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Celebrating two years of reporting on the industry’s progress toward net zero

ISSN 2753-7757 (Online)

BP predicts carbon emissions could fall more steeply than estimated previously

1/2/2023

Clean energy compilation - solar panels, crops in a field, wind turbine and electricity pylon Photo: Shutterstock
‘Any successful and enduring energy transition needs to address all three elements of the so-called energy trilemma: secure, affordable and lower carbon,’ said Spencer Dale, BP’s Chief Economist, launching the company’s Energy Outlook 2023 report earlier this week

Photo: Shutterstock

The global carbon budget is running out, and oil and gas investment will be needed for another 30 years, are these are two key findings in BP’s latest Energy Outlook report.

This year’s report explores the key trends and uncertainties surrounding the energy transition out to 2050. The three main scenarios considered – ‘Net Zero’, ‘Accelerated’ and ‘New Momentum’ – have been updated to take account of two major developments over the past year: the Russia-Ukraine war and the passing of the Inflation Reduction Act in the US.

 

Launching the Energy Outlook 2023 report, Spencer Dale, BP’s Chief Economist, said: ‘Global energy polices and discussions in recent years have been focused on the importance of decarbonising the energy system and the transition to net zero. The events of the past year have served as a reminder to us all that the transition also needs to take account of the security and affordability of energy. Any successful and enduring energy transition needs to address all three elements of the so-called energy trilemma: secure, affordable and lower carbon.’

 

He continued: ‘The events of the past year have highlighted the complexity and interconnectedness of the global energy system. The increased focus on energy security as a result of the Russia-Ukraine war has the potential to accelerate the energy transition as countries seek to increase access to domestically produced energy, much of which is likely to come from renewables and other non-fossil fuels. But the events also show how relatively small disruptions to energy supplies can lead to severe economic and social costs, highlighting the importance that the transition away from hydrocarbons is orderly, such that the demand for hydrocarbons falls in line with available supplies.’

 

The report’s Accelerated and Net Zero scenarios explore how different elements of the energy system might change in pathways that achieve substantial reductions in carbon emissions by 2050 – by around 75% in Accelerated and over 95% in Net Zero. Both scenarios assume a significant tightening in climate policies globally. Net Zero also includes a shift in societal behaviour and preferences to further support gains in energy efficiency and the adoption of low-carbon energy.

 

Meanwhile, the New Momentum scenario is designed to reflect the current broad trajectory of the world’s energy system. In doing so, it places weight on the marked increase in government ambitions and pledges for decarbonisation that have been seen in recent years. In this scenario, global carbon emissions peak in the 2020s and by around 2050 are around 30% below 2019 levels.

 

Among its key findings, the Outlook states that the carbon budget is running out, noting that despite the marked increase in government ambitions, CO2 emissions have increased in every year since the Paris COP in 2015 (bar 2020). ‘The longer the delay in taking decisive action to reduce greenhouse gas emissions on a sustained basis, the greater are the likely resulting economic and social costs,’ states the report.

 

It also notes that government support for the energy transition has increased further in a number of countries, including the recent passing of the Inflation Reduction Act in the US. However, it warns that the scale of the decarbonisation challenge suggests greater support is required, including policies to facilitate quicker permitting and approval of low-carbon energy and infrastructure.

 

The structure of energy demand changes in all three Outlook scenarios, with the importance of fossil fuels declining, replaced by a growing share for renewable energy and by increasing electrification. Declining oil demand is driven by falling use in road transport as the efficiency of the vehicle fleet improves and the electrification of road vehicles accelerates. Even so, oil continues to play a major role in the global energy system for the next 15 to 20 years across all three scenarios. Meanwhile, the prospects for natural gas depend on the speed of the energy transition, with increasing demand in emerging economies as they grow and industrialise offset by the transition to lower-carbon energy sources led by the developed world, says the report.

 

The report also states that the recent energy shortages and higher prices highlight the ‘importance of the transition away from hydrocarbons being orderly, such that the demand for hydrocarbons falls in line with available supplies’. However, it points out that natural declines in existing production sources means there needs to be continuing upstream investment in oil and natural gas over the next 30 years, including under the Net Zero scenario. Such a finding is likely to spark reaction from climate groups and environmental campaigners who argue that investment in new oil and gas exploration and production should be immediately ended in order to achieve net zero carbon emission goals.

 

Wind and solar account for all or most of the growth in power generation in the Outlook, aided by continuing cost competitiveness and an increasing ability to integrate high concentrations of these variable power sources into power systems. However, continued growth in wind and solar requires ‘a significant acceleration in the financing and building of new capacity’.

 

Meanwhile, modern solid biomass, biofuels and biomethane will continue to grow rapidly, helping to decarbonise hard-to-abate sectors and processes.

 

The report also notes that low-carbon hydrogen will play a critical role in decarbonising the energy system, especially in hard-to-abate processes and activities in industry and transport. Dominated by green and blue hydrogen, with green hydrogen forecast to grow in importance over time, hydrogen trade will be a mix of regional pipelines transporting pure hydrogen and global seaborne trade in hydrogen derivatives.

 

At the same time, carbon capture use and storage (CCUS) is expected to play a central role in enabling rapid decarbonisation trajectories: capturing industrial process emissions, acting as a source of CO2 removal, and abating emissions from the use of fossil fuels. A range of techniques for CO2 removal – including bioenergy combined with carbon capture and storage (CCS), natural climate solutions and direct air carbon capture with storage (DACS) – will be needed for the world to achieve a deep and rapid decarbonisation, states the report.