Energy Transitions Commission: Fossil Fuels in Transition

Our key takeaway: The phasing out of fossil fuels has been one of the most heavily debated topics during COP28, with even further spotlight due to this year’s host country being one of the largest oil producing nations in the world. While the world has agreed that it is essential to limit global warming below 2°C, and ideally to 1.5°C - there is still a reluctance to take fossil fuels completely off the table to achieve this. The Energy Transitions Commission has put its stake in the ground on this topic: “Reducing emissions from fossil production is important, but reducing fossil fuel demand is crucial … to … limit global warming to well below 2°C and ideally 1.5°C, the most important priority is to reduce demand for fossil fuels and to build the supply of new non-fossil energy sources at pace and scale – in particular zero-carbon electricity.” The report lays out the imperative for fossil fuel demand reduction (including reduced investment) and debunks the over-reliance or hope in Carbon Capture, Utilization and Storage (CCUS) as a significant driver of  long-term progress.

The Energy Transitions Commission has published ‘Fossil Fuels in Transition’ (November 2023). Here are the report’s key messages - taken directly from the report itself (we have added the bold):

The vital priority - reducing demand

• Any credible plans to achieve 1.5°C or well below 2°C will require a significant reduction in fossil fuel demand
• Limiting global warming to well below 2°C will be impossible unless emissions from fossil fuel production, processing and combustion in end-uses are reduced to net-zero by around mid-century. This is equivalent to all fossil fuel-producing companies reaching net-zero scope 1, 2 and 3 emissions by mid-century.
• Without such demand reduction, any constraints on supply will be ineffective and could produce price increases which might have serious socioeconomic impacts and undermine political support for the transition.
• Delivering such reductions in fossil fuel demand will require strong and ambitious policies enforced globally and across sectors. These policies should reinforce and accelerate the decline in fossil demand already taking place through policies around the world, such as through long-term contracts for renewables, support for electric vehicle uptake, and carbon pricing.
• Policy and regulation will also have to ensure that enabling infrastructure such as electricity grids, EV charging capacity (including in particular for heavy-duty electric vehicles), and hydrogen and CO2 networks, are built at the pace and scale required.
  

Scope 1 + 2 emissions

Reducing methane emissions rapidly is particularly important given that methane has accounted for about 30% of all warming since the pre-industrial period and reducing methane emission is the fastest way to moderate temperature increases. There are a wide range of actions which could achieve this, many of which are estimated to entail a low or even negative cost

Call to action

All fossil fuel companies

• Commit to achieving net-zero scope 1, 2 and 3 emissions by mid-century, including through absolute reduction targets for the production, transportation and use of fossil fuels.
• Commit to no new exploration to discover new oil and gas basins/fields, nor the development of new coal mining capacity.
• Commit to reducing scope 1 and 2 emissions from fossil fuel production to best-in-class industry standards by 2030, reaching close-to-zero emissions by then or soon after. “Gold standard” commitments by fossil fuel companies should include: (1) Targets (including interim targets) for the reduction in production of fossil fuels, at least in line with those implied in the ACF, and ideally in line with the PBS, (2) Making clear that divestments and asset sell-offs will not count towards meeting such reduction targets unless the buyer has also committed to gold standards, and (3) Accounting for emissions from non-operated joint ventures (NOJVs) on an equity basis.
  

Government

• Commit to enforcing policies to reduce fossil fuel consumption.
• Explicitly reject the idea that all national fossil fuel reserves must be exploited, and commit to no further issuance of new exploration licenses to discover oil or gas fields, nor approve the opening or extension of new coal mining capacity.
• Introduce targets and penalties to incentivise the reduction of scope 1 and 2 emissions from oil, gas and coal production.
• Commit to increase mobilisation of investment in clean energy supply in developing economies, including via multilateral development banks.
  

Financial institutions

• Stop all financing to new oil and gas exploration, and all financial flows to any new coal mine development, or for capacity expansion of existing mines.
• Restrict financing of infrastructure and assets which are likely to lock-in fossil fuel use for multiple decades.
• Restrict financing of any new oil or gas development which would lock-in unneeded long-term supply.
• Restrict financing of fossil fuel companies to those with strategies in line with our criteria above.
• Set portfolio-level financed emissions targets (including scope 3 emissions from fossil fuel clients) that decline in line with at least – but ideally exceeding – the level of ambition stated in the accelerated but clear feasible scenario.