Key uncertainty - paths to a lower carbon world

The speed of transition to a lower-carbon energy economy is a major uncertainty in the outlook for energy. While the pace of growth of carbon emissions is assumed to slow sharply relative to the past, it still falls well short of the significant falls in carbon emissions likely to be required to meet the goals set out at the COP21 meeting in Paris

The ‘faster transition case’ assumes that a range of existing policy mechanisms are tightened by far more than envisaged in the base case.

This means carbon prices in leading economies rise to $100/tonne in real terms by 2035 and a range of other policy interventions encourage more rapid energy efficiency gains and fuel switching.

As a result, emissions peak in the early 2020s and by 2035 are 12% below 2015; global energy intensity and carbon intensity improve at unprecedented rates. Most of the abatement relative to the base case comes from decarbonizing the power sector.

That still leaves a significant gap: the ‘even faster transition’ case illustrates a possible configuration that delivers an emissions trajectory that matches the path of the International Energy Agency’s 450 scenario, which aims to limit the global temperature rise to 2°C on pre-industrial times. Emissions in this case are 32% below 2015 levels by 2035.

Most of the incremental abatement comes from the power sector: by 2035 power is almost entirely decarbonized, with global emissions from power generation less than a quarter of the 2015 level.

In our ‘faster transition case’, emissions peak in the early 2020s and by 2035 are 12% below 2015

Carbon emissions (billion tonnes CO₂)

Emissions peak in the early 2020s and by 2035 are 11% below 2015; carbon intensity improves at unprecedented rates

Reductions in carbon emissions (billion tonnes CO₂ in 2035)

* Carbon capture, use and storage (predominantly in the power sector)

Most of the abatement relative to the base case comes from decarbonizing the power sector

Energy growth and composition

The speed of transition has a significant impact on the growth of energy and its composition.

Energy demand continues to grow in both the alternative cases, but at reduced rates (0.9% p.a. for ‘faster transition’, and 0.8% p.a. for ‘even faster’).

Speeding up the transition has a marked impact on fuel shares. In the ‘faster transition’ case, renewables, together with nuclear and hydroelectric power, overtake oil by 2035; and in the ‘even faster’ case exceed oil and coal combined. That said, in both cases, oil and gas still provide around half of the world’s energy in 2035.

The most radical shifts are seen in the power sector.

The ‘even faster’ case

By 2035, non-fossil fuels supply nearly 80% of global power in the ‘even faster’ case; and more than a third of the carbon emissions from the remaining coal and gas power generation are captured and stored.

Non-fossil fuels provide all the net growth in energy in both cases, pushing coal into decline. Renewables are the main driver, with their share of energy by 2035 rising to 16% in the ‘faster transition’ case and 23% in the ‘even faster’ case, compared with 10% in the base case.

Oil demand is declining by 2035 in both cases, although in the ‘faster transition’ case oil still grows slightly over the Outlook period (2015-2035). Gas maintains some modest growth in the ‘faster transition’ but plateaus in the ‘even faster’ case, squeezed out by non-fossil fuels.

The most radical shifts are seen in the power sector.

By 2035, non-fossil fuels supply nearly 80% of global power in the ‘even faster’ case; and nearly half of the carbon emissions from the remaining coal and gas power generation are captured and stored.

The most radical shifts are seen in the power sector.

By 2035, non-fossil fuels supply nearly 80% of global power in the ‘even faster’ case; and nearly half of the carbon emissions from the remaining coal and gas power generation are captured and stored.

Other low carbon scenarios

By 2035, non-fossil fuels supply nearly 80% of global power in the ‘even faster’ case

By design, the ‘even faster’ case matches the carbon emission decline of the IEA 450 scenario, but it achieves that decline with a different mix of efficiency gains and fuel switching. A selection of other scenarios that show similar declines in carbon emissions illustrates the wide range of plausible paths towards a lower carbon future.

These scenarios have some common features. All project declines in both energy intensity and carbon intensity at historically unprecedented rates - and in almost all, the power sector provides the largest reduction in emissions.

The differences among the scenarios largely reflect differences in assumptions about the relative costs of technologies and about non-cost factors that influence the pace of technology deployment. The uncertainty around these factors makes it difficult to pick any particular path as the best way forward. This underpins the role of carbon pricing since it provides incentives for businesses, markets and consumers alike to follow the most efficient path as technologies and behaviours evolve.

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