‘Emissions don’t have a passport’: World’s ‘financial muscles’ must invest in green energy

For our first episode of The Big Question, a brand new series from Euronews Business where we discuss some of the most important topics on today’s agenda with leaders and industry experts, Angela Barnes met with Dr Fatih Birol, the executive director of the International Energy Agency (IEA), to discuss, among other things, whether climate goals are still on track.

“Our energy world in 2030, only seven years from now, will be very different compared to what we have today,” Dr Birol highlighted from his office in Paris with the Eiffel Tower as the backdrop for the interview.

The energy economist has had a long career in the energy industry but remains optimistic that we can hit climate targets if global cooperation improves.

In the latest World Energy Outlook report, published in October 2023, the IEA stated that world demand for the three fossil fuels: oil, gas and coal will peak by 2030. While coal use enters a steep decline after 2030, gas and oil use will remain close to peak levels for the next two decades.

Angela asked Dr Birol why our reliance on fossil fuels is set to continue and what the future of energy is going to look like, realistically.

What’s limiting the green energy transition?

In the past, the IEA was criticised for not taking a stronger stance on climate change.
However, in 2021 they published a ‘seminal work of the energy industry’ in which Dr Birol and his team of 400 experts laid out a detailed plan to get to net-zero by 2050.

Though the need to address climate change was undeniable, this was also the moment where the cost of renewable energies had reduced sufficiently to now make not only environmental sense, but economic sense too.

Since 2021, investment in green energy has continued to grow. When the Paris Climate Agreement was first signed in 2015, global energy investment sat at $2 trillion (€1.8 trillion) with half spent on fossil fuels and the other half on clean energy.

Today, $1 trillion (€918 billion) is still spent on fossil fuels but the investment in clean energies has grown to $2 trillion. Unfortunately, most of this investment is mainly happening in advanced economics, and also in China, which is classed by the International Monetary Fund (IMF) as an emerging economy.

“The fault line of the whole problem is not enough clean energy investment is happening in the developing world,” Dr Birol explained.

“How are we going to support those countries in order to make the necessary investment for clean energy, for solar, for wind, for efficiency, for electric cars and others?,” he also noted.

How can we speed up the green energy transition?

In the words of Dr Birol, the world needs those with “financial muscles” to step up.

“When I look at, globally, the oil and gas industry, they are far from where they should be,” he told The Big Question.

“This is very unfortunate because they could be a very good ally to reach our targets because they have a lot of engineering skills, they have deep pockets, they have experience.”

Angela and Dr Birol continued to discuss the particular companies that could do more.

How will rising oil prices impact inflation?

Of course, as oil is still a central energy component, the price of crude on the markets holds great power as it has the ability to alter the course of inflation, thus central bank interest rate decisions, as Angela also discussed with Dr Birol.

They touched on the role of OPEC, whom he used to work for, and also how the Middle East conflict is further impacting commodity prices.

“We have been warning [about] the oil markets since the beginning of this year because the demand is very strong. Mainly, oil demand is driven by China because China is coming out of COVID and there’s a big growth [in] China’s demand. But what the producers did, especially Saudi Arabia and Russia, together, they cut the production.

“They didn’t bring enough oil to the markets. When the demand is high, when you bring less oil to the markets, it was very simple, we said at the beginning of the year, we will see tight markets and the price will go up and it really did.”

He further noted how the current geopolitical tensions in the Middle East could lead to another price increase.

“I am afraid the prices may go up again and could be a major problem for the global economy, especially for the developing countries that import a lot of oil and gas. 

“They, more than the European countries, are much more worried than the developing countries, because in Europe, in North America, in Japan, the countries have the economic muscles in order to face these problems. But the developing countries can go through very difficult times if the prices further increase,” he added.

Solar vs. Nuclear – What is the future of energy?

Nuclear energy remains a divisive matter between countries, and also between member states in the EU, such as Germany and France.

For France, nuclear power is key to its energy supply, while Germany opted to close all its power plants by 2022.

Angela asked Dr Birol for his view on nuclear power, which they discussed in the full interview. He also shared his thoughts on solar and other energy options.

He noted, however, that the approach to the transition needs to be a global one as “emissions don’t have a passport”.

“It is in the interests of everybody, even for the advanced economies, that they make this investment because when we talk about climate change, for example, we are in Paris today in Europe. The climate in France will not only be affected by the emissions in Europe, but it is emissions coming from Jakarta or from Detroit or Sao Paulo or Mogadishu.

“It is affecting us all. It is important for the Europeans or the Americans or the Japanese that the clean energy investment is happening also in the developing world, not for ethical and moral reasons, but very selfish reasons, because if the emissions in those countries do not go down, they themselves will be in trouble,” he added.

He further highlighted that those who think reaching climate goals is impossible, are on the wrong side of history.

Watch the full episodes of the Big Question above to learn more.