- Location: Zoom
The global energy system is in the midst of fundamental change as cleaner sources of energy become cheaper and more desirable. These changes will only accelerate as more countries announce plans to confront climate change, requiring dramatic shifts in global energy markets. Earlier this year, bp announced that it was aiming to be net zero by 2050. Against this backdrop, in September the company released its annual Energy Outlook 2020, which includes a number of bold projections outlining what a decarbonized transition could look like. To discuss the Outlook and possible pathways to net zero, EPIC hosted bp Chief Economist Spencer Dale on November 18, 2020.
Dale shared highlights of the Energy Outlook and details on what a net zero world could look like, including how the structure of energy demand will change over the next 30 years, with a declining role for fossil fuels driven by increasing efficiency, electrification and the fastest growing source of energy: renewable energy. Both hydrogen and bioenergy (biofuels, biomethane, and biomass) will be important as well, Dale noted, as consumption shifts away from fossil fuels. Finally, the Outlook concludes that policy measures and societal shifts are vital to sustaining a reduction in carbon emissions.
“We’re on an unsustainable path. Carbon emissions are continuing to rise,” Dale said.
Following Dale’s presentation, EPIC’s Journalism Fellow and The Atlantic reporter Rob Meyer joined the virtual event for a deeper dive conversation. He asked Dale how bp is allocating capital today in order to follow through on its net zero pledge. Speaking metaphorically, Dale shared how the company is shifting its eggs into other forms of energy baskets — such as low or zero carbon — to become a more diversified energy company.
Meyer reminded Dale that this was not the first time bp had announced big plans to transition away from fossil fuels. “Nearly 20 years ago, bp rebranded as ‘Beyond Petroleum.’ It announced that this kind of transition was coming, that it was moving beyond oil…Why is this time different?” asked Meyer.
Dale confirmed, “We were one of the first companies to speak very openly about climate change and the role that fossil fuels played in climate change and trying to shift as a company and move in that direction.”
Dale went on to explain that bp’s investments in different business models were based on the idea that carbon prices around the world would be $40 or $50 a ton. These carbon prices never materialized.
“[It] was very hard for us to go more quickly than the rest of the world was moving,” he said, “because you lose money.”
This time, he argued, “our strategy does not depend on policy changes. It will be greatly enhanced by policy changes, and we will do everything we can to advocate for those policy changes to help support sort of an accelerated pathway, but we’re not banking on them.”
Looking 10 to 20 years out, Meyer asked Dale what the big unknowns were today that could vastly change the future. Dale provided two major unknowns from his personal perspective. The first was the pandemic.
“Do we look back at the pandemic and say that was a significant turning point, a significant point of inflection for the energy transition, and the energy transition was so much faster beyond that point?” Dale wondered.
The second unknown for Dale was what to make of China’s announcement of carbon neutrality by 2060.
“Can China achieve that, and if it does, how will it do that?” asked Dale. “It’s profound partly because China is such a large energy consumer and such a large emitter of carbon emissions today, but also by doing that, it could revolutionize the world.”
Dale explained how China has helped move the solar and wind industries forward because it was able to produce the technology so cheaply, and the rest of the word benefitted from that. Dale wondered if China would do the same for hydrogen and carbon capture, utilization and storage (CCUS) technologies.
Meyer asked Dale if there were any particular technology questions he was focused on.
“The challenge is applying the technologies that exist today at the pace and scale necessary to achieve those decarbonization pathways,” Dale said. “There’s a very key role for governments to play, in terms of government policies, but governments can’t do this on their own.”
A shift in societal behavior and preferences will make it easier to achieve decarbonization, Dale noted, emphasizing the need to “build a constituency supporting decarbonization.”
“It’s for all of us to do, companies like bp, but also you and I as energy consumers,” Dale said.
He pointed out that this shift is indeed happening.
“One of the features over the last few years, which has been really surprising is the way that we see society, demanding change more quickly, if you like, than governments.” Dale said, noting that bp’s commitment to net zero came after shareholders demanded action.
“I think that dynamic is society leading governments rather than governments leading society.”