Statoil warns of threats to green energy

Statoil has warned that geopolitical tensions could jeopardise the push to replace coal with low-carbon energy sources — and highlighted the UK’s vote to leave the EU as an example of the risks to international co-operation.

The Norwegian group, Europe’s second-biggest producer of natural gas after Gazprom of Russia, said the shift towards a more volatile multipolar world might lead countries to put greater focus on energy security than tackling climate change.

Eirik Wærness, chief economist of Statoil, said a future characterised by more frequent political crises and growing protectionism would make it harder to achieve global co-operation on reducing carbon emissions.

This was one of three scenarios laid out by Statoil in its annual long-term outlook on the global energy market, with the other two making more optimistic assumptions about the ability to cut greenhouse gases.

The group did not make a judgment on which scenario was most likely but, in a briefing on Wednesday, Mr Wærness said the UK’s looming exit from the EU was the kind of event that would fit its most pessimistic vision.

An era of increased geopolitical rivalry would lead to “growing disagreement about the rules of the game and a decreasing ability to manage crises in the political, economic and environmental arenas”, said the report.

In this scenario, reducing carbon emissions would be a low priority and international agreements of the kind made at the UN climate change conference in Paris last year would be only partially implemented.

A more isolationist US, an economically stagnant Europe and a weakening of international institutions such as the UN, Nato and the World Trade Organisation were other features of this synopsis, with rising powers such as China and India failing to fill the leadership vacuum.

In this kind of geopolitical landscape, carbon emissions would rise 18 per cent between 2013 and 2040 and continue climbing at the end of the period, Statoil predicted, compared with a 45 per cent reduction in the most optimistic scenario for replacing fossil fuels with renewable power.

Mr Wærness, lead author of the Statoil report, said the world faced a “fantastically difficult” challenge to meet increasing demand for energy from developing countries while cutting greenhouse gases.

Energy demand would rise between 2013 and 2040 by an annual average of between 1.1 per cent, in a world dominated by geopolitical rivalry, and 0.2 per cent in the most optimistic scenario for increased energy efficiency and adoption of new technologies, such as electric cars.

During the same period, the share of oil and gas in the global energy mix would fall from 51.2 per cent to 49.3 per cent under Statoil’s “rivalry” scenario, or 44.7 per cent in a world of energy “renewal”. Use of low-carbon sources such as solar and wind would increase from a 1.2 per cent share in 2013 to 5.2 per cent in 2040 in a world of “rivalry”, or 14.6 per cent in the event of “renewal”.

The biggest swing factor was coal, which would see its share drop sharply from 29.7 per cent to 12.3 per cent in the “renewal” scenario but more modestly to 27.1 per cent in the event of “rivalry” as nations prioritised energy security and economic growth over environmental concerns. Forecasts for a third, more mixed scenario, described as “reform”, fell between the two extremes.

Mr Wærness said the world was falling short of where it needed to be if it was to meet the UN’s ambition to limit the rise in average global temperatures to 2C compared with pre-industrial times by the end of the century. “We need to speed up the pace of change if we are to have any chance of meeting the climate goals,” he said.

Rapid and widespread adoption of electric vehicles provided the best chance of progress, Mr Wærness added, but only if coal was replaced with gas and renewables in the generation of power.

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