Covid-19, electrification and the increase in hydrocarbon will cause fossil fuel demand to peak in 2027, according to a new report published global consultancy group McKinsey & Company.
The pandemic has caused a profound shift in energy demand, according to the International Energy Agency under lockdown conditions electricity demand dropped to Sunday levels.
Based on the current trends, McKinsey & Co have said that it could take the energy sector anywhere between one and four years to recover, with electricity and gas expected to bounce back more quickly than demand for oil.
According to the report, demand for fossil fuels will never return to its pre-pandemic growth curve. Over the long-term, the impacts of behavioural shifts due to Covid-19 are minor compared to long-term shifts such as decreasing car ownership, growing fuel efficiencies and a trend towards electric vehicles.
However, the consultants have predicted that by 2050, half of the world’s energy demand will still be supplied by fossil fuels.
As a result of this, McKinsey & Co have said that the world remains significantly off of the 1.5ºC pathway and will run out of its carbon budget for 2100 in the early 2030s.
Christer Tryggestad, a senior partner at McKinsey, said: ‘While the pandemic has certainly provided a substantial shock for the energy sector across all fuel sources, the story of the century is still a rapid and continuous shift to lower-carbon energy systems.
‘The share of electricity in the energy mix is set to grow by around 50% by 2050 and it’s set to capture all global energy growth as hydrocarbon consumption plateaus. However, in our Reference case, fossil fuels continue to play a significant role in the foreseeable future.
‘There is still a long way to go to avert substantial global climate change. According to our estimates, annual emissions would need to be around 50% lower in 2030 and about 85% lower by 2050 than current trends predict to limit the global temperature increase to 1.5ºC.
‘The importance of policies has increased in the past year. Despite the increased momentum towards decarbonization, many governments still need to translate ambitious targets into specific actions. Additionally, given the unparalleled size of many economic recovery packages post Covid-19, the focus of the stimulus measures will play a key role in shaping energy systems in the decades to come.’
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