The global energy crisis has led to unprecedented conditions in energy and commodity markets, supply- chain challenges and an extraordinary economic environment that is challenging policy makers and the private sector. In the midst of the turmoil, the energy transition has continued and even accelerated, as the economic competitiveness of key clean energy technologies improves against fossil fuels, and many governments seek alternatives to volatile energy commodities.
While the 2022 UN climate talks in Egypt have not led to another step-change in ambition for the low-carbon transition, it remains the case that the majority of the world’s economies and emitters are committed to reaching net zero by the middle of the century, and to the goals of keeping global warming well below 2 degrees Celsius and pursuing efforts for 1.5C.
This year’s New Energy Outlook provides two new scenarios to map how the energy transition may proceed from here – a Net Zero Scenario that charts new country-level pathways to global net-zero emissions by 2050, meeting the goals of the Paris Agreement, and an Economic Transition Scenario, which shows how economic forces and technology tipping points can drive a transition without further policy action. The last ten years of technological development, scale-up and industrial experience have brought several clean energy technologies – wind and solar power, battery storage and electric vehicles – to the point where they can outcompete their fossil-fuel-burning counterparts on an economic basis in most geographies, or soon will. Our Economic Transition Scenario explores a future where the global energy transition is primarily driven by these changes in the economic competitiveness of key technologies, without concerted policy actions to accelerate the transition beyond those policies in place today. It can be interpreted as a world where policy makers and the private sector pursue only the technological transformations which ‘pay for themselves’.
In our updated Scenario, renewable energy dominates the power sector by 2050, with wind (36%) and solar (29%) supplying nearly two-thirds of the world’s electricity demand – a result of their cost-competitiveness in the vast majority of geographies already today. The emissions intensity of the global power system drops by 74%, even as greater electrification and economic growth drive overall power demand up by two-thirds, to nearly 39,000 terawatt-hours. Global power-sector emissions peak this year at 13.7 gigatons of CO2 equivalent, thanks to the post-Covid recovery and the energy crisis, and decline to 5.8 gigatons of CO2 equivalent by 2050 – an impressive 57% reduction, but still far from net zero.
Throughout this transition, the world adds almost 23 terawatts of new power capacity, of which solar, wind and battery storage account for 85%. The annual rates of deployment for wind and solar peak at roughly three times their annual-build records set in 2021.
Transport (including road, aviation, shipping and rail) is the only other sector on track to reduce emissions by 2050, with the rise of electric vehicles in the road segment driving a structural transformation away from liquid fossil fuels and toward reliance on electricity. This yields a 22% reduction in overall (Scope 1) transport emissions by 2050, or 13% after accounting for emissions from power generation. Taken together, electric passenger vehicles, commercial vehicles, buses, trucks and two- and three-wheelers create an additional 5,640 terawatt-hours of power demand by 2050 (about 14% of global electricity consumption), but their efficiency advantage against internal combustion engines means that final energy consumption in all of transport is down 21% by 2050, despite rising demand for all modes of transport.
These efficiency gains, and a broader decoupling of economic growth from energy consumption, are apparent in the overall picture. Global GDP rises by a factor of 2.2x to 2050 in our Economic Transition Scenario, but the amount of ‘useful energy’ consumed in the economy only rises 35%, to 383 exajoules. Strikingly, primary energy consumption grows by a meager 4% to 2050, its gains hobbled by the massive efficiency improvements associated with the electrification of end uses, and the switch from coal- and gas-fired power generation to renewable power.
Unlike transport, emissions from industry remain largely flat, and those from buildings rise by 16% to 2050. This is due to the lack of commercially available, economically competitive technology solutions for abating emissions in these sectors, in our ETS.
The dramatic transformations in the power and road transport sectors eliminate around half of the emissions that might otherwise exist in 2050 under a ‘no transition’ counterfactual scenario, but this is far from the net-zero result required to stay within the climate-safe boundaries set by the Paris Agreement. By 2050, emissions have fallen 29% but unabated coal, oil and gas still emit 24.3 gigatons of CO2 per year. The result is a trajectory consistent with 2.6C of global warming, with a 67% confidence interval.
