Considering 2°C scenarios

According to the International Energy Agency (IEA), a “well below” 2°C pathway implies “comprehensive, systematic, immediate and ubiquitous implementation of strict energy and material efficiency measures."1 Given a wide range of uncertainties, no single pathway can be reasonably predicted. A key unknown relates to yet-to-be-developed advances in technology and breakthroughs that may influence the cost and potential availability of certain pathways toward a 2°C scenario. Scenarios that employ a full complement of technology options are likely to provide the most economically efficient pathways.

Report Jan. 5, 2021

Considering 2°C scenarios

Considerable work has been done in scientific and economic communities to explore potential energy pathways to meet a 2°C target.  For example, the Stanford University Energy Modeling Forum  27 (EMF27)2 provided a  range of full technology scenarios to meet a 2°C target. In previous publications, ExxonMobil  has tested the expected energy mix that could exist under these scenarios. In October 2018, the Intergovernmental Panel on Climate Change (IPCC) published a Special Report on "Global warming of 1.5°C"  (IPCC SR1.5)3  and utilized more than 400 emissions pathways with  underlying socioeconomic development, energy system transformations and land use change until the end of the century. The IPCC report identified 74 scenarios as "Lower 2°C," which are pathways limiting  peak warming  to below 2°C during the entire 21st century with greater than 66 percent likelihood. The chart (below) depicts the range of global energy demand in 2040 across these IPCC Lower 2°C scenarios. As the chart illustrates, predicting absolute 2040 energy demand levels in total and by energy type carries a wide range of uncertainty, and particular scenarios are heavily influenced by technology and policy assumptions.

For comparison purposes, the chart also includes energy demand projections in 2040 based on the IEA's Sustainable Development Scenarios (SDS). The IEA specifically notes that its SDS works backward to examine actions needed to achieve the United  Nations' energy-related  Sustainable Development Goals, including the objectives of the Paris Agreement.4

The chart (below) illustrates potential global CO2 emissions trajectories of the IPCC Lower 2°C scenarios and the EA's SDS and STEPS, relative to ExxonMobil's Outlook for Energy.  In aggregate, the Outlook for Energy projections align with the Nationally Determined Contributions (NDCs8) submitted by Paris Agreement signatories, which  represent each country's plan to reduce its emissions. The IEA STEPS projects emissions at a comparable level generally in line with the 2030 NDC submissions. The 2020 United  Nations Emissions Gap report concluded that the NDCs remain inadequate to meet the Paris Agreement.5  New NDCs have been submitted recently and more are expected  in 2021.

2040 global energy demand mix across IPCC Lower 2°C scenarios

Image 2040 global energy demand mix across IPCC Lower 2°C scenarios
Source: IEA World Energy Outlook 2020, IPCC SR1.5

Global energy-related CO2 emissions 6

Billion tonnes
Image Global energy-related CO2 emissions 6
Source: ExxonMobil 2019 Outlook for Energy, IEA World Energy Outlook 2020,  IPCC SR1.5

The IPCC Lower 2°C scenarios produce a variety of views on projected global energy demand  in total and by specific types of energy. The average of the scenarios' growth rates per energy source has been used to consider potential  impacts on energy demand for this report.7

Based on this analysis,  primary energy demand on a worldwide basis is projected to increase about 0.3  percent per year on average from 2010 to 2040. Expected demand and technologies deployed in 2040 vary by model and energy type (see chart below):

  • Natural gas demand  is expected on average to be similar to 2010, while oil demand is projected on average to decline by about 0.5 percent per year. Together their share of energy demand  is projected on average to still  be almost 50 percent by 2040.
  • Non-bio renewables, such as wind, solar and hydro, are expected to increase on average by almost 7 percent per year, while nuclear power should  increase about 2.5 percent per year.
  • Coal demand is expected to decline by an average of 4.5 percent per year,  representing a  roughly 75 percent decrease from 2010 to 2040.
  • Bioenergy demand  is projected on average to grow at about 2.3  percent per year.
  • Carbon capture and storage (CCS)  is a key technology to address CO2 emissions, enabling lower emissions from industrial and power sectors. In the IPCC Lower 2°C scenarios, CCS would  need to be deployed to a scale  equivalent to about 10 percent of the world's energy demand. (table below)

All energy sources remain important through 2040 across all the IPCC Lower 2°C scenarios, though the mix of energy and technology shifts over time. Across these scenarios, a wide range of outcomes can be observed for the various fuel sources (table below). Nevertheless, oil and natural gas remain essential components of the energy mix, even in models with the lowest level of energy demand. Oil demand is projected to decline modestly on average, and much more slowly than its rate of natural decline from existing producing fields. Natural gas demand holds steady due to its many advantages, including lower greenhouse gas emissions. As a result of these growing energy demand trends coupled with natural field decline, substantial new investments are required in both oil and natural gas capacity, even under the IPCC Lower 2°C scenarios that contemplate substantial reductions in greenhouse gas emissions.

Range of growth rates across IPCC Lower 2°C scenarios from 2010 to 2040 (CAGR)

percent change per year

Image Range of growth rates across IPCC Lower 2°C scenarios from 2010 to 2040 (CAGR)
Source: IPCC SR1.5, ExxonMobil analysis

Average need for CCS in IPCC Lower 2oC scenarios

(Billion tonnes CO2)
Source: IPCC SR1.5, ExxonMobil analysis

Wide variety of 2040 energy mix in IPCC Lower 2oC scenarios

 Share by sources 2040 Average 2040 Range
 Oil and natural gas 48% 28-66%
 Coal 8% 1-21%
 Nuclear 4% 1-7%
 Bio 19% 8-36%
 Non-bio renewables 21% 8-43%
Percent of total energy deploying CCS 10% 1-19%
Source: IPCC SR1.5, ExxonMobil analysis

1 IE4, 2017. Chapter 2 of Perspectives for the energy transition - investment needs for a low-carbon energy system, p 57.

2 "EMF was established at Stanford in 1976 to bring together leading experts and decision makers from government, industry, universities, and other research organizations  to study important energy and environmental issues. For each study, the Forum organizes a working group to develop the study design, analyze and compare each model's results and discuss key conclusions."

EMF is supported by grants from the U.S. Department of Energy, the U.S. Environmental Protection Agency as well as industry affiliates including ExxonMobil.

1PCC, 2018:  Global warming  of 1.5C. An IPCC Special Report on the impacts of global warming  of 1.5°C above pre- industrial levels and related global greenhouse gas emission pathways, in the context of strengthening the global response to the threat of climate change, sustainable development, and efforts to eradicate poverty [V.  Masson-Delmotte, P. Zhai, H. O. Portner, D. Roberts, J. Skea, PR. Shukla, A. Pirani, W Moufouma-Okia, C. P~an,  R. Pidcock, S.   Connors, J.B.R. Matthews, Y. Chen, X Zhou, M. I.  Gomis, E.  Lonnoy, T Maycock, M. Tignor, T. Waterfield (eds.)]. In Press.

4 1EA, World  Energy Outlook 2020, p. 87. The IEA SDS was not assessed by the IPCC as part of the suite of 74 "Lower 2C" scenarios. According  to the IEA "the SDS would provide a 50% probability of limiting the temperature rise to less than 1.65°C, in line with the Paris Agreement objective of 'holding the increase in the global average temperature to well below 2°C!'"

5 UNEP, Emissions Gap Report 2020 Key Messages, accessed December 2020.
https://wedocs.uneporg/xmlu/bitstream/ handle/20.500.11822/3446 1/£GR20KM.pdf

6 The emissions charted from ExxonMobil 2019 Outlook for Energy, 2020 IEA STEPS and 2020 IEA SOS do not contain industry process emissions. Land use and natural sinks are also excluded.

7 The IPCC Lower 2°C scenarios produce a variety of views on the potential impacts on global energy demand in total and by specific types of energy, with a range of possible growth rates for each type of energy as illustrated in this report. Since it is impossible to know which elements, if any, of these models are correct given the inherent uncertainty in energy demand modeling, an average of all 74 scenarios was used to approximate growth rates for various energy types as a means to estimate trends to 2040 indicative of hypothetical 2°C pathways.

8 Reference is made to the first set of NDC submissions made in 2015; new or updated NDCs are anticipated, but not included as part of this analysis as only a few countries have updated their NDCs at this time. Additional NDC submissions are anticipated ahead of the 26th United Nations Climate Change Conference in 2021.

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