The global crisis triggered by the war in Ukraine could ironically accelerate the transition to a more sustainable and secure energy system, according to the latest World Energy Outlook by the International Energy Agency (IEA).

The energy markets, at present, remain extremely vulnerable, with unrelenting geopolitical and economic concerns. This crisis, the IEA warns, is a reminder of the fragility and unsustainability of the global energy system.

Contrary to claims that climate policies and net zero commitments contributed to an increase in energy prices, IEA’s analysis found insufficient evidence to support the claim. In most affected regions, a higher share of renewables correlated with lower electricity prices and more efficient homes. The agency identified that the heaviest burden was falling on poorer households, where a larger share of income is spent on energy.

Governments are now taking longer-term steps in their attempt to shield consumers from the impacts of the crisis. Notable responses include the much talked about U.S. Inflation Reduction Act, which aims to reduce carbon emissions by about 40% by 2030, and the European Union’s ‘Fit for 55’ package, which makes the bloc’s target to reduce emissions by at least 55% by 2030 a legal obligation.

Other assertive programs include the REPowerEU, Japan’s Green Transformation (GX) program, Korea’s aim to increase the share of nuclear and renewables, and the ambitious clean energy targets in China and India.

“Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come,” said IEA Executive Director Fatih Birol. “Even with today’s policy settings, the energy world is shifting dramatically…Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable, and more secure energy system.”

Need for Stronger Policies

The IEA expects fossil fuel demand to peak or hit a plateau in all expected scenarios. The demand for coal from the present crisis is expected to be temporary as renewables, supported by nuclear power, see sustained gains. Based on current policies, natural gas demand will reach a plateau by the end of the decade, while oil demand will level off in the mid-2030s amid rising sales of electric vehicles.

Russian fossil fuel exports are not expected to return to pre-war levels. The country’s share of internationally traded energy can fall to 13% in 2030 from 20% in 2021 from the previous forecast, while the U.S. and the Middle East will gain market share.

The agency expects the share of fossil fuels in global energy to fall to just over 60% by 2050 from the current 80%. And carbon dioxide emissions globally are expected to fall back slowly to 32 billion tons by 2050 from a high point of 37 billion tons a year.

In its stated policies scenario, the agency expects clean energy investment to rise to slightly more than $2 trillion by 2030 – a rise of more than 50% from present numbers. Investment in renewable energy needs to double to more than $4 trillion by the end of the decade to meet net-zero emissions targets by 2050.

The report identified that stronger policies could be the key to driving an increase in energy investment needed to reduce the risks of future price increases and volatility.

“Major international efforts are still urgently required to narrow the worrying divide in clean energy investment levels between advanced and emerging and developing economies,” it said. “Full achievement of all climate pledges would move the world towards the safer ground, but there is still a large gap between today’s pledges and a stabilization of the rise in global temperatures around 1.5 °C.”

Fossil fuel combustion will grow by less than 1% in 2022 as the strong expansion of renewables and electric vehicles prevent a sharper rise, IEA said in another recent report. Emissions jumped by nearly two billion tons in 2021 as the world economy rebounded from the effects of the Covid pandemic.

According to IEA’s Renewable Energy Market Updates – Outlook for 2021 and 2022, renewable energy is expected to account for 90% of the global power capacity increase in 2021 and 2022.