McKinsey projects fossil fuel demand will peak by 2029 - ahead of earlier scenarios
McKinsey - one of the world's largest consultancies - says global fossil fuel demand is set to peak by 2029. The company's Global Energy Perspective 2021 report says that the impacts of Covid-19 have permanently shifted energy demand curves and that although demand will likely rebound to 2019 levels by 2023, it will not return to its previous growth path and is likely to reach a global peak before 2030.
Given the unparalleled size of many economic-recovery packages planned as economies emerge from the pandemic, McKinsey says that the focus of the stimulus measures plays a key role in shaping energy systems in the decades to come.
McKinsey’s previous iterations of the report had flagged dates for 'peak fossil' in the 2030s, but this version is the first since Covid-19 was declared a pandemic by the WHO.
The conclusions are drawn from analyses of four possible scenarios, ranging from a major shift to align economies with the Paris Agreement’s 1.5C pathway, to a scenario in which nations prioritise short-term job creation over long-term decarbonisation in their covid-19 recovery plans, slowing the energy transition.
When all scenarios are averaged out, the global peak in oil demand is expected to come in 2029. For gas, the peak will come in 2037, as - the report says - infrastructure for heating buildings will need to be replaced at scale before demand patterns tip.
Also in the average scenario, green hydrogen will become cost-competitive with gas by 2030. More than 95% of the hydrogen produced globally in 2020 was fossil-based so, while it is widely considered as a key part of the net zero solution for hard-to-abate sectors, it still has some way to go to achieve cost parity.
Nevertheless, McKinsey is warning that more must be done if the world is to align with 1.5C. On a business-as-usual course, described in the report as the reference case, more than half of global energy demand will continue to be met by fossil fuels in 2050. And, by the early 2030s, humanity will have emitted the entirety of the CO2e budget which would need to be spread until 2100 in a 1.5C scenario.
McKinsey’s senior partner Christer Tryggestad said (quoted by edie): “There is still a long way to go to avert substantial global climate change."
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