Governments worldwide have to master the balancing act between secure supplies and a healthy climate. But the current state of emergency is causing many to turn to fossil fuels such as coal and oil again. There are many climate-friendly ways to counter the energy crisis.
This year’s energy shock is the most severe since the Middle East oil crises of 1973 and 1979. Like those disasters, it will cause pain in the short term and reshape the energy economy in the long term. The damage is already foreseeable: Due to the high fuel and electricity prices, most countries are confronted with slowdowns in growth, inflation, declining living standards and massive political setbacks.
But the long-term consequences are by no means inevitable. Clumsy government decisions could trigger a backslide to fossil fuels, making climate stabilization even more difficult. You now have to take a risky path that combines security of energy supply with climate protection.
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What Europe has long imagined as a nightmare of icy winter nights has turned out to be a midsummer fever dream. A heat wave pushed Spanish gas demand to a record high, although on June 14 Russia began choking gas flow through the Nord Stream 1 pipeline to western Europe, sending prices up by 50%. Fears that rationing could be introduced this year were raised. In the US, gasoline costs $5 per gallon (EUR 1.25 per litre). This fuels inflation, which polls show is America’s top concern and President Joe Biden’s main problem. Australia’s electricity market has collapsed. There are bottlenecks and weak points everywhere.
Energy shocks can escalate into political catastrophes. In rich countries, about a third of the 8% inflation rate is due to rising fuel and energy costs. Disgruntled households can no longer pay their bills, prompting policies aimed at isolation and increasing fossil fuel production, regardless of pollution levels.
President Biden, who came to power on promises of a green revolution, is now planning to lift the petroleum tax and visit Saudi Arabia to demand more oil. In Europe, there are emergency taxes, subsidies and price caps, among other things. While the air conditioners are roaring in Germany, new life is being breathed into the coal-fired power plants. The state mining companies in China and India, whose extinction the climate protectors had actually longed for, are currently extracting record amounts of coal.
While the improvised chaos is understandable, it could have disastrous consequences if the clean energy transition falters. Government grants and tax breaks for fossil fuels will be difficult to reverse. Dirty new power plants and oil and gas fields with lifetimes of 30 to 40 years would give their owners one more reason to resist phasing out fossil fuels. Even during the firefight, governments must therefore concentrate on tackling the fundamental problems of the energy industry.
One of the priorities is finding a way to advance fossil fuel projects. This includes above all the relatively clean natural gas, which has an artificially shortened lifespan of 15 to 20 years in order to achieve the goal of a drastic reduction in emissions by 2050.
Europe and Asia in particular have had to break away from Russian gas and coal-fired power plants, but have too little liquefied natural gas (LNG) capacity themselves. The trick is to win over business to programs that are designed for the short term. For example, governments and energy grids can offer guarantee contracts for this period, which ensure a reasonable return on capacity in the event of premature shutdown. Another possibility is the promise of government support in converting these projects to more environmentally friendly technologies, e.g. B. by carbon capture and storage.
However, this does not mean that the shift towards renewable energy – so far the most successful component of the generally inadequate global response to the climate crisis – is waning. Every additional kilowatt hour that the sun feeds into the European power grid is one less that flows through a Russian pipeline. It is therefore important for governments to improve the range, capacity and storage options of their grids and to eliminate the problems that unnecessarily complicate the expansion of renewable energies. Building power grids and markets is clearly a matter for governments, all too often still caught in 20th-century logic.
Technology Quarterly, a supplement of The Economist, reports that the 21st century mindset is refocusing on new ways to power smart, resilient power grids with carbon-free, reliable energy that can provide a safe and effective supply of renewable energy allows. Hydrogen generation through electrolysis with renewable electricity or through steam reforming from natural gas, which takes place in appropriate storage facilities, could be decisive here. The same applies in many places to nuclear power.
The focus of climate-conscious nuclear power enthusiasts is often on sophisticated but unproven small nuclear power plants. What matters, however, is the optimization of construction methods for large plants. Where anti-nuclear opponents are most prevalent, governments need to win their support by creating better safety precautions against accidents and new ways of storing waste, as The Economist points out in its report from Finland. Politicians must convey to voters that their desire for an energy transition that excludes both fossil fuels and nuclear power is a dangerous fallacy.
And finally, the industry must become more reliable. Given that the 20th-century energy market has weathered wars, coups, revolutions, booming demand from China, and new technologies, this demand seems odd at first. But climate change has created an additional layer of uncertainty, while at the same time requiring a massive increase in investment. According to the International Energy Agency (IEA), to achieve net-zero emissions by 2050, annual investments must double to $5 trillion per year. However, there is a risk that this recent crisis and the chaotic way in which governments have dealt with it has made investors even more cautious.
Incentivizing investment means doing away with tricks like greenwashing, protectionist plans to build domestic green supply chains, and silly bank bans on gas projects. What is needed instead is a continuous expansion of measures where there is more certainty about the type and duration of use of emission sources.
These include better transparency so companies understand the externalities they generate, raising carbon prices to raise awareness of environmental impact, and regulations mandating the phasing out of dirty practices. The great energy crisis of 2022 is a disaster. But this could also be the moment when better government policies will ensure the investments needed to resolve the dichotomy between more secure energy supplies and a healthier climate.
The article first appeared in The Economist under the title “How to fix the world’s energy emergency without wrecking the environment” and was translated by Cornelia Zink.
Originally Posted by The Economist, Government Must Now Take a Risky Path in Fighting Energy Emergencies.
