It Don't Come Easy - The Energy Crunch, Decarbonization Goals, Forecasts, and Putin

If the ongoing global energy crunch is teaching us anything, it’s that decarbonizing the world’s economy may be even more difficult than many had figured. While a strong case can be made for reducing — or even slashing — greenhouse gas (GHG) emissions by shifting to low-carbon and no-carbon energy sources, the sheer magnitude of the undertaking means there are likely to be major setbacks and compromises along the way. Setbacks like having to turn to coal-fired generation this winter to help keep parts of the Northern Hemisphere warm and productive, and compromises like acknowledging that sometimes the wind doesn’t blow, the sun doesn’t shine, and utilities need to burn a lot more natural gas to make up the difference — assuming there’s enough gas around to burn, that is. One more takeaway from current events is that energy security in the form of being able to count on your counterparties is a pretty big deal. (We’re looking at you, Vladimir Putin.) With all that in mind, in today’s RBN blog, we examine the long-term outlook for energy and GHG emissions as the United Nations’ climate change conference in Glasgow, Scotland, looms on the horizon.

You could say that how all this plays out is anyone’s guess. And by “this” we could be referring to either the energy supply/demand situation this winter in the northern half of the globe or the prospects for meeting the mid-century goals for decarbonization set by the U.S. and other participants in the Paris Agreement nearly six years ago. Short supply and soaring energy prices, for natural gas in particular, are likely to lead to a lot more coal being burned in green-as-can-be Western Europe this heating season. It’s a hard pill to swallow, and a dose of harsh reality — there’s simply not enough gas around to ensure that everyone there can stay warm and still meet the area’s energy needs, especially if it’s an unusually cold winter or if the region’s wind farms and other renewable energy sources continue to be erratic producers.

Those issues, along with the social impact of higher commodity prices on still-recovering and vulnerable populations are sure to be hot topics at the aforementioned UN Climate Change Conference (COP 26). After Paris, the world seemed to say, “We need to make a change and invest in the future.” The key question this time around will be “How long?” How long will the current energy crisis last? How long will demand for hydrocarbon-based energy continue to hold up (or expand) before demand starts to decline? How long will it be until low- or no-carbon technologies can reliably satisfy demand for energy and all the other things hydrocarbons are used for? And this: How long before the effects of too-high GHG emissions lead to catastrophe?

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