Global energy demand is set to fall 6 per cent this year, nearly seven times the decline following the 2008 global financial crisis, as the industry faces its biggest shock in 70 years from the coronavirus pandemic, according to the International Energy Agency.
The decline in demand from the outbreak, which brought air and land transportation to a standstill following worldwide lockdowns, resulted in a decline equivalent to losing all of India's energy needs, the agency said. India has the third highest total primary energy consumption globally after China and the US.
“This is a historic shock to the entire energy world. Amid today’s unparalleled health and economic crises, the plunge in demand for nearly all major fuels is staggering, especially for coal, oil, and gas," said IEA executive director Fatih Birol. "Only renewables are holding up during the previously unheard-of slump in electricity use.”
It's too early to determine the long term impact of the crisis on the energy sector, Mr Birol said at the launch of agency's Global Energy Review.
The biggest declines in demand will come from advanced economies, with the US likely to see a 9 per cent drop, followed by an 11 per cent decline in the European Union.
Each month of lockdown reduces global energy demand by around 1.5 per cent, according to the IEA.
Electricity demand has also slowed, falling 20 per cent or more, with overall demand for power set to decline 5 per cent this year, the biggest drop since the Great Depression.
The biggest winner from the lockdown measures is the renewables sector. Low-carbon sources are expected to contribute to 40 per cent of global power generation this year.
Global emissions have also fallen nearly 8 per cent following the grounding of aircraft and slowdown in private and public transport.
The share of fossil fuels, notably gas and coal in the energy mix, is set to drop 3 percentage points in 2020, a level not seen since 2001, according to the agency.
An 8 per cent decline in demand for coal this year will be the steepest since the Second Word War, with natural gas, the cleaner source of power generation, also set to fall 5 per cent.
“This crisis has underlined the deep reliance of modern societies on reliable electricity supplies for supporting healthcare systems, businesses and the basic amenities of daily life,” Mr Birol said.
“But nobody should take any of this for granted – greater investments and smarter policies are needed to keep electricity supplies secure.”
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Ten tax points to be aware of in 2026
1. Domestic VAT refund amendments: request your refund within five years
If a business does not apply for the refund on time, they lose their credit.
2. E-invoicing in the UAE
Businesses should continue preparing for the implementation of e-invoicing in the UAE, with 2026 a preparation and transition period ahead of phased mandatory adoption.
3. More tax audits
Tax authorities are increasingly using data already available across multiple filings to identify audit risks.
4. More beneficial VAT and excise tax penalty regime
Tax disputes are expected to become more frequent and more structured, with clearer administrative objection and appeal processes. The UAE has adopted a new penalty regime for VAT and excise disputes, which now mirrors the penalty regime for corporate tax.
5. Greater emphasis on statutory audit
There is a greater need for the accuracy of financial statements. The International Financial Reporting Standards standards need to be strictly adhered to and, as a result, the quality of the audits will need to increase.
6. Further transfer pricing enforcement
Transfer pricing enforcement, which refers to the practice of establishing prices for internal transactions between related entities, is expected to broaden in scope. The UAE will shortly open the possibility to negotiate advance pricing agreements, or essentially rulings for transfer pricing purposes.
7. Limited time periods for audits
Recent amendments also introduce a default five-year limitation period for tax audits and assessments, subject to specific statutory exceptions. While the standard audit and assessment period is five years, this may be extended to up to 15 years in cases involving fraud or tax evasion.
8. Pillar 2 implementation
Many multinational groups will begin to feel the practical effect of the Domestic Minimum Top-Up Tax (DMTT), the UAE's implementation of the OECD’s global minimum tax under Pillar 2. While the rules apply for financial years starting on or after January 1, 2025, it is 2026 that marks the transition to an operational phase.
9. Reduced compliance obligations for imported goods and services
Businesses that apply the reverse-charge mechanism for VAT purposes in the UAE may benefit from reduced compliance obligations.
10. Substance and CbC reporting focus
Tax authorities are expected to continue strengthening the enforcement of economic substance and Country-by-Country (CbC) reporting frameworks. In the UAE, these regimes are increasingly being used as risk-assessment tools, providing tax authorities with a comprehensive view of multinational groups’ global footprints and enabling them to assess whether profits are aligned with real economic activity.
Contributed by Thomas Vanhee and Hend Rashwan, Aurifer
