As the immediate future and, surely, the longterm outlook is very uncertain, the report discerns three possible paths for the world economy, international energy markets, and energy-related greenhouse gas emissions. These paths illustrate how the energy supply, demand, and the global economy (as a main driver) will develop. Not surprisingly, the report also zooms in on renewable energy options, such as hydrogen and other renewable energy options.
“Energy Perspectives aims to address relevant topics and challenges that can fuel discussions and build a greater understanding of what is needed to realise an energy transition and the decisions that the world faces,” says Eirik Wærness, Chief Economist in Equinor.
According to Wærness, an energy transition is a “matter of urgency”. The discussions on our common energy future, where it might go, and where it should go, have never been more relevant, particularly during the Covid-19 crisis.
Globally coordinated efforts from governments, innovation from industry, and the changing behaviour from consumers are required to reach these targets. Energy Perspectives 2021 is our contribution to a fact-based dialogue about this.
Back to the three pathways, which are called Rebalance, Reform, and Rivalry. In each of these scenarios, global energy demands are expected to peak separately. In Rebalance, the total energy demand already peaked in 2019 due to the instantly coordinated tightening of climate policies, as well as behavioral changes on the back of the Covid-19 recovery.
Reform and Rivalry will peak in 2040 and 2045, respectively.
Reform is more-or-less a business-as-usual scenario in which economic growth and fossil energy supply and demand are expected to grow and peak in 2040. Short-term policies, aimed at stimulating the economy by means of relative cheap energy, tend to overrule the long-term outlook. Yes, there are initiatives to reduce the global CO2-footprint (electrification, etc.) but these will not suffice to reach the CO2-emission reduction goals in the Paris agreement.
In the Rebalance scenario, the world will reach these targets, mainly by rebalancing economic growth and subsequent CO2-emissions between the industrialized nations (US, Europe, Asia [in part]) and emerging economies (Africa, South America). Furthermore, the energy supply will need to be increasingly electrified and ‘defossilized’ (partly by higher carbon prices).
CCS (&U) is also an integral part of the puzzle. Finally, Rivalry is a scenario in which climate change policies take a back seat and national interests prevail over a common global agenda.
Trade wars, neglect of international institutions, distrust of science, etc. will lead a more fragmented approach to the global challenge.
Fossil fuel demand and supply will continue until an expected peak in 2045. There will also be a growth in renewable energy as its cost will decrease in the coming decades. Energy efficiency is not really a theme.
One look at the current political climate and the way the pandemic is being handled across the globe, and the third scenario doesn’t seem unlikely. Covid-19 offers an opportunity as humanity battles a common enemy. However, as various vaccine roll-outs have shown, governments have been fighting with each other for supplies from a number of pharmaceutical companies.
In other words, it’ll be a rocky road in the coming years, both for the global economy to recover from COVID-19 and for humanity to address one of the greatest challenges ever.