I
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
A Critical Assessment of the IEA’s Net
A Critical Assessment of the IEA’s Net
Zero Scenario, ESG, and the Cessation
Zero Scenario, ESG, and the Cessation
of Investment in New Oil and Gas Fields
of Investment in New Oil and Gas Fields
Washington, D.C.
www.eprinc.org
June 2023
Authors:
Batt Odgerel
Lucian Pugliaresi
Michael Lynch
Edited by Rupert Darwall

II
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
About the Energy Policy Research Foundation
The Energy Policy Research Foundation was founded in 1944 and is a not-for-profit 
organization that studies energy economics and policy issues with special emphasis on energy 
security, including the role of oil, natural gas, and petroleum products in the national economy. 
It is known internationally for providing objective and technical analysis on a wide range of 
energy issues. It is funded by a variety of donors including foundations, the private sector, and 
the U.S. government. The institute’s publications on developments in U.S. and international 
petroleum are made available on our website: www.eprinc.org.
The Energy Policy Research Foundation’s research is routinely presented at conferences 
and forums, including educational institutions. The institute has been a source of expertise 
for numerous government studies and its chairman and president have served on virtually 
every National Petroleum Council study of oil and gas issues. The Energy Policy Research 
Foundation routinely testifies before Congress and is now engaged in a long-term assessment 
of costs, benefits, timing, and energy security implications of alternative pathways to a lower 
carbon energy system for the national economy. Part of this work includes a systematic 
assessment of the economic and strategic assessment of the role of legacy fuels and U.S. 
potential to develop supply chains for critical minerals and materials to support the energy 
transition.
 
Energy Policy Research Foundation 
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Suite 500P (Mailbox 14) 
Washington, D.C. 20001 
+1 (202) 944-3339 
www.eprinc.org

III
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Acknowledgments
This report was written by Batt Odgerel, who served as the principal author and conducted 
the quantitative analysis. Batt Odgerel also created the graphs and designed the layout of the 
report. Lucian Pugliaresi and Michael Lynch made important contributions to the report. The 
authors would like to express their gratitude to Rupert Darwall for his invaluable guidance 
and exceptional editing support throughout this project. The authors also extend their thanks 
to Janice Meyerson for copy-editing the report and to Glen Sweetnam and Max Pyziur for 
generously sharing their insights on the two-speed transition, electrification, and grid reliability.
This research report was made possible by the support of the RealClearFoundation.

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Batt Odgerel, Lucian Pugliaresi, Michael Lynch
About the Energy Policy Research Foundation	
	
	
	
II
Acknowledgments	
	
	
	
	
	
	
	
III
Figures and Tables	
	
	
	
	
	
	
	
VI
Foreword	
	
	
	
	
	
	
	
	
VIII
Executive Summary	 	
	
	
	
	
	
	
XIV
Purpose of Report	
	
	
	
	
	
	
	
1
Background	 	
	
	
	
	
	
	
	
3
Chapter 1. Net Zero Scenario—Assumptions and Milestones	
	
5
1.1. What Is IEA’s Net Zero Scenario (NZE)?	
	
	
	
5
1.2. Normative vs. Exploratory Scenarios	 	
	
	
	
10
1.3. Low Oil and Gas Price Expectations	
	
	
	
	
10
1.4. High Carbon Prices Worldwide	
	
	
	
	
13
1.5. Rapid, Large-Scale Behavioral Changes		
	
	
	
14
1.6. Energy Supply Comparable to Entire OECD Must Disappear		
16
1.7. Unprecedented Energy-Intensity Improvements	
	
	
18
1.8. Massive Additional Clean Energy Investments		
	
	
20
1.9. GDP Growth Assumptions Constant Across Scenarios		
	
22
Chapter 2. Implications of No New Oil and Gas Development	
	
23
2.1. Oil and Gas Production Without New Oil and Gas Fields	
	
23
2.2. Price Elasticities of Demand and Oil and Gas Prices	
	
	
25
2.3. NZE Implications in Different Areas	 	
	
	
	
28
2.3.1. Macroeconomy	 	
	
	
	
	
	
29
2.3.2. Energy Security	 	
	
	
	
	
	
31
2.3.3. Social Issues and Instability	
	
	
	
	
33
2.3.4. Development	
	
	
	
	
	
	
35
2.3.5. Technological Innovation		
	
	
	
	
37
2.3.6. Environmental and Health	
	
	
	
	
38
Table of Contents

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Chapter 3. Central Role of Oil and Gas in Modern Civilization	
	
40
3.1. Composition of Oil Demand	 	
	
	
	
	
40
3.2. Concentration of Oil Demand in Transportation	
	
	
43
3.3. Limitations of BEVs as ICE Substitutes	
	
	
	
44	
3.4. Composition of Natural Gas Demand	 	
	
	
	
48
3.5. Importance of Natural Gas for Reliable and Resilient Electric Grids	
50
3.6. Rise of Natural Gas Displacing Coal in Electricity Generation		
51
3.7. Reality of Decarbonizing Industrial Heat Processes	
	
	
52
Chapter 4. Understanding Additional Headwinds to Net Zero	
	
54
4.1. Limitations to Additional Cost Improvements in Solar and Wind	
54
4.2. Two-Thirds of Technologies at Demonstration or Lower Stages		
56
4.3. Critical Mineral Supply Challenges	
	
	
	
	
58
4.4. Problem with Ambitious Scenarios and Target		
	
	
58
4.5. A Two-Speed Transition	
	
	
	
	
	
59
Conclusion	
	
	
	
	
	
	
	
	
61
Abbreviations		
	
	
	
	
	
	
	
62
Appendices	
	
	
	
	
	
	
	
	
63
Appendix 1: Incompatibility of NZE and SDG	
	
	
	
63
Appendix 2: The Price Elasticity of Demand	
	
	
	
63
Appendix 3: The Effects of the Russia–Ukraine War on NZE	
	
65
Appendix 4: Oil & Gas Production and Price Without Approved Projects	 66

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Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Figure 1. Global Primary Energy Supply	 	
	
	
	
	
	
3
Figure 2. Carbon Dioxide Emissions by Sector (2019)	
	
	
	
	
4
Figure 3. Share of Global Final Energy Consumption by Fuel Form		
	
	
11
Figure 4. Annual IEA/OECD Crude Import Price (US$2021)	
	
	
	
12
Figure 5. Annual U.S. Henry Hub Natural Gas Spot Price (US$2021)	
	
	
12
Figure 6. Role of Technology and Behavioral Change in Emissions Reductions in NZE	
15
Figure 7. Primary Energy Demand: STEPS vs. NZE in 2050	
	
	
	
17
Figure 8. Assumed Changes in Energy Demand: NZE vs. STEPS	 	
	
	
18
Figure 9. Global Energy-Intensity Improvement: Historical vs. NZE	
	
	
19
Figure 10. Capital Investment in Energy in NZE	 	
	
	
	
	
20
Figure 11. NZE Grid Investment	 	
	
	
	
	
	
	
21
Figure 12. NZE: Global Electricity Supply Costs	 	
	
	
	
	
21
Figure 13. Oil and Gas Demand in IEA WEO-2022	
	
	
	
	
24
Figure 14. Potential Price Spikes by Price Elasticity Level Under Net Zero Scenario	 	
27
Figure 15. Short- and Long-Term Implications of High Oil and Gas Prices	 	
	
28
Figure 16. Impacts of NZE in Six Main Areas	
	
	
	
	
	
29
Figure 17. OPEC Share of Global Oil Production	 	
	
	
	
	
31
Figure 18. Share of Top Three Producing Countries in Production of Selected 
	
Minerals and Fossil Fuels, 2019	 	
	
	
	
	
	
32
Figure 19. Countries Dependent on Oil and Gas Rents (2019)	
	
	
	
35
Figure 20. U.S. Federal Oil and Gas Revenues	
	
	
	
	
	
36
Figure 21. Per Capita Energy Demand and Human Development Index (2019)	
	
36
Figure 22. Daily per Capita Energy Demand by Human Development Index (2019)		
37
Figure 23. Bioenergy for Electricity Generation in NZE	
	
	
	
	
38
Figure 24. Global Land Requirements for Bioenergy for Electricity Generation in NZE	
38
Figure 25. Global Solar and Wind Capacity in NZE	
	
	
	
	
39
Figure 26. Global Land Requirements for Solar/Wind Farms in NZE	
	
	
39
Figure 27. Select Petroleum Products and Their Applications	
	
	
	
41
Figure 28. Global Oil Demand by Sector	 	
	
	
	
	
	
42
Figure 29. OECD Oil Demand	   	
	
	
	
	
	
	
42
Figure 30. Non-OECD Oil Demand	
	
	
	
	
	
	
42
Figure 31. Global Oil Demand in Transport by Subsector	 	
	
	
	
43
Figure 32. Passenger Car Sales by Size and Powertrain	
	
	
	
	
43
Figure 33. Required Growth of Critical Mineral Supply (IEA’s SDS, 2020–40)	
	
46
Figures and Tables

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Figure 34. Tesla Battery Cost Based on Monthly Average Primary Input Spot Prices 
	
(January 2017–May 2022)	
	
	
	
	
	
	
46
Figure 35. Energy Densities of Common Fuels, Li-ion battery	
	
	
	
47
Figure 36. Global Natural Gas Demand by Sector	 	
	
	
	
	
49
Figure 37. OECD Gas Demand	  	
	
	
	
	
	
	
49
Figure 38. Non-OECD Gas Demand	
	
	
	
	
	
	
49
Figure 39. Natural Gas Production by Region	
	
	
	
	
	
50
Figure 40. Global Electricity Generation by Source		
	
	
	
	
51
Figure 41. OECD Electricity	
	
	
	
	
	
	
	
52	
  
Figure 42. Non-OECD Electricity	
	
	
	
	
	
	
52
Figure 43. Global Industrial Heat Demand by Temperature Range (2018)	 	
	
53
Figure 44: Estimates of Wind	
   	
	
	
	
	
	
	
55
Figure 45: Wind Energy PPA Price Indexes Integration Costs
	
(Level 10 Power Energy Analysis)		
	
	
	
	
	
55
Figure 46: Solar and Wind Penetration and Electricity Prices in Europe	
	
	
56
Figure 47. Readiness Levels of 500 Technologies Imports for NZE	 	
	
	
57
Figure 48. Renewable Share of U.S. Energy Demand: Reality vs. Expectations	
	
59
Figure 49. Two-Speed Transition: Net Zero by 2050 Level of Commitment	 	
	
60
Figure 50. Updated NZE (WEO-2022) vs. Previous NZE (NZE Roadmap 2021)	
	
65
Figure 51. Adjusted IEA: Oil Production	 	
	
	
	
	
	
66
Figure 52. Adjusted IEA: Gas Production	 	
	
	
	
	
	
66
Figure 53. Lynch: Oil Production	 	
	
	
	
	
	
	
67
Figure 54. Lynch: Gas Production	
	
	
	
	
	
	
67
Table 1. Definitions and Objectives of NZE and STEPS	
	
	
	
	
10
Table 2. NZE Report: CO2 Prices for Electricity, Industry, and Energy Production in NZE	 14
Table 3. WEO-2021: CO2 Prices for Electricity, Industry, and Energy Production in NZE	
14
Table 4. WEO-2022: CO2 Prices for Electricity, Industry, and Energy Production in NZE	
14
Table 5. NZE Behavioral Changes	
	
	
	
	
	
	
16
Table 6. NZE Grid Investment (See Figure 11)	
	
	
	
	
	
21
Table 7. NZE: Global Electricity Supply Costs (See Figure 12)	
	
	
	
22
Table 8. IEA’s GDP Growth Assumptions		
	
	
	
	
	
22
Table 9. Price Response Potentials by Price-Elasticity Level (Real Terms)	
	
	
26
Table 10. Impact of Russian Gas Cutoff on German Economy	
	
	
	
30
Table 11. Energy Power Generation Wages by Sub-Technology, 2019	
	
	
34
Table 12. Energy Power Generation Occupations, 2019 Median Hourly Wages	
	
34
Table 13. Battery Chemistry by Content, Kg (60 kWh Lithium-Ion)	
	
	
45
Table 14. Estimates of Price Elasticity of Demand	 	
	
	
	
	
64
Table 15. Oil Decline-Rate Assumptions	  	
	
	
	
	
	
68
Table 16. Natural Gas Decline-Rate Assumptions	 	
	
	
	
	
68
Table 17. Short-Term Price Response (in Constant US$2022)	
	
	
	
69

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Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Foreword
Rupert Darwall 
Senior Fellow at the RealClearFoundation
E
fforts by climate activists and Environmental, Social, and Governance (ESG) investors 
to block investment in oil and gas production by Western companies appeared to have 
received a seal of approval from no less an authority than the International Energy 
Agency (IEA), when it published its Net Zero by 2050: A Roadmap for the Global Energy Sector 
in May 2021. As a result, attempts to achieve net zero carbon emissions (NZE) by 2050 have 
become central to the “E” in ESG, and the net zero roadmap has come to define the NZE 
baseline for energy companies.
For this reason, the RealClearFoundation asked the Energy Policy Research Foundation to:
•	
conduct a forensic analysis of the IEA’s major reports on achieving net zero emissions 
by 2050—in particular, Net Zero by 2050 and the World Energy Outlook 2022 (October 
2022); and 
•	
assess the likely economic impact of a cessation of investment in new oil and gas fields on 
the production and prices of oil and natural gas. 
	
The Energy Policy Research Foundation’s analysis conclusively demonstrates that 
the IEA’s assumptions are unrealistic, internally inconsistent, and often support the case for 
increased hydrocarbon fuel production. The whole of the IEA net zero roadmap pivots on the 
assumption that the plunging cost of wind and solar will destroy demand for oil and gas. If 
that does not hold, the whole roadmap goes up in smoke. But as this report shows, the IEA’s 
own analysis contradicts its assumption on the economic superiority of renewable energy.
	
In reality, the IEA’s “net zero roadmap” is a green mirage that will dramatically increase 
energy costs, devastate Western economies, and increase human suffering. As such, investment 
managers and banks that use other people’s money to advance this anti-investment agenda are 
violating their fiduciary obligation to maximize returns for retirees, investors, and shareholders. 
	
Part of the problem stems from net zero advocates doubly misconstruing the IEA’s 
position that there is no need for investment in new oil and gas fields as requiring no new oil

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
and gas investment whatsoever—resulting in calls for the imposition of investment bans to 
progressively throttle the supply of oil and gas, drive prices up to restrict consumption through 
demand destruction, and thereby bring about NZE. That is not what the IEA proposed and 
has categorically warned against. 
	
The IEA’s net zero roadmap projects low and falling oil and gas prices due to renewable 
energy displacing demand for hydrocarbons rather than, as many ESG investors and climate 
activists claim, on high prices due to limited supply destroying demand. The fundamental 
assumption underlying the IEA’s net zero roadmap is that the superiority of alternatives to 
hydrocarbons—principally wind and solar (nuclear barely gets a look in)—will cause demand 
for coal, oil, and natural gas to wither away. 
	
Nonetheless, progressive extremist groups aggressively seized the IEA’s reports to 
justify—indeed, to require—a ban on investment in new oil and gas projects. Climate Action 
100+, a group of 700 investors with over $68 trillion in assets under management, hailed the 
report as a “watershed moment” and highlighted the call from “relatively conservative IEA” for 
an immediate end to new investment in fossil fuel extraction. Similarly, As You Sow, a not-for-
profit climate activist investor, described the IEA NZE report as groundbreaking. Considered 
as the foremost global energy expert, the IEA now recognized that on a net zero pathway, 
“there can be no investment in new fossil fuel supply,” the activist group said.
	
NZE advocates have translated these misrepresentations into action. For the 2023 
proxy season, As You Sow filed shareholder resolutions at five of the largest U.S. banks, pressing 
them to align their financing activities with achieving net zero by 2050. Those resolutions all 
failed, but last year, a resolution filed at the ExxonMobil annual meeting by Ceres, another 
activist investor and a founding partner of Climate Action 100+, cited the IEA net zero report 
and requested the company’s board to produce an audited report on the impact of applying the 
IEA’s net zero assumptions on the company’s financial statements. The resolution received the 
support of 51.0% of voting shareholders.
	
Last year, the Environmental Audit Committee of Britain’s House of Commons asked 
40 leading signatories of the Glasgow Financial Alliance for Net Zero whether they supported 
the IEA’s net zero roadmap. The committee’s request elicited a wide range of responses: from 
BlackRock’s straight “no” and Fidelity International’s recognition of reality—“The current 
energy landscape is considerably different from the environment contemplated in the IEA’s 
net zero scenario” to Franklin Templeton’s more neutral view—“we respect the findings of the 
IEA’s report” through Morgan Stanley’s adoption of the IEA scenario—“we used the absolute 
IEA NZE emissions scenario to define our energy sector’s 2030 interim target” to the net zero 
activism of Legal & General, Britain’s largest asset manager and also a filer of an ExxonMobil 
shareholder resolution similar to Ceres’s—“our research supports that there could be a pathway 
to net zero … in line with the IEA scenario” and the Church of England Pensions Board—
“The Board advocated for and engaged directly alongside other investors with the IEA to 
provide a public 1.5-degree scenario.”
	
Investment managers and advocacy groups would do well to read the fine print of the

X
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
IEA’s reports. As the Energy Policy Research Foundation points out, the IEA itself highlighted 
the destructive consequences of unilateral action designed to suppress supply. “Reducing fossil 
fuel investment in advance of, or instead of, policy action and clean energy demand would 
not lead to the same outcomes as in the NZE Scenario,” the IEA warned in its World Energy 
Outlook 2022. “If supply were to transition faster than demand, with a drop in fossil fuel 
investment preceding surge in clean technologies, this would lead to much higher prices—
possibly for a prolonged period.” 
	
Those words benefited from being written after Russia’s invasion of Ukraine. One 
need only consider the impact of that war on the supply and demand for hydrocarbon fuels to 
appreciate what a devastating impact a “no investment period” policy would have on people’s 
ability to light and heat their homes and go about their daily business and—given the crucial 
importance of oil and especially natural gas on food production—on global suffering. 
	
But the impact of IEA’s actual proposal—“no new investment in oil and gas 
production” as demand allegedly withers away with the rise of wind and solar power—would 
also have a devastating global economic impact when it comes up against adamantine reality. 
The IEA’s supposition is analogous to the claim made by Friedrich Engels that in the transition 
to socialism, the state would wither away. Of course, it never does. 
	
Based on its assumption of demand obsolescence, the IEA foresees low and falling 
hydrocarbon prices: $35 a barrel for oil in 2030 (around half its current level); and, for natural 
gas, $2.1 per million Btu (MMBtu) in the U.S. and $2.0 in the EU in 2030 (p. 51 of the IEA 
net zero roadmap).
 	
History tells us that these assumptions are fanciful. In the 318 months since January 
1997, there were only 26 months when the price of natural gas in the U.S. was less than 
$2.10—and seven of those were in 2020, when demand was suppressed due to the Covid 
pandemic. The IEA’s forecast for EU natural gas prices is even more improbable. Except for 
brief periods during the pandemic, European prices for natural gas are a multiple of those in 
the U.S., as they are structurally higher because of the absence of fracking and, since Russia’s 
invasion of Ukraine, having to compete with Asian markets for limited LNG capacity.
	
Rather than being a plausible description of the future, the IEA’s supposition that 
hydrocarbon fuel prices will dramatically decline as demand withers away is, at best, an 
expression of a political or an ideological aspiration, as opposed to an objective assessment 
of the future. The failure to invest in increased supply is far more likely to result in upwardly 
spiraling prices as demand increasingly exceeds supply, as the Biden administration understood 
when it used the Strategic Petroleum Reserve for the nonstrategic purpose of tamping down 
gasoline prices.
	
To realistically scope the scale of price increases that would flow from implementing the 
IEA’s no investment in new oil and gas fields, the Energy Policy Research Foundation compares 
the net zero supply deficit with the IEA’s Stated Policies Scenario (STEPS). Based on historical 
price elasticities of demand, the 35% supply differential for both oil and gas could see prices

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
more than tripling on the net zero pathway. Whether price increases of this magnitude cause a 
recession or a depression, they will have a significant negative impact on global growth. 	
	
The other side of this coin is, of course, the relative cost of wind and solar energy. 
“Ever-cheaper renewable energy technologies,” the IEA claims, “give electricity the edge in 
the race to zero.” Yet the IEA’s own numbers demonstrate the inferiority of its post–fossil fuel 
energy future as it will require vast increases in capital, labor, and land to produce less energy. 
	
By 2030, the IEA says that its net zero pathway requires investment in the energy 
sector to have risen by $3 trillion annually from its current level of just over $2 trillion a year 
to almost $5 trillion a year (p. 81). A smooth ramp up, so that each year sees $300bn more 
investment than the previous one, implies that the energy sector uses an additional $16.5 
trillion of capital in 2030. 
	
Usually, more investment makes labor more efficient. Not with clean energy. As well 
as more capital, non-hydrocarbon energy requires nearly 38.5% more labor. According to the 
IEA, energy employment expands from about 65 million today to almost 90 million in 2030 
(World Energy Outlook 2022, p. 78).
	
Despite these colossal additional inputs of capital and labor, this new energy system 
produces 7% less energy, as total energy supply falls from 591 exajoules (EJ) in 2020 to 550 EJ 
in 2030 (p. 56 of the net zero roadmap), implying a 33.0% fall in energy output per employee. 
	
If that’s not bad enough, the energy transition has a voracious appetite for land. 
According to the Energy Policy Research Foundation’s calculations, solar and wind generation 
capacity on the IEA’s net zero pathway requires an area equivalent to the combined size 
of California and Texas and bioenergy for electricity production an area the size of France 
and Mexico combined, given current land requirement metrics before accounting for grid 
integration considerations.
	
So, based on the IEA’s own data—more inputs of land, labor, and capital result in less 
energy. There is no theory in growth economics that says that this is a formula for sustained 
economic growth. Quite the opposite. The IEA’s net zero pathway reverses a process that has 
been under way since the dawn of the Industrial Revolution of society obtaining more outputs 
for fewer inputs. In short, it would reverse decades of productivity growth, increasing wages, 
and rising living standards—all of which have improved the human condition and transformed 
our lives for the better. 	
	
Innovation is the secret sauce of the free-market growth machine. Net zero government 
directives are soaking up and misdirecting scarce innovation resources that the market could 
better and more effectively allocate to generating higher economic growth. Around half of 
all emissions reductions on the IEA’s net zero roadmap come from technologies that are at 
an early stage of development. Of 503 clean energy technologies identified by the IEA, 326 
are at demonstration or earlier stages and a further 116 require improvements to become 
competitive.

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Batt Odgerel, Lucian Pugliaresi, Michael Lynch
	
Bottom line: The IEA’s own numbers destroy the economic case for renewable energy. 
Replacing an energy system overwhelmingly based on hydrocarbons with one centered 
predominantly on wind and solar would make the world unambiguously poorer and have 
a negative impact on the lives of billions of people in the world’s poorest nations. And this 
is before considering renewable energy’s own negative environmental impacts. Recognizing 
that widespread deployment of renewables destroys value and destroys nature, it leaves 
decarbonization as the sole potential benefit from deploying wind and solar. If there is an 
economic case for net zero, neither the Intergovernmental Panel on Climate Change nor the 
governments that adopted net zero targets have yet to conduct a proper cost-benefit analysis to 
prove it. 
	
This leaves ESG-focused investment managers in a tight spot. In its World Energy 
Outlook 2022, the IEA implicitly conceded that ESG investment managers exerting pressure 
on oil and gas companies to align their investment programs with net zero are contributing 
to the current macroeconomic malaise of high inflation and weak growth. These investment 
managers have fiduciary obligations to current and future retirees, savers, and shareholders to 
maximize their returns. They do not have a mandate to use other people’s money in an effort 
to avert what they believe could possibly be a planetary catastrophe by destroying corporate 
value and throwing the free-market growth machine into reverse. In particular, their emphasis 
on hydrocarbon fuel supply reduction conflicts with the IEA’s focus on hydrocarbon demand 
reduction and is antithetical to the interests of investors in oil and gas companies. The clear 
implication is that climate activism and being a faithful investment fiduciary do not mix.
	
Finally, there is a geopolitical dimension to NZE that ESG investors and their climate 
activist allies ignore. According to the IEA, its net zero roadmap sees OPEC’s share of the 
global oil market rise from 37% to 52% in 2050, “a level,” the IEA says, “higher than at any 
point in the history of oil markets.” The Energy Policy Research Foundation notes that, if in 
the likely event that oil demand is much higher than projected in the IEA’s net zero roadmap, 
where non-OPEC producers—pressured by ESG investors—follow the net zero profile of 
steeply declining oil production while OPEC producers maintain production in line with 
the IEA’s Stated Policies Scenario, OPEC’s share would rise to an astounding 82% by 2050. 
Wittingly or otherwise, ESG investors are undermining the security interests of the West 
during a period of rising geopolitical tensions.
	
As we approach the 50th anniversary of Henry Kissinger’s December 12, 1973, Pilgrim 
Speech, which led to the creation of the IEA to counteract OPEC market power, the West 
is having to relearn a painful lesson on the strategic importance of energy security. In that 
speech, Kissinger defined the goal of the new energy group as “the assurance of required energy 
supplies at reasonable cost”—a definition of energy security that is as good as any. Surely no 
one at the time envisioned the IEA adopting policies that would lead to OPEC’s share of the 
world’s oil market growing to somewhere between 52% and 82%, giving it de facto control of 
both energy supplies and costs. 
	
The IEA could have chosen to remain faithful to its original mandate, but as the Energy 
Policy Research Foundation report shows, in seeking to become a cheerleader for net zero, the

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
IEA has allowed itself to be used as a tool for climate extremism, has misled policymakers, and 
has endangered the world’s economy and Western security, all while forsaking the purpose for 
which it was created.

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Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Executive Summary
T
he International Energy Agency (IEA) was established in 1974, in the aftermath of 
the first oil price shock, to act as a buyers’ group of Western nations in an attempt to 
counteract OPEC market power. Latterly, its mission has shifted to become a center 
of expertise on and advocate for the energy transition.  In May 2021, it published Net Zero by 
2050: A Roadmap for the Global Energy Sector (Net Zero by 2050), which the IEA describes as 
“a normative IEA scenario that shows a pathway for the global energy sector to achieve net zero 
CO2 emissions by 2050.”1
The word “normative” is an important concession to reality, as NZE is a highly implausible 
scenario. It defies the laws of physics (turning dilute into dense energy) and economics 
(simultaneously cutting the supply and prices of hydrocarbons), creating a multitude of 
risks and challenges. The fundamental assumption underlying NZE is that the superiority of 
alternatives to hydrocarbons as an energy source will cause demand for coal, oil, and natural 
gas to wither away. It is for this reason that IEA stated that under the NZE, there would be 
no need for investment in new oil and gas fields, apart from those already approved in 2021. 
Rather than being a plausible description of the future, demand for hydrocarbons withering 
away is best thought of as an expression of a political or an ideological aspiration, as opposed to 
an objective assessment of the future.
Assumptions and Milestones
The IEA has made many questionable assumptions and milestones for NZE about government 
policies, energy and carbon prices, behavioral changes, economic growth, and technology 
maturity, among others. Some of the assumptions and milestones of NZE:
 All countries must cooperate toward net zero emissions from 2021. (China alone built 
two coal plants per week in 2022.)
 The historical average rate of annual energy-intensity improvements must nearly triple 
throughout the next decade.
 Primary energy supply equal to the size of the current OECD demand must be 
removed through efficiency and electrification by 2050. 
 Global final energy consumption supplied by a single form of energy—electricity—

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
rises from less than 20% in 2021 to about 50% in 2050. 
 The share of all hydrocarbons (oil, gas, coal) in global primary supply decreases from 
about four-fifths in 2021 to less than one-fifth in 2050. Hydrocarbon supply drops 
by 30% between 2021 and 2030; this decrease was 5% in 2019–20 (during the 
pandemic).
 GDP growth is an assumed input, not modeled output. The same growth rates are 
applied to all IEA scenarios.
 Decreasing oil and gas prices are assumed, despite falling production.
 High CO2 prices are assumed for all regions, including the poorest regions.
 Decreasing costs of renewables and low-carbon technologies are assumed. The capital 
cost of technologies such as hydrogen electrolyzers reduces by nearly 80% in less than a 
decade. 
 Massive technological breakthroughs are required. “About half of the emissions 
reductions in 2050 come from technologies at prototype or demonstration stages 
today.” Of the 503 technologies that are important for net zero, 326 (almost 65%) are 
currently at the “demonstration” or lower stages.
 Countries must adopt mandated behavioral changes such as reducing motorway speed 
limits, setting room temperatures within a narrow range, and limiting long-haul flights.
Consequences and Implications
Oil and gas play irreplaceable roles in modern civilization that are not reproducible with low-
carbon alternatives. The attempt to substitute them with inferior, less efficient, energy sources 
will have enormous micro- and macroeconomic consequences and profound  
geopolitical implications.
 Higher, more volatile, oil and gas prices. Under NZE, by 2050, global oil and gas 
supply decreases 78% and 72%, respectively. Historical price elasticities of demand for 
oil and gas suggest that such a rapid reduction in supply without concomitant shifts in 
demand will multiply energy prices. By 2030, in NZE, the crude oil price in the U.S. 
will likely be more than US$200 (in today’s dollars), and gas prices may increase two- 
to fourfold. The additional economic loss from the supply decline may be between 
US$12.2 trillion and US$52.6 trillion in the first 10 years of NZE. This range is 
equivalent to about 1%–4.1% of the world GDP during the same period.
 Huge increase in capital investment for less output. Total capital investment in 
energy must increase from 2.5% of GDP in 2016–20 to 4.5% of GDP by 2030, even 
after ceasing investment in new oil and gas fields. The annual average investment of 
US$2.3 trillion (2019 dollars) in 2016–20 must reach US$5 trillion in 2030 and 
remain at that level through 2050. This annual investment amount is comparable with 
the GDP of Japan, the world’s third-largest economy.

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Batt Odgerel, Lucian Pugliaresi, Michael Lynch
 Despite vastly more capital, labor productivity of the energy sector falls; the IEA 
projects that even with an additional 25 million workers in 2030, the energy sector 
produces 7% less energy.
 NZE also requires a larger land-take devoted to energy production, with negative 
knock-on effects on food security and biodiversity. A simplistic Energy Policy 
Research Foundation analysis suggests that total solar PV and onshore wind capacity 
may require an area almost equivalent to the size of California (159,000 square 
miles) and Texas (268,000 square miles), respectively, and incremental bioenergy for 
electricity production an area the size of Mexico (753,000 square miles), given current 
land requirement metrics before accounting for grid integration considerations.
 Declining labor productivity, combined with investors’ need to recover the capital 
invested in the sector and earn an adequate return on it, would see average electricity 
supply costs rise by 26%, from US$71 per MWh in 2020 to US$90 per MWh in 
2030. As a result, retail electricity prices will increase by 50%, on average, by 2050, 
according to the IEA.
 Far from reducing inflation, as implied by the Inflation Reduction Act, NZE’s formula 
of restricting the supply of hydrocarbons and the switch to an electricity-centered 
energy system powered by intermittent wind and solar would see a structural increase 
in the global price level, risking a further surge in inflation.
 Whereas higher electricity prices under NZE reflect less efficient use of inputs of 
capital, labor, and land, higher oil and gas prices are a consequence of artificially 
constraining supply and higher economic rents for producers. 
 The IEA concedes that the NZE would see OPEC’s share of global oil supply rise from 
its current 35% to an unprecedented 52% in 2050. A more plausible scenario of non-
OPEC + producers following the NZE scenario but OPEC following the more realistic 
IEA STEPS scenario, would see OPEC + share rise to 82%, an outcome that would 
represent an existential threat to the prosperity and security of the West.
 The most probable outcome of NZE is an incomplete, two- or multi-speed 
transition, in which most developing countries do not fully follow through with 
NZE targets. To illustrate this point: under NZE, the world would cease the approval 
of new unabated coal power plants in 2021 (Net Zero by 2050, p. 152). This, of course, 
has yet to materialize. Last year, China alone permitted the construction of two new 
coal plants every week.2

1
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
“
“
Purpose of Report
T
he purpose of this report is to assess the likely economic impact of environmental, 
social, and governance (ESG) with respect to the production and prices of oil and 
natural gas. This report takes the IEA’s major reports—in particular, Net Zero by 2050: 
A Roadmap for the Global Energy Sector (May 2021) and World Energy Outlook 2022 (WEO-
2022; October 2022)—on achieving net zero emissions by 2050.
These reports stated:
“No fossil fuel exploration is required in the [Net Zero Scenario] as 
no new oil and natural gas fields are required beyond those that have 
already been approved for development.” (IEA, Net Zero by 2050, p. 160)
“In NZE Scenario, declining fossil fuel demand can be met without 
the need for the development of new oil fields but with continued 
investment in existing assets.” (IEA, World Energy Outlook 2022, p. 326)
These statements have been interpreted by many financial institutions and banks and the 
media more generally as prohibiting any investment in new oil and gas fields if the net zero 
target is to be reached. As the world’s economy is heavily dependent on oil and gas supplies 
and there are no alternatives economically and technologically, rapid and prolonged decline 
in the production of oil and gas resulting from a lack of investment will have overwhelmingly 
negative impacts on GDP, national security, and development. 
This report examines the feasibility of the IEA’s assumptions behind its Net Zero by 2050 
(NZE) scenario and its implications for oil and gas production, energy prices, and the global 
economy and development. In addition to the aforementioned reports, we reviewed other 
products by the IEA: “Energy Technology Perspectives,” “Global Energy and Climate Model,” 
and “The Role of Critical Minerals in Clean Energy Transitions.”
This report consists of four chapters:
Chapter 1 explains how NZE differs from the IEA’s baseline Stated Policies (STEPS) scenario 
and investigates NZE’s excessively aspirational assumptions in oil and gas prices, energy

2
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
intensity, behavioral changes, and investments, among others.
Chapter 2 delves into the multifaceted negative consequences of halting investment in new oil 
and gas fields on the basis that renewable energy sources do not possess the miracle properties 
ascribed to them by the IEA as being seamless substitutes for oil and gas. Our analysis estimates 
the possible oil and gas prices under NZE scenario, using the IEA’s global energy production 
projections and various demand price elasticities.
Chapter 3 evaluates the important role that oil and gas play in various sectors of the economy, 
with an emphasis on their contribution to the power sector and transportation. The chapter 
refutes NZE’s assertion that hydrocarbons are substitutable at scale and almost fully replaceable 
by 2050.
Chapter 4 examines various significant obstacles to achieving a net zero transition, including 
a lack of technology readiness and the rising costs of renewable energy systems. The chapter 
concludes by questioning the feasibility of a global net zero transition as advocated by the IEA.
The IEA is an intergovernmental organization consisting of 31 member countries, and 
it operates within the financial framework of the OECD. The IEA’s mission includes 
implementing measures to address disruptions in oil supplies and undertaking collective 
measures to ensure the energy security of its members. A central question that this report 
addresses is whether the call for no investment in new oil and gas fields worldwide will 
undermine the IEA’s central mission to effectively address energy security threats and at the 
same time impose large and unsustainable economic losses.

3
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Background
T
he governments of the developed world are undertaking a wide range of programs 
and regulatory initiatives to reduce human-induced carbon dioxide emissions in order 
to avert the most damaging impacts of climate change. Much of the recent effort 
to reduce carbon emissions has focused on developing alternatives to hydrocarbons—oil, 
natural gas, and coal—to produce electric power. Among the more prosperous economies, 
the scaling up of renewable and intermittent energy sources, such as wind and solar power, 
has had substantial progress. However, even with these advances in renewable energy sources, 
the energy transition remains a formidable task and the world remains largely reliant upon 
fossil fuels. According to BloombergNEF, over US$6.5 trillion (nominal) has been invested 
worldwide in the energy transition (excluding investment in power grids) between 2004 and 
2022, but the share of non-hydro renewables was just 6.7% of total global primary energy 
consumption in 2021.3
Figure 1. Global Primary Energy Supply
100
200
300
400
500
600
Exajoules
1910
1900
1920
1930
1940
1950
1960
1970
1980
1990
2000
2010
2021
Renewables
Global impact of transition limited so far
Source: Energy Policy Research, BP, Vaclav Smil
Hydrocarbons still account for 80+ percent
of world primary energy supply.
Use is driven by cost, density, 
convenience, and reliance.
Hydro
Nuclear
Coal
Gas
Oil
Traditional
biomass

4
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
While undertaking a transformation of the power sector is an enormous and difficult task, it 
pales in comparison to the challenges in deploying substitutes (including large-scale carbon 
capture) for liquid petroleum fuels. These fuels remain the dominant energy source for 
transportation as well as the production of plastics, chemicals, fertilizers, and a wide array of 
essential specialty products. Even with these challenges, concerns about climate change have 
created public and political pressure to reduce or even eliminate the production of fossil fuels. 
The U.S. climate envoy John Kerry has publicly stated: “There is ‘no need’ for any new fossil 
fuel investments if the world is to meet its climate goals.” Pressure on banks and other financial 
institutions to stop investing in fossil fuels has led some to respond positively, including 
Blackstone, Inc., which has informed clients that “its private equity arm will no longer invest 
in the exploration and production of oil and gas.” 
Figure 2. Carbon Dioxide Emissions by Sector (2019)
It is vital for policymakers advocating for aggressive efforts to reduce carbon emissions to 
quantify the impacts of such a strategy. The most severe recessions in the past century were 
the direct consequence of the oil crises in 1973 and 1979. Understanding whether an end to 
petroleum investment would be difficult to devastating, or somewhere in between, is of crucial 
importance. Moreover, because most non-OECD petroleum provinces will not follow the 
IEA’s advice, continuing demand for hydrocarbons would see a massive transfer of wealth to 
members of OPEC +, with adverse geopolitical consequences for the West.
Energy 
73.2%
Agriculture,
forestry, land use
18.4%
Waste 3.2%
Industry 5.2%
Fugitive
emissions 
5.8%
7.8%
1.7%
Unallocated
energy
Agriculture &
ﬁshing
Industry
Buildings
Transport
17.5%
16.2%
24.2%
Achieving “Net Zero” requires 
controlling carbon emissions & deploy-
ing new technologies across the entire 
range of the modern economy.
Sources: Carbon Watch, WRI via Our World in Data

5
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
“
Chapter 1
Net Zero Scenario—Assumptions and 
Milestones
1.1. What Is the IEA’s Net Zero Scenario (NZE)?
“Reaching net-zero emissions globally by 2050 is a critical and 
formidable goal.” (Net Zero by 2050 Report: Summary for Policy Makers4)
The Organization for Economic Co-operation and Development (OECD) member countries 
established the International Energy Agency (IEA) after the 1973 energy crisis in order to 
collectively respond to energy-supply disruptions and to address concerns regarding energy 
security. 
In recent years, the IEA has shifted its focus to the energy transition and achieving net zero 
emissions through its Net Zero Scenario (NZE). This represents a critical departure from the 
organization’s original and long-standing mandate to address the reliability and availability of 
energy resources.
NZE is a top-down global pathway, so the scenario data provided by the IEA lack regional 
specificity. Although the IEA has published several reports on country-level net zero or carbon 
Highlights of Chapter 1
•	 The Net Zero Scenario by 2050 (NZE) is the International Energy Agency’s key 
normative scenario, with the goal of reaching net zero emissions in the energy sector. 
•	 With the IEA’s prestige as a center of expertise, its NZE “no investment in new oil 
and gas fields” statement validates a position previously adopted by more extreme 
climate activists, in turn shifting the position of policymakers, financiers, and 
business CEOs.
•	 NZE depends on many questionable assumptions about energy and carbon prices, 
investment, behavioral changes, and energy-intensity improvements, among others.

6
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
neutrality, they are not fully consistent with NZE. For example, the IEA’s report on China, An 
Energy Sector Roadmap to Carbon Neutrality in China, considers only the Announced Policy 
Scenario—i.e., China’s announced target to achieve carbon neutrality by 2060 rather than 
2050.
The Global Energy and Climate Model, the model behind NZE, appears to have achieved 
a high level of sophistication by merging its two main models (World Energy Model and 
Energy Technology Perspectives Model); but like all models, it relies on the validity of its input 
assumptions as well as milestones. 
Important assumptions of NZE are as follows:5
“All countries co-operate towards achieving net zero emissions 
worldwide” (Net Zero by 2050, p. 50). Each country is required to undertake 
a long list of actions toward net zero, which include establishing “long-
term CO2 emissions reduction policy framework[s] by 2025” (p. 130), 
implementing “comprehensive zero‐carbon‐ready building codes” by 2030 (p. 144), 
introducing “[minimum energy performance standards] for  all  main  appliance  
categories  set  at  the  most  stringent levels” by 2025 at the latest (p. 149), and 
transforming the current energy infrastructure to be “based largely on renewable  
electricity and low‐emissions fuels” (p. 180). NZE also asks governments to “signal 
the end of sales of new internal combustion engine cars” globally by 2035 (Net Zero by 
2050, p. 139). However, as discussed in Chapter 4, the actual outcome will likely be 
a two- or multi-speed transition, with many developing countries pursuing different 
pathways that are largely inconsistent with NZE.
Unprecedented energy-intensity improvements. In NZE, the global energy 
demand will be 7% smaller (nearly equivalent to the entire OECD demand today) 
by 2050, despite UN’s projections that there will be 2 billion more people on the 
planet and the IEA assuming that the global economy is some 40% larger.6 The 
average annual improvement rate of energy intensity (energy requirement per unit of 
GDP) has averaged 1.2% globally over the past five decades. However, NZE assumes 
that this rate will increase to 4.2% between now and 2030—about 3.5 times the long-
term average (Net Zero by 2050, p. 66, table 2.3).
Extensive reliance on electricity generated from intermittent resources. In 
NZE, roughly half of global total final energy consumption comes from electricity 
in 2050, compared with less than 20% in 2021 (WEO-2022, p. 446, table A.2c). 
This represents a major shift from the current liquid, solid, and gas-based system to 
an electricity-dominated system, which will have enormous capacity requirements 
for generating electricity from intermittent resources and converting electricity to 
different forms of energy. Additionally, there will be an immense need to store massive 
volumes of energy from these intermittent resources for long hours and sometimes 
days. This system overhaul presents additional risks to the reliability and resilience of 
the world electric systems, as well as national security concerns.

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
End of the hydrocarbon age in under 30 years. The share of oil, natural gas, and 
coal in global primary energy demand drops from almost four-fifths (79.2%) in 2021 
to 61.5% in 2030 to less than one-fifth (18.2%) in 2050 under NZE (WEO-2022, 
p. 445, table A.1c). In 2050, two-thirds of the remaining natural gas and almost 
nine-tenths of the remaining coal must use Carbon Capture Utilization and Storage 
(CCUS) technology to capture and store carbon emissions despite the unproven 
nature of the technology at scale and the certainty of higher costs; the share of the 
non-energy use of oil (feedstock for petrochemicals, etc.) in total oil consumption 
will go up from 17% in 2021 to 72.5% in 2050, although the absolute volume 
of oil consumption for non-energy uses declines by 6.5%. This indicates that oil 
consumption for energy use must be reduced by almost 14 times in less than three 
decades.7
GDP is an input, not an output: average GDP growth rates are constant across 
scenarios. The IEA’s model applies uniform economic growth rates to all its scenarios. 
Although the STEPS and NZE scenarios envision vastly different worlds, world GDP 
remains constant (WEO-2022, pp. 107–8). Thus, GDP growth is an assumed input, 
not modeled output, which therefore risks misleading people as to the impact of net 
zero on economic growth.8 
Low oil and gas prices and high carbon taxes. Despite the highly inelastic demand 
for oil and gas across economic sectors, NZE oil and gas price assumptions are based 
on the premise that demand for oil and gas decreases at a faster pace than supply 
reductions (WEO-2022, pp.110–13). Our analysis suggests that, given their historical 
inelastic demand schedules, oil and gas will experience extraordinary price spikes 
in the short term, which closely tracks the  evolution of prices as economic activity 
bounced back following the pandemic lockdowns and in response to the supply 
shocks caused by Russian aggression in Ukraine. NZE assumes a high CO2 price 
range, between US$180 and US$250 (in 2021 dollars) for all regions (WEO-2022, 
pp. 465–66). However, even the IEA admits that carbon prices must be “introduced 
carefully, with a view to the likely consequences and distributional impacts” (WEO-
2022, p. 115).
“Ever cheaper” renewables in electricity generation (Net Zero by 2050, p. 14). From 
2020 to 2050, the capital costs ($/kW) of coal-fired power plant and gas combined 
cycle gas turbine (CCGT) stay at 2020 levels in the four regions (U.S., EU, China, 
and India) for which the IEA provided estimates, with gas CCGT’s “fuel, CO2 
controls, and O&M” costs ($/MWh) doubling in the U.S. and EU during the same 
period. In contrast, the IEA expects capital costs of solar PV and offshore wind to 
decrease by 42%–47% in these regions between 2020 and 2030 (Net Zero by 2050, p. 
201). 
Decreasing costs of low-carbon technologies. The IEA’s Stated Policies Scenario 
(discussed in the next subchapter) presents aggressive cost estimates for technologies 
essential for the transition. For example, according to this scenario, the capital costs

8
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
of battery electric cars (BEVs, $/vehicle) and fuel cells ($/kW) decrease by 26% and 
40%, respectively, and that of hydrogen electrolyzers falls almost two thirds (–62%) 
between 2021 and 2030. NZE goes even further, by reducing the 2030 cost inputs 
compared with 2021 levels: cost inputs for BEVs fall  by 31% (making it capital-cost-
competitive against hybrid vehicles), fuel cells by 55%, and hydrogen electrolyzers 
by 79% (IEA’s Global Energy and Climate Model documentation, p. 24). Despite the 
detailed menu of future technologies in the IEA’s databases, it is important to note 
that these cost inputs greatly underestimate the potential impact of key barriers such 
as high critical mineral prices and limited land availability (further analyzed in Chap. 
2, pp. 38-39).
At scale, mandated behavioral changes. NZE requires rapid and significant 
behavioral changes that go beyond switching to EVs (Net Zero by 2050, pp. 67–70, ). 
These include cutting motorway speeds, setting room temperatures within a specific 
range, and imposing flight premiums to cap long-haul flights, among other behavioral 
changes and restrictions, which will significantly constrain modern lifestyles and are 
likely to encounter public resistance. (These are further analyzed on pp. 14–16).
These assumptions lead to the following key projected outputs in the model: 
“There is no need for investment in new fossil fuel supply in our net zero 
pathway”: No new oil and gas fields beyond those already approved for development 
(Net Zero by 2050, pp. 21, 101–2, 175). NZE projects oil and gas supply to plunge 
from 329 EJ in 2021 to 256 EJ in 2030 and 81 EJ in 2050 (WEO-2022, table A.1c). 
Contrary to the IEA’s low price estimates, a supply decrease of such magnitude 
could see oil and gas prices break record highs within a short period. Such a scenario 
will likely lead to deeply negative effects for most countries’ economic well-being, 
development, national security, and energy security.
Massive deployment of alternative energy resources. The global solar PV capacity 
multiplies 5.7 times from 892 GW in 2021 to 5,052 GW in 2030 and by 17.3 times 
to 15,468 GW in 2050. Wind capacity growth is still gigantic: from 832 GW in 2021 
to 3,072 GW (a 3.7x increase) in 2030 and 7,795 GW (9.4x) in 2050 (WEO-2022, 
p. 448). The solar capacity growth rate of 470% in less than a decade is an extremely 
tall order, even in the absence of challenges such as land-permitting requirements and 
critical mineral supply constraints and clashes with the IEA’s assumption of falling 
wind and solar costs. Moreover, generating sufficient energy from these intermittent 
resources to replace hydrocarbons reliably and economically is assumed, not 
demonstrated. 
Massive scale-up in investment in alternative energy, grid networks, and battery-
charging infrastructure. Annual average capital investment in energy increases from 
2.5% of global GDP in 2016–20 (about US$2.3 trillion) to 4.5% in 2030 (about 
US$5 trillion in real dollars). Annual investment in transmission and distribution 
more than triples, from US$260 million to US$820 million by the end of this decade;

9
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
“
public charging points will require annual investment of about US$90 million by 
2030. CO2 and hydrogen-enabling infrastructure also require an annual investment 
of US$40 billion in 2030, up from US$1 billion today (Net Zero by 2050, pp. 21, 81–
82). To put the sheer scale into perspective, the additional annual capital investment 
of up to US$2.7 trillion is close to France’s GDP in 2021 (US$2.9 trillion).
Enormous requirements for critical minerals. “[D]emand for lithium for use in 
batteries grows 30‐fold to 2030 and is more than 100 times higher in 2050 than in 
2020” (Net Zero by 2050, p. 70). When combined with the required growth of 12 
other categories of metals and minerals assessed in the IEA’s 2021 critical mineral 
report, the magnitude of this growth surpasses any previous surge in materials supply, 
giving rise to substantial economic and environmental risks globally.
The sharp post-pandemic rise in oil prices and the vertiginous rise in natural gas prices in 
Europe (up nearly 10-fold between January 2021 and August 2022) required the IEA to 
make some concessions to reality. In its World Energy Outlook 2022, which was released after 
the start of the Russia–Ukraine War, the IEA had to explain away these price surges in view 
of its NZE assumption of persistently low oil and gas prices: if reductions in hydrocarbon 
investment occurred at a faster rate than declines in demand, the outcome would be not 
desirable and, hence, investment in existing fields must continue.9 In other words, NZE’s key 
assumption hinges on a very rapid rate of decline in fossil fuel demand globally.  The IEA goes 
on to stipulate that reducing investment in oil and gas without sufficient policy action and 
investment in alternative energy would result in much higher energy prices:
“Reducing fossil fuel investment in advance of, or instead of, policy 
action and clean energy investment to reduce energy demand would 
not lead to the same outcomes as in NZE Scenario. If supply were to 
transition faster than demand, with a drop in fossil fuel investment 
preceding a surge in clean energy technologies, this would lead to much 
higher prices—possibly for a prolonged period—even if the world 
moves towards net zero emissions. The scope for reductions in fossil 
fuel expenditure is closely linked to the scale and speed of increases in 
clean energy expenditure, and to the success of efforts to reduce energy 
demand: it does not make sense to look at any one of these factors in 
isolation from the others.” (IEA, WEO–2022, p. 134)
This paragraph is a crucial admission by the IEA, as it vitiates any justification by ESG 
investors and banks seeking to block investment by Western oil and gas companies in new 
oil and gas fields absent governmental actions to curtail demand. And if such government 
policies have been adopted and do cut demand, it won’t need ESG investors to tell oil and gas 
companies how to deploy their capital—the capital markets will provide a strong signal in the 
form of declining stock prices.

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Batt Odgerel, Lucian Pugliaresi, Michael Lynch
1.2. Normative vs. Exploratory Scenarios
In this section, we examine the assumptions underlying NZE, which became its main 
normative scenario starting in 2021 and is now included in the IEA’s flagship World Energy 
Outlook (WEO), and compare them to the IEA’s other main scenario, Stated Policies 
(STEPS).10 Unlike NZE, STEPS defines a set of starting conditions and tries to answer “What 
can happen?” rather than “What should happen?”11  STEPS is certainly not a failsafe tool, 
considering the IEA’s poor track record of forecasting; however, it is a reasonable baseline 
scenario to test the assumptions of NZE. Table 1 summarizes the definitions and objectives of 
the two scenarios. 
Table 1. Definitions and Objectives of NZE and STEPS12
Although STEPS contains some aspirational elements, e.g., by incorporating announced but 
unimplemented policies, we still consider it a reasonable baseline scenario that better captures 
real-world trends. As shown in Figure 3, the final energy mix of NZE looks completely 
different from both today’s and the STEPS energy mix, with more than half the energy 
supplied in the form of electricity.
1.3. Low Oil and Gas Price Expectations
Oil prices are notoriously difficult to forecast, as the IEA should know (see discussion in 
Chapter 4). As noted above, the NZE scenario’s projections for oil and gas prices, coupled with 
high CO2 prices, assume that the pace of oil and gas demand reductions exceeds that of supply 
destruction. In NZE, a quarter of the annual oil demand is wiped out, compared with STEPS 
by 2030, and the largest drop comes from road transport, which forfeits 35% of the annual 
global oil demand in favor of electric vehicles (EVs) in 2030. By 2050, oil demand is nearly 
eradicated in all sectors of the economy, except as a petrochemical feedstock.
 
Net Zero Emissions by 2050 Scenario 
Stated Policies Scenario 
Type 
Normative 
Exploratory (descriptive) 
Deﬁnitions 
A pathway for the global energy sector to 
achieve net zero CO2 emissions 
Does not rely on emissions reductions from 
outside the energy sector  
Universal access to electricity and clean 
cooking by 2030 
Reﬂects current policy settings based 
on an assessment of the speciﬁc 
policies that are in place and those that 
have been announced by governments 
around the world 
Objectives 
What is needed across the main sectors by 
various actors and by when to achieve net 
zero energy-related and industrial process 
CO2 emissions  
Meet other energy-related sustainable 
development goals  
Provides a benchmark to assess 
potential achievements and limitations 
of recent developments in energy and 
climate policy

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
The IEA crude oil price, a weighted average import price among the IEA members, moves in 
opposite directions under STEPS and NZE. In STEPS, the global oil price remains elevated 
at US$95 (in 2019 dollars) in 2050.13 In contrast, the NZE scenario’s price in 2030 essentially 
falls back to the 2020 pandemic level and further drops to US$24 by 2050.14 As discussed 
in Chapter 2, however, BEVs and other alternative vehicles (FCEVs, etc.) are still far from 
replacing internal combustion engine (ICE) vehicles at a large scale, let alone displacing a third 
of the oil supply in road transport by 2030, as suggested by NZE.
Figure 3. Share of Global Final Energy Consumption by Fuel Form
The NZE scenario requires highly restrictive and punitive policies to destroy demand to 
depress oil and gas prices. According to the GEC model, to prevent a rebound in oil demand 
from lower oil prices, “an increase of fuel duty on top of CO2 price is applied whenever is 
necessary for ensuring that end-user prices are kept at least at the same level as in [STEPS].”15 
Increasing fuel duty and any such additional cost to end users is hard to implement successfully 
in democratic societies, where such uneconomic, impractical decisions are penalized at the 
ballot box, something that the Biden administration recognized with its use of the Strategic 
Petroleum Reserve to bring down gasoline prices.
Natural gas prices are expected to remain high in importing regions in STEPS as their reliance 
on Russian gas decreases. In the NZE scenario, however, natural gas demand is reduced rapidly, 
leading to a fast decline in gas prices and, by 2030, dropping to about US$5/MMBtu, which, 
according to the IEA, is “a floor set by the short‐run marginal cost of delivering gas from 
20%
39%
17%
21%
Other
Heat
Solid fuels
Gas fuels
Liquid fuels
Electricity
52%
17%
14%
10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2030
2021
2040
2050
2030
2040
2050
28%
36%
16%
16%
Net Zero by 2050 Scenario
Stated Policies Scenario
Source: Energy Policy Research, IEA World Energy Outlook 2022

12
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
existing export projects.” This is a similar situation to oil demand reductions in NZE; the role 
of natural gas as a key dispatchable fuel in electricity generation and gas-fired turbines’ ability 
to ramp up quickly make it difficult to replace natural gas with intermittent resources. The 
IEA’s executive director Fatih Birol stated in January 2022: “Gas is expected to retain a major 
role as a source of flexibility and backup for many years to come, especially in economies—
such as Europe—that have large seasonal variations in demand.”16
Figure 4. Annual IEA/OECD Crude Import Price (US$2021)
Figure 5. Annual U.S. Henry Hub Natural Gas Spot Price (US$2021)
0
20
40
60
80
100
120
140
USD/barrel (USD 2021)
1980
1990
2000
2010
2020
2030
2040
2050
Historical 
(Average OECD)
IEA STEPS
(IEA crude oil)
IEA NZE
(IEA crude oil)
$95
$24
$82
$35
$68
(2021)
Source: Energy Policy Research, IEA WEO-2022, IEA Statistics, and World Bank
Historical data is calculated by weighted averaging crude oil import prices in OECD. World Bank’s
GDP deﬂator is used to calculate real US$ values through 2021. Data points are interpolated.
USD/MMBtu (USD 2021)
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2000
2010
2020
2030
2040
2050
$1.8
$1.9
$4.7
$4.0
$6.1
(2022)
Historical 
(Average Henry Hub)
IEA STEPS
(U.S. natural gas)
IEA NZE
(U.S. natural gas)
Sources: Energy Policy Research, U.S. EIA, IEA WEO-2022, World Bank, and U.S. BLS
World Bank’s GDP deﬂator is used to calculate real US$ values through 2021. U.S. CPI is used to convert 
2022 data to 2021 dollars. Data points are interpolated.

13
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Because of their numerous advantages over alternative technologies, the probability of oil and 
gas demand collapsing in this decade is low. As such, any large-scale supply-side destruction 
will result in large increases in oil and gas prices and reduced national wealth (discussed in 
more detail in Chapter 2).
1.4. High Carbon Prices Worldwide
Carbon pricing—either through taxes or trading systems—is regarded as a key instrument to 
achieve the price parity point between hydrocarbons and alternative energy sources. In order to 
achieve net zero, proponents argue that very high carbon prices need to be imposed on carbon-
emitting fuels. An argument for or against carbon pricing is beyond the scope of this report, 
but we note three problems with the IEA’s carbon price assumptions (Tables 2–4):
Extremely high carbon prices are assumed for all regions—most notably, in the 
poorest regions of the world. The 2022 edition of WEO assumes an average price 
of US$180/tonne of CO2 (constant 2021 price) by 2050 for non-OECD countries 
(excluding China, India, and some others), which is 72% of the price assumed for 
OECD countries. If the long-term average inflation in developing countries stays 
at 4.8%, which was the historical rate between 2011 and 2020,17 the nominal price 
in 2050 would be nearly US$670, assuming a constant exchange rate. However, the 
nominal rate could be vastly different, depending on actual exchange rates. As most 
of the energy demand and CO2 emissions through 2050 are expected from the non-
OECD world, utilities, consumers, and businesses in developing countries will have to 
pay more for their absolute emissions quantities, compared with their counterparts in 
richer countries.18
The CO2 price assumptions for developing countries in the WEO-2022 increased 
up to 3.3 times over the WEO-2021 and the Net Zero by 2050 report (2021). The 
carbon price assumption for “Other emerging market and developing economies” for 
2050 was US$55 (constant 2019 price) in WEO-2021 and Net Zero by 2050; but in 
the WEO-2022, the number hiked to US$180 (constant 2021 price). This large change 
in assumed carbon prices in just one year makes it challenging to take NZE seriously.
There are small but important inconsistencies in the dollar values and sectoral 
coverage across the reports. Net Zero by 2050 uses constant 2019 dollars,19 WEO-
2021 uses constant 2020 dollars, and the WEO-2022 uses constant 2021 dollars, 
but the numbers (except for developing countries and one 2030 value for advanced 
economies) are the same for all three reports. Adjusting for U.S. inflation between 
2019 and 2021, the correct numbers in the WEO-2022 would be 6% higher than in 
the Net Zero by 2050 report.20 Another inconsistency is in the sectoral coverage. While 
the title of the tables indicates that the coverage is limited to electricity, industry, and 
energy production, the description says that STEPS prices also cover “end‐use sectors, 
e.g., aviation, road transport and buildings, where applicable.” Clarity about sectoral 
coverage is important, particularly in the context of the EU, where national ETSs exist 
because the EU ETS doesn’t include road transport, heat generation, and other sectors.

14
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Table 2. NZE Report: CO2 Prices for Electricity, Industry, and Energy Production in NZE
Table 3. WEO-2021: CO2 Prices for Electricity, Industry and Energy Production in NZE
Table 4. WEO-2022: CO2 Prices for Electricity, Industry and Energy Production in NZE
1.5. Rapid, Large-Scale Behavioral Changes
Behavioral change is different from one-off or temporary adjustments in that it is a longer-term 
change in people’s daily activities. The Net Zero by 2050 report, published during the pandemic 
in 2021, appears to have overestimated the potential of behavioral changes in the long run. 
Many changes during the Covid-19 pandemic, such as teleworking, were hailed as permanent 
shifts in work and life but have now increasingly proved to be temporary adjustments.
US$ (2019) per tonne of CO2  
2030 
2040 
2050 
Advanced economies 
130 
205 
250 
Select emerging market & developing economies 
(China, Russia, Brazil, & South Africa) 
90 
160 
200 
Other emerging-market and developing 
economies 
15 
35 
55 
US$ (2020) per tonne of CO2  
2030 
2040 
2050 
Advanced economies 
130 
205 
250 
Major emerging economies (China, Russia, 
Brazil, & South Africa)  
90 
160 
200 
Other emerging-market and developing 
economies 
15 
35 
55 
US$ (2021) per tonne of CO2  
2030 
2040 
2050 
Advanced economies with net zero emissions 
pledges (excl. Mexico) 
140 
205 
250 
Emerging market and developing economies 
with net zero emissions pledges (China, India, 
Indonesia, Brazil, & South Africa)
 
90 
160 
200 
Other emerging-market and developing 
economies 
25 
85 
180

15
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
The IEA states: “The assumption that people’s lifestyles and patterns of consumption will 
continue unaltered in a scenario of net zero emissions by 2050 is arguably unrealistic, and 
risks ignoring the potential for individuals, via their choices and habits, to help steer the 
energy system onto a sustainable path.”21 Although there is some truth to that statement, it is 
important not to overlook the stickiness of existing behaviors and the potential negative effects 
of forced behavioral changes on human health, well-being, and prosperity.
Figure 6. Role of Technology and Behavioral Change in Emissions Reductions in NZE
As shown in Figure 6, 54% of the cumulative emissions reductions in the NZE pathway 
come from the adoption of “low-carbon technologies with the active involvement of 
consumers,” such as switching to EVs. However, the effect of behavioral changes coupled with 
material efficiency gains (i.e., reduced demand for materials through recycling and design 
improvements) is just 8%,22 and that of behavioral changes alone is less: “Total CO2 emission 
in NZE between 2021–50 are around 4% less than they would be without such behavioural 
changes” as reducing indoor temperatures and limiting motorway speeds.23
Our review of the IEA reports suggests that the historical data used for these behavioral 
changes are not fully transparent. Although the IEA says that it carried out literature reviews on 
the energy impact of these assumptions, the starting points for many of these assumptions are 
not clear enough to be thoroughly examined. Additionally, potential impacts and risks such as 
cost, social acceptability, and health are not sufficiently addressed by the IEA.
Key behavioral changes from Net Zero by 2050 are listed in Table 5. Although putative 
emissions reductions from them are relatively modest, such measures are likely to spark a 
public backlash, and—other than for select jurisdictions, such as deep-blue cities—politicians 
might well conclude that they are not worth the expenditure of political capital.
2020
GtCO2
2050
–5
–10
–15
–20
–25
–30
–35
Behavioral changes
& materials eﬃciency
Low-carbon
technologies with
active involvement
of consumers
Low-carbon
technologies
Source: Recreation of IEA graph. IEA, Net Zero by 2050 (2021)

16
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Table 5. NZE Behavioral Changes 
1.6. Energy Supply Comparable to Entire OECD Must Disappear 
In NZE, the world must undergo a massive transformation in the composition of fuel sources, 
the volume of energy supply, and the nature of energy sources (electrons vs. molecules) when 
compared with STEPS. By 2050, the STEPS expects an 18.6% increase in global annual 
total energy supply over the 2021 level, with fossil energy sources (coal, natural gas, and oil—
unabated or abated)24 providing nearly two-thirds (62%) of the global energy mix. In contrast, 
NZE sees a 15% reduction in energy supply during the same period, with all types of fossil 
energy contributing just 18% of the energy mix (Figures 7 and 8).25 Further, changes in supply 
through 2040 are much steeper than those between 2040 and 2050, adding to the stringency 
of these changes. The following points further illustrate the magnitude of the demand 
reduction under NZE:
•	
The difference in global energy demand in 2050 between STEPS (740 exajoules [EJ])26 and 
NZE (532 EJ) is 208 EJ. This is almost equal to the entire OECD’s total energy demand 
(218 EJ) in 2021. The OECD comprises of the 38 most developed countries, which make 
up about a third of the global energy demand (IEA’s database).27
•	
A demand collapse of similar magnitude occurred in the former Soviet Union (FSU) 
 
IEA: Policy options 
Phase out ICE cars from large cities 
Low-emissions zones 
Access restrictions 
Parking restrictions 
Registration caps 
Parking pricing 
Congestion charges 
Investment in cycling lanes and public 
transportation 
Rideshare all urban car trips 
Reduce motorway speeds to less than 100 km/h
Speed limits 
Real‐time fuel-eﬃciency displays 
Awareness campaigns 
Raise air-conditioning temperature in cars by 
3°C 
Keep international air travel for business 
purposes and long‐haul ﬂights for leisure at 2019 
levels 
Awareness campaigns 
Price premiums 
Corporate targets 
Frequent‐ﬂier levies  
Target average set‐point temperatures Space 
heating: 19–20°C (66.2–68°F) 
Space cooling: 24–25°C (75.2–77°F) 
Awareness campaigns 
Consumption feedback 
Corporate targets

17
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
countries where energy demand plummeted 38% in a span of eight years (1990–98) before 
somewhat recovering in subsequent years. During this period, almost all FSU countries 
suffered deep, long economic recessions, and a large portion of their populations became 
impoverished.28
In NZE, the world overly depends on one form of energy—electricity—and forfeits the 
benefits of other forms of energy that provide flexibility and energy security. By 2050, 
more than half the modern world’s final energy consumption (52%) comes from a single 
energy form and—for the first time—electrons, not molecules. This contrasts with STEPS, in 
which liquid fuels provide 36% of final energy consumption while electricity makes up slightly 
over a quarter (28%) in 2050. This shift from a relatively diverse mix of energy forms to 
electricity-dominated systems will likely jeopardize the global energy system by exposing it to 
various grid-related risks and vulnerabilities at a much larger scale, while forsaking reliable and 
proven energy technologies.
Figure 7. Primary Energy Demand: STEPS vs. NZE in 2050
0
100
200
300
400
500
600
700
800
Exajoules (1 EJ ≈ 448,000 bbl/d)
STEPS
NZE
2021
2050
Fossil
energy
share:
79%
62%
Other renewables
Renewables
Fossil energy
Gaseous bioenergy
Liquid bioenergy
Solid bioenergy
Hydro
Wind
Solar
Nuclear
Natural gas w/CCUS
Natural gas
Oil (non-energy)
Oil (energy use)
Coal w/CCUS
Coal
Traditional biomass
18%
Diﬀerence is 208 EJ
(almost equal to entire
OECD demand in 2021)
Source: Energy Policy Research, IEA World Energy Outlook 2022

18
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Figure 8. Assumed Changes in Energy Demand: NZE vs. STEPS
1.7. Unprecedented Energy-Intensity Improvements 
NZE assumes a remarkably high level of energy-intensity improvements that have never 
historically been achieved. To reach the demand-reduction goal, the world must almost triple 
its average annual energy-intensity improvements throughout the next decade and maintain a 
very high rate of efficiency improvements between 2030 and 2050 (Figure 9). This assumption 
alone makes NZE an exceedingly improbable scenario, as it has been proved challenging to 
sustain a consistently high rate of efficiency improvements for a long time. 
Global annual energy-intensity improvement rates (defined as the amount of energy used to 
produce a unit of GDP) exceeding 2% annually have become more frequent over the years. 
However, since the 1970s, the decadal averages of such improvements have never surpassed 
1.6% a year. The most significant efficiency improvements have been observed in China, 
which, thanks to its strict five-year plans heavily focused on growing its GDP faster than the 
energy input, achieved a record energy-intensity improvement of 5.6% in 2015.29 That year, 
the world witnessed the highest-ever energy-intensity improvement, of about 3%. However, 
Exajoules (1 EJ ≈ 448,000 bbl/d)
Increase
Reduction
Other renewables
Gaseous bioenergy
Liquid bioenergy
Solid bioenergy
Hydro
Wind
Solar
Nuclear
Natural gas w/CCUS
Natural gas
Oil (non-energy)
Oil (energy use)
Coal w/CCUS
Coal
Traditional biomass
- 450
- 400
- 350
- 300
- 250
- 200
- 150
- 100
- 50
 50
 100
 150
 200
 250
2021
2030
2040
2050
Source: Energy Policy Research, IEA World Energy Outlook 2022
Fossil reduced
at fastest pace
between now & 2040 
Low-carbon
growth accelerates
in 2030-2040

19
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
China has been unable to replicate that achievement, as its energy-intensity improvements have 
slowed significantly since 2015.30
Figure 9. Global Energy-Intensity Improvement: Historical vs. NZE
Some of the key milestones to achieve energy-efficiency improvements under NZE are 
extremely ambitious. For example, the share of zero-carbon-ready buildings31 in total global 
stock must increase from less than the current 1% to 25% in 2030 and over 85% by 2050. Just 
imagine that a quarter of all buildings in the world will either get their electricity and heat only 
from their home solar (or wind) systems with large enough batteries or be able to get a fully 
decarbonized energy supply from the grid. 
Another NZE milestone is to decrease all new buildings’ heating and cooling energy 
consumption by 50% in 2030 and 80% in 2050 from the 2020 level32 (it is indeed possible, 
if we can somehow change human beings’ physical and physiological resistance to indoor 
temperatures twofold in 2030 and fivefold in 2050). These changes are a remarkably tall order, 
even in the most developed countries. For instance, it will take decades for the EU to convert 
its buildings, of which 75% are energy-inefficient, into carbon-neutral buildings, as the current 
rate of yearly deep renovations is just 0.2% and 85–95% of existing EU buildings will still exist 
by 2050.33
-5.0%
-4.0%
-4.2% in 2020-2030.
In the past 5 decades, 
global annual average improvement was -1.2%.
Maintaining these 
improvements consistently 
is highly improbable.
-2.7% in 2030-2050
-3.0%
-2.0%
-1.0%
1970
1980
1990
2000
2010
2020
2030
2040
2050
Historical annual
 10-yr average (historical)
 NZE average
Source: Energy Policy Research, IEA World Energy Balances database
Note: Primary energy / GDP (2019 USD PPP) is used for the calculation.

20
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
1.8. Massive Additional Clean Energy Investments
The Net Zero by 2050 report estimates that total capital investment in energy must increase 
from 2.5% of GDP in 2016–20 to 4.5% of GDP by 2030. The annual average investment 
of US$2.3 trillion (2019 dollars) in 2016–20 must reach US$5 trillion in 2030 and remain 
high through 2050. To put it into perspective, the total capital investment must exceed the 
GDP of Japan, the third-largest economy (US$4.9 trillion in 2021, nominal). The difference 
between the capital investment today and in 2030—US$2.7 trillion—is comparable with 
France’s economy in 2021 (US$2.96 trillion, nominal).34 In NZE, the annual fossil fuel capital 
investment drops from US$836 billion to US$559 billion in 2030 and eventually to US$288 
billion by 2050. The bulk of the required capital investment must be made in electricity 
systems (from US$859 billion today to US$2.4 trillion in 2030), electrification (US$77 billion 
to US$557 billion) and efficiency (US$334 billion to US$777 billion). 
Figure 10. Capital Investment in Energy in NZE
“Global electricity networks that took over 130 years to build need to more than double in 
total length by 2040 and increase by another 25% by 2050,” the Net Zero by 2050 report 
states.35 To achieve this growth, annual investment in electric grid network infrastructure must 
more than triple, from US$259 billion (all values in 2019 dollars) in 2020 to US$822 billion 
in 2030 and almost quadruple to US$1 trillion in 2040 under NZE (Figure 11). 
Furthermore, the global electricity supply cost is expected to increase even further due to 
the higher cost of capital recovery, operations and maintenance, and increased CO2 prices, 
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
5,000
2016-2020
2030
2040
2050
Billion USD (2019)
Other
Source: IEA, Net Zero by 2050 (2021)
Fossil fuels
CCUS
Hydrogen
Electricity system
Electriﬁcation
Eﬃciency
Other renewables
Bioenergy

21
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
among others. This translates to a higher average electricity supply cost per MWh through 
2050 (Figure 12), rising from US$70.9 per MWh in 2020 to US$89.5 per MWh in 2030. As 
a result, NZE expects retail electricity prices to “increase by 50% on average” by 2050.36 The 
need for investors to recover their capital costs and scale of these cost increases demonstrates 
that policies such as the Inflation Reduction Act, which encourages investment in wind and 
solar, will have the opposite effect by raising inflation and worsening the cost-of-living crisis.
However, these are likely to be substantial underestimates due to the various challenges to the 
net zero transition, as discussed in subsequent chapters of this report (e.g., increasing renewable 
system costs, higher material prices, land requirements, technology cost, and readiness levels).
        
Table 6. NZE Grid Investment (See Figure 11)
0
 200
 400
 600
 800
 1,000
2020 2030 2040 2050
Billion USD (2019)
0
30
60
90
120
150
1
2
3
4
5
6
2010
Left axis
Right axis
2020 2030 2040 2050
USD per MWh (2019)
Trillion USD (2019)
CO2
Cost per MWh
Fuel
Power plant
O&M
Power plant
capital recovery
Grids
Source: IEA, Net Zero by 2050 (2021)
Figure 11. NZE Grid Investment
Figure 12: NZE. Global Electricity Supply Costs
Billion US$ (2019)  
2020 
2030 
2040 
2050 
Grid investment 
259 
822 
1,003 
799

22
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Table 7. NZE: Global Electricity Supply Costs (See Figure 12)
1.9. GDP Growth Assumptions Constant Across Scenarios
According to the WEO-2022, “The assumed rates of economic growth are held constant across 
the scenarios. This allows for a comparison of the effects of different energy and climate choices 
against a common macroeconomic backdrop, but it does not capture feedback loops between 
climate action, climate change and economic growth.”37
This grossly underestimates the relationship between GDP and the impact of net zero efforts. 
Some argue that global GDP may increase because of massive spending on alternative 
technologies and low-carbon infrastructure in NZE. Such high levels of policy-driven capital 
investment are likely to crowd out more productive uses of capital. Any short-term stimulus 
will likely dissipate in the medium to long term; and the world, especially OECD countries, 
will have much less wealth than in STEPS because of its dependence on higher-cost, capital-
hungry, inflexible sources of energy.
Table 8. IEA’s GDP Growth Assumptions
2010 
2020 
2030 
2040 
2050 
Trillion US$ (2019)  
—Left axis 
Grids 
0.28 
0.37 
0.58 
0.95 
1.17 
Power plant capital recovery 
0.53 
0.73 
1.62 
2.79 
3.33 
Power plant operations and 
maintenance 
0.29 
0.36 
0.53 
0.80 
0.95 
Fuel 
0.58 
0.37 
0.31 
0.24 
0.23 
CO  price 
0.01 
0.07 
0.30 
0.06 
0.05 
US$ per MWh (2019)  
—Right axis 
 
Average cost (right axis) 
78.40 
70.90 
89.50 
85.50 
80.30 
North 
America 
C. & S. 
America 
Europe 
Africa 
Middle 
East 
Eurasia 
Asia 
Paciﬁc 
China 
India 
2010–21
 
1.9% 
0.9% 
1.6% 
2.7% 
2.0% 
2.1% 
4.9% 
6.8% 
5.5% 
2021–30
 
2.0% 
2.4% 
2.0% 
4.1% 
3.2% 
0.1% 
4.7% 
4.7% 
7.2% 
2030–50
 
2.0% 
2.4% 
1.4% 
4.2% 
3.2% 
1.4% 
3.1% 
2.8% 
4.4% 
2021–50
 
2.0% 
2.4% 
1.6% 
4.1% 
3.2% 
1.0% 
3.6% 
3.4% 
5.2%

23
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
“
Chapter 2
Implications of No New Oil and Gas 
Development
Highlights of Chapter 2
•	 Under NZE, by 2050, global oil and gas supply is expected to decrease by 78% and 
72%, respectively.
•	 Historical price elasticities of demand for oil and gas suggest that such a rapid 
reduction in supply without concomitant shifts in demand will multiply energy 
prices. By 2030, in NZE, the crude oil price will likely be more than US$200, and 
gas prices may increase two- to fourfold.
•	 The additional economic loss from the supply decline may be between US$12.2 
trillion and US$52.6 trillion in the first 10 years of NZE. This range is equivalent to 
about 1.0%–4.1% of world GDP during the same period.
•	 The potential supply shock, coupled with the lack of scalability and substitutability 
of renewables to replace hydrocarbons, will lead to costs and risks in six main areas: 
macroeconomy (inflation, GDP), energy security (dependence, reliability, etc.), 
social issues (wages, communities), development, innovation, and environment & 
health.
2.1. Oil and Gas Production Without New Oil and Gas Fields 
“The trajectory of oil demand in the NZE means that no exploration 
for new resources is required and, other than fields already approved 
for development, no new oil fields are necessary. However, continued 
investment in existing sources of oil production are needed. On average 
oil demand in the NZE falls by more than 4% per year between 2020 
and 2050. If all capital investment in producing oil fields were to cease

24
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
immediately, this would lead to a loss of over 8% of supply each year. 
If investment were to continue in producing fields but no new fields 
were developed, then the average annual loss of supply would be around 
4.5%. The difference is made up by fields that are already approved for 
development.” (page 101, Net Zero by 2050)
Figure 13. Oil and Gas Demand in IEA WEO-2022
Based on the IEA data, global investment in upstream oil and gas in 2022 was US$417 billion 
(in 2021 dollars), considerably less than the pre-pandemic annual average of US$533 billion 
over five years.38 Under STEPS, this investment will have to increase to an average of US$650 
billion by 2030 to meet additional demand.39 Therefore, cessation of investment in new oil 
and gas fields beyond those already approved for development in 2021 will dramatically reduce 
oil and gas supply, both in the short and the long term. The question of how rapidly oil and 
gas production will decrease under NZE depends on the observed decline rate for oil and gas 
fields,40 as well as the size of upstream projects already approved for development. This analysis 
uses scenario data from the WEO-2022 (Figure 13); but in Appendix 4, we also consider a 
more extreme scenario, based on energy economist Michael Lynch’s estimates, which exclude 
approved projects.
Million barrels per day
Trillion cubic meters per year
STEPS
NZE
STEPS
NZE
Source: Data from IEA, World Energy Outlook (2022) & Outlooks for gas markets and investment (2023).
Te data derived and estimated from graphs in the WEO-2022 and the IEA’s gas report for the G7, as the 
IEA’s data tables only show scenario data for 2030 and 2050.
0
20
40
60
80
100
120
2010
2020
2030
2040
2050
0
1
2
3
4
5
2010
2020
2030
2040
2050
Global Natural Gas Demand
Global Oil Demand

25
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
In NZE, global oil supply drops from 96.2 million barrels per day in 2022 to 75.3 MMB/D 
by 2030 and 22.8 MMB/D by 2050, representing a near 80% decrease from pre-pandemic 
levels. This is a stark contrast to STEPS, which shows continued growth until the mid-2030s, 
followed by stable demand of more than 100 MMB/D through 2050. NZE also predicts that 
natural gas supply rapidly declines from over 4 trillion cubic meters (tcm) to 3.3 tcm by 2030 
and further drops to 1.2 tcm by 2050.41 By contrast, STEPS anticipates sustained dependence 
on natural gas through 2050, with global gas demand peaking at about 4.4 tcm in the late 
2020s and staying stable thereafter. 
2.2. Price Elasticities of Demand and Oil and Gas Prices
As discussed in Chapter 1, the IEA assumes for the NZE that the pace of the demand 
destruction will exceed that of the supply shock, leading to continued oil and gas price declines 
through 2050. According to the IEA, the long-term floor of oil price “is largely determined 
by the operating costs for fields currently in operation.”42 The assumption of a rapid and 
prolonged decline in oil and gas demand is highly unlikely, given the growing demand for 
affordable, reliable, and proven energy sources in the developing world. Further, NZE’s 
assumption that oil and gas prices will decrease through 2050 requires a supersonic decrease in 
demand that far outpaces the supply shock resulting from the proposed cessation of investment 
in new oil and gas fields. 
This section utilizes simplified price elasticity assumptions to understand the potential of 
massive price spikes in the short and the long term. Price elasticity of demand measures the 
responsiveness of the quantity demanded of a good or service to changes in its price. To 
calculate the price effect resulting from a rapid decrease in supply, we use the formula of price 
elasticity of demand: 
Estimating the impact on oil and gas prices of a massive decline in production is rather like 
the challenge facing economists in the early 1970s when oil prices soared far beyond historical 
experience. At the time, groups like the OECD (1974) relied on assumed price elasticities of 
demand, specifically –0.3, indicating that for every 10% price increase, demand would drop 
by 3%.43 However, a review of more recent literature reveals that this rate is lower; 32 studies 
collected by Caldara et al. had a median price elasticity of –0.13.44 The natural gas price 
elasticity falls between –0.1 and –0.2, according to various studies.45
Using the index score of 100 for Year 0 and different short-term price elasticities of demand, 
Table 9 shows the first 10 years’ price levels needed to cope with the Net Zero by 2050 report’s 
estimated drop in supply compared with the baseline demand projections in the STEPS 
scenario.46 
Price Elasticities of Demand = % Change in Quantity
% Change in Price

26
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Table 9. Price Response Potentials by Price-Elasticity Level (Real Terms)47
Based on the differentials between the supply estimates under NZE and the STEPS, the oil 
price elasticities of –0.3 to –0.1 imply an increase of 115% to 345% in the first 10 years, while 
for natural gas, the range is 117%–352% during the same period. It is unlikely that price 
increases of this scale for such a prolonged period would not trigger a major recession, and 
long-term effects would start to come into play in the medium term (more capital equipment 
replacement and radical behavioral changes that forcefully alter modern lifestyles). 
Because NZE allows investment in upstream oil and gas projects already approved for 
development, these price spikes would be much higher under a complete cessation of all new 
oil and gas upstream projects (see Appendix 4 for a price analysis of the latter scenario). Over 
time, demand for oil and gas may become more price-elastic due to substitution effects, but 
these will severely affect the economic well-being and national security of most of the world. 
These price projections depend on the initial year the elasticity is operating from. In the past 
five years, the price has varied from deeply negative to well over US$100 in nominal terms. 
The most recent annual crude price was US$94.9 (in 2022). Depending on assumed lag times, 
equation structure, and so forth, prices would climb sharply each year until longer-term effects 
had an impact and slowed the price rise. Under NZE, a price of crude oil (WTI) US$ below 
First year 
=US$100 
Price 
Elasticity 
Year 
1 
Year 
2 
Year 
3 
Year 
4 
Year 
5 
Year 
6 
Year 
7 
Year 
8 
Year 
9 
Year 
10 
Crude 
Oil 
–0.1 
122.5 153.6 186.8 219.7 255.9 292.1 329.2 367.2 407.9 445.2 
–0.15 
115.0 135.8 157.8 179.8 203.9 228.1 252.8 278.2 305.3 330.1 
–0.2 
111.2 126.8 143.4 159.9 178.0 196.1 214.6 233.6 254.0 272.6 
–0.3 
107.5 117.9 128.9 139.9 152.0 164.0 176.4 189.1 202.6 215.1 
NZE–
STEPS 
Supply 
Diﬀerential 
-2% 
-5% 
-9% 
-12% 
-16% -19% 
-23% 
-27% -31% 
-35% 
Natural 
Gas 
–0.1 
112.9 130.9 162.9 189.7 224.5 263.8 303.4 353.3 401.6 451.5 
–0.15 
108.6 120.6 141.9 159.8 183.0 209.2 235.6 268.9 301.0 334.3 
–0.2 
106.4 115.4 131.5 144.9 162.3 181.9 201.7 226.7 250.8 275.7 
–0.3 
104.3 110.3 121.0 129.9 141.5 154.6 167.8 184.4 200.5 217.2 
NZE–
STEPS 
Supply 
Diﬀerential 
-1% 
-3% 
-6% 
-9% 
-12% -16% 
-20% 
-25% -30% 
-35%

27
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
180/barrel (2022 dollars) by 203048 seems highly unlikely, while a price greater than US$200 
seems almost certain. The natural gas price in the U.S. could well double to quadruple under 
NZE.
Figure 14. Potential Price Spikes by Price Elasticity Level Under Net Zero Scenario
While it is difficult to estimate the long-term increase of oil and gas prices and their impact 
on the economy under NZE, such price rises will have unambiguously adverse impacts on 
economic performance. For the first 10 years under NZE, we estimate that the global oil 
and gas fuel receipts will be between US$12.2 trillion and US$52.6 trillion more than under 
STEPS (US$45.4 trillion), equivalent to 1% to 4.1% of assumed GDP.49 In other words, 
consumers will have to pay much more for much less oil and gas, not to mention a wide range 
of costs and risks associated with the transition to net zero. The volatility of oil and gas prices 
suggests that massive supply shocks would likely be felt sooner and be far costlier than the 
aforementioned estimates.  Moreover, various other restrictions on fossil fuels, such as higher 
carbon prices, would further increase these prices.
0
50
100
150
200
250
300
350
400
450
USD/barrel (2022 dollars)
USD/MMBtu (2022 dollars)
2000
2010
2022
Year10
2022
Year10
0
5
10
15
20
25
30
2000
2010
Historical
-0.1
Price elasticity:
-0.15
-0.2
-0.3
Source: Energy Policy Research based on IEA NZE
Crude Oil Price (WTI Spot)
Natural Gas Price (Henry Hub Spot)

28
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Figure 15. Short- and Long-Term Implications of High Oil and Gas Prices
Without adjustments to these failure modes—i.e., if the world stays committed to net zero 
regardless of high costs—the recession will turn into an extended depression and ultimately 
impose radical negative changes upon modern civilization. 
2.3. NZE Implications in Different Areas
The cessation of new oil and gas investment will likely manifest in two main forms. First, the 
reduction of oil and gas production at the pace suggested by NZE will quickly outpace any 
demand-side decrease globally, ushering the world into a widespread energy-supply shock. 
Second, the non-substitutability of hydrocarbons by renewables at scale indicates that there 
will not be sufficient means to aid the large majority of the world to fill the energy-supply gap. 
Assuming no immediate government and industry response to the short-term failure modes 
of the energy transition, NZE’s negative consequences will quickly escalate and will lead to a 
multitude of implications across many areas of national and global importance. These can be 
divided into six major areas: macroeconomy, energy security, society, development, innovation, 
and environment and health. 
Short-term eﬀects
Source: Energy Policy Research
Non-substitutability
Hyperinﬂation
Inferior, costly
substitutes
Long-term impact
Declining national wealth
Compromised natl. & energy security
Forced behavior 
changes
Oil and gas prices
Dec
lini
ng o
il an
d gas
 sup
ply
due
 to 
no i
nves
tmen
t in n
ew ﬁ
elds

29
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Figure 16. Impacts of NZE in Six Main Areas
2.3.1. Macroeconomy
NZE’s side effects will be felt at the macroeconomic level, from increasing energy prices and 
inflation to reducing national wealth and GDP.
Prolonged high energy prices. An energy-supply shock stemming from no investment in new 
oil and gas fields means prolonged high and rising energy prices, resulting in massive costs to 
the global economy. Several studies have estimated the impact of lesser supply disruptions and/
or price shocks, with general agreement on the mechanisms through which oil price increases 
affect the world economy. 
• Prolonged high energy &
technology costs
• Inﬂationary pressures
• Economic slowdown
• Shrinking national wealth
• Job losses at scale
• Social disorder 
• Economic instability
• Social inequality (greater 
impact on low-income 
households)
• Conﬂicts over land permit 
with local communities
• Reduced feedstocks for 
petrochemicals &
fertilizers
• Reduced revenues from oil 
& gas production
• Increased energy poverty
• Dependency on few suppliers
• Compromised energy systems 
with less diversity
• Vulnerability price 
ﬂuctuations
• Treat to resilience &
•     reliability
• No coal-to-gas switching
to reduce air pollution
• Chance of reverting back to 
cheaper priced coal
• Eﬀects of excessive mining 
of key metals (water, health)
• Destruction of forests
• Practically halting 
innovation in oil & gas 
(eg, hydraulic fracturing)
• Reductions in energy 
RD&D by oil & gas 
companies
Macroeconomy
Energy security
Society
Development
Environment/health
Innovation
Oil & gas supply shock
Source: Energy Policy Research
Non-substitutability by 
renewables
Impacts of
No New Investment
in Oil & Gas Fields

30
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
IMF (2000) describes the general mechanisms as:50
•	
a transfer of income from oil consumers to oil producers;
•	
a rise in the cost of production in goods and services;
•	
negative impacts on the price level and inflation;
•	
direct and indirect impacts on financial markets;
•	
changes in supply and demand eventually re-equilibrate the economy at a lower level than 
without the shock.
There are some rules of thumb as to the impact on GDP of higher oil prices. MacKillop (2012) 
mentions a US$10 oil price increase, reducing GDP by 0.5% (US$4/bbl in 2021 dollars).51 
The Congressional Budget Office (2006) suggested that for the U.S., where oil consumption 
was 2% of GDP, a 10% increase in oil prices translated into a 0.2% loss of GDP.52 The recent 
experience in Europe with the ongoing Russian war in Ukraine and uncertain supplies of 
Russian oil and gas shows that economic vulnerability to supply shortages and higher prices 
might be lower than in the past, but remain substantial. An IMF review of estimates of the 
GDP impact of natural gas cutoffs (Table 10) suggests that a loss of 10% of supply could lead 
to up to a 1% lower GDP. Natural gas is less fungible than oil and coal because of its reliance 
on infrastructure; but clearly, economic vulnerability to higher prices remains.
Table 10. Impact of Russian Gas Cutoff on German Economy53
Study 
Gas Loss 
GDP Loss 
ECB (2022) 
10% 
0.70% 
OECD (2022) 
20% 
0.90% 
Bachmann et al. (2022) 
30% 
Full model 0.2%–0.3% 
Simpliﬁed model 1: 1.3% 
Simpliﬁed model 2: 2.2% 
Schnittker et al. (2022) 
9% 
1.50% 
36% 
3.40% 
German Council of Economic 
Experts (2022) 
30% 
2% 
Bundesbank (April 2022) 
40% 
5% 
Bundesbank (June 2022) 
31% ('22/'23) 
1.5% ('22), 6.75% ('23) 
11% ('23/'24) 
4.5% ('24) 
Di Bella et al. (2022) 
12% 
with frictions 3% 
without frictions 0.4% 
Source: Lan, T., Sher, G., Zhou, J. 2022. Te Economic Impacts on Germany of a Potential Russian Gas Shutoﬀ (link) 
.

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Inflation. Higher energy costs will exert inflationary pressures on the other parts of the 
economy.  During previous energy crises—as we’ve witnessed since the Russian invasion 
of Ukraine—high oil and gas prices cause higher prices and costs in food, transportation, 
construction, and agriculture, among other economic sectors, with businesses passing 
high energy costs on to consumers. Producers that use hydrocarbons as a feedstock for 
petrochemicals and fertilizers also suffer from high oil and gas prices.
Lower GDP. Increased activity in green energy sectors may bring about short-term GDP 
growth, but because they are less efficient energy sources than hydrocarbons, their increased 
share of energy output will tend to depress productivity growth. However, GDP growth 
will be hit due to high energy costs (including a greater share of GDP for energy investment 
to generate lower energy output)54 and the resulting inflationary pressures, which, in turn, 
will cause interest rates to be higher than they otherwise would be. As a result, developed 
economies will have lost significant shares of their national wealth by 2050. 
2.3.2. Energy Security
According to the IEA, energy security is defined as “the uninterrupted availability of energy 
sources at an affordable price.” However, pursuing NZE poses risks to key components of 
energy security: supply diversity, stable prices, and reliable and resilient energy systems.
Figure 17. OPEC Share of Global Oil Production
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
1971
1980
1990
2000
2010
2020
OPEC
35%
NZE
2050
OPEC: STEPS
Non-OPEC: NZE
2050
Rest of World
65%
52%
48%
82%
18%
Source: Energy Policy Research, IEA World Energy Outlook 2022, IEA World Energy Balances

32
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Dependency on fewer suppliers (oil and gas). Diversification is key to safeguarding energy 
security. However, under NZE, global oil and gas production will be concentrated in fewer 
countries, mostly OPEC members. In NZE, the share of OPEC’s production in global oil 
supply increases from 35% in 2021 to at least 52% in 2050 if everyone, including OPEC, 
follows the IEA’s net zero suggestions. However, if the “no investment in new oil and gas fields” 
net zero efforts are followed through in the non-OPEC world, including the U.S. and most of 
Europe, but not in OPEC and producers aligned with OPEC such as the Russian Federation, 
the percentage may reach 82% (Figure 17).
Dependency on China for critical mineral production and processing. The majority of 
the global critical mineral supply chains for alternative energy technologies are dominated by 
China’s financing, production capacity, and processing capacity. Replacing oil and gas with 
metal-intensive renewables and batteries risks further reinforcing China’s dominance in these 
critical minerals, at the expense of the energy security of most of the world.
Figure 18. Share of Top Three Producing Countries in Production of  
Selected Minerals and Fossil Fuels, 2019
Source: IEA, The Role of Critical Minerals in Clean Energy Transitions (2021)
Increased vulnerability to price fluctuations. The supply-side concentration of oil and gas 
production increases gives further market power to producers, thereby making supply more 
inelastic (i.e., output less responsive to high prices). Additionally, geographic concentration 
of production in the Middle East makes developed economies more vulnerable to price 
fluctuations caused by potential and perceived disruptions to production, including regional 
political events, terrorism, and military conflict.

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Grid resilience, grid reliability, and cybersecurity issues. The intermittent nature of solar 
and wind power, coupled with limited dispatchable resources, increases the risk of systemwide 
blackouts and brownouts and will likely result in a significant reduction in grid reliability and 
resilience. Mitigating the threat of more frequent outages will lead consumers to invest in their 
own backup generation and batteries and will require system operators to invest in resources to 
maintain system frequency. As solar and wind power generation is more susceptible to weather-
related events, the overall resilience of the grid will likely decline with further replacements of 
natural gas by renewables. Furthermore, as more distributed generation is connected to the 
system, the grid may become more vulnerable to cyberattacks.
2.3.3. Social Issues and Instability
High energy prices and structural changes in the economy will have a profound impact 
on workers in the traditional energy sectors (those that are energy-intensive, such as 
manufacturing and agriculture) and will disproportionately affect low-income households.
Widespread job losses and income reductions. Under NZE, energy jobs grow from 65 million 
today to almost 90 million in 2030, with the share of clean-energy jobs in total energy jobs 
increasing from over 50% to almost 80% during the same period.55 Over the same period, 
total energy supply falls from 591 EJ to 550 EJ.56 Thus, 25 million more people employed in 
the energy sector produce 7% less energy in the space of 10 years. This represents a calamitous 
33% decline in productivity per employee, from 9.1 terajoules (TJ) per employee in 2020 to 
6.1 TJ in 2030. Ultimately, GDP growth and living standards are propelled by productivity 
growth, and the IEA’s own numbers give the lie to the oft-made claim that net zero boosts 
growth. Here is the clearest possible demonstration that the reverse is the case: net zero is toxic 
for economic growth and will make most people poorer.  
The IEA’s job analysis does not include other indirect jobs, as well as induced and supported 
jobs. Induced jobs are those “created by wages earned from the projects and spent in other 
parts of the economy, thereby creating additional jobs,” and supported jobs are those enabled 
“by the purchase where the equipment is a key enabler for another job.”57 By excluding a 
variety of additional jobs related to fossil energy, NZE ignores job losses in sectors benefiting 
from cheap fossil fuels. The impact of potential job losses was illustrated in the European 
Commission’s 2021 report, which found that the number of jobs indirectly related to the 
production of coal, peat, and oil shale was equal to 70% of direct jobs in these industries.58
Wages are a key factor for people when choosing a workplace but are excluded from the IEA’s 
GEC model. Despite high subsidies and the rapid growth in solar and wind jobs, reflecting 
their fundamentally poor economics discussed above, hourly wages in wind and solar energy 
subsectors are significantly lower than those of nonrenewable-energy workers. In electric power 
generation in the U.S., the median hourly wage in natural gas generation was US$34.02 
(nominal), 39% higher than the median wage of US$24.48 in solar generation.59 The only 
low-carbon subsectors with higher wages are in the nuclear industry, reflecting nuclear’s high 
productivity.

34
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Table 11. Energy Power Generation Wages by Sub-Technology, 2019
Table 12. Energy Power Generation Occupations, 2019 Median Hourly Wages
Increased burden on low-income households. Higher energy prices over decades will have 
the biggest impact on low-income households and households in poorer countries due to the 
significant proportion of their income spent on energy. According to the IEA, households in 
developed countries spend about 3% of their disposable income on energy, whereas those in 
developing countries spend about 10%.
Economic instability and social inequality. Societal and structural changes caused by the energy 
transition resulting in job losses, disproportionate impacts on low-income households, and 
macroeconomic and inflationary effects rippling throughout the economy may significantly 
increase the chances of economic and social instability, distress, and even violence.
Energy Subsectors 
Median Hourly Wages 
Geographically Weighted 
Premium/Discount from 
Median Hourly Wages 
Nuclear Generation 
US$41.32
 
114.6% 
Coal Generation 
US$33.64
 
79.6% 
Natural Gas Generation 
US$34.02
 
76.5% 
Wind Generation 
US$25.95
 
34.9% 
Oil Generation 
US$24.49
 
25.7% 
Solar Generation 
US$24.48
 
20.9% 
Other Renewable Generation 
US$17.98
 
–8.6% 
Source: NASEO, Energy Futures Initiative’s Wages, Beneﬁts, and Change report
 
National Median 
Hourly Wages 
Wage Premium Compared 
with National Median
 
Nuclear Engineers 
US$54.55 
185% 
Power Plant Operators 
US$49.18 
157% 
Nuclear Power Reactor Operators 
US$48.33 
153% 
Gas Plant Operators 
US$42.42 
122% 
Solar PV Installers (Electrician) 
US$25.69 
34% 
Wind Turbine Service Technicians 
US$25.44 
33% 
Solar PV Installers (Non-
Electrician) 
US$21.58 
13% 
Source: NASEO, Energy Futures Initiative’s Wages, Beneﬁts, and Change report

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
2.3.4. Development
The oil and gas sector generates large amounts of revenues for producing countries, helping 
them achieve development objectives through royalties and other taxes and fees. The role of the 
oil and gas rents (difference between prices and production costs) is particularly crucial in non-
OECD countries: out of the 40 countries where oil rents were at least 2% of GDP in 2019, 
all except one (Norway) were non-OECD countries. Most of these countries are concentrated 
in Africa, the Middle East, and the former Soviet Union. As of 2019, there were 13 countries 
that derived at least 20% of their GDP from oil and gas rents. Although these countries’ state 
budgets are vulnerable to global oil and gas price fluctuations, a prolonged decline in oil and 
gas exports could greatly hinder the development progress of many of these countries.
The benefits of the oil and gas sector also apply to developed countries like the United States. 
As shown in Figure 19, the federal oil and gas revenues amounted to almost US$20 billion in 
2022, much of which is transferred to state and local governments to fund infrastructure, build 
hospitals, and support communities.
Figure 19. Countries Dependent on Oil and Gas Rents (2019)
20-45%
Oil and gas rents 
as % of GDP
10-20%
2-10%
Source: Energy Policy Research, World Bank national accounts data & Changing Wealth of Nations data

36
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Figure 20. U.S. Federal Oil and Gas Revenues
The other benefit of affordable, reliable energy sources is to provide much-needed energy 
to achieve higher levels of human development in developing countries. The Energy Policy 
Research Foundation’s analysis of the relationship between primary energy demand per capita 
and the Human Development Index (HDI) scores shows a strong correlation between the 
two. In 2019, 78% of global population fell below the HDI score of 0.8, which separates 
“very high” scorers from the rest. The “very high” group, on average, used 3.6 gallons of oil 
equivalent per day, which is 2.3 times more than the next group’s (“high”) energy consumption 
and 9 times more than the “low” group’s energy consumption. Stripping these poorer countries 
of access to oil and gas resources may impede their economic growth and human development.
Figure 21. Daily per Capita Energy Demand by Human Development Index (2019)
0
 5,000
 10,000
 15,000
 20,000
 25,000
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
Million USD (nominal)
Other revenues
Bonus
Rents
Royalties
Source: Energy Policy Research, U.S. Department of Interior
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
Low
Medium
High
2.3 times less than Very High
6.9 times
9.0 times
Very High
3.6 gallons of oil equivalent
1.6
0.5
0.4
(0.8-1.0)
(0.7-0.79)
(0.55-0.7)
(0.0-0.55)
Source: Energy Policy Research, IEA, UN

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Figure 22. Per Capita Energy Demand and Human Development Index (2019)
2.3.5. Technological Innovation
The energy sector, as well as the industries that use hydrocarbons, has continuously innovated 
over the years. One of the more recent revolutions in the oil and gas industry—hydraulic 
fracturing—was a result of continued investment and innovation, no matter how small the 
starting point. 
As energy researcher Gautam Kalghatgi noted, banning ICE vehicles will threaten innovation 
in making transportation more sustainable and efficient.60 Instead, all attention and resources 
will be shifted to technologies that require decades of research and development before 
becoming commercially competitive.
Oil and gas companies are among the biggest funders of research, development, and 
demonstration in the energy sector, covering both conventional and alternative energy sources. 
Many oil and gas companies support RD&D in technologies such as CCUS, hydrogen, solar, 
wind, and even direct air capture (DAC). 
Per Capita Energy Demand
Human Development Index
very high
high
medium
low
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
0
1
2
3
4
5
6
7
8
9
10
China
India
South Sudan
United States
Norway
Germany
Nigeria
Russia
Trendline
1 billion
500 million
200 million
Bubble areas
represent
population sizes:
primary energy metric tons of oil equivalent / year
Bangladesh
78%
of global population falls below
Human Development Index (HDI) of 0.8
Source: Energy Policy Research, IEA, UN

38
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
2.3.6. Environment and Health 
Reducing oil and gas supply will contribute to various environmental and health effects around 
the world. First, it will likely lead to a resurgence of coal consumption, as many low- and 
middle-income countries may struggle to afford higher-priced natural gas for heating, cooking, 
and electricity generation. As a result, coal-to-gas switching in many countries may regress, 
increasing local air pollution and exacerbating health crises in many urban areas. 
Second, the unprecedented quantities of critical minerals and materials necessitate excessive 
mining to scale up the production of EVs, lithium-ion and other types of batteries, solar 
panels, wind turbines, and wires of the grid network. Although mining is critically important 
for the modern economy, intensifying mining activity manifold poses various environmental 
hazards: exposing radioactive materials and dust, releasing toxic compounds and contaminant 
materials to the air and water, increasing sedimentation in rivers, erosion of lands, and excessive 
consumption of water.61 When combined with lax environmental regulations and enforcement, 
mining critical minerals may lead to more frequent local environmental episodes and increased 
health risks to local populations. 
Third, the inherently low density of alternative energy technologies, compared with 
conventional energy sources, requires much larger tracts of land for the same or fewer volumes 
of energy supply. Increased biofuel production may lead to deforestation at scale, while forests 
play a critical role in absorbing CO2 emissions. Based on the current rate of land requirements, 
the annual production of bioenergy for electricity generation will likely need an additional land 
equivalent of the size of Mexico by 2050 (Figures 23–24). In addition to bioenergy production, 
our analysis suggests that installing utility-scale wind and solar around the world will require 
additional land the equivalent of the combined area of California and Texas by 2050 (Figures 
25–26). This assumes sufficient or optimal transmission and storage infrastructure, the current 
rate of efficiencies, and only onshore wind. 
 500
1,000
1,500
2,000
2,500
3,000
3,500
2020
2030
2040
2050
4.6X
Bioenergy
Bioenergy
w/ CCS
(BECCS)
TWh
Source: IEA, Net Zero by 2050 (2021)
Source: Energy Policy Research. Land requirement cal-
culations made using FreeingEnergy.
Size of 
France
Size of 
Mexico
Estimated land used in 2020
Additional Land
Requirement by 2050
Figure 23. Bioenergy for Electricity 
Generation in NZE
Figure 24. Global Land Requirements for 
Bioenergy for Electricity Generation in NZE

39
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
737 
4,956 
10,980 
14,458 
737 
3,101 
6,525 
8,265 
 2,000
0
 4,000
 6,000
 8,000
 10,000
 12,000
 14,000
2020
2030
2040
2050
Solar PV
Source: IEA, Net Zero by 2050 (2021)
Source: Energy Policy Research based on NZE
Assumes suﬃcient/optimal grid infrastructure (transmission,
storage) and current rate of eﬃciency
Solar PV (2050) ≈ California
Wind (2050) ≈ Texas
Wind
GW
Figure 25. Global Solar and Wind 
Capacity in NZE
Figure 26. Global Land Requirements for Solar/
Wind Farms in NZE

40
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Chapter 3
Central Role of Oil and Gas in Modern 
Civilization
Highlights of Chapter 3
•	 Oil and gas play irreplaceable roles in modern civilization that are not reproducible 
with low-/zero-carbon alternatives.
•	 Both oil and natural gas have various applications in the main final energy sectors 
(buildings, transportation, and industry) as well as for non-energy purposes.
•	 The global transportation sector, which consists of road transport, aviation, 
shipping, and others, runs primarily on petroleum products. Although BEVs have 
experienced a surge in sales recently, it is unlikely that they will completely replace 
ICE vehicles due to technological and economic limitations.
•	 Natural gas has played a critical role in replacing coal in power generation and 
contributes to the reliability of the electric systems, which, if replaced by variable 
resources, will cause tremendous strain on the electric system, compromise grid 
reliability and resilience, and impose higher costs on end users.
•	 In industrial heat processes, where high to ultra-high temperatures are required, gas 
has no low-carbon commercial substitutes, making it an essential energy source.
3.1. Composition of Oil Demand
Oil is a crucial resource that plays an integral role in driving economic growth and improving 
the quality of life for people around the world. Oil has a wide range of applications: 
transportation fuels, heating and cooking, electricity generation, and serving as a raw material 
for petrochemicals to produce plastics and hundreds of other products.62 The use of oil spans

41
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
a vast number of applications across the three main energy sectors—transport, industry, and 
buildings—as well as for non-energy use (Figure 27).
Figure 27. Select Petroleum Products and Their Applications
The 1970s twin oil price shocks (1973 and 1979) had a lasting impact on the composition 
of oil demand, particularly in power generation, industry, and buildings. The nominal 
annual U.S. crude oil purchase price had increased 10-fold, from US$3.18/barrel in 1970 to 
US$31.77/barrel in 1981 (4.7 times in real terms, when adjusted for inflation).63 As a result of 
these shocks, OECD oil consumption in power generation more than halved in the seven years 
between 1978 and 1985 (278 million tonnes of oil equivalent [TOE] to 135 million TOE). 
During the same period, OECD demand for oil in industry and buildings (heating) declined 
by 31.2% and 30.6%, respectively. This trend has continued to the present day, with the share 
of power generation in total oil demand in OECD decreasing from 13% in 1978 to 2% in 
2019, industry from 14% to 5%, and buildings from 15% to 6% (Figure 29).
In the U.S., the share of power generation in total oil demand decreased from 10% to 1% 
between 1978 and 2019, making it a negligible source of power generation in the country. 
During the same period, U.S. oil demand in buildings and industry decreased by a factor 
of four. These reductions were largely offset by an increase in transport and non-energy use, 
although total U.S. oil demand never reached its 1978 level.
The non-OECD countries have experienced a substantial increase in oil demand since 1970, 
having risen to 378% by 2019. A large portion of that demand increase was driven by China, 
which accounted for nearly 40% of the total increase. The growth of non-energy applications 
such as petrochemical feedstocks, in addition to the transportation sector, has been a significant 
driver of demand. Despite the impact of the pandemic, oil demand in developing countries is 
expected to continue its upward trend, based on historical patterns (Figure 30).
Buildings (Heating, Cooking)
Industry
Transport (Road, Aviation, etc.)
Non-energy
(Petrochemicals, etc.)
Kerosene
Motor gasoline
Aviation gasoline
Jet fuel
Gas/diesel oil
LPG
Fuel oil
Ethane
Naphtha
Bitumen
Paraﬃn waxes
Lubricants
White & industrial spirit 
Petroleum coke
Source: Energy Policy Research based on IEA classiﬁcation

42
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
According to IEA data, annual global oil demand has risen rapidly over the past five decades, 
growing from less than 2.5 billion TOE in 1971 to over 4.5 billion TOE in 2019, with almost 
all the growth coming from non-OECD countries. Despite a temporary drop in oil demand 
due to the pandemic in 2020, global oil demand recovered somewhat in 2021 and is expected 
to reach pre-pandemic levels in 2023.
Figure 28. Global Oil Demand by Sector
	
	
	
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
1971
1980
1990
2000
2010
2019
Million tonnes of oil equivalent (Mtoe)
Non-energy use
Other energy use
Buildings
Transport
Industry
Other conversions 
& losses
Power generation
Source: Energy Policy Research, IEA World Energy Balances database
Mtoe
Mtoe
0
500
1,000
1,500
2,000
1971
1980
1990
2000
2010 2019
0
500
1,000
1,500
2,000
Source: Energy Policy Research, IEA World Energy Balances database
1971
1980
1990
2000
2010 2019
Figure 29. OECD Oil Demand
Figure 30. Non-OECD Oil Demand

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
3.2. Concentration of Oil Demand in Transportation 
Global oil consumption reached 94 million barrels per day (MMB/D) in 2021.64 The transport 
sector is responsible for almost two-thirds of the global final consumption of oil, with road 
transport accounting for three-quarters of the demand in the transport sector.65 In 2021, 1.3 
billion passenger vehicles66 on the road consumed about 25 MMB/D, making up half the 
road transport demand for that year. Additionally, road freight, such as heavy-duty trucks, 
accounted for over 15% of global oil demand (Figure 31). 
Figure 31. Global Oil Demand in Transport by Subsector
Between 2016 and 2020, 86 million new passenger cars were sold on average globally, with 
15 million sold in the United States. Although passenger car sales have declined in recent 
years, the share of sport utility vehicles (SUVs), which require more gasoline than sedans, has 
hit record levels globally, rising from 16% of all passenger car sales in 2010 to 42% in 2020 
(Figure 32).67 Battery electric vehicle (BEV) sales are growing rapidly, but in 2021, total BEV 
stock accounted for less than 1% of the global passenger car stock.68
Figure 32. Passenger Car Sales by Size and Powertrain
2,500
2,000
1,500
1,000
500
0
1971
1980
1990
2000
2010
2019
Other
Domestic navigation
World aviation bunkers
World marine bunkers
Pipeline transport
Rail
Road
Domestic aviation
Mtoe
Source: Energy Policy Research, IEA World Energy Balances database
80
60
40
20
0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
SUVs (electric)
Cars (electric)
SUVs (conventional)
Cars (conventional)
Million vehicles
Source: Energy Policy Research, IEA World Energy Balances database

44
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
“
3.3. Limitations of BEVs as ICE Substitutes
“In transport, the share of electricity increases from less than 2% in 
2020 to around 45% in 2050  in  the  NZE.  More  than  60%  of  total  
passenger  car  sales  globally  are  EVs  by  2030 (compared with 5% 
of sales in 2020), and the car fleet is almost fully electrified worldwide 
by 2050 (the remainder are hydrogen‐powered cars). The increase 
in electric passenger car sales globally over the next ten years is over 
twenty‐times higher than the increase in ICE car sales over the last 
decade.” (Net Zero by 2050, p. 70)
There has been a widespread notion that replacing internal combustion engine (ICE) vehicles 
powered by petroleum with alternative energy vehicles will bring numerous benefits, including 
reducing greenhouse gas (GHG) emissions to zero. In response, many Western governments 
are planning to ban new sales of ICE vehicles starting in 2030 and are actively encouraging 
sales of BEVs and, in some instances, hydrogen fuel cell electric vehicles (FCEVs). Under the 
IEA’s NZE scenario, electric vehicles will reach 60% of global car sales by 2030. However, 
substituting ICE vehicles with BEVs at scale faces numerous challenges and obstacles. Despite 
government efforts, BEVs are unlikely to achieve the target of replacing ICE vehicles due to a 
range of factors, discussed below.
BEVs will continue to be more expensive than ICE vehicles. According to the IEA’s Global 
Electric Vehicle Outlook 2022, the sales-weighted median price for BEVs in 2021 was about 
45%–50% higher than that of conventional cars in Europe and the United States. The sales-
weighted price difference in China was  9%, owing to the government’s hefty financial support 
for BEVs over many years.69 But the prospect for millions of Chinese BEVs entering the 
U.S. and Europe at scale are rather slim, as these countries are increasingly wary of China’s 
“mercantilist” trade approach.70
Supporters advocate for price caps on EVs, higher subsidies for low-income households, and 
increasing other benefits and subsidies to scale up BEV sales across various income levels. 
However, these options will prove extremely costly to the U.S. or any OECD country in the 
long run, not to mention many developing countries aspiring to provide their constituents 
with the means of affordable transportation.
Scaling up EV batteries will require unprecedented amounts of critical minerals, drive 
up the BEV price, and make car prices susceptible to increasing fluctuations in mineral 
markets. The high demand for minerals and supply-chain disruptions have led to increased 
costs for BEV manufacturers. According to Ford, the cost for a Mustang Mach-E increased by 
US$25,000 per vehicle in 2022.71 The IEA’s Tae-Yoon Kim remarked that cathode materials, 
which used to account for 5% of the battery costs, now make up 20%, resulting in BEV 
manufacturers raising prices.72 The rush to reach net zero emissions is resulting in sky-high 
costs for materials and equipment, as the mineral requirements for each of the major battery 
designs are substantial.73

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
“
Table 13. Battery Chemistry by Content, Kg (60 kWh Lithium-Ion)
The IEA estimates that to achieve the Paris Agreement goals,74 the world will need 
unprecedented amounts of incremental production of the key minerals for EVs and battery 
storage. From 2020 to 2040, the annual global supply of lithium, graphite, cobalt, and nickel 
must increase by 1,800% to 4,000%. Note that this IEA estimate, which goes only to 2040, is 
much less ambitious than the NZE scenario (Figure 33). The detailed breakdown of the critical 
minerals under NZE is much less transparent in the IEA’s publicly available data sources, but 
the massive scale of required growth can be vaguely inferred from the next two sentences in the 
Net Zero by 2050 report:
“Growth in battery demand translates into an increasing demand for 
critical minerals. For example, demand for lithium for use in batteries 
grows 30‐fold to 2030 and is more than 100‐times higher in 2050 than 
in 2020 (IEA, 2021).” (Net Zero by 2050, p. 71)
For EV batteries, marginal innovations are modest, and the focus has been limited to 
improving density and safety to give manufacturers a proprietary edge. As a result, BEVs are 
vulnerable to fluctuations in the prices of battery inputs. For example, the implied cost for a 
typical Tesla battery using spot prices for lithium hydroxide, cobalt, nickel, and manganese 
was approximately US$1,700 in 2017, but this implied nominal cost reached over US$6,500 
in May 2022. Lithium hydroxide prices averaged US$80,750 per metric ton in May 2022, up 
380% from US$16,813 in January 2017. May 2018 prices for cobalt, nickel, and manganese 
were up 183%, 97%, and 44%, respectively, from their levels in January 2017. 75
Nickel (80%) Manganese (10%) Cobalt (10%) 
 Nickel (50%) Manganese (20%) Cobalt (30%) 
Nickel (60%) Manganese (20%) Cobalt (20%)
NMC811
NMC523
NMC622
 
Nickel Cobalt Aluminum 
Oxide
Lithium iron phosphate
 
Source: Bhutada, G. VC Elements
Mineral/Metal 
NMC811 
NMC523 
NMC622 
NCA+ 
LFP 
Lithium 
5 
7 
6 
6 
6 
Cobalt 
5 
11 
11 
2 
0 
Nickel 
39 
28 
32 
43 
0 
Manganese 
5 
16 
10 
0 
0 
Graphite 
45 
53 
50 
44 
66 
Aluminum 
30 
35 
33 
30 
44 
Copper 
20 
20 
19 
17 
26 
Steel 
20 
20 
19 
17 
26 
Iron 
0 
0 
0 
0 
41 
NCA+
LFP

46
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Figure 33. Required Growth of Critical Mineral Supply (IEA’s SDS scenario, 2020–40)
Figure 34. Tesla Battery Cost Based on Monthly Average 
BEVs have a massive GHG footprint, especially those manufactured and sold in China. 
The carbon footprint from power plant emissions and battery manufacturing is never zero and 
varies depending on location. China leads the world in EV sales and manufacturing, but it also 
consumes a large amount of coal. In 2020, coal accounted for 60.6% of China’s primary energy 
Source: Energy Policy Research, IEA, Te Role of Critical Minerals in Clean Energy Transitions (2021)
4,089%
2,372%
2,033%
1,838%
713%
632%
244%
188%
165%
162%
132%
0%
500%
1,000%
1,500%
2,000%
2,500%
3,000%
3,500%
4,000%
Electric vehicles and
battery storage
Multiple
purposes
Lithium
Graphite
Cobalt
Nickel
Manganese
Rare Earth
Chromium
Molybdenum
Copper
Zinc
Silicon
Low-carbon
power generation
IEA’s Sustainable Development Scenario
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
01/2017
01/2018
01/2019
01/2020
01/2021
01/2022
Cost per Battery (Current USD)
Manganese
Nickel
Cobalt
Lithium
Source: Energy Policy Research, LME Monthly Data
Primary Input Spot Prices (January 2017–May 2022)

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
demand and 63.3% of its electricity production, meaning that EVs powered by electricity 
generated in China indirectly emit substantial GHG emissions. This applies, to some extent, to 
any country that is not fully zero-carbon and still relies on fossil fuel-based electrical systems. 
Additionally, because China produces 77% of global EV batteries—i.e., lithium-ion batteries—
the GHG footprint of BEVs globally largely offsets their expected benefits as “low-carbon” 
alternatives to ICE vehicles. In other words, GHG emissions from manufacturing a Tesla 
Model 3’s 80 kWh lithium-ion battery may be close to 16 metric tons of CO2 emissions.76 
When combined with the GHG footprint from energy-intensive mining activities that unearth 
lithium, nickel, and other minerals, these numbers can quickly escalate to an extent that makes 
the whole EV campaign a hyper-wasteful extravagance.
The lack of EV charging infrastructure is a sticking point. As the availability of charging 
stations increases, the inconvenience of refueling decreases and the demand for BEVs rises. 
The IEA recommends that the number of charging stations should be equal to the number 
of BEVs, with most of them being home chargers. However, the cost of charging stations 
can vary greatly, depending on the source of the estimate. Home chargers can cost as little 
as US$750, but the cost can increase to US$1,700 with installation. A detached garage 
charging station can cost upward of US$6,900. Fast public charging stations require significant 
infrastructure upgrades and can cost as much as US$50,000. It is difficult to predict the exact 
mix of charging stations by 2030, but it is estimated that adding 400 million or more charging 
stations will easily exceed a cost of US$1 trillion in investment by that time.77
Figure 35. Energy Densities of Common Fuels, Li-ion battery
Natural gas
CNG
Gasoline
Diesel
Jet fuel
Lithium-ion
battery
Coal 
(anthracite)
LPG 
(propane)
LNG
0
10
20
30
40
0
10
20
30
40
50
Energy density (MJ/L)
Speciﬁc energy (MJ/kg)
Source: Energy Policy Research, various sources
Gasoline is 100 times more energy dense
lithium-ion battery
(EVs are much more eﬃcient (60-80% vs 15%),
but generating electricity is only 30% eﬃcient.)

48
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Battery density is another major challenge. Battery storage suffers from both low energy 
density (stored energy per unit of volume) and low specific energy (stored energy per unit 
of mass) compared with common fuel types. Lithium-ion batteries have an energy density 
100 times less than gasoline, diesel, and jet fuel. Due to these challenges, apart from urban 
transportation, BEVs remain far less cost-effective compared with ICE vehicles, and the use 
of batteries is many decades away from replacing liquids in heavy-duty transportation modes, 
from aviation to marine bunkering.
Technology losses from BEV mandates. According to Gautam Kalghatgi, banning ICE vehicles 
in favor of BEVs will also deny “the benefits of any improvements” in ICE vehicle technology 
and cease research and development efforts in this area. He assessed that such an abrupt change 
would result in replacing the possibility of making large, affordable impacts on sustainability 
through improved ICE technology with hugely expensive, inefficient, and unproven 
technologies (i.e., BEVs).78
3.4. Composition of Natural Gas Demand
Natural gas is an essential part of the global energy balance, with a wide range of applications 
across the three main end-use sectors (industry, buildings, and transport) as well as power 
generation. In industry, natural gas serves as an important feedstock for the production 
of ammonia, hydrogen, and other chemical and petrochemical products. Natural gas is 
increasingly used as a clean transportation fuel source, particularly for heavy-duty vehicles and 
buses, and, as a clean alternative to coal, it is used for heating and cooking in residential and 
commercial buildings while reducing local air pollution in many developing countries.
Natural gas has made a significant impact on mitigating local air pollution, leading to a 
healthier living environment in many areas around the world. One of the latest beneficiaries of 
increased natural gas consumption is China, which implemented a campaign in its northern 
winter heating cities to switch from coal to natural gas in an effort to reduce local air pollution. 
Thanks to the coal-to-gas switching campaign, the level of particulate matter (PM10 and 
PM2.5) in China has declined substantially in recent years. However, apart from residential 
and commercial applications, the role of natural gas remains small in China’s energy mix, as 
this fuel accounts for approximately 2% of China’s electricity generation.
Natural gas has also played a vital role in sustaining rapid population growth in the past 
century, as it is a key input in the production of nitrogen-based fertilizers, which revolutionized 
modern agriculture by radically increasing the yields of food and feed grain crops. Additionally, 
natural gas is used to heat greenhouses, dry crops, and power irrigation systems in agriculture, 
making it an integral part of the global food-supply chain. 
Natural gas demand increased enormously in the past five decades. In the OECD, the total 
growth between 1971 and 2019 was 138%. In non-OECD, the change was even more 
dramatic growth: 656%. In both cases, natural gas demand grew in all three end-use sectors, 
power generation, and non-energy uses (Figure 36).

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
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Figure 36. Global Natural Gas Demand by Sector
	
	
Global natural gas consumption growth benefited from additional new supplies around the 
world. The U.S., owing to the shale revolution, played a key role in that growth, accounting 
for 41% of the global incremental gas supply between 2010 and 2021.79 Unlike most other 
energy fuels and technologies—particularly, the critical minerals supply chain for clean energy, 
which is dominated by China and a few other countries—natural gas supply sources are well 
balanced, with production relatively evenly distributed among major regions (Figure 39).
0
20
40
60
80
100
120
140
1971
1980
1990
2000
2010
2019
Non-energy use
Other energy use
Buildings
Transport
Industry
Other conversions 
& losses
Power generation
Exajoules
Source: Energy Policy Research, IEA World Energy Balances
Exajoules
0
10
20
30
40
50
60
70
80
1971
1980
1990
2000
2010
2019
0
10
20
30
40
50
60
70
80
1971
1980
1990
2000
2010
2019
Source: Energy Policy Research, IEA World Energy Balances
Figure 37. OECD Gas Demand
Figure 38. Non-OECD Gas Demand

50
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Figure 39. Natural Gas Production by Region
3.5. Importance of Natural Gas for Reliable and Resilient Electric Grids
Electric grids play a central role in the functioning of modern society, and any failure to 
maintain their reliability (ability to avoid outages) and resilience (ability to withstand and 
recover from extreme conditions) can have catastrophic social and economic implications. The 
basic operational requirement of a modern electricity grid is the maintenance of frequency,80 
which is maintained by balancing load (consumption) with generation (supply). If there is 
a falloff in generation, or where generation cannot be ramped to meet increasing load, the 
frequency degrades. If this imbalance becomes prolonged, even for a short interval, there is an 
increased possibility of major damage to generation equipment, coupled with service-territory 
blackouts, resulting in massive economic losses.
Dispatchable energy sources and intermittent sources are two completely different players in 
power generation and, therefore, should be valued differently. Some even like to use an analogy 
of team sports, where fossil energy is likened to reliable, uninjured players, such as a starting 
quarterback in football, while intermittent renewables are compared to injured or inconsistent 
players.81
Replacing significant shares of the baseload power provided by coal, natural gas, and coal with 
intermittent, or inverter-based, resources like solar and wind risks creating a large imbalance. 
This is echoed in the North American Electric Reliability Corporation’s (NERC) recent long-
term reliability assessment, which points to four resource mix trends posing major challenges 
to grid reliability: integration of inverter-based resources (i.e., solar and wind); increasing levels 
Exajoules
0
20
40
60
80
100
120
140
1990
2000
2010
2021
Africa
Other Asia Oceania
Australia
China
Other Middle East
Qatar
Iran
Other Europe & Eurasia
Norway
Russia
Other Americas
Canada
United States
Source: Energy Policy Research, IEA World Energy Balances

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
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of distributed resources (home solar systems, etc.); the pace of retirement of nuclear, coal-fired, 
and natural gas generators; and the need for more robust planning approaches to ensure that 
solar and wind have “the capability to support voltage, frequency, and dispatchability.” In other 
words, an aggressive push to net zero grids will very likely lead to serious damage to the electric 
system unless all the above conditions are met.
3.6. Rise of Natural Gas Displacing Coal in Electricity Generation
Natural gas has been displacing coal steadily as an electricity source in recent decades. In 
OECD, the share of natural gas in electricity generation output surpassed that of coal in 2016. 
According to the IEA data, electricity output from natural gas reached 3,051 TWh for the first 
time, accounting for 27.6% of the total output in OECD in 2016. This coal-to-gas switching 
in the power sector resulted in massive reductions in CO2 emissions and brought a net positive 
impact on reducing local air pollution. The IEA’s 2019 report, “The Role of Gas in Today’s 
Energy Transitions,” shows that coal-to-gas switching was responsible for about one-fifth of 
total U.S. emissions savings between 2010 and 2018.82
In non-OECD countries, the role of natural gas has grown significantly but has not been able 
to displace coal at the same pace as in OECD countries. In fact, coal continues to constitute 
nearly half of all electricity output in non-OECD countries, while natural gas’s share remains 
below 20% due to its higher cost, compared with that of coal. In these countries, economics 
plays an even more significant role in determining the fuel mix, despite the attractive potential 
of natural gas to reduce PM2.5 and PM10 levels in many Asian cities where air pollution has 
become a health crisis. Because of the high sensitivity of energy prices in non-OECD countries, 
a forced effort to transition to even costlier renewables and other alternative technologies risks 
these countries reverting back to coal instead of switching to natural gas.
Figure 40. Global Electricity Generation by Source
5,000
0
10,000
15,000
20,000
25,000
1971
1980
1990
2000
2010
2019
Heat
Biofuels & waste
Solar/wind/other
Geothermal
Hydro
Nuclear
Natural gas
Oil
Coal
TWh
Source: Energy Policy Research, IEA World Energy Balances database

52
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
	
	
	
3.7. Reality of Decarbonizing Industrial Heat Processes
Industry remains out of reach from decarbonization efforts, as many of its subsectors continue 
to be “hard-to-abate” not just in economic but also in physical terms. As discussed in Chapter 
4’s section on Technology Readiness Levels, many applications to decarbonize industrial 
sectors are at or below early commercialization levels. One of the main challenges of a net 
zero industry is meeting medium- to high-temperature heat requirements in various industrial 
applications, from iron and steel production to chemical production to food processing. 
Compared with the residential or commercial sector, the large majority of manufacturing 
processes require heating temperatures exceeding 100°C (212°F). 
Industrial heat demand temperatures (or “grades”) vary from under 100°C (low temperature 
for food processing, etc.) to 500°C (high temperature used for forging and making of glass) to 
over 1,000°C (ultra-high temperature for steelmaking, etc.). The low-temperature requirements 
can be met by direct electrification through heat pumps.83 However, it is extremely difficult to 
replace hydrocarbons used for higher-temperature heat due to the underlying limitations of 
renewable energy—most notably, the lack of energy density required for high temperatures, as 
well as their intermittent nature, which may hinder the continued operations of an industrial 
facility. 
Given that almost 95% of iron and steel production, over 70% of nonmetallic minerals, and 
over 65% of chemicals in the U.S. require industrial heat temperatures of at least 500°C, 
the task of decarbonizing the industrial sector remains beyond daunting. Globally, almost 
half of all industrial heat requires temperatures of over 400°C (Figure 43). As the OECD 
world accelerates its transition efforts, demand for minerals and materials that require high-
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
1971
1980
1990
2000
2010
2019 1971
1980
1990
2000
2010
2019
Source: Energy Policy Research, IEA World Energy Balances database
TWh
Figure 41. OECD Electricity 
Generation by Source
Figure 42. Non-OECD Electricity 
Generation by Source

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
grade industrial heat processes will only escalate, inadvertently leading to more demand for 
hydrocarbons. 
IEA’s World Energy Outlook 2019 raised additional challenges in industrial heat processes that 
would further complicate the transition. Those include the long lifetimes and slow turnover of 
capital stock, as well as the highly integrated nature of industrial processes that require a whole-
system approach rather than gradual replacements of individual parts.84
Figure 43. Global Industrial Heat Demand by Temperature Range (2018)
50%
6%
20%
9%
15%
> 400°C
200-
400°C
100-200°C
60-100°C
0-60°C
Global Total
107.9 EJ
>400°C
50%
200-
400°C
6%
20%
9%
15%
100-200°C
60-100°C
0-60°C
Source: IEA, Solar Energy Policy in Uzbekistan: A Roadmap (2022).

54
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Chapter 4
Understanding Additional Headwinds to 
Net Zero
Highlights of Chapter 4
•	 NZE is unlikely to succeed because of the high costs of intermittent resources, the 
unwillingness of developing countries to participate, and various other risks and 
challenges discussed in this analysis.
•	 Intermittent renewable resources have contributed to an increase in electricity costs. 
Solar and wind integration costs are rising, as more grid infrastructure is required 
for marginal capacity of these resources.
•	 According to the IEA, half the emissions reductions required under NZE are 
expected from technologies that are at prototype or demonstration stages today. 
Moving from prototype to commercialization requires decades, and without 
breakthroughs, there will continue to be a technological gap by 2050.
•	 The most likely outcome under NZE is an incomplete, two-speed transition, where 
most developing countries do not fully follow through on their announcements.
4.1. Limitations to Additional Cost Improvements in Solar and Wind
In NZE, the further adoption of solar and wind is of critical importance, as their share of 
electricity generation goes up from 10% in 2021 to 69% in 2050. To achieve large-scale, low-
carbon electrification around the world, continued cost reductions are needed in solar PV and 
offshore wind. Under the NZE scenario, in four key regions,85 solar PV capital costs drop by 
57%–63% by 2050, and offshore wind by 60%–68%. Similar rates of decline are assumed in 
their levelized cost of electricity (LCOE). By 2050, offshore becomes cheaper than onshore 
wind in some markets.86
The prospect of rapid reductions in the cost of intermittent renewable energy resources has

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
created optimistic expectations on wind and solar displacing fossil fuels. A more detailed 
assessment, however, reveals that further decreases in the cost of renewable energy technologies 
face a series of challenges. The dominant crystalline silicon PV technology’s cost decline in the 
past decade was almost exclusively attributable to Chinese solar-panel manufacturing practices 
that leveraged economies of scale, and advanced processing techniques, as well as “mercantilist” 
support from the Chinese central and local governments.87 This is evidenced by the slower 
commercialization and limited growth of other types of solar energy generation, such as copper 
indium gallium selenide (CIGS) and cadmium telluride (CdTe).88 Between 2018 and 2021, 
the reduction in the cost of solar modules and wind turbines slowed significantly, and, since 
2018, renewable contract prices actually increased (Figure 45).89 The per-watt capacity cost of 
solar modules and wind turbines is likely to experience a much slower decline in the future, 
compared with what NZE projects.
	
	
	
	
 	
	
	
	
Renewable technologies require additional high-voltage transmission lines to connect 
renewable power generators to distant demand centers and large increases in intermittent 
renewable power sources. Intermittent power continues to suffer from inadequate storage 
capacity, which forces system operators90 to constantly modify their day-ahead, hour-ahead, 
and real-time planning and operating procedures. This heightens the level of grid vulnerability, 
particularly from cyber security risks.91 
Electricity prices in Europe confirm this relationship between intermittency and integration 
costs. System integration costs of renewables can outweigh their expected efficiency 
improvements as the volume of intermittent supply rises on the power grid. Our analysis based 
0
10
20
30
40
50
Q3 Q4 Q1Q2 Q3 Q4 Q1Q2 Q3 Q4 Q1 Q2
2018
2019
2020
2021
CAISO
PJM
MISO
SPP
ERCOT
0
4
8
12
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Wind Penetration (Capacity Basis)
CAISO
ERCOT
Eastern Interconnection
MISO
SPP
WECC (Non-CA)
SERC
$/MWh
$/MWh
Source: U.S. DOE, Land-Based Wind Market Report, 2021 Edition
Figure 44: Estimates of Wind Indices 
Integration Costs
Figure 45: Wind Energy PPA Price 
(Level 10 Power Energy Analysis)

56
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
on data from Eurostat shows a trend of rising electricity prices for households in 28 European 
countries (second half of 2021) with the share of intermittent renewables in power generation 
(2020).
Figure 46: Solar and Wind Penetration and Electricity Prices in Europe
4.2. Two-Thirds of Technologies at Demonstration or Lower Stages
“Energy Technology Perspectives 2023” (ETP-2023), one of the IEA’s flagship reports, 
acknowledges that “getting to net zero is not possible without more innovation”. According to 
the report, under the NZE scenario, about 50% of all emissions reductions in 2050 come from 
technologies that are at prototype or demonstration stages today.92
The IEA has an extensive database of 503 individual clean energy technologies at various stages 
of Technology Readiness Levels (TRLs).93 The IEA’s 11 TRLs are divided into five main groups: 
Concept (1–3), Prototype (4–6), Demonstration (7–8), Early Adoption (9–10), and Maturity 
(11). Of the 503 technologies, 326 (almost 65%) are at the “demonstration” or lower stages. 
A total of 116 technologies (23%) are “in commercial operation in relevant environment” but 
need “evolutionary” improvement to be competitive. Only 29 technologies (less than 6%) at 
TRL 10 (one level below maturity) have achieved some commercial competitiveness. There 
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0%
10%
20%
30%
40%
50%
60%
Electricity Prices for Households (2H2021)
Share of Solar PV & Wind Generation in Electricity Generation (2020)
Source: Energy Policy Research, Eurostat, IEA
€/kWh
Denmark
Ireland
Germany
Lithuania
Greece
Spain
Portugal
Belgium
Netherlands
Sweden
Estonia
Italy
Croatia
Austria
Finland
Poland
Malta
Cyprus
France
Hungary
Bulgaria
Norway
Czechia
Latvia
Iceland
Slovakia
Romania
Slovenia
Trendline

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
are 32 mature technologies, including large-scale light-water nuclear, hydropower, pumped 
storage, and fossil-based CCUS for ammonia production, but they are not expected to affect 
the transition to a noticeable degree. 
It takes many years to move from one TRL to another (and 20–70 years from prototype to 
commercialization, according to the IEA),94 and it is common for new technologies to stagnate 
into long periods of no progress and, in many cases, never become commercially competitive. 
ETP-2023 asserts that it is necessary to shorten innovation cycles to close this gap in the NZE 
scenario.
Figure 47. Readiness Levels of 500 Technologies for NZE
Compared with the technologies at lower levels, the 32 mature technologies at TRL 11 
have the greatest possibility of being deployed at scale. However, 19 of them are solely in 
the buildings sector, which constitutes a proportionally smaller share (direct emissions in 
buildings was 8% in 2021) of total global emissions. Further, many of the building energy 
technologies have a relatively modest impact on the transition. For instance, potential markets 
for some air-to-air heat pumps are limited to northern heating regions in the U.S., Europe, 
and China. Technologies like smart metering and time-of-use metering, which offer two-way 
communication with the grid or shift power demand away from peak hours, are likely to be 
more impactful, but scaling them up globally may face serious opposition from consumers, on 
the grounds that there are no direct cost savings after investments in related infrastructure and 
equipment.
Cost and commercialization become a serious challenge in energy-intensive sectors such as 
industry and energy transformation.95 There are 14 technologies at TRL 10 and TRL 11 in 
3
9
43
57
43
42
68
61
116
29
32
0
20
40
60
80
100
120
TRL 1
TRL 2
TRL 3
TRL 4
TRL 5
TRL 6
TRL 7
TRL 8
TRL 9
TRL 10
TRL 11
Buildings
Number of technologies
CO2 management
Energy transformation
Industry
Transport
Concept
Initial 
idea
Application 
formulated
Concept
need
validation
Early
prototype
Large
prototype
Full
prototype
at scale
Pre-com-
mercial 
demo
First of a 
kind 
commercial
Large prototype
Demonstration
Early adoption
Mature
Small
prototype
Commercial 
operation in 
relevant 
environ-
ment
Integration 
needed at 
scale
Proof of 
stability 
reached
Source: Enery Policy Research, IEA ETP Clean Energy Technology Guide

58
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
industry, but only two are of high or very high importance to net zero emissions (ammonia and 
high-temperature electromagnetic heating for large-scale processes), while potentially much 
more impactful technologies remain at TRL 9 and below. The zero-carbon production (using 
carbon capture, utilization, and sequestration) of iron and steel, cement kiln, aluminum, and 
high-value chemicals96—the pillars of modern society—remains extremely expensive and is at 
pre-commercial demonstration stages.
On the TRL scale, lithium-ion batteries are currently the only competitive battery storage 
technology, and their use in transport will continue to grow on the back of strong BEV sales. 
However, this potential growth in the transport sector may be thwarted by sluggish growth in 
charging infrastructure, rising feedstock costs, and various disadvantages inherent in batteries, 
such as long charging times, shorter range, and high cost. For grid-scale storage, pumped 
hydropower is the only cost-competitive option; lithium-ion batteries, flywheels, and liquid 
air energy storage are deployed in niche markets with massive subsidies from governments and 
international organizations. 
4.3. Critical Mineral Supply Challenges
Under NZE, the world will need to mine enormous amounts of critical minerals used for solar 
panels, wind turbines, batteries, and grid networks. As discussed in Chapter 1, the incremental 
need for critical minerals, particularly lithium, graphite, cobalt, and nickel, will be at least 
1,800% by 2040, even in a less aspirational scenario.97 In the more aspirational NZE, these 
percentages will likely escalate quickly for all critical minerals. In WEO-2022, the IEA admits 
that although 80% of NZE demand for copper (which is on the lower end of the scale-up list) 
might be covered by announced production plans, “meeting the additional demand could be 
very challenging.”98
An increasing focus on ecological preservation, more frequent land-use conflicts (and the 
difficulty of obtaining mining rights), and long project lead times all contribute to the 
progressively challenging critical mineral supply chain with each additional site of production 
capacity. A review of mining literature (including the IEA’s critical mineral report) reveals 
that an average project lead time from discovery to production takes at least 10 years but is 
more likely to be closer to 30 years.99 Making things worse, the mining industry’s exploration 
expenditures remain nowhere near what NZE requires. For example, S&P Global Market 
Intelligence reported in March 2022: “Global nonferrous exploration budgets reached 
US$11.2 billion in 2021, barely more than half the peak of over US$20 billion in 2012, 
helping drive a multiyear slump in major base and precious metals discoveries.”100 Another 
S&P article (September 2022) asserts that mining companies are jeopardizing the energy 
transition by underinvesting in copper mines in favor of short-term returns.101
4.4. Problem with Ambitious Scenarios and Targets
The Global Energy and Climate Model (GEC), the IEA’s new energy system modeling 
approach integrating its two main models (World Energy Model and Energy Technology 
Perspectives Model), is undoubtedly a complex and sophisticated model that builds on

59
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
“
the agency’s vast expertise and large databases. However, history has shown that mistaken 
assumptions can lead to major flaws in forecasting and scenario analysis. Such failures have 
been a consistent feature in previous forecasts predicting the transition from conventional 
to alternative energy dating back to the late 1970s. Figure 48 (from a JPMorgan analysis) 
demonstrates that many scenarios, forecasts, and goals in the past decades have underestimated 
the challenges of transitioning to alternative energies at scale.
Figure 48. Renewable Share of U.S. Energy Demand: Reality vs. Expectations
NZE is even more ambitious than previous aspirational scenarios. Renowned scientist Vaclav 
Smil called these net zero goals not aspirational but “delusional” because they are well beyond 
our realistic reach.102
4.5. A Two-Speed Transition
“All countries co-operate towards achieving net zero emissions 
worldwide.” – A principle of NZE (GEC Model, p. 7)
NZE requires all countries to cooperate toward net zero emissions by “working together in 
an effective and mutually beneficial way, and recognizing the different stages of economic 
development of countries and regions, and the importance of ensuring a just transition.”103 
This assumption ignores the complex global political environment and national interests. 
As has already been happening, the transition efforts will more likely emerge as a two-speed 
transition, in which non-OECD countries pay lip service to net zero goals without fully 
0%
10%
20%
30%
40%
50%
1960
1970
1980
1990
2000
2010
2020
2030
12%
5%
Amory Lovins
Carter Admin
(solar only)
Source: Recreation of chart from EIA, JPMorgan Asset Management, Vaclav Smil
Note: Renewables include wind, solar, hydropower, geothermal, biomass.
Brent Sørensen
DOE Nat Labs
(RDD Scenario)
UN IPCC
(global)
Actual renewable share 
of US primary energy
Actual solar & wind share 
of US primary energy
Forecasts / scenarios

60
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
following through on their commitments or simply being incapable of making any significant 
progress by 2050. In fact, the early indications of this divergence have been on display during 
climate negotiations where developing countries, as a prerequisite to committing to net zero, 
demand that developed countries act on their Paris Agreement pledge to mobilize US$100 
billion per year for developing countries. 
Despite the seemingly high level of support for net zero from governments around the world, 
only a few have shown tangible commitment by making it into law (however unlikely and 
ambiguous they may be). Because a 2050 target date is well into the future, government 
leaders—OECD and non-OECD alike—find it politically risk-free to make pledges to achieve 
net zero emissions without giving much thought to whether such an effort justifies its costs 
or without making an unbiased and realistic analysis of the scale of the transition. Currently, 
110 countries have proposed or committed to net zero by 2050, of which 78 (71%) are non-
OECD countries and 32 (29%) are OECD countries.104 However, only one non-OECD 
country, Fiji, has passed it into law; 15 OECD countries have passed it into law (Figure 49). 
Figure 49. Two-Speed Transition: Net Zero by 2050 Level of Commitment
Sources: Energy Policy Research, Net Zero Tracker
3
3
11
15
47
9
21
1
0
10
20
30
40
50
Proposed / In Discussion
Declaration / Pledge
In Policy Document
In Law
Level of Commitment
Number of Countries
OECD
Non-OECD

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Conclusion
T
he IEA asserts that the “Net Zero by 2050” scenario would enable a smooth energy 
transition that ensures constant fuel and electricity supplies, minimal stranded assets, 
and reduced volatility in energy markets. However, a comprehensive evaluation reveals 
that the net zero path is anything but smooth, imposing enormous costs and risks on the 
economies of the West. 
NZE would inflict a double whammy on the West. The first blow comes from NZE’s 
recommendation to cease investment in new oil and gas fields beyond those already approved.  
There is no evidence that the world is experiencing  falling demand for hydrocarbons, and 
policies to restrict supplies would lead to rapid and sustained increases in oil and gas prices. 
The second blow comes from the switch to a near all-renewable electrical grid, which would 
have electricity prices soaring more than threefold. These would be body blows to the 
economies of the West. Even if OECD countries remained fully committed to net zero despite 
these costs, it is highly unlikely that there would be a sustained two-speed transition. As the 
developing world fails to meet the energy requirements essential for economic development, 
most will remain heavily reliant on so-called legacy fuels (fossil fuels and nuclear fuels, when 
possible). These fuels can deliver sustained, cost-effective, and resilience energy to support 
economic growth. Renewable and low-carbon energy will play an important role, but it will 
not see massive introduction until major technological and cost concerns are overcome. Much 
of the developed world is likely to remain committed to pursuing a costly path toward a net 
zero future, but cost concerns and failure modes are likely to see a growing realization that the 
goal is not achievable without accepting substantial constraints to economic growth.

62
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Abbreviations
B/D	
	
Barrels per Day
BCM	 	
Billion Cubic Meters
BEV	
	
Battery Electric Vehicle
BOE	 	
Barrels of Oil Equivalent
CCUS		
Carbon Capture Utilization and Storage
CdTe	 	
Cadmium Telluride (solar cell)
CIGS	 	
Copper Indium Gallium Selenide (solar cell)
EIA	
	
U.S. Energy Information Administration
ESG	
	
Environmental, Social, and Governance
EJ	
	
Exajoule (1018 joule)
ETP	
	
Energy Technology Perspectives
EU	
	
European Union
FCEV	 	
Fuel Cell Electric Vehicle
FSU	
	
Former Soviet Union (countries)
GEC	 	
Global Energy and Climate (Model)
GHG	 	
Greenhouse Gas Emissions
HDI	
	
Human Development Index
ICE	
	
Internal Combustion Engine
IEA	
	
International Energy Agency
LCOE		
Levelized Cost of Electricity
LNG	 	
Liquefied Natural Gas 
LPG	
	
Liquefied Petroleum Gas
MMB/D	
Million Barrels per Day
MMBtu	
Million British Thermal Units
NZE	 	
Net Zero by 2050
OECD		
Organisation for Economic Co-operation and Development
PV	
	
Photovoltaic
RD&D	
Research, Development and Demonstration
SDG	 	
Sustainable Development Goals
SDS	
	
Sustainable Development (scenario)
STEPS		
Stated Policies (scenario)
TOE	 	
Tonnes (metric tons) of Oil Equivalent
TRL	
	
Technology Readiness Level
WEO	 	
World Energy Outlook

63
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Appendices
Appendix 1: Incompatibility of NZE and Sustainable Development Goals 
The IEA claims that the NZE scenario integrates three objectives of the UN 2030 Agenda 
for Sustainable Development: tackling climate change (Sustainable Development Goal #13); 
achieving universal access to modern energy services by 2030 (SDG 7); and reducing the 
health impacts of air pollution (SDG 3.9).105 However, an attempt to achieve net zero in 
developing countries is fundamentally incompatible with other sustainable development goals, 
as the transition cost will make it extremely difficult to provide developing countries with 
reliable, affordable energy services by 2030. Also, the increased penetration of intermittent 
energy technologies will significantly slow down, if not halt at once, the cost-effective coal-to-
gas switching efforts to fight local air pollution in highly polluted areas in developing countries 
and will very likely force these countries to continue using coal for heating and cooking.
Appendix 2: The Price Elasticity of Demand
The price elasticity of demand refers to the change in demand relative to changes in price, so 
that an elasticity of –0.1 means that if prices rise 10%, demand will drop 1%, or one-tenth. In 
theory, it is possible to estimate price elasticities using data price and demand (or supply) data, 
but the practice has proved much more difficult for a variety of reasons.
First, crude oil prices are not paid by consumers except in rare instances (some power 
producers historically burned crude). Thus, the demand response is to the price for products 
such as gasoline and diesel fuel, which are only partly related to crude oil prices. Refining 
and transportation costs vary somewhat from place to place, although most notably in small, 
isolated markets; but government policies—especially taxation—mean that prices for gasoline 
range from negligible in some oil production countries to three times that for crude oil in most 
European nations. Thus, a change in crude oil prices does not have the same effect across the 
board, and this also varies over time.
The second problem is that consumers’ ability to respond to prices changes over time, based 
on a variety of factors. In the U.S., households switched from heating oil to natural gas in 
the 1980s; but in many places, natural gas supplies are not available or are available only to 
a limited degree. Also, after a long period of low oil prices, the availability of more efficient 
capital equipment from boilers to automobiles might be limited. In the 1970s U.S., few small 
car models were manufactured, whereas now, they are much more available. Now, electric 
vehicles might be preferred should oil prices soar, but automakers are unlikely to be able to 
accelerate production quickly.

64
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Finally, there are few or no instances when prices change and then remain stable, allowing for 
an estimate of demand response to that level of price increase. The spikes in the 1970s lasted 
for 11 and six years, respectively, before being mostly reversed in 1986, which saw demand 
growth resume. How much more demand would have been reduced if that had not happened 
is a subject for conjecture but hardly definitive.
These problems are reflected in the variety of estimates made by different studies over the years, 
with many illustrated in Table 14 (collected by Michael Lynch). 
Table 14. Estimates of Price Elasticity of Demand
Year 
Price Elasticity 
Region 
Long Run 
Liddle and Huntington 
2020 
–0.34 
Energy 
 
Liddle and Huntington 
2020 
–0.66 
Gasoline 
High-income Europe 
Liddle and Huntington 
2020 
–0.25 
Non-OECD 
Huntingon, Barrios, and Arora 
2019 
0.5 
Crude Oil 
OECD 
Huntingon, Barrios, and Arora 
2019 
0.99 
Gasoline 
OECD 
Huntingon, Barrios, and Arora 
2019 
0.89 
Natural Gas 
OECD 
Huntingon, Barrios, and Arora 
2019 
–0.15 
Crude Oil 
LDC 
Huntingon, Barrios, and Arora 
2019 
–0.61 
Gasoline 
LDC 
Huntingon, Barrios, and Arora 
2019 
–0.5 
Diesel 
LDC 
Huntingon, Barrios, and Arora 
2019 
–1.36 
Natural Gas 
LDC 
Dahl 
2014 
–0.43 
Oil 
 
Dahl 
2014 
–0.61 
Gasoline 
 
Dahl 
2014 
–0.67 
Diesel 
 
Dahl 
2014 
–1.5 
Natural Gas, 
Industry 
 
Dahl 
2014 
–0.56 
 
Labandeira et al.  
2016 
–0.526 
Gasoline 
 
Labandeira et al.  
2016 
–0.31–(–1.16) 
Energy 
 
Labandeira et al.  
2016 
–0.566 
Natural gas 
 
Uría-Martínez et al. 
2018 
–0.26 
Crude Oil 
 
Uría-Martínez et al. 
2018 
–0.611 
 
Uría-Martínez et al. 
2018 
–0.823 
Oil Products 
 
Gately and Huntington 
2002 
–0.24 
Oil 
OECD 
Gately and Huntington 
2002 
–0.18 
Non-OECD 
Short Run 
Caldara et al. 
2016 
–0.13 
Consensus 
 
Labandeira et al . 
2016 
–0.194 
Gasoline 
 
Labandeira et al.  
2016 
–0.184 
Natural gas 
 
Uría-Martínez et al. 
2018 
–0.074 
Crude Oil 
 
Uría-Martínez et al. 
2018 
–0.106 
Crude Oil 
 
Uría-Martínez et al. 
2018 
–0.143 
Oil Products 
 
Source: Michael Lynch

65
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Appendix 3: The Effects of the Russia–Ukraine War on NZE
Since the IEA published its first standalone Roadmap on NZE in May 2021, the world 
has witnessed many unexpected events—most notably Russia’s invasion of Ukraine and the 
resulting energy crisis in Europe. Governments throughout Europe had to face the hard 
reality of energy security and secure the supply of conventional fuels from other sources while 
supporting Ukraine’s efforts to restore its territorial integrity. The war signified the impossibility 
of reaching net zero without compromising energy security, as European countries had to 
extend the closing dates of their coal power plants and sign new liquefied natural gas (LNG) 
deals before the winter. Against this background, the IEA released the World Energy Outlook 
2022 (WEO-2022) which included updated NZE figures.
Compared with the Net Zero by 2050 report (2021), the updated NZE in WEO-2022 has 
higher oil demand in the mid-2020s and requires higher short-term supply from OPEC 
(partly due to lower Russian production). The IEA argues that “investments with shorter 
lead times and quicker payback periods, including extending production from existing fields” 
are necessary to close this gap.106 According to the IEA’s estimate, this will result in OPEC’s 
increasing its share of the global oil supply from 35% in 2021 to 52% in 2050 (Figure 50). 
However, this share could be much higher, as oil demand in 2050 will likely be much higher 
than NZE. In a combined scenario, where non-OPEC countries comply with NZE but 
OPEC countries maintain their STEPS production levels, the share of OPEC will be 82% by 
2050. Note that even this mixed scenario assumes that about half the global oil supply is lost, 
compared with STEPS.107
Figure 50. Updated NZE (WEO-2022) vs. Previous NZE (NZE report 2021)
The updated NZE scenario also has lower Russian natural gas production and overall lower 
gas consumption globally, compared with the Net Zero by 2050 report. This reduction in gas 
-30
-20
-10
 10
+
_
 20
 30
2030
2040
2050
Exajoules
Coal w/ CCUS
Coal
Oil
Natural gas w/ CCUS
Natural gas
Nuclear
Renewables
Source: Energy Policy Research, IEA. Net Zero by 2050 (2021), IEA. World Energy Outlook 2022

66
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
demand gives way to coal demand due to higher price differentials between the two fuels. The 
natural gas prices across the scenarios are higher in WEO-2022 than in the previous iteration, 
reflecting the impact of Russia’s invasion of Ukraine. Higher oil demand and higher coal 
demand until the 2030s, compared with the original estimate, mean that the world must use 
even less fossil energy, abated or unabated, in the 2040s and 2050s.108
Appendix 4: Oil and Gas Production and Price Without Approved Projects
Projected Oil and Gas Production Under No New Oil and Gas Fields Scenario
Figures 51 and 52 are based on the IEA’s projections made in 2020, which were normalized 
such that the most recent year’s (2018) oil and gas production volumes is equal to in the 
production volumes in 2021. According to the adjusted IEA projections, after investment in 
existing fields (orange), global oil production will more than halve, from 89.9 million barrels 
per day (MMB/D) in 2021 to 41 MMB/D in 2040. Natural gas production will also halve, 
from 4,036 billion cubic meters (BCM) to 2,046 bcm during the same period. The average rate 
of decline is 4% for oil and 3.5% for natural gas. Without investment in existing fields (dark 
green alone), these numbers would be 20 MMB/D and 879 BCM, respectively.
 
Energy Policy Research Foundation’s Michael Lynch’s analysis, based on observed decline 
rates by region and field type, shows that the IEA’s projections might be underestimating the 
potential decline. According to Lynch’s analysis, the decline in oil and gas production between 
2021 and 2040 will be even steeper than in the adjusted IEA estimate (Figures 53–54). In 
Figure 51. Adjusted IEA: Oil Production
Figure 52. Adjusted IEA: Gas Production
0
10
20
30
40
50
60
70
80
90
100
2000
2010
2020
2030
2040
Supply with investment in existing ﬁelds
Million barrels per day
Billion cubic meters per year
Supply with no new investment
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2000
2010
2020
2030
2040
Supply with investment in existing ﬁelds
Supply with no new investment
Source: Energy Policy Research, IEA, Te Oil and Gas Industry in Energy Transitions (2020), BP

67
A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
Lynch’s analysis, oil production drops to 28 MMB/D and natural gas to 981 BCM, with the 
average annual decline rates of 6% and 7.2%, respectively. The decline-rate assumptions used 
here are listed at the end of this appendix. Due to the large differences between the adjusted 
IEA estimates and Lynch’s estimates, this report considers both of them as upper and lower 
bounds.
The decline rates described here are used to project regional production, and then the aggregate 
global decline rate is normalized such that it matches the actual 2021 data from BP Statistical 
Review of World Energy 2022. Natural gas production data are also taken from BP Statistical 
Review of World Energy for years up to 2021. The 2022 estimates have been removed from 
the report’s original analysis due to data availability as well as to align with the IEA’s NZE 
scenario’s latest year.
Figure 53. Lynch: Oil Production
Figure 54. Lynch: Gas Production
0
10
20
30
40
50
60
70
80
90
100
Source: Energy Policy Research, Michael Lynch
million barrels per day
Canada Oﬀshore
Canada Onshore
Canada Oil Sands
US Oﬀshore
US Shale
US Onsh. conv
Mexico Onshore
Mexico Oﬀshore
W. Europe North Sea
W. Europe Other
Africa West Coast
Africa Onshore 
S. America Onshore
S. America Brazil
Asia China
Asia India
Asia Other
Russia
Kazakhstan
Other CIS
Saudi
Non-Saudi ME
NGPL
Historical
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2000
2040
2000
2021
2021
2040
billion cubic meters
Canada
US Oﬀshore
US Shale
US Onsh. conv
Mexico
W. Europe North Sea
W. Europe Other
Africa West Coast
Africa Onsh. conv
S. America Onshore 
S. America Brazil
Asia China
Asia India
Asia Australia
Asia Indonesia
Asia Other
FSU Russia
FSU Other CIS
Middle East Qatar
Middle East Saudi Arabia
Middle East Other ME
Historical

68
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
	
  
Price Elasticities of Demand and Oil and Gas Prices
A basic uncertainty involves the initial year price that the elasticity is operating from. In the 
past five years, the price has varied from deeply negative to well over US$100 in nominal 
terms. The most recent annual crude price was US$94.9 in 2022. Using this base price, Table 
17 shows the first five years’ price levels needed to cope with the estimated drop in supply, 
according to Lynch’s and IEA’s production projections, depending on the short-term price 
elasticity of demand.109 Price elasticity of demand is a measure of the responsiveness of the 
Country / region 
Type 
Decline 
Rate 
Country / Region 
Type 
Decline 
Rate 
Canada 
Oﬀshore 
10% 
Canada 
5% 
Onshore 
conventional 
5% 
US 
Oﬀshore 
12% 
Oil Sands 
1% 
Shale 
28% 
US 
Oﬀshore 
12% 
Onshore 
conventional 
5% 
Shale 
28% 
Mexico 
6% 
Onshore 
conventional 
6% 
Western Europe 
North Sea 
10% 
Mexico 
Onshore    
5% 
Other 
5% 
Oﬀshore 
10% 
Africa 
West Coast 
8% 
Western Europe 
North Sea 
10% 
Onshore 
conventional 
6% 
Other 
5% 
South and Central 
Americas 
Onshore 
conventional 
6% 
Africa 
West Coast 
8% 
Brazil 
12% 
Onshore 
conventional 
5% 
China 
6% 
S. America 
Onshore 
conventional 
6% 
India 
6% 
Brazil 
13% 
Australia 
8% 
China 
6% 
Indonesia 
7% 
India 
6% 
Other Asia 
8% 
Other Asia 
8% 
Russia 
6% 
Russia 
6% 
Other CIS 
6% 
Kazakhstan 
5% 
Qatar 
6% 
Other CIS 
5% 
Saudi Arabia 
6% 
Saudi Arabia 
5% 
Other Middle East 
5% 
Other Middle East 
5% 
Natural gas plant liquids 
5% 
Table 15. Oil Decline-Rate Assumptions
Table 16. Natural Gas Decline-Rate Assumptions

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
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quantity demanded of a good or service to changes in its price. 
Table 17. Short-Term Price Response (in constant USD 2022)
It seems unlikely that the price could increase this much for a lengthy period without triggering 
a major recession, and long-term effects would start to come into play in the medium term 
(more capital equipment replacement and radical behavioral changes that forcefully alter 
modern lifestyles). Using both Lynch’s and IEA’s production estimates, short-term oil price 
elasticity of –0.3 for each year implies an increase of 75% to 189% just in the first five years. 
For natural gas, the price increase range is 100%–275% during the same period. The price 
elasticities of –0.1 have even larger increases: 350%–1,350% for oil and 520%–2,400% for 
natural gas in the first five years. Demand for oil and gas may become more price elastic over 
time because of various adjustments, but these efforts will severely incapacitate the economic 
well-being and national security of most of the world.
Price 
Elasticity 
Year 1 
Year 2 
Year 3 
Year 4 
Year 5 
Year … 
Crude (Year 0 = US$94.9—WTI Spot in 2022)   
Based on 
Lynch’s 
production 
projections 
–0.1 
169.6 
295.2 
502.6 
840.5 
1,384.3 
 …  
–0.15 
144.7 
216.1 
317.4 
459.6 
657.9 
 …  
–0.2 
132.2 
181.2 
244.9 
327.2 
433.1 
 …  
–0.3 
119.8 
149.4 
184.4 
225.7 
274.3 
 …  
Based on IEA’s 
production 
projections 
 
107.4 
141.2 
207.9 
302.8 
430.6 
 …  
 
103.2 
124.9 
164.2 
214.2 
274.5 
 …  
 
101.1 
117.1 
144.7 
177.7 
215.3 
 …  
 
99.1 
109.5 
126.7 
146.0 
166.5 
 …  
Natural Gas (Year 0 = US$6.45—Henry Hub Spot in 2022) 
 
 
Based on 
Lynch’s 
production 
projections 
 
13.2 
26.1 
49.5 
90.9 
162.8 
 …  
 
11.0 
18.1 
28.9 
45.0 
68.7 
 …  
 
9.8 
14.6 
21.2 
30.0 
41.9 
 …  
 
8.7 
11.5 
15.0 
19.2 
24.2 
 …  
Based on IEA’s 
production 
projections 
 
8.2 
12.4 
20.2 
30.1 
40.5 
 …  
 
7.6 
10.2 
14.5 
19.2 
23.7 
 …  
 
7.3 
9.2 
12.1 
15.0 
17.6 
 …  
 
7.0 
8.2 
10.0 
11.6 
12.9 
 …  
–0.1
–0.15
–0.2
–0.3
–0.1
–0.15
–0.2
–0.3
–0.1
–0.15
–0.2
–0.3

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Batt Odgerel, Lucian Pugliaresi, Michael Lynch
Endnotes
1  IEA, “Net Zero Emissions by 2050 Scenario (NZE),” Last accessed Jan. 31, 2023 (link). 
2  Myllyvirta, L. et al. (Feb 2023). China permits two new coal power plants per week in 2022. 
Centre for Research on Energy and Clean Air (link). 
3  BloombergNEF. “Energy Transition Investment Trends,” Jan. 2023 (link); idem, “Global 
Investment in Low-Carbon Energy Transition Hit $755 Billion in 2021,” Jan. 27, 2022 (link); 
BP Statistical Review of World Energy 2022 (link)
4  IEA, “Net Zero by 2050: Summary for Policy Makers,” Last accessed Feb. 22, 2023 (link).
5  IEA, Net Zero by 2050 and World Energy Outlook 2022 reports.
6  IEA, Net Zero by 2050, p. 14.
7  According to the IEA, the global oil supply in 2021 was 183 EJ, of which 152 EJ came from 
the energy use of oil. Under NZE, the annual global oil supply is projected to decrease to 40 EJ 
in 2050: 29 EJ for non-energy use and 11 EJ for energy use. The decrease in annual oil supply 
for energy use from 152 EJ to 11 EJ represents a 13.8x contraction; see WEO-2022, table A.1c.
8  GDPs of all regions are expected to grow to various extents: Russia’s compound annual 
average growth rate (CAGR) is 0.1% between 2021 and 2050; India has the highest CAGR, 
of 5.2%, during the same period. Africa (4.1%), Middle East (3.2%), and much of Asia Pacific 
(China, 3.4%, ASEAN, 3.8%) enjoy high growth rates, while the Americas (U.S., 2%, Latin 
America, 2.4%) and Europe (1.6%) will have relatively slow growth rates.
9  IEA, World Energy Outlook, Oct. 2022, p. 134 (link).
10  Under its new modeling framework—Global Energy and Climate Model (GEC)—the IEA 
has three scenarios: NZE, STEPS, and the Announced Pledges Scenario (APS). APS assumes 
that all existing climate commitments by governments will be successfully met on time. We 
largely omit this scenario in this analysis, as APS is still less aspirational than NZE. In previous 
iterations of WEO, the IEA employed various other scenarios, most notably, the Current 
Policies Scenario (projection based on existing policies) and the Sustainable Development 
Scenario (compatible with the Paris Agreement goal of 2-degree scenario).
11  Balula, L. and Bina, O., “Summary – Literature Review of Key References for Scenario 
Building,” WP4 Brief, URBACHINA, Oct. 21, 2013.
12  IEA, “Understanding GEC Model scenarios,” Last accessed Jan. 10, 2023 (link).
13  Note that the crude price was much higher in 2022. For example, WTI Spot Crude was 
USD 94.9 (nominal).
14  Note that although the WEO-2022 uses a different US$ real term (2021 US$) from the 
Net Zero by 2050 report (2019 US$), future price figures remain the same as in the Net Zero by 
2050 report.
15  IEA, Global Energy and Climate Model: Documentation, Oct 2022, p. 21 (link). 
16  Fatih Birol, “Europe and the world need to draw the right lessons from today’s natural gas 
crisis,” LinkedIn, Jan 13, 2022 (link).

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and the Cessation of Investment in New Oil and Gas Fields
17  The historical rate is from the United Nations, “World Economic Situation and Prospects: 
May 2022 Briefing, No. 160,” May 3, 2022 (link).
18  The EU ETS has garnered much attention as a good example of pricing carbon emissions, 
but since it only covers electricity, energy-intensive industry, and aviation (~40% of the 
bloc’s total emissions, according to the EU – EU Emissions Trading System [EU ETS] link) 
emissions from road transport, heat production, and energy production in other sectors are 
covered by national ETSs. According to the World Bank’s Carbon Pricing Dashboard (link), 
all OECD countries, apart from a few wealthy Western and northern European small nations 
(except UK), had an average carbon price of less than US$53 as of 2022. Non-European 
OECD had even lower prices, with Chile, Colombia, and Japan at less than US$6 in 2022.
19  Constant dollar value, per the U.S. Census Bureau, is “a value expressed in dollars adjusted 
for purchasing power”; “Current versus Constant (or Real) Dollars,” Last accessed Apr. 10, 
2023 (link). It is used to compare dollar values between in periods and is inflation-adjusted. 
20  The U.S. inflation rates from World Bank, “Inflation, consumer prices (annual %) - United 
States” (link).
21  IEA, “Do we need to change our behaviour to reach net zero by 2050?” Oct. 29, 2021 
(link).
22  IEA, Net Zero by 2050, p. 67. 
23  IEA, “Do we need to change our behaviour to reach net zero by 2050?”
24  Abatement in this context means using Carbon Capture and Storage (CCS), or Carbon 
Capture, Utilization and Storage (CCUS). Oil includes its consumption for all purposes, 
including non-energy uses such as using it as petrochemical feedstocks.
25  The IEA employs the physical energy content method when calculating primary energy 
equivalent and assumes high conversion efficiency rates for electricity produced by hydro and 
non-thermal means (wind, solar, etc.) and low rates for thermal means (geothermal, coal, 
nuclear, etc.). However, the conversion efficiency gains of renewables will be significantly offset 
by various transformations (e.g., hydrogen production) required for a low-carbon transition; 
IEA, “Key World Energy Statistics Methodology: Conversion factors and unit abbreviations,” 
2021 (link).
26  One exajoule (EJ) per annum equals about 484,000 barrels of oil equivalent per day.
27  It could be argued that Soviet statistics were highly inflated before the Soviet collapse, 
leading to the large drop in numbers. But even that case would support the findings of this 
analysis that energy transition is hard and rare.
28  On economic recessions, see: Weber, I., How China escaped shock therapy: the market 
reform debate, Abingdon, Oxon: Routledge, 2021, p. 6. ISBN 978-0-429-49012-5. OCLC 
1228187814; on poverty, see: Round, J., and Kosterina, E., “The construction of ‘poverty’ 
in post‐Soviet Russia”, Perspectives on European Politics and Society, 2005, 6:3, 403-434, 
DOI:10.1080/15705850508438926.
29  Romero-Torres, J., “Energy Efficiency: Why Not Enough is Being Invested,” ADB, Oct. 
12, 2017 (link). 
30  World Bank, “Energy intensity level of primary energy (MJ/USD 2017 PPP GDP) – 
China,” Last accessed Jan. 5, 2023 (link). 
It is worth noting that China is known for its repeated incidents of inaccurate energy and 
environment data, and local authorities have had incentives to provide falsified data in key

72
Batt Odgerel, Lucian Pugliaresi, Michael Lynch
years such as 2015.
31  According to the IEA, zero-carbon ready buildings are “highly energy-efficient and resilient 
buildings that either use renewable energy directly or rely on a source of energy supply that can 
be fully decarbonized, such as electricity or district energy”; Delmastro, C., and Gordon, M., 
“Pathways for delivering zero-carbon ready buildings by 2030,” IEA, Oct. 27, 2022 (link). 
32  In the Net Zero by 2050 report, index 2020=100, 2030 target=50 and 2050 target=20. IEA, 
Net Zero by 2050, table 2.3, “Key global milestones for energy efficiency in NZE.”
33  European Commission, “Questions and Answers on the Renovation Wave,” Oct. 14, 2020, 
(link). 
34  World Bank, “GDP (current US$) – Japan, France.” 
35  IEA, Net Zero by 2050, p. 119.
36  Ibid., p. 171.
37  IEA, World Energy Outlook 2022, p. 107.
38  IEA, World Energy Investment 2022, Jun. 2022 (link).
39  IEA, World Energy Outlook 2022, p. 24.
40  This is different from the natural decline rate which is associated with the complete 
cessation of investment in all fields, including the existing ones.
41  Note that the updated gas supply is downgraded from Net Zero by 2050.
42  IEA, Net Zero by 2050. p. 101.
43  OECD, Energy Prospects to 1985, Paris (1974).
44  Caldara, Dario, Michele Cavallo, and Matteo Iacoviello, “Oil Price Elasticities and Oil 
Price Fluctuations,” International Finance Discussion Papers 1173 (2016), p. A.6. 
Additional price elasticity estimates can be found in Appendix 3. It presents several estimates 
for demand elasticities, primarily by academic researchers, but they are mostly static estimates. 
Initial reductions in demand are much easier as demonstrated by the behavior in the 1970s, 
when much of the savings occurred from fuel-switching by large users, especially power 
plants that replaced heavy fuel oil with coal. The unused fuel oil was then cracked into lighter 
products. Some of the estimates do take this into account.
45  Auffhammer, M., and Rubin, E., “Natural Gas Price Elasticities and Optimal Cost 
Recovery Under Consumer Heterogeneity: Evidence from 300 Million Natural Gas Bills,” 
Energy Institute at Haas Working Paper 287 (2016); Burke, P. J., Yang, H., “The Price and 
Income Elasticities of Natural Gas Demand: International Evidence, Energy Economics,” 
Volume 59 (2016); Clarion Energy Content Directors, “How Low Can Natural Gas Go? The 
Power Sector Might Have the Answer,” Power-Grid.com, Mar. 1, 2012 (link).
46  Note that predicting oil price is extremely hard, as many factors contribute to global 
oil and gas prices. Price elasticity of demand is a helpful way to understand the relationship 
between price and demand, but it should not be taken as a fail-proof formula.
47  The Year 0 figures are from 2022 and can be different from the figures in Chapter 2 on 
IEA oil and gas price assumptions due to different years’ dollar values adjusted for purchasing 
power. Additionally, the crude oil price here is WTI spot, which is historically lower than the 
OECD’s average import price used by the IEA.
48  In this analysis, Year 0 is 2022, in accordance with the latest NZE, and thus 2030 would be 
Year 8.
49  World GDP in 2021 was US$96.53 trillion (current dollars) (World Bank; link). After

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A Critical Assessment of the IEA’s Net Zero Scenario, ESG, 
and the Cessation of Investment in New Oil and Gas Fields
normalizing it to 2022 dollars using the 2021 inflation of 3.5% (link) and using the IEA’s 
global GDP assumptions (3.3% for 2021–30, 2.6% for 2030–50), we calculated that the 
world GDP will be US$136 billion in Year 10 (2032).
50  IMF Research Dept., The Impact of Higher Oil Prices on the Global Economy (Dec. 2000) 
(link)
51  McKillop, A., “Oil Prices and Economic Growth: Are Oil Shocks a Thing of the Past?” 
Energy & Environment. Vol. 23, No. 8 (Dec. 2012), pp. 1353-1356, Sage Publications, Ltd.
52  Congressional Budget Office, The Economic Effects of Recent Increases in Energy Prices, July 
2006. It is also true that the impact of higher oil and gas prices has declined over time as the 
ratio of energy expenditures to GDP has declined due to ongoing efficiency and productivity 
improvements. Further, Blanchard and Gali (2007) note the lower impact of higher prices 
on the U.S. GDP and CPI, and suggest it is due to “(a) good luck (i.e., lack of concurrent 
adverse shocks), (b) smaller share of oil in production, (c) more flexible labor markets, and 
(d) improvements in monetary policy”; Blanchard, O., and Gali, J., The Macroeconomic Effects 
of Oil Shocks: Why are the 2000s So Different from the 1970s?, NBER Working Paper Series, 
Working Paper 13368 (Sep. 2007). The figure shows the change in GPD (Y) and inflation 
(CPI) in the months after an oil price shock before 1983 and in the post-1984 era.
53  Lan, T., Sher, G., Zhou, J., The Economic Impacts on Germany of a Potential Russian Gas 
Shutoff (2022). 
54  As discussed in Chap. 2, under NZE, the annual capital investment in energy will increase 
from 2.5% of GDP in 2021 to 4.5% of GDP in 2030.
55  IEA, WEO-2022, pp. 77–78.
56  IEA, Net Zero by 2050, p. 56
57  IEA, Global Energy and Climate Model: Documentation, p. 95. 
58  Mandras, G. and Salotti, S., “Indirect jobs in activities related to coal, peat and oil shale: A 
RHOMOLO-IO analysis on the EU regions,” JRC Working Papers on Territorial Modelling 
and Analysis. European Commission’s Joint Research Centre (2021).  
59  The National Association of State Energy Officials (NASEO), the Energy Futures Initiative, 
and BW Research Partnership, Wages, Benefits, and Change, A Supplemental Report to the 
Annual U.S. Energy & Employment Report (Wage Report) (2020), pp. 74–76. 
60  Kalghatgi, G., The Battery Car Delusion, The Global Warming Policy Foundation. Jul. 
2020.
61  Read about more environmental risks of mining at MIT. “Environmental Risks of 
Mining.” Last accessed Apr. 1, 2022 (link).
62  The IEA’s definition of oil includes crude oil, natural gas liquids, refinery feedstocks, and 
additives as well as other oil products, which include such as gas/diesel oil, motor gasoline, 
liquefied petroleum gas (LPG), aviation gasoline, kerosene, and fuel oil naphtha, as well as 
non-energy products such as lubricants, bitumen, white spirit, industrial spirit, and paraffin 
waxes.
63  U.S. Energy Information Administration, “U.S. Crude Oil First Purchase Price,” Last 
accessed Jan. 9, 2023 (link).
64  BP Statistical Review of World Energy 2022 (link).
65  IEA, World Energy Balances (updated Jul. 2022).
66  These include cars, buses, and two/three wheelers according to IEA’s definition; IEA, WEO-

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Batt Odgerel, Lucian Pugliaresi, Michael Lynch
2022.
67  IEA, “Passenger car sales by size and powertrain, 2010–2020,” Oct. 26, 2022 (link). 
68  As of 2021, the global BEV stock was 11.2 million; IEA, “Global electric car stock, 2010–
2021,” Oct. 26, 2022 (link).
69  IEA, Global EV Outlook 2022, May 2022 (link).
70  Hart, D. The Impact of China’s Production Surge on Innovation in the Global Solar 
Photovoltaics Industry, ITIF, Oct. 5, 2020 (link).
71  Bellan, R. “Amid recalls, Ford says costs to build Mustang Mach-E are skyrocketing”. Jun. 
15, 2022. (link)
72  Kim, T., “Critical minerals threaten a decades-long trend of cost declines for clean energy 
technologies,” IEA, May 18, 2022 (link).
73  Bhutada, G., “The Key Minerals in an EV Battery,” May 2, 2022 (link).
74  The IEA’s 2021 report The Role of Critical Minerals in Clean Energy Transitions compares 
the STEPS scenario with the Sustainable Development (SDS) scenario, which indicates “what 
would be required in a trajectory consistent with meeting the Paris Agreement goals [2°C 
temperature rise].” SDS is less ambitious than NZE and is no longer included in the IEA’s new 
modeling approach, Global Energy and Climate Model.
75  A typical Tesla battery requires the input of almost 140 lb. of lithium hydroxide, 20 lb. 
of cobalt, 60 lb. of nickel, and 20 lb. of manganese; see Max Pyziur and Larry Goldstein, 
“Implied Tesla Battery Production Costs,” EPRINC Chart of the Week, Jun 22, 2022.
76  The range was derived from MIT Climate’s comparison of three reports that undertook 
literature reviews on the topic; see Ask MIT Climate, “How much CO2 is emitted by 
manufacturing batteries?” Jul. 15, 2022 (link).
77  The dollar amounts in this paragraph are current U.S. dollars not adjusted for inflation.
78  Kalghatgi, G., The Battery Car Delusion.
79  Global natural gas supply grew by 30.5 exajoules during that period, from 113.5 EJ to 145 
EJ. U.S. contributed an additional 12.6 EJ; Energy Policy Research’s calculation based on IEA 
World Energy Balances data.
80  E.g., the U.S. grid operates at a frequency of 60 hertz; European electricity grids and parts 
of the Japanese grid operate at 50 hertz.
81  This is one of several such analogies: de Caires Watson, D, “Why The Electricity Grid Is 
Like A Football Team” (link).
82  IEA, The Role of Gas in Today’s Energy Transitions, 2019 (link).
83  Rissman, J., “Decarbonizing Low-Temperature Industrial Heat in the U.S. Energy 
Innovation,” 2022 (link).
84  IEA, World Energy Outlook 2019 (link).
85  WEO-2022 has detailed cost estimates for the U.S., EU, China, and India.
86  IEA, World Energy Outlook 2022. p. 471.
87  Hart, D. The Impact of China’s Production Surge on Innovation in the Global Solar 
Photovoltaics Industry.
88  The Tempe, Arizona-based First Solar is the only major CdTe manufacturer.
89  U.S. Dept. of Energy. Land-Based Wind Market Report: 2021 Edition (link).
90  In the U.S., these are either regional transmission organizations (RTO) or independent 
system operators (ISO).

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and the Cessation of Investment in New Oil and Gas Fields
91  Fares, R., “Renewable Energy Intermittency Explained: Challenges, Solutions, and 
Opportunities,” Mar. 11, 2015 (link).
92  IEA, Energy Technology Perspectives 2023. p. 50 (link).
93  IEA, “ETP Clean Energy Technology Guide” (link). According to NASA, the Technology 
Readiness Levels (TRL) “are a type of measurement system used to assess the maturity level of 
a particular technology. Each technology project is evaluated against the parameters for each 
technology level and is then assigned a rating based on the progress of the project.” 
94  IEA, Energy Technology Perspectives 2023, p. 50. 
95  Energy transformation refers to converting energy from one form to another. Examples 
include solar photovoltaics (solar energy to electricity), hydrogen production, and biofuel 
production. 
96  High-value chemicals include ethylene and associated by-products.
97  IEA, The Role of Critical Minerals in Clean Energy Transitions, rev. version, Mar. 2022 (link). 
98  IEA, World Energy Outlook 2022, p. 175.
99  Mining News, “Average lead time for new mines nearly 30 years,” Mar. 6, 2020 (link) 
100  Keen, K, “Mining sector spending too little on exploration amid dwindling discoveries,” 
S&P Global Market Intelligence, Mar. 23, 2022 (link). 
101  Keen, K., Dlin, S., Moors, C., “Mining sector’s failure to seek new copper jeopardizes 
entire energy transition,” S&P Global Market Intelligence, Sep. 6, 2022 (link).
102  Marchese, D., “This Eminent Scientist Says Climate Activists Need to Get Real,” New 
York Times, Apr. 22, 2022 (link). 
103  IEA, Global Energy and Climate Model: Documentation, p. 7. 
104  This excludes 13 countries, including China and India, that have net zero commitments 
to achieve after 2050; Net Zero Tracker (link).
105  IEA, Global Energy and Climate Model: Documentation. p. 9.
106  IEA, World Energy Outlook 2022, p. 134.
107  In STEPS, the IEA’s assumed OPEC oil production is 43.1 MMB/D in 2050. Non-
OPEC’s production in NZE in 2050 is 9.2 MMB/D.
108  IEA, World Energy Outlook 2022, p. 134.
109  Note that predicting oil price is extremely hard, as many factors contribute to global 
oil and gas prices. Price elasticity of demand is a helpful way to understand the relationship 
between price and demand, but it should not be taken as a fail-proof formula.

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Batt Odgerel, Lucian Pugliaresi, Michael Lynch
emitte lucem et veritatem 
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