How Did The Paris Agreement Impact Key Energy Market Players?

How Did The Paris Agreement Impact Key Energy Market Players?

In February 2018, the International Renewable Energy Agency (IRENA) published its EU renewable energy scenario report together with the European Commission, revealing that the EU can increase its share of renewable energies cost-effectively to 34% instead of the previously envisaged 27% in 2030.

Why is this so remarkable?

First of all, the International Energy Agency (IEA) has been the prevailing international energy policy authority and main influencer in the past, even after the founding of IRENA in 2009. Secondly, the discussions around the energy 2030 targets follow the climate imperative. And thirdly, the new results may indicate that something has changed: the power play between established and “more renewable” actors.


IRENA’s Renewable Energy Prospects report for the European Union, inspiring energy objectives for 2030

The Paris Agreement might change history

The Paris climate change agreement that resulted from COP21 in December 2015 in Paris has been considered as a breakthrough in international climate negotiations, as for the first time in history heads of state of 192 nations agreed on a global climate accord, with the overall objective to limit global warming to at least less than 2 °C above 1990 levels, inviting non-state actors such as companies and local and regional governments to contribute, and building on bottom-up national commitments defined by each national government.

Surprising changes for international agencies: the IEA redefined

I would like to take the perspective of an international organisation that is highly affected by this agreement, namely the IEA.

The IEA’s original purpose upon its foundation in 1974 was to help countries co-ordinate a collective response to major disruptions in the supply of oil, which has been widened to address the overall energy supply and demand, starting with fossil fuels and nuclear energy and finally complemented by renewable energies and energy efficiency.

The renowned global energy scenarios presented in the IEA’s annually published World Energy Outlook have followed a rather conservative approach in terms of role and potential of renewable energy and energy efficiency until recently, and this changed dramatically when the Paris agreement was negotiated and accepted.

Energy transformation leads to intra-institutional change

The reason for this change is that the interests of the IEA in the past were dominated by the intention to use fossil fuels and nuclear energy to the maximum, providing a stable energy supply that built on the centralised energy system approach which prevailed in the 20th century.

The conventional energy sector has been the main focus for the IEA, and the objective was clearly to build the energy systems around the interests of the conventional energy providers.

Therefore, the above mentioned energy scenarios neglected the role and potential of renewable energies and energy efficiency considerably still in the first decade of the 21st century and after the founding of the International Renewable Energy Agency (IRENA) in 2009, and the projections of these new elements have been surpassed by reality manifold since then.

The emergence of IRENA had an impact on the IEA which, in order to remain the principal and foremost international agency in the energy sector, started to integrate renewable energies and efficiency potentials into their scenarios to a certain degree, still underestimating their full potential in a carbon restrained world.

Energy scenarios post-Paris: Good-bye to business as usual

The Paris agreement changed the conditions under which the IEA operates fundamentally. As from December 2015, business as usual is no longer considered to be an option, national energy policies change across the world, and the 2°C limit to global warming puts a cap that needs to be considered by the principal carbon emitting sector, the energy sector.

Energy security, a major objective of IEA member states, is no longer restricted to the availability, accessibility and affordability of energy resources, but needs to consider and respect the limited carbon budget with the implication that most of our fossil fuels have to stay in the ground.


Energy Transformations, Credit: Photo by NASA on Unsplash

IEA: Transformation toward a clean energy system is not in line with policy goals

The World Energy Outlook (WEO) and Energy Technology Perspective (ETP) reports following the Paris agreement, notably the 2017 scenarios, explain how the global energy systems need to change in order to comply with the 2 °C target. In the IEA’s ETP 2017 edition, the IEA presented a “below 2C” scenario for first time and shows how global emissions can be pushed down to “net zero” by 2060 to meet the climate goals of the Paris Agreement.

The IEA stated also that out of 26 assessed technologies “needed” for the achievement of long-term climate change targets set as part of the Paris Agreement, only 3 are “on track,” and argued that governments have failed to provide enough support for the large-scale deployment of such technologies, including renewable energy and efficiency, energy storage and electric vehicle technologies, as well as carbon capture and storage.

The authors of the report identify the need for change in the policy frameworks of many countries in order to speed up the required technological developments that will enable the energy sector to limit its greenhouse gas emissions to the required threshold and say: “Transformation toward a clean energy system is not in line with stated international policy goals. Many technology areas suffer from a lack of policy support and this impedes their scaled-up deployment.”


President Nakao and International Energy Agency (IEA) Executive Director Fatih Birol: MOU on ADB and IEA collaboration in supporting low-carbon energy (2017)

The way forward – IEA promoting sustainable energy supply

The Paris Agreement has put the IEA under pressure to comply to both their 29 OECD member countries’ expectations, to support the conventional energy producers and to provide advice on how these operations can continue in a carbon constrained world.

It has created a transformation of the IEA that is now requested to provide solutions in line with the Paris Agreement, which includes promoting renewable energy technologies and the shift to more decentralised future energy systems with integrated demand side management in addition to energy production, and the goal to limit the energy needs by using energy more efficiently.

The transformation needed for the energy sector required an internal transformation in the IEA that is still taking place and will most probably continue, considering the disruptive changes that we observe in today’s energy markets.

Concluding, I would like to illustrate these changes by quoting the IEA’s director Fatih Birol at the World Economic Forum in Davos in 2018: “Renewable energies, especially solar power, it is becoming the cheapest source of electricity generation in many countries and it is competing with traditional fuels for the power plants to build.”

Where is IRENA’s role now?

Well, the IEA is following the trend that IRENA has promoted over the last 10 years, the way to a renewable, liveable future, and IRENA might keep on pulling to yet higher ambition to reduce unnecessary global warming.


A professional expert in sustainability, sustainable energy and climate change topics, with over 15 years of work experience in various projects on sustainability and policy related issues, Katrin holds a M.Sc. equivalent degree in geology and completed a post-graduate environmental sciences course in 2010. Katrin worked on national climate policy for the German Federal Environment Agency, on international climate policy and carbon finance as GIZ consultant to the German Federal Environment Ministry, and she was involved in the intergovernmental founding process of the International Renewable Energy Agency in 2008. She is experienced in communicating complex subjects to diverse target groups and especially interested in creative writing and storytelling.

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