Scenarios on Future Energy Trends

Good morning,

The oil company Shell has published a report on Energy Security Scenarios. Listening to a central player in the energy field, facing pressure to change from multiple directions, can help gain insights into the larger picture of future's energy prospects.

Scenarios are tools to explore the future world trajectories under different sets of assumptions. Scenarios are informed by data and constructed using models. Insights from leading experts in the relevant fields are a key tool in constructing scenarios. 

The Shell report identifies two major factors affecting the future of energy industry. They are the Paris Agreement on limiting global warming to 1.5 °C and, on the other hand, the Russian invasion of Ukraine. The Ukraine war has had substantial effects on the energy security.

As the security mindset has become dominant in the energy policy discussion, national interests have begun to take more precedence within political agendas. These agendas are also shaped by energy prices, supply concerns, and growing climate pressures. Based on this, the report identifies two global scenarios: 

• "Sky 2050": rapid action to bring society to net-zero emissions – this requires major interventions from policymakers in the energy system. The action includes: forced retirement of fossil-fuel assets, punitive carbon prices, the rapid introduction and scaling up of early-stage technologies and significant energy conservation through efficiency and even economic austerity. Governments must restrict societal choices, such as halting the selling of internal combustion engine vehicles and limiting meat consumption. Extensive construction of wind turbines and power lines is expected – also in places where many citizens do not wish to see them, such as sites of natural beauty.

• "Archipelagos": higher fossil-fuel demand compared to Sky 2050, and meeting this demand requires investment. However, activists and an increasing number of investors do not support further oil and gas production. With predicted opposition, governments are forced to step in to ensure money flows under threat of significant financial penalty. With this trajectory, the prospect of a global temperature outcome well below 2°C vanishes, let alone hopes of 1.5°C. This will lead to social unrest and the prospect of the early, and possibly forced, closure of fossil-fuel assets later in the century as solar, wind and hydrogen begin to dominate. Net-zero emissions comes late, and the process of getting there is painful, with society split and some investments ultimately failing. This scenario also threatens to cross climate tipping points. Crossing the critical thresholds leads to extensive and often irreversible changes in the climate system.

The two scenarios will have different effects on the future development of energy systems, including:

• energy demand and the role of renewables

• the role of natural gas, bioenergy, and electrification

• hydrogen innovations

• land use

• the carbon budget, meaning the cumulative CO2 emissions for a given temperature outcome (the carbon budget for a 1,5 °C temperature rise is 500 gigatonnes (Gt) of CO2 emissions)

• the emissions gap – the difference between emissions that lead to 1.5°C global warming and the realized emissions

Scenarios are possible worlds built from incomplete and uncertain information. They have a key role in helping to understanding and prepare for current and future trends.

Let's jump into this week's major headlines.

EU's Carbon Allowance (ETS) price development

UK's Carbon Allowance (ETS) price development

Reuters | WMO: 'More likely than not' the world will soon see 1.5C of warming. With a 66% chance, global temperatures will temporarily reach the 1.5C threshold by 2027.

The Guardian | Cop28 host UAE’s approach is ‘dangerous’, says UN’s ex-climate chief. Christiana Figueres says focus on carbon capture is direct threat to survival of vulnerable countries.

Reuters | Eight dead and thousands evacuated as floods batter northern Italy. The country's Civil Protection Minister said some areas had received half their average annual rainfall in just 36 hours, causing rivers to burst their banks, sending water cascading through towns and submerging thousands of acres of farmland.

Reuters | Southern Europe braces for climate change-fuelled summer of drought. Some regions are already suffering water shortages and farmers expect worst yields in decades. As climate change makes the region hotter and drier, years of consecutive drought have depleted groundwater reserves.

Aljazeera | Cyclone Mocha may have killed ‘hundreds’ in Myanmar’s Rakhine. Rescue and relief efforts are under way in northwestern Myanmar and neighbouring Bangladesh after the cyclone crashed ashore. Due to problems in communication, it is difficult to assess the extent of the damage caused by the massive storm.

The Guardian | Norway under pressure to scale back fossil fuel expansion plans. Climate activists from around the world descended on Stavanger in Norway last week to attend the AGM of the state-owned oil and Equinor – a gas giant planning a controversial new oilfield in the North Sea.

Reuters | Rich nations should step-up support for poorer countries to go green, Japan says. A senior Japanese environment ministry official urges boosting financial and technical support to poorer countries, helping them to tackle climate change and achieve similar decarbonization goals as rich nations. The statement was made ahead of a G7 summit in Hiroshima.

HS | Finland abstains from EU deforestation legislation. Clearing land for cultivation in Finland is unsustainable, says a Finnish Environment Institute professor.

HS | Finland will face a massive climate debt. The diminishing of carbon sinks in the land use sector is equally as harmful as the burning of fossil fuels when global warming is concerned. The 2021 Greenhouse gas inventory showed that the land use sector had become a source of emissions instead of a carbon sink.

HS | Drastic shifts in global wood markets can reduce Finland's loggings – regardless of forest policy. Decreasing chemical pulp prices have recently led the biggest Finnish forestry companies to issue profit warnings.

Reuters | Norway takes over Arctic Council leadership from Russia. The cooperation between the Western Arctic states and Moscow on the regional polar body is frozen due to the invasion of Ukraine. The chair rotates between the eight members every two years, but the war raises concerns over the long-term viability of the council.

Dagens Nyheter | The amount of food waste has diminished in Sweden. Mandatory food waste collection was introduced in Stockholm at the beginning of 2023, and all residential customers living in private houses are connected to the network. Of Stockholm's approximately 13,000 collection points in apartment buildings, only 9,000 have received food waste bins thus far.

Maaseudun tulevaisuus | Spring floods bigger than usual expected in Northern Finland. Warm weather has accelerated the snow melting, causing rising water levels in rivers and natural lakes.

Aktuell Hållbarhet | Review: only a few percent of Swedish companies' operations meet green criteria in the EU Taxonomy. 2022 was the first year that the companies had to report how they coped with EU regulations. For instance, AB Volvo, Electrolux, and Atlas Copco are in the taxonomy - but only fractions of the operations meet the requirements.

Yle | Notable regional differences in environmental damage control in Finland. For the first time, the Regional State Administrative Agency for Western and Inland Finland monitored environmental damage prevention – Ostrobothnia and Central Ostrobothnia failed to meet the set standards. 

HS | Åland permits the shooting of no more than five white-tailed eagles. The so-called "protective hunt" aims to protect female eiders and their nestlings. The white-tailed eagle is a species strictly protected by EU law.

STT | Ministry of Foreign Affairs: Finland will give humanitarian assistance to ease hunger. Russia’s invasion of Ukraine and other conflicts around the world have undermined global food security, which was already weakened by the COVID-19 pandemic. Since the pandemic and Russia’s invasion of Ukraine, the number of people facing acute hunger has risen from 135 million before the pandemic to 345 million today. Afghanistan, Ethiopia, South Sudan, Somalia and Yemen are facing the highest levels of hunger.

Sitra | World Circular Economy Forum 2023 in Helsinki. Finland will host the world’s leading circular economy event, WCEF2023 from 30 May to 2 June, co-organised by Nordic Innovation and Sitra, with partners from around the world.

Kauppalehti | New Finnish innovation: Bubbles with Benefits is a biodegradable bubble wrap designed by students at Aalto Univeristy. The bubble wrap developers were awarded an 8000 € prize in a forest industry competition.

STT | 59 new research fellows elected in the natural sciences and technology fields. The Academy of Finland will pledge grants worth € 35M for research organizations representing the researchers.

Social cost of carbon estimates have increased over time. Estimates of the social cost of carbon are the yardstick for climate policy targets. However, there is great uncertainty and we do not know how estimates have evolved over time. Here I present a meta-analysis of published estimates showing that the social cost of carbon has increased as knowledge about climate change accumulates. Correcting for inflation and emission year and controlling for the discount rate, kernel density decomposition reveals a non-stationary distribution. In the past 10 years, estimates of the social cost of carbon have increased from US$9 per tCO2 to US$40 per tCO2 for a high discount rate and from US$122 per tCO2 to US$525 per tCO2 for a low discount rate. This trend is statistically significant if sensitivity analyses are discounted and paper quality weighted. Actual carbon prices are below its estimated value almost everywhere and should therefore go up. (Nature)

Emissions redistribution and environmental justice implications of California’s clean vehicle rebate project. Vehicle electrification is expected to reduce, in aggregate, emissions of greenhouse gases and criteria air pollutants. However, increased electricity generation to support new electric vehicles introduces possible redistribution of point-source emissions from mobile vehicles to electric generating units such that emissions may decrease in some locations and increase in others, with implications for equity. Researchers have developed a model to analyze the implications of California’s Clean Vehicle Rebate Project (CVRP) for emissions of greenhouse gases and criteria air pollutants, both in aggregate and in their distribution. The results indicate that changes in air pollution do not distribute equally: emissions reductions disproportionately occur in Least Disadvantaged Communities. The finding raises environmental justice and public health concerns as these communities are more likely to experience either larger net increases or smaller net reductions in emissions. (Plos Climate)

Picture of the week:

As various types of electric vehicles become more common, oil demand will decrease