Has Peak Fossil Fuel Demand Passed?
The International Energy Agency projects there will be an enormous decline this year in fossil fuel usage (up to 9% for oil and 8% for coal), owing to the Covid-19 recession. In fact, Carbon Tracker, an influential energy think tank, argues that fossil fuel demand will never again reach the levels seen in 2019. As the global economy recovers next year (or later), solar and wind are expected to fill some of the demand once met by fossil fuels, and as the cost of renewables continues to drop, demand for them will increase still further. They are already the “cheapest source of bulk electricity generation in 85% of the world." There would be no financial incentive for energy-consuming countries to return to fossil fuels.
Demand growth for fossil fuels has been slowing in recent years, growing at under 1% in 2019, due not only to the declining price of renewables but to more governmental regulation of the industry (aside from the USA). This has been in part a response to activist pressure. The result has been a “humbled” Exxon, according to Bloomberg Businessweek, “a mediocre company.”
If the IEA figures are accurate, then last year was "peak year” for fossil fuel demand, “decades before that predicted by the oil companies,” and four to six years sooner than Carbon Tracker anticipated in 2018. As analyst Kingswell Bond put it, “If demand for fossil fuels bounces back in 2021 by half the amount it fell in 2020, and grows at 0.5% a year, it would take eight years to get back to where the industry started. And in the meantime, the renewable energy revolution has not stopped…The ability of the industry to dictate to governments will weaken, and its capacity to frustrate the growth of renewables will reduce.”
Since peak demand also means peak fossil fuel emissions, Bond and colleagues see new hope that we can meet the targets of the 2015 Paris Agreement and keep global warming to 1.5°C. But fossil fuels still supply 80% of the world’s energy, and it’s unclear whether their market share decline will be fast enough to avoid our reaching that level. For one thing, gas is now much cheaper. The Brookings Institution, arguing for a carbon tax to offset that price drop, says “Recovering from the pandemic-induced recession will require large new investments around the world. Whether these investments replicate the past in a rush to return to ‘normalcy’ or lay the foundation for sustainable and resilient growth will determine the planet’s future.”
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