By guest writer: Nick Butler, Visiting Professor at King’s College, London
If 2021 was a year when the energy agenda was dominated by the debate on climate change. The 2022 energy agenda could be disruptive and disappointing. Energy insecurity and rising emissions are some of the keywords.
How and why?
- Energy insecurity
- Political conflicts
- Emissions continue to rise
- Real risks of climate change more apparent
First, energy insecurity is back on the agenda. As economies revive post-pandemic demand is up. It starts with Asia and supplies, especially of natural gas, struggles to keep pace. Russia, master of the European gas market, met its obligations but declined to provide extra supplies. As a result, European gas prices were over 300 per cent higher in December than a year earlier. Those increases will now start to feed through to retail bills.
Secondly, political conflicts threaten to disrupt the energy market. Russia wants to keep Ukraine out of NATO and to maintain its dominant role by opening the Nord Stream2 gas line into Germany. The United States wants to keep nuclear weapons out of the hands of Iran. Libya, Nigeria, and Venezuela all remain in various states of internal conflict. Random events could cut supplies overnight. Energy and politics are inseparable.
Meanwhile despite all the pledges made in Glasgow emissions continue to rise. 160 countries made promises to move towards net zero. But promises are cheap and easy compared to delivery. With Government finances around the world broken by Covid the question of who pays the huge upfront capital costs associated with the next phase of the energy transition – through the development of green hydrogen, carbon capture and storage, small nuclear and extensive new infrastructure – remains unanswered. The USA may not be the only country where public resistance to the cost of the climate agenda reshapes the political landscape in 2022.
Finally, and probably most important, the real risks of climate change grow. Extreme weather has become more common across world. We have no way of predicting the next impact. But the chances of reaching a tipping point – as the Arctic ice melts or drought makes large areas of North Africa and the Middle East uninhabitable – are growing. The chances of avoiding serious global warming – of 1.5, 2 or more degrees now seem vanishingly small.
This all makes for a volatile and dangerous year in 2022. The pressures for change will grow. Both from street protestors, well organised legal and financial challenges and companies still profiting from the production and use of hydrocarbons. The possibility that the courts will attribute liability for the impact of climate changes to those companies grows year by year.
For everyone – from producers and investors to consumers and policy makers – 2022 will be a year of uncertainty and danger. There is yet no orderly path to a successful energy transition, and despite the pledges no genuine global consensus on the way forward. Even as first generation of renewables grows and begins to reshape the electricity sector the world remains reluctantly reliant on coal, oil and gas for the remaining three quarters of its energy needs.
Damning western energy companies will not do much to affect global warming but will inevitably enhance the market power of OPEC.
This minefield sets the agenda for everyone involved in the industry and of course for ONS. In a world where trust and genuine dialogue are scarce nothing could be more important an event which brings people together to look for practical solutions and a common way forward