We are pleased to present Aurora’s new strategic insight report, The Path to Paris: Implications of a Two Degrees world. The report presents our analysis of the abatement required by the transport, power, industry and buildings sectors, to stay within a Two degrees-compliant carbon budget, as well as the implications for demand and prices of coal, oil and gas. The broader implications for policy makers and investors are also discussed, including volumes of oil and gas left in the ground, diversification by big oil and gas players into renewables and burden-sharing between regions.
The analysis draws upon our market experience, with much of the content developed through a detailed consultation process across market participants. The report was first presented during a Group Meeting in June 2019 and was subsequently updated to reflect feedback provided by clients.
Key messages to emerge from the analysis are:
- Global consumption of fossil fuels have been rising steadily over the last three decades despite a string of ambitious climate change treaties. Absent clear decarbonisation initiatives, the World is set to exceed the 2-degree compliant emissions trajectory by 40% (over the period 2020-2040)
- Mass electrification of transport and heat, coupled with the decarbonisation of power and efficiency gains in transport and industry, do not suffice. Meeting Two Degrees will require additional speculative measures from Carbon Capture, aviation, agriculture and Forestry
- Demand destruction in Two Degrees scenario results in coal and oil prices plummeting, but gas prices remain supported through coal-to-gas switching and CCS. Relative to Aurora Central, fossil fuel investors will see a total reduction of US$44 Trillion in revenues by 2040
- Super Majors have begun diversifying into low carbon initiatives, but these assets may not offer a good level of complementarity or returns compared to existing fossil fuel investments. Without further exploration, 760 billion barrels of oil and 60 trillion cubic metres of gas would be left in the ground by 2050.
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