World set to exhaust carbon budget in 2040s, despite predicted energy plateau
A "watershed moment in human history" will occur in 2030 as energy demand plateaus, although the rapid decarbonisation of the global energy supply will still deplete the carbon budget for the goals of the Paris Agreement by 2041.
New research published today (4 September) by sustainability consultancy DNV GL maps the global and regional forecast of the energy transition to 2050. The Energy Transition Outlook 2017 report notes that energy demand will peak in 2025 before plateauing in 2030 as energy-related carbon emissions fall by almost 50% compared to today’s levels.
But, even as renewables claim a greater stake in the energy mix and losses are reduced through an uptake of new efficiencies, the emissions associated with the plateau will not bring the planet within the 2C target of the Paris Agreement – DNV GL estimates an overshoot of the 2C carbon budget by 700Gt of CO2.
DNV GL’s chief executive Remi Eriksen said: “The profound change set out in our report has significant implications for both established and new energy companies. Ultimately, it will be a willingness to innovate and a capability to move at speed that will determine who is able to remain competitive in this dramatically altered energy landscape.
“Even with energy demand flattening and emissions halving, our model still points to a significant overshoot of the 2°C carbon budget. This should be a wake-up call to governments and decision-makers within the energy industry. The industry has taken bold steps before, but now needs to take even bigger strides.”
DNV GL predicts that the first “emission-free” year will only occur in 2090, with the 2C carbon budget completely emptied by 2041. In fact, any progress to push towards limiting a 1.5C rise in global temperatures could be scuppered by 2021, the predicted timeframe for that particular budget overshoot.
In fact, the Energy Transition Outlook report warns that the planet is set to warm by 2.5C, failing to reach the Paris Agreement target, even as renewables and electric vehicles (EVs) grow in popularity and numbers.
The report notes that fossil fuels will still account for around half of the total energy supply in 2050, as electricity grows to account for 40% of global energy demand, compared to 18% today. Fossil fuel’s share of the primary energy mix will decline from 81% today, although hydropower, nuclear and biomass levels are expected to remain flat. Solar and wind energy are expected to collectively account for 27% of the energy supply in 2050. The rest will be sourced from gas.
The report does note that efforts to boost the efficiency and deployment of renewables will lead to a decoupling of emissions with GDP and population growth. Energy intensity (units of energy per units of GDP) have fallen on average by 1.4% annually for the last two decades. The report estimates that this rate will almost double to 2.5%.
The decoupling will be driven by a reduction in energy costs through new technologies and less losses. The world’s energy will cost less than 3% of global GDP by 2050, compared to 5% today. Costs for solar and wind will fall by 18% and 16% respectively as capacity doubles. Separate research has even found that an energy transition of “exceptional scope” could unlock $10trn annually.
DNV GL’s forecast echoes that of Bloomberg New Energy Finance’s (BNEF), in claiming that EVs will account for the majority of new car sales beyond the mid-2030s. In fact, DNV GL estimates that EVs will achieve cost parity with internal combustion vehicles in 2022.
The overshoot warnings are especially prominent in Europe, where major utility firms are "locked" into high emission projects, placing €14bn of earnings at risk unless they realign strategies with the 2C pathway.