The minute
- Global fossil-fuel CO2 emissions are set to fall approximately 0.5% in 2026 compared to 2025, according to Carbon Brief analysis based on the latest IEA forecasts for coal, oil and gas.
- The IEA revised its 2026 oil demand forecast from a 930,000 barrels-per-day (bpd) increase in January to a 2,500,000 bpd decline by September, equivalent to a 2.4% reduction from 2025 levels, as the US-Iran conflict continued to disrupt the strait of Hormuz.
- Coal demand is forecast to rise 1.2% in 2026, partly driven by higher gas prices and a strong El Niño pushing up cooling needs, but the increase in coal emissions is more than offset by declines in oil and gas.
Why it matters: The numbers mark the first time a geopolitical energy shock has produced a net emissions decline rather than a rebound to dirtier fuels. Previous crises, including the 1970s oil embargoes and the 2022 disruption of Russian gas flows to Europe, triggered higher coal burn that overwhelmed any savings elsewhere. The difference in 2026 is that alternatives, particularly electric vehicles and renewables, are now cheap and scalable enough to absorb a significant share of displaced fossil-fuel demand. If the pattern holds, it signals that the global energy system has crossed a structural threshold.
Winners and losers in an oil-demand collapse
The most visible winners are EV manufacturers and the broader electrification supply chain. Carbon Brief notes that EV sales nearly doubled year-on-year in July in markets outside China, Europe and North America. Countries with large domestic renewable capacity, such as Brazil, India and parts of Southeast Asia, also benefit from reduced exposure to volatile fossil-fuel imports. On the losing side sit oil-exporting economies that built fiscal plans around sustained demand growth. The IEA had previously projected that global oil demand would not peak until 2030; the Hormuz crisis may have pulled that inflection point forward by years. As DNV vice president Sverre Alvik wrote in late August, each additional month of conflict increases the probability of permanent demand destruction.
What this means for fossil-fuel exporters
For major oil producers, the revised demand outlook is not a temporary dip to wait out. The IEA now expects oil consumption to remain effectively flat through 2027, rather than rebounding above 2025 levels as initially forecast. That trajectory complicates investment decisions for companies planning long-cycle upstream projects, particularly deep-water and pre-salt developments with break-even timelines stretching a decade or more. National oil companies that depend on export revenue to fund public budgets face a compounding problem: lower volumes and lower prices simultaneously.
What remains undecided
Several critical variables will determine whether the 2026 emissions dip becomes a lasting trend or a one-year anomaly. First, the duration of the Hormuz disruption itself. A ceasefire or de-escalation could bring gas and oil prices down quickly, potentially reversing the incentive to switch fuels. Second, the coal trajectory for 2027 hinges on gas prices: the IEA says coal demand could rise again if gas stays expensive, or drop back if prices ease. Third, governments in countries that had planned to rely on liquefied natural gas (LNG) imports are now signalling shifts toward domestic clean energy or extended coal use, but those signals have not yet translated into binding policy. The gap between announcement and implementation will determine whether the structural shift is real. Finally, the strong El Niño that is boosting coal-fired generation by depressing hydropower output is a temporary climate variable. Once it fades, hydropower recovery could accelerate the emissions decline, or simply return the baseline to where it was before the crisis began.
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