Russian Invasion Of Ukraine Adds a New Dimension To Energy Transition
The European Union has been one of the primary drivers of climate action, advocating for a reduction in the use of fossil fuels in its member states. EU policies and private donors are developing new ways to achieve this goal, including resources committed to post-COVID recovery.
However, sky-high energy prices, especially natural gas, resulting from the Russian invasion of Ukraine have slowed these goals. The war has made Russian energy resources, on which Europe depends, not only unreliable but also unwelcome.
The war in Ukraine should spark a significant shift in thinking about energy transition in the developed world, with climate action now having to account for energy security. It is still unclear what energy sources could emerge as a winner, but there seems to be an opportunity hidden in the background: an opportunity for the world to create an actionable plan for sustainable development with a strong decarbonization agenda.
Together with several of my colleagues, I have written about the disconnect between the developed and developing world regarding climate action and energy transition. COP26 in Glasgow showcased that disconnect, with developing countries pushing to include “just transition” and sustainable economic development as part of the final agreement. These countries need access to reliable and cheap energy to augment their economic development and bring over 3 billion people out of poverty.
Figure 1 illustrates that as income per capita grows, so does energy consumption. For example, the United States uses about 900 kWh per month per capita, only slightly less than the annual average for all of India. Developing countries will need to significantly increase their use of electricity as well as other sources to grow economically. Even though new sources of renewable energy, such as wind and solar, are more accessible and cheaper, they still remain marginal to fossil fuels given their intermittent nature as well as level of electrification. As a result, fossil fuels, including coal, are still widely projected to be important to world energy demand in 2050 and beyond.
This difficult truth has been increasingly recognized as national and international energy agencies and outlooks have pointed to carbon dioxide removal measures in decarbonization scenarios. This includes carbon capture, utilization, and storage, and less advanced technology, such as direct air capture, underscored in the most recent United Nations Climate Report. Combined with traditional and new technologies, such as hydrogen, if successfully developed at scale, all or any of these could become a game changer for global decarbonization goals. They do, however, pose challenges, the most significant of which is the issue of “greenwashing” fossil fuels.Enter the Russian invasion of Ukraine. Russia is a significant supplier of fossil fuels in the global market, including oil, natural gas, and coal. Europe is particularly dependent on Russian energy supplies, but there are implications for the entire world as sanctions or the mere anticipation of sanctions on Russian energy have tightened markets sending prices of all fossil fuels sky high. The result: global inflationary trends and, a likely weaker-than-expected post-COVID recovery or even recession.
When prices of energy are too high, demand destruction occurs. In the current case, demand destruction will occur on several interrelated levels. There is already significant demand destruction for Russian energy. The European Union announced a ban on Russian coal, and many buyers, brokers, and financing institutions are abandoning Russian energy in anticipation of sanctions or even because of social outrage.
Global energy prices are likely to increase. Some countries will purchase Russian energy at highly discounted prices, including in private sales. For others, Russian energy may become a matter of inconvenient necessity from which they will want to divest as soon as possible. Western Europe has until now been rather liberal with their engagements with Russian energy companies, accepting that Russian energy trade is reliable and driven by commercial principles. Germany is the most glaring example. Famous for its Energiewende policy, premature phasing out of nuclear power, and hoping to eliminate its coal reliance by 2038 (or recently even 2030), Germany saw Russian gas as a bridge toward a lower carbon future.
Germany may be a harbinger of a new energy transition. Just five days into Russia’s invasion of Ukraine, the Scholz government announced that Germany would use any energy source available, including nuclear power, to support the country’s energy security. This realization is not particularly new for other parts of Europe vis-à-vis energy security. In fact, Central and Eastern European countries have frequently warned their Western EU neighbors against becoming dependent on Russian energy.
Globally, the developing world has seen energy security as a way to ensure uninterrupted economic development. China, for example, takes an “all of the above” approach in the energy sphere that includes fossil fuels, renewables, nuclear power, and any new technologies that improve use of those resources. Other countries with fewer resources are still heavily dependent on coal, including Southeast Asia, where coal is either domestically available (e.g., Indonesia) or cheaper than any other fuel (e.g., India). Coal is an established and reliable fuel that is relatively easy to transport and store.
Energy security entering climate change discourse in the developed world could be transformative for global decarbonization goals. The ability of the developed world to level with developing nations about the need to provide stable and reliable access to relatively cheap energy sources can become a way in which the latter is able to decarbonize. At least in the short to medium term, faced with limited access to Russian energy resources, many developed countries like Germany will have to admit that reliance on “all of the above” energy sources is needed.
At the same time, we are also unlikely to see those countries limiting their decarbonization goals. As such, they will need to focus more on decarbonization measures that could green up, and not just greenwash, the use of fossil fuels. At the governmental and societal levels, developed countries have more resources to research and invest in decarbonization measures while pursuing their goals in renewable and carbon-free energy. That could become crucial for curbing carbon dioxide emissions in the developing world, where population, economy, and energy demand are destined to grow. Abatement of carbon dioxide emissions from that additional demand, even if not complete, could be more significant than any changes to energy demand in the developed world and, as such, could improve the chances of success at decarbonization globally. Acknowledging that energy security is an important part of energy policy, by all participants in global affairs, may open the door to more method-agnostic, goal-oriented, and science-driven approaches.
 Germany has become highly invested in the development of pipelines to bring Russian gas directly to its shores under the Baltic Sea: Nord Stream 1 (already operating) and Nord Stream 2 (completed but canceled after the Russian invasion of Ukraine). Together, NS1 and NS2 would have the ability to transport in excess of 110 bcm of natural gas annually, more than the current German annual natural gas demand. Together, with the recently completed Turkish Stream, this would allow to completely circumvent the Ukrainian transit of Russian gas, seen by Russia and Germany as unreliable.
Editor’s Note: This article by FPRI Senior Fellow Anna Mikulska is a product of a workshop on “The Global Order after Russia’s Invasion of Ukraine,” hosted by the University of Pennsylvania’s Perry World House on April 14, 2022. The views expressed in this article are those of the author alone and do not necessarily reflect the position of the Foreign Policy Research Institute, a non-partisan organization that seeks to publish well-argued, policy-oriented articles on American foreign policy and national security priorities.
*About the author: Anna Mikulska, Ph.D., is a Senior Fellow at the Foreign Policy Research Institute and nonresident fellow in energy studies at the Baker Institute. Contact: email@example.com