Although my blog is titled “The Rational Pessimist”, I am definitely ‘a cup half full’ kind of guy personality-wise. In a crappy situation, I will generally try to focus on the positive. But reading BP’s latest “Energy Outlook”, a publication that comes out every January, it is difficult to avoid despondency. Here is the latest edition, which was published a couple of days ago.
The charts within this publication are depressing enough, but more so is BP’s concluding slide (click for larger image):
For those not familiar with the publication, the BP Energy Outlook forecasts energy supply and demand out a couple of decades or so. For the January 2014 publication, we are now looking out to 2035, compared with the forecast to 2030 in the January 2013 edition.
Apart from all the numbers for oil, gas, coal, renewables and so on, the latest Outlook also gives a prediction for CO2 emissions out to 2035. This is what they are referring to when they use the word ‘sustainable’ and this is what they define as having ‘room for improvement’. This is how I would reword the last bullet point:
– No, A Frigging Disaster
How on earth can you regard this chart as merely demonstrating ‘room for improvement’?
The red dotted line is the International Energy Agency’s simulated emission path required to keep the atmospheric concentration of CO2 below 450 parts per million, the consensus (although somewhat arbitrary) limit deemed necessary to prevent dangerous climate change.
Is there any silver lining for this dark cloud? If I had to scratch around, then it would be over how they have worked through the Kaya identity—if you remember, the Kaya identity takes us from GDP growth, through energy intensity to arrive at carbon emissions. (I’ve posted previously on the Kaya identity more fully here).
BP’s GDP growth assumption rests on a traditional exponential curve, and this is the key driver of the CO2 number:
Energy intensity is improving, but can’t compensate for the GDP trend, while carbon intensity is only making a marginal contribution in the mitigation of climate change. In short, if global GDP growth suffers a train wreck, all is not lost.
Some people will now accuse me of immorality: wishing lower growth on the world’s poor. But if I had to choose between restrained growth and an average global mean temperature rise of 4 degrees Celsius or beyond, I would have to choose the former as the lesser of two evils. Moreover, when we get to very high degrees of global warming, the climate impacts would come to stymie GDP growth anyway. Rephrased, high GDP growth ultimately contains the seeds of its own demise.
This isn’t really the place for opining on long-term growth, but I will pull out another of BP’s charts:
Implicitly, BP’s numbers suggest that a) China’s economic miracle remains intact and, indeed, extends well into the future; and b) China is the principal driver of global GDP growth. Personally, I think that there is a high probability that China will ‘do a Japan’ in the near future; that is, show a massive step-change downward in GDP growth due to prior decades of excessive fixed capital investment.
(As a side note, the media buzz over China’s renewable push is not showing up in significant coal substitution as can be seen by the Middle Kingdom overtaking the EU in CO2 emissions per head.)
Finally, the report’s concluding chart also showcases BP’s belief that enough energy can be found at the right price. This may be one possibility, but it is certainly not the only one. If fossil fuel extraction costs ratchet up, this will feed back through to emissions by stunting GDP growth.
Have I cheered myself up a bit? Well, perhaps a little. Nonetheless, the high fossil fuel emissions trajectory still has a far too high probability given the risks involved.