Equinor economist: Actions not adequate yet to meet climate goals

Government actions are falling short of what will be necessary to meet long-term global climate change management goals, Equinor’s chief economist warned in a discussion of the Norwegian multinational energy company’s 2019 Energy Perspectives on June 25.

Jun 26th, 2019

Government actions are falling short of what will be necessary to meet long-term global climate change management goals, Equinor ASA’s chief economist warned in a discussion of the Norwegian multinational energy company’s 2019 Energy Perspectives on June 25.

“Humankind has never gone through an energy transition. Everything we’ve done has involved adding new technologies to existing ones. Climate concerns make a true energy transition a necessity,” Erik Waerness, a senior vice-president at Equinor, told his audience at the Center for Strategic and International Studies.

Current climate actions are far from enough to put the world on a path to keep global warming well below 2°C., the forecast says. Global emissions increased in 2018 to reach an all-time peak, and the longer this trend continues, the stronger measures will be necessary to reach common goals, it points out. Rapid and significant technology changes will be more urgent than ever, the forecast indicates.

“If we stopped all exploration investments now and did a little bit of enhanced recovery, global supplies from fields that are being developed would decline at about 4.5%/year through 2050,” Waerness said. “If that goes on for 30 years, the world would be left producing about as much oil as it produces now. It will require at least 300 million new barrels if we are to avoid relying heavily on oil sands and other heavily emitting petroleum sources.”

The world will need 40 times more carbon capture and storage (CCS) capacity than exists today, he said. “Does anybody have an idea how much 1.5 billion tons of carbon dioxide is? It’s twice as much mass as the world produces in wheat each year. To reach that goal by 2050, the world will need to open a new CCS facility each year,” Waerness said.

No walk in the park

In a situation where the global economy continues to grow, reducing carbon emissions by developing more renewable resources will be even more of a challenge, Waerness said. “It should be relatively clear that achieving an energy transition is no walk in the park. Energy-consuming nations will be extremely important in determining whether we meet this goal. There will be a need for massive investments in all sectors,” he said.

Like most current energy forecasts, Equinor’s recent outlook presents three scenarios. The Renewal scenario shows a way to achieve the targets of the 2015 Paris climate agreement and limit global warming to well below 2°C., the commonly accepted limit. This would be delivered through rapid and significant policy tightening, global cooperation, technology developments, and substantial changes in business and consumer behavior.

Under a Reform scenario driven by market forces and technology developments, rules, norms, and institutions that govern relations between actors on the world stage would be characterized by the coexistence of competition and cooperation, rarely developing into sustained or large-scale conflicts. There could be episodic regional crises, but these would remain largely contained and limited in time, the forecast said.

Under a Rivalry scenario, the geopolitical uncertainty and volatility that is currently present in the world could persist and, in some dimensions, also escalate. There would be a resurgence in competition for the balance of power between the major powers. The use of force by nation states increases as conflict prevention mechanisms increasingly would be less effective, and discriminatory, isolationist, mercantilist, and nationalistic political ideologies would gain momentum.

Separating noise from talk

“We’re excited about a lot of things, although you have to take away the noise from all the talk. There are some things on the technology side that are exciting. We’ve probably reached the limit on how many large wind turbines can be onshore, but we still can keep increasing their size offshore. Infrastructure will be necessary to keep alternative vehicles from being simple additions to fossil fuel vehicles,” Waerness said.

All the consequences of policies that are enacted now will have an impact on politicians in the future, he said. “All climate policies that work have regressive impacts. They tend to affect poorer parts of the world’s population. While it’s encouraging to see youth discussing what can be done to improve climate policies, their parents are protesting against price and property impacts from building more wind parks,” he said.

“Look at how difficult it still is to get low-hanging fruit, such as coal, out of the electricity mix, particularly in Norway where no power is generated from coal. That moves the focus to other industrial pollution sources, which is more challenging in many ways,” Waerness observed.

In its Reform and Rivalry scenarios, Equinor’s outlook assumes that climate goals will not be met by 2050 and energy costs from traditional sources will be more expensive. “Perfectly functioning installations such as coal-fired power plants would need to be taken out of service well before they become obsolete,” Waerness said.

“Technology changes we have built into our scenarios may lead to a gradual political miracle where countries agree on measures for reaching our climate reduction targets. We will need that among the biggest players,” he went on. “In the European Union, there are no measures to get members to agree on a carbon change. Consumers need to have an incentive to change behavior, and a carbon tax is the most obvious starting point.”

Contact Nick Snow at nicks@endeavorb2b.com.

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