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Osama Rizvi

Osama Rizvi

Osama Rizvi is an economic and global oil market analyst who brings in a holistic point of view connecting geopolitics, economy and politics. He has…

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The Difficult Truth About Decarbonization

A recently released report by Carbon Tracker claims that fossil fuel-reliant countries will see a 51% drop in oil and gas revenues in the next two decades as the world moves to cut emissions. At the same time, the EIA estimates that global energy demand will increase by 50 percent by 2050 and most of this increase in demand will come from non-OECD countries. With fossil fuels supplying 84% of the world’s energy and clean energy technologies still far from being an acceptable replacement, there is an unavoidable decarbonization dilemma the world must deal with. On the one hand, there is a large part of the world (the Global South) that hasn’t yet realized the level of growth enjoyed by the rest of the world (the Global North). On the other hand, climate change is a ticking time bomb and the only way to diffuse it is to reduce carbon emissions through decarbonization. With clean technologies not anywhere near advanced enough to deal with this issue, the world will have to focus on degrowth, a movement that may be deeply unfair to those countries that have not yet seen large economic growth.

Below is a comparison between the use of energy per person in the U.S. and Pakistan. Energy consumption per person in the U.S. was about 80,000 kWh as compared to 4600 kWh in Pakistan.

The U.S. and China account for 43 percent of global CO2 emissions (as per 2018 data) while many countries from the Global South barely register on a global scale.

It is also interesting to look at carbon emissions not only in terms of energy and electricity use but also in terms of industrial utility, especially in sectors that are critical and highly significant for the development of less developed countries. 

Cement

For example, the Cement industry, a building block of the modern infrastructure that we see all around us, emits 2.8 billion tonnes of CO2 per year, about 8 percent of the total. If the cement industry was a country it would be the “third-largest emitter in the world”. According to the IEA, there was a 0.5 percent increase in the CO2 intensity of cement between 2014 and 2018, but a yearly decline of 0.8 percent is required to comply with the Sustainable Development Goals. Related: Oxford Institute: Don't Expect A Supercycle In Oil

China accounts for 56 percent of global cement consumption. However, last year the highest rate of growth in cement consumption was in sub-Saharan Africa at 5 - 6 percent. To put that into context, the per capita consumption of cement in Africa is only 91 KG as compared to the global average of 521 KG. According to an estimate, the construction market in Africa is expected to register a CAGR (compound annual growth rate) of 6.4 percent from 2019 till 2024. Manufacturing will lead way in Africa in the future as it aims to become the next great investment hub in the world.

Plastic

We produce about 335 million tonnes of plastic every year, of which 50 percent is single-use. Emissions from plastics could reach 56 GT (gigatons) of carbon by 2050, 50 times more than the per annum emissions of all the coal plants combined in the U.S. In wealthy countries such as the Netherlands, the U.S., and Germany, the average person uses more than 10 times plastic than in some less wealthy nations such as India, Tanzania, Mozambique, and Bangladesh. Based on 2015 figures, plastic consumption is expected to increase at 3.2 percent (CAGR) from 2020 to 2027. 

Steel

The steel industry presents another challenge for decarbonization - in fact, it is one of the toughest challenges of all. From buildings to machines, steel is a core component of our modern society. Steel accounts for 8 percent of global carbon emission - 1.9 tonnes of CO2 are emitted per tonne of steel produced. The demand for steel from developing countries has been relatively steady. According to one calculation, demand for steel is expected to increase at a CAGR of 2.6 percent by 2025. Another estimate by OECD claims that as developing countries strive for better living standards, demand for steel will increase by “86 percent to 123 percent between 2006 and 2050”. 

Coal

Even today coal is responsible for supplying more than a third of global electricity and is also used to make steel and iron. according to the United States Environmental Protection Agency, electricity is responsible for 27 percent of global emissions (as per 2018 figures). The UK, which roughly 10 years ago produced 40 percent of its electricity from coal, recently became the first country in the world to pass a Net Zero law. Even the UK is struggling to wean itself off coal as the country prepares to develop a Cumbria coal mine that will supposedly help to create jobs and boost steel production. Related: Could A Comeback In Venezuelan Oil Crash The Markets?

All in all, carbon emissions have continued to rise. In 2018 emissions rose at the fastest rate in 7 years, with 2019 experiencing a slowdown but still hitting a record high amount of 37 bn tonnes of CO2. One silver lining of the COVID19 pandemic was that global emissions fell by 6 percent, the largest reduction since World War II. But it seems that was only a brief drop in global emissions, with December 2020 CO2 emissions more than 2 percent higher than the same time in 2019.

As far as clean technologies are concerned, we are not there yet and it will take more time than most projections allow for any technology to significantly help in reducing CO2 emissions. Take Carbon Capture and Storage (CCS) systems for example. This involves capturing carbon and employing various methods to store it and potentially use it for other products. There are a total of 65 CCS systems in different stages of development across the globe while 26 are working to capture about 40 million tonnes of emissions annually. As can be seen in the figures above, carbon emissions are currently in the billions not millions.

The discussion will therefore have to be directed towards the idea of a Carbon Budget, accepting that there is a certain limit to the magnitude of emissions that we can actually risk. Otherwise, it will only exacerbate the situation. This also requires introducing the idea of degrowth, which refers to prioritizing our environment and encouraging debates about the actual meaning of growth in a bid to regulate our energy consumption. The difficulty then becomes how to deal with the discrepancy between the energy consumption patterns of the Global North and Global South.

Both of these topics, degrowth and a carbon budget will be covered in the next installments of this article. 

By Osama Rizvi for Oilprice.com

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Leave a comment
  • Syd Bates on April 13 2021 said:
    CO2 being a detriment to society is fallacy. Look at the levels in the world, still have not reached historical levels nor have we seen these supposed extreme temperature changes. Further evidence that climate change is a lie.
  • Mamdouh Salameh on April 13 2021 said:
    Even with all the mitigating measures the world could take, the notion of zero emissions in 2050 or even 2100 is an illusion. This is because the global economy will continue to be driven by oil and gas throughout the 21st century and probably far beyond.

    Moreover, global oil demand will continue to grow in absolute terms because of rising world population and growing global economy. Global GDP is projected to double in 2037 to $175 trillion from $87.55 trillion in 2019 and triple to $262.65 trillion by 2050 according to World Bank projections with world population rising from 7.8 billion in 2020 to 9.9 billion in 2050. A wider introduction of electric vehicles (EVs) will very slightly decelerate growth in global oil demand but will never stop it growing.

    Furthermore, global energy transition couldn’t succeed without major contributions from both natural gas and nuclear energy. This negates zero emissions.

    This is the real truth about de-carbonization no matter how environmental activists try to sweeten the pill. Talking about zero emissions by 2050 at a time of growing global demand for oil and gas is contradiction in terms.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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