Energy demand is expected to increase by as much as 50 per cent over the next 30 years, but energy companies and policymakers have widely different visions of that future, says Professor John W Ballantine.
WALTHAM, Massachusetts: Tehran, 1943: Joseph Stalin, Franklin D Roosevelt and Winston Churchill – hosted by the young Shah Reza Pahlavi – agree on plans for the two-front attack on Hitler while sketching out the east-west division of Europe.
Holding the meeting in Iran, with separate consultations with the shah, was no mistake. Gulf oil was a critical resource to the Allied war effort. Oil has flowed under the surface of political conflicts ever since.
Fast forward to today, and political antagonists and energy players are again forging a messy path forward, this time focused on long-term energy transitions as disparate countries try to slow and eventually stop climate change.
The 2015 Paris Agreement was a groundbreaking diplomatic effort – 196 countries committed to prevent average temperatures from rising by more than 2 degrees Celsius, with an aim of less than 1.5 degrees Celcius.
To meet that goal, scientists argue that fossil fuel use will have to reach net zero emissions by mid-century.
The genius of the Paris climate accord was getting all the major parties to agree – particularly major greenhouse gas emitters including Russia, China, India, Brazil and members of OPEC, the Organization of the Petroleum Exporting Countries.
Now, the challenge is implementing the multiplicity of solutions needed to bend the global warming curve.
The Paris Agreement is not a treaty – countries set their own targets and determine their own strategies for meeting them. Each signatory has its own politics, economic structure, energy resources and climate exposure.
The commitments from countries are still falling short as President Joe Biden hosted a virtual climate summit with international leaders on Earth Day, Apr 22, and carried out the hard diplomatic work with Russia, China and other countries to develop implementable solutions.
As an energy economist, I am familiar with countries’ evolving responses to climate change and companies’ shifting investments and different visions of the future. One technology attracting attention from groups on all sides is hydrogen.
DIFFERENT VISIONS OF ENERGY’S FUTURE
As the world’s population and economies grow, energy demand is expected to increase by as much as 50 per cent over the next 30 years, so making the right long-term investments is crucial.
Energy companies and policymakers have widely different visions of that future. Their long-term scenarios show that most expect fossil fuel demand to remain steady for decades and possibly decline. However, many are also increasing their investments in cleaner technologies.
The International Energy Agency – which countries often look to for future scenarios, but which has a history of underestimating demand and clean energy – forecasts that renewable energy will meet about one-third of the global energy demand by 2040 in its most optimistic scenario.
That would be in a world with higher carbon taxes and more wind power, solar power, electric vehicles, carbon capture and storage. Greener technologies may come close to keeping warming under degrees Celcius, but not quite.
FOSSIL FUEL REMAINS
Exxon, on the other hand, forecasts a path dependent on a fossil fuel-based economy, with slower transitions to electric vehicles, steady demand for oil and gas, and a warmer world.
Exxon is also investing in carbon capture and storage and hydrogen, but it believes oil and gas will provide half the global energy supply in 2040 and renewable energy will be less than one-fifth.