Scientific evidence suggests that the dominant cause of climate change is the release of greenhouse gases (GHGs). The World Resources Institute (WRI) estimates that total GHGs were equal to 49.4 Gt CO2e in 2016, with carbon emissions from energy use being the largest source of GHGs, accounting for around 65% of all GHGs.
The estimate of carbon emissions from energy used in the Energy Outlook differs slightly from the WRI definition. The Energy Outlook does not model fugitive methane emissions from the production of hydrocarbons and so they are excluded from the estimates used. The Outlook does, however, include emissions from bunker fuels which are excluded from the WRI definition. Based on the Energy Outlook definition, carbon emissions from energy use in 2016 were 32.9 Gt CO2e, similar to the WRI estimate of 32.3 Gt CO2e.
In addition to carbon emissions from energy use, the WRI estimates that the other main sources of emissions in 2016 were: agriculture (5.8 Gt CO2e); industrial processes (2.8Gt CO2e); land-use and forestry change 3.2 GtC02e); and waste management facilities (1.6 Gt CO2e).
In terms of the carbon emissions from energy use, nearly half of the emissions stem from energy used within industry. The remainder is split roughly evenly between the transport and buildings (including agriculture) sectors.
As the energy transition advances, some emissions can be more readily prevented than others. In particular, carbon emissions from activities or processes which are relatively straightforward or inexpensive to electrify can be reduced as the power sector is increasingly decarbonized. One exception to this is seasonal space heating and cooling demands in buildings. Although these demands can be electrified, the scale of the seasonal fluctuations are hard to meet in a power sector based heavily on intermittent renewable power (see Net Zero).
The majority of emissions which are hard-to-abate stem from activities or processes that are difficult to electrify and so need alternative sources of low carbon energy. This includes high temperature industrial processes, such as those used in iron and steel, cement and chemicals. It also includes long-distance transportation services, including heavy duty trucks, aviation and marine.
The world economy continues to grow over the next 30 years, driven by increasing wealth and living standards in the developing world, but at a slower rate than in the past.
Global GDP annual growth averages around 2.6% (on a 2015 Purchasing Power Parity basis) in all three scenarios. This growth is considerably slower than its average over the past 20-years, in part reflecting the persistent impact of Covid-19 on economic activity. See below for a discussion of the treatment of Covid-19 in this year’s Energy Outlook.
The weaker economic growth than in the past also reflects the assumed increasing impact of climate change on the productive potential of the economy (see Climate change, below, and Estimates of climate change on GDP growth for a discussion of this impact).
The expansion in global activity is supported by population growth, with the world’s population increasing by over 2 billion people to around 9.6 billion by 2050.
But the most important factor underpinning global growth is increasing productivity (GDP per head) – and hence prosperity (income per head) – which drives around 80% of the expansion in global GDP over the Outlook.
Developing economies account for over 80% of the growth in the world economy, with China and India contributing around half of that increase.
The growth in global activity and prosperity is underpinned by continuing high levels of urbanization, which is often an integral part of the development process leading to increasing levels of industrialization and productivity. Countries which are projected to have a relatively fast pace of urbanization over the next 30 years – that is, the level of urbanization is projected to increase by at least a third by 2050 – contribute well over half of the increase in world output over the Outlook, despite making up less than a third of global GDP in 2018.
The growing concentration of greenhouse gases in all three scenarios is assumed to have an increasing impact on the growth and productive potential of the global economy.
Increasing temperatures, combined with more extreme weather patterns and rising sea levels, may trigger a range of impacts that lower economic growth. Efforts to reduce or mitigate carbon emissions may also divert investment from other sources of growth.
Estimating the potential size of these impacts is highly uncertain, with most existing environmental and economic models and studies capturing only a subset of these effects, often very imperfectly. For instance, the economic literature on which our illustrative impact on GDP is based considers only increasing temperatures.
For illustrative purposes, the level of GDP in 2050 in all three scenarios is projected to be around 5% lower relative to a hypothetical world in which the concentration of greenhouse gases was frozen at current levels. These effects are assumed to be greatest in regions which have the highest average temperatures currently (see Estimates of climate change on GDP growth for more details).
The negative impact from rising temperature levels is largest in BAU where little progress is made in reducing carbon emissions. But the upfront costs of the policy actions taken to reduce emissions are greater in Rapid and Net Zero, such that the overall impact on GDP over the next 30 years is projected to be broadly similar in all three scenarios.
Importantly, if the scenarios were extrapolated beyond 2050, the erosion of wealth and prosperity in BAU would get progressively worse, leading to significantly lower levels of activity and well-being than in Rapid or Net Zero.
The environment and economic models and studies underpinning these illustrative estimates of the impact of global warming on economic activity are highly uncertain and almost certainly incomplete – for example, they do not capture many of the potential human costs. Future editions of the Energy Outlook will update these estimates as the scientific and economic understanding of these effects improves.
Growth in global energy demand is underpinned by increasing levels of prosperity in emerging economies. Primary energy increases by around 10% in Rapid and Net Zero and around 25% in BAU.
Much of this increase in energy consumption – the entire growth in Rapid and Net Zero and over half in BAU – stems from economies which are urbanizing quickly.
The average rates of growth of primary energy in Rapid (0.3% p.a.) and Net Zero (0.3% p.a.) are significantly slower than the past 20 years (2.0% p.a.), reflecting a combination of weaker economic growth and faster improvements in energy intensity (energy used per unit of GDP). Primary energy in both scenarios broadly plateaus in the second half of the Outlook.
Energy efficiency measured in terms of final energy use improves by more in Net Zero than Rapid, but these gains are offset in terms of primary energy by the greater use of electricity and hydrogen which require considerable amounts of primary energy to produce.
Growth of primary energy in BAU (0.7% p.a.) is faster and more sustained than in the other two scenarios, reflecting slower gains in energy efficiency.
The faster declines in energy intensity relative to history in Rapid and Net Zero are a critical factor in mitigating the growth in carbon emissions. Other things being equal, if energy intensity over the Outlook improved at the same rate as the past 20 years, carbon emissions by 2050 would be more than a quarter higher in Rapid and Net Zero.
Policies and actions to promote improvements in energy efficiency are central to achieving a low carbon transition.
The Covid-19 pandemic is foremost a humanitarian crisis, but the scale of the economic cost and disruption is also likely to have a significant and persistent impact on the global economy and energy system. At the time of writing, the number of new cases from the pandemic is still increasing and so assessing its eventual impact is highly uncertain.
The central view used in the main scenarios it that economic activity partially recovers from the impact of the pandemic over the next few years as restrictions are eased, but that some effects persist. The level of global GDP is assumed to be around 2.5% lower in 2025 and 3.5% in 2050 as a result of the crisis. These economic impacts disproportionately affect emerging economies, such as India, Brazil and Africa, whose economic structures are most exposed to the economic ramifications of Covid-19.
The pandemic may also lead to a number of behavioural changes; for example, if people choose to travel less, switch from using public transport to other modes of travel, or work from home more frequently. Many of these behavioural changes are likely to dissipate over time as the pandemic is brought under control and public confidence is restored. But some changes, such as increased working from home, may persist.
In Rapid, the impact of the pandemic is assumed to reduce the level of energy demand by around 2.5% in 2025 and 3% in 2050. The impacts are most pronounced on oil demand, which is around 3 Mb/d lower in 2025 and 2 Mb/d in 2050 as a result of the pandemic. The majority of this reduction reflects the weaker economic environment, with around 1 Mb/d of the reduction in 2025 a result of the various behavioural changes. The marginal impacts in BAU and Net Zero are similar.
There is a risk that the economic losses from Covid-19 may be significantly bigger, especially if there are further waves of infection. This possibility is explored in a ‘greater impact’ case, in which Covid-19 reduces the level of global GDP by 4% in 2025 and almost 10% by 2050. In this ‘greater impact’ case, the crisis causes the level of energy demand in Rapid in 2050 to be 8% lower, with the level of oil demand around 5 Mb/d lower.
There is a strong link between access to energy and economic well-being and prosperity. The importance of energy access is embodied in the UN’s Sustainable Development Goal (SDG) 7 which seeks to “ensure access to affordable, reliable, sustainable and modern energy for all”.
One measure monitored by SDG 7 is global access to electricity, where the number of people without access is estimated to have decreased from 1.2 billion in 2010 to 790 million in 2018*.
Economic prosperity and development depend not just on the ability to access electricity, but also on the quantity and quality of the electricity provision.
The World Bank’s multi-tiered framework provides one measure of quality of access, in which Tier 1 access equates to very basic levels of provision (lighting with limited availability) though to Tier 5, which denotes access to plentiful and reliable supplies.
There is a strong link between economic development and the quality of the access to electricity: around three-quarters of low and lower-middle income countries in 2018 had relatively limited access to electricity (Tier 3 or below); whereas over 90% of high-income countries had Tier 5 access.
Although the share of the world’s population without any access to electricity is estimated to have declined to 10% in 2018, around 45% of the world’s population lived in countries with Tier 3 access or below. In all three scenarios, around a quarter of the world’s population in 2050 live in countries or regions in which average levels of electricity consumption are still equivalent to Tier 3 access or below.
Improving the quality of electricity access – and energy access more generally – across the globe is likely to require a range of different policy approaches and technologies, including the development of decentralized and off-grid power generation.