• The oil and gas industry faces a reckoning over its role in the clean energy transition, according to an International Energy Agency report.
• Just 1% of global investment in clean energy has come from oil and gas companies, according to the IEA.
• The industry needs to let go of the "illusion" that carbon capture technology is a solution to climate change, according to the IEA.

The oil and gas industry needs to let go of the "illusion" that carbon capture technology is a solution to climate change and invest more in clean energy, the head of the International Energy Agency said Thursday.

"The industry needs to commit to genuinely helping the world meet its energy needs and climate goals – which means letting go of the illusion that implausibly large amounts of carbon capture are the solution," IEA Executive Director Fatih Birol said in a statement ahead of the United Nations Climate Change Conference in Dubai next week.

The technology captures carbon dioxide from industrial operations before emissions enter the atmosphere and stores it underground.

Oil and gas companies face a moment of truth over their role in the clean energy transition, Birol wrote in an IEA report reviewing the industry's role in transitioning to an economy with net zero carbon emissions by 2050.

Just 1% of global investment in clean energy has come from oil and gas companies, according to Birol. The industry needs to face the "uncomfortable truth" that a successful clean energy transition will require scaling back oil and gas operations, not expanding them, the IEA chief wrote.

"So while all oil and gas producers needs to reduce emissions from their own operations, including methane leaks and flaring, our call to action is much wider," Birol wrote.

The industry would need to invest 50% of capital expenditures in clean energy projects by 2030 to meet the goal of limiting climate change to 1.5 degrees Celsius, according to the IEA report. About 2.5% of the industry's capital spending went toward clean energy in 2022.

One of the major pitfalls in the energy transition is excessive reliance on carbon capture, according to the report. Carbon capture is essential for achieving net zero emissions in some sectors, but it should not be used as a way to retain the status quo, according to the IEA.

An "inconceivable" 32 billion tons of carbon would need to be captured for utilization or storage by 2050 to limit climate change to 1.5 degrees Celsius under current projections for oil and gas consumption, according to the IEA.

The necessary technology would require 26,000 terawatt hours of electricity to operate in 2050, more than total global demand in 2022, according to the IEA.

It would also require $3.5 trillion in annual investment from today through mid-century, which equivalent to the entire oil and gas industry's annual revenue in recent years, according to the report.

U.S. oil major such as Exxon Mobil and Chevron are investing billions in carbon capture technology and hydrogen, while European majors Shell and BP have focused more on renewables such as solar and wind.

Exxon and Chevron are also doubling down on fossil fuels through mega deals. Exxon is buying Pioneer Natural Resources for nearly $60 billion, while Chevron is purchasing Hess for $53 billion.