The scenarios are not predictions of what is likely to happen or what bp would like to happen. Rather, the scenarios help to illustrate the range of outcomes possible over the next thirty years, although the uncertainty is substantial and the scenarios do not provide a comprehensive description of all possible outcomes.
Primary energy demand increases by around 10% in Rapid and Net Zero over the Outlook and by around 25% in BAU.
The differences between the scenarios are driven by a combination of different assumptions about economic and energy policies and social preferences.
Both Rapid and Net Zero assume a significant increase in carbon prices, which reach $250/tonne of CO2 ($2018 prices) in the developed world by 2050 and $175 in emerging economies. This increase in carbon prices incentivizes significant gains in both energy efficiency and the use of lower carbon energy sources. This policy impulse is much smaller in BAU, with carbon prices reaching only $65 and $35 per tonne of CO2 by 2050 in developed and emerging economies respectively.
In addition to carbon prices, the three scenarios assume a number of other policies are enacted to affect both the growth of energy consumption and the mix of energy sources across different sectors of the economy: industry, buildings and transport).
Net Zero is based on the view that there may be economic and political limits to the extent to which an accelerated energy transition can be driven solely by government policies. It assumes that the impact of these polices is accentuated by the changing behaviour and preferences of companies and households, with greater adoption of circular and sharing economies; increased propensity to switch to low carbon energy sources; and less resistance to the accelerated buildout of low carbon technologies and distribution networks.
As a result of these policies and shifts in societal preferences, there is a decline in the share of hydrocarbons (coal, oil and natural gas) in the global energy system in all three scenarios. This is matched by a corresponding increase in the role of renewable energy as the world increasingly electrifies. The scale of this shift varies significantly across the three scenarios, with the share of hydrocarbons in primary energy declining from around 85% in 2018 to between 70-20% by 2050 and the share of renewable energy increasing to between 20-60%.
The transition to a lower carbon energy system in Rapid leads to a fundamental restructuring and reshaping of the global energy system. There are several different aspects to these changes.
First, there is a significant shift away from traditional hydrocarbons (oil, natural gas and coal) towards non-fossil fuels, led by renewable energy. In Rapid, non-fossil fuels account for the majority of global energy from the early 2040s onwards, with the share of hydrocarbons in global energy more than halving over the next 30 years.
Second, the energy mix becomes far more diversified. For much of history, the global energy system has tended to be dominated by a single energy source. For the first half of the previous century, coal provided most of the world’s energy. As the importance of coal declined, oil became the predominant energy source. The energy transition in Rapid means that for much of the next 20 years the global fuel mix is far more diversified than previously seen, with oil, natural gas, renewables and coal (for a time) all providing material shares of world energy. The greater variety of fuels means that the fuel mix is increasingly driven by customer choice rather than the availability of fuels, with increasing demands for integration across different fuels and energy services.
This increased differentiation is further enhanced by the growing importance of electricity and hydrogen at the final point of energy use in Rapid. These energy carriers are more costly to transport than traditional hydrocarbons causing energy markets to become more localized.
The increasing diversification of the fuel mix also leads to greater competition across different forms of energy as they compete for market share against a backdrop of plateauing energy demand in the second half of the Outlook in Rapid. Moreover, the peaking and subsequent decline in the consumption of coal, oil and natural gas in Rapid triggers greater competition within individual fuels, as resource owners compete to ensure their energy resources are produced and consumed. This heightened competition increases the bargaining power of consumers, with economic rents shifting away from traditional upstream producers towards energy consumers.
Similar trends are also apparent in Net Zero, although the pace with which the share of renewables grows is even faster.