World off track to hit 2 degrees C global warming goal: analyst

Energy use scenarios reveal the world is off track to meet the 2 degrees Celsius average global temperature rise limit set by the Paris Agreement.

S&P Global Platts Head of Future Energy Analytics Roman Kramarchuk, speaking at the London Energy Forum 2022 on 21 February, explained the company's reference case scenario showing the "most likely" outcome.

The reference case looked at the energy consumption in 143 countries through to 2050, using commodity data to forecast which sources would provide the most energy in terms of barrel of oil equivalent. The "most likely" reference case diverged from a separate scenario that showed energy consumption where global warming was limited to 2 degrees C.

Energy demand is set to rise alongside the population. "Where is that energy coming from? That is the key question," said Kramarchuk.

During the COVID-19 pandemic, lower energy use caused a dip in CO2 emissions. However, the drop was only 10% of the reductions required to align with a 2 degrees C scenario by 2050.

Asked whether national net-zero goals are achievable, Kramarchuk called the national phase-outs for coal pledged at the Glasgow climate conference a "signpost" for future 2 degrees C scenario alignment. He noted that coal production was set to decline in the reference case.

Renewables, EV to grow either way

Under S&P Global Platts' current reference case projections, the use of renewables rises while the use of coal, natural gas, and oil stays relatively stable through 2050.

"You see how renewables grow there, and what I'd like to point out is that [the] growth of renewables that we're seeing is more rapid than for any other energy usage," said Kramarchuk.

"Historically, if we look back to the 19th century onward, that level of growth [of renewable energy] is faster than we've seen anywhere," said Kramarchuk. The reference case also assumes major uptake of electric vehicles.

To stay within the scope of a 2 degrees C scenario, the world must grow its renewable energy use even more than currently projected. But Kramarchuk questioned whether this level of renewable development was possible.

Carbon price policies too weak

Forecasts reveal that expected CO2 prices are not driving enough change to align with a global 2 degrees C scenario. CO2 prices will reach new records in 2022 and 2023 before plateauing and decreasing, said Kramarchuk.

Some countries have carbon pricing schemes that limit emissions, but not enough. "We have only just over 20 schemes in operation around the world. But … compliance carbon markets only represent 16% of global greenhouse emissions," said S&P Global Platts EU/UK Compliance Analyst Michael Evans.

"I guess looking at it from a [policy perspective], the argument would probably be that we need to do more, both in terms of global coverage of emissions schemes, and also the scope of the schemes themselves," he added.

Evans pointed to gaps in scope, for example in Europe's main carbon pricing mechanism, the EU Emissions Trading System (ETS). "We don't see an ETS of any type covering 100% of a jurisdiction's economic or sectoral coverage. We see sort of a fragmented picture, where we've got regional schemes, we've got city-based schemes, we've got multinational schemes, but … the coverage of those policies is very mixed," he said.

China recently launched a national carbon trading market, although it only covers the power sector for now. "We are seeing more schemes due to come online. We are seeing more pilot schemes in the pipeline. But we need to see more, and very careful management of how those policies broaden to more sectoral coverage of the jurisdiction's economy," Evans said.

Peak oil a decade too late

Industry analysts and forecasters have repeatedly attempted to pin down dates for peak oil and gas, the year when production will reach its highest mark.

Peak oil and gas is not set to occur in time for the world to attain the 2 degree Paris Agreement goal under S&P Global Platts' reference scenario.

Under a 2 degrees scenario, oil production would need to peak in 2025 and natural gas output would need to peak 2024.

Current projections are for the oil and gas sectors to each overshoot their peak deadlines. "[Peak oil] is going to be somewhere in the 2030s. And in our reference case, you know, we had to pick an exact year, and it would be in the later 2030s," Kramarchuk said.

"We've done studies as to what actually has to happen on the ground to get to [a 2 degrees C] case, and when you look into what really has to happen, these are the reasons why that is not our most likely case," Kramarchuk said.

This is partly because natural gas remains "strong" to 2050 under existing conditions in the reference case. A 2 degree C aligned case featuring a renewable-heavy energy system requires lower oil and gas usage than what is forecast.