Rystad: As decarbonisation kicks into high gear, peak in fossil fuel emissions anticipated by 2025

With energy security taking centre stage, the global energy crisis in 2022 hindered the emission reduction progress on the roadmap towards the goals set out in the Paris Agreement. However, Rystad Energy, an energy intelligence group, predicts that fossil fuel emissions will peak within two years, prior to fitting into the pattern of steady decline.

According to Rystad Energy research and analysis, the inflexion point for fossil fuel carbon dioxide (CO2) emissions is nigh, with emissions on track to peak by 2025. On the current global pathway of announced policies, projects, industry trends and expected technological advancements, global CO2 emissions are poised to hit about 39 gigatonnes per year (Gtpa) in 2025 before settling into a steady annual decline as industries clean up their carbon footprint.

Furthermore, emissions hit a record high in 2022, says Rystad while outlining that countries scrambled to secure reliable, affordable fuel for power generation on the back of Russia’s invasion of Ukraine with many turning to more carbon-intensive fuels as a short-term solution to their energy security crises, reviving mothballed coal plants and prioritizing gas over cleaner alternatives.

While these fuels will still have a role to play in the global economy for decades to come, the broader push towards a cleaner future is showing no signs of slowing down, highlights the energy intelligence group.

Artem Abramov, head of clean tech research at Rystad Energy, remarked: “Peak fossil fuel CO2 emissions within the next two years is an outstanding global achievement, exceptional when considering the current supply chain roadblocks and the high focus on energy security. If the industry can maintain this momentum, global warming of less than 2.0 degrees Celsius is within reach.”

While fossil CO2 emissions reached an all-time high of about 38.3 Gtpa last year, raising eyebrows and questions about the world’s ability to deliver on ambitious climate goals to limit warming to between 1.5 and 2.0 degrees Celsius, Rystad’s emissions modelling points to an imminent emissions inflexion point, showing a peak of 39 Gtpa in 2025, but that timeline could move up to as early as next year if the short-term macroeconomic outlook accelerates the energy transition.

In line with this, direct CO2 emissions – carbon dioxide originating from fossil fuel combustion at the plants worldwide – from power and heat generation will peak this year, thus, the decline will be minimal initially before gathering momentum in the coming years, becoming a significant factor behind the decrease in total CO2 emissions from all sectors by 2025.

While last year proved a challenging one for global climate goals, a record amount of new utility-scale solar and wind capacity was added, about 300 gigawatts (GW) globally, underscores Rystad. This triggered a sizeable increase in renewable-generated electricity, a trend that is likely to increase again this year.

However, these new installations were weaker than forecast, thanks to low-carbon supply-chain disruptions and inflationary pressure amid Russia’s invasion of Ukraine, which fundamentally disrupted energy flows, resulting in widespread natural gas shortages, particularly in Europe, facilitating the increase in coal use for power generation. As a result of this, direct fossil CO2 emissions from the power and heat sectors hit record highs of around 14.4 Gtpa.

Moreover, global industrial emissions – process and direct use of fossil fuels for energy generation purposes at industrial facilities – stayed flat in 2022 at ~9.95 Gtpa as post-Covid recovery in China was offset by a visible decline in Chinese industrial carbon intensity.

In contrast, transport emissions increased by 0.2 Gtpa to reach 7.8 Gtpa in 2022 – falling short of pre-Covid peaks of 8.2 Gtpa due to the continued weakness of the aviation sector, triggered by the pandemic and accelerating penetration of electric vehicles (EVs). Rystad adds that EV adoption is approaching the levels needed to offset the annual global growth of the size of the active car fleet.

The firm further states that the power and heating sector is expected to drive the upcoming fossil CO2 decline from mid-decade onwards despite these setbacks. The addition of renewable generation capacity in 2023 is projected to outstrip the uptick in electricity demand while annual renewable generation additions will start materially affecting total fossil fuel output from 2025. This trend will also accompany continuous coal-to-gas switching – the persistent trend established several decades ago net of occasional short-term disruptions – claims Rystad.

Even though transportation and industrial emissions are expected to peak later this decade, they are also expected to join the decarbonisation trend in the second half of the 2020s, underlines the energy intelligence provider while explaining that the first generation of large-scale commercial carbon capture initiatives will also start playing non-negligible roles, driven initially by projects in Europe and North America.

Rystad Energy points out that the decarbonisation picture differs across regions, as key contributors of emissions are expected to play diverging roles in the coming years. The company illustrates this point by elaborating that Europe, the U.S. and China are on track to reduce fossil CO2 emissions by 24 per cent, 18 per cent and 10 per cent, respectively, by 2030.

Additionally, Europe and the U.S. are on a path to structurally decarbonise their economies, leaning into newly implemented clean technology and low carbon policies from 2025 onwards.

As the Chinese transport sector is electrifying at a rapid speed with domestic renewable installations and its low-carbon supply chain being strong, China is positioned for an acceleration in industrial decarbonisation for energy-intensive sectors in the next five-to-ten years. Therefore, Rystad expects Chinese fossil CO2 emissions to plateau this year at about 12.5 Gtpa before declining from 2026 through 2028.

On the other hand, India is expected to continue its momentum of expanding CO2 emissions as its economy expands and the population grows. In lieu of this, the energy intelligence player expects Indian CO2 emissions to increase by 36 per cent between 2022 and 2030, surpassing Europe in 2025 and the U.S. in the early 2030s. The firm also anticipates growing emissions to slow in the 2030s, as non-coal power generation steps up to meet incremental electricity demand growth.

Elsewhere, industrial emissions are expected to increase by about 20 per cent by 2030, driven predominantly by other Asian countries – excluding China – which are set to account for half of the increase in total fossil fuel emissions growth, concludes Rystad Energy.