GlobalEnergyPerspective2022ExecutiveSummaryApril2022McKinsey’sGlobalEnergyPerspectiveisacollaborationbetweenEnergyInsightsandadjacentpracticesAboutusTheGlobalEnergyPerspectiveisdevelopedbyEnergyInsightsincollaborationwithMcKinseySustainabilityandtheGlobalEnergyandMaterialsandAdvancedIndustriespractices.EnergyInsightsisMcKinsey’sglobalmarketintelligenceandanalyticsgroup,focusedontheenergysector.Thegroupenablesorganizationstomakewell-informedstrategic,tactical,andoperationaldecisionsbyusinganintegratedsuiteofmarketmodels,proprietaryindustrydata,andaglobalnetworkofindustryexperts.Itworkswithleadingcompaniesacrosstheentireenergyvaluechaintohelpthemmanagerisk,optimizetheirorganizations,andimproveperformance.McKinseySustainabilityisthefirm’sclient-serviceplatformthataimstoassistthetransformationofallindustrysectorsandtheireffortstocutcarbonemissionsbyhalfby2030,andtoachievenetzeroby2050.McKinseySustainabilityseekstobethepreeminentimpactpartnerandadviserforourclients—fromtheboardroomtotheengineroom—onsustainability,climateresilience,energytransition,andenvironmental,social,andgovernance(ESG)factors.Tofacilitateameaningfulwaveofinnovationandeconomicgrowththatsafeguardstheplanetandadvancessustainability,McKinseySustainabilityleveragesthoughtleadership,innovativetoolsandsolutions,andtopexperts—andsocreatesavibrantecosystemofindustryassociationsandknowledgepartnerships.McKinsey’sGlobalEnergyandMaterialsPractice(GEM)servesclientsinindustriessuchasoilandgas,mining,steel,pulpandpaper,cement,chemicals,agriculture,andpower.Itassiststhemtomakedecisionsonthemostimportantissuesregardingstrategy,operations,marketingandsales,organization,andotherfunctionaltopics.Inaddition,MineLens,MineSpans,andEnergyInsights—specialistdivisionswithinthepractice—offerfundamentalinsightsintocommodity-marketdynamics.GEMservesmanyofthetopglobalplayers,AboutthisreportTheGlobalEnergyPerspective2022offersadetaileddemandoutlookacross55sectors,70+energyproducts,and146countriesforfivekeyscenarios.ThisExecutiveSummaryisaselectionofkeychartsandanalysisfromtheoutlook.ToinquireaboutthecompleteGlobalEnergyPerspective2022,pleasecontactus.Thescenariosweexplorearenotexhaustiveintherealmofallpossibleoutcomes,andcurrentlydonotreflecttheimpactoftheinvasionofUkraineonenergymarkets.includingcorporationsandstate-ownedenterprises,andworkswithmorethan80%ofthelargestminingcompaniesand90%ofthelargestoilandgascompaniesworldwide.McKinsey’sAdvancedIndustriesPracticebringstogetherthreewell-establishedglobalindustrypracticeswithrootsintechnicallycomplexdesignandmanufacturing:automotiveandassembly,aerospaceanddefense,andadvancedelectronicsandsemiconductors.Theglobalnetworkofdeeplyexperiencedindustrialpartnersworkswithindustryexecutivestoaddressissuesthatincludestrategy,organization,operations,technology,marketing,sales,andrisk.Thepracticefocusesoncoreoperatingcapabilitiesandhelpsclientstakealong-term,through-cycleviewoftheevolvingcompetitivelandscape.Itworkswithmanyhigh-performingandiconicindustrialcompaniesaroundfunctional,businessunit,andenterprisetransformationstoacceleraterevenuegeneration,technologyintegration,operationsdesign,andmarginandcashflowimprovements.GetintouchLearnmore2GlobalEnergyPerspective20223GlobalEnergyPerspective2022Editor'snoteWepublishthislong-termenergyoutlookatatimewhenglobalenergymarketsarefacingunprecedenteduncertainty.TheglobalenergylandscapehasbeenimpactedbyincreasedmarketuncertaintyduetotheconflictinUkraine.Alreadybeforetheconflictbegan,thereboundinenergydemandtriggeredsupplyconstraintsandpricespikesformultiplecommodities.Additionally,thelong-termshifttolow-carbonenergysystemscontinuestogainmomentumandhasbeenacceleratinginseveralrespects.WechoosetopublishthisreportnowtocontributeasetofscenariosthatmayhelpcalibratetheinvasionofUkrainewiththelonger-termenergytransitionmomentum.Theconflictishavingimmediateimpactsonenergymarketsaroundtheworld.Theresultinguncertaintyissomethingthattheworldhasnotseeninalongwhileand,asoftoday,thepotentialscenariosthatcouldunfoldremainveryuncertain.Asafirm,wehavebeenexploringoverallscenariosonhowthesituationmightevolveandwhattheimplicationsontheenergymarketscouldbe.Aswecontinuetomonitorthesituation,wewillprovideregularupdatesonwheretheenergymarketcouldbeheadedasstakeholderstrytobalanceaffordability,energysecurity,andlong-termdecarbonizationambitions.Atthesametime,mostofthedevelopmentsmaybepertinenttothelonger-termtrendsinenergysystemsthatwehaveobservedinthepastdecade,likeincreasedcompetitivenessofelectrificationandrenewables.Thisreportspecificallyfocusesonthoselonger-termtrendsandisbasedontheinsightsandanalyticsdevelopedbyMcKinsey’sEnergyInsightsaswellastheexpertiseofourindustryandregionalpractitioners.Lookingbackto2021,theeconomicrecoveryfromtheeffectsoftheCOVID-19pandemicbroughtareboundinenergydemandaroundtheglobe.This,coupledwithsupplysideconstraints,causedenergypricestoseenotableincreases,especiallyfornaturalgasandelectricity.Whilegaspriceshita30-yearlowatthestartofthepandemic,theyreachedanearlytwo-decade-highpointin2021.Powerpricesshowedsimilarvolatility,impactingenergycostsformanybusinessesandhouseholds.Atthesametime,thetransitiontoalow-carboneconomyiscontinuing.InthecontextofCOP26,alargenumberofcountries,aswellasmanyoftheworld’slargestcorporations,havecommittedtoachievingnetzeroemissionswithinthenextfewdecades.Althoughmostofthesepledgeshaveyettobetranslatedintoconcretepoliciesandactions,thecontinuedgrowthoflow-carbontechnologiesshowsthatkeyenablersfortheenergytransitionkeepmomentum.Theseshiftsandtheirinterplayraiseseveralkeyquestionsaboutthepotentialpathaheadfortheglobalenergylandscape.Willpricespikesdelaytheenergytransition,orwillhighfossilfuelpricesaccelerateadoptionoflow-carbonalternatives?Willgovernmentsandbusinessesfurtherincreasetheireffortstodecarbonize,orwillchallengesinimplementationlowerambitionlevels?HowmighttheinvasionofUkraineinfluencethedirectionandspeedofthetransition?And,willtherebeanorderlytransitiontoalow-carboneconomy,orwillrapidshiftscomewithinstabilityandunrest?Our2022GlobalEnergyPerspectivepresentsanewsuiteoffiveenergyscenarios.BasedoncontributionsfromhundredsofMcKinseyexpertpractitionersfromaroundtheworld,thesescenarioscoveraspectrumofpossibleoutcomes,rangingfromstrongdecarbonizationinlinewithmanyoftherecentnet-zeropledgestoascenariothatseesfadingmomentumforatransitionoftheglobalenergysystem.Weusethesescenariooutlooks—andtheunderlyingmodels—tosupporthundredsofleadersaroundtheworldandacrossabroadrangeofsectors,helpingorganizationsnavigatethetransitionsinenergysystems.Thisreportisdividedintofourparts.Partoneprovidesaperspectiveonthedevelopmentoffundamentaldriversfortheglobalenergysystem.Parttwoprovidesanoutlookforpowersystems,andoutlooksforeachenergytypeandcarrier,includinghydrogen,sustainablefuels,naturalgas,oil,andcoal,aswellasaviewontheroleofCCUS.Partthreediscussescarbonemissions,andpartfourreflectsonimplicationsforbusinessleadersandpolicymakers,includingaviewonvaluepoolsandanoutlookforenergyinvestments.Wehopethatthisreportprovidesvaluableinsightintotheenergytransition,andthatithelpsinformthinkingaroundthelow-carbonfuture.April2022GlobalEnergyPerspective202245GlobalEnergyPerspective2022KeyinsightsfromMcKinsey'sGlobalEnergyPerspective202215Whilegovernmentsandbusinessesareincreasinglycommittedtosteepdecarbonizationtargets,energymarketsfaceextremevolatilitydrivenbygeopoliticaltensionsandareboundinenergydemandTheconflictinUkraine,aswellasotherfactors,havetriggeredsig-nificantpeaksinenergypricesasuncertaintiesaroundsupplysecurityandaffordabilityareparamount.ThiscomesatatimewheremarketsarealreadytightfollowingtheCOVID-19reboundThroughout2021,globalenergyde-mandandemissionsincreasedby5%comparedto2020,almostreachingpre-COVID-19levels(~33Gtener-gy-relatedCO₂equivalent)InthecontextofCOP26,atotalof64countries(accountingfor89%ofglobalCO₂emissions)havemadenet-zeropledges,whilefinancialinstitutionsandprivatesectorenter-prisesalsocontinuetoincreasetheirdecarbonizationaspirationsGoingforward,theenergymixisprojectedtoshifttowardpower.By2050,electricityandenablinghydrogenandsynfuelscouldaccountfor50%oftheenergymixElectricitydemandisprojectedtotripleby2050assectorselectrifyandhydrogenandhydrogen-basedfuelsincreasetheirmarketshareduetodecarbonizationRenewablegenerationisprojectedtoreach80–90%oftheglobalenergymixby2050astheglobalbuild-outratesforsolarandwindgrowbyafactoroffiveandeightrespectivelyHydrogendemandinnewsectorscouldreach350–600mtpain2050(comparedto~80mtpatoday);globaldemandforsustainablefuelsisexpectedtomature,reaching8–22%ofallliquidfuelsby2050Theprojectedpeakindemandforfossilfuelscontinuestomoveforward;demandforoilisprojectedtopeakinthenextfiveyearsPeakoildemandisprojectedtooccurbetween2024and2027¹drivenlargelybyEVuptake—adevelopmentthatisalreadyunderway.Coaldemandpeakedin2013and,afteratemporaryreboundin2021,isprojectedtocontinueitsdownwardtrajectoryTheconflictinUkraineisleadingtopricespikesasthemarketandconsumersbalancesupplysecurityandaffordabilityToward2035,gasdemandacrossallscenariosisprojectedtogrowanother10–20%comparedtotoday¹;after2035,gasdemandwilllikelybesubjecttolargeruncertainties,drivenespeciallybytheinterplaywithhydrogenTwotofour¹GtofCO₂willneedtobecapturedbyCCUSby2050todecarbonizeheavyindustrieswherefossilfuelscontinuetoplayasignificantroleEvenifallcountrieswithnet-zerocommitmentsdeliverontheiraspirations,globalwarmingisprojectedtoreach1.7°Cby2100Allscenariosrequiresubstantialshiftstooccuracrosstheenergylandscape.EvenintheCurrentTrajectoryscenario,significantinvestmentswilllikelyberequiredtokickstartnewtechnologiesWithcurrentgovernmentpoli-cies,additionalcommitments,andprojectedtechnologytrends,globalwarmingisprojectedtoexceed1.7°C,makinga1.5°pathwayincreas-inglychallengingTokeepthe1.5°Pathwayinsight,theglobalenergysystemmayneedtoaccelerateitstransformationsignifi-cantly,shiftingawayfromfossilfuelstowardefficiency,electrification,andnewfuels,quickerthaneventheannouncednet-zerocommitmentsTotalinvestmentsacrossenergysectorsareprojectedtogrowbymorethan4%perannumandareprojectedtobeincreasinglyskewedtowardsnon-fossilanddecarbonizationtechnologies,whilereturnsremainuncertainAnnualinvestmentsinenergysupplyandproductionareexpectedtodoubleby2035toreach$1.5trillionto$1.6trillion¹;almostallgrowthisexpectedtocomefromdecarbonizationtechnol-ogiesandpower,whichwillby2050exceedtoday’stotalenergyinvestmentsEBITindecarbonizationtechnologiesandpowerisexpectedtogrowby5%perannum,andcouldoutpacethegrowthinunderlyinginvestmentsBusinessmodelsinahighlydecarbon-izedsystemareexpectedtoremainuncertainacrosssectors,andwilllikelyrelyonadjustmentsinmarketdesign(forexample,capacitypaymentsforflexiblethermalpowergeneration),subsidies,orothersupportmechanisms(forexample,supportforCCUSontopofCO₂prices)2341.BetweenCurrentTrajectoryandAchievedCommitmentsscenariosSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022GlobalEnergyPerspective20226WhiledevelopmentsoftheconflictinUkrainearehighlyuncertain,today’sdecisionscouldimpactthelong-termenergytransitionandpathtowardsdecarbonizationTherearemanyquestionsrelatedtothedevelopmentoftheconflict,aswellastheimpactonGDPandenergymarketsSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022Therearemanyquestionsrelatedtothedevelopmentoftheconict,aswellastheimpactonGDPandenergymarketsWhiledevelopmentsoftheconictinUkrainearehighlyuncertain,today’sdecisionscouldimpactthelong-termenergytransitionandpathtowardsdecarbonizationPotentialuncertaintiesrelatedtodevelopmentoftheconictGDPEnergyEnergymarketsareaectedbyGDP,butarealsoadriverforGDPDemandSupplyInfra-structure•Whatwillbethedurationoftheconflict?•Doestheconflictexpand(withinandbeyondUkraine)?•Doesthenumberofrefugeesfurtherincrease?•Dosanctionsescalate?•Towhatextentandforhowlongareenergyandcommoditymarkets(severely)disrupted?•TowhatextentisGDPdisrupted?•Howdoesinflationdevelop?•Whatwilltheincreasedshareofwalletonenergymeanforgrowthinothersectors?•Howwillhighpricesaffectenergydemand?•Willpoliciesdrivefuelswitching?•Whatshareofnaturalgascanbesubstitutedbyalternatives?•HowcanEuropesubstituteitsRussiangassupplywithLNGfromelsewhere?•CanEuropescalethegridfastenoughtoallowforfasterrenewablesbuild-out?•Whatinfrastructureandconnectionbottlenecksexistthatneedtobeaddressedforachangedenergymix(LNG,gas,renewablesetc.)?•Willgovernmentsacceleratemonetarymeasurestolimitinflation?•Willgovernmentsinvestinimprovinglong-termgrowthprospects?•Willtherebeastructuralshiftinconsumerbehaviorinresponsetothecurrentcrisis?•Willconsumersseefiscalsupportforenergyandfoodcost?•Willgovernmentsseeinvestmentinenergyinfrastructure?GovernmentpolicyandconsumerresponseDurationandscaleofdisruptionMcKinsey’slatestperspectiveontheimpactoftheconflictinUkraineonenergymarketsisregularly.Pleasereferto:WarinUkraine:Livesandlivelihoods,lostanddisruptedMcKinsey’slatestperspectiveontheimpactoftheconflictinUkraineonenergymarketsisregularlyupdated.Pleasereferto:WarinUkraine:Livesandlivelihoods,lostanddisrupted7GlobalEnergyPerspective2022McKinsey’sGlobalEnergyPerspective2022offersadetaileddemandoutlookacrosskeydimensionsOurreportassessesenergysystemsacrosscountries,sectors,andenergyproductsSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022Ourreportassessesenergysystemsacrosscountries,sectors,andenergyproductsMcKinsey’sGlobalEnergyPerspectiveoersadetaileddemandoutlookacrosskeydimensionsBuildson20+state-of-the-artMcKinseyassets,including:McKinseyHydrogenModelMcKinseySustainableFuelsModelMcKinseyPowerModelMcKinseye-TrucksTCOModelNon-exhaustive55segmentsTransport•Roadtransport(includingbuses,trucks,andcars)•Rail•Aviation•Marine•OthertransportSustainableFuelsBuildings•Residentialbuildings•CommercialbuildingsHeatIndustry•Ironandsteel•Chemicals•Manufacturing•Mining••OtherindustryCCUSPower•Electricitygeneration•HydrogenproductionHydrogenSupply70+energyproducts•Naturalgas•Coal•Oilproducts(eg,gasoline,diesel,andHFO)•Renewableresources(eg,solar,wind,andhydro)•Sustainablefuels(eg,HVO,SAF)•Electricity•Hydrogen146countries•45inAsia•43inEurope•31inAfrica•27intheAmericasEnergyproductsGeographiesSectorsCombinesenergyandhydrogendemandprojectionswithcountry-specicsupply-costdynamics.Modelsdetailedcostoutlooksforunderlyingtechnologiessuchaselectrolyzers,SMR,REScostdecline,andCCUSProvidesglobalregulatorytrackingandcountry-leveldemandoutlooksformorethantenbio/synfueltypes(eg,advancedHVO,PtLSAF,drop-inbio/synfuelgasoline),alongwithadvancedfuelsprojectdatabase,feedstockavailability,andproductioncostmodelsProjectscapacityadditionsinthepowersectorandsimulatesdispatchingdecisionsbasedonsystem-costoptimization.Capturesmorethan80%ofglobalpowerdemandatthecountryandsubcountrylevelandmodelsatanhourlygranularityAssessesfutureevolutionofcommercialvehicleparcbycountryandvehicleclassandprojectspowertrainmixdevelopmentbasedontotalcostofownership.Incorpo-ratesviewsonthecostdeclineofofbattery-andhydrogen-fueledenginesine-trucksandeciencyimprovementsofICEtrucksGlobalEnergyPerspective20228InourGlobalEnergyPerspective2022,weexplorefivescenariosAsthestateofenergytransitionisevolving(eg,nationalandindustryclimatecommitments,financialsectorchanges)thisreportintroducesarevisedsetofscenariostoassessthepotentialimpactonfuelsandsectorsThethreemainscenariosusedinthisreportare:•AchievedCommitments•FurtherAcceleration•CurrentTrajectoryOfthese,FurtherAccelerationwillbepresentedasthecentralscenariothroughoutthisreportThesescenariosarecenteredaroundthepaceoftechnologicalprogressandvariouslevelsofpolicyenforcementThisreportthereforeusesthesescenariostoevaluatelong-termtrendsandfundamentalsandtheirimpactontheenergytransition.TheuncertaintiessurroundingtheconflictinUkrainearenotaddressedbythesescenariosScenarioscenteraroundpaceoftechnologicalprogressandlevelofpolicyenforcement1.GlobalaverageCO₂pricesrequiredin2030and2050totriggerdecarbonizationinvestmentssucienttofullthescenario.Pricesareweightedbycountryandsectoremissionsandareholisticinthattheyincludebothexplicitcosts(eg,carbontax,emissiontradingsystem)andimplicitcosts(eg,subsidies,feed-in-taris)toincentivizeabatement2.Warmingestimateisanindicationofglobalriseintemperatureby2100versuspre-industriallevels(median-17th/83rdpercentile),basedonIPCCassessmentsgiventherespectiveemissionlevelsandassumingcontinuationoftrendsafter2050butnonet-negativeemissions3.ExcludinginternationalbunkersInour2022GlobalEnergyPerspectivereportweuse5scenariosFasterSlowerModelledbottom-upaspartofGEP2022SpeedofenergytransitionScenariodescription>2.4ºC<€502.4ºC(1.9-2.9)(1.6-2.4)(1.4-2.1)€55-130€75-140€100-180<1.5ºC€200+1.9ºC1.7ºCRequiredCO₂price¹€/tCO₂,203050Globaltemp.increaselinkedtoexpectedemissionlevelsFadingMomentumFadingmomentumincostreductions,climatepolicies,andpublicsentimentwillleadtoprolongeddominanceoffossilfuelsCurrentTrajectoryCurrenttrajectoryofrenewablescostdeclinecontinues,howeveractivepoliciescurrentlyremaininsucienttoclosegaptoambitionFurtherAccelerationFurtheraccelerationoftransitiondrivenbycountry-speciccommitments,thoughnancialandtechnologicalrestraintsremainAchievedCommitmentsNet-zerocommitmentsachievedbyleadingcountriesthroughpurposefulpolicies;followerstransitionatslowerpace1.5°PathwayA1.5ºpathwayisadoptedglobally,drivingrapiddecarbonizationinvestmentandbehavioralshiftsScenarioscenteraroundpaceoftechnologicalprogressandlevelofpolicyenforcement1.GlobalaverageCO₂pricesrequiredin2030and2050totriggerdecarbonizationinvestmentssucienttofullthescenario.Pricesareweightedbycountryandsectoremissionsandareholisticinthattheyincludebothexplicitcosts(eg,carbontax,emissiontradingsystem)andimplicitcosts(eg,subsidies,feed-in-taris)toincentivizeabatement2.Warmingestimateisanindicationofglobalriseintemperatureby2100versuspre-industriallevels(median-17th/83rdpercentile),basedonIPCCassessmentsgiventherespectiveemissionlevelsandassumingcontinuationoftrendsafter2050butnonet-negativeemissions3.ExcludinginternationalbunkersInour2022GlobalEnergyPerspectivereportweuse5scenariosFasterSlowerModelledbottom-upaspartofGEP2022SpeedofenergytransitionScenariodescription>2.4ºC<€502.4ºC(1.9-2.9)(1.6-2.4)(1.4-2.1)€55-130€75-140€100-180<1.5ºC€200+1.9ºC1.7ºCRequiredCO₂price¹€/tCO₂,203050Globaltemp.increaselinkedtoexpectedemissionlevelsFadingMomentumFadingmomentumincostreductions,climatepolicies,andpublicsentimentwillleadtoprolongeddominanceoffossilfuelsCurrentTrajectoryCurrenttrajectoryofrenewablescostdeclinecontinues,howeveractivepoliciescurrentlyremaininsucienttoclosegaptoambitionFurtherAccelerationFurtheraccelerationoftransitiondrivenbycountry-speciccommitments,thoughnancialandtechnologicalrestraintsremainAchievedCommitmentsNet-zerocommitmentsachievedbyleadingcountriesthroughpurposefulpolicies;followerstransitionatslowerpace1.5°PathwayA1.5ºpathwayisadoptedglobally,drivingrapiddecarbonizationinvestmentandbehavioralshiftsScenarioscenteraroundpaceoftechnologicalprogressandlevelofpolicyenforcementSource:McKinseyEnergyInsightsGlobalEnergyPerspective20229GlobalEnergyPerspective2022Globalenergyconsumptionisprojectedtoflatteninthecomingdecades.Despiterapidgrowthoftheglobaleconomyandpopulationgrowthoftwobillionpeople,energyconsumptionisprojectedtogrowbyonly14%ContinuedreductionsintheenergyintensityofGDPareakeydriver,triggeredbygreaterend-useefficiencyinbuildings,transport,andindustry.Electrificationplaysanimportantroleinthis,asashifttoelectricalsolutionstendstocomewithastep-changeinefficiencyinmanysegments,suchasspaceheatingandpassengercarsTheroleofelectricityinthefinalconsumptionmixisprojectedtogrowfrom~20%todayto40%by2050.Thecorrespondingdoublingofelectricityconsumptioncombinedwithuptakeofhydrogenisprojectedtooffsetfossil-fuelconsumption(whichexcludesprimarydemandofcoalandgasforpowergeneration),whichcouldbe~40%lowerin2050comparedto2020TheglobalenergymixisprojectedtoshiftrapidlytowardspowerandhydrogenShareofelectricityandhydrogeninfinalconsumptionmaygrowto32%by2035,and50%by2050ScenarioscenteraroundpaceoftechnologicalprogressandlevelofpolicyenforcementInour2022GlobalEnergyPerspectivereportweuse5scenariosFinalenergyconsumptionbyfuel,millionTJ30020001004005002000199020502010202020302040Other¹ElectricityHydrogenBioenergyNaturalgasOilCoal+14%2.8%-1.6%6.5%-1.5%-1.9%FurtherAcceleration1.Includesheatandsyntheticfuels0.7%2.3%CAGR2019-5050%7655434850535553502040-20502020-20302000-20102010-20201990-20002030-2040EnergyintensityofGDP,MJ/$Energyconsumptionpercapita,GJ/cap32%ScenarioscenteraroundpaceoftechnologicalprogressandlevelofpolicyenforcementInour2022GlobalEnergyPerspectivereportweuse5scenariosFinalenergyconsumptionbyfuel,millionTJ30020001004005002000199020502010202020302040Other¹ElectricityHydrogenBioenergyNaturalgasOilCoal+14%2.8%-1.6%6.5%-1.5%-1.9%FurtherAcceleration1.Includesheatandsyntheticfuels0.7%2.3%CAGR2019-5050%7655434850535553502040-20502020-20302000-20102010-20201990-20002030-2040EnergyintensityofGDP,MJ/$Energyconsumptionpercapita,GJ/cap32%AnalysisconductedbeforetheinvasionofUkraineinFebruary2022Source:McKinseyEnergyInsightsGlobalEnergyPerspective2022GlobalEnergyPerspective202210PowersupplyanddemandChaptersummaryPowerconsumptionisexpectedtotripleby2050aselectrificationandlivingstandardsgrowElectrificationisoftenthefirstleverprojectedtoachievetheemission-reductiongoals,beingthecheapestandeasiesttoimplementinmostsectorsTransportationisprojectedtoseethefastesttransitiontoelectricityduetoEVsreachingcostparitywithICEcarsalreadyinthemid-2020sInbuildings,increasinglivingstandardsareprojectedtodrivetheincreasingdemandforappliancesandspacecooling,bringingthesectorto~60%electrificationin2050from~30%todayParticularlyforthelongterm,greenhydrogenproductionisprojectedtobethebiggestdriverofadditionalpowerdemand(42%ofthegrowthbetween2035–2050),withhydrogenplayingakeyroleforhard-to-abatesectorssuchasironandsteelRenewablesareexpectedtobecomethenewbaseload,accountingfor50%ofthepowermixby2030and85%by2050SolarandwindbuildsalreadycomeatalowercostthanthanexistingfossilfuelsinmostcountriesandareprojectedtobecomeincreasinglycostcompetitivegloballyThermalgenerationisprojectedtoshifttoaroleofback-upflexibilityprovidertosupportgridstability,withloadfactorsdeclining~30%globallyfrom2019to2050(from40%to28%)Thereareexpectedregionaldifferencesinthedecarbonizationpathsforthepowermix,drivenbyactivepolicies,politicalpreferences,economicfactors,andtheavailabilityoflandandresourcesFlexibleassetslikegasplants,batteries,andhydrogenelectrolyzersarekeyforgridstabilityanddecarbonizationBothtraditionalandnewflexiblecapacityareneededtoensuresystemsecurity(globally,24TWcapacityadditionsby2050).Flexiblecapacityadditionsareestimatedtoaccountfor~25%oftotaladditionsbetween2030and2035,withhydrogen,EVs,andbatteriesmakingupalargeshareofthiscapacityGreenhydrogenisprojectedtoaccountfor28%ofpowerdemandby2050.Despitecreatingadditionaldemand,dispatchableelectrolyzersallowfortheintegrationofmoreintermittentrenewableenergysourcesinthesystem,reducingspecificemissionsby~15%Greenhydrogenisprojectedtocontributeasastoragemechanismforpowerproduction.Gasturbinesconvertedtohydrogencanprovideadditionalflexibility.Newtechnologies,suchasvehicle-to-gridandlong-durationenergystorage,couldplayakeyroleiftheyreachtechnologicalmaturityandprovetobecost-effectiveTechnologieslikeCCUS¹andnuclearwilllikelyseeadditionalgrowthifrenewablesbuild-outremainsconstrainedThelargeprojectedbuild-outofintermittentrenewablescanposechallengesaroundlanduse,transmissioncapacity,andoverallacceptanceShouldroadblocksarisethatlimitthedeploymentofrenewables,low-carbontechnologiessuchasCCUS,nuclear,andlong-durationenergystorage(LDES)couldhelpmeetemissiongoalsNuclearuptakecouldbesignificantinland-constrainedregions,whileCCUScouldcover8—17%oftheremainingfossilgenerationby2050,ifgrowingCO₂pricesmakeitattractiveinregionswithlow-costfuelsSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022AnalysisconductedbeforetheinvasionofUkraineinFebruary20221.Carboncapture,utilization,andstorage11GlobalEnergyPerspective2022Inallscenarios,renewablesareprojectedtoleadthepowergenerationmix,reaching80—90%in2050.IntheFurtherAccelerationscenario,RESshareisexpectedtodoubleinthenext15years,from29%to60%MostofthegrowthinRESisexpectedtocomefromsolarandonshorewind,duetodecliningcosts,andtheyareprojectedtomakeup43%and26%ofgenerationrespectivelyin2050undertheFurtherAccelerationscenario.Off-shorewindisprojectedtoremainlimitedtolessthan7%ofglobalgenerationduetopermittingconstraintsandpolicyhurdles,withpotentialtogrowfurtherifconstraintsononshorewindsuchaslandusepersistThermalgenerationisstillexpectedtoplayanimportantroleasaflexibilityprovider,withgasprovidingsubstantialsharesofbase-loadgenerationupto2040inregionswithfavorablefuelcostsNucleargenerationisstillexpectedtorequireeconomicsupportfrompolicies,whichisnotyetpresentinmanyregionsaspublicacceptancecontinuestoprovechallengingRenewablesareprojectedtoaccountfor80—90%ofpowergenerationgloballyby2050Shareofrenewablesinthepowermixisprojectedtodoubleinthenext15yearsRespondentswhoagreetheactivityisdonefrequentlyintheirorganisation,%responses1.Includessolar,wind,hydro,biomass,BECCS,geothermal,andmarineandhydrogen-redgasturbines2.Otherincludesbioenergy(withandwithoutCCUS),geothermal,marine,andoil3.IncludesgasandcoalplantswithCCUS4.CTreferstotheCurrentTrajectoryscenario;ACreferstotheAchievedCommitmentsscenarioTalentgrowthpracticesdroposharplyandreturninlatetenureShareofrenewables200520152000199520102020241820252030832035205020402045131522273239485870SolarOtherWindonshoreWindoshoreHydrogenHydroGasFossilwithCCUSNuclearCoalGlobalpowergenerationThousandTWhOtherscenarios87CTAC7029%60%86%79%205089%20%FurtherAccelerationRespondentswhoagreetheactivityisdonefrequentlyintheirorganisation,%responses1.Includessolar,wind,hydro,biomass,BECCS,geothermal,andmarineandhydrogen-redgasturbines2.Otherincludesbioenergy(withandwithoutCCUS),geothermal,marine,andoil3.IncludesgasandcoalplantswithCCUS4.CTreferstotheCurrentTrajectoryscenario;ACreferstotheAchievedCommitmentsscenarioTalentgrowthpracticesdroposharplyandreturninlatetenureShareofrenewables200520152000199520102020241820252030832035205020402045131522273239485870SolarOtherWindonshoreWindoshoreHydrogenHydroGasFossilwithCCUSNuclearCoalGlobalpowergenerationThousandTWhOtherscenarios87CTAC7029%60%86%79%205089%20%FurtherAccelerationSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022;McKinseyPowerModelAnalysisconductedbeforetheinvasionofUkraineinFebruary2022GlobalEnergyPerspective202212OildemandChaptersummaryGloballiquidsdemandisexpectedtopeakaround102MMb/dinthenexttwotofiveyears,despiteanear-termrecoveryofliquidsdemandfromtheimpactsoftheCOVID-19pandemicCOVID-19resultedinasignificantdropinliquidsdemand;whileregionaldemandhaslargelybouncedback,pre-pandemiclevelsareprojectedtobereachedonlyby2023,mainlyduetolowinternationalaviationtrafficGloballiquidsdemandisprojectedtopeakinthenexttwotofiveyears,drivenprimarilybyelectrificationandefficienciesacrosssectorsLiquidsdemandin2050couldbe35—50%lowerthantoday’slevels;however,reachingthetargetsetbythe1.5°PathwaywouldrequireanevensteeperdeclineinliquidsdemandOnaregionallevel,liquidsdemandinmajoroilmarkets,suchastheUSandEU,hasalreadypeaked,andallmarkets,includingdevelopingregionssuchasIndiaandSoutheastAsia,arelikelytopeakbefore2040Adeclineinliquidsdemandinroadtransportwilllikelydriveapeakacrossmarkets,whilegrowthinchemicalsandaviationmayslowdownLiquidsdemandinroadtransportisprojectedtodecline75%by2050afterpeakingintheearly2020s,drivenbyslowinggrowthinthenumberofcarsontheroad,increasedefficiency,andacceleratinguptakeofelectricvehicles(EVs),withbio-andsynfuelsdecreasingdemandforcrudeoilfurtherAviationliquidsdemandisprojectedtocontinuegrowing,butuptakeofbio-andsynfuelsmayresultinadecreaseinthedemandforfossilkerosene.Indeed,thedemandforfossilkeroseneisprojectedtopeakbythemid-2030s,whilesustainableaviationfuelsmaygrowto40%ofaviationliquidsdemandby2050Chemicalsremainoneofthefewgrowthavenuesforliquidsdemand;demandisprojectedtogrow50%by2050,despiteincreasingdownwardpressurefromdemandreduction,recycling,andpyrolysisCrudeoildemandisexpectedtodeclinerapidlyafter2030,whileremainingliquidsdemandgrowthmaymostlybeseeninnon-energyuseofoilandbio-andsynfuelsCrudeoilusedforcombustionisexpectedtodeclinefrom80%-45%oftotalliquidsby2050,asgrowthinnon-energyuseofoilcontinuesandbio-andsynfuelsincreasetheirshare,especiallyintransportapplicationsShiftsacrosssectors—suchasfasterEVuptake,increasedusageofalternativefuelsinaviationandmaritime,andincreasedplasticrecycling—couldacceleratetheenergytransitionfurther.Asaresult,crudeoildemandcouldfallto40MMb/dby2050intheAchievedCommitmentsscenario,a25%decreasefromtheFurtherAccelerationscenarioSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022AnalysisconductedbeforetheinvasionofUkraineinFebruary202213GlobalEnergyPerspective2022Liquidsdemandisprojectedtopeakwithinthisdecade.Theprimarydriverforthereductioningrowthisaslow-downindemandgrowthforroadtransportHistorically,oildemandwasgrowingby1—2MMb/d,halfofwhichwasthroughgrowthinroadtransport.Whileoildemandcontinuestorecoverpost-COVID-19in2022and2023,thetrendsareprojectedtochangefrom2024onwardsTheprimarydriverforreducedoildemandforroadtransportisthecontinueduptakeofEVs:•GlobalEVsalesgrew62%perannumonaverageinthelastfouryearsandby96%in2021alone.EVsalesinabsolutetermsincreasedfrom2.3millionin2019to6.6millionin2021•EVsalesinEuropeaccountedformorethan20%oftotalcarsalesin2021;USEVsalesonlyaccountedfor5%,butdoubledyearonyearAlongsidethis,theuseofoilinpowerandheatisdecreasing.Inthebuildingssector,abanonnewdomesticoilheaterscontinuesthedeclineinlinewithhistoricaltrendsOildemandcouldpeakinthenexttwotofiveyearsTheuptakeofelectricvehiclesisthemaindriverforstagnatinggrowthinoildemandTheuptakeofelectricvehiclesisthemaindriverforstagnatinggrowthinoildemand1.Crudeoilproducts,liquidbiofuels,andsyntheticfuelsOildemandcouldpeakinthenexttwotoveyears261022224942018202820300929698100108104106Liquidsdemand,MMb/dFadingMomentumCurrentTrajectoryAchievedCommitmentsFurtherAcceleration242527Post30Keydriversforpeakin2025,FurtherAccelerationOilaverageyearlygrowthMMb/dOildemandchangeforroadMMb/dGlobalEVsaleshare%,passcarHistoricalProjection1,10,60,70,40,4-3,73,11,01,00,60,1-0,221161917232015182022242526202701112359121621253137162520151722181920212324262027+57%+27%2,30,72,00,90,9-8,54,83,61,80,90,2-0,2-0,4202015162217181920272123242526PeakliquidsdemandTheuptakeofelectricvehiclesisthemaindriverforstagnatinggrowthinoildemand1.Crudeoilproducts,liquidbiofuels,andsyntheticfuelsOildemandcouldpeakinthenexttwotoveyears261022224942018202820300929698100108104106Liquidsdemand,MMb/dFadingMomentumCurrentTrajectoryAchievedCommitmentsFurtherAcceleration242527Post30Keydriversforpeakin2025,FurtherAccelerationOilaverageyearlygrowthMMb/dOildemandchangeforroadMMb/dGlobalEVsaleshare%,passcarHistoricalProjection1,10,60,70,40,4-3,73,11,01,00,60,1-0,221161917232015182022242526202701112359121621253137162520151722181920212324262027+57%+27%2,30,72,00,90,9-8,54,83,61,80,90,2-0,2-0,4202015162217181920272123242526PeakliquidsdemandSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022;USEnergyInformationAdministration,Short-termEnergyOutlookAnalysisconductedbeforetheinvasionofUkraineinFebruary2022GlobalEnergyPerspective202214NaturalgasdemandChaptersummaryGashasgraduallyincreaseditsshareintheenergymixandisexpectedtoplayakeyrolethroughoutthetransitionwithitswiderangeofapplicationsTheglobalgaspricerallyin2021wassupportedbyhighgasdemandduetorapideconomicrecoveryandunexpectedweatherconditions,andalowersupplyduetounexpectedoutagesandunderinvestmentUncertaintyaroundthepaceandshapeoftheenergytransitionmayimpactthevolatilityingaspricesandleadtoevenmorepronouncedinvestmentcyclesGoingforward,gascouldplayanewroleinbluehydrogenandammoniaproduction,andgasinfrastructurecouldberepurposedforlow-carbonfuelssuchashydrogenandbiogas,orCO₂transportationforCCUSGasdemandisprojectedtogrowby10%inthenextdecadeinallscenarios.After2030,gasprojectionsdivergeacrossscenariosdrivenbyincreasingdecarbonizationpressureinbuildingsandindustryThedemandforgasisprojectedtobemoreresilientthanforotherfossilfuels.Itsshareinprimaryenergydemandisexpectedtodeclinefrom23%todayto23—15%by2050IntheAchievedCommitmentsscenario,theremaininggasdemandin2050isduetocountrieswithoutnet-zerocommitments,carbonoffsets,orthedeploymentofCCUS,whichexplains54%,15%,and31%ofgasdemandrespectivelyRelativelyrobustabsolutegasdemandtranslatesintoareducingroleofgasinprovidingheatandpowerduetohighgrowthoflow-carbonalternativesinthesesectorsGasdemandisprojectedtopeakby2035.Demandgrowthinpowerandindustry,particularlyinAsia,mayeventuallybeoffsetbydecline,especiallyinbuildingsGasdemandinpowerissettogrowstronglyuntilbetween2035and2040,afterwhichitisprojectedincreasinglytoplaytheroleofback-uptorenewablesLong-termgasdemandislikelytobesupportedbyindustry(forhigh-temperatureheatandchemicals),particularlyinAsiaGasdemandinbuildingsisexpectedtodeclineafter2025.Thedeclinewilllikelybedrivenbyincreasedinsulation,electrification,andusageofgreengasessuchashydrogenorbiomethaneTheregionalshiftofgasdemandtoAsiaisexpectedtocontinue,asChina’sroleofdemand-growthengineistakenoverbySoutheastAsiaafter2030China’sgasconsumptionislikelytobesupportedbycoal-to-gasswitchingandtheroleofCCUSinpowerandindustryAlmostalladditionaldemandforimportedgasissuppliedbyLNG,whichisprojectedtoleadtoagrowthof20–70%in2050comparedto2019,dependingonthescenarioSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022AnalysisconductedbeforetheinvasionofUkraineinFebruary202215GlobalEnergyPerspective2022IntheFurtherAccelerationscenario,gasdemandisprojectedtogrowuntil2035.Thedeclinethereafterisdrivenprimarilybygovernmentpoliciestodecarbonizetheindustrialandbuildingssectors.AlternativefuelsinbuildingsandindustrymayneedstrongpolicysupporttobecomeviableIntheCurrentTrajectoryscenario,gasdemandisprojectedtoincreaseby16%fromtodaybeforeitreachesapeakin2040IntheAchievedCommitmentsscenario,thedeclineisexpectedtostartin2030,drivenbydecarbonizationtargetsinbuildingsandindustryHowever,evenprogressivescenariosarefarfromachievingthe1.5ºPathway,inwhichgasconsumptionmustdeclinesubstantiallybefore2030Overall,thedeclineingasdemandpost2030isdrivenbyelectrification,strongrenewablesuptake,andgreenhydrogenadoptioninthepower,buildings,andindustrialsectorsGasdemandisprojectedtogrowby10%inthenextdecadeinallscenariosScenariosdivergeafter2030,drivenbyincreasingdecarbonizationpressureinbuildingsandindustryRespondentswhoagreetheactivityisdonefrequentlyintheirorganisation,%responsesTalentgrowthpracticesdroposharplyandreturninlatetenureNaturalgasdemandbcmPeaknaturalgasdemand2030203520402019+10%3,5004,0003,0001,5005001,00002,0002,5004,5005,0002040202019902000201020302050CurrentTrajectoryFurtherAccelerationAchievedCommitments1.5ºPathwayHistoricalSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022AnalysisconductedbeforetheinvasionofUkraineinFebruary2022GlobalEnergyPerspective202216.HydrogendemandChaptersummaryHydrogendemandisprojectedtogrowfivefoldby2050,drivenprimarilybyroadtransport,maritime,andaviationGrowthto2035isdrivenbysectorswithfavorableeconomicsversusalternatives,suchasroadtransportwherefuelcellelectricvehicles(FCEVs)willlikelydisplaceconventionaldieseltrucksBeyond2035,privateandpublicsectorcommitmentscoulddrivetheadoptionofhydrogeninsectorswithunfavorableeconomics,suchastheaviationandmaritimesectors,whicharelikelytoadopthydrogen-derivativefuelslikesynthetickeroseneandammoniaThisgrowthisnotwithoutprecedent;historicalnaturalgasadoptionintheEuropeanUnion(EU)indicatesitispossibletorapidlychangetheenergysystemHydrogensupplyisprojectedtoshiftfromnearly100%greyhydrogento60%cleanproductionby2035,ascostsdeclineandpolicymakerssupporthydrogentechnologyadoptionIntheFurtherAccelerationscenario,cleanhydrogensupplytotalsaround~110Mt(~60%oftotalsupply)by2035and~510Mt(~95%)by2050.Someregionsareprojectedtofullyphaseoutgreyhydrogen(fromfossilfuels)by2050,suchastheEUandtheUKAnnouncementsofnewcleanhydrogenproductionprojectstripledyearonyearin2021.Around22Mtofcleanhydrogencapacityhasbeenannouncedtodate,approximately15–20%ofwhatisneededby2035Hydrogenproductionwilllikelybeamajordriverofenergydemandgrowth.By2050,hydrogenisprojectedtoaddapproximately18,000TWhofelectricityconsumption(~36%ofelectricdemandgrowth)andaround300bcmtonaturalgasdemandThreefundamentalenablersmaybeneededtosupportthedevelopmentofthehydrogeneconomyInfrastructureandsupplychain:Timelydeploymentofinfrastructureacrossthewholesupplychainislikelyrequiredtomeethydrogendemand.TransportandstorageinfrastructuremaybekeytoenablingaglobalhydrogenvaluechainTechnologyadvancementandmanufacturingscale-up:Costreductionandincreasedscale-upinrenewableenergyproduction,electrolyzers,andcarboncapture,utilization,andstoragewilllikelybeneededtomakecleantechnologiescostcompetitiveagainstconventionalhigh-carbonproductionroutesGovernmentsupport:Governmentsupportandtargetedactions,suchasanincreaseinCO₂prices,couldbekey.Suchmovesareparticularlyneededinsegmentswherehydrogenwillnotbecostcompetitivecomparedtothehigh-carbonalternative,suchastheaviationsector.Around40countriesalreadyhavededicatedhydrogenstrategiesinplaceNewtradeflowscouldemergetoconnectdemandcenterswithresource-richregionsRegionswithcost-optimalproductionresources,suchasnaturalgasorrenewableenergy,couldbecomemajorhydrogenexporthubsandbeattheforefrontofanewglobalhydrogentradeHydrogenimportswouldenabletheuptakeofhydrogenincountriesthathavedecarbonizationambitions,butlackresourcessuchasrenewableenergy,naturalgas,andcarbondioxidestorage(suchasJapan,SouthKorea,andpartsofEurope)Convertinghydrogentosynfuels(aliquidfuelmixturecontaininghydrogen,suchasammoniaormethanol)attheexporthubcouldexpediteinternationalhydrogenshippingSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022AnalysisconductedbeforetheinvasionofUkraineinFebruary202217GlobalEnergyPerspective2022IntheFurtherAccelerationscenario,before2035,29Mt(30%)ofhydrogendemandgrowthisprojectedtocomefromnewindustrialusessuchasironandsteel,drivenbyearlydecarbonizationtargetsandbynew-builtplants.Another26Mt(30%)comesfromroadtransport,drivenbytheincreasingcostcompetitivenessofhydrogenvehiclesHydrogendemandisprojectedtoaccelerateafter2035acrossallsectors,withroadtransportandnewindustrialusesstillaccountingformorethan50%ofdemandgrowthDemandforsynfuelsproduction,mainlykerosene,diesel,andammoniaforaviationandmaritimesectors,isalsoprojectedtoaccelerateafter2035,resultinginatotalof93Mtin2050,equivalentto~17%oftotalH2demandRefiningistheonlysectorwheredemandisprojectedtodeclinepost2030.Ashydrogenisinvolvedinthehydrotreatingprocessesofoilsinrefineries,theshiftfromoiltocleanerfuelsfortransport(includingdirecthydrogenuseinaviationandmaritime,synfuels,BEV,andFCEV)consequentlydecreasesdemandforhydrogenTransportandnewindustrialusescoulddrivetwo-thirdsofhydrogendemandgrowthto2035Beyond2035,hydrogenisprojectedtoscaleacrossallsectorsoftheenergyeconomyRespondentswhoagreetheactivityisdonefrequentlyintheirorganisation,%responses1.Aviationandmaritimeincludedirectuseofhydrogenandhydrogen-derivedsynfuelsincludingkerosene,diesel,methanol,gasoline,andammonia.Thecategoryalsoincludessomehydrogen-derivedsynfuelsinroadtransport2.NewindustryincludesallnewusesofhydrogeninIndustrialprocesses,eg,ironandsteelproduction,whereaschemicalsandreningaretraditionalhydrogenuses3.OtherincludesbuildingsandelectricitygenerationTalentgrowthpracticesdroposharplyandreturninlatetenure741002626112932912592Aviation&MaritimeNewIndustryNewIndustry1317720502019Chemi-calsRening2035RoadTransportOtherAviation&MaritimeChemi-calsReningRoadTransport84536OtherGlobalhydrogendemandchange2019–50bysectorMtFurtherAccelerationChemicalsReningRoadTransportAviationandMaritimeNewIndustryOtherSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022AnalysisconductedbeforetheinvasionofUkraineinFebruary2022GlobalEnergyPerspective202218SustainableFuelsChaptersummarySustainablefuelscanprovideGHGreductionscomparabletoBEVsandareapplicableinmultiplesectorsSustainablefuelsincludebiofuelssuchashydrotreatedvegetableoil(HVO)orbioethanol,andsyntheticfuels(synfuels)suchasammoniaormethanol.Theycanbeusedasdrop-infuelsinconventionalinternalcombustionengines(ICE)Eventhoughthecostsofusingsustainablefuelsareprojectedtobehigherthanalternativesinthelongterm,theuseof100%renewablediesel,suchasHVO,canachievecomparablelifecyclegreenhouse-gas(GHG)reductiontotheuseofelectricvehicles(EVs),allowingforfasterdecarbonizationofexistingfleetsintheshorttermSustainablefuelsareneededtomeet2030decarbonizationtargetsNewregulations,suchasFitfor55intheEU,willlikelydrivethedemandforsustainablefuelsEveninaworldwithfastEVuptake—whereEVsaccountfor~75%oftotalvehiclesalesby2030—reachingregulatoryGHGreductiontargetsfortransportationcouldrequireasignificantcontributionfromsustainablefuelsThedemandforsustainablefuelsisprojectedtotripleoverthenext20yearsGrowthinsustainablefuelsuntil2035isdrivenprimarilybyroadtransport,reaching290MtintheFurtherAccelerationscenario,whileaviationplaysanincreasinglyimportantrolethereafterPost2035,increasingBEVpenetrationisexpectedtocauseadeclineinICEvehiclesandacorrespondingdeclineofsustainablefuelsusedinroadtransport.However,increasingsustainableaviation-fuelsdemanddrivenbymandatesisprojectedtomorethanoffsetthedecline,resultinginanettotaldemandofalmost400Mtby2050Limitedavailabilityofcertainbio-feedstockscallsfortheuptakeofotheradvancedoptionsInthelate2020s,wasteoilfeedstock(EUREDIIAnnexIXPartAandB)isprojectedtoreachglobalsupplycapsat~30MtintheFurtherAccelerationscenarioMeetingthegrowingdemandforsustainablefuelsbeyond2030isexpectedtorequiregreateruseofothertypesoffeedstocks,includingRFNBO(CO₂andH2)¹andlignocellulosicmaterialsthatrequirenovelproductionpathwaysInvestmentsinsustainablefuelsaregainingmomentum—$40billionto$50billionofinvestmentexpectedby2025With~70%ofinvestmentsalreadyafteraFinancialInvestmentDecision(FID),49Mtofsustainable-fuelscapacityisprojectedby2025However,furtherinvestmentsofbetween$1trillionand$1.4trillionareneededby2040tomeetdecarbonizationcommitmentsandregulateddemandInthecomingdecades,businesscasesmayneedtoconsiderintegratedproductionlogicwithvolumesshiftingfromroadtoaviation,whereprofitabilityofproductionisprojectedtodependonsupply-demandbalance,feedstockavailability,andconsumerattractivenessSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022AnalysisconductedbeforetheinvasionofUkraineinFebruary20221.Renewablefuelsofnon-biologicalorigin19GlobalEnergyPerspective2022Sustainablefueldemandisprojectedtoincreaserapidlyinthe2020–30s,drivenprimarilybydemandgrowthintheroadtransportmarketAfter2035,however,theprojectedincreaseinEVpenetrationofthetransportmarketmaycauseadeclineintheuseofICEvehiclesandacorrespondingdeclineofliquidfuels,andthussustainablefuels,inroadtransport.Ontheotherhand,increasingmandatesinaviationcouldoutweighthedecline,resultinginfurthergrowthofthetotaldemandforsustainablefuels,reachingalmost400Mtby2050intheFurtherAccelerationscenarioHowever,sincetheavailabilityofwasteoilfeedstocksishighlyconstrained,theglobalsupplycap(30Mt)isprojectedtobereachedinthelate2020s,unlesspurposely-grownvolumesoflowILUC⁶/covercropsarerapidlyscaled.Indeed,meetingthegrowingdemandforsustainablefuelswillrequiresignificantgrowthintheuseofotherfeedstocksbeyondoilsandsugars,includingRFNBO(CO₂andH₂forsyntheticfuels)andlignocellulosicNewadvancedfeedstockswilllikelybenecessarytomeetthegrowingdemandforsustainablefuelsLimitedavailabilityofcertainbio-feedstocksmightcallfortheuptakeofotheradvancedoptionsRespondentswhoagreetheactivityisdonefrequentlyintheirorganisation,%responses1.Maritime,rail,buildings,chemicals,industry,andother2.Oilsfromediblecrops3.FeedstockslistedinAnnexIXofREDIIdirective(2018/2001/EU),AnnexA(POME,talloil),andAnnexB(UCO,animalfats)4.Includesallfeedstocksforrelativelyunconstrainedtechnologies,i.e.,PtX,gasication,AtJ,bio/synmethane,greenH₂forreneryuse,ormoreHVOifmorefeedstockisunlocked5.Renewablefuelsfromnon-biologicalorigin6.IndirectlandusechangeTalentgrowthpracticesdroposharplyandreturninlatetenure205030352020254045Sustainablefueldemandbysector,Mt3000502501002001503504002596%402020302050354549%49%+7%p.a.+3%p.a.Sustainablefueldemandbyfeedstocktype,MtInlate2020swasteoilfeedstock(AnnexIXPartAandB)areexpectedtoreachglobalsupplycapataround30MtSynfuelsfromCO₂andH₂andadvancedbiofuelsfromlignocellulosicmaterialsmakeupmostdemandby2050FurtherAccelerationLimitedroleofliquidsustainablefuelsinmaritimewhereammoniaandH₂areexpectedAviationRoadTransportOthersectorsEdiblesugarsWasteoils(AnnexIXPartA)EdibleoilsLignocellulosicandotherWasteoils(AnnexIXPartB)RFNBO5(CO₂andH₂forsynthetic)Respondentswhoagreetheactivityisdonefrequentlyintheirorganisation,%responses1.Maritime,rail,buildings,chemicals,industry,andother2.Oilsfromediblecrops3.FeedstockslistedinAnnexIXofREDIIdirective(2018/2001/EU),AnnexA(POME,talloil),andAnnexB(UCO,animalfats)4.Includesallfeedstocksforrelativelyunconstrainedtechnologies,i.e.,PtX,gasication,AtJ,bio/synmethane,greenH₂forreneryuse,ormoreHVOifmorefeedstockisunlocked5.Renewablefuelsfromnon-biologicalorigin6.IndirectlandusechangeTalentgrowthpracticesdroposharplyandreturninlatetenure205030352020254045Sustainablefueldemandbysector,Mt3000502501002001503504002596%402020302050354549%49%+7%p.a.+3%p.a.Sustainablefueldemandbyfeedstocktype,MtInlate2020swasteoilfeedstock(AnnexIXPartAandB)areexpectedtoreachglobalsupplycapataround30MtSynfuelsfromCO₂andH₂andadvancedbiofuelsfromlignocellulosicmaterialsmakeupmostdemandby2050FurtherAccelerationLimitedroleofliquidsustainablefuelsinmaritimewhereammoniaandH₂areexpectedAviationRoadTransportOthersectorsEdiblesugarsWasteoils(AnnexIXPartA)EdibleoilsLignocellulosicandotherWasteoils(AnnexIXPartB)RFNBO5(CO₂andH₂forsynthetic)Source:McKinseyEnergyInsightsGlobalEnergyPerspective2022;RenewableEnergyDirectiveII(2018/2001/EU)AnalysisconductedbeforetheinvasionofUkraineinFebruary2022GlobalEnergyPerspective202220Carboncapture,utilization,andstorage(CCUS)ChaptersummaryCCUSisnichetodaybutisprojectedtoscalenotably,reaching~2—4Gtby2050.ThiswilllikelyrequireasignificantaccelerationcomparedtothecurrentpipelineTomeetannouncednet-zerocommitmentsintheAchievedCommitmentsscenario,CCUSuptakewillneedtogrow120timesby2050,reaching~4.2Gtanddecarbonizing45%ofremainingemissionsintheindustrysector.Itcouldactasanimportantdecarbonizationleverforhard-to-abatesectorsandasakick-starterforbluehydrogenIntheFurtherAccelerationscenario,hard-to-abatesectorsincountrieswithoutnet-zerocommitmentsareprojectedtodecarbonizetoalesserextent,onlyscalingupwheneconomicallyviableandreaching~3.6Gtby2050IntheCurrentTrajectoryscenario,CCUSdemandwouldreach~2.1Gtby2050,assumingthescaleupismainlyinlinewithtoday’spipelineHowever,CCUSuptakeissubjecttouncertainty,mostlydrivenbyalackofclarityoncommercially-viablebusinessmodelsofCCUSrelativetoalternativedecarbonizationlevers,aswellasontheregulatorydevelopmentBy2050,~80%ofCCUSuptakeisprojectedtobedeployedincement,ironandsteel,andH₂production,yetisexpectedtobesubjecttosector-specificuncertaintiesandtoshowregionaldifferentiationAmongtheindustrialsegments,thehighestCCUSuptakeisprojectedforthebluehydrogenproduction,ironandsteel,andcementsectors(togetheraccountingfor85%ofglobaltotalintheFurtherAccelerationscenario)CCUScouldplayalargerroleinthedecarbonizationofthepowersectorandmayreach1—2Gtby2050ifrenewableenergysources(RES)build-outislimitedbyincreasedlandcostsintheUS,andifIndiaandChinachoosetoavoidstrandingyoungcoalandgasplantsTheroleofCCUSinreducingemissionsvariesbyindustrysegment.Itistheonlyscalablesolutionforcementtoreduceprocessemissions,butisfacingstrongcompetitionfromalternativesinothersegmentsCCUSuptakediffersperregion,mainlydependingondecarbonizationambitions,theeconomicsofbluehydrogen,andtheavailabilityofalternativedecarbonizationleversforhard-to-abatesectorsCO₂revenueschemesareuncertain,asprojectedCO₂pricesofupto$150–$205/tonarelikelyinsufficienttoaccelerateCCUSuptaketowardsanet-zerotrajectoryThecostsandeconomicviabilityofCCUSapplicationsvarywidelydependingonsegmentandgeographyThereislargeuncertaintyontherevenuestreamsforCCUS,giventhattheprojectedcarbondioxidepricesareinsufficienttoscaleupCCUSontheirown,especiallyforlow-puritypointsourceswhereadditionalrevenuesmayberequiredAdditionalrevenuesareprojectedtoaccountfor~15%oftotalrevenuesrequiredtomakebusinesscasestoward2050.Thesecouldbefrommarketandregulatoryincentives(suchasvoluntarycarbonmarkets,governmentsubsidies),consumerwillingnesstopay,andCO₂enduse(suchasenhancedoilrecovery)Especiallyinearlyyears,largeadditionalrevenueisrequiredtokick-startCCUS,giventhatlessthanone-thirdofCCUSisexpectedtobeinthemoneywithoutadditionalrevenuestreamsCost-intensivesegments,suchascement,andironandsteel,areprojectedtotakethemajorityofadditionalrevenuesSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022AnalysisconductedbeforetheinvasionofUkraineinFebruary202221GlobalEnergyPerspective2022Thegrowthinsustainablefuelsisdrivenbythedecarbonizationambitioninmuchofthelatestregulation,recentinvestments,andtechnologicaladvancement.Thisisexpectedtoincludebothdifferenttypesofbiofuelsaswellaspower-to-gasfuels.By2050,theshareofsustainablefuelsintheenergydemandfortransportationcouldbebetween6%and37%,dependingonnet-zeroambitionlevelsacrosscountriesSimilarly,thismomentumishelpingtheuptakeofhydrogen.IntheFurtherAccelerationscenario,demandisprojectedtobemainlyintheironandsteel,roadtransport,andbuildingssectors.Inmaritimeandaviation,hydrogenisalsoprojectedtoberequiredasinputforsynfuelsIntheFurtherAccelerationscenario,CCUSuptakewillneedtoincrease100timesby2050,decarbonizing~40%ofremainingemissionsintheindustrysector.CCUSisanimportantdecarbonizationleverforhard-to-abatesectors,suchasironandsteelandcement,andmayalsobenecessaryasakick-starterforbluehydrogenNewenergytechnologiesaregrowingfromnichetosignificantpartsoftheenergysystemacrossscenariosEspeciallyafter2030,sustainablefuels,hydrogen,andCCUSareprojectedtogrowsignificantlyRespondentswhoagreetheactivityisdonefrequentlyintheirorganisation,%responsesTalentgrowthpracticesdroposharplyandreturninlatetenureAchievedCommitments+upsideCCUSinpowerLiquidsustainablefuels—globalshareintransportenergydemand%GlobalhydrogendemandoutlookMtH₂GlobalCCUSuptakebyscenarioGtCO1.Includesbioandsyntheticliquidsandgasesinroadtransport,rail,maritime,andaviation(notincludinghydrogen)50060001007003002004004020202530354520506x53001015203525404030205020202535455x22050202045254030350136457100x8.6millionbarrelsperdayintheFurtherAccelerationscenarioby2050HandH-derivedsynfuelsconsumptionwillbe10%ofglobalnalconsumptionin20502050demandisequalto10%of2020globalemissionsFadingMomentumCurrentTrajectoryFurtherAccelerationAchievedCommitments1.5°PathwayRespondentswhoagreetheactivityisdonefrequentlyintheirorganisation,%responsesTalentgrowthpracticesdroposharplyandreturninlatetenureAchievedCommitments+upsideCCUSinpowerLiquidsustainablefuels—globalshareintransportenergydemand%GlobalhydrogendemandoutlookMtH₂GlobalCCUSuptakebyscenarioGtCO1.Includesbioandsyntheticliquidsandgasesinroadtransport,rail,maritime,andaviation(notincludinghydrogen)50060001007003002004004020202530354520506x53001015203525404030205020202535455x22050202045254030350136457100x8.6millionbarrelsperdayintheFurtherAccelerationscenarioby2050HandH-derivedsynfuelsconsumptionwillbe10%ofglobalnalconsumptionin20502050demandisequalto10%of2020globalemissionsFadingMomentumCurrentTrajectoryFurtherAccelerationAchievedCommitments1.5°PathwaySource:McKinseyEnergyInsightsGlobalEnergyPerspective2022AnalysisconductedbeforetheinvasionofUkraineinFebruary2022GlobalEnergyPerspective202222InvestmentsandValuePoolsChaptersummaryEnergyinvestmentsmayneedtogrow4%perannumtosupporttheenergytransition,withnewtechnologiescapturing~65%oftheinvestmentsto2035Asubstantialgrowthofenergy-relatedinvestmentsistriggeredbyrapidincreasesinenergydemand,withdemandforpowerexpectedtotripleandhydrogenexpectedtogrowfivefoldby2050intheFurtherAccelerationscenario,combinedwithmorestringentemission-reductiongoalsRenewablesareprojectedtoaccountformorethan30%oftheglobalinvestmentsinthenext15years(excludingtransmissionanddistributionreinforcements).Thisistwiceashighasprojectedinvestmentsinconventionalpowergeneration,andalmostonparwithoilandgasinvestmentsRegionaldynamicsareprojectedtopersist,with70%oftheoilandgasinvestmentsconcentratedinNorthAmerica,MiddleEast,andAfricato2035.EuropeandGreaterChinaareexpectedtohavealargerspendondecarbonizationtechnologiessuchashydrogenelectrolyzersandCCUSNascenttechnologiesandrenewablesarelikelytoconsolidatetheirroleandexperienceaquadruplinginEBITgrowthby2050StartingfromarelativelylowEBITbaseof~$300billiontoday,poweranddecarbonizationtechnologiesareprojectedtogrowat5%perannumandreacharound$1trillionin2050Profitabilityisprojectedtobecomeachallengeforconventionalpower,asitsroleshiftsfrombaseloadtoback-upgeneration,withglobalEBITturningnegativeafter2040intheFurtherAccelerationscenarioTheexceptionallyhighreturnsthatcharacterizedoilandgasinvestmentsinpastdecadesareunlikelytoreoccur,asthedemandoutlookweakensandthecostofsupplyincreases.ProjectedEBITfornewtechnologies,suchascleanhydrogen,EVcharging,CCUS,andsustainablefuelsin2050isexpectedtosurpassthe2021totalenergysectorEBITBusinessmodelsinadecarbonizedsystemremainuncertain,andwilllikelybeaffectedbyregulations'adjustmentsWhereasastronguptakeisprojectedindecarbonizationenergytechnologies,triggeredbycostreductionsandrisingdecarbonizationambitions,revenuestreamsandsupportschemestoincentivizetheselow-carboninvestmentsremainuncertainToenableasuccessfultransition,regulationsmandatingahighershareofrenewables,CCUS,orsustainablefuelscouldaddressthecurrentuncertaintiesinthebusinesscasesofthesenewpropositions,andshouldstimulatearapidgrowthininvestmentsintheshorttermTechnologiessuchasfirmthermalpowergenerationarelikelytoremaininthemixtoprovidesystemstabilitybutcouldseeincreasingsharesofuncertainrevenuesforwhichnewcompensationmechanismsmayneedtobespecifiedSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022AnalysisconductedbeforetheinvasionofUkraineinFebruary202223GlobalEnergyPerspective2022Totalannualinvestmentsintheenergysupplysectorareprojectedtogrowby4%peryearintheFurtherAccelerationscenarioDrivenbyasignificantuptakeofdemandforcleantechnologies—suchas15%CAGRforrenewablepowergenerationand5%CAGRforhydrogendemandbetween2019and2035—fortheenergytransition,almostallgrowthisdrivenbyrenewablespoweranddecarbonizationtechnologiesHowever,despitetheunderlyingdeclineinfossilfueldemandanditspeakin2024intheFurtherAccelerationscenario,requiredinvestmentsinO&Gareprojectedtostaystable.Thisisdrivenbyincreasingcosts,asmaintenancecapexaswellasexplorationcostsincrease,partiallytriggeredbyincreasedenvironmentalrequirementsBothtrendsleadtodecarbonizationtechnologiesmakingupmorethanafourthofglobalinvestmentsintheenergysectorintheearly2030sEnergymayattractincreasinginvestment,withmostgrowthbeinginRESanddecarbonizationtechnologiesDespitedeclineinunderlyingfossil-fueldemand,investmentsinO&GareexpectedtoremainstableRespondentswhoagreetheactivityisdonefrequentlyintheirorganisation,%responsesTalentgrowthpracticesdroposharplyandreturninlatetenureAC20121520351,9502530CT1,1501,1008501,2501,5501,7001,550+4%p.a.12%4%1%2%-1%CAGR2021–352035FurtherAccelerationHistoricalDecarbonizationTechnologies¹PowerRenewables²PowerConventional³GasOilGlobalinvestmentsintheenergysectorBillion$–throughcycleperspectiveaverageoverthree-yearwindow1.Includessustainablefuels,CCUS,hydrogen,andEVcharging2.Includessolar,onshorewind,oshorewind,hydro,andother3.Includescoal,gas,nuclear,andother4.FortheO&Gsegmentsthe2021AcceleratedTransitionScenarioisusedincombinationwithFurtherAccelerationandAchievedCommitments,andthe2021ReferenceCaseScenariowithCurrentTrajectorySource:McKinseyEnergyInsightsEnergyValuePoolsModel;IEAWorldEnergyInvestments;IEAWorldEnergyOutlook2021AnalysisconductedbeforetheinvasionofUkraineinFebruary2022GlobalEnergyPerspective202224EmissionsChaptersummaryGlobalemissionsareheadedtoward1.7°Cto2.4°Cwarming,dependingonthescenarioAcrossscenarios,globalenergy-relatedemissionsareprojectedtopeakbefore2030.By2050,projectedlevelsareexpectedtobe30–70%belowemissionsin2019.IntheAchievedCommitmentsscenario,forexample,globalenergy-relatedemissionsareexpectedtopeakaround2023anddeclineby69%to11GtCO₂by2050However,eventhoughprojectedemissionsreductionshaveacceleratedcomparedtoearlieroutlooks,theworldremainsfarfromachievingthe1.5°Pathway,evenifallcountriesfulfilltheirpledges,asintheAchievedCommitmentsscenario,globalwarmingwilllikelystillexceed1.5°CTomeettherequirementsfora1.5°pathway,matureeconomieswouldlikelyneedtoacceleratetheirannualemissions'decline,onaverage,byafactorofeighttoninetimescomparedtoeffortsinthelasttenyears.Emissionsfromemergingeconomiesareprojectedtocontinuetogrowoverthenextdecade;thesecountriesmayneedtomovetolower-carbongrowthpathssoonerandreachtheiremissionspeaksearlierEmissionsin2021reboundedtohistorictrendsalongsidetheglobaleconomicrecoveryFollowingasignificantdeclinein2020,emissionsshowedastrongreboundin2021,almostreturningto2019levels;emissionsin2021wereonly1%lowerthan2019levels.Thisillustrateshowpre-pandemictrajectoriesinemissionshavelargelycontinuedEmergingeconomiesdrovethereboundinemissions.China’semissionsgrewattwiceitspre-pandemicgrowthrate(3%perannumin2021)andIndiareboundedto2019levelsin2021Bothcoalandnaturalgasemissionswerehigherthan2019levels.Theuseofcoalinpowerprimarilydrovethesurgeincoalemissions,supportedbystrongindustrialgrowthinChinaandhighgaspricesglobally.Gasemissionsonlymarginallydeclinedin2020andincreasedbeyond2019levelsin2021Oilemissionsonlypartiallyreboundedin2021,largelyduetotheslowrecoveryinaviationMeanwhile,2021broughtanewfocusonnet-zerocommitmentsandmethane-emissionreductionsManycountriesupdatedtheirdecarbonizationplansin2021tohavemoreaggressivereductiontargets.Around91%ofglobalCO₂emissionsarenowcoveredbynet-zerotargetsInlate2021,asaprecursortoCOP26,someoftheworld’slargestemittersrecognizedtheGHGmethane(CH4)asaprominentcontributortoglobalwarming.Theycommittedtoa30–50%reductioninmethaneemissionsby2030Althoughthesepledgeswouldreduceglobalmethaneemissionsbyaround13%by2030,theyremainfarfromthe34%thatisrequiredtoachievea1.5°pathway.Somelargeemitters,suchasRussia,India,andChinahavenotyetmadecommitmentstoreduceemissionsStronginnovationmaybenecessarytofurtherdeveloptechnologiestoreducemethaneemissionsandreacha1.5°pathway.Suchtechnologies,alongsideexistingtechnicallevers,willlikelybecrucialtoreducemethaneemissionsSource:McKinseyEnergyInsightsGlobalEnergyPerspective2022AnalysisconductedbeforetheinvasionofUkraineinFebruary202225GlobalEnergyPerspective2022COVID-19triggeredadropinglobalCO₂emissionsofaround5%.However,emissionshavealreadyreboundedandarebacktoapre-COVID-19level.IntheFurtherAccelerationscenario,aflatteningofenergy-relatedCO₂emissionsisprojected,withapeakin2023,followedbyanacceleratingdeclineIntheAchievedCommitmentsscenario,expectedemissionsin2050are30%lowerthaninFurtherAcceleration,reflectingamorerapidshifttorenewablesourcesforpowergenerationaswellasanaccelerateduptakeofnew,lower-carbontechnologiesinend-usesegments,suchasroadtransportandindustryHowever,emissionsacrossallscenariosremainfarfromtherequirementsforthe1.5ºPathway.Dependingonthescenario,themedianofexpectedglobaltemperatureincreasescouldreach1.7—2.4ºCormoreby2100.Thismedianglobalincreaseimpliesa50%chanceofexceedingtheaverageonagloballevel,withstrongerincreasesforspecificregionsGlobalemissionsremainfarfroma1.5ºpathway,evenifallcountriesdeliverontheircurrentcommitmentsKnock-oneffectandregionaldifferencescoulddrivesignificantlyhighertemperatureincreaseslocallyGlobalwarmingcouldexceed2ºCunderallscenarios,eventhoughemissionspeakbefore2030Globalemissionsremainfarabovethoserequiredfora1.5ºpathway,evenifallcountriesdeliverontheircurrentcommitments1.570GtofcumulativeCO₂emissionsfrom2018fora66%chanceoflimitingglobalwarmingto1.5°C2.Warmingestimateisanindicationofglobalriseintemperatureby2100versuspre-industriallevels(median-17th/83rdpercentile),basedonIPCCassessmentsgiventherespectiveemissionlevelsandassumingcontinuationoftrendsafter2050butnonet-negativeemissionsGlobalnetenergy-relatedCO₂emissionsGtCO₂p.a.2030:1.5°Ccarbonbudgetexceeded¹2812016204824323610200020501990203040HistoricalFurtherAccelerationCurrentTrajectoryAchievedCommitmentsFadingMomentum2.4(1.9-2.9)1.7(1.4-2.1)1.9(1.6-2.4)<1.5>2.4Emissionspeak20232019Globalwarmingprojection²,ºC1.5ºPathwayGlobalwarmingcouldexceed2ºCunderallscenarios,eventhoughemissionspeakbefore2030Globalemissionsremainfarabovethoserequiredfora1.5ºpathway,evenifallcountriesdeliverontheircurrentcommitments1.570GtofcumulativeCO₂emissionsfrom2018fora66%chanceoflimitingglobalwarmingto1.5°C2.Warmingestimateisanindicationofglobalriseintemperatureby2100versuspre-industriallevels(median-17th/83rdpercentile),basedonIPCCassessmentsgiventherespectiveemissionlevelsandassumingcontinuationoftrendsafter2050butnonet-negativeemissionsGlobalnetenergy-relatedCO₂emissionsGtCO₂p.a.2030:1.5°Ccarbonbudgetexceeded¹2812016204824323610200020501990203040HistoricalFurtherAccelerationCurrentTrajectoryAchievedCommitmentsFadingMomentum2.4(1.9-2.9)1.7(1.4-2.1)1.9(1.6-2.4)<1.5>2.4Emissionspeak20232019Globalwarmingprojection²,ºC1.5ºPathwayAnalysisconductedbeforetheinvasionofUkraineinFebruary2022Source:McKinseyEnergyInsightsGlobalEnergyPerspective2022GlobalEnergyPerspective202226
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