Energy

COP 26: The Unshakeable Reality About The Energy Transition And Climate Change


190 countries in the world officially ratified the Paris Agreement. The UN General Assembly is the latest platform from which global leaders have put forth compelling arguments to limit and tackle the climate crisis. Running parallel to the increasingly vociferous climate activism is an ongoing shift in how we produce and consume energy, which is why we at DNV decided to produce an impartial forecast of our energy future. Five years into this process, the verdict is sobering: we are not transitioning fast enough to meet the goals of the Paris Agreement.

The energy transition is remarkable in its scope and pace. The energy system is also characterized by a remarkable inertia as policymakers have been unable to hasten decarbonization even faster. With COP 26 almost upon us, it is as important as ever to understand where we are heading and why the planet will warm by 2.3 degrees if we do not succeed with further increasing the pace of transition.

Let’s begin with the remarkable. The energy mix is rapidly decarbonizing and will be split equally between fossil and non-fossil fuels by the middle of the century. Electrification is the hero of the story; electricity is set to meet 38% of energy demand by 2050, which is a doubling from today’s level. The majority of electricity is fossil based today, but it will predominantly be produced by wind and solar.

If electrification is the headline grabbing caped crusader, then energy efficiency is the studious assistant behind the scenes making it all possible. Even as population and economic output grows, the amount of energy required by humanity will level off from the middle of next decade. This also means that we will be spending less on energy as a proportion of GDP, a fact worth remembering for policy makers as they contemplate extraordinary climate measures.

Looking at the flip side; an inability to act decisively is seen in the hard-to-abate sectors like heavy industry, trucking and aviation, which cannot be easily electrified. These sectors account for around 25% of carbon dioxide emissions and emissions will remain stubbornly high as solutions have not received the policy backing they require to scale. Hydrogen, and derivatives from hydrogen often called e-fuels, offer the most likely path to decarbonize these sectors – but we predict it will only constitute 5% of the energy mix by mid-century.

The pandemic sparked a number of sound bites that became political mantras. Much contemplation was given to what the “new normal” would be and then many leaders promised to “build back better”. The level of fiscal intervention unleashed to alleviate the economic impact of the pandemic had the potential to move the dial on how we consume and produce energy, but, apart from in the European Union, this money has been used to build back rather than build back better. The airlines, for example, received billions in bailouts. If we really were to build back better, then greater emphasis should have been placed on investing in biofuels and synthetic fuels as part of the aid packages.

If the pandemic spending can be classed as a missed opportunity, then the upcoming COP 26 meeting cannot afford to be. The response to COVID 19 demonstrates that governments can mobilize great fiscal measures in the face of adversity. Glasgow must be the time to act.



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