In recent years, many nations have begun to identify and address climate risks associated with rising GHG emissions. Since energy use is a significant contributor to GHG emissions, climate policies that target these emissions are likely to play a significant role in the world’s energy future by directly and indirectly affecting people’s energy choices.
Since energy use is pervasive in every aspect of life around the world, and since policies to address GHG and more specifically CO2 emissions will tend to raise the cost of energy and related activities, many countries are taking care in structuring both the nature and the pace of GHG policy initiatives. This approach is understandable as a way to manage climate risks associated with GHG emissions while also minimizing related policy impacts on local economies, industrial competitiveness, energy security and the people’s ability to pay higher costs.
Although climate policies remain uncertain today, it is assumed that governments will continue to gradually adopt a wide variety of more stringent policies to help stem GHG emissions.
Over time, as these policies advance and people respond to rising energy costs, it is anticipated to have greater adoption of energy-saving technologies and practices, as well as lower CO2 emissions per unit of energy consumed. For example, in the power generation sector, policies to stem GHG emissions will likely raise electricity costs for consumers, slowing demand growth. Power producers will also seek to utilize more efficient electricity-generating technologies, and shift from coal toward lower-emission fuel sources like natural gas, nuclear and renewables.
To help model the potential impacts of a broad mosaic of future GHG policies, ExxonMobil in its report “The Outlook for Energy: A View to 2040” used a simple cost of carbon as a proxy mechanism. For example, in most OECD nations, it has been assumed an implied cost of CO2 emissions that will reach about $80 per tonne in 2040. OECD nations are likely to continue to lead the way in adopting these policies, with developing nations gradually following, led by China.
Market forces as well as emerging public policies are already having an impact on energy-related CO2 emissions in many parts of the world. After decades of growth, it is expect ed that worldwide energy-related CO2 emissions will plateau around 2030 before gradually declining toward 2040, despite a steady rise in overall energy use.
Regionally, a variety of emission patterns through 2040 is being seen, reflecting the different stages of economic development and varying degrees and types of energy used at a national level. Increasingly, the world’s CO2 emissions will be driven by developing nations. Overall, non-OECD emissions are likely to rise about 50 percent, as energy demand rises by about two-thirds. Over the same period, OECD emissions are likely to decline approximately 25 percent and approach a 25 percent share of global emissions, down from about 40 percent in 2010.
While emissions in non-OECD nations will play a more significant role going forward, some historical perspective is appropriate. First, in 1980, the OECD accounted for about 60 percent of global emissions. Since then, both OECD and non-OECD nations have made progress in slowing the growth of CO2 emissions by improving the energy efficiency of their economies. In addition, OECD nations have gradually reduced the carbon intensity of their energy use by switching to lower-carbon fuels, namely natural gas and renewables. Together, these factors have helped enable the decline in CO2 emissions that has already begun in the OECD.
Non-OECD emissions surpassed OECD emissions in 2004, largely due to significant economic progress and a carbon-intensive energy mix heavily dependent on coal. Looking ahead to 2040, it is anticipated that non-OECD nations will continue to improve the energy-efficiency of their economies, but also shift toward less carbon-intensive energy sources. Together, these factors will help global CO2 emissions peak around 2030. Even then, emissions on a per capita basis in non-OECD nations will remain about half the level of OECD nations.
Source: ExxonMobil report “The Outlook for Energy: A View to 2040”
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