Unsustainable Energy Production Will Stop, BP Projects

The longer society waits to address climate change, the more likely climate will change society, according to BP’s chief economist Spencer Dale. The human tendency toward procrastination is just one of the scenarios Dale attempts to model when preparing BP’s Annual Energy Outlook. He even has a keen title for the scenario where humans drag their feet on transitioning to a cleaner future of low-carbon energy: “Delayed and Disorderly.”
“The underlying philosophy of Delayed and Disorderly is the belief that the longer you remain on an unsustainable path, the increasing likelihood that society will change,” said BP economist Spencer Dale, “and societal preferences will change in such a way that it will trigger a decisive shift in carbon emissions.”
BP also forecasts a business-as-usual scenario and a rapid transition. The Delayed and Disorderly scenario is more expensive and more disruptive than the rapid transition, but it leads similarly to a much cleaner global energy system.
“In a world where there’s no magic wands, if you delay the timing onto a sustainable path then that’s likely to lead to real costs and greater disruption,” Dale said in a webinar hosted by the Center for Strategic and International Studies.
In its scenario, BP is standing on the shoulders of American economist and Nixon advisor Herbert Stein.
“What Stein observed, quite straightforwardly, is: if something can’t go on forever, it will stop,” Dale said.
“Stein’s Law, although very simple, when applied to the current unsustainable path of the global energy system, has quite profound and important implications. If something can’t go on forever, it will stop.”
CSIS energy and climate expert Sarah Ladislaw asked Dale if BP had estimated the impact of that scenario on the world’s gross domestic product.
“We didn’t have the courage to try and do that,” Dale said, but then he corrected himself: “Not the courage, we just—know when you don’t know things, okay?… The distortions to GDP by implication are very material.”
The scenario anticipates a world that has to rapidly reduce carbon emissions by rationing energy, but that doesn’t mean BP expects energy rationing to take place.
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Stein’s Law has powerful implications for energy companies, Dale continued, and for any robust and resilient strategy they may devise for their future.
“Partly this is a function of the fuel mix,” Dale said. “We think that the outlook for oil and gas will be challenged. It will continue to play a significant role but be increasingly challenged. While on the other side, there’s things with renewable energy—wind and solar power, hydrogen, bioenergy—growing very rapidly. So part of this is a pivot toward some of those fast growing energy sources, but also it’s a pivot in terms of how we think of ourselves as a company. The center of gravity of energy systems is shifting. It’s moving from where the power lies with upstream producers to customers. And in some sense the other part of this pivot is pivoting our mindset away from being an upstream producer to somebody who provides customer solutions.”
Watch Dale’s presentation of BP’s Annual Energy Outlook to CSIS: