• Atmospheric CO2 /Parts per Million /Annual Averages /Data Source: noaa.gov

  • 1980338.91ppm

  • 1981340.11ppm

  • 1982340.86ppm

  • 1983342.53ppm

  • 1984344.07ppm

  • 1985345.54ppm

  • 1986346.97ppm

  • 1987348.68ppm

  • 1988351.16ppm

  • 1989352.78ppm

  • 1990354.05ppm

  • 1991355.39ppm

  • 1992356.1ppm

  • 1993356.83ppm

  • 1994358.33ppm

  • 1995360.18ppm

  • 1996361.93ppm

  • 1997363.04ppm

  • 1998365.7ppm

  • 1999367.8ppm

  • 2000368.97ppm

  • 2001370.57ppm

  • 2002372.59ppm

  • 2003375.14ppm

  • 2004376.96ppm

  • 2005378.97ppm

  • 2006381.13ppm

  • 2007382.9ppm

  • 2008385.01ppm

  • 2009386.5ppm

  • 2010388.76ppm

  • 2011390.63ppm

  • 2012392.65ppm

  • 2013395.39ppm

  • 2014397.34ppm

  • 2015399.65ppm

  • 2016403.09ppm

  • 2017405.22ppm

  • 2018407.62ppm

  • 2019410.07ppm

  • 2020412.44ppm

  • 2021414.72ppm

  • 2022418.56ppm

  • 2023421.08ppm

Solar panels in North London, UK. By 2030, over 500 GW of solar capacity is expected to be deployed across the world
News & Views

The elusive quest for fossil fuel peaks: inside the World Energy Outlook 2023

What should asset owners take away from the IEA’s flagship report?

Content Tags: Research  Transition  Regulation  Energy  US  Europe  UK 

The International Energy Agency (IEA) has released its flagship report, the World Energy Outlook (WEO). 

The document is a finger-on-the-pulse of global energy markets as it includes analyses of current realities and a range of predictions of what lies ahead.

As with any IEA report, context determines its weight. The WEO 2023 reignites a focus on the role of energy security policies, at a time when waves of uncertainty have reached the shores of energy markets once again.

The overarching message this time around is one of cautious optimism as policymakers responded to the global energy crisis in 2022 with an acceleration of renewables capacity, electrification has expanded and fossil fuel demand peaks seem near and possible.

Yet, policies often sway in the direction in which political winds blow. 

The link between policies and long-term capital allocation decisions of asset owners is simultaneously reactive and predictive. Considering the time horizons of investments, for asset owners, understanding the policy terrain is vital.

The IEA’s predictions offer clues of what the future could bring and in so doing, leaves asset owners with three key takeaways.


"The necessary green transition and the European desire to free itself from reliance on Russian natural gas require a significant expansion of renewable energy sources."

Mikkel Svenstrup, chief investment officer, ATP

2030 – the year of fossil fuel peaks?

WEO 2023 starts off where its 2022 version left off: a geopolitically induced energy crisis could prove to be a turning-point in the relationship between energy crises and fossil fuels.

Implying, that once again, crisis response matters. Historically, fossil fuel capacity expanded in the aftermath of a crisis. The IEA, which was itself born out of the oil price shock in 1974, knows this all too well. Yet the hope was, as it always is, that this time is different.

The IEA’s argument is that compared to the 1970s, today’s playbook differs. Significant growth in renewables capacity, both planned and deployed, offers a viable response to energy security concerns.

The response toolkit has been a work-in-progress. “For every $1 spent on fossil fuels, $1.8 is now spent on a range of clean energy technologies and related infrastructure”, the report said.

Net Zero Investor's Annual Conference | 11th December 2023 | London

The WEO 2023 offers a glimpse at the possibility of a crisis-fuelled transition. The IEA is projecting a peak in all three fossil fuel sectors – coal, oil and gas – by 2030. Particularly for natural gas, the prospect of peak demand is significant. In 2011, the IEA referred to a “golden age of gas”. By 2030, the age could end.

The crisis management hypothesis is also feeding into investment decisions. 

In December 2022, when Danish pension fund ATP invested in Better Energy, a solar energy supplier, chief investment officer Mikkel Svenstrup said: “The necessary green transition and the European desire to free itself from reliance on Russian natural gas require a significant expansion of renewable energy sources."


"For every $1 spent on fossil fuels, $1.8 is now spent on a range of clean energy technologies and related infrastructure."

IEA, World Energy Outlook 2023

Rays of sunshine

Whether or not fossil fuel peaks can be achieved depends, ultimately, on renewables deployment. Of all the sources, solar power is shining brightest.

The WEO 2023 includes an optimistic outlook for solar power and the value chain that feeds it. The IEA refers to solar PV as “one of the major successes of the past decade”. Over that period, generation capacity expanded sevenfold.

“A record 220 GW of solar capacity was added in 2022, and deployment levels are projected to more than double,” said the report. 

In one of the IEA scenarios – STEPS – which considers the latest policy settings, the prediction is that by 2030 solar PV deployment could reach as high as 500 GW.

The challenge now, the IEA argued, is to address the trade -intensity of the solar supply chain. Five countries, namely China, India, Vietnam, Malaysia and Thailand, hold 90% of global capacity. 

This means that most others depend on imports. For instance, over 70% of the EU’s solar deployment in 2030 will be dependent on imported goods. Trade-wars that result in higher import duties and tariffs could be determinantal to a decade-long effort of making solar production cheaper and efficient.

Solar power is firmly on asset owners’ radars. Rest, an Australian superfund announced an increased exposure to solar power projects in September 2023 while, in January 2023, Norges Bank announced its acquisition of a 49% stake of a portfolio of Spanish solar plants. 

A month prior, Danish pension fund ATP said it was investing in a solar project a pipeline of 10 GW of supply and in October 2022, Dutch pension fund APG acquired a 49% stake in a $1.2bn solar project near Las Vegas in the US.

Optimism on the policy-front seems to have had a ripple effect in investment committees.

The dragon in the room

A significant portion of the WEO’s analytical focus is on China, and rightly so. 

Over the past decade, no other country has rivalled its footprint on emissions, demand and renewables capacity. It is both the largest consumer of coal and the largest CO2 emitter of the world. 

Simultaneously, it is also the world’s largest solar PV manufacturer and home to 50% of the world’s wind power capacity.

According to the IEA, clean energy deployment in China is rapidly accelerating. “Clean energy is advancing so quickly that China is on track to exceed its 2030 Nationally Determined Contribution (NDC) target of 1200 GW of solar and wind capacity five years ahead of schedule”, the report stated.

Perhaps the most consequential question for China’s transition is one aimed at coal consumption peak. The country consumes more coal than all other countries combined. Chinese power companies, many of which are listed on stock markets across the world, have a vital role to play. So do the iron and steel companies which account for a significant share of industrial energy consumption.

The IEA’s expectation is that coal use in the country could decline and perhaps peak by 2030. 

However, that depends on the pace of renewables capacity deployment that replaces coal. If solar PV capacity additions exceed 270 GW annually, Beijing could be on track to overshoot its 2030 solar targets.

There is also the issue of a slowdown. China, some say, is due a structural adjustment – the looming spectre of a property market crisis, fuelled by a leveraged corporate sector, is hard to ignore. The possibility of an output reduction is a reality for investors and policymakers to grapple with.

The switch to renewables necessitates high levels of infrastructure stock, so macroeconomic health is a vital part of China’s ability to reduce coal use. Ultimately, any change in China’s GDP matters hugely for the global energy transition.

The world achieves fossil fuel peaks only if China achieves its own. As the adage goes - when China sneezes, the world catches a cold.

Some asset owners have skin in the game, although stewardship in China is far from straightforward. China’s listed companies and assets offer opportunities to partake in the country’s quest for fossil fuel peaks.

Norges Bank, for instance, has equity positions in over 600 Chinese companies. A significant part of its exposure is downstream in sectors such as consumer staples and discretionary, healthcare and the financial sector. $280m is invested in BYD, a leading Chinese electric vehicle manufacturer.

At the same time, Norges Bank has invested in companies that are critical to China’s transition. The Norwegian asset owner has minority stake in China Gas Holdings Ltd – a natural gas distribution company with a sizable methane emissions footprint. Another minority stake is in China Longyuan Power Group – China’s largest wind power producer.

The WEO 2023 predicts a peak in all major fossil fuels by 2030. The prediction is bold and dependent on several confounding factors such as regional variation in decarbonisation and a non-linear demand outlook. 

The boldness, however, is not without foundation. Solar power deployment, electrification of transport and the urgency of an energy-security response that favours clean energy are all reasons to be optimistic. Whether or not the optimism is long-lasting and widespread remains to be seen.

Also read
$30bn pension fund NOW: on an unstoppable mission to colour its entire portfolio green

Content Tags: Research  Transition  Regulation  Energy  US  Europe  UK 

Related Content