Four months after COP26, the global energy picture has changed significantly — and not in the direction that COP negotiators would have hoped. Far from declining, coal use globally surged to record levels over the winter, causing emissions to rise. And that was before Russia invaded Ukraine, causing a global energy crisis that has forced countries, especially in Europe, to look for ways to quickly wean themselves off Russian oil and gas, and reconsider timelines of commitments to cut the use of fossil fuels.
A recent study by McKinsey & Co estimated that the road to net-zero will require $9.2 trillion of investment, every year, between now and 2050. However, a recent research paper in Nature found that, of the $14 trillion spent on economic stimulus in G20 countries in 2020 and 2021, only six percent was allocated to areas that would cut emissions. While that means investments fell well short of the $9.2 trillion required, it amounts to $840 billion – the most investments ever made into cutting emissions in such a short time frame.
While the road net-zero will require significantly more investments, there are reasons to be optimistic.
First, significant investments into alternative marine fuels for the shipping industry are increasingly being made in important trading zones. While the shipping industry only accounts for 3% of global carbon emissions, methane emissions from shipping increased by 150% from 2012 to 2018. Alternative marine fuels will help significantly reduce the industry’s emissions.
The Suez Canal Economic Zone (SCEZ) is one of the most important trading hubs in the world. The global ocean fleet is made up of 5,534 ships and the Suez Canal had over 18,000 ships pass through it in 2019 alone. Since COP26, the SCEZ has signed an MOU for a $5 billion project with Norway’s Scatec to build its first green ammonia plant, has agreed to build a $2.6 billion green methanol plant, and has signed an MOU with the EBRD to develop a national low-carbon hydrogen strategy that could help unlock Egypt's, and this important trading hub’s, potential for a greener economy.
Another important factor contributing to the optimism is how countries that are historical hydrocarbon producers are substantially increasing investments to foster their energy transition. This signals their understanding of the need to develop and produce climate-friendly energy sources as their reliance on hydrocarbons for state revenue and economic growth will not last forever.
This week in Nigeria, the government, alongside the European Union and Germany, released the Environmental and Social Management Plan (ESMP). It aims to address bottlenecks in the renewable energy sector and enable the country to meet the targets of adding 9,000 megawatts of electricity from renewable sources to the national grid before 2030. The ESMP is a critical step for Nigeria’s transition that simplifies the process of carrying out Environmental and Social Impacts Assessments, reduces costs for local developers, and promotes renewable energy production.
In Brazil, an impressive and important milestone was recently reached. Renewable energy sources now account for more than 80% of the electricity matrix in Latin America's largest nation. This helps substantiate the country’s green agenda reform goals and bodes well for its long-term growth.
The UAE aims to become the first Middle Eastern country to be carbon neutral by 2050, with clean and renewable energy investments worth Dh600 billion ($163.5bn) planned over the next three decades. The country is building large-scale renewable energy projects, including the world’s largest single-site solar power plant in Al Dhafra - a project that will use approximately 3.5 million solar panels to generate enough electricity for 160,000 homes across the UAE and mitigate 2.4 million tonnes of carbon dioxide annually. The country also plans to build the Mohammed bin Rashid Solar Park in Dubai with a 5-gigawatt capacity and is also constructing Barakah Nuclear Energy Plant, the Arab world’s first multi-unit operating nuclear plant.
The global energy transition is often described by proponents as a quick one-stop solution and not as a transitional period that will likely get worse before it gets better. Despite the war in Ukraine, there are many reasons to be optimistic about the road towards net-zero.
By Cyril Widdershoven for Oilprice.com
