In the statement that launched a thousand headlines last week, the CEO of Saudi Aramco announced that the global clean energy transition is “not going smoothly.” Amin Nasser said that in order for the transition to avoid some of the turbulence and pitfalls it has been experiencing in recent months, simultaneous investment in both fossil fuels and renewable energies will be necessary. It’s true that already installed renewable energy is not yet even close to reaching the kind of capacity necessary to support the world’s energy needs. What’s more, installing renewable energy capacity requires much more infrastructure and investment than simply building more wind turbines and solar panels. It will require huge advancements in energy storage and smarter energy grids as well in order to make decarbonization feasible, reliable, and sustainable.
All of this will take a lot of time and a lot of money. Unfortunately, we don’t have a lot of time. Last year’s landmark 6th Assessment Report from the Intergovernmental Panel on Climate Change (IPCC) laid out the grim prognosis in no uncertain terms last August. The report, titled Climate Change 2021: The Physical Science Basis, shows with certainty that climate change is undeniably fuelled by human industrial activity, and that we have already irreversibly altered the climate’s natural trajectory. However, there is hope. There is still a window in which the world can decarbonize quickly enough to avoid the very worst impacts of climate change (think more frequent and more extreme weather events, devastating drought in some areas and devastating flooding in others, rising sea levels, and acidic oceans) but that window is closing frighteningly fast.
In order to avoid these apocalyptic effects, the global community needs to keep temperatures from rising more than 1.5 degrees Celsius over pre-industrial averages. “The report provides new estimates of the chances of crossing the global warming level of 1.5°C in the next decades,” the IPCC wrote in a press release that accompanied the publishing of the report, “and finds that unless there are immediate, rapid and large-scale reductions in greenhouse gas emissions, limiting warming to close to 1.5°C or even 2°C will be beyond reach.”
The problem is that this kind of rapid decarbonization will require unprecedented levels of action and cooperation from the public and private sectors across borders and will need to take place in the immediate term, while the global economy is still reeling from the Covid-19 pandemic. The major supply chain issues emanating from the pandemic continue to wreak havoc across virtually every major economic sector in the world. One of the hardest hit has been the energy sector.
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From Asia to Europe, countries around the world are experiencing devastating energy crunches and soaring electricity prices, all of which are preventing economic recovery as well as that fabled smooth clean energy transition. "As the global economy has started to recover there has been a resurgence of demand for oil and gas but since investment in oil and gas has fallen supplies have lagged which is why we see very tight markets in Europe and parts of Asia," Aramco CEO Nassar said. "I am proposing that investment in both existing and new energy be continued until the latter is developed enough to realistically and significantly be able to meet rising global energy consumption."
What this statement fails to capture, however, is that last year’s low oil and gas production levels were more than likely just a pandemic-related fluke rather than a result of intentional and targeted decarbonization efforts. In fact, the EIA projects that oil and gas production will not only bounce back, but will break records, reaching an unprecedented 12.4 million b/d in 2023.
By Michael Kern for Oilprice.com
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However, what is hindering energy transition is the hasty EU policies to accelerate energy transition at the expense of fossil fuels, the incessant pressure by environmental activists on the oil industry to dives of its oil and gas assets and the hapless IEA’s net-zero emissions 2050 roadmap calling for immediate halt to investment in oil and gas.
The gas-to-coal shift hasn’t only retarded the drive towards net-zero emissions by many years but also exposed the inability of renewables to satisfy the EU’s energy and electricity demand because of their intermittent nature.
Yet, governments, environmental activists, divestment campaigners, the IEA and investment banks continue to call for the ditching oil and gas in order to achieve net-zero emissions by 2050 which will never be achieved by 2050 or ever. Their dogma and fanaticism have blinded them to the fact that oil and gas will continue to drive the global economy throughout the 21st century and probably far beyond.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London