The Big Picture: Many Roads to Net Zero

• The International Energy Agency's (IEA) net-zero road map has rocked the oil and gas industry with the rapid phaseout of hydrocarbons it envisages. • It’s up to governments, however, to make this happen, with some using it to accelerate action and others still moving more slowly. • The real impact of the plan may ultimately be in the debate it has sparked, and how this could add to policy and investor momentum for climate action. The pathway set out by the IEA to reach net-zero emissions by 2050 is not prescriptive. But the IEA sees it as the most feasible one. It is designed to "inform policymakers so they understand the implications of their actions -- and of their inaction,” according to the agency’s Executive Director Fatih Birol. It's perhaps unsurprising then that the road map is resonating differently across the world, with some dismissing it and others seeing it as a useful framework to inform more ambitious targets (EC May21'21). Vice President of the European Commission Frans Timmermans commended it for showing a feasible path to net zero that acknowledges renewables are the future. But even advocates face potential sticking points. Many governments have declared net zero by 2050 targets, but few have mapped out specific steps on how to get there, and there is scope for disagreement en route -- along with hit and miss incentives. Recent renewables tenders in Italy and Germany, for example, failed to entice bidders to fill the capacity on offer. That helps illustrate the point that while renewables are plunging in cost, a lot of policy, funding and mindset stars need to align to get growth at the pace and scale needed for oil demand to shrink to levels set out in the IEA report. Carbon offsets, which the IEA excluded, could also figure among policy and commercial plans. The report is a message to policymakers to "introduce vast aggressive new policies globally. If those policies don’t come, then oil demand will not drop fast enough and new projects will be needed (and they will be built by someone)," says Martijn Olthof, equities manager at APG Asset Management. Policy, Investor Clarity