Disclaimer

Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. But I can't by law give you advice, and I do make mistakes. Remember: the unexpected sometimes happens. Oddly enough, the expected does too, but all too often it takes longer than you thought it would, or on the other hand happens more quickly than you expected. The Goddess of Markets punishes (eventually) greed, folly, laziness and arrogance. No matter how many years you've served Her. Take care. Be humble. And don't blame me.

BTW, clicking on most charts will produce the original-sized, i.e., bigger version.

Wednesday, August 2, 2017

Have CO2 emissions already peaked?

Burning coal was responsible for 44% of global CO2 emissions in 2012.

According to BP's Statistical Review of World Energy, production of coal globally fell by the most on record in 2016.  In China, the world's largest consumer and producer of coal, production fell by 7.9%.  In the US, production fell by 19%.  World production fell by 5.1%.  So, ceteris paribus, total emissions should have fallen by 2%.

Source


In fact, total CO2 emissions were flat.  Why flat instead of falling?  Because part of the decline in coal use was as a result of a switch from coal to natural gas.  Yes, it's true, part was because of a switch to renewables too, but not enough.  And in 2016, the demand for oil rose 1.6%, from 95 million barrels per day to 96.5 mbpd.  The IEA forecasts that oil demand will rise by about 1.5% this year.

But in 2018, the explosive growth in EV sales will be starting to nibble at total oil sales.  EVs will make up perhaps 5% of new car sales globally, reducing oil demand by, say, 0.5%.  In 2019 EVs will be 10% of global car sales.  In 2020, 15%?  By 2020, the decline in demand induced by the rising percentage of the car fleet which is EV/PHEV will be enough to offset the demand for oil from other uses.  I'm ignoring the use of oil as a chemical feedstock because I'm only interested right now in calculating oil's impact on CO2 emissions.  And they will peak in 2020.

Meanwhile, in electricity generation, the world will continue to switch from coal to renewables plus gas.  So coal demand will likely continue to decline.  There may be a modest spike in global coal demand this year as China force feeds economic activity because of the 19th National Congress  (they do it every time) but growth will taper off in 2018 onwards.

So 2017 will prolly be the peak for CO2 emissions (up a little on 2016), with small falls in 2018 and 2019, but accelerating declines thereafter.

This is very much not a consensus view.  Even BNEF, the most optimistic of the "official" forecasters reckons the peak in emissions will come in 2026.  And the IEA and BP reckon they will go on rising for decades.  My different outlook comes from 3 factors:


  • I believe EV/PHEV sales will continue to double every 18 months, or faster.  
  • And with the costs of wind, solar and batteries continuing to decline, the incentive to switch away from coal will intensify.  
  • 2017 will be somewhat cooler than 2016, but 2018?  2019?  Even if year by year emissions peak, the level of CO2 in the atmosphere will continue to rise.  So I think there will be renewed global concern about global warming, and the pressure to retire coal plants will only increase.  
[Update: See also this post]

References:

Coal falls hard as renewables continue to surge

CO2 emissions flat for 3rd straight year

IEA Oil Market Report

Only 1.2%?

Center for Climate and Energy Solutions

List of countries by coal production

The "long tailpipe" argument in Europe gets harder




No comments:

Post a Comment