As nations discuss the best path towards a just global energy transition, there are two seemingly opposing arguments on the feasible speed of the transition away from fossil fuels, and their role in the long term. After consecutive Conference of Parties (COP) meetings held in petrostates, during COP29, distinct and often overlapping country blocks have formed in support of different transition avenues: Organization of the Petroleum Exporting Countries (OPEC+), BRICS, Organisation for Economic Co-operation and Development (OECD), the industrialised, developing, oil reserves-rich, among others.
The controversy
In his opening remarks at COP29 in Baku, Azerbaijani President Ilham Aliyev took a provocative stance, describing Azerbaijan’s fossil fuel resources as “a gift of God”. He emphasised their importance for global energy security, especially in light of geopolitical tensions and fluctuating energy supplies. This was followed by outrage from Western representatives and media, amid controversy for potential conflicts of interest on behalf of COP29 staff. As a response, Aliyev claimed Western hypocrisy, with rich and industrialised countries still representing a sizeable portion of global demand, and relying heavily on gas for energy security.
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This occurs in the midst of a larger push within the COP membership and leadership about the role of fossil fuels in the future energy matrix. OPEC+, which is due to meet on 1 December, advocates for a sustained role of fossil fuels, framed as a pragmatic transition while its high-income OECD counterpart, pressured by climate groups, pushes for ever more ambitious goals and climate targets.
This struggle is evidenced by the focus on the wording of agreements reached and targets announced: To OPEC+ members, it is vital that official texts do not include phrases such as “fossil fuel production phase-out” – a landmark achievement of the climate movement during COP28, which “signalled the beginning of the end of the fossil fuel era”, according to the United Nations Framework Convention on Climate Change. Though the language was not reversed, all that OPEC+ cared about was that focus be drained into other aspects of the energy transition, and so it did: COP29 was the COP of climate finance. Despite Aliyev’s provocation, the main-stage fight was between industrialised economies, and their developing, often non-OECD counterparts demanding more financing from them, in order to meet the climate targets they often feel pressured to.
Diverging forecasts
Interestingly, the OECD’s (through the International Energy Agency (IEA)) and OPEC+’s disagreements don’t stop at what they want to happen. As per their oil demand forecasts, they have starkly diverged notions of what is going to happen. Whether hopeful thinking by either party or otherwise, the IEA’s and OPEC+’s visions of 2030, extrapolated into 2050, exist in vastly different worlds.
OECD’s IEA and OPEC sharply diverge in their oil demand forecasts
The IEA shook the markets in mid-2024, standing behind its bold prediction of peak oil demand taking place by 2030, in its landmark report ‘Oil 2024’. This scenario would see oil demand peaking at 105 million barrels per day, plateauing and decreasing thereafter. Meanwhile, OPEC, in this year’s version of the World Oil Outlook, sets out a vision of growing oil demand into 2050, with its base scenario placing total crude demand at 120 million barrels per day.
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By GlobalDataThe truth is always somewhere in the middle. But, where exactly?
The major driver in the wedge between the two forecasts seems to be the assumptions made on the future oil demand of developing countries. Large emerging markets such as China, India, Indonesia, Pakistan, Bangladesh, and Nigeria, as large consumption centres with solid or growing industrial bases, will largely shape the possible future scenarios’ oil demand. A large number of energy-intensive developing economies stand to heavily increase the energy intensity of their economies. These countries are both the ones that stand to increase their demand the most and the ones that find it the hardest to finance renewable projects.
As such, COP29 climate finance goals for mitigation and their implementation are a critical driving force for the adoption of fossil fuel alternatives in the largest new fossil fuel demand regions. The meetings in Baku wrapped up with a contentious agreement, whereby developed nations committed $300bn annually until 2035 to help developing nations combat climate change. This fund includes both financing for mitigation and adaptation efforts. The promised amount is lower than the $500bn demanded by developing countries, and critics have rounded on it as fraying international cooperation over climate issues.
Despite the agreement, many intended recipients of the deal said it was “too little, too late”, a feeling that underlines the difficulties of accomplishing global cooperation on climate finance. Though this is the final sentiment as COP29 comes to an end, for some it’s a step in the right direction for climate challenges.
For a detailed analysis and comprehensive data, stay tuned to leading data and analytics company GlobalData’s upcoming insights on COP29 agreements.
