A cluster of reports and analyses in the last week is pointing to a consistent conclusion: fossil companies and their investors ignore the post-carbon transition at their peril, as electric vehicles and renewable energy surge toward explosive growth as mainstream energy and carbon solutions.
Yesterday, a report released by Carbon Tracker Initiative and the Grantham Institute at Imperial College London concluded that EVs could stall world-wide demand for oil and coal by 2020, and that “polluting fuels could lose 10% of market share to solar power and clean cars within a decade,” The Guardian reports.
The study predicts no growth in oil demand from 2020 to 2030, then steady reductions through 2050, notes Vox climate specialist David Roberts.
The simple, elusive factor that differentiates this study from business-as-usual analyses by fossil companies, the International Energy Agency, and Canada’s National Energy Board, mostly projecting growth in fossil demand through 2035 or 2040: Carbon Tracker and Grantham actually put together “a scenario that takes into account the latest cost reduction projections for the green technologies, and countries’ pledges to cut emissions,” The Guardian states.
“Electric vehicles and solar power are game-changers that the fossil fuel industry consistently underestimates,” said Carbon Tracker senior researcher Luke Sussams. “Further innovation could make our scenarios look conservative in five years’ time, in which case the demand misread by companies will have been amplified even more.”
CTI Research Director James Leaton agreed that “there are a number of low-carbon technologies about to achieve critical mass, decades before some companies expect.”
The report projects solar supplying 23% of global electricity demand by 2040 and 29% by mid-century, enough to phase out coal and reduce natural gas to a 1% market share. At 35% of road transport by 2035 and two-thirds by 2050, electric vehicles are on track to displace a market-tipping 25 million barrels of oil per day.
“Under such a scenario, coal and oil demand could peak in 2020, while the growth in gas demand could be curtailed,” The Guardian states. “It could also limit global temperature rises to between 2.4° and 2.7°C above pre-industrial levels, while more ambitious action by countries than currently pledged, along with falling costs of solar and electric vehicles, could limit warming to 2.1° to 2.3°C”— not enough to stabilize the global climate, but still a monumental contribution to the larger effort.
On Vox, Roberts says projections for electric vehicle uptake are “all over the map”—with the U.S. Energy Information Administration’s estimate increasing dramatically each year over the last few, BP assigning EVs a 6% market share by 2035, Bloomberg New Energy Finance placing them at 35% of new car sales globally by 2040, and Greentech Media anticipating 11.4 million EVs on U.S. roads by 2025, compared to the EIA’s 7.5 million.
Analysts also differ on when they expect oil demand to peak. So the question, Roberts writes, is how seriously to take optimism.
“The very kind of models this study critiques are the ones that have consistently underestimated the growth of solar and wind,” he notes. “They use baseline scenarios that assume no further cost and policy changes when, in reality, cost and policy changes are both rapid and inevitable.”
In fact, “experience shows that markets at the centre of this kind of interest and activity do not continue to grow on a steady, linear path. They take off, lurching into exponential growth. That shift is impossible to predict in advance with any precision, but at this point, we ought to know that it’s coming.”
The study has Huffington Post Canada Business Editor Daniel Tencer critiquing the Canadian government and fossil industry for failing to adapt their production estimates to the new reality—and pointing to a recent Canadian Centre for Policy Alternatives/Parkland Institute report that makes a similar case. Late last month, CCPA economist Mark Lee warned that the “green paradox” might push Canada to extract more oil and gas, faster, while it still can.
“The Canadian Association of Petroleum Producers predicts that Canadian oil production will continue to grow beyond 2020 at a similar pace that it has grown over the past decade. It sees oil output rising about 15% from 2020 to 2030, to 5.54 million barrels per day,” Tencer notes. But Carbon Tracker tells a different story, and “not preparing for such a scenario could have major costs.”
London-based financial journalist Carl Mortished took a similar tack in an opinion piece last week for the Globe and Mail [subs req’d]. The headline: “If you have oil, pump it now because the glut isn’t over.”
As oil demand falls farther short of supply, he writes, “producers of low-cost oil will chase the last dollar of demand,” with the Middle East/OPEC, Russia, and the United States boosting their combined market share from 56% now to 63% in 2035. “The oil industry will become dominated by the more efficient producers, the Walmarts of liquid fossil fuels offering lower, reliable prices and convenience, leaving little room for marginal higher-cost players, except in brief periods of exceptional higher pricing.”
Which points to “hard questions about the future viability of Canadian oil sands,” Mortished notes. “It is also worth asking whether the Keystone XL pipeline, now promised by President Donald Trump to the obvious delight and relief of Prime Minister Justin Trudeau, will really do much to improve the economics of new oil sands investment.” For the foreseeable future, he adds, “every new piece of oil infrastructure needs to be benchmarked against low-cost production.”
