Contributed by Robert Lyman © 2019
“He who lives by the crystal ball soon learns to eat ground glass.”
Predicting the future has always been a perilous and uncertain activity. For centuries, soothsayers foretold events by cutting up chickens and examining their entrails. Today, scientists, economists and others use sophisticated computer models to do the same thing, often with similar results. In perhaps no other field has the practice, and malpractice, of attempting to project future events become more controversial than in the field of energy. Once, the challenge of the analyst was mainly to understanding past trends and how current events might alter them. Today, however, he or she must be mindful of how projections will align with claims of Anthropomorphic Global Warming (AGW) (i.e. that humans are the major influence on the global climate) and that governments must manage the energy economy to produce their preferred environmental outcomes. To some extent, projecting the energy future has become a tug of war between economic and political considerations.
This point is illustrated in the most recent report by British Petroleum, the BP Energy Outlook 2019 edition. British Petroleum is one of the most highly-regarded commentators on global energy markets. This is partly because of its authoritative reporting of energy supply and demand statistics, which it provides free to the public in the annual BP Statistical Review of World Energy. It is also because of its occasional special reports, including its energy outlook documents. The 2019 edition, just published, sets out BP’s analysis of the possible global energy supply, demand and carbon dioxide equivalent emissions trends to 2040.
BP has come under increasing pressure from believers in AGW and their supporters in the financial services industry to support climate change activism. This has been increasingly evident in its last few outlook documents. The 2019 edition succumbs by not presenting two or even three alternative scenarios of the future, but four. The “More Energy” (ME) scenario assumes that the future energy outlook will be very much like the past; that is, driven by the desire of people, especially in the developing countries, for increasing access to improved lifestyles and the energy services that support them, with only modest improvements in technology. The “Evolving Transition”(ET) scenario sees the consumer-driven pressures being partially offset by more rapid technological change and a politically-driven shift towards a lower-carbon dioxide fuel mix. The “Less Globalization” (LG) scenario is much like the Evolving Transition one, but it reflects the potentially adverse economic effects of prolonged trade disputes and increasing protectionism. Finally, the “Rapid Transition” (RT) scenario is one in which all governments adopt policies that will reduce global greenhouse gas (GHG) emissions by 45% by 2040; this might be considered the “lite” version of the policies recommended by the Intergovernmental Panel on Climate Change (IPCC) in the Summary for Policy Makers based on its Special Report 15 of September 2018. Most of the commentary and graphic illustrations in the report are based on the Evolving Transition scenario.
The outlook is a quite long document, filled with interesting graphs and tables. One can find it here:
In this commentary, I will not attempt to summarize the outlook, but rather to draw attention to its projections that are of most interest from the perspective of those who take a skeptical view of the AGW thesis and its related policy prescriptions.
Global Primary Energy Consumption and Fuel Shares
Using 2017 as a base, the BP scenarios all project that the world’s primary energy consumption will grow in the period to 2040. Consumption rises from about 14 billion tonnes of oil equivalent (Btoe) in 2017 to 15 Btoe under the Rapid Transition scenario, 17 Btoe in the Evolving Transition scenario, and 23 Btoe in the More Energy scenario.
All of the growth in energy demand comes from fast-growing developing economies, led by India and China.
The shares held by different fuels vary considerably among the scenarios. In the ET scenario, the shares of consumption held by coal and oil decline, that held by natural gas rises considerably, nuclear and hydro stay roughly constant and renewable energy use rises considerably. In the RT scenario, each of these trends is slightly increased, except that renewables account for all the growth in energy demand.
In the ET scenario, energy consumption grows at an annual average rate of 1.2 per cent, down from over 2 per cent in the previous 20 years. Despite significant growth in prosperity in many countries, a substantial portion of the world’s population still consumes relatively low levels of energy (annual consumption of less than 100 GJ per head) in 2040. They are the ones left behind.
The Dual Challenge
BP states that the global energy system faces a dual challenge: the need for much more energy to serve the needs of a growing population and the need for far fewer carbon dioxide emissions. In its graphs, BP presents these goals as essentially irreconcilable. Certainly, the ET scenario is not consistent with achieving either of these challenges. The RT scenario is also described as a “half-way stop” in reducing carbon emissions.
In the ET scenario, the demand for energy in transport services almost doubles by 2040. All of the growth is outside the OECD.
The energy efficiency of the average car increases by 50 per cent, and truck fuel efficiency increases sharply as well.
However, as the scope for further efficiency gains in aviation and marine modes is small, nearly half the increase in energy use from 2030 to 2040 is in these two modes.
Transport continues to be dominated by oil. In the ET scenario, the share of oil in transport declines from 94 per cent currently to 85 per cent by 2040. Electricity accounts for only 5 per cent of transport demand by 2040.
In the ET scenario, the number of electric vehicles reaches around 350 million by 2040, of which around 300 million are passenger cars. This is equivalent to around 15 per cent of all cars and 12 per cent of all light duty vehicles. As there are only about 5 million electric light duty vehicles (cars, SUVs and pickup trucks) on the world’s roads today, this represents a large leap of faith.
A counter-trend to rising fuel efficiency in passenger vehicles is that the rise in global incomes may affect commuter behaviour in Asia. Many people there may no long choose to ride in high occupancy public transport and shift to private vehicles, a fact BP describes as a “key challenge”.
Natural Gas Demand
In the ET scenario, the importance of natural gas as an energy source greatly increases, supported by broadly-based demand, plentiful low-cost supplies, and the increasing availability of gas globally, due to increasing trade in liquified natural gas (LNG).
Natural gas grows at an average rate of 1.7 per cent per annum – increasing nearly 50 per cent by 2040.
The growth in gas demand is led by the industry and the power sectors, largely driven by developments in the developing countries.
The speed and pattern of gas demand growth in the non-OECD, however, depends on the pace at which the required supporting infrastructure (i.e. transmission and distribution systems) is built, which BP describes as an area of major uncertainty.
The Global Fuel Mix
The following graphs illustrate the projected changes in fuel mix under the ET scenario, along with the resulting changes in the shares of primary energy.
Page 7, BP Energy Outlook
It is notable that:
- In 2040, fossil fuels, (oil, natural gas and coal) still constitute 78 per cent of primary energy consumption globally.
- Coal consumption, which is condemned by supporters of the AGW hypothesis, remains essentially flat over the period, but still exceeds the role played by renewables in 2040.
- While use of renewable energy grows at the rate of 7 per cent per annum, its share of global energy consumption only increases from 4 to 15 per cent. (Recall that the ET scenario is a moderately optimistic case from the perspective of AGW believers.)
BP’s projections thus show the share of global energy demand served by fossil fuels, which has been declining at the rate of 1 per cent per decade since 1990, declining at the faster rate of 3 per cent per decade in the period to 2040. At this rate of change, fossil fuels’ share of consumption would decline to zero in 26 decades, or somewhere around the year 2500.
Carbon Dioxide Emissions
In the ET scenario, carbon dioxide emissions from energy use increase, not decrease, in the period to 2040. They are higher by 7 per cent in 2040.
Net emissions would rise from 33.4 billion tonnes in 2017 to 36 billion tonnes in 2040.
Most of the emissions growth is in the power and buildings sectors, and all of it is in the developing countries.
These trends would mean that the goals enunciated in the COP21 Climate Agreement would not be met.
As stated at the outset, forecasting the future is difficult at the best of times.
British Petroleum undoubtedly finds itself in a quandary. As one of the premier compilers and analysts of past energy market developments, it might be tempted to base future projections largely on an extrapolation of current trends. Presenting such an outlook, however, would have exposed the company to great abuse by the adherents to the AGW hypothesis and their supporters. Faced with that threat, BP has included the extrapolation of present trends as an “outlier” scenario, and focused most of its analysis and commentary on the Evolving Transition scenario. To protect itself even further, it has added two scenarios that anticipate higher emissions reductions, including one (i.e. the Rapid Transition scenario) that comes close to, but does not quite match, the future envisaged by those who demand a “Green New Deal”.
BP thus may have realistically accommodated the political pressures on it, but at some cost to its credibility. After all, if none of one’s scenarios respond adequately to what one states are the compelling dual challenges faced by the global energy system, they are all reduced to products of political compromise, not detached and objective economic analysis.
Other prestigious forecasters include the International Energy Agency, the United States Energy Information Administration and EXXON. As each updates its energy outlook report in the coming months, we will see how well they accommodate or resist the politicization of energy supply and demand analysis.