Energy Outlook Update - May 2022

Summary:

• We have opted for a change in the way we cover developments in the energy sector. The Energy Outlook will be published shortly after the IEA World Energy Outlook (WEO) on which it draws. The next Energy Outlook will therefore be published in December 2022 at the latest.
• Given that the last Energy Outlook appeared in June 2021, the IEA published its WEO 2021 in October and in light of the most recent developments such as COP26, Atradius has produced this Energy Outlook update. Two important new choices have been made.
• ¡ First, the STEPS scenario that has been used so far as a benchmark scenario is replaced by a scenario that covered (net zero) pledges as well: the Announced Pledges (APS) scenario. This is arguably more optimistic, but is justified by the likelihood that countries will live up to their commitments now that the sense of urgency related to climate change has gained momentum.
• Second, the Sustainable Development Scenario that we have employed so far as the ‘dream scenario’ is replaced by the Net Zero 2050 scenario where the temperature increase is limited to 1.5 degrees Celsius. Despite being more optimistic, Atradius considers this a more focused scenario which is also linked up with the  APS, where the temperature goal of the Paris Agreement is not met. 
• In the APS as well as in Net Zero 2050, energy efficiency, electrification and a much larger role for renewables instead of fossil fuels play a key role in the energy transition. But the Nero 2050 world is one fundamentally different from the current one in which all these elements, thanks to heavy investment in technology that is now still in prototype phase, play a much larger role than in APS.
• During the COP26 further steps were taken towards Net Zero 2050, providing some more robustness to the APS scenario. There were also agreements on finance, methane emissions and monitoring. But there is a lot of work to be done. And the clock is ticking.

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