November 2, 2022, by Dr. Hannes Swoboda (President of the Club of Rome – Austrian Chapter).
A few days before the next climate conference COP27 in Sharm-El-Sheik, this year’s World Economic Outlook of the International Energy Agency was published. Fatih Birol, the agency’s director, makes it clear in his foreword that Russia’s war against Ukraine has not only ushered in a geopolitical turning point, but also unleashed the “first truly global energy crisis.”
New factions for the economy and society
One only has to imagine how in recent years the European Union with its member countries, but also many other states, have been preparing for a gradual energy turnaround, away from fossil fuels, and suddenly the framework conditions were changed. Gas supplies from Russia were reduced and the prices for oil and gas, but also for products dependent on them, such as fertilizer and food, went up rapidly. More than in the last energy crisis, the shortage of supply from Russia and the price increases have had an impact throughout the economy. But perhaps the psychological impact after long years of increasing prosperity on the one hand, and after the financial crisis and the Corona epidemic, which were overcome reasonably well, on the other hand, was stronger than in 1973.
At any rate, a financially not insignificant transfer of wealth from the consumers of fossil energies to the producers is currently taking place as a result of the massive price increase. But such transfers do not burden all strata equally. What is certain – and the Energy Outlook 2022 thankfully points this out several times – is that poverty has again increased significantly due to the energy crisis and its aftermath. Fewer people have access to modern forms of energy supply due to the exorbitant price increases. This is not only a social problem, but also a threat to stability in affected countries and brings new tensions into the relationship between the rich “West” and the poor “South”.
The Energy Outlook rightly calls for a “fair and inclusive” energy transition. This concerns the weaker social classes within the rich countries but also support for the poorer part of the world as a whole. And since Europe is at the center of the current crisis, both in terms of the war and in terms of the energy consequences of Russian aggression, the European Union is particularly challenged.
But of course, those countries that benefit from global redistribution as a result of the disruption in Europe’s energy trade with Russia, namely the United States and the energy-rich countries of the Middle East, should also be engaged in supporting the poorer countries. Considering that developing countries and those undergoing industrialization are particularly lagging in their efforts to achieve climate goals, support from the winners of the energy crisis would be especially important.
3 scenarios of energy demand
The Energy Outlook 2022 presented – as in the years before – 3 scenarios how the energy demand and the corresponding supply could develop. The authors of the report do not hide their preference for the scenario that leads to zero emissions in 2050. The least ambitious scenario is based on current government policies and actions. Already somewhat more ambitious is the scenario that takes the announced promises of the individual governments seriously and has them as the starting point for the calculations.
The Net Zero Scenario (NZS) calls for a rapid phase-out of fossil fuels and increased investment in sustainable, clean energies. That, at least, in addition to energy conservation and energy efficiency measures. Such a strategy is quickly drafted, but its implementation faces a number of bottlenecks. As the reports published at the same time from the UN in view of COP27 also note, investment in green energy has fallen well short of promises and energy policy needs. So, more investment in sustainable energy is needed and this in times of economic crisis and financial increases in military spending. At least double, if not triple, the amount of money would have to flow into sustainable energy production if the net zero emissions target is to be achieved.
Bottlenecks must be overcome quickly
Without additional financial resources, the climate target agreed in Paris and thereafter cannot be achieved. In addition, some productions that are important for the energy turnaround, such as those of heat pumps, fall significantly short of demand and would have to be increased. Crucial, however, is the supply of those minerals and rare earths that are necessary for the electrification of our energy system – according to conventional technologies. The massively increased electrification of industry and mobility is a supporting pillar of the energy transition. And the more we want to realize the net zero scenario, the more we need to replace fossil fuels with sustainably generated electricity.
In 2030, 50% of final energy consumption should be covered by climate-neutral electricity. But in order to store electricity and keep it ready for the respective consumption, batteries are needed. And currently, it is mainly lithium-ion batteries that perform this task. But these batteries need many raw materials that are difficult – and expensive – to extract. Especially if the extraction is to be done with high ecological standards. And we see, especially in Europe from Serbia to Portugal, but also worldwide, many protests from people who fear lasting damage to the environment. In any case, electrification based on current battery technologies requires a vast amount of new mines in particularly sensitive areas with all the risks mentioned. (See the debate on “Geopolitics and Climate change” organized by the IIP and the Club of Rome -Austrian Chapter https://www.iipvienna.com/event-calendar/iip-2022-2-8eefw)
Now there are different researches and attempts how to generate batteries without this huge amount of precious resources. And similar is the case for the production of green hydrogen. But we are still far from being able to rely on these technologies on a large scale. But research in this direction must be continued and intensified. What we need in any case are increased recycling efforts within the framework of a circular economy, which must enable the recovery of many raw materials. But all this also requires additional financial resources.
It is also crucial, however, to have enough skilled workers to implement the energy transition. At present, the shortage of such skilled workers – from researchers to electricians and installers – is a bottleneck that will soon have to be overcome. In the long term, however, it is precisely the net zero scenario that can make a significant contribution to job creation.
Connection to the Earth4All report
These aspects and interrelationships are also brought into the systemic context precisely in the new report to the Club of Rome: Earth4All – A Survival Guide for Humanity. The WEO also addresses the issue of inequality and poverty as a fundamental basis for energy transition. These are two of the 5 critical turnarounds from the report, which include energy. Earth4All Initiative experts see similar trends in the current energy market, but hope for an even faster turnaround in their “the giant leap” scenario. See our summary of Earth4All.
Positive trends need to be reinforced
In summary – and these are the conclusions of the Energy Outlook, Earth4All but also the recent UN reports – some positive steps have been taken in the field of renewable energy in recent years. For example, harmful emissions in the US and the EU have decreased both overall and per capita. And with respect to the world’s largest emitter, China, while there are still increasing emissions, overall and per capita, there is a flattening of the increase. And hopefully this is not just due to the slowdown in growth caused by COVID.
On the other hand, what is needed in any case is increased investment in sustainable electricity production and grid infrastructure. Without electrification on a sustainable basis, our climate goal cannot be met. And a number of bottlenecks need to be overcome if electrification is to make progress. And whatever needs to be done in the short term, especially in Europe, to supply the population with sufficient energy, the energy transition must be pursued vigorously at the same time.
In-depth discussion on 19.12. at the TU Vienna
To discuss the topic further, we have invited Fatih Birol for the 19.12.2022 in cooperation with TU Vienna, Climate & Energy Fund, and the WEC Austria to give a presentation to the Energy Outlooks in Vienna and to discuss with him afterwards. Digital participation is possible via the Club of Rome.