269337422295151HistoricalStatedPoliciesAnnouncedPledgesCCBY-NC-SA4.0.AnnexATablesforscenarioprojections455ATableA.15:Electricitygeneration(TWh)TableA.16:Renewablesgeneration(TWh)AnnexATablesforscenarioprojections455ATableA.15:Electricitygeneration(TWh)TableA.16:Renewablesgeneration(TWh)TableA.16:Renewablesgeneration(TWh)Electricitygeneration(TWh)2010202020212030205020302050World21539267082833434834498453587861268NorthAmerica5233520553575771781660439749UnitedStates4354423943714625627048697937CentralandSouthAmerica1130127613311605259217893543Brazil51662163976211748111387Europe4120395641824691570351657539EuropeanUnion2956275829633238368935835017Africa6878358691204233713303704MiddleEast829120312331651288616063460Eurasia1251136714551540193715251925Russia1036108711581177137611491296AsiaPacific8288128661390818371265731842031350China42367767853911136143421095816109India974153316862708529826896553Japan11641009102496999210361303SoutheastAsia685111611641704314317513561HistoricalStatedPoliciesAnnouncedPledgesRenewablesgeneration(TWh)2010202020212030205020302050World42347539806015073324521757548873NorthAmerica860133413852668585833617895UnitedStates4458338742034484926206573CentralandSouthAmerica7438889101287228715013365Brazil43752550970010997611329Europe963159616312836424934916422EuropeanUnion660106911121971285424704318Africa11518419744014296653234MiddleEast1835481669662342227Eurasia229279285340545384786Russia170219222249399252416AsiaPacific130632233604733417117793824944China7912192246649019658505612704India16232533795638669905745Japan115216232356586391768SoutheastAsia10526629650614636682802HistoricalStatedPoliciesAnnouncedPledgesCCBY-NC-SA4.0.456InternationalEnergyAgencyWorldEnergyOutlook2022TableA.17:SolarPVgeneration(TWh)TableA.18:Windgeneration(TWh)456InternationalEnergyAgencyWorldEnergyOutlook2022TableA.17:SolarPVgeneration(TWh)TableA.18:Windgeneration(TWh)TableA.18:Windgeneration(TWh)SolarPVgeneration(TWh)2010202020212030205020302050World328241003401112118483818761NorthAmerica313016270825569473286UnitedStates311614566823508942963CentralandSouthAmerica025321895682901104Brazil01114119340137446Europe231761985537646881184EuropeanUnion22139151461584567777Africa01215883841771380MiddleEast01012895221141153Eurasia04414311645Russia022512514AsiaPacific646758023717294260610609China12613261474391115865442India0617342421634533144Japan47991147203154205SoutheastAsia01929106473131911HistoricalStatedPoliciesAnnouncedPledgesWindgeneration(TWh)2010202020212030205020302050World34215971870460410691581617416NorthAmerica1053974361047219214153290UnitedStates95342379948193112352801CentralandSouthAmerica385108219457289893Brazil25773137259152305Europe1545135031196208116263575EuropeanUnion140397396893149512262608Africa2182281295143724MiddleEast0242624658704Eurasia015239151213Russia00314701683AsiaPacific775817942011532922368017China454666551543331215774345India20677721111162131550Japan4995918675299SoutheastAsia061253232124602HistoricalStatedPoliciesAnnouncedPledgesCCBY-NC-SA4.0.AnnexATablesforscenarioprojections457ATableA.19:Nucleargeneration(TWh)TableA.20:Naturalgasgeneration(TWh)AnnexATablesforscenarioprojections457ATableA.19:Nucleargeneration(TWh)TableA.20:Naturalgasgeneration(TWh)TableA.20:Naturalgasgeneration(TWh)Nucleargeneration(TWh)2010202020212030205020302050World2756267327763351426035475103NorthAmerica9359299139058859241086UnitedStates839823813807755826914CentralandSouthAmerica22252530603470Brazil15141521342439Europe1032834889844778896825EuropeanUnion854684733656570705603Africa12101325453075MiddleEast0614519662138Eurasia173219219232293235306Russia170216217230283232289AsiaPacific5826507021264210313672603China7436640864312097181494India264342128337131358Japan2883956190206219271SoutheastAsia000025098HistoricalStatedPoliciesAnnouncedPledgesNaturalgasgeneration(TWh)2010202020212030205020302050World4855633365516848673061423902NorthAmerica121719311908195310241550599UnitedStates10181679164115556201231283CentralandSouthAmerica17822925622221321489Brazil36537627302110Europe946844902606402531127EuropeanUnion58955558740021929230Africa234346360470680390308MiddleEast527873888119816061128988Eurasia603604682762897711697Russia521469535589598554501AsiaPacific1151150615551636190816171094China92256291345344316330India107667011515610770Japan3323953861987419269SoutheastAsia336350361529787503334HistoricalStatedPoliciesAnnouncedPledgesCCBY-NC-SA4.0.458InternationalEnergyAgencyWorldEnergyOutlook2022TableA.21:Coalgeneration(TWh)TableA.22:Totalfinalconsumption(EJ)458InternationalEnergyAgencyWorldEnergyOutlook2022TableA.21:Coalgeneration(TWh)TableA.22:Totalfinalconsumption(EJ)TableA.22:Totalfinalconsumption(EJ)Coalgeneration(TWh)2010202020212030205020302050World86709439102029049595281092594NorthAmerica210691210452133213938UnitedStates19948569942013112837CentralandSouthAmerica426168332181Brazil11182710810Europe1068603678352233201113EuropeanUnion755383460168167823Africa25924824420511517122MiddleEast011416315Eurasia235256258203202193137Russia1661761751079611091AsiaPacific4958735979088040533573942268China3263494153635239311848551511India6581097123415049371458307Japan3173112941876319250SoutheastAsia185487493656858571231HistoricalStatedPoliciesAnnouncedPledgesTotalfinalconsumption(EJ)2010202020212030205020302050World383.2417.5439.1484.5543.6450.8432.7NorthAmerica76.673.777.578.575.173.857.7UnitedStates63.861.665.164.860.260.946.3CentralandSouthAmerica19.219.320.423.329.121.922.0Brazil9.19.510.011.113.410.510.4Europe63.157.260.057.451.653.439.7EuropeanUnion45.941.343.540.534.037.626.1Africa20.925.326.231.847.427.437.0MiddleEast19.223.124.129.640.027.934.2Eurasia23.827.028.528.230.727.327.6Russia19.222.123.322.122.521.521.0AsiaPacific145.4179.5188.4215.6241.2199.7191.6China76.3100.2105.7114.0111.2107.891.0India19.025.827.537.353.832.239.6Japan14.211.812.111.19.310.57.3SoutheastAsia16.119.319.826.534.724.527.1HistoricalStatedPoliciesAnnouncedPledgesCCBY-NC-SA4.0.AnnexATablesforscenarioprojections459ATableA.23:Industryconsumption(EJ)TableA.24:Transportconsumption(EJ)AnnexATablesforscenarioprojections459ATableA.23:Industryconsumption(EJ)TableA.24:Transportconsumption(EJ)TableA.24:Transportconsumption(EJ)Industryconsumption(EJ)2010202020212030205020302050World143.2160.4166.7189.4208.8178.1173.7NorthAmerica17.918.318.620.922.120.018.4UnitedStates14.214.514.716.216.815.613.8CentralandSouthAmerica7.26.77.08.29.87.78.2Brazil4.03.84.04.55.14.24.3Europe19.618.418.918.917.718.115.5EuropeanUnion14.313.413.913.711.713.110.3Africa3.94.04.26.110.35.98.7MiddleEast7.89.710.212.715.311.912.9Eurasia8.49.39.59.310.39.09.3Russia6.98.18.27.88.47.67.7AsiaPacific78.494.198.3113.3123.4105.5100.7China49.459.461.566.762.462.451.2India7.911.512.418.127.516.121.6Japan6.15.05.35.14.54.83.8SoutheastAsia6.28.48.811.415.210.712.6HistoricalStatedPoliciesAnnouncedPledgesTransportconsumption(EJ)2010202020212030205020302050World101.7105.0113.4129.8147.0123.7112.5NorthAmerica29.626.929.128.424.926.718.0UnitedStates25.023.025.124.020.422.515.0CentralandSouthAmerica6.16.57.28.310.67.97.3Brazil2.93.43.64.04.63.83.4Europe15.614.415.314.511.713.68.4EuropeanUnion11.710.611.110.07.59.45.5Africa3.74.75.06.311.36.310.1MiddleEast4.95.35.76.48.96.16.9Eurasia4.74.85.25.45.85.25.1Russia4.03.84.13.83.33.83.0AsiaPacific22.130.132.040.345.538.433.7China8.313.615.016.915.316.211.8India2.73.94.26.810.36.57.5Japan3.32.62.52.21.72.11.1SoutheastAsia3.75.35.48.49.97.86.9HistoricalStatedPoliciesAnnouncedPledgesCCBY-NC-SA4.0.460InternationalEnergyAgencyWorldEnergyOutlook2022TableA.25:Buildingsconsumption(EJ)TableA.26:Hydrogendemand(PJ)460InternationalEnergyAgencyWorldEnergyOutlook2022TableA.25:Buildingsconsumption(EJ)TableA.26:Hydrogendemand(PJ)TableA.26:Hydrogendemand(PJ)Buildingsconsumption(EJ)2010202020212030205020302050World116.8127.6132.4136.5158.3121.3122.0NorthAmerica23.723.824.223.322.621.316.4UnitedStates20.520.320.819.718.418.213.6CentralandSouthAmerica4.44.84.95.47.14.95.2Brazil1.41.71.71.92.91.72.1Europe24.321.222.220.319.018.413.3EuropeanUnion17.615.115.914.412.712.88.6Africa12.515.816.218.324.014.216.5MiddleEast5.36.56.78.914.38.413.1Eurasia8.49.910.510.210.89.89.8Russia6.27.47.87.47.27.17.0AsiaPacific38.245.547.750.060.644.347.8China15.622.223.724.428.823.624.2India7.08.18.59.212.26.67.8Japan4.33.83.93.53.03.22.2SoutheastAsia5.34.54.55.48.04.66.3HistoricalStatedPoliciesAnnouncedPledgesTotalhydrogendemand(PJ)202020212030205020302050World107301131913438168221506434575NorthAmerica182219372173267428356960UnitedStates141815301710211823356135CentralandSouthAmerica3143444537585801528Brazil19225711381350Europe105510461109120717463890EuropeanUnion82780082784413082825Africa3313584977694921322MiddleEast128614071914232518762939Eurasia876869879942774861Russia815802805859699759AsiaPacific5047535864098107671716348China287930823610393637917298India97510451342213412843585Japan2102172443433491119SoutheastAsia4524686028485931566Internationalbunkers‐‐44146728StatedPoliciesAnnouncedPledgesHistoricalCCBY-NC-SA4.0.AnnexATablesforscenarioprojections461ATableA.27:Hydrogenbalance(MtH2equivalent)TableA.28:TotalCO₂₂emissions(MtCO₂)AnnexATablesforscenarioprojections461ATableA.27:Hydrogenbalance(MtH2equivalent)TableA.28:TotalCO₂₂emissions(MtCO₂)Hydrogenbalance(MtH2equivalent)2021203020502030205020302050Low‐emissionhydrogenproduction16243022590452Waterelectrolysis04172116758329FossilfuelswithCCUS12895731122Bioenergyandother0000102Transformationofhydrogen0310149550186Topowergeneration‐014192760Tohydrogen‐basedfuels00366918118Inoilrefining0253624Tobiofuels0111133Hydrogendemandforend‐usesectors03151613140266Low‐emissionshydrogen‐basedfuels0033551596Totalfinalconsumption001339768Powergeneration‐02016828Trade0154441873Tradeasshareofdemand0%10%22%13%19%20%16%STEPSAPSNZETotalCO₂emissions(MtCO₂)2010202020212030205020302050World32893347793663936211319793151112399NorthAmerica648953195563457931673648450UnitedStates54694382461035832180286143CentralandSouthAmerica114910951187119913151002507Brazil412425474460491361166Europe473237483974312622802365417EuropeanUnion331225462726202012291468116Africa1174131513721592217914291305MiddleEast1637194220732307270620521730Eurasia2159220023092107209719681649Russia1694173118111561141414761221AsiaPacific1443318227191091983916266176905300China87921159312129118407970105972255India168622292472327533252934977Japan11881025102775546166032SoutheastAsia1162166717242186261019521063Includesemissionsfromindustrialprocessesandflaring.HistoricalStatedPoliciesAnnouncedPledgesTableA.28:TotalCO2emissions(MtCO2)CCBY-NC-SA4.0.462InternationalEnergyAgencyWorldEnergyOutlook2022TableA.29:ElectricityandheatsectorsCO₂₂emissions(MtCO₂)TableA.30:TotalfinalconsumptionCO₂₂emissions(MtCO₂)462InternationalEnergyAgencyWorldEnergyOutlook2022TableA.29:ElectricityandheatsectorsCO₂₂emissions(MtCO₂)TableA.30:TotalfinalconsumptionCO₂₂emissions(MtCO₂)TableA.30:TotalfinalconsumptionCO2emissions(MtCO2)ElectricityandheatsectorsCO₂emissions(MtCO₂)2010202020212030205020302050World124741350214378127599308113303138NorthAmerica259617301841100043869549UnitedStates234615261633823281548‐57CentralandSouthAmerica23522425014710611942Brazil4656792724136Europe17311131122974454650982EuropeanUnion1188732822432200259‐7Africa421454473455400388163MiddleEast550676682710792638461Eurasia1034949993879880811656Russia892771800678625632517AsiaPacific5907833889108824614581701685China348653755798560535155188986India7851055119914468921395111Japan48946044623578226‐12SoutheastAsia3976927088861103811339HistoricalStatedPoliciesAnnouncedPledgesFinalconsumptionCO₂emissions(MtCO₂)2010202020212030205020302050World1872019522204682162721056187859124NorthAmerica347431643324314923702665556UnitedStates286326012752252417432148259CentralandSouthAmerica8037758429481095803426Brazil342342368397430322147Europe282524702585224016281767320EuropeanUnion20101716179514969621159116Africa56869072796316109011101MiddleEast924102311341321165011981154Eurasia93011181178111411251061945Russia678859903801727772671AsiaPacific80779347962510429960890333581China5043589459945889418851211348India86711091205174223501474843Japan67154856450639342165SoutheastAsia690904934123114221081671Includesemissionsfromindustrialprocesses.HistoricalStatedPoliciesAnnouncedPledgesCCBY-NC-SA4.0.AnnexBDesignofthescenarios463AnnexBDesignofthescenariosTheWorldEnergyOutlook‐2022(WEO‐2022)exploresthreemainscenariosintheanalysesinthechapters.Thesescenariosarenotpredictions–theIEAdoesnothaveasingleviewonthefutureoftheenergysystem.Incontrasttothe2021editionoftheWEO,wedonotvarytheassumptionsaboutpublichealthandeconomicrecoveryimplicationsacrossthescenarios.Thescenariosare:TheNetZeroEmissionsby2050(NZE)ScenarioshowsanarrowbutachievablepathwayfortheglobalenergysectortoachievenetzeroCO2emissionsby2050,withadvancedeconomiesreachingnetzeroemissionsinadvanceoftheotherscenarios.Thisscenarioalsomeetskeyenergy‐relatedUnitedNationsSustainableDevelopmentGoals(SDGs),inparticularachievinguniversalenergyaccessby2030.TheNZEScenariodoesnotrelyonemissionsreductionsfromoutsidetheenergysectortoachieveitsgoals,butassumesthatnon‐energyemissionswillbereducedinthesameproportionasenergyemissions.Itisconsistentwithlimitingtheglobaltemperatureriseto1.5°Cwithoutatemperatureovershoot(witha50%probability).TheAnnouncedPledgesScenario(APS)takesaccountofalltheclimatecommitmentsmadebygovernmentsaroundtheworldincludingNationallyDeterminedContributionsaswellaslongertermnetzeroemissionstargets,andassumesthattheywillbemetinfullandontime.Theglobaltrendsinthisscenariorepresentthecumulativeextentoftheworld’sambitiontotackleclimatechangeasofmid‐2022.TheremainingdifferenceinglobalemissionsbetweentheAPSandthegoalsintheNZEScenarioshowsthe“ambitiongap”thatneedstobeclosedtoachievethegoalsagreedintheParisAgreementin2015.TheStatedPoliciesScenario(STEPS)doesnottakeforgrantedthatgovernmentswillreachallannouncedgoals.Instead,itexploreswheretheenergysystemmightgowithoutadditionalpolicyimplementation.AswiththeAPS,itisnotdesignedtoachieveaparticularoutcome.Ittakesagranular,sector‐by‐sectorlookatexistingpoliciesandmeasuresandthoseunderdevelopment.TheremainingdifferenceinglobalemissionsbetweentheSTEPSandtheAPSrepresentsthe“implementationgap”thatneedstobeclosedforcountriestoachievetheirannounceddecarbonisationtargets.IEA.CCBY4.0.464InternationalEnergyAgencyWorldEnergyOutlook2022B.1PopulationTableB.1⊳PopulationassumptionsbyregionCompoundaverageannualgrowthratePopulation(million)Urbanisation(shareofpopulation)2000‐212021‐302021‐50202120302050202120302050NorthAmerica0.9%0.6%0.5%50253258082%84%89%UnitedStates0.8%0.5%0.4%33535238183%85%89%C&SAmerica1.1%0.7%0.5%52355960181%83%88%Brazil1.0%0.5%0.2%21422422987%89%92%Europe0.3%0.0%‐0.1%70070169076%78%84%EuropeanUnion0.2%‐0.1%‐0.2%45144842975%77%84%Africa2.5%2.3%2.1%13721686248744%48%59%MiddleEast2.1%1.5%1.1%25228934873%76%81%Eurasia0.4%0.3%0.2%23724425365%67%73%Russia‐0.1%‐0.2%‐0.2%14414213475%77%83%AsiaPacific1.0%0.6%0.4%42504496473450%55%65%China0.5%0.2%‐0.1%14231443138363%71%80%India1.3%0.8%0.6%13931504163935%40%53%Japan‐0.1%‐0.5%‐0.6%12512010592%93%95%SoutheastAsia1.2%0.8%0.6%67472679251%56%66%World1.2%0.9%0.7%78358507969257%60%68%Notes:C&SAmerica=CentralandSouthAmerica.SeeAnnexCforcompositionofregionalgroupings.Sources:UNDESA(2018,2019);WorldBank(2022a);IEAdatabasesandanalysis.PopulationisamajordeterminantofmanyofthetrendsintheOutlook.WeusethemediumvariantoftheUnitedNationsprojectionsasthebasisforpopulationgrowthinallscenarios,butthisisnaturallysubjecttoadegreeofuncertainty.The2022RevisionofUNDESA'sWorldPopulationProspectscouldnotbeincorporatedinthismodellingcycleasthemodellingwasalreadyadvancedbyitspublicationtime.Therateofpopulationgrowthisassumedtoslowovertime,buttheglobalpopulationnonethelessexceeds9.6billionby2050(TableB.1).Morethanhalfoftheincreaseovertheprojectionperiodto2050isinAfricaandaroundafurtherthirdisintheAsiaPacificregion.Indiaaddsaround250millionpeopletoitspopulationtobecometheworld’smostpopulouscountry,overtakingChina,wherethepopulationisprojectedtodecreasebyaround40million.Theshareoftheworld’spopulationlivingintownsandcitieshasbeenrisingsteadily,atrendthatisprojectedtocontinueovertheperiodto2050.Inaggregate,thismeansthatallofthe2billionincreaseinglobalpopulationovertheperiodisaddedtocitiesandtowns.IEA.CCBY4.0.AnnexBDesignofthescenarios465BB.2CO2pricesTableB.2⊳CO2pricesforelectricity,industryandenergyproductioninselectedregionsbyscenarioUSD(2021)pertonneofCO2203020402050StatedPoliciesScenarioCanada546277Chile,Colombia132129China284353EuropeanUnion9098113Korea426789AnnouncedPledgesScenarioAdvancedeconomieswithnetzeroemissionspledges1135175200Emergingmarketanddevelopingeconomieswithnetzeroemissionspledges240110160Otheremergingmarketanddevelopingeconomies‐1747NetZeroEmissionsby2050ScenarioAdvancedeconomieswithnetzeroemissionspledges140205250Emergingmarketanddevelopingeconomieswithnetzeroemissionspledges90160200Otheremergingmarketanddevelopingeconomies2585180Note:Valuesarerounded.1IncludesallOECDcountriesexceptMexico.2IncludesChina,India,Indonesia,BrazilandSouthAfrica.Thereare68directcarbonpricinginstrumentsexistingtoday,coveringmorethan40countries.Globalcarbonpricingrevenuein2021increasedbyalmost60%from2020levels,toaroundUSD84billion(WorldBank,2022).ExistingandplannedCO2pricingschemesarereflectedintheSTEPS,coveringelectricitygeneration,industry,energyproductionsectorsandend‐usesectors,e.g.aviation,roadtransportandbuildings,whereapplicable.IntheAPS,higherCO2pricesareintroducedacrossallregionswithnetzeroemissionspledges.Noexplicitpricingisassumedinsub‐SaharanAfrica(excludingSouthAfrica),theCaspianregionandOtherAsiaregions.Instead,theseregionsrelyondirectpolicyinterventionstodrivedecarbonisationintheAPS.IntheNZEScenario,CO2pricescoverallregionsandriserapidlyacrossalladvancedeconomiesaswellasinemergingeconomieswithnetzeroemissionspledges,includingChina,India,Indonesia,BrazilandSouthAfrica.CO2pricesarelower,butnevertheless,risinginotheremergingeconomiessuchasNorthAfrica,MiddleEast,RussiaandSoutheastAsia.CO2pricesarelowerinallotheremergingmarketanddevelopingeconomies,asitisassumedtheypursuemoredirectpoliciestoadaptandtransformtheirenergysystems.IEA.CCBY4.0.466InternationalEnergyAgencyWorldEnergyOutlook2022AllscenariosconsidertheeffectsofotherpolicymeasuresalongsideCO2pricing,suchascoalphase‐outplans,efficiencystandardsandrenewabletargets(TablesB.6‐B.10).Thesepoliciesinteractwithcarbonpricing;therefore,CO2pricingisnotthemarginalcostofabatementasisoftenthecaseinothermodellingapproachesIEA.CCBY4.0.AnnexBDesignofthescenarios467BB.3FossilfuelresourcesTableB.3⊳Remainingtechnicallyrecoverablefossilfuelresources,2021Oil(billionbarrels)ProvenreservesResourcesConventionalcrudeoilTightoilNGLsEHOBKerogenoilNorthAmerica23724242372171727981000CentralandSouthAmerica29185625357494933Europe1511257192836Africa12544430454842‐MiddleEast8871139887291791430Eurasia146940228855755218AsiaPacific502771227265316World17526192208853363318651073Naturalgas(trillioncubicmetres)ProvenreservesResourcesConventionalgasTightgasShalegasCoalbedmethaneNorthAmerica161485010817CentralandSouthAmerica884281541‐Europe546185185Africa191015110400MiddleEast81120101911‐Eurasia69168130101017AsiaPacific2113844215320World2198064228025449Coal(billiontonnes)ProvenreservesResourcesCokingcoalSteamcoalLigniteNorthAmerica2578389103158401519CentralandSouthAmerica146033225Europe137982164415403Africa15343452970MiddleEast141366‐Eurasia1912015387996632AsiaPacific4608974173758091428World1075208033401133954007Notes:NGLs=naturalgasliquids;EHOB=extra‐heavyoilandbitumen.ThebreakdownofcoalresourcesbytypeisanIEAestimate.CoalworldresourcesexcludeAntarctica.Sources:BGR(2021);BP(2022);CEDIGAZ(2022);OGJ(2022);USDOE/EIA(2013);USDOE/EIA(2015);USGS(2012a);USGS(2012b);IEAdatabasesandanalysis.IEA.CCBY4.0.468InternationalEnergyAgencyWorldEnergyOutlook2022TheWorldEnergyOutlooksupplymodellingreliesonestimatesoftheremainingtechnicallyrecoverableresource,ratherthanthe(oftenmorewidelyquoted)numbersforprovenreserves.Resourceestimatesaresubjecttoaconsiderabledegreeofuncertainty,aswellasthedistinctionintheanalysisbetweenconventionalandunconventionalresourcetypes.Overall,theremainingtechnicalrecoverableresourcesoffossilfuelsremainsimilartotheWorldEnergyOutlook‐2021.Allfuelsareatalevelcomfortablysufficienttomeettheprojectionsofglobalenergydemandgrowthto2050inallscenarios.RemainingtechnicallyrecoverableresourcesofUStightoil(crudepluscondensate)totalmorethan200billionbarrels.Worldcoalresourcesaremadeupofvarioustypesofcoal:around80%issteamandcokingcoalandtheremainderislignite.Coalresourcesaremoreavailableinpartsoftheworldwithoutsubstantialnaturalgasandoilresources,notablyinAsia.Overall,thegradualdepletionofresources(atapacethatvariesbyscenario)meansthatoperatorshavetodevelopmoredifficultandcomplexreservoirs.Thistendstopushupproductioncostsovertime,althoughthiseffectisoffsetbytheassumedcontinuousadoptionofnew,moreefficientproductiontechnologiesandpractices.IEA.CCBY4.0.AnnexBDesignofthescenarios469BB.4ElectricitygenerationtechnologycostsTableB.4a⊳TechnologycostsinselectedregionsintheStatedPoliciesScenarioCapitalcosts(USD/kW)Capacityfactor(%)Fuel,CO2,O&M(USD/MWh)LCOE(USD/MWh)VALCOE(USD/MWh)202120302050202120302050202120302050202120302050202120302050UnitedStatesNuclear5000480045009090903030301051009510510095Coal2100210021003515n.a.25252595210n.a.95210n.a.GasCCGT1000100010005540203540406070110607080SolarPV1090710510212223101010503025605060Windonshore138013101250424344101010353030404045Windoffshore40402460182042464935201512070501207560EuropeanUnionNuclear660051004500808080353535140120105140120105Coal2000200020004020n.a.115130140180255n.a.165215n.a.GasCCGT1000100010002010n.a.100120130155270n.a.135220n.a.SolarPV810530410141414101010503530608080Windonshore159015101450293030151515555045656060Windoffshore304020001500515659151010604030604540ChinaNuclear280028002500808080252525656560656560Coal800800800605035606070758095757050GasCCGT56056056035252095105115115130140100110105SolarPV6304103001718191055352015455060Windonshore116010901050262728151010454040505050Windoffshore28601840138033394325151010055401006035IndiaNuclear280028002800758590303030756565756565Coal120012001200657575403535605550605545GasCCGT70070070040504575858595100105959085SolarPV590380270202122555352015403555Windonshore930880830262830101010454035504545Windoffshore27801820130033373925151012075501208060Notes:O&M=operationandmaintenance;LCOE=levelisedcostofelectricity;VALCOE=value‐adjustedLCOE;kW=kilowatt;MWh=megawatt‐hour;CCGT=combined‐cyclegasturbine.Costcomponents,LCOEandVALCOEfiguresarerounded.LowervaluesforVALCOEindicateimprovedcompetitiveness.Sources:IEAanalysis;IRENARenewableCostingAlliance;(IRENA,2022).IEA.CCBY4.0.470InternationalEnergyAgencyWorldEnergyOutlook2022TableB.4b⊳TechnologycostsinselectedregionsintheAnnouncedPledgesScenarioCapitalcosts(USD/kW)Capacityfactor(%)Fuel,CO2andO&M(USD/MWh)LCOE(USD/MWh)202120302050202120302050202120302050202120302050UnitedStatesNuclear500048004500909090303030100100100Coal21002100210030n.a.n.a.85150180165n.a.n.a.GasCCGT1000100010005025n.a.60859585130n.a.SolarPV1090680470212223101010503025Windonshore138012901220424344101010353030Windoffshore4040236016204246493520151206545EuropeanUnionNuclear660051004500808070353535140115115Coal20002000200030n.a.n.a.135175210220n.a.n.a.GasCCGT1000100010002510n.a.110130135160240n.a.SolarPV810510360141414101010503525Windonshore159014901410293030151515555045Windoffshore30401920132051565915105603525ChinaNuclear280028002500858080252525656560Coal800800800605020658515080105195GasCCGT56056056030252595110130110130155SolarPV6304002701718191055352015Windonshore116010801020262728151010454035Windoffshore2860178012003339432515101005535IndiaNuclear280028002800758590303030706565Coal12001200120065753540651706085205GasCCGT700700700404530708511590105145SolarPV590360240202122555352015Windonshore930870800262830101010454035Windoffshore2780174011403337392515101207045Notes:O&M=operationandmaintenance;LCOE=levelisedcostofelectricity;kW=kilowatt;MWh=megawatt‐hour;CCGT=combined‐cyclegasturbine;n.a.=notapplicable.CostcomponentsandLCOEfiguresarerounded.Sources:IEAanalysis;IRENARenewableCostingAlliance;(IRENA,2022).IEA.CCBY4.0.AnnexBDesignofthescenarios471BTableB.4c⊳TechnologycostsinselectedregionsintheNetZeroEmissionsby2050ScenarioCapitalcosts(USD/kW)Capacityfactor(%)Fuel,CO2andO&M(USD/MWh)LCOE(USD/MWh)202120302050202120302050202120302050202120302050UnitedStatesNuclear500048004500909085303030100100100Coal21002100210030n.a.n.a.85155220165n.a.n.a.GasCCGT1000100010005025n.a.558010580130n.a.SolarPV1090620430212223101010503025Windonshore138012701190424344101010353030Windoffshore4040220015004246493520151206040EuropeanUnionNuclear660051004500808070353535140115115Coal20002000200025n.a.n.a.135185250230n.a.n.a.GasCCGT1000100010002515n.a.95115135145195n.a.SolarPV810470340141414101010503525Windonshore159014701380293030151515555045Windoffshore30401800124051565915105603525ChinaNuclear280028002500858070252525656565Coal80080080055n.a.n.a.80120180100n.a.n.a.GasCCGT5605605603525n.a.90110130105130n.a.SolarPV6303602501718191055352015Windonshore116010601000262728151010454035Windoffshore2860164011203339432515101005035IndiaNuclear280028002800708590303030756565Coal12001200120065n.a.n.a.4010520060n.a.n.a.GasCCGT7007007004040n.a.558011075100n.a.SolarPV590320210202122555352015Windonshore930840790262830101010453535Windoffshore2780156010803337392515101206545Notes:O&M=operationandmaintenance;LCOE=levelisedcostofelectricity;kW=kilowatt;MWh=megawatt‐hour;CCGT=combined‐cyclegasturbine;n.a.=notapplicable.CostcomponentsandLCOEfiguresarerounded.Sources:IEAanalysis;IRENARenewableCostingAlliance;(IRENA,2022).IEA.CCBY4.0.472InternationalEnergyAgencyWorldEnergyOutlook2022Allcostsareexpressedinyear‐2021dollars.Majorcontributorstothelevelisedcostofelectricity(LCOE)include:overnightcapitalcosts;capacityfactorthatdescribestheaverageoutputovertheyearrelativetothemaximumratedcapacity(typicalvaluesprovided);costoffuelinputs;plusoperationandmaintenance.Economiclifetimeassumptionsare25yearsforsolarPV,andonshoreandoffshorewind.Weightedaveragecostofcapital(WACC)reflectsanalysisforutility‐scalesolarPVintheWorldEnergyOutlook‐2020(IEA,2020),witharangeof3‐6%,andforoffshorewindanalysisfromtheOffshoreWindOutlook2019(IEA,2019),witharangeof4‐7%.OnshorewindwasassumedtohavethesameWACCasutility‐scalesolarPV.AstandardWACCwasassumedfornuclearpower,coal‐andgas‐firedpowerplants(7‐8%basedonthestageofeconomicdevelopment).Thevalue‐adjustedlevelisedcostofelectricity(VALCOE)incorporatesinformationonbothcostsandthevalueprovidedtothesystem.BasedontheLCOE,estimatesofenergy,capacityandflexibilityvalueareincorporatedtoprovideamorecompletemetricofcompetitivenessforpowergenerationtechnologies.Fuel,CO2andO&Mcostsreflecttheaverageoverthetenyearsfollowingtheindicateddateintheprojections(andthereforevarybyscenarioin2021).SolarPVandwindcostsdonotincludethecostofenergystoragetechnologies,suchasutility‐scalebatteries.Thecapitalcostsfornuclearpowerrepresentthe“nth‐of‐a‐kind”costsfornewreactordesigns,withsubstantialcostreductionsfromthefirst‐of‐a‐kindprojects.IEA.CCBY4.0.AnnexBDesignofthescenarios473BB.5OtherkeytechnologycostsTableB.5⊳CapitalcostsforselectedtechnologiesbyscenarioStatedPoliciesAnnouncedPledgesNetZeroEmissionsby20502021203020502030205020302050Primarysteelproduction(USD/tpa)Conventional640650660650670650680Innovativen.a.1400105013309801020910Vehicles(USD/vehicle)Hybridcars16122146861486114528147181446014638Batteryelectriccars21322157721418515265136181478313251BatteriesandhydrogenHydrogenelectrolysers(USD/kW)1505575445390265315230Fuelcells(USD/kW)100604050354530Utility‐scalestationarybatteries(USD/kWh)285185135185135180135Notes:kW=kilowatt;tpa=tonneperannum;kWh=kilowatt‐hour;n.a.=notapplicable.AllvaluesareinUSD(2021).Sources:IEAanalysis;Jameset.al.(2018);Thompson,etal.(2018);FinancialTimes(2020);BNEF(2021);Coleetal.(2020);Tsiropoulosetal.(2018);Allcostsrepresentfullyinstalled/deliveredtechnologies,notsolelythemodulecost,unlessotherwisenoted.Installed/deliveredcostsincludeengineering,procurementandconstructioncoststoinstallthemodule.Industrycostsreflectproductioncostsintheironandsteelsub‐sectoranddifferentiatebetweenconventionalandinnovativeproductionroutes.Conventionalroutesareblastfurnace‐basicoxygenfurnace(BF‐BOF)anddirectreducediron‐electricarcfurnace(DRI‐EAF).TheinnovativeroutesareHisarnawithcarboncapture,utilisationandstorage(CCUS),DRI‐EAFwithCCUSandhydrogen‐basedDRI‐EAF.CostsforconventionalprimarysteelincreaseovertimereflectinganincreasingshifttowardsDRI‐EAFinnewcapacity,whichismorecapitalintensive.Vehiclecostsreflectproductioncosts,notretailprices,tobetterreflectthecostdeclinesintotalcostofmanufacturing,whichmoveindependentlyoffinalmarketpricesforelectricvehiclestocustomers.Historicalvaluesin2021havebeenusedfortheglobalaveragebatterypacksize.Inhybridcars,thefuturecostincreaseisdrivenbyregionalfueleconomyandemissionsstandards.Electrolysercostsreflectaprojectedweightedaverageofinstalledelectrolysertechnologies(excludingChina,wherethemodelledcostsarelower),includinginverters.Fuelcellcostsarebasedonstackmanufacturingcostsonly,notinstalled/deliveredcosts.Thecostsprovidedareforautomotivefuelcellstacksforlight‐dutyvehicles.Utility‐scalestationarybatterycostsreflecttheaverageinstalledcostsofallbatterysystemsratedtoprovidemaximumpoweroutputforafour‐hourperiod.IEA.CCBY4.0.474InternationalEnergyAgencyWorldEnergyOutlook2022B.6PoliciesThepolicyactionsassumedtobetakenbygovernmentsarekeyvariablesinthisWorldEnergyOutlook(WEO)andthemainreasonforthedifferencesinoutcomesacrossthescenarios.AnoverviewofthepoliciesandmeasuresthatareconsideredinthevariousscenariosisincludedinTablesB.6‐B.10.Thepoliciesareadditive:measureslistedundertheAnnouncedPledgesScenario(APS)supplementthoseintheStatedPoliciesScenario(STEPS).Thetablesbeginwithbroadcross‐cuttingpolicyframeworks,followedbymoredetailedpoliciesbysector:power,industry,buildingsandtransport.ThetablesfortheSTEPSlistonlythenewpoliciesenacted,implementedorrevisedsincethepublicationoftheWEO‐2021.PoliciesalreadyconsideredinpreviouseditionsoftheWEOarenotlistedduetospaceconstraints.However,wedorestatemajorlong‐termpoliciestobeclearwhichtargetsandgoalsaremetintheSTEPSandwhichareonlymetintheAPS.Someregionalpolicieshavebeenincludediftheyplayasignificantroleinshapingenergyataglobalscale,e.g.regionalcarbonmarkets,standardsinverylargeprovincesorstates.Thetablesdonotincludeallpoliciesandmeasures;rathertheyhighlightthepoliciesmostprominentinshapingglobalenergydemandtoday,whilebeingderivedfromanexhaustiveexaminationofannouncementsandplansincountriesaroundtheworld.Amorecomprehensivelistofenergy‐relatedpoliciesbycountrycanbeviewedontheIEAPoliciesandManagementDatabase(PAMS),https://www.iea.org/policies.IEA.CCBY4.0.AnnexBDesignofthescenarios475BTableB.6⊳Cross-cuttingpolicyassumptionsforselectedregions/countriesbyscenarioRegion/countryScenarioAssumptionsUnitedStatesSTEPSEnergyprovisionsintheInflationReductionAct(2022),ConsolidatedAppropriationsAct(2021)andInfrastructureInvestmentandJobsAct(2021).DefenceProductionActsupportingdomesticproductionofheatpumps,solarequipmentandbatteries.USMethaneEmissionsReductionActionPlan.APSUpdatedNDCaimingtoreduceGHGemissionsby50‐52%by2030(from2005levels)andnationaltargettoreachnetzeroGHGemissionsby2050.Commitmenttoreducemethaneemissionsfromtheoilandgassectorby40‐45%by2025and2021USMethaneEmissionsReductionActionPlan.CanadaSTEPSEnergyandemissionsreduction‐relatedprovisionsinthe2020HealthyEnvironmentandaHealthyEconomyPlan;extendedInvestinginCanadaInfrastructureProgramme;andEmissionsReductionFund.HydrogenStrategyandStrategicInnovationFund.APSCommitmenttoreachnetzeroGHGemissionstargetby2050.Commitmenttoreducemethaneemissionsfromtheoilandgassectorby40‐45%by2025,andfurtherby75%by2030relativeto2012.MeasuresintheHealthyEnvironmentandHealthyEconomyactionplan.CentralandSouthAmericaSTEPSColombia:EnergyprovisionsintheTenMilestonesin2021Plan;NationalStrategyforMitigationofShort‐LivedClimatePollutants;andNationalEnergyPlanto2050.Chile:2021NationalStrategyforGreenHydrogen.APSBrazil:Long‐termobjectiveofreachingclimateneutralityby2050.Chile,CostaRicaandColombia:Netzeroemissionsby2050.CommitmenttoGlobalMethanepledgebyeightcountriesintheregion.Colombia:NationalStrategyforMitigationofShort‐LivedClimatePollutants.EuropeanUnionSTEPSEnergyspendingprovisionsintheEuropeanGreenDealandnationalrecoveryplanswithintheEURecoveryandResilienceFacility.Spendingprovisionstostimulatelong‐terminvestmentinenergyefficiencyandcleanenergyimplementedaspartofnationalpolicyresponsestotheenergycrisisasofAugust2022.HorizonEuroperesearchandinnovationfundingprogramme.APSFullimplementationofthedecarbonisationtargetsintheFitfor55package.2050NetZeroEmissionstargetby2050embeddedinthe2021EuropeanClimateLaw.EUmemberstate‐leveltargetsforclimateneutrality.TargetsintheEUHydrogenStrategyforaClimateNeutralEurope.PartialimplementationofthetargetslaidoutintheREPowerEUPlan,eliminatingtheimportofRussiangassupplytotheEuropeanUnionwellbefore2030.EUmemberstatescommitmenttotheGlobalMethanePledge.OtherEuropeSTEPSUnitedKingdom:TenPointPlan;BuildBackGreenerplan;2020EnergyWhitePaper;andprovisionsofthe2021NorthSeaTransitionDeal.Norway:2021GreenConversionPackage.APSUnitedKingdom:FullimplementationofthetargetfornetzeroGHGemissionsby2050.CommitmenttotheGlobalMethanePledge.Norway,IcelandandSwitzerland:Climateneutralitytargets.Norway:ClimateActionPlan2021‐2030.IEA.CCBY4.0.476InternationalEnergyAgencyWorldEnergyOutlook2022TableB.6⊳Cross-cuttingpolicyassumptionsforselectedregions/countriesbyscenario(continued)Region/countryScenarioAssumptionsAustraliaandNewZealandSTEPSAustralia:Spendingandpolicymeasuresfromthe2020ClimateSolutionsPackage.NewZealand:Energy‐relatedmeasuresfromtheCovidResponseandRecoveryFund.APSAustralia:Fullimplementationofthe2022ClimateChangeBillemissionstarget,includingnetzeroemissionsby2050,and‐43%by2030relativeto2005.NewZealand:FullimplementationoftheNewZealandZeroCarbonamendmenttotheClimateChangeResponseActsettinganetzeroemissionstargetforallGHGexceptbiogenicmethaneby2050.CommitmenttotheGlobalMethanePledge.ChinaSTEPSMadeinChina2025transitionfromheavyindustrytohighervalue‐addedmanufacturing.14thFive‐YearPlan:oReduceCO2intensityofeconomyby18%from2021to2025.oReduceenergyintensityofeconomyby13.5%from2021to2025.o20%non‐fossilshareofenergymixby2025.o25%non‐fossilshareofenergymixby2030.NDC:oAimtopeakCO2emissionsbefore2030.oLowerCO2emissionsperunitofGDPby60%from2005levels.APSCarbonneutralitytargetby2060.IndiaSTEPSEnergy‐relatedelementsoftheSelf‐ReliantIndiaScheme(AtmanirbharBharat).450GWrenewablescapacityby2030and50%oftotalinstalledcapacitytobenon‐fossilfuel‐basedenergysourcesby2030.Enhancedenforcementofenergyefficiencypolicyunderthe2022amendmentstotheEnergyConservationAct.NationalHydrogenMission.APSUpdatedNDCtoreducenationalcarbonintensityby45%by2030from2005levels,increaseinnon‐fossilenergycapacityto500GWby2030,andreducecarbonemissionsby1GtCO2by2030.Netzeroemissionsby2070.SoutheastAsiaSTEPSIndonesia:23%shareofrenewableenergyinprimaryenergysupplyby2025and31%by2050.Singapore:GreenPlan2030.APSIndonesia:Netzeroemissionsby2060orbefore.Malaysia:Carbonneutralitytargetby2050.Thailand:NetzeroGHGemissionstargetby2065.VietNam:Carbonneutralitytargetby2050.Indonesia,Malaysia,PhilippinesandVietNam:CommitmenttotheGlobalMethanePledge.IEA.CCBY4.0.AnnexBDesignofthescenarios477BTableB.6⊳Cross-cuttingpolicyassumptionsforselectedregions/countriesbyscenario(continued)Region/countryScenarioAssumptionsJapanSTEPSImplementationofconcretepolicies(renewableenergy,batteries,energyefficiencyandnuclearpower)announcedinthe6thStrategicEnergyPlanundertheBasicActonEnergyPolicy,aimingtorealisethePlan’s2030energyoutlook.Publicspendingoncleanenergyinnovation‐2021nationalbudget.APSFullimplementationofthe6thStrategicEnergyPlanundertheBasicActonEnergyPolicy,includingcarbonneutralitytargetfor2050andotherpolicytargetsbeyond2030.AcceleratednuclearpoliciesunderdiscussionintheGreenTransformation(GX)ImplementationCouncil.CommitmenttotheGlobalMethanePledge.KoreaSTEPSNewEnergyPolicy.KoreanNewDealCleanEnergySpending.14thLong‐termNaturalGasSupplyandDemandPlan(2021‐2034).MethaneReductionPlan2018‐2030.APSCarbonNeutralityandGreenGrowthActforClimateChangecommittingtoCO2neutralityby2050.Commitmenttoreducemethaneemissionsfromallsectorsby30%below2018levelsby2030,witha28.6%sectoralreductiontargetforenergy.AfricaAPSNetzeroemissionstargetsby2050inNigeria,SouthAfrica,RwandaandGhana.Nineothernetzeroemissionscommitmentsfromsub‐SaharanAfricancountries.Alluniversalaccesstargetsforelectricityandcleancooking.Notes:STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario.NDC=NationallyDeterminedContributions(ParisAgreement);CCUS=carboncapture,utilisationandstorage;GHG=greenhousegases;GW=gigawatt;Gt=gigatonnes.IEA.CCBY4.0.478InternationalEnergyAgencyWorldEnergyOutlook2022TableB.7⊳Electricitysectorpoliciesandmeasuresasmodelledbyscenarioforselectedregions/countriesRegion/countryScenarioAssumptionsUnitedStatesSTEPSInflationReductionActgrantsandtaxcreditsforrenewables,nuclearpowerandCCUS.100%carbon‐freeelectricityorenergytargetsby2050inupto21statesplusPuertoRicoandWashingtonDC.30GWoffshorewindcapacityby2030.Updatedrenewableportfoliostandardpolicies(Delaware,Illinois,Nebraska,NorthCarolinaandOregon).APSG7commitment:Achievepredominantlydecarbonisedelectricitysectorby2035.CanadaSTEPSReachnearly90%non‐emittingrenewablesgenerationby2030.Phaseoutconventionalcoal‐firedplantsby2030.APSG7commitment:Achievepredominantlydecarbonisedelectricitysectorby2035.EuropeanUnionSTEPSNewcoalphaseoutcommitmentsinSlovenia,EstoniaandCroatia.UpdatedNationalEnergyandClimatePlans,notablyoffshorewindtargets.APSHighertargetsforrenewables(40%renewablesshareofgrossfinalconsumptionby2030)withinFitfor55package.G7commitment:Achievepredominantlydecarbonisedelectricitysectorby2035.OtherEuropeAPSUnitedKingdom:EnergySecurityStrategysetsnewambitionsforoffshorewind,nuclear&hydrogen.G7commitment:Achievepredominantlydecarbonisedelectricitysectorby2035.AfricaSTEPSPartialimplementationofnationalelectrificationstrategies.APSSouthAfrica:Increasedrenewablescapacityandreducedcoal‐firedcapacityunder2019IntegratedResourcePlan.Fullimplementationofnationalelectrificationtargets.ChinaSTEPS14thFive‐yearPlanforRenewablestargetsfor3300TWhofrenewablesby2025(ofwhich1400TWhshouldbesolarandwind)andthatover50%ofincrementalelectricityconsumptionismetbyrenewables.APSOverallcoalusetodeclineinthe15thFive‐YearPlanperiod(2025‐2030).IndiaAPSUpdatedNDC‐50%cumulativeelectricpowerinstalledcapacityfromnonfossilfuel‐basedenergyresourcesby2030.JapanSTEPSAchieveelectricitygenerationoutlookby2030inthe6thStrategicEnergyPlan.Restartnuclearpowerplantsalignedwiththe6thStrategicEnergyPlanandtheGreenTransformation(GX)policyinitiative.APSAcceleratednuclearexpansion,includingSMRs,underdiscussionintheGreenTransformation(GX)ImplementationCouncil.GreenGrowthStrategy:30‐45GWofoffshorewindcapacityin2040.6thStrategicEnergyPlan,withadditionalpoliciestosupportrenewablesinpowergenerationtoreach2030targets.G7commitment:Achievepredominantlydecarbonisedelectricitysectorsby2035.KoreaSTEPSIncreaserenewablesinelectricitygenerationtoover20%andnuclearpowertoover30%,anddecreasecoal‐firedpowerby2030undertheNewEnergyPolicyDirection.SoutheastAsiaAPSIndonesia:Renewableenergyaccountsforhalf(21GW)oftotalpowercapacityadditionundertheNationalElectricitySupplyBusinessPlan(RUPTL)2019‐2028.VietNam:PowerDevelopmentPlan8proposed19‐20GWofsolar,18‐19GWofwind,22GWofnaturalgasand37GWofcoal‐firedcapacityby2030.Notes:STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario.ETS=emissionstradingsystem;TWh=terawatt‐hour;GW=gigawatt;SMR=smallmodularreactor.IEA.CCBY4.0.AnnexBDesignofthescenarios479BTableB.8⊳Industrysectorpoliciesandmeasuresasmodelledbyscenarioforselectedregions/countriesRegion/countryScenarioAssumptionsAllregionsAPSUNResolutiontoendplasticpollutionwithbanonsingle‐useplastics.Lowersplasticsdemand.NetZeroEmissionsSteelInitiative.ConcreteActionforClimate.UnitedStatesSTEPSInflationReductionActof2022:InvestmentsincleanmanufacturingandtaxcreditsforCCUS.APSDepartmentofEnergyIndustrialDecarbonizationRoadmap.FirstMoversCoalitiondemandandproductiontargetspersub‐sector,notably10%ofaluminiumandsteelproducedbylow‐emissionsmeansby2030.CanadaSTEPSCleanindustrypackagesandprovisionstopromotecleanindustrywithinBuildingCanada'sCleanIndustrialAdvantage.CentralandSouthAmericaSTEPSBrazil:Energyefficiencyguaranteefund.EuropeanUnionSTEPSEUupdatestotheemissionstradingsystemreflectingextensionsforfreeallocationand2.2%annualreductionsofemissionsallowances.EU:InnovationFundsupportforrenewableenergy,energy‐intensiveindustries,energystorageandCCUS.Sweden:Governmentcreditguaranteesforgreeninvestment.France:France2030‐EUR5.6billionforindustrydecarbonisation.OtherEuropeSTEPSUnitedKingdom:IndustrialDecarbonisationChallenge.Pilotfundingforlow‐emissionsindustrialclusters,andIndustrialEnergyTransformationFundfundingforenergyefficiency.APSUnitedKingdom:IndustrialDecarbonisationStrategy.AustraliaandNewZealandSTEPSAustralia:NationalHydrogenStrategytodevelopcleanhydrogen.ChinaSTEPSMadeinChina2025targetsforindustrialenergyintensity.Reducecomprehensiveenergyconsumptionpertonneofsteelby2%by2025.Emissionsfromsteelsub‐sectorpeakbefore2030.APSExpansionoftheemissionstradingsystemcoveragetoindustry.IndiaSTEPSPerform,Achieve,Trade(PAT)Schemetotradeenergysavingcredits.MakeinIndiaprogramme.Boosttoindustrysectorbybuilding11industrialworld‐classcorridors.UnionBudget2021‐2022,i.e.thenationalbudget,includesUSD26billiontoenhancethemanufacturingcapabilitiesof14keysub‐sectors.JapanSTEPSGreenInnovationFundprovidesfundingforR&Dforinnovativetechnology.APSTechnologyRoadmapforTransitionFinanceinthecement,pulpandpapersub‐sectors.Note:STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario;CCUS=carboncapture,utilisationandstorage;ETS=emissionstradingsystem;R&D=researchanddevelopment.IEA.CCBY4.0.480InternationalEnergyAgencyWorldEnergyOutlook2022TableB.9⊳Buildingssectorpoliciesandmeasuresasmodelledbyscenarioforselectedregions/countriesRegion/countryScenarioAssumptionsUnitedStatesSTEPSInflationReductionAct:Rebatesforheatpumpsandenergyefficiencyupgradesinresidentialandcommercialbuildings.Updatedminimumenergyperformancestandardsforcentralairconditioningandheatpumps.APSStateandlocalimplementationofenergysmartbuildingcodesandzeroenergybuildingcodes.CanadaSTEPSImplementationofupdatedapplianceefficiencystandards.Large‐scaleenergy‐efficientretrofitsaspartoftheCanadaInfrastructureBankgrowthplan.GreenerHomesGrantandinterest‐freeloansfordeephomeretrofits.APSAllnewbuildingsmeetzerocarbon‐readybuildingstandardsby2030.CentralandSouthAmericaSTEPSColombia:Supportforefficientlighting,efficientrefrigeratorsandsubstitutionoffirewoodusewithLPGorelectriccookingstoves.Argentina:Strengthenedenergyefficiencybuildingcodesandmandatoryefficiencylabellingfornewsocialhousing.EuropeanUnionSTEPSEURecoveryandResilienceFacilityflagshiparea(Renovate)forenergyefficiencyinbuildings.Country‐levelincentivesforrenovationandapplianceupgrades,newbuildingcodes,andcleanheatingincentivesandinvestment.Bansoninstallingcertainfossilfuel‐firedboilersinneworexistingbuildings:Austria(2021);France(2022);Belgium(Flanders,2022);Slovenia(2023);Germany(2026).APSEUEnergyPerformanceofBuildingsDirectiveobjectivetoachieveahighlyenergy‐efficientanddecarbonisedbuildingstockby2050.RenovationWaveobjectivetodoubletherateofbuildingenergyretrofitsby2030.OtherEuropeSTEPSUnitedKingdom:Low‐CarbonHeatSupportandHeatNetworksInvestmentProject;variousretrofitincentiveschemesforimprovingbuildingsefficiencyaspartofthePlanforJobs.APSUnitedKingdom:Futurehomesstandardbanningfossilfuelheatinginnewhomeconstructionby2025.UnitedKingdom:Banoninstallingnaturalgas‐firedboilersinallexistingbuildings(2035).AfricaSTEPSSouthernAfricanDevelopmentCommunitylightingstandards.Minimumenergyperformancestandardsformajorresidentialappliancesandequipment,includingin:Algeria,Benin,Egypt,Ghana,Kenya,Morocco,Nigeria,Rwanda,SouthAfrica,Tunisia.APSAlltargetsforcleancookingmet.AustraliaandNewZealandSTEPSAustralia:Fundingforenergyefficiencymeasures,includingenergyratinglabelsandstatefundingforenergy‐efficientretrofits.Energyefficiencystandardsfornewhomesupgradedtosevenstarsin2023.NewZealand:Replaceallremainingcoal‐firedboilersinschoolswithelectricorrenewablebiomassalternativesby2025.IEA.CCBY4.0.AnnexBDesignofthescenarios481BTableB.9⊳Buildingssectorpoliciesandmeasuresasmodelledbyscenarioforselectedregions/countries(continued)Region/countryScenarioAssumptionsChinaSTEPSStandardformaximumenergyconsumptionpersquaremetreinbuildings.GreenandHigh‐EfficiencyCoolingActionPlan.Minimumperformancestandardsandenergyefficiencylabellingforroomairconditioners.IndiaSTEPSEnergyConservationandSustainableBuildingCodeaspartoftheEnergyConservation(Amendment)Bill,comprisingnormsorenergyefficiencyandconservation,minimumuseofrenewableenergyandothergreenbuildingsrequirements.CoolingActionPlan.Standardsandlabellingforlightcommercialairconditioners,freezersandlightbulbs.Energyefficiencylabellingforresidentialbuildingsforrentersandhomeowners.JapanSTEPSRevisedretaillabellingsystem.APSNewresidentialandservicesbuildingsmeetthenetzeroenergyhomeornetzeroenergybuildingstandardonaverageby2030.KoreaSTEPSRebateforpurchaseofappliancesentitledtoenergyefficiencygrade1.KoreanNewDeal:Increasedfundingtoimprovetheefficiencyofschools,publichousing,recreationalandhealthcarefacilities.APSAllnewbuildingsmeetzerocarbon‐readybuildingstandardsby2030.SoutheastAsiaSTEPSVietNam:Minimumperformancestandardsandlabellingforappliancesandlightinginresidentialandcommercialbuildings.Singapore:Enhancementstominimumenergyperformancestandardsforlightbulbs.Malaysia:Minimumenergyperformancestandardsandlabellingforwashingmachines,refrigeratorsandairconditioners.Note:STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario;LPG=liquefiedpetroleumgas.IEA.CCBY4.0.482InternationalEnergyAgencyWorldEnergyOutlook2022TableB.10⊳Transportsectorpoliciesandmeasuresasmodelledbyscenarioforselectedregions/countriesRegion/countryScenarioAssumptionsAllregionsAPSLDVs:COP26declarationby39governmentsonallsalesofnewcarsandvansbeingzeroemissionsgloballyby2040,andbynolaterthan2035inleadingmarkets.1HDVs:GlobalMoUonZeroEmissionsMedium‐andHeavy‐dutyVehiclesamong15countries,targets100%newtruckandbussalesbeingzeroemissionsby2040.2InternationalCivilAviationOrganizationCarbonOffsettingandReductionSchemeforInternationalAviationtooffsetCO2emissionsabove2019levels.InternationalMaritimeOrganizationinitialGHGemissionstrategytoreduceemissionsfrominternationalshippingbyatleast50%by2050comparedto2008.UnitedStatesSTEPSInflationReductionAct:ExtensionoffederaltaxcreditforelectricLDVsandcharginginfrastructureto2032,andtaxcreditsforbiofuelsincludingsustainableaviationfuel.Fueleconomystandardstoimprove8%peryearforpassengercarsandlighttrucksformodelyears2024‐2025andrequirementof10%formodelyear2026relativeto2021levels.MorestringentstandardsforGHGemissionsformodelyears2023‐2026whichrequires5‐10%emissionsreductionsperyear.InCalifornia,AdvancedCleanCarsIIregulationaimstoachievezeroemissionspassengercarsandlighttrucksalesby2035,aswellasAdvancedCleanTrucksregulationtoachieveazeroemissionsmedium‐andheavy‐dutytruckfleetby2045.APSAnnouncedexecutiveorderforatargetof50%ofallnewpassengercarsandlight‐dutytruckstobezeroemissionsvehiclesby2030.SustainableAviationFuelGrandChallengetoscaleuptheproductionofatleast3billiongallonsperyearby2030,andby2050sufficientsustainableaviationfueltomeet100%ofdomesticaviationdemand.WashingtonStatetargettophaseoutallnewsalesandregistrationsofinternalcombustionenginecarsandvansfrom2030.CanadaSTEPSProvincesofQuebecandBritishColumbiaaimtophaseoutallnewsalesandregistrationsofinternalcombustionenginepassengervehiclesby2035.APSEmissionsReductionPlantoachieve100%zeroemissionslight‐dutyvehiclessalestargetby2035.Nationalaimtoachieve100%ofmedium‐andheavy‐dutytrucksalestobeemissionsvehiclesby2040.CentralandSouthAmericaAPSColombia:Allurbanbussalesaretobezeroemissionsby2035.Chile:AllLDVandurbanbussalesaretobezeroemissionsby2035,aswellaslong‐distancetrucksandintercitybusesby2045.CostaRica:Targetof100%ofLDVsalestobezeroemissionsvehiclesfrom2050.Ecuador:Allpublictransportvehiclesmustbeelectricfrom2025.1Fulllistofsignatories:https://zevdeclaration.org/signatories‐list/2Fulllistofsignatories:https://globaldrivetozero.org/mou‐nations/IEA.CCBY4.0.AnnexBDesignofthescenarios483BTableB.10⊳Transportsectorpoliciesandmeasuresasmodelledbyscenarioforselectedregions/countries(continued)Region/countryScenarioAssumptionsEuropeanUnionSTEPSNationalrecoveryandresilienceplansofEUmemberstatessupportgreenmobility,railways,electricvehiclesandcharginginfrastructure.RenewableEnergyDirectiveIItosupplyaminimumof14%oftheenergyconsumedinroadandrailtransportby2030asrenewableenergy.APSFitfor55package:oAverageemissionsofnewcarstoreduceemissionsby55%from2030andby100%from2035relativeto2021levels.oAlternativeFuelsInfrastructureRegulationtoacceleratethevehiclerecharginginfrastructuredeployment.oReFuelEUAviationsetsa63%blendingmandateofsustainableaviationfuelsby2050,withasub‐obligationofsyntheticfuels.oFuelEUMaritimeinitiativetargetsthereductionofaverageGHGintensityofenergyusedon‐boardbyshipsupto75%by2050relativeto2020levels.RevisionoftheCleanVehiclesDirectiveincludingminimumrequirementsforaggregatepublicprocurementforzeroemissionsurbanbuses.OtherEuropeSTEPSUnitedKingdom:Almost11%ethanolblendmandateby2032.Norway:NationalTransportPlansupportingrailwaysandthemaritimesector.APSUnitedKingdom:Implementationofabanin2030onsalesofnewinternalcombustionenginecarsandvans.Hybridvehiclestobephasedoutfrom2035.100%zeroemissionsnewtrucksandbussalesby2040.Sustainableaviationfuelmandateof10%by2030.Norway:Sustainableaviationfueltargetof30%by2030.Allcitybusestobezeroemissionsby2025.Targetof100%ofnewHDVsalestobezeroemissionsby2030.AustraliaandNewZealandAPSNewZealand:Transitionto100%salesofzeroemissionsnewcarsandvansby2035.Targetszeroemissionsvehiclestomakeup100%ofurbanbussalesby2025and100%ofstockby2035.JapanSTEPSNationalbudget2022forsubsidiessupportingelectricandFCEVs.FueleconomystandardofLDVstoimprovefuelefficiencyby32%to2030relativeto2016levels.APSGreenGrowthStrategyandthe6thStrategicEnergyPlanaimingforsalesof100%zeroemissionsvehicles(includinghybrids)forpassengervehiclesby2035andforlightcommercialvehiclesby2040.KoreaSTEPSSubsidyschemetosupportelectricvehicles.Investmentinurbanandmasstransit.Partialimplementationoftargetforzeroemissionsvehicles:one‐thirdofnewpassengercarsalesin2030areelectricvehicleorFCEVs.APSTargettoincreasethenumberofFCEVsto200000by2025(GreenNewDeal).Fullimplementationoftargetforzeroemissionsvehicles:by2030,50%ofpassengercarsalestobehybridorplug‐inhybridvehiclesand33%tobebatteryelectricandFCEVs.IEA.CCBY4.0.484InternationalEnergyAgencyWorldEnergyOutlook2022TableB.10⊳Transportsectorpoliciesandmeasuresasmodelledbyscenarioforselectedregions/countries(continued)Region/countryScenarioAssumptionsChinaSTEPSMeetsandexceedstargetsfromtheChinaSocietyofAutomotiveEngineersfornewenergyvehiclestoreach20%ofnewvehiclesalesin2025.Corporateaveragefuelconsumptiontargetof4.0litres/100kmfor2025and3.2litres/100kmfor2030.NewEnergyAutomobileIndustryDevelopmentPlan(2021‐2035).Extensionofpurchasetaxexemptionandsubsidiesfornewenergyvehicles.Nationalrailwayinvestments.APSChinaSocietyofAutomotiveEngineerstargetnewenergyvehiclecarsalesreachmorethanhalfby2035including1millionFCEVs.IndiaSTEPSUrbanandpublictransitinvestments.Partialimplementationof20%bioethanolblendingtargetforgasolineand5%biodieselin2030.APSExtensionofFAMEPhaseIIprogrammetosupportthetargetof500000electricthree‐wheelersand1millionelectrictwo‐wheelers.Nationalrailwaystargetofnetzeroemissionsby2030.SoutheastAsiaSTEPSIndonesia:IntroductionoftheB30programmetoincreasebiodieselblendsto30%with40%mandatein2023.APSIndonesia:Governmentplanstophaseoutconventionaltwo‐wheelersfrom2025andtohave2millionelectricvehiclesinpassengerlight‐dutyvehiclestockby2030.Thailand:Targetfor100%zeroemissionsvehiclesalesfrom2035.Malaysia:100%ofcarsby2030tobeelectrified,CNG,LPGorbiofuel‐fuelledvehicles.Singapore:Targetstophaseoutpassengerinternalcombustionenginevehiclesby2040.OtherAsiaAPSPakistan:Targetsfor30%ofpassengerlight‐dutyvehiclesalestobeelectricby2030and90%oftrucksalestobeelectricvehiclesby2040.90%ofurbanbussalestobeelectricvehiclesby2040.50%ofelectrictwo/three‐wheelersalesby2030.Notes:STEPS=StatedPoliciesScenario;APS=AnnouncedPledgesScenario.LDV=light‐dutyvehicleandincludespassengercarsandlightcommercialvehicles.HDV=heavy‐dutyvehicle.MoU=memorandumofunderstanding;GHG=greenhousegases;km=kilometre;FCEVs=fuelcellelectricvehicle;CNG=compressednaturalgas;LPG=liquefiedpetroleumgas.IEA.CCBY4.0.AnnexCDefinitions485AnnexCDefinitionsThisannexprovidesgeneralinformationonterminologyusedthroughoutthisreportincluding:unitsandgeneralconversionfactors;definitionsoffuels,processesandsectors;regionalandcountrygroupings;andabbreviationsandacronyms.UnitsAreakm2squarekilometreMhamillionhectaresBatteriesWh/kgwatthoursperkilogrammeCoalMtcemilliontonnesofcoalequivalent(equals0.7Mtoe)DistancekmkilometreEmissionsppmpartspermillion(byvolume)tCO2tonnesofcarbondioxideGtCO2‐eqgigatonnesofcarbon‐dioxideequivalent(using100‐yearglobalwarmingpotentialsfordifferentgreenhousegases)kgCO2‐eqkilogrammesofcarbon‐dioxideequivalentgCO2/kmgCO2/kWhgrammesofcarbondioxideperkilometregrammesofcarbondioxideperkilowatt‐hourkgCO2/kWhkilogrammesofcarbondioxideperkilowatt‐hourEnergyEJexajoule(1joulex1018)PJpetajoule(1joulex1015)TJterajoule(1joulex1012)GJgigajoule(1joulex109)MJmegajoule(1joulex106)boebarrelofoilequivalenttoetonneofoilequivalentktoethousandtonnesofoilequivalentMtoemilliontonnesofoilequivalentbcmebillioncubicmetresofnaturalgasequivalentMBtumillionBritishthermalunitskWhkilowatt‐hourMWhmegawatt‐hourGWhgigawatt‐hourTWhterawatt‐hourGcalgigacalorieGasbcmbillioncubicmetrestcmtrillioncubicmetresMasskgkilogrammettonne(1tonne=1000kg)ktkilotonnes(1tonnex103)Mtmilliontonnes(1tonnex106)Gtgigatonnes(1tonnex109)IEA.CCBY4.0.486InternationalEnergyAgencyWorldEnergyOutlook2022MonetaryUSDmillion1USdollarx106USDbillion1USdollarx109USDtrillion1USdollarx1012USD/tCO2USdollarspertonneofcarbondioxideOilkb/dthousandbarrelsperdaymb/dmillionbarrelsperdaymboe/dmillionbarrelsofoilequivalentperdayPowerWwatt(1joulepersecond)kWkilowatt(1wattx103)MWmegawatt(1wattx106)GWgigawatt(1wattx109)TWterawatt(1wattx1012)GeneralconversionfactorsforenergyMultipliertoconvertto:EJGcalMtoeMBtubcmeGWhConvertfrom:EJ12.388x10823.889.478x10827.782.778x105Gcal4.1868x10‐9110‐73.9681.163x10‐71.163x10‐3Mtoe4.1868x10‐210713.968x1071.16311630MBtu1.0551x10‐90.2522.52x10‐812.932x10‐82.931x10‐4bcme0.0368.60x1060.863.41x10719999GWh3.6x10‐68608.6x10‐534121x10‐41Note:Thereisnogenerallyaccepteddefinitionofboe;typicallytheconversionfactorsusedvaryfrom7.15to7.40boepertoe.Naturalgasisattributedalowheatingvalueof1MJper44.1kg.Conversionstoandfrombillioncubicmetresofnaturalgasequivalent(bcme)aregivenasrepresentativemultipliersbutmaydifferfromtheaveragevaluesobtainedbyconvertingnaturalgasvolumesbetweenIEAbalancesduetotheuseofcountry‐specificenergydensities.Lowerheatingvalues(LHV)areusedthroughout.CurrencyconversionsExchangerates(2021annualaverage)1USdollar(USD)equals:BritishPound0.73ChineseYuanRenminbi6.45Euro0.84IndianRupee73.92JapaneseYen109.75Source:OECDNationalAccountsStatistics(database):purchasingpowerparitiesandexchangeratesdataset(period‐average),https://doi.org/10.1787/data‐00004‐en,accessedSeptember2022.IEA.CCBY4.0.AnnexCDefinitions487CDefinitionsAdvancedbioenergy:Sustainablefuelsproducedfromnon‐foodcropfeedstocks,whicharecapableofdeliveringsignificantlifecyclegreenhousegasemissionssavingscomparedwithfossilfuelalternatives,andwhichdonotdirectlycompetewithfoodandfeedcropsforagriculturallandorcauseadversesustainabilityimpacts.Thisdefinitiondiffersfromtheoneusedfor“advancedbiofuels”inUSlegislation,whichisbasedonaminimum50%lifecyclegreenhousegasreductionand,therefore,includessugarcaneethanol.Agriculture:Includesallenergyusedonfarms,inforestryandforfishing.Agriculture,forestryandotherlanduse(AFOLU)emissions:Includesgreenhousegasemissionsfromagriculture,forestryandotherlanduse.Ammonia(NH3):Isacompoundofnitrogenandhydrogen.Itcanbeusedasafeedstockinthechemicalsector,asafuelindirectcombustionprocessesinfuelcells,andasahydrogencarrier.Tobeconsideredalow‐emissionsfuel,ammoniamustbeproducedfromhydrogeninwhichtheelectricityusedtoproducethehydrogenisgeneratedfromlow‐emissionsgenerationsources.Producedinsuchaway,ammoniaisconsideredalow‐emissionshydrogen‐basedliquidfuel.Aviation:Thistransportmodeincludesbothdomesticandinternationalflightsandtheiruseofaviationfuels.Domesticaviationcoversflightsthatdepartandlandinthesamecountry;flightsformilitarypurposesareincluded.Internationalaviationincludesflightsthatlandinacountryotherthanthedeparturelocation.Back‐upgenerationcapacity:Householdsandbusinessesconnectedtoamainpowergridmayalsohaveasourceofback‐uppowergenerationcapacitythat,intheeventofdisruption,canprovideelectricity.Back‐upgeneratorsaretypicallyfuelledwithdieselorgasoline.Capacitycanbeaslittleasafewkilowatts.Suchcapacityisdistinctfrommini‐gridandoff‐gridsystemsthatarenotconnectedtoamainpowergrid.Batterystorage:Energystoragetechnologythatusesreversiblechemicalreactionstoabsorbandreleaseelectricityondemand.Billioncubicmetresofnaturalgasequivalent(bcme):Anenergyunitequaltotheenergycontentofonestandardbillioncubicmetresofnaturalgas.Biodiesel:Diesel‐equivalentfuelmadefromthetransesterification(achemicalprocessthatconvertstriglyceridesinoils)ofvegetableoilsandanimalfats.Bioenergy:Energycontentinsolid,liquidandgaseousproductsderivedfrombiomassfeedstocksandbiogas.Itincludessolidbioenergy,liquidbiofuelsandbiogases.Biogas:Amixtureofmethane,CO2andsmallquantitiesofothergasesproducedbyanaerobicdigestionoforganicmatterinanoxygen‐freeenvironment.Biogases:Includebothbiogasandbiomethane.IEA.CCBY4.0.488InternationalEnergyAgencyWorldEnergyOutlook2022Biogasoline:Includesallliquidbiofuels(advancedandconventional)usedtoreplacegasoline.Biojetkerosene:Kerosenesubstituteproducedfrombiomass.Itincludesconversionroutessuchashydroprocessedestersandfattyacids(HEFA)andbiomassgasificationwithFischer‐Tropsch.Itexcludessynthetickeroseneproducedfrombiogeniccarbondioxide.Biomethane:Biomethaneisanear‐puresourceofmethaneproducedeitherby“upgrading”biogas(aprocessthatremovesanycarbondioxideandothercontaminantspresentinthebiogas)orthroughthegasificationofsolidbiomassfollowedbymethanation.Itisalsoknownasrenewablenaturalgas.Buildings:Thebuildingssectorincludesenergyusedinresidentialandservicesbuildings.Servicesbuildingsincludecommercialandinstitutionalbuildingsandothernon‐specifiedbuildings.Buildingenergyuseincludesspaceheatingandcooling,waterheating,lighting,appliancesandcookingequipment.Bunkers:Includesbothinternationalmarinebunkerfuelsandinternationalaviationbunkerfuels.Capacitycredit:Proportionofthecapacitythatcanbereliablyexpectedtogenerateelectricityduringtimesofpeakdemandinthegridtowhichitisconnected.Carboncapture,utilisationandstorage(CCUS):Theprocessofcapturingcarbondioxideemissionsfromfuelcombustion,industrialprocessesordirectlyfromtheatmosphere.CapturedCO2emissionscanbestoredinundergroundgeologicalformations,onshoreoroffshore,orusedasaninputorfeedstockinmanufacturing.Carbondioxide(CO2):Isagasconsistingofonepartcarbonandtwopartsoxygen.Itisanimportantgreenhouse(heat‐trapping)gas.Chemicalfeedstock:Energyvectorsusedasrawmaterialstoproducechemicalproducts.Examplesarecrudeoil‐basedethaneornaphthatoproduceethyleneinsteamcrackers.Cleanenergy:Inpower,cleanenergyincludes:generationfromrenewablesources,nuclearandfossilfuelsfittedwithCCUS;batterystorage;andelectricitygrids.Inefficiency,cleanenergyincludesenergyefficiencyinbuildings,industryandtransport,excludingaviationbunkersanddomesticnavigation.Inend‐useapplications,cleanenergyincludes:directuseofrenewables;electricvehicles;electrificationinbuildings,industryandinternationalmarinetransport;CCUSinindustryanddirectaircapture.Infuelsupply,cleanenergyincludeslow‐emissionsfuels.Cleancookingsystems:Cookingsolutionsthatreleaselessharmfulpollutants,aremoreefficientandenvironmentallysustainablethantraditionalcookingoptionsthatmakeuseofsolidbiomass(suchasathree‐stonefire),coalorkerosene.Thisreferstoimprovedcookstoves,biogas/biodigestersystems,electricstoves,liquefiedpetroleumgas,naturalgasorethanolstoves.IEA.CCBY4.0.AnnexCDefinitions489CCoal:Includesbothprimarycoal,i.e.lignite,cokingandsteamcoal,andderivedfuels,e.g.patentfuel,brown‐coalbriquettes,coke‐ovencoke,gascoke,gasworksgas,coke‐ovengas,blastfurnacegasandoxygensteelfurnacegas.Peatisalsoincluded.Coalbedmethane(CBM):Categoryofunconventionalnaturalgasthatreferstomethanefoundincoalseams.Coal‐to‐gas(CTG):Processinwhichcoalisfirstturnedintosyngas(amixtureofhydrogenandcarbonmonoxide)andthenintosyntheticmethane.Coal‐to‐liquids(CTL):Transformationofcoalintoliquidhydrocarbons.Onerouteinvolvescoalgasificationintosyngas(amixtureofhydrogenandcarbonmonoxide),whichisprocessedusingFischer‐Tropschormethanol‐to‐gasolinesynthesis.Anotherroute,calleddirect‐coalliquefaction,involvesreactingcoaldirectlywithhydrogen.Cokingcoal:Typeofcoalthatcanbeusedforsteelmaking(asachemicalreductantandasourceofheat),whereitproducescokecapableofsupportingablastfurnacecharge.Coalofthisqualityiscommonlyknownasmetallurgicalcoal.Concentratingsolarpower(CSP):Thermalpowergenerationtechnologythatcollectsandconcentratessunlighttoproducehightemperatureheattogenerateelectricity.Conventionalliquidbiofuels:Fuelsproducedfromfoodcropfeedstocks.Commonlyreferredtoasfirstgenerationbiofuelsandincludesugarcaneethanol,starch‐basedethanol,fattyacidmethylester(FAME),straightvegetableoil(SVO)andhydrotreatedvegetableoil(HVO)producedfrompalm,rapeseedorsoybeanoil.Criticalminerals:Awiderangeofmineralsandmetalsthatareessentialincleanenergytechnologiesandothermoderntechnologiesandhavesupplychainsthatarevulnerabletodisruption.Althoughtheexactdefinitionandcriteriadifferamongcountries,criticalmineralsforcleanenergytechnologiestypicallyincludechromium,cobalt,copper,graphite,lithium,manganese,molybdenum,nickel,platinumgroupmetals,zinc,rareearthelementsandothercommodities,aslistedintheAnnexoftheIEAspecialreportontheRoleofCriticalMineralsinCleanEnergyTransitionsavailableat:https://www.iea.org/reports/the‐role‐of‐critical‐minerals‐in‐clean‐energy‐transitions.Decompositionanalysis:Statisticalapproachthatdecomposesanaggregateindicatortoquantifytherelativecontributionofasetofpre‐definedfactorsleadingtoachangeintheaggregateindicator.TheWorldEnergyOutlookusesanadditiveindexdecompositionofthetypeLogarithmicMeanDivisiaIndex(LMDI).Demand‐sideintegration(DSI):Consistsoftwotypesofmeasures:actionsthatinfluenceloadshapesuchasenergyefficiencyandelectrification;andactionsthatmanageloadsuchasdemand‐sideresponsemeasures.Demand‐sideresponse(DSR):Describesactionswhichcaninfluencetheloadprofilesuchasshiftingtheloadcurveintimewithoutaffectingtotalelectricitydemand,orloadsheddingsuchasinterruptingdemandforashortdurationoradjustingtheintensityofdemandforacertainamountoftime.IEA.CCBY4.0.490InternationalEnergyAgencyWorldEnergyOutlook2022Directaircapture(DAC):TechnologytocaptureCO2directlyfromtheatmosphereusingliquidsolventsorsolidsorbents.ItisgenerallycoupledwithpermanentstorageoftheCO2indeepgeologicalformationsoritsuseintheproductionoffuels,chemicals,buildingmaterialsorotherproducts.WhencoupledwithpermanentgeologicalCO2storage,DACisacarbonremovaltechnology.Dispatchablegeneration:Referstotechnologieswhosepoweroutputcanbereadilycontrolled,i.e.increasedtomaximumratedcapacityordecreasedtozeroinordertomatchsupplywithdemand.Electricitydemand:Definedastotalgrosselectricitygenerationlessownusegeneration,plusnettrade(importslessexports),lesstransmissionanddistributionlosses.Electricitygeneration:Definedasthetotalamountofelectricitygeneratedbypoweronlyorcombinedheatandpowerplantsincludinggenerationrequiredforownuse.Thisisalsoreferredtoasgrossgeneration.End‐usesectors:Includeindustry,transport,buildingsandother,i.e.,agricultureandothernon‐energyuse.Energy‐intensiveindustries:Includesproductionandmanufacturinginthebranchesofironandsteel,chemicals,non‐metallicminerals(includingcement),non‐ferrousmetals(includingaluminium),andpaper,pulpandprinting.Energy‐relatedandindustrialprocessCO2emissions:Carbondioxideemissionsfromfuelcombustionandfromindustrialprocesses.Notethatthisdoesnotincludefugitiveemissionsfromfuels,flaringorCO2fromtransportandstorage.Unlessotherwisestated,CO2emissionsintheWorldEnergyOutlookrefertoenergy‐relatedandindustrialprocessCO2emissions.Energysectorgreenhousegas(GHG)emissions:Energy‐relatedandindustrialprocessCO2emissionsplusfugitiveandventedmethane(CH4)andnitrousdioxide(N2O)emissionsfromtheenergyandindustrysectors.Energyservices:Seeusefulenergy.Ethanol:Referstobioethanolonly.Ethanolisproducedfromfermentinganybiomasshighincarbohydrates.Currently,ethanolismadefromstarchesandsugars,butsecond‐generationtechnologieswillallowittobemadefromcelluloseandhemicellulose,thefibrousmaterialthatmakesupthebulkofmostplantmatter.Fischer‐Tropschsynthesis:Catalyticproductionprocessfortheproductionofsyntheticfuels,e.g.diesel,keroseneornaphtha,typicallyfrommixturesofcarbonmonoxideandhydrogen(syngas).TheinputstoFischer‐Tropschsynthesiscanbefrombiomass,coal,naturalgas,orhydrogenandCO2.Fossilfuels:Includecoal,naturalgasandoil.Gaseousfuels:Includenaturalgas,biogases,syntheticmethaneandhydrogen.IEA.CCBY4.0.AnnexCDefinitions491CGases:Seegaseousfuels.Gas‐to‐liquids(GTL):Aprocessthatreactsmethanewithoxygenorsteamtoproducesyngas(amixtureofhydrogenandcarbonmonoxide)followedbyFischer‐Tropschsynthesis.Theprocessissimilartothatusedincoal‐to‐liquids.Geothermal:Geothermalenergyisheatfromthesub‐surfaceoftheearth.Waterand/orsteamcarrythegeothermalenergytothesurface.Dependingonitscharacteristics,geothermalenergycanbeusedforheatingandcoolingpurposesorbeharnessedtogeneratecleanelectricityifthetemperatureisadequate.Heat(end‐use):Canbeobtainedfromthecombustionoffossilorrenewablefuels,directgeothermalorsolarheatsystems,exothermicchemicalprocessesandelectricity(throughresistanceheatingorheatpumpswhichcanextractitfromambientairandliquids).Thiscategoryreferstothewiderangeofend‐uses,includingspaceandwaterheating,andcookinginbuildings,desalinationandprocessapplicationsinindustry.Itdoesnotincludecoolingapplications.Heat(supply):Obtainedfromthecombustionoffuels,nuclearreactors,geothermalresourcesorthecaptureofsunlight.Itmaybeusedforheatingorcooling,orconvertedintomechanicalenergyfortransportorelectricitygeneration.Commercialheatsoldisreportedundertotalfinalconsumptionwiththefuelinputsallocatedunderpowergeneration.Heavy‐dutyvehicles(HDVs):Includesbothmedium‐freighttrucks(3.5to15tonnes)andheavy‐freighttrucks(>15tonnes)Heavyindustries:Ironandsteel,chemicalsandcement.Hydrogen:Hydrogenisusedintheenergysystemasanenergycarrier,asanindustrialrawmaterial,oriscombinedwithotherinputstoproducehydrogen‐basedfuels.Unlessotherwisestated,hydrogeninthisreportreferstolow‐emissionshydrogen.Hydrogen‐basedfuels:Seelow‐emissionshydrogen‐basedfuels.Hydropower:Energycontentoftheelectricityproducedinhydropowerplants,assuming100%efficiency.Itexcludesoutputfrompumpedstorageandmarine(tideandwave)plants.Industry:Thesectorincludesfuelusedwithinthemanufacturingandconstructionindustries.Keyindustrybranchesincludeironandsteel,chemicalandpetrochemical,cement,aluminium,andpulpandpaper.Usebyindustriesforthetransformationofenergyintoanotherformorfortheproductionoffuelsisexcludedandreportedseparatelyunderotherenergysector.Thereisanexceptionforfueltransformationinblastfurnacesandcokeovens,whicharereportedwithinironandsteel.Consumptionoffuelsforthetransportofgoodsisreportedaspartofthetransportsector,whileconsumptionbyoff‐roadvehiclesisreportedunderindustry.Improvedcookstoves:Intermediateandadvancedimprovedbiomasscookstoves(ISOtier>1).Itexcludesbasicimprovedstoves(ISOtier0‐1).IEA.CCBY4.0.492InternationalEnergyAgencyWorldEnergyOutlook2022Internationalaviationbunkers:Includesthedeliveriesofaviationfuelstoaircraftforinternationalaviation.Fuelsusedbyairlinesfortheirroadvehiclesareexcluded.Thedomestic/internationalsplitisdeterminedonthebasisofdepartureandlandinglocationsandnotbythenationalityoftheairline.Formanycountriesthisincorrectlyexcludesfuelsusedbydomesticallyownedcarriersfortheirinternationaldepartures.Internationalmarinebunkers:Includesthequantitiesdeliveredtoshipsofallflagsthatareengagedininternationalnavigation.Theinternationalnavigationmaytakeplaceatsea,oninlandlakesandwaterways,andincoastalwaters.Consumptionbyshipsengagedindomesticnavigationisexcluded.Thedomestic/internationalsplitisdeterminedonthebasisofportofdepartureandportofarrival,andnotbytheflagornationalityoftheship.Consumptionbyfishingvesselsandbymilitaryforcesisexcludedandinsteadincludedintheresidential,servicesandagriculturecategory.Investment:Investmentisthecapitalexpenditureinenergysupply,infrastructure,end‐useandefficiency.Fuelsupplyinvestmentincludestheproduction,transformationandtransportofoil,gas,coalandlow‐emissionsfuels.Powersectorinvestmentincludesnewconstructionandrefurbishmentofgeneration,electricitygrids(transmission,distributionandpublicelectricvehiclechargers),andbatterystorage.Energyefficiencyinvestmentincludesefficiencyimprovementsinbuildings,industryandtransport.Otherend‐useinvestmentincludesthepurchaseofequipmentforthedirectuseofrenewables,electricvehicles,electrificationinbuildings,industryandinternationalmarinetransport,equipmentfortheuseoflow‐emissionsfuels,andCCUSinindustryanddirectaircapture.Dataandprojectionsreflectspendingoverthelifetimeofprojectsandarepresentedinrealtermsinyear‐2021USdollarsconvertedatmarketexchangeratesunlessotherwisestated.Totalinvestmentreportedforayearreflectstheamountspentinthatyear.Levelisedcostofelectricity(LCOE):TheLCOEcombinesintoasinglemetricallthecostelementsdirectlyassociatedwithagivenpowertechnology,includingconstruction,financing,fuel,maintenanceandcostsassociatedwithacarbonprice.Itdoesnotincludenetworkintegrationorotherindirectcosts.TheLCOEprovidesafirstindicatorofcompetitiveness.Foramorecompleteindicator,seeVALCOE.Light‐dutyvehicles(LDVs):Includepassengercarsandlightcommercialvehicles(grossvehicleweight<3.5tonnes).Lightindustries:Includesnon‐energy‐intensiveindustries:foodandtobacco,machinery,miningandquarrying,transportationequipment,textile,woodharvestingandprocessingandconstruction.Lignite:Atypeofcoalthatisusedinthepowersectormostlyinregionsnearligniteminesduetoitslowenergycontentandtypicallyhighmoisturelevels,whichgenerallymakeslong‐distancetransportuneconomic.DataonligniteintheWorldEnergyOutlookincludepeat.Liquidbiofuels:Liquidfuelsderivedfrombiomassorwastefeedstock,e.g.ethanol,biodieselandbiojetfuels.TheycanbeclassifiedasconventionalandadvancedbiofuelsaccordingtoIEA.CCBY4.0.AnnexCDefinitions493Cthecombinationoffeedstockandtechnologiesusedtoproducethemandtheirrespectivematurity.Unlessotherwisestated,biofuelsareexpressedinenergy‐equivalentvolumesofgasoline,dieselandkerosene.Liquidfuels:Includeoil,liquidbiofuels(expressedinenergy‐equivalentvolumesofgasolineanddiesel),syntheticoilandammonia.Low‐emissionselectricity:Includesrenewableenergytechnologies,low‐emissionshydrogen‐basedgeneration,low‐emissionshydrogen‐basedfuelgeneration,nuclearpowerandfossilfuelpowerplantsequippedwithcarboncapture,utilisationandstorage.Low‐emissionsfuels:Includemodernbioenergy,low‐emissionshydrogenandlow‐emissionshydrogen‐basedfuels.Low‐emissionsgases:Includesbiogas,biomethane,low‐emissionshydrogenandlow‐emissionssyntheticmethane.Low‐emissionshydrogen:Hydrogenthatisproducedfromwaterusingelectricitygeneratedbyrenewablesornuclear,fromfossilfuelswithminimalassociatedmethaneemissionsandprocessedinfacilitiesequippedtoavoidCO2emissions,e.g.viaCCUSwithahighcapturerate,orderivedfrombioenergy.Inthisreport,totaldemandforlow‐emissionshydrogenislargerthantotalfinalconsumptionofhydrogenbecauseitadditionallyincludeshydrogeninputstomakelow‐emissionshydrogen‐basedfuels,biofuelsproduction,powergeneration,oilrefining,andhydrogenproducedandconsumedonsiteinindustry.Low‐emissionshydrogen‐basedfuels:Includeammonia,methanolandothersynthetichydrocarbons(gasesandliquids)madefromlow‐emissionshydrogen.Anycarboninputs,e.g.fromCO2,arenotfromfossilfuelsorprocessemissions.Low‐emissionshydrogen‐basedliquidfuels:Asubsetoflow‐emissionshydrogen‐basedfuelsthatincludesonlyammonia,methanolandsyntheticliquidhydrocarbons,suchassynthetickerosene.Lowerheatingvalue:Heatliberatedbythecompletecombustionofaunitoffuelwhenthewaterproducedisassumedtoremainasavapourandtheheatisnotrecovered.Marineenergy:Representsthemechanicalenergyderivedfromtidalmovement,wavemotionoroceancurrentsandexploitedforelectricitygeneration.Middledistillates:Includejetfuel,dieselandheatingoil.Mini‐grids:Smallelectricgridsystems,notconnectedtomainelectricitynetworks,linkinganumberofhouseholdsand/orotherconsumers.Modernenergyaccess:Includeshouseholdaccesstoaminimumlevelofelectricity(initiallyequivalentto250kilowatt‐hours(kWh)annualdemandforaruralhouseholdand500kWhforanurbanhousehold);householdaccesstolessharmfulandmoresustainablecookingandheatingfuels,andimproved/advancedstoves;accessthatenablesproductiveeconomicactivity;andaccessforpublicservices.IEA.CCBY4.0.494InternationalEnergyAgencyWorldEnergyOutlook2022Moderngaseousbioenergy:Seebiogases.Modernliquidbioenergy:Includesbiogasoline,biodiesel,biojetkeroseneandotherliquidbiofuels.Modernrenewables:Includeallusesofrenewableenergywiththeexceptionoftraditionaluseofsolidbiomass.Modernsolidbioenergy:Includesallsolidbioenergyproducts(seesolidbioenergydefinition)exceptthetraditionaluseofbiomass.Italsoincludestheuseofsolidbioenergyinintermediateandadvancedimprovedbiomasscookstoves(ISOtier>1),requiringfueltobecutinsmallpiecesoroftenusingprocessedbiomasssuchaspellets.Naturalgas:Includesgasoccurringindeposits,whetherliquefiedorgaseous,consistingmainlyofmethane.Itincludesbothnon‐associatedgasoriginatingfromfieldsproducinghydrocarbonsonlyingaseousform,andassociatedgasproducedinassociationwithcrudeoilproductionaswellasmethanerecoveredfromcoalmines(collierygas).Naturalgasliquids,manufacturedgas(producedfrommunicipalorindustrialwaste,orsewage)andquantitiesventedorflaredarenotincluded.Gasdataincubicmetresareexpressedonagrosscalorificvaluebasisandaremeasuredat15°Candat760mmHg(StandardConditions).Gasdataexpressedintonnesofoilequivalent,mainlyforcomparisonreasonswithotherfuels,areonanetcalorificbasis.Thedifferencebetweenthenetandthegrosscalorificvalueisthelatentheatofvaporisationofthewatervapourproducedduringcombustionofthefuel(forgasthenetcalorificvalueis10%lowerthanthegrosscalorificvalue).Naturalgasliquids(NGLs):Liquidorliquefiedhydrocarbonsproducedinthemanufacture,purificationandstabilisationofnaturalgas.NGLsareportionsofnaturalgasrecoveredasliquidsinseparators,fieldfacilitiesorgasprocessingplants.NGLsinclude,butarenotlimitedto,ethane(whenitisremovedfromthenaturalgasstream),propane,butane,pentane,naturalgasolineandcondensates.Networkgases:Includenaturalgas,biomethane,syntheticmethaneandhydrogenblendedinagasnetwork.Non‐energyuse:Theuseoffuelsasfeedstocksforchemicalproductsthatarenotusedinenergyapplications.Examplesofresultingproductsarelubricants,paraffinwaxes,asphalt,bitumen,coaltarsandtimberpreservativeoils.Non‐renewablewaste:Non‐biogenicwaste,suchasplasticsinmunicipalorindustrialwaste.Nuclear:Referstotheprimaryenergyequivalentoftheelectricityproducedbyanuclearpowerplant,assuminganaverageconversionefficiencyof33%.Off‐gridsystems:Mini‐gridsandstand‐alonesystemsforindividualhouseholdsorgroupsofconsumersnotconnectedtoamaingrid.IEA.CCBY4.0.AnnexCDefinitions495COffshorewind:Referstoelectricityproducedbywindturbinesthatareinstalledinopenwater,usuallyintheocean.Oil:Includesbothconventionalandunconventionaloilproduction.Petroleumproductsincluderefinerygas,ethane,liquidpetroleumgas,aviationgasoline,motorgasoline,jetfuels,kerosene,gas/dieseloil,heavyfueloil,naphtha,whitespirits,lubricants,bitumen,paraffin,waxesandpetroleumcoke.Otherenergysector:Coverstheuseofenergybytransformationindustriesandtheenergylossesinconvertingprimaryenergyintoaformthatcanbeusedinthefinalconsumingsectors.Itincludeslossesinlow‐emissionshydrogenandhydrogen‐basedfuelsproduction,bioenergyprocessing,gasworks,petroleumrefineries,coalandgastransformationandliquefaction.Italsoincludesenergyownuseincoalmines,inoilandgasextractionandinelectricityandheatproduction.Transfersandstatisticaldifferencesarealsoincludedinthiscategory.Fueltransformationinblastfurnacesandcokeovensarenotaccountedforintheotherenergysectorcategory.Otherindustry:Acategoryofindustrybranchesthatincludesconstruction,foodprocessing,machinery,mining,textiles,transportequipment,woodprocessingandremainingindustry.Passengercar:Aroadmotorvehicle,otherthanamopedoramotorcycle,intendedtotransportpassengers.Itincludesvansdesignedandusedprimarilytotransportpassengers.Excludedarelightcommercialvehicles,motorcoaches,urbanbuses,andmini‐buses/mini‐coaches.Peat:Peatisacombustiblesoft,porousorcompressed,fossilsedimentarydepositofplantoriginwithhighwatercontent(upto90%intherawstate),easilycut,oflighttodarkbrowncolour.Milledpeatisincludedinthiscategory.Peatusedfornon‐energypurposesisnotincludedhere.Plasticcollectionrate:Proportionofplasticsthatiscollectedforrecyclingrelativetothequantityofrecyclablewasteavailable.Plasticwaste:Referstoallpost‐consumerplasticwastewithalifespanofmorethanoneyear.Powergeneration:Referstofueluseinelectricitygenerationplants,heatplants,andcombinedheatandpowerplants.Bothmainactivityproducerplantsandsmallplantsthatproducefuelfortheirownuse(auto‐producers)areincluded.Processemissions:CO2emissionsproducedfromindustrialprocesseswhichchemicallyorphysicallytransformmaterials.Anotableexampleiscementproduction,inwhichCO2isemittedwhencalciumcarbonateistransformedintolime,whichinturnisusedtoproduceclinker.Productiveuses:Energyusedtowardsaneconomicpurpose:agriculture,industry,servicesandnon‐energyuse.Someenergydemandfromthetransportsector,e.g.freight,couldbeconsideredasproductive,butistreatedseparately.IEA.CCBY4.0.496InternationalEnergyAgencyWorldEnergyOutlook2022Rareearthelements(REEs):Agroupofseventeenchemicalelementsintheperiodictable,specificallythefifteenlanthanidesplusscandiumandyttrium.REEsarekeycomponentsinsomecleanenergytechnologies,includingwindturbines,electricvehiclemotorsandelectrolysers.Renewables:Includesbioenergy,geothermal,hydropower,solarphotovoltaics(PV),concentratingsolarpower(CSP),windandmarine(tideandwave)energyforelectricityandheatgeneration.Residential:Energyusedbyhouseholdsincludingspaceheatingandcooling,waterheating,lighting,appliances,electronicdevicesandcooking.Roadtransport:Includesallroadvehicletypes(passengercars,two/three‐wheelers,lightcommercialvehicles,busesandmediumandheavyfreighttrucks).Self‐sufficiency:Correspondstoindigenousproductiondividedbytotalprimaryenergydemand.Services:Energyusedincommercialfacilities,e.g.offices,shops,hotels,restaurants,andininstitutionalbuildings,e.g.schools,hospitals,publicoffices.Energyuseinservicesincludesspaceheatingandcooling,waterheating,lighting,appliances,cookinganddesalination.Shalegas:Naturalgascontainedwithinacommonlyoccurringrockclassifiedasshale.Shaleformationsarecharacterisedbylowpermeability,withmorelimitedabilityofgastoflowthroughtherockthanisthecasewithinaconventionalreservoir.Shalegasisgenerallyproducedusinghydraulicfracturing.Shipping/navigation:Thistransportsub‐sectorincludesbothdomesticandinternationalnavigationandtheiruseofmarinefuels.Domesticnavigationcoversthetransportofgoodsorpeopleoninlandwaterwaysandfornationalseavoyages(startsandendsinthesamecountrywithoutanyintermediateforeignport).Internationalnavigationincludesquantitiesoffuelsdeliveredtomerchantships(includingpassengerships)ofanynationalityforconsumptionduringinternationalvoyagestransportinggoodsorpassengers.Single‐useplastics(ordisposableplastics):Plasticitemsusedonlyonetimebeforedisposal.Solar:Includessolarphotovoltaicsandconcentratingsolarpower.Solarhomesystems:Small‐scalephotovoltaicandbatterystand‐alonesystems,i.e.withcapacityhigherthan10wattpeak(Wp)supplyingelectricityforsinglehouseholdsorsmallbusinesses.Theyaremostoftenusedoff‐grid,butalsowheregridsupplyisnotreliable.AccesstoelectricityintheIEAdefinitionconsiderssolarhomesystemsfrom25Wpinruralareasand50Wpinurbanareas.Itexcludessmallersolarlightingsystems,e.g.solarlanternsoflessthan11Wp.Solarphotovoltaics(PV):Electricityproducedfromsolarphotovoltaiccells.Solidbioenergy:Includescharcoal,fuelwood,dung,agriculturalresidues,woodwasteandothersolidbiogenicwastes.IEA.CCBY4.0.AnnexCDefinitions497CSolidfuels:Includecoal,modernsolidbioenergy,traditionaluseofbiomassandindustrialandmunicipalwastes.Stand‐alonesystems:Small‐scaleautonomouselectricitysupplyforhouseholdsorsmallbusinesses.Theyaregenerallyusedoff‐grid,butalsowheregridsupplyisnotreliable.Stand‐alonesystemsincludesolarhomesystems,smallwindorhydrogenerators,dieselorgasolinegenerators,etc.Thedifferencecomparedwithmini‐gridsisinscaleandthatstand‐alonesystemsdonothaveadistributionnetworkservingmultiplecostumers.Steamcoal:Atypeofcoalthatismainlyusedforheatproductionorsteam‐raisinginpowerplantsand,toalesserextent,inindustry.Typically,steamcoalisnotofsufficientqualityforsteelmaking.Coalofthisqualityisalsocommonlyknownasthermalcoal.Syntheticmethane:Methanefromsourcesotherthannaturalgas,includingcoal‐to‐gasandlow‐emissionssyntheticmethane.Syntheticoil:SyntheticoilproducedthroughFischer‐Tropschconversionormethanolsynthesis.ItincludesoilproductsfromCTLandGTL,andlow‐emissionsliquidhydrogen‐basedfuels.Tightoil:Oilproducedfromshaleorotherverylowpermeabilityformations,generallyusinghydraulicfracturing.Thisisalsosometimesreferredtoaslighttightoil.TightoilincludestightcrudeoilandcondensateproductionexceptfortheUnitedStates,whichincludestightcrudeoilonly(UStightcondensatevolumesareincludedinnaturalgasliquids).Totalenergysupply(TES):Representsdomesticdemandonlyandisbrokendownintoelectricityandheatgeneration,otherenergysectorandtotalfinalconsumption.Totalfinalconsumption(TFC):Isthesumofconsumptionbythevariousend‐usesectors.TFCisbrokendownintoenergydemandinthefollowingsectors:industry(includingmanufacturing,mining,chemicalsproduction,blastfurnacesandcokeovens),transport,buildings(includingresidentialandservices)andother(includingagricultureandothernon‐energyuse).Itexcludesinternationalmarineandaviationbunkers,exceptatworldlevelwhereitisincludedinthetransportsector.Totalfinalenergyconsumption(TFEC):Isavariabledefinedprimarilyfortrackingprogresstowardstarget7.2oftheUnitedNationsSustainableDevelopmentGoals(SDG).Itincorporatestotalfinalconsumptionbyend‐usesectors,butexcludesnon‐energyuse.Itexcludesinternationalmarineandaviationbunkers,exceptatworldlevel.Typicallythisisusedinthecontextofcalculatingtherenewableenergyshareintotalfinalenergyconsumption(indicatorSDG7.2.1),whereTFECisthedenominator.Traditionaluseofbiomass:Referstotheuseofsolidbiomasswithbasictechnologies,suchasathree‐stonefireorbasicimprovedcookstoves(ISOtier0‐1),oftenwithnoorpoorlyoperatingchimneys.Formsofbiomassusedincludewood,woodwaste,charcoalagriculturalresiduesandotherbio‐sourcedfuelssuchasanimaldung.IEA.CCBY4.0.498InternationalEnergyAgencyWorldEnergyOutlook2022Transport:Fuelsandelectricityusedinthetransportofgoodsorpeoplewithinthenationalterritoryirrespectiveoftheeconomicsectorwithinwhichtheactivityoccurs.Thisincludesfuelandelectricitydeliveredtovehiclesusingpublicroadsorforuseinrailvehicles;fueldeliveredtovesselsfordomesticnavigation;fueldeliveredtoaircraftfordomesticaviation;andenergyconsumedinthedeliveryoffuelsthroughpipelines.Fueldeliveredtointernationalmarineandaviationbunkersispresentedonlyattheworldlevelandisexcludedfromthetransportsectoratadomesticlevel.Trucks:Includesallsizecategoriesofcommercialvehicles:lighttrucks(grossvehicleweightlessthan3.5tonnes);mediumfreighttrucks(grossvehicleweight3.5‐15tonnes);andheavyfreighttrucks(>15tonnes).Unabatedfossilfueluse:CombustionoffossilfuelsinfacilitieswithoutCCUS.Usefulenergy:Referstotheenergythatisavailabletoend‐userstosatisfytheirneeds.Thisisalsoreferredtoasenergyservicesdemand.Asresultoftransformationlossesatthepointofuse,theamountofusefulenergyislowerthanthecorrespondingfinalenergydemandformosttechnologies.Equipmentusingelectricityoftenhashigherconversionefficiencythanequipmentusingotherfuels,meaningthatforaunitofenergyconsumed,electricitycanprovidemoreenergyservices.Value‐adjustedlevelisedcostofelectricity(VALCOE):Incorporatesinformationonbothcostsandthevalueprovidedtothesystem.BasedontheLCOE,estimatesofenergy,capacityandflexibilityvalueareincorporatedtoprovideamorecompletemetricofcompetitivenessforpowergenerationtechnologies.Variablerenewableenergy(VRE):Referstotechnologieswhosemaximumoutputatanytimedependsontheavailabilityoffluctuatingrenewableenergyresources.VREincludesabroadarrayoftechnologiessuchaswindpower,solarPV,run‐of‐riverhydro,concentratingsolarpower(wherenothermalstorageisincluded)andmarine(tidalandwave).Zerocarbon‐readybuildings:Azerocarbon‐readybuildingishighlyenergyefficientandeitherusesrenewableenergydirectlyoranenergysupplythatcanbefullydecarbonised,suchaselectricityordistrictheat.Zeroemissionsvehicles(ZEVs):VehiclesthatarecapableofoperatingwithouttailpipeCO2emissions(batteryelectricandfuelcellvehicles).IEA.CCBY4.0.AnnexCDefinitions499CRegionalandcountrygroupingsFigureC.1⊳MaincountrygroupingsNote:Thismapiswithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Advancedeconomies:OECDregionalgroupingandBulgaria,Croatia,Cyprus1,2,MaltaandRomania.Africa:NorthAfricaandsub‐SaharanAfricaregionalgroupings.AsiaPacific:SoutheastAsiaregionalgroupingandAustralia,Bangladesh,DemocraticPeople’sRepublicofKorea(NorthKorea),India,Japan,Korea,Mongolia,Nepal,NewZealand,Pakistan,People’sRepublicofChina(China),SriLanka,ChineseTaipei,andotherAsiaPacificcountriesandterritories.3Caspian:Armenia,Azerbaijan,Georgia,Kazakhstan,Kyrgyzstan,Tajikistan,TurkmenistanandUzbekistan.CentralandSouthAmerica:Argentina,PlurinationalStateofBolivia(Bolivia),Brazil,Chile,Colombia,CostaRica,Cuba,Curaçao,DominicanRepublic,Ecuador,ElSalvador,Guatemala,Haiti,Honduras,Jamaica,Nicaragua,Panama,Paraguay,Peru,Suriname,TrinidadandTobago,Uruguay,BolivarianRepublicofVenezuela(Venezuela),andotherCentralandSouthAmericancountriesandterritories.4China:Includesthe(People'sRepublicof)ChinaandHongKong,China.DevelopingAsia:AsiaPacificregionalgroupingexcludingAustralia,Japan,KoreaandNewZealand.Emergingmarketanddevelopingeconomies:Allothercountriesnotincludedintheadvancedeconomiesregionalgrouping.IEA.CCBY4.0.500InternationalEnergyAgencyWorldEnergyOutlook2022Eurasia:CaspianregionalgroupingandtheRussianFederation(Russia).Europe:EuropeanUnionregionalgroupingandAlbania,Belarus,BosniaandHerzegovina,NorthMacedonia,Gibraltar,Iceland,Israel5,Kosovo,Montenegro,Norway,Serbia,Switzerland,RepublicofMoldova,Türkiye,UkraineandUnitedKingdom.EuropeanUnion:Austria,Belgium,Bulgaria,Croatia,Cyprus1,2,CzechRepublic,Denmark,Estonia,Finland,France,Germany,Greece,Hungary,Ireland,Italy,Latvia,Lithuania,Luxembourg,Malta,Netherlands,Poland,Portugal,Romania,SlovakRepublic,Slovenia,SpainandSweden.IEA(InternationalEnergyAgency):OECDregionalgroupingexcludingChile,Colombia,CostaRica,Iceland,Israel,LatviaandSlovenia.LatinAmerica:CentralandSouthAmericaregionalgroupingandMexico.MiddleEast:Bahrain,IslamicRepublicofIran(Iran),Iraq,Jordan,Kuwait,Lebanon,Oman,Qatar,SaudiArabia,SyrianArabRepublic(Syria),UnitedArabEmiratesandYemen.Non‐OECD:AllothercountriesnotincludedintheOECDregionalgrouping.Non‐OPEC:AllothercountriesnotincludedintheOPECregionalgrouping.NorthAfrica:Algeria,Egypt,Libya,MoroccoandTunisia.NorthAmerica:Canada,MexicoandUnitedStates.OECD(OrganisationforEconomicCo‐operationandDevelopment):Australia,Austria,Belgium,Canada,Chile,CzechRepublic,Colombia,CostaRica,Denmark,Estonia,Finland,France,Germany,Greece,Hungary,Iceland,Ireland,Israel,Italy,Japan,Korea,Latvia,Lithuania,Luxembourg,Mexico,Netherlands,NewZealand,Norway,Poland,Portugal,SlovakRepublic,Slovenia,Spain,Sweden,Switzerland,Türkiye,UnitedKingdomandUnitedStates.OPEC(OrganizationofthePetroleumExportingCountries):Algeria,Angola,RepublicoftheCongo(Congo),EquatorialGuinea,Gabon,theIslamicRepublicofIran(Iran),Iraq,Kuwait,Libya,Nigeria,SaudiArabia,UnitedArabEmiratesandBolivarianRepublicofVenezuela(Venezuela).SoutheastAsia:BruneiDarussalam,Cambodia,Indonesia,LaoPeople’sDemocraticRepublic(LaoPDR),Malaysia,Myanmar,Philippines,Singapore,ThailandandVietNam.ThesecountriesareallmembersoftheAssociationofSoutheastAsianNations(ASEAN).Sub‐SaharanAfrica:Angola,Benin,Botswana,Cameroon,RepublicoftheCongo(Congo),Côted’Ivoire,DemocraticRepublicoftheCongo,Eritrea,Ethiopia,Gabon,Ghana,Kenya,Mauritius,Mozambique,Namibia,Niger,Nigeria,Senegal,SouthAfrica,SouthSudan,Sudan,UnitedRepublicofTanzania(Tanzania),Togo,Zambia,ZimbabweandotherAfricancountriesandterritories.6IEA.CCBY4.0.AnnexCDefinitions501CCountrynotes1NotebyRepublicofTürkiye:Theinformationinthisdocumentwithreferenceto“Cyprus”relatestothesouthernpartoftheisland.ThereisnosingleauthorityrepresentingbothTurkishandGreekCypriotpeopleontheisland.TürkiyerecognisestheTurkishRepublicofNorthernCyprus(TRNC).UntilalastingandequitablesolutionisfoundwithinthecontextoftheUnitedNations,Türkiyeshallpreserveitspositionconcerningthe“Cyprusissue”.2NotebyalltheEuropeanUnionMemberStatesoftheOECDandtheEuropeanUnion:TheRepublicofCyprusisrecognisedbyallmembersoftheUnitedNationswiththeexceptionofTürkiye.TheinformationinthisdocumentrelatestotheareaundertheeffectivecontroloftheGovernmentoftheRepublicofCyprus.3Individualdataarenotavailableandareestimatedinaggregatefor:Afghanistan,Bhutan,CookIslands,Fiji,FrenchPolynesia,Kiribati,Macau(China),Maldives,NewCaledonia,Palau,PapuaNewGuinea,Samoa,SolomonIslands,Timor‐LesteandTongaandVanuatu.4Individualdataarenotavailableandareestimatedinaggregatefor:Anguilla,AntiguaandBarbuda,Aruba,Bahamas,Barbados,Belize,Bermuda,Bonaire,BritishVirginIslands,CaymanIslands,Dominica,FalklandIslands(Malvinas),FrenchGuiana,Grenada,Guadeloupe,Guyana,Martinique,Montserrat,Saba,SaintEustatius,SaintKittsandNevis,SaintLucia,SaintPierreandMiquelon,SaintVincentandGrenadines,SaintMaarten,TurksandCaicosIslands.5ThestatisticaldataforIsraelaresuppliedbyandundertheresponsibilityoftherelevantIsraeliauthorities.TheuseofsuchdatabytheOECDand/ortheIEAiswithoutprejudicetothestatusoftheGolanHeights,EastJerusalemandIsraelisettlementsintheWestBankunderthetermsofinternationallaw.6Individualdataarenotavailableandareestimatedinaggregatefor:BurkinaFaso,Burundi,CaboVerde,CentralAfricanRepublic,Chad,Comoros,Djibouti,KingdomofEswatini,Gambia,Guinea,Guinea‐Bissau,Lesotho,Liberia,Madagascar,Malawi,Mali,Mauritania,Réunion,Rwanda,SaoTomeandPrincipe,Seychelles,SierraLeone,SomaliaandUganda.AbbreviationsandacronymsACalternatingcurrentAFOLUagriculture,forestryandotherlanduseAPECAsia‐PacificEconomicCooperationAPSAnnouncedPledgesScenarioASEANAssociationofSoutheastAsianNationsBECCSbioenergyequippedwithCCUSBEVbatteryelectricvehiclesCAAGRcompoundaverageannualgrowthrateCAFEcorporateaveragefueleconomystandards(UnitedStates)CBMcoalbedmethaneCCGTcombined‐cyclegasturbineCCUScarboncapture,utilisationandstorageCDRcarbondioxideremovalCEMCleanEnergyMinisterialCH4methaneCHPcombinedheatandpower;thetermco‐generationissometimesusedCNGcompressednaturalgasCOcarbonmonoxideCO2carbondioxideCO2‐eqcarbon‐dioxideequivalentIEA.CCBY4.0.502InternationalEnergyAgencyWorldEnergyOutlook2022COPConferenceofParties(UNFCCC)CSPconcentratingsolarpowerCTGcoal‐to‐gasCTLcoal‐to‐liquidsDACdirectaircaptureDACSdirectaircaptureandstorageDCdirectcurrentDERdistributedenergyresourcesDRIdirectreducedironDSIdemand‐sideintegrationDSOdistributionsystemoperatorDSRdemand‐sideresponseEHOBextra‐heavyoilandbitumenEMDEemergingmarketanddevelopingeconomiesEORenhancedoilrecoveryEPAEnvironmentalProtectionAgency(UnitedStates)ESGenvironmental,socialandgovernanceEUEuropeanUnionEUETSEuropeanUnionEmissionsTradingSystemEVelectricvehicleFAOFoodandAgricultureOrganizationoftheUnitedNationsFCEVfuelcellelectricvehicleFDIforeigndirectinvestmentFIDFinalinvestmentdecisionFiTfeed‐intariffFOBfreeonboardGECGlobalEnergyandClimate(model)GDPgrossdomesticproductGHGgreenhousegasesGTLgas‐to‐liquidsHDVheavy‐dutyvehicleHEFAhydrogenatedestersandfattyacidsHFOheavyfueloilHVDChighvoltagedirectcurrentIAEAInternationalAtomicEnergyAgencyICEinternalcombustionengineICTinformationandcommunicationtechnologiesIEAInternationalEnergyAgencyIGCCintegratedgasificationcombined‐cycleIIASAInternationalInstituteforAppliedSystemsAnalysisIMFInternationalMonetaryFundIMOInternationalMaritimeOrganizationIOCinternationaloilcompanyIPCCIntergovernmentalPanelonClimateChangeIEA.CCBY4.0.AnnexCDefinitions503CLCOElevelisedcostofelectricityLCVlightcommercialvehicleLDVlight‐dutyvehicleLEDlight‐emittingdiodeLNGliquefiednaturalgasLPGliquefiedpetroleumgasLULUCFlanduse,land‐usechangeandforestryMEPSminimumenergyperformancestandardsMERmarketexchangerateNDCsNationallyDeterminedContributionsNEANuclearEnergyAgency(anagencywithintheOECD)NGLsnaturalgasliquidsNGVnaturalgasvehicleNOCnationaloilcompanyNPVnetpresentvalueNOXnitrogenoxidesN2OnitrousdioxideNZENetZeroEmissionsby2050ScenarioOECDOrganisationforEconomicCo‐operationandDevelopmentOPECOrganizationofthePetroleumExportingCountriesPHEVplug‐inhybridelectricvehiclesPLDVpassengerlight‐dutyvehiclePMparticulatematterPM2.5fineparticulatematterPPApowerpurchaseagreementPPPpurchasingpowerparityPVphotovoltaicsR&DresearchanddevelopmentRD&Dresearch,developmentanddemonstrationSDGSustainableDevelopmentGoals(UnitedNations)SMEsmallandmediumenterprisesSMRsteammethanereformationSO2sulphurdioxideSTEPSStatedPoliciesScenarioT&DtransmissionanddistributionTESthermalenergystorageTFCtotalfinalconsumptionTFECtotalfinalenergyconsumptionTPEDtotalprimaryenergydemandTSOtransmissionsystemoperatorUAEUnitedArabEmiratesUNUnitedNationsUNDPUnitedNationsDevelopmentProgrammeUNEPUnitedNationsEnvironmentProgrammeIEA.CCBY4.0.504InternationalEnergyAgencyWorldEnergyOutlook2022UNFCCCUnitedNationsFrameworkConventiononClimateChangeUSUnitedStatesUSGSUnitedStatesGeologicalSurveyVALCOEvalue‐adjustedlevelisedcostofelectricityVREvariablerenewableenergyWACCweightedaveragecostofcapitalWEOWorldEnergyOutlookWHOWorldHealthOrganizationZEVzeroemissionsvehicleZCRBzerocarbon‐readybuildingIEA.CCBY4.0.AnnexDReferences505AnnexDReferencesChapter1:OverviewandkeyfindingsIEA(InternationalEnergyAgency)(2022),WorldEnergyEmployment,https://www.iea.org/reports/world‐energy‐employmentIEA(2021a),WorldEnergyOutlook2021,https://www.iea.org/reports/world‐energy‐outlook‐2021IEA(2021b),TheRoleofCriticalMineralsinCleanEnergyTransitions,https://www.iea.org/reports/the‐role‐of‐critical‐minerals‐in‐clean‐energy‐transitionsIEA(2021c),NetZeroby2050:ARoadmapfortheGlobalEnergySector,https://www.iea.org/reports/net‐zero‐by‐2050IEA(2016),WorldEnergyOutlook2016,https://www.iea.org/reports/world‐energy‐outlook‐2016IEA(2015),WorldEnergyOutlook2015,https://www.iea.org/reports/world‐energy‐outlook‐2015IMF(InternationalMonetaryFund)(2022a),WorldEconomicOutlook:CounteringtheCost‐LivingCrisis,https://www.imf.org/en/Publications/WEO/Issues/2022/10/11/world‐economic‐outlook‐october‐2022IMF(2022b),IMFConsumerPriceIndex(database),https://data.imf.org/CPI(accessedOctober2022).IPCC(IntergovernmentalPanelonClimateChange)(2022a),ClimateChange2022‐Impacts,AdaptionandVulnerability,https://www.ipcc.ch/report/ar6/wg2/IPCC(2022b),ClimateChange2022–MitigationofClimateChange,https://www.ipcc.ch/working‐group/wg3/Chapter2:SettingthesceneArgusMediaLimited,(2022),https://www.argusmedia.com/enBNEF(BloombergNewEnergyFinance)(2022),BimonthlyPVIndex(database),https://about.bnef.com/(accessed29August2022).ENTSOGTransparencyPlatform,(2022),https://transparency.entsog.eu/#/mapICISDigital,(2022),https://www.icis.com/explore/services/digital/IEA(InternationalEnergyAgency)(2022a),SolarPVGlobalSupplyChains,https://www.iea.org/reports/solar‐pv‐global‐supply‐chainsIEA.CCBY4.0.506InternationalEnergyAgencyWorldEnergyOutlook2022IEA(2022b),WorldEnergyInvestment2022,https://www.iea.org/reports/world‐energy‐investment‐2022IEA(2022c),Criticalmineralsthreatenadecades‐longtrendofcostdeclinesforcleanenergytechnologies,https://www.iea.org/commentaries/critical‐minerals‐threaten‐a‐decades‐long‐trend‐of‐cost‐declines‐for‐clean‐energy‐technologiesIEA(2020),TheOilandGasIndustryinEnergyTransitions,https://www.iea.org/reports/the‐oil‐and‐gas‐industry‐in‐energy‐transitionsIMF(InternationalMonetaryFund)(2022),WorldEconomicOutlookJulyUpdate,https://www.imf.org/en/Publications/WEO/Issues/2022/07/26/world‐economic‐outlook‐update‐july‐2022OECD(OrganisationforEconomicCo‐operationandDevelopment)(2022),OECDEconomicOutlook,https://w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022IEA(2022f),GlobalEnergyReview:CO2emissionsin2021,https://www.iea.org/reports/global‐energy‐review‐2021IEA(2022g),Whatwouldnetzeroby2050meanfortheemissionsfootprintsofyoungerpeopleversustheirparents?,https://www.iea.org/commentaries/what‐would‐net‐zero‐by‐2050‐mean‐for‐the‐emissions‐footprints‐of‐younger‐people‐versus‐their‐parentsIEA(2022h),CleanEnergyTransitionintheGreaterHornofAfrica,https://www.iea.org/reports/clean‐energy‐transitions‐in‐the‐greater‐horn‐of‐africaIEA(2022i),CoolingTracking,https://www.iea.org/reports/space‐coolingIEA(2022j),AnEnergySectorRoadmaptoNetZeroEmissionsinIndonesia,https://www.iea.org/reports/an‐energy‐sector‐roadmap‐to‐net‐zero‐emissions‐in‐indonesiaIEA(2021),CleanEnergyTransitionintheSahel,https://www.iea.org/reports/clean‐energy‐transitions‐in‐the‐sahelIEA(2020a),CleanEnergyTransitioninNorthAfrica,https://www.iea.org/reports/clean‐energy‐transitions‐in‐north‐africaIEA(2020b),Iscoolingthefutureofheating?,https://www.iea.org/commentaries/is‐cooling‐the‐future‐of‐heatingIPCC(IntergovernmentalPanelonClimateChange)(2022),ClimateChange2022:Impacts,AdaptationandVulnerability,https://doi.org/10.1017/9781009325844IPCC(2021),ClimateChange2021:ThePhysicalScienceBasis.ContributionofWorkingGroupItotheSixthAssessmentReportoftheIntergovernmentalPanelonClimateChange,https://doi.org/10.1017/9781009157896IPCC(2018),GlobalWarmingof1.5°C,AnIPCCSpecialReportontheImpactsofGlobalWarmingof1.5°Cabovepre‐industriallevels,https://doi.org/10.1017/9781009157940LightingGlobal/ESMAP,GOGLA,EfficiencyforAccessandOpenCapitalAdvisors(2022),Off‐GridSolarMarketTrendsReport2022:StateoftheSector,https://www.gogla.org/events/sneak‐peek‐off‐grid‐solar‐market‐trends‐report‐2022‐state‐of‐the‐sectorNASAGoddardInstituteforSpaceStudies(2022),2021Tiedfor6thWarmestYearinContinuedTrend,NASAAnalysisShows,https://www.giss.nasa.gov/research/news/20220113/IEA.CCBY4.0.512InternationalEnergyAgencyWorldEnergyOutlook2022NetZeroTracker(2022),NetZeroTracker,(database),https://zerotracker.net/(accessedSeptember2022).Rafaj,P.,G.KiesewetterandV.Krey(2021),Airqualityandhealthimplicationsof1.5°C‐2°Cclimatepathwaysunderconsiderationsofageingpopulation:amulti‐modelscenarioanalysis,EnvironmentalResearchLetters,Vol.16,N.4,https://iopscience.iop.org/article/10.1088/1748‐9326/abdf0bRMI(RockyMountainInstitute)(2018),ClosingtheCircuit:Stimulatingend‐usedemandforruralelectrification,https://rmi.org/wp‐content/uploads/2018/10/SEED‐Demand‐Stimulation‐Report.pdfSEforALL(SustainableEnergyforAll)andCPI(ClimatePolicyInitiatives)(2021),EnergizingFinance2021,https://www.seforall.org/system/files/2021‐10/EF‐2021‐UL‐SEforALL.pdfWorldBank(2022),TheGlobalHealthCostofPM2.5AirPollution:Acaseforactionbeyond2021,https://doi.org/10.1596/978‐1‐4648‐1816‐5WHO(WorldHealthOrganization)(2022),Householdairpollutiondata,https://www.who.int/data/gho/data/themes/air‐pollution/household‐air‐pollution,(accessed17June2022).WHO(2021),WHOGlobalAirQualityGuidelines:particulatematter(PM2.5andPM10),ozone,nitrogendioxide,sulphurdioxideandcarbonmonoxide,https://www.who.int/publications/i/item/9789240034228Chapter6:OutlookforelectricityElia,A.(2020),Windturbinecostreduction:Adetailedbottom‐upanalysisofinnovationdrivers,EnergyPolicy,https://doi.org/10.1016/j.enpol.2020.111912Energie‐ControlAustria,MEKHandVaasaETT(2022),HouseholdEnergyPriceIndex(database),https://www.energypriceindex.com/price‐data(accessed4August2022).EuropeanCommission(2022),Proposalforacouncilregulationonanemergencyinterventiontoaddresshighenergyprices,https://eur‐lex.europa.eu/legal‐content/EN/TXT/PDF/?uri=CELEX:52022PC0473&from=ENEuropeanCouncil(2022),G7Leaders’Communiqué,https://www.consilium.europa.eu/en/press/press‐releases/2022/06/28/g7‐leaders‐communique/IEA(InternationalEnergyAgency)(2022a),ElectricityMarketReport‐July2022:Update,https://www.iea.org/reports/electricity‐market‐report‐july‐2022IEA(2022b),AchievingNetZeroHeavyIndustrySectorsinG7Members,https://www.iea.org/reports/achieving‐net‐zero‐heavy‐industry‐sectors‐in‐g7‐membersIEA.CCBY4.0.AnnexDReferences513DIEA(2022c),GlobalHydrogenReview2022,https://www.iea.org/reports/global‐hydrogen‐review‐2022IEA(2022d),NuclearPowerandSecureEnergyTransitions,https://www.iea.org/reports/nuclear‐power‐and‐secure‐energy‐transitionsIEA(2022e),AfricaEnergyOutlook2022,https://www.iea.org/reports/africa‐energy‐outlook‐2022IEA(2022f),SteeringElectricityMarketsTowardsaRapidDecarbonisation,https://www.iea.org/reports/steering‐electricity‐markets‐towards‐a‐rapid‐decarbonisationIEA(2022g),SoutheastAsiaEnergyOutlook2022,https://www.iea.org/reports/southeast‐asia‐energy‐outlook‐2022IEA(2022h),WorldEnergyInvestment2022,https://www.iea.org/reports/world‐energy‐investment‐2022IEA(2022i),SolarPVGlobalSupplyChains,https://www.iea.org/reports/solar‐pv‐global‐supply‐chainsIEA(2021a),WorldEnergyOutlook2021,https://www.iea.org/reports/world‐energy‐outlook‐2021IEA(2021b),TheRoleofCriticalMineralsinCleanEnergyTransitions,https://www.iea.org/reports/the‐role‐of‐critical‐minerals‐in‐clean‐energy‐transitionsIEA(2021c),HydropowerSpecialMarketReport,https://www.iea.org/reports/hydropower‐special‐market‐reportIEA(2021d),TheRoleofLow‐CarbonFuelsintheCleanEnergyTransitionsofthePowerSector,https://www.iea.org/reports/the‐role‐of‐low‐carbon‐fuels‐in‐the‐clean‐energy‐transitions‐of‐the‐power‐sectorREN21(2022),Renewables2022GlobalStatusReport,https://www.ren21.net/wp‐content/uploads/2019/05/GSR2022_Full_Report.pdfSöderholm,P.(2020),Metalmarketsandrecyclingpolicies:Impactsandchallenges,MineralEconomics,pp.257–272,https://doi.org/10.1007/s13563‐019‐00184‐5Chapter7:OutlookforliquidfuelsCarmenFerrara,G.(2021),LCAofglassversusPETmineralwaterbottles:AnItaliancasestudy,Recycling,Vol.6(50),https://doi.org/10.3390/recycling6030050IEA(InternationalEnergyAgency)(2022a),A10‐PointPlantoCutOilUse,https://www.iea.org/reports/a‐10‐point‐plan‐to‐cut‐oil‐useIEA(2022b),WorldEnergyInvestment2022,https://www.iea.org/reports/world‐energy‐investment‐2022IEA.CCBY4.0.514InternationalEnergyAgencyWorldEnergyOutlook2022IEA(2021),RenewableEnergyMarketUpdate2021,https://www.iea.org/reports/renewable‐energy‐market‐update‐2021SamuelSchlecht,F.(2020),ComparativelifecycleassessmentofTetraPakcartonpackagesandalternativepackagingsystemsforbeveragesandliquidfoodontheEuropeanmarket,IFEU‐InstitutfürEnergie‐undUmweltforschung[InstitureforEnergyandEnvironmentalResearch],https://www.tetrapak.com/content/dam/tetrapak/publicweb/uk/en/sustainability/2020‐lca‐tetra‐pak‐european‐market.pdfChapter8:OutlookforgaseousfuelsACER(AgencyfortheCooperationofEnergyRegulators)(2022),Estimatednumberanddiversityofsupplysources2021,https://aegis.acer.europa.eu/chest/dataitems/214/viewBEIS(DepartmentforBusiness,EnergyandIndustrialStrategy)(2022),Atmosphericimplicationsofincreasedhydrogen,https://www.gov.uk/government/publications/atmospheric‐implications‐of‐increased‐hydrogen‐useCapterio(2021),WhytheEUshouldenactmethaneregulationforimportedoilandgas,https://flareintel.com/insights/why‐the‐eu‐should‐enact‐methane‐regulation‐for‐imported‐oil‐and‐gasCedigaz(2022),Naturalgastradeflows(database),https://www.cedigaz.org/(accessed1September2022).Davis,M.etal.(2022),NorthAfricacanreduceEurope'sdependenceonRussiangasbytransportingwastedgasthroughexistinginfrastructure,https://ccsi.columbia.edu/sites/default/files/content/pics/publications/CCSI‐Capterio‐Associated‐Gas‐North‐Africa‐Address‐Energy‐Crisis‐Mar‐2022.pdfEurostat(2022),EUTradesince1999,http://appsso.eurostat.ec.europa.eu/InternationalEnergyAgency(IEA)(2022a),Theenergysecuritycasefortacklinggasflaringandmethaneleaks,https://www.iea.org/reports/the‐energy‐security‐case‐for‐tackling‐gas‐flaring‐and‐methane‐leaksIEA(2022b),GlobalHydrogenReview2022,https://www.iea.org/reports/global‐hydrogen‐review‐2022IEA(2022c),SoutheastAsiaEnergyOutlook,https://www.iea.org/reports/southeast‐asia‐energy‐outlook‐2022IEA(2011),Areweenteringagoldenageofgas?https://www.iea.org/news/iea‐special‐report‐explores‐potential‐for‐golden‐age‐of‐natural‐gasWolfram,P.etal.(2022),Usingammoniaasashippingfuelcoulddisturbthenitrogencycle,NatureEnergy,https://doi.org/10.1038/s41560‐022‐01124‐4IEA.CCBY4.0.AnnexDReferences515DZhizhin,M.etal.(2021),MeasuringGasFlaringinRussiawithMultispectralVIIRSNightfire,RemoteSensing,Vol.13(16):3078,https://doi.org/10.3390/rs13163078Chapter9:OutlookforsolidfuelsIPCC(IntergovernmentalPanelonClimateChange)(2021),ClimateChange2021:ThePhysicalScienceBasis.ContributionofWorkingGroupItotheSixthAssessmentReportoftheIntergovernmentalPanelonClimateChange,https://www.ipcc.ch/report/ar6/wg1/downloads/report/IPCC_AR6_WGI_FullReport.pdfHavlíkP.etal.(2014),Climatechangemitigationthroughlivestocksystemtransitions,PNAS,pp.3709‐3714,https://doi.org/10.1073/pnas.1308044111AnnexB:DesignofthescenariosBGR(BundesanstaltfürGeowissenschaftenundRohstoffe)(Germany)(2021),(FederalInstituteforGeosciencesandNaturalResources),Energiestudie2021:DatenundEntwicklungenderdeutschenundglobalenEnergieversorgung,[EnergyStudy2021:DataanddevelopmentsinGermanyandglobalenergysupply],https://www.bgr.bund.de/DE/Themen/Energie/Downloads/energiestudie_2021.htmlBNEF(BloombergNewEnergyFinance)(2021),EnergyStorageSystemCostsSurvey,https://about.bnef.comBP(BeyondPetroleum)(2022),StatisticalReviewofWorldEnergy,https://www.bp.com/en/global/corporate/energy‐economics/statistical‐review‐of‐world‐energy.htmlCEDIGAZ(2022),CountryIndicators(databases),https://www.cedigaz.org/databases/(accessed5September2022).Cole,W.,A.WillFrazierandC.Augustine(2021),CostProjectionsforUtilityScaleBatteryStorage:2021Update,https://www.nrel.gov/docs/fy21osti/79236.pdfFinancialTimes(2020),Electriccarcoststoremainhigherthantraditionalengines,https://www.ft.com/content/a7e58ce7‐4fab‐424a‐b1fa‐f833ce948cb7IEA(InternationalEnergyAgency)(2021),WorldEnergyOutlook2021,https://www.iea.org/reports/world‐energy‐outlook‐2021IEA(2019),OffshoreWindOutlook2019,https://www.iea.org/reports/offshore‐wind‐outlook‐2019IRENA(InternationalRenewableEnergyAgency)(2022),RenewablePowerGenerationCostsin2021,https://www.irena.org/publications/2021/Jun/Renewable‐Power‐Costs‐in‐2020IEA.CCBY4.0.516InternationalEnergyAgencyWorldEnergyOutlook2022James,B.etal.(2018),MassProductionCostEstimationofDirectH2PEMFuelCellSystemsforTransportationApplications:2018Update,https://www.energy.gov/sites/default/files/2020/02/f71/fcto‐sa‐2018‐transportation‐fuel‐cell‐cost‐analysis‐2.pdfOGJ(OilandGasJournal)(2022),Worldwidelookatreservesandproduction,https://www.ogj.com/ogj‐survey‐downloads/worldwide‐production/document/17299726/worldwide‐look‐at‐reserves‐and‐productionThompson,S.etal.(2018),Directhydrogenfuelcellelectricvehiclecostanalysis:Systemandhigh‐volumemanufacturingdescription,validation,andoutlook.JournalofPowerSources,304‐313,https://doi.org/10.1016/j.jpowsour.2018.07.100Tsiropoulos,I.,D.TarvydasandN.Lebedeva(2018),Li‐ionbatteriesformobilityandstationarystorageapplications,https://publications.jrc.ec.europa.eu/repository/handle/JRC113360UNDESA(UnitedNationsDepartmentofEconomicandSocialAffairs)(2019),WorldPopulationProspects2019,https://www.un.org/development/desa/publications/world‐population‐prospects‐2019‐highlights.htmlUNDESA(2018),WorldUrbanisationProspects2018,https://population.un.org/wup/USDOE/EIA(USDepartmentofEnergy/EnergyInformationAgency)(2015),WorldShaleResourceAssessment,https://www.eia.gov/analysis/studies/worldshalegasUSDOE/EIA(2013),TechnicallyRecoverableShaleOilandShaleGasResources:AnAssessmentof137ShaleFormationsin41CountriesOutsidetheUnitedStates,https://www.eia.gov/analysis/studies/worldshalegas/pdf/overview.pdfUSGS(UnitedStatesGeologicalSurvey)(2012a),AnEstimateofUndiscoveredConventionalOilandGgasResourcesoftheWorld,https://pubs.er.usgs.gov/publication/fs20123042USGS(2012b),AssessmentofPotentialAdditionstoConventionalOilandGasResourcesoftheWorld(outsidetheUnitedStates)fromReserveGrowth,2012,https://pubs.er.usgs.gov/publication/fs20123052WorldBank(2022a),WorldDevelopmentIndicators,https://data.worldbank.org/indicator/SP.POP.TOTLWorldBank(2022),StateandTrendsofCarbonPricing2022,https://openknowledge.worldbank.org/handle/10986/37455IEA.CCBY4.0.AnnexEInputstotheGlobalEnergyandClimateModel517AnnexEInputstotheGlobalEnergyandClimateModelGeneralnoteThisannexincludesreferencesofdatabasesandpublicationsusedtoprovideinputdatatotheIEAGlobalEnergyandClimate(GEC)Model.TheIEA’sowndatabasesofenergyandeconomicstatisticsprovidemuchofthedatausedintheGECModel.TheseincludeIEAstatisticsonenergysupply,transformation,demandatdetailedlevels,carbondioxideemissionsfromfuelcombustionandenergyefficiencyindicatorsthatformthebedrockoftheWorldEnergyOutlookandEnergyTechnologyPerspectivesmodellingandanalyses.SupplementaldatafromawiderangeofexternalsourcesarealsousedtocomplementIEAdataandprovideadditionaldetail.Thislistofdatabasesandpublicationsiscomprehensive,butnotexhaustive.IEAdatabasesandpublicationsIEA(InternationalEnergyAgency)(2022),CoalInformation,https://www.iea.org/data‐and‐statistics/data‐product/coal‐information‐serviceIEA(2022),EmissionsFactors2022,https://www.iea.org/data‐and‐statistics/data‐product/emissions‐factors‐2022IEA(2022),EnergyEfficiencyIndicators,https://www.iea.org/data‐and‐statistics/data‐product/energy‐efficiency‐indicatorsIEA(2022),EnergyPrices,https://www.iea.org/data‐and‐statistics/data‐product/energy‐pricesIEA(2022),EnergyTechnologyRD&DBudgets,https://www.iea.org/data‐and‐statistics/data‐product/energy‐technology‐rd‐and‐d‐budget‐database‐2IEA(2022),GlobalEnergyReview2022:CO2emissionsin2021,https://www.iea.org/reports/global‐energy‐review‐co2‐emissions‐in‐2021‐2IEA(2022),GlobalFuelEconomyInitiative2021DataExplorer,https://www.iea.org/data‐and‐statistics/data‐tools/global‐fuel‐economy‐initiative‐2021‐data‐explorerIEA(2022),GreenhouseGasEmissionsfromEnergy,https://www.iea.org/data‐and‐statistics/data‐product/greenhouse‐gas‐emissions‐from‐energyIEA(2022),MethaneTrackerDatabase2022,https://www.iea.org/data‐and‐statistics/data‐product/methane‐tracker‐database‐2022IEA(2022),MonthlyElectricityStatistics,https://www.iea.org/data‐and‐statistics/data‐product/monthly‐electricity‐statisticsIEA.CCBY4.0.518InternationalEnergyAgencyWorldEnergyOutlook2022IEA(2022),MonthlyGasDataService,https://www.iea.org/data‐and‐statistics/data‐product/monthly‐gas‐data‐service‐2IEA(2022),MonthlyOilDataServiceComplete,https://www.iea.org/data‐and‐statistics/data‐product/monthly‐oil‐data‐service‐mods‐completeIEA(2022),NaturalGasInformation,https://www.iea.org/data‐and‐statistics/data‐product/natural‐gas‐informationIEA(2022),RenewableEnergyMarketUpdate‐May2022,https://www.iea.org/reports/renewable‐energy‐market‐update‐may‐2022IEA(2022),SDG7:DataandProjections,https://www.iea.org/reports/sdg7‐data‐and‐projectionsIEA(2022),WeatherforEnergyTracker,https://www.iea.org/data‐and‐statistics/data‐product/weather‐for‐energy‐trackerIEA(2022),WorldEnergyBalances,https://www.iea.org/data‐and‐statistics/data‐product/world‐energy‐balancesIEA(2022),WorldEnergyInvestment2022,https://www.iea.org/reports/world‐energy‐investment‐2022IEA(2021),GlobalEnergyReview2021,https://www.iea.org/reports/global‐energy‐review‐2021IEA(2021),Renewables2021,https://www.iea.org/reports/renewables‐2021IEA(n.d.),FossilFuelSubsidiesDatabase,https://www.iea.org/data‐and‐statistics/data‐product/fossil‐fuel‐subsidies‐databaseIEA(n.d),HydrogenProjectsDatabase,https://www.iea.org/data‐and‐statistics/data‐product/hydrogen‐projects‐databaseIEA(n.d.),MobilityModel(database),https://www.iea.org/areas‐of‐work/programmes‐and‐partnerships/the‐iea‐mobility‐modelIEA(n.d.),PoliciesDatabase,https://www.iea.org/policies/ExternaldatabasesandpublicationsSocio‐economicvariablesIMF(InternationalMonetaryFund)(2022),WorldEconomicOutlook:April2022update,https://www.imf.org/en/Publications/WEO/weo‐database/2022/AprilOxfordEconomics(2022),OxfordEconomicsGlobalEconomicModel,June2022update,https://www.oxfordeconomics.com/global‐economic‐modelIEA.CCBY4.0.AnnexEInputstotheGlobalEnergyandClimateModel519EUNDESA(UnitedNationsDepartmentofEconomicandSocialAffairs)(2019),WorldPopulationProspects2019,https://population.un.org/wpp/Publications/Files/WPP2019_Highlights.pdfUNDESA(2018),WorldUrbanisationProspects2018,https://population.un.org/wup/WorldBank(2022),WorldDevelopmentIndicators,https://data.worldbank.org/indicator/SP.POP.TOTLPowerENTSO‐E(2022),TransparencyPlatform(database),https://transparency.entsoe.eu/GlobalTransmission(2020),GlobalElectricityTransmissionReportandDatabase,2020‐29,https://www.globaltransmission.info/report_electricity‐transmission‐report‐and‐database‐2020‐29.phpIAEA(InternationalAtomicEnergyAgency)(2022),PowerReactorInformationSystem(database),https://pris.iaea.org/pris/NRGExpert(2019),ElectricityTransmissionandDistribution(database),https://www.nrgexpert.com/energy‐market‐research/electricity‐transmission‐and‐distribution‐database/S&PGlobal(March2022),WorldElectricPowerPlants(database),S&PMarketIntelligencePlatform,https://www.spglobal.com/marketintelligence/IndustryFastmarketsRISI(n.d.),Pulp,PaperandPackaging,https://www.risiinfo.com/industries/pulp‐paper‐packaging/FAO(FoodandAgricultureOrganisationoftheUnitedNations)(n.d.),FAOSTATData,http://www.fao.org/faostat/en/#dataGlobalCement(2022),GlobalCementDirectory2022,https://www.globalcement.com/IHSMarkit(n.d.),Chemical,https://ihsmarkit.com/industry/chemical.htmlInternationalAluminiumInstitute(2022),WorldAluminiumStatistics,http://www.world‐aluminium.org/statistics/InternationalFertilizerAssociation(n.d.),IFASTAT(database),https://www.ifastat.org/MethanolMarketServicesAsia(n.d.),(database),https://www.methanolmsa.com/METI(MinistryofEconomy,TradeandIndustry)(Japan)(2022),METIStatisticsReport,https://www.meti.go.jp/english/statistics/index.htmlS&PGlobal(2022),PlattsGlobalPolyolefinsOutlook,https://plattsinfo.platts.com/GPO.htmlIEA.CCBY4.0.520InternationalEnergyAgencyWorldEnergyOutlook2022UNDESA(UnitedNationsDepartmentofEconomicandSocialAffairs)(n.d.),UNComtrade(database),https://comtrade.un.org/data/USGS(UnitedStatesGeologicalSurvey)(2022),CommodityStatisticsandInformation,NationalMineralsInformationCenter,https://www.usgs.gov/centers/nmicWorldBureauofMetalStatistics(n.d),(database),https://www.world‐bureau.com/services.aspWorldSteelAssociation(2022),WorldSteelinFigures2022,https://worldsteel.org/steel‐topics/statistics/world‐steel‐in‐figures‐2022/TransportAIM(AviationIntegratedModel)(2020),Anopen‐sourcemodeldevelopedbytheUniversityCollegeLondonEnergyInstitute,www.ucl.ac.uk/energy‐models/models/aimBenchmarkMineralIntelligence(n.d.),Mega‐factoryAssessmentReport,https://www.benchmarkminerals.com/megafactories/EVVolumes(2022),ElectricVehicleWorldSales(database),https://www.ev‐volumes.com/InstituteforTransportationandDevelopmentPolicy(2022),RapidTransitDatabase,https://www.itdp.org/rapid‐transit‐database/InternationalAssociationofPublicTransport(2018),WorldMetroFigures2018,https://www.uitp.org/publications/world‐metro‐figures/InternationalAssociationofPublicTransport(2017),LightRailTransitWorldStatisticsDatabaseInternationalAssociationofPublicTransport(2015),MillenniumCitiesDatabasesforSustainableTransportICAO(InternationalCivilAviationOrganization)(2022),AirTransportMonthlyMonitor,https://www.icao.int/sustainability/pages/air‐traffic‐monitor.aspxIMO(InternationalMaritimeOrganization)(2020),FourthIMOGHGStudy2020,https://www.imo.org/en/OurWork/Environment/Pages/Fourth‐IMO‐Greenhouse‐Gas‐Study‐2020.aspxInternationalUnionofRailways(2020),InternationalRailwayStatistics,ISBN978‐2‐7461‐3144‐6,https://uic‐stats.uic.org/JatoDynamics(n.d.),https://www.jato.com/solutions/jato‐analysis‐reporting/LMCAutomotive(n.d.),LMCAutomotiveForecasting,https://lmc‐auto.com/OAG(OfficialAviationGuide)(n.d.),OAG(database),https://www.oag.com/IEA.CCBY4.0.AnnexEInputstotheGlobalEnergyandClimateModel521EUNCTAD(UnitedNationsConferenceonTradeandDevelopment)(2021),ReviewofMaritimeTransport2021,https://unctad.org/system/files/official‐document/rmt2021_en_0.pdfBuildingsandenergyaccessAHRI(Air‐Conditioning,Heating,andRefrigerationInstitute)(2022),Statistics,https://www.ahrinet.org/analytics/statisticsEuropeanHeatPumpAssociation(2022),MarketData,https://www.ehpa.org/market‐data/GOGLA(GlobalAssociationfortheOff‐gridSolarEnergyIndustry)(2022),GlobalOff‐GridSolarMarketReport,https://www.gogla.org/global‐off‐grid‐solar‐market‐reportGlobalResearchView(2022),GlobalAirSourceHeatPumpsMarket,https://www.globalresearchview.com/report/global‐air‐source‐heat‐pumps‐market‐by‐t/GRV76827JRIA(JapanRefrigerationandAirConditioningAssociation)(2022),EstimatesofWorldAirConditionerDemandbyCountry,https://www.jraia.or.jp/english/statistics/file/World_AC_Demand.pdfMEMR(MinistryofEnergyandMineralResources)(Indonesia)(2022),HandbookofEnergyandEconomicStatisticsofIndonesia,https://www.esdm.go.id/assets/media/content/content‐handbook‐of‐energy‐and‐economic‐statistics‐of‐indonesia‐2021.pdfNationalBureauofStatisticsChina(2022),ChinaStatisticalYearbook2021,http://www.stats.gov.cn/tjsj/ndsj/2021/indexeh.htmNationalStatisticalOffice(India)(2019),DrinkingWater,Sanitation,HygieneandHousingConditionsinIndia,http://mospi.nic.in/sites/default/files/publication_reports/Report_584_final_0.pdfOLADE(LatinAmericanEnergyOrganisation)(n.d.),ElectricityAccess(database),https://sielac.olade.org/default.aspxUSEIA(UnitedStatesEnergyInformationAdministration)(2018),2015RECS(ResidentialEnergyConsumptionSurvey)SurveyData,https://www.eia.gov/consumption/residential/data/2015/USAID(UnitedStatesAgencyforInternationalDevelopment)(n.d.),DemographicandHealthSurveys(database),https://dhsprogram.com/Data/WorldBankGroup(2022),RegulatoryIndicatorsforSustainableEnergy,https://rise.esmap.org/WHO(WorldHealthOrganization)(2022),HouseholdAirPollutionData(database),https://www.who.int/data/gho/data/themes/air‐pollution/household‐air‐pollutionIEA.CCBY4.0.522InternationalEnergyAgencyWorldEnergyOutlook2022EnergysupplyandenergyinvestmentBGR(BundesanstaltfürGeowissenschaftenundRohstoffe)(Germany)(2021),(FederalInstituteforGeosciencesandNaturalResources),Energiestudie2021:DatenundEntwicklungenderdeutschenundglobalenEnergieversorgung,[EnergyStudy2021:DataanddevelopmentsinGermanyandglobalenergysupply],https://www.bgr.bund.de/DE/Themen/Energie/Downloads/energiestudie_2021.htmlBP(2022),StatisticalReviewofWorldEnergy2022,https://www.bp.com/en/global/corporate/energy‐economics/statistical‐review‐of‐world‐energy.htmlBNEF(BloombergNewEnergyFinance)(2022),SustainableFinanceDatabase,https://about.bnef.comBloombergTerminal(n.d.),https://www.bloomberg.com/professional/solution/bloomberg‐terminalCedigaz(2022),Cedigaz(databases),https://www.cedigaz.org/databases/CleanEnergyPipeline(2022),(database),https://cleanenergypipeline.com/CRU(n.d.),Coal(databases),https://www.crugroup.com/IJGlobal(2022),Transaction(database),https://ijglobal.com/data/search‐transactionsKayrros(2022),(dataanalytics),https://www.kayrros.com/McCloskeybyOPIS,aDowJonesCompany(2022),Coal(databases),https://mccloskeycmm.com/document/show/phoenix/251450?connectPath=Coal.HomeNASA(NationalAeronauticsandSpaceAdministration)(UnitedStates)LangleyResearchCenter(LaRC),(2022),PredictionofWorldwideEnergyResourceProject,https://power.larc.nasa.gov/Preqin(n.d.),Alternativeassets(database),https://www.preqin.com/RefinitivEikon(2022),Eikon(financialdataplatform),https://eikon.thomsonreuters.com/index.htmlRystadEnergy(2022),(databases)https://www.rystadenergy.comUSEIA(UnitedStatesEnergyInformationAdministration)(2022),(databases),https://www.eia.gov/analysis/WorldBank(2022),PublicParticipationinInfrastructureDatabase,(database)https://ppi.worldbank.org/en/ppiIEA.CCBY4.0.InternationalEnergyAgency(IEA)ThisworkreflectstheviewsoftheIEASecretariatbutdoesnotnecessarilyreflectthoseoftheIEA’sindividualMembercountriesorofanyparticularfunderorcollaborator.Theworkdoesnotconstituteprofessionaladviceonanyspecificissueorsituation.TheIEAmakesnorepresentationorwarranty,expressorimplied,inrespectofthework’scontents(includingitscompletenessoraccuracy)andshallnotberesponsibleforanyuseof,orrelianceon,thework.SubjecttotheIEA’sNoticeforCC-licencedContent,thisworkislicencedunderaCreativeCommonsAttribution4.0InternationalLicence.AnnexAislicensedunderaCreativeCommonsAttribution-NonCommercial-ShareAlike4.0InternationalLicence,subjecttothesamenotice.Thisdocumentandanymapincludedhereinarewithoutprejudicetothestatusoforsovereigntyoveranyterritory,tothedelimitationofinternationalfrontiersandboundariesandtothenameofanyterritory,cityorarea.Unlessotherwiseindicated,allmaterialpresentedinfiguresandtablesisderivedfromIEAdataandanalysis.IEAPublicationsInternationalEnergyAgencyWebsite:www.iea.orgContactinformation:www.iea.org/contactTypesetinFrancebyIEA-October2022Coverdesign:IEAPhotocredits:©GettyimagesWorldEnergyOutlook2022Withtheworldinthemidstofthefirstglobalenergycrisis–triggeredbyRussia’sinvasionofUkraine–theWorldEnergyOutlook2022(WEO)providesindispensableanalysisandinsightsontheimplicationsofthisprofoundandongoingshocktoenergysystemsacrosstheglobe.Basedonthelatestenergydataandmarketdevelopments,thisyear’sWEOexploreskeyquestionsaboutthecrisis:Willitbeasetbackforcleanenergytransitionsoracatalystforgreateraction?Howmightgovernmentresponsesshapeenergymarkets?Whichenergysecurityriskslieaheadonthepathtonetzeroemissions?TheWEOistheenergyworld’smostauthoritativesourceofanalysisandprojections.ThisflagshippublicationoftheIEAhasappearedeveryyearsince1998.Itsobjectivedataanddispassionateanalysisprovidecriticalinsightsintoglobalenergysupplyanddemandindifferentscenariosandtheimplicationsforenergysecurity,climatetargetsandeconomicdevelopment.

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