Governments at COP28 reached an agreement, for the first time in COP history, to abandon fossil fuels. It sends a strong signal that countries now recognize the need for a low-fossil economy to combat climate change.
To achieve this goal, governments must incorporate the reduction of fossil fuel use into their nationally determined commitments (NDCs) and establish relevant policies to support an orderly transition. Today, fossil fuels remain a profitable business that also offers energy security. Business models based on clean solutions in energy-intensive sectors are often far from competitive. In aviation and shipmentThey can be up to 10 times more expensive, in steel manufacturing twice as expensive and the plastic production, 50% more expensive.
Therefore, for radical changes to occur, policies and capital must be directed toward improving the clean energy economy. This includes price incentives for clean energy, the reduction of “fossil fuel subsidies” and carbon pricing mechanisms. In the meantime, more attention needs to be paid to a just transition. Fossil fuel-exporting countries may need help to adapt, as will workforces in energy-intensive sectors around the world.
Under the IEA’s Net-Zero scenario, global demand for coal, oil and natural gas must be reduced to 9%, 25% and 22% of 2022 levels, respectively, by 2050. For the remaining demand for fossil fuels in By 2050, the majority of its emissions will be offset by carbon capture and storage (CCS) technologies.