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  First Thoughts

    Dan Gilmore

    Editor

    Supply Chain Digest



 
Sept. 6, 2019

Energy, the Supply Chain and CO2


Annual BP Report on Energy Highlights the Disconnects on CO2 Emissons  - and Huge Decisions Lying Ahead

 

In late 2015, some 180 nations came together to agree they would sign the so-called UN Paris Climate Accord. With great fanfare and self-promotion, leaders from around the world agreed to submit plans for reduction in CO2 emissions that collectively would ensure the rise in global temperatures as a result of CO2 would stay under the UN's target of a rise of less than 2 °C above pre-industrial levels. (Though the US later pulled out).

It isn't working.

That is certainly a major takeaway from the freshly released Statistical Review of World for Energy 2019, from energy giant BP. The review is a sort of almanac of all matter of energy related data, now in its 68th year, and as always it is quite an interesting and educational read.


Gilmore Says....

Mercedes and cheeseburgers, or lower CO2? A middle path? The 2020 election will be very interesting and consequential indeed.

What do you say?

Click here to send us your comments
 

The report is full of data on energy production and consumption. Energy of course is at the heart of supply chain in many ways, and central to our lives. A world of relatively cheap, abundant energy would bring prosperity and more income equality to much of the world.

High energy prices have the opposite effect, as we learned in the 1970s and again in 2008.

Energy costs can have a major impact on a variety of supply chain decisions, including network design and how to optimally navigate the tradeoff curve between inventory and transportation costs.

The headline news from the report is that global primary energy consumption grew at a rate of 2.9% last year, almost double its 10-year average of 1.5% per year, and the fastest since 2010.

And since the world still runs primarily on fossil fuels, despite what world leaders and the UN celebrated in 2015, that means CO2 emissions are headed up not down.

I am not CO2 emissions zealot, but the delta between the feel good statements in Paris and the subsequent reality is rather stark.

"My guess is that when our successors look back at Statistical Reviews from around this period, they will observe a world in which there was growing societal awareness and demands for urgent action on climate change, but where the actual energy data continued to move stubbornly in the wrong direction," commented BP's chief economist.

And it's clear why: almost everywhere, political leaders will choose jobs and growth over CO2 reductions. Emissions continue to rise in Green leaning Europe despite more than two decades supposedly addressing the issue through carbon trading and more.

Great timely case in point: news just this week that environmentalists are planning major demonstrations at a huge auto show scheduled in a couple of weeks in Frankfurt, saying German car companies are a big part of the CO2 problem.

But of course, export of Mercedes and BMWs are literally the engine of German economic strength. Maybe those car companies will indeed navigate soon to an electronic car path (which do not reduced total CO2 emissions nearly as much as many believe), but it is likely to take time.

"Do we really want to go to a quarter of people and say you have to give up your car?" said the head of Germany's automaker association when environmentalists suggested that more radical policies were needed.

I am going to make it fairly short and sweet this week, presenting a few key charts from the report.


The first shows on the left half that ironically since 2015 global energy consumption has been rising. On the right, you can see CO2 emissions were up 1.9% in 2018, well ahead of the average rise over the previous five years.

 

This was mostly the result of generally strong economic conditions seen globally last year. For now and the foreseeable future, economic growth, especially in emerging economies, means rising CO2.

The next chart looks at which countries represented what share of the growth in energy consumption in 2018. China as usual by far led the pack, responsible for 34% of the total growth in energy consumption. The US was second at 15% - driven again almost 3% economic growth – followed by India at 10% of the total.

 

Surprising to me, other developing Asian countries represented just 10% of the growth.

Finally, each year the report shows trends in the share of different energy sources over time, as shown in the graphic below.

While oil's share continues to decline, it is still the top source, at about 34%, with the recent declines in share really leveling off. While coal's share is also declining, it remains the number 2 source – still widely used not only in China but Green thinking Europe. Natural gas has picked up share as utilities switch from coal to gas for producing electricity – driven largely by costs, not CO2.

And alternative sources? As you can see, hydropower has gone flat, with nuclear continuing to decline after the Japan nuclear disasters a few years back.

As for true renewables (wind, solar, bio fuels, etc.), the trend is clearly up but still represent less than 5% of total global energy consumption.

Mercedes and cheeseburgers, or lower CO2? A middle path? The 2020 election will be very interesting and consequential indeed.


The full BP report is available here: Statistical Review of World Energy 2019

Any reaction to this data on energy and CO2? Let us know your thought at the Feedback section below.


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