When I talk about “LCFVs” or global low carbon fuels and vehicles initiatives what am I really talking about and why should it matter to you? If you’re in upstream oil and gas, or in downstream, why should you even care about stuff like biofuels, fuel economy, electric vehicles? Given a presumably anti-climate Trump Administration, why bother with climate change concerns? And, air pollution? What does it have to do with what you’re doing? Let me explain, drawing from my November report to my clients.
Despite a prolonged period of low crude oil prices, citizens and policymakers in many countries have never been more serious or committed to combating climate change in all sectors, including transport. We know this. The Paris Agreement entered into force in what seemed like a record time – less than a year after it was negotiated. Transport currently contributes 23% of energy-related greenhouse gas (GHG) emissions and 20% of energy use and is expected to double by 2030, according to IEA. Passenger transport accounts for nearly 60% of total transport energy demand, and 60% of this is in OECD member countries right now.
Decarbonizing transport is a major challenge with some strong and powerful advocates around the world calling for a single one-shot solution (electrification). That’s something that needs to be watched closely by all sectors of the oil and gas industry. But in any event, the reality is that multiple strategies will be required to achieve decarbonization with the understanding that fossil fuel demand will remain in place for some time, especially in emerging economies, and that it could get “cleaner.”
GHG emissions are increasing, and so is transport-related air pollution. After all the global oil and car industries have done to clean up fuels and vehicles over the last 20+ years, air pollution is actually worse than ever in some parts of the world as more and more people with growing incomes buy cars. The global car fleet is expected to double in the next 20-25 years, shown in the figure below. And with oil prices so low, people are driving more than ever in countries like China and the U.S.
Air pollution mitigation, except for in extreme cases (like China) has been completely overshadowed by the climate change movement, but the consequences are much more immediate and alarming as the following chart shows. The problem is so bad that some cities are considering car bans policies, some for the first time. Along with improving and encouraging public transport, they don’t know what else to do.
These two main drivers, climate change and air pollution mitigation, is where “LCFV” initiatives come into play. These kinds of initiatives are targeted to reduce conventional fossil fuel demand and/or the demand for the internal combustion engine primarily in an effort to reduce GHGs and air pollution, but also as a tool toward economic development and energy diversification as well. These kinds of initiatives, which I have been covering on my site and for my clients are shown in the figure below.
Countries are now responding with initiatives requiring biofuels blending, electrification, other alternative fuels and tough fuel efficiency standards, among other measures. These measures are linked and need collective watching. The graphic below shows intended nationally determined contributions (INDCs) for transport countries have submitted as part of their Paris Agreement commitments, as well as a summary of other policy support and measures for renewable transport (e.g. biofuels, advanced biofuels), fuel economy/efficiency and electric vehicles (i.e. zero emission vehicles).
My experience is that industries tend to care, appropriately, about what’s happening in their own backyards. But what motivated me to start my consultancy is the recognition that the stakeholders need to look beyond their backyards and at the bigger picture. It’s looming.
You can’t understand the full competitive landscape by only watching what’s happening in your own industry – you need to understand the full landscape to assess both opportunities and threats. And that’s totally overwhelming! Yet, the bigger picture is where we see the convergence of these trends that ultimately affect demand for the all the stakeholders’ products. The following graphic showing recent data from IEA on the reduction in oil demand by 2040, makes this very clear.
Where are the strategic threats and opportunities in the evolving and emerging “carbon-smart” economy? They’re both there for all the industries involved. And yes, Trump or no Trump, the march toward a global carbon-smart economy is going to continue whether you agree or not (how it will evolve in the U.S. is yet to be determined). Helping out with the big picture by taking a holistic view that cuts across industries, as well as identifying these strategic threats and opportunities for my clients is what I’m trying to do on a daily basis, and that’s why you find me posting on diverse-seeming topics such as biofuels, fuel economy, zero emission vehicles, oil demand and air pollution mitigation. They all fit together. But understanding how they will fit together, especially in key countries, and what it will mean for the stakeholders in all the affected industries is critical.
This article was submitted and published through the U PUBLISH IT PORTAL. The opinions of this article are those of the author and not necessarily the publisher. U PUBLISH IT is a FREE information sharing portal designed for industry to write about the industry, in a way that will benefit industry. Consider it an educational portal for sharing and advancing the energy solutions needed for our world.
To submit your articles, presentations and thoughtful perspectives, please go to:
Did you enjoy this article?
We respect your privacy and will never share your information with third parties.