LONDON—The cost of producing energy from renewable sources such as solar and wind will fall sharply over the next 35 years, BP PLC said Monday, but without a system in place that levies a charge for carbon emitted into the atmosphere, natural gas and coal will remain the cheapest source of supply to 2050.

In a report analyzing the impact of technology on energy production and consumption in coming decades, the oil giant said that a carbon price of $40 a ton would make gas a more economical power source then coal—a more carbon-intensive fuel—but a higher carbon price will be needed to make wind and solar more competitive.

"Without a price on carbon, fossil fuels are fiercely competitive," said David Eyton, BP's technology chief. The oil giant's long-term forecasts project that coal will remain the dominant fuel in power generation by 2035, but will lose market share to natural gas and renewables. In transport, liquid fuels are expected to continue to dominate in coming decades.

The report comes ahead of a global summit in Paris intended to seal a deal that would ensure man-made global warming is limited to two degrees Celsius above preindustrial levels.

BP is one of a number of giant oil companies that have been vocal in pushing for a price on carbon as a means to lower climate-warming pollution in the run up to the gathering, arguing that continued investment in fossil fuels is necessary to meet the world's growing energy needs, but that a tax or cap on carbon emissions would help favor cleaner-burning gas over coal.

A 1% switch from coal-fired to gas-fired power plants "would cut emissions as much as increasing renewable energy by 11%," BP Chief Executive Bob Dudley told a conference in Paris in June. BP and other large oil companies are producing an increasing volume of natural gas, with BP expecting it to comprise 60% of its production by the end of the decade.

The coal industry has defended its role in the energy mix, highlighting that advanced technologies can sharply reduce carbon emissions and that coal remains a critical fuel, particularly in fast industrializing emerging markets.

Ultimately, BP expects competition between energy resources in power generation to increase over the coming decades and a carbon price of between $40 and $80 a ton could make a significant difference to which energy sources are most competitive. To tackle global warming though, the company believes more stringent measures will be needed.

"All the analysis I've seen suggests that you need to have a price on carbon considerably higher than the sorts of prices that we've used here to stabilize at 2 degrees centigrade," BP's Mr. Eyton said.

Write to Sarah Kent at sarah.kent@wsj.com

 

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(END) Dow Jones Newswires

November 02, 2015 09:05 ET (14:05 GMT)

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