Carbon Tracker Report: Demand for fossil fuels will peak in the 2020s
The Carbon Tracker Initiative, a team of financial specialists making climate risk real in today’s capital markets, published a report predicting that the peak in fossil fuel demand will have a dramatic impact on financial markets in the 2020s.
2020 Vision: Why You Should See Peak Fossil Fuels Coming shows that solar and wind will displace all growth in fossil fuels as they continue to expand against a backdrop of falling energy demand. With global energy demand expected to grow at 1-1.5% and solar and wind at 15-20% a year, fossil fuel demand will peak between 2020 and 2027, most likely 2023.
Kingsmill Bond, Carbon Tracker New Energy Strategist and author of the report, said: “The 2020s will be the decade of fossil fuel demand peaks, as one bastion after another is stormed and overwhelmed by the rising renewable tide. This will inevitably lead to trillions of dollars of stranded assets across the corporate sector and hit petro-states that fail to reinvent themselves.”
The impacts of the energy transition will be vast: The fossil fuel sector has invested an estimated $25 trillion in infrastructure and there will be systemic risk to financial markets as they seek to digest vast amounts of stranded assets; the transition will directly affect companies that compose up to a quarter of equity indexes and debt markets, hitting banking, capital goods, transport and automotive sectors and fossil fuel exporting countries will suffer.
Carbon Tracker warns that the first impacts of the energy transition are already being felt: Coal-fired and gas-fired power plants in Europe and parts of the US are already being closed down because they are uneconomic; Peabody Energy, the world’s largest private sector coal producer, went bankrupt in 2016 and in 2017 electric vehicles were 3 million out of 800 million cars globally, but 22% of growth in car sales, and are set to provide all growth in car sales in the early 2020s.
Kingsmill Bond said: “Investors anticipate, so they will typically react even before companies see peak demand. This is what happened recently in the coal and European electricity sector transitions. We believe that investors will start to react faster as the energy transition works its way through the world’s capital markets. As each sector is impacted, it becomes easier for the market to anticipate something similar happening to the next sector.”
You can download the full report here