Policy and Technology are Making the 1.5-degree Goal Harder to Attain

The world is far from being on track to meet targets and ambition set out in the Paris Climate Agreement. Increased levels of geopolitical conflict have unfortunately made the energy transition more fragmented, and positive developments are in many cases offset by negative ones.

“The continued war initiated by Russia’s invasion of Ukraine and the challenges with inflation and cost of living are putting a damper on absolutely necessary energy transition measures,” says Eirik Wærness, Chief economist in Equinor.

“On the other hand, it is encouraging to see that substantial progress has been made in some areas such as solar PV and electric vehicle deployment. Despite short-term setbacks the longer-term signals clearly point in the direction of decarbonisation, but speed and scale are uncertain,” continues Mr. Wærness.

The past winter has been an ordeal in many parts of the world with an energy crisis that has had global ramifications and hit several sectors. Europe in particular has had to take unprecedented measures to sustain a balance in supply and demand of natural gas. They fared well, mainly due to milder than average temperatures and demand destruction and are now in a mode focusing on next winter’s energy supply security. A dilemma is that, partly because of European call on global LNG to counter the loss of Russian volumes, emerging economies in Asia had to increase their use of coal to satisfy their energy demand.

“With energy security and affordability high on the agenda, we’ve turned every stone to maximise our energy deliveries to Europe. At the same time, we have contributed to a balanced energy transition by advancing renewables and low-carbon solutions projects,” says Anders Opedal, President and CEO of Equinor.

Separate deep dive on critical minerals

Energy Perspectives is an independent energy scenario analysis prepared by Equinor analysts. This year, the publication does not include a full report as the previous edition was published only 9 months ago, but all data, forecasts and assumptions have been updated. Also, the analysts have conducted a separate deep dive on critical minerals, a highly relevant energy transition topic, that will be part of the presented material.

“The role of critical minerals and rare earth elements (REEs) in the energy transition is receiving substantial attention as unprecedented demand, declining reserves and increasingly complex supply chains are challenges that need to see solutions,” says Eirik Wærness.

Based on a continued global momentum in addressing the climate challenge the Walls scenario signals a path of substantial energy transition, however falling clearly short of Paris-consistent climate ambitions for 2050. The increased levels of geopolitical conflict, especially triggered by the Russian invasion of Ukraine, have made the trade-off between the three criteria of the energy trilemma (energy affordability, energy security and energy decarbonisation) more challenging. In many ways the walls have become thicker and higher, despite the incorporation of expected positive consequences of the Inflation Reduction Act in the US and further changes in energy and climate policies in EU.

The Bridges scenario is a normative scenario aligned with the 1.5-degree global warming ambition in the Paris Agreement. This scenario requires a low geopolitical conflict level, common solutions to common challenges across regions, sharing of technology and financial support from industrialised countries to developing countries. Another year has passed by with only moderate progress and that amplifies the massive shortcomings of actual energy transition measures compared to stated ambitions.