Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Sign in to the product or service center of your choice.
A global sense of urgency around the impacts of climate change
reflects the record-breaking series of disasters around the world
over the past two years. As some 75% of global greenhouse gas (GHG)
emissions come from the use of energy, the pressure for action is
squarely on changing the future fuel mix - and quickly.
Four sets of key actors in policy, regulation and investment
continue to ramp up pressure for change:
Government policies strengthened to reduce
Greenhouse Gases (GHGs) faster. By May of this year, some 73% of
global GHG emissions were covered under some form of state net zero
emissions target.
Companies increased emissions reductions
targets. Multiple energy and non-energy companies announced much
stronger emissions reduction commitments 2020 as they were faced
with demands for more stringent goals and more specific
milestones.
Financial sector pressures increased on
companies. Financial investors ramped up demands for portfolio risk
assessments, disclosures consistent with the Task Force on
Climate-related Disclosures (TCFD) recommendations, and strong
targets to reduce emissions across the value chain. Companies are
increasingly being requested by investors and shareholders to
explain how their portfolios would perform in a transition toward a
net zero or 1.5ºC world—whether or not they expect that future
to be a reality.
Activists and shareholders won climate-related
resolutions, replaced board members, and sued companies, arguing
that lower emissions were a matter of human rights.
But targets are only words until they turn into actions. Change
is already here, and more is coming. But how quickly can a global
economic infrastructure with 80% of primary energy needs currently
met by fossil fuels (oil, coal and natural gas) shift to lower
carbon sources?
To answer this question and provide companies with more than one
potential future, IHS Markit outlines three forward-looking energy
outlooks to 2050 built bottom-up by our country and sector experts.
In addition, we outline two net zero cases that start from the
predetermined goal of reaching a pathway to net zero global GHG
emissions by 2050 and work backwards.
Scenarios and net zero assumptions
Each of the integrated outlooks embodies different economic,
geopolitical, climate policy, costs and technology assumptions that
are plausible.
Inflections, the base case scenario, includes pivotal shifts in
social, policy, and market forces that drive fundamental change in
energy markets. Although governments are strongly committed at the
outset to climate change actions, the marketplace and company
actions are often the leading drivers in moving investment toward
clean fuels. The energy transition accelerates—but moves in
different ways and at different speeds around the world.
Green Rules outlines a super-charged reaction following the
pandemic and climate-related disasters where populations demand
strong government action and cooperation to provide security around
health and physical environment. There is a revolutionary shift in
the energy transition, but even then not all climate targets are
met.
Discord projects a dysfunctional world in which the political
turmoil of 2020 returns after a short rebound, hampering economic
growth and creating investment uncertainty and inertia. Some trends
toward decarbonization continue, but many fade away.
A bridge to net zero
Net zero cases are fundamentally different from forward-looking
scenarios that project outcomes based on articulated and plausible
assumptions. Our net zero cases, conversely, begin with a
predetermined outcome of reaching global net zero GHG emissions by
2050 and "backcast" to the present.
Unlike some outside analyses, we do not believe that the massive
energy and industrial infrastructure of today can change overnight.
Instead, we construct a "bridge" from our faster transformation
scenario, Green Rules, to the net zero cases. We assume that even
very strict and global climate-related policies put into effect in
the next few years could not start to impact emissions until around
2027. This emissions "overshoot" creates the need to compensate in
later years to reach the final goal of net zero.
We outline two different cases which reflect both the
uncertainty around the long-term scale of carbon capture and the
differences of opinion among policy makers over the use of an
"enabler" of hydrocarbons.
Accelerated Carbon Capture and Sequestration (ACCS) includes
widespread use of CCS to offset emissions from energy as well as
hard-to-abate industrial sectors. Annual sequestration by 2050
equals about one-quarter of today's energy-related emissions.
Multitech Mitigation (MTM) includes only a small amount of CCS,
and instead relies on diversification of energy supply and
extensive electrification of all sectors and economies based on
renewable capacity. This case also includes strong advances in
end-use efficiency and conservation.
Emissions and energy outcomes differ widely by scenario
and case
Each of the three scenarios and two net zero cases has different
implications for primary and final energy demand, and for global
GHG emissions and temperature paths going forward. None of the
scenarios gets close to net zero by 2050. The net zero cases, which
by definition reach their goal, must continue to produce negative
emissions for decades after mid-century in order to reach the Paris
Agreement target of limiting global average temperature rise to
1.5⁰C by 2100.
Susan Farrell, Vice President on the Climate and
Sustainability team, heads the IHS Markit Energy and Climate
Scenarios, which project five different integrated trajectories for
oil, gas, coal, wind, solar, nuclear, and other energy sources out
to 2050 at a global and key country level.
