3.1 Key trends
Despite growing momentum, a huge acceleration is required to transform energy and industrial systems in line with a 1.5°C pathway. As the International Energy Agency has confirmed, keeping to this goal means no new fossil-fuel projects. This transition will create many jobs, but more focus is needed on ensuring a just transition.
- Energy systems must transform for 1.5°C
- Overseas coal finance is being phased out
- Low carbon electricity has overtaken fossil fuel power
- Clean technologies are the key to energy access
Potential emissions from developed fossil-fuel reserves exceed carbon budgets in order to maintain a sustainable climate. Recent announcements have only closed the gap to 1.5°C by 11-14%.
“Developed reserves“ refers to those reserves that are expected to be recovered from existing wells and installed facilities or, if facilities have not been installed, that would involve a low expenditure (for example, when compared to the cost of drilling a well) to put the reserves on production.
Even if global coal use were phased out overnight, developed oil and gas reserves would still push the world beyond 1.5°C
Oil Change International/Reclaim Finance, “NGFS scenarios: Guiding finance towards climate ambition of climate failure?“
Net zero targets are being set at all kinds of scales and types of organisations. There are now hundreds of cities with such targets.
The initial lockdowns in March/April 2020 put a huge dent in emissions, but they have quickly come back to near pre-pandemic levels as economies have reopened. In the first quarter of 2021 China’s CO2 emissions grew at their fastest pace in more than a decade, increasing by 15% year-on-year, new analysis for Carbon Brief shows.
Half-year and quarterly figures are expressed at an annual rate.
Though some countries continue to invest in coal, global demand is now clearly at a tipping point, and is in decline.
EJ = exajoule.
Renewables were the only source of electricity generation to grow last year, despite the pandemic. The International Energy Agency raised its forecasts for wind and solar capacity growth by 25% in a single year. Estimates also suggest that renewables investment will surpass upstream oil and gas investment in 2021.
US GDP is on a long-term rising trend even as primary energy consumption declines, a sign of gradual improvements in energy efficiency.
The distribution of energy consumption remains along income lines, though the historical responsibility for emissions is contested terrain.
According to the Global Carbon Project, for fossil fuel-related CO2 emissions between 1850 and 2019, the US is responsible for 25% and China for 13%. But if you shorten the timeframe to 1990-2019, then China is responsible for 21% and the US for 19%. China’s annual emissions are now larger than all OECD countries combined.
3.2 Accelerating the transition to zero-carbon energy
The cost reductions in photovoltaic technology and wind are astonishing.
Renewables are still small, but account for a fast-rising share of global energy consumption.
Though daunting, this rate of change has already been seen in some markets. The rate of deployment in UK offshore wind has increased from an average of 250MW/yr across 2005-2010, to 1200MW/yr over the last five years.
The UK is now half way to net zero, compared with emissions in 1990, a drop largely achieved via reduced coal consumption.
There are, however, question marks over whether developing countries are receiving enough investment for energy transition.
There is no shortage of money worldwide, but it is not finding its way to where it is most needed. Governments need to give international public finance institutions a strong strategic mandate to finance clean energy transitions in the developing world.
Fatih Birol, IEA Executive Director
For the first time ever, low carbon energy (renewables plus nuclear) accounts for a higher share of global electricity supply than coal. In the EU, renewables now contribute more to the electricity mix than all fossil fuels combined.
2020 was a tipping point for wind power in China. China’s renewable-energy generation is expected to soar over the next few decades.
China will strictly control coal-fired power generation projects, and strictly limit the increase in coal consumption over the 14th five-year plan period [2021-2025] and phase it down in the 15th five-year plan period.
President Xi Jinping, Leaders Summit on Climate, 2021
Industrial coal consumption has fallen by 75% since the 1970s and 50% in the past six years. Coal power stations are being retired in their dozens.
Over the past year, significant progress has been made towards ending overseas coal finance. The UK announced that it would end international support for fossil fuels in December 2020, including export finance, aid funding and trade promotion. It said very few exceptions would be made (and few if any will be made for coal).
In the months since, first South Korea and then Japan and the rest of the G7 countries, plus the EU, agreed to end international support for coal in 2021. This leaves only China as a major financier of coal projects without such a commitment.
Countries are also stepping up their domestic commitments to phase out coal. Globally coal retirements are accelerating, but in 2020 there was still a net-capacity addition.
Recognising that continued global investment in unabated coal power generation is incompatible with keeping 1.5°C within reach, we stress that international investments in unabated coal must stop now and commit to take concrete steps towards an absolute end to new direct government support for unabated international thermal coal power generation by the end of 2021
G7 Climate and Environment: Ministers’ Communiqué, 21 May 2021
Indonesia and Vietnam remain reliant on coal. That said, there is some cause for optimism. Both countries have recently cancelled a significant amount of coal and, Vietnam in particular, built a huge amount of new solar capacity last year. The Indonesian government will only allow the completion of coal plants that are already under construction or have reached their financial close, Energy and Mineral Resources Ministry director-general Rida Mulyana told a parliamentary hearing in May.
Global demand for pure hydrogen is rising steadily. Hydrogen consumption reached an all-time high in 2020. The most attractive use cases seem to be industrial processes that require temperatures of 1,000°C and higher. The emphasis, however, needs to be on green hydrogen: the current approach to generating hydrogen relies almost entirely on fossil fuels.
After declining during the global financial crisis, hydrogen investments across the rich world are rising again.
3.3 New frontiers in energy access
In Africa about 10m-20m extra people lost access to energy in 2020, as incomes declined and poverty rates rose.
2020 is an estimated figure
In addition to the impact on health and quality of life, this is a drag on productivity. People in this position are disproportionately poor and living in some of the fastest-warming areas of the world.
There is of course a potential emissions downside of this rapid growth in air conditioning, unless we phase out HFCs and radically improve the efficiency of air conditioners. This can become a devastating feedback loop, whereby warming leads to more demand for air-conditioning which in turn creates more demand for air-conditioning.
Practically everybody in the rich world has access to electricity, and in rich countries such as the US, the share of people's total expenditure devoted to energy has been in long-term decline. The share of people with access to electricity is rising fast in poorer countries but there is a long way to go.
A growing share of the global population has access to clean fuels.
Electric cooking is already cheaper than firewood and charcoal in some settings and costs are coming down.
This is likely to increase global access to energy.
Despite the cost and climate advantages of renewables, there is a risk that rising energy demand in African countries will be met by gas or other fossil fuels.
African decision-makers need to act quickly if the continent wants to avoid being locked into a carbon-intense energy future.
Alova et al, 2021
Clean energy accounted for over half of energy investments in China's Belt & Road initiative in the first half of 2020. Coal investments are still a big concern.