Fossil fuels peaking not enough to limit global warming, study warms

08 February 2021 4 min. read

Aggregate fossil fuel demand is set to peak in 2027, according to a new study. The research also asserts that demand for coal, oil and gas will never return to its pre-pandemic growth curve.

International consultancy McKinsey & Company has published an outlook on the future of the energy industry. The Global Energy Perspective 2021 states that aggregate fossil fuel demand is set to peak in 2027 – coal having already peaked, and with oil peaking in 2029 and gas in 2037.

The pandemic has resulted in a profound reduction in energy demand, and McKinsey expects it will take between one to four years for demand to recover – with electricity and gas demand expected to bounce back more quickly than demand for oil. Overall, however, fossil fuels will never return to their pre-pandemic growth curve, the researchers concluded.

Peaks in fossil-fuel demand

Christer Tryggestad, Senior Partner at McKinsey, stated, “While the pandemic has certainly provided a substantial shock for the energy sector across all fuel sources, the story of the century is still a rapid and continuous shift to lower-carbon energy systems.”

This is not to say that change in the energy sector will be instantaneous, of course. As per McKinsey’s report, it looks as though fossil fuels will continue to play a significant role for the foreseeable future. With that being said, the share of electricity in the energy mix is set to grow, and it’s set to capture all global energy growth as hydrocarbon consumption plateaus.

Following on from this, over the long-term, the impacts of behavioural shifts due to Covid-19 are minor compared to “known” long-term shifts such as decreasing car ownership, growing fuel efficiencies and a trend towards electric vehicles, whose disruptive impact is estimated to be three-to-nine times higher than the pandemic’s by 2050.

The future energy landscape, 2015-2050

In 2020, McKinsey found that coal is still the largest individual energy source in the world – and in 2025, as energy demand grows, it may enjoy one final spike in use. However, after that it is expected to enter a sustained state of decline. At the same time, while oil and gas also decline, sustainable power will be on the ascendancy.

By 2040, the world’s largest supplier of energy stands to be solar power – and by 2050, onshore and offshore wind, and hydroelectricity will produce more energy than coal, gas, oil and nuclear combined.

If this scenario holds true, 50% of global power generation will come from renewable sources by 2035. As a result, global CO2 emissions look set to peak in 2023 – following one final period of growth in the wake of a Covid-19 recovery, and will begin to decline by 2030. However, that may still not be good enough to offset the worst impacts of global warming.

While an earlier peak of hydrocarbon demand means a substantial reduction in forecasted carbon emissions, the world remains significantly off of the 1.5ºC pathway aimed for in the Paris climate accord, and the planet will run out of its carbon budget for 2100 in the early 2030s. According to McKinsey estimates, annual emissions would need to be around 50 lower in 2030 and about 85% lower by 2050 than current trends predict, if the world is to limit the global temperature increase to 1.5ºC.

Global energy-related CO₂ emissions

At present, the world is closest to McKinsey’s ‘reference case’, which simply relies on expectations that current technologies can evolve and incorporates current policies and an extrapolation of key policy trends. For an accelerated transition, however, long-term behavioural changes bolstered by the governmental response will be required to help accelerate decarbonisation.

The accelerated transition scenario assesses the impact of 10 conceivable shifts happening at an accelerated pace (e.g., uptake of EVs, recycling, renewables and hydrogen) – and while it is still short of a 1.5ºC target, it suggests that a more proactive stance on a wider scale could help reach that goal.

As a result of this, Tryggestad concluded, “There is still a long way to go to avert substantial global climate change. The importance of policies has increased in the past year. Despite the increased momentum towards decarbonization, many governments still need to translate ambitious targets into specific actions. Additionally, given the unparalleled size of many economic recovery packages post Covid-19, the focus of the stimulus measures will play a key role in shaping energy systems in the decades to come.”