The Intergovernmental Panel on Climate Change (IPCC) released their synthesis report Sunday, Nov. 2nd. The report combines the Panel’s past work and reiterates the near unanimity in the scientific community regarding the man-made role in global climate change. Still, public and political perception is very much divided and the report aims to lay the foundation for a new global treaty on climate change by the end of next year. Stark in their assessment, the IPCC posits a grim future in the absence of any meaningful mitigation. Not all change is bad however, and, when examining the energy implications, global climate change produces its share of winners.
According to the Panel, the most recent 30-year period was likely the warmest of the last 1,400 years. Nowhere is that more apparent than in the oceans. Between 1971 and 2010, more than 90 percent of the energy accumulated in the climate system was stored in the ocean. Since the beginning of the industrial era, ocean acidification is up 26 percent and Arctic and sub-Arctic ice sheets have continued to shrink, increasing the rate of sea level rise worldwide. On land, spring snow cover has decreased in extent globally and permafrost temperatures have increased in most regions.
Globally averaged combined land and ocean surface temperatures, Source: IPCC
Greenhouse gas (GHG) emissions are at an all time high and the IPCC unabashedly pointed the finger at the oil and gas industry. Increased use of coal has halted the gradual push toward decarbonization of the world’s energy supply and, in 2010 the energy industry was responsible for 35 percent of the annual GHG emissions. More broadly, CO2 emissions from fossil fuel combustion and industrial processes accounted for 78 percent of the total GHG emissions increase between 1970 and 2010. The Panel’s scientists agree that warming will more than likely exceed two degrees – the threshold for dangerous climate change – and that a full reversal in global energy policy is necessary to limit the damage. However, not all change is created equal and the uneven distribution of warming and precipitation patterns makes the creation of a global strategy all the more difficult.
GHG emissions: 1970-2010, Source: IPCC
Among the immediate winners are the Arctic nations, namely Russia. It is estimated that the Arctic holds approximately 30 percent of the world’s undiscovered natural gas reserves and 13 percent of the world’s undiscovered oil reserves. Russia is believed to hold over half of the total Arctic resources.
To date, Russia has been the most active in the Arctic, with a number of projects in development in the Barents and Kara seas. Western companies are eager to join and ExxonMobil, Statoil, and Total have already embarked on significant partnerships with state-owned oil and gas giants Rosneft and Gazprom. However, territorial disputes have thus far defined the region’s development: the United States and Canada disagree on the boundaries of the promising Beaufort Sea as well as the legal status of the Northwest Passage; Norway and Russia seemingly ended their 40-year dispute; but Canada and Russia continue to assert their territorial sovereignty all the way to the North Pole.
Source: EIA and USGS
Extreme conditions, low commodity prices, and sanctions (Russia) have limited total Arctic output. Political debates will likely continue, but the IPCC predicts the conditions will only get easier for oil and gas extraction. By mid-century, the Panel suggests that the Arctic Ocean may be ice-free during the summer months and global glacier volume and permafrost area are projected to decrease by up to 85 and 81 percent respectively. This is a huge boon, especially to North American producers hindered by shorter lease terms. Over the next decade, Arctic investment is expected to reach $100 billion. In the United States, Shell is preparing to return to the Arctic and drilling in Alaska’s Arctic National Wildlife Refuge may resurface.
In a carbon-conscious future, the renewable energy industry is the long-term winner. To maximize dangerous climate change mitigation the IPCC prescribes a renewables share of 80 percent of the power sector by 2050, up from 22 percent today. Moreover, the report suggests that fossil fuel power generation without carbon capture and storage should be phased out almost entirely by 2100. These are difficult goals to meet and generally depend on the willingness of governments across the globe to accept climate change challenges head on, but the renewables industry is well positioned for a leap forward.
As of 2013, renewable electricity generation is on par with that of natural gas. By 2015, solar energy consumption is expected to more than double from 2012 levels along with 39 and 67 percent gains in wind and biodiesel respectively. The European Union is on pace to meet its 20 percent by 2020 agreement and projects particularly large growth in offshore wind and solar. Global investment in renewables is expected to average $230 billion annually to 2020, albeit down from 2011’s peak of $280 billion. Developing nations are increasingly onboard and, in 2013 new renewable capacity surpassed new fossil fuels and nuclear capacity for the first time in China.
The glass is still only half full however, as data shows fossil fuel dependence hasn’t budged. With the IPCC’s report now in hand, policy makers worldwide have their work cut out for them as they prepare for the Paris summit in 2015. Absent any binding agreements, fossil fuels will continue to hamstring renewable energy growth. Of course global climate change poses a great threat to our way of life and any examination of the primary beneficiaries is an entirely subjective matter. We all stand to lose as rising sea levels and rising temperatures displace large populations and affect agricultural processes. An increasingly accessible Arctic does not demand drilling. The IPCC report concludes that ambitious mitigation is compatible with economic growth.
By Colin Chilcoat of Oilprice.com
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