Wind, solar and other types of renewable power will overtake coal to become the world’s top source of electricity in just 15 years if the pledges countries are making for a global climate change deal this year are met.
This shows today’s energy companies are making a “major fatal error” if they assume climate action is not going to affect their businesses, Fatih Birol, the IEA chief economist, said.
“That would be like assuming interest rates will stay the same for the next 25 years,” he told the FT in an interview. “It’s the same type of short-sightedness.”
For the first time in UN climate negotiations, nearly all countries are supposed to limit their greenhouse gas emissions as part of a global agreement due to be signed in Paris in December.
The measures already unveiled by dozens of nations should sharply reduce the use of fossil fuels, especially coal, in the US, the EU and elsewhere, the IEA says in a report timed to influence negotiations for the Paris deal.
But the agency warns the schemes launched so far will not be enough stop average global temperatures warming more than 2 degrees Celsius from pre-industrial times, a limit countries have already agreed should not be breached because it could cause risky climate change.
That means governments must ensure any agreement clinched in Paris requires countries to review and step up their emissions targets every five years, says the IEA, which monitors global energy trends.
“We have to have a peaceful divorce between economic growth and emissions for the well-being of all the world’s citizens,” Mr Birol told the FT in an interview.
Energy-related emissions from carbon dioxide, the most abundant greenhouse gas produced by human activities, stalled in 2014 even though the global economy grew.
This rare event raised speculation that the historic link between economic growth and rising emissions may finally be breaking.
But Mr Birol said there was no guarantee that carbon pollution levels would stay flat in the future, partly because India and other nations were still building inefficient, polluting coal power plants.
These types of coal stations should be banned, the IEA says, and global greenhouse gases should peak by 2020 if climate change is to be curbed.
The IEA wants the Paris agreement to include a long-term deadline for phasing out greenhouse gas emissions, because it says this offers a more tangible goal to guide business investment than the existing 2 degree temperature target.
The leaders of the Group of Seven nations last week backed a goal to phase out emissions this century and sharply reduce greenhouse gases by 2050.
But such targets are dividing the nearly 200 countries negotiating the Paris climate agreement. Some say emissions should be virtually eliminated by 2050 while others say there should be no firm deadline at all.
Two thirds of greenhouse gases come from producing and burning the coal, oil and gas used to power the world’s electricity systems, factories and cars, so meeting countries’ climate targets is expected to require rising levels of renewable energy investment, which reached $270bn globally in 2014.
Renewable accounted for about half of all new power plant capacity built last year, and the IEA expects that share to rise in coming years.
The agency says renewable power now accounts for 22 per cent of global electricity generation, well behind coal at 41 per cent.
But the IEA’s analysis of countries’ Paris climate pledges shows renewables’ share of generation will rise to 32 per cent by 2030, just pipping coal, long the world’s leading source of electricity.