‘All-or-nothing’ energy transition pathway jeopardises security of supply
A more realistic energy transition strategy would be the creation and use of the cleanest possible fossil fuels to bridge the gap to net-zero emissions
Central to the global response to climate change is the transition away from fossil fuels to renewable energy. But, while a more responsible and sustainable way of producing energy is imperative, one must appreciate the complexities of the competing demands between climate change action and the continued need for sufficient energy supply.
The push to de-fund fossil fuels too rapidly in the “all-or-nothing” manner that’s now under way to reach net-zero emissions is disruptive to energy security and leads to major economic and supply side shocks. This results in soaring energy prices and an increased cost of living — a trend that is amplified in developing countries that rely on fossil fuel energy for their development.
Despite the growing trend by financial institutions, investors, governments and shareholders to divest from coal in a bid to hasten global decarbonisation efforts, the complete and immediate abandonment of fossil fuels is unrealistic. A more realistic energy transition strategy would be the creation and use of the cleanest possible fossil fuels to bridge the gap while we work towards achieving net-zero carbon emission goals. Doing so would ensure energy availability and security of supply, all the while alternative, less environmentally harmful and more sustainable forms of energy production are introduced into the global energy mix.
This approach to the energy transition is a more sensible, accountable and responsible way of transitioning from fossil fuels to a more stable supply of alternative energy sources. It takes into account the different realities of various economies around the world and is more accommodating of the various pathways available to achieving net-zero emissions in future.
While lowering the global carbon footprint is vitally important to reduce the effects of climate change, trying to achieve these carbon reduction targets too rapidly means that the alternative forms of energy production are insufficient to substitute bottlenecked fossil fuels supply. This could result in global energy security concerns, destabilise economies and affect consumer affordability across the globe — not just those in developing nations.
In this instance, adopting technologies that enable the production of the cleanest possible fossil fuels allows resource owners to manage their resources more effectively and become more environmentally friendly in their operations. This approach, albeit slower than some of the step-change decarbonisation initiatives currently being adopted, still facilitates a responsible journey towards net-zero.
Energy security must remain the foundation of the energy transition pathway
It should come as no surprise that parts of the world are currently facing an energy crisis, caused by an inevitable supply-side squeeze due to irresponsible investment and the move to de-fund fossil fuels, which has resulted in the rapid displacement of fossil fuels energy supply with alternative energy technologies.
Though the Russia-Ukraine war has worsened this energy crisis, the pace of the energy transition and resultant irresponsible investment is the cause of the inelasticity in the energy sector — a sector that is most critical to maintaining a stable global economy second to that of water.
In light of the current energy security concerns, mining companies, investors, governments and policymakers must call into question whether they are advancing the energy transition in the most responsible manner possible. In doing so, they need to take into account the impact that a strained and inelastic energy system could have when “black swan” events such as the Covid-19 pandemic or Russia-Ukraine war unfolds and causes another severe shock to the global economy.
Since black swan events are difficult to predict and oftentimes have catastrophic effects, and seem to be occurring more regularly, they should always be considered and planned for. An irresponsible approach to the energy transition creates the very inelasticity in the energy sector that prohibits its robustness in the face of black swan events, resulting in compromised energy security, and resultant volatile spill over effects.
Parts of Europe, for example, are currently dealing with the inconvenient truth that they may have irresponsibly jeopardised their energy security by too quickly excluding coal and nuclear power from their energy mix and growing too reliant on Russian gas as a bridging fuel during the transition period to a low carbon economy.
Coal, which many thought would soon be phased out, has once again become an absolute vital cog in the global economy and is now in great need as coal-fired power stations flagged for early decommissioning may continue to generate power for longer than anticipated.
In this situation, it is clear that energy security has trumped decarbonisation targets, probably to the detriment of the energy transition wins already achieved. This has cast a spotlight on the need for more responsible investing even if this means reverting to a more sensible approach to the energy transition, such as investing in technologies to produce cleaner fossil fuels and technologies that can responsibly and efficiently extract coal resources. These technologies reduce or remove pollutants emitted into the atmosphere or allow for greater efficiencies per unit of energy generated while maintaining a more sensible approach to the energy transition.
This introduction of complementary and supportive energy transition strategies, which includes the simultaneous use of both renewable energy technologies and cleaner fossil fuel technologies, allows both strategies to run side-by-side to one another. This will, in turn, ensure that incremental environmental improvements are achieved while awaiting the full implementation of net-zero carbon emission technologies.
This will enable investors to see the global fossil fuel sectors through a less binary lens — instead viewing them as necessary contributors in the energy transition, committed to providing responsibly produced, cleaner fuels, with the least possible impact on the environment.
Greening fossil fuels for a just energy transition
Producing cleaner coal and creating a supportive policy and investment environment for clean coal technologies in the short term is critical to support the long-term ambition to reach net-zero emissions. Doing so would prevent any negative shocks to the energy sector and enable much-needed socioeconomic development to continue. This would also ensure that the poor and vulnerable, who are most exposed to the unintended consequences of the energy transition, are protected.
• The authors are executive directors of Acrux Resources.
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