The rich and the ready must lead global transition from fossil fuel production
Rich fossil fuel-producing countries need to start reducing output now and end production within 20 years, as part of a just energy transition that will minimise climate overshoot and return global warming below 1.5°C by the end of the century, a new report shows.
Published by the global climate science and policy institute Climate Analytics, End of the Pipeline: Managed vs Market-driven Routes to Ending Fossil Fuel Production shows that as fossil fuel demand falls, rich countries can ease the strain on poorer and more vulnerable producers by coordinating on planning the transition. It also shows that coordination may benefit all producers by moderating the inevitable fall in prices.
“Every country currently producing coal, oil and gas will have to stop producing them if we are to slow, stop and ultimately reverse global warming and constrain the ever-escalating impacts that it’s driving – there’s no hiding place,” said Dr Neil Grant, Senior Expert on Mitigation Pathways at Climate Analytics and the report's lead author.
“This report shows that if richer and more economically able producers go first and work with poorer countries that need a little more time, everyone can benefit.”
Although the demand side of the global energy transition has been frequently analysed, the implications for fossil fuel producing countries, and options for minimising the economic impact of the production phase-out, have not been as well studied.
Two routes to zero
The report analyses two idealised pathways that both phase out global fossil fuel production fast enough to halt global warming by mid-century, keep overshoot of the Paris Agreement 1.5°C target as small as possible, and allow temperatures to return below 1.5°C by 2100.
Under the market-driven pathway, countries exit production in a sequence determined purely by economics, with high-cost fields falling out of operation first and the cheapest continuing. In the coordinated pathway, economics plays a role, but countries work together to plan a more equitable phase-out: wealthy countries with diversified economies go first, poor countries that depend heavily on fossil fuel income go last, and others land in the middle of the sequence.
In both pathways, production drops steeply over the next 10 years, with the rate of decline then flattening out:
- coal production falls 72% by 2035 and is phased out around 2050
- gas production falls 51% by 2035 and is gone by 2060
- oil production falls 28% by 2035 and is phased out by 2070.
But the implications for specific countries differ markedly.
‘Just, orderly and equitable’
In the market-driven scenario, developing countries such as Angola, Equatorial Guinea, Nigeria and Trinidad & Tobago could see oil and gas production fall by on average 50% by 2035. This would severely threaten fiscal stability and already strained budgets for spending on areas such as health and education.
A coordinated approach would ease the situation for the poorest and least-ready countries substantially: over the decade, instead of halving, gas production would fall by 10% and oil production by 36%. The cliff edge would become a more manageable gradient.
This would necessitate a faster phase-out by the richest and most ready countries, such as Australia, Canada, China, Norway, the UK and US, which would end coal, oil and gas production by the early 2040s in the coordinated scenario.
Other major producers such as Russia, Saudi Arabia and the UAE would end coal production around 2040, gas production in the mid 2040s, and oil production by or just after 2050.
“At the UN climate summit in 2023, governments explicitly pledged to transition away from fossil fuels in a ‘just, orderly and equitable manner,’ accelerating action in the 2030s – our report is showing what that looks like for fossil fuel producers,” said Bill Hare, CEO of Climate Analytics.
“And although there’s a lot to unpick in terms of what coordination might look like and how it might work, the basic principle is sound: as fossil fuel demand falls under the advent of renewables and electrification, a government can either decide to work with others on a just and orderly transition, or mount a highly disorderly, divisive and costly rearguard action to buy a few extra years.”
Under both scenarios, fossil fuel prices fall markedly, with oil descending under US$50 per barrel by 2035, around half of its recent price. But coordination can moderate the price fall, providing some relief for all producing governments.
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