A new report, produced in partnership between Carbon Tracker and the Grantham Institute at Imperial College London, analyses the potential for continued cost reductions in solar photovoltaics (PV) and electric vehicle (EV) technologies to displace demand for currently dominant fossil fuels and mitigate CO2 emissions. In doing so, the report reviews the validity of continuing to base corporate strategies on ‘business as usual’ scenarios.
The scenario analysis warns that big energy companies are seriously underestimating low-carbon advances with a business-as-usual (BAU) approach, and that stranding of fossil fuel assets is likely as the low- carbon transition gathers pace. Growth in electric vehicles (EVs) alone could lead to 2 million barrels of oil per day (mbd) being displaced by 2025 – the same volume that caused the oil price collapse in 2014-15. This scenario sees 16mbd of oil demand displaced by 2040 and 25mbd by 2050, in stark contrast to the continuous growth in oil demand expected by industry.
“Electric vehicles and solar power are game-changers that the fossil fuel industry consistently underestimates. Further innovation could make our scenarios look conservative in 5 years’ time, in which case the demand misread by companies will have been amplified even more,” said Luke Sussams, senior researcher at Carbon Tracker.
The power and road transport sectors account for approximately half of fossil fuel consumption, so growth in solar photovoltaic (PV) and EVs can have a major impact on demand. The report argues that the use of BAU scenarios should be retired. Scenarios should now apply, as a minimum, the latest cost reduction projections for solar PV and EVs, along with emissions commitments nations have made in their Nationally Determined Contributions (NDCs) under the Paris Climate Agreement, to reflect the current state of the low-carbon transition.
Global warming
Global average temperature rise is limited to between 2.4°C (50% probability) and 2.7°C (66% probability) by 2100 in this scenario – far below the BAU trajectory towards 4°C and beyond used by fossil fuel companies. If climate policy exceeds the pathway prescribed by NDCs, and overall energy demand is lower, cost reductions in solar PV and EVs can help limit global warming to between 2.1°C (50% probability) and 2.3°C (66% probability). Efforts must be made to align with this more carbon-constrained trajectory.
Explore more by reading the report herebelow
Source & Image credit: Carbon Tracker
