Decarbonization of the energy system—from a hydrocarbon-based to a sustainable, low-carbon energy system—poses an existential threat to the oil and gas industry. It also presents oil and gas companies with new portfolio opportunities to build adjacent businesses, shape and participate in new markets, and drive new sources of value from existing assets and capabilities. No company can afford to sit on the sideline.
It will be challenging. Successfully navigating the Decarbonization Transition is about more than achieving emissions-reduction targets and ensuring sustainability. It’s also about ensuring equity in energy access to enable global growth and improve living standards.
The Decarbonization Transition will also be expensive. Accenture has estimated that the investment required in the energy system through 2050 falls between $90 and $105 trillion, with the bulk of that related to building, adapting or strengthening the necessary infrastructure. Companies will need to generate competitive returns to attract the infrastructure investments the transition will require. The fundability of the transition will be key.
Rise in global CO2 emissions that the energy system will experience by 2050 if no action is taken to accelerate the Decarbonization Transition
Fall in global CO2 emissions that the energy system will experience by 2050 if aggressive, yet pragmatic, actions are taken to accelerate the Decarbonization Transition
Section 1: Resetting the destination for energy decarbonization
Actions speak louder than words
Striving to achieve the net-zero emissions goal requires both aspiration and action. But which actions will be the most impactful, investable and executable for the oil and gas industry? Which actions are most likely to happen?
The short answer is those that offer attractive returns, leverage existing infrastructure and value chains, and can be funded. We have identified these as Clean the Core actions, or those that eliminate or mitigate emissions from today’s energy system.
Beyond Cleaning the Core, there are other proven and commercially viable actions that will usher in lower-cost, higher-performing and cleaner energy consumption solutions. These actions Accelerate the Transition and include: switching supplies from coal to cleaner gas and renewable electricity; replacing today’s internal combustion engine vehicles with battery-powered and low-carbon solutions in transportation; and replacing existing feedstocks with recycled alternatives that require less processing energy or release fewer in-process emissions.
The final set of actions will Extend the Frontier by providing solutions that overcome otherwise unabatable energy emissions challenges or that satisfy demands that currently can only be met through fossil-based energy supplies. Such solutions will materialize over time and contribute significantly to the transition as they achieve viability at scale. These actions include: the development and commercialization of green and blue hydrogen; biofuels for aviation and shipping; electricity-based fuels such as ammonia and synfuels; advanced clean industrial processes; and in-situ carbon capture, utilization and storage solutions beyond what is technically and economically feasible today.
Shifts in final energy demand
In our stretch case, we envision 22 GT of CO2 being eliminated from the power sector by:
Energy efficiency (-7 GT CO2)
Process and material efficiency (-7 GT CO2)
Final demand management
(-5.4 GT CO2)
Carbon capture, utilization and storage (CCUS) (-2.8 GT CO2)
Circularity solutions (-2.4 GT CO2)
Shifts in final energy supply
In our stretch case, we envision 20 GT of CO2 being eliminated from the power sector by shifting supply:
From coal to solar and wind
(-11 GT CO2)
From fossil fuel to electricity consumption (-5.2 GT CO2)
From coal to gas (-2.1 GT CO2)
To hydrogen (-1 GT CO2)
To biofuels (-0.9 GT CO2)
What does the future hold?
Based on our analyses of five core energy sectors, 15 industry sub-sectors, and 11 cross-sector themes, we have developed two possible "states of the world" for 2050.
One is the consequence of business-as-usual practices and mindset. Shifts that are already underway will continue, but not accelerate dramatically to change direction. In this scenario, global CO2 emissions are projected to rise by 35 percent, to as much as 54 GT by 2050.
The other “state of the world” depicts what we’ve termed the “stretch case.” Here, we’ve prioritized solutions that promote decarbonization, but also reduce energy demand, increase efficiency, reduce cost or control risk. We’ve also made some assumptions based on what our analysis tells us is possible:
Total energy consumption will peak between 2020 and 2030, before falling to a level of around 85 percent of the 2019 level by 2050;
The share of final energy consumption would shift significantly toward electricity, increasing from 20 percent in 2019 to 45 percent by 2050;
The shift away from coal and improvements in process efficiencies would improve the intensity of CO2 emissions from power generation by 90 percent;
The share of renewables used in power generation would grow to as much as 91 percent by 2050.
These and other shifts have the potential to cut CO2 emissions by more than 40 GT in the power sector alone. This is what we believe is possible, realistic and within reach.
What will it take?
Beyond actions to Clean the Core, Accelerate the Transition and Extend the Frontier, the industry will have to reimagine ecosystem partnerships—within the sector and across sectors that are currently hydrocarbon-dependent. Proactively orchestrating ecosystem partners to bring a united vision of the energy future to life is one of the most important roles oil and gas companies will play. We explore that role and the implications for oil and gas companies in the next section.