Smoke rises from a coal-powered steel plant at Hehal village near Ranchi, India, in eastern state of Jharkhand, Sept 26, 2021. (PHOTO / FILE / AP)

LONDON - World fossil fuel demand is set to peak by 2030 as more electric cars hit the road, the International Energy Agency said, undercutting the rationale for any rise in investment.

The report from the IEA, which advises industrialized countries, contrasts with the view of oil producer group the Organization of the Petroleum Exporting Countries, which sees oil demand rising long after 2030 and calls for trillions in new oil sector investment.

In its annual World Energy Outlook released on Tuesday, the IEA said peaks in oil, natural gas and coal demand were visible this decade in its scenario based on governments' current policies - the first time this has happened.

The transition to clean energy is happening worldwide and it's unstoppable. It's not a question of 'if', it's just a matter of 'how soon' – and the sooner the better for all of us. Governments, companies and investors need to get behind clean energy transitions rather than hindering them.

Fatih Birol, executive director of International Energy Agency

"The transition to clean energy is happening worldwide and it's unstoppable. It's not a question of 'if', it's just a matter of 'how soon' – and the sooner the better for all of us," said IEA Executive Director Fatih Birol.

"Governments, companies and investors need to get behind clean energy transitions rather than hindering them."

Still, the IEA also said as things stand, demand for fossil fuels is set to remain far too high to keep within reach the Paris Agreement goal of limiting the rise in average global temperatures to 1.5 C.

"This risks not only worsening climate impacts after a year of record-breaking heat, but also undermining the security of the energy system, which was built for a cooler world with less extreme weather events," the agency said in a statement.

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By 2030, the IEA expects there to be almost 10 times as many electric cars on the road worldwide, and it cited policies supporting clean energy in key markets as weighing on future fossil fuel demand.

For example, the IEA now expects 50 percent of new US car registrations will be electric in 2030, up from 12 percent in its outlook two years ago, largely as a result of the US Inflation Reduction Act.

The IEA said the key to an orderly transition is to scale up investment in all aspects of a clean energy system, rather than in fossil fuels.

"The end of the growth era for fossil fuels does not mean an end to fossil fuel investment, but it undercuts the rationale for any increase in spending," the IEA report said.

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An OPEC report earlier this month said calls to stop investments in new oil projects were "misguided" and "could lead to energy and economic chaos."