Oil and gas production will fall faster than previously expected, renewable energy will grow more rapidly, and global carbon dioxide emissions will drop as a result, according to a new analysis released yesterday by colossal fossil BP.
BP’s Energy Outlook 2023, released Monday, follows a flurry of reports and analyses that show global cleantech investment exceeding US$1 trillion per year for the first time, renewable electricity overtaking fossil energy, and a green jobs boom on the near horizon.
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The landing page for the BP Energy Outlook acknowledges that the global carbon budget is running out, with CO2 emissions continuing to rise since the 2015 Paris agreement. “The longer the delay in taking decisive action to reduce emissions on a sustained basis, the greater are the likely resulting economic and social costs,” the company says.
Driven by Russia’s invasion of Ukraine and permanent changes in energy demand, BP projects oil consumption falling 5% faster and gas demand 6% faster through 2035 than it previously expected, the Guardian reports. Those gains will drive down emissions by 3.7% in 2030 and 9.3% in 2050 compared to the company’s previous projections.
“From an energy perspective, the disruptions to Russian energy supplies and the resulting global energy shortages seem likely to have a material and lasting impact on the energy system,” said BP Chief Economist Spencer Dale. “Global energy policies and discussions in recent years have been focused on the importance of decarbonizing the energy system and the transition to net zero. The events of the past year have served as a reminder to us all that this transition also needs to take account of the security and affordability of energy.”
That assessment echoes at least a half-dozen reports in the last two weeks alone, all pointing toward a faster energy transition leading to deeper carbon cuts. BloombergNEF reported that global energy transition investment exceeded US$1 trillion—and equalled the investments still pouring into fossil fuels—for the first time. Analysts widely predicted a cleantech arms race, and a study found that fossil use has likely peaked.
This morning, the UK-based Ember energy think tank reports that the decline in fossil energy, particularly natural gas, “is set to be the story of 2023” in the European Union.
There’s still a lot more ground to cover. “In order to get on track for net zero emissions in 2050, the world would need to immediately triple this $1.1 trillion spend—and add hundreds of billions of dollars more for the global power grid,” writes Bloomberg Green columnist Nathaniel Bullard.
At the same time, “to paraphrase the late energy investor T. Boone Pickens, the first trillion was the hardest. The most recent trillion was the fastest—but if we are to achieve the deepest decarbonization possible, it will also be slower than every trillion that comes after it.”
That trajectory matches up with an analysis for the Rocky Mountain Institute (RMI) that shows energy transition technologies primed to take off. UK energy analyst Kingsmill Bond “makes a case that wind and solar power are going through growth that looks almost exactly like the trend lines for the early stages of transformative products and industries, across technologies and eras, like automobiles and smart phones,” Inside Climate News writes. “The growth begins slowly, with high costs, and shifts into high gear as costs shrink and efficiency rises.”
The optimism in that outlook, suggesting that fossil fuel demand has already peaked, “is almost jarring in its clarity, and in its contrast with the pessimism I see and feel every day as the threats of climate change become clearer,” says clean energy reporter Dan Gearino.
But the numbers in Bullard’s Bloomberg column aren’t inconsistent with the RMI assessment. He points to global clean energy investment hitting its new milestone after growing by more than $250 billion between 2021 and 2022, the largest annual increase ever. Wind and solar added more than 350 gigawatts—that’s 350 billion watts—of new capacity, and investment in electrified transport grew even faster than clean power production.
“Passenger EVs account for the bulk of the transport dollars invested ($380 billion) but by no means all of that sector’s capital flow last year.” Bullard says. “Public charging infrastructure saw an influx of $24 billion, while nearly $23 billion was spent on electric two- and three-wheelers. Electric buses got $15 billion, and commercial electric vehicles such as trucks received $8 billion.”
Charts accompanying Bullard’s post show nuclear investment stagnating at about $30 billion, energy storage and sustainable materials growing quickly to hit thresholds of about $17.5 and $25 billion, respectively, carbon capture and storage almost tripling to $6.3 billion, and hydrogen more than tripling to just over $1 billion.
Those last two technologies “have made big promises in the past half-decade, and investment is now following,” he writes. “But there will need to be orders of magnitude more use of them to have a substantial climate impact.”
An ‘Arms Race’ in the Right Direction
Bullard declares decarbonization “a game of decades and a game of dollars”. With the 2030 deadline for a 45% reduction in global carbon pollution a scant seven years away, the 2022 investment numbers don’t have decades to add up. But they still reflect a new “arms race” that has taken hold, with countries trying to outdo each other on clean energy development.
The catalyst came from one of the unlikeliest places. When United States Sen. Joe Manchin (D-WV) agreed last summer to back the Biden administration’s decarbonization agenda with the Inflation Reduction Act (IRA), it unleashed US$369 billion in mostly clean energy investment that is now beginning to flow into states, cities, communities, and companies across the U.S. It also triggered anxiety in Canada about how federal climate investment will keep up with the country’s biggest trading partner and rumblings of a U.S.-European trade war driven by stringent Buy North American rules in the IRA.
With that, talk at the annual World Economic Forum meetings in Davos, Switzerland earlier this month turned to a cleantech arms race, with countries finally (finally!) starting a race to the top, rather than the bottom, in the investments needed to drive down emissions—and everyone scrambling to keep up with China.
“We will especially look at how to simplify and fast-track permitting for new cleantech production sites,” European Commission President Ursula von der Leyen said in Davos. “To keep European industry attractive, there is a need to be competitive with the offers and incentives that are currently available outside the EU.”
That support will take the form of state aid and a sovereign fund for renewable energy companies within a new Net-Zero Industry Act, Reuters reports, aimed at keeping the continent competitive with U.S. tax credits for solar and wind developments and manufacturing capacity.
Those commitments point to “a marked shift in climate geopolitics, a realm in which Europeans had long held the crown as leaders in environmental action and regulation,” writes Bloomberg columnist Akshat Rathi. “While discussions at the United Nations annual COP meetings continue to require all countries to collaborate on global strategies, targets, and financing, U.S. investments in climate technologies are forcing global powers to compete when it comes to devising and scaling solutions aimed at tempering humanity’s impact on the Earth.”
That puts the world “on the cusp of a cleantech arms race,” David Victor, professor of innovation and public policy at the University of California San Diego, told Rathi. But unlike arms races of the militarized, invariably destructive variety, this one doesn’t have to be zero-sum.
“If the U.S. and Europe can work together to allow their industries access to each other’s markets,” Rathi writes, citing Victor, “then investments made in technologies will be able to deliver greater good. That kind of cooperation is in Europe’s interests.”
An assessment released last week has those increasingly ambitious climate policies putting the world on track for a 1.8°C increase in average global warming—still short of the 1.5°C maximum driving global climate policy and public climate alarm, but far short of the dire scenarios still showing up in recent analyses.
The Inevitable Policy Response, a climate transition forecasting consortium convened by the UN Principles for Responsible Investment (UNPRI), cites competition with China as the catalyst for a wave of new green subsidies between October and January.
Of the 89 global policy announcements added to the tracker over the latest quarter, 68 supported or confirmed a 1.8°C climate future, Reuters reports. “The race to the top in clean energy unleashed by the U.S. IRA and being followed up by the EU Green Industrial Plan, combined with other positive policy announcements since COP 27, point to an acceleration in clean energy deployment relative to recent expectations,” said IPR Project Director Mark Fulton.
Sustainable Energy Flourishes as Fossils Fade
With that dynamic taking shape, Toronto-based Corporate Knights was in Davos to release its Global 100 ranking of the world’s top sustainable companies, now in its 19th year. In a year of outlandish fossil fuel profits, the Global 100 only included one oil company that is betting big on aviation biofuels, but still outperformed three of the top global stock indexes specializing in environment, social and government (ESG) investments.
“Sustainable revenue now makes up half of gross revenue for the Global 100 compared to just 5% for the wider benchmark, while sustainable investment shows a similar trend,” Corporate Knights writes. And “while improved productivity scores for carbon, energy, water, and other environmental performance indicators are often collateral benefits of underlying megatrends, such as increasing electrification, energy efficiency, and digitization, the improvement in sustainable revenues and investments is generally the result of much more deliberate corporate investment policies and strategic decisions.”
“Very often, there is visionary leadership from the CEO, and the company has a clear view of the way the world is headed and how to get ahead of it,” said Corporate Knights Research Director Ralph Torrie.
That kind of momentum has the Smart Prosperity Institute’s PLACE Centre predicting a green jobs boom in every corner of Canada, creating millions of new jobs and attracting hundreds of billions in investment. “From improving the energy efficiency of homes in Victoria, British Columbia, to producing hydrogen in Stephenville, Newfoundland, careers will be built across the country,” the centre’s John McNally writes for Corporate Knights, with each region building on its own specific strengths.
While a new generation of enterprises and technologies flourishes, this morning’s analysis by the Ember think tank shows fossil energy fading. “Europe’s political response to Russia’s invasion of Ukraine in 2022 was to accelerate its electricity transition,” Ember writes. “There is now a focus on rapidly cutting gas demand—at the same time as phasing out coal. This means a massive scale-up in clean energy is on its way.”
Already, Europe is coming out of a year in which wind and solar delivered a record 22% of its electricity, ahead of gas at 20% and coal at 16%, Ember says. Russia’s war triggered a short-term dash for gas and coal that drove up power sector emissions by 3.9%, mostly because of increased coal use.
But “it could have been much worse: wind, solar and a fall in electricity demand prevented a much larger return to coal,” the think tank writes. And “2023 will be quite the opposite. Hydro generation will rebound, French nuclear units will return [perhaps?—Ed.], wind and solar deployment will accelerate, and electricity demand will likely continue to fall over the coming months. In 2023, Europe is set to witness a huge fall in fossil fuels—of coal power, yes, but especially gas power.
Solar, Wind ‘Unequivocally’ Cheaper
And the trend isn’t limited to Europe. In the U.S., the transition is being driven by the stunningly low cost of renewables helped along by the IRA. There’s been mounting evidence for years that new solar and wind farms cost less for utilities to operate than fossil fuel plants they’ve already built and paid for. Now, a new analysis by the Energy Innovation climate think tank in San Francisco concludes that it’s “unequivocally” cheaper to build wind and solar than to operate existing coal plants that consume more water and produce climate-busting carbon emissions.
“The Inflation Reduction Act has made this local replacement and reinvestment scenario so economic and so much cheaper than coal,” said lead author and Energy Innovation policy analyst Michelle Solomon. “It really creates a big opportunity to diversify the economics in coal communities.”
Past analysis has shown poverty-stricken, coal-dependent West Virginia as a big winner from the Biden administration’s coal and jobs agenda, and one former steel community in the state’s northern panhandle is in line to gain 750 new jobs from a long-duration battery manufacturing plant.
And another traditionally coal-heavy jurisdiction, Australia, is going through a similar fast transition, with fossil fuels hitting a record low across the country’s east coast grid and green power meeting a record 40% of demand while overtaking black (anthracite) coal for the first time, the Sydney Morning Herald reports. “When black coal is counted with brown coal (lignite), which is used in Victoria’s power plants, the fuel still delivers the dominant share of the east coast electricity mix,” the paper writes, citing the Australian Energy Market Operator (AEMO). “However, large wind and solar farms coupled with Australians’ booming uptake of rooftop solar panels have been radically reshaping the market and squeezing out fossil fuels.”
The result is that coal-dependent Australian states, like Queensland in the northeast, are paying more for electricity than those with more renewables on the grid, RenewEconomy reports.
Why, whenever alternatives to fossil fuels are mentioned, mainly solar and wind generated energy is promoted, with nuclear
coming in as a distant third place, as the only alternatives?
What about geothermal, tidal, and hydro power? While admittedly local (at present) in scope, they should be considered part of the mix of energy sources for the future.
Also what are we to do about the continual rise of CO2 from anthropogenic burning of fossil fuels, deforestation, and ocean acidification which harms the oxygen producing, carbon sequestering CO2 phytoplankton? And carbon credits and net zero –
there are lots of ways these ‘solutions’ can be made inoperative. We don’t have 50 years, like the tobacco industry, to make the essential changes. BP’s spin is impressive, but on-the-ground actions are something else.