Meeting the goals of the Paris Agreement

Over the past few months I have been deeply involved with my colleagues in the Shell Scenario team preparing a new scenario that illustrates a technically possible but challenging pathway for society to meet the goals of the Paris Agreement on climate change. From an emissions mitigation perspective, those goals are as follows;

• Holding the increase in the global average temperature to well below 2 °C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 °C above pre-industrial levels
• . . . aim to reach global peaking of greenhouse gas emissions as soon as possible;
• . . . achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century.

Today, that scenario is being launched as an extension of the two existing global Shell scenarios already in use, Mountains and Oceans. Both those 2013 scenarios achieve the goal of net-zero emissions, but not early enough to also ensure the rise in average surface temperature stays well below 2°C, rather they plateau at around 2.5°C. The new scenario, named Sky, sees a rapid energy transition taking place over 50 years as the Paris Agreement moves into full operation and countries ratchet their nationally determined contributions (NDC) in two five-year cycles through the 2020s towards a pathway that reaches net-zero emissions in the energy system by 2070. The ‘ratchet’ mechanism is the underlying driver of the Paris Agreement, although the formal way in which it will function is still being negotiated. But it is critical that it works, given that the first round of NDCs result in a ~3°C pathway, or possibly higher.

The Sky outlook is not a given though; it sits in the top right corner of a classic scenario matrix, one which embraces both global leadership and the need for mechanisms and approaches to share common interests. Both will be required to address the climate issue, but on a consistent and long-term basis. In 2014 and 2015 the world saw a flash of the potential that is there as the Paris Agreement was brought to fruition.

Sky means big transformations for society on many fronts; we identified seven major changes for the coming decades for success. Sky requires a complex combination of mutually reinforcing drivers being rapidly accelerated by society, markets, and governments.

From now to 2070 –

1. A change in consumer mindset means that people preferentially choose low-carbon, high-efficiency options to meet their energy service needs.
2. A step-change in the efficiency of energy use leads to gains above historical trends.
3. Carbon-pricing mechanisms are adopted by governments globally over the 2020s, leading to a meaningful cost of CO2 embedded within consumer goods and services.
4. The rate of electrification of final energy more than triples, with global electricity generation reaching a level nearly five times today’s level.
5. New energy sources grow up to fifty-fold, with primary energy from renewables eclipsing fossil fuels in the 2050s.
6. Some 10,000 large carbon capture and storage facilities are built, compared to fewer than 50 in operation in 2020.
7. Net-zero deforestation is achieved. In addition, an area the size of Brazil being reforested offers the possibility of limiting warming to 1.5°C, the ultimate ambition of the Paris Agreement.

But Sky is not without its challenges.

For example, the existing energy system has been under pressure for much of this century with rapidly rising demand, driven by population growth, development and even a much-heralded saviour, energy efficiency. The connections people make through international travel have already doubled in the first two decades of this century (measured in terms of international air travel arrivals), partly through the efficiency drives by airlines and aeroplane manufacturers which in turn lower costs.

Coal also remains a fuel of choice, despite its higher CO2 emissions and local air quality impact in some cities. A stark reality of the early 21st century is the lack of a clear development pathway for an emerging economy that doesn’t include coal. Coal is a relatively easy resource to tap into and make use of. It requires little technology to get going but offers a great deal, including electricity, heating, industry, and, very importantly, smelting to make iron. Although solar PV and wind offer clean, distributed electricity, benefiting households, electricity alone is currently insufficient for rapid urbanisation and industrialisation, including the construction of cities and the manufacture of products such as automobiles and appliances.

Nevertheless, Sky shows that achieving net-zero emissions in just 50 years is technically possible, but there is no margin for interruption, stalled technologies, delayed deployment, policy indecision, or national back-tracking. Rather, it requires a rapid acceleration in all aspects of an energy transition and particularly robust policy frameworks that target emissions. Success can be accomplished only through a broad process that is embraced by societies, led by governments, and lightly coordinated by organisations including the UNFCCC, the EU, ASEAN, and others.

Perhaps the most interesting aspect of the work over the past months has been the collaboration with the MIT Joint Program on the Science and Policy of Global Change. They used their Integrated Global System Modelling (IGSM) framework to assess the rise in global average surface temperature that we might see under the Sky transition, which then led to the recognition that the extended ambition of the Paris Agreement, limiting the temperature rise to 1.5°C, was still a possibility. It wouldn’t be the energy transition alone that could deliver that, but the addition of a significant and rapid program of reforestation happening around the world. Nature based solutions (NBS) will be very important over the coming decades.

Sky on its own lands squarely between 1.5 and 2°C, meeting the primary goal of the Paris Agreement, but with large scale reforestation gives the world a shot at 1.5°C. The MIT report can be found here.

You can read the full story on the Shell website at www.shell.com/skyscenario.

Note: Scenarios are not intended to be predictions of likely future events or outcomes and investors should not rely on them when making an investment decision with regard to Royal Dutch Shell plc securities. Please read the full cautionary note in www.shell.com/skyscenario.