Increased strife among nations likely would be good for the coal industry but would drive up greenhouse gas emissions and undermine climate change goals, said the chief economist for one of Europe’s largest oil companies.
Eirik Waerness, lead economic strategist for Norwegian giant Statoil, is in Washington this week discussing his company’s projections for energy until 2040, with climate change as a huge challenge.
Waerness said his projections have a “very important message” to deliver: “In all these scenarios oil and gas are here to stay.” But coal could wither away and be taken out of the energy mix. Natural gas, however, can grow by slightly more than 30 percent globally, which will be higher than demand.
Waerness’s company is a member of a coalition of several major oil companies lobbying the United Nations to endorse a carbon price, or a tax on carbon dioxide, to address the climate crisis when world leaders meet in Paris later this year to hash out a deal on emission reductions.
The coalition is seen as part of a bid by major oil and gas producers to maintain a strong market for natural gas as a low-carbon fossil fuel that is more competitive than coal. A carbon price would help them do that.
Under one scenario Statoil is looking at, called the “conflict scenario,” it sees the world much as it is currently, with countries seeking “energy independence” instead of more collaborative arrangements to free themselves from reliance on neighbors that they don’t like.
Waerness said several areas of conflict are emerging, from Russia’s aggression in Ukraine, China’s encroachment in the South China sea and trouble mounting in the Middle East.
Under that scenario, he says, coal would remain one of the principal choices for producing electricity globally because of its availability as an in-country resource, making countries less dependent on imports.
Waerness, speaking Wednesday at the Center for Strategic and International Studies in Washington, also discussed a “reform scenario,” which would allow for oil and gas production while reducing emissions and maintaining economic growth at a higher level than the crisis, coal-heavy scenario.
Under “reform” projections, coal drops off, but natural gas and even oil are still being produced. Waerness said this model would tighten emissions, but comes shy of the 2-degree Celsius reduction that global leaders are trying to reach to slow manmade climate change.
Yet under the scenario, the world would see an increased “tightening” of emissions, making for a “much tougher” regulatory situation than now, he said.
Nevertheless, “We will be twice as richer in 2040” under this scenario, with only about 30 percent more energy being used.
Under the crisis projections, with coal still in the mix, economic growth would be less at 2 percent, compared with 2.8 percent under the reform scenario.
To achieve the 2-degree reduction, the world needs to move more renewable energy sources such as wind and solar. Even then, oil and gas are still being produced and make up about 60 percent of global energy use.
He said the Group of 7 discussions centered on the year 2100, but Statoil’s outlook goes only to 2040.
Waerness says 2100 “is beyond” what an oil and gas company can plan for because the time horizon is so far out. He said 2040 is a much more reasonable timeframe for an oil company to plan for and account for production scenarios.
