The Spanish presidency is the first of the new trio comprised also of Belgium and Hungary. Whereas the previous trio was defined by Russia’s full-scale invasion of Ukraine, this new trio will potentially need to reshuffle its priorities for the EU and transatlantic relationship, following not only the parliamentary elections in June 2024 and the formation of the next European Commission, but also the US elections shortly after. Each new presidency trio sets long-term goals for its collective eighteen-month term and the priorities of each individual presidency generally reflect the broad ambitions of the trio (although Hungary may be blocked from chairing the Council given ongoing concerns about the government’s lack of alignment with EU values).

Spain takes up the mantle from Sweden, whose presidency prioritized security, European unity, competitiveness, the green transition, democratic values, and the rule of law. Sweden made a dent in these goals, and Spain is inheriting over three hundred pieces of unfinished legislation, of which it has identified more than 120 as priorities. Spain’s thematic priorities for its own presidency show continuation on some themes (the green transition and European unity) as well as more novel focuses (reindustrialization and social justice).

In a speech on June 15, Spanish Prime Minister Pedro Sánchez outlined a number of priorities for Spain’s EU presidency. It is worth taking a closer look at four of these priorities to assess the chances of moving each issue forward, as well as one additional wildcard he did not mention.

1. European reindustrialization

Sánchez’s agenda includes a new emphasis on economic security and beefing up European industrial strategy, including in the health and agriculture sectors. Spain will pay special attention to ensuring thriving strategic industries in Europe with greater innovation capacity, combined with an openness to deepen external partnerships.   

In that vein, the commitment to openness will likely include a push to deepen ties between the EU and Latin America, potentially as soon as the EU-Community of Latin American and Caribbean States summit on July 17-18. Spain might also prioritize getting the long-negotiated EU-Mercosur free trade agreement with Latin America over the finish line, although divergences over environmental rules might take longer to overcome than Spain would like.

Regarding its intention to ensure economic security within the bloc, Spain will likely take advantage of its presidency to advance the conversation on economic governance. Especially on the future of fiscal rules, EU member states need to reach consensus on the re-imagination of the Stability and Growth pact (the agreement that sets limits of 60 percent of gross domestic product for debt and 3 percent for annual deficits), which has been suspended since the COVID-19 pandemic. The success of the Spanish presidency may well be judged on this contentious issue. In an increasingly fragmented global economy, Europe is facing growing challenges to maintain its competitiveness. These include the effects of the Russian war in Ukraine and the US Inflation Reduction Act, which has drawn criticism as protectionist. Here Spain must facilitate conversations within the EU that build on recent Commission proposals for EU competitiveness beyond 2030.  

Although Europe hasn’t produced big tech champions on artificial intelligence (AI), it is leading the world in proactive regulation—a phenomenon called the “Brussels Effect,” in which the EU’s size and active approach toward regulation encourages foreign-based companies to comply with EU standards. In that regard, one of the most likely accomplishments of the Spanish presidency will be finalizing the AI Act, which Sánchez identified as a key priority—unsurprisingly, given Spain’s own leadership in the AI market. Although there is widespread support to get the AI Act passed, there is still a major sticking point between the Parliament and the Commission on banning facial recognition software.

2. The green transition

Driving the green transition has been a long-time focus of the current Spanish government. Heading into the Spanish presidency, pushing environmental legislation around the EU’s “Fit for 55” ambitions is one of Spain’s top priorities.

In particular, following the European Parliament’s vote in May on legislation to reduce methane emissions, the Spanish presidency will preside over the conversations between the Council and the Parliament on the final text of this legislation. Another green transition priority will be building on the progress that took place under Sweden’s presidency on proposals to define the regulatory framework for a future natural gas and hydrogen market. Trilogues—talks among the Parliament, the Council, and the Commission—have begun on the issue, but one of the main hurdles remains identifying, or “unbundling,” gas providers from the owners of the infrastructure.

We’re also likely to see movement on legislation to decouple the EU’s wholesale electricity prices from natural gas, a long-held Spanish priority that Spain helped push into the Commission proposal for reforming the EU electricity market. Despite Spain historically leading the charge on this initiative (motivated most recently by ongoing protests over sky-high energy prices), it may be hindered by its new position as it must oversee the debate on this legislative proposal neutrally. The proposal remains controversial and detractors such as Germany and Denmark continue to argue that the current system is preferable, as it promotes transparency and investment in greener energy sources.

3. Social and economic justice

Progressive social policy has been a priority at the national level in Spain for years, and we can expect this portfolio to receive special attention during its presidency, unless the elections turn to the advantage of the right and far-right. Spain has been a dedicated advocate for policies promoting social equality and workers’ rights, which we will likely see carry over to the EU level. For instance, Madrid’s presidency comes at the final stages of the negotiations on the Commission’s proposed legislation to issue a European disability card, allowing for easier freedom of movement for disabled persons across the EU.

Spain may also push to finalize legislation protecting the rights for platform workers so that ride-share drivers, delivery drivers, and other gig workers are afforded similar rights as traditional company employees. It is a contentious issue. European countries use different practices and approaches, with some more determined to protect gig workers while others seek to preserve the economic advantages offered by the platforms.

While not specifically on the agenda, the multi-pronged demographic challenge Europe has to face in the near future requires much more attention. It is already playing out in issues around competitiveness, social welfare programs, immigration policy, and Europe’s position in the world. Spain could use its presidency to give the necessary impetus to the discussion. In addition, Spain will likely oversee the discussions on the EU Pact on Migration and Asylum.

4. Strengthening European unity

The Spanish presidency will likely divide this priority into an individual and an EU-wide component. At the individual level, this will mean ensuring citizens feel a part of Europe. One way to do this might be for Spain to restart the conversation on European identity by hosting a summit or another kind of convening, following the Conference on the Future of Europe, which concluded in 2022.

From an EU perspective, Spain has been vocal in its support for enlargement for candidate countries, including Ukraine. In October, the European Commission will release its report on enlargement, which the European Council will have to draw conclusions from. Western Balkans countries intent on joining the EU have a strong supporter in Spain. (A notable exception is Kosovo, whose independence Spain refuses to recognize, in part because Madrid sees parallels with its own separatist movements.) In April, Spanish Minister of Foreign Affairs José Manuel Albares toured the Western Balkans, marking the first visit in twelve years by a Spanish foreign minister to the region and signaling Spain’s support for its countries’ EU hopes.

In addition to enlargement, Spain is vocal in its support for institutional reforms at the EU level. In particular, Madrid has been a leader on the debate around extending the EU’s qualified majority voting (QMV) mechanism to include foreign and security policy issues, which would allow the EU to be more dynamic and responsive in these areas. Spain is unlikely to make a significant breakthrough on QMV during its presidency, but it may be able to advance the discussion during its term. Despite growing consensus among EU member states, smaller countries are more reluctant to adopt QMV because their views could be more easily overcome: Only fifteen out of the twenty-seven member states need to agree in a QMV system, but they must represent at least 65 percent of the EU’s total population.

5. Elections could revise the agenda

“Europe must become an area of certainties,” Sánchez said as he was introducing the Spanish agenda for its EU presidency. And yet, the approaching snap general election has introduced a great deal of uncertainty about who will be in power in Spain going forward. Spaniards are now in election mode, with voting taking place on July 23. The elections were supposed to take place in December, but Sánchez called for snap elections after his party had a poor result in local elections at the end of May.

If Sánchez’s party wins the election, it will, of course, have a minimal impact on the current agenda for Spain’s EU presidency. Likewise, if there is no clear majority from the election, the current government will remain as a caretaker during negotiations around a new coalition, albeit with limited ability to prioritize the European agenda. However, in the event of a major shakeup in the election, the formation of a new government will be decisive for the future of Spanish domestic policy, and, just as decisively, the EU agenda could change, too.

Lisa Homel is an assistant director of the Atlantic Council’s Europe Center.

Marie Jourdain is a visiting fellow of the Atlantic Council’s Europe Center.

The post Five things to expect from Spain’s EU presidency appeared first on Atlantic Council.

Key to these international aspirations is the US domestic agenda. Expanding access to critical minerals and increasing manufacturing capacity is essential for meeting the Biden administration’s decarbonization targets. Through legislation like the CHIPS and Science Act, the Bipartisan Infrastructure Law, and the Inflation Reduction Act (IRA), Biden has committed to increase domestic mining, processing, and manufacturing operations to boost the US middle class and build economic resilience. Federal policies have created powerful incentives for manufacturers, such as Tesla, Schneider Electric, General Motors, and Ford, to establish manufacturing facilities in North America.

City leaders have taken advantage of recent legislation to deliver economic growth to their communities. The IRA’s incentives for investments in clean energy are prompting the federal government to work closely with US cities to make manufacturing investments that can increase US energy security, reduce emissions, and support domestic manufacturing. Since the signing of the law, companies have  announced 31 new battery manufacturing projects, 96 gigawatts of new clean power to add to the grid, and $210 billion of investments in the electric vehicle (EV) industry, bringing jobs and growth to US cities.

The role of mayors in the clean energy transition

The growing diplomatic power of mayors was on display at the first-ever Cities Summit of the Americas held in Denver in April 2023. The summit fostered conversations on bridging national-level support and community-led action to build robust clean energy supply chains. In Denver, mayors exchanged best practices in taking advantage of recent legislation and establishing clean energy industries. Mayor Tim Kelly of Chattanooga, Tennessee, highlighted workforce development as a central pillar of Chattanooga’s growth in low-carbon industries. Mayor Luis Colosio of Monterrey, Mexico, outlined the importance of overcoming political and regulatory obstacles to usher in major regional projects, like his city’s new Tesla Gigafactory. He also emphasized the need to incorporate community input in municipal investment strategies. 

The summit signaled the administration’s new efforts recognizing cities and city-level decisionmakers as key actors for making progress toward US decarbonization and climate objectives and strengthening ties with like-minded partners across the Western hemisphere. At the summit, the US Department of State also launched a new Cities Forward initiative that aims to strengthen mayoral partnerships by matching US, Latin American, and Caribbean cities to address urban sustainability challenges. Latin America and the Caribbean have abundant mineral resources, and are important allies in the United States’ efforts to establish new clean energy supply chains for products like batteries, solar panels, and EVs. These new initiatives tap into mayors’ dual ability to connect with local constituents and forge international partnerships based on common challenges.

Strengthening partnerships with Latin America and the Caribbean

Regional mayors and officials in Latin America and the Caribbean are crucial partners for ensuring social license to operate given their unique understanding of community concerns and challenges. The region accounts for 35 percent of global production of lithium, 40 percent of copper, and 10 percent of nickel. These resources will play a crucial role in the Western hemisphere’s transition toward renewable energy and electrification and ultimately contributes to global climate objectives.

However, increased mining in Latin America could instigate regional discontent and threaten hemispheric relations if voices of local leaders are not included. In Peru, community backlash against the Chinese-owned Las Bambas copper mine halted production for four hundred days, costing the company $9.5 million per day. In Argentina, protests against a new local mining law led to its swift repeal by a provincial legislature.  Local officials have the convening power to bring communities together to solicit buy-in and leverage opportunities within energy transition supply chains. Peer-to-peer exchanges between mayors like those at the Cities Summit and investment projects such as the Cities Forward initiative can mitigate these challenges by expanding opportunities for cities to reap the benefits of major mining and manufacturing projects.

While individual cities and towns are already stepping up to the plate, national governments need to provide assistance to help cities establish industries across the Americas. Municipalities need workforce development programs to meet the demand from eager investors, standards in environmental, social, and governance (ESG) to attract investment, and resource management to improve their absorptive capacity to accept new projects at scale. By providing greater coordination and resource sharing from both the bottom up and top down, the United States can make progress toward empowering cities and towns to play a role in the clean energy supply chain while benefiting from the industry’s economic growth and opportunities.

Establish technology standards with consultation from local governments 

National policies can be adapted to better suit the needs of local government, but that only happens if local leaders have a seat at the table. The US Government National Standards Strategy for Critical and Emerging Technology released last May calls for new standards to define the development of renewable energy technology, yet includes no mention of perspectives from local governments. The American National Standards Institute (ANSI) should include stakeholders from mayoral and statewide offices to help shape ESG standards for the mining, manufacturing, and producing of critical minerals to ensure that future regulations are strong but not onerous. At an international level, local officials from mining communities should be included in ongoing discussions to set sustainable mining standards in the Americas alongside national governments and the mining industry.   

Establish regional workforce development programs and streamline visa processes

For cities to attract investment and deliver economic benefits for local communities, a trained workforce is required. Technological advancement and increased automation reduce the number of people needed on the assembly line but increases the demand for a highly skilled workforce. For example, US semiconductor companies, buoyed by the CHIPS and Science Act, will have 300,000 unfilled vacancies for skilled engineers by 2030. Beginning with the North America Leaders Summit, the three heads of state should collaborate on establishing North American workforce training programs and streamlined visa processes to create a stronger workforce across the region.

To further promote regional training and information sharing, the Unit for City and State Diplomacy at the US Department of State should organize mayoral convenings on the sidelines of major energy conferences across the region. The Caribbean Renewable Energy Forum in Miami, International Renewable Energy Agency’s Investment Forum in Latin America, and Energy Transition North America present opportunities for mayors to hear directly about investment opportunities and share strategies for meeting industry standards.

Leverage existing subnational networks to communicate USG funding opportunities 

Trusted city networks can magnify the impact of national-level initiatives. In 2022, the US Department of Energy (DOE) announced $39 million in funding for universities, national laboratories, and private sector-led projects to increase domestic supply of critical minerals. The Bipartisan Infrastructure Law appropriated over $62 billion to DOE to support a range of domestic clean energy projects, including grants targeted at local governments. By utilizing already established subnational networks like C40 Cities and The United States Conference of Mayors, the DOE, along with other US agencies, can better disseminate programs and resources available to empower city-level efforts to leverage investments and funding opportunities to power the low-carbon transition.   

From local to global: Strengthening clean energy supply chains

While the United States continues to establish national and international policies to build new clean energy supply chains, cities and towns are implementing national objectives in real time. Across the hemisphere, city councils mediate tensions between communities and mining companies, subnational departments of labor enroll students in training programs, and mayors devise standards to raise the federal ESG benchmark. Local leaders will continue to play a fundamental role in driving both the standards and implementation of projects that will shape a low-carbon energy future. These efforts have been on full display during the Biden administration’s Investing in America tour. 

Maia Sparkman is an assistant director at the Atlantic Council Global Energy Center

Willow Fortunoff is a former assistant director at the Atlantic Council Adrienne Arsht Latin America Center and Fulbright Research Fellow

Meet the authors

Staff

Maia Sparkman

Assistant Director

Global Energy Center

Africa Climate Change & Climate Action

Former staff

Willow Fortunoff

Adrienne Arsht Latin America Center

Americas Caribbean

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To accelerate US industrial decarbonization, policymakers should start with the lowest hanging fruit, such as electrification or cleaning hydrogen for existing use cases, and then expand to more difficult areas. Greening the electricity sector would sharply curtail emissions from electricity-intensive industries, while switching to clean hydrogen in refineries will likely accelerate hydrogen’s relevance for other promising but unproven use cases, such as in steelmaking. By targeting “easier” challenges, policymakers can achieve decarbonization gains as quickly as possible.

The most effective paths to accelerate industrial decarbonization will require permitting reform and pursuing a comprehensive understanding of clean energy deployment, including in transmission. While the United States has enhanced fiscal support for clean energy development, policymakers across the country at all levels of government should reduce permitting review times and ensure that projects are not stuck in regulatory limbo indefinitely. The United States should also research methods of decarbonization, including nuclear energy development, and wires-vs-pipeline transportation costs for green hydrogen. To limit the consequences of climate change, the United States must urgently advance a suite of efforts to guarantee the domestic and international industrial emissions reductions the world needs.

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This is the 5th installment of the Unlocking Economic Development in Latin America and the Caribbean report, which explores five vital opportunities for the private sector to drive socioeconomic progress in LAC, with sixteen corresponding recommendations private firms can consider as they take steps to support the region.

How does the private sector perceive Latin America and the Caribbean (LAC)? What opportunities do firms find most exciting? And what precisely can companies do to seize on these opportunities and support the region’s journey toward recovery and sustainable development? To answer these questions, the Atlantic Council collaborated with the Inter-American Development Bank (IDB) to glean insights from its robust network of private-sector partners. Through surveys and in-depth interviews, this report identified five vital opportunities for the private sector to drive socioeconomic progress in LAC, with sixteen corresponding recommendations private firms can consider as they take steps to support the region.

Meaningfully advancing the green agenda

The private sector identified the green agenda as a major opportunity, with more than half of survey respondents flagging “addressing climate change” as a top sustainable development and business priority to drive full economic recovery from COVID-19.¹ While climate action is critical on a global level, companies recognize that it is particularly pressing in LAC.

LAC is the world’s most economically unequal region and the second-most disaster-prone region in the world, highly vulnerable to climate consequences.² This vulnerability threatens to further entrench inequality and undermine the wellbeing of people and communities. Every year, between one hundred and fifty thousand and two million people in LAC are pushed into poverty or extreme poverty because of natural disasters, while as many as seventeen million people could migrate across LAC by 2050 due to climate change.³ Climate change also threatens food security, which can heavily impact rural communities.⁴ It will generate economic costs of up to $100 billion annually by 2050, which undercut growth and limit the ability of businesses to operate, prosper, and thrive.⁵

Recommendations for the private sector

Advancing the green agenda is not only imperative as a means of addressing the threat of climate change, but also as a means of unlocking massive business opportunities with the potential to drive private-sector-led economic recovery and growth in LAC. In particular, private firms have an important role to play by creating green jobs, promoting the circular economy, and partaking in green finance.

1. Creating green jobs: Firms can help create green jobs by adopting sustainable practices, seizing business opportunities in emerging green sectors, and providing upskilling, reskilling, and other support for workers displaced by the green transition.
2. Promoting the circular economy: Firms can help drive a transition to a circular-economy model by financing circular-economy efforts, supporting multistakeholder initiatives, and adopting and promoting sustainable business practices.
3. Partaking in green finance: The financial sector can help foster a green-finance ecosystem in the region by tightening environmental, social, and governance (ESG) requirements, aligning investments with green objectives, and nurturing green[1]bond markets in LAC.

About the author

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Thanks to Ukrainian bravery and determination, almost nobody now doubts our ability to survive the war and defeat Russia’s invasion. However, many international observers are now starting to ask a new question: What will Ukraine do next?

I was recently in my hometown of Chernihiv. Russia tried to seize it in the first weeks of the full-scale war. For a period, the city was surrounded. One year later, Chernihiv is humming with activity. Ruins are gradually being rebuilt and businesses are working. During my trip, I talked to a local entrepreneur, Andrii, who owns a small store. He donates half of his profits to the Ukrainian military. Andrii asked me: “Of course, we will win, but what happens next? How will the country develop?”

I answered him and I can answer the whole world. We have a clear vision of what Ukraine must become and how to achieve it. Our plan for Ukraine has three pillars: security, freedom, and drive.

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Security comes first. All other efforts will be futile without this key ingredient. Ukraine needs a strong army to ensure the safety of our people and our economy. This is also the only way to make sure NATO’s eastern border remains secure.

Freedom is the second pillar. This is a central aspect of Ukraine’s European identity. As a nation, we stand for human rights and against international aggression. The new Ukraine will be a place where citizens and businesses have the freedom to innovate and succeed. We aim to remove unnecessary barriers to business development while ensuring inclusion and equality through social policies.

The third pillar is drive, shaping our goal for dynamic growth. We want Ukraine to become a global competitor and contributor, not a state dependent on others. By attracting investment and promoting innovation, Ukraine will become a new engine of European economic growth.

Ultimately, Ukraine’s goal is to join the Trillion Dollar Club. We need to finance a strong army of 500,000 personnel and a highly developed defense sector, as well as social services, education, and healthcare. A GDP of $1 trillion will enable ample funding for these sectors without imposing a critical burden on the budget.

At present, we see an investment potential in the region of $500–900 billion toward the rebuilding of Ukraine over the next 20 years. Additionally, replacing Russian and Chinese exports to EU and G7 countries could generate very large volumes annually.

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The construction industry and infrastructure development are top priorities. Currently, the damage inflicted by Russia on Ukraine’s residential sector alone amounts to over $54 billion. Reconstruction will require a significantly larger investment, creating unprecedented challenges and opportunities for the entire sector. We envisage a generational infrastructure upgrade that moves Ukraine away from the post-Soviet model and toward a modern European approach.

In the longer term perspective, we intend to rely on sectors where Ukraine already has proven potential and can offer globally competitive solutions. This includes food security, green transition, high-end technology, and industry.

We are committed to participating in the green transition, which is essential for Europe. This will make it possible to replace Russian energy resources. Our understanding of the green transition goes beyond energy to include the development of green metallurgy and a shift toward green logistics. Furthermore, Ukraine’s large reserves of strategic minerals position us as a major player in the production of lithium-ion batteries and nuclear fuel. The availability of resources provides an opportunity for high-tech production, opening the way for the EU to replace supplies from China.

Industrial development will generate demand for technological solutions and innovation. We expect to see a new boom in the Ukrainian IT sector, as well as the emergence of sectoral R&D centers capable of meeting the needs of other industries and the digital economy.

We are focused on technological development, but we are also very much aware that 350 million people are currently facing starvation worldwide. We aim to boost food security and become a food provider for 600 million people globally.

None of the above would be possible without the people who will make it happen and for whom all of this is intended. We aim to create conditions for millions of Ukrainians to return home and to persuade others to relocate to Ukraine by implementing attractive social policies and citizenship rules.

Simultaneously, we need to do the same for investors. The task we face is enormous. Ukraine’s record annual foreign direct investment (FDI) total remains the $11 billion received in 2007. We must attract at least that amount every single year for the next two decades.

We understand that investors need to see tangible results not just ambitious plans. Key steps include reform of Ukraine’s law enforcement agencies and courts, along with the establishment of strong and independent regulators. If successfully implemented, this will provide an institutional framework to ensure fair play and anti-corruption policies.

Setting up a business in Ukraine will become easy. We will simplify and digitize all processes involved in the creation of a new business, from construction permits and environmental regulations to turnkey utilities connections. We will reform monetary, tax, and labor policies by revising rates and tariffs and liberalizing the labor market. Ukraine will become one of the most convenient places on the planet to do business. 

Ukraine’s future goes beyond sectoral growth. We envision ourselves as an integral part of the European community and a driving force for global development. We will contribute to international security, propose solutions for shared challenges, and establish good governance practices.

Over the last 10 years, Ukraine has already made significant progress toward countering corruption. Further advances are crucial as we seek to become a NATO member to protect our nation, and as we pursue EU membership to open up new business opportunities and consolidate reforms.  

There is no alternative for us. Ukrainians must turn these ambitions into reality to ensure the country’s future safety and preserve freedom. Otherwise, Russia will remain a threat and will inevitably make another attempt to destroy Ukraine.

We call on all Ukrainians to return home and invite the global community to join us on this transformative journey. We invite them to invest in our resilient nation and to become shareholders in the prosperity that Ukraine’s success will surely bring. This is more than a national task; it is a global call to action. It will show how ordinary people in extraordinary times can turn adversity into strength.

Yulia Svyrydenko is Ukraine’s First Vice Prime Minister and Minister of Economic Development and Trade.

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The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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Since then, other countries have caught up. Today, 90 percent of global GDP is under some form of net-zero commitment, which would have been unimaginable in 2019. The progress made by both governments and corporate boardrooms across the world has been staggering. It is becoming ever-clearer that there is no future economy—and certainly no future financial investment—without a green economy and green finance at its heart. The United Kingdom, by working with its close ally the United States, can reassert its climate leadership through a green special relationship that can galvanize net-zero objectives domestically and abroad.

This paradigm shift toward net zero has created a global net-zero race. Countries are now seeking to demonstrate not only when they will achieve net zero, but also how net-zero commitments can catalyze and deliver the new clean technologies of the future. In the United States, the Inflation Reduction Act’s commitment of $369 billion in public investment in clean energy is a game changer that has sent shock waves throughout the world. The money is important, but what is also critical to the act is its long-term stability, with tax credits guaranteed until January 2033. The European Union also has its €1 trillion Green Deal, again with long-term funding commitments that can foster a new green economy. It is vital that the United Kingdom, once a climate leader, demonstrate similar ambitions if it wishes to re-establish climate leadership and avoid falling behind in the net-zero race.

The UK government recently embarked on a review of its net-zero readiness. That review sought to make recommendations on how net zero could be achieved in a more pro-growth, pro-business manner. The group’s final report, Mission Zero, concluded that net zero is not a cost but rather an opportunity, to secure £1 trillion of inward investment by 2030 and create 480,000 new jobs. Conversely, the cost of “not zero” would be far higher for the UK economy. The review also recognized the importance of ensuring that the United Kingdom collaborates with friends and partners to jointly address the world’s shared climate challenge. Carbon dioxide knows no borders. Like-minded nations should recognize that rivalry and competition, while healthy in driving markets forward and bringing costs down, must not be allowed to create new barriers and delay progress on climate action.

Many criticize the Inflation Reduction Act for being protectionist, for putting the United States first. Others claim the act will start a global subsidy race. That concern is overblown. While there is clearly a chance the law will lure companies to the United States by the promise of tax credits and investment, the wider deployment of these technologies will not be possible without establishing global supply chains and international cooperation. There is not enough skilled labor for the demand the green Industrial Revolution is creating, and new alliances for delivering net zero must therefore be forged. Without collaboration, net zero and the economic promise of the energy transition will fall short.

For the United States and the United Kingdom, an opportunity exists as like-minded friends and allies to work together to establish a new green special relationship. As advocates of democracy, liberty, and freedom, we can work with developing nations to support their own energy transitions. The net-zero prize for our nations is not simply an economic one: it can also strengthen the foundations of our shared democratic values across the globe.

Washington and London can also forge new partnerships across green industries where we cannot go it alone. Together, the allies can be greater than the sum of their parts in several strategic energy partnerships where they enjoy  a comparative advantage. In new nuclear technologies, such as advanced and small modular reactors, TerraPower and X-Energy—both US companies—are seeking to locate in the United Kingdom where there are shovel-ready former coal sites with local populations that recognize the benefits of nuclear energy for workers. In carbon capture, the United Kingdom has vast geologic storage opportunities with up to 78 billion metric tons of capacity identified under the North Sea. In energy efficiency, Ameresco—another US firm—is partnering with the City of Bristol to invest £450 million in a new district heating network. These are joint opportunities from which both sides recognize the huge mutual benefits of cooperation. These can go much further, if stakeholders are willing to seize this moment to collaborate.

The Inflation Reduction Act has fired the starting gun toward delivering on net zero by providing the investment, certainty, and stability needed to allow private capital to flow and drive forward the green revolution. That investment will go far further, and achieve far greater value, if it is matched with partnerships to maximize comparative advantages that are shared by the United States and United Kingdom in achieving net zero. Now is the time to build a Green Special Relationship, for the future. Global ambitions to achieve net zero and combat climate change depend upon it.

The Rt Hon. Chris Skidmore, MP is chair of the UK government’s Net Zero Review and a former UK energy minister. He authored the government’s recent Mission Zero report. He delivered a speech on the “Green Special Relationship” at the Atlantic Council on Tuesday, April 25.

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Shortening the review process for transmission projects and renewable interconnection to the grid is critical for accelerating the United States’ clean energy transition. Transmission lines take an average of five to ten years to build, largely due to the complex patchwork of stakeholders and permitting authorities involved in the review process. In addition, of the 2,000 gigawatts (GW) of generation capacity awaiting connection to the US transmission system, natural gas accounts for only 85 GW and coal merely 1 GW—the rest are zero-carbon technologies.

The critical permitting bottlenecks holding back the energy transition involve securing access to and approval of new transmission lines and the interconnection of new renewable projects to the grid. The legislation in the bill does not address either subject and will do little to clear the blockages in the permitting queue. To meet climate targets, legislators must adopt additional measures that are specific to transmission and renewable interconnection.

Completion of the Mountain Valley Pipeline
The Mountain Valley Pipeline, the most contentious of the provisions included in the bill, will proceed with development and could be completed as early as the end of this year. Some approve of the pipeline’s completion for its potential economic and energy security benefits, while others condemn its negative environmental impact. Construction on the pipeline is already 94 percent complete, but the impact on the environment and indigenous communities remains an open issue.

The Builder Act

The debt ceiling deal includes the Builder Act, which introduces reforms to NEPA that impose time limits on environmental reviews unless the project sponsor and agency agree to extend, designate a lead agency to coordinate federal project permitting, and allow project sponsors to conduct the NEPA study themselves, subject to agency review. In addition, the act revises language within the original NEPA legislation, requiring agencies to consider only environmental effects that are “reasonably foreseeable” and alternatives that are “technically and economically feasible,”  potentially constraining which environmental impacts and alternatives a company must evaluate.  Whether the updated legal language will result in a less comprehensive consideration of alternatives will be revealed in future litigation. Finally, the act shortens the length of NEPA documents, although the page limits do not apply to appendices, which could minimize the effects of this reform.

The provisions in the act that set time limits on the preparation of Environmental Impact Statements (EIS) and Environmental Assessments (EA) will shorten the federal review process but will not resolve the state and local jurisdictional issues that also hinder project deployment. Currently, it takes on average four-and-a-half years to complete an EIS. The Builder Act creates a two-year deadline for completing an EIS and a one-year deadline for an EA. The lead agency can extend the deadline in consultation with the project applicant but must complete the process within ninety days of a court order after the deadline. Projects, however, are not automatically approved if the timeline is not met, and significant barriers remain related to agency staffing to meet the shortened deadlines, an issue neglected in the debt ceiling reforms.

Contrary to widely expressed fears, these changes are unlikely to affect the integrity of the NEPA process. NEPA statements remain subject to the same judicial review as they were before the amendment, and if its conclusions are unsound, a reviewing court will send the NEPA document back to the agency for further review. The reviewing agency must still scrutinize any documents submitted by project sponsors and is responsible for final approval. If short deadlines prevent rigorous analysis from being completed, the NEPA document would not likely stand up in court. The environmental community, civil society, and businesses can still add comments or additional information to the administrative record but now have less time to review and comment on EISs and EAs, putting more pressure on interested parties to move swiftly.

Interregional Transmission Planning Opportunities Study

NEPA is not the biggest barrier to the rapid buildout of transmission and renewable infrastructure. The uncoordinated patchwork of federal and state permitting agencies involved in approvals, asynchronous review processes that stretch permitting times, and the Federal Energy Regulatory Commission (FERC)’s lack of direct authority over transmission wires—in contrast to its authority over natural gas pipelines—play a much more significant role in holding back project development. In addition, disagreements about cost allocation have proven formidable obstacles to building transmission and getting new renewable projects onto the grid.

These barriers are being studied extensively. The US Department of Energy (DOE) is conducting a National Transmission Planning study to be released this summer. FERC also issued a Notice of Proposed Rulemaking (NOPR) in April 2022 to improve regional transmission planning and cost allocation procedures. Instead of using these and other studies to inform legislation, the Builder Act directs the North American Electric Reliability Corporation (NERC) to conduct an interregional transmission planning opportunities study that will be published within eighteen months of the bill’s passage, followed by a year of public comment. FERC will then recommend statutory changes subject to their own review timeline.

Congress, FERC, and other federal agencies should not wait for completion of the NERC study.  Instead, they should act using completed studies and the results of the DOE and FERC processes when considering additional transmission permitting and planning reform, as the infrastructure is needed as soon as possible. A Princeton study estimates the grid will need to expand by 60 percent by 2030 and triple in size by 2050. Building 60 percent more electricity transmission infrastructure within four years, starting in 2026 after the NERC study’s completion, is not feasible.

Permitting streamlining for energy storage

The bill also adds energy storage to the list of “covered projects” under the Fixing America’s Surface Transportation (FAST) Act, which improves federal-state coordination and enshrines tangible deadlines for review, but can pose additional eligibility criteria and procedural requirements that do not make the process simpler. Project proponents are subject to restrictions on review period extensions and must interpret new terminology in consultation with agencies to ensure compliance with the program. Overall, including energy storage projects under FAST-41—named after Title 41 in the FAST Act—is a welcome development. Such programs should be expanded but must be supplemented with reform of the standard permitting process.

Recommendation for permitting reform

The permitting reforms in the agreed legislation will not affect the integrity of the EIS and EA processes, despite concerns from the environmental community. However, they fail to address the substantive permitting issues related to transmission and interconnection that investors and developers face today. Bills that address primarily oil and gas leasing and permitting are counterproductive to both the permitting discussion and energy transition goals. Legislators must work together and compromise to address permitting issues.

This article is the first in a series on EnergySource discussing permitting reform in the United States. The next article will examine opportunities for permitting reform after the debt ceiling bill.

Ken Berlin is a senior fellow and the director of the Financing and Achieving Cost Competitive Climate Solutions Project at the Atlantic Council Global Energy Center.

Frank Willey is a project assistant at the Atlantic Council Global Energy Center.

Meet the authors

Fellow

Ken Berlin

Senior Fellow

Global Energy Center

Chinese Climate Change & Climate Action

Staff

Frank Willey

Project Assistant

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However, the region has failed to harness its full hydropower potential. Tajikistan has only developed 4 percent of its total capacity, while Kyrgyzstan has exploited just 10 percent. If Tajikistan and Kyrgyzstan were to fully capitalize on their topography, they would have a surplus of electricity to export to their fossil fuel-dependent neighbors.

Several roadblocks have stalled Central Asia’s hydropower development. But through investments in Central Asia’s energy infrastructure and by fostering new dialogue on transboundary water management, the United States and European Union (EU) can help unlock much of Central Asia’s potential and forge stronger ties to the region.

Barriers to development

The majority of Central Asia’s hydropower infrastructure was built during the Soviet era and is not equipped for today’s challenges. The dated technology is unable to generate and distribute electricity at a scale needed to support rising demand in the region.

Climate change has compounded these problems. Central Asia is warming faster than most regions in the world, and recent cases of extreme heat have increased electricity demand while depleting water flows, plunging the region into darkness.

In addition, advancing new projects in Central Asia has been difficult. Historically, hydropolitics has hindered regional cooperation. Downstream republics, including Uzbekistan, Kazakhstan, and Turkmenistan are dependent on the flow of water for cotton and wheat production, which account for 5 percent of Kazakhstan’s GDP and nearly 25 percent of Uzbekistan’s. Uzbekistan’s former president even threatened the use of military force against Kyrgyzstan and Tajikistan over proposed dam projects in 2012.

A glimmer of hope

Since then, however, new leadership has engaged in more constructive dialogue on shared resources in Central Asia. This newfound willingness to cooperate has opened the door for new hydroelectric dam projects. Projects that were shelved for decades are advancing to new stages of development. The Rogun and Kambar-Ata Dams, once points of contention between upstream and downstream republics, now provide hope for Central Asia’s hydropower sector.

In 2016, Tajikistan restarted construction of the Rogun Dam, and now the early stages of the future world’s tallest dam sit on the Vakhsh River. With the technical assistance of an Italian company, Webuild, the Rogun Dam is expected to become fully operational by 2032, with a capacity of 3,600 megawatts (MW), doubling Tajikistan’s installed electrical generation capacity. Even though the project has endured significant delays, the Rogun Dam can transform the region with clean baseload energy.

The Kambar-Ata Dam is another beneficiary of the hydropolitics détente in Central Asia. In January of 2023, Kyrgyzstan, Kazakhstan, and Uzbekistan agreed to a roadmap for the project, which will have an installed capacity of 1,860 MW. Nonetheless, the project remains in the early stage of development and needs additional financing before its completion.

Pathways forward

Central Asia is trending in the right direction but must overcome several barriers before maximizing its full hydropower potential.

To mitigate cross-border disputes over new hydroelectric dams, Central Asian governments should address how to navigate the water-energy nexus. Central Asian republics should conclude new water-sharing agreements that set out clear frameworks for apportioning water between upstream hydroelectric power producers and downstream agricultural users. Greater transboundary transparency on the use of shared resources can reduce anxieties over new dam projects and help plan for contingencies in water availability. Preemptive measures can ensure the sustainable and long-term operation of hydroelectric dams in Central Asia.

Given new technology, small-scale hydropower can avoid much of the political fighting related to large-scale dams. Smaller units can be more easily deployed in existing canals and irrigation systems. This minimizes the disruption to the environment and local populations compared to large-scale units. Additionally, small-scale hydropower does not require large power lines, helping electrify rural areas in Central Asia, who tend to lack access to consistent electricity. Small-scale hydropower is not a silver bullet, but it can help expand Central Asia’s hydropower production at the margins.

To fully capitalize on its clean energy potential, however, Central Asia should continue to develop large-scale hydropower projects. Financing new projects remains a key challenge. Development institutions, such as the World Bank and Asian Development Bank, have offered support, but more is needed.

For decades, Russia has been closely linked to Central Asia’s energy system, but President Vladimir Putin’s invasion of Ukraine has motivated Central Asian governments to hedge their dependency on Moscow. New partners–China and the EU–see Russia’s isolation as an opportunity to gain new inroads into the region through energy investments.

China has avoided entering into the region’s historically fractious hydropolitics by investing downstream in Uzbekistan and Kazakhstan, both significant hydrocarbon exporters. At a recent summit with Central Asian leaders, Beijing expressed continued commitment to oil and gas investment in the region. The EU, which now accounts for 42 percent of Central Asia’s total foreign direct investment, has also taken a greater interest in the region, hoping to reduce the region’s reliance on Russian energy and counter China’s Belt and Road Initiative.

Interest from international partners is geopolitical in nature. However, if the United States and EU force Central Asian republics to choose a side in a larger geopolitical contest, they could be less receptive to new investments with strings attached and move closer to Russia and China. Instead, Western nations should focus on how investments can accelerate the region’s energy transition, thereby reducing demand for Russian hydrocarbons and strengthening Central Asia’s energy security.

Central Asia’s untapped potential for hydropower presents a unique opportunity for the region and for many Western nations. With greater international assistance and a pragmatic approach that addresses the root of the water-energy nexus, external partners can help Central Asia overcome barriers to development, strengthen collaboration, and support the region’s clean energy transition.

Maxwell Zandi is a young global professional at the Atlantic Council Global Energy Center.

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Through the purchase of carbon credits, corporations can immediately reduce their global carbon footprints while also serving their long-term economic interests to expand their market bases. That is in part because, by purchasing high-quality carbon credits in voluntary carbon markets, these companies can support the sustainable growth of low- and middle-income populations in the world’s fastest-growing regions—including across the African continent.

Voluntary carbon markets allow entities like corporations and individuals to buy carbon credits entirely at their discretion to offset their emissions. These markets differ from compliance markets, which feature legally binding emissions-reduction obligations, often under cap-and-trade structures like those in the European Union and California. Carbon credits are not intended to replace corporate emissions-reduction efforts; rather, they can serve as an additional mechanism to accelerate transitions to net zero, offset unavoidable emissions, and direct capital to regions with insufficient local investment.

Although still relatively immature, voluntary carbon markets have grown considerably—in 2022, their overall value surpassed two billion dollars, a fourfold increase from 2020, and African credits have grown 36 percent on average over the last five years. However, this rapid growth coupled with a lack of underlying structure has led to various issues, including concerns about the quality and legitimacy of many carbon credits sold, which cast doubt on the credits’ actual contributions to climate-change mitigation and stall market growth. Additionally, some carbon credits, which are primarily purchased by corporations based in the Global North, have hindered development in the Global South. For example, some governments in the Global South have forced local communities to sell land for the purpose of creating carbon credits. Organizations such as the Integrity Council for the Voluntary Carbon Market are working to solve the various issues related to the voluntary carbon market; in March, it released the first part of its “Core Carbon Principles,” outlining standards around carbon credits to ensure that offset efforts create verifiable impact.

Carbon-credit prices currently lack standardization, with prices being determined by the type or specific characteristics of the credits. They typically range from under four dollars per ton for lower-quality credits, often renewable energy projects, to over one hundred dollars for higher-quality credits, mainly tons removed from the atmosphere through carbon-removal technologies such as direct air capture. However, with large-scale removal technology still in development stages, removal projects accounted for just 3 percent of all projects issuing credits in 2022. In recent years, low-priced or “junk” credits have flooded the market, enabling dozens of companies to claim carbon-neutral status while only making limited environmental impact. At the twenty-seventh United Nations Climate Change Conference of the Parties, Kristalina Georgieva, head of the International Monetary Fund, asserted that unless carbon credits are priced on a trajectory that attains a seventy-five-dollar average price per ton by 2030, climate goals will remain out of reach. While Georgieva’s comments were likely targeted at compliance markets, pricing between the two markets is inherently connected, and there’s interest in formalizing that connection. By adopting thoughtful carbon-credit-purchasing strategies, including by supporting higher-quality credits that accurately reflect the value of a carbon ton, corporations can strengthen the voluntary carbon market and help it integrate it with compliance markets, rather than delegitimize it.

As rating agencies in the industry mature, corporations will need to take it upon themselves to work with these players and do their own due diligence to ensure that the carbon credits they purchase are high quality, as determined by key characteristics. For example, high-quality credits are “additional”: In other words, the emission reduction would not have occurred without the offset financing activity, an increasingly difficult hurdle for renewable energy credits. A high-quality credit is also quantifiable, in that it is produced by a project that can properly track resulting emissions reductions, and brings other environmental benefits such as improving air quality or enhancing biodiversity. Corporations may need to hire teams to analyze and determine the best partners to purchase credits from or work with trusted brokers with shared values. It will require collaborating with governments, banks, and other industry players to help build the necessary infrastructure and integration with compliance markets.

Thoughtful participation comes at a price, leaving open the question of why corporations should, if not mandated, participate sincerely or meaningfully in voluntary carbon markets at all. Engaging cheaply just to claim carbon-neutral status, what many call “greenwashing,” will likely become meaningless to consumers soon. While corporations may be incentivized to invest in credits to get ahead of regulatory risk or to appease investors, another often unmentioned reason is to support and grow their future consumer bases. Many opportunities for high-quality carbon credits are in the Global South, which will be disproportionately affected by climate change—and also host the largest urban centers and burgeoning middle-income populations. By the end of the century, Africa is projected to be the only continent experiencing population growth and will be home to thirteen of the world’s twenty largest urban areas. India’s population just surpassed China’s. If the Global South is not supported in its sustainable growth, achieving climate goals will become nearly impossible, and economic environments will become less prosperous.

Instead, by purchasing high-quality carbon credits, corporations can help build a sustainable future that expands economic opportunity in the Global South. For example, corporations can purchase reduction credits by supporting organizations like KOKO Networks, which developed a bioethanol cooker and fuel dispensary service in the hopes of transitioning the third of the world’s population that currently cooks on charcoal or wood (particularly in Africa and Southeast Asia) to a less carbon-heavy and less pollutive fuel source. By integrating hardware (their cookstove) with software (data collected at their dispensaries) KOKO Networks is able to properly measure its carbon impact and issue carbon credits to account for the reduction in emissions. Other such organizations are LifeStraw, which prevents carbon-dioxide emissions generated from boiling water via wood or charcoal by offering a drinking straw that filters water, and Mauto, which recently closed a five-million-dollar transaction to deploy electric two-wheelers across Africa. While more advanced technologies for carbon removal may prove fruitful in the future, corporations should not overlook the credits available today via initiatives like these that can have an immediate impact on ensuring Africa and other regions’ low- and middle-income populations grow sustainably.

Carbon-reduction credits (in contrast to carbon-removal credits) can help shift high-polluting consumer behaviors to sustainable practices in the world’s fastest-growing markets. When purchasing a bioethanol cookstove or an electric vehicle is not financially feasible in African markets, the sale of carbon credits could effectively subsidize these products and make them available to consumers at competitive prices. On the individual level, a mother in Nairobi can cook cleanly in her home, improving her family’s health, resulting in possibly lower medical costs or fewer days of missed work. On a larger scale, avoiding deforestation can help lessen the local impact of climate change because forests regulate weather conditions and help to avoid massive droughts or monsoons that can destroy crops and livelihoods. It is in corporations’ best interest to ensure African consumers are increasingly economically advantaged, a reality that is only possible through sustainable expansion, and carbon credits serve as one tool to support this growth.

By participating in the voluntary carbon market and purchasing high-quality carbon credits, corporations can contribute to sustainable development in the urban centers of tomorrow, while serving their own business interests. Rather than turning away from carbon credits due to the difficulties involved, corporations should lean in and consider which credits can best support their future customers.

Aubrey Rugo is co-president of the London Business School Tech & Media Club.

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When Congolese President Félix Tshisekedi spoke at the virtual Leaders Summit on Climate this week, he had the force of the continent behind him. And his message was that developed countries must do more. As the summit comes to a close, the world still has so much to learn from Africa about how to tackle the climate crisis—if the world would only listen.

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The post Through carbon markets, corporations have a role to play in Africa’s development. They should take it seriously. appeared first on Atlantic Council.

In recent years, NATO has become much more active in identifying global warming as a threat and focusing on how it can do its part to combat climate change and bolster energy security. Following NATO’s Madrid Summit last year, it released its Strategic Concept, in which it proclaimed “NATO should become the leading international organization when it comes to understanding and adapting to the impact of climate change on security.” Furthermore, NATO policymakers have recognized that there is a potential danger of redundant replication of climate projects between the climate policies of NATO and member states that would not have additional value toward addressing climate change. The Strategic Concept does partially account for this, as it argues that NATO should strengthen its cooperation with the EU to accelerate the development of NATO’s climate strategy.

In contrast to NATO, the European Union has been a significant player in climate action dating back to as least 2001, when it issued Directive 2001/77/EC, which promoted renewable electricity generation. Moreover, some EU member states had already attempted to “mainstream” climate policy into NATO strategy. For example, some German senior officials hoped that the Permanent Structured Cooperation (PESCO) program, established in 2017, would introduce climate change as a challenge for NATO to face. Despite such efforts, these attempts with PESCO have had mixed success at best.

Likewise, NATO-EU cooperation is regularly hampered by the Cyprus dispute. Turkey, which is the only state that recognizes the breakaway republic of Northern Cyprus and has stationed military forces in its territory, is a NATO member but not an EU member, whereas Cyprus is an EU member but not in NATO. Turkey justifies its opposition to NATO-EU cooperation on the basis that doing so would imply its recognition of the Republic of Cyprus. In fact, following the aforementioned NATO-EU joint declaration, Turkish diplomats reportedly expressed discontent with the declaration and distanced themselves from it. As the Cyprus dispute is unlikely to be resolved soon, further NATO-EU cooperation on climate action beyond vague declarations is doubtful under existing channels.

On the surface, it might seem like NATO-EU cooperation should be easy (despite the Turkey/Cyprus issue) given that, for example, the two organizations are just a few miles from each other in Brussels. Unfortunately, when speaking with employees at both organizations, it’s always surprising at just how lacking the overlap and coordination truly is. Hence, any effort to develop, say, a NATO- or EU-led policy steering body to develop strategies to address climate change will likely run into the same issues most other NATO-EU cooperation projects run into. 

To avoid this, the G7 could potentially act as a primary steering platform for NATO and the EU to develop climate strategies before being disseminated to NATO and EU member states to implement or deliberate further.

How would this work?

To start, the G7 could provide a permanent guest invitation to the NATO secretary general to attend G7 meetings, much like how the G20 provides permanent guest invitations to several intergovernmental organizations. This would ensure that the NATO secretary general has a direct means of communication with the European Commission and the United States simultaneously, which would help in preventing transatlantic discord like that seen over the US Inflation Reduction Act. It would also reduce chances of a NATO-EU impasse developing over the Cyprus dispute before consensus is reached at the most senior policymaking levels of NATO and the European Union, as neither Turkey nor Cyprus will be present in this channel.

Beyond its membership structure and distance from the Cyprus dispute, the G7 is a suitable vehicle for NATO-EU cooperation because of its existing security and climate agenda, which is increasingly aligned with that of NATO’s. Except for Japan, every member of the G7 is a NATO ally, and the European Union is represented at the body by the European Commission. And, although it was originally formed as an informal forum to discuss economic policy following the 1970s energy crises, the G7 has put security on its agenda as far back as 1980 when the Soviet Union invaded Afghanistan. It has also addressed global warming since 1985. Discussing climate change from a security perspective will not be a matter of “mission creep” for the G7.

Additionally, the G7 has already incorporated a commitment to achieving net zero carbon emissions since 2015 and recognized climate change as an existential security risk in 2022. The same year, the G7 launched the Partnership for Global Infrastructure and Investment (PGII) to assist with global climate financing and introduced the G7-led Climate Club to tackle climate change, with membership open to all countries. Climate is a high priority for the recently concluded G7 Summit in Hiroshima as well, with the G7 ministers of Climate, Energy and the Environment releasing new ambitious targets for 2030, such as increasing offshore wind capacity. 

The G7 has engaged in greater cooperation with NATO as well. Since February 2022, the G7 has coordinated closely with NATO in response to Russia’s invasion of Ukraine. This included the convening of the 2022 G7 Summit just prior to NATO’s Madrid Summit, with European Commission President Ursula von der Leyen, European Council President Charles Michel, and Japanese Prime Minister Fumio Kishida in attendance at the latter. Later, during the G20 Bali Summit, the G7 and NATO issued a joint statement for the first time in their histories to express their concern about the missile strike in Polish territory.

Altogether, there is a strong opportunity for meaningful NATO-EU cooperation by using the G7 as a convening platform for climate change-related discussions. The demand to accelerate decarbonization campaigns has never been stronger in all three organizations, and they should seize this opportunity together.

Francis Shin is a research assistant in the Atlantic Council’s Europe Center.

Rachel Rizzo is a nonresident senior fellow at the Atlantic Council’s Europe Center.

The post The G7 can take NATO-EU climate cooperation to the next level appeared first on Atlantic Council.

Event transcript

Uncorrected transcript: Check against delivery

Speaker

Grant Shapps
UK Secretary of State for Energy Security and Net Zero

Moderator

Richard Morningstar
Founding Chairman, Global Energy Center, Atlantic Council

RICHARD MORNINGSTAR: Good afternoon, everybody, and good evening for those of our friends in Europe who are—who are joining us today. I’m Dick Morningstar. I’m the founding chairman of the Atlantic Council’s Global Energy Center and, among other things, a former US ambassador to the European Union.

And it’s my honor to lead this discussion today on the United Kingdom’s energy priorities with Secretary and Member of Parliament Grant Shapps, who is the secretary of state for the Department of Energy Security and Net Zero.

And I guess to state the obvious, with Russia’s war in Ukraine and the ensuing energy crisis, that’s highlighted the risks of energy underinvestment and dependence on malign actors, and has demonstrated the need for a cohesive and a strategic approach to energy security and decarbonization. And I want to emphasize that the green transition and decarbonization relates directly to energy security because, among other things, it will reduce dependence on single actors like Russia.

And as part of the response to these challenges, the UK government has recently launched its Powering Up Britain plan, which outlines how the government will enhance energy security and deliver on its net-zero commitments. And it’s fascinating that the secretary’s title is secretary for the Department of Energy Security and Net Zero, which tells you how important Britain sees the net-zero commitments. But this comprehensive strategy aims to advance energy independence and economic security through a series of multi-pound investments to expand clean energy and to take critical steps to achieve the UK’s goal of zero emissions by 2050.

Today we’re lucky to have Secretary Shapps with us, who will speak on the priorities for implementing this initiative and the department’s plans, and we’ll get into a whole bunch of—a whole bunch of related issues.

Let me remind you we have both an in-person audience and a virtual audience. This is a public session and it’s on the record and that, unfortunately, we can only handle questions from the in-person audience. And so if you have questions there’s a microphone over to the right where you’ll be able to line up or get up and ask the question.

So let’s start. So with that, maybe first, Mr. Secretary, you could tell us about your trip. I realize you had an unfortunate delay at Heathrow Airport which lasted overnight. But he’s in great—you’re in great shape for the session this afternoon.

But what are you going to be doing here in Washington and how important do you think the US-British relationship is—the US-UK relationship—with respect to the topics we were talking about, energy security, the green transition? How can we all work together on this?

GRANT SHAPPS: Yeah. Well, Ambassador, first of all, it’s great to be here. It’s fantastic to be at Atlantic Council and brilliant to be discussing this issue, which is so high up both of our populations’ agendas and, in fact, many people throughout the world, obviously, as a consequence of what happened in Ukraine.

But, actually, on the way here we passed the old post office pavilion and that fantastic statue of Benjamin Franklin is just out to the front and to the right of it, and I was reminded that he was, of course, American British. He had an American mother and a British father.

RICHARD MORNINGSTAR: And lived in Paris.

GRANT SHAPPS: And lived in Paris, yes, amongst other places.

RICHARD MORNINGSTAR: Right. Yeah.

GRANT SHAPPS: And, obviously, was absolutely critical to—you know, one of the founding figures—central founding figures of the United States. But it did remind me of, you know, that sort of very, very close relationship and everyone will, at least somewhere in their minds, remember that he had that famous experiment. He was an energy pioneer because he put a kite up in 1752 and demonstrated lightning was electricity, which was news to many because it was unproven at the time.

But in 1757 he moved to the UK. He moved to London. I don’t know where Paris was in all of that but at some point he lived in London. The bit of this that struck me, he lived on a street called Craven Street, and Craven Street is right by where this new department for energy security and net zero has its new home and we’re about to move in there in the old war office right on Whitehall there.

So, I mean, you just kind of, you know, perhaps by a quirk of nature get the sense of, you know, our obvious history is stretching back but on the energy side of things throughout history pioneering so many of the big energy breakthroughs including nuclear power on the defense side, obviously, the Manhattan Project on the civil side, the UK created the first—the world’s first nuclear civil power station at Calder Hall in Cumbria.

It was producing a massive forty megawatts, actually, on the side because what it was really doing was producing plutonium at the time for our military nuclear program. But our histories are tied and our approaches to what’s happened with Putin, what’s happened in Ukraine, are tied—closely tied together as well.

And, you know, if you look at by a long way, by a long stretch, the United States has put the resource into, you know, helping to fight Putin’s evil war but the number-two country is the UK and, again, you know, we just share that natural instinct to always be the countries to be in defense of those freedoms and liberties.

But energy has become a sort of blackmail. Putin has used energy as a weapon of war to blackmail the West in the hope that we would all crumble. We haven’t. We have managed to see our way through the first very difficult winter, you know, various different ways. I mean, Germany had a pipeline, and a second one on its way, to have 47 percent of their gas was from Putin. The UK was much more fortunate. We didn’t have a gas pipeline. We only bought 4 percent of our gas. So it wasn’t such a big wrench. But nonetheless, we still suffered in our energy prices.

And so we know that our response for this year and going forward has to be the thing that you just mentioned, which is we can have renewable energy which splits us off from the gas reliance, from the hydrocarbons, and nuclear in a renaissance that is going to make us energy-independent. It’s popular at home. I know it’s popular here. It deals with a big concern, which is the cost of living for our citizens in both countries and once again, I mean, just sort of back to the start with Benjamin Franklin, you know, the two countries working closely together. I’ve come here directly from a meeting with your energy secretary, Jennifer Granholm, discussing precisely these issues and how we can work in much closer cooperation. And that’s our third meeting in three months to move this agenda forward. So there’s a lot of serious work going on.

But I think that’s the challenge that lays ahead of us—cheap, reliable energy that no despotic leader can prevent us from accessing in the future.

RICHARD MORNINGSTAR: So, you know, energy certainly is and should be part of the special relationship between the UK and the US. What are some—where can that cooperation take place? How can one and one make three?

GRANT SHAPPS: So I would say, first of all, the UK has had, in the last ten to fifteen years, a big move into renewables. So if you take offshore wind, for example, in the North Sea we have the world’s biggest wind farm. But as you—also in the North Sea we have the world’s second-biggest, the third-biggest. The fourth-biggest is being constructed, and that will then become the largest again. And we’ve got the world’s first floating and the largest floating wind farms. As well, we’ve installed a lot of solar. Surprisingly—here’s a stat that will amaze people. It amazes me even as I repeat it for the hundredth time. The UK produces as much solar power as France, despite France being twice the geographical mass, and also the weather in the UK not being quite as sunny as in France.

So, you know, we’ve managed to do a lot on renewables. We still need to go further. I think, in answer to your question, you have now mechanisms in place to do that transition to renewables with several different acts from Congress, including the Inflation Reduction Act. And so there’s a great—we’re seeing a great requirement for the skills and the knowledge and the technologies that have been built up over the last decade and a half, and we’re keen to work together on that.

And that’s just one example. Nuclear power, civil nuclear power, very obvious areas of deep cooperation, some of which already exist. There’s much, much more to do with natural obvious partners, for all the reasons we discussed.

RICHARD MORNINGSTAR: Do your conversations include cooperating on critical materials? I mean, one of the great concerns has been we don’t want a dependence on Russia to be—you know, we’ll get over the dependence on Russia, but then what about China? And is that an area of potential cooperation?

GRANT SHAPPS: Yeah, absolutely. Critical minerals are at the heart of actually every form of renewable power and also nuclear power. So, I mean, they are—without sourcing out the supply chain to critical minerals, we can’t make this transition. So it’s not—you know, working with the US, but also other countries; Canada is a good example with lots of minerals, but many others as well, to make sure that we are not—again, change of policy, different world. Who knows what will happen next, as the last few years have demonstrated? We must not be reliant on unreliable partners again.

And, you know, I go back to the very obvious and most extreme example with our German friends finding themselves so reliant on Putin, who’s turned out to be the least reliable interlocutor, whilst actually this last month closing down their nuclear power. They closed down their last reactor last month. And so, of course, critical minerals are at the heart of making sure that, you know, countries who share our values are able to secure the power that they need. So there’s some ideas that we’ve been discussing just in the last hour of my meeting here in Washington about how we further bring the world together to discuss this. Of course, we’ve been doing it at the G7 Energy Conference in Japan, in Sapporo, and elsewhere. But actually, that was one of the subjects which—watch this space. There’s going to be more on this very soon.

RICHARD MORNINGSTAR: You know, we talked a little bit even before we came in that there are somewhat different approaches in the US and the UK. You know, we have our IRA, which created a lot of angst, which I think is dissolving some on the continent. What’s Britain’s view towards the IRA and the various approaches?

GRANT SHAPPS: Well, the first thing to say is we’re very careful to call it “eye-rah.” We’ve renamed it, in the UK, for reasons of history that some will recognize.

RICHARD MORNINGSTAR: I guess so.

GRANT SHAPPS: So the Inflation Reduction Act. But I think—I think the fundamental issue is this: In the UK we have a political consensus around the need to secure national energy security. And that one of the ways to do that is you actually very accurate, I thought, summed up in your introduction, is to move to renewables so that we’re not reliant on hydrocarbons that all too often—not always. You know, we have not seen all the gas. You have a lot of LNG, and other places are good partners. But actually, all too often we end up too reliant on a single form of energy, and then the world changes geopolitically, and we end up in difficulty.

So in the UK, we have a political consensus that actually several years ago, and actually under this Conservative government which will sound odd to an American ear, we passed legislation that said we had to get to net zero by 2050. So that was a cross-parliament agreement. Just a small twist to that is they also legislated essentially that the energy secretary could go to jail if we don’t do it. So when I say I’m working on this night and day, I mean night in particular because that’s when you start to worry about this stuff. For truth, it would have to be for a contempt of court. It would have to be because I wasn’t seriously addressing the issues. But, nonetheless, we have that political consensus.

In the US, clearly it creates a big dividing line. And because it creates a big dividing line it seems to me—I mean, correct me if I’m wrong because I’m just saying this from observing the US political scene—Congress actually in the end sort of got to the same place. But not by using mandates and laws and—but instead by using tax breaks and, you know, on the other side of that, obviously having to raise the tax in the first place or add it to debt. But that’s the consensus that has come about and created not just the IRA but also some of the other large acts which have now passed.

Frankly, I think, on balance, the world needs to get to this position of energy security. So, you know, whatever wills—means to the ends, I think is right. There are one or two rough edges that we’ve been talking about, including critical minerals, which we’re working through. But I think the world will be a better place for the biggest economy in the world actually being, you know, in the driving seat as far as switching to renewables and more nuclear, which I think is a very big part in this story.

RICHARD MORNINGSTAR: Are you concerned about issues that—again, I think they’re beginning to dissolve some—but competition issues related to IRA or other, you know, issues that might put Britain or other countries at a disadvantage, or?

GRANT SHAPPS: Yeah. So there are a couple of parts of guidance which have now been issued, which have helped sort of take off some of these rough edges, as you know. And we’re just working with the administrations in London and in Washington to deal with the final parts of that jigsaw. But, as I mentioned in the kind of intro, the opportunity is not just at a global to have the world’s biggest economy actually moving towards this energy transition in a big way, but then also from an entirely national point of view to have so many businesses and organizations asking for assistance, help, experience by British expertise. And I think British companies coming here are doing it.

I mean, a lot of—a lot of time I spend talking to companies who are, you know, for example, going to the West Coast—which is where I’m going tomorrow, to California—because, you know, we’ve got, you know, gigawatts of offshore wind now and we want to get to fifty gigawatts in the next six-and-a-half years off our coasts. You know, California wants to—I think I saw their figure was forty gigawatts or forty-five, something like that. They need the expertise. So it’s a massive opportunity to work together and, you know, to provide goods and services to each other as well.

RICHARD MORNINGSTAR: Let’s talk a little bit about the EU. We’ve talked about the US-UK energy relationship and areas of cooperation and so forth. Post-Brexit relations with the EU, how closely do you work with Brussels on energy issues?

GRANT SHAPPS: Yeah. Well, let me be completely candid with you. They weren’t happy that we left the club. We wanted our independence. I didn’t actually happen to vote for Brexit personally, but I am a democrat and I believe in democratic outcomes. The country voted to leave. And actually, I was always torn on it because, you know—you know, to an American audience, I ask you: Would you—would you give up control over your borders, many of your laws, you know, finances? Although we weren’t in the euro itself. Answer, definitely no. You know, and actually, why would Britain do something like that as well? Which is gradually what the EU was becoming, ever more so.

So, yes, it’s been—I think it’s fair and candid to say it’s been a little bit tricky for a while. However, very, very pleased to report since Rishi Sunak became prime minister and he helped to settle the Northern Ireland protocol issue through this thing called the Windsor Framework, it’s been transformative. So just last month I was out in Belgium, for example, at a leaders summit on energy, to which Britain wasn’t actually invited last year. Actually, a number of other countries weren’t as well, so it wasn’t just us. But now we are very much more working together. I have constant contact with my French, you know, counterpart, my Belgian counterpart, my, you know, Netherlands, German, et cetera. So we are now working very, very closely.

The other thing which has changed is not just the Windsor Framework. This winter, when Putin was holding Europe in particular hostage to energy blackmail, Europe as in the EU, continental Europe, discovered that Britain, as ever, was the absolutely indispensable, reliable partner. France happened to have a lot of their nuclear power down over the summer, some scheduled, some not. They power most of their electricity from nuclear. Their fleet was down. We were exporting renewable energy to France through the interconnectors. And they saw that, you know, we left the EU but we didn’t leave Europe, and we’re still there as partners. And did so, actually, with the war in Ukraine, where, as I mentioned before, our response has, I think, been foremost in the European countries.

So, you know, very much better is the simple answer.

RICHARD MORNINGSTAR: Speaking of Ukraine—and I don’t know whether this is within your—you know, your area, but on sanctions questions, energy sanctions questions, are there any differences in approach between, you know—there’s sort of a consistent G7 approach, but looking behind—you know, behind the scenes, are the views towards sanctions pretty much consistent with the US, Britain, with the—Brussels and the member states, key member states?

GRANT SHAPPS: Yeah. I think—I think, actually, broadly speaking it’s been one of the surprising—I think people may have doubted before February 24 last year whether the West would come together and properly react to what Putin’s done. But I think beyond any shadow of a doubt, that’s what’s happened.

And I mean, in terms of the UK’s position, at the time I happened to be transport secretary. And you know, I made sure that we were the first to ban Russian aircraft in our skies, the first to ban Russian ships from our ports—and not just Russian ships, but ships that were being leased or had some funding behind them or were flagged or, you know, whatever else. And again, actually, one of the things about being able to make those policies independently is that we can be more fleet of foot, we can move faster. And we tried to do that through transport, but also through energy policies where I’d say we weren’t actually buying very much Russian hydrocarbon but we immediately suspended the sale—announced the suspension of the purchase, rather.

But I—you know, actually, frankly, the EU got there, slightly slower timescale but not critically. The US got there. I remember the transportation secretary, Pete Buttigieg, calling me and saying it’s going to be in the—I think it was in the State of the Union, actually, as I recall—it’s going to be in tonight’s State of the Union. I’ve been pushing to make sure that, you know, the same things that we had already done on transport were matched.

So, you know, I think actually the West has impressively moved in lockstep and that’s exactly as it should be.

RICHARD MORNINGSTAR: Well, you know, sanctions are never a zero-sum game. How do you think they’re working? Are you happy with how the energy sanctions are working with the price caps and other sanctions?

GRANT SHAPPS: Yeah. So I think you’re absolutely right. I think sanctions are rather like this. If you put a sanction here then, you know, the thing, whatever it is—it could be energy but it could be anything else—finds its way around that, you know, and if you just give it enough time a new avenue, a new pathway—it’s like business. It’s very—you know, it’s very enterprising and it will find its way around that sanction and I think we see evidence of that in the way that the Russian economy has responded over a period of time. I think we have to be honest about the limitations of that.

Having said that, when the world acts in unison I think it still matters. It matters hugely because—not just in the case of Putin, Russia, and Ukraine but also what other countries might think if we don’t respond convincingly and together.

So I have no doubt that oil still finds—somehow finds a way around. I know that there were many arguments in favor and against a cap and floor prices and all these other—these other things. The important thing, I think, is not the exact measure. I think the important thing is the cooperation in those measures and I think we’ve seen terrific cooperation.

RICHARD MORNINGSTAR: Right. And it’s, certainly, been better than not having them.

GRANT SHAPPS: Definitely. Oh, yeah.

RICHARD MORNINGSTAR: So, again, thinking about Ukraine, it’s been a pretty good—I think we all would agree, better than expected winter, part of it being luck, part of it being good policy. Concerns about next winter—how concerned are you?

GRANT SHAPPS: Well, as I say, I spend my day and nights thinking about these issues. But we got through the first winter and that will have been the hardest one because we had to divert or find replacement for all of that Russian hydrocarbon.

So logic tells you that winter 2023-24 should be better but we should not rest on our laurels and that is one of the reasons why, you know, I think, pay tribute to the United States the way that the US has responded with LNG, the way that we already had LNG ports and so we brought it into the UK and then exported to Europe, the way that Germany now has built new capacity to bring LNG and other countries now—the United Arab Emirates, for example, will be coming on stream, if not this year next year. So the world has found its way around these things.

What I think now is really important—and I’m going to be saying and doing more on it, and this is what I’ve been speaking with my American opposite number with today—is thinking about the more medium term. So in the UK, as in the US, we’ve allowed nuclear civil power to reduce as a proportion of our power partly because we both have oil and gas. It became unfashionable. There were lots of protests about it.

But, actually, we are reversing that policy. We want a quarter of our energy to be nuclear civil and we want to exploit not just the gigawatt size of it but also the small modular reactors, and, you know, there are many different designs from Rolls Royce to Westinghouse and others and we think the time has come for those things.

I’ve just set up something called Great British Nuclear to take this forward. I’ve appointed a minister in the British government in my department who for the first time ever is responsible as the minister for nuclear. We’ve never had somebody with that title and wakes up every day and that’s what he focuses on.

So I think, again, with caution, if last winter was OK then this winter will be but nothing is set in stone. We could have terrible weather or something else. We need to keep making sure that we make sure the markets work properly. The price of, you know, gas has fallen dramatically at the moment. Again, we have to keep an eye on these things. But the medium term is where my focus is shifting to because we need to get the energy mix right and secure in the long term.

RICHARD MORNINGSTAR: On nuclear, are you sensing a shift of opinion on nuclear? I mean, Britain and other places as well, the US and Europe, or at least certainly parts of Europe, other parts of the world. Do you believe that in 2050, when you need to be at net zero—unless you’ve gone to jail in the meantime—do you think that nuclear is going to be a major part of the clean-energy world?

GRANT SHAPPS: I do. And I think, to answer the first part of your question, yes, attitudes have changed tremendously. You know, for example, of all the nuclear reactors—we’re producing about 16 percent of our electricity through nuclear right now in the UK. It’s fairly similar to the US. Of all the reactors that are still operational right now in the UK, every single one of them was commissioned under a conservative government, under the Tory Party, my party.

Now, I’m not making that as a political point. I’m making it because it demonstrates the fact that this was a deeply politically divisive issue in the past. It isn’t now, and partly because of the war in Ukraine and the need for energy security, but also partly because of climate-change issues and the rest.

We have reattributed the taxonomy to say that nuclear power is clean power in order to get the finance into that area as well. So I think, yeah, I think there is a general acceptance. I think with things like—with technologies like small modular reactors, more countries who weren’t using nuclear civilly, for civil power before, I think are likely to in the future. And it’s becoming much more practical than it was in the early days because the technology has moved in in seventy years.

RICHARD MORNINGSTAR: Two more quick questions on nuclear come to mind. Is there cooperation today between either UK and US companies or UK and US laboratories on small modular reactors? And then I guess a somewhat unrelated question: Is the argument that nuclear development in the West is critical from a national-security standpoint, relating to things like nonproliferation, concern about how nuclear power may be used by, you know, Russia, China, maybe other countries, is that a salient argument? And also then the cooperation with the US

GRANT SHAPPS: Yes. Yeah. Well, on the cooperation front, yes. I’ll tell you openly, it’s one of the subjects we’ve been discussing today. Actually, I think there’s a really interesting part of this which harks back to one of your previous questions on the supply-chain side of things. We talked about supply chains of, you know, hydrocarbons. But actually there’s also a supply chain in uranium enrichment and so on and so forth. So there’s lots of work to go on there.

Both the UK and the US have pretty unique skills and knowledge in these areas. And very few countries in the world are in a position to carry out the enrichment and some of the processes that come after enrichment. We’re both signed up to nonproliferation. So it’s very important. The way this is done is internationally responsible. And again, I think it’s one of the very good reasons why the UK and the US should and are starting to work very closely together on nuclear.

And, you know, uranium has to be enriched to a very different level for nuclear and some of the SMRs, and then advanced modular reactor, AMR, technologies in particular to—if you want to turn it into a weapon at 80 or 90, 95 percent enriched, so that we’re talking about two very different things.

And I think some of these new technologies are incredibly exciting. I was with a British firm who are working on a Magnox system, which is technology which has been around for a while. But the advantage of Magnox is if you had a leak, it comes into the air and it freezes immediately if it’s anything less than 550 degrees C.

So there’s lots of very interesting work going on, lots of great science going on. And, of course, even way beyond that, I just—quick—we’ve talked about fission. If you just talk about fusion, I went with the prime minister when I launched the document you mentioned, Powering Up Britain, to Oxford, where we have a research center in Culham, and we stood next to the hottest place in, certainly, the solar system, ten times hotter than the Sun at Tokamak there. So, you know, it’s always twenty years away to get to fusion…

RICHARD MORNINGSTAR: You know, and I want to get to audience questions. If anybody has a question, please come up—come up to the microphone over there. I mean, I’ve got enough questions to last for the next hour and a half, but we’d like to—we’d like to get some questions.

While you’re going up, you know, it sounds like, you know, that you take—I think what we do—an all-of-the-above approach towards and maybe agnostic on technologies as to—as to how we’re going to achieve net zero. Do you have priorities? I mean, as you’re thinking about what you have to do, do you have a list of priorities like—and I’m not saying it’s this—but, like, nuclear first, or hydrogen second, and something else third? Or is it sort of like we’re going to look at all of these things and see how they develop?

GRANT SHAPPS: I do. But the overriding principle is we must never be in—we must never be driven by a single technology, right? If it’s oil and gas—and we went a long way to oil and gas, not least because we were producing a lot of it in the North Sea—then, as that starts to run down, we’re starting to import it, and then you start to get reliant. Or in France, nuclear. They have a terrific nuclear industry. They’re building two of our nuclear power stations at Hinkley Point and at Sizewell, and they’re running the rest. But actually, you know, as they would say, this summer a lot of them are down for scheduled and, unfortunately, some unscheduled maintenance, and suddenly they’re short in power. And so on and so forth: the wind doesn’t always blow, the sun doesn’t always shine. So we have the—you know, we produced last year—57 percent of our electricity in the last twelve months has come from renewables and nuclear together. That’s great. But if the sun’s not shining and the wind’s not blowing, you need to rely more on that nuclear, and so on and so forth. So—

RICHARD MORNINGSTAR: I though the sun always shined on the—

GRANT SHAPPS: Of course. I know, I know, I know. But amazingly, there are occasions. So I think, first of all, energy mix.

Secondly, you ask: To what extent are we directing that? Well, we have set out in a lot of detail how much of our energy we want to get from these different forms. So offshore wind, fifty gigawatts by 2030, in six-and-a-half years’ time. You know, we’re saying we want on hydrogen ten gigawatts, half—at least half of which has to be green rather than blue. We set out on nuclear twenty-four gigawatts into the future to get to a quarter of our power. So, yeah, we’re doing that.

And probably the most exciting thing—I just want to say this before we take the questions—carbon capture, utilization, and storage, CCUS—four initials that I bet actually if I polled at home in Britain most people won’t have heard of—could be a trillion-pound/trillion-dollar industry. And I’m very excited about that, not least because geographically or geology—from a geological point of view the North Sea, in fact in many cases where we took the oil and gas out of, has a lot of storage potential.

RICHARD MORNINGSTAR: That’s great.

Well, let’s get a question from the audience. If you could identify yourself and ask the question.

Q: Thank you. Mr. Secretary, I’m George Pickart with the General Electric Company. We’re very pleased to be deeply embedded in UK’s electricity sector, working across all of the technologies that you’ve mentioned whether it’s onshore or offshore wind, or nuclear SMR, grid equipment, technology, et cetera.

You couldn’t have teed up my question any better. You know, we’ve been spending a lot of time and investing a lot of money in how you decarbonize gas because we don’t see a future of the electricity system without that large rotating equipment on the grid. So the issue is, how do you produce that with fewer carbon emissions? And so we’re pursuing both expanding our hydrogen capability and also working with a number of different collaborators on carbon capture and storage.

And I wanted to commend you and your government for the strategy that you’ve put in place on carbon capture. We’re quite interested, as you probably know, in collaborating on the Net Zero Teesside project, and you’ve put together a very good vision, a strategy, the financial mechanisms, the funding. I think what’s missing, really, is sort of the timebound element of it. I just wondered if maybe you could tell us, do you expect a decision on these projects to go forward within the next year? And can we look forward to that?

GRANT SHAPPS: Yeah. So, well, I should explain. Thank you for the question. And thank you for what GE does, as well, because it’s a great partnership. It’s a very good example.

The strange thing is I spend my time going around the world to countries saying how have you done it, and that’s actually largely with the help of your businesses who have come in and invested in these renewables and much else. And that is a great—I mean, you know, we’re capitalists. We believe this is the way to bring the best technologies together, and then often re-export them as well. So, you know, thanks for that.

Secondly, on CCUS, in that Powering Up Britain document we announced a twenty-billion-pound initial program. This is track one of our CCUS clusters. And, as you mentioned, Teesside, which is in the northeast, and the northwest are the two kind of areas where this has developed. And then we’re going to have expansions to those, and there’s clusters in Scotland and also in Humber, also on the east coast. Track one expansion will be this year, and then we’re actually going to have track two as well. So that is—you know, the 20 billion is the first part of it over 20 years.

So we’re—and the reason, I should just explain, actually, Ambassador, to our audience. The reason that I’m saying all this, and so excited about it, and why the question is so relevant is that we know that by 2050 we will still need oil and gas. This isn’t just me saying this. This is because the IPCC, the—you know, the global sort of experts say that there will still be oil and gas being required. In which case, you got to deal with the CO2. We have enough space in the North Sea for seventy-eight billion tons of CO2. Now, what is seventy-eight billion tons? It’s fifteen billion elephants, well-fed ones. It’s two-hundred million St. Paul’s Cathedrals, for the British audience here online. It’s a lot of space. It would take probably one-hundred-years’ worth of British CO2 and one hundred years of all of European CO2, which we can bury under the North Sea.

So this is very much in line with the overall mission of both energy security and net zero. And, you know, projects which look to help with that are already getting our backing. So, I mean, I’m not quite sure on the project that GE’s particularly interested, but it may be that it’s, you know, track-one expansion or track-two path right now, I guess.

Q: Thank you.

GRANT SHAPPS: Thanks.

RICHARD MORNINGSTAR: Thank you.

I think we have two more questions that I see right now. And we’re running—we have about four or five minutes left. And I also think it’s important before we finish, I don’t know if 3:45 is an absolute cut off, but Ukraine reconstruction. And there’s a conference on the 21st to 25th, and your views on that. Maybe we take these two questions—why don’t we take the two questions and then answer them together, and then if you have any comments on Ukraine, and then we’ll call it day.

Q: Yeah, thank you very much, Mr. Secretary. My name Kevin Gundersen. I’m with Huntsman Corporation. And we are the world’s leading spray foam insulation company.

And in your remarks, you discussed many options for energy security. But your government has done the one thing that no other government has done, which is make insulation the centerpiece of its energy policy. When you talk about medium- and long-term solutions, we feel very strongly and are very supportive of what you are doing, that insulation is a short- and medium-term solution to the energy crisis. It’s a relatively old technology and people don’t really think about it, but it does work in lowering greenhouse gas emissions and lowering utility bills.

The British government has had various iterations in the past of insulation schemes. And given the amount of funding and the support this time around, what are you and the government doing to make sure that the execution of this program works this time around, given the importance of the issue at the moment?

RICHARD MORNINGSTAR: Thank you. Let’s have Lee’s question, and then maybe you can respond to that, and maybe say a little something on Ukraine.

Q: Thank you, Ambassador. Thank you so much, Mr. Secretary. My name is Lee Beck. I’m with the Clean Air Task Force. We’re a global climate organization.

Thank you so much for your fantastic remarks about technology optionality and next-generation technologies, carbon capture, nuclear, fusion. It’s really, really fantastic. And you said something really important, that oil and gas will likely be around still by 2050. COP26 saw the launch of the Global Methane Pledge. COP28 will be where we’re going to be really talking about the decarbonization and reducing emissions from the fossil fuel sector. What are—what is your vision for methane mitigation, one of the fastest ways to act on climate in the near term?

RICHARD MORNINGSTAR: Great, so I’d say let us—yeah, why don’t you just take those two and then if you could say a little bit about Ukraine.

GRANT SHAPPS: Sure. So, first of all, I love your point about insulation. I mean, the best energy is the energy you don’t have to use in the first place. And it’s kind of—the high energy bills that people are being paying has suddenly both changed the maths—or, math, as you would say—and it has also changed the—you know, made people have another fresh look at, even though the technology, as you rightly say, has by and large been around. But so I think it’s enormously important.

We’re always being pushed to go further, but it’s worth saying that when we came to power, this conservative administration, which is in 2010, only about 14—one-four—percent of homes were adequately insulated, A to C on an energy rating. It’s now just approaching half of homes. So we’ve done half the job. Right now, in terms of size and scale, we have twelve billion pounds in the current periods going into this, I think up till 2028. And we’re working on new ways to target that. So we’re about to launch something called the Great British Insulation Drive, which you’ll be hearing more of very soon.

But, yeah, massively important, obviously, when new homes go up they’re much better insulated. We have a lot of Victorian housing stock. And they were very good builders, the Victorians, but not very good at building well-insulated, warm buildings, necessarily. So, yeah, more to happen on that front.

I’m just furiously looking at my notes actually on methane, because I noticed a stat when I was having to think about this earlier, which I was blown away by, which was something like a 60 percent reduction in our methane. But I’m afraid I cannot spot the exact number right now. But that pledge from COP26—our 60 percent reduction is not from COP26, it’s from earlier than that—but that pledge is incredibly important. And we mustn’t lose sight of the fact that we will go without CO2, but there are many other forms of greenhouse gases, and there are a lot of different responses that we need to take.

The brilliant thing about all this stuff is, you know, again, Ukraine and the high prices has made us look differently at it. Energy security—national energy security—you know, in my case, I say it’s powering Britain from Britain, I always say. You know, it’s just the flipside of the coin of net zero. That’s why we named the department Energy Security and Net Zero. They’re actually the same thing. You know, to get there, to be really secure, you know, we need to go through that whole transition. So and that’s our stated direction.

And you very kindly asked about the Ukraine reconstruction conference. It’s in London this summer. I actually took over the presidency on behalf of the UK from the Swiss, who ran the conference last year. There’s a huge amount of activity going into that. I’m speaking to my Ukrainian counterparts. I know the whole world—the whole civilized world will be there to help and support Ukraine, which we must do because, in my view, Ukraine could be lost in two different ways. We could lose it because we don’t stick together, we don’t have these different sanctions, we don’t respond to the energy crisis. But we could equally lose it by allowing Ukraine to be destroyed, even if they win. And that would be completely and utterly unacceptable.

RICHARD MORNINGSTAR: And, just very briefly, because we have run out of time, how would you—how would you begin to approach Ukraine energy reconstruction? And, you know, with the potential of ultimately Ukraine becoming a real energy powerhouse in Europe?

GRANT SHAPPS: Yeah. Well, I think—I’ve been speaking—on a personal basis, I’ve been speaking to my opposite numbers. Initially Oleksandr Kubrakov, who was minister for reconstruction and infrastructure and transport, at the time, now deputy prime minister. And also my opposite—direct opposite number, and actually I’m speaking to them—the first thing I do when I get home is speaking to them again in advance of this conference as well. And Ukraine has huge potential assets. I mean, in the same way as they’re the breadbasket of the world, or certainly of Europe and perhaps Africa, they also have the potential to be both in renewable energy but also in modernized nuclear civil energy as well.

So, you know, we’re very keen to make sure for their sake, but also, I think, for the world’s sake, that they are assisted in being brought back to what they’ll need to be to rebuild that industry and rebuild the country’s economy as well. It’s very close work. I’ve been personally very committed to all this. I’ve had Ukrainians living in my house for the last year, a family of three, and their dog as well, Mad Max. So every time I’ve gone home, I’ve been reminded of how evil that war has been. And Britain, and I know America, are committed to Ukraine’s future.

RICHARD MORNINGSTAR: And I can assure you, everybody here, I think, is likewise committed.

You know, unfortunately, we have come to a close. I’ve been getting sort of dirty looks from our events staff because I think we’ve gone over time. But—and we could have—I think we could have gone for another hour or two. But it’s been great. And I really want to thank Secretary Shapps for joining us and offering his insights on Britain’s path forward on energy and climate—not just Britain; you know, looking at it from a more global standpoint. And I hope you’ll be visiting us many times and maybe come back to our Global Energy Forum.

But I also would like to thank all of you who joined us in studio, as well as those around the world who are watching this virtually. And I would remind everybody that there is a recording of this conversation that’s available or will be available on YouTube, Twitter, Facebook, and the Atlantic Council webpage.

I’d also like to thank those here who made the event possible: Olga Khakova, who’s the deputy director at the Energy Center responsible for European energy security; Katie Kenney; Paddy Ryan; Frank Willey; Max Zandi; and our events—wonderful events staff.

So please join us for future events, Atlantic Council events. We will be having our eighth annual—I’ve been here eight years, so I guess I started it the first year—eighth annual Central and Eastern European Energy Conference—Energy Security Conference. That takes place on June 15 in person and online, and there will be more information on that on the webpage. And just, you know, keep watching our webpage for events.

So, again, this was on the record, and take care. See you next time.

GRANT SHAPPS: Thank you very much.

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One of the most interesting but under-reported achievements so far in 2023 has been the connection of Ukraine’s first biomethane production plant. This facility is one of a series of similar projects that are expected to position Ukraine firmly at the center of Europe’s energy transition. Situated in northern Ukraine’s Chernihiv region, the plant connected to the gas distribution grid in early April. A further four plants are expected to follow suit before the end of the current year.

With more facilities in the pipeline, Ukraine could be producing up to three billion cubic meters of biomethane annually by 2030, which would represent 10% of the EU’s total targeted production. By 2050, Ukraine could scale up production sevenfold to reach an annual level representing around two-thirds of the country’s total prewar natural gas consumption.

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Since the biomethane molecule is similar to that of natural gas but non-polluting and fully compliant with decarbonization goals, investments to support production and transmission infrastructure are expected to be affordable. This can already be seen in a number of swift upgrades that have allowed existing Ukrainian power generation plants using biomass to undergo partial conversions to biomethane.

Soaring energy prices in the wake of Russia’s full-scale invasion of Ukraine and the blockade of Ukrainian grain exports have helped producers to fast-track their investments in this budding sector. With traditional export routes severely restricted by the Kremlin’s Black Sea grain blockade, some agricultural businesses have used their crops to produce biogas and biomethane. Meanwhile, with European electricity and gas prices reaching record levels last year against a backdrop of Russia’s invasion, biomethane production is now five times more profitable than grain production.

Analysts say Ukrainian-produced biomethane is cheaper for European buyers than volumes produced in EU countries. Thanks to support from DENA, the German biogas register operator, Ukraine will also soon be able to set up its own register, which should allow sellers to provide proof of origin for exported biomethane by the end of this year.

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Of course, much of Ukraine’s ability to scale up this segment of the energy industry will depend on how quickly the war ends and on the ability of producers to attract funding. There are signs, however, that international appetite to work with Ukrainian energy industry partners is already growing, even as Russia’s invasion continues.

At the beginning of May, Ukraine’s gas transmission system operator, GTSOU, said it had received interest from non-resident companies looking to import natural gas to the country and possibly store it in underground facilities over the summer months. Prior to the war, more than 100 non-resident companies had signed up to import and store gas in Ukraine. In 2020, for example, a third of the gas stored in Ukraine’s 30 bcm underground facilities belonged to foreign entities. Following the start of Russia’s full-scale invasion last year, this figure dropped to just 2%. However, the latest capacity bookings reported by GTSOU signal renewed international interest in injecting gas despite the ongoing war risk.

This interest is largely driven by a widening spread between current and winter prices, which means traders have an incentive to buy cheaply now hoping to sell at much higher prices later this winter. Storage facilities across the EU are also filling up fast, effectively prompting companies to turn to Ukraine’s vast facilities to store surplus volumes.

Undoubtedly, this will increase Europe’s overall security of supply, particularly during the winter months when gas can be withdrawn and used across the EU. One could argue that Ukraine’s comparatively cheaper storage and transmission tariffs, together with the work carried out both by GTSOU and the storage operator UTG in previous years to attract customers, have also been instrumental in attracting international interest.

Further progress in the storage sector now seems increasingly realistic. Discussions are currently underway at the government and private sector levels to issue war risk insurance for companies looking to store gas in Ukraine. This could provide an extra measure of safety for existing or new clients. Whatever format these insurance measures take, it seems clear that wartime Ukraine remains a critical energy partner for Europe, and will continue to play an important role in the continent’s complex energy transition.

Dr. Aura Sabadus is an energy journalist who writes about Eastern Europe, Turkey, and Ukraine for Independent Commodity Intelligence Services (ICIS), a London-based global energy and petrochemicals news and market data provider. Her views are her own. You can follow her on Twitter @ASabadus.

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The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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The post Russia’s invasion fails to prevent progress in Ukraine’s energy sector appeared first on Atlantic Council.

Cleaning up hydrogen

Today, the vast majority of hydrogen is produced from reforming the methane in coal or natural gas in a process that produces ten times more carbon dioxide than hydrogen by mass. It is principally used for refining heavy sour oil and producing ammonia for fertilizer. 

The most promising pathways to create zero-carbon clean hydrogen at scale are through renewables-produced green hydrogen or nuclear-powered pink hydrogen, both of which use zero-carbon electricity to separate hydrogen and oxygen via electrolysis. There is also blue hydrogen, which comes from natural gas in a process paired with carbon capture. Blue hydrogen’s role in decarbonization, however, is contingent on the mass buildout of carbon transportation and storage infrastructure.

If deployed judiciously, clean hydrogen can have a meaningful impact on lowering emissions in hard-to-electrify sectors, which require a chemical feedstock, long-duration energy storage, or extreme heat.

Long-haul trucking is a viable clean hydrogen offtaker

For most forms of transportation, growing economies of scale have given batteries an edge over hydrogen fuel cells. However, long-haul trucking—which accounts for 7 percent of transportation emissions—may be too high a fence for batteries to climb.

As a vehicle becomes heavier, its battery must expand proportionately in volume to provide the requisite power. Electric freight tractors use battery packs that are significantly heavier than the weight of diesel a truck typically carries, which decreases range and payload capacity while requiring more frequent charging. This is meaningful in the freight industry, where time is precious, and downtime can come at a cost of over $50 per hour before accounting for costs of charging. An electric long-haul truck takes thirty minutes to charge to only 70 percent capacity even with megawatt charging.  In comparison, hydrogen re-fueling can be done quickly. Refueling a hydrogen truck takes ten minutes.

Hydrogen fuel cell trucks are therefore likely to edge out batteries for trips surpassing 180 miles and payloads above 24,000 pounds, according to an industry study.

The US Department of Energy estimates that total cost of ownership for hydrogen fuel cell long-haul vehicles will become affordable by 2030 thanks to new production tax credits for clean hydrogen. Furthermore, the department cites evidence that the long-haul trucking sector is willing to pay a premium for clean hydrogen. This outcome, however, is contingent on a buildout of refueling infrastructure along freight corridors. To boost demand, infrastructure could be built along freight lines that support high volumes of freight, such as near seaports. This can help medium-sized refueling stations reach their breakeven utilization rate. To do so, industry and policymakers must overcome a chicken-and-egg problem. The development of refueling infrastructure is critical to enable hydrogen-powered long-haul trucks, and—conversely—hydrogen refueling stations will rely on long-haul trucking for their income, as hydrogen uptake in transportation is likely to be confined to this sector.

California and Texas: Unlikely hydrogen trucking partners

California and Texas are important players in both green hydrogen and long-haul trucking.

Not only do the two states have the largest populations and economies in the country, but they also have outstanding green hydrogen potential.

Both California and Texas have excellent renewable resources, including solar and wind. The two states have deployed nearly 74 gigawatts of solar and wind capacity with another 36 GW in development.

Texas and California are the nation’s largest and second-largest renewables generators. As more renewable electricity production grows in these states, so will green hydrogen capacity—although there will be tensions between providing renewables for power generation or hydrogen.

Long-haul trucking is a natural use case for green hydrogen in both states. Texas and California are the country’s largest users of diesel for the transportation sector, consuming 633,000 barrels per day in 2021, or about 21 percent of total US diesel demand. Both states rely heavily on trucking to transport cargo from ports along the coast of California and Texas to destinations further inland. Indeed, Los Angeles, Long Beach, and Houston are the country’s first, second, and fifth-largest container ports by volume, respectively.

There is already evidence that Texas and California’s long-haul trucking sectors could see synergies between ports and green hydrogen production. California provides fiscal support for zero-emissions vehicles, plans to end the sale of fossil fuel-powered medium- and heavy-duty trucks by 2036, and continues to develop hydrogen refueling infrastructure. Tellingly, Hyundai Motor will soon operate thirty fuel cell electric trucks in California; Hyundai states this deployment will mark the largest commercial deployment of fuel cell electric trucks in the United States in the super-large vehicle class. In North Texas, Air Products and AES are teaming up to construct the country’s largest green hydrogen facility to service the trucking industry.

The trucking fleet is replaced very rapidly: the average lifespan of a super-large class truck is eight years, while the median truck on the road today is approximately six years old. In comparison, personal vehicles are replaced on average only every ten and a half years. Moreover, unlike the personal vehicle segment, most long-haul trucks are procured by fleet owners who pay very close attention to the total cost of ownership, not just the sticker price. If hydrogen-fuel trucks become more competitive than their diesel counterparts, there could be a relatively rapid adjustment.

Hydrogen: Here for the long-haul

Hydrogen’s technical and economic fundamentals are likely to improve as technology advances and the Inflation Reduction Act incentivizes investments in renewables. Owing to their renewables potential, large ports, and significant diesel demand, California and Texas are primed to lead the trucking market’s transformation. While trucking fleet turnover will take time, hydrogen appears poised to disrupt the US trucking market.

Joseph Webster is a senior fellow at the Atlantic Council Global Energy Center.

William Tobin is a program assistant at the Atlantic Council Global Energy Center.

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Joseph Webster

Senior Fellow

Global Energy Center

Central Asia China

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The post Green hydrogen: Loaded up and (long-haul) trucking appeared first on Atlantic Council.

Yet China’s emergence as the world’s leading player in wind has been costly. Beijing’s wind capacity deployment to less-than-ideal locations has been inefficient, while its failure to build corresponding transmission connections stunted growth in some of its windiest provinces. Moreover, Beijing’s acquisition of wind technology—sometimes by outright theft—has increased tensions with the West. China has risen to the top of the global wind industry, but at tremendous financial and diplomatic cost.  China’s successes and failures provide lessons to other countries seeking to use their own wind industrial policies to address climate challenges and strengthen economic growth.   

China’s expansive industrial policy

China’s total industrial policy spend comprised at least 1.73 percent of total GDP in 2019, more than four times that of the United States. China’s wind industry policies included enforcing localization requirements, using a feed-in tariff for initial sectoral development, employing massive direct and indirect subsidies, and obtaining—many would say stealing—foreign intellectual property.  

China’s wind industrial policy began with feed-in-tariffs introduced in 2009 and domestic content requirements to achieve 1 percent of the country’s energy mix by 2010.

In addition to localization requirements and feed-in tariffs, China’s wind industry also benefitted from a range of direct and indirect industrial subsidies.

Chinese provinces often extend their own subsidies for wind energy. In 2021, Guangdong province issued subsidy standards for grid-connected offshore wind projects at 1500 Renminbi per kilowatt. At this scale, a similar program in the United States would yield about $109 million in subsidies for a 500 megawatt turbine, a remarkable level of support from a subnational government.

Chinese wind industrial policy’s supply chain secrets: subsidies for steel, ships—and even coal

The Chinese wind industry has received fillips from “cross-subsidies” for steel, coal, and shipbuilding.

Steel is an important cost driver for wind projects, accounting for about 90 percent of the materials used for an offshore wind turbine, which in turn represents nearly 40 percent of the installation cost for offshore wind projects. Steel is also a key component for onshore wind projects, although those installation costs vary far more dramatically.

In China, steel and coal are inseparable.

China’s steel production primarily employs blast furnace-basic oxygen furnace, which uses coal for 90 percent of the production processes. This reliance on coal makes China’s steel, which is heavily subsidized, highly carbon intensive.

Coal generation has long been subsidized by the Chinese government, with one estimate finding support of at least $37.7 billion in 2014; China’s total electricity sector subsidies stood at $30 billion in 2021, with much of that spending still directed to coal. Beijing also quadrupled the amount of new coal power approvals in 2022 compared to 2021, contradicting China’s climate pledges.

China’s steel-coal nexus has provided significant support for the development of its wind industry, but at significant environmental cost. To be clear: even China’s carbon-intensive wind turbines are orders of magnitude less polluting than coal or natural gas, and China’s wind turbine deployment is unambiguously a positive for the climate. However, these climate benefits are reduced by the Chinese wind industry’s dependence on a carbon-intensive, coal-consuming steel industry.

Finally, China’s steel and coal subsidies complement another industry vital for offshore wind: shipping. Beijing subsidized its shipping and shipbuilding industries to the tune of $132 billion between 2010 and 2018. Its ship manufacturing capabilities ensure it can produce wind turbine installation vessels and other ships for use in offshore wind deployment. China dominates this industry; in 2019, China accounted for about 55 percent of global shipbuilding orders, and employs 33 out of the 49 existing wind turbine installation vessels. Given its low-cost steel and extensive shipbuilding complex, China is extremely well-positioned to continue to deploy offshore wind rapidly.

Forced technology transfer and espionage

The PRC has obtained foreign intellectual property related to the wind industry via forced technology transfers and industrial espionage. In exchange for operating rights within China, Spanish company Gamesa was obligated by the Chinese government to train in-country competitors. As a result, the company’s share of the Chinese market fell from 33 percent in 2005 to just 3 percent by 2010. Many foreign companies saw their intellectual property stolen by Chinese firms, often with the support of Chinese intelligence services. For instance, American Superconductor Corp (ASMC), a computer systems supplier to wind turbines, had its source code hacked and its contracts with Chinese suppliers terminated in the early 2010s. Stories like ASMC’s abound throughout the wind industry. 

China’s wind industrial policy has been, at best, a highly ambiguous success. China is indisputably the leader in wind energy markets, as it historically accounts for about half of all new wind installations by capacity. It is also the world’s leader, by far, in offshore wind deployment by capacity.

However, this progress has come at great and often unnecessary cost. China’s generous and holistic industrial subsides should have been deployed in a technologically agnostic manner, as much of its wind industrial policy spending was wasted. The Chinese wind market’s overall capacity factor has historically lagged other markets, with some research showing real capacity factors below 23 percent as late as 2019, compared to utilization factors of over 34 percent in the US market. This low rate is due in part to the stunted growth in China’s most wind-rich provinces in the early 2010s due to a lack of transmission capacity, leading to significant curtailment. China’s actual wind generation is much less impressive than its deployment of wind capacity.

Moreover, Beijing’s aggressive—often illegal—actions to secure wind energy intellectual property has alienated the West and provoked political distrust. Chinese leaders may now complain about economic de-risking, but their arguments ring hollow, as Chinese firms aggressively pushed Western companies out of their domestic wind market.

China’s wind energy industrial policy has ensured it is the world’s largest and most important wind producer, but it remains to be seen if the benefits will outweigh the considerable costs. Other countries considering their own wind industrial policies should apply lessons from China’s experience. To accelerate decarbonization, countries must be mindful of the unintended consequences of subsidies; nimbly adjust transmission networks to accommodate onshore and offshore wind generation; respect fundamental intellectual property rights; and use market mechanisms, such as a pollution fee on carbon. Otherwise, they risk misallocating resources and alienating vital partners, as China has done.

Joseph Webster is a Senior Fellow at the Atlantic Council’s Global Energy Center and edits the China-Russia Report. The opinions expressed in this article are those of the author.

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Chile is one of the highest-volume lithium producers in the world, producing 26 percent of global supply in 2021, and possesses the world’s largest proven reserves. With the energy transition underway and demand for the metal estimated to increase by 450 percent through 2050, the country is uniquely positioned to benefit from a technologically and commercially mature lithium industry that, to date, has struggled to grow. 

While the nationalization of resources in Latin America regularly raises alarms within demand centers and investor groups, Chile has demonstrated success in nationalizing its other abundant mineral resource—copper. Codelco, Chile’s state-owned copper company, has high technical expertise and standards with its main issues deriving from its misfortune of declining resources, not from mismanagement. Chile currently ranks thirty-fourth and thirty-third on the Atlantic Council’s Freedom and Prosperity Indexes, respectively, reflecting its institutions’ strong commitment to transparency, accountability, and integrity in economic, political, and legal spheres. While Codelco’s past success could steward the creation of Chile’s state-owned lithium business, there is limited precedent that this approach could benefit other industries. 

Opponents of the initiative argue that the move could jeopardize foreign direct investment in lithium development in the country and ‘kill the golden goose’ for Chile’s economic diversification. However, the decision to nationalize could deliver overdue clarity and provide transparent foundations upon which industry development can proceed, providing businesses and investors with a degree of certainty for future operations and arguably more predictability than had existed previously. Boric has stressed that no existing contracts will be altered without being the “fruit of an agreement” with SQM or Albemarle, the two existing lithium mine operators—and that existing contracts will otherwise be respected. 

This announcement extends beyond national economics. Boric’s administration designed the proposal to directly address longstanding grievances, such as inequality and water rights, that were highlighted during Chile’s Estallido Social in 2019. While Chilean state-owned enterprises have a complicated history concerning the well-being of local communities, this plan’s priority and primary purpose is to ensure that the population benefits from the lithium boom. 

For instance, Chilean Minister of Mining Marcela Hernando announced that private companies that want to take advantage of lithium must do so by direct lithium extraction (DLE) and not through brine evaporation, a system that involves an ecologic loss of two million liters of water for each ton of lithium carbonate produced. This comes in direct response to Chile’s decades-long drought, which has led to anxiety from local communities, particularly in the Atacama Desert, regarding lithium brine extraction’s intense water use. Interestingly, DLE technology companies have said that state support could prove beneficial for growing this technology in Chile’s lithium operations.

Provided that the national lithium company will partner with private lithium firms already operating, this initiative is also set to enhance the public-private partnership model, which according to the administration is key to the successful implementation of the national lithium strategy. In fact, it is necessary to include the private sector in this venture, as the process of identifying reserves, as well as progressing from brine to lithium carbonate—the product that is exported—is technologically intensive. The expertise and infrastructure of existing private-sector enterprises will be a continuing feature of Chile’s lithium industry for the foreseeable future. 

In this scenario, the United States has the unique opportunity to collaborate with Chile to make the most of its natural resources while identifying ways to establish regional supply chain partnerships. As one of the United States’ free-trade agreement partners in the region, Chile represents a strong partner to promote the diversification of supply chains for raw materials associated with the manufacturing of electric vehicle batteries, in line with the goals of the Inflation Reduction Act. 

More broadly, Chile has the potential to participate as a valued partner in creating a more robust, diverse, and resilient global supply chain ecosystem as the new energy system develops. To realize this vision, Washington should not treat Chile’s nationalization of lithium as an impediment, but rather distinguish it from other nationalization trends in the region. Engagement with Chile in building this partnership should focus on maximizing the value of the country’s resources. By the same token, Chile’s inclusion in these partnerships will be part and parcel of ensuring that it feels it is obtaining the best deal from its resources for its economy and citizens, a precursor for obtaining the political consensus for its lithium industry to bring critical supplies to global markets. 

Existing mechanisms such as the Americas Partnership for Economic Prosperity and the Minerals Security Partnership present ideal fora to engage with Chile through remaking those supply chains. These channels can be utilized to facilitate private-sector-public-sector interactions between lithium industry participants and the government of Chile as well as the new national business. 

Chile’s national lithium strategy, if successful, could serve as a model for natural resource exploitation across the region. However, it is too early to extrapolate this historically successful approach of nationalization from mining to other industries. Such international collaboration, and facilitation of public-private partnerships, may yet facilitate the sustainable and equitable development of this particular industry that has struggled to scale.

Ignacia Ulloa Peters is an assistant director at the Atlantic Council’s Adrienne Arsht Latin America Center.

William Tobin is a program assistant at the Atlantic Council Global Energy Center, where he focuses on energy and climate policy.

The post Lithium drives the energy transition. Will Chile’s plan to nationalize production be a speed bump? appeared first on Atlantic Council.

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A total of 330 megawatts of border capacity was allocated for exports to Moldova for 11 April. The volumes initially available for export should be enough to single-handedly cover almost half of Moldova’s daily needs. More capacity is expected to be made available to Slovakia, potentially helping Ukrainian energy companies to improve their cash flow position by selling at a premium in neighboring Central European markets.

Earlier in March, Ukrenergo and the European Network of Transmission System Operators for Electricity (ENTSO-E), which the Ukrainian energy giant joined a year ago, decided to increase the capacity for electricity trading with Europe from 700MW to 850MW. Cross-border capacity is under constant review and is expected to increase further in the upcoming months, deepening Ukraine’s integration with European electricity markets.

In addition to the existing ENTSO-E connection with Moldova, Slovakia, Romania, and Hungary, Ukraine also has a separate isolated power link with Poland, which it hopes to increase in the coming months. On April 10, a total of 80MW of capacity was allocated for westward electricity exports from Ukraine.

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The resumption of Ukrainian energy exports allows the country to build on progress made in the first half of 2022 during the early months of the Russian invasion. Ukraine and Moldova unplugged from the Russian and Belarusian grids just hours before Russia’s fall-scale invasion began on February 24. Both countries had been connected to these grids since the Soviet era. Within less than a month and against all odds, Ukraine and Moldova were then able to synchronize with Europe’s ENTSO-E system. By June 2022, Ukraine had even begun exporting electricity to neighboring Romania and Slovakia.

These energy exports proved to be a popular innovation for all parties. Crucially, they provided struggling Ukrainian energy companies with much-needed additional revenues. Falling domestic demand inside Ukraine made it possible for Ukrainian producers to provide cheap electricity to the country’s European neighbors, where prices last summer were two or three times higher than in Ukraine.

When Russia began a campaign of missile attacks against Ukraine’s civilian infrastructure in October 2022, the Ukrainian government decided to temporarily halt exports as part of efforts to support the country’s vulnerable domestic energy system. The recently established ENTSO-E interconnection played a vital role in safeguarding Ukrainian energy security during the winter months as Russia’s bombing campaign continued, allowing Ukraine to reverse flows and import electricity from Central Europe. This helped offset domestic electricity production losses caused by Russian airstrikes.

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The rolling blackouts introduced during the winter months to help stabilize the Ukrainian energy system are now over and the situation in the energy sector as a whole appears to have stabilized. This is in part due to effective countermeasures introduced by Ukraine over the past six months to defend and repair the country’s energy infrastructure. It is also thanks to low seasonal demand along with an increase in renewable and hydro electricity generation.

This means that, at least until the start of the summer season when its nuclear power plants are scheduled to enter planned maintenance, Ukraine should be in a position to provide neighboring European countries with cheaper electricity. This could help to bring a degree of relief to a tight European market, which is still reeling from Russia’s deliberate gas curtailments throughout most of 2022.

The risk of further Russian airstrikes on Ukraine’s energy infrastructure is not completely over, of course. Scaled down attacks continue, while concerns remain that Moscow could attempt a major new campaign in the coming months, particularly as recently leaked documents indicate Ukrainian air defenses may be running dangerously low on ammunition.

At this stage, it is clear that Putin’s winter bombing campaign was unable to achieve its goals of crippling the Ukrainian energy system and forcing Ukraine back to the negotiating table. Instead, Ukraine has survived what was widely billed as the toughest winter in the country’s modern history and is now in a position to resume energy exports to the European Union.

Dr. Aura Sabadus is a senior energy journalist who writes about Eastern Europe, Turkey, and Ukraine for Independent Commodity Intelligence Services (ICIS), a London-based global energy and petrochemicals news and market data provider. Her views are her own. You can follow her on Twitter @ASabadus.

Further reading

UkraineAlert Apr 6, 2023

NATO poses a threat to Russian imperialism not Russian security

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Russia’s passive acceptance of neighboring Finland’s NATO membership raises serious questions over the Kremlin’s efforts to portray the invasion of Ukraine as a response to NATO expansion, writes Peter Dickinson.

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Human wave tactics are demoralizing the Russian army in Ukraine

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Vladimir Putin’s invasion of Ukraine has not gone according to plan but he still hopes to win a long war of attrition. However, Russia’s reliance on human wave tactics risks undermining morale within his invading army, writes Olivia Yanchik.

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Ukrainians will never surrender. How long can they count on the West?

By Serhiy Prytula

Ukraine’s remarkable resistance during the first days of the Russian invasion convinced the democratic world to back the country but with Putin now preparing for a long war, continued Western resolve is vital writes Serhiy Prytula.

Civil Society Conflict

The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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In this issue brief, Global Energy Center experts examine the role of decarbonization in European energy security, the obstacles impeding clean energy development, and the opportunities for transatlantic collaboration towards low-carbon energy security.

Hear more from the authors as they explore decarbonization’s role in European energy security with The Washington Post’s climate correspondent, Tim Puko.

Authors

Staff

Richard L. Morningstar

Founding Chairman, Global Energy Center

Global Energy Center

Geopolitics & Energy Security Oil and Gas

Fellow

András Simonyi

Nonresident Senior Fellow

Global Energy Center

Energy & Environment Europe & Eurasia

Staff

Olga Khakova

Deputy Director, European Energy Security

Global Energy Center

Geopolitics & Energy Security Europe & Eurasia

Staff

Paddy Ryan

Assistant Director, European Energy Security

Global Energy Center

Energy & Environment Energy Transitions

The Atlantic Council would like to thank our donor, the Smith Richardson Foundation, for supporting our work on this project.

This issue brief was written and published in accordance with the Atlantic Council Policy on intellectual independence. The authors are solely responsible for its analysis and recommendations. The Atlantic Council and its donors do not determine, nor do they necessarily endorse or advocate for, any of this issue brief’s conclusions.

The authors would like to thank Jonathan Joyner and Maxwell Zandi for their assistance with this project.

Issue Brief Dec 8, 2022

Securing alternative gas supplies and addressing critical infrastructure gaps in Europe

By Richard L. Morningstar, András Simonyi, Olga Khakova, Paddy Ryan

This issue brief offers recommendations for measures that European countries decoupling their energy supplies from Russia should take to give themselves the best chances of succeeding.

Energy & Environment Energy Markets & Governance

In-Depth Research & Reports Sep 21, 2022

Bolstering energy security in Northeastern Europe through transatlantic cooperation

By Richard L. Morningstar, Olga Khakova, Paddy Ryan

Northeastern Europe has already made efforts to end its reliance on Russian energy supplies. It is the perfect region for the US and allies to prove that de-Russification and decarbonization of the energy sector can occur in tandem.

Energy & Environment Europe & Eurasia

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

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The post Accelerating the energy transition to strengthen European energy security: Key barriers to overcome appeared first on Atlantic Council.

The US-Argentina relationship is increasingly characterized by mutual interest in developing lithium deposits and in defining China’s role in Argentina, in the latter case both in the area of China’s growing lithium investments and in other areas. Wednesday’s meeting coincided with the two hundredth anniversary of bilateral ties, but for this long-standing partnership to continue to grow, each side will have to clearly articulate its national interests and find consensus on those important topics.

Argentina, with one of the world’s largest lithium reserves, has received renewed attention considering lithium’s importance in electric vehicle and grid storage batteries, essential technologies that will be needed at large scale for an energy transition. The country has over twenty-eight lithium projects under exploration, including thirteen ongoing or announced projects with Chinese investment since 2018. Two of the thirteen Chinese projects are valued at or above one billion dollars, a significant promise of funds at a time when Argentina’s economy is contracting.

The Biden administration has also set its sights on lithium acquisition, naming the mineral as a strategic component of its proposed “Made in America” supply chain. Because of this domestic focus and particularly constraints in the 2022 Inflation Reduction Act, the United States has thus far been unable to accommodate Argentina’s efforts at greater bilateral lithium collaboration. If current trends continue, Argentine lithium could be largely channeled either toward Argentine national development or Chinese economic and energy growth, leaving the United States out of this critical mineral market. The Biden-Fernández conversation was a missed opportunity to demonstrate greater US flexibility on lithium sourcing and underscore how US and Argentine interests align on this theme.

Beyond lithium investments, the interest the United States and Argentina share in defining China’s role in Argentina was another key topic left publicly unsaid, even if the ideal scope of Chinese engagement differs for each country. For the United States, in an age of geopolitical competition, any US ally’s engagement with China draws increased scrutiny. Over the past year, attention has turned to Argentina’s agreement with China to build a nuclear power plant and its participation in Beijing’s Belt and Road Initiative.

For Argentina, China remains a strong trade and investment partner, and the country’s public and private sectors are strongly focused on deepening opportunities for exports. In future encounters, Biden and Fernández—or other top officials from the respective countries—should dedicate part of their discussions to further parsing the other’s posture on Chinese engagement. Hearing Argentina’s rationales for engaging with China first-hand would greatly help the United States craft competitive alternatives that fulfill US and Argentine interests.

Fernández may be seeking a second four-year term in October. In an election year, voters are looking for tangible deliverables, which he will not receive from this week’s Biden meeting alone. Without substantive bilateral engagement on two crucial long-term topics, Fernández will return to Argentina with limited guarantees for the future, independent of how discussions develop around restructuring the country’s International Monetary Fund loan. Ultimately, managing Argentina’s critical mineral resources and triangulating between Beijing and Washington will be a long-term challenge for whoever the country’s next president may be.

Isabel Bernhard is an assistant director at the Atlantic Council’s Adrienne Arsht Latin America Center.

The post The US and Argentine presidents left the most important words unsaid appeared first on Atlantic Council.

Thus, the various “Africa+1” summits held in 2022 placed significant emphasis on investment and trade deals. The summit between Africa and the United States, which took place in December 2022 after an eight-year hiatus, was a result of the reframing of Africa’s importance to the United States. The Deal Room at the summit struck private sector investments and partnerships worth $15.7 billion. The UK-Africa Investment Summit emphasized the role of British businesses in enabling Africa to reap the benefits of the green industrial revolution. India, the fifth-largest investor in the continent, views the green economy as a source of new opportunities. Furthermore, in March, at the second International parliamentary Conference “Russia-Africa” in Moscow, President Putin said that Russia “has always given and would continue to give to cooperation with African countries,” with an Africa summit planned in July.

Notably, Japan also stepped up. At the Eighth Tokyo International Conference on African Development (TICAD) summit in Tunisia last summer, Japan made a $30 billion pledge, to be financed by both the public and private sectors over the next three years, surpassing its previous commitment made in 2019. The new Green Growth Initiative with Africa (GGA) was launched with a dedicated fund of $4 billion combining public and private financing, aspiring to steadily expand climate change mitigation and adaptation business through proactive investment. The initiative was accompanied by a series of memoranda of understanding (MOUs) between Japanese and African partners.

Despite Tokyo’s political commitment to Africa, trade relations with Africa have been sluggish since the beginning of the 2010s as China and India grew as economic powers. Japan’s market share fell from seventh (over 4 percent) in 2000 to seventeenth (less than 2 percent) in 2018. In 2020, Japanese Official Development Assistance (ODA) to sub-Saharan Africa accounted for only 7.8 percent of all Japanese ODA and has been on a downward trend for the past two decades. While there has been debate over increasing ODA to sub-Saharan Africa in response to the international security environment, with the larger infrastructure gap to fill today, ODA will still remain a limited tool for the growing green infrastructure financing in Africa.

The silver lining for Japan is revamped private interest toward green growth for Africa and the more flexible role of the public in incentivizing and structuring such interests.

Japanese companies with a presence in Africa see “resources/energy” as a promising business arena, doubling the percentage for “natural gas and oil,” according to a recent survey. Major trading houses that have the most local subsidiaries in Africa among Japanese companies, such as Toyota Tsusho and Sumitomo Corporation, are actively investing in renewables and green supply chains. These companies are also exploring opportunities in the green hydrogen value chain. Toyota Tsusho Corp recently acquired SoftBank’s renewable energy unit and announced “Green Economy” agreements at TICAD. The company’s Africa-based businesses doubled their sales in the past five years, reaching 1 trillion yen in 2022. Sumitomo Corporation is partnering with Namibia’s national power utility NamPower to produce ammonia from green hydrogen, with a feasibility study anticipated to be completed by the end of 2023.

Japanese commercial banking institutions have also recalibrated their interests. These interests are incubated by Africa-based institutions such as the Africa Finance Corporation (AFC), a pan-African infrastructure solution provider with an approximately $2 billion investment portfolio and a track record of making climate change adaptation and mitigation investments. AFC secured $389 million through a samurai bond, a type of bond issued in Japan by a foreign entity and denominated in yen, which offers a way for foreign issuers to access Japan’s capital market; many Japanese megabanks participated, and the issuance “was significantly oversubscribed.” Another example is Mizuho Bank—the third-largest financier by assets in Japan and the first major Japanese lender to pledge to stop financing new coal mining projects—which joined the African Hydrogen Partnership (AHP) as its first Japanese member in 2022. Mizuho signed an MOU during TICAD with Namibian Investment Promotion and Development Board for the development of an African green hydrogen hub in Namibia. With Japan as the second-biggest hydrogen patent holder (24 percent) following the EU’s 28 percent, the hydrogen economy is becoming a new frontier platform for Africa-Japan engagement. AFC and Mizuho are in agreement to co-finance infrastructure projects in Africa, and the catalytic role of Africa’s institutional partners will be key in alleviating fears over project bankability.

While Japan still lags in the mobilization of blended financing, it is becoming a viable and strategic instrument to lower risks and incentivize private interests. In particular, the mobilization of a public insurance scheme to structure financing is a critical component of the aforementioned GGA. Egypt’s future onshore wind farms near the Gulf of Suez (announced in December 2022 and March 2023) are being co-financed by a multinational consortium of banks led by Japanese public and commercial banks. These projects are part of Japan’s LEAD Initiative and will receive the highest commercial risk insurance coverage by Nippon Export and Investment Insurance (NEXI). Japan aims to formulate 1 trillion-yen scale deals in total through the LEAD Initiative portfolio by 2025. Although the LEAD Initiative is currently limited to projects in the MENA region, it has been designed to broaden project eligibility for loans, and projects may qualify for this category regardless of whether they involve Japanese exports or investments. Acceleration of this program will help de-risk projects and catalyze investments.

With Japan’s chairmanship of the G7 sure to be defined in large part by heightened concerns over energy security after one year of war in Ukraine, it is imperative that Japan maintains the momentum generated from the promises made at the 2022 TICAD and charts a distinct course from the previous decade while building relationships with countries in Africa. Japan should catalyze mechanisms to incentivize and structure green investment, such as the LEAD Initiative as laid out in the GGA, and look to build out blending financing capabilities. While challenges remain, increased private interest and a flexible public role present a positive outlook for Africa-Japan relations in the future.

Emi Yasukawa is a member of this year’s Women Leaders in Energy and Climate Fellowship at the Atlantic Council. She is the senior researcher of congressional affairs at the Embassy of Japan in Washington, DC. The views and opinions expressed in the article are those of the writer and do not necessarily reflect the views or positions of the Government of Japan.

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Emi Yasukawa

Women Leaders in Energy Fellow

Global Energy Center

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The post Green investment takes the lead: Japan’s revamped approach in Africa appeared first on Atlantic Council.

It’s time for the United States to lead the global clean energy transition in the same way.

For years, US and European politicians have lauded the consistent decline in the cost of renewables and batteries to increase public support. The World Economic Forum noted that the cost of electricity from utility-scale solar photovoltaic panels plunged 85 percent from 2010 to 2020.

This price reduction correlates with China’s state industrial policy and control of more than 80 percent of global solar manufacturing. The International Energy Agency (IEA) stated that “China has been instrumental in bringing down costs worldwide for solar panels, with multiple benefits for clean energy transitions.”

But China’s role in clean tech cost reductions cannot be recognized anymore without acknowledging—and condemning—how those reductions were achieved: through state-sponsored intellectual property theft, human rights abuse, environmental destruction, and predatory investment practices. The FBI concluded that the “Chinese Communist Party are a grave threat to the economic well-being and democratic values of the United States.”

The United States is conflicted. Policymakers want cheap Chinese clean energy goods but recognize that such reliance undermines US economic strength and security. This conflict yields perverse results, like the waiving of justified tariffs even after the Commerce Department concluded that Chinese firms violated trade rules.

The United States must not jeopardize its national security priorities out of fear of slowing climate progress. And US success cannot be dependent on China, the world’s greatest and ever-growing climate polluter. Instead, the United States should develop a secure, resilient, and responsible clean energy supply chain. Leaders speak about the energy transition as virtuous; we must ensure that the means are as well.

The United States should address this now, as US companies reorient their supply chains from the ground up. The IEA found that the clean energy transition will require an exponential demand growth in critical minerals while also noting that the US permitting system inhibits timely domestic production.

Meanwhile, the Chinese Communist Party has spent over a decade amassing critical mineral mines around the world, and localizing processing and manufacturing at home. President Joe Biden acknowledged that “China controls most of the global market in these minerals.”

The current US administration understands this fact and has taken some notable actions. The Inflation Reduction Act (IRA), for example, included $370 billion worth of “carrots” to encourage domestic clean energy manufacturing. Yet, the Treasury Department is wrestling with how to interpret language in the IRA that restricts federal incentives for electric vehicles (EVs). The law only permits subsidies for EVs if 40 percent of their critical minerals were mined or processed in the United States, or a country with which the United States has a free trade agreement (FTA). The law prohibits subsidies if materials are sourced from China and other malign actors.

Following a meeting with President Biden, European Commission President Ursula von der Leyen said that the EU would qualify for IRA subsidies. Yet many of Europe’s EV Gigafactories are owned by Chinese Communist Party-affiliated companies.

As currently written, the IRA’s subsidy test may create loopholes that could open the door for unscrupulous laundering-like activity. For example, an enterprising commodities trader in an FTA country could potentially import and minimally process Chinese metals and qualify for US subsidies.

The administration should make clear that moving prohibited goods through a friendly port does not—and should not—qualify for US taxpayer-funded subsidies.

Instead, the United States should adopt a focused and prescriptive interpretation that applies to countries and companies, both foreign and domestic. To qualify for subsidies and other federal incentives, companies should have to disclose their critical minerals and processing supply chain. This is the only way for the United States to really know where and how its clean energy goods are produced.

Those who refuse to share this information should be barred from receiving subsidies. After all, if a company chooses to do business with cheaper Chinese inputs, then it already enjoys a cost advantage.

US policy should help make choosing the right path profitable. And we must ensure that the benefits of the US market and federal taxpayer-funded incentives only accrue to those who can demonstrate a transparent, secure, responsible supply chain. Chinese firms have repeatedly failed that test.

Republicans and Democrats are united on the China threat. The administration should build on that rare bipartisan consensus. The United States should close loopholes and prohibit US taxpayer funds from benefiting our greatest strategic adversary. To do otherwise could politically imperil the IRA and substantively undermine our strategic goals—to increase US security and build a responsible clean energy supply chain.

Frank Fannon served as the inaugural US assistant secretary of state for energy resources. He is currently managing director of Fannon Global Advisors, a consultancy finding opportunity in geopolitics and the energy transition, and a nonresident senior fellow at the Atlantic Council Global Energy Center.

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Francis R. Fannon

Nonresident Senior Fellow

Global Energy Center

Energy & Environment Geopolitics & Energy Security

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China Energy & Environment

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The post The US clean energy transformation can’t happen at the expense of national security appeared first on Atlantic Council.

Zambia has 2,800 megawatts (MW) of installed electricity generation capacity, with 85 percent of the electricity mix derived from hydropower, and  31 percent of the population has access to energy—the majority being in urban areas. The global disruptions to expected rainfall patterns, linked to the effects of climate change, has directly affected Zambian hydropower. Zambia’s loadshedding challenges made news this past December as their public utility, ZESCO, announced that consumers would experience up to twelve hours of loadshedding a day because of critically low water levels at the Kariba Dam, on the border of Zambia and Zimbabwe. During this time, the dam on Zambia’s side of the border could not deliver even 40 percent of its 1,080 MW capacity, crippling the country’s ability to deliver energy to consumers.

There are notable low-hanging fruits in the development of Zambia’s electricity mix. While Zambia has the potential to generate 2,300 MW of solar and 3,000 MW of wind, only 76 MW of solar has been installed and no wind power to date. And while 67 percent of the urban population has access to energy, the connection is disrupted frequently due to loadshedding and service disruption caused by aforementioned low water levels in hydropower stations. While the rains in early February assisted in shoring up water levels, climate change will continue to impact rainfall levels and create future problems in energy generation unless the energy mix diversifies.

Attracting low-capital cost investment for new energy projects has, until recently, been a challenge. President Hichilema took office shortly after Zambia became the first African country to default on its sovereign debt in 2020 during the COVID-19 pandemic and found that his predecessors had accumulated $30 billion in unserviceable debt. Much of Zambia’s borrowing under former President Lungu’s leadership was part of China’s Belt and Road Initiative (BRI), from which Zambia received $5.23 billion in the energy sector alone. The BRI led to considerable expansion of infrastructure and nearly a two-fold increase in electricity consumption over the previous decade, but left the country unable to balance its payments. 

Recognizing the need to diversify Zambia’s energy grid, the government has been working towards securing private sector investment to deploy solar projects throughout the country to close the energy poverty gap. The government has outlined a plan to achieve universal access to energy for all Zambians by 2030 by bringing additional solar, hydro, geothermal, and thermal energy online.

While developed nations look to decarbonize, countries in sub-Saharan Africa, including Zambia, will need significantly more energy to power a high-growth society and achieve development goals. The vast majority of Zambia’s population is comprised of smallholder farmers, producing 80 percent of the country’s agricultural production. That same population is the most vulnerable to climate change impacts, as they rely on rain-fed agriculture. The process of realizing Zambia’s breadbasket potential will require a shift from traditional to modern farming practices, which will require significantly more energy to drive irrigation development and the mechanization of agricultural production. Furthermore, Zambia’s economy has the potential to expand its raw materials sector, and to bolster its GDP by adding value to its products through increased processing and smelting of minerals within Zambia’s borders. Doing this will require more power, and importantly, in continuous supply. 

Positively, Zambia has received a recent wave of investment in its power infrastructure, a result of Hichilema welcoming foreign investors and independent power producers. A few notable investments and memoranda of understanding (MOUs) have been announced by key partners from around the world, positioning Zambia as a high prospect for low-carbon energy investments and unlocking opportunities to deliver investments in 24/7 clean electricity systems necessary to power industrial activity such as minerals processing. A few weeks ago, seven British companies announced an investment commitment of $2 billion in renewable energy projects in Zambia, to produce 1,500 MW of clean energy. Earlier this year, ZESCO and the United Arab Emirates’ Masdar signed an MOU to develop solar projects worth $2 billion, meant to generate 2,000 MW. This investment, labeled a “capital injection” by President Hichilema, will nearly triple Zambia’s electric capacity in combination with the investment from the British coalition. Critically, these investments will bolster the Zambian grid’s ability to generate electricity at times when hydropower generation is low and solar irradiance is high.

Providing commitments to develop Zambia’s energy infrastructure is not a matter of aid or charity. It has the potential to bring Zambia into the fold of the global economy—a process which adds value for Zambians and Zambia’s trade partners—and provide critical inputs to the global energy transition.

Recognizing this, during the US-African Leaders Summit hosted by the Biden Administration this past December, the United States, the Democratic Republic of the Congo (DRC), and Zambia signed an MOU to strengthen cooperation to develop a cross-border integrated electric vehicle (EV) battery value chain. This MOU is a welcome example of the form of partnership which the United States and allies should adopt in their commercial partnerships with African nations. Notably, the MOU expresses a desire to support the DRC and Zambia in developing economic activity within the EV battery value chain from the mine to the assembly line, not solely in the extraction of raw materials. Such a partnership provides an area for the US private sector to share knowledge and provide project development services and enable local industry and capacity to grow while firming global supply for critical materials and technologies for the energy transition, a win for all partners involved. 

Zambia, as well as other countries across the continent, has held recent high-level diplomatic visits to establish a stronger relationship between the United States and Africa. Secretary of Treasury Janet Yellen visited Zambia in January, and Vice President Kamala Harris has just begun her tour on the continent which includes a stop in Zambia. The trips to the continent have highlighted the US’s mutual interests in strengthening Africa’s security and economic prosperity, but discussions surrounding energy development, the backbone of a prosperous future in Africa, have remained vague. While the diplomatic engagements are notable, the trips should place a heavier emphasis on opportunities for the United States to further strengthen energy development throughout the continent, a critical missing link in driving economic growth and expanding opportunity for communities in Zambia and elsewhere on the continent.

As debt-burdened African nations expand engagement with higher-income countries beyond aid, Zambia serves as an important case study on opportunities to attract investor interest in energy development. In order to keep momentum up, investment transparency and translating MOUs into action will be critical to accelerate progress on achieving sustainable development goals. Notably, the investor interest that Hichilema’s administration is attracting is a positive signal for neighboring countries by showing the outcomes that are associated with a commitment to good governance.

Maia Sparkman is an assistant director at the Atlantic Council Global Energy Center.

William Tobin is a program assistant at the Atlantic Council Global Energy Center.

Meet the authors

Staff

Maia Sparkman

Assistant Director

Global Energy Center

Africa Climate Change & Climate Action

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William Tobin

Assistant Director

Global Energy Center

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Africa Energy & Environment

EnergySource Jan 31, 2023

Africa and the global LNG crunch: Balancing energy security, development, and decarbonization

By Robert F. Ichord, Jr.

As Europe looks to replace Russian gas and Asia looks to switch off coal, African LNG could play a central role. Gas development in Africa could unlock new revenues and, in turn, drive development across the continent.

Africa Energy & Environment

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The post Country spotlight: Unlocking a high-energy future for Zambia appeared first on Atlantic Council.

As climate change has transitioned from abstract threat to tangible reality, cities have become increasingly aggressive in pursuing decarbonization solutions. By examining the decarbonization efforts of specific metropolitan areas as case studies, local, regional, and national leaders can gain a better understanding of what strategies might work in their own jurisdictions. This paper focuses on the decarbonization pathway of Valencia, Spain, a city of about eight hundred thousand inhabitants that is recognized as a global leader in sustainability.

Valencia has unique characteristics that shapes its efforts to lower its carbon footprint. The city has capitalized on the opportunities afforded by the compactness of its five-kilometer radius, and by a port with limited reach into the Spanish hinterland.

To decarbonize, Valencia is attempting to limit the use of personal cars; incentivize public transportation; improve energy efficiency in buildings; and use key technologies, such as hydrogen or ammonia, to reduce emissions of certain industrial sectors.

Similar to other cities that are working toward emissions reductions, Valencia faces obstacles to decarbonization that must be overcome. The primary challenges are related to measuring emissions, assigning responsibility for them, and incentivizing market actors to deploy capital for decarbonization. While every locale is unique, lessons learned from Valencia are likely to have great relevance for other cities looking to reduce emissions.

Valencia’s carbon footprint

Valencia is a unique city with a distinctive carbon profile. This Mediterranean city is one of Europe’s top tourist destinations; it’s also a major maritime transit hub. In 2021, the city hosted approximately 3.25 million overnight stays, down from pre-pandemic levels, but up by 90 percent compared to 2020.¹ Moreover, Valencia’s port handled 5.6 million twenty-foot equivalent unit (TEU) containers, or a little less than 6 percent of all European containers, while serving nearly 7,300 vessels.²

As shown in Figure 1, Valencia’s carbon emissions largely result from energy (excluding transportation) and transport, with these two categories contributing to 82 percent of the city’s emissions. Industrial processes add another 9 percent. 

While industrial decarbonization is of critical importance for Europe, industry plays a smaller role in Valencia city’s direct emissions compared to industrial emissions in the surrounding region. Valencia region, rather than Valencia city, contains the bulk of industry in the area. Of this sector, the most important from an emissions standpoint are the ceramics and refineries industries, which are highly complex industries to decarbonize. The Valencia region’s high solar insolation is a contributing factor in the public and private sectors’ interest in commercial development of green hydrogen as a fuel source for the region’s industries and tourism sector, in particular, as a feedstock for sustainable aviation fuels. The Port of Valencia, which is owned by the national government, measures its carbon footprint by evaluating the amount of carbon emissions per ton of shipments handled.³

Valencia’s decarbonization strategy

Efforts to decarbonize Valencia involve strategies to tackle both the city’s primary contributors to carbon emissions and the region’s industrial emissions. The planned tactics are necessarily diverse in approach, interconnected, and inclusive, with stakeholders from the community, businesses, and organizations taking part in the conversation. 

Valencia City

Since 2015, Valencia’s city government has emphasized sustainability and decarbonization through public engagement and innovative policy. In 2019, the city government coalesced various existing efforts under a vision document called “Missions Valencia 2030,” and shortly thereafter generated a climate-centric vision document, “Valencia 2030 Climate Mission.”⁴ In 2022, the city also released a “Valencia 2030 Urban Strategy,” designed to be a roadmap and tool for the city to achieve its goals, decarbonization included.⁵ These documents reflect the city government’s broader attempts to make Valencia a sustainability leader, including a history of meeting regularly with stakeholders across society (citizens, universities, business, etc.) to focus on urban decarbonization solutions. Its work has paid off: Valencia was chosen as the World Design Capital for 2022, which recognizes sustainable urban design, and the European Union has just given Valencia its European Green Capital award for 2024.⁶

Valencia city’s decarbonization efforts can be grouped into four pillars, which were stressed in Valencia’s European Green Capital application: energy efficiency, renewable energy, green infrastructure, and mobility.⁷ Each is designed to take advantage of and to preserve Valencia’s urban morphology: compact, dense, historic, and mixed use. All also are logically linked one to each other. 

To achieve greater energy efficiency and deploy renewable energy, the city government sees an opportunity in upgrading the built environment. Valencia’s many flat roofs hold promise for rooftop solar, while the same aging buildings could be refurbished with energy-efficiency improvements. Valencia Climate and Energy, a municipal foundation, provides advice, training, and assistance on both fronts.⁸

For increasing climate-friendly infrastructure, the city has committed to preserving and even expanding a green belt, primarily farmland, that surrounds the city as part of a strategy to boost consumption of locally grown foods. Local stakeholders conveyed to the authors that Valencia faces a tradeoff between a desire to preserve the green belt’s primary function, which is to grow food for local consumption, and the need to find suitable surface areas for renewable energy production, specifically solar photovoltaics. Currently, the city’s preference is clearly toward landscape preservation. 

The mobility pillar, specifically an emphasis upon switching from private automobile use to the “green” modes (walking, bicycling, and public transit), is the focus of much of Valencia’s decarbonization efforts. The city already has an edge on this front. Because it is a dense, flat city with a relatively small radius of five kilometers, Valencia is highly walkable and bikeable. Valencia also has few natural barriers, such as rivers, that would otherwise increase distances for pedestrians and cyclists. To further encourage walking and cycling, the city provides real-time traffic information via AppValencia, empties urban waste containers more frequently to make walking more desirable, and invests heavily in cycling-friendly infrastructure, such as bike lanes.⁹ Valencia stakeholders who were interviewed by the authors report that although Valencia’s residents at first were resistant to these changes—in particular, bike lanes and cycling—they now embrace them. 

In addition to creating a more pedestrian- and bike-friendly environment, the city continues to build on its public-transit strategy. Over recent decades, the city has overseen substantial improvements to its metro system. The investments are already paying dividends, with ten lines in service and one hundred and thirty-eight stations servicing one hundred and fifty-six kilometers of network.¹⁰ Although Valencia, like other cities, is facing declining passenger volumes in the post-COVID era, the city remains committed to public transit.¹¹ Metrovalencia has invested 235 million euros to improve the frequency of trains.¹² Some areas will see an average frequency of 7.5 minutes, down from the current ten to twenty minutes.¹³AppValencia, a city-financed initiative, provides real-time information to users, encouraging mode switching. 

Valencia region and port

The Valencia region’s industrial decarbonization efforts, focused on ceramics and refining, are linked to the deployment of green hydrogen. Energy firms BP and Iberdrola are studying the feasibility of building the Valencia region’s largest green hydrogen plant for supply to BP’s Castellón refinery.¹⁴ Because refineries already use grey hydrogen (produced from natural gas), using green hydrogen would significantly lower industrial carbon output. Renewables-powered green hydrogen could quickly become a reality in this region, given excellent solar-generation capacity and even greater potential for even more capacity. Spain is Europe’s leader in green hydrogen and produces almost no natural gas.. Potential linkages with Morocco as an emerging green hydrogen export market further enhance the viability of this strategy. In addition to using green hydrogen via imports or indigenous production, Valencia may be able to access blue hydrogen from North African producers, such as Algeria.

Valencia port has made considerable progress in reducing the carbon intensity of its handling activities, as emissions fell from 3.19 kilograms (kg) of CO2 per ton handled in 2008 to 2.23 kg per ton in 2019.¹⁵ Fundación Valenciaport, the port authority’s research and innovation arm, has been a local leader in creating energy-efficiency and alternative-energy programs.¹⁶ Deep decarbonization of port activities will require the deployment and scaling of new technologies, such as ammonia for maritime transport and zero-carbon fuels for port operations. 

The Valencia region, city government, port authority, private companies, and universities have been exploring ways to develop a local “hydrogen valley,” similar to those emerging across Europe (including elsewhere in Spain), to catalyze green hydrogen development through clustering supply and demand.¹⁷ In October 2021, Fundacion Valenciaport, the city, and regional entities led a proposal, dubbed “H2VLC Valencia Hydrogen Valley,” with the support of private-sector companies and academic research centers, to organize pilot projects in green hydrogen.¹⁸

Remaining challenges

Despite Valencia’s impressive successes, significant challenges remain. The city’s decarbonization efforts are subject to larger market forces. Renewables and other forms of clean generation, clean hydrogen for industrial use, and clean maritime shipping will all require multilateral solutions extending well beyond Valencia’s borders.

To continue momentum for Valencia’s decarbonization, city and regional leaders should focus on several priorities. First, the region, port, city, and private sector should strengthen their commitments to developing Valencia’s green hydrogen capabilities, given the region’s massive potential as a hub for this fuel. Second, the city should continue to prioritize its emphasis on buildings, through improving the energy efficiency of aging buildings, ensuring new construction meets high energy-efficiency standards, and prioritizing rooftop solar. Finally, the city and regional governments should continue to strengthen the connections between their decarbonization agendas and positive economic, social, and environmental transformation. Green hydrogen production, renewable energy programs, building efficiency programs, bicycling and transit investments, sustainable tourism, and more should continue to be part of a green and prosperous Valencia. One question that remains to be answered is whether the “green belt” surrounding the city should continue to be reserved primarily for food production (a substantial point of pride for the city) or if parts of it should be devoted to large-scale solar generation, which would immediately reduce the city’s emissions.

Despite the challenges Valencia faces in achieving its objectives, the odds favor continued progress. Valencia stakeholders interviewed by the authors were confident that the city’s political preconditions to implement swift transition policies will remain in place. Their argument is that the green transition is politically sustainable, given voter sentiment and increasing local evidence of climate change (hotter summers, in particular). For these reasons, although the political parties governing the region and city are not the same, the governments have not clashed on key policy questions. Whether this situation holds indefinitely will determine the extent to which Valencia’s leaders can realize their ambitious decarbonization goals for 2030 and beyond.

Staff

Peter Engelke

Deputy Director of Foresight, Scowcroft Strategy Initiative

Global Energy Center Scowcroft Center for Strategy and Security

Technology & Innovation Europe & Eurasia

Staff

Joseph Webster

Senior Fellow

Global Energy Center

Central Asia China

The Atlantic Council would like to thank BP for its support of this project.

This issue brief was written and published in accordance with the Atlantic Council Policy on intellectual independence. The authors are solely responsible for its analysis and recommendations. The Atlantic Council and its donors do not determine, nor do they necessarily endorse or advocate for, any of this issue brief’s conclusions.

The authors would like to thank Maia Sparkman, Elina Carpen, and Visit València Foundation for their assistance with this project. In addition, they would like to recognize workshop participants whose contributions helped inform this paper. The participants include the following:

• Raul Cascajo Jimenez, Climate & Energy Committee, Valencia Port Authority
• Debora Domingo Calabuig, Vice-rector for Sustainable Development of Campus, Universitat Politecnica de Valencia
• María Vicente Gil Vila, Conselleria of Mobility, Generalitat Valencia
• Juan Manuel Diez Orejas, Corporate Planning & Control, Port Authority of Valencia
• Jaume Mata, Head of Sustainable Tourism, Visit Valencia
• Carla Isabel Montagud Montalva, Director of the Chair, Energy Transition in Cities; Deputy Director, Sustainable Development, School of Industrial Engineering, Universidad Politécnica de Valencia
• Josep Sanz Argent, R&D – Energy Transition, Fundación Valenciaport
• Jose Villalba, Head of Climate Emergency Service & Energy Transition, City Council, Valencia

Issue Brief

Mar 22, 2023

Rotterdam, Netherlands: An integrated approach to decarbonization

By Peter Engelke, Joseph Webster

The issue brief focuses on the decarbonization pathway of Rotterdam, Netherlands. Given Rotterdam’s centrality to Europe and the sheer scale of its port, decarbonizing the city will require a strategic effort.

Energy & Environment Energy Transitions

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

learn more

The post Valencia, Spain: Decarbonization through innovative partnerships appeared first on Atlantic Council.

Rotterdam’s modest size of about six hundred and fifty thousand residents belies its outsized role as a critical hydrocarbon gateway for the European continent. Not only does the port serve as an entry point for fuels that power much of northwestern Europe, but it also serves as a vast industrial complex featuring multiple power plants that convert incoming fuel to electricity for transmission, and refineries that convert crude oil into fuel and a series of petroleum products that are transported elsewhere in the region.

Because Rotterdam’s port operations affect millions of people, the city’s decarbonization efforts are well positioned to have an impact not only within the city, but also far beyond its borders. As such, actions to lower the city’s carbon footprint are the subject of intense interest across Europe, and even the rest of the world.

Rotterdam’s decarbonization strategy is multipronged, technologically oriented, and focused on its port, which contributes to the bulk of the city’s emissions. Rotterdam’s multifaceted strategy includes plans to deploy carbon capture and storage to mitigate the port’s emissions, while also transitioning to greater utilization of clean hydrogen necessary to decarbonize key industrial sectors.

Given Rotterdam’s centrality to Europe and the sheer scale of its port, decarbonizing the city will require a strategic effort involving multiple levels of government, from the Port of Rotterdam all the way to the European Union.

Rotterdam’s carbon footprint

Given the port’s significance for northwestern Europe’s hydrocarbon imports, calculating Rotterdam’s total carbon footprint is not straightforward. The port of Rotterdam, Europe’s largest, is an entryway for imports of coal, crude oil, and liquefied natural gas (LNG) from around the world. It extends inland for forty-two kilometers and features hundreds of facilities, including port operations, and industrial applications such as refining. Some twenty-nine thousand seagoing vessels and nearly one hundred thousand inland (river) vessels enter and exit the port annually.¹. In 2021, four hundred and sixty-nine million metric tons of goods—dry bulk, containers, and liquids—moved through the port, roughly half of which were hydrocarbons (coal, oil, and liquified natural gas).

Due to the difficulty around measuring the indirect emissions of Rotterdam’s port, this issue brief will examine the city’s Scope 1 emissions—that is, emissions directly attributable to the city. Direct emissions include those from the multiple power plants and oil refineries in the port.

In 2020, the port emitted 22.4 million tons of carbon dioxide (CO2), accounting for nearly 16 percent of all CO2 emissions in the Netherlands.² The city of Rotterdam reports that the entire municipality, including the port and associated industries, produces approximately 20 percent of the Netherlands’ greenhouse gas emissions, indicating that the port releases a disproportionate share of the city’s carbon emissions.³

Rotterdam’s emissions trajectory, therefore, is largely tied to the port. As shown in Figure 1, the city has made impressive strides in reducing port emissions, from 30.6 million metric tons of CO2 in 2016 to 22.4 million metric tons in 2020, a 27-percent reduction in just four years, far outweighing the 5 percent decline in throughput at the Port from 2016 to 2020.⁴ Although disruptions from COVID-19 undoubtedly contributed to the sharp decline in 2020 emissions, CO2 emissions reductions can largely be attributed to a decline in the use of coal-fired power. 2016 to 2020 witnessed a 75 percent drop in coal-related emissions, a decrease of more than 10.4 million metric tons.⁵ Still, workshop participants indicated that Russia’s invasion of Ukraine threatens to reverse some of this progress, as natural gas shortages are leading to a rebound in coal generation.

While natural gas CO2 emissions levels at the port nearly tripled from 2016 to 2020, the decrease in coal-related emissions outpaced the expanded use of natural gas. Given that Dutch generation from natural gas rose by 39 percent from 2016 to 2020, it is likely that some of Rotterdam’s previous coal-fired emissions were replaced by natural gas generation—and related emissions—produced outside of the city’s boundaries.⁶Still, on balance, natural gas has lowered Rotterdam’s carbon emissions by displacing coal. This was to be expected. Although natural gas’s methane emissions are a concern, it generates fewer CO2 emissions than coal: one US study found that natural gas yields nine hundred and seventy-six pounds of CO2 for every megawatt-hour of produced electricity, compared with coal at 2,257 pounds.⁷

Coal emissions also fell due to higher generation of electricity from biomass. Rotterdam’s Maasvlakte MPP 3 power station, which opened in 2016, runs on coal, biomass, and residual flows from surrounding industry.⁸ It replaced the now-closed MPP 1 & 2 coal-only generators. According to Uniper, the plant’s operator, MPP 3 saves more than one million tons of CO2 each year.⁹

It is important to note, however, that Rotterdam’s story is not exclusively reliant on efforts to switch from coal to gas or biomass. Accelerated deployment of renewable energy has made a major dent in Dutch emissions and, by extension, Rotterdam’s emission profile.¹⁰ As shown in Figure 2, solar and wind power constituted nearly 20 percent of the Netherlands’ electricity generation in 2020, up from 9 percent in 2016. As a percentage of overall consumption, renewable energy’s growing share of electricity generation is displacing hydrocarbons, particularly coal.

Despite access to lackluster sunlight resources, the Netherlands nevertheless has expanded solar generation by nearly 450 percent from 2016 to 2020, as solar’s share of all electricity generation rose from 1 percent to 7 percent.

While there may be declining returns to greater solar generation in the Netherlands, the nation enjoys excellent onshore and offshore wind resources. Development of offshore wind power generation is slated to play a major role in Rotterdam’s decarbonization future, as the Netherland seeks to deploy 70 GW of new offshore wind capacity by 2050. Still, there are significant challenges that need to be overcome to scale wind energy in the Netherlands. Despite the nation’s wind endowments, Dutch onshore wind capacity remains remarkably underdeveloped due in part to parochial concerns about “horizon pollution.” The decarbonization future of the Netherlands—and Rotterdam—will hinge to a large degree on deployment of wind generation.

Rotterdam continues to build on its decarbonizing success by ensuring more accurate monitoring of its port operation emissions. In early February 2022, the Port of Rotterdam Authority teamed up with technology company Big Mile to identify transport-related emissions at the port, with plans to start with ships, and later adding road and rail transport.¹¹ Rotterdam’s improving emissions measurement systems will likely continue to yield real decarbonization progress.

Rotterdam’s decarbonization strategy

Starting around 2016, stakeholders in Rotterdam began developing the procedural bases of a decarbonization strategy. Under the city’s direction, this stakeholder-driven process ultimately resulted in the 2019 Rotterdam Climate Agreement, a document that now constitutes the city’s master decarbonization plan.¹² This gradual, multiyear, and consensus-oriented process drew from key industry, government, and civil society stakeholders in Rotterdam and beyond. More than one hundred organizations and one thousand people were involved in the process, which was organized by theme (port and industry, built environment, mobility, clean energy, and consumption).¹³

The climate agreement is, therefore, as important for its decarbonization ambitions as it is for the participation and buy-in of major actors across the city, province, and nation.

The original climate agreement sets forth forty-nine climate “deals” that collectively aim to reduce citywide emissions (including at the port) by 49 percent by 2030, as compared to 2017 levels. It focuses on three types of interventions to achieve this goal: increasing energy efficiency through greater utilization of residual heat from industry and other applications; changing the energy system to include additional clean energy electricity generation; and transitioning from fossil fuels to zero-emission energy sources. The national and city governments will fund the projects. In addition, the Port of Rotterdam through its own energy transition plan is prioritizing the three tactics above plus a fourth pillar: making transportation more sustainable. Finally, the city of Rotterdam also launched the Rotterdam Sustainability Compass, which lists all of the city’s sustainability ambitions and outlines energy transition economic opportunities.

Given the overwhelming importance of the port and its large role in emissions, much of Rotterdam’s decarbonization strategy rests on reducing maritime and refinery emissions via production or importation of clean hydrogen or clean ammonia. To meet European climate targets, the city will need to build out significant hydrogen production and import capacity. An emphasis on infrastructure is important given that the Port of Rotterdam assumes that it will have to import eighteen million tons of hydrogen by 2050.¹⁴ In this vision, Rotterdam’s contribution as a critical entrepot for hydrocarbons will shift to an equally strategic gateway for the importation of clean ammonia.

In addition to importing cleaner fuels, Rotterdam is seeking to decarbonize local industrial emissions via greater carbon sequestration and storage. The Porthos project, for example, is designed to transport CO₂ from hard-to-abate industries at the port and store the emissions in empty gas fields underneath the North Sea.¹⁵ Porthos is enormously important to Rotterdam’s objectives, representing about half of the Dutch government’s fiscal support in 2021 for sustainability projects.¹⁶

Remaining challenges

Rotterdam has already notched several decarbonization wins by employing coal-to-gas, coal-to-biomass, and coal-to-renewables strategies. The next steps will be more difficult and involve more complicated trade-offs. Implementing carbon-capture projects such as Porthos, for example, is expensive and controversial. Likewise, the Netherlands has yet to demonstrate its ability to quickly and dramatically scale offshore wind capacity, which will be crucial for local hydrogen production. Due to the maturity of European offshore wind (OSW) markets, there is little concern over finding funding for OSW projects. Instead, experts consulted for this paper expressed more concern about the lag between project initiation and regulatory approval. The benefits are worth the costs, and the rewards outweigh the risks, however, as progress in green hydrogen and clean ammonia will be vital for reducing emissions in some hard-to-abate sectors and operations at the port, such as refining. To continue decarbonization efforts, Rotterdam should build on its “Climate Deals,” which now stand at over 58 deals. One area for expansion is in sustainable aviation fuel, or SAF. Rotterdam refineries have begun increasing their capacity for SAF and other renewable products. Because SAF is the only viable near-term aviation decarbonization drop-in fuel, the city should incorporate SAF into an updated, expanded Climate Deal framework.¹⁷

Despite local progress, Rotterdam’s cannot control all facets of its decarbonization future. The city’s centrality and reach will be determined in part by regional and global geopolitical, economic, and technological macrotrends. The war in Ukraine provides a powerful and timely illustration, challenging Rotterdam’s climate goals, as local stakeholders stressed to the authors. Russia’s invasion of Ukraine—and Moscow’s quasi-embargo on natural gas exports to Europe—has pressured the continent to increase the use of coal to generate electricity. The Netherlands’ commitment to phase out natural gas production from its Groningen field in North Holland, for example, is leading the government to raise generation at coal-fired power plants.¹⁸

Staff

Peter Engelke

Deputy Director of Foresight, Scowcroft Strategy Initiative

Global Energy Center Scowcroft Center for Strategy and Security

Technology & Innovation Europe & Eurasia

Staff

Joseph Webster

Senior Fellow

Global Energy Center

Central Asia China

The Atlantic Council would like to thank BP for its support of this project.

This issue brief was written and published in accordance with the Atlantic Council Policy on intellectual independence. The authors are solely responsible for its analysis and recommendations. The Atlantic Council and its donors do not determine, nor do they necessarily endorse or advocate for, any of this issue brief’s conclusions.

The authors would like to thank Maia Sparkman and Elina Carpen for their assistance with this project. In addition, they would like to recognize workshop participants whose contributions helped inform this paper. Participants included the following:

• Andr. Bosman, Director Corporate Communication & Government Relations, Uniper Benelux Corn. Boot, Head of Communications & External Affairs, Netherlands, Belgium, & France, BP
• Frederiek Doedijns, Area Director, Port & Industry, Stedin
• Gillis Oudeman, Head of Public Affairs, City of Rotterdam
• Katelien van den Berge, Coordinator, Energy Transition, City of Rotterdam

Issue Brief

Mar 22, 2023

Valencia, Spain: Decarbonization through innovative partnerships

By Peter Engelke, Joseph Webster

The issue brief focuses on the decarbonization pathway of Valencia, Spain. Lessons learned from Valencia are likely to have great relevance for other cities looking to reduce emissions.

Energy & Environment Energy Transitions

The Global Energy Center develops and promotes pragmatic and nonpartisan policy solutions designed to advance global energy security, enhance economic opportunity, and accelerate pathways to net-zero emissions.

learn more

The post Rotterdam, Netherlands: An integrated approach to decarbonization appeared first on Atlantic Council.

For this reason, hydrogen is gaining increased attention from policymakers and the public. While altogether a welcome development, it also comes with risks. The reason for this is simple: hydrogen is an energy carrier, not a primary fuel, and its production requires energy. For this reason, the process of devoting financial and clean energy resources to create hydrogen for applications where it is not optimal will detract from carbon abatement efforts, particularly when investments and energy are devoted to make clean hydrogen for applications which are more efficiently electrified.

The bottom of the ladder

Hydrogen is versatile, and its properties are ideal for the decarbonization of many vital economic processes which cannot easily be electrified, especially in industries such as refining, steel, and cement. Nonetheless, there are many applications which do not draw on hydrogen’s physical strengths, which policymakers should be wary of:

• Liquefaction for exports. Liquefying hydrogen will be too energy intensive per unit of energy, and therefore too expensive, to justify transporting the liquid product. Converting a fuel (wind, solar, water energy, natural gas, etc.) to electricity, from electricity to hydrogen, and then from hydrogen to liquified hydrogen will result in a roundtrip efficiency (the efficiency derived from dividing the energy carried in the primary fuel by the energy present in the resultant product) of less than 40 percent, even before factoring in boil-off and regasification. This figure decreases substantially if hydrogen imports are destined for electricity generation.
  
  Compounding these disadvantages, the amount of energy which can be transported via hydrogen, even in liquid form, is 40 percent that of an equivalent volume of liquid natural gas.
  
  Finally, the export and import of liquid hydrogen will largely not be able to repurpose existing liquefied natural gas (LNG) terminals. Hydrogen embrittlement will require new storage tanks, piping, pumps, and valves, while new, higher-capacity compressors will be needed to achieve a liquified temperature of −253 degrees Celsius, as opposed to −162 degrees Celsius for natural gas. These expensive and time-consuming refurbishments would severely harm project economics.
• Baseload thermal power generation. It is unlikely that converting electricity or natural gas to hydrogen and then to electricity will be economically viable, except in limited circumstances, such as long-term storage. Utilizing hydrogen for power generation exhibits poor roundtrip efficiency. The maximum achievable roundtrip efficiency for power-to-power hydrogen applications is 29 percent, per a study published in the International Journal of Hydrogen Energy, and between 18 and 46 percent, per a study published in Nature Energy. For reference, a combined-cycle natural gas plant can operate at efficiencies ranging from 45 to 60 percent. Co-firing natural gas with hydrogen or using a 100-percent blend of hydrogen in gas turbines may have value for inter-seasonal storage applications, however.
• Domestic heating. Electrifying heat via heat pumps is highly efficient, while blending hydrogen into residential gas distribution pipelines for heating is far less so. In the United Kingdom, a meta-study by Oxford’s Jan Rosenow of thirty-two independent studies found that hydrogen for space and hot water heating results in higher energy system costs; leads to more significant environmental impacts, including greater land use requirements; and requires about five times more electricity to heat a home than a heat pump. Michael Liebreich, the founder of Bloomberg New Energy Finance, calculates that obtaining the equivalent of 70 gigawatts (GW) of residential heat via hydrogen would require 150 GW of renewable electricity. Conversely, obtaining that same amount of residential heat via heat pumps would require only 26 GW of renewable electricity.
  
  A study on hydrogen by the UK Parliament found “hydrogen could play a role in domestic heating, but the extent of its potential is still uncertain and looks likely to be limited rather than widespread.”
• Mid- to low-temperature industrial process heat. These applications should be electrified to the greatest feasible extent. Technologies like industrial heat pumps show considerable promise.
• Ground transportation (light transportation, trains, and buses). Batteries are more efficient, converting 80-90 percent of stored electricity to traction. This compares to 40-60 percent for hydrogen fuel cells, not accounting for the fact that hydrogen already needed to be converted from electricity or another feedstock. Batteries are also more advanced on the cost curve than fuel cells, will likely be able to deliver improved range, and enjoy incumbency advantages via more developed infrastructure. Moreover, in applications for these vehicles with fixed routes where fuel cells might make sense due to the availability of refueling infrastructure, electrical lines will be able to deliver better results at more competitive prices. However, hydrogen vehicles could play a pivotal role in certain heavy-duty markets, if batteries are unable to meet weight-to-volume requirements which enable them to power these vehicles as innovation progresses.

Key hydrogen applications

While hydrogen has limitations, it will have an important role to play in the decarbonization of key applications. Hydrogen burns at a higher temperature (2182 degrees Celsius) than natural gas (1937 degrees Celsius), yet combustion of hydrogen produces only water. Hydrogen is also an ideal solution for industrial applications such as steel, which is responsible for 7-9 percent of global greenhouse gas emissions.

• Chemicals. The first priority for building the market for low- to zero- carbon hydrogen should be to decarbonize existing hydrogen applications. This begins with refining—where hydrogen is used for hydrotreating and hydrocracking, which are essential to process heavy sour crude oil—and chemicals, with an emphasis on nitrogen-based fertilizer for which hydrogen is used to produce ammonia.
  
  Today, the demand for hydrogen totals about 100 million tons per annum. Today, less than one million tons per annum are derived from “low-carbon” sources of hydrogen production, although this could scale to 16-24 million tons per annum by 2030 if all projects in the pipeline today were completed.
• Steel. Hydrogen is essential to decarbonizing steel. Through a process called the direct reduction of iron, which uses hydrogen to reduce iron instead of coke, green steel can be made, bypassing the dirty blast-furnace-basic oxygen furnace (BF-BOF) process, in oversimplistic terms. While electrochemical substitute processes are on the horizon, they are not yet technologically mature.
• Long-duration energy storage. Unlike batteries, which store electricity electrochemically in a galvanic cell, hydrogen is a chemical energy storage solution which can play a role in integrating the electrical grid by storing energy for long periods of time, eventually being converted back to electricity via combustion or by using fuel cells. The use of hydrogen for short-term “grid balancing”—the production of hydrogen during periods of high electricity production for use when production drops—competes with batteries, which store energy better per unit of volume and are achieving manufacturing scale already. However, the production of hydrogen with the express intent to fill protracted gaps in firm electricity generation is more cost-effective than using valuable battery storage for this purpose. Batteries are more economically employed for short-term storage, balancing daily ebbs in renewable generation.

A mix of uncertainty and necessity

One area to watch is decarbonizing heavy-duty vehicles, such as for mining and construction applications, whose requirements may differ from long-haul trucking. The best pathway to decarbonize haul trucks, for instance, is uncertain due to the weight-to-volume ratio for batteries approaching the scale needed to power these applications. Companies such as First Mode are trialing hydrogen haul trucks for mine sites and have fielded models which deliver more power than diesel predecessors.

Other hard-to-abate sectors similarly pose substantial amounts of uncertainty, with no clear candidate for the best pathway for decarbonization. This includes aviation, where hydrogen may yet emerge as a viable pathway for enabling low-emission flights, at least in certain contexts. This also includes shipping, for which methanol—a hydrogen carrier—may be a leading solution.

In any case, universal electrification is not possible with currently available technologies. Hydrogen will remain an irreplaceable building block of a net-zero energy system, and policymakers should continue to value it as such. But everything that can be electrified should be, leaving clean hydrogen for the most economically viable and carbon-intensive applications, allowing us to accelerate deployment where it is most needed.

William Tobin is a program assistant at the Atlantic Council Global Energy Center.

Joseph Webster is a senior fellow at the Atlantic Council Global Energy Center.

Hydrogen as a decarbonization tool commentary & analysis

Working with a wide-ranging community of experts and stakeholders, our hydrogen experts provide timely commentary on hydrogen technology’s potential and limitations.

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William Tobin

Assistant Director

Global Energy Center

Africa China

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Joseph Webster

Senior Fellow

Global Energy Center

Central Asia China

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In response, the European Commission unveiled its own green industrial policy: “a Green Industrial Plan (GIP) for the Net-Zero Age,” followed by a newly announced subsidy scheme for the solar panel, battery, wind turbine, electrolyzer, and heat pump industries. Although the GIP and subsidy scheme were drafted in reaction to the IRA, future EU green industrial plans should use the IRA as an opportunity for the European Union and the United States to collaborate in specific segments of clean industrial value chains: batteries and their critical raw materials, as well as electrolyzers. Challenging China’s historical dominance across clean industries will be difficult and costly, and as tensions mount, Europeans and Americans have everything to gain from working together.

The IRA: A massive shift in clean global value chains

The IRA was itself meant to address decades of Chinese, and to a lesser extent, European, domination in five industries: electric vehicles (EVs), batteries, wind, solar, and emerging technologies like green hydrogen production and carbon capture. China grew its influence through heavy government investments, protectionist policies, an increasingly integrated internal market, and low labor costs. In September 2020, Xi Jinping announced a new net-zero plan designed to give Beijing an insurmountable lead in clean industries. Since then, Chinese investments in clean manufacturing have accelerated dramatically, reaching 91 percent of global clean manufacturing investments in 2022. Meanwhile, European clean industries developed from a set of policies incentivizing the decarbonization of industries (notably via the Emissions Trading System, or EU ETS), an environmentally minded internal market, and a skilled labor force.

But through $369 billion worth of tax credits and funding support (and potentially much more), the IRA will dramatically shift the economics of clean energy technologies and EVs in the United States and the rest of the world. Among the policies that have caused friction with US trade partners, the IRA could provide upfront investment tax credits for up to 70 percent of investment costs for renewable energy technologies, and halve the generation costs of onshore wind and solar. The federal government will also provide $7,500 for any American wishing to purchase a new EV, including incentives with domestic content requirements. Already, there are numerous industrial actors responding to these requirements by pledging new or expanded US-based production, such as Enel in solar, Hyundai in EVs, and Panasonic in batteries.

Given the economic disruption the IRA may cause for Europe’s EV and green industries, the GIP was designed to mimic some IRA provisions and play on the EU’s existing comparative strengths in response. This includes simplifying regulation and loosening state aid rules, as well as investing in skills training and securing critical raw material sources. The plan also plays to the European Union’s primary strengths in its highly skilled workforce and existing regulatory incentives—such as the EU ETS and the upcoming Carbon Border Adjustment Mechanism (CBAM)—to ensure existing decarbonization plans remain on track. The new EU subsidy scheme for green industries was similarly meant to match the IRA’s own subsidies, but make it comparatively easier for European companies to acquire aid.

However, where Europe faces greater challenges in implementing its industrial plan is its lack of fiscal firepower compared to the United States, as well as a deficit in administrative capacity due to the EU’s supranational structure to accelerate and simplify regulation. Furthermore, the new subsidy rules are not meant to apply beyond 2025, as European Commissioner for Competition Margrethe Vestager earlier insisted that such measures would be “targeted, temporary and proportionate.” The transitoriness of the subsidy scheme, which was meant to prevent states like France and Germany from benefitting disproportionately compared to other EU member states, likewise reflects more broadly how the European Union still lacks a cohesive, sweeping energy strategy that is integrated between member states, reducing its own internal market strengths.

The IRA will impact different industries in different ways. For some, such as wind, Europeans will retain their lead. In other industries, like battery production and emerging technologies like green hydrogen generation, localizing what would have been European production in the United States will be a no-brainer. Understanding how the IRA will reshuffle US, Chinese, and European positions in these global value chains will be critical to finding where it makes sense for the transatlantic alliance to collaborate closely.

Solar and wind: Lessons from history

In the solar photovoltaic (PV) market, even if the US and Europe coordinated more, China’s outright dominance would be hard to challenge on the international stage. But whereas European policymakers seem to have generally given up any hope of reviving domestic PV production following the collapse of solar PV in Germany, US policymakers have taken a more assertive role in encouraging the growth of its own PV production. The IRA tax credits will make domestic module production competitive, but not exports. For US PV producers, this relative barrier to exporting is somewhat mitigated by exponential growth in domestic demand. For Europeans, it means continued reliance on Chinese manufacturing in the near future, even with the ongoing implementation of the GIP and subsidy scheme.

In contrast, European producers have maintained their lead in wind energy production and will likely continue to do so. The region remains a leader in patents for wind technologies, and has the largest pool of start-ups. While the IRA emphasized investments in offshore wind energy, Europe would have retained its own strong lead in its existing base of offshore windfarms and the installation of offshore wind turbines even without the introduction of the subsidy scheme, which directly impacts wind energy technologies. As well as that, wind is traditionally harder to displace as an industry due to its high transportation costs. By supporting the training of skilled workers, simplifying the regulatory environment, and accelerating permitting processes, the GIP will provide a welcomed boost to the European wind industry, at a time when China increases its export capacities.

Electric vehicles: a long awaited catch-up in the United States

The United States has lagged behind its peers in EV market share, with EVs making up 20 percent of car markets in Europe compared to 6.5 percent in the United States. This leaves room for greater uptake in the latter. Moreover, there are extraordinary growth prospects for EVs around the globe, reinforced by the recent European Parliament vote to ban sales of combustion engine cars by 2035—likely meaning that there will be “enough [EVs] to go around.” But it remains to be seen whether knowledge, engineering and R&D capacities will move away from Europe and China to the United States. For now, and despite calls from France and Germany to ramp up support for European EV producers, Europe’s green industrial plan and subsidy scheme do not clearly define their support for the industry. Instead, the GIP and scheme have focused mainly on the key component of EVs: batteries. 

A new arms race? Batteries and electrolyzers

The battery sector, an essential component of the energy transition, will be the key area of US and European competition with China. Given its strategic importance, the United States and Europe have both placed local battery production high on their wish lists, with the latter creating a European Battery Alliance in 2017. Yet China dominates the critical raw material supply chains required for batteries, producing fifteen times as much lithium as the United States and refining and exporting 80 percent of the world’s cobalt in 2020. The IRA’s strict domestic content and sourcing requirements limit supply chains to free trade partners and exclude “foreign countries of concern” (primarily China and Russia). This would place European carmakers, overly dependent on offtake agreements with Chinese suppliers, in a difficult position.

Dramatically reducing dependence on China for battery ecosystems will be costly. Due to vertical integration, economies of scale, and long learning curves, China’s battery industry is now competitive even without national policy support. The IRA would essentially duplicate existing (but Chinese dominated) battery supply chains at huge costs, and the EU subsidy scheme would likely run into similar issues.

For electrolyzers, vital to producing clean hydrogen and decarbonizing heavy industries, Europe and the United States are keen to develop their own domestic production capabilities in the face of cheaper Chinese products. In this race, the GIP will add another string to Europe’s bow. An upcoming Critical Raw Materials Act will seek to secure the supply of minerals, while additional funding and faster permitting will accelerate the deployment of battery and electrolyzer manufacturing in Europe. The subsidy scheme will further incentivize European battery and electrolyzer producers to retain and ramp up their investments in the region as well.

For Europe and the United States, a “join or die” moment

Given the large investment needs, US policymakers and their European counterparts have everything to gain from joining forces and designing new win-win partnerships. Building domestic capabilities in electrolyzers, battery manufacturing and their supply chains, and reducing their dependencies on China will be extremely costly.

In fact, China is ramping up its own investments. In 2022, China invested over 500 billion dollars on clean industries (about 3 percent of its GDP). In comparison, Europe spent 4 percent of its GDP on measures to shield its consumers from rising energy costs, a much higher proportion than the share of spending implied by the IRA with respect to US GDP (likely around 1-2 percent). Consequently, the European Union has demonstrated a capacity to make large-scale investment decisions, but it is running out of momentum to continue doing so (even with its newly announced subsidy scheme) due to how much it has already spent in response to the energy crisis.

Instead of igniting undue competition, the IRA should be used as a platform to build new mutually beneficial agreements. Policymakers on both sides of the Atlantic should build on the success of the low-carbon steel and aluminum agreement and anticipate tensions around the CBAM. A recent proposal to design a transatlantic “buyers club” for critical raw materials in battery production is a step in the right direction. The United States and European Union could also use the discussions sparked by the IRA, GIP, and EU subsidy scheme for green industries to work closer together to agree on common global norms, reducing Chinese influence over international standards.

Without transatlantic coordination, the United States and European Union may become mired in a trade war over the EV and green industries, which would render them both vulnerable to climate change and growing authoritarian control over the global decarbonization consensus. It is crucial for the United States and Europe to agree on collaborative industrial policies that would at least challenge Chinese dominance in green industries to ensure existing decarbonization efforts are not derailed by trade disputes and Europe’s economic anxieties do not come to pass.

Théophile Pouget-Abadie is a nonresident fellow at the Atlantic Council’s Transform Europe Initiative and policy fellow at the Jain Family Institute.

Francis Shin is a research assistant at the Atlantic Council’s Europe Center.

Jonah James Allen is a nonresident fellow at the Atlantic Council’s Transform Europe Initiative and research fellow at the Jain Family Institute.

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Théophile Pouget-Abadie

Nonresident Fellow

Europe Center Transform Europe Initiative

Civil Society Climate Change & Climate Action

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Francis Shin

Research Assistant

Europe Center

Economic Sanctions Europe & Eurasia

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Jonah Allen

Nonresident Fellow

Europe Center Transform Europe Initiative

Civil Society Climate Change & Climate Action

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As Europe drives investment into the MENA region, green hydrogen’s potential in sub-Saharan African nations like South Africa, Namibia, and Kenya risks being overlooked as a driver of needed sustainable energy and economic development. Partially due to the effects of COVID-19, the population without access to electricity in sub-Saharan Africa rose in 2020 for the first time since 2013. Currently, the region accounts for 77 percent of the global population without access to electricity, up from 74 percent prior to the pandemic. Energy demand is set to rise dramatically over the next 30 years, as the region’s current population of 1.18 billion is expected to double to over 2.2 billion by 2050.

But supporting sub-Saharan sustainable energy development is not only a pressing facet of a just global energy transition; it would also be a mutually beneficial investment decision. The average long-term practical yield for a photovoltaic solar energy installation in the region is 4.34 kWh/kWp/day, significantly higher than Europe’s 3.44 kWh/kWp/day. Nearly 30 percent of the region is capable of producing over 5 kWh/kWp/day of photovoltaic output, with some of the strongest concentrations of solar irradiation in Namibia, South Africa, Botswana, and Ethiopia. Sub-Saharan wind energy potential is also strong, particularly along the coasts of Namibia, South Africa, and Kenya. If successfully developed, renewable energy capacity could produce economically viable green hydrogen in Africa under €2 per kilogram by 2030.

South Africa signaled its intention to develop green hydrogen at scale with the release of the South African Hydrogen Society Roadmap (HSRM) in February 2022. The HSRM outlined four catalytic demonstration zones designed to lay the groundwork for long-term decarbonization of industry and transportation as well as the creation of a robust export market for green hydrogen and green ammonia.

In cooperation with Hydrogen Council members Anglo American and ENGIE, South African private and public sector operators are pursuing the development of a centralized hydrogen valley known as the Platinum Valley Initiative (PVI). The valley aims to connect three hubs—Johannesburg, Durban, and Limpopo—with a projected aggregated demand of 184 kilotons (kt) of green hydrogen by 2030. The initial viability study projected that the PVI could add between $4-9 billion to South African GDP by 2050 in addition to creating between 14,000-30,000 direct and indirect jobs annually. The nine currently proposed projects would contribute to decarbonization efforts spanning the transport, industrial, and mining sectors.

In addition to HSRM and PVI, South Africa signed a Just Energy Transition Partnership (JETP) agreement with France, Germany, the United Kingdom, and the United States in November 2021. At COP27, US Special Presidential Envoy for Climate John Kerry and South African President Cyril Ramaphosa announced the endorsement of the $8.5-billion JETP investment plan. Expanding the transportation and energy potential of green hydrogen is a key component of the investment strategy.

To the west, Namibia is also expanding its development goals for green hydrogen with a focus on Southern Corridor Development Initiative (SCDI). Following the hydrogen valley model, the SCDI is a partnership between the Namibian Green Hydrogen Council and the German firm Hyphen Hydrogen Energy. The project is expected to produce 300,000 tons of green hydrogen by 2030 from 5-6 gigawatts (GW) of installed renewable energy capacity. The Namibian Port Authority (Namport) is a critical component of the SCDI scheme, already laying the groundwork with Hyphen and the Port of Rotterdam to identify needed export infrastructure.

Before an export market can develop, however, Namibia’s existing energy woes must be addressed. In 2022, only 56 percent of Namibians had access to electricity, and the nation imported 60-70 percent of its electricity demand. Hyphen says its planned projects will generate 1.5-2 terawatt-hours of surplus electricity per year, nearly equal to Namibia’s purchases from the South African Power Pool (SAPP) regional electricity network. Hyphen’s development contract is only a fraction of the 26,000 square kilometers reserved by the government for green hydrogen development. As more projects are announced, renewable energy costs will decrease, and additional electricity supply should be available to both meet domestic demand and contribute to the decarbonization of the SAPP.

Already leading the continent in geothermal energy capacity, Kenya announced a slate of investment partnerships on the sidelines of COP27 for the growth of an East African green hydrogen hub. Fortescue Future Industries (FFI), an Australian firm with a global green hydrogen and ammonia portfolio, won the rights to develop a 300-megawatt (MW) green hydrogen and ammonia plant over the next three years.

Kenya’s development of renewable energy capacity has been a blessing for the country, nearly doubling electricity access from 32 percent in 2013 to 75 percent in 2022. Kenya Electricity Generating Company’s (KenGen) geothermal infrastructure is responsible for 70 percent of that growth, and the state-owned firm announced an additional $2-billion investment in new geothermal plants in 2021. As geothermal energy continues to expand, new solar and wind projects can exclusively produce green hydrogen and its derivatives without shortchanging residential, commercial, or industrial electricity demand.

As electrolyzer costs continue to decrease and sub-Saharan Africa’s renewable energy capacity grows, developing a robust green hydrogen and ammonia economy across the region could serve as an economic and energy development boon. Before that vision can be achieved, however, the inequities between nations and energy networks within the region must be addressed through cooperation and international support. Of the forty-eight countries in the region, twenty-four have electricity grids which service less than half of their national populations; eight have grids which reach less than 20 percent of citizens. This broad range of energy system reach complicates viability assessments for green hydrogen and other sustainable energy sources when focusing on sub-Saharan Africa as a whole. Instead, development potential in specific nations like South Africa, Namibia, and Kenya should be the focus of near-term support, with the goal of expanding successful programs and investments across the region over the next 30 years.

As sustainable energy markets develop in regional leaders throughout the decade, regional partnerships like the African Green Hydrogen Alliance should expand their membership. Angola, Mozambique, Botswana, Tanzania, and Ethiopia all possess reasonable wind and solar resources and form a corridor along the southern and eastern coasts of Africa, a prime opportunity for domestic development of green hydrogen and export to Asian buyers.

Regional leaders should pursue strategies to support the expansion of electricity grids and sustainable energy in neighboring nations. Adapting previous strategies like the Mozambique Transmission Company’s (MOTRACO) cross-border interconnection project—which linked transmission networks from South Africa, Mozambique, and Eswatini for aluminum smelting—may be a way to connect large-scale utility grids, which would bolster each nation’s ability to produce cost-effective green hydrogen on a consistent basis. International financing agreements like Just Energy Transition Partnerships (JETPs) or initiatives like Power Africa should support the long-term goal of leveling electricity access and energy networks across the region, building from lessons learned from existing agreements with South Africa. While concrete strategies for developing sustainable energy in energy-insecure sub-Saharan countries remain undefined, identifying early avenues of support is a critical step in harnessing the potential 50 million tons of regional green hydrogen capacity by 2035, according to a recent report from the European Investment Bank.

Kenya, Namibia, and South Africa are well positioned to expand their production capacity over the next ten years while gradually expanding green hydrogen markets to neighboring nations and setting the foundation for future export markets to Europe and Asia. If done correctly, the African Green Hydrogen Alliance partners could set favorable regulatory environments for the region and leverage their supply on international markets. Green hydrogen has unique potential to fuel the sustainable development of the transportation networks, industrial bases, and commercial enterprises of sub-Saharan nations while also strengthening their relationship with international trading partners.

Daniel Helmeci was a Summer 2022 Young Global Professional at the Atlantic Council Global Energy Center.

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Notably, the move to restrict the export of equipment used to make key technology (here, solar panels) mirrors US actions to do the same with semiconductors. This mirroring tactic aligns with Beijing’s typical tit-for-tat approach when reacting to contentious events with the United States in recent years. As US-China geopolitical hostilities hit green tech sectors, intense competition brings both advantages and drawbacks for the industry.

The pretty…

Bottlenecks and vulnerabilities revealed by the COVID-19 pandemic have contributed to a global impulse to on-, re-, and friend-shore supply chains, resulting in increased investment in core technologies. The Biden administration has ramped up spending on semiconductors and STEM education, as well as batteries and their related components. Not only have American green tech sectors received greater policy prioritization, but they will also gain from new funding initiatives and from investments into STEM-related human capital and infrastructure. Moreover, a diversified tech supply chain would reduce geopolitical leverage of third-party countries, like China, in the medium to long term.

Additionally, recognizing supply chain dominance by countries of concern has the benefit of spurring research into and development of alternate technologies to reduce dependence on vulnerable supply chains. China’s supremacy in the production of silicon—the key critical mineral used in commercial solar panels currently—helps justify researching and commercializing other materials to produce solar panels, such as perovskites (though Chinese firms still play a major role in developing the technology) and US-led cadmium-telluride.

…and the ugly

China watchers have traditionally pointed to climate as an area for cooperation with China even during heightened tensions, but increasingly geopolitics have pushed environmental efforts towards competition. Secretary Raimondo’s November 30 speech on US-China relations mentioned competition twenty-six times, whereas cooperation appeared only six times. Democrats’ initial rush to decouple from China’s domestic clean energy industries temporarily strained relations with allies, while Republicans like Rep. Cathy McMorris Rodgers want to slow down the clean energy transition for fear of overreliance on China (and then focus on outcompeting China)—both strategies prioritize geopolitical competition over mitigating climate change. As Ilaria Marzocco noted, national security motivations for developing these technologies are eclipsing climate change needs.

Escalating even non-tech US-China tensions could threaten progress on climate efforts and green tech development. Conflict between the two, such as over a flashpoint like Taiwan, could distract these giants and force green tech advancements to take a back seat to conventional security priorities. Following Nancy Pelosi’s visit to Taiwan, China suspended the high-level US-China bilateral climate talks (though the talks resumed in November). Further straining the relationship could jeopardize green tech deployment and emissions reductions as the United States and China exchange blows.

Looking ahead: Pushing the pretty and mitigating the ugly

The Inflation Reduction Act (IRA) dedicates billions to funding clean energy initiatives. Prompt implementation of the different financing mechanisms will allow green tech companies to access the benefits of competition. Already, the Environmental Protection Agency has made progress; on February 14, it released guidelines for the IRA’s Greenhouse Gas Reduction Fund, of which $7 billion targets solar power deployment through the Zero-Emissions Technology Fund Competition. It expects to start accepting proposals this summer. Ensuring follow-through on implementation of US industrial policies will tackle the classic climate problem of failing to put commitments into practice and reduce the pain of supply chain reorientation.

Policymakers also need to guard against counterproductive fallout from tech tensions. The Biden administration has additional tech restrictions planned, buoyed by bipartisan support for countering China across multiple sectors. Beijing could respond in-kind with restrictions of its own going beyond solar panel equipment; China also dominates wind power supply chains, for example, and Beijing has taken issue with the Ford-CATL deal over concerns it could share core battery technology with the US company. Biden’s potential outbound investment executive order has been anticipated for several months, though, so it would not come as a surprise to Beijing. Clear communication with Chinese counterparts about US policy changes—when appropriate—can help dampen the reaction to competitive policies.

Meanwhile, like how Pelosi’s Taiwan visit suspended high-level US-China climate change talks for months, mitigating risks across other areas of the relationship will help insulate green tech from the negative effects of geopolitical competition. Sustaining bilateral dialogues and cooperating on other areas of mutual interest —for example, governance of AI-powered weapons, illicit fentanyl trade, nuclear threats from North Korea and Iran—can counter some of the spillover of rising tensions into the green tech sector.

China and the United States represent the top two individual emitters, together making up nearly 40 percent of global CO₂ emissions. A healthy level of competition can catalyze innovation and uptake of clean energy and secures supply chains, but officials should take care not to escalate to where antagonism between the green tech powerhouses would slow down development and cut off markets around the world from accessing the best tools to combat emissions. How the two governments manage their relationship and their domestic policies affects economic outcomes for green tech companies as well as global climate security outcomes.

Jennifer Lee is a member of this year’s Women Leaders in Energy and Climate Fellowship at the Atlantic Council. She is an associate at the Scowcroft Group.

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Jennifer Lee

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The conference was joined by mayors from Croatia, representatives from US cities and DOE’s National Laboratories, and leaders from the non-profit and private sectors engaged in city-level decarbonization efforts. Kicking off with keynote remarks from Ivica Puljak, Mayor of Split, and Andrew Light, Assistant Secretary of Energy for International Affairs at DOE, the two leaders emphasized their commitment to empowering cities to play a key role in enabling policies that leverage technological innovation and unlocking funding to realize the energy transition. By recognizing cities as laboratories of change, the initiative aims to disseminate best practices in decarbonization, with an eye towards scaling policies to the national and international level. 

As cities assess their emissions and press ahead with decarbonization, many are finding that buildings and transportations are their two most emissions-intensive sectors. Decarbonizing commercial and residential buildings through data-driven energy management retrofits of inefficient stock is one of the most cost-effective ways to lower carbon emissions in cities. Speakers highlighted the ways cities can work to improve building performance to reduce greenhouse gas emissions. 

Russia’s war in Ukraine has accelerated the transition by increasing the price of fossil-based energy and demonstrating the interconnection between energy security and decarbonization. The war’s impact has pushed cities in Europe to make buildings more energy-efficient with support from municipal co-financing. Through this initiative, DOE’s National Laboratories will work with city leaders to deploy energy-efficient technologies.

Electrifying transportation will be key to a clean energy future. Regional power grids must be modernized to accommodate the increased demand created by a growing electric vehicle fleet. Panelists expressed desire to improve low-carbon transportation between cities, highlighting the need for national governments to support regional-scale mobility. Cities must take a much more holistic approach when planning for a decarbonized transportation sector by improving walkability and bikeability, spreading amenities beyond downtowns, and improving access to public transportation. However, providing financing at scale to address these changes is daunting. In Croatia, for example, the Environmental Protection and Energy Efficiency Fund provides investments for the public and private sectors, as well as directly to citizens, to retrofit buildings, install renewable energy sources, and decarbonize transportation.

The conference concluded by discussing opportunities for cities to become more resilient to climate impacts and to engage with citizens to respond to extreme heat, floods, and droughts. The conversation detailed the work between DOE’s National Labs and cities to develop a shared vision on maximizing economic growth and equity as it relates to a clean energy transition. A resilient city builds policies with co-benefits to address disparities in health, education, and resource access, and to engage with the communities most vulnerable to the impacts of climate change.

The conference provided a starting point for transatlantic cooperation on city-level decarbonization, but central to lowering emissions is improving education and communication with local community members to empower them to be agents of change. The Alliance for Green Cities promises to be an invaluable incubator for ideas to advance global decarbonization efforts, starting at the city level.

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These actions are welcome, given the troubling environmental legacy of the prior administration. Deforestation rates surged under former President Jair Bolsonaro’s term, reaching the highest levels in 2021 since 2008. The Bolsonaro administration weakened environmental agencies intended to protect the Amazon rainforest, eased protections on protected land, and fired the head of Brazil’s National Institute for Space and Research (INPE) after it released data showing that deforestation rates had increased. Lax environmental policies resulted in land robbery and the increase of illegal activity, particularly related to logging and mining. Illegal mining saw a 46 percent increase in the Yanomami Indigenous territory in northern Brazil from 2020 to 2021, raising environmental justice concerns as the uniquely impacted Yanomami community experienced increased violence and diseases due to polluted rivers as a result of ore processing.

Lula’s return to office marks a return to the protection and conservation of the Amazon and its people while balancing the sustainable development of the region. The president created the country’s first Ministry of Indigenous Peoples, representing 307 indigenous groups. Lula also welcomed Marina Silva back to the federal government as Minister of Environment, the position she held during Lula’s first term as president. A well-known environmentalist from the Amazon state of Acre, Silva’s return to the Ministry signals Lula’s commitment to prioritizing environmental protection.

The return of the Amazon Fund

Deforestation of the Brazilian Amazon has made the forest a net carbon emitter since 2016, accelerated by Bolsonaro’s policies and the shuttering of the Amazon Fund. Soon after Lula’s victory, however, Brazil’s Supreme Court ruled to reactivate the fund, which he signed on his first day back in office.  With this reversal, Brazil is taking steps to once more be a clean energy and decarbonization leader in the region. But in order to reach these goals, expanding and diversifying funding is crucial.

Deforestation is a major factor in driving up greenhouse gas emissions, with tropical deforestation being responsible for roughly 20 percent of annual emissions. The Amazon rainforest holds 48 billion tons of carbon and its preservation is essential in the global fight against climate change and reaching ambitious net-zero goals. To assert low-carbon leadership in the region, Brazil should take advantage of the momentum behind the Amazon Fund right now.

The fund has historically been supported by Norway and Germany, but its support is set to grow. The Norwegian government—after backing out of the fund while Bolsonaro was in power—is keen on resuming donations immediately, and Germany signed a new pledge committing to donations following Lula’s October win. Additionally, following President Lula and Biden’s meeting this month, the two leaders released a joint statement in which Biden committed to work with the US Congress to contribute funds to conserve the Brazilian Amazon, including directly to the Amazon Fund. France, the European Union, and the United Kingdom have also announced their intentions to contribute to the fund.

While the addition of some of the world’s wealthiest countries are a significant step to broaden the fund’s scope, it is not enough. At COP27 in Glasgow, over one hundred world leaders representing more than 85 percent of the world’s forests pledged to halt deforestation by 2030, but little momentum has been seen since. As governments raise their ambition in forest preservation and funding, the focus must next turn to industry whose spending power and contributions in technology will be vital to expanding conservation efforts.

Private-sector participation in conservation funding would prove beneficial for Brazil, where although early satellite data shows deforestation in the Amazon has been declining since Lula’s return to office, experts say it may take years to show major progress following environmental setbacks under Bolsonaro. This progress will more effectively be accomplished with a suite of multi-sectoral funders. The fund’s potential for impact should be marketed to a broad coalition of funders from government, finance, and industry alike, with the option to contribute using verifiable carbon credits.

Building an even cleaner energy mix

Brazil’s environmental leadership need not be confined to the management of its ecosystems, however. Brazil already has one of the world’s highest shares of renewable energy in primary energy consumption, where clean energy sources meet 46 percent of total energy supply—not just electricity—in Brazil. By such a measure, Brazil is a clean energy powerhouse. Nonetheless, there are areas for Brazil to expand its low-carbon leadership.

Much of Brazil’s high share of clean energy in its energy supply is owed to biofuels, which are used in the industrial and residential heat, and transport sectors, at 50 percent and 25 percent, respectively. The country has been a pioneer in the use of biofuels for transportation, and in 2017 issued the RenovaBio policy which links the use of biofuels in transportation with Brazil’s Nationally Determined Contribution (NDC) under the Paris Agreement to reduce its emissions by 43 percent from 2005 levels by 2030. The country has committed under its NDC to increase the use of bioenergy, with high blending standards to support this. However, as an alternative to biofuels, Brazil could benefit from more targeted investment and policy support for electromobility, which does not pose the same concerns associated with the carbon intensity of land use. Brazil surpassed 100,000 cumulative electric vehicle sales in 2022, but deployment is limited by a lack of charging infrastructure. The country has less than 5,000 charging stations, while Germany, for instance, has over 1 million.  

Furthermore, the country has a genuine opportunity to increase the share of clean energy in the power grid above 86 percent. Much of this share is owed to hydropower, which accounts for about 65 percent of total generation. Brazil is being eyed as a prime destination for wind development, with a potential of 1.8 terawatts (TW) onshore and offshore. The Ministry of Mines and Energy has taken steps to clarify the regulatory and legal frameworks for offshore wind development, which are severely lacking across Latin America, and could be catalytic for investment beyond the 17 GW of offshore wind already planned in Brazil.

However, the integration of intermittent renewables onto the electric grid will require more power system balancing to ensure generation matches demand. This comes amid a troubling outlook for hydropower in Brazil, historically a reliable baseload energy source, but whose generation is forecast to be more variable, as climate change leads to abnormal weather patterns. Increasingly frequent droughts and less predictable rainfall may increase the need for energy storage or gas peaker plants, if necessary, to ensure the consistent delivery of electricity to consumers.

Another area for Brazil to lead is by modernizing Petrobras and orienting it towards the energy transition. Petrobras is the largest oil company in Latin America and Brazil’s flagship state-owned enterprise. Prior to Lula’s victory, core energy advisors expressed a desire to make Petrobras more active in investing in renewable energy assets. After his election, Lula appointed Jean Paul Prates to the role of CEO, a senator and political ally of Lula. Prates has a history of introducing sustainability-focused legislation, even during Bolsonaro’s term. This background could bode well for the management of Petrobras at a critical juncture. Debt-constrained Petrobras will need to find innovative models if it desires to pair energy-transition ambitions with returns for the Brazilian public, but if it succeeds, it could offer lessons for national or state-owned oil company modernization on a global scale.

Bolstering Brazil’s environmental and clean energy leadership will require careful planning in the years ahead. The re-emergence of Lula does not seal this fate.  While it can showcase its clean electricity sector, Brazil will need to balance using resources for conserving the Amazon and expanding electrification amid competing domestic economic and political priorities. For instance, Brazil will need to invest to maintain its social welfare state, amid a high benchmark interest rate of 13.75 percent and conflict between the Lula administration and the Central Bank of Brazil over fiscal policy, challenges which will impact the investment climate and Lula’s domestic political efficacy in tandem. Despite these challenges, Brazil has the potential to act as a first mover among emerging markets in making progress towards net-zero.

Lizi Bowen is associate director for digital communications and community engagement at the Atlantic Council Global Energy Center.

Maia Sparkman is an assistant director at the Atlantic Council Global Energy Center.

William Tobin is a program assistant at the Atlantic Council Global Energy Center.

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Lizi Bowen

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Global Energy Center

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Maia Sparkman

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The power of renewables: Productive use appliances as climate change solutions in sub-Saharan Africa

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570 million people in the region, or 48 percent, lack access to electricity, while 900 million people, or 83 percent, lack access to clean cooking. This leaves the unserved hooked to polluting and fossil-based alternatives to meet basic energy needs, further impacting the region’s ability to grapple with climate change. Productive use appliances (PUAs) powered by renewables can play a critical role in reducing carbon emissions and mitigating the effects of climate change, while enabling a wide range of climate adaptation and resilience activities.

Productive use appliances are energy-using, productivity-increasing, and income-generating devices designed for specific economic activities within agriculture and small and medium enterprises. Some common examples of PUAs include solar water pumps for irrigation; cold storage for preservation of food; solar cookstoves; poultry lighting, egg incubators and milking machines for livestock; and grain mills for small-scale food processing. Renewable energy sources, such as solar and wind, powering grids, off-grid appliances, and productive loads connected to mini-grids, offer a sustainable and accessible solution to meeting the energy needs for PUAs.

The benefits of PUAs in sub-Saharan Africa

Adoption of productive uses is a significant leap up the energy ladder as increased use of electricity helps unlock productivity and results in increased incomes. With increased incomes, households can afford more appliances, like refrigerators and electricity for cooking, that provide health benefits and time savings. PUAs can serve as loads that enhance the viability of off-grid, mini-grid, and utility service, helping reduce energy costs and improve the quality of supply. They can also help create local jobs in areas such as manufacturing, installation, maintenance, and repair. This not only provides employment but also strengthens the local economy. By improving livelihoods and food security, PUAs can help to reduce poverty and increase economic growth.

Climate mitigation, adaptation, and resilience

By reducing the use of fossil fuels and the associated greenhouse gas emissions, the productive use of renewable energy appliances helps mitigate and adapt to the changing climate. For example, a solar-powered water pump can provide farmers with access to irrigation even during times of drought, reducing the need for diesel-powered pumps that contribute to greenhouse gas emissions and helping communities combat food insecurity. Similarly, using a solar-powered refrigerator for food storage can help reduce emissions from traditional refrigeration systems that rely on refrigerants with high global warming potential. They also provide communities with access to cold storage for food and medicine, which can be critical during times of extreme weather and power outages.

Finally, the productive use of renewable energy appliances can help build resilience to the impacts of climate change. By reducing dependence on fossil fuels, communities can become more self-sufficient and less vulnerable to price spikes and supply disruptions. Additionally, renewable energy systems can be designed to be modular, scalable, and circular, allowing communities to adapt to changing energy needs over time.

Challenges and solutions

Despite the numerous benefits, much of its potential is yet to realized. For example, over 5.4 million small-holder farmers could use solar water pumps in sub-Saharan Africa, but less than 10 percent of them do so. This is due to constraints that impact both demand and supply of PUAs: the high, potentially prohibitive cost of PUAs and electricity supply; the patchy quality and reliability of supply, especially grid-based supply; the dearth of PUAs themselves; the lack of mechanisms to identify demand; and limited access to finance for end users and PUA suppliers.

To address these constraints, several solutions are being tested and have proven successful that can be unleashed to scale PUAs in sub-Saharan Africa:

• Ensure that PUAs are available. Innovation, supply chain expansion, and customer targeting of PUAs is increasing uptake. For example, focused efforts in promoting solar cooling in Nigeria to fishing communities for better storage of fish, a valuable commodity, resulted in significant benefits. However, it is necessary to develop and enforce consistent quality standards for PUAs to prevent market spoilage, along with harm to consumers and the environment.
• Provide access to finance for small businesses, end users, and providers of energy services. Results-based financing, grants, and subsidies are being leveraged to bring the private sector into underserved markets and address affordability constraints of end users. Pay-as-you-go (PAYGo) payment mechanisms, which are already prevalent in the distributed energy resource (DER) sector, enable end users to repay over a period of time, reducing affordability constraints. In order to create financing interventions that effectively support both the demand and supply of PUAs, it is necessary to assess the constraints that PUA end users and energy service and appliance providers face when accessing finance.
• Support business development. End users need to make informed equipment and appliance purchasing decisions, have the technical skills to operate new equipment, and develop the entrepreneurial and business skills to manage business operations so that they capitalize on the PUAs. Additionally, it is crucial to provide access to markets through complementary services such as transportation and communication infrastructure. This will enable the production and sale of goods and services produced through the use of PUAs.
• Provide sufficient electricity supply. Creating new sources of power, expanding transmission and distribution to increase supply and serve more areas, and connecting more customers are important for advancing access in the region.

It is crucial for sub-Saharan Africa to shift towards low-carbon energy sources to decrease the amount of greenhouse gases released into the atmosphere, as well as to build the region’s adaptive and resilience capacity. But this must be done in a way that supports the growth and progress of the continent and provides energy access to the millions of Africans who currently lack it. Productive use appliances powered by renewable energy show promise for fulfilling these diverse priorities.

Sharmila Bellur is a member of this year’s Women Leaders in Energy and Climate Fellowship at the Atlantic Council. She is a sustainable development consultant at the World Bank.

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If fully implemented, such projects, might act as a catalyst for more investments in hydrogen production and infrastructure in the region and for the process of demand creation that remains at the core of the future of hydrogen development.

Furthermore, the potential in the MENA goes well beyond the region itself and its relationship with Europe. Some Gulf countries are set to export green hydrogen products to Asia and their sovereign funds and renewables companies are looking at hydrogen investments in several African countries.

The implications of the MENA region’s commitment to renewables development and to hydrogen in particular are thus wide-ranging and should be supported at the policy and operational level by, among others, the EU, the multilateral finance development institutions, and other international partners.

Many projects were announced at COP27. Egypt, the host country, was the main protagonist: 9 memoranda of understanding (MoUs) on feasibility studies on production of green hydrogen and green ammonia were signed. Such products would mostly be exported to European and Asian markets. If turned into investment decisions and implemented fully, the nine projects are supposed to be worth around $83 billion and to produce collectively 7.6 million tons of green ammonia and 2.7 million tons of green hydrogen per year, when fully operational. Also at COP27, the Egyptian authorities and a consortium of local and international investors announced the commissioning of the first phase of what is supposed to become the first integrated green hydrogen plant in Africa.

The most noticeable development at a political level in the field of hydrogen development regarded EU-Egypt cooperation, when the President of the European Commission von der Leyen and Egypt’s President al-Sisi issued a Joint Statement on the EU-Egypt Renewable Hydrogen Partnership and the Vice President of the European Commission and its Energy Commissioner signed a MoU, with the Egyptian Ministers of Oil/Petroleum and Electricity/Renewables, to establish a strategic partnership on renewable hydrogen. The two sides agreed to set up an EU-Egypt Hydrogen Coordination Group and to organize an annual meeting of a Business Forum that would include industrial and energy players.

Furthermore, on November 9, Egypt’s President and Belgium’s Prime Minister launched a new international platform on hydrogen, named the “Global Renewable Hydrogen Forum”.

After COP27, seven more MoUs were signed by the relevant Egyptian agencies with various investors to conduct feasibility studies on new projects with a view to setting up facilities to produce green hydrogen and its derivatives.

Egypt is not the only Arab country to move dynamically on this front. Governments, sovereign funds, and industrial players in Saudi Arabia, the United Arab Emirates, Oman, and Morocco are acting quickly and boldly.

Saudi Arabia, which launched a comprehensive Saudi Green Initiative in 2021, is planning a substantial development of green hydrogen and green ammonia production centered around NEOM, a new city and area to be developed in the northwestern corner of the country. If fully implemented, the project would set up the world’s largest utility green hydrogen facility. The Green Initiative also includes thirteen renewable energy projects, with a combined capacity of 11.3 GW that would help reduce some 20 million tons of carbon emissions per year.

Oman launched recently a new Strategy on Green Hydrogen that foresees $140 billion in investment by 2050, targeting an annual production of 1-1.25 megatons (MT) of green hydrogen by 2030, rising to 3.25-3.75 MT by 2040 and 7.5-8.5 MT by 2050. Oman is also working on a project to establish a green steel plant fed by hydrogen, with an annual production of 5 million tons. Such product would be exported to other Middle Eastern countries as well as to Europe, Japan, and other Asian markets.

The UAE, the host of COP28 in 2023, is also very active through different channels: at COP27 it announced a joint initiative (denominated “PACE”, Partnership to Accelerate Transition to Clean Energy) with the United States, with the aim to “catalyze $100 billion in financing, investment, and other support and to deploy globally 100 gigawatts (GW) of clean energy by 2035 to advance the energy transition and maximize climate benefits.” The UAE is also in the process of developing green hydrogen within its borders and abroad, mainly through Masdar, a key player with plans stretching from Africa to Central Asia.

Qatar has launched a project for establishing the largest blue ammonia facility worldwide and is very active in acquisitions in international renewables companies. Its sovereign fund QIA is also considering support to projects in Egypt, for developing green ammonia and green fuel for navigation.

At a regional level, according to the recently issued IEA report “Renewables 2022”, rapid growth in wind and solar will see renewables capacity across MENA rise faster than expected earlier. Such capacity is indeed set to triple to reach 45 GW in five years, with a significant upward revision from the IEA’s 2021 report (that estimated a capacity of 32 GW to be reached between 2021 and 2026). The IEA expects Saudi Arabia, the UAE, Israel, Oman, Morocco, and Egypt to account for 85 percent of renewable capacity growth in the region between 2022 and 2027.

Underlying most of these efforts is the goal, especially for gas-producing countries, to push ahead with renewables projects with the aim to liberate, in the short-medium term, gas resources for export, in light of the European quest for diversification of gas supplies and of the global energy crunch.

Two trends should thus be monitored over the coming months and years:

• In spite of the harsh debate at COP27 on the role of oil and gas in the transition, including the claims by most fossil fuel-producing (or would-be producing) countries in MENA (and in Africa) on the need to continue to invest in oil and gas, these same countries are already investing to a significant extent in renewables development. This may not be occurring at the pace necessary, without a common strategy and with a number of uncertainties, but nonetheless signifies a rising level of ambition.
• The idea of interconnecting these countries with European and Asian markets for exporting green renewables appears to gradually be taking shape, initially through the export of blue and green ammonia and, at a later stage, green hydrogen through converted or dedicated infrastructure. The initiatives jointly launched by the EU and Egypt at COP27 hopefully will advance this aim.

Giampaolo Cantini is a nonresident senior fellow at the Atlantic Council Global Energy Center.

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With the support of European investment, North Africa could become the world’s foremost producer of green hydrogen, capitalizing on vast swaths of uninhabited land, solar radiation intensity, offshore wind capacity, and existing pipeline networks. In October, Morocco hosted the Executive Vice President of the European Commission for the European Green Deal to sign a Memorandum of Understanding (MoU) on the establishment of a Green Partnership between the signatories. The Moroccan MoU preceded an agreement signed in November between the EU and Egypt creating a strategic partnership on green hydrogen.

Developing hydrogen infrastructure at scale will be costly and come with a range of challenges—particularly regarding regional water scarcity—but long-term investments utilizing existing resources could spur clean manufacturing and industrial development for hydrogen producing states while also generating export revenues for decades to come. Already, African states are organizing resources to invest in the requisite technologies. The African Green Hydrogen Alliance—comprised of Morocco, Mauritania, Namibia, Egypt, South Africa, and Kenya—was launched in May, and hopes to expand its membership on the continent. 

Among the alliance’s members, Morocco is well positioned to be a regional leader in a green hydrogen economy, ranking alongside the United States, Saudi Arabia, Australia, and Chile as the five countries most likely to produce cost competitive green hydrogen. In 2019, the Moroccan Ministry of Energy established the National Hydrogen Commission, which released a hydrogen roadmap aiming to mobilize a $10-billion investment for 14 terawatt-hours of new renewable energy capacity required to generate green hydrogen for both domestic consumption and export.

To accommodate a rise in green hydrogen production and support other net-zero goals, Morocco aims to increase renewables’ share of power generation to 52 percent by 2030, 70 percent by 2040, and 80 percent by 2050. The Ministry of Energy projects that an additional 14 gigawatts (GW) of renewable energy will be added to the grid by 2027, mainly from solar and wind sources, although interest in nuclear energy has picked up. The Moroccan Agency for Solar Energy is leading the country’s effort to expand domestic solar energy capacity with the multi-stage Noor Solar Project, a massive project expected to invest $2.6 billion by 2030. Noor’s multiple concentrated solar power (CSP) sites—located in the Ouarzazate municipality, which boasts the highest level of solar radiation in the world—include the largest CSP plant currently in operation which produces 500 megawatts (MW) daily and is slated for expansion later this year. The fourth phase of Noor projects is currently under development and is expected to generate 950 MW upon completion. 

While early investment in renewable capacity placed Morocco in the spotlight of North African green hydrogen development, other regional actors share similar potential. Algeria has the largest wind energy potential on the continent—approximately 7,700 GW if fully developed—and released plans to expand renewable energy production to 15 GW by 2035, with an annual growth rate of 1 GW. Mauritania’s combined solar and wind potential exceeds 500 GW if fully developed. 

New renewable energy projects in the region should first and foremost focus on providing access to electricity and non-biomass fuels to the entire population. Fortunately, North African electricity grids are relatively well developed, with 97.6 percent of the population having access to electricity, and recent grid expansions into rural communities have greatly expanded energy access since 2000. 

North Africa should begin to focus on green hydrogen as a driver of industry, transportation, and infrastructure development as energy networks continue to expand. Already, North Africa is a powerful exporting bloc of ammonia and fertilizers, and using green hydrogen to transition away from the capital- and emissions-intensive Haber-Bosch process which uses methane or coal as feedstocks for ammonia production—towards green ammonia could support the region’s export potential and energy storage capacity. Green hydrogen’s use case for transportation is strong, especially as production costs decrease, making North Africa a prime location to scale medium- and light-duty vehicles for automakers like Volkswagen, Hyundai, and Toyota, which already possess manufacturing capability in the region. 

As domestic use cases for green hydrogen develop and attract capital investments, attention should shift to creating the infrastructure needed to transport hydrogen around the continent and overseas. Pipeline infrastructure designed for natural gas and liquefied petroleum gas (LPG) exists across the region with multiple new lines under development including the Trans-Saharan pipeline which would span over 4,000 kilometers connecting Nigeria and Algeria. Early implementation of hydrogen blending could make North African nations global leaders in hydrogen transportation, allowing for increased say in regulatory frameworks moving forward. 

Supporting green hydrogen development in North Africa through targeted investment in renewable energy and infrastructure projects would be of mutual benefit for both sides of the Mediterranean. Recognizing the region’s unique potential for the development of green hydrogen would incentivize North African nations to pursue a pragmatic course of sustainable development and provide Europe with new energy import options that better align with the bloc’s emissions reduction goals. Following COP27 in Egypt, North Africa’s hydrogen future should continue to be encouraged and supported by international capital. As an emerging source of sustainable fuel and electricity generation—with large global demand potential and a myriad of end use cases—hydrogen can act as a catalyst of development in North Africa, an opportunity which should not be overlooked.

Daniel Helmeci was a Summer 2022 Young Global Professional at the Atlantic Council Global Energy Center.

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The energy sector must withstand a constant siege of cyberattacks—including some backed by nation-states. New attacks can propagate at the speed of light, and their consequences can take days and weeks to unravel, disrupting markets, making equipment unsafe to operate, and causing cascading effects that spread beyond the targeted organization.

Every energy sector participant—new or established, private or public—has an interest in maturing cybersecurity across an increasingly interconnected digital energy system. To continue to strengthen resilience and reliability, investments designed to improve the cost-benefit profile for cybersecurity are critical not just for the biggest players, but for everyone.

Both new and old energy technologies depend on cybersecurity. Rapid digitalization across the energy sector has increased efficiency and decreased emissions, but also has changed and expanded the vulnerabilities the sector must consider. Attackers increasingly target not just information technologies (IT), but operating technologies (OT) as well.  Retrofits to existing OT infrastructure like pipelines and legacy generating plants mean these are now often network-connected. Newer technologies like wind and solar depend on digital management.

The cyber threat isn’t limited to big players or the Global North. Recent years have seen successful ransomware against the biggest petroleum products pipeline in the United States, against the biggest electricity supplier in Brazil, and against smaller infrastructure operators like the municipal electricity utility in Johannesburg. We have also seen attacks against subcontractors leveraged to penetrate electric utilities connected to the US grid. This is a global challenge, for organizations large and small.

Faced with a continuous onslaught of cyberattacks, the energy sector will need to establish practices and institutions that drive down the cost of deploying strong cybersecurity across the energy value chain. Startups, subcontractors, and small utilities will become a consistently weak link in the energy ecosystem if affordable, effective cybersecurity remains unavailable.

So how can the energy sector ensure that cybersecurity keeps pace with cyber risk, and seize opportunities to get ahead of attackers? How can public and private sector leaders contribute to building a community of trust?

Regulators in the energy sector should ensure they enable—or at a minimum, don’t stifle—technology innovations that enhance cybersecurity. Cyber innovation will need to keep pace with both the new technologies of the energy transformation and the known risks to those technologies, even if slow-moving regulatory processes have not yet accounted for new business models, technologies, or threats.

Similarly, regulators should consider how to encourage rapid information sharing about threat intelligence. Although threat intelligence can help quickly harden targets against novel attacks, operators may be reluctant to share information if they believe it will later lead to legal and financial liabilities. Tabletop exercises that convene public and private organizations can improve incident response, building relationships and providing actionable insights before a crisis occurs.

Public and private sector leaders can both work to expand the pool of cybersecurity talent—one of the chief cost barriers for stronger cybersecurity. Cybersecurity experts are scarce, and experts who are also familiar with the operating technologies enabling the energy transition even more so. Training programs—public or private—will help meet demand. Solutions that expand the scope and power of automation can also help, as can information-sharing that enables security teams to quickly recognize new threats and efficiently apply patches.

For asset operators (public or private), cybersecurity should be part of decision-making on new projects. Considering how to secure new infrastructure or planned retrofits can help reduce the cost and complexity needed to manage risk. Monitoring operations helps operators and cyber analysts understand how systems interact with each other during normal production—and enables earlier detection of malicious activity. Seeking opportunities for automation of routine tasks can reduce the cost of strong cybersecurity. Advancements in machine learning and artificial intelligence make it easier to rapidly draw useful insights from massive data sets.

Private sector collaborations can help build trust and cyber maturity across the industry. Common standards and certifications can help spread best practices and build confidence that potential partners or clients will not introduce new vulnerabilities. Threat intelligence can sometimes be more comfortably shared across peer organizations than with regulators.

Private sector leaders can assess and improve their own organizations’ cyber risk posture. Boards that accurately understand their cyber risks will be better able to invest appropriately in managing those risks. Likewise, making clear that cybersecurity is a cross-cutting competency key to performance for every business unit helps build a strong security culture. And of course, recognizing that cybersecurity is an ongoing effort across the sector helps build the collaboration across the energy sector needed to contend with a dynamic, interconnected cyber threat landscape.

Finally, an inclusive energy transformation will also require cyber-inclusivity. Even as the Global North continues to build the connective tissue necessary to meet the cyber risks of a digitalized energy system, passing those lessons forward as the developing world pursues electrification and sustainable energy access will be necessary to ensure that the energy system of the Global South is constructed with cyber-resiliency in mind. Using global convenings like the Atlantic Council Global Energy Forum in Abu Dhabi earlier this month to bring cybersecurity to the table alongside discussions of increasing energy access is critical to build community and advance shared security in a digital energy system.

Leo Simonovich is the vice president and global head of industrial cyber and digital security at Siemens Energy.

Reed Blakemore is a deputy director at the Atlantic Council Global Energy Center.

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In September 2022, I anticipated that Putin’s plan to cut gas supplies to Europe and leave consumers to freeze would fail. With the cold season now almost over, this prediction has so far turned out to be correct. Contrary to the Kremlin’s expectations, Western consumers not only stayed warm in their homes; many European companies have actually been turning to Ukraine to place surplus gas volumes in local storage facilities.

Admittedly, Europe has been lucky. Demand and supply have been balanced because consumption remained muted thanks to unseasonably mild temperatures and falling industrial demand. Meanwhile, there have been sufficient alternative deliveries of liquefied natural gas (LNG) from the global market amid a lack of competition from China, which has been struggling with the aftermath of the Covid pandemic.

Much was also due to the resilience of European markets, which responded promptly to Russia’s decision to cut gas supplies to a trickle in 2022, forcing gas prices to reach record levels. Far from breaking Europe’s resolve, Putin’s energy war against the EU has shocked the bloc into fast-tracking its energy transition, completing projects which had been long overdue or forgotten and seeking alternative supplies to plug the gaping Russian shortfall.

With Russia’s share of European imports plummeting from 40% to less than 10% towards the end of 2022, European companies turned to global LNG markets, sourcing 96.3 million tons in 2022, up from 56.3 million tons the year before. Thanks to a raft of policies mandating storage targets, most underground facilities reached 90% fullness or higher by the start of the heating season on October 1, overshooting the target by ten percentage points. This means that as winter comes to an end, storage facilities remain at some of their highest levels and gas prices have fallen to a 16-month low.

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There are still lingering risks. An unexpected cold snap later in February or the early weeks of spring, a steep recovery in Chinese demand, or the possibility of a major escalation in Ukraine could spook markets and lead to more volatility or price spikes. Despite these potential threats, European energy markets are now clearly better prepared to absorb potential shocks.

Europe has been working to expand its LNG importing capacity, which is set to increase by no less than 20% this year. Undoubtedly, much will also depend on the availability of LNG supplies globally. However, the fact that Germany managed to commission three LNG terminals within less than a year to replace lost Russian pipeline imports points to the extraordinary ability of European markets to respond in the face of formidable challenges.

Projects that have been long delayed or forgotten have not only been resurrected but also promptly completed. For example, after many years of hesitation, Bulgaria managed to bring an interconnector with Greece into commercial operation that allows the Bulgarians to tap alternative Caspian gas and LNG. Meanwhile, Germany and France established bidirectional gas flows, which will allow not only Germany to export gas to France, but also to import from this direction. Even Romania, which had long been averse to exporting domestically produced gas, has seen some volumes shipped physically to neighbouring Bulgaria.

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Online Event Thu, July 20, 2023 • 8:00 am ET

After Vilnius: What’s next on Ukraine’s path to NATO?

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Putin’s energy war against Europe has served as a catalyst for renewable projects. With the permitting process fast-tracked across the EU, installations of solar panels and heat pumps had one of their best years to date. Solar capacity shot up by 41.4GW or 25% year-on-year to 208.9GW in 2022 and is set to grow even faster in 2023.

Russian imports of coal and oil were also hit by a raft of European sanctions as EU consumers stopped taking coal and seaborne oil in the second half of 2022. This meant that Russia’s share in EU imports of coal and oil dropped to less than 15% in 2022, compared to over 45% for coal and 25% for oil the previous year, according to the latest Eurostat figures.

There are now signs that Europe’s large economies may be staving off recession and indications that energy markets are regaining an even keel, but the same cannot be said about Russia’s own gas sector. Russia’s total gas output fell 12% in 2021 to the lowest level since 1990. The situation is even worse for state producer Gazprom, whose production fell year-on-year by 20% in 2022, the largest annual drop in the company’s history. Gazprom managed to increase gas exports to China by 5.4bcm but lost most of its 140bcm European market. It also took a hit on the domestic Russian market, losing market share to independent producers in 2022.

Gazprom may now be looking to partially revive its fortunes by using Turkey as a back door. It plans to sell gas to the Turkish gas incumbent BOTAS, which would then sell it on to Europe as whitewashed Turkish gas. This might allow Moscow to recover at least some of the losses incurred in 2022. At the same time, the fundamental nature of the shifts that have taken place over the past twelve months mean Russia now has little hope of returning to its formerly dominant position in Europe’s energy markets.

Dr. Aura Sabadus is a senior energy journalist who writes about Eastern Europe, Turkey, and Ukraine for Independent Commodity Intelligence Services (ICIS), a London-based global energy and petrochemicals news and market data provider. Her views are her own. You can follow her on Twitter @ASabadus.

Further reading

UkraineAlert Dec 26, 2022

Eight reasons for Ukrainian optimism in 2023

By Brian Mefford

Ukrainians have experienced an incredibly traumatic year but the country enters 2023 with reason for cautious optimism that Vladimir Putin’s criminal invasion can be decisively defeated, writes Brian Mefford.

European Union NATO

UkraineAlert Jan 17, 2023

How Europe can help Ukraine defeat Russia and win the peace in 2023

By Andreas Umland

Continued European support for Ukraine will be crucial in 2023 and must feature a combination of intensification and innovation if Vladimir Putin’s invasion is to be decisively defeated, writes Andreas Umland.

Conflict Economic Sanctions

UkraineAlert Dec 22, 2022

Russia’s defeat is the top global priority for 2023

By Oleksii Reznikov

Ensuring that the Russian invasion of Ukraine ends in defeat is vital for the international security system and must be the strategic priority for 2023, writes Ukrainian Defense Minister Oleksii Reznikov.

Conflict European Union

The views expressed in UkraineAlert are solely those of the authors and do not necessarily reflect the views of the Atlantic Council, its staff, or its supporters.

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The post Russia is losing the energy war as Putin’s winter gas attack backfires appeared first on Atlantic Council.

Flagship Event Sat, January 14, 2023 • 12:01 am ET

2023 Global Energy Forum

The 2023 Forum will have a special focus on the challenge of managing energy security priorities and decarbonization efforts in tandem, including the continuing impact of the crisis in Ukraine on the energy transition. This two-day conference starts at 9:00 AM in Abu Dhabi and virtually at 12:00 AM ET (midnight).

Africa Americas Energy & Environment Energy Markets & Governance

Event transcript

Uncorrected transcript: Check against delivery

Speakers

H.E Arifin Tasrif
Minister of Energy and Mineral Resources, Republic of Indonesia

Introducer

Reed Blakemore
Deputy Director, Global Energy Center, Atlantic Council

REED BLAKEMORE: I think as we’ve seen throughout the past two days of our agenda, the energy trilemma is a key theme that we’re all working through, defining not just the energy space this year but will certainly define the energy space looking out to 2050 and likely beyond. The move to a minerals-intensive clean-energy system creates enormous demand for new resource capacity, new challenges for environmental stewardship, and of course more broadly a new paradigm for global energy security. It’s absolutely imperative that we address these emerging issues head-on and [that] we do so quickly.

So, to that end, we’re honored to be joined by a leader in this space, a key global actor in the critical mineral supply chain, to say a few words on this important topic. So please put your hands together and welcome the minister of energy and mineral resources of the Republic of Indonesia, His Excellency Arifin Tasrif.

MINISTER ARIFIN TASRIF: Good afternoon. I think this time is quite heavy time for us—after lunch, and I have to move from the previous place to this place. Thank you. Thank you for the opportunity.

Honorable Mr. Frederick Kempe, president and CEO of the Atlantic Council, thank you for inviting me to stand at this podium… Distinguished ladies and gentlemen: Critical minerals and their supply chains [have] become a bristling issue among economists. In this light, every country has various definitions and categorizations [for] critical minerals, including their criticalities, parameters, and analytical levels. Critical minerals are fairly limited and very much needed to support clean energy. Geographically, they are in several countries, and refineries [are] also in several countries. Therefore, global collaboration is needed to be able to produce the minerals [that are] needed to support [the] clean energy transition.

Indonesia has a policy to increase mineral-added value. Besides that, we have also to secure supply chains to fulfill our demand in order to reach our target [of] net-zero emissions by 2060. This policy is our noble intention so that our 207 million Indonesians could… benefit from mineral sources so that they may get much better living conditions than [before].

In the context of [the] global supply chain, Indonesia hopes not only to provide raw materials but to cooperate with other parties to develop large-scale downstream industries to create competitive outputs. We appreciate global players who have recently [invested] in Indonesia, such as… Freeport Indonesia [which invested] to build a copper smelter. So the smelting and the processing itself will be completed by—hopefully, within end of this year­. PT Vale, Whitford, and Huayou [are] to build an electric vehicle battery raw-materials factory; Eramet and BASF [are] to build an electric vehicle battery raw-material factory; [and] Contemporary Amperex Technology and LG [are] to build an electric vehicle battery raw material factory.

[Batteries are] very important for Indonesia, especially for transportation. We have about 140 million vehicles in land transportation, [and] 120 million of these are two-wheeled vehicles, [a number equal to] almost half of our population. So if we calculate one liter [of] consumption per motorcycle, [and] multiply by 120 million, it [equals] eight hundred thousand barrels [of] oil per day. So you can imagine how we burn. We subsidize the fuel but we are in the process to reduce, minimize, or even to be released from the subsidy. Besides that, we also have another advantage. Reduced [emissions] reduce the noise, which will also improve our health condition.

[It’s] not only in land transportation; we also consider marine transport. Indonesia is [an] archipelagic [country]. We have about sixteen thousand islands. So I make a joke that we—by the process, this island will be reduced automatically. If we don’t care about climate change, it will sink.

So [with] this significance, Indonesia forces several steps to enhance governance on clean energy. We implement policy on mineral exploration, especially critical minerals, through enhancing exploration, indexing rare-earth-elements inventories, [and supervising] mineral governance while maintaining environmental sustainability; and, second, [we] try to integrate [the] supply chain between mining and smelter facilities, as well as integrate the industrial users of mineral-processed products.

We would like to reiterate that Indonesia is ready to cooperate with partner countries to develop manufacturing facilities on critical minerals to support the energy transition. So [I] look forward to [cooperating] with you all.

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The post ‘Global collaboration is needed’ on critical minerals to support the energy transition, says Indonesian energy minister appeared first on Atlantic Council.

Flagship Event Sat, January 14, 2023 • 12:01 am ET

2023 Global Energy Forum

The 2023 Forum will have a special focus on the challenge of managing energy security priorities and decarbonization efforts in tandem, including the continuing impact of the crisis in Ukraine on the energy transition. This two-day conference starts at 9:00 AM in Abu Dhabi and virtually at 12:00 AM ET (midnight).

Africa Americas Energy & Environment Energy Markets & Governance

Event transcript

Uncorrected transcript: Check against delivery

Speakers

Amos Hochstein
Special Presidential Coordinator for Global Infrastructure and Energy Security, US Department of State

Moderator

Helima Croft
Managing Director, Global Commodity Strategy, RBC Capital Markets

HELIMA CROFT: There’s been so much discussion at this conference about the challenges of critical minerals—how we need to source more supply, how we need—the unique security challenges of critical minerals. Walk us through, sort of level set for us, what’s the scale of the challenge as we think about meeting Paris climate goals?

AMOS HOCHSTEIN: First, it is always great to be back at the Energy Forum. Last year I tested positive in the airport on the way, so I ended up in a—

HELIMA CROFT: We didn’t tell anybody that, yes.

AMOS HOCHSTEIN: We did not say that at the time, but that’s really why I appeared on a screen from my hotel room in Brussels. But it’s great to be back here in person for many, many reasons.

Look, I actually believe that this is the greatest challenge not just for our ability to meet net-zero goals, but it’s actually one of those things that crosses over to being one of the most important challenges and national security risks overall—not just energy, but a national security risk for the United States and for large parts of the world. And the reason for that is because if we don’t—if we just continue as things are today, as they’ve been developing for the last ten years, we’ll be in a place where we have full control or significant control of critical minerals in the hands of very few and that’s a great challenge.

HELIMA CROFT: You know, Amos, how does this differ from the security challenges of traditional hydrocarbons? And you mentioned concentration risk, but there’s also this issue around China, which is it’s in the hydrocarbon challenge but it also seems to be very, very pronounced when it comes to critical minerals.

AMOS HOCHSTEIN: Well, my view is that if we’re—everybody always thinks about the hydrocarbon world of the twentieth century—

HELIMA CROFT: Yes.

AMOS HOCHSTEIN:—and that we’re now moving to this great new world of the green energy world, which is a better world in many ways, but that somehow that’s going to solve the geopolitical challenges of the energy world.

The way we’re going right now we’re actually creating a carbon copy of the twentieth century geopolitics of energy architecture and just putting it into the twenty-first century. Instead of having a small group of countries that control oil supply and, perhaps, refining, we’re now going to create a one or maybe a couple of countries that will control the entire supply chain for wind, solar, electric vehicles’ chips, and if we do that then the geopolitics of energy of the 1970s will be repeated in the 2030s and 2040s.

HELIMA CROFT: So, Amos, can you just walk us through? I mean, where does it rank? When you think of national security priorities for this administration, you know, where does it rank in terms of, you know, when you go in to see President Biden how concerned is he about critical minerals?

AMOS HOCHSTEIN: I think people don’t always believe me but he actually can talk more about critical minerals and the challenges of the critical minerals than almost—than many in our own government. He understands this challenge very personally. I have had many conversations with him about this.

It’s because if we want to create—and look, we’re at a place we talk about this all the time in this conference, right? Dr. Sultan talked about it yesterday. We have to accelerate the investment in clean energy technology and in renewable energy. That creates a challenge because as you accelerate something more rapidly than the market would normally have developed you have to make sure that you have the raw materials and the supply chain behind it. Right now, we may not.

So, to do that, suddenly there is a rush to buy and to acquire, from mining to processing and refining and assembly, and if you look at where that is right now it’s not in a good place for a diverse—well-diversified energy system.

HELIMA CROFT: Are there particular aspects of it that are especially acute? I think we’ve discussed graphite before as a particular challenge.

AMOS HOCHSTEIN: So if you look at what is the materials that are necessary for batteries or materials that are necessary for wind and you break it down and you look item by item, and suddenly you realize that graphite is mined in many different countries but it’s processed only in one country, and we’re going to have two new processing facilities in the United States likely over the next couple of years. But that will supply a very small percentage of what even just a small percentage of what the United States needs.

And then look at lithium and who’s owning the assets. Who owns the mining? Who owns the processing? Who owns cobalt? Who owns the mining? Where is it going? Nickel, copper. Copper we need not just for batteries. We need it across—if you want to electrify everything copper is really important.

So all of that is right now concentrated in one country: in China. China controls somewhere between 60 [percent] and 100 percent of all the items that I just mentioned. So we have to—as we talk about accelerating the investment, it’s not just about deployment of cells or of turbines and building the grid.

We actually have to accelerate the investment that the rest of the world—this is not just about US versus China. It’s about making sure that we have a diversified energy system and if—I’m not looking to have all the processing in the United States.

HELIMA CROFT: Right. Right.

AMOS HOCHSTEIN: The IRA is definitely intended to build up our own capacities. But we need that around the world.

HELIMA CROFT: So let’s dig into the IRA right now. Can we, basically—you know, we’ve had the IRA, this, you know, groundbreaking legislative, you know, success for the Biden administration. How do you think about the IRA sort of delivering on, you know, the development of this industry in the United States?

AMOS HOCHSTEIN: Well, you have—Piedmont is an American company that’s going to have lithium mining in South Carolina and processing in Tennessee. Same company has assets in Ghana to get—for the mining of lithium. We have multiple examples. Jervois from Australia is just—is going to just announce that they’re opening the first in many decades primary cobalt mine in the United States—not as big as [the Democratic Republic of the Congo (DRC)], but it is a mine. But what I don’t want is all of that cobalt’s right now destined to leave the country, so—because we don’t have processing. So what IRA is doing is creating—if you look at a carrot and a stick to get companies to do things, this is—IRA is all about the carrots. It’s about what are the tax incentives and the grants and other financial incentives for companies to build the capacity that we need.

But Helima, we can’t—

HELIMA CROFT: Right.

AMOS HOCHSTEIN: IRA is about the United States. This is a global issue. We want this to be built, whether it’s lithium in Serbia or projects in Chile, in Argentina, and in Australia. But it’s not enough that they’re built in those countries. Who owns them and where are they going? And you have to look at the next level of the—of the problem. If one country owns all the raw material and one country owns—or all the processed material, then eventually they get to decide where the battery’s going to be built.

HELIMA CROFT: OPEC—

AMOS HOCHSTEIN: And if they get to decide where the battery’s built, then they get to decide perhaps where the car is built. And all of a sudden you have a real challenge where the auto industry—and we know the auto industry moves where the costs are, right? That’s how the United States became a hub for—European and Asian car manufacturers make their cars in the United States when it became cheaper to make them in the United States for the US market. So that’s the real challenge that we’re facing.

HELIMA CROFT: Well, you’ve laid out an enormous challenge. What is the role of getting, you know, obviously, more financing? Like, how do you de-risk financing for this?

AMOS HOCHSTEIN: So that’s—so we launched, together with the—at the G7 we launched something called the Partnership for Global Infrastructure and Investment, which the idea behind it is how do we pool resources from the United States and the G7 members plus others and the MDBs to de-risk investment in these areas. And this is an extraordinarily difficult challenge because you have country risk, commodity risk, currency risk, and ESG risk, and that makes it very difficult.

We’re having initial successes now in—after several months of starting to be able to put together these kinds of packages that allow us to use the financial instruments that we have as governments, whether it’s Ex-Im and DFC in the United States or it’s KFW in Germany or in the United Kingdom, et cetera, the EU, and of course Japan with JBIC. So that—but how do you figure out how to blend where they’re used to de-risk it by taking the first loss or taking and putting that capital where it fits in the capital stack of the investment to make sure that we can incentivize the others? I’m not very optimistic that we’re going to have significant Western financing of mining projects in certain countries around the world where they’re not comfortable, but I think we’re starting to see a success where we can find buyers into the mining side and incentivize processing and refining of those products in a number of those countries, and Serbia is a very good example of that.

HELIMA CROFT: Do you have others you could talk about?

AMOS HOCHSTEIN: I have others that I will be able to talk about.

HELIMA CROFT: You’ll be able to talk about.

So we just attended the Future Minerals Forum in Riyadh, and one of the big issues that was brought up there was the challenge of getting financing in a rising rate environment. I mean, how much does that give you concern?

AMOS HOCHSTEIN: That’s what I lose sleep about every night: How do I solve that problem? And we’ve had conversations. We’ve, you know, spent some time—the US national security adviser and myself spent some time with some of the fund managers to understand their perspective of what does it take. We’ve traveled around to see how do we structure—what do we need to do—in other words, what can the US government or the G7 governments in combination do that would change the outlook of financial institutions, whether it’s banks or it’s private equity? What do we need to do that gets you over that hump?

I think we have a—we have more information today. We’re putting those deals together. We have some transactions that are in their final stages that will demonstrate that we can do this. But the challenge is enormous, and I think part of the challenge is that there’s not enough attention to this challenge.

So what I would say on the financial institutions, I think we have to find a different way to look at not just de-risk the investment, but we have to put in the risk to the final product. If I’m going to say I’m not going to invest in financing the mining or the processing but I will invest in the final product, well, you’re going to have to put a risk now on that final product because you’re going to have to ask them: How are you going to guarantee your supply chain? What if you don’t have it? And suddenly I think if you have that outlook, then perhaps you say, OK, if I’m going to secure my investment in the final product, whether it’s the car or the product itself—or other products—I have to now invest in the supply chain to make sure that it’s there. And I think that’s a mindset change that is slow, and I—because of the lack of understanding of the basic data of where the supply chain actually lives, everybody I give the numbers to always reacts with surprise even if they are people who are heavily invested in the sector.

HELIMA CROFT: So, Amos, I want to ask you, you recently took a trip to the DRC. When you think about, you know, you have been in the seat for energy security for how many decades? I mean, you were at the State Department under President Obama. You were head of the Bureau of Energy and National Resources. And sort of in your career, how much has the energy security portfolio that you’ve had, how much has it changed because of the critical minerals imperative? Like, does it change where you’re spending your time? Like, how does your day-to-day job change because of this?

AMOS HOCHSTEIN: I think, remarkably, it’s the same job with a different set of countries. And I started working on energy security in the 1990s. That ages me a little bit. I turned fifty last week. So in—when I was on the Foreign Affairs Committee actually working on completely other issues, and all of a sudden realizing that we in the United States didn’t talk about energy in foreign policy but every other country did, whether they were consumers and it affected their—how much they subsidized energy and therefore a percentage of their GDP or if they were the providers of energy and therefore it was a big portion of their income.

And today, I see it as exactly the same thing when—OK, so I’m in the DRC because they have 80 percent of cobalt in the world, they have significant copper resources, and they have really great lithium—very high-quality lithium there as well. So they said to me—some folks there without naming names said: We’re the Saudi Arabia of cobalt. That was the statement that was made to me by this individual. And I said: I wish you were, because the Saudi Arabia of cobalt or the Saudi Arabia of actual Saudi Arabia has that resource, and look at what it’s done for the country.

HELIMA CROFT: Right.

AMOS HOCHSTEIN: It’s been able to turn the country around, develop it into a—the major powerhouse, an economic powerhouse that it has—that it is today with institutions and roads and bridges and hospitals and everything else. You’ve had cobalt for all these years. It’s time to think about how do you manage these resources so that the more you put an effort on getting at—rooting out corruption, and putting an emphasis on who are the workers and what their rights are, and the taking care of the country and investing it back, that’s part of the opportunity that all of a sudden, after ten years, the world is really paying attention. We want these products for all these things that we want. This is the opportunity for a whole new set of countries if they—if they decide that they want to be part of this economy, they have an opportunity to become the Saudi Arabia of cobalt or of lithium or of copper, of nickel or graphite, whatever it is.

But if we keep a concentrated market where all these countries are essentially production facilities on a highway to one country, they won’t get that opportunity to develop and to expand their economies and to do what’s right for their people. And the rest of the world will end up with a single supplier for the products that we need the most in order to create this net-zero world that we’re trying to advance.

HELIMA CROFT: Amos, I want to drill a little bit deeper on this because, I mean, clearly the DRC has had, you know, enormous challenges. I mean, think about it was the world’s worst war at one time. Five million people reportedly died in that war. I mean, how do you solve for these enormous governance problems? I mean, the track record in terms of oil countries in sub-Saharan Africa, you know, wasn’t particularly great in the 1990s in early 2000s. You know, think about Nigeria. I mean, how does Congo sort of break the sort of resource curse?

AMOS HOCHSTEIN: So I don’t want to pick on Congo, but I—

HELIMA CROFT: No, no, I know, but it’s an enormous opportunity if they could—this resource. I mean—

AMOS HOCHSTEIN: Right. So I think it’s exactly what you just said: Don’t look at it as a challenge and a problem; look at it as an opportunity. And I think that as—look, we as a world, we want to have—we want to have a net-zero world. We want to all—many of us in this room want to have—drive electric vehicles. But we also want to know that it was built in a certain way and coming from a certain—that the supply chain into it was, first of all, clean so that we actually don’t defeat the purpose, and that worker rights were respected while building these cars and the materials in it. So this is not between—as we are suddenly paying attention to what we drive and what we’re going to consume and what kind of electricity we’re going to have, now we can come and say we want to make sure the countries that are producing it get their fair share, too. And so don’t allow companies that are going to come and bid in your—when you put out a tender that are not going to respect those basic principles.

And it’s remarkable. If you don’t—if you tell them you can’t hire children and you have to have an actual living wage and you have to do all the things that the successful oil and gas countries have done that have developed their economies in a sustainable way, if we take those lessons learned and say—you have the opportunity. You can look at it two ways. You could look at the resource curse countries who failed the resource curse test or the ones that succeeded. And that’s—and that’s what I—I’m sitting here in the UAE.

HELIMA CROFT: Right.

AMOS HOCHSTEIN: This is the example that you can draw from. But I think it’s incumbent upon us to say we’ll help you get there, but you have to want to. And the opportunity really is that while just a few years ago—three, four years ago Western companies were leaving the mining of lithium and copper and so on, and now they all want back in. So require them to live by those standards. And don’t feel like you have to take the one company that’s going to give you perhaps what sounds like a sweetheart deal at the beginning and that doesn’t allow for development of your own economy.

HELIMA CROFT: How much—I mean, China, you could say, has a—had a head start on the United States in sub-Saharan Africa, did not put the same emphasis on governance, labor rights, environmental rights. How do you see—I mean, you’ve brought up the whole issue of China on processing. You’ve talked about the OPEC of one. How do we think about China’s, you know, relationship with these key sources of supply?

AMOS HOCHSTEIN: I’ll say about China and this issue the same exact thing I said in Europe in 2013, 2014, 2015 about Russia and gas. We are not here to say Russia should not supply gas to Europe. It should play in a competitive, diversified market according to basic transparent rules of the game. If we had done that then, we probably would be in a different place today in Europe.

That’s the same message on China. We’re not saying China shouldn’t be part of this market. It should. It could. It is. And they’re not leading the United States; they’re leading the world. This is not an America versus China. It is not. This is about the rest of the world should not want to rely on one supplier. I don’t know a single business that ever wants to rely on one supplier for all its products. So I think this is not about who’s ahead, the United States or China; this is about saying to the Chinese: We want to do—we want what you want, which is to be in the business of accelerating investment into a renewable energy net-zero world. But nobody should end up wanting to dominate that market and to—to the exclusion of everybody else.

We will be in a healthier place if I—if there are multiple locations around the world that build batteries or that do the refining and the processing. Not every country should have a whole ecosystem in that country, but we should have centers that can do this. And to do that, that’s why the G7 took this initiative to pool our resources to do that through the [Partnership for Global Infrastructure and Investment (PGII)]. That’s what I think we’re going to try to mobilize as much as possible. But there has to be a buy in, and the buy in has to be governments that are not necessarily what I’ve just said now would still be like, yeah, we get it, but I have bigger challenges to think about. I actually think this is the clear and present danger, because if you don’t do something in the next twelve, twenty-four months the fate will be sealed for the next twenty years.

HELIMA CROFT: So we really have a very, very small window.

AMOS HOCHSTEIN: It’s a very small window.

HELIMA CROFT: You see the urgency. You said President Biden sees the urgency of this. So if we—when we meet back here at this time next year, how do you think our conversation’s going to look? I hope I get to do the interview, Fred, looking at you.

AMOS HOCHSTEIN: My hope is that the conversation that we have at this event next year, just as we come out of COP28, will be about reviewing the change in the direction of the supply chain. And I think we are going to be. I think we’re going to be in a place where we’re going to be able to discuss transactions that have taken place, both in the mining side and in the processing.

And I think people sometimes think only about the mining side. The mining side is less important. The processing and the assembly and so on are critical. And I think we’re going to be in a place to say we’ve made a dent and we’ve put ourselves in a trajectory—not that we’ve made a meaningful—if you took up our percentages and, you know, 80 percent went down to only 78 [percent]—Amos, we failed—but, rather, what’s the trajectory? What are we FIDing for these facilities? And I think that we’ll be in a much better place next year. That’s my hope and that’s my—I hate saying hope because hope is, like, well, I hope so.

HELIMA CROFT: Yeah. That’s the goal.

AMOS HOCHSTEIN: It’s the goal. That’s what we’re working towards.

HELIMA CROFT: We have one minute left, and you brought something up when I saw you at breakfast this morning I thought was such an important point in terms of talking about this issue of, like, just transition, equity, the sort of what happens with the digital development divide. I just think if you could sort of talk that through for us, because I was so struck by the sort of real issues around what could happen if you don’t close it.

AMOS HOCHSTEIN: So I think the digital—the critical minerals and the digital divide, to me, are two parallels. They are remarkably similar and the same challenge exists in both. If we don’t do something about the—about it on the energy side then we are going really fast on this—on electrification and moving everything so quickly that if we—how do—if all these companies are saying I’m not going to build a car that is an [internal combustion engine (ICE)] car past 2035, and you have large parts of the world that don’t have a sustainable grid for the baseload they have today, how do you end up with—how do you suddenly convert all the cars? You don’t, and all of a sudden you’re isolating countries out of the rest of the world’s economy.

So the divide between developed and developing suddenly widens significantly as a result of our own success. It goes back to what we talked about yesterday about how much money is going into clean energy implementation in developing countries—I think 27 percent today, declining—expected to decline to 22 percent.

The same thing is happening on the digital side. If you’re still in—today, we’re going from 3G to 4G and kind of skipping [4G] and going into 5G while already the research and development on to 6G, which will be [expected to deploy around 2027 to 2028].

But [3G to 4G] is different than [4G to 5G]. So 5G is a sea change of technological change. If we don’t—if we don’t upgrade systems across sub-Saharan Africa and Southeast Asia, South Asia, Central Asia, where we get to 5G quickly, we are going to condemn countries that are still in 3G. It’s no longer, OK, it’s a little bit slower. But, rather, you’re no longer able to connect to what the commercial world would look like and that—suddenly mobile banking and e-commerce becomes extremely difficult if you can’t actually connect into the rest of the world.

So we’re on a path, both on digital connectivity as well as on the critical minerals and investment in renewable energy that if we don’t start spending the dollars more equally it’s not only that it’s not fair to people with—who are born into countries that are lower income but we’re actually going to create a divide that is no longer bridgeable.

And that’s why we’re starting to look at investments and there I can tell you we’ve done some significant investments on 5G through Africell in DFC and Ex-Im Bank have done this, and we’re working with our European counterparts so that, again, we don’t have just one supplier.

So it’s not just one Huawei ZTE but, rather, we have all the—we have a healthy ecosystem that can invest in to upgrade these systems from 3G to 5G and then making sure that those are reliable vendors that provide not only fast connectivity but secure connectivity as well.

HELIMA CROFT: Amos, the time’s up. I want to thank you for another extraordinary conversation. What I always like when we have these conversations is, I mean, you have been incredibly prescient. You’ve told us we’ve got a twelve- to fourteen-month window. I think we should take that incredibly seriously. Your track record on warning about Europe’s dependence on Russian gas—I remember in September of 2020, right, you were the one, basically, I almost felt like, a lone voice out there talking about the need to get as much gas as possible into Europe.

We should have taken you more seriously then. I think—I hope everyone—this sort of twelve- to fourteen-month window I hope we all understand the urgency of the challenge you’ve laid out.

So thank you so much, Amos.

AMOS HOCHSTEIN: Thank you, Helima.

Watch the full event

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Flagship Event Sat, January 14, 2023 • 12:01 am ET

2023 Global Energy Forum

The 2023 Forum will have a special focus on the challenge of managing energy security priorities and decarbonization efforts in tandem, including the continuing impact of the crisis in Ukraine on the energy transition. This two-day conference starts at 9:00 AM in Abu Dhabi and virtually at 12:00 AM ET (midnight).

Africa Americas Energy & Environment Energy Markets & Governance

Event transcript

Uncorrected transcript: Check against delivery

Speakers

Yasmine Fouad
Minister of Environment and Ministerial Coordinator and Climate Envoy for COP27, Arab Republic of Egypt

Mahmoud Mohieldin
Climate Change High-Level Champion for COP27, Egypt; Special Envoy on Financing 2030 Agenda for Sustainable Development, United Nations

Damilola Ogunbiyi
Special Representative of the UN Secretary-General; CEO, Sustainable Energy for All

Moderator

Dan Murphy
Anchor and Correspondent, CNBC

DAN MURPHY: Thank you so much for being here today and thank you to the Atlantic Council for hosting us. Minister, thank you so much for the opening remarks as well. And thank you to the director-general for also setting the scene for our next conversation.

And as we take the stage, I’d like to introduce our panel for our first conversation today. Of course, Dr. Yasmine, minister in Egypt, is joining us. But we also have Mahmoud Mohieldin, the climate change high-level champion for COP27 in Egypt, joining us; and Damilola Ogunbiyi, the CEO of Sustainable Energy for All and also a special representative to the UN secretary-general. So please make our panel feel welcome on this Sunday morning, and thank you again for being here. [Applause.]

Minister, just to begin, I think the best way to summarize the overall sentiment at the conference so far was from Dr. Sultan Al Jaber in his opening remarks at the conference. And he said: The world is still way off when it comes to achieving the goals of the 2015 Paris climate agreement. So, in your view, how can COP in the Emirates address some of those challenges and build on the progress that was made in Egypt?

YASMINE FOUAD: Thank you very much for that question.

First of all, you know that the COPs were designed that one build upon one another, so it’s not in isolation of the multilateralism process.

Secondly, I think that there are three parts that I’ve just mentioned in the opening remarks quickly that would be very sectional.

First of all, that if we don’t want to be far away from the Paris agreement in 2015, we have a good opportunity to seize, which is the Paris rulebook, the Sharm El Sheikh plan of implementation but much more, which is the global goal on adaptation that should be adopted in COP28. And that’s very important to look at because the world is looking at that part very importantly, and there are million and trillions of finance that would go for adaptation just if the target is being set.

Secondly, the global stock-take is also one important part that we can seize in order to put further implementation to the Paris agreement.

Last but not least, the loss and damage, also the fund that was dedicated in COP27 and the governance of that fund, on how can we further look into the implementation and the actual disbursement of that fund.

These are three important issues because they have to work parallel with the mitigation actions, with the NDCs. And looking further on how countries are implementing NDCs because the first reporting will take place in 2024, so we have a very good opportunity in COP28 in November to see how countries will be able to finalize and report back on their updated NDCs. Thank you.

DAN MURPHY: And achieving progress is particularly challenging at the moment because what we’ve seen coming into COP28 and all through COP27 is this chorus of criticism being leveled towards the oil and gas industry, and I want your reaction to this as well. What do you say to those critics who claim that the COP process is basically a bloated expedition of oil and gas executives, photoshoots for politicians, and all being run by special interests and lobbies? How do you react to that?

YASMINE FOUAD: I react simply that they are—oil and gas is part of the problem, like any other industry, and they have to be present in that part in order to present what they can do into that. If we are always saying that the COPs should be inclusive because the crisis affects us all then everyone has to be around the table.

Let me give you a good example aside from the oil and gas. The heavy industries, the cement industry, or the fertilizers industry—why they shouldn’t also be criticized that they are around the table.

In Egypt, there was a day for the decarbonization and that was the first time that we have that day. We know that there were some—and a lot of criticism on why are we including that in the discussion. They should be part of that discussion in order to be faced with the reality that you, as emitter, as part of the pollution, you need to come up and step in and say whether you’re credible, whether you will be able to be committed, and how you’re going to do that and how you’re going to make that transition.

Starting that dialogue in COP27 it was really essential not to exclude but to include and face the fact that what you’re going to do in that part and how you’re going, really, to make a difference if you are going to make a difference and the world will be watching and will be evaluating and assessing that.

DAN MURPHY: And just one more question before I open it up to the panel.

But do you—do you also think that there is a public perception gap here? Because I also get the sense that it’s quite hard for the general public to square the fact that you can have a major fossil fuel producer like the UAE also being a global leader in climate. How do you address that public perception gap and sell this to the general public, who may not understand that those two things can be directly correlated?

YASMINE FOUAD: I think that the only way that you can do that is to present an actual commitment and plans that you would be able to fulfill.

Sustainability is—cannot be divided. Sustainability would mean a one-fledged package that you are looking at the environmental and the economic and add the social aspects. Once that—that’s even away from the climate—once that is being very clear and you’re committed to do that and, yet, also you need to look at how best will you be able to make that transition.

The transition is not only for a country rather than the other. The transition would mean a just transition, that those who need the transition should be availed the time, the technology, and the finance, and those who have the finance should be availed the time and showed the targets and respect those targets on making that kind of the transition because the fact says for sustainability the regular oil and gas and the regular fossil fuel cannot live longer and will not be able to ensure the demands of our future generation.

So the shift to the renewables is a must and, in fact, is not an option.

DAN MURPHY: Mmm hmm. Thank you, Minister.

Mahmoud, I’ll take it over to you now, and through the COP27 process we did see great progress on mitigation, adaption, things like loss and damage and financing, in particular. How do you think the UAE can build on the COP27 agenda and what would you be focusing on here?

MAHMOUD MOHIELDIN: Right. Thank you so much. It’s great to be in Abu Dhabi and it’s great as well to start the year with an event with the Atlantic Council, as I ended last year with an event with the Atlantic Council. It was different. It was an insurance and adaptation. They were focusing more on energy.

But we take that all from a holistic perspective. That’s why I liked the introductory remarks by Francesco and, of course, by Her Excellency, the minister.

So on this issue of process and accumulation over time, and it was from the very beginning when Egypt and the UAE were announced in Glasgow to host COP27 and COP28, it was very much an understanding that the outcomes and the conclusions of COP27 are going to pave the way for a successful COP in the United Arab Emirates.

And I would really—you put them nicely in the order of the Paris agreement. I think Sharm El Sheikh managed to protect the Paris agreement and protect the ambitions of Glasgow, including the 1.5 degrees. It made, really, a breakthrough when it comes to the adaptation agenda with very practical suggestions in partnership with the private sector in areas related to the work and the adaptation from water management to agriculture to coastal areas to food security and other areas of work. And then, the great achievement, and that is really—quoting the secretary-general of the UN—he said that this was a huge political achievement, you know, the loss and damage, because those who are experts—and many of them are in this room—days before reaching the agreement they were really in doubt that this was ever going to happen, but I think the great work conceptions, the great leadership of the Egyptian diplomacy, the great work by Germany, Chile, and everybody on the parties and non-parties alike had realized that we cannot really escape from the loss and damage and dilute it under different notions including adaptation.

What’s common between the three? It’s all of the elephant in the room: it’s finance. Without finance you cannot really have any progress in mitigation. Adaptation will be an interesting academic notion, and loss and damage is all about finance. So how can we deal with that is basically going to be the discussion that we’ll be having here in Abu Dhabi today and during the sustainability week as well.

It’s easy to talk about the one hundred billion [dollars], but we know now it’s a drop in the ocean when it comes to the requirements of finance. It’s no more than 3 percent of the requirements of total finance for when it comes to developing economies and emerging market even if you put advanced economies and China aside. So we need really to have serious money.

How is this money going to be coming from? There are some suggestions here. One, this could be coming out of generosity, and this could be very much a call of optimism in this regard. Others say, well, it could be out of fairness. Those who have been polluting the world for almost two hundred years may realize today it’s about time to contribute. The third aspect could be—which is more relevant—could be about efficiency gains; the mutual benefits of investments in mitigation and adaptation, but in a new way to make adaptation with reward to those who are investing in it, including from the private sector.

And then if you are not really going to be convinced of any of the three arguments, there are the fear factor, and it’s either fear about the planet or fear about your livelihoods; that it’s a very serious argument that if we are not going to get our act together—not just about the impact of global warming and what will happen in 2030, 2050 and beyond, but immediately we see the threats of forced migration. Immediately we see the fear of new phenomena with climate refugees.

And there is an interesting book on this by a good author. It’s called The Nomad Century, with a heat map that we know now that it happened that low-income countries, poorer countries are in warmer areas of the planet. They will be forced to leave their villages and towns, and there will be nothing to stop them unless there is something that we can do today to prevent that from happening. So the loss and damage, the kind of—the prevention act that this definitely will be costly, but the cost of it will be much less than if we wait and wait for the outcomes of doing nothing.

DAN MURPHY: It’s a perfect setup for my question to Damilola, as well, and good morning to you, Damilola, because what we also know is that equity and inclusivity are critical tenets here, too, and of course the concept of a just transition was also principal in the Paris Climate Accords.

So explain to us a bit more about your role and why this concept of a just transition is also critical in this climate conversation.

DAMILOLA OGUNBIYI: Well, good morning to you, and thank you for having me here at the Atlantic Council.

Why the notion of a just transition is so important is because when we’re talking about transitioning, we forget that a lot of people don’t even have sufficient energy. So when we talk about the developing world and my continent, Africa, we’re talking—the just transition to them is getting enough energy to survive, getting enough energy to live a dignified life. We’re starting at a scenario where the, you know, per capita the average African with the installed capacity has barely 404 kilowatt hours in Sub-Saharan Africa. That is kind of twenty times less than the average American.

So the just is really important. For the first time in history, we actually truly have the chance for when people are getting energy, it to be clean, it to be renewable. But you can’t forget the fact that a lot of economies, they want to industrialize. There’s a lot of things people want to do with energy. So we shouldn’t just look at, you know, one side of the world and forget another side. There’s no way in our climate promises where you can—you can go ahead and hit net zero and leave a billion people in energy poverty. It just doesn’t happen that way.

So as we’re talking about the just, as we’re talking about equity, as we’re talking about just the right thing to do, we also have to talk about the reality that this will mean more energy for a certain region in the world, and it means that the developed world had to use less. Energy efficiency is the best fuel source to try and, you know, mitigate. You have to use less to make sure other people have more and they—and they can come up again.

So in our work at Sustainable Energy for All, we really, really focus on that. And we have different partners, and some are here today—Global Energy Alliance for People and Planet—to say what is the best way of making sure people are truly not left behind. And it’s not about, you know—no offense to people in the solar systems space, but it’s not about giving a solar lantern and ticking a box that you’ve electrified somebody. It’s giving enough energy for people to live dignified lives.

DAN MURPHY: Damilola went viral just recently. Was it—was it a Vox documentary that landed on Netflix?

DAMILOLA OGUNBIYI: Yeah.

DAN MURPHY: You were speaking inside this documentary—which is incredible, by the way, and you can find it on the internet and watch it. It’s very, very good. But within the documentary it was revealed that by 2030 climate change is expected to push an additional 132 million people into extreme poverty, and many of them are going to be women, girls, and marginalized communities. So, Damilola, just how serious is that challenge and the issue that policymakers are facing today in addressing it?

DAMILOLA OGUNBIYI: I think sometimes when we are in these forums or we are in countries like this we sometimes forget that the people that we are really trying to help, at least in my role, are people who it’s the difference between life and death. So, for example, a woman cutting down trees, using fuel wood could die prematurely because of this. It does happen. About a million women, you know, already die because they’re using fuel every day—fuel wood, sorry, every day instead of using other, cleaner sources of energy.

For me, it’s quite upsetting because that’s not seen as an emergency. And everything has to be seen as an emergency. Apart from the deforestation it causes, it’s actually affecting human life. Before we talk about all the insurgencies or all the refugees that are actually leaving because of climate, there are key emergencies happening now. And these are solvable problems, right? We always talk about technology breakthroughs, which are so important, but everything we need to provide power to the people who don’t have it—electricity and clean cooking—exists today. What doesn’t exist, which Mahmoud was talking about, is the financing to do it.

And even the political will exists. In my continent, I never thought I would see presidents coming and saying: We want to do the energy transition. Tell us how to do it. So we’re sitting down with them. We’re planning with them. But honestly, we don’t know how it’s going to be financed, which isn’t a good place to be.

So that’s why we’re looking for different, innovative ways of financing. And one is what we’re also presenting at the Abu Dhabi Sustainability Week, which is the African Carbon Market[s] Initiative. How do we massively scale up the use of high-integrity carbon markets that people can buy from Africa as a way to fund the transition, of which energy access and provision of energy is at the heart of it?

DAN MURPHY: Minister, this is an issue that you know all too well in Egypt and across the continent. How did COP27 move the needle on inclusion and equity, if at all?

YASMINE FOUAD: OK. Thank you very much. Egypt was actually very keen since we started the process of preparation to make sure that it is an inclusive COP.

So, first of all, when we—every year we have what’s called the World Youth Forum, and that took place in January and we made different sessions to include the youth. We worked even together with the UAE in the last year Sustainability Week in order to engage a group of the Arab youth working for climate. That was one part.

Another part is that we worked together with the Secretariat to include a number of African NGOs that were not usually part of the UNFCCC process because we wanted to make sure that they were represented.

And our famous story of the green zone. The green zone is a part that usually it’s the responsibility of the hosting government to do it to present its cases and so forth. Our president was very keen that our green zone would be walking distance from the blue zone, that’s number one. Number two, that it does not only include the national—[inaudible]—so it’s not telling the story of Egypt but it included parts where we invited different international organizations such as universities from the academic and international NGOs, and even indigenous people and local communities from around the world, to present their cases if they are not allowed through the regular UNFCCC process. And last but not least, as we designed the blue zone on different thematic days, the same thematic days were taking place in the green zone to ensure that their voices are discussing the same issues that we would like to discuss as part of the presidency program. So all that was efforts that were done over eleven months to ensure that an inclusive COP is meaningful, is implementable, and comes out with tangible results.

DAN MURPHY: Mahmoud, can you add to that as well?

MAHMOUD MOHIELDIN: Right. In terms of the actionable measures and the levels of action that you want all of that to be translated in—how to get finance, investment into the right direction—these are with three levels.

First, I would say the local level. And there have been a great deal of localization of efforts of climate action, not just to raise awareness but there are opportunities. And the final impact will be where people live—in their townships, in their cities, in their urban areas or rural areas. And we had a very good initiative called the Green Smart Projects in which we managed to mobilize the interests of the private sector and all of the businesses, from the microenterprises to the megaprojects, with two notions, green and smart, as the main transformation for the future. And that is basically an area of work that’s going to be a permanent feature of the work, and Egypt with an idea as well through the partnership with the UN that we want to scale that up as well.

At the regional level, I’m happy I see my good friend the director for the Africa region of the—of the champions, Bogolo, here—that we had five regions of the UN, including Africa. And in partnership with GFANZ, with consultancy firms, we have a pipeline of projects because that was always a big question by investors. We have the money. You remember the GFANZ promise of asset-backed entities ready to direct funding, but they say, well, we have the money but we don’t have the pipeline of projects. So we worked hard for, like, five, six months in order to have pipeline of projects, and they are available in compendium on the UNFCCC and on the five regions of the UN And you’ll—you will see good mix of projects. Many of them, as you may expect, could be more on the mitigation front than energy, including renewables. But we saw growing interest with better packaging and incentives in areas related to adaptation as well.

On the work on the regions, I’m happy as well to see debt-reduction mechanism being tested, including investments that are required to link—to be linked to debt reduction and get the investments into nature and into climate. Good examples came from Seychelles, from Belize. A fantastic project as well from Barbados, which is basically having KPIs linked to the NDCs of, in the case of Barbados, that could be really replicated elsewhere. And here we can really see the beauty of partnerships between governments, private sector, and credit enhancers.

Then the big—the big work, which was basically about the global level. Here, of course, we’ll talk about the future of financing the one hundred billion dollars. The COP26 with COP27 have produced this piece about a good costing exercise for what’s required. What we need as a minimum is one trillion dollars from now until the end of 2025. This figure will be no less than $2.4 trillion after 2025 until 2030. And here, the idea of getting more efficient long-term finance with improved terms of funding, I’m arguing for no more than 1 percent to be spent on climate-related activities. Maturities shouldn’t be—no less than ten years, grace period ten years, and maturity for no less than twenty years. And there are some models in different multilateral development banks that already have something similar to that like IDA, like the IMF with the Resilience and Sustainability Trust Fund, and of course the good example of the carbon-credit market.

This is a very big area of work that requires global standards with good capturing of the value, good regulations. And I’m happy that Egypt just a couple of days ago issued the regulations for the carbon-credit market. And again, with the initiative on Africa and capturing the value, we have something similar with GFANZ Africa.

So I see the movements at the three levels—the local, the regional, and the global. But basically, what we need, quoting a prominent economist, Esther Duflo, she says, well, the solutions are not very different from what the minister and my good friend Damilola just mentioned. It’s about finance, technology as you mentioned. But there is something missing, which is leadership. It’s not just the political leadership; leadership in sectors, leadership in the civil society. And we hope through this process and the world that we’ll be seeing in the road to COP28 we can really get this kind of leadership more and more materialized into action, because without that we wouldn’t have got some of the main achievement[s] that we had during the previous COPs.

DAN MURPHY: Just on this issue of financing, clearly a major challenge. And to go back to what Dr. Sultan was saying, in his speech he said, and I quote: “To achieve the Paris goal, global emissions must fall 43 percent by 2030 at a time of continued economic uncertainty, heightened geopolitical tensions, and increasing pressure on energy security, that so-called energy trilemma.” So certainly not an easy backdrop. How do you de-risk this for investors? And how do you incentivize governments to be moving money in the right direction here?

MAHMOUD MOHIELDIN: I was very pleased to see in the conclusion of this survey conducted by the Atlantic Council that there is a great interest in investing in renewables. As we know, roughly speaking between 2021 and 2022 the investments were ranging between [$]365 billion to $400 billion in the renewables. This figure needs to be multiplied. The factors are between six to seven. The good thing is that the reward for such investments are realized.

The issue of risk mitigation is the main issue of concern. And here, the multilateral development banks—the like of the African Development Bank; the World Bank, my former employer—and many others, including for the private sector, can do a great job in this area. But for that to work, I’m worried about a drift in terms of action. That holistic approach that was emphasized by Francesco, by the minister, by Damilola. You cannot really say: Well, we are going to be taking only energy and renewables and leave the rest of the story. In this time of crises—multiple crises—you need to have inclusive growth for jobs to deal with the poverty reduction. Now we are at levels much worse than what we started with the SDGs in 2015. It’s not the expected 130 million added that Damilola mentioned because of problems related to energy. We already had lost almost a decade of work in that front.

So the private-sector work is very much realized in mitigation. What we need, some sort of nudging help and some sort of packaging of the projects, especially in the frontier markets.

When it comes to adaptation, here I would really argue that the very able and competent ministers from developing economies should ask for more funding for adaptation and give the way to the private sector and don’t crowd out the private sector because the private sector need just to be leveraged in that front. And then we’ll see in the coming weeks through the replenishment of the Green Climate Fund, through the work of the loss and damage fund how the good ideas floating around the importance of finance and technology are going to be materialized in the world. That would be a great test by the time we are here again in the UAE in November to discuss these issues.

DAN MURPHY: And Damilola, I think to tie all of this together, the ultimate question that we’re trying to answer here is: How is this move away from fossil fuels ultimately going to impact socioeconomic development? And how do we ensure that that move away doesn’t cause a backsliding in socioeconomic development? Your view?

DAMILOLA OGUNBIYI: I mean, it’s important to understand the energy needs and what the energy is used for. That is very fundamental. So just from my engineering background, it’s really important to understand how energy systems work—what it means for baseload, what types of energy you need—and then to understand how people want to develop. There’s no scenario where you can actually achieve without having energy development and climate together.

And that’s what we’ve been trying to do in saying that, you know, when you’re telling countries—because this is a whole shift of an economic change in countries. You have to go and say: What exactly is your energy-transition pathway?

So if we take my country, Nigeria, Nigeria made it very clear we needed to uplift one hundred million people out of poverty and we needed to uplift our industrial base. And if you can do it clean, that’s your problem but figure it out.

So we need to take in consideration what the country wants. What we do a lot of time is take these regional approaches to a very localized problem. There’s a vast difference from the energy transition plan in Nigeria to our neighbors in Ghana, to Kenya. You know, but you say, oh, Africa as a whole. Africa is full of different countries and different nuances. Even in my country what happens in northern Nigeria is different from what happens in southern Nigeria.

So you have to understand that. That’s the just and the energy part of it. And you also understand this takes a long time. The Nigerian president at COP26 announced they will get to net zero at 2060, not 2050, because when you looked at the transport sector, the industrial sector, the oil and gas sector, it was—it just wasn’t possible. So being realistic about what a country has to do is important.

And, lastly, I have to touch on the finance again because for a country like Nigeria to get to net zero with perfect policies, perfect political stability, between now and 2060 will cost in the region of $1.9 trillion.

So we need to really be realistic when we talk about the numbers of what you’re asking countries that are easily spending 80 percent of their revenue on debt servicing—on interest-only debt servicing—how exactly they’re going to do it.

So I don’t know the solutions but I’m excited to find how we’re going to crack this. But this financing issue is really at the heart of the entire energy transition.

DAN MURPHY: We have about ten minutes left on stage here. But if anyone has a question for the minister or our other panelists, please raise your hand and we can get a microphone over to you.

It’s also your opportunity to ask some questions as well. So, by all means, if you do have a question, please raise your hand.

But to continue the conversation, I think we can also look at this other issue of just energy access as well. Eight hundred million people around the world still don’t have access to energy. As I understand it, the global population will probably reach around 9.7 billion, ten billion, people by 2050. We’re going to need 30 percent more energy than what we currently have today.

So what would be your view, Damilola first, on the biggest transition risk right now? What do you see it as?

DAMILOLA OGUNBIYI: I mean, like I said, it’s eight hundred million without access but it’s actually one billion people in energy poverty, because because you have electricity doesn’t mean you have it constantly, and what those figures don’t talk about is the 2.4 billion people that don’t have access to clean cooking as well. So when we talk about energy we have to talk about both.

I mean, the greatest risk is leaving those people behind. It’s continuing with growing demands of energy elsewhere and leaving those people behind, and that’s why energy efficiency is just so important.

And we’ve seen it around Europe. When people got high energy bills they started using less, and that’s the thinking. You know, in developing countries there’s hardly any waste because people don’t have enough to use in the first place.

So we really need to come together and look at what is the social return on investment. By giving power to these people affects GDP, affects jobs. It creates whole industries if we do focus as well with our effort for places that don’t have it.

It’s also important because if those people get electricity the way the rest of the world has, using very dirty fuels, we’re going to go back in about two decades again saying we want to transition again, and we don’t have to do that.

DAN MURPHY: Mahmoud, can you speak to that?

MAHMOUD MOHIELDIN: If I can build on that. There are two things, one at the global level. If we’re not going to be dealing with the problem that is very much upon us, it is going to derail all efforts related to finance and investment because what we see on the recession, fears of stagflation, low growth in developing economies and advanced economies, investments prospects in ’23 and ’24 are, on average, less than where they were in 2020 by 5 percent to 8 percent.

So, here, we need to see what kind of investment effort that we need to push in order to deal with the problems related to climate action as it is part of sustainable development, not an isolated one.

The second thing, that we have more than 60 percent of developing economies and emerging markets are in some form of debt distress. If you are a developing economy you are either at a debt challenge or a debt crisis or a debt catastrophe, and that cannot really be left for time to be solved. And there could be some relaxed folks around there because they say, well, advanced economies and their financial systems are protected. It’s not the global financial crisis.

Now, but that may have triggering effect as part of the supply chain and if we are going to be seeing these scattered fires that will catch the rest of the economy. So we need to have through G7, G20, it is good that both Egypt and India and the United Arab Emirates are invited as guests for the G20. So, hopefully, the issues related to priorities for climate action are going to be reflected in the discussion in India.

And then at the project level what made the news in Glasgow, what made the news when it comes to projects in Sharm El Sheikh, are the projects related to what’s called JET P projects—just energy transition initiatives—and South Africa was first. Then we heard about Indonesia. Then another project in Vietnam. And all of these projects are ranging between eight billion dollars to more than fifteen billion dollars.

What we need to see is some serious actions in these country platforms that are going to be transformational. The way that they are designed are fantastic—phasing out from fossil, investing in renewables, dealing with the impact on community. This is really nice when it comes to design.

What is missing so far is, basically, the kind of action that we need to see not just in these three countries but in the rest of the countries, including in Africa, Latin America, and Asia.

DAN MURPHY: Minister, would you like to add to that as well and, perhaps, offer a view on what you see is the biggest transition risk from here?

YASMINE FOUAD: Thank you.

I think the transition risk is that not only as Dr. Mahmoud has mentioned on the part related to the finance or the projects but also one important part on the transition risk is very much related to the culture and the mindset.

Even when you started earlier discussing the public perception, the just transition—as we need to invest in technology, we need to invest in finance, and we need to invest on plans and time and give countries that part. We need to invest in changing the mindset of the public of how can that be done.

For example, Egypt, as a country, has been facing for quite a long time the waste—the municipal solid waste—and every time we started engaging in that discussion we fail on that part on different fronts—on tackling the informal sector, on putting the laws in place, in including the private sector, in even collecting and doing more infrastructure work.

Part of the change that we have been trying to do is investing in the way people looking at the garbage and how that can be dealt with. The first part that we have done beside the law is the way we have been addressing the young people and school children in order to change the mindset and how can that be done.

Two things that we have been trying to do, first, working on what kind of green jobs could be done within the waste sector, what are they offering, and how can that be included. Secondly, working with the youth and the young children. Even we have in Egypt a very famous group of young people who clean up the Nile and they are called the VeryNile, and the moment we went down with them everyone—by the way, and that’s part of the public perception—was getting ironic and sarcastic, saying, why are you cleaning the Nile when your streets are still full of garbage. But that is taking a lot of courage and being bold to do that kind of work.

So one thing that I would recommend for a just transition is to invest in the human resources, changing the mindset and the culture, and doing that kind of and alternative jobs that could be provided and how could those jobs come at the very local level, and here I talk about the rural areas.

For an example, part of what we’ve been facing is the burning of the rice straw that comes up with the methane and with the increase in greenhouse gases and air pollution, and all Cairo would be a black cloud over two and a half month[s].

Part of what we’ve been providing is a job opportunity of the recycle of the rice straw, getting compost, getting fertilizer, but including also the women in the rural area for providing clean energy.

So that’s, I think, is very important and key because finance and technology will not solve if we keep the same mindset within the same reach.

DAN MURPHY: It’s a very good point and very important to add. Thank you, Minister.

And we have a few minutes left. Does anyone in the room have a question for the minister or any of our other panelists? I thought I’d open the floor, give you the opportunity to have your say.

All right. I think we’re OK. Oh, in the front. Sir? We’ll try and get a microphone over to you if we can.

[Pause.]

Thank you.

Q: Thank you. I would like to ask Dr. Mahmoud, how does he see the energy transition contributing to economic diversification in the MENA Region?

MAHMOUD MOHIELDIN: Well, this is a very good question that has been raised before the time of COVID and before the war in the Ukraine. And there was a very important piece that came out from the IMF about where the demand for fossil fuel in the GCC will be reaching its peak. There was some similar work as well that was conducted for Norway. And here the discussions were basically about the peak will be some year like 2027 or 2029, based on different models. And then we got this piece by Daniel Yergin on The New Map. And then, of course, the idea there is not a factor of time; it’s a factor of technology.

We are where we are today in energy and diversification of the sources of energy because the huge investments in invention in countries like the US and Europe, and development—research and development at scale in China. That’s why you see some projects, including here in Masdar, in Egypt in Benban, in Ouarzazate in Morocco with a fraction of their cost only nine or ten years ago.

But diversification here is not just about diversifying the sources of energy, but being in Abu Dhabi I’d just like to emphasize this point, that this country have been prepared for that. When Masdar was established in 2006, I listened carefully to His Excellency Sheikh Mohamed bin Zayed when he said that the day that the UAE will be exporting the last barrel of oil will be a day of celebration because we are going to be prepared for it. We are going to be with diversified sources of energy and diversified economy that’s not going to be mourning the day that we lost this source of energy. So it’s good to have this kind of mid-term, long-term planning.

The first part of the investments that are required for the GCC countries have been all those—the investments in skills. When the discussions, especially with the—we have talks about the fourth industrial revolution, about the investments in the fourth industrial revolution-related kind of investments, skilling up the population, and how to do the digitalization better, this was a source of interest here.

And then investments in areas related to the services sector and manufacturing that could be with high value-added component. There are many good examples that we can get from countries especially, from Latin America that were very much dependent on commodities and they were hit by the ups and downs of the cycles.

So it’s all, I think, there is a great deal of learning by doing in this region, and we have seen the prices of oil in the one hundreds-plus, and we saw the in the negatives during the—in the futures market in COVID, so I think it’s basically about how to diversify better. I’m not worried about the areas related to investments in fiscal and on the finance, but more are needed definitely on matters related to the skills and the human—the human capital.

But I would borrow from my good friend, Damilola, here—is basically when you talk about the region at large, there could be these kind of generic kind of suggestions. But what could be good for Bahrain may not be necessarily good for the UAE or Qatar or Saudi Arabia. So some sort of granularity on the design as we see it. In the vision for 2030, for instance, in the UAE and Saudi Arabia, the first and last line in those reports were basically starting with diversification and the last point was basically gaining the momentum from the diversification investments.

So it’s in the mind of the policymakers, and we’ll see some sort of a good pace in that direction. But that needs to be done in a faster pace and not to be misled by sudden prices in fossil fuel because we know that they don’t last forever.

DAN MURPHY: Excellent question. Does anyone else in the room—over here, sir. We’ll try and get a microphone to you. There it is over there.

Q: Hi, good morning. Thank you very much.

I’d like to ask a question to Damilola with reference to the point you astutely made that it’s very easy to talk about the urgency of things like the refugee crisis, but there is an urgency obviously that’s preexisting and is, as indicated by you, to do with how many people are living currently, whether or not they are moving across into different countries.

What would you like to see—what would you think would be an impactful way to approach this year’s COP in order to land that understanding so that action could be more effective?

DAMILOLA OGUNBIYI: Thank you. I think I’ve mentioned it a few times. It’s all about money right now. You know, there has to be a concerted effort on funding the transition in developing countries knowing that energy access is at the heart of that transition and, you know, developing industry and jobs. People don’t like to live where they are—leave where they are because they just want to. They leave because they don’t feel that they can get, you know, what they need from their locality.

And we see that, you know, the climate issue has caused lots of conflicts—of course, lakes drying up. There’s a lot of things happening, you know, on continent in developing countries that can be avoided if there was just this effort. And this effort isn’t just going to come from the private sector. It’s hard for the private sector sometimes to even fund emerging economies, not to talk about developing countries. So sometimes a public-private partnership is an understanding that you do have to fund government. And developed countries that have caused a lot of these problems do have to put money on the table because there is a social return on investment which will keep people hopefully in their localities and bring the economic growth that we want for everybody.

DAN MURPHY: Fantastic. Is there—perhaps time for one more question. Yes, sir, in the front here.

Q: Just in relation to finance, should we not be talking about the value created—so, you know, that’s a huge opportunity—rather than how much it’s going to cost.

The other aspect is—to put it to the panel—you know, we also might need to make the link between energy and health care because, from an air pollution, that’s a huge cost. And also our health system—you know, we’ve seen from COVID huge pressure. So there’s a huge opportunity to make a link between global energy and health care. So I put that to the panel. How do we deal with that?

YASMINE FOUAD: Thank you. Let me touch base on that because one part that we have been doing in COP27, two parallel global initiatives: one that was talking about the nutritions—and the nutrition and what kind of food that you need to change in the practices of the sustainable food, and what kind of emissions that are related to that; and another part on the gender as we are very much—not only interested, but believing also on the parts related to the woman is the energy, water, and food nexus. One part related to that is the more you are using your energy in making that just transition, even at the local level and at the level of the small and medium household, and using that renewable energy for irrigation and for food systems, that would make a very good package. It’s a package that will be at the heart of the human development process, but it’s a package that would strengthen the resilience of the woman, provide the food you are using the renewable energy, you are making access to water, you are working on the nutrition and the food practices. The whole package that I’m talking about is making us more resilient to the diseases. We’re making us more strength and more power. And we are making the kind of a shift in the energy transition and using it properly in a circular way.

MAHMOUD MOHIELDIN: If I can, in just a couple of seconds, the issues related to health, the impact on nature are not adequately factored in the decision making. So you—[inaudible]—the cost, but when we do the counting of—the accounting for the returns, we do only the accounting for the financial returns of the projects. If we are putting into consideration the cost to the health system, as you mentioned, to the nature at large, and many—very few even OCD countries are doing that in their natural accounting. That needs to change. The regulatory structure and the incentives need to be changed. And that would be the way in order to provide the proper incentives in addition to the nexus up road the minister mentioned, but there is an issue related to regulations.

And one very final thing: the issues about—I don’t like to leave it in a worrying part, but the issues related to forced migrants because of climate, issues related to refugees are not an issues of far distant kind of a problem. These are imminent problems. If we check what happened in this region in Yemen and Syria before the developments that we all know in 2011, it had something to do with the climate. And I refer you to the Ian Bremmer book on the—on the crises. And while I wouldn’t—[inaudible]—to the estimates of 1.2 billion refugees in 2050 by Zurich and others, but basically look now and how many millions in Pakistan, for instance, are displaced within their country, and how many of them are looking for opportunities outside Pakistan because of what they are in today.

So it’s basically we have the solutions, finance, technology. What is missing? Leadership. And basically, hopefully, through COP28 we can get some better solutions into that action.

DAMILOLA OGUNBIYI: So just very quickly, totally agree on health care. We actually launched a Powering Healthcare guide yesterday with IRENA, which is looking at how to provide power to ten thousand health facilities across the African and part of Asia as well. These are easy, deployable, renewable solutions that can be used to actually treat people, because it is estimated about a billion-point-two people, I believe, go to health-care centers and have no access to electricity, so they have no access to health care. Thanks.

DAN MURPHY: Well, this has been a fantastic conversation. I want you to thank my panelists.

MAHMOUD MOHIELDIN: Oh, thank you.

DAMILOLA OGUNBIYI: Thank you.

DAN MURPHY: Minister, Mahmoud, and Damilola, thank you so much.

MAHMOUD MOHIELDIN: Yeah. Thank you.

DAN MURPHY: Appreciate it.

MAHMOUD MOHIELDIN: Thank you. [Applause.]

DAN MURPHY: Thank you for listening. Enjoy the rest of your Sunday. And thanks again to the Atlantic Council.

Joining us up onstage next is going to be the Atlantic Council CEO, Fred Kempe, alongside John Kerry, Elizabeth Yee, and Andrew Steer. Please make them feel welcome. Ladies and gentlemen, thanks again and good morning. [Applause.]

The post The lessons of COP27 and how they can apply to COP28 appeared first on Atlantic Council.

Flagship Event Sat, January 14, 2023 • 12:01 am ET

2023 Global Energy Forum

The 2023 Forum will have a special focus on the challenge of managing energy security priorities and decarbonization efforts in tandem, including the continuing impact of the crisis in Ukraine on the energy transition. This two-day conference starts at 9:00 AM in Abu Dhabi and virtually at 12:00 AM ET (midnight).

Africa Americas Energy & Environment Energy Markets & Governance

Event transcript

Uncorrected transcript: Check against delivery

Speakers

John Kerry
Special Presidential Envoy for Climate, US Department of State

Andrew Steer
President and CEO, Bezos Earth Fund

Elizabeth Yee
Executive Vice President of Programs, The Rockefeller Foundation

Moderator

Frederick Kempe
President and CEO, Atlantic Council

FREDERICK KEMPE: So during the UN climate conference in Egypt this past November, COP27, your three organizations—so the US government, Rockefeller Foundation, Bezos Earth Fund—announced the establishment of a new tool in the global effort to keep [the] 1.5 [degree limit] alive, the Energy Transition Accelerator. Now, there’s no doubt about the scale of the challenge to limit global warming to 1.5 degrees. There’s no doubt that that challenge is immense. And as we’ve witnessed the effects of climate change permeating, a constant drumbeat of other challenges elbows out this with—when world leaders have to give more attention to the coronavirus pandemic, Putin’s criminal war in Ukraine, you know, recession, inflation.

Inaction, however, is not an option. That’s what makes the launch of the Energy Transition Accelerator at COP27 so exciting. That’s the reason we wanted to have a panel dedicated to that here at our seventh Atlantic Council Global Energy Forum. This new policy platform—which was announced as a collaboration among the US government, Rockefeller Foundation, and Bezos Earth Fund—aims to overcome one of the largest, if not THE largest, inhibitors to meeting global net-zero targets, and that’s access to finance and particularly in emerging markets.

So at the Atlantic Council, we pride ourselves on having tough, but necessary conversations—you heard that yesterday, as well—which enable us to resolve the globe’s most fundamental challenges. And the question of how to unlock that funding certainly ranks among them. So for that reason, I hope our conversation today with these distinguished individuals will illuminate a path forward and provide us with their vision for removing the barriers.

So I’ve known Secretary Kerry as Senator Kerry, now Special Envoy Kerry, but you’ll be Secretary Kerry because I—this will—this is the title that I like to connect with you most. You’ve been such a leader in all three of those realms. Everything you touch you take enormously seriously, and that’s the kickoff for this question.

When you and your partners introduced the idea of the Energy Transition Accelerator at COP27—and it might even be interesting to know how it came about—you said your aim was to put the carbon market to work to deploy capital to speed the transition from dirty to clean power. So how did this come about? Why do you feel—why did you feel that such an initiative like this one is so vital? And then maybe you can put it a little bit into the context of the COP28 we have coming at us. You heard Dr. Sultan tomorrow morning—yesterday morning. By the way, thank you for being there, Mr. Secretary. So let me turn to you to kick off this discussion.

JOHN KERRY: Well, Fred, thank you very, very much. And thanks for the Atlantic Council’s leadership and your leadership personally for a long period of time. You and I have known each other for many, many years now. And I’m delighted to be here with Elizabeth and with Andrew, and I thank them—both of them and Raj Shah in absentia—for the Rockefeller Foundation and Bezos Earth Fund daring and willingness to push the curve here, which is what we need to do.

You’re all leaders of either a business or a nongovernmental organization or some interest in this issue, and in that capacity there isn’t one of you who doesn’t have the skillset of standing back and looking at a problem when you see it and say, OK, how are we going to solve this. We are—we are here because we are problem-solvers and people who want to get things done. And I am particularly disposed to avoid situations where you’re just spinning wheels and pretending, and there’s an awful lot of pretense around this particular issue in many quarters.

We have to be more than deadly serious. I think all of you know that. This is life and death. It is existential. We have folks around the world, some of whom think they can be indifferent to it. But we’re seeing the consequences of that indifference. And if you’re content in your business or otherwise to spend literally billions of dollars, hundreds of billions of dollars to clean up after storms or to, you know, build a dike after the flood has come or whatever it is, you’re on the wrong side of this issue if that’s where you are.

You know, we have a lot of challenges around the world right now. The world is surprisingly discordant and at odds with itself in too many places, and that’s a tragedy. But it’s human-induced and it is human-solvable, and what we need to do is be more focused on the ways in which we’re going to address these kinds of issues, and none more so than on the climate crisis.

So this really came about because of reality. I was traveling last year around the world and having many, many different meetings to try to gin up ambition, which we did, by the way. We succeeded in ginning up ambition significantly in Glasgow, building on what we did in Paris, and we are now—and we have built up some ambition out of Sharm El Sheikh and now we need to meet the reality that this is the year of a stock take in which everybody’s going to be looked at pretty carefully and it is the year also during which we have coming at us the question of loss and damage and how do you begin to manage that more effectively, and so there’s a lot at stake.

So what I found in my travels everywhere, [universally], around the planet, is not enough money is being put on the table to solve this problem. We’re either not trying to do it or we’re trying to do it on the cheap, and the result is that we’re not doing it. We’ve never had the full measure of the one hundred billion [dollars] that was promised in Paris and I—you know, I’m sorry that our political process is such that that hasn’t been possible.

But we’ve put a lot of money on the table. We put $94 billion last year out of the Pittsburgh energy meeting—$94 billion mobilized within three weeks put on the table as real money to go to less developed country initiatives. We don’t get credit for that, no credit in our system which says you’ve got to put a hundred billion [dollars]. So we have 94 billion [dollars] but it doesn’t count towards a hundred [billion dollars.]

So what I’m trying to say is, folks, the system is broken in terms of how we’re trying to fix this and we need to respond more effectively. When I met with Macky Sall, the president of Senegal, or I met with Tshishekedi, the president of DRC, and I met with President Buhari in Nigeria, to a person they said, you know, we’d love to be able to not have to exploit our gas. We understand the challenge. But I’ve got people who don’t have electricity. I need to be able to grow my economy. I need to be able to have my country share in what the rest of the world has and to build out community and to build out capacity. And that was to a person, and they would say, you know, can you help us with the build-out of our renewable energy structure or new grid or whatever it is.

The answer is no, we can’t, because we don’t have the money. Very few people—no government in the world has enough money to deal with what everybody is telling us we must do in order to deal with this crisis. What is that?

Well, the UN finance report, the other individual finance reports, all say that to have this transition effected adequately to meet the challenge of keeping 1.5 degrees as the limit of warming on the planet we’re going to have to invest a minimum of about four trillion dollars a year for the next thirty years in order to build out the grids, deploy the renewables, transition from gas turbine, whatever it is, and be virtuous in the way we are providing power to our businesses and homes, in the way that we are propelling our vehicles, et cetera.

Energy. Energy is the single, you know, summary of how you cure this problem. Why? What is the problem? The problem is emissions—methane emissions, [carbon dioxide] emissions, the other greenhouse gas emissions. Emissions. Emissions is pollution, and for some reason we’ve kind of turned our backs on the responsibility that we fought for in the 1970s and 1960s to hold people accountable for pollution.

So the science is clear on this. There’s no debate. I don’t care where you come from in the political spectrum. There is no debate that emissions that come from the way we power our societies and propel our societies, those emissions are damaging and we do not cure this problem if we do not meet what the scientists have said, which is reduce the emissions at a rate that allows us to minimize the damage.

And the science said that—in 2018, the scientists said to us not that we could eliminate the crisis but that by moving to hold 1.5 degrees we can avoid the worst consequences of the crisis. Read it carefully. The worst consequences, not the crisis completely.

So how do we do that? Well, if we don’t have money, we’re not willing to invest, we don’t do it. It’s that simple.

So the money part we’ve been working on with Rockefeller and Bezos Fund to figure out how could we de-risk the deals that are out there to provide energy, to deploy renewables, to do this transition. But how do we de-risk it and create bankable deals? Because the trillions that are in the background waiting to be invested by the largest financial institutions—in fact, all financial institutions in the world—would love to be able to invest. But there are hurdles—political hurdles, currency hurdles, various natural disaster hurdles, and risks. We have to eliminate those.

So what we did was sit there and say, OK, how are we going to get the cash to be able to grease the skids to make the bankable deal come together so we can get a [[power purchase agreement (PPA)]. That’s a twenty-five-, thirty-year PPA, and you can actually go to the market and finance what you’re trying to do. That’s the key.

And what I landed on with the encouragement of a number of people, one of them, many of you know, is Anne Finucane, who wrote about this two or three years ago, talking about how there is a distinction between some of the exploited credits or offsets that have existed versus virtuous ones.

And what we’ve done is sit down and put together a set of guiding principles, which we’re releasing today, and we’re pulling together a group of people, some of which are announced today but it’s not a complete list—there are more people that are going to be added to that—to have a broad cross-section of input so that we are putting together, according to our principles, a mechanism that can attract some cash that will be used for limited purposes, and I will come to that in a moment.

But what this is trying to do is make sure that we do this in the near term, we do it in an inclusive way, which is, you know, high—that we’re delivering on the broader sustainable development goals, that we’re including people who are affected, sometimes left behind in this process, that we’re protecting their interests, that it’s comprehensive, that we are supporting ambitious power sector-wide transition, that it has high integrity.

Some offsets and some credits were not high integrity and they’ve given a bad name to the idea that there might be a way in which you can attract some capital and still reduce emissions and avoid the worst of, you know, some avaricious practices out there.

And we also want this to be supplemental. This is not in place of any obligation to put public money or fulfill the commitments that we have asked for, and it is to be transitional, meaning it’s not forever. It’s not a fifteen-, twenty-year bonanza that somebody’s going to say, well, I can buy a credit and then I don’t have to do X, Y, and Z. No. Sorry, that’s not the way it is.

Everybody is going to be responsible for living up to net zero and meeting the measurements. But we believe you can have high integrity, accountable transparent credit, which will help us to be able to put some money on the table and the money is used in the following way.

When we put together the deal with Indonesia, which we negotiated for a year and a half or so, we had to figure out how do we close some coal plants, how do we now accelerate the transition to the renewables that we want deployed, and how do we do this in a way that’s transparent and virtuous and so forth.

Well, we found that way and we made an agreement with X amount of renewables that are going to be deployed with the pace of closing of coal and transitioning, and not just closing excess capacity but really getting at the problem of emissions.

And that’s our goal here, folks, and I’m convinced for the following reason. It is accountable to the naked eye. There are only two purposes for which we will allow someone to be able to buy a credit: one, to be closing down or transitioning existing fossil fuel facility that is providing power, and two, for the actual deployment of renewables that will replace current dirty sourcing.

That’s it. So you can see it built. You can see it coming online. You can measure what is happening here. And if you do this correctly, which we are determined to do, we can get a certain amount of cash now because some companies have tried hard—not enough yet—to begin to implement their programs for net zero by 2050, correct? And so you may have a company—a large tech company or somebody—that has gotten to 80 percent of their scope-one reductions, but then they get stuck. Why are they stuck? Not their fault; they’re stuck because there aren’t enough electric vehicles to be able to buy to get your fleet to be electric so you’re reducing emissions and living up to your goal, or because they’re—you know, there isn’t a grid, you don’t have a smart grid and you can’t tap into the smart grid, therefore you don’t have a physical way of using your power the way that meets the standard.

So we have to be smart. We can’t sit there and say, well, tough, you know we’re going to hold you accountable anyway. Nobody is living by a law to reduce—to hit 2050 net zero. There’s no law. People are doing it because they’re exercising a sense of public responsibility. And if we turn around and say to them we’re not going to listen to your problem or we’re not going to try to address your problem or we’re not going to give you an opportunity to be able to get where you’re trying to go, they’re going to say: Well, the hell with you. Why the hell do I try to do this? It’s easier for me to avoid the crisis of an NGO criticizing me because they say what I’m doing is violative of green principles when I’m trying to be a good citizen. I might as well opt out, and I don’t get my board of directors all wound up in what’s going on.

So, long story short here, folks—sorry about this—but we need to find a virtuous way of getting money into the system so that we can transition faster. That is exactly what this is for. And if we can get—and here’s why. In Egypt, we cut a deal with the Egyptians called—it’s the NWFE program, where they are going to shut down five gigawatts of gas-provided power, transition that gas to Europe to help them in the context of Ukraine and the problem they have, but they’re going to shut down eleven gas turbines that are polluting and deploy ten gigawatts of renewables. Wow, fifteen net transition of power and emissions. And the way we made it happen was we put up money. We did find some concessionary funding. Very hard. It was very hard, but we got about 500 million total in the end. We put thirty-five million in cash, some lending. The EBRD put in some money from a trust fund. We got money from Germany. Germany really stepped up—thank you, Germany—and put major funding on the line in terms of a very concessional loan. And so, in the end, that money facilitated the de-risking and allowed us to be able to get the deal, which is a ten-billion-dollar expenditure to be able to deploy new energy.

Now, we can’t take a year and a half to do this one by one by one. So what we want is to create a means by which we’re attracting capital to the table which will be concessionary. They’re buying the credit. They get a certain period of time where that credit is going to help them meet their goal, but it helps us meet our goal. It actually results in a reduction of emissions. And I don’t see how anybody can be critical of real reductions in emissions because that is our challenge right now. That’s how we win this battle.

So as I say, it’s temporary. We don’t know yet this consultative group which is going to be coming together, and some were announced today. More will be announced in the next days. But it’s going to be broad-based, jurisdictional, and help us to be able to put this together in a way that has true environmental integrity but works. So SBTi, VCMI, these different players will be at the table, but so will business. So will other people who need to make it work.

So thank you. I know I went on a little long, but I—

FREDERICK KEMPE: Mr. Secretary, I’m just so glad this audience got to hear that. Ladies and gentlemen, excellencies, you just heard one of the most powerful advocates and executors for creating a better world. So thank you so much for that opening statement laying out this really, really exciting plan.

Let me—and you know, four-trillion-dollar need next thirty years. Question of how to de-risk, how to create bankable deals. You laid out some of the guiding principles. We’re going to be looking forward to seeing the rest and the people who are engaged.

Let me turn to Liz. So, as all things, these things become acronyms, so it’s already become ETA, so the Energy Transition Accelerator. How can it be designed to promote a just transition from fossil fuels to clean energy? And so that’s, ultimately, the goal. And then so that fossil fuel workers and vulnerable communities are protected.

Also, just listening to Secretary Kerry, you know, Sharm El Sheikh wasn’t that long ago. You know, it seems like you’ve made quite a bit of progress. Can you talk about the progress you’ve made since then and the progress you want to make, like, going up to COP28 as well? Yeah.

JOHN KERRY: Liz, why don’t you talk about it a bit and then I’ll add.

FREDERICK KEMPE: Yeah. Yeah. Yeah.

ELIZABETH YEE: So I think, you know, what—and thank you for those inspiring and good, excellent framing comments. I mean, I think from a foundation perspective we draw a lot of inspiration and leadership from your vision, and are very, very supportive of it because—you know, I mentioned this yesterday in my remarks—I think for the foundation one of the things that we care so much about is making sure that we put humanity at the center of all of our efforts. That is the core business that we are in. And this, to me, when we were looking at this opportunity with you, enabled us to do that because it enabled us to solve the challenge that we saw around project development, a critical need on decommissioning and reducing emissions, as well as putting people at the center of what we need to do.

And as we work on this together, I think we really want to make sure that the ETA does three things. And I just wanted to share that.

So, first, the first order of work is really around how we actually do these country-driven energy-transition strategies and making sure that we do it in a very high-integrity, jurisdictional way. And I mentioned those critical words because I think that is also a key differentiator in what other frameworks have been out there. And so, for us, what we’re trying to do is just make sure that we design a really good high-integrity process and make sure that we actually put the guardrails in place to make sure that workers, in particular, are front and center in the design of it.

And we can do a lot by looking at existing projects and programs that have done this. You know, one of the things that I know we’ve been working on with the Global Energy Alliance for People and Planet, which includes Andrew and the IKEA Foundation—and Joseph is here, as well, today—is working on the Komati power plant in South Africa. And one of the things that GEAPP and the foundations and we have done is work with them—the local electric utility, the local university there—to provide training and upscaling of existing workers that are at that plant, but also communities so that we’re building capacity around new green jobs for those communities. And that is a critical part. I think Her Excellency and Damilola and several people on the prior panel mentioned that, and that is a key part of the energy transition and it will be a key part of the ETA.

I’d say second is just making sure that we allocate a certain percentage of the carbon credit towards adaptation purposes. Not enough money goes to adaptation. That is a critical area that we know needs to happen. And we’ve seen that as an effective mechanism in other similar programs.

And then the last—and to your point, Secretary Kerry—is that we have a process that’s transparent and, most importantly, inclusive. And so that is why I think—and if you’d like to speak about it more, perhaps we can talk about the high-level group that we’ve pulled together to make sure that we’re getting a cross-section of people from around the planet—the best minds private sector, government, public sector—to help us develop and design this in a way that has the integrity that we are seeking to be able to deliver.

FREDERICK KEMPE: So let me come back to you in a minute, Secretary Kerry, on that question of how much has been achieved and what should be achieved. Let me go to Andrew first for the point of view from the Earth Fund—the Bezos Earth Fund.

You know, this is an interesting three groups to come together. So why did you decide to join this initiative? Why do you see it as vital? And how do you actually make sure that the ETA delivers the high-quality emission reductions, and that they contribute rather than distract companies from genuine climate action if that’s a danger at all?

ANDREW STEER: Well, look, first, Fred, thank you so much for this event. I think the Atlantic Council’s Global Energy Forum each year has become a really central driving, agenda-setting place to come. So thank you very much.

Why did we join? Well, when Secretary Kerry gives you a call and says, for heaven’s sake let’s get on with it, you don’t say, well, let me think about it. You say, absolutely we are going to jump right in.

We’ve all seen the—and thank you for your inspiring words, Secretary Kerry. I can be brief because I think you’ve said it so much better than we would.

We’ve all seen the numbers: 4.2 trillion per year has to be spent on the future of energy, so to speak. That’s a tripling of what we need. We’re incredibly excited when we see coal-powered electricity-generating plants closing, aren’t we, because that’s going to be necessary. We need to see 925 closing every single year. So when you hear, oh, here’s one, yeah, now you’ve got another 924 to do each year between now and 2030.

Now, some people would say: Well, why do you need—why do you need carbon credits? I mean, isn’t it attractive already to invest in renewable energy? Well, yes, it is. Plain fact of the matter is it’s not happening at anywhere near the pace that’s required. And if you’re a country that’s really willing to show leadership—as South Africa has, Indonesia has, Vietnam is, various other ones—you actually need some help. And Secretary Kerry and other political leaders have played an amazing role with the leaders of these countries actually taking bold measures. Now we need to, if you like, empower those bold measures. And so you do need carbon markets.

Now, why [are] carbon credit markets not working at the moment for energy? Because there’s something puzzling going on because there’s been far more work done on the nature side of carbon markets with regard to developing/emerging countries than energy. And actually, energy is more intuitive, isn’t it, because actually doing forest protection and restoration is actually more complicated. But far more work has been done on that. Far more money is flowing on that than to energy. So we’ve got to address that, and that’s what this is all about.

Why are private companies not investing at the moment? It’s because it’s too complicated and they say: Look, there are so many pitfalls. Quite frankly, we put some money in, someone’s going to grumble there’s leakage or it’s low quality. What’s the point? We’ll be accused of greenwashing. And what we’re trying to do is say: Actually, there is a sensible path forward. There is that sweet spot between, you know, on the one hand, you know, making sure you get the standards right; on the other hand, making sure you get the volumes of money right.

And so what we’re trying to do is, I think, terribly exciting. This is not just us working on our own; this is bringing in the entire global architecture, if you like.

At the moment, as you know, greenhouse-gas protocol; that’s how you measure greenhouse gases. Then there is CDP; that’s where you register what your greenhouse gases are. Then there’s SBTi, Science Based Targets Initiative; that’s how you set your targets. Then there are various standards-setting—like, you mentioned it yourself, Secretary Kerry—VCMI. That’s looking at the demand side. That basically says: If you’re a private company and you want to get credit, you’ve got to be already on a good downward path. You’ve got to be signed up to science-based targets.

Then there’s something called ICVCM. I hope you’re keeping up with all of this. That’s on the supply side. And that basically says: Look, if you’re going to invest in an investment that’s going to actually have some credibility, it better be high quality. And Liz mentioned the issue of what’s called the jurisdictional approach, which is very big on the—on the nature side. That means you can’t just do a little project here because someone might cut down the forest there; you’ve got to look at the whole jurisdiction. Same thing applies [to] energy. No point decommissioning one coal plant and investing in renewable energy if someone else builds another coal plant over here. So governments need to be part of it. We need a jurisdictional approach.

So what we’re going to do, every single one of those alphabet soups I just mentioned, every single one of them is on the advisory council, the consultative group, together with many more—the sort of Brian Moynihans, head of Bank of America; Catherine McKenna, who wrote the report, you know, for the secretary-general; many leaders from the developing world are on that. At 9:15 this morning our time, a press release came out with some of those names already. Do look at it.

It’s great to see Fred Krupp in the audience here because he’s the president of EDF, the Environmental Defense Fund. They, together with the Center for Energy—Center for Climate and Energy Solutions, will be providing, if you like, the intellectual driving force and managing this.

So this is an incredibly exciting venture. We would urge you to sort of join with us. Particularly if you’re on the investment side; particularly if you’re a company that’s thinking, my goodness me, I wouldn’t—I would really like to get engaged in this; we’d love to talk to you.

So we’re going to be very tough on the—if you like, the standards side. We’ve got best nongovernmental organizations in the world, best developing-country leaders that are demanding all of the kinds of safeguards that Liz talked about. But at the same time, we need ambitious providers of funding that are not going to be providing the funding through this as an alternative to doing what they need to do in their own scope one, two, and three, but as a complement to that. Because even if you’re on that wonderful trajectory coming down to net zero in your own company, you’re still emitting in the meantime some carbon, and this can actually help compensate for that.

FREDERICK KEMPE: Thank you for that, Andrew.

And, Mr. Secretary, what’s very exciting about this, obviously, is what you’ve underscored, which is the measurable results side of it. So let me go back to the question that I posed to Liz about it’s been a short time since Sharm, what have you achieved? It’s not that long of a time before COP28. What do you want to achieve by then?

And I guess there’s a third question within that, which is this is a really promising strategy to scale climate finance, but 4.2 trillion, how much of it do you want to do there? So in other words, what are the—how does this fit into other promising strategies?

JOHN KERRY: Well, it’s an integral part of it, Fred. And let me describe part of the challenge here, folks, because it’s not simple.

We’ve been wrestling with development, I mean, for as long as all of us have been alive, and there are special challenges in development. I mean, when you go to an African country where only 17 percent of the nation has power, you don’t have a particularly large pool of paying customers to be able to support a long-term PPA at market rates. I mean, it just doesn’t work because you don’t have enough—in some places, they don’t even collect revenue for the electricity that’s being used. And so you have to build structure in certain places.

Now, that’s not our central problem. That’s a moral and political challenge in the sense that, you know, you can’t be asking these countries to defer their future completely. They want to [be] able to develop. They have a right to be able to develop. We need them to develop. It’s important [for] stability on the planet, relationships, and so forth. But we’re going to have to be able to provide a concessionary structure for a period of time so that you can then get enough of a revenue stream that you’re able to support something in the marketplace. That’s one grouping.

Fortunately, that is not the grouping that is most important to the solving of the climate crisis. Why? Because they are an infinitesimal amount of the problem currently. What we want to do is avoid them becoming more of a part of the problem, because if you add up all the developing world and it goes crazy on gas, for instance, in the next ten years, we’re in trouble. We’re just negating everything else we’re doing out there.

So the way we’re looking at it is—and I’ve said this many times; many of you may get tired of me saying it, but to me, it’s the fundamental organizational principle. It’s the reality around which we have to organize ourselves, as I said earlier. That is, twenty countries, twenty economies, equal 80 percent of all the emissions. If those twenty countries will get their act together, we win the battle. We can win the battle. And that’s why we focused on Indonesia, because it’s one of those twenty. That’s why we’re focusing on Brazil, one of the twenty. That’s why we—Vietnam’s not yet one of the twenty, but it’s in the next ten, so we’re focused on Vietnam because there’s too much coal and we’ve got to begin to transition them.

And in each of those cases—and we focused on Mexico, which is in those twenty. And President AMLO, thanks to, I think, the good meetings we had over the last year and a half, has really changed and come around and said we’re going to deploy renewables. It wasn’t in their lexicon a year-and-a-half ago, and now they’re talking about thirty gigawatts of renewables deployed, increased hydro, and for the first time really beginning to try to exploit their geothermal—which, by the way, they have active volcanoes. This is a place that has extraordinary capacity in geothermal. So there’s money on the—you know, being left off the table here—left on the table—that people could make if you would begin to get all of that moving in the right direction.

So that’s what we’re trying to do now, is get the larger economies in a place where they are actually reducing emissions. And as I said earlier, folks, this is not a forever program. This is not a sort of you can buy your way out for the long term. This is sort of a delay—ten years, wherever we land. This is the kind of decision that this consultative group has to help us make. Is it—is it till 2030 or is it till 2035 or something? But you’re still going to have to be responsible to meet net zero by 2050, and that’s going to require every company to still do scope one, scope two, scope three, et cetera. So what we’re trying to do is get as far as we can, Fred, in the next few months so that, hopefully, we could have a few pilot efforts that are actually out there working—we’ve arrived at pricing and at the mechanism and so forth—and we could come to the UAE at COP28 and have an implementable program that goes forward.

Now, this is not the only thing we’re doing. Of high priority for President Biden is MDB reform, multilateral development bank reform. We must find the way to be interpreting the charters correctly so that we could have a significant amount of additional money that is available for concessionary lending, which would make an enormous difference. And both of you—your foundations, the Rockefeller and the Bezos, are invested and interested in helping to get that kind of reform. And then whatever else we can find as a way of getting into the trillions that need to be deployed.

But those twenty countries do have the ability to provide revenue for these transactions and they can get market-based deals going. I mean, we’re looking at PPAs that can be struck with Indonesia that will help in this transition. And I think that the market is really critical to this, which is why we’re looking at a market-based component of how you’re going to solve this problem.

The trillions of dollars that were assembled—you know, Mark Carney did a lot of really hard work assembling the GFANZ and so forth, but that money is investment money. It’s not giveaway money. And investment money means you’re going to have to be able to get a return on that investment because you’re accountable to clients. You have fiduciary responsibilities and you can’t just ignore them. So we have to harness the combined efforts of the regulatory structures which look at disclosure, for instance. I mean, it’s very hard for me to understand how anybody could be fulfilling their fiduciary responsibility by ignoring [the] climate crisis and allowing your supply chain and your entire business to be disrupted by damage and by future interventions of mother nature. That doesn’t fit, in my judgment.

So I think we’re due for a real reckoning here with how the marketplace is looking at these challenges and this reality. We can’t solve the climate crisis without—and I want to—don’t ever edit me at that word, “we can’t solve the climate crisis”— without being able to marshal these sums of money, and we can marshal them. This is the largest market the world has ever known, folks, the clean-energy market, the transitional market. The building out of smart grids, new transmission lines, putting in place the infrastructure to support electric vehicles, building out the hydrogen network, I mean, all of this is money-making. It’s how we built our nations. It’s how we have employed millions of people. We’re just transitioning again as we transitioned, frankly, in the original industrial revolution.

And we have to be excited about this because it is millions of jobs. Fastest-growing job in the United States of America two years ago, three years ago for several years was wind turbine technician. Second-fastest-growing job was, unfortunately, nurse practitioner because of COVID. Third-fastest-growing job was solar panel installer. There are extraordinary opportunities here if we will get our act together. And many, many, many companies have now come to that conclusion and recognize that, you know, you can marry the future here. You can do this in a way that provides a planet that is cleaner, healthier, and safer.

FREDERICK KEMPE: Thank you, Mr. Secretary.

So, Liz, I’ve got a signal—I’ll get a signal from somebody whether we’re wrapping up. We have some time. But I think I’d like to be able to ask you a quick question and Andrew a quick question, then close out.

But I want to go back to what Secretary Kerry talked about at the very beginning about how to de-risk it and how to create bankable deals. That’s the world you come from Liz. You can share with the audience a little bit what your job was before taking on what you’re doing now because it fits perfectly with this. So how do you design an ETA to ensure de-risking capital flows upfront for the most urgent fossil fuel transition projects in emerging markets, from the banker’s perspective?

ELIZABETH YEE: Thanks, Fred, and just to come clean on that, I think, in my old life before I got a chance to work in philanthropy, I spent about twenty years as a public power infrastructure banker at a firm called Lehman Brothers, which some of you may have known.

But I think one of the—I think that’s what’s really interesting to me in this regard because there is a lot that needs to be done in terms of developing the financial structure, and that is why, as Andrew said, we need people like Anne, like Brian—all of the bright financial minds we’ve got—Chris Leeds on our team, as well—helping us think about how do we actually marry the forces of banking and markets together since that will be such a critical element of the design.

And, you know, I think there is—I’ll just say a couple of things. One is I want to acknowledge that there are a number of other existing structures that people are working on in the market today, so Asian Development Bank has its energy transition mechanism; you know, the Climate Investment Funds has its own fund. So I think we want to learn from what other people have already done and have started doing so that we can build on top of that.

I think we also need to take a look at some of the interesting ways that we can securitize and use that market to be able to look at the forward opportunities there, to basically think about how then we can take those revenues that might come later or those opportunities and financial gains that come later and put them forward because, as the secretary said, we need the resources upfront to developing countries today to be able to both decommission and create the infrastructure asset on the other side that allows them to continue building and growing their economies.

So we’ve got a lot of financial structuring work to do. That is why it’s a critical work stream of the ETA and the path that we are going to take going forward.

So stay tuned, but I think, as Andrew said, you know, this is a whole-of-planet effort. We need your engagement, and we would encourage and welcome it as part of the work going forward, so thanks.

FREDERICK KEMPE: Terrific. Please.

JOHN KERRY: One thing just very quickly. The IRA is going to make an enormous difference in this challenge, and I know some people are reacting, oh, my gosh, there are some provisions in the IRA that are kind of protectionist and maybe get in the way. And I think we’ll be able to resolve and work through those. I really do.

But the bottom line is by putting literally hundreds of billions of dollars on the table for further R&D and development, and deployment of initial startup initiatives, we’re going to help develop supply chains where they don’t exist. And we’re going to help accelerate—I mean, that’s an enormous amount of concessionary funding that is going into—right now in the Department of Energy we have billions of dollars that are going into companies, into projects. It’s going to help close the gap here in terms of what is fundable and financially—you know, can work.

And I think it’s going to change things. We’re going to have—it will help with the deployment of green, or blue, or, you know, turquoise hydrogen and so forth. I think that exciting things are going to be happening.

And rather than having some other entities complain and say, well, you guys have now changed the market and you’re going to shift things, everybody should join and do the same thing. That’s how we accelerate to the four trillion dollars, folks. We shouldn’t be sitting there saying, oh, my god, let’s go backward. Everybody should join up and do the same thing. Put your money into this development. Put your money on the line in terms of research and development, and that’s how we’re going to win this battle, I’m convinced.

ANDREW STEER: Amen.

FREDERICK KEMPE: Thank you, Mr. Secretary, and the Inflation Reduction Act—I got a good briefing just yesterday on what it does alone for hydrogen, and so that’s pretty exciting.

So finally, Andrew, I think this—we’ll wrap up with this question. When this platform was launched, you stated there were very knotty—meaning K-N-O-T-T—questions that the group would have to grapple with.

What are the knottiest, and how are you—and are you grappling with them?

ANDREW STEER: Well, first, who wants to solve easy problems? These are difficult problems. And that’s why we’re sort of stuck, we’re sort of constipated at the moment. I mean, there is plenty of money out there, but it’s not going to the right place—plenty [of] money in the world, and it’s not going in the right place.

So what are they? There are on the both supply and the demand sides, standards that are honorable, including human standards, environmental, ecological standards, and so on. On the demand side, that’s—you know, a company has to honor its own scope one, two, three emissions. Those are difficult problems.

But there are other difficult problems which we’re going to be grappling with, which is going to be really exciting, you know. How do you set the price? Where does the money go? And this is your point, Liz, about de-risking it—which also Secretary Kerry mentioned. The great thing about voluntary carbon markets is they work for you twice. You put a hundred million dollars into this. That buys renewable energy in and of itself. But in addition to that, it changes the entire calculus for a deal, as Secretary Kerry says. That hundred million dollars can unlock two hundred—several billion dollars if you do it right. But you have to then actually make sure the money is injected in the right way.

So those are some of the knotty problems, but they’re exciting. And, you know, someone—I had the privilege of running one of the best environmental think tanks in the world, the World Resource Institute, and we were leaders in standards. Environment NGOs have done us a huge favor setting high standards, but sometimes in this very, very high-stress, high-pressure, need-for-action-today world, sometimes almost too thoughtful, and sometimes we slow things down too much.

So what we’re trying to do is unlock that, get the standards that are just as high, but actually then unleash, you know, a flow of funds that can make a huge difference.

JOHN KERRY: As a result of Andrew’s alliterative description, we now understand that the ETA is the Colace or Senekot of a movement, right?

FREDERICK KEMPE: That does seem to be a really good place to end this.

So Mr. Secretary, Liz, Andrew—what a wonderful conversation. This could go on a lot longer. I’m sure people in the audience who would like to contribute to this in one way or another will catch you and provide you ideas. And we can help connect you all, as well, with the ETA and with this group.

But thank you so much for being here. Thank you for what you are doing—

JOHN KERRY: Ten seconds?

FREDERICK KEMPE: Please.

JOHN KERRY: Everybody here, your organizations, your countries—whoever can speak out—Alexei Navalny’s family has made it clear he is very ill and being held in prison without medical care that he needs. So anybody who could speak out and make it clear that the world believes that even prisoners should be given the medical care that they need—and hopefully we can make a difference.

FREDERICK KEMPE: Thank you for that, thank you for being here.

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The post US climate envoy John Kerry outlines new principles for accelerating private capital needed for the energy transition appeared first on Atlantic Council.

If the world gets lucky, this could be the year fossil fuel producers and climate activists bury their hatchets and join hands to reduce emissions and ensure our planet’s future.

If that sounds hopelessly utopian, take that up with the leaders of this resource-rich, renewables-generating Middle Eastern monarchy. The United Arab Emirates is determined to inject specificity, urgency, and pragmatism into a process that often has lacked all three: the twenty-eighth convening of the United Nations Climate Change Conference, known as COP28, from November 30 to December 12.

To kick off 2023, the oil and gas and climate communities gathered this weekend for the Atlantic Council Global Energy Forum, launching the annual Abu Dhabi Sustainability Week. After decades of mutual mistrust, there is a growing recognition that they can’t live without each other.

Thank Russian President Vladimir Putin’s criminal war in Ukraine, and his ongoing weaponization of energy, for injecting a new dose of hard-headed reality into climate conversations. It’s seldom been so clear that energy security and cleaner energy are indivisible. The guiding principle is “the energy sustainability trilemma,” defined as the need to balance energy reliability, affordability, and sustainability.

What’s contributing to this new pragmatism is a recognition by much of the climate community that the energy transition to renewables can’t be achieved without fossil fuels, so they must be made cleaner. They have come to accept that natural gas, in particular liquified natural gas (LNG), with half the emissions footprint of coal, provides a powerful bridging fuel.

Once derided by green activists, nuclear power is also winning over new fans—particularly when it comes to the small, modular plants where there are fewer concerns over safety and weapons proliferation.

For their part, almost all major oil and gas producers, who once viewed climate activists with disdain, now embrace the reality of climate science and are investing billions of dollars in renewables and efforts to make their fossil fuels cleaner.

“Every serious hydrocarbon producer knows the future, in a world of declining use of fossil fuels, is to be low cost, low risk, and low carbon,” said David Goldwyn, the former State Department special envoy for energy. “The only way to ensure we do this is to have industry at the table.”

Nowhere is this shift among climate activists more evident than in Germany, where Vice Chancellor Robert Habeck, the Green Party leader, is serving as the pragmatist-in-chief.

Habeck, who serves as federal minister for economic affairs and climate action, has been the driving force behind extending the life of the country’s three nuclear plants through April and in launching Germany’s first LNG import terminal in December, with as many as five more to follow.

“I am ultimately responsible for the security of the German energy system,” Habeck told Financial Times reporter Guy Chazan in a sweeping profile of the German politician. “So, the buck stops with me. … I became minister to make tough decisions, not to be Germany’s most popular politician.”

Some climate activists were aghast this Thursday when the UAE named Sultan Al Jaber, the CEO of the Abu Dhabi National Oil Company (ADNOC), as president of this year’s COP28.

“This appointment goes beyond putting the fox in charge of the henhouse,” said Teresa Anderson of ActionAid, a development charity. “Like last year’s summit, we’re increasingly seeing fossil fuel interests taking control of the process and shaping it to meet their own needs.”

What that overlooks is that Al Jaber’s rich background in both renewables and fossil fuels makes him an ideal choice at a time when efforts to address climate change have been far too slow, lacking the inclusivity to produce more transformative results.

Full disclosure: Al Jaber’s companies ADNOC and the clean-energy innovator Masdar (where he was founding CEO in 2005 and is now chairman) are sponsors of the annual Atlantic Council Global Energy Forum in Abu Dhabi, a fact that has given me a close-up look at his years-long commitment to reducing emissions and promoting renewables.

Al Jaber also represents a country that despite its resource riches has become a major nuclear power producer, was the first Middle East country to join the Paris Climate Agreement, and was the first Middle East country to set out a roadmap to net-zero emissions by 2050.

Over the past fifteen years, the UAE has invested forty billion dollars in renewable energy and clean tech globally. In November it signed a partnership with the United States to invest an additional one hundred billion dollars in clean energy. Some 70 percent of the UAE economy is generated outside the oil and gas sector, making it an exception among major producing countries in its diversification.

Sheikh Mohamed bin Zayed al Nahyan, president of the United Arab Emirates, has explained his country’s approach this way: “There will be a time, fifty years from now, when we load the last barrel of oil aboard the ship. The question is… are we going to feel sad? If our investment today is right, I think—dear brothers and sisters—we will celebrate that moment.”

Al Jaber, speaking to the Global Energy Forum, captured his ambition to drive faster and more transformative results at COP28.

“We are way off track,” said Al Jaber.

“The world is playing catch-up when it comes to the key Paris goal of holding global temperatures down to 1.5 degrees,” he said. “And the hard reality is that in order to achieve this goal, global emissions must fall 43 percent by 2030. To add to that challenge, we must decrease emissions at a time of continued economic uncertainty, heightened geopolitical tensions, and increasing pressure on energy.”

He called for “transformational progress… through game-changing partnerships, solutions, and outcomes.” He said the world must triple renewable energy generation from eight terawatt hours to twenty-three and more than double low-carbon hydrogen production to 180 million tons for industrial sectors, which have the hardest carbon footprint to abate.

“We will work with the energy industry on accelerating the decarbonization, reducing methane, and expanding hydrogen,” said Al Jaber. “Let’s keep our focus on holding back emissions, not progress.”

If that sounds utopian, let’s have more of it.

This article originally appeared on CNBC.com.

Frederick Kempe is president and chief executive officer of the Atlantic Council. You can follow him on Twitter @FredKempe.

THE WEEK’S TOP READS

#1 A new world energy order is taking shape
Rana Foroohar | FINANCIAL TIMES

In this smart piece, the FT’s Rana Foroohar warns of a China-led energy order and how that could shift the global balance of power.

“What does that mean in practice?” Foroohar asks. “For starters, a lot more oil trade will be done in renminbi. [Chinese leader] Xi [Jinping] announced that, over the next three to five years, China would not only dramatically increase imports from [Gulf] countries, but work towards all-dimensional energy co-operation.”

“This could potentially involve joint exploration and production in places such as the South China Sea, as well as investments in refineries, chemicals, and plastics. Beijing’s hope is that all of it will be paid for in renminbi, on the Shanghai Petroleum and Natural Gas Exchange, as early as 2025.” 

This is something any serious thinker on energy should bear in mind. Read more →

#2 Ships going dark: Russia’s grain smuggling in the Black Sea
ECONOMIST

In this thought-provoking narrative, the Economist highlights the growing economic potential of the North Sea, particularly as a producer of wind power.

While the Economist acknowledges significant hurdles, from the vagaries of weather to the threat of cheaper competition in Southern Europe, it also writes that if “these problems can be overcome, the new North Sea economy’s impact on the continent will be momentous.

“As Europe’s economic epicentre moves north, so will its political one, predicts Frank Peter of Agora Energiewende, a German think-tank. Coastal Bremen, one of Germany’s poorest states, could gain clout at the expense of rich but landlocked Bavaria. At the European level, France and Germany, whose industrial might underpinned the European Coal and Steel Community, the EU’s forebear, may lose some influence to a new bloc led by Denmark, the Netherlands and, outside the EU, Britain and Norway.”  Read more →

#3 Time is not on Ukraine’s side
Condoleezza Rice and Robert Gates | WASHINGTON POST

Former Secretary of State Condoleezza Rice and former Secretary of Defense Robert Gates, two of the most perceptive international strategists out there, deliver a compelling argument for how President Joe Biden’s administration should do more for Ukraine now.

The only way to avoid Russian domination of Ukraine, they write, “is for the United States and its allies to urgently provide Ukraine with a dramatic increase in military supplies and capability — sufficient to deter a renewed Russian offensive and to enable Ukraine to push back Russian forces in the east and south. Congress has provided enough money to pay for such reinforcement; what is needed now are decisions by the United States and its allies to provide the Ukrainians the additional military equipment they need — above all, mobile armor.”

“Because there are serious logistical challenges associated with sending American Abrams heavy tanks, Germany and other allies should fill this need,” they write. “NATO members also should provide the Ukrainians with longer-range missiles, advanced drones, significant ammunition stocks (including artillery shells), more reconnaissance and surveillance capability, and other equipment. These capabilities are needed in weeks, not months.”

One hopes Biden is reading. Read more →

#4 Robert Habeck was Germany’s most popular politician. Then he took office
Guy Chazan | FINANCIAL TIMEs

Don’t miss Guy Chazan’s brilliant, sweeping profile of German Vice Chancellor Robert Habeck, who oversees his country’s energy and economic policies, and his struggle as a Green politician to diversify resources away from Russia.

“As the energy crisis continued, traits that distinguished Habeck from other politicians came to the fore,” Chazan writes, reporting on Habeck’s willingness to make tough decisions. “On the day of the invasion last February, amid rounds of emergency meetings, he found time to visit Andrij Melnyk, Ukraine’s ambassador to Berlin. ‘That was the most important meeting I had since the war began,’ Melnyk told Der Spiegel, ‘because he offered real human sympathy.’ Habeck also spoke openly about the uncertainties the government faced.”

Read this for a profile of the type of leader who, understanding the importance of compromise and pragmatism, will be vital in making the energy transition a success. Read more →

#5 American Democracy is Still In Danger
Erin Baggot Carter, Brett L. Carter, and Larry Diamond | FOREIGN AFFAIRS

This week’s must-read is a clarion call on the importance of US democracy and the dangers it faces, from Erin Baggot Carter, Brett L. Carter, and Larry Diamond.

“The health of American democracy,” they write, “is both a domestic and a national security concern. China and Russia—the United States’ principal authoritarian adversaries—have been using (and exacerbating) America’s democratic divisions and travails to gain advantage in the competition for global leadership. To regain the advantage, the United States must both repair its own democracy and reinvigorate its voice for democracy in the global arena. Democracy must go on the offensive.”

To do this, they argue, “Washington must rejoin the battle for global soft power, in a manner that reflects American values. It must transmit the truth, and in ways that engage and persuade global audiences. The goal must be not only to counter disinformation persuasively with the truth but to promote democratic values, ideas, and movements. In order to counter disinformation and report the truth that autocracies suppress, multiple credible streams of information are needed. Furthermore, they must be independent; while the US government may provide material support, these outlets must operate free of editorial control. That way, they will be seen to be independent because they are.” Read more →

Atlantic Council top reads

Global Energy Forum Jan 14, 2023

COP28 president-designate: With the world ‘way off track’ on Paris goals, ‘transformational progress’ is needed

By Daniel Malloy

In his first remarks since being named the incoming president of COP28, Sultan Al Jaber spoke on Saturday morning at the Atlantic Council’s Global Energy Forum in Abu Dhabi.

Climate Change & Climate Action Energy & Environment

Fast Thinking Jan 9, 2023

How Brazil can respond to its democracy stress test

By Atlantic Council

Now that authorities have cleared the protests and launched an investigation into security failures, our experts break down what’s to come.

Brazil Democratic Transitions

New Atlanticist Jan 13, 2023

Russian War Report: Russian hacker wanted by the FBI reportedly wins Wagner hackathon prize 

By Digital Forensic Research Lab

In December 2022, Wagner Group organized a hackathon that was won by a man wanted by the FBI for his connection to computer malware.

Conflict Cybersecurity

The post Dispatch from Abu Dhabi: How to reduce carbon emissions without blocking progress appeared first on Atlantic Council.

But that’s only spurred the world’s most influential energy experts and policymakers to take another look at the needs of the energy system and devise new policies, practices, and standards to fill those needs. And from January 14 to 15, many of them gathered at the Atlantic Council’s Global Energy Forum to lay out their solutions and call for urgent collaboration on improving energy security and accelerating progress toward climate goals.

Below are highlights from the event, hosted by the Global Energy Center in partnership with the United Arab Emirates Ministry of Energy and Infrastructure as part of Abu Dhabi Sustainability Week, and featuring leaders such as COP28 President-Designate Sultan Al Jaber and US Special Presidential Envoy for Climate John Kerry.

Editor’s note: This article was updated on January 18 to note sponsors of the Atlantic Council’s Global Energy Forum.

Explore the full event

Jan 14, 2023

2023 GEF: Day 1

The 2023 Forum has a special focus on the challenge of managing energy security priorities and decarbonization efforts in tandem, including the continuing impact of the crisis in Ukraine on the energy transition.

Jan 15, 2023

2023 GEF: Day 2

The 2023 Forum will enable world leaders to be at the front end of empowering an inclusive energy transition at a moment where the nexus of energy security and climate action has come into acute focus.

The latest from Abu Dhabi

• European energy commissioner: Stronger green targets are coming amid gas supply challenges
• Tackling the biggest challenges for critical minerals supply chains—capacity, resiliency, and sustainability
• The next steps to harnessing hydrogen’s potential
• Achieving net-zero will require rethinking supply chains. Here’s how to make it happen.
• Nuclear energy is ready for a breakout moment—if it can find the fuel
• Biden administration official raises critical questions around critical minerals
• How will the global climate effort change after the Inflation Reduction Act?
• Overcoming the biggest challenges that stand in the way of a net-zero developing world
• John Kerry on the carbon offset initiative that aims to bring renewable-energy investment to developing countries
• COP28 leaders: Here’s how to spark a just energy transition that includes everyone
• Read coverage from day one

European energy commissioner: Stronger green targets are coming amid gas supply challenges

By Andrea Clabough

“Both our presidents are willing to invest a lot to keep [the] transatlantic relationship,” said Kadri Simson, the European Commission’s commissioner for energy, as she brought a message of unity and optimism to close out the Atlantic Council 2023 Global Energy Forum. 

Speaking with Richard Morningstar, founding chairman of the Council’s Global Energy Center and former US ambassador to the European Union (EU), Simson addressed how the past year has endangered the bloc’s energy and economic security in ways unseen in decades because of Russia’s war of aggression in Ukraine. Simson explained that the EU’s rapid action to reduce its natural gas consumption, efforts to grow renewable power capacity wherever possible, and support of diverse suppliers of liquefied natural gas (particularly the United States) enabled the bloc to pull through this winter. Though she acknowledged that the winter ahead could be even more challenging, she noted that “2022 was an extraordinary year for our renewable production… and targets for next year are even higher.” Renewable energy expansion via the REPowerEU strategy surpassed all expectations. 

She thus rejected the notion that the EU has abandoned the “Green Deal” and countered that the bloc is negotiating even stronger green targets right now. She also rejected the idea that the price cap on Russian seaborne oil, coordinated with the Group of Seven (G7) nations, was ineffectual at sixty dollars per barrel, saying the evidence suggests that Russia is selling oil at discounts well below this number. She added that she hopes to never have to trigger the newly developed natural gas pricing mechanism. 

Simson was cooler, however, on the issue of the US Inflation Reduction Act—a source of mounting tensions throughout late 2022 over its perceived nationalistic provisions. She reasserted that the transatlantic relationship remains robust to the benefit of both sides and that any issues around unfair competition in the law can be solved through the existing EU-US working group on this issue. Her remarks suggested that, whatever 2023 may bring, Europe is fully prepared to weather the storm—and will do so alongside its friends and allies. 

Tackling the biggest challenges for critical minerals supply chains—capacity, resiliency, and sustainability

As clean energy technologies proliferate, demand is soaring for critical minerals—but there is a two trillion dollar investment gap over the next fifteen years to finance supply chains for minerals needed to keep global warming below 2 degrees Celsius. Panelists including Indonesia’s energy minister took on the best ways to resolve these questions on Sunday at the Global Energy Forum.

Read more

Global Energy Forum

Jan 15, 2023

‘Global collaboration is needed’ on critical minerals to support the energy transition, says Indonesian energy minister

By Atlantic Council

Energy minister Arifin Tasrif told fellow policy leaders at the Global Energy Forum that Indonesia is ready to cooperate with partner countries to develop the infrastructure needed to ramp up critical-mineral production.

Energy & Environment Energy Markets & Governance

Dive into the research

Report

Mar 27, 2022

The United States, Canada, and the minerals challenge

By Reed Blakemore, Paddy Ryan, Randolph Bell

An energy mix enabled by clean technologies will be far more mineral-intensive than its hydrocarbon-based predecessor. Demand for minerals like lithium, nickel, and cobalt is projected to skyrocket over the coming years, with supply chains largely unprepared to scale up accordingly. And procurement of these minerals has been plagued by concerns over environmental impact, human […]

Americas Energy & Environment

The next steps to harnessing hydrogen’s potential

By Andrea Clabough

Is hydrogen the Swiss Army Knife of low-carbon energy? It may be too early to tell, but there are plenty of potential end uses for the fuel that point to the fuel’s role in the long term, said a panel of private-sector hydrogen experts at the Global Energy Forum on Sunday.

Both Meg Gentle, executive director of High Impact Fuels, and Shuayb Ismail, associate partner and head of partnerships at Xynteo, agreed that hydrogen and e-fuels are not future visions; rather, these are usable fuels right available now with vast decarbonization potential in the right conditions. Gentle discussed her company’s work in Chile producing “drop-in” e-fuels suitable for a variety of vehicles, both land and seaborne. High Impact Fuels’ facility in Chile is powered entirely by wind energy resources available in the region and produces methanol. Ismail explained how his company assisted an Indian steel producer switch to green hydrogen to decarbonize its production methods, resulting in a 10 to 20 percent cost reduction. He emphasized that at Xynteo, “we truly believe that industry has to be the driver for the energy transition.”

But there remain significant barriers to widespread hydrogen adoption. Joe Webster, Atlantic Council senior fellow, noted that there are a number of policy issues around hydrogen—especially around hourly matching, which would require hydrogen facilities to limit their use of electricity to an amount equivalent to the renewable energy they use in a given hour. Hussein Fouad El Ghazzawy, senior energy and industry consultant at LYNX, spoke from Egyptian and African perspectives. He cited that a recent European Investment Bank report showed that African clean-hydrogen production potential could reach fifty million tons per year by 2035. However, Africa remains tightly constrained by limited or insufficient infrastructure of all kinds. For global hydrogen economies of scale, further investments in Africa are needed, he said.

The panelists broadly agreed that the price of renewable energy is continuing to pose a challenge, as it plays a major role in high hydrogen costs. This is among the key areas where policymakers could potentially do more to support scaling of global hydrogen production.

Editor’s note: Xynteo is a sponsor of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

Achieving net-zero will require rethinking supply chains. Here’s how to make it happen.

By Andrea Clabough

Value and supply chains are one of the hottest topics in the energy space ever since the onset of the COVID-19 pandemic. After realizing the energy system’s vulnerability to disruptions amid a pandemic, is it possible to reconfigure global value chains toward a net-zero emissions future? 

A group of private-sector and think-tank experts, as well as US government officials, considered what decarbonized value chains of 2030, 2050, and beyond might entail for sustainability at the Global Energy Forum on Sunday. Andrew Herscowitz, chief development officer of the US International Development Finance Corporation (DFC), asserted that “it’s absolutely critical that all of us are playing a role in diversifying the supply chain.”

The path there will require considering diverse energy systems and unique regional and country pathways to net-zero. Fahad Alajlan, president of the King Abdullah Petroleum Studies and Research Center, noted how dramatically the conversation around fuels such as natural gas and nuclear has shifted since the war in Ukraine began. He argued that the world cannot deploy a whiplash approach to how it perceives energy and energy supply chains every time a new crisis emerges. Lorenzo Simonelli, chairman, president, and CEO of Baker Hughes, and Christian Bruch, president and CEO of Siemens Energy AG, supported Alajlan’s perspective. Simonelli reiterated that the key challenges are emissions—not a particular type of fuel—and thus there is no benefit for the public or private sector to be overwhelmed by arguments over certain energy sources. Herscowitz added that “[DFC] will finance gas projects… It’s one of the reasons I’m here, to see what we can do.”

Another key area of agreement was the need for energy efficiency throughout value chains, as well as thoughtful management of existing equipment. Bruch noted the risk of stranded assets—when a piece of energy infrastructure is not used for its full lifespan and thus becomes a financial loss—if the energy community fails to plan ahead and utilize what it has already. 

The challenges to successfully transition supply chains to a net-zero world are thus substantial, but perhaps not insurmountable. Marisa Drew, chief sustainability officer at Standard Chartered Bank, described the need for unity and a frank discussion among all stakeholders on these very problems at the next United Nations Climate Change Conference, known as COP28, to unlock long-term, sustainable, and investable solutions.

Editor’s note: Baker Hughes is a sponsor of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

Nuclear energy is ready for a breakout moment—if it can find the fuel

By Andrea Clabough

Is nuclear energy’s guiding mantra “no fuel, no fun”? Daniel Poneman, president and CEO of Centrus Energy Corp. and former deputy US secretary of energy, suggested as much in a special session of the Global Energy Forum on Sunday afternoon. He and expert panelists representing the Polish, Romanian, and Canadian nuclear energy industries delved into what opportunities and challenges lie ahead for nuclear power of all stripes in a decarbonizing world. 

The panelists firmly agreed that, without nuclear power, achieving net-zero emissions is impossible for the global community; indeed, the world must grow its nuclear fleet and pursue innovative, emerging nuclear technologies such as small modular reactors and microreactors, which show tremendous potential as flexible reactor options. Ana Birchall, special envoy for strategic and international affairs at Nuclearelectrica, spoke from the Romanian perspective and emphasized the importance of nuclear now regaining its status as a clean, affordable, reliable fuel in the wake of Russia’s invasion of Ukraine. Indeed, she projected that Romania could, with its imminent unit additions, become an exporter of nuclear-generated zero-carbon power to its neighbors. Adam Guibourgé-Czetwertyński, undersecretary of state for the Polish Ministry of Climate and Environment, lauded nuclear energy in Poland as a source of energy independence and stable industrial supply. 

That said, the panelists acknowledged that a buildout of nuclear power in a net-zero world faces some challenges. Most important, as Poneman explained, is the scarcity of supply (and suppliers) for High-Assay Low Enriched Uranium (HALEU) fuel, which was produced in Russia but is now limited to just a few remaining suppliers. He recommended that the US government consider making a US-based plant a global supplier of HALEU, reducing the proliferation risks but enabling the necessary export of this crucial input. 

Joseph McBrearty, president and CEO of Canadian Nuclear Laboratories, delved into the permitting and stakeholder relationship challenges associated with nuclear energy construction and waste management. He noted that indigenous relationships are especially foundational to nuclear power companies—because nuclear facilities are often on or near indigenous-owned land—and that these and other relationships must be nurtured early on. Guibourgé-Czetwertyński and Birchall agreed that robust public support for nuclear energy is a lynchpin to a successful nuclear policy and noted that public support for nuclear energy is very high in both Poland and Romania thanks to their industries’ sterling safety records. Broadly, the panelists expressed optimism for advanced nuclear technologies to be a major component of the decarbonization puzzle and for the ability of industry to scale these technologies safely while maintaining public confidence.

Nuclear Energy Policy Initiative

The Atlantic Council’s dedicated home for the exploration of nuclear energy’s future.

Biden administration official raises critical questions around critical minerals

Amos Hochstein has a warning. The special presidential coordinator for global infrastructure and energy security at the US State Department said Sunday at the Global Energy Forum that securing minerals such as cobalt and copper, which are critical to clean energy technologies, is becoming a crucial challenge for the energy transition—and one that will look familiar to those who lived through the 1970s.

“The way we’re going right now, we’re actually creating a carbon copy of the twentieth century geopolitics of energy architecture and just putting it in the twenty-first century,” Hochstein said. “Instead of having a small group of countries that control oil supply and perhaps refining, we’re now going to create one or maybe a couple of countries that will control the entire supply chain for wind, solar, electric vehicles, and chips.”

Read the full transcript

Global Energy Forum

Jan 15, 2023

Amos Hochstein on how critical minerals impact net-zero progress—and US national security

By Atlantic Council

The special presidential coordinator for global infrastructure and energy security warned that twentieth-century energy geopolitics are being copied over into the twenty-first century.

Energy & Environment Energy Markets & Governance

How will the global climate effort change after the Inflation Reduction Act?

By Andrea Clabough

The Inflation Reduction Act (IRA): A zero-sum game, or transatlantic win-win? Brad Crabtree, assistant secretary of the Office of Fossil Energy and Carbon Management at the US Department of Energy, says the latter. At a Global Energy Forum panel discussion, Crabtree argued that the IRA, despite concerns that some of its provisions may be nationalistic, is in many respects how the United States is paying it forward on achieving major global emissions reductions. “We, the United States as a country, have already benefited from the investments that others have made,” he said, later adding, “[t]he way we look at it, we’re all in this together.”

But he acknowledged some of the lingering concerns around the IRA, which has been criticized by European allies for subsidizing domestic industry at the expense of European companies, noting that officials “are working really hard now” on some of those concerns; he also said that the Biden administration will sincerely address these issues to the fullest extent possible. Other panelists argued that Europe should consider a similar approach to that of the United States. Lee Beck, senior director at the Clean Air Task Force noted that “climate is a political-economy outcome” and Europe could benefit greatly from an incentives-based approach that can commercialize technologies. Ben Backwell, chief executive officer of the Global Wind Energy Council, added, “It’s not about taking investment from one place and going somewhere else… we should not see this as a competitive thing at all.” He recommended designing “an IRA for Europe.” 

Tim Holt, member of the executive board and labor director at Siemens Energy, and Julian Mylchreest, executive vice chairman of Global Corporate & Investment Banking for Bank of America, emphasized that there need not be a competition for money, attention, or other resources among the transatlantic allies. Both private-sector representatives agreed that there is sufficient capital for rapid decarbonization in the United States and the European Union. They argue the IRA is especially well-positioned to catalyze that money and drive transformational change at scale in key sectoral investments such as hydrogen and carbon capture, utilization, and storage. 

The panelists all cautioned that more challenges to IRA implementation remain; Crabtree pointed out that the US government remains understaffed and under-resourced in managing the regulatory and permitting side of the IRA, particularly with the wave of applications for new infrastructure (such as carbon storage wells) that is expected to come. The panelists’ discussion conveyed that while the IRA represents a crucial and impactful step forward, realizing its full potential—for both the United States and the world at large—will be an ongoing process with numerous hurdles still ahead.

Editor’s note: Bank of America is a sponsor of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

Overcoming the biggest challenges that stand in the way of a net-zero developing world

By Andrea Clabough

According to Isabel Munilla, deputy assistant secretary of energy for market development, climate, and multilateral engagement at the US Department of Energy (DOE), “innovation anywhere supports progress everywhere.” Speaking at a Global Energy Forum panel about supporting developing countries in their net-zero goals, Munilla described a number of innovative programs at the DOE that may help, including the Net Zero World Initiative, which aims to mature, then scale, promising decarbonization technologies, as well as the Clean Energy Solutions Center, through which the Department offers technical assistance. She said that the DOE believes driving down costs for key technologies in the United States (such as with the DOE’s “cost targets for hydrogen and long-duration battery storage) will help set the developing world on a pathway to success.

But other panelists cited extant challenges. Otmane Benamar, GE Gas Power’s chief technology officer for Europe, Middle East, and Africa, warned that especially in the developing world, “a lot of grids cannot handle the intermittency of renewable fuel,” upping the urgency to improve and harden grid infrastructures. Daniel Schroth, director of the African Development Bank’s Renewable Energy and Energy Efficiency Department, agreed with Benamar, adding that focus should also be placed on improving legal and regulatory frameworks for power systems in developing countries. Mary Burce Warlick, deputy executive director at the International Energy Agency, pointed to the extremely high costs of capital—in some cases seven times that of developed regions—as a key limiting factor in moving money to the regions that need climate finance the most. She argued that governments providing concessional finance can help ignite the private sector, which can then begin to move money at a meaningful scale. 

The panelists’ discussion conveyed that there are numerous and complex problems in scaling up climate development finance, and they are unlikely to be resolved with any silver-bullet solution; however, the panelists largely agreed that there is potential for transformative change.

Editor’s note: GE is a sponsor of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

John Kerry on the carbon offset initiative that aims to bring renewable-energy investment to developing countries

By Andrea Clabough

“We have to be more than deadly serious,” about climate change, said US Special Presidential Envoy for Climate John Kerry at the Global Energy Forum. “This is life and death.” 

Kerry spoke on a panel that included representatives of each of the partners behind the Energy Transition Accelerator, a joint initiative introduced at COP27 last year that is intended to catalyze billions of dollars in much-needed private-sector investment to phase out fossil fuels and accelerate renewable energy. 

Kerry said that the Accelerator is one important way to move trillions of dollars of annual climate financing (foundational to limiting global warming to 1.5 degrees Celsius) to where it is needed most: developing countries and the energy sector. He explained that “energy is the single summary of how you cure this problem… [because] the problem is emissions.” The partners behind the Accelerator, he explained, are figuring out how to “de-risk the deals that are out there… and create valuable deals” that will make investment in the energy transition a viable opportunity for the global private sector.

At the Forum, the partners announced new guiding principles for the Accelerator, a list that calls the project to be inclusive, comprehensive, and high-integrity; it also calls on the project to promote near-term efforts to reduce greenhouse gas emissions and to incentivize new private-sector climate finance that is supplemental to, rather than a substitute for, other sources of finance.

Kerry was joined by Accelerator co-founders Andrew Steer, president and chief executive officer of the Bezos Earth Fund, and Elizabeth Yee, executive vice president of programs at The Rockefeller Foundation. Yee and Steer both emphasized the importance of a “highly credible” and transparent initiative, resilient to claims of “greenwashing.” Yee noted that the system created by the initiative must accelerate job growth in developing countries to build robust coalitions behind clean-energy acceleration. She also said that the Accelerator will need to ensure that it allocates a certain percentage of funds from carbon-credit sales toward adaptation purposes. Steer said that carbon credits are necessary because, without this clear incentive structure, cleaning up the global energy sector (through investment in renewable energy) is “not happening at anywhere near the pace that is required.” He added that the governance element of this mechanism, such as ensuring that emissions reductions in one locality are not neutralized by emissions increases elsewhere, is crucial to ensuring credibility and success.

Read more

Global Energy Forum

Jan 15, 2023

US climate envoy John Kerry outlines new principles for accelerating private capital needed for the energy transition

By Atlantic Council

US special presidential envoy for climate John Kerry joined with partners behind the Energy Transition Accelerator to announce the next steps for the initiative at the Global Energy Forum.

Energy & Environment Energy Markets & Governance

COP28 leaders: Here’s how to spark a just energy transition that includes everyone

By Andrea Clabough

What does equity really mean in the context of the upcoming COP28? Panelists at the Global Energy Forum discussed how to ensure the entire global community is brought into the transition. 

Yasmine Fouad, the Egyptian minister of environment and ministerial coordinator, played a key role in Egypt’s execution of COP27 in 2022 as the country’s climate envoy for the summit; she argued that each COP must build upon the other and that, going forward, COP28 must be defined not by exclusion but rather by inclusion. This inclusion should highlight groups such as the Global South, the world’s least developed countries, and women—but it should also embrace industries that have felt unwelcome in the COP process. Pointing to the oil and gas industry, Fouad said that “the crisis affects us all, so everyone has to be around the table.” She suggested that all industries and all sectors of the economy must be prepared to put forth credible transition strategies. 

Mahmoud Mohieldin, the United Nations (UN) special envoy on financing 2030 agenda for sustainable development, focused on the need for localized solutions to ensure that no one gets left behind in the energy transition. He emphasized the financing challenge for debt-stressed developing economies and the progress made by innovative financing models at local, regional, and global levels that are directing money toward the most vulnerable countries and regions. He argued that because the climate crisis has arrived, “ministers from developing economies should ask for more funding for adaptation” immediately. 

Damilola Ogunbiyi, special representative of the UN secretary-general and chief executive officer of Sustainable Energy for All, concurred with Mohieldin on the need for immediate, innovative financing models. She cited her organization’s African Carbon Market Initiative as a key example but also encouraged further action: “You cannot hit net zero and leave a billion people in energy poverty,” she said. She added that close partnership with recipient countries, bearing their unique resources and potential decarbonization pathways in mind, must underpin these efforts, explaining that “being realistic about what a country has to do is important.” 

The panelists’ remarks underscored the enormous challenge ahead for the UAE during its COP28 presidency as it seeks to integrate a wide range of sectors and stakeholders, particularly those long shut out from the COP processes; pave the way for an implementation plan for the loss and damage fund; and mobilize climate finance for the developing world.

Read more

Global Energy Forum

Jan 15, 2023

The lessons of COP27 and how they can apply to COP28

By Atlantic Council

Speaking at the Atlantic Council’s Global Energy Forum, leaders from COP27 in Egypt give a debrief on lessons learned that could be applied to COP28 in the United Arab Emirates.

Energy & Environment Energy Markets & Governance

Day one coverage

• How the UAE could tackle the tricky business of climate diplomacy
• The role of natural gas vs. renewables sparks debate
• Europe has taken major strides to reduce its dependence on Russian energy. How can it work for the long haul?
• What will it take to solve the energy trilemma?
• Powering forward—and paying for—the energy transition
• UK official: Cooperation on a low-carbon, secure energy future “makes us all more prosperous”
• Gas is here to stay—until renewables are ready, say ministers
• COP28 president-designate: With the world “way off track” on Paris goals, “transformational progress” is needed
• The 2023 Global Energy Agenda

How the UAE could tackle the tricky business of climate diplomacy

By Andrea Clabough

As climate change rapidly accelerates, geopolitics seems to be pushing the key players who could resolve it further apart. But according to an expert panel of diplomatic and private-sector experts who gathered Saturday at the Global Energy Forum, that direction need not be destiny, and creative approaches may yet help the global community fill the gaps. 

Charles Hendry, former minister of state for energy for the United Kingdom, opened the discussion with the view that the United Arab Emirates, host of the upcoming United Nations Climate Change Conference of the Parties (COP28) is ideally suited to help bridge the serious and growing differences among key stakeholders such as the United States and China, but also many developing countries skeptical of Western leadership on climate. Neil Brown, managing director at KKR Global Institute, concurred that the UAE brings “credibility” on climate negotiations where the United States and Europe often lack it. He emphasized the importance of what happens not at COP28 but afterwards—especially for the private sector. “Will [COP28] bring private capital off the sidelines?” Brown asked.

Paula Dobriansky, senior fellow at the Harvard Kennedy School of Government and vice chair of the Atlantic Council’s Scowcroft Center for Strategy and Security, reiterated that great-power competition could still dangerously undermine collective, targeted action at COP28 regardless of who hosts the conference. She highlighted China and Russia as problematic examples of countries that remain largely aloof from the COP process and deeply suspicious of US leadership. Ana Palacio, former Spanish minister of foreign affairs and a member of the Atlantic Council’s board of directors, added that China is among those intent on undermining a rules-based international order. In this context, she argued that the US Inflation Reduction Act is a sorely needed example of leadership that has intrinsic value for Europe. 

The panelists agreed that geopolitical competition is as tense now as anytime in recent memory—but this competition cannot be allowed to circumvent meaningful collaboration wherever possible on addressing climate issues. Trust and mutual agreement must be pursued wherever possible, and the UAE at COP28 may be best positioned to make up the trust deficit.

The role of natural gas vs. renewables sparks debate

By Andrea Clabough

Are expanded investments in natural gas fundamentally in conflict with renewable energy as the world ponders the reliability challenge of the coming decades? This was a central debate among panelists on Saturday at the Global Energy Forum. 

Paddy Padmanathan, vice-chairman and CEO of ACWA Power, which has a wide-ranging portfolio of projects in several developing countries, argued that the focus should be on the potential of renewable and emerging energies to power the future. He suggested that Europe can rapidly replace Russian energy resources with expanded renewable power and that it is already doing so. Likewise, many developing countries are starting from the ground floor on energy access altogether; renewable energy can be deployed quickly and effectively at scale, compared to conventional fuels projects which could take a decade or longer to become operational. 

But the other panelists had different views. Helima Croft, managing director and head of global commodity strategy of RBC Capital Markets, cautioned that the worst of the global energy supply uncertainties may be yet to come—for example, if China reopens and dramatically increases its oil and gas demand later this year. She expressed concern that Europe and the world writ large may be forced to rely on the Organization of the Petroleum Exporting Countries (OPEC)—which has the only real spare capacity in the world—and traditional energy diplomacy in such a circumstance. 

Osama Mobarez, secretary general of the East Mediterranean Gas Forum, emphasized that a strategy like REPowerEU, which may prove viable in Europe, may not be so in many developing countries. He warned that no one solution (such as renewable energy alone) can satisfy the energy needs of the world and that oil and gas will remain integral to the global energy system for years to come—themes echoed by speakers throughout the Forum. Carlos Pascual, senior vice president for global energy at S&P Global Commodity Insights, concurred that multiple energy sources are essential in a world where billions of people still lack access to reliable power and clean cooking resources. He added that high capital costs for many developing countries, which are not typically a barrier to renewable energies with high up-front costs in the United States and the European Union, are a major challenge that could potentially shut these economies out of major growth opportunities due to poor energy access.

This debate suggests that equity and justice considerations around clean energy, the Just Transition, and energy poverty remain fundamental challenges despite the rapid, and ongoing, progress in lowering barriers to zero-carbon energy sources. 

Editor’s note: RBC Capital Markets is a sponsor of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

Europe has taken major strides to reduce its dependence on Russian energy. How can it work for the long haul?

By Andrea Clabough

Europe has just faced one of the most dangerous, fraught years in its recent history—with energy security at the heart of the challenges presented by Russia’s invasion of Ukraine. At the Global Energy Forum on Saturday, Ditte Juul Jørgensen, the European Commission’s director-general for energy, joined officials and business leaders to discuss how Europe weathered the storm (so far) and what the European Union (EU) can do in concert with its allies and private-sector leaders to remain resilient against Russia’s ongoing weaponization of energy. 

Jørgensen’s keynote remarks highlighted how the EU’s energy security strategy, RePowerEU, was initially received with skepticism at its launch in May 2022—with critics asking: “Can Europe reduce its dependence on Russian energy supplies as much as they say they want to?” she recalled. “Yes is the answer after this year, and it has been done swifter than what anyone had in mind.” 

She argued that by setting clear and binding targets, and matching action with ambition, Europe was able to withstand Russia’s attempts to starve the continent of energy. She concurred with Maksym Timchenko, CEO of Ukraine’s DTEK, who argued during the panel discussion that Ukraine can, and will, rebuild its energy infrastructure and become a reliable supplier of natural gas, nuclear, and renewable energy to its European neighbors. “Putin will not plunge Ukraine into darkness,” he said. “The country will not be frozen. And we will be stronger after this winter season.”

Geoffrey Pyatt, assistant US secretary of state for energy resources, said that the Russian invasion has demonstrated the strength and endurance of the US-EU alliance and that the United States remains firmly committed to seeing Europe through the upcoming winter and beyond. US liquefied natural gas (LNG) exports and the shared commitment to energy transition, Pyatt said, are central to this partnership. He framed the Inflation Reduction Act, currently a source of transatlantic tension given its tax credits for electric vehicles made in the United States, as an opportunity for Europeans to invest in the United States and ultimately accelerate the energy transition on both sides of the Atlantic. 

Panelists representing European energy companies offered their own suggestions on how Europe might move forward. Anatol Feygin, executive vice president and chief commercial officer of Cheniere Energy, suggested that his company has pioneered the very model of market flexibility that enabled Europe to resist Russia’s manipulation of energy markets. Even so, he argued that it is critical for suppliers of natural gas to continuously improve the lifecycle emissions profiles of their products. Luis Cabra, deputy CEO of Repsol, noted that while Europe has made vast strides in reducing emissions, renewables alone cannot solve the complex, multi-faceted problem of economy-wide transition.

Ben Wilson, chief strategy and external affairs officer of National Grid, suggested that the powerful combination of hydrogen and renewable energy is a compelling long-term solution for Europe and that investment in transmission must accompany the anticipated enormous expenditure in new renewable energy capacity. Amid these varying perspectives on what to do next, one thing is clear: Europe has a great deal of work ahead to fully disentangle itself from Russian energy over the long term.

Editor’s note: DTEK, Cheniere Energy, and Repsol are sponsors of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

European energy security commentary & analysis

Working with a wide-ranging community of experts and stakeholders, the European Energy Security project provides timely commentary and analysis on the geopolitical, sustainability, and economic implications of transatlantic energy security developments

What will it take to solve the energy trilemma?

By Andrea Clabough

Panelists discussed the challenges in solving the energy trilemma—affordability, reliability, sustainability—at the Global Energy Forum on Saturday, soon after the Atlantic Council’s Global Energy Center launched the 2023 “Global Energy Agenda.” The panel featured Albanian minister of infrastructure and energy Belinda Balluku and experts representing private-sector energy companies including Crescent Petroleum, General Electric, and Excelerate Energy. 

Balluku opened the discussion with a frank assessment of the energy security situation in Southern Europe. She pointed out that there’s a need for not only a range of energy solutions to address the current crisis fueled by the Russian war in Ukraine, but also for long-term resiliency and economic growth in the region. She highlighted the importance of rapidly expanding Albania’s renewable energy resources (an expansion that has been accelerated all over Europe by Russia’s recent invasion). But she also noted the importance of Albania’s strategy around Floating Storage Regasification Units (FSRU)—a strategy supported by the United States—which has since 2020 become a cornerstone project supplying imported liquid natural gas to Albania’s neighbors. Diversification of energy supplies and suppliers, she concluded, is thus crucial to Albania’s and Europe’s energy security. Steven Kobos, president and chief executive officer of Excelerate Energy, concurred with Balluku and pointed to his company’s rapid response FSRUs in Finland and elsewhere. He warned, however, that a real supply crisis for natural gas could be in the making as demand outside Europe could grow in the coming months and new supply in the near term will be sharply limited as new production infrastructure is still years out from operations. 

The other panelists offered similarly nuanced views of the role of gas in the energy transition—particularly when considering the unique needs of many developing countries. Neeraj Agrawal, chief financial officer of Crescent Petroleum, described his company’s work harnessing natural gas to shift Iraqi electricity generation away from diesel fuel, which is more polluting. He argued that natural gas will be a lynchpin resource for many developing economies in Africa and Asia that are decarbonizing while providing a reliable power supply to more than one billion people worldwide who lack it. Roger Martella, chief sustainability officer at General Electric, agreed with the imperative to expand global electrification but steered the conversation toward the importance of resiliency. He argued that amid accelerating cyber attacks and intensifying climate change, the world must harden electrical grids. He also acknowledged the need to address the “ecosystem” of challenges in building energy infrastructure in many parts of the world which, he said, policy alone cannot solve on its own.

Editor’s note: Crescent Petroleum, General Electric, and Excelerate Energy are sponsors of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

Read the report

Global Energy Agenda

Jan 13, 2023

The 2023 Global Energy Agenda

By Landon Derentz, Christine Suh, Ameya Hadap, Paul Kielstra (Editors)

The third edition of the Global Energy Agenda provides context for the year that has passed. It features a survey of thought leaders in the energy sector, as well as a series of essays by the leading figures in energy, to set the energy agenda for 2023.

Energy & Environment Geopolitics & Energy Security

Powering forward—and paying for—the energy transition

The energy transition will require unlocking tremendous amounts of capital; but energy investments aren’t keeping up as much as is needed, warned a panel of experts at the Global Energy Forum on Saturday.

Read more

Global Energy Forum

Jan 14, 2023

How to finance a sustainable and just energy transition

By Atlantic Council

At the Global Energy Forum, experts plotted out ways countries can incentivize investments that can support a stable energy supply and finance a sustainable and just energy transition.

Energy & Environment Energy Markets & Governance

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UK official: Cooperation on a low-carbon, secure energy future “makes us all more prosperous”

By Andrea Clabough

According to Grant Shapps—the UK secretary of state for business, energy, and industrial strategy—energy matters more than it ever has before.

Shapps’s message was part of keynote remarks he delivered at the Global Energy Forum, where he emphasized both what has and has not changed in the energy sector over the last year. He pointed to hard energy-usage choices that the world has faced as prices for fuels have skyrocketed and the world’s low-income economies have been forced to make difficult decisions. In addition, the worrisome acceleration of climate change has presented a constant threat as heat waves have scorched Europe, bomb cyclones have devasted the United States, and flooding has led to thousands of fatalities in Pakistan. 

But Shapps expressed his confidence in the future, arguing that “we will succeed as humanity” in fighting the existential challenge of climate change. He noted the growing number of entrepreneurs and innovators worldwide pushing ahead with crucial technological innovations, such as the recent nuclear fusion success at the United States’ Lawrence Livermore National Laboratory. He lauded Britain’s rapid strides in building some of the largest wind farms in the world in the North Sea, which provide 86 percent of the United Kingdom’s electricity needs. These developments, he concluded, should give us all hope for the future. 

He cautioned, however, that “a fairer future is worth fighting for” and emphasized the need for expanding just transition initiatives, such as those in South Africa and Indonesia, to provide both climate and economic security (as well as needed job growth) to developing countries. Despite the world facing what he deemed a challenge no other generation has faced before, he said there are many reasons to be hopeful—and much work to be done.

Shapps’s remarks took place a day after the United Kingdom and United Arab Emirates signed a Clean Energy Memorandum of Understanding to increase investment and cooperation between the two countries on energy security. “When it comes to climate change… none of us should have to settle for less. So working together really matters.”

Gas is here to stay—until renewables are ready, say ministers

After gas prices spiked this year, some energy users are beginning to regain a sense of equilibrium with steadier prices. But that may not be the case in the long term, said two energy ministers speaking at the Global Energy Forum.

“There isn’t much gas coming into the market until 2025,” said Saad Sherida Al-Kaabi, the Qatari minister of state for energy affairs and president and chief executive officer of QatarEnergy. “So I think it’s going to be a volatile situation for some time to come.”

“Gas has to be available, and it has to be affordable,” to help support renewable energy, clean up the environment, and assist countries in reaching their climate goals, said Suhail bin Mohammed Al Mazrouei, UAE minister of energy and infrastructure.

“More renewable energies will be installed,” Al Mazrouei added, “but we need a baseload; and for a baseload, we need more investments in gas.”

Editor’s note: The UAE ministry of energy and infrastructure is a partner of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

H.E. Eng. Suhail bin Mohammed Al Mazrouei and H.E. Saad Sherida Al-Kaabi speak with Frederick Kempe at the Atlantic Council’s Global Energy Forum on January 14, 2023. Photo via the Atlantic Council.

H.E. Eng. Suhail bin Mohammed Al Mazrouei and H.E. Saad Sherida Al-Kaabi speak with Frederick Kempe at the Atlantic Council’s Global Energy Forum on January 14, 2023. Photo via the Atlantic Council.

H.E. Eng. Suhail bin Mohammed Al Mazrouei and H.E. Saad Sherida Al-Kaabi speak with Frederick Kempe at the Atlantic Council’s Global Energy Forum on January 14, 2023. Photo via the Atlantic Council.

H.E. Eng. Suhail bin Mohammed Al Mazrouei and H.E. Saad Sherida Al-Kaabi speak with Frederick Kempe at the Atlantic Council’s Global Energy Forum on January 14, 2023. Photo via the Atlantic Council.

H.E. Eng. Suhail bin Mohammed Al Mazrouei and H.E. Saad Sherida Al-Kaabi speak with Frederick Kempe at the Atlantic Council’s Global Energy Forum on January 14, 2023. Photo via the Atlantic Council.

H.E. Eng. Suhail bin Mohammed Al Mazrouei and H.E. Saad Sherida Al-Kaabi speak with Frederick Kempe at the Atlantic Council’s Global Energy Forum on January 14, 2023. Photo via the Atlantic Council.

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Global Energy Forum

Jan 14, 2023

Why accessible and affordable gas plays a role in helping countries reach climate goals and expand renewable energy

By Atlantic Council

Energy ministers from the United Arab Emirates and Qatar discussed the role gas plays in the energy transition at the Atlantic Council’s Global Energy Forum.

Energy & Environment Energy Markets & Governance

COP28 president-designate: With the world “way off track” on Paris goals, “transformational progress” is needed

By Daniel Malloy

With a pivotal United Nations climate change summit set to take place in the United Arab Emirates at the end of this year, “the world is playing catch-up” to implement emissions-reduction goals, said UAE Minister of Industry and Advanced Technology Sultan Al Jaber, the newly designated president of the summit. But, he added, there’s ample opportunity to accelerate new technologies and refashion old ones to reach net-zero emissions, a milestone that would represent “the greatest economic and human promise since the first Industrial Revolution.” 

In his first remarks since being named the incoming president of the twenty-eighth UN Climate Change Conference of the Parties (COP28), Al Jaber spoke on Saturday morning at the Atlantic Council’s Global Energy Forum in Abu Dhabi, a two-day gathering of policymakers, government officials, and business leaders that sets the energy agenda for the coming year.

Al Jaber acknowledged that the world is “way off track” in hitting the goals of the 2015 Paris climate accords, intended to limit global warming to 1.5 degrees Celsius. 

But in his first opportunity to set out the vision for the landmark conference—which he said will be a COP of “solidarity” and “action” as it engages in the first “global stocktake” progress report—Al Jaber offered a roadmap to the “transformational progress” he envisions.

Editor’s note: Al Jaber is CEO of the Abu Dhabi National Oil Company and chairman of Masdar, both of which are sponsors of the Atlantic Council’s Global Energy Forum. More information on Forum sponsors can be found here.

Read more

Global Energy Forum

Jan 14, 2023

COP28 president-designate: With the world ‘way off track’ on Paris goals, ‘transformational progress’ is needed

By Daniel Malloy

In his first remarks since being named the incoming president of COP28, Sultan Al Jaber spoke on Saturday morning at the Atlantic Council’s Global Energy Forum in Abu Dhabi.

Climate Change & Climate Action Energy & Environment

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The 2023 Global Energy Agenda

By Landon Derentz, Christine Suh, Ameya Hadap, Paul Kielstra (Editors)

In 2022, Russia’s invasion of Ukraine undermined the global energy system’s return to pre-COVID normalcy, injecting turmoil and uncertainty into the sector. Russia’s gas cuts led Europe to compensate for the loss of energy supply by reverting to coal and oil, leading the global community to confront deepening tensions between national security, energy security, and climate action.

However, the crisis in Europe, despite causing an upsurge in carbon-intensive power, provided the world with fresh impetus to change the trajectory of the energy transition. In response, policymakers worldwide are hastening efforts to decouple their economies from foreign hydrocarbons and to decarbonize energy systems. Ultimately, the war may accelerate longer-term energy trends toward a more sustainable and secure system.

Against this backdrop, energy leaders head into 2023 with a greatly revised outlook from 2022, as revealed in the Atlantic Council’s third edition of the Global Energy Agenda. The publication includes an analysis based on our survey of energy stakeholders, representing a wide variety of professions across the sector from more than fifty countries. Complementing our survey analysis, a diverse group of experts, corporate leaders, and policymakers contributed essays that provide deeper insights on the tumult of 2022 and its implications for reshaping energy systems for the future.

Despite a year defined by complications to the energy transition, there is reason to be optimistic as the global energy community doubles down on in-tandem efforts to achieve climate goals and longer-term energy security for all.

Read the agenda

Global Energy Agenda

Jan 13, 2023

The 2023 Global Energy Agenda

By Landon Derentz, Christine Suh, Ameya Hadap, Paul Kielstra (Editors)

The third edition of the Global Energy Agenda provides context for the year that has passed. It features a survey of thought leaders in the energy sector, as well as a series of essays by the leading figures in energy, to set the energy agenda for 2023.

Energy & Environment Geopolitics & Energy Security

The post Highlights from Abu Dhabi as policy leaders gathered for the Global Energy Forum appeared first on Atlantic Council.

Flagship Event Sat, January 14, 2023 • 12:01 am ET

2023 Global Energy Forum

The 2023 Forum will have a special focus on the challenge of managing energy security priorities and decarbonization efforts in tandem, including the continuing impact of the crisis in Ukraine on the energy transition. This two-day conference starts at 9:00 AM in Abu Dhabi and virtually at 12:00 AM ET (midnight).

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Event transcript

Uncorrected transcript: Check against delivery

Speakers

Amos Hochstein
Special Presidential Coordinator for Global Infrastructure and Energy Security, US Department of State

Claudio Descalzi
Chief Executive Officer, Eni

Bernard Mensah
President of International, Bank of America

Elizabeth Yee
Executive Vice President of Programs, The Rockefeller Foundation

Moderator

Hadley Gamble
Anchor, CNBC

Introduction

Landon Derentz
Senior Director, Global Energy Center, Atlantic Council

LANDON DERENTZ: I’m Landon Derentz. I’m the senior director of the Atlantic Council Global Energy Center and I’m really excited to welcome each of you back to the seventh annual Global Energy Forum as we build on what was, really, a remarkable and incredible morning featuring Their Excellencies—His Excellency Dr. Sultan Al Jaber, Minister Suhail Mazrouei, Minister Saad al-Kaabi, and, of course, Minister Grant Shapps.

When I joined the Atlantic Council last year and we began to build towards this forum, I gravitated towards one issue: How do we incorporate a conversation about financing all aspects of the energy transition, both conventional and clean?

We heard this morning the world is short energy today, and without investing trillions of dollars into the zero-emissions technologies and infrastructure we need we’ll be short energy tomorrow. As we shift to the next segment of the program, I’m really excited because we’re lucky to have the experts that can help us start to break down the financial barriers to accelerate the energy transition.

Before we have a panel discussion hosted by Hadley Gamble, to kick off this discussion I’m thrilled to invite to the stage one of the strongest voices in global energy policy in Washington, DC, maybe even globally, and bring to the forum his deep policy, diplomatic, and industry expertise.

So please join me in welcoming Amos Hochstein, special presidential coordinator for global infrastructure and energy security. Welcome, Amos.

AMOS HOCHSTEIN: Morning, and thank you, Landon. It’s good to be back in a place where I can be working with you and in your new role in the Atlantic Council. Really, congratulations both to you and to the Atlantic Council, and, really, congratulations to the Atlantic Council for convening again because when the Atlantic Council has this gathering, as I think, Dr. Sultan says, it’s setting the agenda for the year, for 2023, and as we look at setting the agenda, I think before we can set that agenda we have to look, I think, in review of 2022 and to see what kind of lessons we need to learn and what we’ve learned.

Now, 2022 is packed with a lot of things that happened. So I want to focus on the many lessons that we need to learn on—within the energy sector.

This is a year where the energy markets were upended, not by market fundamentals but, rather, by missiles, tanks, and bullets as a horrific assault of one country on its neighbor, invasion, the aggressor being a major energy supplier, which then impacts the markets and really changed—as we sort of talked about a little bit earlier, changing the flows of energy in a way that we never thought would ever happen but also we probably would think was never possible.

How could Europe possibly survive not one but two winters without flows from Russia? And, yet, that’s exactly what has been unfolding and we’re still in that process of trying to figure out how do you redirect energy around the world, both in gas, oil, and upon us on February 5 is the EU ban on oil products, and that is a change that we saw fundamentally in 2022, [and] we have to think about what does that mean.

And one of the things that that means as we focus on the energy transition is we have to do so while ensuring that we have adequate supplies in the market, and how do we do two things at the very same time? How do we make sure that commodities are priced—first of all, commodities are available and are priced in a way that support economic growth, especially as the world is facing increased inflation concerns and, potentially, a recession and trying to battle against that?

How do we make sure that we focus on that transition, but we do have enough investment in increased production that supports the years of the energy transition to make sure we have those commodities and priced appropriately?

And while we do that, we have to invest in accelerating the energy transition and that means increasing investment in [the] deployment of renewable energy and advancing clean technology. In 2022, the US Congress passed the largest investment in energy, climate, and energy transition that we’ve ever seen in the United States. And while we’re seeing that, we know that that investment is coming, and we’re going to look at 2023 as the year of implementation. And we know that to do that, we have to think about the last two years were about getting the tools—in the United States at least, getting the tools from Congress, getting the funding that we needed in this investment.

But as we go forward, now it’s all about implementation. It’s all about making sure that we can have the resources to invest. And we’re already seeing that ahead of 2023 taking shape in the United States. We’ve seen record investments in solar, wind, electric vehicle, battery supply chains, materials, and products from mining to processing—opening the first mining sector in the United States that we’ve seen in many, many decades; the first cobalt mine opening in Idaho this year. These are things we haven’t seen in the United States in a very long time. And what that means is that we can ensure a diversified energy security for the future.

So as we’ve talked about for the last twenty years energy diversification, and we talked about oil and gas, we now have to have the exact same conversation for energy diversification in the energy of the future. And as we do that, that is the agreement that we signed with PACE that was mentioned before between the United States and the United Arab Emirates, a Partnership to Accelerate Clean Energy, to invest together one hundred billion in these technologies.

But here is the thing that was blocking us. Here is what’s not working. As we hear financial institutions and the private sector and governments around the world talking about hundreds of billions of dollars into trillions of dollars of commitments and pledges to invest in the energy transition, we have to talk more about where are those dollars being deployed. They’re being deployed increasingly only in OECD and developed countries, and not in developing countries and middle-income countries. And that’s because there’s a barrier to finance. And that barrier to finance is risk—whether it’s commodity risk or it’s currency risk or ESG risk or—well, the E of ESG or the G of ESG—and reputational risks. And therefore, the easier dollar is always going to be spent somewhere in the United States or in Germany or in Australia, or in Chile, and that’s as far down as we go when it comes to the developing and middle-income countries.

And that’s the—that’s the kind of discussion we need to have, is how do we come together to de-risk. What is the role of government? What is the role of banks? What is the role of private equity? What are the roles of multilateral development institutions and financial institutions [in de-risking] these projects? What are the kinds of steps that can be taken so that we don’t just have examples of a project here and there, but actually have a de-risking of these projects so that they are not just investment opportunities or charity or development, but they are bankable projects? And I think that’s the challenge that we’re going to face as we go into the future if we really want to have an equitable energy transition. And if you want to fight climate change, it can’t be done in one group of countries and not in another.

So I’m looking forward to this panel. I’m looking forward to the next couple of days as we look at how we manage this energy transition…

HADLEY GAMBLE: Good morning, everybody, once again, and welcome to the Atlantic Council’s Global Energy Forum. I’m here to join you to talk about something that is very close to all of our hearts and minds, and at a time when energy security has never equaled national security in quite the same way.

We’re going to be talking about financing a sustainable and inclusive energy transition. Amos you know. I want to introduce the rest of my panel. Liz Yee. She is the executive vice president at the Rockefeller Foundation. I’m also speaking to Claudio Descalzi, of course, the CEO of Eni; and Bernie Mensah, the president of international at Bank of America. Panelists, welcome and thank you so much for joining us.

I want to kick it off, actually, with Amos. Just to sort of follow on to the situation that we find ourselves in today, it’s no secret that the oil and gas community in the United States had high hopes, if you will, of the fact that the Republicans would be taking the House and what that could potentially mean for their agenda in the United States. But given what we saw over the last couple of weeks and their seeming inability to elect a speaker, do you think those hopes are misfounded?

AMOS HOCHSTEIN: Speaking of energy finance…

HADLEY GAMBLE: You know me so well.

AMOS HOCHSTEIN: Well, first, I think there were high hopes for the Republicans, for winning the House and the Senate. I think they’re willing to look at the House or maybe now they’re happy they only won the House.

Look, I think it’s not about politics on this issue. It’s—

HADLEY GAMBLE: Of course it is.

AMOS HOCHSTEIN: Politics govern so much of what we do in order [to] be able to get things done.

But what I said before is what I really mean. We’ve gotten a lot of tools from Congress. Congress has passed enormous amounts of funding for energy, for [the] energy transition. So I think where we need to be now is working with the oil and gas sector.

And you know, the Biden administration is clearly going to have continued disagreements on many issues with the oil and gas sector in the United States. It is no secret. I don’t need to say it another way. We’re going to have disagreements. But I think we can also come together in dialogue to understand that we are living through an extraordinary time—a time of a war in Europe that is affecting the energy market… that we are coming out of COVID, the demand is rising, and we’re all battling together to make sure we don’t have an inflationary pressure. So I think the dialogue that we need to have with the oil and gas sector in the United States is how do we have an increase in production, how do we take extraordinary profits and invest them right back into America, into additional production.

I think that’s not going to be about Congress. We’re going to hear a lot of investigations and hearings, and Congress will do what Congress does. But I think we have to keep our eye on the ball, and that is to make sure we have enough production in the United States and around the world while we do everything else to invest in the energy transition. We know we need it, and we know that we have a horizon that is long enough to justify those investments.

HADLEY GAMBLE: It’s tough to engage with the American oil and gas community when you’re telling them that they’re acting in an un-American way by giving profits back to their shareholders. Isn’t that capitalism? And capitalism, doesn’t that pay for our ability to be a democracy and project our values?

AMOS HOCHSTEIN: So, Hadley, as you and I have discussed before, in prior discussions, what I mean about when I say un-American, there’s no accusation of companies’ motivations and companies how they’re working. But when you’re in a place where as a result of this extraordinary year, the two best quarters in 150 years are both in the same year, and you compare the profit level of companies with the historic arc of translating profits on a sustained basis within investment in [capital expenditure (CAPEX)], we’re a little bit of a mismatch of—based or in a correlation to historic trends. And therefore, if you are going to have those [kinds] of profits—and these are not revenues; these are profits—on a sustained basis and not invest, that is not what [the] American business community has done for the last hundred-plus years. And we want to go back to the way it normally is, that when there is an extraordinary event, when there are large profits, when there’s justification for additional capital expenditures, the companies do that.

And to be fair, that’s exactly what’s happened over the last couple of months and weeks. We have heard more American companies announce that they are increasing CAPEX for 2023. Their projection for increased production in 2023 is going up as well. We’re having those conversations not just with American companies, but with companies both public, private, and state-owned to have the same exact conversation across the board.

HADLEY GAMBLE: Is a windfall tax still on the cards for 2023?

AMOS HOCHSTEIN: I’m going to leave that conversation for—if that’s a tool that we need, then we can talk about it. It is not on the table at the moment.

HADLEY GAMBLE: Bernie, I want to bring you in and talk a little bit more about the finance side of things. When you look at what’s happening in the United States today, obviously when it comes to governing, a divided house is not necessarily what you want from a policy perspective, but from a markets perspective, from a finance perspective, from a banking perspective, tied-up House and Senate actually means markets can look forward to a bit of status quo.

How difficult, in your mind, is 2023 going to be for the financing of projects that we’re talking about today?

BERNARD MENSAH: Thanks, Hadley. Thanks for having me here, and great to be here this week.

I think for us in finance the big issue is what the central banks are doing, and I think that’s what’s driving global flows. The deposits taken by the largest banks—and we all announced our results yesterday through the pandemic—increased a lot. I think our balance sheet at Bank of America went up from something like 2.3, 2.4 trillion dollars to about 3 trillion dollars, some of that because of all the stimulus money that came in.

But I think one of the most important macro issues that we’re all facing is that for ten years, central banks have expanded their balance sheets enormously, by trillions of dollars. I think cumulatively Japan, Europe, United Kingdom, and the United States, maybe ten trillion, something like that. They’ve all said, we’re shrinking our balance sheets back down, and we’re feeling that ripple effect. And I think after ten years of expansion, it’s going to take more than a quarter or two for that to feed through. And we’ll all have to adjust from zero rates, negative rates. I’m not sure if it’s a headwind, but it will be a reallocation of all of those excess savings in the marketplace, and we’ll deal with that, and we’re very well set up and able to deal with that.

And everybody is watching what happens to just, you know, overall savings rates, et cetera. Within that there’s a huge amount of capacity to lend and to drive changes, and I’m sure we’ll touch on this later. And I absolutely sympathize with what Amos has been saying, which is getting the capital and the balance sheet to the right place. There is a huge amount of excess savings in the world—in this region, in Japan, in Northern Europe, in the United States, and our job in finance is—that’s what we do. We take money from the savers and give it to those that want to invest it, and we’ve done it very well in the standard model of the oil and gas sector. As we move into this new sector, that’s the challenge. And that’s why I’m here; that’s why we’re all super engaged.

HADLEY GAMBLE: So less the politics and more the central bank policy.

BERNARD MENSAH: Yeah, the central bank policy is an important—this is in oil and gas. I don’t want to turn it into a finance piece, but it’s something that we—not that we grapple with, but I think in finance we’re cognizant of the fact that that expansion of central bank balance sheets was massive. It drove massive underlying flows, and when it stops and it’s starting to shrink, it will have impacts definitely.

HADLEY GAMBLE: No doubt. No doubt.

Claudio, I want to bring you in on this just a little bit more broadly. Earlier we had the chance to hear from two of our, frankly, experts in the field: His Excellency, Suhail Al Mazrouei, the UAE’s energy minister, as well as Saad Al Kaabi, the energy minister from Qatar, two gentlemen that I have interviewed on multiple occasions. And we heard some comments about 2023 and what that should look like. And one of the comments was that we should forgive Russia. How difficult is that to hear?

CLAUDIO DESCALZI: We have to forget Russia or—

HADLEY GAMBLE: Forgive.

CLAUDIO DESCALZI: Ah, forgive. (Laughter).

No, I don’t know. I think that the war is still there, and it’s not easy to forgive anybody when you kill people, or innocent people, or women and children, and bomb hospitals…(audio breaks).

HADLEY GAMBLE: Bernie, in terms of those financial instruments, what does this look like to you?

BERNARD MENSAH: It has solutions for this. I think it looks like a lot of—I think it looks like a lot of just engagement… across different parts of the capital structure. So… just have a different risk appetite although they’ll have different, you know, return metrics that they might want, which is different to what shareholders of Eni might want or what just my bank, others. We’ve got a structure financing that’s been growing… then you call somebody that Amos might know and he might come in, or she, and figure out how to make that work. The Indonesian just energy structure was interesting. It started off in South Africa.

Perhaps my specific piece is trying to make sure that we do it at scale as quickly as possible. At the moment, my sense is [there are] lots of smaller things. There’s an element of, oh, isn’t this cool, we’ve done this innovative thing for this piece here. But it hasn’t really lit a fire, as I might say. But practically, those things are—those things are happening.

HADLEY GAMBLE: Yeah.

One of the comments that we heard earlier from Mr. Mazrouei, he was, essentially, saying the challenges, the things that he’s worried about, and he said another year of high price fluctuation. Amos, in your mind, is the United States prepared for prices at a hundred dollars? Because when we spoke yesterday on CNBC, there have been suggestions that we could see prices at a hundred, $110 a barrel, and you told me, I just don’t know if prices will get there.

AMOS HOCHSTEIN: And since yesterday, I still don’t know. But I think that there’s a—look, it’s not for us to—we have to prepare for different scenarios and what we’ve done over the last eighteen months in hyperdrive has been to work with consumers and suppliers around the clock.

I mean, I’ve—before the war started, I was making calls to Claudio to ask him, in different scenarios what happens? How do you surge capacity in different markets? And I called others to do the same thing—how do we figure out what that is?

I can’t control what the price is going to be. What I can control is what our reactions are and we had a weird market wherein gas—global prices were rising but it was because of an event. We were taking a product off. A producer took its product off the market all of a sudden in natural gas. We now have—the EU passed a ban on crude and a ban on products. We have a price cap on crude. We may have a price cap on products that would come into play in a few weeks from now. We have to see. We’re all in discussions on that.

So we are—this is a—this is not a regular market where there’s just price fluctuation based on supply and demand. There are real geopolitical events that are affecting that. So I think we do have to be prepared for higher prices and what our responses are. We will be prepared for that. We are looking at those scenarios. We have to be prepared for the reverse and what happens if prices decline and go to a lower level, and how are we opportunistic in the market there in order to continue to ensure our future.

So this is going to be a really fluid dynamic. I don’t know what’s—I think Claudio is right in one fundamental way, and I think His Excellency Minister Mazrouei, as you just quoted, that this year is going to be about the war, and what happens in the war, if it escalates or if it dissipates, will determine where the price and what the price environment that we’re all in. And we’re going to have to all get together and have this conversation. And that’s going to go towards the financial sector in the United States and around the world, the oil and gas sector, and the governments to figure out how do we prepare for it.

HADLEY GAMBLE: Yeah. You’ve used the Strategic Petroleum Reserve repeatedly to address price fluctuation. Some people would say successfully, others would say you got lucky or it was a blip. What else is on the table?

AMOS HOCHSTEIN: Look, let me just correct you. We didn’t use the Strategic Petroleum Reserve because of price fluctuations. We’ve had plenty of price fluctuations in the past. We had years of prices above a hundred dollars and we didn’t use the Strategic Petroleum Reserve. We used the SPR as the result of a crisis that was causing price fluctuations, and there’s a big difference. The previous time we used the SPR was during the Libya war when nearly two million barrels came off the market overnight. It’s not the fluctuation that you’re addressing; it’s the fact that there’s an underlying security crisis that is an emergency. And that’s what the SPR is. We’ve used it, as you said, in extraordinary [circumstances].

If you remember, in June we were at over $120 a barrel. Today, we’re at eighty dollars or so. So if those who argue that adding a million barrels a day doesn’t matter, then it shouldn’t matter in any event. So I think that’s a bit hard to argue.

We’ve used—we have more that we can use in the future. I think that we worked together with Congress and canceled the mandated releases 2024 through 2027. That’s a significant amount of oil that the market was expecting that would be released from the SPR. Well, we canceled it. In this price environment, that doesn’t make a lot of sense. And we will at the same time continue to use that if a crisis emerges or one that will affect consumers in the United States and around the world. And I think the alternative of going into a recession as a result of exceeding energy prices is probably not advantageous.

HADLEY GAMBLE: Yeah.

Claudio, how difficult is the price environment for you today in Europe? Because we’re talking about recession. We’re talking about the worries about central bank policy. And frankly, in the United Kingdom, they are already there.

CLAUDIO DESCALZI: So the price is not really the main problem because after eight years of very low prices other companies, our company immediately reacted so—because we cannot control the price, we had to control, ourselves, the cost. And we reduced what we call the cash neutrality, so the total breakeven. We can imagine that in 2012, 2013 the average cash neutrality for a company was $110, $100 per barrel. Now it is about less than forty dollars per barrel. It means that with a price at forty dollars a barrel, you can survive. Maybe you break even, but you can go ahead. So there [is] a lot of efficiency that we can create.

The issue outside is that—so outside our company—what you said before. We have a situation over a gap between demand and supply. And the supply is low because we didn’t invest. And after COVID and after the war, we realized that the hydrocarbon demand with coal we can say is inelastic. Ten, twenty years ago we thought that now the gas demand in Europe was 50 percent less; the same. And in China, it’s seven or eight times more. So there is a big increase of gas demand, and that was good because coal went down. Now coal is ramping again. So we have this issue that we have to invest.

And investing now is not easy. You must have the right key performance indicator to go to bank and ask for money because what we are doing still is link our bond or our financing process to sustainability link bonds. We have been the first last year to have a framework that we presented, and then after one month we issued bond. Sustainability bond means that you have to set a path out to 2050 where you must be net zero. You must have intermediate targets, so 2026, 2030, 2035, 2040, 2045, 2050. And you have to demonstrate in term of renewables, [carbon dioxide], greenhouse gas emissions, methane emissions, scope one, two, and three. So is a—is a matrix over a lot of elements, certified. You go to the bank and say: I need this because I have this. And if you’re not able to be compliant, you pay a penalty in term of cost of money. So it’s quite complex. A big company can do that. Small companies, much, much more difficult, so they cannot get money to invest in the upstream. So the process is this for the investment.

Then—and we talked before—the supply chain, there is a big disruption. So now there is hub. There is onshoring, nearshoring. And after COVID, we have a regional hub that try to be self-sufficient because they realize that if they need something it was not like before that you buy also if the product is built—is manufactured in somewhere else. No. Now the main and critical issue to survive must be in your country. So that means a big separation. That is true for renewables, because there is now a long-distance connection. It’s true for everything. So energy. From energy you have health, food. Food is—we never talk about food, but the disruption that we have with food because of the war and because of the, I think, lack of investment especially in Africa—Africa is buying everything—is creating a very dangerous underbalance.

So I’m not worried about the price—the price I can cure the price with our internal stuff—but the rest. So if we have to increase the production to reduce the price it’s almost impossible now, first of all because upstream take six, seven years to get through with some production—maybe more if it’s a green field—and then we have this discrepancy and gap between the supply that we made in the last three years. Talk about green hydrogen, where we work, or renewable in term of continuity of energy deliver. And we are not there.

HADLEY GAMBLE: Yeah.

CLAUDIO DESCALZI: So we have to be, I think—you know, the issue is that, it’s not for the United States, but generally speaking, that the world never talk about energy security. Never, because energy is there, Russia. And we never talk, like for the virus, we never talked about COVID. But overnight, everybody became expert. So everybody talk about COVID. Now everybody talk about energy. And that create a big mess.

HADLEY GAMBLE: (Laughs.) Are we talking about the politicians or just the—

CLAUDIO DESCALZI: No, no, I talk about—I talk about everybody.

HADLEY GAMBLE: The armchair politicians.

CLAUDIO DESCALZI: It’s a big mess because, you know, you must be competent to talk about something. You can jeopardize and kill somebody, kill—in term that you can arm somebody, because if you select the wrong solution that is much worse than the problem itself.

HADLEY GAMBLE: Do you ever believe there will be accountability for those who made decisions that actually imperiled Europe’s security with regards to Nord Stream 2, with regards to Nord Stream and to the relationship with Russia? And I’m talking about Angela Merkel and others.

CLAUDIO DESCALZI: I think that if there is no energy security plan, you know, what you can do. If there is an energy security plan, the first one is diversification of regional—of the sources, diversification—diversification of technologies, and experts permanent ready to face the issues. So that is organization and processes. If you don’t have that—and it’s not easy. You grab what you have every day and you live day by day, but that is not in an organized and rich society.

HADLEY GAMBLE: Yeah.

Bernie, when you think about how difficult it is for you to make decisions long term, obviously, His Excellency the Qatari energy minister was talking about governance and the worry of having a four-to-eight-year time horizon on what you can do, and the security of your investment as a result of that. Now we’re seeing activist investors pushing back. We’re seeing, for example, the Florida—the state of Florida, in terms of their pension fund, they don’t agree with the ESG methods in investments, for example, of Larry Fink, and so they’ve decided to pull their money. We saw that during the Trump administration as well. To your mind, how difficult does that make your decisions? Because if you can’t—if you don’t have a long-term horizon and you’ve got to worry about, as we say, the politics—and perhaps those may or may not actually understand the energy market—it’s kind of tough to be one of the top investors.

BERNARD MENSAH: We would love a roadmap set by the politicians that says here’s the transition path, here are the transition energy sources, here’s what’s going to happen. And then that way we can, you know, figure out, you know, what the investment horizons might be, et cetera. And actually, we’re one of those highly regulated industries, so we don’t want to become a tool for that policy mix. A decision by governments—our regulators telling us what our balance sheet should look like or stressing it in this way or that or adding capital or liquidity buffers given how—what our lending book looks like. So we’re very keen to be told what the path is and then—and then to get it.

If a government says no more hydrocarbon cars in ten years or—

CLAUDIO DESCALZI: No more Claudio. (Laughter.)

BERNARD MENSAH: No more—(laughs).

CLAUDIO DESCALZI: You drop—you drop me.

BERNARD MENSAH: Then it makes a difference. So we have to manage through that. And we have huge competing interests that call on us and ask us what we’re doing with our lending, absolutely. In the United States, there are some states that have subpoenaed us—it’s public knowledge—with respect to what our lending policies are, and we have others that are the other way. I occasionally attend our annual general meeting when it’s in person, which it hasn’t been, and we have a lot of activists that are pretty aggressive about what we’re doing. So we have to navigate that, which is fine. That’s what we do. And I think that’s what we choose to do. But I think we are engaged, as is the rest of the industry, in really trying to keep that balance and to manage through.

And then the other thing I would say is, touching a little bit on where Claudio went, there is a lot of underlying infrastructure and finance as well that isn’t as visible—really boring stuff like accounting policies and disclosure policies. And we do a lot of work with middle-market companies that are in the supply chain because for Eni, for the big companies, they know what’s coming and they’ve got the resources to set themselves up for that. And we worry about a lot of people that we lend a million dollars to, two million dollars to, smaller companies that will wake up one day and find that they can’t sell their product on Amazon because Amazon says is it green or not, and they’re like, what are you talking about. So there’s a lot of nitty-gritty work. But some of the things around accounting disclosures are really dull—I could send everybody to sleep in the room—but really important, like, I think, in the energy space grids, for example, where I’m absolutely not an expert but in the last six to eight months I’ve realized how critically important it is. And I’m getting my credit investment committees to make sure that we’ve got, you know, the capital to back acquisitions, mergers, restructurings in a bunch of large, you know, grid spaces around Europe.

HADLEY GAMBLE: Yeah.

Elizabeth, just in terms of the job situation, particularly in the United States, obviously, with the transition, depending on which side of the fence you fall, this could be a boon for US job growth, and at the same time we are hearing so much pushback from politicians who say that this is bad for business. In your research, what have you seen?

ELIZABETH YEE: I’m so glad you brought that up because I think, listening to the conversation, I want to make sure that we put people at the core of what we do. One of the things we talk about is being in the humanity business, and I do think, you know, there are, with the [Inflation Reduction Act (IRA)], with the Infrastructure and Jobs Act, there are a lot of opportunities to create jobs. You know, the transition’s going to be hard, but we can’t lose sight of the fact that from that there is a lot of opportunity to be created.

And I see my colleague Joseph Nganga in the front row. I mean, that is why, for example, at the Glasgow COP we launched the billion-and-a-half-dollar philanthropic and [nongovernmental-organization] alliance called the Global Energy Alliance for People and Planet, which is focused on energy access for the eight hundred million to a billion people who don’t have reliable energy and want to be part of the modern economy and need to be part of the modern economy. But in so doing, it’s not just the carbon. It’s really thinking about how do we actually create the millions and millions of jobs that need to happen. How do we make sure—Hadley, we were talking about, too—women, half the planet, we need access to jobs.

And we have seen when we actually put women at the center of what we do—and we’ve been working in India, I think just to your point, Bernard, one of the things that the Global Energy Alliance does is it supports small developers to be able to deploy mini-grids to places that don’t have access to energy so that we have clean energy in communities that don’t currently have that opportunity. If we do that, we create jobs in the community so that they understand and they have a chance to be part of the green economy. We electrify communities. We’ve seen household incomes rise by 30 percent. So I think if we can continue to do that, both in emerging markets but also, Amos, in our home country, I think there is a lot of things that we can tap into to create the jobs of the future that we need for the transition.

HADLEY GAMBLE: Amos, the Inflation Reduction Act, a major win for the Biden administration, landmark legislation, but has ruffled feathers, as you know, in Europe. And apparently, they’re even considering a Buy European Act to counter what they see as unfair practices. There was even the suggestion that we could see in the coming weeks a move to file a complaint against the United States at the World Trade Organization over this. When you take a step back and think about this a bit more broadly, how dangerous is it that in the moves to the energy transition, because they are coming from very different governments and very different situations, we could undermine the strategic alliance of the West?

AMOS HOCHSTEIN: Well, first, I think it would be difficult to say that the Biden administration is undermining the alliance. I think the—really the last eighteen months have been all about strengthening the alliance. And I, in twenty-seven years in working in Washington in both energy and foreign policy, have never seen the alliance stronger, in fact. And I think one of the things that Putin underestimated the most and was surprised the most was the strength of the alliance, both the transatlantic one—NATO—but then beyond that into global alliances from Middle East to Asia and around the world. So I think the alliance is strong.

I think you saw President Macron’s visit in Washington a few weeks ago where President Biden addressed this issue directly and said that we’re going to be working with the EU. We have a task force that’s working between the Commission and the United States. We’re working also with other countries that affect.

The IRA is an enormous success. I mean, it is a remarkable investment in clean energy that nobody ever expected the United States to do. In fact, most people inside the United States who spend a lot of money trying to figure out what’s about to happen in America did not know that this legislation would pass, and it did. And it has some things, as when you do large pieces of legislation like this that are transforming the economy into the future, there are going to be some things that we got to fix and we have to address. And we’re working with our allies to be able to address them.

But I think that that should not be the distraction towards what we are achieving. One, unemployment is at the lowest rate it has been in a very, very, very long time in the United States—talking, Elizabeth, to your point about putting people at the center of this. The IRA is driving investment from around the world and inside the United States in a sector that—what have we been all saying since Paris? That we want to drive investment and incentivize investment in an energy transition. That’s what the IRA was supposed to do, and that’s what it—I’ve never seen something translate so quickly, and we’re already seeing those investments in the United States in this sector. We’re doing things we haven’t done in a long time. We are diversifying a global economic engine of renewable energy from one single-source supplier, which is where we are heading, into a much more diversified sector. So I think the IRA is incredibly important.

And I think we’re going to be fine with the—in the alliance, but I think it’s important for countries to follow suit, not in the way you described, but in creating these incentives across the board. We need more of that. And if you think about some of the things that we are depending on—so just on the critical minerals, and I know we’ll talk about it during this conference—some of the processing facilities that don’t exist yet that we are going to be building now, if they are built on time and in the broadest term—sort of expectation of what they hope the size will be, it will still only supply us, in the near term, 15 percent, 20 percent of what the United States’ demand is.

So we need these kinds of incentives across the board and around the world for countries to incentivize investment, and that’s what Claudio was talking about when he says that a carbon tax—what does a carbon tax do in Europe? It incentivized him to invest in [the current cost of supplies].

And what Bernie is talking about—if you have these kinds of incentives, then he is going to unlock in his investment committee the dollars that need to go to this. That’s what the IRA does; it’s not about isolating the United States from the rest of the world; it’s about sending a message that’s a clear message across the world we need to incentivize investment because on its own, it’s not going to happen. We have this mantra of the market will fix it, the market will address it. The market will not fix it, the market will not address it. And investments into transforming the global energy system is not going to happen. We need to build a lot more across the whole spectrum.

Look at nuclear. We need to have a lot more nuclear if we want to reach any of these goals, whether it’s traditional nuclear, or it’s SMRs, or future fusion investment that we need to do. But to do that, the market on its own is not going to do it. We have to create government spending and signal sending to the market that if we’re willing to make the small dollar investment, that will leverage the larger dollar investment.

And so I think that all of these things are not signs of weakness in the alliance; on the contrary, I think they are signals of strength of the alliance. We’ll get past it; I assure you we’re going to be fine.

HADLEY GAMBLE: More time in Brussels for me.

Gentlemen—Claudio, you had a point?

CLAUDIO DESCALZI: Do I finish, or? No, I just want one comment on what Amos said about the need to give incentive or—not subsidy, incentive through the investment. It’s true, and it’s not—a gap between the United States and Europe is a general gap also inside Europe because you can do that also if you have the fiscal space.

HADLEY GAMBLE: Yeah, and I—

ELIZABETH YEE: Hadley, can I just add on to that for one sec? I think one of the things that I just want to make sure—I mean, it—emerging markets only have 27 percent of the flows they need to actually do the energy transition. I just don’t want to lose sight of that because I think it’s really critical to your point, Amos. And I think one of the things that I—you know, to the point of trying to create, bring together critical actors to change…

We need to fix the global financial architecture in a way that it doesn’t—that is not impeding investment from the private sector, that encourages additional investment from government. And so I think, you know, working together as a planet to achieve these goals, with all the different people coming together…