The campaign of 'Beyond Hydrocarbon' or Zero Carbon Energy got momentum after the United Nations in 2015 adopted 'Clean and Affordable Energy' as Global Goal 7 among 17 Sustainable Development Golas (SDGs) for the year 2030. Closely linked to this is SDG 13 - Climate Action; which has set trend for all the businesses including energy.
Today there is an immense focus on "Energy Transition" and "Decarbonization of energy". Major oil and gas companies and power utilities are devising strategies to make their portfolios compliant with the Paris Climate Goals. The underlying premise for these actions is the belief that the transition to lower and zero-carbon energy sources should be accelerated to mitigate the impact of global warming and the associated changes in global climate. How realistic are these goals? If history is any guide, energy transitions take decades. Prior transitions have been led by new fuels with better functionality and lower costs, e.g., from wood to coal and from coal to gas. The current transition is likely to be more expensive and more challenging.
Much of the focus today is on decarbonizing electric power production, but only about one-quarter of global greenhouse gas (GHG) emissions are from electricity. Coal, the most carbon-intensive fuel, accounts for about 40 per cent of power generation globally. Even if coal consumption were to plateau within the next few years, it will remain the fuel of choice in Asia for decades to come.
There are comparable obstacles to changing the energy mix in other sectors. Shifting the world's car, truck, plane, and shipping fleets from oil-based to low carbon fuels will require decades, not years. And in industries like refining, petrochemicals, and cement and steel production, which together generate about 20 per cent of global GHG emissions, carbon abatement is even more challenging. Because of these facts, every long-term outlook, including all IHS Markit scenarios, fall well short of achieving the goal set out in the 2015 Paris Accord of limiting the increase in average global temperature to 2 degrees Celsius. The industrial sector is the largest global user of energy. Decarbonizing this sector would require a significant increase in the use of fossil-free electricity for direct thermal heat and pressure to substitute for metallurgical coke, methane, ethane and naphtha as feedstocks. At present, only 15% of industrial energy use is derived from electricity.
Substituting fossil fuels with renewable power is feasible for some industrial processes (not all) and will be very expensive. Electrochemical production of chemical compounds like ammonia is promising but in early stages of development. In short, decarbonizing industrial energy use is hugely challenging and will be very expensive. One potential solution to decarbonize the industrial sector is the application of Carbon Capture and Sequestration (CCS) for removing CO2 in the atmosphere. IHS Markit database of CCS projects indicates that at present, CCS facilities are sequestering only about 0.1% of the world's CO2 emissions. Increasing this to just 5% of global emissions annually will be a massive task and will require creating a new industry comparable in size to today's oil and gas industry which has been developed over 150 years.
In summary, achieving Paris goals will require strategies to decarbonize all sectors of the global energy economy. Although significant progress is being made to decarbonize the power sector, much work is needed to accelerate the decarbonization of other sectors.
(Atul Arya is Chief Energy Strategist, IHS Markit that would run a side event alongside the 24th World Energy Congress.)
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