In its 2021 World Energy Outlook, the International Energy Agency (IEA) illustrated the following four different energy mix scenarios reflecting changes in total energy demand in 2050 as compared to 2020:

• Stated Policies: Total primary energy demand increases by over 26%.
• Announced Pledges: Total energy demand increases by over 14%.
• Sustainable Development: Total energy demand declines by around 2%.
• Net-Zero Emissions: Total energy demand declines by almost 8%.

Demand for natural gas and oil has different outcomes across the IEA scenarios. Demand grows compared to 2020 in the Announced Pledges scenario but declines in the Sustainable Development and Net-Zero Emissions scenarios.

Even in the Net-Zero scenario, 2050 oil demand remains at 19 MMBBL/day and natural gas at 27 MMBOE/day and, despite a reallocation of capital to renewables, significant investment in upstream natural gas and oil is still required. IEA estimates this to average $495 billion each year from 2020 to 2050 globally in the Announced Pledges scenario and $210 billion per year from 2020 to 2050 in the Net-Zero Emissions scenario, a total of approximately $14.8 trillion globally and $6.3 trillion respectively for the period 2020 to 2050.

Achieving the IEA’s Sustainable Development Scenario (limiting temperature increase to below 2 degrees Celsius) requires significant progress on several fronts:

• Improving energy efficiency of power generation, transportation and industrial processes. 
• Reducing emissions from fossil fuels or capturing and storing or utilizing those emissions.
• Increasing the amount of non-carbon energy, such as renewables and nuclear power.

Changes in the energy system take time, as energy infrastructure components have long asset lives and change would have to go beyond replacing the power generation and distribution systems to include replacing automobile, truck, ship and aircraft fleets or retrofitting them to meet new specifications. Increasing renewable power utilization would also require significant improvement in the daily and seasonal reliability of wind- and solar-powered electricity generation, or a significant improvement in energy storage that would reduce the amount of backup fossil fuel-fired electricity generation needed.

The Net-Zero Emissions Scenario is useful data to inform the decisions to be made by policy makers, who have the greatest scope to move the world closer to its climate goals. The assumptions used in the scenario are challenging. For example, as mentioned above, reducing energy demand by almost 8% from 2020 levels, effectively requires reverting energy demand back to 2010 levels, while supporting 3 billion more people with three times the economic activity. Increasing renewables’ share of the electricity supply to the level assumed in 2050 would require annual capacity additions four times the record that was set in 2020. The electricity market in 2050 is assumed to be 150% greater than the market in 2020, the equivalent of adding an electricity market the size of India every year. Further, of 400 milestones needed to achieve net-zero emissions described in the Net-Zero Emissions Scenario, 85% are demand-side actions requiring government intervention. It will continue to be important for policymakers to address the imperatives of energy security and affordability alongside climate risk.

These widely varying factors are the reason scenario planning is important. There is not just one pathway to a low carbon future; there are numerous ways in which government action and technology development could interact with consumer behavior to bring about a low-carbon future. Performance on climate-related risk and opportunity is driven by the strength of strategic planning, including the use of widely varying scenarios, as well as the financial strength and asset flexibility to manage across a range of possibilities.