The world is currently heading for an environmentally catastrophic rise in temperatures from pre-industrial levels by mid-century, but switching power generation from fossils to renewables and nuclear at speed could keep global heating close to the targets set in the 2015 Paris Agreement, BloombergNEF has calculated in its latest New Energy Outlook (NEO).

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The NEO’s economic transition scenario – in which no new policy action is taken by governments to accelerate a transition to clean energy – renewables and electrification of transport halves the world’s energy-related emissions by 2050, with wind and solar providing two-thirds of total generation and – with battery storage – accounting for 85% of the 23TW of new capacity built. Yet in this calculus, said the report authors, unabated coal, oil and gas emissions still fuel “a trajectory consistent with 2.6°C of global warming”.

However, in the NEO net zero scenario modelling, a sped-up build-out of clean power plant, electrification of transport and industry, buildings and heat, and carbon capture and storage and hydrogen sector growth together could displace fossil fuels to create a global power system dominated by wind (48%) and solar (26%) generation, with the remainder coming from other renewables (7%), nuclear (9%), hydrogen and coal or gas with carbon capture.

Matthias Kimmel, team leader for energy economics at BNEF, highlighted the 57% fall in power sector emissions and drop of 22% in the transportation sector driven by the changeover to electric vehicles. “The energy transition in the power sector is well under way, and our modelling shows global emissions in the power sector peak around 2023,” he said.

“Despite the recent inflationary pressures, renewables remain competitive and the gap between renewables and fossil fuels continues to widen. We’re on the right track, but there is still much more work needed to push for solutions we already know make economic sense.”

Kimmel noted that NEO – which looks at energy systems of nine nations currently accounting for 63% of global CO2 emissions – forecasts global coal, oil and gas use all beginning to fall in the next decade, with coal peaking and declining “immediately, while oil does the same in 2028 and gas in the early 2030s”.

Electrification of transport and industrial processes, buildings and heat using “steadily” lower-carbon power, the NEO authors spotlight, as “the next biggest contributor to emissions reductions”, abating about a quarter of total CO2 over the period, with remnant reductions from demand-side efficiency gains and recycling, hydrogen, bioenergy and CCS, together making up the final quarter in cuts.

BNEF foresees CCS capacity going from about 40 megatons (Mt) in 2021 to 1.7 gigatons by 2030, and over 7 gigatons by 2050, while hydrogen use grows five-fold, from 90 million tons of largely fossil-based generation today to about 500Mt of green H2 by 2050.

David Hostert, global head of economics and modelling at BNEF and lead author of the 2022 NEO, said: “Our net zero scenario shows that a credible pathway to meet the goals of the Paris Agreement still exists, but getting there requires immediate action. Clean power deployment needs to quadruple by 2030, in addition to a major investment in carbon capture and storage, advanced nuclear technologies, and hydrogen.

“To get on track this decade, there needs to be $3 invested in low-carbon supply for every $1 in fossil-fuel supply. There are also critical enabling factors to consider: electrification and economic growth will quadruple the planet’s power demand by 2050.

“We need to see a massive acceleration in the build-out of power grids, manufacturing capacity for low carbon technologies, and supply of critical metals and materials. These could become painful bottlenecks tomorrow, if left unaddressed today.” Hostert said.

The NEO forecasts for its net zero scenario see “countries take different routes to net zero”, with developed nations including the US, UK, France, Germany, Japan and Australia stemming emissions “rapidly” over the decade, while emerging economies, such as India and Indonesia, would witness a rise “for several more years” before sharply declining. China, said the report authors, was “charting its own course, blending elements of both developed and developing pathways”.

“Cleaning up the power system is most impactful in countries that heavily rely on coal today, such as China, India and Australia. Switching to clean power accounts for at least two-thirds of their total emissions abatement over the next 28 years.

“Electrifying fossil-fuel based processes in transport, industry and buildings should be a priority in countries that have already lowered the carbon intensity of their electricity generation.”

Notably, the NEO found that China, India and Indonesia could even outperform their national emissions targets, the so-called NDCs (nationally determined contributions), or increase the ambition of these targets by 2030, by “relying only on technologies that are economically competitive today, or very soon to be”.

BNEF flagged six key “action areas”areas for policy makers and private sector actors to accelerate the global energy transition:

  • Accelerate deployment of mature climate solutions
  • Support development of new climate solutions
  • Manage phase-out of carbon-intensive activities
  • Create ‘appropriate’ climate transition governance structures
  • Support emerging markets transitions
  • Scale up supply of critical materials

“The fork in the road is upon us. Policy makers returning home from COP27 have an opportunity to start closing the so-called ‘implementation gap’, by removing barriers to the deployment of renewable energy and electric vehicles, accelerating the development of newer technologies like hydrogen and carbon capture, and actively managing the transition away from unabated fossil fuels,” Hostert said.