Emissions plunged last year, but at a ‘scarily high’ price
By Linda Hsieh, Editor & Publisher
BP released its newest Statistical Review of World Energy in July, supplying some valuable context for understanding the extent of the impact that the pandemic had on the global energy system last year. While most of the findings aren’t surprising, they do shed some light on how the energy system behaved under extreme pressure. Here are some quick highlights:
• World energy demand fell by an estimated 4.5%, the biggest reduction seen since World War II.
• Oil consumption fell by 9.3%, or 9.1 million bbl/day. BP’s Chief Economist Spencer Dale called this reduction “far bigger than anything seen in history.” In fact, the fall in oil demand accounted for three-quarters of the decline in total energy consumption.
• Natural gas showed much greater resilience than oil. Demand fell by a little over 2%.
• While OPEC+ proved that they were both able and willing to step in and stabilize oil markets (after overcoming initial disagreements), whether they will always do so is uncertain. If there is a more sustained fall in oil demand, such as what the industry might see in a net-zero transition, there may be more incentive for OPEC members to protect market shares instead.
• Renewable energy, excluding hydropower, rose by 9.7%. This was driven by strong increases in wind and solar generation. However, this growth in renewables “hasn’t made even the smallest dent in total coal generation,” Mr Dale pointed out. Coal generation is essentially unchanged in 2020 from its 2015 level. “There’s still a long way to go to squeeze coal out of the power sector.”
• Global carbon emissions from energy use fell by 6.3%, or over 2 gigatonnes of CO2. This level of carbon emissions had not been seen since 2011. And while this is the type of decline that the world needs to see for the next 30 years in order to meet the Paris climate goals, it was driven by a huge loss in economic output and activity. Mr Dale said the emissions cut equates to a “scarily high” implied carbon price of almost $1,400 per tonne. “The challenge is to achieve sustained falls in emissions of a similar scale without causing massive disruption and damage to everyday lives and livelihoods.” Moreover, because the decline was triggered by unprecedented lockdowns, the world will likely see a reversal as economies open back up in 2021 and into 2022.
• The number of companies that have stated ambitions to reach net zero has increased more than sixfold since 2019, to more than 3,000. This correlates to the surge in ESG-related investments. Inflows to ESG-related funds have increased from less than $30 billion in 2015 to more than $330 billion in 2020, an 11-fold increase.
A practical transition
It’s critical to keep in mind, amidst the world’s intensifying focus on climate change, that efforts to curb carbon emissions should be done “in the context of sustainable development and efforts to eradicate poverty,” Mr Dale said. The World Bank estimates that the COVID-19 pandemic has made basic electricity services unaffordable for an additional 30 million people, the first reversal in six years. There’s also an estimated 2.6 billion people who still don’t have access to clean cooking facilities. Climate actions are very important, but they should not make it any harder for people in developing countries to improve their standards of living.
Climate action must also be rooted in facts. The energy transition will require renewables, but it will also require oil and natural gas for many years to come. This means drilling contractors, like many others, have a key part to play, whether it’s developing fuel cell technology or energy storage systems (Page 12), improving the fuel efficiency of rig power systems (Page 20), or through geothermal drilling (Pages 34 and 36). Read on in this issue to learn about real-world innovations happening out in the field right now. DC
Linda Hsieh can be reached at linda.hsieh@iadc.org.
Click here to download the 2021 Statistical Review of World Energy.
