We have four main corporate supply and demand scenarios, one of which represents a carbon constrained future. In our planning process, we don’t assign probabilities to the scenarios so that we test the portfolio and improve our preparedness across a range of future potential outcomes. To evaluate the implications of different scenarios that combine alternative energy technology advancement and government actions, we developed the carbon constraint scenarios:
Figure 1: ConocoPhillips Corporate and Carbon Scenarios
The scenarios define pathways to possible carbon constrained futures with a mix of technology advancement and government policy actions. Each of these pathways is designed to stretch our thinking about rates of new technology adoption and other factors, but to be plausible and create a cohesive story.
With the exception of Scenario 3, these scenarios were developed to achieve a pathway commensurate with the IPCC’s scenario of achieving a near 50 percent chance of limiting the increase in global average temperature by 2°C.
Figure 2: Scenario Comparison - Global Emissions Trajectories
The scenarios consider several drivers of change and implications for energy demand.
Technology: The scenarios cover a range of technology outcomes. One includes rapid technology development with a small carbon price introduced by governments to kick-start technology advancement. The technological progress accelerates the development and uptake of electric cars, battery storage, smart grids and renewable power, all of which reduce greenhouse gas emissions. In another, the technological transformation is so rapid that CO2 capture and storage is not required. New technology adoption could also be slower if internal security (including trade and energy security) was considered to be more urgent than emissions reduction.
Legislation and Regulation: Government policies can change at different rates and can manifest in different ways. Legislation could take the form of global agreements to limit GHG emissions primarily through linked carbon pricing mechanisms and assisted by technological innovations. This could drive the development of lower cost renewable power and carbon capture and storage. Governments could also respond to slower development of technology and costlier alternatives by introducing command and control measures, such as renewable portfolio standards, to force higher cost technologies into the mix.
Demand Changes: The different scenarios illustrate a range of demand implications. In a scenario with energy security concerns, there could be expansion of energy efficiency, renewables and nuclear power in countries that do not have access to domestic energy sources and the use of fossil fuels, especially coal, in those with domestic supply. In situations with a growing carbon price, incentivizing coal-to-gas fuel switching, efficiency improvement and renewables would be expected. This could also increase natural gas demand. In some cases, gas demand stays higher for longer given more rapid reductions in use of coal in power generation, and in other cases, gas demand change is more modest. Oil demand and demand reductions vary in different scenarios. In scenarios with technology breakthroughs (e.g., power storage), energy efficiency improvements and adoption of alternatives to oil and gas are more accelerated. GDP growth also varies as cost of emissions reductions and energy system changes vary.