The European Climate Foundation have published new research, by Cambridge Econometrics, the International Council on Clean Transportation (ICCT) and Pöyry Management Consulting, into the economic effects of reducing transport-related CO2 emissions. The study, titled ‘Oil Market Futures’, presents the long-term impacts on oil prices and the wider economy if there is a global effort to tackle climate change. The results show that, in a world where climate policies are implemented to drive investment in low-carbon technologies, demand for oil from transport will be significantly lower: by around 11 million barrels per day in 2030 and by 60 million barrels per day in 2050. This lower oil demand would result in oil prices stabilizing to between $83 and $87 per barrel in the long run, rather than increasing to $90 per barrel by 2030 and over $130 per barrel by 2050 (in 2014 prices), as expected in the business-as-usual case. As a result, industries and consumers would benefit from reduced spending on oil, leading to net macroeconomic benefits.
Gareth Davis, Director for Energy Consulting at Pöyry, said, “The rise of shale oil, the slowing world economy and OPEC’s changed production policy have led to unprecedented levels of oversupply in global oil markets. Our central view is this oversupply will unwind and prices will return to $80/barrel by 2020. In a business-as-usual scenario prices would continue to rise after 2020, however aggressive climate policies could deliver oil demand reductions that would hold prices at this level.”
Phil Summerton, Director at Cambridge Econometrics, said, “In a world where climate policies are being implemented to drive investment in low-carbon technologies – as they have too and as governments agreed in Paris – we’ll simply need less oil for transport. Through policy support and technological disruption, we can expect the global economy to be using 11 million fewer barrels of oil per day by 2030. This rises to 60 million in 2050. This will have profound impacts, but the advantages are clear and by moving early the benefit can be maximized.”
Drew Kodjak, Executive Director, ICCT, said, “We have seen how vehicle standards around the globe have already reduced oil demand, and with governments increasingly waking up to the imperative to tackle climate change, we can expect this trend to strengthen. Companies such as Tesla have shown what innovative engineers are capable of, and governments in California, Norway and the Netherlands have shown how rapidly change can be delivered via smart policies. This analysis shows how decision-makers can tackle the twin challenges of transport emissions and resource dependency.”
A summary of the report is available to download as a PDF here.