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PATHWAY

TO NET ZERO

EMISSIONS

Energy Transition Outlook 2021

PATHWAY TO NET ZERO Energy Transition Outlook 2021

Developed nations, leading companies and easy-to-elec-

trify sectors are therefore going to have to go below zero

before 2050. That is a key ﬁnding of our analysis of what it

will take to achieve the ambitions of the Paris Agreement.

I want to stress that our Pathway to Net Zero Emissions is

not the most likely pathway, but a plausible pathway.

Elsewhere, in our Energy Transition Outlook (ETO), we set

out our forecast which we see as the ‘most likely’ pathway

for the world’s energy future, through to 2050. We have

issued our ETO annually for the last ﬁve years and have

repeatedly warned that the energy transition we see —

and which some commentators have labelled ‘unrealisti-

cally fast’ — leads to a global warming of 2.3°C by the end

of this century. In other words, a dangerous outcome for

humanity.

In this publication, which is a ﬁrst from DNV, we draw on

our ETO model to answer the question: “How can the world

achieve 1.5°C within the bounds of techno-economic and

political feasibility?”

The short answer is that the world has sufﬁcient techno-

logical capability and economic capacity to reach the

1.5°C target. Electricity, powered by wind and solar, will

be the dominant technology. Economically, the world will

have to spend an additional amount close to 1% of GDP

on energy infrastructure. That is signiﬁcant, but not a

roadblock. In the short term, there will be relatively high

costs due to incentives and taxes needed to put immature

technologies in motion, like we saw for solar PV and wind

25 years ago. The critical constraints — what the world

lacks — are time and tough policy. Time-wise, we have to

act now, at the beginning of the “decade of action”, and at

speed and scale to avoid the mounting costs of inaction.

Policy-wise, tough mandates and bans lie ahead, as well

as creative regulations that nudge desired behavioural

changes like ﬂying less, using more electricity for road

transport, and actively practicing circularity.

Readers may be surprised to ﬁnd in our Pathway a 2050

energy mix that includes 21% of fossil fuel in the system.

Therefore, you will ﬁnd that some 20% of emissions cuts will

have to be in the form of carbon capture and carbon

removal. That is because, in our view, it is infeasible to

transition to a completely fossil-free energy system by 2050.

I am well aware of the great challenge that going below

zero poses. For DNV, and many of our customers, it

means reducing our own emissions to zero and going

well beyond that before 2050. For some nations, like the

US, it means that the announced ambitions to decarbonize

the power system by 2035 and the economy by 2050 are

not enough. But if those who can don’t go below zero,

and in doing so lower the cost and raise the performance

of critical technology, we will never limit global warming

to well below 2°C. For example, for Sub-Saharan Africa to

stretch to a 23% decarbonized energy system by 2050 it

will require both extraordinary commitment from the

region itself, and reliance on funding and technology

learning and transfer from faster-transitioning regions.

1.5°C is within our grasp only if everybody lifts what

they can.

FOREWORD

Remi Eriksen

Group president and CEO

DNV

Zero is not enough. That is because, try as they might, many developing

nations and hard-to-abate sectors will not be able to achieve zero emissions

by 2050 — the critical threshold for the world to stay within 1.5°C of warming.

CONTENT

Foreword 2

Highlights 4

1 Introduction 6

1.1 Forecast and backcast 6

1.2 The scientiﬁc basis 8

1.3 Recap of our ETO — the 'most likely' future 10

1.4 The gap to be closed 12

1.5 Net zero policies 14

2 Pathway to net zero (PNZ) 16

2.1 CO2 emissions 16

2.2 Energy demand and supply 18

2.3 Costs and energy expenditures 28

3 Sector roadmaps 32

3.1 Road transport 34

3.2 Maritime 36

3.3 Aviation 38

3.4 Buildings heating 40

3.5 Manufacturing — Iron & Steel 42

3.6 Manufacturing — Cement 44

3.7 Manufacturing — Petrochemicals 46

3.8 Power 48

3.9 Hydrogen 50

3.10 Carbon capture and storage 52

3.11 Energy efﬁciency 54

3.12 Comparison of the sectors 56

4 Regional roadmaps 58

North America 60

Latin America 62

Europe 64

Sub-Saharan Africa 66

Middle East and North Africa 68

North East Eurasia 70

Greater China 72

Indian Subcontinent 74

South East Asia 76

OECD Paciﬁc 78

Comparison of the regions 80

5 Methane, land use, and bold action 82

5.1 Methane 82

5.2 Emissions from land use (AFOLU) 84

5.3 Outside the energy system 86

5.4 This pathway needs bold action — now 88

References 92

Project team 93

Content

/94

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PATHWAYTONETZEROEMISSIONSEnergyTransitionOutlook2021PATHWAYTONETZEROEnergyTransitionOutlook20212Developednations,leadingcompaniesandeasy-to-elec-trifysectorsarethereforegoingtohavetogobelowzerobefore2050.ThatisakeyfindingofouranalysisofwhatitwilltaketoachievetheambitionsoftheParisAgreement.IwanttostressthatourPathwaytoNetZeroEmissionsisnotthemostlikelypathway,butaplausiblepathway.Elsewhere,inourEnergyTransitionOutlook(ETO),wesetoutourforecastwhichweseeasthe‘mostlikely’pathwayfortheworld’senergyfuture,throughto2050.WehaveissuedourETOannuallyforthelastfiveyearsandhaverepeatedlywarnedthattheenergytransitionwesee—andwhichsomecommentatorshavelabelled‘unrealisti-callyfast’—leadstoaglobalwarmingof2.3°Cbytheendofthiscentury.Inotherwords,adangerousoutcomeforhumanity.Inthispublication,whichisafirstfromDNV,wedrawonourETOmodeltoanswerthequestion:“Howcantheworldachieve1.5°Cwithintheboundsoftechno-economicandpoliticalfeasibility?”Theshortansweristhattheworldhassufficienttechno-logicalcapabilityandeconomiccapacitytoreachthe1.5°Ctarget.Electricity,poweredbywindandsolar,willbethedominanttechnology.Economically,theworldwillhavetospendanadditionalamountcloseto1%ofGDPonenergyinfrastructure.Thatissignificant,butnotaroadblock.Intheshortterm,therewillberelativelyhighcostsduetoincentivesandtaxesneededtoputimmaturetechnologiesinmotion,likewesawforsolarPVandwind25yearsago.Thecriticalconstraints—whattheworldlacks—aretimeandtoughpolicy.Time-wise,wehavetoactnow,atthebeginningofthe“decadeofaction”,andatspeedandscaletoavoidthemountingcostsofinaction.Policy-wise,toughmandatesandbanslieahead,aswellascreativeregulationsthatnudgedesiredbehaviouralchangeslikeflyingless,usingmoreelectricityforroadtransport,andactivelypracticingcircularity.ReadersmaybesurprisedtofindinourPathwaya2050energymixthatincludes21%offossilfuelinthesystem.Therefore,youwillfindthatsome20%ofemissionscutswillhavetobeintheformofcarboncaptureandcarbonremoval.Thatisbecause,inourview,itisinfeasibletotransitiontoacompletelyfossil-freeenergysystemby2050.Iamwellawareofthegreatchallengethatgoingbelowzeroposes.ForDNV,andmanyofourcustomers,itmeansreducingourownemissionstozeroandgoingwellbeyondthatbefore2050.Forsomenations,liketheUS,itmeansthattheannouncedambitionstodecarbonizethepowersystemby2035andtheeconomyby2050arenotenough.Butifthosewhocandon’tgobelowzero,andindoingsolowerthecostandraisetheperformanceofcriticaltechnology,wewillneverlimitglobalwarmingtowellbelow2°C.Forexample,forSub-SaharanAfricatostretchtoa23%decarbonizedenergysystemby2050itwillrequirebothextraordinarycommitmentfromtheregionitself,andrelianceonfundingandtechnologylearningandtransferfromfaster-transitioningregions.1.5°Ciswithinourgrasponlyifeverybodyliftswhattheycan.FOREWORDRemiEriksenGrouppresidentandCEODNVZeroisnotenough.Thatisbecause,tryastheymight,manydevelopingnationsandhard-to-abatesectorswillnotbeabletoachievezeroemissionsby2050—thecriticalthresholdfortheworldtostaywithin1.5°Cofwarming.3CONTENTForeword2Highlights41Introduction61.1Forecastandbackcast61.2Thescientificbasis81.3RecapofourETO—the'mostlikely'future101.4Thegaptobeclosed121.5Netzeropolicies142Pathwaytonetzero(PNZ)162.1CO2emissions162.2Energydemandandsupply182.3Costsandenergyexpenditures283Sectorroadmaps323.1Roadtransport343.2Maritime363.3Aviation383.4Buildingsheating403.5Manufacturing—Iron&Steel423.6Manufacturing—Cement443.7Manufacturing—Petrochemicals463.8Power483.9Hydrogen503.10Carboncaptureandstorage523.11Energyefficiency543.12Comparisonofthesectors564Regionalroadmaps58NorthAmerica60LatinAmerica62Europe64Sub-SaharanAfrica66MiddleEastandNorthAfrica68NorthEastEurasia70GreaterChina72IndianSubcontinent74SouthEastAsia76OECDPacific78Comparisonoftheregions805Methane,landuse,andboldaction825.1Methane825.2Emissionsfromlanduse(AFOLU)845.3Outsidetheenergysystem865.4Thispathwayneedsboldaction—now88References92Projectteam93Content4PATHWAYTONETZEROEnergyTransitionOutlook20211.ThisPathwaytoNetZero(PNZ)ispossibleonlywithstrongpolicyimplementation,andcontrastswithour‘mostlikely’forecastsetoutinourEnergyTransitionOutlook(ETO)−Technicallyandpoliticallyfeasible,butverychallenging−HalvingglobalCO2emissionsby2030relativeto2017isalmostunattainable,andournetzeroreportfindsemissionreductionby2030tobe30%−Netzerocanbeachievedwithscaleupoftoday’stechnologies,butrequirestoughgovernmentalinterventionsacrossallsectorsandregions(bans,carbonpricing,mandates,andeffectiveimplementation,communication,andmonitoring),andalsocertainbehaviouralshifts−Netzero2050isnotanendstate.In2050,theglobalenergysystemwillstillbechangingrapidly,deliveringnetnegativeemissionsbeyond2050Developedregionsandsectorscanandmustgobelowzeroemissionstoreach1.5°ConaglobalscaleHIGHLIGHTS202020252030203501020-10403050PathwaytonetzeroemissionsUnits:GtCO2/yrNaturalgasusepeaksBatterypackcost<$100/kWhNonewoil&gasfielddevelopment(Developedregions)EUenergyemissionsreduce67%comparedto1990EVsoutnumberICEVs(passenger)Nonewoil&gasfielddevelopment(Developingregions)Worldwide:50%newpassengervehiclesalesEVChina:emissions50%of2019Europe:50%newvehiclesalesEVGas-firedpowerpeaksSub-SaharanAfricaemissionspeakNewICEpassengervehiclesalesbannedChina,Eur&N.AmericaSolarPVbecomesbiggestsourceofelectricityglobally5Highlights20402045205021002.Fortheworldtoreachnetzeroemissionsby2050andhencesecurea1.5°Cfuture,leadingregionsandsectorshavetogomuchfurther,faster−Thestartingpointsoftheworld’sregionsareverydifferent,withvaryingemissionintensities,technologiesandcapabilitiestodecarbonize−OECDregionsneedtomovefasterandhaveearliernetzerodates—intheprocessmaturingkeydecarbonizationtechnologiestospurdecarbonizationoflessdevelopedregions−NorthAmericaandEuropeneedtoreachzeroemissionsin2042,whileGreaterChinashouldreduceemissionsby98%by2050−Somedevelopingregionswillhaveenergysystemsthatarefarfromdecarbonizedbymid-century,e.g.Sub-SaharanAfricawillreduceemissionsbyjust23%andtheIndianSubcontinentby64%−Withhard-to-abatesectorsonlyabletocutemissionsby80-95%atbest,easy-to-electrifydemandsubsectorsneedtogobelowzero.3.Renewableelectricity,hydrogen,andbioenergyareessential,butinsufficient−Maximizingnon-fossilsourcesintheenergymix,asfarasisfeasiblein2050,deliversjust80%oftheemissionsreductionrequiredforthenetzerotarget−Electricitywillaccountfor51%ofenergydemand,with86%ofthatelectricitysuppliedbysolarPVandwind.Nucleardoesnotfeatureprominentlybecauseitistoocostlycomparedwithvariablerenewableenergy−Hydrogen,predominantlygreen,willaccountfor13%oftheenergydemand,anddedicatedrenewableenergyproductionfromwindandsolarplantswillprovidemorethanhalfofthehydrogensupply−Fossilfuelusereducesby80%butwillstillaccountfor21%oftheenergymixin2050.Nonewoilandgaswillbeneededafter2024indevelopedand2028indevelopingcountries−20%ofnetzerodecarbonizationwillrelyoncarboncaptureappliedtofossilCO2andcarbonremoval,deliveredthroughbioenergywithCCS(BECCS),directaircapture(DAC)andnature-basedsolutions4.Massive,earlyactionisneededifwearetohaveanychanceofreachinga1.5°Cfuture−Short-termaction/sprintsandlong-termplanninghavetotakeplaceatthesametime,startingnow−Allregionsandsectorshavetostepupnow,buttheleast-developedcountriesneeddedicatedtechnologyandfinancialassitancetoenableafasttransition−Technology,policiesandinvestmentsneedtoworktogether—andCOP26needstodeliverabolder,morecoordinatedframeworkforaction−Timeisthekeyconstraint,notcapital.Evenwithverylargeinvestmentsrequired(USD55trninrenewablesandUSD35trningridsover30years)theadditionalcostsofreaching1.5°Carelessthan1%ofglobalGDPN.AmericanmanufacturingreachesnetzeroWindeclipsessolarPVaslargestprimaryenergysource4.7GtCO2peryearnegativeemissionsviaCCSandDACandremovalbylandusechanges(reforestationetc.)N.AmericaandEuropereachnetzerowithDACCCSpeaksat5.2GtCO2EVsoutnumberICEVs(commercial)ontheroadCoal-firedpowerstationsbannedHydrogen=10%energydemand,andgrowing6PATHWAYTONETZEROEnergyTransitionOutlook20211INTRODUCTIONDespitetherapidlyunfoldingenergytransitioncurrentlyunderway,DNV’sEnergyTransitionOutlook(ETO)2021findsthattheworldismostlikelyheadedtowards2.3°Cofglobalwarmingbyendofthiscentury.Asweemphasized,atemperatureincreaseofthatmagnitudeplaceshumanityatgreatrisk.Inthisreport,wedescribeapossiblepathwaytoavoidsuchanoutcome.Morespecifically,wedetailhowtoclosethegaptonetzeroby2050,byusingourETOmodeltodevelopaplausiblepathwaytowardsafuturewheretheglobalaveragetemperatureincreaseislimitedto1.5°Cbytheendofthecentury.1.1FORECASTANDBACKCASTLimitingglobalwarmingto1.5°Cisanextremelychal-lengingtaskrequiring,asweshow,rapidreductioningreenhousegas(GHG)emissionsacrossallsectorsandregions.Thishastohappenfasterthananythingseenhistoricallybecausethecostsofinactionaremountingalarmingly.Speedandscaleareparamount;everytenthofadegreecloserto1.5°Cmakesanenormousdiffer-ence−especiallytovulnerablecommunitiesmostaffectedbyclimatechangeandwho,ironically,aretheleastresponsibleforemissions.Weacknowledgethattherearemanypossiblepathstowardsa1.5°Cfuture.Wehavechosentodefine,modelanddescribeapathwaythatistechnicallyandpoliticallyfeasible.Ourpathwayreliesonexistingtechnologiesandtheirscale-up,andnotonuncertainscientificandtechnologicalbreakthroughs.Itispoliticallyfeasibleinthatitreliesonaproventoolboxofpolicymeasures,andallowsfordevelopingregionstoimplementthenecessarymeasureslaterthantheirdevelopedregioncounterparts.Althoughweareconfidentthatwehavestruckarealisticbalancebetweenviabletechnologyandpolicy,thepathwaywedefineisstillanextremelychallengingone,andthereareundoubtedlyalternativeroutestoachievinga1.5°Cfuture,aspresentedbymanyotherenergyforecastersaswellasbytheIPCC.InourETO,weforecastourbestestimateoftheenergyfuture;wesometimesalsorefertothisasthe‘mostlikely’future.Itincorporatesexpectedeconomic,technological,andpoliticaldevelopments,andleadsto2.3°Cofglobalwarmingbyendofthiscentury.Incontrast,inthisreport,weaimforafuturethatlimitsglobalwarmingto1.5°Cbytheendofthiscentury—notthroughaforecastofwhatislikely,butthroughabackcastofwhatisnecessary.Thisreportthereforedescribesbotha1.5°CfutureandprovidesapathwayforclosingthegapbetweenthefutureweareheadingtowardsandthefuturedefinedbytheParisAgreement(Figure1.1).BynetzerowemeanthatthesumofglobalCO2emissionsfromenergy,processesandlandusereacheszeroby2050.Limitingglobalwarmingto1.5°Cisanextremelychallengingtaskrequiring,rapidreductioningreenhousegas(GHG)emissionsacrossallsectorsandregions.7Introduction1ChapterguideChapter1describesthesciencebaseunderpinningourworkanddetailsourapproach.ItalsorecapskeyfindingsfromtheETOreportanddescribesthegapthatneedstobeclosedtoattaina1.5°Cfuture.Thechapteralsooutlineshowwehaveappliedvariouspolicyprinci-pleswefindcriticaltoreachingthenetzeroobjective.Chapter2detailsourpathwaytonetzeroemissions(PNZ)bydescribingboththerequiredemissionstrajec-toryandhowenergydemandandsupplysectorscancontributetoachievingthepathwayonaglobalscale.Thischapteralsooutlinesthecostsandenergyexpend-itureneededtoreacha1.5°Cfuture.Whileseveralstudieshaveestimatedthenumberofjobsthatcouldbecreatedintheprocessofrealizinga1.5°Cfuture(e.g.,ILOetal.,2020),thatisnotsomethingwehaveinde-pendentlymodelledforthisreport,althoughwemightdosointhefuture.OurPNZcomprisesseveralroadmapsforsectorsandregions,detailinghoweachsectorandeachregionwouldcontributetoreachingthePNZ.Chapter3includesroadmapsformanyofthelargestemittingandmostchallengingsectorstoabate,includingtransportsubsectorssuchasmaritimeandaviation,andmanufacturingsubsectorssuchassteelandcement.Theselectionofsectorsisnon-exhaustive;therearesmallersectorsnotcoveredinthisreport.Chapter4includesroadmapsforalltenofourworldregions,asdescribedinourETO.Thischapterisexhaustiveinthesensethatallcountriesareincludedaspartofoneofthetenregions.Chapter5summarizesmethaneemissionsandotherGHG-emittingsectorsoutsidetheenergysystemsandhighlightstheactionsnecessarytoachievethepathway.ThefocusofthetworeportsETO2021Mostlikelyheadingtowards2.3°CPathwaytonetzeroHowtoclosethegapto1.5°CFIGURE1.1ThefocusoftheETOandthePathwaytonetzeroreports1.11.5202021002.3Units:Changeinaveragetemperaturewrtpre-industriallevels(°C)8PATHWAYTONETZEROEnergyTransitionOutlook20211.2THESCIENTIFICBASISTheParisAgreement(2015)states:”Thisagreement[….]aimsto[….]holdtheincreaseintheglobalaveragetemperaturetowellbelow2°Cabovepre-industriallevelsandpursuingeffortstolimitthetemperatureincreaseto1.5°C”.Threeyearslater,theIPCCspecialreporton1.5°C(IPCC,2018)highlightedthatlimitingwarmingto1.5°CimpliesreachingnetzeroCO2emissionsgloballyaround2050,with“concurrentdeepreductionsinemissionsofnon-CO2forcers,particularlymethane”.Thereportdepicted90differentpathwaysforhowthiscouldbeachievedandhighlightedfouroftheseas“illustrativemodelpathways”toshowarangeofmitigationapproaches.CommontoalmostallthepathwaysfromtheIPCC,isthatthenetglobalanthropogenicCO2emissionsin2050areclosetozero,beforemovingintoa“post2050”eracharacterizedbynetnegativeemissions.ThescientificconclusionsfromtheIPCCpavedthewayforUNSecre-tary-GeneralAntónioGuterres,tostate,attheendof2020,thatatopUNpriorityin2021wastobuildaglobalcoalitionforcarbonneutrality.Alonglistofnetzeropledgesfromcountriesandcompaniesalikehasfollowed.Globally,thenetzerofocusmakesalotofsense.AstemperatureincreaseiscloselycorrelatedwithCO2concentrationintheatmosphere,haltingglobaltemp-eratureincreaserequiresglobalnetemissionstoreachzero.Thisisalsowhywefinditscientificallysoundtofocusourmethodologyandthisreportonhow,plausibly,toaccomplishtheverychallengingtaskofachievingglobalnetzeroCO2emissionsin2050.ThatnetzeroCO2emissionsin2050willlimitglobalwarmingtobelow1.5°Cisofcourseasimplification.Indeed,althoughCO2represents65%ofGHGemissions,9whathappenstootherhighlypotentgreenhousegasessuchasmethane,willalsoplayasignificantroleifwearetokeepglobalwarmingbelowthe1.5°Cthreshold.TheIPCCcarbonbudgetsandnetzeroconsiderationshavetakenaccountofemissionsfromotherGHGs.Methaneemissionsfromfossilfuelsorchangesinagriculturalpractices,includingfertilizeruseoraerosolemissions,haveaconsiderableinfluenceonwhatnetzeroCO2willmeaninpractice.WeusetheIPCCscenariosinlinewith‘verylow’and‘low’non-CO2GHGemissionsestimates,correspondingwellwiththeverylowCO2emissionsweproject;hencetheapproachisconsistent.InChapter5,wedescribehowmethaneemissionsfromtheenergyindustrycontributetoglobalwarming.Beyondtheenergysystem,othergasessuchasmethanefromtheagriculturalsectorarealsoimportant.WehaveincludedourviewsontheseemissionsinSection5.3.Whilenetzeroisalogicalgoalonaglobalscale,itshouldbeappliedwithcareonaregionalscaleorsectoralscale.Thereisabigdifferencebetweennetzeroandgrosszero,andaglobalnetzerofuturedoesnotmeanallsectorsandregionswillmeetthezero-emissionthreshold.Itisbothimplausibleandunjusttoexpectallsectors,regions,orcountriestoachievethischallenginggoalatthesametime.Tobeginwith,thestartingpointsforeachregionareverydifferent,asaretheirabilitiestodealwithemissions;similarly,thechallengesfacingthevariousdemandsectorsvaryconsiderably,intermsofreadilyavailableabatementoptions.Inlightoftheseconsiderations,thisreportappliesthenetzeroapproachonaglobalscaleonly,whileallowingforalargedifferentiationonaregionalscale.Inasimilarvein,weapplythenetzeroapproachtotheentiretyofenergydemand,andnotatthescaleofindividualdemandsectors,whichwilldecarbonizeatdifferentrates.UsingourmostlikelyfuturefromtheETOgivesustheopportunitytoseewhereregionsandsectorsaregoingtobe—comparedtowheretheyneedtogo.Whiletheconceptofa‘justtransition’iscompelling,wehavenotattemptedtomodeladramatictransferofwealthacrosstheworldregionsoverthenext30years,inpartbecauseenergyprovisionandconsumptionisinitselfarelativelysmallcomponentoftotaleconomicactivity,andinpartbecauseitisunfortunatelynotverylikelytohappenanytimesoon.Therefore,inourPNZ,wehaveappliedthesamepopulationandGDPgrowthassumptions,andthereforealsoGDP/personin2050,usedinourETO‘mostlikely’future.Whilethisisnotconsistentwiththenotionofajusttransition,agreaterinjusticewouldarisefromtheexpectationthatallregionsshouldmoveatthesamedecarbonizationpaceregardlessoftheirdifferentstartingpositions.WehavethereforescaledtheimplementationofmeasurestoachievenetzerorelativetotheGDPoftheregion—asfurtherdescribedinourpolicysection.Ourapproachisthusarguablybalancingthefairandtheplausible.CommontoalmostallthepathwaysfromtheIPCC,isthatthenetglobalanthropogenicCO2emissionsin2050areclosetozero,beforemovingintoa“post2050”eracharacterizedbynetnegativeemissions.Analternativeapproachcouldhavebeentoapplytheindividualnationallydeterminedcontributions(NDCs)fromeachcountry.WhilethisideafromtheParisAgree-mentisaverygoodone,theoverwhelmingdifficultyfromtheoutsethasbeenthatthesumofpledgesfallswellshortoftheglobalambitionofnetzeroin2050.WhilebeingawareofandinformedbytheNDCs,wehavethereforenotappliedthemdirectly,butinsteadhavedesignedapathwaywhich,whilechallenging,istechni-callyachievableandpoliticallyfeasible,andwhichwillachievenetzeroemissionswiththeintenttolimitglobalwarmingto1.5°C.Introduction110PATHWAYTONETZEROEnergyTransitionOutlook20211.3RECAPOFOURETO—THE'MOSTLIKELY'FUTUREEarlierthisyear,DNVpresentedthefiftheditionofitsEnergyTransitionOutlook(ETO)—our`bestestimate`forecastoftheenergyfuturewhichstandsincontrasttoscenario-basedoutlookspresentingmultiplescenarios.Historically,energydemandhasgrowninlockstepwithGDP.Inourbest-estimateforecastofthefutureenergysystem,wepredictthatthisisgoingtochangedramaticallyinthenextthreedecadesduetoacceleratedelectrificationanddramaticefficiencygainsbothoutpacingeconomicgrowthinthecomingyears.Ourbestestimateforecastpredictsthatworldfinalenergydemandwillleveloffatsome466EJbyaround2035,whichisonly8%higherthanin2019.Thereafter,energydemandflattensthroughtomid-century.However,itisnotacertaintythatfinalenergydemandafter2050willremainstable.Withmostenergyserviceselectrifiedbythen,energydemandmightriseonceagaininconjunctionwitheconomicgrowth.Still,emissionsarenotlikelytoriseafter2050,despitethepossiblyhigherdemandforenergyservices.By2050,agrowingshareoffinalenergydemandwillbesuppliedbyrenewables,constantlyaddingtoprimaryenergysupply.Theirshareintheprimaryenergysupplywilltriplefromtoday`s15%to45%by2050,whilstthefossilshareoftheprimaryenergysupplymixwillfallfrom80%todayto50%bythen(Figure1.2).Nuclearwillbestableat5%betweentodayand2050.In2019,29%oftheworld’senergydemandwasfromtransport.Thesector’sstrongrelianceonoil(92%in2019)willshrinkto60%towards2050duetoagrowingshareofelectricityandhydrogenusedinallformsoftransport.Thedemandshareofthebuildingssector(28%)wasveryclosetothatoftransportin2019.Despitearapidgrowthinbothresidentialandcommercialfloorarea,energydemandfromthebuildingssectorwillgrowbyonly26%,reachinga33%shareoftotaldemandby2050duetosignificantenergyefficiencygainslinkedtoadeclineinthecostofenergy-efficienttechnologies,andadvancesin‘green’buildingdesignandconstruction.In2019,30%oftheworld’sfinalenergydemandwasconsumedbythemanufacturingsectorwiththebase-materialssubsectortakingthelargestsharewithinmanufacturing(38%).Manufacturing’sfinalenergydemandwillgrowby8%tomid-centurywithanassociatedfuelmixchange.Coal’ssharewillcontinuetodeclinefromtoday’s35%to20%by2050,withelectricityandhydrogenfillingthegap,contributingtotheaverage1.6%efficiencyimprovementinthemanufacturingsectoroverthenextthreedecades.Theongoingenergytransitionischaracterizedbythegrowingdominanceofelectricityinfinalenergydemandwithitssharegrowingfromtoday’s19%to38%bymid-centuryowingtoacombinationofdecliningcosts,technologicalprogressandfavourabledecarbonizationpolicies.Atthesametime,directuseofoilandcoalwillhalveby2050,whilesharesofdirectuseofgas,bioenergyandheatstaystable.Hydrogen’ssharewillgrowfromnegligiblelevelstodayto5%by2050.Themajorityofthisisgoingtobeusedforindustrialheating(30%),withsmallersharesusedinmaritimetransport(16%),heavylong-haultrucking(6%),aviation(12%),andinbuildings(9%).Theremainingthirdisgoingtobeusedinnon-11energyuses.By2050,globalrenewablesourceswillhavea60%share,dominatedbyhydrogenproductionfromelectrolysispoweredbydedicatedwindandsolarPVgeneration.WindandsolarPVwillalsodominateelec-tricityproductionbymid-century.82%oftheworld’sgrid-connectedelectricityproductionwilloriginatefromrenewablesourceswithwind(33%)andsolarPV(36%)havingthehighestshares,leavinglittlespaceforfossil-basedelectricityproduction,thoughinsomeregionssuchastheMiddleEastandNorthAfricaandNorthEastEurasia,fossilfuelsinpowersupplyremaincentral.Althoughtheaforementioneddevelopmentsrequiremassiveinvestmentsincapital-intensiverenewablesandassociatednetworks,theshareofglobalGDPallocatedtoexpenditureonenergywilldeclinesteadilyfrom3.2%todayto1.6%bymid-century.Globalenergy-relatedCO2emissionsassociatedwithourETOforecastareexpectedtobe18.6GtCO2in2050,a45%reductioncomparedwithcurrentlevels.Althoughsignificant,thisisfarfromtheParisAgreementambitionstohalvegreenhousegasemissions(GHG)by2030andachievenetzeroby2050.Accordingtoourbestestimateforecast,by2050thelargestcontributortotheseemissionlevelsisthemanufacturingsector(6GtCO2),followedbytransport(5.4GtCO2)andbuildings(4.8GtCO2).Carboncaptureandstorage(CCS)uptakewillaccelerateinthe2040s,capturingabout1.3GtCO2emissionsfrompower,manufacturing,process-basedemissionsandnaturalgas-basedhydrogenproduction.OurETOshowshoweachtenworldregionshaveverydifferentstartingpointsandthusdifferentemissionreductionpathwaysto2050.TheIndianSubcontinentandSub-SaharanAfricawillincreasetheiremissionsbetween2019and2050by40%and55%respectively,whereasOECDregionswillreducetheiremissionsbyabout70%each.Withourbestestimateforecastofthefutureenergysystemandanextrapolationofemissiontrendsinnon-energysectors,the1.5°Cbudgetwillbeexhaustedby2029,andthe2°Cbudgetshortlyafter2050.IntheETO,anetzeroemissionseconomywouldlikelyonlybereachedaround2100.Intheabsenceofthemajorinterventionsoutlinedinthisreport,theworld'sfutureenergysystemiscertainlynotontracktomeetthegoalsoftheParisAgreement.Introduction112PATHWAYTONETZEROEnergyTransitionOutlook2021AsdescribedinSection1.2,"TheScientificBasis",theIPCChasdefinedthepathwayconsistentwitha1.5°CfutureasrequiringnetzeroCO2emissionsby2050.TheETOforecast,summarisedintheprevioussection,shows22.9GtannualCO2emissionsby2050.Simplyput,theabsolutegaptobeclosedistherefore22.9GtCO2in2050.KnowingthatglobaltemperatureincreaseiscloselycorrelatedwithCO2concentrationintheatmosphere,cumulativeemissionsareatleastasrelevantastheabsoluteemissionsinanygivenyear.In2020,theremainingcarbonbudgetfor1.5°Cusingthep67thresholdwas400GtCO2(IPCC,2021a).InourETO,the1.5°Ccumulativecarbonbudgetovershootwascalculatedtobe690GtofCO2by2050,androughlyestimatedtobe1.250GtofCO2by2100,asillustratedinFigure1.4.This,therefore,isthelikelyovershootofthe1.5°CcarbonbudgetderivedfromourETOforecast.Akeyquestionis—howdoweclosethisgap?Physically,thegapwillbeclosedthroughimplementationoflow-emissiontechnologies.Therearetechnicalsolutionsthatneedmassivedeploymentandscaleup,suchasrenewableenergy,storage,grids,hydrogen,andCCS.Othertechnologiesmustbescaleddown,suchascoal,oil,gas,andcombustionengines.Themainleverforscalingupabatementsolutions,bothintermsoftheirdevelopmentandimplementation,however,ispolicy.Ifwearetoclosethegapandlimittheglobalaveragetemperatureincreaseto1.5°C,itwillbethroughtighteningenergy,industrialandclimatepoliciesinallregionsandsectors,andbyapplyingtheentirepolicytoolbox.ThenetzeropolicyconsiderationsincludedinthePNZ,aredescribedinthenextsection.Theemissionsreductionpotentialfromchangesinbehaviourisalsointeresting.Behavioursarenudgedbypolicies,andwhetherbehaviouralchangesareencour-agedorenforcedinvolvesafinebalance.Oneexampleisthatinaviation,wehavelimitedtheincreaseinthenumberofflightsbymakingflyingmoreexpensivethroughsignificantsustainableaviationfuel(SAF)uptakepolicies,suchastaxesandmandates.1.4THEGAPTOBECLOSED13Buteventhe1.5°Cnetzeroemissionpathwaywillhaveagaptocloseafter2050.IPCC(2021a)emphasisesthateventhemostoptimisticSSP1-1.9scenarioholdingglobalwarmingbelow1.5°Cwillhaveatemporaryovershootofthe1.5°Ccarbonbudget.Indeed,ourPNZfindsthesame,andasdescribedinthepathwayresultsinChapter2,thelikely2050overshootwillbe230GtofCO2.Thisisagapinthe1.5°Cpathwaythatneedstobeclosedwithnetnegativeemissionsafter2050.Inthe50yearsthroughto2100,averagenetnegativeemissionsthereforeneedtobe4.7Gt/yrtoproduce230Gtinnetnegativeemissions.Ifwearetoclosethegapandlimittheglobaltemperatureincreaseto1.5°C,itwillbethroughtighteningenergy,industrialandclimatepoliciesinallregionsandsectors.Introduction114PATHWAYTONETZEROEnergyTransitionOutlook20211.5NETZEROPOLICIESFortheenergytransitiontoachievenetzeroemissions,DNVanticipatesanintensificationofpolicyeffortstoimplementemissionabatementoptionsatmassivescaleandspeed.Strengtheningofbothrequirementsandincentivestoadvancedecarbonizationacrossallsectorsandregionsisinevitable.InDNV’sEnergyTransitionOutlook2021,wedescribedindetailwhatweterma"policytoolbox"andhowourforecastfactorsinpolicymeasures(Figure1.6)thatpropelenergysystemevolutioninthreemainareas:—Supportingtechnologydevelopmentandactivatingmarketuptakethatclosestheprofitabilitygapforcleanenergytechnologiescompetingwithexistingtechnologies—Restrictingtheuseofinefficientorpollutingproducts/technologiesbymeansoftechnologyrequirementsorstandards—Providingeconomicsignalstoreducecarbon-intensivebehaviours.DNV’sPNZactivatesthepolicytoolboxofprovenpolicymeasures,inbothdemandandsupplysectors.Theoverarchingprincipleguidingourpolicyanalysis,andimplementationofpolicymeasures,isthatweexpecthighGDPregions(Europe,NorthAmerica,OECDPacific,GreaterChina)tomoveatfasterpaceandgreaterdepthtomeettheParisAgreement.Theseregionaleconomieshavestrongdecarbonizationgoals,accountforthebulkofemissions(historicallyandpresentlyabove60%ofglobalemissions),andemitfarmorethanlessaffluentregions.Theyalsopossessthewealthandcompetencefortechnologydevelopmentandtoboostcostlearningcurve-basedcostreductionsforkeyabatementtechnologies.Atthelevelofsectorsorsupplychains,comprisingseveraltechnologiesatvaryinglevelsofcommercialreadiness,ablendofpolicieswillbeneeded.Theurgencyofachievingnetzerowillrequiresynchronousaccelerationofbothtechnologydevelopmentanduptake.Here,wehighlightthestrengthenedpolicyfactorsforgingourpathwaytonetzero,andmoredetailispresentedinChapters3and4onsectorsandregionsrespectively.FIGURE1.6PolicyfactorsincludedinourOutlookEnergystoragesupportZeroemissionvehiclesupportHydrogensupportCCSsupportAEnergyefficiencystandardsBansandphase-outplansCarbon-pricingschemesFuel-,energy-andcarbontaxationAir-pollutioninterventionsPlasticpollutioninterventionsSustainableaviationfuelssupportRenewablepowersupport172839410511612BCTAXH15Buildings—Banstargetphase-outoffossil-basedheatingandlimitequipmentchoicesforspace/water/cooking—Higherenergyefficiencystandardsfornewbuildsandrenovationstoreduceheating/coolingdemand—Consumer-sidefossil-fuelsubsidiesareremoved,andhighercostofcapitalhindersfossil-basedheatingTransport—Fueleconomyemissionstandardstighteninallmarkets,andtaxesongasolineanddieselincrease—BansonnewICEvehiclesalesindevelopedregionsfrom2030(first-movercountriesandstepwiseregionalimple-mentation),followedbymostdevelopingregionsinthe2040s—Zero-emissionvehicleincentivespromotee.g.,EVadoptionandsupportincl.charginginfrastructure—Shippingandaviationfuel-mixshiftsdrivenbyfuelblendingmandatesandcarbonpricingManufacturing—CarbonpricingdrivesCCSuptake—Energyintensityimprovementsdrivenbyregionallydifferentiatedtaxationonfuels—Costofcapitalincreasesdrivedownattractivenessoffossil-basedequipment—Requirementsincreasematerialefficiencyandrecyclingrates(e.g.,plastics,scrapsteel)—CAPEXsupportforelectrificationandforhydrogeninironandsteel-making—EnergytaxationencouragesfuelswitchingfromfossilfuelstoelectricityandhydrogenusagePowergeneration—Netzeropledgestriggercostofcapitalincreasesthatreducetheattractivenessoffossil-basedgeneration—Amixofmandatesandcarbonpricingendunabatedgas-firedgenerationinallregions—Bansenableoilandcoal-firedgenerationphase-outinallregionsby2045—Allregiongovernmentssupportrenewablebuild-out,e.g.,cleancapacityauctions,investmentsubsidiesforstoragecapacitycoupledwithrenewablegeneration,andevolvingmarketdesignCCS&Directaircapture—Highercarbonpricesacceleratedeployment—MandatesrequireCCSinnaturalgas-firedpowergeneration—CCSanddirectaircapture(DAC)capacityramp-upisenabledbypoliciessupportingCAPEXreductionandvaluechain/infrastructuredevelopmentHydrogensupport—Policymeasuresstimulatedemandforhydrogen,suchasmandatesinaviationandmaritime,energytaxationboostingfuelswitchinginmanufacturingandinotherhard-to-abatesectors,wherehydrogenisthemostviableoptionindecarbonizationplans/obligations—Policymeasuresstimulatethesupplyofgreenhydrogen,suchasCAPEXsupporttointegratedrenewableelectricityandelectrolyserprojects,subsidiestogrid-powered,renewables-basedelectrolysis,andtosupply-chainshiftsinsteelproductionEnergyefficiency—Targetsandlegislationacceleratethepaceofimprovementinenergyefficiencye.g.,tightenedstandardsforequipmentandappliances,buildingcodes,requirementsrenovation/retrofits,andenergyintensityimprovementsinbuildings—Incentivestoreplenishequipmentbase(e.g.,fossil-basedtoelectricity-basedtechnologiesorswitchingtoalternativecombustion-basedfuel)—Taxcuts,accesstocheapfinancing,anddirectsubsidiesforenergyefficienttechnologies—R&Dsupportfornewtechnologies—Publicspendingforbuild-outofsupportinfrastructure,e.g.,EVchargers,hydrogen,anddistrictheatingnetworksCarbonpricing—Netzeropolicypassesthecostofemittingtoemittersandcarbonpriceswillbecomemoreeffective.HighGDPregionsaccustomedtoenergyfees,willbefrontrunnersincarbonpricing(EUR,NAM,OPAslightlyaboveCHN),reachingpricelevelsofUSD100-150/tCO2by2030.By2050,regionaltrajectoriesrangebetweenUSD50-250/tCO2.—Carbon-borderadjustmentmechanismsdriveconvergenceamongleadingregions,andallregions’carbon-pricetrajectoriesarepulledupwardsforeffectiveemissioncutsGovernmentfunding&costofcapital—Mostregiongovernmentswillredirectfundingtowardsemissionsreductionandcleanenergy,bothdomesticandoverseas.ExamplesofthelatterareJapan,SouthKorea,Chinaannouncinganendtofinancingandbuildingnewcoal-firedpowerplants,andG7countriesendingsupportwithoutco-locatedCCS—Revisionofgovernmentfundingparallelsafinancesectorshifttoaligninvestmentpracticeswithnetzero.Increasinglylimitedpoolsofcapitalwillbeavailableforfossil-fuelprojectsandwithhighercostofcapital,coal-firedfacilitiesfacingthehighestdiscountrateIntroduction116PATHWAYTONETZEROEnergyTransitionOutlook20212PATHWAYTONETZERO(PNZ)Inordertoachievenetzeroemissionsin2050,fossilfueluseisreducedabout80%fromtoday,andcarboncaptureandremovalremovesafurther8GtofCO2emissions.The2050PNZenergysystemwillbedominatedbysolarandwindgeneratedelectricity,butalsoseesastrongroleforhydrogeninthehard-to-abatesectors.2.1CO2EMISSIONSThepathwaytonetzeroemissions(PNZ)isdesignedsothatglobalCO2emissionsin2050hitnetzero.Thepresent(2019)emissionsare44Gt,andourETOforecasts2050emissionsto23Gt.TheleverstobringdownemissionsaredescribedunderNetzeropoliciesinChapter1.AsillustratedinFigure2.1,thesectorwiththelargestemissionsin2050isthetransportsector,eventhoughthesectorreducesmorethan80%ofitsemissions,from8.9Gttodayto1.7Gtin2050.Thetransportsectorusesmostoftheworld’soil,andcarboncaptureisverychallenging.Continueduseoffossil-fuelledvehiclesintheroadsectorinthedevelopingregions,andinaviation,makeupthebiggershareoftheremaining2050transportemissions.Today,electricitygenerationisthesectorwiththelargestemissions,butalsotheeasiesttotransformintoanon-fossilenergymix,reducingemissionssignificantlyto0.1Gtin2050.InadditiontowhatisshowninFigure2.1,thereareemissionsfromagriculture,forestryandotherlanduse(AFOLU),whichwillreducefrom6Gttodaytonegativeemissionsof2.1Gtin2050,asdescribedinSection5.2.FurtherdetailsonthevarioussectorsandsubsectorsareincludedintheregionalroadmapsinChapter4ofthisreport.17Pathwaytonetzero2Fossilfuel-relatedemissionsarecurrentlysplit38%fromcoal,28%oil,22%gas,with11%fromprocessemissions,and1%frombiomass.Thedevelopmentofemissionsiswellcorrelatedwithfutureenergyfromfossil-fuelcarriers,butcarboncaptureandstoragealsoplaysadecisiverole.CoalandoilusefallsrapidlyinourPNZ,whilegashasasteadybutmoremoderatedecline.Captureratesarehigherforcoalandgas,wheremuchoftheCO2isemittedatlargepointsourcescomparedwithoil,withitstypicallysmallpointsources.Fromtodayto2050,coalemissionsarereducedby92%,gasemissionsby83%andoilemissionsby85%.The2050emissionsarerelevantinthemselves,butitisthecumulativeemissionsthatdecidestheCO2con-centrationintheatmosphere,andhencetheglobalclimateresponseintermsofglobalaveragetemperatureincrease.Cumulativeemissionsfrom2020to2050arecalculatedto630GtinourPNZ.Comparingthattoa1.5°Ccarbonbudgetof400Gt,wethereforehaveanovershootofthe1.5°Ccarbonbudgetof230Gtin2050.ThisisdescribedinmoredetailinChapter1.The2050emissionsarerelevantinthem-selves,butitisthecumulativeemissionsthatdecidestheCO2concentrationintheatmosphere,andhencetheglobalclimateresponseintermsofglobalaveragetemperatureincrease.18PATHWAYTONETZEROEnergyTransitionOutlook20212.2ENERGYDEMANDANDSUPPLYThissectionoutlinesenergydemandandsupplydevel-opmentsassociatedwithourPNZ.Historicallyglobalenergyusehasgrowninlockstepwithpopulationandeconomicactivity.Thistrendisnowdecoupling,andwewillseeglobalenergydemandandsupplystartingtodeclinedespiteagrowingpopulationandincreasedeconomicactivity.ThisdecouplingtrendwillintensifyunderourPNZ.ThepopulationinthevariousregionsarethesameinthePNZasintheETO.WeareusinginputfromWittgensteinCentreforDemographyandGlobalHumanCapital,expectingaglobalpopulationof9.4Bnpeoplein2050,andpeakpopulationsoonthereafter.Theglobaleconomywillcontinuetogrow,andDNVhasdesignedaseparatemodelforeconomicgrowth.Onaverage,overthenext30years,weexpectaCAGRof2.4%,accumulatingtoa100%growthuntil2050,withtheglobaleconomythenatUSD290trn.ThisgrowthtrendisincorporatedintoourPNZ.DetailsofourpopulationandGDPestimatesaregivenintheETO.WhilethesepopulationandeconomicestimatesremainthesameforbothourETOforecastandourPNZ,energydemandandsupplydifferssubstantially,asweexplainbelow.FinalenergydemandinthePNZ,asillustratedinFigure2.3is380EJin2050,a12%declinecomparedwith2019.AftertheCOVID-19reboundin2021and2022,finalenergydemandgraduallystartsreducingwhenourPNZpoliciesandtechnologiesstarttotakehold.AswithETO,themanufacturingsectorhasthehighestdemand(130EJ)in2050inourPNZ,andthisenergyusealsostaysflat.Buildingenergydemanddeclinessomewhat,andtransportenergydemandseesasignificantdecline.Thestableanddecliningenergyusedoesnotmeanwewillhavefewerenergyservices.Onthecontrary,thePNZeffectivelyleveragesthebenefitsofenergyefficiencyandelectrificationtomeetenergyserviceneedsofthepopulation.AmoredetaileddescriptionofenergydemandisgiveninthevarioussectoralroadmapsinChapter3.Primaryenergysupplyin2050inthePNZwillbeverydifferentto2019,asistobeexpected.Fromavalueof19596EJin2019,theprimaryenergysupplydropsto503EJ,areductionof16%,asillustratedinFigure2.4.ThiscontrastswithourETOestimateofhardlyanyreductionin2050comparedwith2019.WhileourassumptionsregardingpopulationandGDPhavenotchanged,thisclearlyindicatesthatthePNZwillalsobeamoreenergyefficientpathwaywithahighershareofmoreefficientrenewableenergy,helpingtodelivertherequiredlevelofdecarbonizationtogetherwithcarboncaptureandremoval.InourPNZ,worldprimaryenergysupplyhasalreadypeakedin2019.FundamentaltoachievingourPNZ,isamassiverampingupofvariablerenewableenergysources(VRES)accom-paniedbyadrasticnearphase-outofcoalandstrongdeclineoftheotherfossilfuels.Solarandwindtogetherprovidemorethanhalfofprimaryenergysupply.Withcontinuedhighlearningrates,thereisapositiverein-forcementatworkininstallingmoreandmoresolarandwind,whichcontinuestobringdownthelevelizedcostsoftheseenergysources.Theshareofsolarandwindin2050isalmostdoublethatoftheirshareinourETO.CoalisnearlyphasedoutinourPNZbutisstillusedmainlyformanufacturingusesinregionssuchasSub-SaharanAfrica(SSA)andtheIndianSubcontinent(IND),whichhavetransitionslaggingthedevelopedregions,withalaterphase-outofcoal.Despitethepushtoeliminateunabatedfossilfuelscompletely,oil(8%)stillpersistsintheenergysystemin2050,duetoitsprevalenceinhard-to-abatesectorssuchasaviationandcontinued,butlimited,useintheroadsectorindevelopingcountrieswherecharginginfrastruc-turewillnotbefullybuiltoutby2050.ThePNZalsohasnaturalgasinthemixin2050,butmostofitsuseiscoupledwithCCSorsimilarabatementtechnologies.Bothoilandgasalsoremainwithafairamountofresidualuseinthenon-energysector,forexampleasfeedstockforplastics,butthisfossilfueluseisnotcausinganydirectemissions.BioenergyincreasesitsshareandroleinourPNZ,growingfroma9%sharein2019toa19%sharein2050.Thisisduetomultiplefactors:heat-onlyplantshavingtousebioenergy;theincreaseduseofbioenergyinthemanufacturingsector;andtheuseofbioenergyforproductionofbiofuels,especiallyforaviationandmaritimesectors.Regulationsandmandatesaimtoreplacenaturalgaswithemissionfriendlybiomethanewherethisispossibleandavailable.BothnuclearandhydropowerhaveacontinuedpresenceintheenergysysteminourPNZ.Becauseofitsstableanddispatchableelectricity,anditslonglifetime,hydropowerwillstillplayaroleintheenergymix,anditsshareincreasesslightlyfrom2%in2019to4%by2050.Surprisingly,whilenuclearstillmaintainsapresencein2050,itsimportancereducesfrom5%in2019to3%in2050,becauseitlosesouttorapidlydecliningcostsanduptakeofsolarandwind.CoalOwingtoitshighemissionsintensity,coalisthefirsttargetofdecarbonizationpolicies.GlobaldemandinthePNZwillplummet,alreadydecreasingby33%in2030,andfalling89%by2050.Thepowersectorwillshowthemostimpressivetransfor-mation.Representing96EJandalmosttwothirdsofcoaldemandin2019,afastandglobaltransitionwillleadtoa39%decreaseindemandby2030,77%by2040andacompletephase-outby2050duetoaglobalbanofunabatedcoalusebythen.Pathwaytonetzero220PATHWAYTONETZEROEnergyTransitionOutlook2021Forhigh-heatprocessesinthemanufacturingsector,coal'sphase-outwillbemoretempereddespiteitshighcarbonemissions.Inironandsteel,coalusewilldecreaseby20%by2030and74%by2050comparedwith2019levels,forbothindustrialheatandironorereduction.Asimilardeclineof72%overthe2019-2050periodwillbeobservedforbasematerials.TheIndianSubcontinent(IND)andSouthEastAsia(SEA)regionswillbedriving77%oftheremaininguseinmanufacturingby2050,withuseevencontinuingtoincreaseintheseregionsuntilthemid-2030s.Around800milliontonnesofcoalwillstillhavetobeextrac-tedby2050,exclusivelyashardcoaladaptedforuseinindustry.Thebiggestproducers—mostlymeetingtheirowndemand—willatthattimebetheIndianSubcontinent(49%ofglobalproduction),GreaterChina(14%),Sub-SaharanAfrica(14%)andNorthEastEurasia(11%).OilGlobaloildemandinourPNZwillfall77%from165EJin2019to38EJin2050.Afterthe2021and2022reboundfromthepandemic,thedeclinestartsalreadyin2023,andby2030,globaloildemandwillbe21%lowerthanin2019.Lookingatdemandsectors,wefindthatoiluseinthetransportsector,currentlyaccountingformorethantwothirdsofglobaloiluse,willreducemorethan80%overthenextthreedecades,owingtoelectrificationofroadtransportaswellashydrogen-basedfuelsreplacingoilinaviationandmaritimetransport.Thesecondbiggestsector,non-energyuseofoilinplasticsandpetrochemicals,isthesectorwhereoildemandkeepsupreasonablywell.Asthisoilisnotburnedanddoesnotcausedirectemissions,itisalsotheonlysectorwhereoildemandisequalbetweenourPNZandourETO.However,unlikemostotherforecasters,DNVexpectsoilusetopeakinthenon-energysectoranddeclinetowards2050,owingtoincreasedrecyclinginthepetrochemicalandplasticsindustry.Inaworldwithrapidlydecliningoildemand,oilproductionwillbeincreasinglyconcentratedintheregionwiththelowestproductioncost:MiddleEastandNorthAfrica(MEA).Aswemovetowards2050,thisregionwilldomi-nateoilproduction.Indeed,inourPNZanalysis,threequartersofalloilproductionwillcomefromMEAin2050.Itshouldbeemphasizedthattheregionalspreadofproductionisuncertainassupply-sidepoliciestocontrolproduction,inanoversupplied,shrinkingmarket,haveyettobeagreedamonghydrocarbonproducingcountries,andthisisunknownandunfamiliarterritoryfortheoilindustry.Nevertheless,inourPNZ,thereisvirtuallynoneedfornewoiltocoverglobaloildemand.Thepathwayhasashortperiodwherenewoilcapacityadditionsfallrapidlyfrom2022towardszeroin2024indevelopedregionsand2028indevelopingregions,withnonewoiladditionsneededthereafter.GasInourPNZ,globalgasdemandisexpectedtodeclineconsistentlyfrom163EJtodayto142EJby2030andfallfurtherto73EJbymid-century,givinganoveralldeclineof55%inglobaldemandoverthenextthreedecades.Intermsofthesectorbreakdown,thepowersectorwillremaintheprimaryconsumerofgas,contributing58EJtototaldemandtoday,upto60EJin2030,andfallingto24EJby2050.Whilecontinuingtobethelargestsector,21theshareofthepowersectorwilldeclineslightlyfrom36%todayto33%by2050.Thebuildingsector,currentlyconsumingthesecond-largestshareofglobalgasat21%,will,asaresultofincreasingelectrificationofbuildingheatingandcooking,dropto8%andfifthpositionamonggas-usingsectorsby2050.Asinthecaseofoil,non-energyuseofgasasafeedstock,ontheotherhand,willclimbfromfifth(9%)tosecondposition(16%)sinceitisnotamajoremittingsector.Energysector’sownusewilldeclineslowlyfrom21EJtodayto12EJby2050,andmanufac-turingsectorenergydemandwillmorethanhalvefrom26EJtodayto11EJbymid-century.NorthAmerica(NAM),currentlytheworld’sleadingproducerofnaturalgasresponsibleforaquarterofglobalproduction,willconcedethispositiontoNorthEastEurasia(NEE),withlessstringentclimateambitionsaswellaslowerextractioncosts.By2050,NEEwilldominatethenaturalgasmarket,supplyingclosetohalf(47%)oftheworld’sdemand(whileNAM’sshareisexpectedtogodownto8%).TheMEAregionwillmaintainitssecond-placeposition,supplyingonaverage18%(between15%and19%)ofglobalgasoverthenextthreedecades.Beforetheendofthisdecadenonewcapacityadditionswillberequiredtorespondtoglobalgasdemand,andassuch,newcapacityadditionsareforcedtostopwithinthisdecadeworldwide.Theywillberapidlyphasedoutfrom2022to2024inOECDregionsandfrom2026to2028elsewhereintheworld.Thatisnotachallengefromasupplypointofview;theexistingfields’supplyofgasissufficienttomeetallfuturedemand.SolarPVTogetherwithwind,solarPVisalreadythecheapestgeneratorofnewelectricityinmostplacesintheworld,andcostscontinuetofallrapidly.Thepresentshareof3.2%ofglobalelectricitygenerationin2020ishowevermodest,buttherateofincreaseisstunning.InthePNZ,weseeaneartenfoldgrowthofgrid-connectedsolarPVfrom0.9in2020to8PWhin2030.Thestronggrowthcontinues,reaching29PWhin2050.By2030,solarPVwilltakeoverasthelargestsourceofelectricityglobally,apositionitwillholduntil2048,whenwindbecomesthelargestsourceofgrid-connectedpowersupply.In2050,solarPVwillproduce41%oftheworld’sgrid-connectedpower,trailingwind’s43%.AsshowninFigure2.8,thegrowthwillinitiallybedomi-natedbyGreaterChina(CHN),whichwillgrowitssharePathwaytonetzero222PATHWAYTONETZEROEnergyTransitionOutlook2021fromthepresent31%to38%ofallinstalledsolarPVin2028.AlthoughCHNwillcontinuetogrowthereafter,thestrongestgrowthafter2030willbeintheIndianSubcon-tinent(IND)which,in2050,willholdthelargestsharewith21%ofworld’sgrid-connectedsolar.WewillseeastrongsolarPVbuild-outinallregionswiththeexceptionofNorthEastEurasia(NEE).Inadditiontothegrid-connectedcapacity,wewillhaveamoderatesolarPVoff-gridproductionof2.8PWhin2050,withintegratedrenewableelectricityandelectro-lyserprojectsfordedicatedhydrogenproduction—correspondingto10%ofthegrid-connectedPVproduction.ThePVoff-gridproductionforhydrogenwillbebiggestintheIndianSubcontinent(IND),followedbyNorthAmerica(NAM).Finally,therewillbeasmallamount(0.1PWh)ofoff-gridproduction,mainlyinSub-SaharanAfrica(SSA)andsomeintheINDregion,supplyingoff-gridpowertoruraldistrictsforlighting,mobilechargingandothersmallenduses.ItisamassivetasktogrowsolarPVatthespeedenvisionedinthePNZ.PVcapacityinstallations—forgridandoff-gridcombined—aregrowingfromthepresent100+GWperyeartoaround630GWperyearin2030andthenstayingatthatleveluntil2045,asshowninFigure2.9.Themodelshowsaspikeininstallations,ofupto2500GWperyearinthelate2040s,whichisaresultofacoalbaninthepowersectorinthe2040s.TotalPVinstalledis24TWin2050,ofwhich14TWarepuresolarand10TWaresolar+storage.CHNwillbethebiggestregionwith5TWinstalled,followedbyINDwith4.5TWandNAMwith3.5TW.ForIND,theselargeamountsofsolarPVposeachallengefromaspace(landuse)perspective,requiringsome80,000squarekilometresforPVinstallations.Althoughdeemeddoable,thiswillrequirecarefulplanning.WindElectricityfromwindundergoesremarkablegrowthinthePNZ,movingfrom5%oftheelectricitygenerationin2019to18%in2030,31%in2040andfinallyaccountingfor45%in2050.Weconsiderthreecategoriesofwindpowerplants:onshorewind,fixedoffshorewind,andfloatingoffshorewind.Ofthesethree,onshorewindpowergrows16timesfrom2019to2050.Incomparison,fixedoffshoregrows8timesmorethanonshorewindbutfromamuchlowerbase,andaccountsfor14%ofthetotalelectricitygenerationby2050.Ofthethree,floatingoffshorewindistheleastmatureandhasthelowestshareinelectricitygeneration(2.5%)in2050.Globally,by2050thepower23systemwillconsistof7.9TWofonshorewind,2.4TWoffixedoffshorewindand400GWoffloatingoffshorewind.TheGreaterChinaregion(CHN)hasthelargestamountofelectricitygeneratedbywindpowerintheworldatpresent,andthischangeswithNorthAmerica(NAM)overtakingby2050inourPNZ(Figure2.10).CHNandEurope(EUR)aresecondandthird,respectively.Theseregionsareleadersinwindpowerandtheinstallationsofcapacitiestriggersteepercostreductionsforwindpower,whichbringdowncostsofthesetechnologiesforotherregions.ThisresultsinsignificantwindgenerationinourPNZeveninregionswhichhavehistoricallynotinvestedinwindpower,suchasSouthEastAsia(SEA).AllregionsexceptNorthEastEurasia(NEE)willhaveconsid-erablewind-poweredelectricityinourPNZ.Aconsiderablenumberofnewwindpowerplantswillneedtobeinstalledeveryyear(Figure2.11)togeneratetheselevelsofwindpower.From2020to2030,onaverage,180GWofwindpowerplantsbecomeopera-tionaleveryyear.From2030to2040,thisvalueincreasesto290GWofwindpowerplantsbecomingoperationaleveryyear,followedby590GWperyearofwindpowerplantsbecomingoperationalfrom2040to2050.AsillustratedinFigure2.11,from2020to2030foreveryGWoffixedoffshorewindpower,8GWofonshorewindpowerplantsarebuilt.However,competitionforsuitablelandwillincreasinglyimpactonshorewindcosts,andatthesametimeoffshorewindcostswilldeclinerapidly.Thus,regionssuchasNAMandCHNwillstartinvestingmoreinfixedoffshorewindpowerplants.From2035onwards,foreveryGWoffixedoffshorewindpowerplant,only2GWofonshorewindpowerplantsarebuiltworldwide.Intotal,approximately10%ofnewpowerinstallationsareoffshorewindpowerplants,acrosstheworld,from2040onwards.Suchamassivedevelopmentinfixedoffshorewindtranslatestohigherinvestmentsinnewelectricitygridlines,notleastunderseacables.Inadditiontothegrid-connectedwindcapacitydescribedabove,about1.2TWofbothonshoreandfixedoffshorewindcapacitywillbebuiltinourPNZfordedicatedhydrogenproductionasoff-gridcapacityby2050.ThemajorityofthisfixedoffshorewindwillbebuiltinCHN,whilemostofthisonshorewindwillbeinstalledinNAM,andEUR.OtherrenewableenergyandnuclearTheuseofrenewableenergysuchasbioenergyandhydropowerandnuclearenergychangesovertimeinthePNZ.Asmentionedpreviously,theimportanceofbioenergyincreasesgreatlyinourPNZ,giventhattherePathwaytonetzero224PATHWAYTONETZEROEnergyTransitionOutlook2021arenoeasyalternativesforthermalplantswhicharecrucialforregionssuchasNorthEastEurasia(NEE).Theamountofbioenergyinprimaryenergysupplyincreasesfrom55EJin2019to97EJby2050(Figure2.12).WhileinourPNZ,theshareofbioenergyis19%in2050,inourETObioenergyhadashareof12%,clearlyindicatingthecriticalityofbioenergyinreachingnetzero.Incontrast,theamountofhydropowerincreasesslightlyfrom2019to2050,butmoreorlesshasthesameshareasintheETOin2050.Unlikemanyother1.5°Cscenarios,withourPNZwefindthat,theroleofnucleardiminishesinbothabsoluteenergytermsandasashareofprimaryenergy,from2019to2050.Thesharereducesfrom5%in2019tolessthan3%by2050.Thecostsassociatedwithwastedisposal,coupledwiththedrasticcostdecreasesforsolarandwindcausenucleartoplayasmallerroleintheenergysystemcomparedwithETO.ThebioenergygrowthinourPNZundergoesasectoraldemandshiftbetween2019to2050(Figure2.13).In2019,buildingshadthelargestdemandforbioenergy(54%),butthankstoelectrificationandhydrogenuseinbuildings,thebuildings’sharedropsto21%by2050.Bycontrast,weseemanufacturingandheat-onlypowerplantsusingmoreofthebioenergyinthePNZ,comparedwithETO.Forexample,by2050,inNAM57%ofbio-energydemandisinthemanufacturingsector,andinNEE91%ofbioenergydemandisinheat-onlyandpowerplants.Incomparison,manufacturingaccountedfor16%25ofthebioenergydemand,andheat-onlypowerplants19%,in2050inETO.Theabsolutedemandforbioenergyinthetransportsectorgrowsonlymodestlyfrom4.3EJin2019to5.5EJin2050.ThisisinstarkcontrasttoourETOwherethedemandgrowsupto8EJby2050.AkeytakeawayfromthePNZisthatweneedtochangethewaybioenergyiscurrentlyusedtoachievenetzero.Morebioenergyneedstobeusedinhard-to-abatesectorslikeaviation,manufacturing,andheat-onlyplants,especiallycoupledwithCCS,whilebioenergywillbelessimportantindecarbonizingroadtransport,whereelectri-ficationisusuallyabettersolutiontoachievenetzero.ElectricityInourPNZelectricitydemandgrowsbyover183%from2019to2050,incontrasttotheETO,whereelectricitydemandgrewby116%withinthesametimeframe.AllelectricitydemandsectorsaregrowinginourPNZ(Figure2.14),whichdemonstratesthecentralroleelectrificationwillplayindecarbonizingtheenergysystem.Thelargestincreaseindemandisseenfromhydrogen,whereelectricityisusedtoproducegreenhydrogenfromelectrolysis.Fromverylowlevelsin2019,thepowerdemandforelectrolysis,suppliedthroughbothgridelectricityanddedicatedoff-gridrenewables,grows400timesitslevelin2019andby2050,theshareofelectricitydemandforhydrogenis17%.Sincehydrogeniscrucialfordecarbonizinghard-to-abatesectors,decarbonizedelectricityisanecessitytofacilitatecleanhydrogenproduction.Effectively,thisisdecarbonizationthroughindirectelectrification.Thetransportsectorseesthenexthighestgrowth(28-fold)intermsofelectricitydemand,whereelectrificationisanimportantleverforthePNZinroadtransport.Theshareoftransport-drivenelectricitydemandgrowsfrom1%in2019to14%by2050.Whiletheshareofbuildingsinelectricitydemanddropsfrom43%in2019to31%by2050,inabsolutenumbersbuildingsseeanear100%growthduetotherapidexpansionofbothresidentialandcommercialfloorspace.Thisalsohaspositiveimplicationsintermsofelectricityaccessandindoorairpollution,especiallyindevelopingregionssuchasSub-SaharanAfricaandtheIndianSubcontinent.Intheseregions,electricityreplacesfossilfuelsandtraditionalbiomass.Themanufacturingsectorseesamodestgrowthof53%inelectricitydemand,from2019to2050.TheelectricitygenerationprofileofPNZisradicallydifferentfromthatin2019,witharapidnear-termphase-outofcoal,substitutedbysolarandwind(Figure2.15).Solarelectricityseesa39-foldincreasefrom2019to2050,whilewindelectricityincreases22-foldoverthesameperiod.Solarandwindaccountfor86%oftheelectricityby2050.Intotal,non-fossilsources(renewa-blesandnuclear)accountfor96%ofthegeneration,incontrasttoETO,wherenon-fossilsourcesaccountfor84%oftheelectricitygenerationby2050.Despitethenetzeroemissionconstraints,naturalgashasstayingpowerintheelectricitysector,accountingfor4%ofgenerationin2050.TheNorthEastEurasiaregionhasthehighestshareofnaturalgas-firedelectricitygenerationintheworld,whereevenin2050,65%ofitsgenerationPathwaytonetzero226PATHWAYTONETZEROEnergyTransitionOutlook2021willcomefromnaturalgas.Globally,underourPNZ,allnaturalgasusedinthepowersectorisabatedwithCCS.Nonetheless,thenegativeemissionsfrombiomass-firedpowergenerationarenotsufficientinthePNZtomaketheglobalpowersectorachievenetzeroin2050(detailedinSection3.8).Theoff-gridsolarcapacityintheworldis117GWby2050,chieflyinstalledinSub-SaharanAfrica(SSA)andtheIndianSubcontinent(IND).Off-griddedicatedrenewablecapacityforhydrogenproductiongrowsfromjust4GWin2019toapproximately3.8TWby2050.Thisdedicatedrenewablecapacitywillbesplitequallyamongoffshoreandonshorewind,andsolarelectricity.Incontrast,theETOhadonlyabout1.8TWofoff-griddedicatedrenewablesforhydrogenproductionin2050.HydrogenHydrogenisanintegralpartofnetzerostrategiesbeingdevelopedbymanycountriesandisurgentlyneededforthedecarbonizationofhard-to-abatesectors.InourPNZ,hydrogenanditsderivativeslikee-methanol,e-ammoniaorsustainableaviationfuelsaresummarizedundertheumbrellatermof‘hydrogen’.Figure2.16showsthatonethirdofglobalhydrogenandsynthetic-fueldemandby2050isusedforindustrialheating.By2050,23EJ/yrofenergydemandinmanufac-turingwillbesuppliedbyhydrogen,whichrepresentsan18%shareofenergycarriersusedinmanufacturing.GreaterChina(CHN),NorthAmerica(NAM)andEurope(EUR)areclearlyleadingthisdevelopmentwithonefourthofhydrogenuseinmanufacturinginCHN,onefifthinNAMandonesixthintheEURregion.Roadtransportationwillaccountfor18%ofglobalhydrogendemand,almostexclusivelythroughlong-haulheavyroadtransport.By2050,hydrogenwillaccountfor16%ofroadtransport’senergydemand,despitesignifi-cantsubsidiesassumedinourPNZ.Thisrelativelysmallshareistheresultofthecompetitivenessofbattery-electricpropulsioninallsegmentsofroadtransport.Thestoryisdifferentinmaritimetransportation,whichwillaccountfor15%ofglobalhydrogendemandbymid-century.Theabsenceofasignificantbattery-electricoptionformostpartsofmaritimetransportleavessyntheticfuels,biofuels,ammonia,andhydrogenasviableoptionsfordecarbonizationleadingtohydrogenanditsderivativessupplying75%ofthemaritimefuelmixby2050inourPNZ.Globalaviationwillalsoseeasignifi-cantshareofhydrogenanditsderivativesinitsfuelmix.12%ofglobalhydrogendemandcomesfromglobal27aviationandwithinaviation,hydrogenwillcoverabout40%ofglobalaviationenergydemand.Aswithmaritime,alackofbattery-electricalternativesmakesitmoredifficulttodecarbonizeaviationwhichleadstoahighershareofhydrogeninanyconceivablenetzeropathway.Only8%ofglobalhydrogendemandwillgotothebuildingssector.Strongelectrificationofbuildingsendusessuchasspaceheating,waterheatingandspacecoolinglowerstheneedforotherfuelsfordecarboni-zation.Hydrogenwillmakeonlymodestprogressinreplacingnaturalgasinspaceheating,waterheatingandcookingamountingtoslightlylessthan5%ofthebuildingssectorfuelmix.Figure2.17showsthebreakdownofglobalhydrogenproductionbysource,bothforenergyandnon-energypurposes.Theshareofnon-carbonfreehydrogenwillbeverylowby2050withlessthan5%.Hydrogenfromcarbon-freesourcesisshownastwocategories:hydrogensuppliedviaelectrolysisfromgridelectricity;andoff-griddedicatedrenewable-basedelectrolysis.Inaddition,hydrogencanalsobesuppliedfromnaturalgaswithassociatedcarboncaptureandstorage(CCS).Bymid-century,thehighestshareofhydrogenproductionwillcomefromdedicatedoff-gridcapacities(46%),ledbyoffshorewind,whilstgrid-basedelectrolysiswillberesponsiblefor34%ofthehydrogenproductionbythen.15%willbesuppliedfromnaturalgaswithCCS.Globalhydrogenproductionneedstosignificantlyscale,andalmostdoubleeverycomingdecadetosupplyourPNZdemandofhydrogen.Withthiscomesahugecapacitybuild-up.Electrolysiscapacityfordedicatedoff-gridhydrogenproductionwillneedtobe0.4TWin2030,1.9TWin2040,and3.8TWby2050,clearlyledbyGreaterChinaandEurope.Grid-basedelectrolysiswillneedtofollowthiscapacityramp-upwithabout80GWofelectrolysiscapacityby2030,530GWby2040andalmost2TWby2050.Here,thedevelopmentisledbyNorthAmericaandEurope.Insum,by2050,ourPNZwillneedabout5.8TWofelectrolysiscapacitytosupplydecarboni-zationinthedifferentdemandsectors.Totalhydrogenproductionin2050at525Mt/yearunderourPNZcompareswith280Mt/yearforecastbyourETO.Thisimpliesthathydrogensatisfies13%ofenergydemandin2050inourPNZversus5%inourETOforecast.Pathwaytonetzero228PATHWAYTONETZEROEnergyTransitionOutlook2021ThePNZisaffordableinthesensethatithaslowercoststhanthepresentenergysystem.WhileglobalGDPwillmorethandoubleby2050,globalenergyexpenditureswillnotgrowasfastowingtoimprovementsinenergyefficiencyandtoincreasingelectrification,whichinturncausefinalenergydemandtofall—a12%declinecomparedwith2019(Figure2.3).Thechallenge,however,isthatoverallcostsforourPNZarehigherthanthoseassociatedwiththe‘mostlikely’futureweforecastinourETO.Thosehighercostsmaybeusedasanexcuseforinaction.DivertingtheenergyexpenditureManycommentatorsassumethatthetransitiontoanetzerofuturecomeswithanunassailablemountainofcosts.OurPNZanalysisshowsthatthisisnotthecaseeithergloballyoronaregionallevel.Insomesectors,however,thePNZcallsforhigherexpenditures.Inthosecases,conventionaltechnologiesarecheaperbutcomewiththeexternalitycostofhighemissions.InourPNZ,aswithourETO,‘energyexpenditures’,ascalculatedbythemodel,includesfossil-fuelextraction,transport,andrefinementsuchasliquefaction,regasifi-cation,refineries,andconversiontohydrogenandelectricity.Similarly,allcostsinthepowersector,includingpowergrids,areincorporated,includingtheinstallationandoperationofrenewableenergyplants.Wedonotincludeinvestmentsinenergy-efficiencymeasuresaswellasindownstreamcarbonmitigationcosts.WeregardthemodelledsubsidiesthatweincludeinourPNZassupportthatbenefitsconsumersanddonotcounttheseasenergyexpenditures.Adiscussionontheirimpactoncarboncaptureisincludedlater.ManyofthesecoststhatarenotincludedinthemodelarestillrelevantincalculatingtheoverallcostofthePNZ,andwecommentonandquantifymostofthesecostsbothinthischapterandinthesectoralroadmaps.WeprovideanassessmentoftheimpactoftheseadditionalPNZcostsattheendofthissection.However,withreferencetoourstrictmodeldefinitionofenergyexpenditures,weshowinFigure2.18thatdespitemassiveinvestmentsinhighcapital-costrenewablesandelectricitynetworks,theshareofglobalGDPallocatedto2.3COSTSANDENERGYEXPENDITURES29energyexpenditureswillmorethanhalve,droppingfromitscurrentlevelof3.2%to1.4%bymid-century.Themainreasonforthisdevelopmentisthestrongdeclineinfossilexpenditures.Forupstreamoilandgas,expenditureswilldeclineby85%throughto2050.Aglobalbanonnewcapacityadditionby2028meansthat,afterthatyear,expendituresrelatesolelytotheoperationoftheremainingproductionfieldstosupplyarapidlydecliningmarket.Theoverallpictureforpowergenerationisthatcostsshiftfromoperatingexpenses(OPEX),dominatedbythecostoffossilfuels,tocapitalexpenditures(CAPEX)inrenewablepowerandrelatedinstallations.Indeed,almostnofossilfuel-firedpowerinvestmentswillbemadefrom2030,andtheremainingcostswillbeforoperatingandmaintenanceuntiltheirphase-outinthe2040s.Theprogressivedeclineoffossilfuel-relatedinvestmentcontrastssharplywithhigherexpendituresinlow-carbonpowergeneration,asshowninFigure2.19.Theincreaseinelectricitydemandwillleadtoanalmostquadruplingofnon-fossilpowerexpendituresby2050,andtotalinvestmentsofsomeUSD55trnoverthenext30years.TheriseisparticularlyvisibleforsolarPVandwindpower.Together,theywillrepresentathirdofglobalenergyexpendituresin2050,analmosteight-foldincreasecomparedwith2019.AsdiscussedmorefullyinthesectionsofChapter3coveringsolarPVandwind,thespikeinexpenditureonpowergenerationfromthesesources,especiallysolarPV,from2045onwardsrelatestotherapidphase-outoffossilfuelplants.Thedoublingofelectricityproductionanddecentraliza-tionofpowergeneration,coupledwithalargeamountofnewVREScapacity,necessarilyleadstostronginvestmentingrids,totallingsomeUSD35trnoverthenext30years.Gridexpenditureswillalmosttriplefrom2019to2050.ThecostofcarboncaptureNotincludedinthemodelledexpendituresshowninFigure2.18arethecostsofcarboncapture,useandstorage(CCUS)anddirectaircapture(DAC).ThesewillaccountforsignificantspendingreachingUSD750bnby2050,equalto0.3%ofglobalGDPin2050.Figure2.20showstheworld'stotalexpenditureoncarboncaptureandremovaltechnologyneededtorealizethetransitiontonetzeroemissions.Pathwaytonetzero230PATHWAYTONETZEROEnergyTransitionOutlook2021GovernmentsupportFinancialsupportfromgovernmentsisanessentialpartofthePNZanddecisiveforthedecarbonizationofseveralsectors.Bymultiplyingregionalcarbonemissionsbycarbonprices,wederivearoughoverviewofregionalcarbon-pricingrevenuegeneratedbypassingthecostofemit-tingtoemitters.Thisestimateisnotentirelyaccurate,asnotallsectorsapplythesamecarbonrates,e.g.,thetransportsectortypicallyhasotherformsoffueltaxes,buttheestimategivesareasonablygoodindicationofthelevelsofcarbon-relatedrevenuegenerated.AscanbeseenfromFigure2.21,globalenergy-relatedcarbon-pricingrevenuewillrisefromaroundUSD500bn/yrtodaytoalmostUSD2,000bnin2030,beforefallingagaintolessthanUSD500bn/yrin2050.GreaterChinahasthebiggestsharebyfar,followedbyNorthAmericaandEurope;allthreeregionshavingrelativelyhighcarbonprices.Thesecarbonrevenuesarelikelytobeatleastpartiallyrefunneledbackintotherespectiveenergysectorsintheformofdecarbonizationsupporttonetzeropriorityareas.Suchsupportiskeytoramping-upcoreabatementtechnologies.Figure2.18showsenergyexpendituresunderthePNZinaccordancewithourstrictdefinitionofwhatconstitutesenergyexpenditure.Thoseexpenditurestotal1.4%ofGDPin2050.However,aswehavediscussedinsomedetail,thereareadditionalcostsassociatedwithourPNZ.Thesumoftheseadditionalcostsamountstolessthan1%ofGDP(USD3trn)in2050.TotalexpenditureonthePNZisthereforesomethingintheregionof2.3%ofGDPin2050—considerablylessthan3.2%ofworldGDPcurrentlyspentonenergy.Hence,weconcludethatthePNZisaffordable.Itis,however,bynomeanscheap,andrequireslargeupfrontinvestments,muchofwhich,wehope,willbesubventedbyfundsgeneratedbycarbonpricingpolicies.FinancialsupportfromgovernmentsisanessentialpartofthePNZanddecisiveforthedecarbonizationofseveralsectors.31SolarPanelFarmwithuniquedesigninaformofanisland(Zoneiland).Energyisusedtopowercityheating(stadswarmte)inamodernsustainabledistrictNoorderplasseninAlmere,TheNetherlands.Pathwaytonetzero232PATHWAYTONETZEROEnergyTransitionOutlook20213SECTORROADMAPSWefocusourpathwaytonetzero(PNZ)ondevelopmentswithinthemostenergy-intensiveindustriesandthedemandandsupplysectorsresponsibleforthelion’sshareofemissions.Wehaveselectedninesectorsthattogethercurrentlycontributemorethan29GttoglobalCO2emissions,whichisover80%ofglobalenergy-relatedemissions.Bymid-century,totalemissionsfromtheselecteddemandandsupplysectorsareexpectedtobe2.4Gtand0.15Gt,respectively,underthePNZ,instarkcontrastto8.3and2.9GtexpectedintheETO.Theemissionsreductionbymorethan70%inthedemandsidesectorsandbymorethan90%onthesupplyside(comparingPNZversusETOfiguresin2050)willbedrivenbystrictandambitiousnetzeromeasuresdescribedundereachsector.Intermsofsectoralcontributions,atpresent,roadtransportisbyfarthelargestemitteramongthesevendemand-sidesectorsinfocus,witha40%shareofthetotal.By2050,undertheETOforecast,thissectorisexpectedtoremainthesectorwiththelargestshare,albeitsmallerthantoday(32%).Theironandsteelandbuildingsheatingsectorsfollowcloselybehind.UnderthePNZ,theroadtransportsector,withdifficultcondi-tionsforCCS,stilldominatestheremainingemissionscontributinghalfoftotal,withironandsteelinsecondplace.InthePNZ,theeasiertoabatepowersectorseesamuchmorerapidtransitiontowardsrenewableelectricityandmuchhigherprevalenceofCCSintheworld’sfossil-fuelledplants,aselaboratedinthepowersection(p.48),resultinginpowercontributingonly0.14Gttototalremainingemissions.Fromthenegligible0.07%ofdemand-sideemissionsbeingcapturedonaveragetoday,theaverageCCScaptureratewillbeabout12%underPNZversusonly2.5%undertheETO,withupto90%ofemissionsinpowergenerationbeingcaptured.Inthischapterwedetailthepathwaystonetzerofortheninechosensectorsonbothdemandandsupplysidescoveringtechnologies,policiesandinvestment.SomeofthesectorswhichcontributesmallersharestoglobalCO2emissions,andwhichdonotformpartofourfocusinthischapterincludemanufacturedgoods,constructionandmining,rail,energysectorownuse,andagriculture.Whereregionsandregionabbreviationsarementioned,pleaserefertoChapter4(Regionalroadmaps,p.59)fortheregionoverview.Intermsofsectoralcontributions,atpresent,roadtransportisbyfarthelargestemitteramongthesevendemand-sidesectorsinfocus,with40%shareoftotal.33Sectorroadmaps3TABLE3.1Emissions,sectoralcontributions,andCCScaptureratesin20192019DemandSectorsAbsoluteEmissionsafterCCS(GtCO2)ContributiontoTotalRemainingEmissions(%)CCSCaptureRate(%)RoadTransport6.5440%0%Maritime0.885%0%Aviation1.067%0%BuildingsHeating2.2614%0%IronandSteel2.6216%0%Cement1.056%0.4%Petrochemicals1.7711%0.4%Total/WeightedAverageDemandSectors16.18100%0.07%SupplySectorsPower13.100.0%Bluehydrogen0.0090.0%TABLE3.2Emissions,sectoralcontributions,andCCScaptureratesunderETOandPNZscenariosby20502050DemandSectorsAbsoluteEmissionsafterCCS(GtCO2)ContributiontoTotalRemainingEmissions(%)CCSCaptureRate(%)ETOPNZETOPNZETOPNZRoadTransport2.641.2332%51%0.0%0.0%Maritime0.290.054%2%0.0%0.0%Aviation0.830.3410%14%0.0%0.0%BuildingsHeating1.390.1417%6%0.0%0.0%IronandSteel2.000.5224%21%1.2%36.5%Cement0.590.087%3%15.9%73.3%Petrochemicals0.540.057%2%15.9%73.3%Total/WeightedAverageDemandSectors8.292.41100%100%2.5%11.9%SupplySectorsPower2.910.142.8%89.7%Bluehydrogen0.020.0190.0%95.0%34PATHWAYTONETZEROEnergyTransitionOutlook20213.1ROADTRANSPORTInourPNZ,finalenergydemandfromglobalroadtransportisreducedbyaquarterin2050comparedwithDNV`sETO.Oilusefallsby66%,withelectricity(+27%)andhydrogen(+475%)fillingthegap.Fromthisdevelopment,anemissionreductionof54%isachieved.WhilethenumberofvehiclesisequalbetweenETOandthePNZ,thecompositionoftheworld`sfleetdifferssignificantly,showingincreasedbatteryelectricvehicleuptakeinallcategories.TechnologiesThebasictechnologiestoreducesectoralemissionsinroadtransportalreadyexist.Inpassengertransport,themainmechanismtoreduceemissionsisreplacementofICEVsbyEVs.EVsareaboutthreetimesmoreefficientthanICEVs,andastheEVfleetexpands,energydemandforroadtransportdeclinessignificantly.Moreover,EVsbecomeprogressivelylessemissions-intensivewiththeongoingpenetrationofrenewablesinthepowermix.NewmodelsofEVsarealreadyproliferatingdrivingfurtherimprovementsinvehicleperformancemeasuressuchasrangeonasinglecharge.ThisappliestobothpassengerandcommercialEVs.HeavilylinkedwiththeuptakeofEVsistheavailabilityandaveragechargingspeedofrechargingstations.Newlithium-ionbatteryconfigurationsaswellasnewsolid-statebatteriesarelikelytoincreasechargingspeedsignificantly,whichishighlynecessaryforoperatingheavycommercial-vehicleswithbatterysizesexceeding400kWh.Atthesametime,theavailabilityandaveragechargingspeedofpublicchargingstationsneedstofollowthedevelopmentofbatterychargingspeed.35Sectorroadmaps3InaccordancewithourETO,wedonotforeseeabrightfutureforhydrogen-propelledpassengervehiclesinourPNZowingtohighercostsandlowerefficiency.Fuel-cellelectricvehicle(FCEV)technologyislikelytoprevailonlyinlong-haultrucking,whereastheadvantagesofelectricpropulsionwilledgeoutbothfossilfuelandhydrogeninshort-tomediumhaultrucking.OurPNZaccommodatessomefossilfuel-propelledroadtransport.However,conditionsforICEmanufacturersarelikelytobeverytough:muchtighterfueleconomystandardswillrequireverylargeinvestmentsinengineefficiencyimprovementsevenasICEsalesandthusrevenuesaredeclining.InlinewithourETOfindings,wedonotforeseethetransitioninroadtransporttobesignificantlyconstrainedgloballybytheavailabilityofrawmaterials.Imbalancesindemandandsupplywillbesolvedthroughcollaboration,tradeandinnovation.Policies—Fuel-economystandardswillbemorestringent.By2050,therewillstillbesomediesel-andgaso-line-fuelledvehiclesontheroad,buttheywillalmostexclusivelybecommercial.Webelievethatthosevehicleswillhavetobesubjecttomuchstricterfueleconomystandardsthancurrentlyimplementedtoreducetheirfuelusetoaminimum.—NorthEastEurasiaandLatinAmerica,whichhaveacomparablyhighshareofnaturalgas-drivenvehiclestoday,areexpectedtoincreasetheshareofinternalcombustionvehiclespropelledbynaturalgasby30%in2050tocontributetoPNZ.—Additionaltaxesongasolineanddieselwillbeneededtoacceleratetheuptakeofbattery-electricvehicles(BEVs),reduceenvironmentalpollutionandthusmitigateroadtransportsectoremissions.Taxationlevelsneedtoincreasebybetween+75%(Sub-SaharanAfrica)and+200%(NorthEastEurasiaandMiddleEastandNorthAfrica)comparedwithcurrentlevels.—Newsalesofinternalcombustionengine(ICE)vehicleswillbebanned.OECDregionsandGreaterChinawillneedtostartbanningpassengerICEvehiclesstepwisefrom2030onwards,withtheotherregionsfollowingonlyafewyearslater.However,inSub-SaharanAfrica,itisunlikelythatwewillseeatotalbanofICEvehicles.TheprohibitionwillneedtobeextendedtoICEcommercialvehicles,withjustafewyears’graceperiodafterbansofpassengerICEvehicles.—ThepurchaseofEVsneedstobefurthersupportedbygovernmentsandmanufacturerswithe.g.,directorindirectpurchasepricereductionsheavilyweightedtothenextfewyears,and/orquotasforEVsharesinmanufacturers’fleets.InvestmentsCurrently,thepurchaseofEVsissubsidizedinmanyregions,andthisneedstointensifyinanetzeroscenario.Whileinsomeregionsasharecomesfromthemanu-facturersthroughdiscounts,alargeproportioniscoveredbygovernments.Additionally,furtherincentiveslikereducedtollroadsorreducedparkingfeesareinplaceinmanyregions.Thesesupportmeasurescomewithsignificantfiscalcosts.Incontrast,fossil-fuelsubsidiessuchastaxbreaksondieselwillreduce,relievinggovernmentalbudgets.36PATHWAYTONETZEROEnergyTransitionOutlook20213.2MARITIMEMaritimetransportneedstoreduceitsemissionsbyatleast95%tocontributetoaglobalandcross-sectoralnetzeroby2050.Energydemandforglobalshippingwillbeabout20%lowercomparedtoDNV’sbestestimateforecast(ETO).TechnologiesCurrently,theworldfleetismostlypoweredbydieselenginesrunningonmarinefueloils.Decarbonizingshippingwillrequirehigherenergyefficiency,improvedlogisticsandnewfuels.Irrespectiveofenergyefficiencyimprovementsimplemented,achangetolowcarbonfuelswillberequiredtodecarbonizeshippingby2050.Therehasbeenanincreaseintheuptakeofalternativefuelinshipsonorderfrom6%inMay2019tonearly12%inJune2021.Exceptfortheelectrificationunderwayintheferrysegment,thealternativefuelsarecurrentlystillmainlyfossil-based—andaredominatedbyliquefiednaturalgas(LNG).Allshipswillprobablynotmakeatransitiontothesamefuelinthelongerterm.OurPNZshowsadiversefutureenergymixcomprisingbothfossilandlowcarbonfuels,wherefossilfuelsaregraduallyphasedout.Thefuelmixincludesfossilmarinefueloils,LNGandliquefiedpetro-leumgas(LPG),electro-basedhydrogen,ammoniaandLPG,andbio/electro-basedmethanol,LNGandmarinegasoil(MGO).Keyonboardtechnologiesforuseofhydrogenandammoniawillbeavailablein4-8years,whileothertechnologiesarealreadyavailable.Whileweexpectthatthecombustionenginewillcontinuetobethedominantenergyconverterinthefleet,futureintegrationofmarinefuelcellsinpowersystemshasthepotentialtoprovidehigherefficiencyandtherebylowerfuelconsumption.37Sectorroadmaps3Thetechnicalapplicabilityandcommercialviabilityofalternativefuelswillvarygreatlyfordifferentshiptypesandtrades.Deep-seavesselshavefeweroptionscomparedwiththeshort-seasegment.Forthelatter,theshorterdistancesandhighlyvariablepowerdemandsoftenmakeelectricorhybrid-electricpowerandpropul-sionsystemsmoreefficientthantraditionalmechanicaldrives.Forthedeep-seasegment,mostoftheenergyconsumptionrelatestopropulsionatsteadyspeedoverlongdistances,whichfavoursenergyefficientmechanical,direct-orgeared-driven,two-strokecombustionengines.Theshipsrequirefuelthatisgloballyavailable,andthefuelenergy-densityisimportanttomaximizethespaceavailableforthetransportofcargooverlongdistances.Thefuturefuelandtechnologyshiftsmustgotogetherwithgreaterenergyefficiencyofships,requiringintensi-fieduptakeofbothtechnicalandoperationalenergy-efficiencymeasures.Abatementmeasuressuchaswindpowering,airlubricationsystems,andvarioushullandmachinerymeasures,arenowemerging.Thedrivefordecarbonizationinglobalindustrialvaluechainswillalsodrivelogisticsoptimizationincludingmeasuressuchasincreasedfleetutilizationandspeedreductions—facili-tatedbydigitalization.PoliciesThreefundamentalkeydriverswillpushdecarbonizationinshippinginthecomingdecade:—Regulationsandpolicies—Accesstoinvestorsandcapital—CargoownerandconsumerexpectationsAclearandlong-termpredictableregulatoryframeworkforemissionreductionswillbethekeydriverfortechnologydevelopmentandinvestmentsindeploymentofcarbon-neutralfuelsandsolutions.Initialpoliciesneedtofocusonloweringcriticalbarriers.Theseincludetechnicalmaturityandfeasibilityoftechnologyonboardvessels,includingsafetyandrules,aswellasbarriersrelatedtomarketdemand.Organizationbarrierssuchasmanagerialpractices,legalconstraints,andlackofinformation,willalsoformsubstantialobstaclestoimplementation.Whenthemaintechnicalandorganizationalbarriersareremoved,thesolutionsneedtobeimplementedinthefleetleadingtolarge-scaleuptakeofcarbon-neutralfuels.Thisrequireslargeinvestments,especiallyininfrastructurerelatedtoproductionanddistributionofcarbon-neutralfuelsandonboardengineandfuelsystems.Enforceableregulationswillplayanimportantroleinmandatingtheuptakeandcreatingincentivesforinvestinginproductionandinfrastructure.Thiscouldforexamplebethroughtechnicaloroperationalrequire-mentstoGHGemissions,oracarbonpriceensuringalevelplayingfieldforshipsthatrunonmoreexpensivecarbon-neutralfuels.InvestmentsThetotalonboardinvestmentcostsfortheperiodupto2050isestimatedintherangeofUSD200-450bn,dependingonwhetherthefuturefuelscanbeusedonexistingfuelsystemsandmachineryornot.Inadditiontoonboardinvestmentneeds,theenergytransitioninshippingwillrequiremajorinvestmentsininfrastructureandproductioncapacityforsupplyofcarbon-neutralfuels.Theonshoreinvestmentcostsandthehighercostofproducingzero-carbonorcarbonneutralfuelswillleadtoatleastasignificanthigherfuelcostforships.Currently,theworldfleetismostlypoweredbydieselenginesrunningonmarinefueloils.Decarbonizingshippingwillrequirehigherenergyefficiency,improvedlogisticsandnewfuels.38PATHWAYTONETZEROEnergyTransitionOutlook20213.3AVIATIONTheglobalaviationsectorwillseeafairlymodestgrowthinourPNZcomparedwithmostothergrowthforecasts,withthenumberofflightsincreasinggloballyfrom4.4bntodayto7.2bnpassengerflightsperyearin2050.Duetointroductionofdecarbonizedfuel,emissionsreductionfromthesectoris68%fromtodayto2050;remainingemissionsareat340MtCO2in2050.TechnologiesAviationisahard-to-abatesectorwithopportunitiesforelectrificationlimitedtoshort-haulflights,representingonlyasmallfractionofaviationfueluse.Decarbonizationthereforeneedstofocusonthedecarbonizationofthefuelitself.Efficiency,asmeasuredinenergyuseperpassenger-km,willcontinuetoimproveduetobetterenginetechnology,improvedaircraftdesign,largerplanesaswellasbetterflightpathlogistics.Annualefficiencyimprovementswill,however,decreasefrom1.9%/yrtodayto1.2%/yrin2050.Deploymentofelectricaircraftislikelytostartbefore2030forverysmallshort-haulplanes,andinthe2030sforslightlylargershort-haulplanesinleadingregions.Batterieshaveverylowenergydensity,andonlyhybrid-electricsolutionsarerelevantformedium-andlong-haul.Sinceonlyaminorpartofaviationfuelisconsumedonshort-haulflights,electricitywillrepresentonly2%oftheaviationfuelmixin2050.Theaviationindustryhasstartedtodirectextensiveresearchintohydrogenasafutureaviationfuel,withearlyindicationspointingtohydrogenbeingmostpromisingformedium-haulaircraft.Therearetechnology,cost,andregulatorychallengesaplenty,andrealistically,wewill39Sectorroadmaps3seehydrogen-poweredairplanesinuseonlyafter2040inthefirstfewregions,withlimitedwideruptakebeforemid-century.Sustainableaviationfuel(SAF)canreplacetheexistingkerosenewithrelativelylittleadjustmentoffueltanksandengines(dependingonblendingratio).Intheshortandmediumterm,SAFislikelytoconsistmainlyofbiofuelsproducedfromfeedstockssuchasusedcookingoil,municipalsolidwaste,grassycropsandalgaeandthroughconversiontechnologiessuchashydroprocessedestersandfattyacidssyntheticparaffinickerosene(HEFA-SPK),Fischer–Tropsch,pyrolysisandalcoholtojet.Inthelongerterm,otherSAFsolutionswillbedeveloped,andliquidsyntheticfueloriginatingfromhydrogenislikelytorepresentmorethanhalfoftheSAFinthedevelopedregions.Asformostsyntheticfuels,theefficienciesintheentireproductionprocessarelow.Policies—Increasingfeesandtaxes,andmorecostlyfuels,makeairfaresexpensive,andarelikelytobeeffectiveenoughontheirowntolimitgrowthinthenumberofflights.Flyingcanbeperceivedasaluxuryandrestrictingthenumberofflightsperpersonisapossibleauxiliarypolicy.—Mandatesonfueltargetsandblend-inswilldrivedecarbonizationofthefuelmix.Intheforeseeablefuture,oil-basedaviationfuelwillremaincheaperthanalternativefuelsandtechnologies,includingbiomass-derivedorelectricity-basedsustainableaviationfuels,purehydrogen,orbatteries.Conse-quently,fuelblendingmandateswillbethemainpolicytoolenforcinguptakeoflowcarbonfuels,andwehaveappliedthefollowingscale-up,dependingonregionandlengthofflight.—NAM/EUR—gradualscale-upto15%in2030,40%in2040and75%SAFblendinginaviationkerosenein2050—OPA/CHN—scaleupoflevelsofSAFabout75%ofthelevelinNAM/EUR—LAM/NEE/MEA/SEA/IND—scale-upoflevelsofSAFabout50%oflevelinNAM/EUR—SSA—scaleupoflevelsofSAFabout25%oflevelinNAM/EUR—Flightsbetweenleadingandlaggingregionswillfollowtheleadingregion’suptake—Technologymandatesforelectricshort-haulflightsarelikelyandhavebeenappliedupto80%forshort-haulflightsby2050inleadingregions.—Energy-efficiencyimprovements,inadditiontofuelblendingmandatesandtaxation,areexpectedtocontinue,butmoreasafactorofcostreductionthanpolicy,aselaboratedbelow.InvestmentsInourETOwehavealreadyincludedaquitesignificantSAFshare.Thiscomeswithadditionalcosts;andwebelievetheaviationsectorisabletofinancethisthroughhigherairfares.Afurtherenforcementoffuelblendingmandatescomeswithadditionalcosts.However,moreexpensiveflights,potentiallypairedwithbehaviouralmeasuresdiscouragingunnecessaryairtravel,willre-ducethenumberofflights.TheabsoluteinvestmentsforsocietyinaviationisthereforelowerratherthanhigherinthisPNZcomparedtotheETO.40PATHWAYTONETZEROEnergyTransitionOutlook20213.4BUILDINGSHEATINGThebuildingspaceandwaterheatingsubsectorisconsideredhard-to-abate.InourPNZ,weseeanemissionsreductionof94%from2019to2050inbuildingsectorheating,andenergyuse44%lowerin2050,comparedwithourETO.Suchadrasticreductioninenergyuseandemissionsisonlypossiblethroughthedualcatalysationofenergyefficiencyandelectrificationtodrivedecarbonization.TechnologiesThetechnologiesforachievingnetzeroemissionsinbuildingheatingalreadyexist.Therefore,itistherateatwhichsuchtechnologiesaretakenupinthevariousworldregionsthatmakesallthedifferenceintermsofemissionsreduction.Maindecarbonizationoptionsinclude:Electrificationofbuildingheatingwithbothconventionalelectricheatersandheatpumps.Technologicalleapfrog-gingtoelectricheatinginregionssuchasSSAandIND,whereelectricityreplacesconventionalbiomassuse,ratherthancoal,oil,ornaturalgas.ThisispossibleduetofastertechnologytransfertotheseregionsfromOECDregions.HydrogenisalsousedinbuildingheatingintheOECDPacific(OPA)todecarbonizebuildings,intandemwithelectrification.Energyefficiencyimprovementssuchasinnovativebuildingmaterialsandthermalenvelopesreducethespecificheatingdemand.Thisisnotjusttechnologydependentinthesensethattheuptakeoftheseoptionscanbeencouragedbylowerspecificheatingdemandrequirementsthroughpolicy.41Sectorroadmaps3PoliciesThepolicyadjustmentslistedbelowshouldnotbeconsideredinisolation,butratherintandemwiththeavailabletechnologies:Regulationprohibitingfossil-basedheatingwithapartialban,translatingtoalimitedandregionallydifferentiatedpercentageofnewbuildingsallowedtousefossilfuels:—InNAM,EUR,CHNandOPA,onlyfossilfuelheatingisconstrainedto50%ofnewbuildingsin2050,whilefortherestoftheworld75%maybefossilfuel-heated.—Thelifetimeoffossilfuelheatingequipmentishalved,from15yearsto7.5years,enablingfasterphase-outoffossil-fuelequipmentandhencephase-inofelectrifi-cationofbuildingheating.Suchahalvingalsohastheeffectofincreasingthelevelizedcostofheatprovidedbyfossil-fuelequipment.Coupledwithleapfrogging(mentionedintheTechnologiessection),thishastheeffectofdevelopingregionssuchasSSAandINDeffectivelyelectrifyingbuildingheatingtoalargeextent.Highercostofcapitalforfossil-fuelboilersincommercialbuildings:—Investorsincommercialbuildingprojectswillfacedifficultyinsecuringfundingforfossilfuelconnectedbuildings.Oilandnaturalgasboilershaveacostofcapitalof17%,exceptinMEAandNEEwhereitis11%,whilecoalboilershaveacostofcapitalof20%in2050.Incomparison,costofcapitalofelectricandrenewa-bleequipmentwilldecreasefrom7%in2022to6%in2025andthereon.Higherenergyefficiencystandardsforexistingandnewbuildingsleadingtolowerspecificheatingdemand:—ThespecificspaceheatingdemandofbuildingsinNAM,EURandOPAreducesby2%peryearonaveragefrom2022,whileinCHNthereductionis1.5%peryear.Therestoftheworldseesareductionof1%peryearonaverage.Additionally,fossil-fuelsubsidiesforbuildingheatinginMEAandOPAareremovedfrom2022.InvestmentsThetransitionweforeseetoachievethePNZinthebuildingheatingsectorrequiresenormousprivateandpublicinvestmentsintothemanufacturingvaluechainofheatingequipment.JointventuresbetweenprivateentitiesfromOECDregionsandpublicentitiesindevelop-ingregionsareneeded,especiallygiventhemassiveexpansionofnewbuildingspaceexpectedinthecomingdecadesduetothere-structuringtowardamoreservice-based(tertiary)economy.Indirectly,electrificationofbuildingheatingwillalsoleadtoinvestmentsintostrengtheningtheelectricgridinfrastructure,alsoincountriesthatcurrentlydonothavereliableconnectiontotheelectricitygrid.42PATHWAYTONETZEROEnergyTransitionOutlook20213.5MANUFACTURING—IRON&STEELInourPNZ,globalsteelproductionisexpectedtostartdecliningwithinthisdecadethankstomaterialefficiencyandrecyclingmeasures.By2050,thevastmajorityofsteelwillbeproducedinelectricarcfurnaces.Asaresultoftheseandothermeasures,weforeseeanemissionsreductionof80%andanenergyconsumptionreductionof8%from2019to2050inironandsteelproduction.Duetothehighusageofcoal,theCO2intensityofironandsteelproductionissignificant,witheachtonneofcrudesteelproducedresultingin1.4tCO2ofdirectemissions,or2.0tCO2ifindirectelectricityandheatemissionsareincluded.Ironandsteelaccountfor22%ofemissionsfrommanufacturingenergyuse.Around40%ofenergydemandinironandsteelmakingcomesfromthereductionofironore,aprocesscurrentlyrelyingpredominantlyoncoalusedinblastfurnaces.Thehighshareofcoalinthesector’senergyinputs,thelonglifetimeofincumbentassets,aswellastypicallylowmarginsinamature,competitiveandcommoditizedmarketposemajorbarrierstoloweringemissions.Furthermore,manytechnologiesthatareessentialinanetzeropathway,suchasrailinfrastructure,windturbinesandCCSequipment,requirelargeamountsofsteel.Asaresultofmaterialefficiencyandrecyclingmeasures,steeldemandandproductionareexpectedtostarttograduallydecreasewithinthisdecadeinourPNZ.43Sectorroadmaps3TechnologiesThetechnologiesrequiredfordecarbonizingironandsteelproductionarealreadyavailable.Thesemainlyincludethealreadywidelyusedscrap-basedelectricarcfurnace(EAF)forsteelproduction,andthepromisingdirectreduction.Directreductionofironisthesolid-statereductionofironoxideintoiron,wherepre-heatedironoreisconvertedintodirectreducediron(DRI)withhydrogenactingasthereducingagentandenergysource.TheDRIcanthenbefeddirectlyintoanelectricarcfurnacetoproducesteel.Low-carbondirectreductioncanbeeitherhydrogen-basedornaturalgas-basedwithcarboncaptureandstorage(CCS).Thesetwosimilartechnologiesarecurrentlyeithernoteconomicallyviableduetothehighcostsand/orlowavailabilityoffeedstock(e.g.,inthecaseofgreenhydrogen-basedDRI).Thedirectreductioncanalsobedesignedtooperatewithmethane,hydrogen,oramixtureofthesegasesasthereducingagent.Therefore,blendingofhydrogenintonaturalgasisseenasatransitionstrategybeforethereistechnologicalreadinessforpurehydrogenuse.Insummary,thetechnicalsolutionsneededtodecarbonizeironandsteelexist,butthemainbarriersareeconomic(competingwithexistingfossil-basedbasicoxygenfurnacetechnology)andpolicy-related.Policies—Carbonpricingisthemostimportantpolicyforthecommercialisationandscalingupoflow-carbonironandsteelproduction.Sufficientlyhighpricingofcarbonemissions,internalizingthecostofnegativeexternalities,isneededforlow-carbontechnologiestomakesensecommercially.—RecyclingpolicyenablesafastertransitiontosteelproductionviaEAF.InourPNZ,by2050,allsteelproductionintheOECDand90%ofproductioninotherregionsisassumedtobeviaEAF(Figure3.11),andthesteelrecyclingrateclimbsto95%globally.—IncentivesforfuelshiftsandCCS.TheDRI-EAFtechnologyreliesonnaturalgasorhydrogenfordirectreductionofiron,andfuelswitchingtohydrogenwillbenefitfromlowerhydrogenprices(5%-25%)asaresultofenergytaxation,aswellasthesignificantlyfasterexpansionofglobalhydrogenproductioncapacitywithhigherhydrogenuptakeinotherdemandsectors.Furthermore,successfuldecarboni-zationofnaturalgas-basedDRIwillbedependentonsupportforthescalingupofCCStechnologies(seetheSection3.10onCCS).—Substantialregionalizedcapitalexpendituresupportofbetween35%to50%isforeseenforhydrogenandelectricityuseinironorereduction,aimedatminimiz-ingtheuseofcoal.—FurtherPNZassumptionstowardsreducingemissionsincludeagradualdecreaseinthesteelintensityofnewbuildings(20%lowerby2050)andafasterimprove-mentofenergyintensityinsteelproductionitself(1.2%/yrversus1%/yrinETO).ThedecarbonizationroutesoutlinedaboveareconsistentwiththoseoutlinedbytheEnergyTransitionCommission(ETC,2020)andtheInternationalEnergyAgency(IEA,2020).InvestmentsTheaddedvalueoftheglobalsteelindustryisaroundUSD500bn(WorldSteel,2019).Low-carbonsteelproductionisaround10-50%moreexpensivethanthefossil-basedcounterparts,withuncertainfutureCAPEXandOPEXcostsandwithfutureenergycostshighlysensitivetothecostofnaturalgasandelectricity(IEA,2020).Assumingthecostdifferenceofinnovativetechnologieswouldbeatthelowerend(10%)by2050,thiswouldtranslatetoanadditionalannualcostofaroundUSD35bnfortheglobalsteelindustry.Currently,sustainabilitycertificationinitiatives,suchasResponsibleSteel,andindustryassociationsthatmakepubliccommitmentstoprocure100%netzerosteelby2050arepavingthewaytowardssteeldecarbonizationinpioneeringcountries.InthePNZ,weenvisioninvestmentsininfrastructureforsustainablesteelandforEAFcapacitiestorampupfasterbeyondtheOECDregionsinwhichtheycurrentlyexist.Similarly,toachievehighrecyclingrates,theinfrastructureforcollectionandprocessingwillneedtobeembeddedindevelopingregions.44PATHWAYTONETZEROEnergyTransitionOutlook20213.6MANUFACTURING—CEMENTAlthoughcontroversial,cement’suniquepropertiesmakeitunlikelytobereplacedinthecomingdecades.MassivedeploymentofCCSandanewmaterialcompositionwillhoweverdecreasetheCO2emissionsfrom2.7Gttodayto0.1Gtin2050.TechnologiesReaching4.1billiontonnesin2019,cementproductionaccountedforaround7%ofglobalCO2emissions.Whilemaintainingproductionattoday’slevels,emissionintensitywillneedtodecreaseby48%by2030and95%by2050inourPNZ.Clinker,themaincomponentofcement,isthemostenergy-intensiveandcarbonemit-tingcomponentofcementproduction,fortworeasons:—Combustion-relatedemissionsfromenergyuse(1.1GtCO2in2019),wherethehighheatprocessaround1500°Cinclinkerproductionpredominantlyreliesonhighcarbonemittingfossilfuelssuchascoalandpetcokeandhavelimitedelectrificationpotential.—Process-relatedemissions(1.6GtCO2in2019),wheretheuseofcarbonatedminerals(mostlylimestone)asarawmaterialreleasesCO2aspartoftheproductionprocess.OurPNZseesthreemaindecarbonizationroutes:Carboncaptureandstorage(CCS)isthemainandmosteffectiveabatementsolution,becauseofunavoidableprocessemissions,andwillcapture50%ofdirectemis-sionsby2031and87%by2050.Technologyishoweverstillinanearlyphaseofdeployment,withonlyahandfulofprojectsbeingannouncedforthemoment.Aseriousramp-upwillbenecessarytounleashthesnowballeffectoftechnologycostlearningtoachieveitsfullpotential.45Sectorroadmaps3Fuelswitchingischallenginggivencompatibilitylimi-tationswiththedrykiln.Coalusewillneverthelessdecreaseby63%becauseofincreasingenergyprices,thelastusersbeingintheIndianSubcontinentandSouthEastAsia.Hydrogenwillhaveanimportantroleandrepresents25%,mostlymixedinnaturalgas.Wasteco-processing(plastics,tyres…)willalsocontinuetogrow,asitdivertswastefromlandfillorincineration,andisasourceofincomefortheindustry.Improvementsinenergyintensityofcementwillbemadethroughloweringtheclinker-to-cementratioandtheuseofalternativematerialsforclinkerorcement,whichsimultaneouslyimpactprocessemissionsintensity,reducingby30%in2050.Minorgainsareexpectedfromreuseofconcretebecause,unlikeotherrawmaterials,thereiscurrentlynoviabletechnologytoperformcradle-to-cradlerecyclingforcement.Althoughalothasalreadybeenachievedbyphasing-outoldertechnologies,suchaswetkilns,further25%gaininenergy-efficiencyisexpected.Currentcementinstallationsarequiteyoung,especiallyindevelopingregions,andhavealonglifespan:mostof2050productionwillbeperformedinplantsthatalreadyexist,andwhereretrofittingwillbethefavourableabatementoption.Afuturepotentialabatementsolutionistheimpactofrecar-bonation.Thisisanaturalprocess,inwhichfinelygroundconcretepartlyreabsorbstheatmosphericCO2releasedduringtheproduction,whichcouldsignificantlyreducetheoverallprocessemissions,butthepotentialrequiresfurtherstudyandhasnotbeenassessedinthePNZ.PoliciesDecarbonizationofcementwithhighrelianceonCCSwillnotbecost-competitivewithoutpolicymeasuresnudgingemissionsreductionandimplementationofsolutions.—CarbonpricingisthestrongestpolicymechanismsinourPNZ.TheeffectisobservablealreadytodayintheEURregion,withsufficientlyhighcarbonpricestoincreasetheshareofalternativefuels.Topreventtraditionallylocalcementproductionfrommovingtolow-costregions,weexpectthatcarbonpricedisparitieswillbehandledthroughimplementationofcarbon-borderadjustmentmechanismsthatreducetheriskofcarbonleakage.Thisisspecificallyrelevantforcement,beingalowvalue-addedproductgenerating6.9kgCO2/USDrevenue,farabovesteel1.4kgCO2/USD(McKinsey,2020).—Increasedtaxationonfossilfuelswilltriggerfuelswitchingawayfromcoalandboosttheuseoflessenergyintensivecement.—Regulationandgovernmentpromotionsupportiveofnewandalternativematerials,enforcementofpublicprocurementforlow-carboncement,andeasedregulationoncementcompositionfordifferentuse.Thesuperiorqualitiesofconcretemaketheconstruc-tionsectorreluctanttotransitionawayfromthecurrentcompositionofcement,hencetheneedforactivepromotionfromgovernmentstoreducethecarbonfootprintofcement.Tworegions,GreaterChinaandtheIndianSubconti-nent,willbethelocusofdecarbonizationeffortsbecausetogetherthesetworegionsaccountformorethan60%ofcementproductionoverthe2021-2050period.Emissionsinthosetworegionswilldecreaseby90%comparedtoourETOforecast,whilemaintainingasimilaroutput.Indevelopingregions,policieswillwalkthefinelinebetweenclimateobjectivesandaneedforhousingandinfrastructureforfast-growingpopulations,highlightingtheurgencywithwhichglobalclimatefinancingforabatementoptionsneedstobedeployed.InvestmentsGiventhepredominantlyupfrontcapitalcostsofcarboncapture,CO2abatementforcementholdspotentiallysignificanteconomicimpactforasectorinwhichmarginshavehistoricallybeentight.Moreover,cementplantsareusuallylocatednearquarries,scatteredacrosstheland-scapeandmayrequireconsiderableinvestmentsfortheconnectiontofutureCO2infrastructureandtransportnetworks.Asanexample,theEnergyTransitionCommis-sionestimatesthatdecarbonizationofcementwoulddoubleitsunitcost(ETC,2020),whichillustratesthecomingrevolutioninthissector.46PATHWAYTONETZEROEnergyTransitionOutlook20213.7MANUFACTURING—PETROCHEMICALSThechemicalandpetrochemicalindustry,relyingonfossilfuelsalsoasfeedstock,willremainkeydriversofoilandgasdemand,butthephasingoutofcoaltogetherwiththedeploymentofcarboncapturewithsignificantindustryuse(CCUS),willsharplyreducetheenergyandprocessCO2emissionsby94%in2050.TechnologiesThechemicalindustryencompassesmanyproductswidelyusedinoureverydaylives:plasticspackaging,fertilizers,pharmaceuticals,tyresetc.Thisdiversityimpliesthatabroadrangeofsolutionsareneeded.However,certainkeydecarbonizationoptionswillreducethedirectandindirectemissionsofthesector:Fuelswitchingfromcoaltonaturalgasfortheremainingcoal-basedmethanolandammoniaproduction,mostlyinGreaterChina.Thisbothincreasesenergyefficiencyandreducesemissionsintensity.Hydrogenisgeneratedduringthereformingprocessandisanessentialpartofthereaction.Apartialfuelshifttohydrogenfromelectrol-ysisisexpected.However,carbondioxideiseitherrecombineddirectly(methanol)orlater(toproduceureafromammonia)inthevaluechain,sochemicalplantsmustinthatcasefindothersourcesofcarbon,hinderingthecompetitivenessofnon-fossilhydrogenpathwaysandexplainingtheremainingshareofnaturalgas.Thesevariousmeasuresleadtoadecreaseofprocessemissionintensityby30%in2050.Increasedbiomethaneshare,inthemethanemix,reachingaglobalaverageof73%in2050,willinduceanetdecreaseinemissions.Primarybuildingblocksforplastics,ormonomers,willcontinuetobeprimarily47Sectorroadmaps3Sectorroadmaps3sourcedfromoilandgas,asprocessesandcurrentplantsaretailoredandoptimizedforthesefuels.Energyefficiencygainsof25%onheatintensitywillbeachievedthroughtheglobaluptakeofcatalyticprocesseslikenaphthacatalyticcracking.Gainsthroughelectrificationwillbelimited,duetohigh-temperatureprocessesandtothedualuseoffossilfuelsasafeedstockandenergysource.Carboncapture,useandstorage(CCUS)willabatetheremainingemissions.Forsomeprocesses,suchasammoniaproductionfromnaturalgas,carboncapturehasaclearbenefitbecauseofthefurtherneedforcarbondioxide,ofteninthesameplant.Carboncaptureisalsocost-effectiveinthatcasebecauseofthepureCO2output,andseveralindustrialplantsalreadyhavethetechnologyinplace,explainingtherapidfutureramp-up.Plasticrecyclingreachinga47%average,withregionaldisparities.ChemicalrecyclingopensnewpossibilitiesasdescribedinourTechnologyProgressReport(DNV,2021).Eco-designofconsumerproducts,withanincreasedfocusonproductrecyclabilitywillhavetofollow.Thisalsoincludesadecreaseinplasticwasteinthemanufacturingprocess.Non-recyclablepolymersshouldbedirectedtowardswaste-to-energy(includingco-processing)andwaste-to-fueltechnologiesforabetteruseoftheembeddedenergy.PoliciesPoliciesinourPNZwilltargetthechemicalandpetro-chemicalsectorbroadly,bothonitsdirectandindirectemissions.—CarbonpricingencouragesfuelswitchingandretrofittingwithCCUSonexistingplants,especiallyforhydrogenproductionfromnaturalgas.—Policyinterventiononplasticsincludesmandatedrecycling,withageneralizationofextendedproducerresponsibility,andtaxesonunrecycledplastics,incombinationwithincreasingrecyclingrates.Indeed,forplastics,aroundhalfofcarbonisembeddedintothematerialitself,andnotaccountedforinthedirectemissionsofthesector,thereforethedisposalphasehasastrongimpactonthefinalcarbonfootprint.—Landfillbansforplastics,accompaniedbyregulationsonproductdesignforhigherrecyclabilitywillalsoavoidlong-termGHGemissionsandpromotestheuseofnon-recyclableplasticsasalternativefuelssource.Reducingthedemand,viaabanofsubstitutablesingle-useplasticswillalsohaveamoderateimpactonglobalemissions.—Supporttodecarbonizedhydrogen,anessentialchemicalforammoniaproduction.Emissionsfromthiskeyelementinnitrogenfertilisers,whichcurrentlyaccountsforaround500MtCO2/yr,mustbeaddressedwhileassuringthecloselyrelatedfoodsecurity.Thiswillthusremainoneofthemainconcernsforgovern-ments.—Stringentregulationonlocalnitratepollutionandinterventionsonfoodwastereducesammoniaderivativesdemand.Althoughammoniaproductionisdecarbonized,finaluseofitsderivativesandtheirsubsequentsoildecompositionareasourceofcarbondioxideandnitrousoxideemissions.Fuelswitchingfromcoaltonaturalgasfortheremainingcoal-basedmethanolandammoniaproduction,mostlyinGreaterChina.Thisbothincreasesenergyefficiencyandreducesemissionsintensity.InvestmentsEnergyefficiencyinvestmentsonnewplants(process,fuelshiftsfromcoaltonaturalgas)couldinfactleadtocostsavings(IEA,2018),althoughinitialcapitalexpenditurescouldbehigh.Themostimportantupfrontcapitalcostswillhoweverbetheinstallationorretrofitofcarboncapture,orforwaterelectrolysisinthecaseofhydrogenproduction.Thiscouldleadtocostincreasefrom15%to111%forammonia(MaterialEconomics,2019)and50%forethylene(ETC,2020).48PATHWAYTONETZEROEnergyTransitionOutlook20213.8POWERGiventhatelectrification,whetherdirectorindirect,iscentraltothedecarbonizationofallregionsandsectors,arenewableandstablepowersystemiscriticalforachievingnetzero.CO2emissionsfromthepowersectorreducefrom13.1Gtin2019to0.1Gtin2050.ThepowersectornarrowlymissesreachingnetzeroinourPNZ.ThelargestregionalcontributortopowersectoremissionsisNEE,accountingfor0.6Gtoftheremainingemissionsin2050(Figure3.18).Onlytworegions,NAMandEURachievenegativeemissionsinthepowersector,andthisisachievedby2036and2035,respectively.Sincethepowersectorbecomescoal-free,thelargestremainingcontributortopowersectoremissionsisnaturalgas,accountingfor66%ofemissionsin2050(Figure3.17).Ontheoppositesideofthescaleisbiomass-firedpowergeneration,which,whencoupledwithCCS,providesnegativeemissions.Overall,theshareofelectricityinfinalenergydemandincreasesfrom19%in2019to53%in2050,whichcontrastswithourETOwhereelectricityhasashareof38%in2050.TechnologiesAlltechnologiesconsideredinthepowersectorofourPNZexist,andrenewableelectricitygenerationtechnol-ogiesarealreadyprovenatscale.Carboncaptureandremoval—Carboncaptureandstorage(CCS)iscriticaltoeliminateemissionsfromtheremainingfossilfuel(mostlynaturalgas)powerplants,especiallyCHPandheat-onlypowerstationsthatgener-ateheattodistrictheatingsystems.Therearenorenewa-blealternativestoheatgenerationexceptbiomassandwaste.Therefore,acombinationoffossil-to-biomasstransitionandCCSwillbeneededtodecarbonizeheatsupply(seeSection3.10forfurtherinformationonCCS).49Sectorroadmaps3Sectorroadmaps3Flexibilityanddigitalinfrastructuretoensuresecurityofpowersupply—Averylargeshareofvariablerenewableenergysources(VRES)inapowersystemisfearedtocauseissuesofsupplystability.Acombinationofdigitalgridinfrastructuresolutions,batterystorageandbackupdispatchablecapacitycanhelpensurefrequencystability,evenat100%VRESpenetration.Inbalancinghourlyanddailyfluctuations,pumpedhydro,batterystorage,dispatchablegeneration,demandresponseandintercon-nectionswillbethekeyflexibilityproviders.LowCAPEXnaturalgascombined-cyclepowerstationswillplayacriticalroleinprovidingbackupcapacitytopowersystemsinextremecaseswherehighdemandmeetslowwindandsolargeneration.ForthecontinuedinvestmentinVRESitisessentialthatflexibilityisbuilt-inandthereissufficientdispatchablepower(IRENA,2019a,b).Power-to-hydrogenwillplayavitalroleinutilizingexcessrenewableelectricityandavoidinglongintervalswithzeroprices.Extensionoflifetimeofnuclearpowerplants—despiteitshighcostandwasteissues,nuclearpowerstillprovidescarbon-freeelectricityandhasaroleinourPNZ.AlthoughcountriessuchasTurkeyandBulgariaarepivotingtonuclearpoweratpresent,wedon’texpectsignificantexpansionofnuclearcapacityduetoitscostandlongconstructiontimes.However,delayingthedecommission-ingofexistingnuclearplantsandallowingthemtorunmoreflexiblythroughrefurbishmentsofkeycomponentswouldbesensible,despitetheadditionalcostassociatedwiththeserefurbishments(IAEA,2020).Giventhis,inourPNZ,thelifetimeofnewnuclearpowerplantsisincreasedfrom75yearsto100years.PoliciesThepoliciestoachieveaPNZinthepowersectorconsistofcostofcapitalforpowersectorinvestment,subsidiesandothersupport,mandates,andbans.Thesepoliciesshouldbeconsideredinconjunctionwiththetechnolo-gieshighlightedabove.Costofcapital—InourPNZ,itwillbeincreasinglydifficultforprojectdeveloperstoraiseequityfinancingforfossil-fuelpowerplants,orforthatmattertoaccessadvantageouslypriceddebtfinancing.Thisisreflectedashighercostofcapitalforinvestmentforfossilfuelpowerplants,differentiatedbyfossilfueltypeandregions.Incontrast,renewablepowerinvestmentshavereducedcostofcapital,from7%in2022to6%in2025andthereafter.—Oilandnaturalgaspowerplantshaveacostofcapitalof11%inMiddleEastandNorthAfricaandNorthEastEurasia,whiletherestoftheworldhas17%.—Coalpowerplantswillhaveacostofcapitalof20%withoutanyregionaldifferentiation.Investmentsupportforstoragecapacity—increasedsubsidiesaregiventoinvestmentforstoragecapacitieswhicharecoupledtoVRES.Reducedlifetimesoffossilpowerplants—inourPNZ,newfossilfuelcapacityadditionsfrom2022havereducedlifetimeswhicharemandatedbypolicy.Thisaffectsallthreetypesoffossilfuelpowerplants,whoselifetimesarereducedfrom40yearsto25years.From2045on,residualoilandcoalfiredpowergenerationcapacityisforciblyretiredinallregions.Supportandmarketdesigntoensurecontinuedinvest-mentinrenewablepower—Withhighsharesofsolarandwindinpowersystems,theelectricitypriceswillbecomeincreasinglyvolatilewithextendedperiodsofverylowornegativepricingiftheelectricitymarketscontinuetooperateinthesamemannerastheydotoday.Newmarketdesignsorfinancialsupportmechanismstokeepcapturepricesabovecostswillhelptosustaincontinuedpowerinvestments.InvestmentsTheworld’spower-linegridcapacityinPNZincreasesby140%from2019to2050.Incomparison,inourETOtheincreasewas119%duringthesametimehorizon.Worldgridcostsareapproximately0.4%oftheworldGDPandthisvalueremainsnearlythesamefrom2019to2050.From13%in2019,theshareofgridexpendituresinenergyexpendituresincreasesto33%by2050.Higherinvest-mentsintogridswillbenecessarytosupportanearly100%VRESpowersystem.Thiswillalsoneedtobecomplementedbytheinvestmentsintostate-of-the-artdigitalinfrastructuretoensuresecurityofpowersupply.50PATHWAYTONETZEROEnergyTransitionOutlook20213.9HYDROGENHydrogenisnowconsideredthemostviableoptionfordecarbonizationinmanyhard-to-abatesectorssuchasaviation,long-haultrucking,ironandsteelproduction,orhighheatprocesses.Hydrogenfrombothrenewablesandfromfossilfuelscombinedwithcarboncaptureandstorage(CCS)supportanetzeroenergysystemin2050.TechnologiesThetechnologiestobothsupplyelectrolyserswitheitherrenewablepowerorfossilfuelsaswellastheconversiontohydrogenviaelectrolysisorsteammethanereforming/gasificationarematureandincommercialuse.Regardingelectrolysers,alkalineelectrolysersaremorematurethanpolymerelectrolytemembrane(PEM)electrolysersandthusdominatethemarketatpresent,butPEM`sadvan-tageinoperatingmoreflexiblywillincreaseitssharesubstantially.OurPNZencompassestwomainproductionroutesforelectrolyser-basedhydrogen:grid-basedelectrolysersandstandalonerenewables-basedelectrolysers.Topreventpossiblefuturefluctuationsofelectricityprices,investorswillgravitatetowardsdedicatedoff-gridrenewablegenerationforhydrogenproduction.Butgrid-basedhydrogenproductionwillexploitthesefluctuationsandmakeuseofcheapelectricityavailableforlonghours,avoidingcurtailmentofsolarandwind.Alongsideelectrolysis-basedhydrogenproduction,wewillalsoseeacontinuationofhydrogenproducedfromCCS-treatednaturalgasviasteammethanereforming.Withgrowinginstallationsofrenewablepower,fossil-fuelbasedhydrogenforenergypurposeswillseealargereductioninmarketshare(Figure3.19).HydrogenproductionasenergycarrierbyproductiontypeFIGURE3.17Units:PJ/yrNaturalgaswithCCSElectricity54,0003,60060202020302050FIGURE3.1951Sectorroadmaps3Sectorroadmaps3AlthoughcurrentlynotpartofourETO,weexpectthatthesignificantlygrowinghydrogenproductionbasedonburgeoningdemandunderourPNZwillverylikelyleadtointer-regionalhydrogentrade.Weforeseebothpipelineandshippingasimportantmeansforhydrogentrade,alsoincombinationwithhydrogentransformedtolargermolecules.Dependingontheendusewewillseehydrogenblendedwithnaturalgasinexistinggrids(e.g.,forbuildingsgassupply)ordedicatedhydrogenpipe-lines(e.g.,intransport).Toconclude,thebasictechnologiestorealiseglobalhydrogentradeexisttoday.OngoingR&Deffortwillneedtoaimat,interalia,improvingPEMfuelcellsandelectrolysersaswellasstorageandtransportoptionsthroughimprovedtankdesignandmetalhydrides.PoliciesTochannelhydrogenusetowhereitsbestsuited,aPNZwillseesectoralhydrogensupportandincentivestocreatehydrogendemand.—Energytaxation—Hydrogenconsumptioninmanufac-turingwillseeenergytaxationfavouringhydrogentobooste.g.,carbonneutralsteelorzeroemissionprocessheat.—Mandatesonfuel-mixshiftsandemissiontrajectoriesinaviationandmaritimetransportwillcreateasignifi-cantdemandmarketforhydrogen—Requirements—Refinerieswillberequiredtoincreasetheirhydrogenshareforenergyprovisionandindoingsoadvancetheirownglobalemissionreductioncontri-butionOntheproductionside,explicitCAPEXreducingmeas-uresareneededtoboostcostlearningcurve-basedcostreductionsforhydrogen.—CAPEXsupporttointegratedrenewableelectricityandelectrolyserprojects,andsubsidiestogrid-powered,renewables-basedelectrolysis.BothsupportmechanismswillbestrongestinOECDregionsandlowerindevelopingregions.—Steelproductionwillbebackedbysupporttoshifttoahydrogensupplychain.InvestmentsAccumulatedinvestmentingrid-basedelectrolysistoprovidehydrogenforenergypurposeswillamounttoaboutUSD1,700bnby2050andanadditionalUSD1,350bnfordedicatedhydrogenpipelines.Withactionsstartingsoon,thiswouldmeananaverageglobalannualinvestmentofaboutUSD60bnperyearforgrid-basedelectrolysisandlessthanUSD50bnperyearfordedicatedhydrogenpipelines.Furtherinvestmentswillneedtobemadefordedicatedhydrogenproductionincombinationwithrenewablepowerplantsaswellasforthebuild-outoftheassociatedinfrastructureforintegrationintohydrogensupplychains.Tochannelhydrogenusetowhereitsbestsuited,aPNZwillseesectoralhydrogensupportandincentivestocreatehydrogendemand.52PATHWAYTONETZEROEnergyTransitionOutlook20213.10CARBONCAPTUREANDSTORAGEInourPNZ,CCSdeploymentgrowsrapidlyfromaroundamere80Mttodaytonearly3.3GtofCO2capturedin2030,reachingapeakofaround5.1Gtin2042,beforeslowlydecliningbacktosome4.7Gtbymid-century.Technology-basedcarbonremoval,generallyreferredtoascarboncaptureandstorage(CCS),isneededtocaptureemissionsthataretechnicallydifficultorprohibi-tivelyexpensivetoeliminate.ReachingnetzerowillbevirtuallyimpossiblewithoutCCS.Technologyperseisnotaninhibitor,withCCSfacilitieshavingoperatedforseveraldecadesinareassuchasenhancedoilrecoveryorfertiliserproduction,wheretheCO2canbecapturedatrelativelylowcost.However,foraslongastherearefossilfuelsintheenergymixaswellasemissionsaspartofproductionprocesses,CCSwillbesorelyneeded.Theexisting20orsocommercialCCSoperationsworldwidearenowherenearthelevelrequiredtomovetowardsnetzeroemissions(GCCSI,2021).However,CCShasrecentlycomeintofocusonceagainowingtoitscriticalroleinhard-to-abatesectors,anditsdualroleinbothreducingemissionsanddeliveringcarbondioxideremoval.ThecontemporaryfocusonCSSalsostemsfromtherealizationthataspeedyramp-upofCCSisrequiredimmediately—certainlyintheremainderofthisdecade—tounleashtechnologycost-learningdynamicsassociatedwithcumulativeincreasesininstalledcapacity.InourPNZ,theamountofcarboncapturedviaCCSstartstobecomeexponentialinthesecondhalfofthisdecade,growingrapidlyfromaroundonly80Mttodaytonearly3.3GtofCO2capturedin2030,reachingapeakofaround5.1Gtin2042,beforeeasingtoaround4.7Gtbymid-centuryinlinewithareducedamountofglobalemissionstocapture.Inthisscenario,theresultisthat95%ofemissionsinhydrogenproduction,94%innaturalgasproduction,90%inthepowersector,80%inrefineries,and95%ofindustrialprocessemissionsarecapturedby2050.53Sectorroadmaps3Sectorroadmaps3TechnologiesInfrastructuretotransportandstoreCO2safelyandreliablyisessentialforexpandingtheprevalenceofCCS.CCSfacilitiescaneitherbestand-alone‘point-to-point’projectsor‘hubandcluster’networkswhichbringtogethermultipleCO2emittersand/orstoragelocationsusingsharedtransportationinfrastructures.EstablishingsuchCCShubswillhelpacceleratedeploymentbyreducingcosts.Atleast12CCShubs(GCCSI,2021)arecurrentlyindevelopmentglobally—includinginAustralia,Europe,theUnitedStates,Canada,andproposalsinMalaysiaandIndonesia—withmanyofthemlinkedtolow-carbonhydrogenproduction(IEA2020).IEA’sanalysisofCO2emissionsfrompowerandindustrialfacilitiesinChina,EuropeandtheUnitedStatesfindsthat70%oftheemissionsarewithin100kmofpotentialstorage.Butshorterdistancescanreducecostsfurtheranddecreaseinfrastructuredevelopmenttimes.DirectAirCaptureDirectaircapture(DAC)technologieshavesignificantpotentialtoacceleratethetransitiontonetzero.DACtechnologiesextractCO2directlyfromtheatmosphereforpermanentstorage(carbonremoval),orforuse,forexample,incarbonatingbeverages,ingreenhouses,ortoproducesynthetichydrocarbonfuels.AnadvantageofDACisthepotentialforflexibilityinsiting,reducingtheneedforCO2transport.DACfacilitiescanalsobeco-lo-catedwithotherCCSfacilities,suchasCCS-equippedpowerorindustrialplants,tofacilitateaccesstoexistingCO2transportinfrastructureandenablingthesefacilitiestoreachnetzeroorevennegativeemissions.Directaircaptureplantsarealreadyoperatingonasmallscale,buttheircostsarecurrentlyprohibitivelyhigh(IEA2020).GovernmentsupportandsubsidiescanmakeDACcompetitiveasacarbonoffsettingmethodovertimebyprogressingtheindustry’scostlearningcurves.WhennetzeroemissionsarereachedinourPNZ,3.3GtofenergyandprocessCO2emissionsstillremain,notablyinthetransportandindustrysectors.Weexpectthataround1.1GtoftheselingeringemissionswouldbecapturedandstoredviaDACtechnologies.Inordertoreachthisgoal,significantgovernmentsupportisassumedinOECDcoun-triesandinGreaterChina,coveringrespectively80%and40%ofthegapbetweenunitCO2capturecostviaDACandregionalcarbonprices.PoliciesCostisthekeyCCSbarrierandthefittingorretrofittingofCCStopowerorindustrialplantswillhappenonlywithgovernment-drivendeploymentpolicies.Inouranalysis,weseeregionalcarbon-pricetrajectoriesasthekeydeterminantoftheuptakeofCCSinpower,manufactur-ing,andindustrialprocessing,incombinationwithothersupportmeasuressuchasinfrastructureandinvestmentsupport,andincentivespertCO2,particularlydrivenbyNorthAmerica,theEUplusNorwayandtheOECDPacificregion,andfromGreaterChinathroughmandates.OurPNZassumesfasterramp-upratesandahighermaximumCO2capturerateforCCScomparedwiththeETO.Insummary,thefollowingaretheadditionalpolicyassumptionsforourPNZ:—Highercarbonpricesincentivizingdeployment—MandatesrequiringCCSinnaturalgas-firedpowergeneration—CAPEX/OPEXsupportandpoliciespromotingvaluechain/infrastructuredevelopmentenableCCSanddirectaircapturecapacityrampupInvestmentsInlinewiththegrowthinCCS,associatedcapitalandoperatingexpendituresareexpectedtogrowtoapeakofjustaboveUSD300bnperyearby2046,thendecliningslowlytojustbelowUSD300bnperyearby2050thankstoloweremissions.DACtechnologyisexpectedtotakeoffaroundadecadelaterduringthe2030s,withexpendi-turesgrowingexponentiallytoreachapeakofUSD480bnperyearin2046.ThisindicatesaunitCO2capturecostthatisoversixtimeshigherinDAC,comparedwithconventionalCCS,by2050.BecauseDACtechnologyisstillinitsinfancy,itwillrequiremuchhigherlevelsofgovernmentsupport.Inordertoreachtherequiredlevelby2050,wehaveassumedthatinitiallyuptothreequartersofthecostsaresubsidized,withtheneedforsubsidiesdecliningovertheyearsdowntoaround30%by2050.54PATHWAYTONETZEROEnergyTransitionOutlook20213.11ENERGYEFFICIENCYWithagreatdealmoreelectricityintheenergymix,onewouldexpectourPNZtogeneratehigherenergyefficienciesrelativetoourETO.Thisisindeedthecase,withworldenergyintensity,asmeasuredbyprimaryenergyconsumedperunitGDP,decliningby2.9%/yrfrom2015to2030.However,evenwiththisgain,theworldstillfallsshortofthe2030SDG#7targetofdoublingtheglobalrateofenergyefficiencyimprovementabovethe2000-2015averageof1.6%.Asthingscurrentlystand,thecleanalternativesforincumbentfossiltechnologiesinsectorslikeaviation,maritime,hightemperatureindustrialheating,andironandsteel,aregenerallytooexpensive,immature,oreveninfeasible.However,improvingenergyefficiencybeyondhistoricaltrendsisnotonlydesiredbutrequiredforanyshort-ormedium-termemissionreductioninthesesectors.Eveninsectorslikeresidentialheating,whereelectrificationiseconomicallycompetitive,thetransitiondoesnothappenovernight.So,measureslikebetterbuildinginsulationwillhelpreduceemissionsoftheexistingbuildingstockwhiletheinstalledequipmentbaseisgraduallyreplenished.Inmosteasy-to-electrifysectors,electrificationandenergyefficiencyinvestmentsaretheeasiestwaytoreduceemissionsintermsoftechnologicalavailabilityandcost.Mostofthehigh-efficiencytechnologiesarecurrentlyavailableinthemarket.Moreover,thesetechnologiesareeitheralreadyatcostparitywiththeincumbentorabouttobecomesosoonintermsoftotalcostofownership.However,asweseeintheexamplesofEVs,heatpumpsorLEDlights,theupfrontcostofthenewtechnologyisusuallyhigherthantheconventionalalternative.Enactingsmartpoliciestoovercomethisinitialbarrieriscritical.TechnologiesPrevioussectionsdiscussspecifictechnologiesthatareneededtoreachnetzeroorclosetonetzeroinvarioussectors.Torecap,therearethreemainpathstoimproveenergyefficiency:Incrementalchangesinexistingtechnologies:continuedimprovementsintheefficienciesofvariousenginesandboilerstoreducefactorslikeheatlossesandfriction.Theefficienciesoftechnologieslikeinternalcombustionengines,gasturbinesorjetengineshavebeenimprovingovermanydecadesandmanyarealreadyreachingtheirthermodynamicslimits.Butwhereverpossible,evensmallimprovementswillhelpreduceemissions.Theseimprovementswillmakesignificantdifferences,especiallyinhard-to-abatesectorswheretechnologyswitchingiseithercostlyorimpractical.55Sectorroadmaps3Sectorroadmaps3Switchtomoreefficienttechnologies:EVsandheatpumpsaretypicalexampleswheretheswitchtoamoreefficienttechnologycanbringa3-4-foldimprovementinenergyefficiency.Thisefficiencyleapistheprimarydriverofelectrification,andastheelectricitymixbecomesgreener,electrificationinvestmentswilltranslateintofurtheremissionreductions.Measurestoreduceenergydemand:betterinsulationofbuildingenvelopesorbetteraerodynamicsoftransportvehicleshelptoreduceenergyconsumptionwhileprovidingthesameamountof(orevensuperior)energyservices.PoliciesAlthoughthereisamarketincentiveforimprovingtheenergyefficiencyoftechnologies,reachingnetzerorequiressignificantadditionalpolicysupportforenergyefficiency.Therearetwomainreasonsforthis.Firstly,therateofenergyefficiencyimprovementsneededtoreachnetzeroistypicallyfasterthanthehistoricalimprovementratesrealizedbymarket-drivenresearchanddevelopment.Secondly,wewillneedtocontinueinvestingintheenergyefficiencyofsoon-to-be-obsoletetechnologieslikeinternalcombustionengines,andthathastobepushedbyappropriateincentives.Energyefficiencypolicieswillneedtocomeinmanyshapesandforms.—R&Dtomaintainahighrateofenergyefficiencyimprovementsinfossiltechnologies,continuedR&Dwillberequired.ThisR&Deffortwillbepartlyfundedbytheprivatesectorasincreasingrequirementsforenergyefficiencyandemissionintensitywillforcecorrespond-inginvestments.However,asfossiltechnologiesbecomemoreandmoreuncompetitive,governmentswillneedtoprovidefinancialsupporttoensurecontinu-ationofR&Defforts.—Policiesforlow-carbontechnologies,astheinitialadoptionisnormallylimitedbytwofactors:highupfrontcostsandlackofsupportinginfrastructure.Policiesaimingtosupportlow-carbontechnologieswillneedtoaddresstheseissuesbyfirstlysupportingR&Dtokick-startthepositivefeedbackloopthatresultsincostreductionasaresultofaccumulatedexperience,andthenforgoingtaxrevenuefromthesalesanduseofthesetechnologies,andfinallybyensuringaccesstolow-interestfinancingorevensubsidizingbydirectfinancialsupport.Insomecountries,governmentspendingwillbeneededtocoverorsupportthecostofsomesupportinfrastructurelikepowergrids,smartmeters,andEVcharging.—Passivepolicieslikemandates,bansandstricterstandardswillcontinuetobeimportanttoolsforgovernmentstopushenergyefficiency,butquickandwidespreadadoptionofthesepoliciesinthenetzerofuturewillrequireactivefinancialsupporttoovercometheburdenofaffordability.InvestmentsInadditiontotheR&Dspendingneededtodevelopmoreefficientenginesandboilers,significantinvestmentlevelsarerequiredtoreplacetheexistingstockoffossil-burningcars,trucks,stoves,boilersatratesfasterthannaturalreplacementrates.Thereisahugeenergysavingpotentialtoberealizedbyimprovinginsulationofthebuildingstock,especiallyindevelopingcountries.InregionslikeSouthEastAsia,theIndianSubcontinentandSub-SaharanAfrica,themajorityofbuildingsthatwillbeoccupiedin2050areyettobebuilt.Enforcingbetterbuildingstandardsonthesenewbuildingswillbekeytoreducingenergyconsumption,especiallywhenitcomestospacecooling.InOECDcountries,theseupgradeswillbecostlierbutequallycrucial.Fromabuildinglifetimeperspective,someoftheseinvestmentswillresultinsavingshigherthantheupfrontcost.Privatesectorsandgovernmentswillneedtomakeinfrastructureinvestmentstosupporttheadoptionofenergy-efficienttechnologies.SuchinvestmentsinvolveEVcharginginfrastructure,hydrogentransmissionanddistributionnetworks,districtheatingpipelines,andpowergrids.Althoughtheseinvestmentswillbeacrucialpartofenergyefficiencyimprovements,itisnoteasytoassesshowmuchoftheseinvestmentscouldbedirectlylinkedtorequiredenergyefficiencyimprovements.56PATHWAYTONETZEROEnergyTransitionOutlook20213.12COMPARISONOFTHESECTORSFigure3.23showstheevolutionofCCScaptureratesinselectedsectorsfrom2019to2050.Thereisastarkcontrastbetweenstationary,largepointsources—suchasmanufacturingandpower—whereCO2emissionsathighconcentrationscanbecapturedrelativelycost-effec-tively,versusmobile,dispersedsources–suchastransportandbuildings–whereCCStechnologycannotbeappliedduetothelowdensityofemissionsandthereforeremainsnearzerowithinour2050timeframe.Furthermore,theareaofthesector-specificconcentriccirclesrevealsthatthegreatestreductionofabsoluteemissionshappensinthepowersector,from13.1Gtdownto0.1Gt,thankstotheveryhighuptakeofCCS.Inbuildings,despitethelackofCCS,westillseeasubstantialdeclineinemissionsthankstoelectrification,from2.6Gtdownto0.1Gt.Intransport,althoughemissionsarebroughtdownsignificantly,wearestillleftwith1.6Gtofemissionsfromhard-to-abatetransportsegments,suchaslong-haultrucking,aviationandmaritime.Figure3.24similarlyhastheCCScapturerateonthey-axisbutshowssectoralemissionintensitiesin2050onthex-axis.Thisvisualizationshowsthatby2050,particularlychallengingsectorswillbethoseonthefar-rightlowercorner,withhighemissionintensitiesandlowCCScapturerates,i.e.,roadtransportandaviation,aswellasironandsteel.BuildingsheatingandmaritimetransportdonotlendthemselvestoCCScapture,butdecarboni-zationisachievedthroughelectrificationandfuel-switchinginthesesectors,whichenablefairlylowemissionintensitiesby2050.57Sectorroadmaps3Sectorroadmaps358PATHWAYTONETZEROEnergyTransitionOutlook20214REGIONALROADMAPSGlobalemissionsandtheregionalpictureCountriesandregionshaveverydifferentstartingpointsregardingavailableresourcesandexistingenergy-sectorinfrastructure,andintermsofhumandevel-opment.InourPNZ,weemphasizethatthetenworldregionswillmoveatdifferentpacestowardstheirnetzerodestinations,andthedevelopedregionswillgettherebefore2050.Thisdoesnotimplythataregionshoulddelayitseffortstoreduceemissions.Tothecontrary.Webelieveitisineveryregion’sbestinteresttoadvancetheirdevelop-mentandeconomies,whilenotincreasingemissionsintandem.Thetechnologiesavailabletodaymakethispossibleandofferlargepotentialforleapfroggingcostly,pollutingenergyprovision,production,andtransport.Allregionsalsoneedtoadapttheirecon-omiestotheeffectsofclimatechange,andenhancetheirtrade-climatereadiness(WEF,2021)withglobaltraderelationsseeingadoptionofcarbon-borderadjustmentmechanisms.Nevertheless,webelievethathighGDPregionswithmoreadvancedeconomieswill—andshould—movefasterandcarrymoreoftheweightinenablinganetzerofuture(seediscussionalsoinSection1.5Netzeropolicies).Thisappliesparticularlytoensuringprogressinthedevelopmentofkeydecarbonizationsolutions,whicharecurrentlylessmatureandsignificantlymoreexpensivethantoday’sconventionaltechnology;thekeyistoacceleratethecommercialreadinessofthesesolutionsfortheworldatlarge.Inthischapter,wedescribethepathwaystonetzeroforthetenworldregions.Ineachoftheregionalsections,thePNZofthemainsectorsoftransport,buildings,manufacturing,andenergysupplyarebrieflyexplained.Fordetailedinformationregardingpoliciesimplementedineachsector,pleaserefertoChapter3Sectorroadmaps:Transport—Sections3.1to3.3,Buildings—Section3.4,Manufacturing—Sections3.5to3.7andEnergySupply—Sections3.8and3.9.59Units:GtCO/yr-1.0-0.20.80.60.40.20.0-0,4-0.6-0.81.21.01.00.70.50.40.30.30.1-0.1-0.3-0.8IndianSubcontinentSub-SaharanAfricaMiddleEast&NorthAfricaNorthEastEurasiaSouthEastAsiaGreaterChinaLatinAmericaOECDPaciﬁcEuropeNorthAmerica2050Energy-relatedCO2emissionsafterCCSandDACRegionalroadmaps4NorthAmerica(NAM)LatinAmerica(LAM)Europe(EUR)Sub-SaharanAfrica(SSA)MiddleEast&NorthAfrica(MEA)NorthEastEurasia(NEE)GreaterChina(CHN)IndianSubcontinent(IND)SouthEastAsia(SEA)OECDPacific(OPA)60PATHWAYTONETZEROEnergyTransitionOutlook2021NORTHAMERICA(NAM)RegionstatisticsPopulationGDPEnergyuseNetCO2Emissions2019Overall366mn22.6trn109EJ6.0GtPercapita61600298GJ16.5t2050Overall437mn33.6trn73EJ-0.8GtPercapita76800163GJ-1.8tAllGDPfiguresinthereportarebasedon2011purchasingpowerparityandin2017internationalUSD61Regionalroadmaps4NetzeropathwayThePNZforNAMseesCO2emissionsreducefrom6Gtin2019to-0.8Gtby2050(Figure4.3),witharapidreductionincoalandoil,supplantedbyelectricityandhydrogen(Figure4.2),intheenergysystem.EveninthePNZ,transport-sectoremissionsarethehardesttoabateinNAM.Theremainingoilinprimaryenergysupply(Figure4.1)ismostlyusedinthetransportsector,andmostnaturalgasuseisabatedwithCCSandusedinthenon-energyandmanufacturingsectors.PolicyleversEconomy-wideeconomicsignals−Theriseinaverageregioncarbonprices,toUSD100/tCO2in2030andUSD250/tCO2in2050,isreflectedascostsforfossilfuels.Transport−CO2emissionsreduceby97%inNAMfrom2019to2050(Figure4.3).ThiscontrastswiththeETOwheretheequivalentreduction(2019-2050)was77%.SuchadecreaseforPNZisachievedbyatwo-prongedstrategyforelectrificationofroadtransportinNAM,throughsubsidiesforelectricityforEVsandbanningsalesoffossil-fuelvehiclesfrom2030forpassengervehiclesandfrom2040forcommercialvehicles,amongothersmeasures.Whilesubsidiesashighas25%aregiventoelectricityforEVpropulsion,thefossil-fueltaxisincreasedby100%intransportin2050.Buildings−CO2emissionsfallbyalmost100%inNAMfrom2019to2050(Figure4.3).IntheETO,however,theequivalentreduction(2019-2050)was74%.Threepolicyleverscontributehere:betterenergyefficiencystandardsfornewcommercialandresidentialbuildings’specificenergyuse(45%reductioninspaceheatingandcooling),partialbanningoffossil-fuelequipment(coal,oil,andgas)inbuildings,andacceleratedphase-outoffossil-fuelequipmentbyhalvinglifetimes(from15to7.5years)ofnewequipment.Manufacturing−CO2emissionsreduceto-0.2GtinNAMin2050,whichstandsincontrasttoourETOwherethereductionwasto0.38Gtby2050.ThePNZreductionisachievedbyinvestmentsupporttoelectrificationofheatsupplyinthemanufacturingsector,specificallya10%support,startingfrom2022oftheinvestmentcostofindustrialelectricheatboilersandheatpumps.Similarly,a50%supportofelectricandhydrogencapacityinvest-mentsinthesteelproductionaregivenfrom2022.Energysupply−CO2emissionsfromenergysupplyarereducedbybansonfossilfuelpowerplantsfrom2040inNAM.Similarly,a20%costofcapitalforcoalpowerplantsfrom2025,anda17%costofcapitalforoilandgaspowerplantsalsoeliminatethesepowerplantsfromtheelec-tricitygrid.BoththeCanadianandUSgovernmentshavenetzeroGHGtargetsfor2050.WhereastheUSaimsfordrop-pingbelow50-52%of2005levelsby2030,Canadaaimsforareductionof40-45%.TheCanadiantargetisenshrinedintheNet-ZeroEmissionsAccountabilityAct(June2021).Concretizationofnetzeroimplementationplansandpolicymeasuresareinprogress.ExamplesareCanada’sclimateplan:AHealthyEnvironmentandaHealthyEconomyanditsNetZeroAdvisoryBody(establishedin2021);andtheUSBuildBackBetterAgendaandTheInfrastructureandJobsActthatfocusoninfrastructure,energy,andtransportationtospurthepathtonetzero.Besidesdomesticefforts,bothfederalgovernmentsarepursuingcooperativeeffortstoadvancetechnologydevelopmentanddeployment,suchasthroughtheMissionInnovation,theNet-ZeroProducersForum,andtheGlobalMethanePledge.Formoredetailsonthecurrentsituationandenergy-transitioncontext,pleaserefertoDNV’sEnergyTransitionOutlook2021.Ambitionsforemissionsreduction62PATHWAYTONETZEROEnergyTransitionOutlook2021LATINAMERICA(LAM)RegionstatisticsPopulationGDPEnergyuseNetCO2Emissions2019Overall657mn10.7trn36EJ1.9GtPercapita1610055GJ2.9t2050Overall763mn22.7trn39EJ0.1GtPercapita2970051GJ0.2tAllGDPfiguresinthereportarebasedon2011purchasingpowerparityandin2017internationalUSD63Regionalroadmaps4NetzeropathwayThePNZforLAMseesCO2emissionsreducingfrom1.9Gtin2019to0.1Gtin2050(Figure4.6).AlthoughthemanufacturingsectorhasnegativeemissionsbyusingbiomassandCCS,transportremainsthesectorwiththehighestnetemissionsin2050.Electricity’sshareinfinalenergydemandincreasesfrom17%in2019to53%in2050;hydrogen’ssharerisesfromalmostzeroto8%by2050(Figure4.5).Halfoftheprimaryenergyissuppliedbysolarandwindin2050(Figure4.4).PolicyleversEconomy-wideeconomicsignals−Theriseinaverageregioncarbonprices,toUSD50/tCO2in2030andUSD100/tCO2in2050,isreflectedascostsforfossilfuels.Transport−Transportsectoremissionsreduceby75%from2019to2050inPNZ,incontrasttothe20%reductioninourETO.Thissteepreductioninemissionsispartlyachievedbycompletelybanningthesaleofinternalcombustionengine(ICE)passengervehiclesin2044,withrestrictionsonsaleofICEcommercialvehiclesbeginningin2043.Simultaneously,electricityforvehiclepropulsionissubsidizedby10%ofitsaveragepricefrom2022,thusincentivizinginvestmentsinEVs.Buildings−CO2emissionsfrombuildingsreduceby88%from2019to2050,incontrasttoa38%reductioninETO.Apartialbanofnewfossil-fuelequipmentforbuildings,alongwithasubsidyof10%oftheelectricitypriceforbuildings,drivesthesereductions.Additionally,ahighercostofcapitalforfossil-fuel(17%foroilandnaturalgas,20%forcoal)equipmentofcommercialbuildingsalsodetersinvestmentandlocking-inofthesetechnologies,whilereducingemissions.Manufacturing−MultiplepolicyleversreduceCO2emissionsto-0.14Gtby2050inaPNZinLAM.Electricityandhydrogenasenergycarriersaresubsidizedby10%comparedtotheiraverageprice,andbiomassissubsi-dizedby30%.Similarly,thecapacitycostofelectricheaters(includingheatpumps)issupportedby4%from2022.Theshareofelectricarcfurnace(EAF)insteelproductionincreasesto90%by2050,whichalsodrasticallyreducestheconsumptionofcoalinthemanufacturingsector.Energysupply−Theincreasingcostofcapitalforcoal,oil,andnaturalgaspowerplants,amongotherpolicylevers,leadstoeliminationofCO2emissionsfromthepowersectorby2050.Additionally,agradualreductioninthecostofcapitalofnon-fossilpowerplantsalsocatalyzesinvestmentsintorenewablepowerplants.Moreimportantly,thesupportforstoragecapacityinvest-mentsalsorises,whichencouragesinvestmentsintoVRES.Allthehydrogenrequiredforenergypurposesisproducedthroughelectrolysisfrom2028.Furthermore,investmentsintooilandgascapacityadditionsintheregionarebannedfrom2028.Thenetzeroagendaispresentintheregion.Chile’sdraftClimateChangeFrameworkLawtargetscarbonneutralityby2050.Argentina,Brazil,Columbia,CostaRica,andPanama,havepledges,buttheyarenotyetsetinlaw.MexicoandPeruhavetargetsunderdiscussion(ECIU,2021).Uruguaytargetscarbonneutralityasearlyas2030,but,again,thisaimisnotenshrinedinlaw.InmostLAMcountries,sectoralimplementationplanshaveyettobedeveloped.Withrichnaturalresources,theregioniswell-endowedforenergysystemdecar-bonization.Land-basedmitigationmeasureswillalsobeinfocus(e.g.,Brazil’spledgetoeliminateillegaldeforestationby2030).Cooperativeinitiativesexist,e.g.,theRenewableEnergyforLatinAmericaandtheCaribbean(RELAC)Initiative’sregiongoalof70%renewableelectricityby2030.ArgentinaandMexicohavejoinedtheGlobalMethanePledge.Formoredetailsonthecurrentsituationandenergy-transitioncontext,pleaserefertoDNV’sEnergyTransitionOutlook2021.Ambitionsforemissionsreduction64PATHWAYTONETZEROEnergyTransitionOutlook2021EUROPE(EUR)RegionstatisticsPopulationGDPEnergyuseNetCO2Emissions2019Overall545mn22.9trn72EJ3.7GtPercapita42000133GJ6.7t2050Overall542mn31.5trn49EJ-0.3GtPercapita5810091GJ-0.6tAllGDPfiguresinthereportarebasedon2011purchasingpowerparityandin2017internationalUSD65Regionalroadmaps4NetzeropathwayThePNZforEURseesCO2emissionsdroppingfrom3.7Gtin2019to-0.05Gtby2050(Figure4.9),andto-0.3GtwithDAC.EURhasthehighestambitionstoachieveaPNZ,whichalsotranslatestohavingthehighestcarbonpriceincomparisonwithallotherregionsinourPNZ.About80%ofthefinalenergydemandisprovidedbyelectricityandelectrolysis-basedhydrogenby2050(Figure4.8).Oil,asthemajorfossilfuelremainingin2050(Figure4.7),isusedinthenon-energysector.PolicyleversEconomy-wideeconomicsignals−Theriseinaverageregioncarbonprices,toUSD150/tCO2in2030andUSD250/tCO2in2050,isreflectedascostsforfossilfuels.Transport−CO2emissionsreduce98%from2019to2050inEUR;thisisagreaterdecreasethaninETO,whereareductionof81%wasseenforthecorrespondingperiod.EURbansthesaleofICEvehiclesinbothpassengerandcommercialsegmentsfrom2035.InourPNZ,EUR,alongwithOPA,hasthemoststringentpolicymeasuresinroadtransport,intandemwithsubsidizedelectricitypricesforEVpropulsion.Buildings−CO2emissionsreducetozero,ortoslightlypositiveemissions,by2050,whileintheETOthereductionfrom2019to2050was53%.ThereductionsinCO2areachievedbecauseofamandatedpartialbanof50%onfossil-fuelequipmentinbuildingsby2050.Likewise,thelifetimeofnewfossil-fuelequipmenthalves(from15to7.5years),whichalsoenablesafasterphase-outoffossilfuel.Commercialbuildingsalsofacehighercostofcapitaliftheyhavefossil-fuelequipment.Manufacturing−CO2emissionsinthemanufacturingsectorinEURreduceto-57Mtby2050,againduetoemissionsbeingcapturedfrombiomasscombustion.Electricityandhydrogenbothhavecapacityinvestmentsupportof50%forironorereductioninEUR,alongwitha100%shareofEAFinsteelproductionin2050.Electricity-basedheatingisincentivizedbyasubsidyof10%oftheelectricityprice,whileataxof25%isaddedontopoffossil-fuelprice,assistingthetransitiontobiomass.Energysupply−CO2emissionsfromthepowersectorreduceto-40Mtby2050,withnegativeemissionsachievedduetobiomass-firedpowerplants.Oilandgascapacityadditionsarebannedfrom2024,followedbyafasterrampuprateforCCS,whichenablestheproductionofbluehydrogen.Concurrently,gridelectricityissubsidizedwhenusedforhydrogenproduction,inadditiontothecapacityinvestmentsupportof25%fordedicatedrenewablesforhydrogenproduction.Despitethis,theregioncontinuestoproducebluehydrogenuntilitnarrowstoashareofjust0.1%in2050.TheEUtargetsof55%cutsbelow1990-levelsby2030andnetzeroGHGemissionsby2050wereagreeduponinDecember2020.Theobjectiveofaclimate-neutralEUby2050isbinding,enshrinedintotheEuropeanClimateLawofJune2021.SeveralEUmembershavefasterandhigherdecarboni-zationambitionse.g.,Germany65%andDenmark70%by2030,andSwedenfornetzeroGHGemissionsby2045.OutsidetheEU,theUKaimstoreduceemissionsby68%by2030and78%by2035(comparedwith1990-levels),withtargetssetinlawin2019.Amongallregions,EURhasprogressedthefurthestinbackingupitspledgeswithnetzeroimplementationplansandstrengtheningpolicies.ExamplesaretheGreenDeal,the‘Fitfor55’Package,andtheEUTaxonomyregulationtoredirectinvestmentflowsinalignmentwithobjectives;andallEUmembersdevelopingnationallong-termstrategies,coveringGHGreductions/removals,witha30-yearperspective.Formoredetailsonthecurrentsituationandenergy-transitioncontext,pleaserefertoDNV’sEnergyTransitionOutlook2021.Ambitionsforemissionsreduction66PATHWAYTONETZEROEnergyTransitionOutlook2021SUB-SAHARANAFRICA(SSA)RegionstatisticsPopulationGDPEnergyuseNetCO2Emissions2019Overall1.11bn4.5trn26EJ1GtPercapita400023GJ0.9t2050Overall1.99bn18.4trn38EJ0.7GtPercapita920019GJ0.4tAllGDPfiguresinthereportarebasedon2011purchasingpowerparityandin2017internationalUSD67Regionalroadmaps4NetzeropathwayThePNZforSSAseesCO2emissionsdroppingfrom1Gtto0.7Gtby2050(Figure4.12).Regionally,theCO2emissionsofSSAarebehindthatofonlyIND.Giventhehistoricallylowemissionsfromthisregion,thisisjustifiedforourPNZ.Thecriticalpointtonoteisthattheregionlargelyleapfrogsfossilfuelintensiveinfrastructure(Figure4.10).PolicyleversEconomy-wideeconomicsignals−Theriseinaverageregioncarbonprices,toUSD15/tCO2in2030andUSD50/tCO2in2050,isreflectedascostsforfossilfuels.Transport−CO2emissionsincreaseslightly,risingfrom250Mtin2019to280Mtby2050.ThisisnotsurprisingastransportpoliciesadoptedinSSAaretheleaststringent,withnobansonthesaleofICEvehicles,unlikeinotherregions.Thisalsobecausethenecessarycharginginfrastructureforelectrificationoftransportisnotyetpresentandwilltakelongertimetocomeintoexistenceintheregion.Transportstillremainsahard-to-abatesectorinourPNZforSSA.Buildings−CO2emissionsreduceby23%from2019to2050.Thisisachievedthroughpartialbans(25%)onfossilfuelequipmentinbuildingsby2050.Additionally,thelifetimeofnewfossil-fuelequipmentinbuildingshalve(from15to7.5years),andtraditionalbiomassequipmentsimilarlyhasonlyhalfthepreviouslifetime.Thisenablesfasterelectrificationofbuildings,risingfrom5%in2019to22%in2050.Commercialbuildingsalsofacehighercostofcapitaliftheyhavefossil-fuelequipment.Manufacturing−CO2emissionsreduceby47%from2019to2050inthemanufacturingsector.Thecostofcapitalofoilandgasequipmentinthemanufacturingsectorincreasesfrom8%in2022to17%,andthecostofcapitalofcoalequipmentincreasesto20%.Thisconsid-erablyreducestheattractivenessoffossil-fuelequipmentinthePNZ,enablingthefaster-phaseoutofthese.Energysupply−CO2emissionsfromthepowersectorreduceto8Mt,from2019to2050.Thisdecreaseoccurswiththeshareofelectricityinfinalenergydemandrisingfrom7%to29%(Figure4.11).Similarly,hydrogengrowsfromhavingnosharein2019to5%in2050.Newoilandgascapacityadditionsarebannedfrom2028.Gridelectricityissubsidizedwhenusedforhydrogenproduc-tion,inadditiontothecapacityinvestmentsupportof10%fordedicatedrenewablesforhydrogenproduction.Regionalambitionsfromnationallydeterminedcontri-butions(NDCs)suggestaregionaltargetforemissionstogrowbynomorethan174%by2030relativeto1990.Lookingaheadto2050,veryfewSSAcountrieshaveadoptedtargetstoreduceemissions.SouthAfricahasanetzerotargetby2050(GovernmentofSouthAfrica,2020)anditsClimateChangeBill,dueinparliamentlaterthisyear(MG,2021).ItsupdatedNDC(September2021)putsthepowersectorinfocusduringthe2030s,coupledwithlow-emissionvehiclesintransport,anddecarbonizationofhard-to-abatesectorstargetedoverthe2040s.Theseareallbasedoncontinuedeffectivemultilateralcooperation.Theregionisonadevelopmenttrajectory,focusingonhuman-developmentoutcomesandeconomiesthatdependonenergysystemsevolving.PromisedglobalfinanceandtechnologytransferwillbeimportantforcountriesoftheSSAregiontopursuelow-emissiondevelopmentstrategies.Formoredetailsonthecurrentsituationandenergy-transitioncontext,pleaserefertoDNV’sEnergyTransitionOutlook2021.Ambitionsforemissionsreduction68PATHWAYTONETZEROEnergyTransitionOutlook2021MIDDLEEASTANDNORTHAFRICA(MEA)RegionstatisticsPopulationGDPEnergyuseNetCO2Emissions2019Overall539mn11.2trn49EJ3.7GtPercapita2060091GJ6.9t2050Overall728mn25.6trn42EJ0.5GtPercapita3500057GJ0.7tAllGDPfiguresinthereportarebasedon2011purchasingpowerparityandin2017internationalUSD69Regionalroadmaps4NetzeropathwayCO2emissionsreducefrom3.7Gtin2019to0.5Gtin2050inMEA(Figure4.15).Thisisachievedbybreakingawayfromtheuseofindigenousoilandgas.OurPNZseesMEAdepartingfromusingitsdomesticoilandgas,especiallyinthetransportsector,partlybecauseofanincreasingcarbonprice,butalsoinresponsetomountingpressuretoabate,duetohighemissionsinthepast.Nevertheless,considerablenaturalgasremainsinthesystem,especiallyinmanufacturingandbuildings(Figure4.13).Whilesomegreyhydrogenremains,whichisusedasfeedstock,allthehydrogenusedasanenergycarrierisproducedfromelectrolysisfrom2029(Figure4.14).PolicyleversEconomy-wideeconomicsignals−Theriseinaverageregioncarbonprices,toUSD30/tCO2in2030andUSD100/tCO2in2050,isreflectedascostsforfossilfuels.Transport−CO2emissionsreduceby58%from2019to2050.ThiscontrastswiththeETO,whereanincreaseof12%wasseenforthecorrespondingperiod.Despiteitsvastdomesticresources,andlowerfuelprices,thereisabanonthesaleofnewICEvehiclesfrom2045forpassengervehiclesand2050forcommercialvehicles.Concurrently,thetaxonoilpricefortransportrisesby200%in2050,albeitfromalowbase.Buildings−CO2emissionsreduceby88%from2019to2050whereasinourETOtheequivalentreductionwas24%.Alloilandnaturalgassubsidiesforbuildingsareeliminatedfrom2022.Simultaneously,apartialbanof25%onallnewfossil-fuelequipmentinbuildingsisimplementedby2050.Thesetwopolicylevers,alongwiththelifetimeofnewfossil-fuelequipmentbeinghalved(from15to7.5years),contributetotheemissionreductions.Manufacturing−Inthemanufacturingsector,CO2emissionsreduceto36Mtby2050.Thecostofcapitalofoilandgasequipmentinthemanufacturingsectorincreasesfrom8%in2022to11%in2050,whilethecostofcapitalofcoalequipmentincreasesto20%.Simultane-ously,aninvestmentsupportof4%isgiventoelectricheatproduction.Thisconsiderablyreducestheattrac-tivenessoffossil-fuelequipmentinthePNZ,enablingfasterphase-outofthese.Energysupply−CO2emissionsfromthepowersectorreducefrom1Gtin2019tozeroby2050.Thisoccurswhiletheshareofelectricityinfinalenergydemandsimultaneouslygrowsfrom17%in2019to58%by2050.Hydrogen’ssharegrowsfromnearlyzeroto9%by2050(Figure4.14).Newoilandgascapacityadditionsarebannedfrom2028.Concurrently,gridelectricityissubsidizedwhenusedforhydrogenproduction,inadditiontothecapacityinvestmentsupportof10%fordedicatedrenewablesforhydrogenproduction.ParisAgreementcommitmentshavefocusedonrestrictingemissionsby2030,comparedtobusiness-as-usualscenarios,andfrommanycountriesintheMEAregion,thisisconditionaloninternationalsupport.Recent(2021)announcementshavea2050-timehori-zon.TheUnitedArabEmirates,thefirstamongtheregion’spetrostates,hasannouncedastrategicinitia-tivecommittingtoachievenetzeroGHGemissionsby2050,possiblyleadingothersinthePersianGulftofollowsuit.IsraelaimstocutGHGemissionsby85%in2050,relativeto2015.Turkey,thelastG20countrytoratifytheParisAgreement(October2021),alsoannouncedanetzerogoalby2053.Egypt’sVision2030isimminentandinterestinhostingCOP27in2022hasbeenexpressed.Domesticeffortsarebeingmade,butneedsdetailingofsectoralimplementationplans.Internationally,IraqhasindicateditssupportfortheGlobalMethanePledge,andQatarhasjoinedtheNet-ZeroProducersForum.Formoredetailsonthecurrentsituationandener-gy-transitioncontext,pleaserefertoDNV’sEnergyTransitionOutlook2021.Ambitionsforemissionsreduction70PATHWAYTONETZEROEnergyTransitionOutlook2021NORTHEASTEURASIA(NEE)RegionstatisticsPopulationGDPEnergyuseNetCO2Emissions2019Overall319mn5.7trn45EJ3.0GtPercapita18000140GJ9.4t2050Overall316mn11.3trn44EJ0.4GtPercapita35900140GJ1.1tAllGDPfiguresinthereportarebasedon2011purchasingpowerparityandin2017internationalUSD71Regionalroadmaps4NetzeropathwayCO2emissionsreducefrom3Gtin2019to400Mtby2050(Figure4.18).NEEistheregionwiththehighestpercapitaCO2emissionsin2050.Considerableuseofnaturalgasremainsinthesystem(Figure4.16),themajorityofwhichisusedinthenon-energysectorandforabatedpowergenerationandbluehydrogenproduc-tion.AlthoughNEEachievessomeabatementofemis-sionsbytheuseofCCScoupledwithbiomass,thisisnowherenearenoughtoachievenetzero.PolicyleversEconomy-wideeconomicsignals−Theriseinaverageregioncarbonprices,toUSD30/tCO2in2030andUSD100/tCO2in2050,isreflectedascostsforfossilfuels.Transport−CO2emissionsreduceby65%from2019to2050.ThiscontrastswiththeETO,whereareductionof2%wasseenforthecorrespondingperiod.Despiteitsvastdomestichydrocarbonresources,andlowerfuelprices,saleofnewICEvehiclesisbannedfrom2045forpassen-gervehiclesand2050forcommercialvehicles.Concur-rently,thetaxonoilpricefortransportis200%in2050,albeitfromalowbase.Buildings−CO2emissionsreducefrom0.7Gtin2019to0.1Gtby2050;intheETOtheemissionswere0.9Gt.Apartialbanof25%onallfossil-fuelequipmentinbuildingsisimplementedby2050,andthelifetimeofnewfossil-fuelequipmentishalved(from15to7.5years).Thesetwopolicyleverscontributetothereductioninemissionsbyenablingfasterphase-outoffossilfuelinfrastructure.Similarly,throughbiomasscoupledwithCCS,NEEalsoachievesnegativeemissionsfromdirectheatforitsbuildings.Manufacturing−CO2emissionsinthemanufacturingsectorreducefrom0.9Gtin2019to50Mtby2050.Thecostofcapitalofoilandgasequipmentinthemanufac-turingsectorincreasesfrom8%in2022to11%in2050,andthecostofcapitalofcoalequipmentincreasesto20%.Simultaneouslyinvestmentsupportof4%isgiventoelectricheatproduction.Thisconsiderablyreducestheattractivenessoffossil-fuelequipmentinthePNZ,enablingthefasterphase-out.Energysupply−CO2emissionsfromthepowersectorreducefrom1.1Gtin2019to0.1Gtby2050.Thisoccurswhilesimultaneouslywithgrowthintheshareofelectric-ityinfinalenergy,risingfrom15%in2019to30%in2050(Figure4.17).Similarly,hydrogenincreasesfromverylowlevelsto8%by2050.Allnewfossilfuelpowercapacityadditionshavereducedlifetimes(from40to25years),thusenablingafasterphase-outoffossilfueluseforpowergeneration.Newoilandgascapacityadditionsarebannedfrom2028.Concurrently,gridelectricityissubsidizedwhenusedforhydrogenproduction,alongwithcapacityinvestmentsupportof10%fordedicatedrenewablesforhydrogenproduction.InterpretationofcountryNDCpledgesintheNEEregionsuggeststhattheaverageregionaltargetforreducingenergy-relatedemissionsis26%by2030,relativeto1990,withRussiaaimingforcutsofaround30%.Lookingaheadto2050,fewcountriesoftheNEEregionhaveadoptedtargetstoreduceCO2emissions.Russia,beingdominantinsizeandeconomy,hasfacedpressurefromtheEURregiontomakemoreambitiouscommitments.Thelong-termstrategyfor2050thatwasoriginallyproposed,effectivelymeantincreasingemissionstowards2030fromtoday’slevels,anddeclin-ingthereafterduetomoreaggressivepoliciesbetween2028-2050.Peakemissionsweretobereachedinaround2030andcarbonneutralityachievedclosetotheendofthecentury(WRI,2020).However,anearliernetzeroyearisnowunderconsider-ationwithanewdraftplanthataimstocutCO2emis-sionsby79%by2050withnetzeroemissionsachievedby2060.Formoredetailsonthecurrentsituationandenergy-transitioncontext,pleaserefertoDNV’sEnergyTransitionOutlook2021.Ambitionsforemissionsreduction72PATHWAYTONETZEROEnergyTransitionOutlook2021GREATERCHINA(CHN)RegionstatisticsPopulationGDPEnergyuseNetCO2Emissions2019Overall1.44bn30.6trn145EJ11.8GtPercapita21200100GJ8.1t2050Overall1.33bn65.1trn91EJ0.3GtPercapita4900068GJ0.2tAllGDPfiguresinthereportarebasedon2011purchasingpowerparityandin2017internationalUSD73Regionalroadmaps4NetzeropathwayGreaterChina’sCO2emissionsfallfrom11.8Gtin2019to0.3Gtin2050(Figure4.21).Consideringthesizeofbothabsoluteandshareofemissionsfromthisregion,comparedwiththerestoftheworld,itisimperativethatCHNachievesnetzeroinorderfortheworldtoachievenetzero.Arapiddeclineintheuseofcoal(Figure4.19),whichisreplacedbyelectricityandhydrogen,andfastuptakeofCCSallcontributetothisreductioninemissions.PolicyleversEconomy-wideeconomicsignals−Theriseinaverageregioncarbonprices,toUSD100/tCO2in2030andUSD200/tCO2in2050,isreflectedascostsforfossilfuels.Transport−CO2emissionsdecreaseby92%from2019to2050,whichcontrastswiththeETO,whereareductionof64%wasprojectedforthecorrespondingperiod.CHNinstitutesabanonthesaleofICEvehicles(bothpassengerandcommercial)from2035,whilesubsidizingtheelectric-itypriceby20%from2022.Buildings−CO2emissionsreducefrom1.8Gtin2019to20Mtin2050,whileintheETOthereductionwasto600Mt.Apartialbanof50%onallnewfossil-fuelequipmentinbuildingsisimplementedby2050,whilethelifetimeofnewfossil-fuelequipmentishalved(from15to7.5years).Thesetwopolicyleverscontributetotheemissionreductionsbyenablingfasterphase-outoffossilfuelinfrastructure.Manufacturing−CO2emissionsreducefrom5.5Gtin2019to35Mtby2050inthemanufacturingsector.Thecostofcapitalofoilandgasequipmentinthemanufac-turingsectorincreasesfrom8%in2022to17%,whilecostofcapitalofcoalequipmentincreasesto20%.Simultane-ouslyinvestmentsupportof20%isgiventoelectricheatproduction.Thisconsiderablyreducestheattractivenessoffossil-fuelequipmentinthePNZ,enablingtheirfasterphase-outofthese.Energysupply−CO2emissionsfromthepowersectorreducefrom4.5Gtin2019to22Mtin2050.Allnewfossilfuelpowercapacityadditionshavereducedlifetimes(from40to25years),thusenablingafasterphaseoutoffossilfueluseforpowergeneration.Thisreductioninemissionsoccurswhiletheshareofelectricityinenergydemandgrowsfrom23%in2019to61%in2050(Figure4.20).Similarly,theshareofhydrogengrowsfromalmostnothingto16%by2050.Newoilandgascapacityadditionsarebannedfrom2028.Concurrently,gridelectricityissubsidizedwhenusedforhydrogenproduc-tion,inadditiontothecapacityinvestmentsupportof10%fordedicatedrenewablesforhydrogenproduction.A20%investmentcostsupportisprovidedforrenewableelectricitybatterystorage,whichfurtherbooststheinstallationofVRESpowerplants.InSeptember2020,Chinaannouncedthatitwillaimforemissionstopeakbefore2030andbecarbonneutralby2060.ThecarbonneutralitytrajectorywillberootedinFive-YearPlans(FYP),connectingpresentpoliciesto2035developmentgoals,andcontinuingthetransitionto2060.Overthe14thFYP(2021-2025)increasesincoalconsumptionshallbelimited,beforecoalusethenphasesdownduring2026-2030.Carbon-emissionintensity(tCO2perunitGDP)shalldecreasebymorethan65%(from2005)by2030.Long-termdecarboniza-tionplansareunderdevelopment.Anationalplanforpeakemissionsisimminent(winter/2021/22),andindustry-specificplanswillfollow.Inadditiontodomesticefforts,Chinamadethepolicyannouncementtostopfinancingandbuildingnewcoal-firedpowerplantoverseasandpromisedtostepupsupportbackingdevelopingcountriesintheirpursuitoflow-carbonfutures.Formoredetailsonthecurrentsituationandenergy-transitioncontext,pleaserefertoDNV’sEnergyTransitionOutlook2021.Ambitionsforemissionsreduction74PATHWAYTONETZEROEnergyTransitionOutlook2021INDIANSUBCONTINENT(IND)RegionstatisticsPopulationGDPEnergyuseNetCO2Emissions2019Overall1.83bn12.7trn46EJ2.8GtPercapita690025GJ1.5t2050Overall2.29bn48.2trn72EJ1.0GtPercapita2100031GJ0.4tAllGDPfiguresinthereportarebasedon2011purchasingpowerparityandin2017internationalUSD75Regionalroadmaps4NetzeropathwayCO2emissionsinthePNZforINDreduceinthePNZfor2.8Gtin2019to1.0Gtin2050(Figure4.24),drivenbyrapidpenetrationofrenewablesinprimaryenergy(Figure4.22).Despitethisrampupofrenewables,substantialsharesofnaturalgas(7%),coal(10%),andoil(9%)persistintheenergysystemin2050.INDhasthelargestCO2emissionsin2050.Givenitshistoricallylowemissionsfromtheenergysector,itisvitalthataPNZhelpstheregionphaseoutfossilfuelandavoidbeinglocked-intonewfossilinfrastructure.PolicyleversEconomy-wideeconomicsignals−Theriseinaverageregioncarbonprices,toUSD30/tCO2in2030andUSD75/tCO2in2050,isreflectedascostsforfossilfuels.Transport−CO2emissionsreduceby54%from2019to2050,whileintheETOtheemissionsgrewby100%inthecorrespondingperiod.INDinstitutesabanonthesaleofpassengerICEvehiclesfrom2041andoncommercialICEvehiclesfrom2047andsubsidizesthetransportelectricitypriceby8%from2022.Buildings−CO2emissionsreducefrom0.6Gtin2019to36Mtby2050,whileintheETO,emissionswerestill0.6Gt.Apartialbanof25%onallnewfossil-fuelequipmentinbuildingsisinstitutedby2050,andthelifetimeofnewfossil-fuelequipmentishalved(from15to7.5years)from2022.Thesetwopolicyleverscontributetothereductioninemissionsbyenablingfasterphase-outoffossilfuelinfrastructure,andacceleratingelectrificationofbuildings.Manufacturing−CO2emissionsreducefrom1.1Gtin2019to0.7Gtin2050inthemanufacturingsector.Thecostofcapitalofoilandgasequipmentinthemanufac-turingsectorincreasesfrom8%in2022to17%,whilecostofcapitalofcoalequipmentincreasesto20%in2050.Concurrently,a15%taxoncoalpriceisleviedinthemanufacturingsector,furtherdiscouragingcoaluse.Investmentsupportof3%isgiventoelectricandhydro-genheatproduction.Theseconsiderablyreducetheattractivenessoffossil-fuelequipmentinthePNZ,enablingfasterphase-outoffossil-fueltechnologies.Energysupply−CO2emissionsfromthepowersectorreducefrom1.2Gtin2019to40Mtby2050.Allnewfossilfuelpowercapacityadditionshavereducedlifetimes(from40to25years),thusenablingfasterphase-outoffossilfueluseforpowergeneration.Simultaneously,theshareofelectricityinenergydemandgrowsfrom17%in2019to53%by2050(Figure4.23).Newoilandgascapacityadditionsarebannedfrom2028and,gridelectricityissubsidizedwhenusedforhydrogenproduc-tion.Inaddition,capacityinvestmentsupportsof7.5%areimplementedfordedicatedrenewablesforhydrogenproduction.Despitethis,theshareofbluehydrogeninhydrogenasanenergycarrierisapproximately12%in2050.NetzerotargetsaremostlystillunderconsiderationintheINDregion.SriLankahasadvanceditscarbon-neutralitytargetto2050(originallysetfor2060).Indiaiscommittedtoalargerenewableenergyexpansion,andasalargeemitterfacespressuretomakecommitments(Ahluwaliaetal.,2021).Aregionaldrivertowardsadoptingnetzeroambitionsisstrategicgreenindustrialization,availabilityoftechnologytodecoupleanincreaseinenergyusefromemissionsandavoidanceoflocking-inenergysystemstofossilfuels.Anotherdriverisself-interestineffectiveclimateactiongiventheregion’svulnerabilitytoclimaterisk(Germanwatch,2021)Theregionisonadevelopmenttrajectory,withfocusonachievinghuman-developmentoutcomes.Inordertomeetbothdevelopmentgoalsandemissionsgoals,globalclimatefinancingandtechnologytransferwillbeimportantformanycountriesintheregion.Formoredetailsonthecurrentsituationandenergy-transitioncontext,pleaserefertoDNV’sEnergyTransitionOutlook2021.Ambitionsforemissionsreduction76PATHWAYTONETZEROEnergyTransitionOutlook2021SOUTHEASTASIA(SEA)RegionstatisticsPopulationGDPEnergyuseNetCO2Emissions2019Overall673mn9trn32EJ1.7GtPercapita1340047GJ2.6t2050Overall783mn25.2trn34EJ0.3GtPercapita3120044GJ0.4tAllGDPfiguresinthereportarebasedon2011purchasingpowerparityandin2017internationalUSD77Regionalroadmaps4NetzeropathwayCO2emissionsreducefrom1.7Gtin2019to0.3Gtin2050inthePNZforSEA(Figure4.27),drivenbyrapidpenetrationofrenewablesandreductionsinfossilfueluse(Figure4.25).However,significantamountsoffossilfuelsremainevenin2050,especiallynaturalgasinpower,coalinmanufacturing,andoilintransport(accountablefor50%ofemissionsin2050).PolicyleversEconomy-wideeconomicsignals−Theriseinaverageregioncarbonprices,toUSD50/tCO2in2030andUSD100/tCO2in2050,isreflectedascostsforfossilfuels.Transport−CO2emissionsreduceby72%from2019to2050(150Mt),whichcontrastswithourETO,whereareductionof8%wasseenforthecorrespondingperiod.SEAimplementsabanonsaleofpassengerICEvehiclesfrom2040andoncommercialICEvehiclesfrom2047andsubsidizesthetransportelectricitypriceby10%from2022.Despitethesemeasures,thereisstillconsiderableoiluseandmakestransportemissionsremainsignificant.Buildings−CO2emissionsreducefrom400Mtin2019to27Mtin2050,whileintheETO,theemissionsin2050were210Mt.Apartialbanof25%onallnewfossil-fuelequipmentinbuildingsisinstitutedby2050,whilethelifetimeofnewfossil-fuelequipmentishalved(from15to7.5years)from2022.Thesetwopolicyleverscontributetothereductioninemissionsbyenablingfasterphase-outoffossilfuelinfrastructureandpromotingelectrificationofbuildings.Manufacturing−Inthemanufacturingsector,CO2emissionsreducefrom590Mtin2019to120Mtby2050.Costsofcapitalofoilandgasequipmentinthemanufac-turingsectorincreasesfrom8%in2022to17%whilecostofcapitalofcoalequipmentincreasesto20%by2050.Investmentsupportof4%isprovidedforelectricandhydrogenheatproduction.Thesemeasuresconsiderablyreducetheattractivenessoffossil-fuelequipmentinthePNZ,enablingfasterphase-outoffossilfueltechnologies.Energysupply−CO2emissionsfromthepowersectorarealmosteliminatedby2050,withonly14Mtremaining.Allnewfossilfuelpowercapacityadditionshavereducedlifetimes(from40to25years),thusenablingfasterphase-outoffossilfueluseforpowergeneration.Thisoccurswhiletheshareofelectricityinfinalenergysimultaneouslygrowsfrom17%in2019to56%in2050(Figure4.26).Similarly,theshareofhydrogengrowsfrominsignificantlevelsto8%by2050.Newoilandgascapacityadditionsarebannedfrom2028and,gridelectricityissubsidizedwhenusedforhydrogenproduc-tion.Inaddition,capacityinvestmentsupportsof10%areprovidedfordedicatedrenewablesforhydrogenproduction.TheParisAgreementcommitmentsofSEAcountrieshavefocusedonrestrictingemissionsby2030comparedtobusiness-as-usual(BAU)projections,butareconditionaloninternationalsupport.Theregion’seconomicweightisgrowingandsoisitscarbonfoot-print.Netzerotargetsaremostlyunderconsideration.ThePhilippineshasa2030goal(NDCfrom2021)ofreducingGHGsby75%againstprojectedBAUemissions.Thailandisdraftingitszero-carbonemissionsmasterplan,tobepresentedinNovember(COP26),anditsnetzeroyearisproposedtobearound2065(BangkokPost,2021).Indonesiawillexploretheopportunitytoprogresstowardsnetzeroemissionsby2060(GovernmentofIndonesia,2021).Accesstocleanenergytechnologiesandfinancearekeyfortheregion’sdecarbonizationefforts,andtodecoupleannualeconomicgrowthfromcarbon-intensiveenergygrowth.TheASEANenergycooperationiscentralindirectingdecarbonizationeffortsintheregion.Formoredetailsonthecurrentsituationandenergy-transitioncontext,pleaserefertoDNV’sEnergyTransitionOutlook2021.Ambitionsforemissionsreduction78PATHWAYTONETZEROEnergyTransitionOutlook2021OECDPACIFIC(OPA)RegionstatisticsPopulationGDPEnergyuseNetCO2Emissions2019Overall207m8.5trn36EJ2.4GtPercapita41200175GJ11.5t2050Overall194m11trn22EJ-0.1GtPercapita57200112GJ-0.4tAllGDPfiguresinthereportarebasedon2011purchasingpowerparityandin2017internationalUSD79Regionalroadmaps4NetzeropathwayOPA’sCO2emissionsreducesfrom2.4Gtin2019to-0.1Gtin2050(Figure4.30);thisisachievedbyelectrification,transitioningtohydrogenandCCSandDAC.Despitetheslightlynegativeemissions,OPAhasconsiderableoil(9%)andnaturalgas(6%)remainingintheenergymix(Figure4.28),mostlyusedinthenon-energysector.Nevertheless,about65%oftheprimaryenergyisobtainedfromsolarandwindin2050.PolicyleversEconomy-wideeconomicsignals−Theriseinaverageregioncarbonprices,toUSD100/tCO2in2030andUSD250/tCO2in2050,isreflectedascostsforfossilfuels.Transport−CO2emissionsreducefrom540Mtin2019to25Mtby2050.OPAinstitutesabanonthesaleofpassen-gerICEvehiclesfrom2036andofcommercialICEvehiclesfrom2035,whilesubsidizingthetransportelectricitypriceby25%from2022.Buildings−CO2emissionsfallfrom640Mtin2019to16Mtby2050.Apartialbanof50%onallnewfossilfuelequipmentinbuildingsisinstitutedby2050,whilethelifetimeofnewfossil-fuelequipmentishalved(from15to7.5years)from2022.Additionally,allsubsidiesonnaturalgasconsumptionareeliminatedfrom2022.Thesepoliciescontributetowardsthereductioninemissionsbyenablingfasterphase-outoffossil-fuelinfrastructureandpromotingelectrificationofbuildings.Manufacturing−CO2emissionsreducefrom780Mtin2019to25Mtin2050.Costofcapitalofoilandnaturalgasequipmentinthemanufacturingsectorincreasesfrom8%in2022to17%in2050whilecostofcapitalofcoalequipmentincreasesto20%.Aninvestmentsubsidyof10%isgiventoelectricandhydrogenheatproduction.Theseconsiderablyreducetheattractivenessoffossil-fuelequipmentinthePNZ,whichenablesfasterphaseoutoffossil-fueltechnologies.Energysupply−CO2emissionsfromthepowersectorreducefrom1Gtin2019to26Mtin2050.Allnewfossilfuelpowercapacityadditionshavereducedlifetimes(from40to25years),thusenablingfasterphase-outoffossilfueluseforpowergeneration.Simultaneouslytheshareofelectricityinfinalenergygrows,risingfrom23%in2019to47%in2050.Similarly,theshareofhydrogengrowsfromverylowlevelsin2019to30%by2050(Figure4.29).Newoilandgascapacityadditionsarebannedfrom2024andgridelectricityissubsidizedwhenusedforhydrogenproduction.Inaddition,capacityinvestmentsupportof25%fordedicatedrenewablesforhydrogenproductionareimplemented.AmongAsianeconomies,JapanandSouthKoreafollowedChinainpledgingcarbonneutralityby2050(October2020).NewZealandtargetsnetzeroemissionsfornon-agriculturalactivities,setinlawin2019,butAustralialacksclearpoliciestowardsachievingParisAgreementgoals,andassuchisanoutlieramongdevelopedcountries.NewZealand’s2050EmissionReductionPlan,advisedbyanindependentClimateChangeCommission,isimminent(December2021).Japanenshrinedcarbonneutralityintolaw(May2021)andhaslauncheditsGreenGrowthStrategywithsectoralactionsplansandenvisionedpolicytools(METI,2021).SouthKorea’s2050CarbonNeutralStrategy(GovernmentoftheRepublicofKorea,2020)outlinesacomprehensiveenergy-decar-bonizationstrategy.Inadditiontodomesticefforts,JapanandSouthKoreadrivecooperativeefforts,e.g.,AsiaEnergyTransitionInitiative(AETI)andtheGlobalGreenGrowthInstitute.BothJapanandSouthKoreahavevowedtoendfinancingofoverseascoalprojects.Formoredetailsonthecurrentsituationandenergy-transitioncontext,pleaserefertoDNV’sEnergyTransitionOutlook2021.Ambitionsforemissionsreduction80PATHWAYTONETZEROEnergyTransitionOutlook2021COMPARISONOFTHEREGIONSPowersectoremissionsaremeasuredasCO2emissionsfrompowersectorsafterCCS.TheseemissionsaredecreasingeverywherewithEuropeandNorthAmericaachievingnegativeemissionsduetotheiruseofbiomass.Mostregionshavenegligibleemissionsin2050,but2030doesnotseeasignificantreductionwhencomparedwithourETO.Aswith2019,GreaterChinahasthehighestpowersectoremissionsin2030.Incontrast,NorthEastEurasiawillhavethehighestpowersectoremissions,withGreaterChinaseeingadrasticreductionfrom2030to2050.Electrificationismeasuredasshareofelectricityinfinalenergydemand.ThisincreasessubstantiallyinallregionsovertimeandtohigherlevelsthanforecastinourETO.Electrificationispivotalinachievingdecarbonization,especiallygiventherolevariablerenewableenergysources(VRES)haveingreeningthepowersector.GreaterChinaisleadingthewayinelectrification,overtakingOECDPacificby2030.Sub-SaharanAfricahaslargerelectrificationin2050inourPNZ,whencomparedwiththeETO.COMPARISONOFTHEREGIONS81Energyusepercapitaismeasuredasgigajouleofprimaryenergydemandperpersoninaregion.AllregionsexceptNorthAmericaseeareductioninenergyusepercapitain2050,whencomparedwiththeETO.GiventheexistinglowenergyusepercapitainSub-SaharanAfricaandIndianSubcontinent,thelevelsdonotundergodrasticreductionsfrom2019to2050.Carbonintensityofprimaryenergyismeasuredasthegrammesofenergy-relatedCO2emissionsafterCCS,permegajouleofprimaryenergyconsumptioninthecorrespondingregion.Allregionsseerapiddecarbonization.Surprisingly,NorthAmericahasthelowestcarbonintensityin2050,andaconsiderablereductionwhencomparedwithourETO.MiddleEastandNorthAfricaandtheIndianSubcontinentseethelargestreductionsfrom2030to2050.Regionalroadmaps482PATHWAYTONETZEROEnergyTransitionOutlook20215METHANE,LANDUSE,ANDBOLDACTION5.1METHANEGiventhepotencyofmethane(CH4)asaGHG,itisnecessarytoapplymeasurestodiminisheasy-to-abateCH4.TheconcentrationofCH4intheatmospherehasmorethandoubledsincepre-industrialtimesandhasbeensecondonlytoCO2indrivingclimatechange.Furthermore,approximatelyhalfofCH4emissionsareanthropogenic.Mostoftheseemissionsareassociatedwiththeagriculturalsector(40%),andapproximately35%arefromextractionanduseoffossilfuels(oil,naturalgas,andcoal)(UNEP,2021).Methanehasashorterhalf-life(12.4years)thanCO2,butoverboththe100-yearand20-yearGlobalWarmingPotential(GWP)timehorizon,itis29.8and82.5timesmorepotentthanCO2pertonneofGHGemitted,respectively(IPCC,2021b).Forexample,thetotalCH4emissionsfromfossilfuelsin2018was113.3Mt,butthisisequivalentto3.4GtCO2whenconvertedtoa100-yearGWP,orapproximately11%ofthetotalCO2emissionsfromtheenergysector.Usingthe20-yearGWP,thisrisesto9.4GtCO2eq,oraboutaquarteroftheenergysector’sCO2emissions.AbatingCH4emissionsfromtheenergysectorisa‘low-hangingfruit’mitigationstrategyforaPNZ(IPCC,2021a).Methaneemissionsfromfossil-fuelextractionandusearewellunderstoodandtheirabatementissostraightforwardthattheIEAarguesthatmostsectorscanbeabatedbymorethanhalfinlessthantwoyears.Indeed,manysectorscouldachieveupto90%abatementinthatshorttimeframe(IEA,2021a).TheCH4abatementmeasuresintheoilandgassectorincludeupstreamanddownstreamleakdetectionandrepair,blowdowncaptureanduseofrecoveredgaswithvapourrecoveryunits,replacingpressurizedgaspumpsandcontrollerswithelectricorairsystems,andfinallycappingunusedoilandgaswells,amongothers.TheCH4abatementmeasuresincoalminingincludepre-miningdegasification,airmethaneoxidationwithimprovedventilationandfloodingabandonedmines(IEA,2021a).83Methane,Landuse,andboldaction5HistoricaldataonCH4emissionsfromallfossilfuelsareobtainedfromEmissionsDatabaseforGlobalAtmos-phericResearch(EDGAR)(EC-JRCandPBL,2021).Ourabatementassumptionsforcoalarebasedonexpertopinion,andabatementassumptionsforoilandnaturalgasarebasedonIEA(2021a).MethanereductionsinourPNZFigure5.1showstheglobalCH4emissionsinthefossil-fuelsector,givenin100-yearGWPterms,whichrapidlyreduceinthePNZ,fallingby88%from2019to2050.Thereductioninabsolutetermsis3GtCO2eq.ThebiggestreductioninCH4emissionsoccursfromcoal,mostlybecauseofthestrongerdeclineincoaluseinourPNZ.Incontrast,theweakreductioninCH4emissionsfromnaturalgasisduetothepersistenceofnaturalgasintheenergysystem,eveninthePNZ.Furthermore,theCH4emissionintensityofnaturalgasproductionanduseishigherthanthatofcoal.Figure5.2givestheregionalbreakdownofCH4emissions.Unsurprisingly,MEAandNEE,whichhaveabundantfossilfuelsandlowercarbonprices,dominateCH4emissions,alsoinourPNZ.BanningnewcapacityadditionsforoilandnaturalgasdrasticallydecreasestheCH4emissionsassociatedwiththesefuels.Figure5.3showsthemethaneemissionsinCO2eqterms,relativetoenergy-sectoremissions,usingthe100-yearand20-yearGWP.Whereasthe100-yearGWPshowsthattheshareofCH4emissionsincreasesfrom9%todayto17%in2050,thelatter20-yearGWPshowsanincreasefrom25%to47%ofenergy-relatedCO2emissions.DespitereductionsinCH4emissionsinabsolutenumbers,theirshareinenergy-sectorGHGemissionsincreasesasnaturalgaspersists,eveninthePNZ,mostlycoupledwithCCS.WhyonlyCO2andCH4?Othergreenhousegases,suchasNOX,HFCs,andCFCs,aremorepotentclimategases(measuredinGWPpertonneofgasemitted)andmorepersistentthanbothCO2andCH4.However,wedonotconsidertheseinourreport.Therearetwomainreasonsforthis.Firstly,theenergysectorisnotasignificantcontributortotheseemissions.Secondly,thequantitiesofthesegreenhousegasesarelow,despitetheirhighpotency.84PATHWAYTONETZEROEnergyTransitionOutlook20215.2EMISSIONSFROMLANDUSE(AFOLU)Agriculture,forestry,andotherlanduse(AFOLU)isthelargestsourceofGHGemissionsoutsidetheenergysectorandcontributes23%ofglobalGHGemissions.LanduseisbothasourceandasinkofGHGsandplaysasignificantroleinthecycleofenergy,water,andaerosolexchangebetweenlandsurfacesandtheatmosphere.ThisexchangeresultsinbothemissionstoandremovalsofCO2,CH4,andN2Ofromtheatmosphere(IPCC2019).Inthisreport,asdescribedin‘TheScientificBasis’(Chapter1),wefocusonactivitiestoreachnetzeroCO2emissionsanduseIPCClow-emissionpathwaysforotherGHGemissions.ThetotalnetCO2emissionstotheatmospherefromAFOLUwere6.6GtCO2in2019andareanetresultofdeforestation,afforestation,loggingandforestdegradation,andregrowthofforestsfollowingwoodharvestorabandonmentofagriculture.CO2emissionsfrompeatburninganddrainage,aswellasforestfires,arealsoincludedinthisfigure(GCP,2020).InordertoachieveaCO2netzeropathwayfromboththeenergysystemandemissionsfromlanduse,landuseemissionsneedtofallbelowzeroby2050.ThisisbecauselandareasneedtoactassinksandcompensatefortheremainingCO2emissionsfromtheenergysystem.ThecumulativeCO2emissionsfromenergy,processes,andlanduseovershootsthe1.5°Ccarbonbudgetby230GtCO2by2050.Therefore,landuse,aswellasothernegativeemissionstechnologies(e.g.,directaircapture),Workeronatreenursery85mustcontributewellbeyond2050andcontinuetoremoveCO2fromtheatmospheretoensurestabilizationat1.5°C.By2050,theremainingannualemissionsfromenergyandindustrialprocessesafterDACare2.1GtCO2;thismeansthatland-useemissionsmustdecreasefromtoday’slevel,reachnegative-2.1GtCO2in2050,andthen,togetherwithotherCO2reductionmeasures,continuetoremoveCO2emissionsfortheremainingpartofthecentury.AssumingacontinuedscalingupofDAC,aswellasfurtherimprovementsinlanduseafter2050,thiscouldresultintotalnegativeemissionsof-5GtCO2/yrfrom2070,andthencontinuetowards2100.Cumulatively,thisamountsto-230GtCO2,whichwouldeliminatethe1.5°Ccarbonovershootby2100.Figure5.4showsapathwayforCO2land-useemissionsthroughto2050.Similartoourapproachintheenergysystem,wethinkitisfeasibleforemissionsfromlandusetodecreaseslowlyinitially,andthenforthepaceofreductiontoaccelerate.First,thetrendofincreasingemissionsmustbereversed,then,by2030,arapiddeclineisnecessarysuchthatCO2emissionsfromlandusereachnetzeroby2040.Thereafter,landuseachievesnegativeemissionssuchthatby2050negativeemissionsof2.1GtCO2compensateforremainingemissionsfromtheenergysystem,therebyachievinganoverallnetzeroresult.DecarbonizationfromlandusevstheenergysystemIsthisdevelopmentinlanduseplausible?Whynotremoveemissionsfromtheenergysysteminstead?Webelievethatchangesinlandusearecomparativelyeasierthanfulldecarbonizationofsomeofthehard-to-abatesectors,suchasaviation,orfordevelopingregionstoreachnetzeroby2050.Ourviewisconsistentwithmanyscientificreportsonnature-basedsolutionsaswellaswithconclusionsreachedbytheIPCC.Amongthe90globalemissionpathwaysincludedintheIPCC’s1.5°Creport(2018),therangeofremovalsofCO2emissionsin2050variesbetween-1to-11GtCO2/yr.Houghtonetal.(2015)estimatedthatthere-establishmentofforestsonabout500Mhaoflandthatwerepreviouslyforested,butnotcurrentlyusedproductively,wouldremove3.7GtCO2/yrfordecades;thisareaisequivalentto10%oftheworld’savailableagriculturalland.Soilcarbonsequestrationandrestorationofdegradedlandhaveco-benefitsforagricultureandhavethepotentialtoreduceemissionsby2.3-5.3GtCO2/yr(IPCC,2018).Inordertoachieveourproposedlevelofnegativeemissionsfromchangesinlanduse,themodelincludes,butisnotrestrictedto,afforestationandreforestation.Equallyimportantaremeasurestoreduceemissionsthroughsignificantlylimitingdeforestationandforestdegradation,aswellaspreservationoflandandcarbonstocks.Thereisconsiderableuncertaintyabouttheeffectofpoliciesandincentivestolimitemissionsfromlanduse.Incontrasttoemissionsfromenergy-relatedactivities,theseemissionsareadirectresponsetopopulationgrowthandtheassociatedrequirementforincreasedfoodproduction.However,itwillnotbepossibletolimitglobalwarmingto1.5°Cwithoutaddressingemissionsfromlanduse.Therefore,GHGemissions,particularlyCO2fromlanduse,mustdeclineandbecomenegativeinorderforglobalwarmingtostabilizeat1.5°C.Agriculture,forestry,andotherlanduse(AFOLU)isthelargestsourceofGHGemissionsoutsidetheenergysector.Methane,Landuse,andboldaction586PATHWAYTONETZEROEnergyTransitionOutlook20215.3OUTSIDETHEENERGYSYSTEM87AmongGHGemissionscausedbyhumanactivity,72%stemfromtheenergysystem(WRI,2021).Forthe28%ofemissionsthatdonotoriginatefromtheenergysystem,23%comesfromAFOLUandmostoftherestfromwasteandchemicals.Theenergysystemisthemainfocusofthispathwayreport,and,asexplainedintheprevioussection,wehavealsodetailedCO2emissionsfromtheAFOLUsectorinordertoobtainamore-completenetzeroscenario,includingallmajorCO2emissions.Whathappenswithemissionsoutsidetheenergysystemisalsoofconsiderableimportanceforfutureglobalwarming,bothintheshorttermandthelongterm.Forinstance,therecentIPCCreport(IPCC,2021a)high-lightedthatcurbingmethaneemissionsfromallsources(energy,aswellasothersectors)hasthebestpotentialforrequiringtheleastamountofefforttolimitglobaltemperatureriseinthenextfewdecades.EmissionsoutsidetheenergysystemareindirectlyaccountedforinourPNZ,asdescribedinthesection‘TheScientificBasis’atthestartofthereport.Itiswellestablishedthatrepresentativepathwaysto1.5°CareclosetonetzeroCO2emissionsin2050.ThescientificagreementthatnetzeroCO2emissionsin2050wouldindicateawarmingof1.5°Cisdependentonthedevelopmentofnon-CO2GHGsfollowingrepresent-ativepathwayssimilartoreductionsintheenergysystem.ThetotalsumofGHGsultimatelydeterminestheglobalaveragetemperatureincrease,andthelogicalimplica-tionsareclear:—AmoreaggressivereductionofGHGinothersectors,providesslightlymoreleewayintheenergysector,andstillenablesreaching1.5°C.—Withlessactiononreducingemissionsintheothersectors,inordertoreach1.5°Citwillbenecessarytocutemissionsevenfasterandmoreseverelyintheenergysector.ItisbeyondthescopeofthisreporttodescribehowCH4andN2Oagriculturalemissionsoremissionsfromwasteandlandfillshouldbereduced—e.g.,throughashiftindietarychoices.Nevertheless,weassumeareductioninthesenon-CO2emissionsinlinewithIPCCrepresentativepathwaysfor1.5°C.Itis,however,clearthatreaching1.5°Cisextremelydifficult,andtoreachthisgoalallsectors—bothwithinandoutsidetheenergysystem—needtoacttogetherandwithurgency.Curbingmethaneemissionsfromallsources(energy,aswellasothersectors)hasthebestpotentialforrequiringtheleastamountofefforttolimitglobaltemperatureriseinthenextfewdecades.Methane,Landuse,andboldaction588PATHWAYTONETZEROEnergyTransitionOutlook20215.4THISPATHWAYNEEDSBOLDACTION—NOWThepathwaytonetzeroemissionsstartstoday.ItisalreadythreeyearssincetheIPCCspecialreporton1.5°Cillustratedtheir90alternativescenariostoreach1.5°C;allfourillustrativepathways,andalmostallothers,hadsteepreductionsinemissionsstartingataround2020.Thelackofurgentclimateactionsbetween2018and2021meansthattheprospectofreachingnetzeroisevenmorechallenging.Ironically,theCOVID-19pandemicresultedinsignificantreductionsinemissions,buttheseareoflittlelong-termhelpasemissionsarenowrisingsteeplyagain.Wehavelostthesethreeyears,andthereisnoroomforanyfurtherdelays.AsstatedinIEA’s1.5°CreportinMaythisyear(IEA,2021c):“Actionthisyearandeveryyearafter”isessential.IntheDNVPathwaytonetzero(PNZ),thereductioninemissionsstartsnow,and2022emissionsaredownfromthisyear.Inspiteofthebuilt-ininertiainthefossil-fuelsystem,reductionsinfossil-fueluse—inparticularcoal—willstartnow.Thisisbynomeanseasy,buteasypathwaystonetzeroand1.5°Cdonotexist.HowrealisticisourPNZ?Itisdefinitivelynotthemostlikelyfutureinthesensethatitrequiresverybold,coordinated,andproximateactionfromgovernmentsaroundtheworldandthereiscurrentlynoclearindicationthatsuchactionswillindeedbetaken.OurETOisourbestattempttoforecastthetrajectorythatweareon—withtheeconomic,technological,andpoliticaldevelop-mentsthatweexpect,withreasonablecertainty,tounfold.ThePNZenergytransitionisdramaticallyfasterandmuchmoredemanding.Itischallengingfrommanyperspectives.Conflictingprioritiesandarangeofbarriers—aslistedinourETO—standinthewayofurgentpolicyaction.Resourcelimitationsandramp-upchallengesthreatentojeopard-izetherapidscale-upneededinnewtechnologies.Adramaticturnaroundinthefinancingsectorisessentialtofundthetransition.ThatdoesnotmeanthePNZcannotbeachieved.Itisbasedontechnologiesthatalreadyexist,andascale-upofthese.Resourcelimitationswillinfluencethetransitionbutarenotlikelytobearoadblock;forexample,thereismorethanonebatterychemistrythatcanbeusedinEVbatteries.AswehavepointedoutintheexpendituresectioninChapter2,theadditionalcostsrequiredforachievingthePNZarelessthan1%ofGDP,andevenwiththisadditionalcostadded,thePNZplacesusontracktospendalowershareofourGDPonenergyinthefuturethanwedotoday.And,finally,thepandemichasproventhatimmediateandtoughpoliticalactionscanbetakenshouldtheproblembeperceivedassufficientlyurgentandcritical.Thewindowisclosingtoreach1.5°C—butthePNZisbothtechnicallyandpoliticallyfeasible—andthereforeitsachievementisarealisticpossibilityifwecanharnessthebestofourefforts.Themostcriticalconstraintisclearlytime.Coordinatedeffortsacrossallregionsandallsectorsareneeded—indevelopedanddevelopingnations,andinharderandeasiersectorsalike.Asthesectoralandregionalroad-mapsinthisreportclearlyshow,thisdoesnotmeaneveryonemustdothesamethingatthesametime—buteveryonemustact.WestronglycautionthatthePNZwillbeoutofreachiftheworldwaitsanotherfiveyearsbeforetakingtheimpor-tantfirststeps.2022isalmostuponus,andpolicyanddecisionmakersaroundtheworldmustchangedirectionandintroducethenecessarymeasuresassoonaspossible,asoutlinedintheroadmapsinthisreport.Thewindowisclosingtoreach1.5°C—butthePNZisbothtechnicallyandpoliticallyfeasible.89Thetimingofthisreportisnotarbitrary.Oneweekafterpublication,COP26willcommenceinGlasgowafteraone-yeardelayduetothepandemic.Wehopethatthisreport—togetherwithotherlandmarkreportsfromtheIPCC,IEA,andotherorganisations—willsparkurgentaction.Ashighlightedatthestartofthispublication,fortheworldtoreachthenetzeroemissionsrequiredfora1.5°Cfuture,leadingregionsandsectorsmustgomuchfurther,muchfaster.Wehopethatdecisionmakerswillbepersuadedthattheycannotrestonthelaurelsoftheirnetzeroambitions,andthattheyneedtodomuchmorethanthat.And,aboveall,weemphasizetheurgencyofactingnow.Methane,Landuse,andboldaction590PATHWAYTONETZEROEnergyTransitionOutlook2021EnergytransitionoutlookOurmainpublicationdetailsourmodel-basedforecastoftheworld’senergysystemthroughto2050.Itgivesourindependentviewofthemostlikelytrajectoryofthecomingenergytransition,andcovers:—Theglobalenergydemandfortransport,buildings,andmanufacturing—Thechangingenergysupplymix,energyefficiency,andexpenditures—Detailedenergyoutlooksfor10worldregions—Theclimateimplicationsofourforecast.Wealsoprovidedetailsonourmodelandmainassump-tions(i.e.,population,GDP,technologycostsandgovern-mentpolicy).Our2021Outlookexplores,interalia,theimpactofCOVID-19andthegrowingimportanceofhydrogenasanenergycarrier.TechnologyprogressreportWeexplorehowkeyenergytransitiontechnologieswilldevelop,compete,andinteractinthecoming5years.Thetentechnologiesare:—Energyproduction:floatingwind,solarPV,andwastetofuelandfeedstock—Energytransport,storage,anddistribution:pipelinesforlow-carbongas;meshedHVDCgrids,newbatterytechnology—Energyconversionanduse:novelshippingtechnolo-gies,EVsandgridintegration,greenhydrogenproduction,CCS.Weattempttostrikeabalancebetweentechnicaldetailsandissuesofsafety,efficiency,cost,andcompetitiveness.Theinterdependenciesandlinkagesbetweenthetechnologiesareaparticularareaoffocus.ENERGYTRANSITIONOUTLOOK2021REPORTSOVERVIEW91FinancingtheenergytransitionFocusesonthefinancialopportunitiesandchallengesforfinanciers,policymakers,developers,andenergycompanies:.—Anaffordabletransition—consideringwhetheraParis-complianttransitionisaffordable,andwhatmaybeneededtomobilizeandredirectcapital—Acceleratingthetransition—examiningtheroleoffinancialmarkets,policy,andregulation,andhowtogetcapitaltoflowtowhereitcanhavethemostimpactonemissions—Ensuringajusttransition—exploringtheimportanceofbalancingsustainabilitypriorities,ensuringco-benefits,andbuildingclimateresilience.ThereportcombinesDNV’sindependentenergyforecastto2050withviewsfromadiversesetofleadersintheenergyandfinancesectors.MaritimeforecastTheMaritimeForecastto2050offersshipownerspracticaladviceandsolutionsasshipping’scarbonreductiontrajectoriesrapidlyheadtowardszero.—DNV’snewcarbonriskframeworkallowsdetailedassessmentsoffuelflexibilityandFuelReadysolutions,theeconomicrobustnessoffuelandenergyefficiencystrategies,andtheirimpactonvesseldesign.—Decarbonizationisleadingtoincreasedregulatoryrequirements,newcargo-ownerandconsumerexpectations,andmorerigorousdemandsfrominvestorsandinstitutions.—Investmentsinenergyandfuelproductionwillbeessentialtoshipping’seffortstodecarbonize.Thisisthegrandchallengeforthemaritimeindustry.Butbyworkingtogetherasanindustry,embracingfuelflexibility,andconsultingwithexpertpartners,shippingcanreachitsdestination.92PATHWAYTONETZEROEnergyTransitionOutlook2021Ahluwalia,M.S.,&Patel,U.(2021)GettingtoNetZero:AnApproachforIndiaatCoP-26(CSEPWorkingPaper13).NewDelhi:CentreforSocialandEconomicProgressBangkokPost(2021)Decarbonization,theSEAsianway.WrittenbyJohannaSon,29.September.Availableat:https://www.bangkokpost.com/opinion/opinion/2189467/decarbonisation-the-se-asian-wayDNV(2021)TechnologyProgressReport.dnv.com/etoDNV(2021)EnergyTransitionOutlook2021.dnv.com/etoEnergy&ClimateIntelligenceUnit-ECIU(2021)NetZeroTracker.Availableat:https://eciu.net/netzerotrackerEnergyTransitionsCommission—ETC(2020)MissionPossibleEuropeanCommission,JointResearchCentre(EC-JRC)/NetherlandsEnvironmentalAssessmentAgency(PBL)(2021)EmissionsDatabaseforGlobalAtmosphericResearch(EDGAR),releaseEDGARv6.0_GHG(1970—2018)ofMay2021GermanWatch(2021)GlobalClimateRiskIndex.©Germanwatche.V.GlobalCarbonProject(2020)Carbonbudgetandtrends2020.Availableat:www.globalcarbonproject.org/carbonbudget.GlobalCCSInstitute—GCCSI(2021)GlobalStatusofCCS2021—CCSAcceleratingtoNetZero©GCCSILtdGovernmentofIndonesia(2021)IndonesiaLong-TermStrategyforLowCarbonandClimateResilience2050GovernmentofSouthAfrica(2020)SouthAfrica’sLow-EmissionsDevelopmentStrategy2050.FebruaryGovernmentoftheRepublicofKorea(2020)2050CarbonneutralstrategyoftheRepublicofKoreatowardsasustainableandgreensociety,DecemberHoughton,R.A.,B.Byers,andA.A.Nassikas(2015)ArolefortropicalforestsinstabilizingatmosphericCO2.Nat.Clim.Chang.,doi:10.1038/nclimate2869.InternationalAtomicEnergyAgency—IAEA(2020)IAEADataAnimation:NuclearPowerPlantLifeExtensionsEnableCleanEnergyTransition.Writtenby:ErikEnglishandJeffreyDonovonInternationalEnergyAgency—IEA(2018)TheFutureofpetrochemicalsIEA(2020)EnergyTechnologyPerspectivesIEA(2021a)MethaneTracker2020.Availableat:https://www.iea.org/reports/methane-tracker-2020IEA(2021b)DrivingDownMethaneLeaksintheOilandGasIndustryIEA(2021c)NetZeroby2050,AroadmapfortheglobalenergyindustryIntergovernmentalPanelonClimateChange-IPCC(2021a)SummaryforPolicymakers.In:ClimateChange2021:ThePhysicalScienceBasis.ContributionofWorkingGroupItotheSixthAssessmentReportoftheIntergovernmentalPanelonClimateChange.Writtenby:Masson-Delmotte,V.,etal.CambridgeUniversityPress.InPress.IPCC(2021b)TheEarth’sEnergyBudget,ClimateFeedbacks,andClimateSensitivity.In:ClimateChange2021:ThePhysicalScienceBasis.ContributionofWorkingGroupItotheSixthAssessmentReportoftheIntergovernmentalPanelonClimateChange.Writtenby:Forster,P.,etal.CambridgeUniversityPress.InPress.IPCC(2019)ClimateChangeandLand—AnIPCCSpecialReport.IPCC(2018)Globalwarmingof1.5°C,SummaryforpolicymakersInternationalLabourOrganization(ILO)andInter-AmericanDevelopmentBank(IDB)2020Jobsinanet-zeroemissionsfutureinLatinAmericaandtheCaribbean.Authors:Saget,C.,Vogt-Schilb,A.andLuu,T.WashingtonD.C.andGenevaInternationalRenewableEnergyAgency—IRENA(2019a)Innova-tionlandscapeforarenewable-poweredfuture:solutionstointegratevariablerenewable.AbuDhabi.©IRENA2019IRENA(2019b)Solutionstointegratehighsharesofvariablerenewableenergy.AbuDhabi.©IRENA2019Mail&Guardian—MG(2021)ClimatechangeBilltobetabledinparliament.Writtenby:TuniciaPhillips.Sept.30.Availableat:https://mg.co.za/environment/2021-09-30-climate-change-bill-to-be-tabled-in-parliament/MaterialEconomics(2019)Industrialtransformation2050McKinsey(2020)Layingthefoundationforzero-carboncementMETI(2021)OverviewofJapan’sGreenGrowthStrategyThroughAchievingCarbonNeutralityin2050UnitedNationsEnvironmentProgramme(UNEP)andClimateandCleanAirCoalition(2021)GlobalMethaneAssessment:BenefitsandCostsofMitigatingMethaneEmissions,Nairobi:UnitedNationsEnvironmentProgrammeWorldEconomicForum—WEF(2021)Thedevelopingworldmustgetreadytoadaptitstradetoclimatechange.Writtenby:IsabelleDurant.Availableat:https://www.weforum.org/agenda/2021/03/protecting-trade-will-protect-developing-countries-from-climate-change/WorldResourcesInstitute—WRI(2020)Russia’sProposedClimatePlanMeansHigherEmissionsThrough2050.Writtenby:KatieRoss,April13.Availableat:https://www.wri.org/insights/russias-pro-posed-climatWRI(2021)Cleanenergy,Customers,cities,regulatorsandutilitiestodrivethetransitiontoalow-carbongrid,LoriBirdetal.Availableat:https://www.wri.org/initiatives/clean-energyWorldSteel(2019)Totalproductionofcrudesteel.Availableat:https://www.worldsteel.org/steel-by-topic/statistics/annual-pro-duction-steel-data/P1_crude_steel_total_pub/CHN/INDREFERENCES93TheprojectteamTHEPROJECTTEAMThisreporthasbeenpreparedbyDNVasacross-disciplinaryexercisebetweentheDNVGroupandtwoofourbusinessareas—EnergySystemsandMaritime—across15countries.ThecoremodeldevelopmentandresearchhasbeenconductedbyadedicatedteaminourEnergyTransitionresearchprogramme,partoftheGroupDevelopmentandResearchunit,basedinOslo,Norway.Inaddition,wehavebeengreatlyassistedbytheexternalEnergyTransitionOutlookCollaborationNetwork.DNVcoreteamSteeringcommitteeRemiEriksen,DitlevEngel,UlrikeHaugen,TrondHodne,LivHovemProjectdirectorSverreAlvik,sverre.alvik@dnv.comModellingresponsibleOnurÖzgünCoremodelling-andresearchteamandcontributingauthorsBentErikBakken,KavehDianati,ThomasHorschig,AnneLouiseKoefoed,MatsRinaldo,SujeethaSelvakkumaran,AdrienZambonReferencegroupPeterBjerager,TheoBosma,LucyCraig,JanKvålsvold,JeremyParkes,PierreC.Sames,RuneTorhaugOthercontributingexpertsEdwinAalders,JørgAarnes,GudmundBartnes,DanielBrenden,NicholasCole,LindaSigridHammer,ErikAndreasHektor,HenrikHelgesen,MariusLeisener,ToreLongva,EricaMcConnell,MitchellRosenberg,BarbaraScarnato,RoelJoukeZwartCommunicationresponsibleandeditorMarkIrvine,mark.irvine@dnv.comHistoricaldataThisworkispartlybasedontheWorldEnergyBalancesdatabasedevelopedbytheInternationalEnergyAgency©OECD/IEA2020,buttheresultingworkhasbeenpreparedbyDNVanddoesnotnecessarilyreflecttheviewsoftheInternationalEnergyAgency.Forenergy-relatedcharts,historical(uptoandincluding2018)numericaldataismainlybasedonIEAdatafromWorldEnergyBalances©OECD/IEA2020,www.iea.org/statistics,License:www.iea.org/t&c;asmodifiedbyDNVHeadquarters:DNVASNO-1322Høvik,NorwayTel:+4767579900www.dnv.comThetrademarksDNV®andDetNorskeVeritas®arethepropertiesofcompaniesintheDetNorskeVeritasgroup.Allrightsreserved.AboutDNVDNVisanindependentassuranceandriskmanagementprovider,operatinginmorethan100countries,withthepurposeofsafeguardinglife,property,andtheenvironment.Whetherassessinganewshipdesign,qualifyingtechnologyforafloatingwindfarm,analysingsensordatafromagaspipelineorcertifyingafoodcompany'ssupplychain,DNVenablesitscustomersandtheirstakeholderstomanagetechnologicalandregulatorycomplexitywithconfidence.Asatrustedvoiceformanyoftheworld’smostsuccessfulorganizations,weuseourbroadexperienceanddeepexpertisetoadvancesafetyandsustainableperformance,setindustrystandards,andinspireandinventsolutions.dnv.com/eto

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