New Report Considers Future of Energy with an Eye to Implications of COVID-19

For Immediate Release: May 20, 2020
Contact: Lauren Dunlap | 202.328.5006 | [email protected]

WASHINGTON, DC—The COVID-19 pandemic has created the largest decline in global energy demand since World War II, but what does this mean for future energy markets? A new report released today by Resources for the Future (RFF) compares long-term global energy market projections from leading international energy institutions to examine projected future energy trajectories and the implications of COVID-19.

Global Energy Outlook 2020: Energy Transition or Energy Addition? finds that the world may be on the cusp of its first true energy transition, but that more ambitious public policies and technological innovations will be needed to satisfy the energy demands of the world’s growing population while also achieving long-term environmental goals.

Among the key findings of the Global Energy Outlook 2020 report:

• In a global economy shaken deeply by COVID-19, short-term demand declines for fossil fuels, while renewables are estimated to grow slightly.
  • The International Energy Agency (IEA) estimates that primary energy demand in 2020 could decline for oil (–9%), coal (–8%), natural gas (–5%), and nuclear (–2%), while renewables would grow by 1%.
  • But uncertainty abounds: future GDP and energy trends are uncertain long term, with recent research suggesting that the range of economic growth paths considered by most energy outlooks is far more narrow than the historical record suggests.
    
    
• As travel and human activity are slashed to curb the spread of COVID-19, reduced fossil energy consumption in 2020 will reduce CO2 emissions.
  • The IEA estimates that emissions could fall by roughly 8% this year, returning to their 2010 levels. However, absent substantial changes in public policies to address climate change, a return to economic growth likely means a return to emissions growth.
    
    
• Paris Agreement targets will not be reached without substantial new policies and widespread deployment of low-, zero-, and potentially negative-emissions technologies.
  • From 1998 through 2018, global energy-related CO2 emissions grew by 48%. Over the next 20 years, most Ambitious Climate scenarios suggest that emissions will need to decline at roughly the same rate to align with international climate goals.
    
    
• The future of coal is driven by the global East.
  • Stark differences in fossil fuel consumption mark the energy divide across the global East (Asia-Pacific, Africa, and the Middle East) and global West (the Americas, Europe, and Eurasia).
  • Apart from natural gas, fossil fuel demand is expected to decline in the global West across all scenarios from 2018 to 2040; in contrast, in the global East, demand for coal, oil, natural gas, and other fossil fuels grows under most scenarios, but begins to decline under Ambitious Climate scenarios.
    
    
• Since 2009, the levelized cost of solar photovoltaic (PV) power has declined by nearly 90%. Over that time, global solar electricity production has grown more than tenfold. But this may be just the beginning.
  • Solar power has grown from supplying less than 0.01% of the world’s electricity in 2008 to more than 2% in 2018. By 2040, multiple scenarios project that solar will provide over 20% of the world’s electricity.

RFF President and report lead author Richard G. Newell explains the historic impact of coronavirus on global energy markets: “The projections presented in today’s report were all generated well before the impacts of COVID-19 were felt. Since these projections, the world has seen unprecedented change.”

“Revised projections for global energy use in light of the crisis show the largest decline in global energy demand since World War II, stretching across every continent,” says Newell.

“The International Energy Agency expects a 6% decline in energy use, leading to an 8% drop in global CO2 emissions for 2020, but if economic activity returns to pre-pandemic levels, emissions can be expected to rebound,” says RFF Senior Research Associate and report coauthor Daniel Raimi.

“As a result, this short-term drop associated with COVID-19 may have little appreciable long-term impact on atmospheric carbon dioxide concentrations, although it could have ripple effects on the pace of national and global policy responses and decarbonization efforts that persist for many years,” says Raimi.

The report was released worldwide this morning together with RFF’s updated interactive Global Energy Outlook data tool.

The RFF Live digital event, “The Global Energy Outlook 2020: What Has Changed Due to COVID-19?” will launch the report release and interactive data tool at 11 a.m. EDT on May 20. The webcast event, featuring Helima Croft, RBC Capital Markets; Mark Finley, Rice University’s Baker Institute; Meghan O’Sullivan, Harvard University’s Kennedy School; and report coauthors Newell and Raimi, will feature an in-depth panel discussion on some of the potential long-term outlooks for energy markets and the short- and long-term implications of COVID-19 for the global energy system.

Together with Newell and Raimi, the report is authored by RFF Research Assistant Seth Villanueva and RFF Postdoctoral Fellow Brian Prest. The Global Energy Outlook 2020 includes projections from Bloomberg New Energy Finance, BP, Equinor, ExxonMobil, the Institute of Energy Economics of Japan, the International Energy Agency, the Organization of the Petroleum Exporting Countries, Shell, and the US Energy Information Administration.