As part of its on-going methodology of scenario-assisted planning, this year Shell will present two new global scenarios looking out to 2050: Scramble and Blueprints. Shell last issued a set of global scenarios in 2005, looking forward to 2025.
Shell uses scenarios to help review and assess strategy. The scenarios are not forecasts but rather efforts to understand the possible interplay of different types of change. During the 1990’s, as market liberalization accelerated, the Shell global scenarios explored increasing globalization, the onrush of new technology and market liberalization.
The three scenarios issued in 2005 saw continuing globalization in the simplistic sense of the word: continuing economic growth and an increasing movement of people and ideas across the globe. The focal question, which ran throughout all three scenarios, was how the ‘triple dilemma’ posed by trying to achieve efficiency, social justice and security could be resolved in a globalized world.
Shell’s two new global scenarios looking ahead to 2050 are built on what it calls the “predetermined factors of three hard truths about energy”:
There is step change in demand for energy driven by growing population and increasing prosperity.
“Easy”—i.e., easily and relatively cheaply produced conventional—oil and gas will not be able to match this pace of growth. In fact all energy sources together will struggle to match demand, which will have to be met partly by new energy efficiency technology. The world is going to need all the energy it can get.
Shell Chief Executive Jeroen van der Veer has put a date on the peaking of easy oil and gas: “After 2015, easily accessible supplies of oil and gas probably will no longer keep up with demand.”
Environmental stresses—both local pollution and climate change—are increasing.
In a speech published on the Shell website, van der Veer provides a little more detail on the two new scenarios, prior to the rollout.
The presumption is that by 2100, the world will have a radically different energy system than today’s, with renewables—solar, wind, hydroelectricity, and biofuels—making up a large share of the mix, along with nuclear.
Humans will have found ways of dealing with air pollution and greenhouse gas emissions. New technologies will have reduced the amount of energy needed to power buildings and vehicles.
The scenarios explore two very different possible ways of getting there.
In the Scramble scenario, nations rush to secure energy resources for themselves, fearing that energy security is a zero-sum game, with clear winners and losers. The use of local coal and homegrown biofuels increases fast. Taking the path of least resistance, policymakers pay little attention to curbing energy consumption—until supplies run short. Likewise, despite much rhetoric, greenhouse gas emissions are not seriously addressed until major shocks trigger political reactions. Since these responses are overdue, they are severe and lead to energy price spikes and volatility.
The Blueprints scenario is less painful, even if the start is more disorderly. Numerous coalitions emerge to take on the challenges of economic development, energy security, and environmental pollution through cross-border cooperation. Much innovation occurs at the local level, as major cities develop links with industry to reduce local emissions. National governments introduce efficiency standards, taxes, and other policy instruments to improve the environmental performance of buildings, vehicles, and transport fuels.
Regardless of the route, van der Veer said, “the world’s current predicament limits our room to maneuver...Using more energy inevitably means emitting more CO2 at a time when climate change has become a critical global issue.”
Shell traditionally uses its scenarios to prepare for the future without expressing a preference for one over another. But, faced with the need to manage climate risk for our investors and our descendants, we believe the Blueprints outcomes provide the best balance between economy, energy, and environment. For a second opinion, we appealed to climate change calculations made at the Massachusetts Institute of Technology. These calculations indicate that a Blueprints world with CO2 capture and storage results in the least amount of climate change, provided emissions of other major manmade greenhouse gases are similarly reduced.
But the Blueprints scenario will be realized only if policymakers agree on a global approach to emissions trading and actively promote energy efficiency and new technology in four sectors: heat and power generation, industry, transport, and buildings.
This will require hard work, and time is short. For example, Blueprints assumes CO2 is captured at 90% of all coal- and gas-fired power plants in developed countries by 2050, plus at least 50% of those in non-OECD countries. Today, none capture CO2. Because CO2 capture and storage adds costs and yields no revenues, government support is needed to make it happen quickly on a scale large enough to affect global emissions.
Blueprints will not be easy. But it offers the world the best chance of reaching a sustainable energy future unscathed, so we should explore this route with the same ingenuity and persistence that put humans on the moon and created the digital age.
The world faces a long voyage before it reaches a low-carbon energy system. Companies can suggest possible routes to get there, but governments are in the driver’s seat. And governments will determine whether we should prepare for bitter competition or a true team effort.