Later this month about 25,000 people are headed to Glasgow for the 26th annual United Nations Framework Convention on Climate Change (UNFCCC), known as COP26. The UK, this year’s host of the Conference of the Parties, has asked participants to submit more ambitious targets for emissions reductions by 2030 in order to enable the possibility of achieving global net-zero emissions by mid-century. Conference leaders have also asked for increased monetary contribution to climate adaptation and mitigation funds, and have the stated goal of finalizing the regulatory framework for implementing and enforcing the pledges made in the 2015 Paris agreement.
At the same time that the world ramps up for the latest and most robust global climate meeting, an energy crisis is unfolding in Europe and Asia which could set the world back in terms of carbon emissions, and which showcases just how difficult the road to decarbonization will be. As global economies have surged back to life in the post-pandemic era, demand for consumer goods and services has skyrocketed. While consumers have largely bounced back to business as usual, however, supply chains have not been able to keep up.
In the energy sector, supply has simply been unable to keep up with demand, causing an energy crunch and severe price spikes in the European Union, China, and India, leading to massive disruptions of supply chains and industries around the globe. In Europe, the EU is trying to walk a tightrope act between getting enough natural gas from Moscow to stay afloat without seriously compromising their energy security and giving the Kremlin too much geopolitical power. India is seriously at risk of running out of coal, which accounts for 70% of the national energy mix. In China, many energy companies have simply stopped producing, as coal prices have skyrocketed but national price caps prevent energy companies from raising electricity prices accordingly, forcing them to either run at a deficit or shut down entirely. Related: Is America Doomed To Replicate Europe’s Energy Crisis?
The energy crunch and resulting energy insecurity in these regions has highlighted the extent to which all of these governing bodies, which have made considerable climate pledges, are still reliant on fossil fuels. Indeed, China has now lightened its restrictions on coal mining for the last three months of the year in order to keep the lights on and keep supply chains in motion, meaning that China will burn and import more coal this year than it did last year, seriously imperling the nation’s own emissions pledges as well as the world’s chances of avoiding the worst impacts of climate change.
What’s more, China’s energy crunch stands to hurt consumers across the globe as energy shortages have forced Chinese production to slow down at a time that demand for Chinese-made goods is surging as consumers start spending again post-Covid. And the energy crunch is just the latest in a long series of pandemic-related unfortunate events for global supply chains, including worker shortages, microchip shortages, and shipping shortages. This means that we can expect rising prices on all kinds of goods while inflation is already on the rise in many countries.
Achieving net-zero is going to require an extremely delicate balancing act as the world struggles to move away from fossil fuels while keeping the economy running smoothly. This current crunch is likely just one of many similar hiccups to come. However, if these bumps in the road continue to send energy-strapped countries back to coal, as this current snap has done, that spells out major trouble for the climate. The green transition likely won’t be easy or smooth, and will almost certainly continue to hurt consumers in the process, but the alternative is far worse.
By Haley Zaremba for Oilprice.com
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