The International Energy Agency's calls for fossil fuel resources to remain unexploited in order to reach net-zero targets by 2050, has been rebuffed by some of the world's top oil consumers in Asia.
The Paris-based agency's roadmap to carbon neutrality calls for no new investment in fossil fuel supply projects and no further final investment decisions in new unabated coal plants, which uses the fuel without lowering its carbon impact.
However, for many of the world's fossil fuel-consuming economies in Asia, a rapid shift away from hydrocarbons comes in the way of industrialisation plans.
Japan, which pledged to go net-zero last year, is the fifth-largest consumer of crude and the world's fourth-largest importer of the fuel.
The country with the world's third largest economy "needs to protect its energy security including a stable supply of electricity, so we will balance this with our goal of becoming carbon neutral by 2050", Akihisa Matsuda, the deputy director of international affairs at Japan's Ministry of Economy, Trade and Industry (METI) told Reuters.
The report's suggestions to reach carbon neutrality "is not necessarily in line with the Japanese government's policy", he added.
The report also raised concerns in Australia, which continues to commit to coal and gas investments.
"The IEA report doesn't take into account future negative emission technologies and offsets from outside the energy sector – two things that are likely to happen and will allow vital and necessary future development of oil and gas fields," Australian Petroleum Production and Exploration Association chief executive Andrew McConville told the agency.
The IEA report comes as developed nations such as the US, turn their backs on fossil fuels.
The US has frozen new exploration activities on federal lands and has rejoined the Paris Agreement, which seeks to limit emissions to below 2°C above pre-industrial levels. It also plans to halve emissions from 2005 levels by 2030.
A number of countries adopted positions on carbon neutrality last year after movement restrictions to curb the spread of the Covid-19 pandemic led to a record fall in carbon emissions.
The IEA's recommendations for reaching net zero emissions by 2050, are "dizzyingly ambitious", Ehsan Khoman, director, head of emerging markets research - Emea at Japan's MUFG Bank said on Thursday.
The direct implications of the IEA's call to halt upstream projects is a shrinking of global oil supplies by more than 8 per cent annually.
"The IEA’s recommendations may prove challenging to transpire at the speed and magnitude as it’s NZE [net zero emissions] trajectory necessitates, and instead could be designed to provide clarity around the practicalities of increased climate ambition," Mr Khoman said.
However, others such as Joeri Rogelj, director of research, Grantham Institute, Imperial College London said that the IEA's roadmap is not the most ambitious.
Its call to action on reaching net-zero targets is, however, far from being the most conservative and is more than a token effort, he added.
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Will the pound fall to parity with the dollar?
The idea of pound parity now seems less far-fetched as the risk grows that Britain may split away from the European Union without a deal.
Rupert Harrison, a fund manager at BlackRock, sees the risk of it falling to trade level with the dollar on a no-deal Brexit. The view echoes Morgan Stanley’s recent forecast that the currency can plunge toward $1 (Dh3.67) on such an outcome. That isn’t the majority view yet – a Bloomberg survey this month estimated the pound will slide to $1.10 should the UK exit the bloc without an agreement.
New Prime Minister Boris Johnson has repeatedly said that Britain will leave the EU on the October 31 deadline with or without an agreement, fuelling concern the nation is headed for a disorderly departure and fanning pessimism toward the pound. Sterling has fallen more than 7 per cent in the past three months, the worst performance among major developed-market currencies.
“The pound is at a much lower level now but I still think a no-deal exit would lead to significant volatility and we could be testing parity on a really bad outcome,” said Mr Harrison, who manages more than $10 billion in assets at BlackRock. “We will see this game of chicken continue through August and that’s likely negative for sterling,” he said about the deadlocked Brexit talks.
The pound fell 0.8 per cent to $1.2033 on Friday, its weakest closing level since the 1980s, after a report on the second quarter showed the UK economy shrank for the first time in six years. The data means it is likely the Bank of England will cut interest rates, according to Mizuho Bank.
The BOE said in November that the currency could fall even below $1 in an analysis on possible worst-case Brexit scenarios. Options-based calculations showed around a 6.4 per cent chance of pound-dollar parity in the next one year, markedly higher than 0.2 per cent in early March when prospects of a no-deal outcome were seemingly off the table.
Bloomberg
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