Client Alerts

International Energy Agency calls for a ban on all new oil and gas projects and sets other radical new targets in its “Net Zero by 2050” report

Volterra Fietta Client Alert
21 May 2021

On 18 May 2021, the International Energy Agency (“IEA”) set out far-reaching proposals as part of “Net Zero by 2050”, its roadmap for decarbonising the energy sector.

The most controversial proposal will likely be a complete halt by 2021 to all new oil and gas projects and coal mines beyond those already committed.  The IEA also called for an end to the opening of new coal-fired power stations after 2021, no new sales of fossil fuel boilers after 2025, an end to the sale of internal combustion engine cars after 2035 and massive investment in renewable energy.

The report marks a radical change in approach for the IEA, which has historically been aligned with hydrocarbon-consuming economies and has advocated new fossil fuel projects to support the development of emerging economies.  The IEA’s new report embraces the aim of achieving carbon neutrality by 2050.

The IEA calls for a virtually immediate halt to all new coal mines, coal mine extensions, new oil and gas field exploration and new unabated coal plants

The IEA’s most far-reaching proposal is to end, after 2021, all new coal mines, coal mine extensions, new oil and gas field exploration and new unabated coal plants beyond those already committed.  The IEA has also called for no new sales of fossil fuel boilers after 2025.

Assuming its proposals are adopted, the IEA estimates that by 2050 oil consumption could fall by 75% and coal consumption by 90% compared to current levels.  Wind and solar power could provide 70% of the world’s electricity, compared to just 10% today.  According to the IEA, solar energy could become the world’s leading source of energy production by 2050.

Speaking on 18 May 2021, Fatih Birol, the IEA’s Executive Director, noted that the road to carbon neutrality in 2050 is “narrow” but still “achievable”.   The IEA anticipates that, although the adoption of its recommendations would result in a decline in oil production, the share of oil production controlled by OPEC would increase, from 37% today to 52% in 2050.

The IEA also calls for investment in renewable energy and innovation and an end to new internal combustion engine car sales

The IEA notes that massive investments are needed for existing solutions such as the electrification of the automobile sector and the deployment of renewable energies, as well as to accelerate innovations in technologies that are in the prototype phase today.  This is the case, for example, with CO2 capture systems or green hydrogen electrolysers.

The IEA’s “Net Zero by 2050” report proposes 400 milestones, which it sees as crucial if the goal of net zero emissions by 2050 is to be met.  Among them, by 2040, 60% of the stock of cars on the road worldwide will have to be electric, compared to 1% today.  As to renewable energy, by 2030, the report recommends the deployment of four times more solar and wind capacity than in 2020.  By 2030, all new buildings are to be zero-carbon ready and by 2050, 50% of existing buildings are to be retrofitted to zero-carbon ready levels.  In the IEA’s ideal scenario, in 2050, renewables would produce 90% of the world’s electricity, as compared to 29% in 2020.

According to the agency’s projections, the current rate of investment in the energy sector of $2 trillion per year will have to be increased to nearly $5 trillion per year by 2030.  This would add 0.4 percentage points of growth per year to global GDP, says the IEA in an analysis conducted with the IMF.  In addition, it would create tens of millions of jobs.

The IEA’s recommendations, if implemented, may give rise to calls for compensation by existing energy industry participants

The IEA’s report is not formally binding even on its 30 member States, which include Australia, Canada, France, Germany, the United Kingdom and the United States.  It a fortiori does not bind non-member States.

If implemented by its member States or others, the IEA’s roadmap would promote investment opportunities in the renewable energy sector.

At the same time, the IEA’s call to suspend new oil and gas projects, new coal mines and coal mine extensions could, if implemented, have severe ramifications for investors already engaged in exploration and pre-approval activities.  To the extent that such policy changes renege on existing commitments to investors or on their legitimate expectations, they might constitute violations by States of their public international law obligations under international investment treaties.  Foreign investors that consider that such violations have occurred will in certain circumstances be entitled to seek compensation from the responsible State through international investment arbitration.

Given the fast-moving and highly politicised nature of energy regulation, investors in both traditional and renewable energies should ensure that they are familiar with the public international law protections available to them.  Government policymakers should equally pay close attention to the past, present and future commitments that they make, expressly or by implication, to energy investors.

For further information about these developments, please contact Graham Coop ( or Gunjan Sharma (