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Increased fossil fuel production: future stranded assets or a signal of failure in climate change goals?
The 2023 “Production Report Gap” tracks the misalignment between governments’ planned fossil fuel production and global production levels consistent with limiting global warming to 1.5°C or 2°C. The report represents a collaboration of several research and academic institutions (more than 80 experts from 30 countries). This year the report reveals that governments on aggregate are on track to produce more than twice the amount of fossil fuels in 2030 than would be needed to limit the global temperature rise to 1.5 degrees putting at risk the energy transition and showing a continuing disconnect between the expansion of fossil fuel use and production and governments' climate goals.
- Disconnection between government targets and actions: Governments are planning on producing around 110% more fossil fuels in 2030 than would be consistent with limiting warming to 1.5°C, and 69% more than would be consistent with limiting warming to 2°C. This production gap is also projected to grow over time: by 2050, planned fossil fuel production is 350% and 150% above the levels consistent with limiting warming to 1.5°C or 2°.
- According to the report oil and gas companies increased their upstream investments by 39% to nearly USD 500 billion in 2022 worldwide, the highest level since 2014. Many of these planned production projects could also become stranded assets as the world decarbonizes and fossil fuel extraction targets fail to reflect falling demand and changing sociopolitical realities.
- Reasons to continue with fossil fuel projects: The energy crisis after the war in Ukraine, the ensuing pressures on global energy supply, and record demand despite record high prices. For example, there are many plans to invest in liquefied natural gas infrastructure by exporters and importers alike. Many countries are promoting gas as a “bridge” or “transition” fuel, but with no apparent plans to transition away from it.
- Energy crisis has also helped to accelerate the broader transition to clean sources: global pace of vehicle electrification has vastly exceeded prior expectations. In Europe, renewable power capacity is expected to double over the 2022–2027 period, Australia and the United States of America passed landmark climate laws in 2022, China is on track to double its wind and solar energy capacity by 2025 instead of 2030, and India earmarked over USD 4 billion for clean energy in its national budget.
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