WEBVTT - How to Think About the Future 0:00:00.200 --> 0:00:02.680 This is Dana Perkins and you're listening to Switch on 0:00:02.880 --> 0:00:05.840 the b NEF podcast. If you've listened to the show before, 0:00:06.200 --> 0:00:08.920 you'll know that we at BNF spend a lot of 0:00:08.960 --> 0:00:12.160 time talking about the future. After all, it's a huge 0:00:12.200 --> 0:00:15.319 part of the discussion around climate. People are thinking about 0:00:15.320 --> 0:00:17.759 what a warmer world might look like, how warm is 0:00:17.800 --> 0:00:20.200 it actually going to get, How much carbon budget do 0:00:20.239 --> 0:00:22.720 we have left to spend between now and X date 0:00:22.760 --> 0:00:25.959 in the future. The net zero targets discussed to copy 0:00:26.000 --> 0:00:30.480 six or by companies or by countries are inherently forward looking. 0:00:30.800 --> 0:00:33.199 So one of the most forward looking teams we have 0:00:33.280 --> 0:00:36.560 at BIENF is the energy economics team, or perhaps I 0:00:36.600 --> 0:00:39.479 should just say that they look the furthest out because 0:00:39.640 --> 0:00:42.120 they build different scenarios that go out to the year 0:00:43.360 --> 0:00:46.800 between now and If certain versions of the future could 0:00:46.880 --> 0:00:49.680 be true, what steps might need to be taken to 0:00:49.840 --> 0:00:53.440 make them true. Enter scenario analysis, which I think I 0:00:53.560 --> 0:00:56.040 just oversimplified and had a bit of a tendency to do. 0:00:56.200 --> 0:00:59.480 In today's show. Today I speak with sebhend Best, who 0:00:59.560 --> 0:01:02.080 is the chief economist at BNF, and he's also the 0:01:02.160 --> 0:01:05.480 chief author of our new energy Outlook. Now if I 0:01:05.480 --> 0:01:07.600 put it in another way, he's the guy who leads 0:01:07.640 --> 0:01:10.920 our team of forward thinkers. We talk about the New 0:01:11.000 --> 0:01:14.800 Energy Outlook and within it our energy Transition scenario, as 0:01:14.800 --> 0:01:18.200 well as three new net zero scenarios that were introduced 0:01:18.200 --> 0:01:20.240 earlier this year. If you want to read our New 0:01:20.319 --> 0:01:22.760 Energy Outlook, you can find it at be enough, go 0:01:22.920 --> 0:01:25.840 on the Bloomberg terminal, or on benof dot com. A 0:01:25.920 --> 0:01:28.800 quick reminder, we do not provide investment strategy advice, and 0:01:28.840 --> 0:01:30.880 our full disclaimer is at the end of the show. 0:01:31.560 --> 0:01:43.039 But for now, let's speak with Seb about the future. Seb, 0:01:43.120 --> 0:01:45.680 thank you for joining today, pleasure, thanks for having me. 0:01:46.120 --> 0:01:49.400 So we are going to talk about benf new Energy Outlook, 0:01:50.040 --> 0:01:52.160 and we're also going to talk about some net zero 0:01:52.600 --> 0:01:55.360 scenarios that we did that were an expansion on that 0:01:55.400 --> 0:01:58.360 this year. But let's first dig into what is the 0:01:58.360 --> 0:02:00.800 New Energy Outlook we lovingly call NEO. But what is 0:02:00.800 --> 0:02:02.840 the New Energy Outlook and what's it hoping to achieve? 0:02:03.040 --> 0:02:05.600 Great question, right, what is it? It's a big study 0:02:05.800 --> 0:02:09.799 and it's designed to pull together all the energy analysis 0:02:09.880 --> 0:02:12.679 that we do across B and e F into long 0:02:12.800 --> 0:02:16.680 term scenarios, trying to understand what the future energy economy 0:02:16.880 --> 0:02:20.280 might look like. So it's a scenario exercise and we 0:02:20.320 --> 0:02:24.080 do it annually and it's about six people pulling their 0:02:24.120 --> 0:02:29.840 brains together to hopefully join the dots and provide insight 0:02:30.000 --> 0:02:32.840 into how all the changes that we're looking at and 0:02:32.880 --> 0:02:37.960 tracking on a day to day basis manifest into for 0:02:38.000 --> 0:02:41.680 those of you who are interested in detail, well maybe 0:02:41.680 --> 0:02:44.000 not super deep detail, but detail on how we go 0:02:44.040 --> 0:02:46.040 about modeling in their approach to this. We actually have 0:02:46.040 --> 0:02:49.960 another podcast by a colleague of subs, Mattias, who goes 0:02:50.000 --> 0:02:52.280 into that, but today we're going to talk about more 0:02:52.480 --> 0:02:55.480 the findings and what this tells us about the future. 0:02:55.960 --> 0:02:58.440 Now we have this outlook, when is the last time 0:02:58.480 --> 0:03:02.040 that we did this, So that twenty one New Energy 0:03:02.080 --> 0:03:05.120 Outlook came out in July, and we do it once 0:03:05.160 --> 0:03:08.040 a year before that, it was actually October, so the 0:03:08.040 --> 0:03:11.320 publication date changes somewhat, but it's an annual exercise and 0:03:11.360 --> 0:03:15.200 every year we try and make it insightful and keep 0:03:15.240 --> 0:03:17.639 pushing the boundary getting to the you know, the real 0:03:17.880 --> 0:03:21.200 cold face if you excuse the pun, of the really 0:03:21.240 --> 0:03:25.079 big transition questions as we look around the world. So 0:03:25.200 --> 0:03:27.200 when we look at this year, we did a couple 0:03:27.240 --> 0:03:30.160 of different things and we looked at net zero pathways. 0:03:30.320 --> 0:03:32.680 Can you just explain what that means. We will get 0:03:32.760 --> 0:03:35.040 into the detail of it in a couple of minutes, 0:03:35.080 --> 0:03:38.280 but what are the net zero pathways this year hoping 0:03:38.320 --> 0:03:40.640 to achieve? Let me take a step back and just 0:03:40.760 --> 0:03:44.160 explain a little bit about scenarios a set of which 0:03:44.280 --> 0:03:47.960 are these net zero pathways. And it's important to recognize 0:03:48.000 --> 0:03:52.120 the difference between a scenario and a forecast. A forecast 0:03:52.200 --> 0:03:54.440 is a prediction we're saying what we think will happen. 0:03:54.840 --> 0:03:58.520 A scenario is different in the sense that it generally 0:03:58.560 --> 0:04:01.280 looks much further out, and trying to build a picture 0:04:01.320 --> 0:04:06.160 of the future in extreme uncertainty with complex dynamics that 0:04:06.240 --> 0:04:08.520 we can use as an anchor to help us make 0:04:08.560 --> 0:04:12.600 decisions and take big bets. So we're not trying to 0:04:12.640 --> 0:04:17.200 predict the future here, we're trying to present plausible pathways. 0:04:17.279 --> 0:04:21.280 And for the energy transition, there's a lot of uncertainty, 0:04:21.360 --> 0:04:25.000 and so we could build loads of different types of scenarios. 0:04:25.600 --> 0:04:28.200 None of them are wrong, none of them are right, 0:04:28.279 --> 0:04:29.880 none of them are true, none of them are false. 0:04:30.120 --> 0:04:33.599 It's just whether they're useful or not useful. And so 0:04:33.720 --> 0:04:38.880 in near one we developed three different pathways to a 0:04:39.000 --> 0:04:44.159 net zero emissions economy for the energy sector. And there's 0:04:44.240 --> 0:04:46.200 just lots of different ways to get there. So we 0:04:46.240 --> 0:04:49.480 had to make some decisions about what were the technology 0:04:49.520 --> 0:04:52.720 mixes that we wanted to investigate that we thought our 0:04:52.760 --> 0:04:55.920 clients and our readers would find most insightful and most 0:04:56.000 --> 0:04:59.160 useful as they're making decisions, you know, within this transition. 0:04:59.440 --> 0:05:03.159 So we produce three different pathways. We called one the 0:05:03.240 --> 0:05:06.919 green scenario, we called one the red scenario, we called 0:05:06.920 --> 0:05:09.640 one the gray scenario. All of them have lots of 0:05:09.680 --> 0:05:12.280 renewable energy and electric vehicles and the things that we 0:05:12.320 --> 0:05:16.640 can see happening now. But the scenarios differ by sort 0:05:16.680 --> 0:05:18.920 of the second phase. If you're like, well, we call 0:05:19.000 --> 0:05:22.520 phase two technologies. Are we talking about hydrogen, are we 0:05:22.600 --> 0:05:26.679 talking about carbon capture applications? Are we talking about maybe 0:05:26.720 --> 0:05:30.560 small nuclear reactors? How do we get to zero? And 0:05:30.560 --> 0:05:33.080 there are some pretty fundamental questions about what we might 0:05:33.160 --> 0:05:36.479 need to see over the next thirty years to get there. 0:05:36.720 --> 0:05:39.880 Let's talk a little bit about scenarios because these are 0:05:39.960 --> 0:05:43.320 not new to the industry. Lots of organizations do this 0:05:44.120 --> 0:05:46.680 how do the net zero scenarios that we've looked at 0:05:46.720 --> 0:05:49.680 and our approach to looking at net zero, how does 0:05:49.720 --> 0:05:53.200 it maybe map onto or inter relate with the Intergovernmental 0:05:53.200 --> 0:05:55.080 Panel on Climate Change or the i p c c 0:05:55.320 --> 0:05:58.960 S warming scenarios. Yeah, there are certainly lots and lots 0:05:59.000 --> 0:06:02.880 of scenarios out there, and it's pretty difficult actually to 0:06:03.040 --> 0:06:06.960 know which wants to read how to interpret them relative 0:06:07.000 --> 0:06:09.760 to one another. It's not straightforward. I mean, there's a big, 0:06:09.800 --> 0:06:13.560 big complex exercises and it gets a bit inside baseball 0:06:13.760 --> 0:06:17.040 in terms of how they differ, why they differ. There 0:06:17.080 --> 0:06:20.320 are some well known scenarios that are used. Perhaps the 0:06:20.360 --> 0:06:22.600 most important from a climate perspective are the ones that 0:06:22.640 --> 0:06:25.360 the Intergovernmental Panel and Climate Change put together, because what 0:06:25.440 --> 0:06:28.640 they essentially do for all the other economic modelers out 0:06:28.640 --> 0:06:32.240 there who are building scenarios to help them make decisions 0:06:32.279 --> 0:06:35.920 is they provide us with a relationship between the amount 0:06:35.960 --> 0:06:38.640 of greenhouse gases and the atmosphere and the impact on 0:06:38.680 --> 0:06:44.720 the climate. And so often when we're describing climate objectives 0:06:44.800 --> 0:06:47.039 in terms of degrees, we need to understand how many 0:06:47.040 --> 0:06:50.400 emissions that means, and then we have to turn that 0:06:50.440 --> 0:06:53.440 into a budget, a carbon budget which we can then 0:06:53.480 --> 0:06:57.400 operate within, and the difference between scenarios is often the 0:06:57.480 --> 0:07:00.280 definition of that budget, how many miss and have we 0:07:00.320 --> 0:07:03.040 got to work with, and how that budget is then 0:07:03.080 --> 0:07:06.880 divided up by different sectors and different countries, and then 0:07:06.880 --> 0:07:11.880 which technologies or pathways might be employed within the scenario 0:07:12.200 --> 0:07:17.040 to get emissions down while continuing to ensure that demand 0:07:17.560 --> 0:07:22.680 for goods and services and energy within the economy continues 0:07:22.720 --> 0:07:25.200 to be met. So the i PC scenario is really 0:07:25.200 --> 0:07:29.800 are looking at the relationship between atmospheric greenhouse gas concentration 0:07:29.960 --> 0:07:34.000 and temperature, and we can then build from that climate 0:07:34.040 --> 0:07:37.920 scenarios that are consistent with certain temperature outcomes. And for 0:07:37.960 --> 0:07:43.280 the new energy out we built a global emissions trajectory 0:07:43.440 --> 0:07:47.320 that is consistent with one point seven five degrees of warming. 0:07:47.400 --> 0:07:50.400 So halfway between two and one point five there's a 0:07:50.480 --> 0:07:53.840 really really big difference in the total amount of emissions 0:07:53.840 --> 0:07:56.600 in the system between one and a half and two degrees, 0:07:56.680 --> 0:07:58.720 and these are the two temperatures that of course everyone 0:07:58.760 --> 0:08:01.720 talks about in terms of the Paris Climate Agreement. Do 0:08:01.840 --> 0:08:05.000 better than two degrees. Pushing towards one point five means 0:08:05.040 --> 0:08:07.960 that somewhere in there is where governments of the world 0:08:07.960 --> 0:08:10.560 have kind of agreed to try and head and we 0:08:11.000 --> 0:08:13.280 can use that as a guide try and set the 0:08:13.320 --> 0:08:16.760 carbon budget. Our scenarios are right down at the low 0:08:16.880 --> 0:08:19.640 end therefore, of the I p C c S range, 0:08:19.640 --> 0:08:22.360 because they have the very very high emissions trajectories and 0:08:22.480 --> 0:08:24.480 the low and so we're trying to get to one 0:08:24.480 --> 0:08:27.040 point five or right down the bottom if we continue 0:08:27.080 --> 0:08:29.840 on without dramatic policy intervention. From here, we've got to 0:08:29.920 --> 0:08:32.440 run out of carbon budget to keep within one point 0:08:32.440 --> 0:08:36.240 five degrees by right. So this is some of the 0:08:36.320 --> 0:08:40.040 urgency around the next ten years is on the current trajectory. 0:08:40.200 --> 0:08:43.040 Even with all the renewables being built out, with the 0:08:43.040 --> 0:08:46.040 record electric vehicle sales and a lot of government interests, 0:08:46.360 --> 0:08:48.520 we're going to run out of budget pretty soon for 0:08:48.640 --> 0:08:53.120 two degrees. That point is we buy ourselves at extra 0:08:53.559 --> 0:08:57.560 twenty five years almost. It's huge, it's huge. And so 0:08:58.240 --> 0:09:01.080 these temperature differences seem small all but in terms of 0:09:01.120 --> 0:09:05.320 the impact on the transition of the economy from dirty 0:09:05.360 --> 0:09:08.160 to clean, they're really really big. And see this is 0:09:08.160 --> 0:09:10.600 a really big problem for modeling because you've got to say, well, 0:09:10.880 --> 0:09:13.440 what is the right temperature trajectory, how do you possibly 0:09:13.480 --> 0:09:16.439 decide where the one point five, one point seven, one 0:09:16.480 --> 0:09:19.880 point nine two point three what the right answer is, 0:09:20.000 --> 0:09:22.319 and then how do you split that up between sectors 0:09:22.360 --> 0:09:25.360 between countries, Because if you can't model that, then you 0:09:25.400 --> 0:09:28.120 don't really know how to model the supply side, which 0:09:28.160 --> 0:09:30.320 is all the technologies that get us there. And that's 0:09:30.360 --> 0:09:33.920 the first challenge with sort of big net zero energy 0:09:33.960 --> 0:09:36.520 scenarios that we develop. So just to be clear, when 0:09:36.520 --> 0:09:38.320 we set out to do this, we were aiming for 0:09:38.480 --> 0:09:41.640 a net zero emissions world, but we didn't have a 0:09:41.679 --> 0:09:45.200 temperature change in mind. It was just can we get 0:09:45.240 --> 0:09:49.520 to net zero in specifically the energy world that you know, 0:09:49.520 --> 0:09:51.720 that's what we're talking about here. This is agnostic of 0:09:52.240 --> 0:09:56.199 agriculture and other sectors outside of energy. Yeah, the exercise 0:09:56.200 --> 0:09:59.640 we do is just energy focused. So we're skipping a 0:09:59.679 --> 0:10:02.240 whole bunch of emissions that matter, and agriculture and land 0:10:02.360 --> 0:10:05.480 use and the leaking of methane and other things from pipelines. 0:10:05.520 --> 0:10:08.280 We're looking at really the core of the of the 0:10:08.400 --> 0:10:13.000 energy economy, which is the supply, transformation and consumption of energy, 0:10:13.760 --> 0:10:16.520 whether it be to heat a building, move a car, 0:10:17.120 --> 0:10:20.600 make an electron, or even actually as a feedstock into 0:10:20.679 --> 0:10:23.440 chemical industries, you know, things like oil of course go 0:10:23.520 --> 0:10:26.640 to make plastics something. So there's a there's a lot 0:10:26.679 --> 0:10:29.960 of energy accounting in these scenarios. We're trying to track 0:10:30.000 --> 0:10:32.400 each one of those flows all the way through to 0:10:32.600 --> 0:10:34.920 the useful economy, which is the things we want, right 0:10:35.080 --> 0:10:38.199 but what we want is to move around to warm 0:10:38.240 --> 0:10:40.400 the spaces and cool the spaces that we live in, 0:10:40.880 --> 0:10:44.000 and we want to make things and build things, and 0:10:44.200 --> 0:10:46.640 we need energy to do all of that. What percentage 0:10:46.679 --> 0:10:48.880 of the remaining carbon budget would you say that the 0:10:49.000 --> 0:10:53.360 energy industry occupies, so the energy sector makes up over 0:10:54.160 --> 0:10:57.040 It depends how you do the accounting, but it's certainly 0:10:57.080 --> 0:11:00.880 towards three quarters of global greenhouse gas emission. That is 0:11:00.920 --> 0:11:05.040 the really sort of immediate and big challenges to decarbonize 0:11:05.480 --> 0:11:09.000 the energy sectors, and there's a huge number of different 0:11:09.040 --> 0:11:12.120 technology challenges within that. And the outlook, the new energy 0:11:12.120 --> 0:11:16.080 outlook kind of starts with that end economy and goes, well, 0:11:16.080 --> 0:11:18.320 what do we need and then how do we do 0:11:18.400 --> 0:11:20.960 those things? How do we get those things in a 0:11:21.040 --> 0:11:23.640 zero carbon way over time? And what are the technology 0:11:23.640 --> 0:11:28.760 transitions that we might anticipate needing to happen to do that. Okay, 0:11:28.840 --> 0:11:32.199 let's talk about the three different scenarios that we put forward. 0:11:32.640 --> 0:11:34.440 Which one do you start with? This isn't picking your 0:11:34.480 --> 0:11:36.320 favorite child, it's at the very beginning, which one do 0:11:36.320 --> 0:11:38.760 you want to start with? Well, let me discuss all 0:11:38.840 --> 0:11:40.640 three at once, and then we can see which one 0:11:40.679 --> 0:11:43.640 is the most interesting, because I don't think there's one 0:11:43.679 --> 0:11:46.320 that is right now more likely than the others. In in 0:11:46.200 --> 0:11:50.600 in a way, these are global technology paradigms rather than 0:11:51.200 --> 0:11:54.640 sort of bottom up balanced scenarios. Would you say they're 0:11:54.679 --> 0:11:58.119 intentionally extreme. They're designed. If you think about a landscape 0:11:58.120 --> 0:12:01.080 of a future possible worlds, it's very hard to be 0:12:01.080 --> 0:12:03.480 able to pinpoint. And our job isn't really to pinpoint 0:12:03.600 --> 0:12:06.320 the future. It's not a prediction. Our job is to 0:12:06.400 --> 0:12:09.679 describe parts of the landscape that enable people to make 0:12:09.720 --> 0:12:12.760 decisions in a useful way. And so we've defined with 0:12:12.800 --> 0:12:17.560 these scenarios three different technology paradigms. One where we have 0:12:17.800 --> 0:12:21.160 a lot of green hydrogen, one where we have a 0:12:21.160 --> 0:12:23.640 lot of nuclear and what we've called red hydrogen, but 0:12:23.679 --> 0:12:26.160 people call it pink hydrogen, and one where we have 0:12:26.280 --> 0:12:30.360 carbon capture and storage as the dominant secondary vectors of decabanization. 0:12:30.679 --> 0:12:35.080 All three scenarios have loads of renewables, loads of electric vehicles, 0:12:35.400 --> 0:12:38.520 heat pumps, and other forms of electrification of the economy 0:12:38.679 --> 0:12:40.280 because these are the things we can kind of do 0:12:40.360 --> 0:12:42.440 today and the things that are already happening in The 0:12:42.520 --> 0:12:46.760 big uncertainty around that landscape is what about these secondary solutions, 0:12:46.760 --> 0:12:49.360 Which ones will emerge, which ones will get to scale, 0:12:49.360 --> 0:12:51.560 which ones will get cost competitive, And it's quite hard 0:12:51.559 --> 0:12:54.439 to pick that for now. So we defined the scenarios 0:12:54.480 --> 0:12:58.280 based around then assumption that in the future, whether it's 0:12:58.320 --> 0:13:00.920 the green hydrogen or whether it's the nuclear or whether 0:13:00.920 --> 0:13:03.880 it's the carbon capture and storage, those are the technologies 0:13:03.920 --> 0:13:07.520 that that end up dominating. But in reality, actually, since 0:13:07.520 --> 0:13:10.600 you are talking about all three, hydrogen plays a central 0:13:10.679 --> 0:13:12.920 role in all three of them in some way, shape 0:13:13.000 --> 0:13:15.160 or form. It just depends on what we make the 0:13:15.240 --> 0:13:19.040 hydrogen out of. Why is it that hydrogen appears in 0:13:19.080 --> 0:13:23.440 all three net zero scenarios? So hydrogen emerges because you 0:13:23.520 --> 0:13:26.920 can't electrify everything. But that's the basic conclusion of doing 0:13:27.320 --> 0:13:29.719 all this sector level analysis is there are things that 0:13:29.800 --> 0:13:31.720 don't work well with electricity, and we kind of know 0:13:31.760 --> 0:13:35.280 that obviously like an aeroplane would require very big and 0:13:35.280 --> 0:13:39.880 heavy batteries to do long haul flights. Similarly, shipping, you 0:13:39.960 --> 0:13:42.560 could see certain sort of coastal shipping routes done with 0:13:42.600 --> 0:13:47.960 electric ships, but for long ocean voyages you need a 0:13:48.040 --> 0:13:50.719 lot of energy storage and energy density in the form 0:13:50.760 --> 0:13:53.559 of batteries which make the ships very heavy that displaces 0:13:54.080 --> 0:13:57.600 space for cargoes, etcetera. Even in the power sector wind 0:13:57.640 --> 0:14:01.560 and PV, you can only get you maybe seventy of 0:14:01.640 --> 0:14:05.600 supply depending on the country, depending on the latitude and 0:14:05.640 --> 0:14:09.600 the natural resources that country has to work with, which 0:14:09.679 --> 0:14:12.400 means you've got of the electricity demand in the year 0:14:12.400 --> 0:14:13.920 which needs to be met by something else. And what 0:14:13.960 --> 0:14:17.160 we say is a lot of the energy transition can 0:14:17.200 --> 0:14:21.320 be met with clean electrons, but there is a significant 0:14:21.320 --> 0:14:25.280 fraction and what we calculate to be at least of 0:14:25.360 --> 0:14:28.960 final energy consumption that it's not an electricity based and 0:14:29.000 --> 0:14:31.400 of that in our scenario is certainly in the green 0:14:31.480 --> 0:14:35.960 and the red. Around twenty of final energy consumption we 0:14:36.000 --> 0:14:38.280 think could be hydrogen, and then it matters how you 0:14:38.320 --> 0:14:40.880 make the hydrogen. But hydrogen being an energy carrier, being 0:14:40.880 --> 0:14:43.480 a molecule that looks a little bit more like a 0:14:43.520 --> 0:14:45.760 fossil fuel than it does like an electron, and therefore 0:14:45.800 --> 0:14:48.520 has applications in what we might call hard to abate 0:14:48.560 --> 0:14:51.680 sectors in parts of the economy we can't electrify. And 0:14:51.680 --> 0:14:54.200 that's why it appears, because it's pretty useful. If we 0:14:54.240 --> 0:14:57.160 don't use hydrogen, we've got to find other molecule based solutions. 0:14:57.160 --> 0:14:59.800 It could be synthetic fuels or bio fuels, it could 0:14:59.840 --> 0:15:03.680 be carbon capture and sequestration. Continue to use the fossil 0:15:03.720 --> 0:15:06.800 fuel molecules, but then we deal with the emissions separately. 0:15:07.280 --> 0:15:10.960 For most of the energy economy outside of power, and 0:15:11.040 --> 0:15:13.880 certainly in this second phase, clean versions of what we 0:15:13.920 --> 0:15:16.520 do today are actually quite few and far between. So 0:15:16.560 --> 0:15:19.920 the questions we have to ask ourselves are what emerges 0:15:20.040 --> 0:15:22.760 is the most likely solution, and if we don't know that, 0:15:23.080 --> 0:15:26.600 how could we present different scenarios that reflect different winners. 0:15:26.600 --> 0:15:29.120 And that's that's what we've done. So you bring up 0:15:29.120 --> 0:15:31.120 the hard to abate sectors and how difficult it's going 0:15:31.160 --> 0:15:34.680 to be in that run to In that run to 0:15:34.760 --> 0:15:38.840 actual net zero world, there are industries like you brought 0:15:38.920 --> 0:15:42.800 up late aviation that are proving to be extremely challenging. Now, 0:15:42.920 --> 0:15:46.240 let's hope for some serious technology breakthroughs that will help 0:15:46.320 --> 0:15:49.360 us then. But you also mentioned that the energy transition 0:15:49.480 --> 0:15:51.920 is happening in many respects in two parts, and there 0:15:52.080 --> 0:15:54.480 is a big emphasis on the decade that we are 0:15:54.520 --> 0:15:57.160 sitting in right now and everything we need to deploy. 0:15:57.480 --> 0:16:01.360 How does it differ across the three different scenarios. Because 0:16:01.400 --> 0:16:03.880 I took a look at them and I tried to 0:16:03.920 --> 0:16:06.280 do a quick zoom in, and they look very similar. 0:16:06.440 --> 0:16:09.560 I think that's an important conclusion, is that getting to 0:16:09.640 --> 0:16:14.200 net zero, which is consistent with an orderly transition, if 0:16:14.200 --> 0:16:16.400 we want to get on track, we want to get 0:16:16.400 --> 0:16:20.560 on track for one point five degrees or just net 0:16:20.640 --> 0:16:25.400 zero in then there's a certain trajectory that we have 0:16:25.480 --> 0:16:29.800 to meet in terms of emission productions every year. And 0:16:29.840 --> 0:16:32.240 when we do the math on this, what becomes really 0:16:32.240 --> 0:16:35.480 clear is that we have to go much much faster 0:16:35.560 --> 0:16:37.760 this decade. And actually the only way you can go 0:16:37.840 --> 0:16:41.240 faster is by deploying the things you've got. You can't 0:16:41.320 --> 0:16:45.200 reduce emissions faster by investing in early stage technology that 0:16:45.200 --> 0:16:49.000 that's for later, right, But this decade you need to 0:16:49.040 --> 0:16:52.240 deploy everything you've got and that means you need to 0:16:52.320 --> 0:16:56.680 have faster and more renewable energy deployment. You need more 0:16:56.720 --> 0:16:59.440 electric vehicles on the road, you need greater recycling in 0:16:59.480 --> 0:17:02.360 the industry is you need more heat pumps being put 0:17:02.400 --> 0:17:06.119 into buildings can run off electricity. You need a greater 0:17:06.400 --> 0:17:10.800 penetration of bio fuels or sustainable aviation fuels for airplanes, 0:17:11.240 --> 0:17:13.520 and you've got to do that at a certain rate 0:17:13.560 --> 0:17:16.040 to get on track by That doesn't solve your problem, 0:17:16.040 --> 0:17:18.880 but that keeps you within striking distance of your end goal, 0:17:19.200 --> 0:17:23.520 and because getting on track is the primary task. Regardless 0:17:23.520 --> 0:17:26.000 of the scenario, they do look very very similar. They 0:17:26.080 --> 0:17:28.560 differ in the way in which we might need to 0:17:28.600 --> 0:17:31.119 see the ramp up and the scaling of these phase 0:17:31.200 --> 0:17:35.680 two options, whether that's green hydrogen or carbon caption storage 0:17:35.760 --> 0:17:39.040 or small module in nuclear reactors or whatever technology set 0:17:39.320 --> 0:17:41.600 we are thinking about. We're gonna have to scale that 0:17:41.680 --> 0:17:45.360 up this decade so it's ready to deploy post These 0:17:45.359 --> 0:17:48.639 are coming from very small percentages of the overall market 0:17:48.680 --> 0:17:50.720 right now. We need to see almost like a hockey 0:17:50.800 --> 0:17:54.160 stick upward of adoption these technologies. In my correct yeah, 0:17:54.200 --> 0:17:55.880 for those I mean, but even for wind and PV 0:17:56.240 --> 0:17:59.320 right in our scenarios. We want to see about an 0:17:59.320 --> 0:18:04.600 average of five gigawatts of wind and sort of giga 0:18:04.600 --> 0:18:10.000 wats of PV deployed every year out to which is 0:18:10.680 --> 0:18:14.320 double the PV and about sort of fourish times the 0:18:14.320 --> 0:18:18.080 amount of wind that we've seen in even in the 0:18:18.119 --> 0:18:22.120 technologies where we're already doing a lot renewables in particular 0:18:22.200 --> 0:18:24.320 that are cost competitive today. We just need a rate 0:18:24.359 --> 0:18:26.240 of a rate of deployment, a rate of change. It's 0:18:26.240 --> 0:18:28.680 a lot lot faster than the sort of the organic 0:18:29.119 --> 0:18:32.000 rate of deployment, which means we need policy intevidual. So 0:18:32.080 --> 0:18:34.320 let's talk about that. So there's the policy intervention that 0:18:34.400 --> 0:18:37.400 is needed to create this hockey stick kind of very 0:18:37.480 --> 0:18:41.080 quick adoption of certain technologies. If we left everything to 0:18:41.240 --> 0:18:46.640 economics and every country was a complete rational actor in economics, 0:18:47.160 --> 0:18:49.120 where would that get us? Because that was the analysis 0:18:49.200 --> 0:18:51.439 we did the prior year we did our New Energy Outlook, 0:18:51.480 --> 0:18:53.679 and then we said, okay, if we just looked at 0:18:53.680 --> 0:18:56.679 a world agnostic of policy, where would that get us 0:18:56.680 --> 0:18:59.760 from a warming standpoint? I think most people would think that, well, 0:18:59.800 --> 0:19:02.960 in the absence of policy, we're heading out towards four 0:19:03.040 --> 0:19:05.639 or five degrees and the end of days, right. I 0:19:05.680 --> 0:19:10.399 think what we determined from previous scenario work, and that 0:19:10.480 --> 0:19:14.720 looks at the underlying economics of technology change where it 0:19:14.840 --> 0:19:18.439 exists today. So that means we're thinking about where the 0:19:18.480 --> 0:19:21.080 crossover points are from the new to the old, and 0:19:21.080 --> 0:19:23.800 in some parts of the economy those crossover points are 0:19:24.240 --> 0:19:27.800 distant distant. There's not a technology solution that's remotely cost 0:19:27.880 --> 0:19:31.440 competitive today for steel or cement or shipping, but there 0:19:31.480 --> 0:19:34.840 are lots of cheap renewables. Electric vehicles are coming, and 0:19:34.880 --> 0:19:37.520 depending on how you heat the house, your heat pumps 0:19:37.520 --> 0:19:40.159 can look attractive as well. So the absence of big 0:19:40.760 --> 0:19:45.520 climate policy drivers, we get to about three point three 0:19:45.520 --> 0:19:48.000 degrees of warming, and what that means is that emissions 0:19:48.400 --> 0:19:51.879 peak and start to decline across the energy economy, but 0:19:52.000 --> 0:19:55.000 not nearly fast enough to get to zero in. So 0:19:55.000 --> 0:19:58.919 there's a lot to do beyond the underlying sort of 0:19:59.000 --> 0:20:01.600 pace of transition and buy our numbers. I think we 0:20:01.640 --> 0:20:07.760 need to see emissions down roughly from levels by a 0:20:07.800 --> 0:20:09.520 lot of that has to happen just from the power 0:20:09.520 --> 0:20:12.640 sector doing more, because the power sect, you can it's 0:20:12.680 --> 0:20:17.680 where we have the most cost competitive abatement options to deploy. 0:20:17.760 --> 0:20:20.760 So just to add some complexity to this decade, and 0:20:20.800 --> 0:20:23.760 actually not even this decade, just this year and next year, 0:20:24.520 --> 0:20:28.159 I can't help but think about the incredibly erratic and 0:20:28.680 --> 0:20:32.000 may I even say, very high natural gas prices and 0:20:32.040 --> 0:20:36.320 what that's doing to a number of different countries and 0:20:36.359 --> 0:20:39.040 the utilities operating there, because this has become what was 0:20:39.080 --> 0:20:42.160 at one point in time highly regional and now more 0:20:42.240 --> 0:20:45.240 much much more of a global marketplace for gas. Analogy, 0:20:46.480 --> 0:20:50.560 do we see in our scenarios these natural gas prices 0:20:50.640 --> 0:20:54.840 fundamentally changing the near term future or the long term future. 0:20:55.160 --> 0:20:59.359 There's always a question to ask in scenario work whether 0:21:00.000 --> 0:21:04.720 always in the market today is a meaningful signal for 0:21:04.760 --> 0:21:08.679 the longer term, And invariably it's not. Prices go up, 0:21:08.680 --> 0:21:12.439 prices go down. They tend to reflect dynamics of the moment. 0:21:12.680 --> 0:21:16.879 And what we know is that in the absence of 0:21:17.400 --> 0:21:20.960 forces that drive the system in a certain direction, and 0:21:20.960 --> 0:21:24.560 those might be policy or different geo political events or 0:21:24.560 --> 0:21:28.600 something like that, that you get commodity cycles. The adage 0:21:28.600 --> 0:21:31.399 that the solution to high prices is high prices is 0:21:31.400 --> 0:21:36.639 broadly true. High prices should create new supply that drives 0:21:36.680 --> 0:21:39.359 prices down. The increases demand that drives prices up, and 0:21:39.400 --> 0:21:41.400 you play this game and so you get these commodity 0:21:41.440 --> 0:21:44.720 cycles then more complicated than that, of course, But the 0:21:44.840 --> 0:21:49.240 question really is is this time different. Do the gas 0:21:49.280 --> 0:21:52.879 prices that we assume into the future should they be 0:21:53.000 --> 0:21:57.760 altered by the current crunch on gas? And if so why? 0:21:58.119 --> 0:22:00.880 Really difficult question, I think the main in thing we've 0:22:00.880 --> 0:22:03.159 got to ask ourselves is there any reason why that 0:22:03.200 --> 0:22:07.879 commodity cycle gets broken? And climate policy is something that 0:22:07.920 --> 0:22:12.200 can break a commodity cycle, because a commodity cycle relies 0:22:12.280 --> 0:22:16.440 on demand sort of waxing and waning, and supply waxing 0:22:16.440 --> 0:22:19.480