Report – Fossil fuels: analysis of trajectories compatible with a 1.5°c scenario
The Institut de la Finance Durable publishes its report ‘Fossil energies: analysis of trajectories compatible with a 1.5°c scenario’
Financing green and transitional activities is essential to building tomorrow’s low-carbon economy. At the same time, meeting climate objectives also means reducing the use of fossil fuels, which are responsible for 80% of greenhouse gas emissions, along a trajectory that will enable progressive alignment towards carbon neutrality, and that must combine carbon constraints with technical and economic feasibility.
Beyond the commitments already made on coal and non-conventional oil and gas, the question of financing oil and gas in general is now being raised. Many players in the Paris marketplace are already developing their own alignment methodologies compatible with the Paris objectives and a 1.5°C scenario. It should be noted that the success of the energy transition implies global action by all players: these commitments must not be limited to players on the Paris marketplace if the aim is to reduce investment in fossil fuels worldwide.
The aim of this working group is therefore to develop tools for understanding 1.5°C aligned scenarios, to make their use as simple and adapted as possible to the needs of financial players in developing an investment strategy compatible with the objectives of the Paris Agreement. Against a backdrop of intense scrutiny of corporate strategies, and in particular those of financial institutions, with regard to the financing of fossil fuels, the aim of this project is to build a frame of reference from which these institutions can individually construct or develop their strategies.
The first stage of the work is to list the main energy-climate scenarios aligned with a 1.5°C objective that are currently used by players in the marketplace. The International Energy Agency (IEA), the Networking for Greening the Financial System (NGFS, based on scenarios produced by research institutes), the International Renewable Energy Agency (IRENA), BloombergNEF (BNEF) and many others, are all institutions that propose scenarios to model possible decarbonization trajectories. Each of these scenarios has its own modeling specificities (scope of analysis, number of variables, optimization method, etc.) and makes different assumptions about decarbonization levers (maturity and cost of technologies, land availability, etc.).
The differences in approach between the scenarios can sometimes be difficult to grasp. So, in the autumn of 2023, the Institut de la Finance Durable working group conducted a series of hearings with climate experts and scientists. The aim ofthis analysis is to align market players’ understanding of investment trajectories compatible with a 1.5°C scenario. Its aim is to identify the main lessons to be learned from the reference energy-climate scenarios currently available.