DNV Energy Transition Outlook: Energy related emissions will peak by 2024
Report Summary:
Global emissions peak in 2024, slow reduction affecting climate goals
According to DNV's 2024 Energy Transition Outlook, global energy related emissions are expected to peak in 2024, but the pace of emissions reduction thereafter is slow and difficult to achieve key climate targets. Despite the rapid increase in solar photovoltaic installed capacity and reduced demand for coal, China's gasoline demand has reached its peak, and global oil demand is expected to peak within a few years. However, decarbonization progress in industries such as heavy industry, shipping, and aviation that are difficult to electrify has been slow, especially in the rapidly growing demand for aviation. The report predicts that by 2030, global energy related carbon emissions will only decrease by 5% compared to 2023, which is still far from the IPCC's goal of halving by 2030. In addition, the report points out that cumulative emissions will continue to push up global temperatures, and global warming may reach 2.2 ℃ by 2100.
The slow development of the electrification industry makes it difficult to compare the rapid cost decline and growth of solar energy and batteries
Electric vehicle sales increased by 50% last year, and it is expected that the global proportion of electric vehicle sales will reach 50% by 2031. The global market share of electric vehicles is expected to reach 25% by 2025. The global solar installed capacity increased by 80% to 400 gigawatts last year, and it is expected to continue to increase in 2024, although the growth rate is slightly slower. Solar energy+energy storage systems are rapidly developing, making 24-hour solar power supply possible. The cost of solar energy and batteries has sharply decreased, and this trend is expected to continue.
However, the progress of decarbonization technologies such as hydrogen energy and carbon capture (CCS) has been slow. DNV has lowered its short-term and long-term forecasts for hydrogen energy. Although CCS has made some progress, its overall scale is relatively small, and it is expected to capture only 2% of global emissions by 2040 and 6% by 2050. In the field of electricity, the growth of offshore wind power and small modular nuclear reactors is also lower than expected. Overall, renewable energy is expected to grow 2.2 times by 2030, but there is still a gap from the triple growth target set by COP28. Meanwhile, energy efficiency improvement is relatively slow in the short term, with global energy intensity only improving by 2% annually, which is only half of the 4% improvement rate targeted by COP28.
The competitiveness of China's clean technology accelerates the global energy transition
China has implemented a long-term strategic industrial policy in the field of "new energy" technology and now dominates the manufacturing of almost all related technologies. In 2023, China will account for 58% of global solar installations and 63% of new electric vehicle sales. Through large-scale low-cost clean technology exports and overseas direct investment, China has accelerated global transformation, especially in the fields of solar energy and batteries, while exports of wind turbines and electrolytic cells are also growing. However, based on considerations of national economic and energy security, the United States and Europe are strengthening their protectionist policies, adopting tariffs and other protective measures to support the construction of local supply chains. However, if we leave the Chinese supply chain too quickly, it may lead to a sharp increase in production costs, repeated innovation, and a slowdown in transformation speed. As an alternative supply chain, government investment has increased research and production support for strategic industries such as battery storage, alleviating the initial cost disadvantage of alternative supply chains.
National economic and security priorities pose obstacles to energy transition
Regional conflicts, geopolitical tensions, and growing security concerns have intensified military attention and spending. Budget pressure is cutting government aid funds for domestic energy transition and for countries in the southern hemisphere. Sub Saharan Africa is expected to account for only 4% of global renewable energy investment by 2050. In addition, although borrowing costs have slightly relaxed, it still puts pressure on public budgets and exacerbates the cost of living crisis for many families. Extreme weather events have exhausted budgets, but have not yet driven climate action. The government at all levels has failed to effectively address issues such as approval delays and avoidance of neighbors, resulting in reduced profits for renewable energy projects in multiple regions. In addition, the increasing issue of biodiversity poses challenges to the development of renewable energy and the power grid.
Market forces are insufficient to achieve climate goals, and energy policy alignment is urgently needed
Market forces alone are not sufficient to achieve the goal of controlling temperature rise under the Paris Agreement. Although the market can often effectively promote the popularization of renewable electricity and electric vehicles, it falls short in addressing complex technological measures in other industries. Market forces are distorted as external costs are not properly priced, which limits investments in fossil fuel substitution, carbon capture and removal, and energy efficiency. Many countries still heavily subsidize fossil fuels, hindering the decarbonization process. To achieve rapid emission reduction, it is necessary to set a cost for carbon. Although the United States adopts incentive based approaches to promote the adoption of renewable and clean energy, the lack of relevant measures to curb emissions has led to high levels. In contrast, China's carbon pricing is expanding its scope, but it started relatively late and at a lower level than Europe.