Energy Insights

Scenario 3

Cháoxī (潮汐)/Prilivy (приливы )/Tides

The Cháoxī (潮汐)/Prilivy (приливы )/Tides: This scenario describes a return to a more bi-polar world separated into large US-led and China-led blocks but with a large group of non-aligned emerging economies that draw profit from playing the blocs against each other. The balance between the two blocks ensures coexistence is possible but limits the space for big global initiatives. Demand for energy continues to boom, and it proves hard to shift out of fossil fuel dependence, so the solutions sought in many regions are giant…

The socio-political transition: Competition between the two main blocks with non-aligned countries benefiting as intermediaries results in strong competition, short-termism and more of the known market driven solutions. A strong focus on GDP, fear of deindustrialisation and loss of jobs mean true reform is impossible and existing market designs largely remain locked in.

The techno-economic transition: The economic paradigm has barely changed. GDP is still king. And given that change is costly, and causes stranded assets, lock-in to existing fossil fuel solutions is more widespread than once thought. End-of-pipe solutions such as CCS are common. Those places - notably the European Union - that do still try to reduce the causes rather than the impacts, are forced to slow down their efforts, as they risk deindustrialisation if they force the pace.

The physical transition: There is no doubt that climate change and biodiversity loss is continuing, but its manifestations, even repeated events, are often forgotten as humans adapt - like the frog in a pot of slowly warmed water, there is little reaction even as boiling point approaches. Indeed, the use of AI to anticipate such events reduces their perceived impact and a few ultra-rich individuals are toying with geo-engineering solutions to "save the world". At the same tie both also result in additional energy demand.

Main driving forces

Adjusting political systems in the face of conflicts The market competition logic holds fast, with the advantage that decisions are decentralised and rapid, and the disadvantage that externalities are dealt with only when forced by government, something that is hard when global competition is tough. End of pipe fixes are the prefered solution.

Seeking a new paradigm for the global economy Citizens and governments in many places are not prepared to pay the price needed to make a serious transition. Governments lack the funds to subisdise what cna be a painful change of behaviour or production.

Fluctuating space for natural habitats It falls to the ultra rich and some far sighted governments to develop vast nature parks that are left for wildlife only. The downside, is outside these locations, biodiversity is under ever greater pressure.

Energy affordability as an enabler of production and economic growth is vital. A country or region that tries to use energy prices as a lever for change risks rapid deindustrialisation and a flight of investment capital elsewhere. Maximising local renewable sources is seen as vital but the growth of more expensive transition steps like low carbon hydrogen carriers and large scale - long duration storage stalls. As a consequence, traditional fossil fuel demand starts to reduce but not fast enough to reduce greenhouse gas emissions in line with the goals of the Paris agreement.

Popular sentiment also reaffirms that as energy is a basic need there is no way that “excessive” costs can be dumped on consumers, and states see it as vital for competitiveness to bring energy to those who do not have it yet.

Security of supply figures as a consideration but the impact of strategic resources as geopolitical bargaining chips is reduced by the significant group of non-aligned countries providing enough space for working the market based systems. Strong growth of energy demand and a focus on competitiveness limits the possibility of strategic behavior.

Energy and environment suffers somewhat, as even those regions or countries that remain ambitious in their climate and green goals cannot race too far ahead of the slowest mover, without suffering a disadvantage in competitiveness.

Even the European struggles to meet its ambitious energy transition targets. As growth of renewables and electrification of energy demand are not coordinated but instead driven by different market incentives. This creates disconnects in supply and demand in time and space which means a slower drop in demand for fossil fuels to supply sticky demand or to create electrification of demand ahead of the supply of renewables.

A few consequences of Tides on different geographies

Large competing blocks led by US and China create a reasonable economic environment but also maintain the current dynamic of dysfunctional global governance --> the energy transition progresses up to a point that makes economic sense given current market structures, but it is difficult to unlock investment in the more difficult sectors --> there is not enough focus on energy efficiency especially in growing energy markets --> CO2 starts to drop for the right reasons and an acceleration can be seen going into the 2030s and 2040s.

A large group of emerging economies are largely successful at remaining independent of the two large blocks (US or China). This allows them to act as an intermediary between these blocks which increases their rôle both diplomatically as well as in terms of economic activities.
Industrial competitiveness concerns and citizen protests against the cost of change ensure that many parts of Africa, Latin America, Asia and Europe remain locked into fossil fuel consumption. Despite the decreasing cost of renewable energy, the cost of energy storage remains high, and especially up-front cost of investing in entirely new energy systems is prohibitive for many.
Fossil fuel producers such as those in the Middle East and North America maximise their rents, but also push their downstream industries (such as synthetic chemicals) that use fossil fuels as feedstocks, seeing as they have a substantial competitive advantage, and can thus become essential links in global supply chains.

Signals and key drivers

Involving a group based in multiple geographies, we have gathered a number of releavant information sources, be these reports, articles, or workshop outputs. Just a handful of articles are listed below. As the website has to be "finished" at a particular point in time, the articles may appear old. But do not fear, in the actual tool we are using, there are regular updates of new articles.