IEEJ：October ©IEEJ 2023
Special Bulletin
A Japanese Perspective on the International Energy Landscape (659)

October 20, 2023

IEEJ Outlook 2024: How to Realize Various Pathways to Energy Transition
Ken Koyama, PhD
Chief Economist, Senior Managing Director
The Institute of Energy Economics, JapanOn October 20, the Institute of Energy Economics, Japan, published IEEJ Outlook 2024 atits 445th meeting on research reports. The IEEJ Outlook projects global energy supply and demand
up to 2050, being positioned as the IEEJ’s flagship publication. The IEEJ releases the annual outlook
every October, providing a long-term energy supply and demand analysis in the form of an annual
regular exercise and special analyses on up-to-date topics. In addition to a long-term analysis basedon the Reference Scenario and the Advanced Technologies Scenario for regular exercise, the latest
IEEJ Outlook features a special analysis on how to realize various pathways to energy transition, asindicated by the subtitle. The following summarizes key points of the latest IEEJ Outlook.
The IEEJ Outlook features the Reference Scenario and the Advance Technologies Scenariothat take a “forecast approach” projecting global energy supply and demand under various assumptions
on future changes, based on changes to date. The forecast approach contrasts with the “backcastapproach” that the International Energy Agency has adopted for an analysis of global carbon neutrality
to consider how global energy supply and demand should change for the achievement of the global
carbon neutrality goal. It must be noted that both the forecast and backcast approaches are useful tools
for future analysis and have their respective significance.
In the IEEJ Outlook’s Reference Scenario in which current trends will be sustained, global
primary energy demand will steadily increase under sustained economic growth, posting an 18% risefrom 2021 to 17.4 billion tons of oil equivalent in 2050. The increase will be driven by Emerging
Markets and Developing Economies, including India and the Association of Southeast Asian Nations,which will account for 67% of the global increase. In China, which has led global energy demand
growth, demand will decline due to the declining population and decelerating economic growth. As
natural gas and oil demand increases steadily, despite a decrease in coal demand, fossil fuels willcontinue to account for most of the global energy supply, capturing 73% in 2050.
In the Advanced Technologies Scenario in which advanced energy technologies will spreadas much as possible to enhance climate change prevention and energy security measures, primaryenergy demand in 2050 will be 21% less than in the Reference Scenario due to powerful progress inenergy efficiency improvement. Demand will sharply grow for non-fossil energy sources such as
renewable energy and nuclear, while slackening for fossil fuels. Coal demand will decrease
substantially due to a decrease in demand for coal for power generation. Oil demand will also plungeas the electrification of vehicles makes progress. Natural gas demand will level off in the 2030s before
decreasing moderately. As a result, global energy-related CO2 emissions in 2050 will total 14.7 billion
tons, 19.2 billion tons or 57% less than the 33.9 billion tons in the Reference Scenario. The emissions
in 2050 are close to those in the Announced Pledge Scenario (in which announced national emission
reduction goals will be achieved) in the IEA World Energy Outlook 2022 released last year. Even in
the Advanced Technologies Scenario, fossil fuels will still account for 53% of primary energy demand
1

IEEJ：October ©IEEJ 2023
in 2050, keeping their position as an important energy source.
In the Outlook’s special analysis, the following three points are extremely important. First,
we analyzed the energy transition in ASEAN, which will drive global energy demand growth andincrease its presence in the international energy market, from the perspective of minimizing costs andclarified the importance of balanced, pragmatic efforts according to ASEAN countries’ national andenergy conditions. We qualitatively demonstrated that it is important for ASEAN to replace coal withnatural gas as its main energy source in the early stage of the energy transition, while adequately
expanding renewable energy consumption, and later introducing hydrogen and other innovative energy
technologies in order to realize carbon neutrality at minimum costs. Deviating from this optimal pathwould increase energy transition costs and economic burdens. The ASEAN analysis also demonstrated
that total energy demand in 2050 will change significantly depending on economic growth and energy
efficiency improvement assumptions and that ASEAN’s energy mix will have to dramatically change
to promote decarbonization.
Second, we analyzed the importance of a stable natural gas and LNG supply. As indicatedin the abovementioned ASEAN analysis, gas and LNG are expected to play an important role inpromoting the global energy transition in the future. Global LNG demand in 2050 will remainunchanged from the present level in the Advanced Technologies Scenario and increase significantlyin the Reference Scenario. This analysis indicated that if a decline in the existing LNG supply capacity
is taken into account, an average annual investment of 8 million to 18 million tons in LNG production
capacity will be required until 2050. Securing investment to stabilize the LNG market is crucial for
LNG to fulfill its expected role. Over the longer term, it will be important to clarify standards for“abated LNG” which can be consistent with decarbonization and promote LNG use in accordancewith those standards. From the perspective of LNG buyers, we pointed out that it is important toposition long-term contracts to ensure stable supply while pursuing flexibility in the LNG market andpromote specific initiatives to secure long-term contracts.
Third, we analyzed negative emission technologies (NETs) that reduce CO2 in theatmosphere. Energy scenarios of governments and government-related organizations in majorcountries towards achieving carbon neutrality goals indicate that carbon neutrality cannot be achieved
without NETs. Among various NETs options, DACCS (Direct Air Capture with Carbon Storage) andBECCS (Bioenergy with Carbon Capture and Storage) technologies, which combine DAC (Direct AirCapture) and biomass energy use with CCS (Carbon Capture and Storage), are attracting attention
from the viewpoint of technical maturity and CO2 removal potential. For NETs, it is essential todramatically promote technological development and cost reduction, grasp the CO2 removal potential,and establish methods for measuring removed CO2. This analysis also suggested that international
cooperation, such as the development of international systems for promoting NETs, will beindispensable.
The Outlook includes a BOX analysis on greenhouse gas emission reduction and criticalmineral usage through the electrification of vehicles in the whole of the so-called well-to-wheel energy
flow. It showed that GHG emissions from plug-in hybrid vehicles (PHEV) and battery electric vehicles(BEV) are significantly lower than those from internal combustion engine vehicles (ICEV). On theother hand, critical minerals are used for BEVs far more than for PHEVs, indicating that BEV diffusion
may exert a great impact on the critical mineral supply-demand balance. It was also shown that whenfuel is switched from oil to electrofuels, PHEVs may emit less GHG than BEVs. This analysis
presented important issues to be examined regarding vehicle electrification.
2

IEEJ：October ©IEEJ 2023
Long-term global energy outlooks entail great uncertainties. At present, particularly, thegeopolitical situation has become chaotic due to the destabilization of the international energy situationand global divides amid the Ukraine crisis, making it extremely difficult to depict a future picture of
the world. Even in the face of such difficulties, however, it is important to take advantage of various
ideas to analyze future possibilities for the world. The IEEJ is determined to continuously contributeto solving energy problems in the world through analyses in the IEEJ Outlook.
Contact: report@tky.ieej.or.jp
The back issues are available at the following URL
http://eneken.ieej.or.jp/en/special_bulletin.html

3