By varying key aspects of Current Trajectory and Below 2° it is possible to explore the impact of other issues and uncertainties affecting the outlook of the energy system.
The two scenarios used in the Outlook – Current Trajectory and Below 2° – help to explore some of the uncertainties surrounding the evolution of the energy system stemming from differences in the speed and nature of the energy transition.
But there are many other uncertainties and issues influencing the outlook for global energy.
This section considers three current issues that have the potential to have an important bearing on the future evolution of energy system.
There have been significant increases in geopolitical conflicts and tensions in recent years, including the wars in Ukraine and the Middle East, and the greater use of trade sanctions and tariffs. Further escalation in these tensions could lead to increased geopolitical fragmentation, in which countries reduce their exposure to international trade and become increasingly self-reliant, with significant implications for the global energy system.
Improvements in energy efficiency – reducing the amount of energy needed to produce a given amount of goods and services – have an important bearing on the size and nature of the energy system. The pace of improvement in energy efficiency over the past five years or so has been materially weaker than its historical average. If this weakness persists, it could have significant implications for both the overall level of energy demand and the mix of fossil and non-fossil fuels.
Carbon emissions from energy and industrial use have continued to increase, growing at an average annual rate of 0.6% over the past five years. In doing so, the world is gradually exhausting carbon budgets consistent with limiting global temperature rises. The longer the world remains on its current pathway, the greater the risk of there being a costly and disorderly transition if the world wishes to remain within a given carbon budget.
The possible implications of these three issues for global energy are investigated by undertaking some ‘sensitivity analysis’ to the main scenarios. This type of analysis has the benefit that most elements of the existing scenarios are assumed to be unchanged, allowing the key features of each of the issues to be isolated and explored.
In reality, other elements of the energy system would not be completely unchanged if any of these three alternative issues were to materialise. As such, the results of the sensitivity analysis should be viewed as illustrative of the broad ways in which each issue may impact the global energy system, rather than as providing a complete characterisation or detailed quantification.