Full Speed Ahead - Decarbonizing the Transportation Sector
The transportation sector is emitting around 8 Gt of CO2 per year, or 21% of the global emissions total. Two shocks are now affecting the transportation sector. First, Covid-19 destroyed 8 million barrels per day of oil consumption related to travel and transportation in 2020 — and 5 million bpd so far in 2021. Looking at jet fuel alone, Rystad Energy expects this to be nearly 3 million bpd lower in 2021 than it was in 2019. International travel will not get back to 2019 levels by 2023, but that will be 2.5 million bpd lower than the level expected for 2023 before the pandemic struck.
The second shock is related to the longer term structural shift in the transportation sector. The main trend is a shift from fossil fuels to electricity and — for aviation and shipping specifically — a shift also to low carbon fuel. The June edition of our comprehensive Energy Transition Report focuses on electric vehicles. Here we show how sales of EVs have soared so far in 2021. In Germany, sales grew to 22% of all passenger vehicle new sales in 1Q 2021, versus 14% in 2020 and 3% in 2019. Similar development is seen in France, the UK and China, while large markets like the US, Japan and India are still lagging. Most automakers have presented plans for ramping up their new EV models as they dial back their ICE offerings. Rystad Energy demonstrates in this report that a target of a 72% market share for EV sales in 2030 is not unrealistic, and that this would be consistent with the 1.5 degree scenario.
Within aviation, we expect a significant uptick in in commercial electric flights still to be at least 10 years out. However, observing United Airlines announcing the acquisition of up to 50 net zero emission supersonic aircrafts, to carry passengers beginning in 2029, represents an early signal that also the aviation sector could make the green shift. The shipping sector is also making some bold moves, with batteries, hydrogen and ammonia coming up as the fuels of the future. In this newsletter, you can read about the International Maritime Organization (IMO) setting a target to reduce the carbon intensity in the shipping sector by 40% by 2030 compared with 2008 levels, a well-intended measure that may have some unintended negative consequences. Also in the machinery sector (construction, mining, agriculture), driving 4% of global oil demand, we see low carbon solutions emerging. New solutions for energy storage and especially reduced battery costs, will of course be key in achieving a reduced carbon footprint from the whole transportation sector. The combined new battery demand across all transportation segments is expected to grow 15% annually on average from 2020 through 2050, with demand from the EV sector being the key driver. The transportation sector, driving around 30% of global CO2 emissions, will no doubt be an important part of pushing the energy transition forward towards net zero in 2050.