Few people doubt the legitimacy of issues such as climate change and global warming caused by fossil fuels because of which energy transition has been seen principally – some will insist solely – in terms of a transition to renewables led by specific sources depending on the local environment. Against the backdrop of fundamental energy inequity, within and across countries, this could be simplistic approach.
‘Resilient supply chains’ became the call and goal of both businesses and governments in the wake of supply disruptions caused by Covid 19. The continuing Russia-Ukraine war which caused oil & gas prices soar fetching windfall gains to the fossil fuel industry, has made ‘energy security’ the focal point around which the fossil fuel industry is marshalling its resources and members.
Darren Woods, CEO of ExxonMobil, observed, on the eve of the industry’s annual CERA Conference, that reducing emissions without compromising energy security of billions of people will call for multiple solutions, (https://corporate.exxonmobil.com/news/corporate-news/exxonmobil-at-ceraweek). Governments too have joined the chorus, justifying, in the name of national energy security, the billions of subsidies that the fossil fuels industry continues to get.
At the same conference, Amin Nasser, CEO of Saudi Aramco, scornfully dismissed the current energy transition strategy as a failure on multiple fronts, advocating that “We should abandon the fantasy of phasing out oil and gas, and instead invest in them adequately”. (https://www.theguardian.com/environment/2024/mar/20/fossil-fuels-oil-and-gas-clean-energy), perhaps as a rejoinder to the International Energy Agency (IEA) calling the fossil fuel industry a ‘marginal force at best’. Woods described how the fossil fuel industry has a holistic perspective, with investments in low emissions, carbon capture, direct air capture (where they are running a pilot project in Baytown).
A few days earlier, Shell announced that “it may slow the pace of its emissions reductions for this decade by setting a new plan to reduce the carbon emissions intensity of the energy it sells by 15-20% by the end of the decade, compared with its previous target of 20%’, (https://www.theguardian.com/business/2024/mar/14/shell-warns-it-may-slow-emissions-reduction-during-crucial-climate-decade), a move that has drawn criticism from climate activists, some of whom in Germany, the Netherlands, Norway and Sweden were “blocking access to North Sea oil infrastructure as part of a coordinated pan-European civil disobedience protest” against the continued exploitation of North Sea fossil fuel deposits (https://www.theguardian.com/environment/2024/mar/16/climate-activists-across-europe-block-access-to-north-sea-oil-infrastructure).
Uneven investments
In its 2023 report, the IEA (https://www.iea.org/reports/world-energy-investment-2023/overview-and-key-findings) says that investment by the oil and gas industry in low-emissions sources of energy is less than 5% of its upstream investment, although it could be in double-digits among the large European companies. Around $2.8 trillion will be invested in energy in 2023 of which more than $1.7 trillion to clean energy, including renewable power, nuclear, grids, storage, low-emission fuels, efficiency improvements and end-use renewables and electrification and a little over $1 trillion to fossil fuel supply and power, of which around 15% is to coal and the rest to oil and gas. Between 2023 and 2021, annual clean energy investment has risen at 24% with investment in fossil fuels rising at 15%, but the IEA sees it as a “a short-term scramble for oil and gas supply”, while remaining convinced that the fossil fuel industry will at best be a marginal force. (https://www.iea.org/reports/world-energy-investment-2023/overview-and-key-findings).
Over investing in fossil fuels?
However, as The International Renewable Energy Agency’s (IRENA) notes, “to keep 1.5°C alive, deployment levels must grow from some 3,000 gigawatt (GW) today to over 10,000 GW in 2030, an average of 1000 GW annually. China, the European Union and the United States accounted for two-thirds of all additions last year, leaving developing nations further behind” (https://www.irena.org/News/pressreleases/2023/Mar/Investment-Needs-of-USD-35-trillion-by-2030-for-Successful-Energy-Transition).
More troubling is a UN report, compiled by the United Nations Environment Programme (UNEP) in collaboration with academic partners, based on a scrutiny of the plans of the 20 largest fossil fuel-producing countries, responsible for a staggering 84% of global carbon emissions and roughly three-quarters of the world’s fossil fuel consumption in 2021. These governments’ plans show they intend to produce, in total, 110% more fossil fuels in 2030 than are compatible with the 1.5°C limit set out in the Paris Agreement, and 69% more than is consistent with 2°C of warming. This will result in 460% more coal, 83% more gas, and 29% more oil production in 2030 than the world can afford to burn on its increasingly miniscule 1.5 C carbon budget. (https://healthpolicy-watch.news/governments-plan-massive-expansion-of-fossil-fuel-production-despite-climate-the crisis/).
Nearly 90% of these countries have failed to sync their fossil fuel production with their carbon-neutral pledges. President Biden has exhorted oil companies to increase production as has the government in Brazil. Saudi Arabia too stands committed to oil, while Qatar and Russia are focused on increasing gas output, with only the UK and Norway planning significant declines in output. In the case of coal, reductions planned by China and the US will be offset by projected increases in India, Indonesia and Russia. Incidentally, India’s coal production hit the 1 billion tonne mark, having grown at 5.2% after 2014-15, a significant jump over the 2.8% annual growth between 2008-09 and 2013-14 (The Times of India, March 24, 2024, Page 15).
If the demand for fossil fuels peaks by 2030 as forecast by the IEA, there will be excess investment in new fossil fuel supply, spoiling the transition but also posing a threat to investors, as detailed in a new analysis by The Carbon Tracker Initiative, a climate-focused financial think tank, (https://insideclimatenews.org/news/08112023/un-production-fossil-fuels-outstrip-climate-goals/).
Unstable future
In an interview to The Times of India (October 23, 2021, Page 20), Philippe Benoit, adjunct senior research scholar at Columbia University’s Center on Global Energy Policy, sees the need to go beyond simplistic thinking, speaking of two dimensions of ‘energy equity’ –under-privileged populations without access to basic energy and developed countries consuming more energy per capita and in absolute terms than poorer countries.
The future is an unstable mixture (caused by glaring inequalities in income and wealth) where mobility is getting redefined, space travel has gone commercial, air travel is booming, recycling of batteries is water-intensive and millions of poor people walk long distances to fetch firewood. We have no choice but to think of energy transition in terms beyond emission reductions and technologies.
The future of energy is too complex to be left to the mercy of specific agendas, precisely the kind of scenario that calls for genuinely visionary thinking and leadership. Unfortunately, that is hard to find.
