Is the energy transition at risk?

Despite the current situation, experts believe that decarbonization objectives can still be achieved

We are a few days away from COP27, in which measures for the decarbonization of countries will occupy an important place. Last year’s meeting, which took place in Glasgow, concluded with the agreement of all countries to maintain the Paris target to control global warming below 1.5 degrees. An important milestone of the meeting was to reduce the use of coal. However, the current context of energy crisis unleashed in the wake of the Ukraine War is affecting this commitment. Some institutions, such as the Massachusetts Institute of Technology (MIT), have already warned that geopolitical instability could slow down the progress that has been made so far to achieve decarbonization objectives and that, in the case of the European Union, they go through reducing greenhouse gas emissions by 55% by 2030 compared to 1990. A first step towards energy neutrality that Brussels has set out to achieve by 2050.

And it is that the use of coal, far from being reduced, has increased. The International Energy Agency (IEA) predicts that demand for this mineral will again reach an all-time high in 2022. In Europe, which had been until now the “champion” of this green revolution, Germany, has burned coal again after last July the Executive of Olaf Scholz approved a regulation that allowed to return to operate the power plants that were supplied with energy sources of fossil origin, One measure seeks to reduce excessive dependence on Russian gas, which, in the German case, accounts for 55% of supply.

The question that arises, then, in the current situation is inevitable, will the decarbonization objectives be achieved?

The difficulties exist, but experts believe that it is still possible. However, they warn that, in the short term, it seems inevitable that it will have to increase CO2 emissions.

“In the specific case of Europe, although it will have to increase its carbon emissions to continue supplying affordable energy to its consumers and businesses, in the medium term, the goal of climate neutrality still seems achievable, as measures are being taken to accelerate the deployment of renewable energy and clean technologies,” says Irene Lauro, economist at Schroders.

Although, in his opinion, the EU still has some significant challenges ahead, as the shortage of raw material supply could weaken its ability to achieve its ecological goals, once the continent has built all the necessary infrastructure to produce solar and wind energy, it will finally be energy independent and will be able to enjoy clean and unrestricted sources.

Therefore, this would only be a bump in the road that would not condition the strategy towards neutrality. The fact that the EU wants to “get rid of” its dependence on Russian gas as soon as possible can even become an incentive to accelerate the transition. This is what Pedro Linares, director of the BP Chair of Energy and Sustainability at Comillas Pontifical University, believes. “It may be necessary to go through a period in which thermal power plants are reopened to cope with the current energy situation. However, this is not incompatible with achieving the decarbonisation targets. The current situation has many drawbacks, but it can also bring opportunities that can help accelerate the process. As a result of the conflict in Ukraine, the population has become aware of the need for energy-saving measures. In addition, from the EU, the intensification of the development of clean energy projects is being promoted, “explains Linares.

Another question that currently arises is whether this transition is compatible with reasonable energy prices. In this sense, experts indicate that, as the share of renewable energies increases in the “energy mix”, the less pressure will be exerted on prices. And, at present, the degree of increase in energy tariffs is highly conditioned by the cost of CO2 emission rights. “The cost of energy is affected by carbon taxes. However, the higher the proportion of renewables and nuclear energy used for electricity generation, the weaker the impact on prices,” says Lauro.

Likewise, this progressive reduction of fossil energy sources, including natural gas (which, although it is true that it pollutes half as much as coal or oil, it is no less so that it emits CO2 into the atmosphere), will no longer be an element of distortion, since the objective is that it disappears completely by the middle of the century. “I don’t think we have to pay a high price for the transition. There is no incompatibility between advancing in decarbonization and an affordable cost. Of course, everything will depend on how the process is carried out. If it is done in a gradual manner and without steps back and forth, there will be no problems. The greatest risk lies in the fact that it is done in a disorderly manner and, above all, that an industrial structure is not developed around them, which replaces the old activities, so that alternative employment is not generated, and that it suffers, “says Linares.

Thus, for the transition to be a success, together with the creation of an innovative alternative industry that generates employment, it will be necessary, in addition to setting long-term objectives (as has already been done), legal certainty and issuing stable economic signals, which allow attracting investors interested in renewable projects. “It is very important that taxes or subsidies are not simply removed, since an unclear legal framework discourages investment,” adds the director of the BP Chair at Comillas Pontifical University.

Achieving net zero emissions will thus require a radical decarbonization of the energy mix, so developed countries will have to go to a scenario of less dependence on dirty energy sources and consume other low-carbon ones. A reduction in dependence on fossil fuels that, in the opinion of Irene Lauro, must be accompanied by a well-diversified energy mix. “Although the sun and wind can provide infinite energy, however, they have some limitations due to their variable production, since their ability to meet electricity demand depends on factors such as location or climate. This highlights the importance of a well-diversified energy mix, with multi-technology solutions with different sources that tend not to be correlated and that help ensure the stability of the system. Improved grid flexibility and technological investment in energy storage should also be part of the solution, as well as demand-side management mechanisms, which reduce consumption through investments to improve energy efficiency,” concludes the Schroders analyst.

Therefore, despite the difficulties, full decarbonisation is still possible.

Source: Reason