Today’s energy crisis is delivering a shock of unprecedented breadth and complexity. With unrelenting geopolitical and economic concerns, energy markets remain extremely vulnerable, and the crisis is a reminder of the fragility and unsustainability of the current global energy system, the report warns.

The WEO’s analysis finds scant evidence to support claims from some quarters that climate policies and net zero commitments contributed to the run-up in energy prices. In the most affected regions, higher shares of renewables were correlated with lower electricity prices – and more efficient homes and electrified heat have provided an important buffer for some consumers, albeit far from enough.

Alongside short-term measures to try to shield consumers from the impacts of the crisis, many governments are now taking longer-term steps. Some are seeking to increase or diversify oil and gas supplies, and many are looking to accelerate structural changes, according to the IEA.

In the WEO’s Stated Policies Scenario, based on the latest policy settings worldwide, these new measures help propel global clean energy investment to more than $2tn/y by 2030, a rise of more than 50% from today. As markets rebalance in this scenario, the upside for coal from today’s crisis is temporary as renewables, supported by nuclear power, see sustained gains. As a result, a high point for global emissions is reached in 2025. At the same time, international energy markets undergo a profound reorientation in the 2020s as countries adjust to the rupture of Russia-Europe flows.

For the first time ever, a WEO scenario based on today’s prevailing policy settings – in this case, the Stated Policies Scenario – has global demand for every fossil fuel exhibiting a peak or plateau. In this scenario, coal use falls back within the next few years, natural gas demand reaches a plateau by the end of the decade, and rising sales of electric vehicles (EVs) mean that oil demand levels off in the mid-2030s before ebbing slightly to mid-century. This means that total demand for fossil fuels declines steadily from the mid-2020s to 2050 by an annual average roughly equivalent to the lifetime output of a large oil field. The declines are much faster and more pronounced in the report’s more climate-focused scenarios.

Global fossil fuel use has grown alongside GDP since the start of the Industrial Revolution in the 18th century; and putting this rise into reverse will be a pivotal moment in energy history, says the IEA. The share of fossil fuels in the global energy mix in the Stated Policies Scenario falls from around 80% to just above 60% by 2050. Global CO₂ emissions fall back slowly from a high point of 37bn t/y to 32bn t/y by 2050. This would be associated with a rise of around 2.5°C in global average temperatures by 2100, far from enough to avoid severe climate change impacts. Full achievement of all climate pledges would move the world towards safer ground, but there is still a large gap between today’s pledges and a stabilisation of the rise in global temperatures around 1.5°C.

Today’s growth rates for deployment of solar PV, wind, EVs and batteries, if maintained, would lead to a much faster transformation, although this would require supportive policies not just in the early leading markets for these technologies but across the world. Supply chains for some key technologies – including batteries, solar PV and electrolysers – are expanding at rates that support greater global ambition. If all announced manufacturing expansion plans for solar PV see the light of day, manufacturing capacity would exceed the deployment levels in the Announced Pledges Scenario in 2030 by around 75%.

Stronger policies will be essential to drive the huge increase in energy investment that is needed to reduce the risks of future price spikes and volatility, the IEA has noted. Subdued investment due to lower prices in the 2015–2020 period made the energy sector much more vulnerable to the sort of disruptions seen in 2022. While clean energy investment rises above $2tn by 2030 in the Stated Policies Scenario, it would need to be above $4tn by the same date in the Net Zero Emissions by 2050 Scenario, highlighting the need to attract new investors to the energy sector. And major international efforts are still urgently required to narrow the worrying divide in clean energy investment levels between advanced economies and emerging and developing economies.

Russia has been by far the world’s largest exporter of fossil fuels, but its invasion of Ukraine is prompting a wholesale reorientation of global energy trade, leaving it with a much-diminished position. All Russia’s trade ties with Europe based on fossil fuels had ultimately been undercut in previous WEO scenarios by Europe’s net zero ambitions, but Russia’s ability to deliver at relatively low cost meant that it lost ground only gradually. Now the rupture has come with a speed that few imagined possible. Russian fossil fuel exports never return – in any of the scenarios in this year’s WEO – to the levels seen in 2021, with Russia’s reorientation to Asian markets particularly challenging in the case of natural gas. Russia’s share of internationally traded energy, which stood at close to 20% in 2021, falls to 13% in 2030 the Stated Policies Scenario, while the shares of both the US and the Middle East rise.

For gas consumers, the upcoming Northern Hemisphere winter promises to be a perilous moment and a testing time for EU solidarity – and the winter of 2023/2024 could be even tougher. But in the longer term, one of the effects of Russia’s recent actions is that the era of rapid growth in gas demand draws to a close. In the Stated Policies Scenario, the scenario that sees the highest gas use, global demand rises by less than 5% between 2021 and 2030 and then remains flat through to 2050. Momentum behind gas in developing economies has slowed, putting a dent in the credentials of gas as a transition fuel.

Commenting on the report, IEA Executive Director Fatih Birol, says: ‘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. Even with today’s policy settings, the energy world is shifting dramatically before our eyes. 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.’