Balancing Act: Can the world combat climate change as energy demand rises?

Last year’s sharp rise in energy demand surprised many forecasters, but is it a statistical blip or an indication that the world is failing in its efforts to combat climate change?

ENERGY LANDSCAPE: Wind power is now a significant part of the world‘s energy mix

Last year, global energy consumption grew by 2.9%, its fastest annual increase since 2010 and more than double the average for the last decade. More worryingly, carbon dioxide emissions also rose at the most rapid rate seen in the last seven years. The burning of fossil fuels released 33,890 million metric tons of carbon into the atmosphere in 2018. That 2% increase on the previous year was twice the long-term growth rate.

The sharp rise in demand surprised many forecasters, but is it a statistical blip or an indication that the world is failing in its efforts to combat climate change? According to the authors of the BP Statistical Review of World Energy, there are real reasons for concern. Last year’s increases took place against a background of only moderate economic growth – and there’s usually a strong correlation between GDP and energy use. And they happened despite a significant rise in fuel prices. Conventional wisdom suggests that higher energy bills should make consumers and businesses thriftier.

When BP’s statisticians drilled deeper into the data, however, they found one factor that could explain a lot of the extra energy use last year. In 2018 there was an unusually high number of hot and cold days, especially in the two most energy-hungry parts of the world: the U.S. and China. Extremes of temperature in either direction drive up energy use: cold weather creates extra heating demand, and fridges, freezers and air conditioners all work harder when the temperature rises.

Weather and climate are different things, and last year’s conditions could simply be down to chance. But increasingly volatile weather is one of the predicted effects of global warming. If there is a link between 2018’s weather and the rising levels of carbon in the atmosphere, BP says, “this would raise the possibility of a worrying vicious cycle: increasing levels of carbon leading to more extreme weather patterns, which in turn trigger stronger growth in energy (and carbon emissions) as households and businesses seek to offset their effects.”

Paris can wait

Shouldn’t greenhouse gas emissions be going down now? Many people think so. Inspired by 16-year-old Swedish activist Greta Thunberg, thousands of school students have abandoned their desks over recent months to call for swifter action on climate change by governments. Adult protesters have staged climate protests and sit-ins in major cities.

In truth, countries aren’t breaking their emissions reduction promises – yet. The 2015 Paris Agreement on climate change, adopted by almost 200 countries, commits signatories to pursue efforts to limit the impact of global warming to 1.5 degrees Celsius . The agreement accepts that this goal will require an end to the growth of greenhouse gas emissions, and for countries to become carbon neutral by the second half of this century.

Decisions about the pace of decarbonization were left up to individual signatories, however, with the agreement recognizing that countries differ in their level of economic development and their energy needs. The nationally determined contributions (NDCs) submitted by most countries on joining the Paris Agreement include commitments to reduce carbon emissions relative to 2005 levels, with a deadline of 2025 or 2030.

Importantly, while some countries have signed up to absolute reductions, others have committed to carbon intensity improvements, measured in terms of greenhouse gas emissions per unit of GDP. Those terms mean countries still have between six and 11 years to get their reduction programs underway; and for some fast-developing economies, success in 2030 will still mean an absolute increase in carbon emissions.

GREEN LANDMARK: The Eiffel Tower was illuminated green to celebrate the 2015 Paris Climate Change Agreement.

Joules in demand

It is an inconvenient truth that the world’s efforts to tackle climate change are taking place amid a continual increase in energy demand. That isn’t always obvious to consumers in developed economies. Europe experienced no growth in energy consumption during 2018, and its carbon emissions actually fell thanks to a change in fuel mix and the continued rise of renewable power sources.

Worldwide, however, energy demand is expected to rise substantially, increasing by a third on today’s levels by 2040. Some of that change will be driven by an increasing human population, which is likely to pass the nine billion mark sometime in the 2030s. The bulk of it, however, will be down to rising standards of living. The global economy is expected to double in size over the next 20 years, and the overwhelming majority of that growth will take place in countries and regions that are currently poor.

According to the U.N., people in Europe each consume an average of 120 gigajoules of primary energy each year. Currently, 80% of the world’s population get by with much less than 100 gigajoules per capita, the level at which the benefits of more energy to quality of life are considered to tail off. Bringing the number of people in energy poverty down significantly will require huge increases in output. BP estimates that production will have to rise by almost 70% just to cut that number by half.

LIGHTING UP TIME: There have been an usually high number of hot and cold days in energy-hungry China.

The transition ramps up

Behind the discouraging headline figures, there is evidence that the transition to a lower-carbon energy system really is underway. One of the most significant shifts in recent years has been from oil to natural gas. Burning gas still produces carbon, albeit 20% to 30% less than oil, and half as much as coal. Gas is something that big energy companies understand very well – they’ve been dealing with it for years in their existing production operations. And technological advances have made gas more available and more accessible in recent years. In North America, hydraulic fracturing has produced large quantities of cheap gas, for example, while the development of liquefied natural gas (LNG) technologies allows the fuel to be transported from areas beyond the reach of conventional pipelines.

Gas integrates easily into modern energy networks too. Gas power stations are cheap to build and easy to control, for example. That’s especially useful in a world where operators are looking for power sources to fill the gaps left by intermittent renewable sources like wind and solar power.

Gas now accounts for almost a quarter of global primary energy production, up from 15% in the 1980s. Last year, gas production increased by 5.3%, one of the fastest rates of growth since 1984. That trajectory looks set to continue. A number of major energy companies are adjusting their portfolios and investment plans to focus more on gas than oil. Oil’s share of global primary energy production has dropped from half in 1990 to around a third today.

The really big transition story, however, is the rise of renewables. In just over a decade, wind, solar and biomass have grown from nothing to be a significant part of the world’s energy mix. In 2018, renewable sources, including hydroelectric power, provided 40% of Germany’s electricity, passing coal for the first time. Even in the U.S., which has adopted a pro-coal energy policy in recent years, the fuel’s contribution to electricity production has fallen from 40% to a quarter in the last five years, while renewables’ share of total electricity production reached 17% last year.

EXPANDING HORIZONS: Liquified natural gas allows fuel to go beyond the reach of conventional pipelines.

From big oil to big energy

The major energy players are keen not to be caught out by the energy transition. After a few false starts in the past, most are now taking steps to position themselves for a lower-carbon future. They are investing in renewable energy technologies and buying up the developers of solar and wind power plants. And tellingly, oil companies are looking for ways of connecting with consumers as roadside filling stations become less relevant. BP, Shell and Total have all bought electric car charging networks; Shell and Total have also purchased retail electricity and gas suppliers.

These moves are significant, but relatively small. Oil companies are still spending 10 times more on fossil fuel exploration and production than on clean technologies. Pressure to do more is ramping up, however, not least from big investors. Norway’s $1 trillion sovereign wealth fund, which manages the proceeds of the country’s oil and gas industry, has announced plans to move away from oil and gas investments. This summer, Legal & General Investment Management, one of the largest shareholders in Exxon Mobil, announced that it would begin to sell off its holdings, saying the oil giant wasn’t doing enough on climate change and sustainability issues. For its part, Exxon argues that it has invested more than $9 billion in research on biofuels, carbon capture and other clean energy technologies.

RENEWABLES RISE: In the U.S. renewables increased their contribution to electricity production.

Demand side response

It won’t just be the energy companies that have to do more. Impressive as the progress in clean energy production has been, the change isn’t yet happening fast enough to stop and ultimately reverse the growth of carbon emissions. Turning the tide may require concerted effort – and cash – from governments and individuals alike. India, for example, estimates that it needs to spend $330 billion on renewable energy over the next decade. That’s a bill the country will struggle to cover. But for other nations and corporations facing high costs to take the next step along the carbon reduction curve, investing in proven renewable technologies in India could be an appealing alternative.

An appreciable acceleration of the transition will require big changes on the demand side of the energy equation too, says Steve Harley, President, DHL Energy Sector. “Consumers and businesses will have their own vital role to play, reducing their energy use through efficiency improvements and ensuring the energy they do use comes from cleaner sources.”

Left: TOWERING ACHIEVEMENT: More energy-efficient buildings will be needed to turn the carbon emission tide - Right: PLUGGED IN: The world needs an increased adoption of electric vehicles.

That will require a combination of technological and behavioral change, Harley notes. “There are plenty of solutions available today, including energy-efficient buildings and the adoption of electric or hydrogen-fueled vehicles. And companies can often make big improvements through changes to their operations.” These are all areas where DHL is currently working to support its customers, helping them find lower-carbon approaches to meet their logistics needs – from zero-emission transport solutions to the sharing of assets to maximize utilization.

There’s still plenty of work to do, however, and the world faces some tough technical and social challenges if it is to break its dependence on fossil fuel energy. There are few viable alternatives to coal and oil in heavy industrial processes such as steel and concrete production, for example. And in the logistics sector, zero-emission sea and air transport are still a long way over the horizon. The task ahead looks daunting, but the progress so far suggests reasons for cautious optimism. Clean energy technologies have grown further and faster than anyone expected. They may continue to surprise us in the years to come.  —  Jonathan Ward

Published: October 2019

Images: Geoffroy Van Der Hasselt/Anadolu Agency/Getty Images; Dong Wenjie/Getty Images; Xu congjun/Imaginechina/ddp; Rick Wilking/Reuters; A. Tamboly/dpa; Stefan Papp/ddp