BP Says Ukraine War and IRA Could Spur Energy Transition

When Russia’s invasion of Ukraine led to gas shortages and soaring prices, it was used by both governments and fossil fuel companies to justify more oil, gas and coal development.

However, one oil major predicts the longer-term consequence of the invasion will be to speed the transition to renewable energy.

“The increased focus on energy security as a result of the Russia-Ukraine war has the potential to accelerate the energy transition as countries seek to increase access to domestically produced energy, much of which is likely to come from renewables and other non-fossil fuels,” BP Chief Economist Spencer Dale said in the company’s Energy Outlook 2023, released Monday, as Reuters reported. 

In the report, BP explained how the war had changed its predictions from its Energy Outlook 2022 because it had increased national concerns about energy security, decreased economic growth and associated energy demand and altered the global energy mix with the reduction of Russian fuel exports. In addition, the passage last year of the Inflation Reduction Act (IRA)–the largest climate investment in U.S. history–also altered BP’s estimates for carbon dioxide emissions and the renewable energy transition. 

“Government support for the energy transition has increased in a number of countries, including the passing of the Inflation Reduction Act in the US,” BP said. “But the scale of the decarbonization challenge suggests greater support is required globally, including policies to facilitate quicker permitting and approval of low-carbon energy and infrastructure.”

In its outlook, BP looked at three scenarios: Accelerated, Net Zero and New Momentum. The Accelerated and Net Zero scenarios assume that climate policies rise in ambition to reduce carbon dioxide emissions by around 75 percent and 95 percent by 2050 respectively. The New Momentum scenario is based on current policies and sees emissions peak in the 2020s and fall to 30 percent below 2019 levels by the 2050s. 

The Intergovernmental Panel on Climate Change has warned that the world needs to reach net zero emissions by the early 2050s in order to limit global warming to 1.5 degrees Celsius above pre-industrial levels and avoid the worst impacts of the climate crisis. The New Momentum scenario still falls far short of that, but all three scenarios improved from a climate perspective when compared to 2022’s outlook.

• Gross Domestic Product (GDP) for all three scenarios was three percent lower by 2035 and six percent lower by 2050.
• Energy consumption for all three scenarios was around 3.5 percent lower by 2035 and 5.5 to six percent lower by 2050.
• In the New Momentum scenario, a decrease in fossil fuel consumption plus an increase in domestic sources of energy meant the carbon intensity of the global fuel mix fell by around one percent by 2035 and around two percent by 2050.
• Also in New Momentum, oil and gas imports to India, China and the EU fell by more than 10 percent by 2035. 
• Because of both the war and the IRA, emissions projections for the New Momentum scenario were 3.7 percent lower for 2030, 6.4 percent lower for 2040 and 9.3 percent lower for 2050.

BP has a stated goal of reaching net zero by “2050 or sooner,” The Guardian reported. However, like its peers, the oil giant has also come under fire for using stated climate commitments to greenwash its continued reliance on fossil fuels. Its financial plans for 2023 spend up to two times on oil and gas what they earmark for renewable projects. In internal documents obtained during a U.S. House investigation, BP said carbon capture technology would “enable the full use of fossil fuels across the energy transition and beyond.”

In its 2023 Outlook, BP did emphasize the importance of a speedy energy transition. 

“The carbon budget is running out,” the company wrote. “Despite the marked increase in government ambitions, CO2 emissions have increased every year since the Paris COP in 2015 (bar 2020). The longer the delay in taking decisive action to reduce emissions on a sustained basis, the greater are the likely resulting economic and social costs.”

However, it also said that carbon capture would play a “central role” in timely decarbonization and that oil would “play a major role in the global energy system for the next 15-20 years.”