Growth in global energy demand in all three scenarios is driven entirely by emerging economies, underpinned by increasing prosperity and improving access to energy. Energy consumption in the developed world falls as improvements in energy efficiency outweigh demands from higher levels of activity.
The contrasting energy trends in developed and emerging economies lead to a continuing shift in the centre of gravity of energy consumption, with the emerging world accounting for around 70% of energy demand by 2050 in all three scenarios, up from around 50% as recently as 2008.
Growth of energy consumption in the emerging economies is led by India and Other Asia, which together account for more than the entire increase in primary energy in Rapid and Net Zero and almost 60% in BAU. India is the largest source of demand growth out to 2050 in all three scenarios.
Growth in China’s energy demand slows sharply relative to past trends, reaching a peak in the early 2030s in all three scenarios. Indeed, China’s energy demand in Rapid and Net Zero by 2050 is back close to 2018 levels, helped by accelerating gains in energy efficiency and a continuing shift in the structure of the economy away from energy-intensive industries. Despite that, China remains the largest market for energy in all three scenarios, accounting for over 20% of the world’s energy demand in 2050, almost twice that of India.
Africa’s contribution to demand growth increases in the second half of the Outlook, supported by a growing population and rising prosperity. Even so, Africa’s energy consumption remains small relative to its size: although around a quarter of the world’s population are projected to live in Africa in 2050, it accounts for less than 10% of total energy demand in all three scenarios.
A key factor underlying the contrasting trends in energy demand in developed and emerging economies are the significant differences in the level of energy consumption per capita.
In 2018, average energy consumption per capita in the developed world was more than three times that in emerging economies, with an average person in the US consuming 12 times more energy than an average person in India.
These differences in energy consumption largely reflect differences in economic development and prosperity, as well as a range of other factors, including economic structure, local climatic conditions and differences in natural resource endowments.
The degree of this inequality narrows over the Outlook, reflecting both the sustained increases in economic activity and prosperity in the emerging world and the marked falls in energy consumption per capita in developed economies: US energy consumption per capita falls by 40% over the Outlook in Rapid. Even so, by 2050, average energy consumption per capita in the developed world in Rapid is still more than twice that in emerging economies. Similar convergence in energy consumption per head is also apparent in Net Zero and BAU.
These differences in the current levels of energy consumption between developed and emerging economies are also reflected in average carbon emissions per capita, offset only partially by the lower average carbon intensity of the fuel mix in the developed world relative to emerging economies.
The differential in carbon emissions per capita narrows markedly by the end of the Outlook in Rapid. This is almost entirely driven by the narrowing in energy consumption per capita, with the degree of improvement in the average carbon intensity of the fuel mix broadly similar in developed and emerging economies.
As well as differences in the pattern of energy demand growth across developing and emerging economies, the nature of the energy transition also depends on variations in the fuel mix in different parts of the world.
There are marked differences in the current mix of energy used across countries and regions, as illustrated, for example, by the varying importance of different energy sources in US, EU, China and India. These differences reflect numerous factors including the level of economic development and the cost and availability of different energy sources.
The current fuel mix in the US and EU have some similarities, with oil and gas accounting for the majority of energy supplies, and coal and renewable energy having significantly smaller shares. This contrasts with China and India, where coal currently accounts for between 55-60% of primary energy.
The transition to a lower carbon energy system in Rapid is driven by several common trends which lead to a gradual convergence in the fuel mix across all four countries.
Most significant is the growing competitiveness of renewable energy, which combined with its widespread availability and the increasing electrification of the energy system, leads renewable energy to be the single largest energy source in all four countries in Rapid by 2050, providing between 45-55% of energy supplies.
The growth in renewables (including bioenergy) is part of a broader trend towards a lower carbon fuel mix, supported by higher carbon prices and other policies. This shift is also reflected in a move away from the use of coal, which is substantially reduced in China and India in Rapid by 2050, and entirely phased-out in the US and EU.
These trends also help drive a convergence in the role of natural gas, with its share declining in US and EU, and increasing in China and India, such that by 2050 it accounts for between 15-25% of energy in all four countries.
A similar degree of convergence is also apparent in Net Zero. Although the same qualitative trends are apparent in BAU, the more limited progress made in phasing out coal use in China and India means the degree of convergence is considerably less.
The global energy system is highly interconnected, with huge international flows of traded energy. In 2018, almost three-quarters of global oil production was traded internationally and around a quarter of natural gas.
These trade flows are associated with large energy imbalances (surpluses and deficits) as countries with large resource endowments export energy to countries with less natural energy resources.
For example, in 2018, China imported around 70% of the oil it consumed and a little over 40% of its natural gas. The corresponding numbers for India were a little above 80% and 50%.
These oil and gas deficits in China and India persist in Rapid, although to varying degrees. China’s combined net imports of oil and gas decline slightly by 2050, helped by a 50% fall in Chinese oil demand (see Oil). In contrast, India’s combined oil and gas imports more than double by 2050, driven in part by increased coal-to-gas switching which leads to a marked deepening in India’s dependence on imported LNG.
On the other side of the trade balance, exports of oil and gas over the Outlook continue to be dominated by the Middle East and Russia.
The expansion in US oil and gas production associated with the shale revolution, together with falling domestic consumption, means the US becomes a sizeable net exporter of oil and especially gas in Rapid. US exports of oil and gas peak in the 2030s before gradually declining as production of US tight oil and unconventional NGLs falls back (see Oil).
The disruptions associated with Covid-19, together with the increase in trade disputes and sanctions in recent years, may lead to rising concerns about energy security, particularly in countries which are highly dependent on energy imports.
The potential impact of a shift towards deglobalization and increased concerns about energy security on the global energy system is explored next.
The disruptions associated with Covid-19 may lead to a process of deglobalization, as countries seek to increase their resilience by becoming less dependent on imported goods and services, and companies reshore certain activities and move supply chains closer to home. One manifestation of these trends is that concerns about energy security may increase, particularly in countries which are highly dependent on energy imports.
The impact of these possible changes on Rapid is explored in an alternative Deglobalization case in which:
The slower trend GDP growth results in the level of world GDP by 2050 being 6% lower in Deglobalization than in Rapid and energy demand around 5% lower, with those falls concentrated in countries and regions most exposed to reduced foreign trade.
The risk premia on imported energy means that the fall in energy is concentrated in traded fuels, especially in oil and natural gas given the relatively low level of coal consumption remaining towards the end of the Outlook in Rapid. These falls lead to a pronounced narrowing in energy deficits and surpluses around the world. For example, China’s net imports of oil and gas in Deglobalization are 30% lower than in Rapid by 2050. Likewise, US net exports of oil and gas are around 50% lower by 2050.
The fall in traded fossil fuels relative to domestically produced energy, especially renewable energy, means that the carbon-intensity of the global fuel mix by 2050 is slightly lower in Deglobalization than in Rapid.