The Paris Agreement reflected an unprecedented international determination to act on climate. The focus must be on the decarbonization of the global energy system as it accounts for almost two-thirds of greenhouse gas emissions. Critically, the economic case for the energy transition has never been stronger. Today around the world, new renewable power plants are being built that will generate electricity for less cost than fossil-fuel power plants. And through 2050, the decarbonization can fuel sustainable economic growth and create more new jobs in renewables.

We are in a good position to transform the global energy system but success will depend on urgent action, as delays will raise the costs of decarbonization.

—IRENA Director-General Adnan Z. Amin

To meet the climate goals set in the Paris Agreement and keep the global temperature rise to below 2 degrees, the CO₂ emission intensity of the global economy would need to be reduced by 85% in 35 years. This means reducing energy CO₂ emissions by 2.6% per year on average, or 0.6 gigatonnes (Gt) per year in absolute terms.

The German government requested IEA and IRENA to shed light on the essential elements of an energy sector transition that would be consistent with limiting the rise in global temperature to this level. The overarching objective of the study is to analyze the scale and scope of investments in low-carbon technologies in power generation, transport, buildings and industry (including heating and cooling) that are needed to facilitate such a transition in a cost-effective manner, while also working towards other policy goals. The findings of this report will inform G20 work on energy and climate in the context of the 2017 German G20 presidency.

To address these questions, the IEA and IRENA separately examined the investment needs for energy sector pathways that would put the world on track towards a significant reduction in energy-related GHG emissions. Each institution has developed one core scenario that would be compatible with limiting the rise in global mean temperature to 2°C by 2100 with a probability of 66%, as a way of contributing to the “well below 2°C” target of the Paris Agreement.

Both the IEA and IRENA analyses start with the same carbon budget for the energy sector. But the pathways to reaching the goal differ between the two analyses: the modelling analysis conducted by the IEA aims at laying out a pathway towards energy sector decarbonization that is technology-neutral and includes all low-carbon technologies, taking into account each country’s particular circumstances. The analysis conducted by IRENA maps out an energy transition that stresses the potential of energy efficiency and renewable energy sources to achieving the climate goal, while also taking into consideration all other low-carbon technologies.

While IEA and IRENA base their energy sector analyses on different approaches and use different models and/or tools, there are similarities in high-level outcomes that support the relevance for a pathway and framework for a timely transition of the global energy sector.

IRENA. In REmap—IRENA’s global roadmap for the transition—energy demand by 2050 could be about the same as in 2015, due to significant energy efficiency improvements. The supply mix however, would change substantially, with the share of renewables in total primary energy supply reaching two thirds by 2050.

Primary CO2 emissions reduction potential by technology in the Reference Case and REmap, 2015-2050. Click to enlarge.

The energy transition would require additional investments in low-carbon technologies. Further significant cost reductions across the range of renewables and enabling technologies will be major drivers for increased investment, but cumulative additional investment would still need to amount to US$29 trillion over the period to 2050. This is in addition to the investment of US$116 trillion already envisaged in the Reference Case. Reducing the impact on human health and mitigating climate change would save between two- and six- times more than the costs of decarbonization, according to IRENA’s calculations.

IRENA’s macroeconomic analysis suggests that such investment creates a stimulus that, together with other pro-growth policies, will:

• boost global GDP by 0.8% in 2050;

• generate new jobs in the renewable energy sector that would more than offset job losses in the fossil fuel industry, with further jobs being created by energy efficiency activities, and;

• improve human welfare through important additional environmental and health benefits thanks to reduced air pollution.

Globally, 32 gigatonnes (Gt) of energy-related CO₂ were emitted in 2015. The report states that emissions will need to fall continuously to 9.5 Gt by 2050 to limit warming to no more than two degrees above pre-industrial temperatures. 90% of this energy CO₂ emission reduction can be achieved through expanding renewable energy deployment and improving energy efficiency.

Renewable energy now accounts for 24% of global power generation and 16% of primary energy supply. To achieve decarbonization, the report states that, by 2050, renewables should be 80% of power generation and 65% of total primary energy supply.

The report also describes how the energy sector transition needs to go beyond the power sector into all end-use sectors. Renewables need to account for the majority of power generation in 2050, based on continued rapid growth especially for solar and wind power in combination with enabling grids and new operating practices.

The buildings, industry and transport sectors need more bioenergy, solar heating and electricity from renewable sources that substitute conventional energy. Electric vehicles need to become the predominant car type in 2050. Liquid biofuel production must grow ten-fold. High efficiency all-electric buildings should become the norm. Deployment of heat pumps must accelerate and a combined total of 2 billion buildings will need to be new built or renovated.

IEA. According to IEA, the 66% 2°C Scenario would require an unparalleled ramp-up of all low-carbon technologies in all countries. An ambitious set of policy measures, including the rapid phase out of fossil fuel subsidies, CO₂ prices rising to unprecedented levels, extensive energy market reforms, and stringent low-carbon and energy efficiency mandates would be needed to achieve this transition. Such policies would need to be introduced immediately and comprehensively across all countries in order to achieve the 66% 2°C Scenario, with CO₂ prices reaching up to US$190 per tonne of CO₂.

Global emissions abatement by technology and region in the 66% 2°C Scenario relative to the New Policies Scenario. Click to enlarge.

In the 66% 2°C Scenario, aggressive efficiency measures would be needed to lower the energy intensity of the global economy by 2.5% per year on average between 2014 and 2050 (three-and-a-half times greater than the rate of improvement seen over the past 15 years); wind and solar combined would become the largest source of electricity by 2030. This would need to be accompanied by a major effort to redesign electricity markets to integrate large shares of variable renewables, alongside rules and technologies to ensure flexibility.

By 2050, nearly 95% of electricity would be low-carbon; 70% of new cars would be electric; the entire existing building stock would have been retrofitted, and the CO₂ intensity of the industrial sector would be 80% lower than today.

Around US$3.5 trillion in energy sector investments would be required on average each year between 2016 and 2050, compared to US$1.8 trillion in 2015. Fossil fuel investment would decline, but would be largely offset by a 150% increase in renewable energy supply investment between 2015 and 2050. Total demand-side investment into low-carbon technologies would need to surge by a factor of ten over the same period. The additional net total investment, relative to the trends that emerge from current climate pledges, would be equivalent to 0.3% of global gross domestic product (GDP) in 2050.

Fossil fuels remain an important part of the energy system in the 66% 2°C Scenario, but the various fuels fare differently. Coal use would decline most rapidly. Oil consumption would also fall but its substitution is challenging in several sectors. Investment in new oil supply will be needed as the decline in currently producing fields is greater than the decline in demand. Natural gas plays an important role in the transition across several sectors.