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BP Energy Outlook 2019 and CO2 emissions

March 20, 2019

In their annual Energy Outlook, BP identified the dual challenge of the need for more energy to support global economic growth and rising prosperity, and the need for transition to a lower carbon future.

They used a scenario approach to address uncertainties in demand and climate change action out to 2040.  They stress that scenarios are not forecasts but ways of exploring the implications of different judgements and assumptions. CEO Bob Dudley said that this approach “will give us flexibility and agility to meet uncertainty head on” – the principal goal of scenario planning.

The first scenario, which is discussed in most detail, is a simple evolutionary one: “Evolving Transition”. We might think of it as a base case: it assumes that government policies, technologies and societal preferences evolve much as they have done in the recent past.

Even so, some interesting conclusions emerge:

  • Global energy demand grows by a third to 2040, with energy consumed by industry and buildings accounting for 75% of the growth – transport energy demand slows due to vehicle efficiency;
  • As China shifts towards a more services-based economy, much of the growth in industrial production will be located in lower-income countries and regions, including India, Other Asia and Africa;
  • Renewables become the largest source of global power generation by 2040, penetrating the global power system faster than any fuel in history; demand for oil grows, before plateauing, coal consumption remains flat.
  • Global carbon emissions continue to rise, by 7% by 2040.

My take on that is that, unless something changes and despite the rapid growth of renewables, growing energy demand will continue to drive climate change, with potentially catastrophic consequences.

Another scenario, “Rapid Transition”, sounded more hopeful. This brings together policy action across many areas – gains in energy efficiency, a switch to lower carbon fuels, material use of Carbon Capture, and in the power sector a significant increase in the carbon price.  This delivers a 45% decline in carbon emissions by 2040 compared to today, but even this is only in the middle of projections that claim to meet the Paris climate goals.

Significant levels of carbon emissions remain, and so to meet the Paris goals, the second half of the century would need to see the near-complete decarbonisation of the power sector together with greater electrification of end-use, supplemented by greater use of hydrogen and bio-energy.

Two other scenarios, “More energy” and “Less globalisation” explore different ends of the economic growth spectrum. The former, requiring 25% more energy than the Evolving Transition scenario, generates 28% more COemissions. Drily the Outlook comments this “highlights the need for further action to reduce carbon emissions”!

“Less globalisation” envisages escalating trade disputes that reduce global GDP growth and hence energy demand.  This means 5% less emissions than “Evolving Transition” but growth in emissions only beginning to plateau in 2040. Also there are concerns about energy security that drive more domestically-produced energy (fracking?) and less energy trade. The impact on net energy exporting countries could be de-stabilising.  Very little climate change benefit in return for the lack of prosperity and political risk.

BP energy outlook

Finally, the Outlook considers a “Single-use plastics ban”.  Even in the Evolving Transition scenario, the use of oil for plastics is assumed to decline due to increased environmentalist pressure. In this scenario, with an increasingly tight regulatory regime followed by an outright ban in 2040, oil demand grows more slowly, but ultimately depends on what alternative materials replace plastic.

Interestingly, in a classic and impressive way, BP is supporting its communication of the scenarios with animations (with more to come). Getting people to “live” alternative scenarios is made much easier if the basic story is supported by some evocative scenario names and illustrations.

Congratulations to BP for using scenarios so well for such an important issue. The implications for the planet are starkly shown, which is at least something that can be used as a call to action.

Written by Huw Williams, SAMI Principal

The views expressed are those of the author and not necessarily of SAMI Consulting.

SAMI Consulting was founded in 1989 by Shell and St Andrews University. They have undertaken scenario planning projects for a wide range of UK and international organisations. Their core skill is providing the link between futures research and strategy.

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