BusinessNZ Energy Council


Oil and gas critical to global emissions reduction effort – BP

Oct 17, 2019 | News

Oil and gas will remain a key part of the global energy mix for decades to come if the world is to improve access to energy for a growing population and at the same time reduce emissions, BP group chief economist Spencer Dale says.

Modelling by the firm shows that even if non-hydro renewables were to grow at twice their current rate and emissions in 2040 were to fall to levels last seen in 1980, oil and gas would still be providing about half the world’s energy, Dale said in Wellington yesterday.

Achieving net-zero carbon will require a mix of renewables and fossil fuels and a much greater focus by policymakers on carbon capture and storage, he told regulators and executives at a BusinessNZ Energy Council function.

“Demonising” oil and gas or presenting the climate challenge as a choice between renewables or fossil fuels, will not help.

“The world needs many fuels and many technologies and many energies for many years if we are going to achieve the Paris climate goals,” he said.

“Even in a scenario entirely consistent with meeting Paris; even in a scenario with renewables growing ‘off the chart’ relative to anything ever seen in history, you will still need to see trillions of dollars of investment in oil and gas.”

New Zealand’s government last year shocked the energy sector by banning new offshore exploration as part of a long-term climate strategy in which fossil fuels were “not our future.”

It is instead backing trials of renewably made hydrogen but has resisted funding trials into carbon capture and storage or hydrogen production that relies on CCS to be emissions-free.

Against the expert advice of the Interim Climate Change Committee, it is also persisting with a strategy to make the power sector 100 percent renewable by 2035, a policy the committee believed would be costly and distracting for little actual emissions reduction. Power generation here is already about 85 percent renewable.

Dale observed that, at current trend rates, global emissions are not being reduced fast enough to meet the 2015 Paris target to limit global warming to about 1.5 degrees Celsius.

The strong take-up of wind and solar during the past decade has largely been offset by reductions in the nuclear generation fleet. Much emissions policy has also been focused on decarbonising transportation when, for most countries, power generation is the biggest producer of emissions, he said.

Globally, the share of fossil fuels in power generation is virtually unchanged.

“Collectively, for the world as a whole, we have made precisely no progress over the last 20 years.”

While the world had done a “fantastic” job supporting the wind and solar industries to the point they no longer need subsidies in many countries, policy support for carbon capture, use and storage has been lacking.

Unless that picks up rapidly in the next decade, Dale said the Paris targets won’t be met, or the world will be on a “very costly” path to meet them.

“Almost every single scenario I have seen has a significant role for carbon capture, use and storage and yet we’ve seen almost no policy support and incentives,” he told BusinessDesk.

Governments should also be “colour-blind” as to whether hydrogen is produced from ‘green’ sources, or is ‘blue’ and reliant on CCS.

“It doesn’t matter how the hydrogen is produced as long as it zero-carbon and as cheap as it possibly can be.”

The global finance community is taking a harder line on high-emission fuel development. Some government-controlled investment funds are cutting holdings in firms tied to coal or oil sands production, while some banks – often under pressure from customers – are also restricting lending to coal-fired generation projects.

Dale observed that decarbonisation is a lot easier in a rich, developed country where energy demand tends to be flat, than in a developing country which is likely to be a lot poorer and where energy demand is growing very rapidly.

Few countries are pursuing decarbonisation with more determination than China, he said. It, and India, increased their use of renewables by more than 25 percent last year, yet each were also forced to use more coal-fired generation to meet rising demand.

“It’s not because they are wedded to coal. They are growing all these other fuels like crazy, and it’s just not enough. This idea that we should stop investment in coal – I don’t know what they would say to the energy ministers in these countries.”

Dale noted that, while energy demand is forecast to increase by 20-30 percent out to 2040, all of that demand is effectively coming from developing nations.

About 80 percent of the world’s population uses less than 100 gigajoules of energy a year – a threshold the United Nations considers a yardstick of well-being. New Zealanders use about 200 GJ per capita a year whereas the figure in China is just under 100 GJ and about 25 GJ in India.

Dale said that, at current rates, about two-thirds of the world’s population would still be “energy deficient” by that measure in 2040.

Unless the world focuses on meeting both energy demand and reducing emissions, the “vast majority” of the world’s population risks being left behind.

“I don’t want global poverty to be my solution to climate change. We’ve got to find a more efficient way of doing it than that.”

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