Transition to a lower carbon future

According to the 2016 edition of the BP Energy Outlook global demand for energy is expected to increase by 34% between 2014 and 2035, or by an average of 1.4 per cent per year. This growth in overall demand includes significant changes in the energy mix, with lower-carbon fuels growing faster than carbon-intense fuels as the world begins to transition to a lower-carbon future.

The Outlook looks at long-term energy trends and develops projections for world energy markets over the next two decades. “In the middle of a downturn in oil and gas prices, it is important not only to adapt to the current tough conditions, but also to prepare for the next set of challenges. Energy is a long-wavelength industry and we need a long term perspective of how the energy landscape we operate in is likely to evolve,” Bob Dudley, group chief executive, said. “As this year’s Outlook demonstrates, the world is going to continue to demand growing supplies of energy but the mix of those supplies is changing and becoming less carbon-intense.

However, further policy action may be necessary to meet international targets to limit carbon emissions.”

Despite the rapid growth of other sources, the Outlook projects that fossil fuels will remain the dominant form of energy over the period to 2035, meeting 60 per cent of the projected increase in demand and accounting for almost 80 per cent of the world’s total energy supplies in 2035.

Gas will be the fastest growing fossil fuel, increasing 1.8 per cent a year and oil will grow steadily at 0.9 per cent a year, although its share of the energy mix continues to decline. Growth of coal is projected to slow sharply, such that by 2035 its share in the energy mix is at an all-time low, with gas replacing it as the second-largest fuel source.

Non-fossil fuels are projected to grow even faster than anticipated in last year’s Outlook. Renewables, including biofuels, are projected to grow at around 6.6 per cent per year, and as a result their share in the energy mix increases from three per cent today to nine per cent by 2035.

“The outlook for the next 20 years is for continuing growth of energy demand as the world economy expands and more energy is required to power higher levels of activity,” Spencer Dale, group chief economist, said.

Income and population are the key drivers behind the growing demand for energy. By 2035 the world’s population is expected to reach nearly 8.8 billion, meaning an additional 1.5 billion people will need energy. Over that same period, GDP is expected to more than double, with China and India accounting for half of the projected increase.

“The continuing reform of China’s economy towards a more sustainable pattern of growth causes growth in its energy demand to slow sharply – weighing most heavily on global coal, which grows at less than a fifth of the rate seen over the past 20 years,” explained Dale. “The world is fundamentally changing and we see evidence of this in how and what type of energy is consumed.”