Our Opinion: 2022

A Blow for ‘net zero’

Switching the world economy from fossil fuels to green alternatives was always going to be a challenged. It just got a lot harder.

Western nations are scrambling to cut exposure to Russian energy, and a rapid shift to green energy is looking ever more like a national security issue. US President Joe Miden recently tweeted that Russia’s war on Ukraine “should motivate us to accelerate our transition to a clean energy future.” To protect our economy over the long term, we need to become energy independent – and clean energy means tyrants like Putin won’t be able to use fossil fuels as a weapon.

Optimistic climate campaigners foresee a win-win: what could be better than starving the Putin war machine of funds while also saving the planet? In future, clean energy will be seen as the ‘energy of freedom’. But others are sceptical. Renewables’ capacity will be slow to ramp up, and weaning Europe off Russian gas will be a slow process. Meanwhile, energy prices are spiralling, emissions are rising, and some analysts expect fossil fuels to remain vital in the short-term as a bridge to net zero.

As part of the wide-ranging sanctions on Russia, Biden signed an executive order blocking US imports of Russian coal and gas, with the aim of sending a powerful blow to Putin’s war machine. The US can afford to act swiftly; it gets only 7% of its imported oil from Russia. By contrast, the EU gets 40% of its gas and just over 25% of its oil from Russia. It announced cuts to imports of Russian gas by two-thirds within a year – though this target will obviously become irrelevant if Putin follows through on threats to cut off the gas in response to Western sanctions.

For now, however, gas is still flowing through the pipelines from Russia to Europe, and oil is still being unloaded at European refinaries. Germany, and to a lesser extent Italy, is ensuring €800m a day is being sent to Moscow. Even worse, the soaring price of natural gas since the invasion means the amount paid to Russia has doubled in the last year.

In the UK, the Boris Johnson government is looking at “alternative sources of energy that are cheaper and more reliable and less vulnerable to the whims of a dictator.” The Business & Energy secretary, said Britain would “phase out” imports of Russian oil by the end of 2022 and was exploring options to end Russian gas imports.

The UK government’s new ‘energy supply strategy’ is likely to include an increase in North Sea oil and gas production, and more investment in nuclear and renewables, including offshore wind. It could also include looking again at fracking for shale gas, which has been under a moratorium for the past two years. The UK’s approach broadly reflects the fact that, in the short term, the Ukraine war means that Europe may be burning more coal but, in the long term, it could drive a speeded-up green transition.

Meanwhile, the whole question of the UK’s net-zero ambitions is becoming more central to politics. Unlike many countries in mainland Europe, the UK gets very little gas from Russia: the proportion varies between 2% and 4% . However, gas is a global market, and constrained Russian supply dramatically affects the price we pay. When it costs £100 to fill up a car, the benefits of going electric might start to outweigh the doubts. Alternatively, high fuel prices could help motivate a backlash against net zero. It seems increasingly clear that this tension will be at the centre of UK politics for the next decade or more.

But what about China? China has been sending mixed messages on Ukraine. While it may be in Beijing’s interests for a weakened Russia to be drawn further into its orbit, it is not in China’s interests for the international system to collapse, fuelling a global recession and regional conflicts. Like the UK, China directly gets relatively little gas from Russia (5% of gas imports, 10% of oil). But overall it is a net importer of energy, and a big emitter of carbon, and will be heavily affected by the rocketing prices for oil and gas. Typically, when China experiences energy shock, its response is to burn more coal. So as oil and gas prices rise, we are likely to see China turn back to coal, which it can produce domestically, to keep power stations going. China is still building new coal plants, and emissions there rose 4% last year, accounting for a quarter of the global rise in emissions.

This transition was already in trouble before the Ukraine crisis. Last year the surging post-pandemic recovery boosted global demand for power, and coal power output in Europe rose 18%, its first jump in nearly a decade. Coal use globally surged to record levels over the northern hemisphere winter, and 80% of the world’s energy is still from fossil fuels. Most analysts, including within the industry, think the jump in coal will be short-lived. Yet there’s a risk that the economic instability created by Russia’s war of aggression will prove a long-term setback for the green transition, rather than an incentive.

What has happened this year is the first net-zero price crisis. It is a bitter reminder of just how costly the green transition will be, and also how necessary.

19th April 2022