The International Energy Agency is urging countries to increase investments in clean energy and to divest from polluting fuels such as coal.
World oil demand is set to fall in the Paris-based agency's assessment of energy consumption until 2050.
Consumption of oil, the mainstay of the global economy today, is set to decline to 75 million barrels per day from 100 million bpd. The decline will be made possible if countries continue to make the pledge towards reaching net-zero emissions by the middle of the century, in line with the 2016 Paris Agreement goals.
The accord mandates capping the global rise in temperatures to 1.5 degrees Celsius above pre-industrial levels.
"Today’s climate pledges would result in only 20 per cent of the emissions reductions by 2030 that are necessary to put the world on a path towards net-zero by 2050,” said Fatih Birol, IEA's executive director.
“Reaching that path requires investment in clean energy projects and infrastructure to more than triple over the next decade."
In the scenario based on announced pledges highlighted by the IEA, demand for fossil fuels peaks by 2025, with carbon dioxide emissions set to fall by 2050, if all pledges towards carbon neutrality are met.
All sectors will see a decline in emissions, with the electricity sector delivering the largest share. The global rise in temperatures will also hold at around 2.1 degrees Celsius by 2100.
“The world’s hugely encouraging clean energy momentum is running up against the stubborn incumbency of fossil fuels in our energy systems,” said Mr Birol.
“Governments need to resolve this at COP26 by giving a clear and unmistakable signal that they are committed to rapidly scaling up the clean and resilient technologies of the future. The social and economic benefits of accelerating clean energy transitions are huge, and the costs of inaction are immense," he added.
The IEA's call to increase spending on clean energy comes amid a worldwide shortage of energy supplies, including oil and gas.
Oil prices are trading above $80 per barrel for the first time in three years, prompting organisations such as Opec to cite a rally fuelled by "energy transition" as a key reason.
The IEA's earlier call for no new investment in fossil fuel supply projects has also come under sharp criticism from oil producing states.
On Wednesday, the IEA's Mr Birol said there's been "gross mischaracterisation" of the agency's call for cleaner energy investments amid a global shortage of supply of conventional fuel.
He said the global shortages can be attributed to high post-Covid economic growth driven by fossil fuels, extreme weather events as well as planned and unplanned outages.
"Now, some people are portraying this very situation as the first crisis of clean energy transition. This is not accurate. This is wrong. And this is a gross mischaracterisation, which we don't share, to say the least," Mr Birol told reporters.
He also dismissed the long-term viability of gas as a transitional fuel, complementing various clean energy sources on the path to net-zero by 2050.
Gas prices have surged around 85 per cent year-to-date, burdening consumers, particularly in Europe with high heating and utility costs.
"Natural gas has been presented as a reliable, affordable energy source, which could complement clean energy, but the current station volatility in the natural gas markets, I believe, is not good news for the natural gas industry," Mr Birol said.
"The natural has industry didn't get good marks from millions of consumers around the world, and I think they should take note of this," he added.
