Oil & gas in a low carbon world - Energi og Klima

Oil & gas in a low carbon world

The International Energy Agency (IEA) is often critiqued for being pro fossil fuel and anti-renewables, but are their scenarios so different to those developed by the broader researcher community?

Klimarisiko påvirker beslutninger om oljeinvesteringer - blant mye annet.Photo: Pete Markham cba

No one seems to like the International Energy Agency’s (IEA) World Energy Outlook (WEO) scenarios, at least, not from the environmental side. They get a particular ire from renewable advocates.

Perhaps they have been bad at solar and wind, but they have not fared so well with CCS either, or China, or …

The IEA is trying to understand where the world is going, and I don’t think anyone has been particularly good at that. The point of scenarios is not to predict the future, but to explore the consequences of key uncertainties moving forward.

If the IEA WEO scenarios get a hard time, then who does better? From a climate perspective, one would obviously look at the scenarios assessed by the IPCC. The research community has now developed a new set of scenarios, called the Shared Socioeconomic Pathways (SSPs), that will frame climate policy discussions for the next decade, or more, and feed into the next IPCC assessment reports.

How do the IEA scenarios stack up against those assessed by the IPCC?

A comparison is not trivial, as scenarios often serve different purposes. What are the key conceptual differences?

International Energy Agency (IEA)

The IEA has two sets of scenarios, those in the Energy Technology Perspectives (ETP) and the World Energy Outlook (WEO). The ETP and WEO are both updated annually, with reports of about 500 pages each.

I will focus here on the recently released WEO scenarios, of which there are three.

The Current Policies Scenarios (CPS) considers the impact of only those policies and measures that are firmly enshrined in legislation as of mid-2017.

The New Policies Scenario (NPS) is the central scenario of the WEO, and aims to provide a sense of the direction in which latest policy ambitions could take the energy sector. It builds on the Current Policies Scenario, by including the effects of announced policies, as expressed in official targets and plans. The New Policies Scenario differs from the Nationally Determined Contributions (NDCs) of the Paris Agreement, as the IEA considers policies and not targets.

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The Sustainable Development Scenario (SDS) builds on the Sustainable Development Goals (SDGs) of the United Nations and aims to provide an energy sector pathway that integrates three closely associated but distinct policy objectives: to ensure universal access to affordable, reliable and modern energy services by 2030 (SDG 7.1); to substantially reduce the air pollution which causes deaths and illness (SDG 3.9); and to take effective action to combat climate change (SDG 13).

The WEO scenarios finish in 2040, which limits the discussion of long-term consequences of climate policy.

The three WEO scenarios for Primary Energy Demand (left) and the associated CO₂ emissions (right).

Intergovernmental Panel on Climate Change (IPCC)

The IPCC does not generate scenarios, but every five years or so, the IPCC assesses the scenario literature. In the Fifth Assessment Report, released in 2014, there were about 1200 scenarios assessed in Working Group 3 (Chapter 6) covering about 100 pages and with an accessible database.

In preparation for the Sixth Assessment Report, the Integrated Assessment Modelling Consortium (IAMC) has developed a new scenario framework, called the Shared Socioeconomic Pathways (SSPs), that will be the foundation of future scenario work. Currently, only a subset of the scenario data is available, limiting the ability of researchers to work with the scenarios.

The SSP framework is rather complex, and would require a blog post to explain. In short, five narratives for the future of the world were developed, and these qualitatively explore key uncertainties along the dimensions Challenges to Mitigation and Challenges to Adaptation.

The SSP narratives are then quantified to give scenarios of population, economic activity, and energy consumption, and when climate policies are included, they lead to different levels of radiative forcing at the end of the century.

The different SSPs have very different baselines, and very different challenges to avoid different temperature levels. To take too extremes, in a world with “regional rivalry”, there is no model that can avoid 2°C of warming, while in a “sustainability” world, the baseline without any climate policy has only modest warming.

Each sub-figure is a different Shared Socioeconomic Pathway (SSP), and by using Shared Policy Assumptions (SPAs), the SSPs can be forced to reach different radiative forcing levels in 2100.

This rich scenario structure is too complex for a comparison of the WEO scenarios, and we collapse the different SSPs into one figure.

The figure shows «net emissions», which includes CO2 emissions from fossil fuel combustion, cement, net land-use change, and carbon dioxide removal (generally bioenergy with carbon capture and storage). The bold scenarios in each case (with white markers), are known as «marker scenarios», that will be analysed further with complex climate models.

Here all the Shared Socioeconomic Pathways (SSPs) are merged into one figure, and coloured in terms of the radiative forcing level in 2100 (W/m²). The temperature increase in 2100 is the full range for the median temperature in 2100 from each scenario run.

Comparing the WEO and other 2°C scenarios

A comparison of these different scenarios is not easy. Each scenario set has a different socioeconomic background, and even when the energy system is aggregated to eight or so variables, there are still eight moving parts, making comparisons a little like whack-a-mole. The same temperature outcome, could be achieved with very different energy systems.

My main goal is to assess whether the IEA gives a warped view of the world, promoting fossil fuels at the expense of renewable energy. To make comparisons easy, I only compare with scenarios that avoid 2°C of warming at the end of the century. That is, after all, where we want to go!

It is important to note that the SSPs have a large range, since they are based on six different Integrated Assessment Models (IAMs), and the five different SSPs (1-5), shown above, have very different challenges to mitigation. The WEO only has three scenarios from one model, and does not include model or socioeconomic variations. Comparisons should not be made against individual scenarios, but rather, the “cloud” of scenarios.

The Sustainable Development Scenario has primary energy consumption consistent with most 2°C scenarios. Likewise, all 2°C pathways require rapid reductions in (unabated) coal consumption. The results for oil are quite different, with the Sustainable Development Scenario having generally lower oil consumption compared to most other 2°C scenarios. In fact, oil consumption in the New Policy Scenario is not so different to many 2°C scenarios. Gas consumption is more nuanced, with a large variation in gas pathways for different 2°C scenarios. To understand the future of gas in a low carbon world is going to require much more analysis.

The grey scenarios are the Shared Socioeconomic Pathways (SSPs) that have radiative forcing of 2.6W/m² in 2100, consistent with a median temperature of 1.7-1.8°C above preindustrial. The large range is due to different models and different socioeconomic pathways (SSPs).

The WEO is often critiqued for its scenarios of wind and solar consumption. Though, most of those critiques focus on the New Policies Scenario. The IEA argues that the New Policies Scenario does not anticipate raised political ambition to deploy more solar and wind to avoid 2°C of warming. The Sustainable Development Scenario, perhaps better for comparisons, has higher solar and wind generation then most other 2°C scenarios, though, these have also been critiqued.

The WEO has relatively low bioenergy consumption, and it is lowest in the Sustainable Development Scenario. This is in stark contrast to most other 2°C scenarios, which are based on high levels of bioenergy, particularly after 2050 and particularly when linked to carbon capture and storage. Nuclear and Hydro consumption vary little by scenario, though, some 2°C scenarios have particularly high levels of nuclear.

The grey scenarios are the Shared Socioeconomic Pathways (SSPs) that have radiative forcing of 2.6W/m² in 2100, consistent with a median temperature of 1.7-1.8°C above preindustrial. The large range is due to different models and different socioeconomic pathways (SSPs).

Perhaps the biggest difference between the WEO and other 2°C scenarios is the deployment of carbon capture and storage. Most 2°C scenarios have large-scale deployment of CCS, but over the years, the WEO has continually revised CCS deployment down. All else equal, even accounting for whack-a-moles, less CCS means less fossil fuels. The CCS issue alone, makes the Sustainable Development Scenario somewhat more conservative in terms of fossil fuel consumption in relation to other 2°C scenarios.

Comparisons with CO2 emissions is difficult, as the IEA does not include cement but others do (and the scenario data does not allow disaggregation). The Sustainable Development Scenario is at the lower end of most fossil fuel and industry CO2 pathways, but including cement would bring them closer together (about 5% of the total emissions in 2015).

Beyond 2040, the Sustainable Development Scenario diverges into two pathways. One consistent with 2°C, reaching net-zero emissions in 2100, and one towards 1.5°C, reaching about -20GtCO2/yr by 2100 requiring large-scale carbon dioxide removal. The WEO does not explore pathways beyond 2040, so it is not known how 1.5°C-2°C would be met, and what the implications are for bioenergy and carbon capture and storage, and carbon dioxide removal more broadly.

The grey scenarios are the Shared Socioeconomic Pathways (SSPs) that have radiative forcing of 2.6W/m² in 2100, consistent with a median temperature of 1.7-1.8°C above preindustrial. The large range is due to different models and different socioeconomic pathways (SSPs).

Moving forward with the WEO scenarios

Based on this simple, and quick, overview, I don’t see a case that the WEO scenarios are outliers that favour fossil fuel consumption and downplay non-fossil sources. In fact, in many aspects, the Sustainable Development Scenario is more aggressive than most other 2°C scenarios, including on fossil fuel reductions. The WEO is certainly more conservative on CCS, which feeds through to lower fossil fuel use.

The problems with the WEO, in my opinion, lie elsewhere. The WEO tends to highlight the New Policies Scenario, with the Sustainable Development Scenario seen as some sort of afterthought, an added extra. The figures above show that the New Policies Scenario is by no means aggressive, and indicates the current lack of ambition in climate policy.

Sure, maybe solar and wind will be deployed much faster than indicated by the New Policies Scenario, but this has little climate consequence if it does not go hand-in-hand with reductions in fossil fuels emissions. As reported earlier, emissions are set to rise in 2017, and it is hard to see that they will go down in the next few years.

A more pertinent question is why the WEO focusses on the New Policies Scenario. Is it because of the IEA history in energy security questions, trying to understand where the world is going and not where it should be going?

Many scenarios focus on something similar in spirit to the New Policy Scenario. One example I wrote about recently, is the DNV GL Energy Transition Outlook, which tries to see where the world is going, not where it should be going! The Statoil Energy Perspectives, also focusses on a central scenario, in much the same way as the IEA.

For climate policy discussions, more focus on how to bridge the gap between the New Policies Scenario and the Sustainable Development Scenario would be useful. It may also weaken the critiques of the IEA, as the Sustainable Development Scenario fits in well with other 2°C scenarios, but arguably, the IEA takes a more critical view on technological feasibility.

While I think scenarios of where we are going (New Policies Scenario) are important, they are not much use unless placed in the context of where we need to go (Sustainable Development Scenario).

Oil and gas in a low carbon world?

What does the WEO, and indeed other 2°C scenarios, say about the future of oil and gas.

On the assumption we move towards 2°C, then broadly speaking:

  • Coal: Rapid declines starting immediately;

  • Oil: Depending on decline rate of existing fields, there is limited space for new oil;

  • Gas: A more complex discussion, with a broad range of outcomes;

  • Non-fossil sources: All have to grow rapidly, and displace fossil sources;

  • CCS: Likely needed in various niche applications, but the required scale is uncertain;

  • Beyond 2040: a broader range of technologies, including carbon dioxide removal and even solar radiation management.

On the assumption we don’t move towards 2°C? That would be the current New Policies Scenario, or some variation of it. That would mean new coal, oil, gas, and modest growth in renewable energy. If governments aren’t willing to push society towards a Sustainable Development Scenario, what role should business play in taking the lead?

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