Coal, Oil and Gas Going into Extra Time

Fossil fuels in 1.5 degree pathways

To halt the global temperature rise and limit it to 1.5 degrees Celsius by the end of the century, global CO₂ emissions must fall to net zero by around mid-century and then become net negative, according to the latest report from the Intergovernmental Panel on Climate Change (IPCC). Taking action in the current decade is crucial to achieve this. By 2030, CO₂ emissions have to be reduced by 48 per cent compared to 2019 in via 1.5 degree pathways with no or limited over­shoot. According to the IPCC, a net-zero energy system will require a substantial reduction in total fossil fuel use, minimising the use of unabated fossil fuels, and the use of CCS in the remaining fossil fuel sys­tem. Emissions from the continued opera­tion of the existing fossil fuel infrastructure without additional abatement measures would exceed the remaining carbon budget for 1.5 degrees. To keep the Paris tempera­ture goal within reach, coal-fired power generation will need to be rapidly and sig­nificantly reduced, and oil and gas use will have to peak and decline as well. Many of the modelled pathways assessed by the IPCC rely on CCS and CDR being deployed on a very large scale in order to reach ambitious targets. If carbon sequestration technologies are limited to levels deemed feasible by experts, the share of fossil fuels, especially gas, in the energy mix declines much faster and to lower absolute levels.

In the recently published update of its Net Zero Roadmap, the International Energy Agency (IEA) projects that oil and gas production will decline by around 2 per cent per year until 2030, and then by 4 to 5 per cent per year until 2050. Therefore, in a 1.5 degree scenario, no new oil and gas fields would need to be developed to meet demand. Instead, investment in the fossil fuel industry would be limited to maintaining existing production and minimising emis­sions from its operations.

The incoming COP President, Sultan Ahmed Al Jaber of the United Arab Emir­ates (UAE), head of the national oil com­pany ADNOC, stated that phasing down the demand for, and supply of, all fossil fuels is inevitable and essential. At the same time, he stresses the need to invest in reducing emissions within the existing fossil fuel system. To achieve the goal of an energy sys­tem that is free of unabated fossil fuels by mid-century, all available technologies and solutions must be scaled-up, now.

A complete phase-out of all fossil fuels for both energy and material use, for exam­ple in the chemical industry, is not actually reflected in scientific mitigation scenarios. In political terms, however, the demand is highly symbolic. The exact wording of the COP decision on phase-down vs. phase-out and unabated vs. all fossil fuels and the resulting narrative is of great importance for the future of the fossil fuel economy. This will be seen as a signal regarding the fate of investment in new fossil fuel infra­structure, but also an indicator about the extent to which abated fossil fuels will be included in mitigation policies or sustain­able investment guidelines, and whether the costly construction of CCS infrastruc­ture should be publicly funded.

Fossil fuels and the UNFCCC

In the context of the United Nations Framework Convention on Climate Change (UNFCCC), it has long been impossible to explicitly address the role of fossil fuels. The countries of the Organization of the Petroleum Exporting Countries (OPEC) and Russia, in particular, have been adamant in their opposition to sectoral and fuel-specific language. Their position is that the UNFCCC mandate does not cover the use of specific energy sources, but only the resulting emis­sions. Other fora, such as the G20 and G7, have also failed to agree on phasing out fossil fuels. In their communiqués, the term “unabated” is used in this context, along with ill-defined goals such as “sustainable and clean energy systems”.

When COP26 in Glasgow (2021) called for a phase-down of coal-fired power gen­era­tion and the elimination of inefficient fossil fuel subsidies, it was the first time that language explicitly naming fossil fuels was included in a UNFCCC decision text. Since then, there has been an increasing struggle to for­mulate a target that meets scientific require­ments while being politi­cally viable.

In addition to the debates about the time horizon and the distinction between indus­trialised and developing countries, the lines of conflict also concern the differentiated treatment of coal, oil and gas. Large emerg­ing economies such as India, China and Indonesia, citing historical responsibility and equity, are critical of calls for phasing out fossil fuels in general, and also opposed to singling out coal-fired power generation, which is particularly harmful to the cli­mate. In this context, India’s initiatives in Glasgow (COP26) and Sharm El Sheikh (COP27) to phase down all fossil fuels also served to highlight the bias of many devel­oped countries, especially the United States.

The distinction between unabated and abated fossil fuel use has given the phase-out debate a new focus. The latter refers to reducing emissions both during the pro­­duction phase of fossil fuels, primarily by avoid­ing volatile methane, and during their use, primarily by capturing and storing CO₂ from process and waste gas streams from large point sources such as power plants and industrial facilities.

The net-zero strategies of major emitters such as the United States, China and Canada, as well as many scientific mitigation sce­narios rely heavily on CCS (see SWP Com­ment 38/2023). However, the technology, albeit being the subject of intensive research for decades, has so far failed to live up to expectations in practice. In particular, it currently has no role in decarbonising power generation, which is also crucial for rapid emission reductions in other sectors. According to the Global CCS Institute, only one commercial-scale power plant with CCS was in operation worldwide at the end of 2022.

At COP28, the first Global Stocktake under the Paris Agreement will be completed. The aim is to review the collective progress towards achieving the climate targets and encourage the subsequent strengthening of national commitments. Due to the massive ambition and implementation gap, the focus of the debate has shifted towards short-term measures in order to course-cor­rect. The substantial ad­vancements in solar and wind energy, as well as in electricity storage tech­nology, lend further support to manifold calls to prioritise renewable energy sources and swift­ly phase out coal-fired power generation.

The EU is advocating for a clear signal at COP28 to restrict the deployment of CCS to those sectors where no viable mitigation options exist or are prohibitively expensive. Many ambitious nations, especially from Small Island Developing States and North­ern Europe, still favour a complete phase-out of all fossil fuels. There is deep concern that limiting a phase-out to “unabated” fossil fuels would send the wrong signal and further delay the urgent changes needed in investment and infrastructure priorities.

Emission-reduced use of fossil fuels

To evaluate the limiting of a phase-out to unabated fossil fuels through the lens of ambitious climate goals, three key dimen­sions must be considered. Firstly, there needs to be a clear definition of the level of emission reductions required for fossil fuels to be considered as abated in line with the Paris temperature goal. Secondly, it is cru­cial to clarify the feasible scope of practical CCS applications and determine the extent to which they can reduce emissions, as well as the factors limiting reductions. And thirdly, in view of the dwindling remaining carbon budget, it is essential to determine the time frames in which these contribu­tions could be realised.

Tug-of-war over the dominant narrative

The battle over the wording of the fossil fuel phase-out is also tied to the attempt to establish a narrative of the sustainable, climate-neutral use of fossil fuels being an alternative to renewable energy sources. The OPEC states in particular, with Saudi Arabia as their mouthpiece, are actively pursuing this. Internationally, the Kingdom is advocating a climate policy triad of “miti­gation, abatement and removal”. This un­usual division distinguishes between miti­gation – whereby CO₂ emissions are avoided through the use of largely climate-neutral technologies such as solar, wind and nuclear energy, or through efficiency gains – and abatement, which involves reducing CO₂ emissions from the use of fossil fuels. It suggests that, with CCS and CDR, the climate-neutral use of fossil fuels is possible indefinitely. Hence, according to the nationally determined approach of the Paris Agreement, the choice should be left to individual countries, and no technology or energy source should be discriminated against or favoured. The narrative also paves the way for calls to promote and sup­port all technologies equally.

Saudi Arabia itself is pursuing a “circu­lar carbon economy” (CCE) approach, which it has been promoting internationally since its G20 Presidency in 2020. The CCE ap­proach is based on the four pillars of “reduce, reuse, recycle and remove”. The “reduce” strand (analogous to mitigation) includes measures to reduce the amount of CO₂ that needs to be managed. The King­dom attaches great importance to this sub-pillar at the national level, for example by setting an ambitious target of 50 per cent renewable electricity generation by 2030. However, the focus of its political communication is clearly on the continued use of fossil fuels, which they say should be enabled through the development and deployment of alternative materials, syn­thetic fuels and hydrogen, combined with the expansion of CCS, CCU and CDR.

The UAE’s action programme for its up­coming COP Presidency calls for “accelerat­ing a just and orderly energy transition and drastically reducing emissions by 2030”. The UAE is focusing on renewable-energy expansion targets and energy-efficiency im­provements, as well as reducing the emis­sions intensity of fossil fuels, particularly by reducing associated fugitive methane. The Emirates are expending considerable political capital to commit the oil and gas industry to making a substantial contribution to climate change mitigation. The goal of securing commitments from as many major oil and gas companies as possible is at the heart of their multi-sectoral climate action agenda. COP President Al Jaber’s call for the world to use only the cleanest oil and gas possible may also be read as a mes­sage from the Gulf States, which feature relatively low upstream emissions, to fossil fuel producers with higher emission inten­sities. In addition to countries with out­dated production infrastructure, this would also include those that rely on unconven­tional sources such as shale gas and oil sands.

The stance of the two oil states – Saudi Arabia and the UAE – that the existing system must be decarbonised while the new system is being built is entirely consistent with the urgency required by science. How­ever, emphasising the narrative of the cli­mate-neutral use of fossil fuels can give rise to the impression that this is a tactic to pro­long the fossil fuel business model at the expense of climate protection, rather than a mitigation strategy. This notion undermines the legitimate goal of moving CCS technology from its current weak position towards the required performance level and greater deployment through a concerted push in research, development and invest­ment incentives. Harnessing the current momentum without creating perverse incen­tives for continued investment in fossil fuels will be a difficult balancing act beyond the Dubai conference.

In its joint negotiating position for COP28, the EU has developed a differentiation that seeks to address this dilemma and also bridge internal dissent within the bloc. It points out that the transition to a net-zero economy in line with the 1.5 degree target requires a global phase-out of un­abated fossil fuel use and a reduction in the consumption of all fossil fuels before the end of this decade. Accordingly, the energy sector should be largely free of fossil fuels well before 2050, and power generation should be fully or largely decarbonised by the 2030s, leaving no room for new coal-fired power plants. Given the limited avail­ability of abatement technologies, the EU claims they should be deployed in sectors that are difficult to decarbonise. CDR should contribute to negative emissions – not delay climate action in sectors where there are effective and cost-efficient alter­natives.

Outlook

COP28 is of particular importance due to the Global Stocktake and the unprecedented integration of the fossil fuel industry, which is being promoted by the Presidency. Given the geopolitical situation, it is very unlikely that Dubai will produce a major breakthrough with a clear signal for a rapid phase-out of fossil fuels. The question about the role of fossil resources in a net-zero economy will occupy the global community for a long time to come. If a compromise can be found along the lines put forward by the EU, this would at least set a course in the direction of the rapid reduction of fossil emissions deemed necessary by science. A certain openness to regionally specific solu­tions and the use of abated fossil resources as a feedstock for materials would be main­tained without unduly upgrading the CCS pathway, especially in the short term.

Beyond the COP decision, there is an urgent need for more transparency and hon­esty when it comes to short- and medium-term contributions and the emissions inten­sity of different technology pathways. The assumptions used in modelled pathways should be made explicit and subjected to a reality check, including the IPCC’s assess­ment. In order to evaluate risks and appro­priately prioritise mitigation over abatement, it would be very helpful to identify conditional pathways that outline future developments based on a high or limited availability of CCS and CDR. To prevent further polarisation of the debate and in­crease feasibility, governance mechanisms for carbon management should be geared towards minimising residual emissions (see SWP Comment 29/2023).

In addition to conceptual clarity and science-based definitions for abated fossil fuels, it is particularly important to find cross-sector solutions that consider emis­sions on a life-cycle basis. The strategic goal of climate neutrality needs to be taken into account, as emissions intensity alone is often not an appropriate metric to incen­tivise the necessary structural changes. Shift­ing emis­sions beyond the boundaries of one’s own sector, product or national inventory can lead to pathways that appear to be climate-neutral in accounting terms but do not actually reduce emissions signifi­cantly in the long term. In this context, the fossil fuel industry’s credibility would be en­hanced if it explicitly addressed the emis­sions that result from the end-use of its prod­ucts and presented clear transition plans.

COP28 President Al Jaber often speaks of pragmatic solutions and recently called for “separating fact from fiction” when it comes to climate action. In the context of reducing emissions from the use of fossil fuels through abatement technologies, this would be a neces­sary, if not sufficient, step towards a net-zero economy.