Report extract

Stated Policies Scenario

Assessing today's policies and plans

The Stated Policies Scenario reflects the impact of existing policy frameworks and today’s announced policy intentions. The aim is to hold up a mirror to the plans of today’s policy makers and illustrate their consequences for energy use, emissions and energy security.

The aim of the Stated Policies Scenario is to provide a detailed sense of the direction in which existing policy frameworks and today’s policy ambitions would take the energy sector out to 2040. Previously known as the New Policies Scenario, it has been renamed in WEO 2019 to underline that it considers only specific policy initiatives that have already been announced.

In aggregate, these commitments are enough to make a significant difference. However, there is still a large gap between the projections in the Stated Policies Scenario and a trajectory consistent with shared sustainable energy goals – the Sustainable Development Scenario.

The policies assessed in the Stated Policies Scenario cover a broad spectrum. These include Nationally Determined Contributions under the Paris Agreement, but much more besides. In practice, the bottom-up modelling effort in this scenario requires a lot of detail at the sectoral level, including pricing policies, efficiency standards and schemes, electrification programmes as well as specific infrastructure projects.

The sorts of announcements made by governments include some far-reaching targets, including aspirations to achieve full energy access in a few years, to reform pricing regimes and, more recently, to reach net zero emissions in some countries and sectors. As with all the policies considered in the Stated Policies Scenario, these ambitions are not automatically incorporated into the scenario: full implementation cannot be taken for granted, so the prospects and timing for their realisation are based upon our assessment of countries’ relevant regulatory, market, infrastructure and financial circumstances. 

Where policies are time-limited, they are generally assumed to be replaced by measures of similar intensity, but we do not assume future strengthening – or weakening – of future policy action, except where there already is specific evidence to the contrary.

An inventory of the key policy assumptions available (for all scenarios), along with all the underlying data on population, economic growth, resources, technology costs and fossil fuel prices, are also available in this introduction to the World Energy Model.

None of the scenarios in our Outlook is preordained: all are possible. The Stated Policies Scenario is not a forecast and it should not be interpreted or treated as such. It includes a detailed assessment of policies that have already been announced (“stated”), but it does not speculate on how these might evolve in future.

A forecast would need to try to second-guess the future responses of policy makers, whether these are triggered by concerns about energy security or affordability, or by a reaction to rising emissions and their impacts.

We do not give decision makers the benefit of the doubt on these future responses. Our intention in the Stated Policies Scenario is to provide a candid picture of where the energy world is heading, and thereby provoke careful deliberation and action, not to sugar-coat the Outlook with an optimistic prediction of future policy changes.

The Stated Policies Scenario is also a valuable tool to assess some uncertainties raised by the global pandemic and economic crisis. Examples are the lower energy efficiency savings due to lower sales of new vehicles or replacement of old and inefficient appliances and impact of teleworking on future energy demand in buildings and transport.

To understand the impact of a longer pandemic and stronger economic turmoil, we developed the Delayed Recovery Scenario (DRS). This scenario illustrates perfectly the scenario-based approach of the World Energy Outlook: the DRS retains the initial policy assumptions of the STEPS while public health and economic assumptions differ.

The energy sector is technology-intensive, and it has passed through several innovation-led transformations in the last two centuries. The world is now entering a new phase of technology-driven transformation propelled by advances in digital technologies, mass manufacturing and environmental awareness. The markets for these technologies will be largely shaped by policy goals, which means that governments have a central role to play.

Our approach, in all scenarios, incorporates a dynamic process of learning-by-doing whereby deployment affects the future costs of fuels and technologies, including the cost of investing in energy efficiency. However, while the evolving costs of known technologies are modelled in detail, we do not try and anticipate technology breakthroughs (e.g. nuclear fusion).

The case of solar PV provides a good example of the links between policy, learning and cost reductions. As described in previous editions of the Outlook, the capital costs of this technology have been decreasing with a learning rate of around 20% for over a decade. In practice, this means that each time the cumulative amount of added PV capacity doubles, the costs fall by 20%.

The Stated Policies Scenario follows this trend over the period to 2040. Since policies and markets drive a higher level of solar PV installation in the Sustainable Development Scenario, this results in even more progress along the learning curve.

Analysis in the Stated Policies Scenario includes detailed consideration of evolving risks to energy security that could require an enhanced policy response today:

  • Risks to oil security remain. The market and policy environment may be changing, rapidly in some areas, but oil security concerns don’t disappear in the Stated Policies Scenario (or other scenarios that we examine) as import dependence in Asia rises, reliance on some major supply chokepoints remains high and pressure on some traditional producers intensifies.
  • Gas markets are changing rapidly. The movement towards a more interconnected global gas market, as a result of growing trade in liquefied natural gas (LNG), increases competition among suppliers while changing the way that countries need to think about managing potential shortfalls in supply.
  • Electricity moves to the heart of modern energy security. Cost reductions for renewables and advances in digital technologies are opening huge opportunities for energy transitions, while creating some new energy security dilemmas. Policy makers and regulators will have to move fast to keep up with the rising need for flexible operation of power systems. Issues such as the market design for storage, the interface between electric vehicles and the grid, and data privacy all have the potential to expose consumers to new risks.

The Outlook continues to ring the alarm bell on trends in global emissions of CO2 and the pollutants that cause poor air quality. This is not new. For example, the 2008 edition introduced an ambitious new analysis on energy-related emissions, warning that “the consequences for the global climate of policy inaction are shocking” and underlining that “strong co-ordinated action is needed urgently to curb the growth in greenhouse gas emissions and the resulting rise in global temperatures”.

The projections from ten years ago make for uncomfortable reading today. At the time, our Reference Scenario (in which governments make no changes to their existing policies and measures) projected that global energy demand would exceed 14 000 Mtoe by 2018 (from 12 200 in 2008), and that – given a continued preponderance of carbon-intensive fuels in the energy mix – that would imply 2018 energy-related CO2 emissions reaching 33.7 billion tonnes.

By contrast, the 450 Scenario from WEO 2008 laid out a strategic policy pathway that would lead to a peak in global emissions at just over 31 billion tonnes. A key element of this strategy was to take advantage of the temporary lull in demand growth, due to the financial crisis, and put investment in new industrial and power generation facilities on an alternative, more efficient and low-carbon pathway.

Over the last 10 years, the Paris Agreement was concluded, deployment of renewable energy in the power sector has increased rapidly, and natural gas has made inroads into the position of coal in the United States and China. However, our latest data shows that global energy demand indeed exceeded 14 000 Mtoe in 2018 and that energy-related CO2 emissions hit 33.3 billion tonnes in 2018, a new historic high and much closer to the Reference Scenario projections than to the 450 Scenario. So far, with an expanding global economy and population, the forces of continuity in energy have been stronger than the forces of change.