The International Energy Agency (IEA) has issued its annual World Energy Outlook 2016. The IEA has examined several scenarios. All the Paris COP21 climate pledges from 190 countries have been incorporated into its main scenario. (It does not include any assessment of what the Trump administration may do with respect to the COP21 committments made by the world's second largest emitter.) It has projected that this scenario will actually result in 2.7 °C of warming. A scenario, called the 450 Scenario, with a 50% probability of limiting global warming to 2 ° C was also examined.
In its main scenario which includes emission reductions from COP21 pledges, the IEA projects a 30% rise in global energy demand to 2040. In 2040 it is projected that 60% of all new power generation capacity will come from renewables. In 2040 renewables are projected to represent 37% of all power generation. By 2040 most renewables-based generation is projected to be competitive without subsidies. Solar PV is expected to see a further 40-70% reduction in cost by 2040 and onshore wind by an additional 10-25%. However, fossil fuel generation continues to be important. Natural gas consumption is projected to rise by 50%. Growth in coal use essentially stops while growth in nuclearpower is limited to China.
Energy-related CO2 emissions plateaued in 2015 mainly because of a 1.8% improvement in the energy intensity of the global economy. This is partly because a growing proportion of the $1.8 trillion currently invested in energy annually is directed to renewables. But the IEA projects that even with the COP21 commitments energy-related emissions will continue to grow by 0.5% per year.
It is projected that a cumulative $44 trillion in investment will be needed in the global energy supply over the next 15 years. 60% of this will go to oil, gas and coal extraction and supply, including power plants using these fuels, and nearly 20% to renewable energies. Another $23 trillion will be required for energy efficiency improvements. For comparison over the last 15 years, 70% of total energy supply investment went to fossil fuels. This scenario requires a significant reallocation of capital from fossil fuels to renewables. This is aided by dropping fossil fuel subsidies. In 2015 the value of fossil-fuel consumption subsidies dropped to $325 billion, down from $500 billion the previous year.
The IEA projects that the COP21 commitments will slow the projected rise in global energy-related CO2 emissions. However, it does not believe that this is enough to limit warming to less than 2 °C. The IEA's 450 Scenario, which is based on a 50 % probability of limiting warming to under 2 °C, requires a further major reallocation of investment capital going to the energy sector. A greater proportion of the $40 trillion in cumulative energy supply investment has to move from fossil fuels and towards renewables and other low carbon investments in nuclear and carbon capture and storage so that the share going to fossil fuels would drop to about a third. In addition, $35 trillion is needed for improvements in energy efficiency - that's $12 trillion more compared with the main scenario. The 450 Scenario implies that before the end of this century, the energy sector must become carbon-neutral. That means all residual emissions from fuel combustion are either captured and stored, or offset by technologies that remove carbon from the atmosphere.