Gas Demand to Grow to Late-2030s: Report
Unlike demand for oil, which has already peaked in the US and the European Union and will peak globally later this decade, gas demand has almost two more decades of growth ahead of it, according to research by McKinsey published January 14.
The sectors with the largest gas demand growth include chemicals, other industry, and buildings in non-OECD Asia and the Americas. Following the peak, declining demand for gas is driven by the power sector, as gas shifts its role from baseload provider to flexibility provider.
In the power sector, gas and, increasingly, renewables are more economical alternatives to coal. Until 2035, heavy industry, particularly iron and steel and cement, is expected to show net growth driven by economic growth in India and southeast Asia.
Despite the long-term decline in demand for all three fossil fuels, each continues to play a key role in the global energy landscape in the McKinsey Reference Case. Without further decarbonisation policies, more than half of all global energy demand comes from fossil fuels by 2050. In the Accelerated Transition case, both coal and oil demand will be 22% lower compared with the Reference Case in 2050 (and 52% and 27% lower versus 2019, respectively).
The projected CO2 emissions in the Reference Case are far from pathways that would limit global warming to 1.5°C. In addition, global energy-related emissions in the Reference Case remain flat until 2030, followed by a gradual decline until 2050. By contrast, CO2 emissions need to reach net zero by 2050 to move to the 1.5°C Pathway. The coming decade is particularly crucial, requiring a decline in global emissions of more than 50% by 2030.
This requires substantial and rapid changes in how societies around the globe fuel their economies. Despite the increased momentum toward decarbonisation, many governments still need to translate ambitious targets into specific policies. Furthermore, the Reference Case can be interpreted as a sign that additional ambitious initiatives and policy measures are needed to move closer to the 1.5°C Pathway. In other words, not enough is being done, it says.