Note from the CEO - December 2022
After a tumultuous 2022, what’s next?
The energy sector has – to an even greater degree than previously – ascended to the top of the international agenda amid widespread turbulence in 2022. Energy security, in particular, has become a top priority. In some emerging economies, where the annual energy use per capita equates to less than the use of a single refrigerator, governments are facing a pressing question: How can we produce more energy, for all our citizens, in a smart way? In contrast, a key question facing high-income countries, especially in Europe, is: How can we restore and maintain energy security while also lowering the carbon footprint of our energy supply?
Entering the final weeks of 2022, many are wondering whether the global energy crisis will carry over into 2023. Fears of an impending global recession continue to stalk markets, alongside geopolitical concerns. The energy transition is moving forward quickly, despite some temporary setbacks this past year. A turning point has seemingly been reached; for the first time we see global investments in renewables exceed oil and gas investments. Technologies are delivering and driving the high speed of deployment of renewable energy. Alas, supportive policies have been lagging thus far, although the US Inflation Reduction Act and REpowerEU in Europe stand out as important energy transition drivers.
Another milestone reached in 2022 was that the global population surpassed 8 billion people, marking a corresponding increase in energy demand in the immediate future. I saw firsthand at COP27 how all these concerns came together. Numerous initiatives were sanctioned, including the Loss & Damage Fund and a broader commitment to reducing methane emissions. Rystad Energy’s data for technology deployment shows that the 650-gigatonne budget for CO2, which corresponds to the 1.6-degree target, is achievable as a stretched target. Adding methane reduction on top of this means it is still possible to reach the 1.5-degree scenario.