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Director, Energy Transition Practice
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How quickly can we reach a zero-carbon world?
Even with an accelerated pace of change, a ‘2-degree world’ remains out of reach. While emissions will fall faster than our base case and go beyond the Paris Agreement NDCs at a global level, we would need much more radical action to meet the ultimate 2-degree goal.
Our fourth annual Carbon Constrained Scenario pushes the boundaries of our base-case analysis. The scenario envisages a future where change happens much faster. Where the transition to cleaner energy is accelerated: renewables play an exponentially bigger role and carbon emissions are cut faster than under current pledges.
Technology quickens the pace of decarbonisation
But decarbonisation will progress despite slow progress on international climate policy. How? Because policy management has competition: technology has become a key driver of change.
The rise of renewables, growth in electric vehicles and electrification of end-use demand are already having an impact. These and other technologies – some as yet undeveloped or untested – could join and potentially outstrip policy as a key disruptive force.
Electric vehicles go mainstream
In our scenario, by 2040, the US, EU and China will see Electric Vehicles (EVs) account for 100% of new vehicle sales and other regions won’t be far behind, collectively displacing 11 million b/d of oil. As a result, EVs help accelerate peak oil to 2031. And we expect power demand from the transport sector to be over 1,900 TWh, more than 1.5 times larger than India’s power market in 2017
The end of fossil fuels?
Coal takes the brunt of an accelerated energy transition – declining materially as lower carbon fuels expand share. Gas will be a bright spot through 2040, a key bridge fuel for the energy transition supported by the need for reliable and flexible thermal generation in the power sector.
However, we don’t see fossil fuels completely disappearing anytime soon. The drop is relative, from an 85% share in 2012 to just less than 75% in 2040. Oil, in particular, retains a keystone role in the energy system for decades to come.
Can we go further and faster?
Much more would need to happen beyond the power sector. A major improvement in the quality and costs of batteries is one potential game-changer; another is high-cost, as-yet commercially unproven, technology such as carbon capture and storage.
Part 1: The global energy transition is well underway
New technologies including renewable energy, the growth in electric vehicles and electrification of end-use demand are key drivers. What might be achievable if current market trends develop even faster and what will this mean for commodity markets? In our carbon-constrained scenario, we imagine a world where technology outstrips policy as the key force behind decarbonisation, accelerating the pace of the energy transition.
Part 2: Oil and the accelerated energy transition
In part 2, David explains that our carbon-constrained scenario is an opportunity for our analysts to ask strategic questions about the pace of change. In our study, we have pushed the boundaries of our base-case analysis to dig deeper. We quantify what an accelerated energy transition means for commodity markets, taking major market dynamics into account and forming an integrated view across the energy value chain.