New market analysis finds energy incumbents are talking up future demand. Rapid advances in technology, increasingly cheap renewable energy, slower economic growth and lower than expected population rise could all dampen fossil fuel demand significantly by 2040, a new study published today by the London-based Carbon Tracker Initiative finds.
The analysis challenges nine business as usual (BAU) assumptions made by the big energy companies when calculating that fossil use will continue to grow for the next few decades. Typical industry scenarios see coal, oil and gas use growing by 30%-50% and still making up 75% of the energy supply mix in 2040. These scenarios do not reflect the huge potential for reducing fossil fuel demand in accordance with decarbonisation pathways.
The full report can be found here.
The in-depth analysis exposes that fossil fuel industry thinking is skewed to the upside, and relies too heavily on high demand assumptions to justify new and costly capital investments to shareholders. Reviewing previous industry, IEA and U.S. EIA projections, shows them to be too conservative in their expectations for renewables growth. This raises questions over the likely accuracy of their future projections.
Carbon Tracker’s head of research, James Leaton, said: “We have seen in recent weeks how the fossil fuel sector has misled consumers and investors about emissions — the Volkswagen scandal being a case in point — and deliberately acted against climate science for decades, judging from the recent Exxon expose. Why should investors accept their claims about future coal and oil demand when they clearly don’t stack up with technology and policy developments?
“Investors need to challenge companies who are ignoring the demand destruction that the market sees coming through much sooner than the business as usual scenarios being cited by the industry. Otherwise they will be on the wrong side of the energy revolution.”
The report, entitled Lost in transition: How the energy sector is missing potential demand destruction, examines alternative trajectories to mainstream energy industry modelling, produced by reputable financial houses like Bernstein and CitiGroup, that signal a more concerted drive to a low-carbon energy transition, hitting fossil fuel demand as a result.
The study finds that conventional fossil fuel company business models could be woefully behind the curve due to, for example, underestimating changes in emissions policy, technological advances or energy efficiency gains that can cause dramatic changes in demand trends. This is the first time a wide-range of fossil fuel industry demand scenarios has been compared with alternative and credible financial market views.
The analysis shows how the industry is assuming very slow incremental changes in the energy supply mix going forward. This ignores the potential downside risk explored in the research. Across all factors contributing to energy demand there is scope for reducing future emissions levels and staying within the 2˚C threshold. This includes considering different fundamental market conditions relating to population rise and GDP growth as well as more obvious advances in energy efficiency and clean technology.
Carbon Tracker’s senior analyst and co-author, Luke Sussams, said: “The incumbents are taking the easy way out by exclusively looking at incremental changes to the energy mix which they can adapt to slowly. The real threat lies in the potential for low-carbon technologies to combine and transform society’s relationship with energy. This is currently being overlooked by Big oil , coal and gas.”
Key findings of the report are:
– Global population growth may not rise to 9 billion by 2040 – the UN’s 2015 median-variant forecast applied by all fossil fuel companies – but population may only climb to 8.3 billion according to climatic and socioeconomic modelling.
– GDP growth could be lower than expected in major markets, including China and the U.S. For example, the OECD sees global GDP grow at 3.1% to 2040 rather than the 3.4% assumed by the IEA – a key industry reference point. This difference equates to roughly a drop in demand equivalent to half a year’s global energy demand in 2012.
– Moreover, the world is increasing its ability to decouple energy demand from economic growth. For example, we find that demand is drastically lower if global energy intensity of GDP falls by 2.8% per annum in line with the IEA’s 450 Scenario as opposed to 2.2% in the IEA’s New Policy Scenario.
– Fossil fuel company assumptions about future carbon intensity are inconsistent with decarbonisation plans set out by some 150 countries in their Intended Nationally Determined Contributions (INDCs). Incumbents generally expect carbon fuels to make up 75% of energy demand by 2040. We calculate that their scenarios see cumulative CO2 emissions to 2030 being up to 100GtCO2 higher than in an INDC scenario. These higher carbon intensity assumptions overlook huge shifts that are occurring in the energy sector:
-> The speed and scale of advancements in the competitiveness of renewable energy technologies is exceeding expectations. We show the extent to which the IEA in particular has been hugely conservative in the past and remains so compared to other industry forecasts.
-> The cost of energy (battery) storage is falling rapidly and is seven years ahead of average forecasts made last year, meaning the technology could be cost-competitive with power grids by 2025. The synergy between energy storage and renewable energy technologies has the potential to transform energy markets, but is not being factored into fossil fuel scenarios.
-> Global coal demand is structurally declining. China has shifted its energy system to such a degree that peak coal demand could occur in the very near-term. India has an ambitious short-term solar PV plan (160GW of solar and wind by 2022) that, by our calculations, could displace 158 million tonnes – roughly India’s total coal imports in 2012.
-> Electric vehicles (EVs) and energy efficiency will hit demand. Fossil fuel companies expect oil demand to grow between 0.4% and 0.8% a year to 2040, much from the road transport sector, oil’s biggest market. However, regulations requiring greater efficiency from combustion engine cars will hit oil demand in the short-term. Longer-term, oil industry scenarios see negligible take-up of electric vehicles (EVs) by 2040 but EVs could be cost-competitive with combustion engines by 2025 according to alternative forecasts, resulting in exponential growth.
-> All scenarios see future growth in gas demand. But as energy markets change, the levels of gas demand will be lower if the fuel loses its base-load role and switches to being a backup for renewables.
The full report can be found here.
Will Self-Driving Cars Be Better for the Environment?
Technologists, engineers, lawmakers, and the general public have been excitedly debating about the merits of self-driving cars for the past several years, as companies like Waymo and Uber race to get the first fully autonomous vehicles on the market. Largely, the concerns have been about safety and ethics; is a self-driving car really capable of eliminating the human errors responsible for the majority of vehicular accidents? And if so, who’s responsible for programming life-or-death decisions, and who’s held liable in the event of an accident?
But while these questions continue being debated, protecting people on an individual level, it’s worth posing a different question: how will self-driving cars impact the environment?
The Big Picture
The Department of Energy attempted to answer this question in clear terms, using scientific research and existing data sets to project the short-term and long-term environmental impact that self-driving vehicles could have. Its findings? The emergence of self-driving vehicles could essentially go either way; it could reduce energy consumption in transportation by as much as 90 percent, or increase it by more than 200 percent.
That’s a margin of error so wide it might as well be a total guess, but there are too many unknown variables to form a solid conclusion. There are many ways autonomous vehicles could influence our energy consumption and environmental impact, and they could go well or poorly, depending on how they’re adopted.
One of the big selling points of autonomous vehicles is their capacity to reduce the total number of vehicles—and human drivers—on the road. If you’re able to carpool to work in a self-driving vehicle, or rely on autonomous public transportation, you’ll spend far less time, money, and energy on your own car. The convenience and efficiency of autonomous vehicles would therefore reduce the total miles driven, and significantly reduce carbon emissions.
There’s a flip side to this argument, however. If autonomous vehicles are far more convenient and less expensive than previous means of travel, it could be an incentive for people to travel more frequently, or drive to more destinations they’d otherwise avoid. In this case, the total miles driven could actually increase with the rise of self-driving cars.
As an added consideration, the increase or decrease in drivers on the road could result in more or fewer vehicle collisions, respectively—especially in the early days of autonomous vehicle adoption, when so many human drivers are still on the road. Car accident injury cases, therefore, would become far more complicated, and the roads could be temporarily less safe.
Deadheading is a term used in trucking and ridesharing to refer to miles driven with an empty load. Assume for a moment that there’s a fleet of self-driving vehicles available to pick people up and carry them to their destinations. It’s a convenient service, but by necessity, these vehicles will spend at least some of their time driving without passengers, whether it’s spent waiting to pick someone up or en route to their location. The increase in miles from deadheading could nullify the potential benefits of people driving fewer total miles, or add to the damage done by their increased mileage.
Make and Model of Car
Much will also depend on the types of cars equipped to be self-driving. For example, Waymo recently launched a wave of self-driving hybrid minivans, capable of getting far better mileage than a gas-only vehicle. If the majority of self-driving cars are electric or hybrids, the environmental impact will be much lower than if they’re converted from existing vehicles. Good emissions ratings are also important here.
On the other hand, the increased demand for autonomous vehicles could put more pressure on factory production, and make older cars obsolete. In that case, the gas mileage savings could be counteracted by the increased environmental impact of factory production.
The Bottom Line
Right now, there are too many unanswered questions to make a confident determination whether self-driving vehicles will help or harm the environment. Will we start driving more, or less? How will they handle dead time? What kind of models are going to be on the road?
Engineers and the general public are in complete control of how this develops in the near future. Hopefully, we’ll be able to see all the safety benefits of having autonomous vehicles on the road, but without any of the extra environmental impact to deal with.
New Zealand to Switch to Fully Renewable Energy by 2035
New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.
New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.
Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.
Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”
The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.
Zero net emissions by 2050
Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.
Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.
She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.
Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”
A worldwide shift to renewable energy
Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.
Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.
Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.
Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.
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