Can a 90% reduction in greenhouse gas emissions be achieved by 2040 in the EU?

August 4, 2025

The EU has a 2030 greenhouse gas (GHG) reduction target of 55% below 1990 levels, in preparation for net-zero GHG emissions in 2050. Regulation (EU) 2021/1119 Article 4(3) of the European Climate Law requires an intermediate 2040 climate target to set the pace for EU-wide reductions of net GHG emissions. The EU Commission unveiled the legislative proposal for this target in early July, and in line with earlier communications and assessment documents, the proposal sets out the binding Union 2040 climate target as a reduction of net GHG emissions (emissions after deduction of removals) by 90% compared to 1990 levels by 2040. But can this be achieved in 15 years?

A recent overview of EU GHG emissions is shown in the table below, extracted from the European Environment Agency GHG database. Only carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O) are shown.

Greenhouse gas1990 CO2eq Gt2023 CO2eq Gt2023 CO2eq as a % of total 1990 GHG emissions
CO23.772.5152%
CH40.670.408.4%
N2O0.300.183.8%

Of the 0.58 Gt CO2eq which is CH4 and N2O in 2023, 0.46 Gt comes from agriculture and waste handling, which represent among the most challenging emission reduction tasks. For example, raising cattle means there will be methane emissions – it’s part of bovine biology. Some further reductions in these gases may be possible by optimizing fertilizer use and adjusting cattle feed, but a 90% reduction is unlikely. As such, the non-CO2 greenhouse gases will take a disproportionate part of the remaining 10% of the emissions in 2040, leaving little room for any CO2.

While the 90% GHG reduction by 2040 is not a full transition to net-zero, it nevertheless represents an almost complete transformation of the energy system, because the remaining 10% will be CH4 and N2O emissions from agriculture and some other industrial process GHG emissions (such as fluorinated gases). In such a situation, any remaining fossil fuel CO2 emissions would only be coming from rapidly diminishing legacy uses e.g. some old trucks, a last remaining coal steel mill and so on. In effect, the proposed European target implies net-zero (or nearly net-zero) CO2 emissions in just 15 years.

This means that achieving the 2040 target requires the rapid maturing and full implementation of all available clean energy technologies, not just solar PV and wind, but even nascent technologies such as synthetic aviation fuel (e-SAF) and direct air capture of CO2. And this could be where a problem lies.

The energy system, like any other advanced technology system, needs to go through phases of implementation in its development. New technologies will enter and establish themselves, after which they will ramp up as costs come down and broad market access is achieved, then finally they will reach a level of market saturation and further growth will be limited. This happens in all markets and takes time. In the energy system the path to full maturity is measured in decades as shown in the illustration. By contrast, in the information technology sector (e.g. smart phones), the timeline is about half that for energy.

The development of solar PV is a good example. Even though the first patent for a solar PV device can be traced back to 1935, the first commercial use of solar PV was by NASA in the 1970s as an expensive but necessary means of powering orbital vehicles like Skylab. The first terrestrial power plant was a 1 MW facility in California, built by the oil company ARCo in 1982. Forty-three years later solar PV generates 13% of global electricity, but most of this has occurred in the last decade.

Looking at the wide range of technologies which we currently use for energy or will use in the years to come, the development curve can be populated as shown. At the far left just entering the mix are technologies like small modular nuclear reactors (SMR) and in the top right corner are mature departing (at least in Europe) technologies like coal fired power stations. Solar PV and wind are now in the fastest part of the ramping up zone.

To date, the transition in Europe has largely relied on wind and solar PV, although more recently passenger electric vehicles (EV) have entered the mainstream. While these three technologies have further to run and can continue to reduce EU emissions, a good portion of remaining emissions won’t be directly reduced by solar PV and wind, other technologies will need to scale up.

In 2025 EU energy system emissions are at about 2.6 Gt CO2, of which 0.6 Gt CO2 is from electricity generation. The remaining 2 Gt is from direct fuel use in road transport, aviation, home heating, cooking and industry. These activities will need to migrate to low carbon fuels like hydrogen or biofuel, be electrified or have their CO2 captured and stored. The issue that Europe faces is that all the technologies required for this 2 Gt are on the left-hand side of the diagram, with several on the far left in their infancy. Some technologies, like EVs, are on the cusp of rapid ramp up, but one technology that is mandated for 2030, notably e-SAF, is arguably still newborn. The 1% mandate for 2030 (and rising to 5% by 2035) will require an initial 10,000 barrels per day of production across the EU.

Although it is clear that an array of relatively new or very new technologies are now required to largely eliminate fossil fuel use or capture CO2 emissions, Europe has nevertheless chosen a 2040 target that front-loads the task into the first 15 years of the next 25 years (to net-zero emissions in 2050), rather than back-loading the task to allow the required technologies to mature. 

Front-loading, given ongoing emissions from agriculture, puts significant pressure on hard to abate sectors such as industry and aviation which will need to fully decarbonise by 2040, just 15 years from now.

One way out of this dilemma is to allow the use of a variety of carbon removal offsets into the equation. For example, importing CO2 removal credits from reforestation projects in Brazil under Article 6 of the Paris Agreement could make additional room within the EU carbon budget. This could be both a long-term strategy for the EU or a shorter-term gap-filling measure.  The proposed legislation recognizes this in Recital 8.

  • A number of elements to facilitate the achievement of the 2040 target should be appropriately reflected, including a potential limited contribution towards the 2040 target of high quality international credits under Article 6 of the Paris Agreement, in the second part of the 2030-2040 decade, in line with accounting rules of the Paris Agreement; the role of domestic permanent removals (Biogenic emissions Capture with Carbon Storage (BioCCS) and Direct Air Capture with Carbon Storage (DACCS)) in the EU ETS; enhanced flexibility across sectors. 

However, the legislative proposal has also proposed severe constraints on the use of such credits, with a 3% (of 1990 emissions) limit on the use of Article 6 credits and the notion of somehow linking the use of DACCS and BioCCS to residual emissions from hard to abate sectors. Article 4.4 a+b.

  1. Starting from 2036, a possible limited contribution towards the 2040 target of high-quality international credits under Article 6 of the Paris Agreement of 3% of 1990 EU net emissions supporting the EU and third countries in achieving net greenhouse gas reduction trajectories compatible with the Paris Agreement objective to hold the increase in the global average temperature to well below 2°C and pursue efforts to limit the temperature increase to 1.5 °C above pre-industrial levels – the origin, quality criteria and other conditions concerning the acquisition and use of any such credits shall be regulated in Union law;
  1. The role of domestic permanent removals under the greenhouse gas emission allowance trading system within the Union (‘EU ETS’) to compensate for residual emissions from hard to abate sectors;

The use of Article 6, at least over the period 2030 to say 2060, could be a game-changer for the EU and for the host countries receiving investment. The 3% limit needs to be increased considerably.

Both DACCS and BioCCS are also on the left side of the development curve. While there are many small (<10 kt per year CO2) DACCS facilities in operation globally, there is just one large-scale demonstration project in the USA and no large-scale activity at all in Europe, despite some key companies in the DACCS world being based in Europe. The focus on the USA is because of the specific incentives for DACCS within US energy legislation, which also don’t exist in Europe (at least not directly, but there could be support via the EU innovation fund, although no such projects appear on the current funding list). The EU needs to turbo-charge DACCS development over the next decade. It’s also a foundation technology for e-SAF, which is another important element within the EU climate programme, given the mandates for aviation fuel.

The EU Parliament and Council discussions on this legislation over the coming months should prove interesting. MEPs will need to assess how energy system development pathways align with the ambition of the 2040 target and the tools available to deliver it.

Different planes or new fuels?

July 2, 2025

Over 60 years ago I went on the first plane ride that I can recall, a relatively new Qantas Boeing 707 V-Jet from Malaya to Australia (we had travelled to the Federation of Malaya – as it was then – some three years earlier by ship), returning to Australia after my father’s military assignment. The Boeing 707 and it’s UK rival the de Havilland Comet were the first planes of the so-called jet-age, that transformed commercial aviation from a niche sector for a few to the global giant it is today.

The Boeing 707 first came into service in late 1958 and production finally ceased in 1991 (a military variant), with a few still in military and private use today. Commercial use spanned 55 years. Boeing introduced the 737 just 10 years after the 707 and multiple variants of it are still being produced today and still more being introduced (e.g. Boeing 737 MAX 10). While the current 737 shares the same basic fuselage shape and size as the original 737, significant differences exist in engine technology, wing design, cockpit avionics, and overall performance and efficiency capabilities. Looking at yet another Boeing series, between the first commercial flight of the 747 and its eventual complete retirement, the time span could be 80 years.

Flying today on a new Boeing 787 or Airbus A350 is a different experience to a Boeing 707 in the early 1960s, but the plane is basically the same, albeit with vast improvements. The 1960s 707s were turbofan jets using kerosene fuel from crude oil (Jet A then Jet A-1), and that remains the case today. An entire industry and significant global infrastructure now exist to supply a very tightly specified and highly quality-controlled fuel to a fleet of some 28,000 commercial aircraft.

Aviation rests on its superlative safety record, and while accidents do happen, the number of fatalities per million passengers has fallen from around 6 in the 1960s to less than 0.1 today (Source: Aviation Safety Network, 2024; Multiple sources compiled by World Bank, 2024 – processed by Our World in Data). One of the reasons behind this is a history of continuous improvement of a single technology set, that being turbofan jets running on kerosene fuel. This has involved refining and building experience around a single solution that works and then aiming for perfection. That learning curve has been running since the dawn of the jet-age and continues today, not only making planes safer, but also more efficient, quieter and more comfortable.

But aviation now faces a dilemma, that being its contribution to climate change. The contribution stems not only from the fossil fuel sourced carbon dioxide (CO2) in the engine exhaust, but also nitrous oxides, and particulates and water vapour that lead to contrail formation. To address these issues the aviation industry will have to depart from turbofan jets running on kerosene fuel and search for new sources of power.

The initial shift has been to use new fuels which have a much lower net carbon footprint but are otherwise chemically similar to existing fuels. The current sustainable aviation fuels (SAF) come from biogenic sources, but a future generation of such fuels could be produced via synthesis (e-SAF), using atmospheric CO2 and hydrogen electrolysed from water. While every fuel change in the aviation context is tested, trialled, and progressively certified for commercial use, such a change represents only a modest departure from the existing aviation technology set. Once tested and approved, these so-called drop-in fuels, can substitute for Jet A-1. This allows aviation to manage its environmental impact without a serious departure from the technology model that has been sustained and improved on over 70 years.

The alternative technology pathway which would involve changing the types of planes and their propulsion system sets up a much bigger challenge. Such a change may become necessary to fully manage both greenhouse gas emissions and contrail formation. Two possibilities for change are currently under consideration; battery electric planes and planes that are fuelled by liquid hydrogen. While both require a significant level of technology development for implementation, the introduction of such planes means starting a new learning cycle for safety and efficiency improvements, which is really where the challenge lies for this industry.

In the Shell 2025 Energy Security Scenarios, these technologies do make an appearance, but in different ways and on different timelines. For example, electric planes appear in all three scenario story-lines, but not until the 2030s given the limited options available now and the need to wait for further battery capacity improvements.  Hydrogen fuelled planes appear in two scenarios, but only after 2040 in one story and still later in another. Both the battery electric and hydrogen technology pathways introduce many new safety considerations for the sector, including the basic engine design and the air-frame considerations for carrying liquid hydrogen. With everything changing, caution prevails such that the scaling of these technologies in the scenarios takes decades.

In all our scenarios, even by the end of the century, liquid hydrocarbon fuel remains the dominant aviation fuel, although the fuel could be coming exclusively from sustainable sources by then. The reason for the extended timeline is the long life of the planes themselves (25-35 years), the even longer timeline associated with a plane series and the conscious decision of the industry to carefully manage the introduction of anything new due to safety considerations.

In a recent report by Carbon Tracker, Awaiting take-off: Why aviation’s net zero plan still doesn’t fly, the authors argue that anticipating SAF and e-SAF as the main solutions for aviation simply locks in the capacity to burn fossil fuels. They state that the major aviation incumbents are exhibiting risk-averse path dependency, holding principally to their legacy businesses and making limited investments in new propulsion technology. They note that investment into conventional aircraft dwarfs current efforts to scale up new propulsion aircraft (electric, hydrogen and hybrid).

In terms of scale, Carbon Tracker are right – investment in liquid hydrocarbon combustion planes (using Jet-A1, SAF or e-SAF) dwarfs new propulsion aircraft investment even though the industry has set clear targets to be at net-zero emissions by 2050. So why would an industry that is intent on managing its carbon footprint act in this way? There are several reasons. The first is that SAF (and even e-SAF) is becoming a reality and supply is growing globally, although SAF currently accounts for less than 0.6% of total aviation fuel consumption, highlighting the urgent need for wider adoption. The second factor relates to the discussion above; maintaining a tried and tested technology solution for aviation is critical and any risk-averse behaviour is due entirely to safety considerations, which is a paramount concern for the industry. Finally, there is the reality of flights and CO2 profiles as shown in the chart below, where we see that a minority of flights – the long-haul flights – are responsible for a sizable share of total aviation CO2 emissions. Electric planes and first-generation hydrogen planes are going to be for shorter haul routes, which have limited overall CO2 impact. The long-haul flights today make up 20% of all flights but account for nearly 70% of emissions and these flights won’t be serviced by battery electric or hydrogen planes for a long time. As such, heavy investment in electric and hydrogen aviation won’t have much impact on the aviation CO2 profile by 2050 because long-haul versions of such aircraft could be several generations of development away.

Source: The high-resolution Global Aviation emissions Inventory based on ADS-B (GAIA) for 2019–2021, Teoh et al., Atmospheric Chemistry and Physics, 24, 725–744, 2024.

New aviation technologies will emerge, and the industry will eventually move on from the current technology solution, but don’t expect that for 2050, at least not as the main mechanism for managing CO2. Over the relatively short period of 25 years to 2050, for an industry that operates on timelines of 30-80 years, the solution will rest with the increased use of sustainable aviation fuel and the ability to manage CO2 through carbon removal credits (for more on this, see Like it or not, carbon management is the future – Shell Climate Change).

Note: Shell Scenarios are not predictions or expectations of what will happen, or what will probably happen. They are not expressions of Shell’s strategy, and they are not Shell’s business plan; they are one of the many inputs used by Shell to stretch thinking whilst making decisions. Read more in the Definitions and Cautionary note. Scenarios are informed by data, constructed using models and contain insights from leading experts in the relevant fields. Ultimately, for all readers, scenarios are intended as an aid to making better decisions. They stretch minds, broaden horizons and explore assumptions.

Like it or not, carbon management is the future

May 28, 2025

One of the differentiating features of the Shell scenarios work is the timeline through to 2100 that is offered. Many other energy scenarios more typically model through to 2050, such as in the World Energy Outlook from the IEA. But for a thorough analysis of the long term emissions of CO2 and temperature, a view to 2050 isn’t sufficient.

The Shell scenarios have always recognised that while fossil fuels lose market share and eventually make their way out of the energy system, in the medium term there will continue to be abundant use. This is the result of a world that still depends on fossil fuels for nearly 80% of global energy needs and for many other uses too. Even in the long term, under the most rapid transition pathway we could devise, a modest tail of fossil fuel use extends into the 22nd century before finally declining to almost zero use. Without managing carbon emissions, the CO2 from this tail will add up, which in turn would drive up temperature until fossil fuel use stops, given increases in temperature come from the accumulation of CO2 in the atmosphere over time, not the level of CO2 emissions in any given year.

The 2025 Energy Security Scenarios extend through to 2100 and therefore offer insight into this long tail of fossil fuel use and how the associated CO2 emissions might be managed. The scenarios comprise three storylines; two exploratory scenarios called Surge and Archipelagos, and Horizon, our third scenario, normative and illustrative of a rapid acceleration of the energy transition.  In Surge, an era of robust economic growth is ushered in by artificial intelligence technologies, with the transition accelerating as a result, whereas the Archipelagos scenario sees a world where trade friction and geopolitics impinge on the speed of the transition.

In Horizon, the CO2 still to come, assuming no management of CO2, amounts to 1 trillion tonnes, enough to take the world to almost 2°C from where we are today. In Surge and Archipelagos the numbers are 1.7 trillion tonnes and over 2 trillion tonnes respectively, which implies temperatures well over 2°C. The long tail is important because climate action to date has largely assumed that fossil fuels could be quickly phased out by a rapid transition. Rather, a dual focus is required, comprised of building a new energy system but also recognising the need to mange the CO2 from the legacy system as well.

While the Horizon scenario serves as a useful reference for the pathway to net-zero emissions in 2050, Surge and Archipelagos offer a flavour of the world that we are actually dealing with. Surge embodies a rapid transition, with technologies like solar PV and grid batteries scaling at rates considerably faster than now. But it is also a world of higher economic growth, which brings with it more demand for goods and services (which includes those solar PV panels) and therefore more energy demand. In the short term that means even more fossil fuel use. But by the end of the century fossil fuels have shifted from the current level of 78% of the energy system to just under 10% – a startling transition in 75 years. With a focus on carbon management, net-zero emissions comes earlier, in 2080, too late for limiting warming to 1.5°C, but sufficient for 2°C in 2100 after a short period of overshoot of 2°C.

Nevertheless, Surge still requires a commercial breakthrough for the deployment of carbon capture and storage (CCS) technology. In the scenario this happens via direct air capture (DAC) with geological storage (DACCS), which is deployed at very large scale after 2040. The big technology companies, seeking ways to manage their growing indirect carbon footprints, step in and invest. DAC also lends itself to modular assembly line production, which is how the technology scales rapidly. The scenario recognises that a complete end to fossil fuel use is a 100-year journey, during which time carbon management must play an increasing role.

A DACCS unit operating late in the century in Surge (AI generated).

The three scenarios don’t just focus on technology to capture carbon but also highlight the importance of land carbon management. This includes ending deforestation, encouraging the agriculture sector to engage in carbon farming (soil carbon management), embarking on large scale reforestation and protecting critical ecosystems with high carbon stocks, such as mangroves, wetlands, and grasslands. The size of the land management prize, as demonstrated in the Horizon scenario, is 600 billion tonnes of CO2 over the course of the century, or 15 years of current CO2 emissions.

The current global CO2 story can be illustrated as shown below, with most CO2 emissions coming from fossil fuel use, but there are contributions from current land use activities and industries such as cement manufacture. The bioenergy industry is shown as carbon neutral, as the CO2 that is emitted when the fuel is used is reabsorbed when the originating biomass grows.

By 2060 in the Surge scenario, the global CO2 story has changed considerably. Fossil fuel use has dropped by about half but remains a big part of the energy system. However, emissions are down by nearly 75% due to extensive carbon management activities. By 2080, when Surge reaches net-zero emissions, fossil fuel use has fallen by two-thirds, but is still important in industry and aviation.

The importance of carbon management throughout this century cannot be understated, and this was the message from a recent Tony Blair Institute report as well. Their report states (amongst other key points);

  • Prioritise global investment in carbon capture –
    • investing in solutions that capture emissions at source before they reach the atmosphere, together with breakthrough technologies like direct air capture that permanently remove carbon. Both are technologically feasible but need policy and capital to scale.
  • Scale up nature-based solutions
    • from planting forests to developing carbon-smart crops, we must harness the power of nature and science together. Nature is one of our best allies in this fight, and we need to back it with smart science and innovation.

Coming back to the evidence from the scenario stories, managing carbon in this century means the difference between limiting warming to a level society can adapt to or allowing the surface temperature rise to exceed 2°C, and possibly by several tenths of a degree.

Note: Shell Scenarios are not predictions or expectations of what will happen, or what will probably happen. They are not expressions of Shell’s strategy, and they are not Shell’s business plan; they are one of the many inputs used by Shell to stretch thinking whilst making decisions. Read more in the Definitions and Cautionary note. Scenarios are informed by data, constructed using models and contain insights from leading experts in the relevant fields. Ultimately, for all readers, scenarios are intended as an aid to making better decisions. They stretch minds, broaden horizons and explore assumptions.

Is a nuclear-powered marine sector a possibility?

March 10, 2025

I recently had the opportunity to attend a workshop in London where the global marine community was beginning to think about the possibility of nuclear power for ships. Various governments, companies and marine classification societies have recognised that the technology for nuclear power in commercial ships both viable and visible in the medium term, even while there is no short-term prospect of such ships coming into service. But these same organisations also recognise that creating a safe marine regulatory environment for nuclear powered ships could take many years, so starting now is a prudent step to at least allow for the possibility of this technology to emerge.

But under what conditions might such a development take place? Is there any pathway to nuclear powered shipping?

An AI projection of the engine room of medium sized SMR powered container ship.

Scenarios are the ideal tool for addressing such questions and the recently released 2025 Energy Security Scenarios are well placed for this purpose with one of the scenarios featuring nuclear powered commercial shipping. Just to be clear, these story-lines are exploratory in nature, as is the case with all the scenarios that Shell produce (including those with normative outcomes – see Horizon below). There is no intent to forecast the emergence of nuclear shipping but rather to awaken people to the possibility that it could happen and the circumstances required.

The 2025 Energy Security Scenarios are comprised of three scenario story-lines:

  • Surge – an era of robust economic growth is ushered in by artificial intelligence technologies that are welcomed and not overly challenged, with economic growth and AI infrastructure driving up energy demand. The geopolitical landscape offers a spur for change as China and the USA compete for AI dominance. A new technocratic era emerges.
  • Archipelagos – self-interest is deeply rooted in national psyches. The world is still mindful of the energy system disruption in 2022 following Russia’s invasion of Ukraine, but also a world that reacts to the pressures of increasing migration across multiple borders and uneven global trade patterns. Trade friction and geopolitics impinge on the speed of the energy transition, but this is countered somewhat by growing societal pressure to address climate change, which forces action.
  • Horizon – illustrative of a rapid acceleration of the energy transition and introduction of carbon management practices to sharply reduce emissions, both in response to a comprehensive policy framework with strong societal and political support. The scenario takes a normative approach aimed at a world that achieves two key things: net-zero emissions by 2050 and global warming limited to 1.5°C by the end of the century.

The three stories also illustrate three very different pathways that could be taken by the marine sector, but all three scenarios indicate that change is coming.

In Horizon, the urgent need to get to net-zero emissions in the near term drives the sector to quickly rally around hydrogen fuel cell technology (or the use of hydrogen could also be interpreted as ammonia for marine fuel) as a solution that can be delivered in the near term. While biofuels do help lower the carbon footprint of marine bunkers for a period, the singular early push towards hydrogen dominates the storyline. By 2050 the technology is very well established and by 2075 most ships are using fuel cell technology and hydrogen as the energy source. By late in the century the marine sector is back to a single fuel, as has been the case for many decades up to now. While the scenario sees an end to fossil fuel use in the sector, this isn’t the case by 2050, the current year for a net-zero emissions goal as adopted by the International Maritime Organization (IMO) in July 2023. This means that in 2050 the sector will need to make considerable use of carbon removal offsets, which the Horizon scenario makes available in abundance by mid-century.

In Archipelagos, a broadly slower transition means that by 2050 the situation is little changed from today. Biofuels are in use and hydrogen fuel cell technology has been established, but deployment remains limited within the global shipping fleet. However, as pressure mounts on the sector with the world heading towards 2°C of warming and the first 2°C year already on the record books in a warm El Niño year in the early 2050s, fuel cell technology starts to gain momentum. By 2075 hydrogen fuel cell propulsion is ordered for the majority of new ships, but it still takes a further 30-40 years for the global fleet to completely change. The end of fossil fuel use in shipping isn’t seen until about 2120.

In Surge, a very different pathway emerges in a world of technology achievements and broad societal acceptance of science and technology. In the period up to the early 2040s a number of different marine technologies appear, including hydrogen fuel cells, ammonia, biofuels, green methanol and drop-in synthetic fuels. But the array of technology choices becomes a problem in itself, with the sector that traditionally prefers a single fuel not seeing significant investment in any one option.

In a parallel development in Surge, the small modular reactor (SMR) comes into the picture in the 2030s as major AI technology companies fund development, seeking new secure energy solutions for very large data centres. The technology matures quickly, and AI itself helps solve early issues. SMR use becomes much broader than data centres, with assembly-line style production bringing down costs, leading to a near plug-and-play nuclear customer experience in the 2040s. A handful of marine companies adopt the SMR developments and form a consortium to build a medium sized SMR powered container ship which undergoes successful trials and multiple port visits in the late 2030s and early 2040s.

Finally, in the mid-2040s in Surge, after years of stop‒start progress in alternative marine fuels but pressure still building on the sector to reduce emissions, a major Chinese shipping company places an order for five large SMR container ships, each with twin 30 megawatt reactors. These are put into service in 2050 on well-established routes from Shanghai to the US West Coast and to Rotterdam in the Netherlands. Following a successful start, the technology becomes established throughout the industry, to the extent that by 2090, all large vessels have SMR propulsion.

The nuclear story in Surge only comes about for several very specific reasons. These are all challenging to imagine.

  • Nuclear is not immediate, so its emergence depends on no other early single emissions solution for the marine sector becoming locked in (as is the case in Horizon). This is both a technology issue and an issue with society not fully addressing CO2 emissions in the near term in alignment with the Paris Agreement.
  • Broad societal acceptance of nuclear power, which aligns with the techno-optimism of Surge.
  • A global security situation that can accept the wider use of nuclear technology (problematic in Archipelagos).
  • Changes in the commercial nuclear regulatory environment, which tends to licence specific fixed sites for nuclear power, rather than considering the reactor as a mobile entity.
  • A marine regulatory environment that can classify and set high standards for commercial nuclear vessels.

None of the above is to argue that commercial nuclear shipping will happen, it may never appear, but it is nevertheless interesting to think about the problem in a structured way and consider the alternatives for the sector. Scenarios, – such as Shell’s 2025 Energy Security Scenarios are an excellent tool for doing this.

Note: Shell Scenarios are not predictions or expectations of what will happen, or what will probably happen. They are not expressions of Shell’s strategy, and they are not Shell’s business plan; they are one of the many inputs used by Shell to stretch thinking whilst making decisions. Read more in the Definitions and Cautionary note. Scenarios are informed by data, constructed using models and contain insights from leading experts in the relevant fields. Ultimately, for all readers, scenarios are intended as an aid to making better decisions. They stretch minds, broaden horizons and explore assumptions.

Artificial intelligence, climate and temperature

February 17, 2025

Note: With the release of new scenarios from Shell, please read here what scenarios are, and what they are not.

In early February the European Copernicus climate service announced that the January 2025 global average surface temperature was the highest ever recorded for that month. This came despite a shift away from the warmer El Niño conditions in the Pacific that are often associated with record breaking months, and which had been an underlying contributor to the yearly temperature anomaly of 1.55°C recorded for 2024. These recent temperature measurements raise the question as to where and when the global average surface temperature might settle in the decades ahead, given the ongoing rise in anthropogenic fossil fuel CO2 emissions, as seen, for example, from 2023 to 2024. A casual inspection of recent emissions data gives a first indication of no change in direction, but beneath the headline trend of rising fossil fuel emissions, a very different story is beginning to emerge. To see that trend and imagine the changes ahead requires considerable analysis and a view about future societal trends.

So, we come to The 2025 Energy Security Scenarios, released by the Shell scenarios team last week. Three scenarios are offered, two which explore the future based on underlying trends playing out across the world today and one which takes a normative approach to understand the full depth and speed of change required to achieve net-zero emissions in 2050 and to limit warming to 1.5°C by 2100. All three scenarios recognise that the world is currently being shaped by security, competitiveness, and climate concerns, with technologies like artificial intelligence rushing headlong towards us.

The two exploratory scenarios are called Surge and Archipelagos.  In Surge, an era of robust economic growth is ushered in by artificial intelligence technologies (AI) that are welcomed and not overly challenged, with economic growth and AI infrastructure driving up energy demand. The geopolitical landscape offers a spur for change as China and the USA compete for AI dominance. The Archipelagos scenario sees a world still mindful of the energy system disruption in 2022 followings Russia’s invasion of Ukraine, but also a world that reacts to the pressures of increasing migration across multiple borders and uneven global trade patterns. Trade friction and geopolitics impinge on the speed of the energy transition, but this is countered somewhat by growing pressure to address climate change, which forces action across society, but not at the pace needed for achievement of net-zero CO2 emissions in the nearer term.

Horizon, our third scenario, is normative and illustrative of a rapid acceleration of the energy transition and introduction of carbon management practices to sharply reduce emissions, both in response to a comprehensive policy framework with strong societal and political support. Horizon includes a fast and comprehensive change in global land management practices, including an end to deforestation in the 2030s, in combination with strong government support for the full range of carbon capture and storage technologies.

The 2025 Energy Security Scenarios are built on the back of The Energy Security Scenarios released in 2023, but by including Surge the scenarios team has explored the implications for energy in a world where AI begins to reshape society. This has a real impact on the energy system for several reasons. Most importantly, it sees energy demand increase due to greater economic growth and it transforms the way energy infrastructure is built in the decades ahead.

For two centuries the energy system has largely evolved through the development of big, bespoke projects, like offshore platforms extracting oil or the many huge refining complexes that dot the globe. But a trend that has emerged in recent years is to build equipment on assembly lines and assemble it, ‘Lego-like’, in the field. Solar PV is like this, and grid electricity storage has scaled up rapidly on the back of battery production. In Surge, this trend spreads and accelerates and the general technology push enabled by an AI world supports this, both at the manufacturing facilities and by enabling virtual networks of otherwise disconnected devices in the field.

Shown above, assembly line production of small modular direct air capture units in the late 2030s illustrates the change in the way energy infrastructure is built and deployed. Modular production accelerates the transition and AI systems ensure efficient integration of multiple units in the field.

The trend towards modular production benefits solar PV, electricity storage, heat pump deployment, hydrogen production via electrolysis, direct air capture of CO2 and the introduction of small modular nuclear reactors (SMR). Other energy system technologies also benefit. In Surge, the introduction of SMRs via this route eventually transforms the marine sector and takes it away from liquid and gaseous fuels like marine diesel and LNG. The first SMR ships come into service just before 2050 and by late in the century in Surge, all ocean-going vessels are nuclear. However, this development isn’t seen in Archipelagos or Horizon.

Surge also sees a new business model for carbon management. A trend that has emerged in recent years has resulted in considerable venture capital funding for the development of direct air capture (DAC) technologies, with companies such as Google, Airbus, Microsoft, BCG and NYK all agreeing to buy future DAC carbon credits. Dozens of DAC startups have appeared and projects, albeit modest in scale, are underway. In Surge this trend accelerates as the cost of DAC drops rapidly with assembly line production of capture modules, akin to building air conditioners or refrigerators. The voluntary carbon market flourishes, with DAC credits underpinning it, and high credibility carbon neutral labelling enters widespread use. Both consumers and business customers demand carbon neutral goods and services. One outcome is that by the late 2040s global DAC with geological storage (DACCS) use exceeds traditional CCS within power generation and industry. The future of geological storage of CO2 becomes a DAC story, with billions of tonnes per year of CO2 captured and stored via this route later in the century.

Surge offers insight into a higher growth pathway, something which many governments are striving for. The increased growth means greater energy demand, but as discussed it also brings with it a faster transition and rapid scaling of carbon storage. Surge therefore reaches net-zero CO2 emissions well within this century, meaning that by 2100 surface temperature warming is limited to 2°C, albeit after a temporary overshoot of this threshold.

But even in a slower growth, more fractious world, illustrated by Archipelagos, the momentum in the energy transition is sufficient to reach net-zero emissions by about 2120, which delivers about 2.2° of warming. The implication of this, in combination with Surge, is that warming is unlikely to exceed 2-2.5°C, a significant shift from multiple reports in the early 2010s where scenarios that delivered 4°C of warming were highlighted in adaptation analyses. Evidently, in just a decade, the current momentum in the energy transition has delivered a new global warming paradigm for consideration.

The energy transition is now at a tipping point; the questions at hand are not whether society can reach net-zero CO2 emissions or whether society is able to limit surface temperature warming, but how soon will net-zero emissions be realised and just how low might the eventual temperature plateau be.

Future fuels, food and land use implications

December 20, 2024

I recently had the honour to represent Shell as an industry observer and panellist at the 80th anniversary of the International Civil Aviation Organisation (ICAO). This important United Nations agency emerged during the final months of the Second World War, after several years of negotiation. Agreement was reached in early December 1944 at the famous Stevens Hotel in Chicago. 80 years later delegates met again at the same location, now the Hilton Chicago, to celebrate the achievement and to recognise all that ICAO has done over the years to steer civil aviation to be such a successful, safe and highly valued global enterprise.

Today civil aviation constitutes some 28,000 planes carrying nearly 5 billion passengers per year and over 60 million tonnes of cargo, but this operation runs almost exclusively on jet fuel derived from crude oil. In 2024 about 7 million barrels per day of jet fuel is consumed by civil aviation activities, with a resultant global CO2 footprint of about 1.1 billion tonnes annually, or just over 3% of global energy related CO2 emissions.

In Chicago, one of the key themes of the 80th anniversary event was sustainability, with CO2 emissions from the sector prominent within the panel discussions. While there were some fascinating discussions about short haul electric aviation and longer haul hydrogen powered planes, these upcoming technologies are not going to make any real dent in the aviation carbon footprint for some decades, so the focus for now is on the fuel used by existing planes and those being built with similar engine types over the coming twenty or more years. Given the very long lead times in aviation to develop, test and certify as safe even minor variations of the current technology set, we shouldn’t expect new technologies to displace the existing set anytime soon.

Sustainable aviation fuel (SAF) has become a key focus for the aviation industry. These are fuels that have their origin outside the fossil fuel supply chain, such as from biogenic sources, various waste streams and eventually via direct synthesis from carbon and hydrogen molecules derived from the air and water. As such, their carbon footprint can be much lower than conventional fuel. Carbon emissions can still result from land use change, when biogenic feedstocks are grown and harvested, and when energy is used in the production and transport of SAF. For example,  using SAF today (the predominant current feedstock being used cooking oil) can result in a reduction of up to 80% in carbon emissions compared to conventional jet fuel, depending on the feedstock used, production methods, and supply chain logistics (IATA).

In the Sky 2050 scenario, developed as part of The Energy Security Scenarios published by Shell in 2023, SAF make major progress in replacing fossil derived fuels. Nevertheless, even with the rapid progress illustrated in Sky 2050 to limit warming to less than 1.5°C by 2100, the SAF journey for aviation is one that takes over 50 years.

Within this storyline, another discussion emerges and this featured in the panel sessions at the ICAO 80th event in Chicago. It’s the issue of land use to make the significant amount of biogenic SAF. By 2065 in the chart above, biogenic SAF production has passed 6 million barrels per day, eclipsing the current 2.7 million barrel per day production of biofuels, which are primarily for cars and trucks. Such a level of production has raised concerns about the sustainability of these fuels, given the amount of land that might be needed to grow the crops and whether or not that competes with the need to grow crops for food or leads to further deforestation for agriculture in some parts of the world.

This is a valid set of questions and to help answer them there is a new analysis conducted by MIT and co-authored by three of my colleagues; Land-use competition in 1.5°C climate stabilization: is there enough land for all potential needs?; Gurgel A, Morris J, Haigh M, Robertson AD, van der Ploeg R and Paltsev S (2024), Front. Environ. Sci. 12:1393327. doi: 10.3389/fenvs.2024.139332. The MIT earth-system integrated modelling capability is ideal for such complex questions.

In this analysis the data in the Sky 2050 scenario is used to create a deeper understanding of the land pressures that confront the world. There is a need to grow food and potentially supply much more bio-energy from the land, and consideration must also be given to continued human development, land for wind turbines and solar PV and for land management and restoration to preserve biodiversity and grow the land carbon stock. These current and future needs all intersect.

The authors found that with proper regulatory policies and radical changes in current practices, global land is sufficient to provide increased consumption of food per capita (without large diet changes and accounting for a larger population) over the century while also utilizing 2.5–3.5 billion hectares (Gha) of land for nature based practices that provide a carbon sink of 3–6 gigatonnes (Gt) of CO2 per year as well as 0.4–0.6 Gha of land for energy production—0.2–0.3 Gha for 50–65 exajoules (EJ) per year of bioenergy and 0.2–0.35 Gha for 300–600 EJ/year of wind and solar power generation.

The authors set out the case starting with the split of current global land use, shown below.

They note that global land use was quite stable before the Industrial Revolution, but in the middle of the nineteenth century, changes in land use from natural vegetation to pasture and cropland accelerated—1.08 Gha of natural forests and natural grassland that existed in 1800 became agricultural areas by 1900, and had risen to 3.41 Gha converted by 2000. The most recent 50 years have experienced declining rates of land use conversion worldwide (refer to 4.1 Global land use: 1700–2100, in the paper).

Looking forward, land use becomes a critical consideration in any scenario. There will be more demand for food, there will be more renewable energy production, urban areas will expand and we are likely to see greater demand for bioenergy. At the same time, growing societal pressure to address biodiversity loss may become overwhelming for policymakers and planners, as well as the need to manage global carbon stocks much more proactively. As such, well financed nature-based solutions  (NBS) become important, as can be achieved through carbon markets. The paper finds that the two largest adopted options are related to agricultural areas, such as in cropland (including both biochar and a broad suite of regenerative agricultural practices) and optimal grazing in pasture area. Natural forest protection also increases. Other relevant NBS practices accumulate to sizeable amounts by the end of the century, which is the case for reforestation of natural forest areas. Total land managed for NBS by the end of the century is projected to be about 3.5 Gha, of which 0.77 Gha is related to forest, 1.17 Gha to cropland, 1.17 Gha to pasture, 0.26 Gha to grassland and 0.15 Gha to other land types. Globally, the analysis finds there is enough land in each category to accommodate the NBS projections from Sky 2050, while also ensuring growing demand for food and other land-based products is met.

The paper authors project that global land area dedicated to bioenergy more than doubles by mid-century. It grows from about 100 Mha in 2020 to 242 Mha in 2050 and 286 Mha by 2100. Dedicated biomass growing areas enable growing bioenergy consumption. The total commercial bioenergy use grows from about 20 EJ in 2020 to about 50 EJ in 2050, and about 70 EJ in 2100. Land use at the global level can accommodate these demands expected under a 1.5°C climate stabilization scenario. At the regional level, however, challenges to integrate all land uses may arise and the paper explores this aspect in further detail.

The novelty of the study is in providing a clear message that it is possible to meet the land needs for major human requirements such as food and energy, while protecting and restoring land more broadly. The study shows the feasibility of achieving the land-use optimization needed for a climate stabilization scenario. With all inherent uncertainty about the potential cost reductions for existing technologies and deployment of new regulatory and technological options, one message is clear: there is an urgent need for advancing sustainable land management for food, energy and nature.

Note: Shell Scenarios are not predictions or expectations of what will happen, or what will probably happen. They are not expressions of Shell’s strategy, and they are not Shell’s business plan; they are one of the many inputs used by Shell to stretch thinking whilst making decisions. Read more in the Definitions and Cautionary note. Scenarios are informed by data, constructed using models and contain insights from leading experts in the relevant fields. Ultimately, for all readers, scenarios are intended as an aid to making better decisions. They stretch minds, broaden horizons and explore assumptions.

Assessing the gap

November 5, 2024

In the weeks before a UNFCCC COP, the UN Environment Programme (UNEP) traditionally publishes its Emissions Gap Report. The report assesses the latest scientific studies on current and estimated future greenhouse gas emissions and compares these with the emission levels permissible for the world to progress on a least-cost pathway to achieve the goals of the Paris Agreement. This year is no exception, and so we saw the Emissions Gap Report 2024 published on October 24th. It makes for sobering reading, with the headline statement being that unless there is an increase in emissions mitigation ambition in new nationally determined contributions (NDC) and that these start delivering immediately, the world is on course for a temperature increase of 2.6-3.1°C within this century vs. 1850-1900. In her foreword to the report, the UNEP Executive Director, Inger Andersen, states that current NDC promises are putting us on track for best-case global warming of 2.6°C this century.

There is no doubt that anthropogenic greenhouse gas emissions are continuing to rise, but given the state of the energy transition, is it reasonable to say the world is on track for 2.6-3.1°C of warming through lack of action?

The answer comes down to ways in which the future is assessed. The UNEP outcome is essentially a projection based on current policy trends, or a forecast derived from what governments have said they will do. They have rightly recognized that current NDCs, which stretch to 2030, do not contain sufficient reductions to lower emissions in line with the 2021 Glasgow Climate Pact (the outcome of COP26, targeting a 45% reduction of CO2 emissions by 2030 relative to 2010 levels). But after 2030, the outcome they project (i.e. 2.6-3.1°C of warming this century) is based on an assumption of only modest ongoing changes in the energy system as an extension of what the current NDCs say will happen in the period 2025 to 2030. This of course gives a rather depressing outlook, and is shown in the top line of the table below taken from the UNEP report.

Note: Unconditional NDCs are those which a country will implement through its own resources, whereas conditional NDCs are dependent on a country receiving financial help from other Parties for implementation.

Of course, it’s not for UNEP to state what specific countries should do, so it’s not a surprise that their projection comes about as discussed. But it’s also not a fair representation of how progress in the energy transition will likely play out. For that, a different tool, other than projections,  is needed. In Shell, we use scenarios, as do many other organisations.

Scenario analysis is a technique that helps businesses and organizations plan for the future by considering the potential impact of current and future events and trends. It’s a valuable tool for strategists and leaders to think about how the world is changing and what that means for society. Scenario analysis involves considering various trends seen in the present and using them to offer different options for future development paths. It’s a forward-looking “what if” analysis that challenges conventional wisdom about the future. When the world is looked at through such a lens, a very different outcome emerges.

In The Energy Security Scenarios published by Shell in March 2023, two alternative futures are presented, namely Sky 2050 and Archipelagos. Both start with the realities of the 2020s, including the lack of progress towards the 2030 ambition within the Glasgow Climate Pact. As time moves on into the 2030s, Sky 2050 takes a normative approach that starts with the desired outcome of global net-zero emissions in 2050 and works backwards in time to explore how that outcome could be achieved. By focusing on security through mutual interest, the world achieves the goal and a global temperature rise of less than 1.5°C in 2100. Archipelagos follows a possible path in a world focusing on security through self-interest. Even so, change is still rapid, and the world is nearing net-zero emissions by the end of the century.

For this discussion, I will just focus on Archipelagos, as it is exploratory in nature rather than goal seeking, or normative. The scenario is built on the foundations of what we are seeing today, which includes a rapid growth in electric vehicle production, a burgeoning solar PV sector, growing use of batteries and the beginnings of a hydrogen economy. But it also builds on the general antipathy towards carbon removals, such as through direct air capture (DAC) of CO2, and it embraces the somewhat divisive geopolitics currently in play, with security being uppermost in the minds of global leaders.

Archipelagos presents us with a challenging geopolitical environment, but not one in which the energy transition just plays out at the current rate. It accelerates as countries seek security, as technologies further mature and as climate concerns grow, albeit not as a primary driving force in society. Energy policies do change, although the focus may not be minimizing emissions, and this is seen in the lacklustre development of the carbon capture and storage (CCS) industry and the collapse of the DAC technology pathway. Oil, coal and gas all peak in the 2030s and demand starts to decline, as shown in the chart above. Both the power generation and passenger road transport sectors change rapidly, but full and comprehensive change throughout the entire energy system takes the best part of a century to unfold.

The above narrative, chart and the century long timetable may look and sound alarming, but an analysis of greenhouse gas emissions in the scenario (performed for Shell by the MIT Center for Sustainability Science and Strategy) shows that warming reaches a plateau of 2.2°C by 2100. This isn’t in line with the Paris Agreement, but not as sobering as the UNEP projection of 2.6-3.1°C either.

Rather than simply project the future based on today’s numbers, scenario analysis points to a very different outcome in which the world is at least nearing the upper threshold of 2°C in the Paris Agreement. Scenario analysis embraces the dynamic nature of the energy system as a variety of policies, technologies and consumer preferences force change. The lesson from Archipelagos is that change is underway and at least by the end of the century fossil fuel use will have been largely phased out (about 15% of energy use vs. 78% now, excluding petrochemicals).

The NDC focus by UNEP is particularly important in 2024, as the Paris Agreement requires that countries update their submissions by February 2025, with a focus on their actions to 2035. The scenario analysis presented above is not designed to encourage complacency on the back of inevitable change, but rather to encourage policy makers to focus on areas where they can make a material difference. While Sky 2050 proceeds faster than Archipelagos in almost every aspect of the transition, there is one stark difference between the two scenarios. Sky 2050 embraces the need for carbon removals, through CCS, DAC and much improved land management.

To reach the goal of the Paris Agreement, including ‘well below 2°C’, society needs to embrace carbon management and the set of technologies and practices that go with it. While the world should not take the rest of the energy transition for granted, it is nevertheless well underway.

Note: Shell Scenarios are not predictions or expectations of what will happen, or what will probably happen. They are not expressions of Shell’s strategy, and they are not Shell’s business plan; they are one of the many inputs used by Shell to stretch thinking whilst making decisions. Read more in the Definitions and Cautionary note. Scenarios are informed by data, constructed using models and contain insights from leading experts in the relevant fields. Ultimately, for all readers, scenarios are intended as an aid to making better decisions. They stretch minds, broaden horizons and explore assumptions.

Oil, gas(oline) and Route 66

October 13, 2024

Over the last three weeks I have been working my way from Chicago to Santa Monica on Route 66, some 2,400 miles of lost highway which for decades were the lifeblood of American motoring. Route 66 had its beginnings in 1926 as the US started building a national highway system.

As the automobile became more affordable, Route 66 boomed and the towns along the way became thriving stopovers, with motels, gas stations and diners popping up throughout the country. It was a defining era for the US. The era was also a defining period for the oil industry. Towns like Ash Fork, Arizona, which has never had a population of more than 1000, housed a dozen gas stations, several motels and numerous places to eat. The gasoline stations reflected not only the demand for fuel but also the intense competition that was created to supply it.

But with the decision to build the Interstate system, Route 66 slowly vanished and the towns along the highway were increasingly bypassed. The gas stations closed and the motels slowly vanished. Today, a drive along Route 66 is a treasure hunt for what remains, some of it in ruins and some beautifully restored by motoring enthusiasts for the new tourist trade.

But Route 66 isn’t just about the demand for gasoline, it’s also about the supply. The highway cuts through Oklahoma, an important oil producing region of the US and home to one of the major global oil pipeline hubs. Just north of Route 66 between Tulsa and Oklahoma City sits the town of Cushing. It’s perhaps not a place many people have heard of, but it is the delivery point for a West Texas Intermediate (WTI) oil futures contract purchased on the New York Mercantile Exchange. What happens in Cushing can impact the world as was seen in 2020 with the COVID-19 pandemic underway. WTI prices briefly went negative, reflecting the fact that storage in Cushing was effectively full.

But change is underway. Throughout Route 66 in Texas and New Mexico, wind turbines can be seen in their hundreds, and electric vehicle charging stations are beginning to appear in some of the towns along the route, reflecting the new demand from American motorists.

How Route 66 is shaped by the future remains to be seen, but today it still represents a fascinating historical portrait of motoring and the oil industry in the USA.

Can Brazil balance oil and climate ambitions?

September 24, 2024

This post is a guest contribution by Thomas Akkerhuis, Energy Analyst and Richard Baker, Senior Energy Adviser, both in the Shell Scenarios Team.

As the Brazil hosted G20 approaches and thoughts regarding COP30 in 2025, also in Brazil, start to appear, Brazil’s own climate efforts and energy system are becoming headline news. In a recent article, the Financial Times describes the challenge the country faces in balancing two fundamental ambitions: to be a global environmental leader while also growing its position as global player in oil production.

There is natural skepticism over whether balancing these seemingly contradictory positions is at all possible, with the Climate Observatory stating that “you can’t be a leader on the environment and climate and at the same time become a mega-producer of oil.”  Perhaps Brazil is following a very narrow path here, but there are good reasons for doing so.

In June this year the Shell Scenarios Team published a Brazil Scenarios Sketch, which there are now several blog postings about, for example, this one. The Sketch is derived from Shell’s latest Energy Security Scenarios. The Scenarios Sketch shows, among other things, that both ambitions are realistic ambitions for Brazil:

  • Brazil has enormous potential to manage the world’s carbon emissions through land-use change, and it can help decarbonise the world through the production of biofuels. Emerging global demand for this capacity, because of climate change pressures, are important reasons to make use of those opportunities.
  • Brazil has significant fossil fuel reserves, with the potential to develop significantly more. There is an important economic argument for developing them. Today, Brazil has a gross domestic product that is below the global average (per capita basis), which is also more unevenly distributed than the global average (Gini coefficient basis). Many other countries have also built their wealth on the production and consumption of fossil fuels.

The sketch is an in-depth study of potential futures for Brazil’s energy and carbon system, through the lens of two scenarios: Sky 2050, and Archipelagos. Both start with the realities of the 2020s, including the struggle to end deforestation in Brazil. As time moves on into the 2030s Sky 2050 takes a normative approach that starts with the desired outcome of global net-zero emissions in 2050 and works backwards in time to explore how that outcome could be achieved. By focusing on security through mutual interest, the world achieves the goal and a global temperature rise of less than 1.5°C by 2100. Archipelagos follows a possible path in a world focusing on security through self-interest. Even so, change is still rapid, and the world is nearing net-zero emissions by the end of the century but the temperature outcome in 2100 is a plateau at 2.2°C.

The starting point for a deeper look at Brazil’s oil production prospects is the anticipated global demand in each scenario. The figure below shows that evolution through to 2060. Demand in 2030 remains at least at 2023 levels in both scenarios, and two decades later in 2050 when Sky 2050 is at net-zero CO2 emissions, the scenario range is still 40-85% of 2023 levels. While a fuel like coal may dwindle quite quickly in a world targeting net-zero emissions, significant oil demand will be with us well unto the second half of the century.

Global oil demand broken down by scenario and use

Oil has an abundance of uses, and for many of them, a lower-carbon alternative is not yet available (at scale). While the world has seen significant progress in electrification of cars and light-duty trucks, and this trend accelerates in both scenarios, the decarbonization of heavy long-haul road freight is a decade or more behind cars: in 2050, oil demand in the road freight sector has not even halved in Sky 2050 and in Archipelagos has even grown.

Other heavy-duty transport has even more difficulties moving away from oil: for example, airplanes, ships and agricultural equipment. Electrification is often not possible, and alternatives like biofuels and hydrogen are in their infancy. In Archipelagos, oil demand for these purposes grows over the next 3-4 decades. And finally, oil is essential to the chemicals industry – which is an industry that is set to grow as more and more people in developing countries move into middle income lifestyles.

Given that the world will need solid and reliable sources of crude oil for decades to come, how might Brazil fit into this picture? The charts below show Brazil’s oil production in the two scenarios, compared with domestic demand and natural field decline given no further investment. Remember that Brazil already makes significant use of ethanol for passenger road transport and increasing use of biodiesel for trucks.

Domestic demand and production of oil in Brazil in Sky 2050 and Archipelagos scenarios. Natural decline assumed 4.5% per year.

Both scenarios have short term production growth already locked in, driven by the development of the Buzios and Mero fields with investment decisions already made. The difference is what happens towards 2040 and thereafter.

In Sky 2050, natural decline matches falling domestic demand from 2040 onwards, but still allows Brazil to maintain a 3% global market share of oil production. In this scenario, Brazil becomes adept at managing carbon emissions and reaches net-zero emissions around 2040 and ahead of almost every other country in the world. Maintaining its role as an oil producer and growing exports in the near term does not undermine it’s net-zero goals.

In Archipelagos, oil production is a growing contributor to the country’s economy, exceeding domestic demand, and growing market share to almost 7% of global production. In this case, Brazilian oil is sufficiently competitive to squeeze out market share from other countries. However, this does not just happen: the best fields have already been commercialized, and while extensive underexplored coastline has huge potential, it does not come with guarantees. Additionally, even if not for export, ongoing investment and exploration would be needed just to maintain current levels of energy security.

In both scenarios, Brazil is an important oil producer – at least in the next decade, offering an opportunity to support its growing economy. And after that, Brazil will keep producing oil – at least to satisfy its domestic demand, and possibly to grow its global market share. Additionally, in Archipelagos, Brazil becomes a key regional supplier offering improved energy security for the Atlantic Basin countries, security being an overriding feature of the scenario. Both the Energy Security Scenarios and the Brazil Scenarios Sketch show a similar view for oil production growth for the next decade, before more substantial divergence starts.

Not all the country’s pathways in the sketch are so divergent, as can be seen below. In both scenarios, biofuel production will double mid-century, and in both scenarios, the trend of ongoing deforestation will be broken. In both scenarios, for biofuels, a large market is emerging as sectors and countries seek to replace their oil-based fuels with biofuels – such as in aviation. Article 6 of the Paris Agreement provides the possibility for sectors and countries to invest in land-use related projects in Brazil to offset their own hard-to-abate emissions.

Biofuel production and land-use change in Brazil in Sky 2050 and Archipelagos

It is a narrow path for Brazil, but the country can make the most of its oil resources while also developing its biofuel and carbon management potential. Both have wider benefit given the continued global demand for oil and focus on security of supply, but also the growing global demand for lower carbon fuels and carbon removal mechanisms. The only real difference between the scenarios is the mix and timing.

 Sky 2050Archipelagos
OilNow to early/mid-2030s: growth Mid-2030s to 2050: energy securityNow to 2050: growth 2030 to 2050: major exporter
Land-use changeFast turnaround in emissions, an end to deforestation in 2033Turnaround in emissions, net-zero deforestation in 2049
BiofuelsDoubled by 2050Doubled by 2050

Note: Shell Scenarios are not predictions or expectations of what will happen, or what will probably happen. They are not expressions of Shell’s strategy, and they are not Shell’s business plan; they are one of the many inputs used by Shell to stretch thinking whilst making decisions. Read more in the Definitions and Cautionary note. Scenarios are informed by data, constructed using models and contain insights from leading experts in the relevant fields. Ultimately, for all readers, scenarios are intended as an aid to making better decisions. They stretch minds, broaden horizons and explore assumptions.