Global fossil fuel demand could be slashed by 2040 due to slowing population and economic growth coupled with a rapid expansion of renewable energy, warns an Oct. 22 Carbon Tracker Initiative report.
Typical industry scenarios see coal, oil and gas use growing by 30 – 50 per cent and still making up 75 per cent of the global energy supply mix in 2040, but none take into account the huge potential for reducing fossil fuel demand as ever-more countries seek to ‘decarbonize’ their economies, according to a new Carbon Tracker Initiative report titled Lost in transition: How the energy sector is missing potential demand destruction.
“The incumbents are taking the easy way out by exclusively looking at incremental changes to the energy mix, which they can adapt to slowly,” said Luke Sussams, Carbon Tracker’s senior analyst and co-author. “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.”
The report counters several fossil fuel-sector ‘business as usual’ (BAU) assumptions, key among them being countries’ intended nationally determined contributions (INDCs) in cutting greenhouse gas emissions and ramping up renewable power development.
This unfolding global green energy revolution is rapidly accelerating thanks to cost reductions of energy (battery) storage being seven years ahead of average forecasts made last year, meaning that the technology could be cost-competitive with power grids by 2025. Such synergy between energy storage and renewable energy technologies has the potential to transform energy markets, but is still not being factored into fossil fuel scenarios.
As renewables take off, global coal demand is facing structural decline, as exemplified by China shifting its energy system to such a degree that peak coal demand could occur in the very near-term, the country having announced a national carbon cap-and-trade system in the run-up to the Paris climate talks.
India has also announced a crash program for developing renewables ahead of Paris – 160 GW of solar and wind by 2022 – which could displace 158 million tonnes or the rough total weight of India’s coal imports in 2012.
Nonetheless, fossil fuel companies still expect demand to grow by 0.4 – 0.8 per cent annually to 2040, thanks to the road transport sector that forms the oil industry’s biggest consumer market.
However, efficiency regulations of combustion engine cars will impact oil demand in the short-term. In the longer-term, oil industry scenarios are projecting a negligible take-up of electric vehicles by 2040, but alternative forecasts suggest that they could be cost-competitive with combustion-engine vehicles as early as 2025.