Governments and politicians may not have agreed on a way forward at the recent COP25 climate talks in Madrid, but it doesn’t mean business leaders can afford to stop and give up on the energy transition. This week’s World Economic Forum is a fresh opportunity for businesses to take the lead in developing a new energy system. The energy industry is critical to making 2020 the year of strategic shift. There are signs of progress. Repsol has committed to be a net zero emissions company by 2050 and Shell has tied executive pay to its carbon emission targets. But when you look at the industry more widely, we are at risk of incrementalism when exponential progress is required.
That’s critical given the market is at an inflection point where our choices will have a decisive effect on global economies, the environment and the future energy market. If the global community were to join Repsol and reach net zero emissions by 2050, it would mean reducing global emissions by 40 gigatonnes per year.
We need a sustainable energy system, but one that is also secure and affordable that accommodates 2bn growth in global population, a 3bn increase in people with access to modern energy and a 40 per cent global GDP increase. Minimising hydrocarbon emissions and maximising efficiency from infrastructure and value chains can go some way to reaching that goal. But much more will be needed.
The transition to clean, zero/low emission alternatives such as renewable energy and the use of electric vehicles need to be accelerated, while solutions including hydrogen, fusion, bioenergy with carbon storage, and in situ carbon capture, utilisation and storage need to be extended beyond what’s technically/economically feasible today. Advancing our energy mix is only possible by rethinking our economic model.
Energy use and economic growth are currently linked, but it is therefore essential we de-correlate growth from resources use. Very few countries have achieved absolute decoupling but countries like Germany, France and the UK have improved their resource efficiency by legislating emissions targets and shifting economic activity to services. To make decoupling possible, companies first need to develop new circular models.