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

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The obvious solution to break Russia’s energy dominance over Moldova is for the authorities to finally implement the unbundling of the gas sector and vertically de-integrate Moldovagaz. The EU Third Energy Package requires the three tiers of a natural gas market (upstream/production, midstream/transmission, and downstream/distribution) not be controlled by the same entity. In practice, this means separating the gas transmission system operator, Moldovatransgaz. The original deadline for unbundling was in 2016, with extensions then granted until January 2020, and then February 2021. In 2021, EU officials opened infringement proceedings against Moldova for its continued failure to unbundle Moldovagaz. In June 2023, the Ministry of Energy announced it was “determined” to complete Moldovagaz unbundling by September 2023. We shall see.

What form any unbundling will take also remains unclear. The Moldovan government may believe it lacks the capacity to manage Moldovatransgaz and the transmission system and may look for an external company to operate it. This would be a major mistake because giving critical infrastructure assets over to foreign entities would be repeating the same error as with Gazprom and Moldovagaz. It would also preclude Moldova’s learning to be self sufficient, a key aspect of energy independence and security. Another theoretical option is privatization, but that requires finding a buyer. Given Moldova’s history of defaults and disputes with private investors, there’s close to zero chance of that happening.

The best option is almost certainly finding a different government entity other than Moldovagaz to take control of Moldovatransgaz. This would replicate how Ukraine unbundled its gas monopoly, Naftogaz, by spinning off the transmission system operator into a separate entity controlled by a different ministry. There is some tangential precedent: Using a revolving EBRD credit of €300 million, the gas trading team at state agency Energocom, led by Maciej Wozniak, has pushed Gazprom out of the Moldovan market. Along the same lines, another state agency could step into the distribution business. This would have the added benefit of being more efficient because nothing new would need to be created; the unbundling would be a matter of paperwork.

There has probably never been a better time for Moldova to get serious about this; the cessation of gas transit from Gazprom into Europe means Russia has already played its energy trump card and has relatively little leverage left.

At the same time, Western interest and willingness to support Moldova during the transition should help cover any gaps. Politically, Moldova taking control of assets ultimately owned by Russia is good optics for Sandu’s government. And the political turmoil in Moscow coupled with the Kremlin’s distraction from its stalled war in Ukraine could make Moldovan maneuvers less likely to elicit an aggressive response. If everything goes right, becoming the supplier to Transnistria could even forge something of a path to national reconciliation. There’s never been a better moment to try, and there’s no time to waste.

Suriya Evans-Pritchard Jayanti is a nonresident senior fellow at the Atlantic Council’s Eurasia Center.

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Moldova needs an energy overhaul

Suriya Evans-Pritchard Jayanti — Wed, 07 Jun 2023 13:33:27 +0000

If energy security is national security, then Moldova is one of the most vulnerable countries in the world. It is perennially at risk of being destabilized by malign actors and vested interests linked to Russia because Moldova faces an existential struggle to heat and power itself.

The tiny country of 3.6 million, wedged between Romania and Ukraine, imports 100% of its natural gas, 99% of its oil, and relies on a single power plant in Russian-controlled separatist region Transnistria for 80% of its electricity. Russia’s Gazprom owns 51% of Moldovagaz, the country’s natural gas monopoly. There is almost no foreign investment in the energy sector, and what little there is has found the country unworkable. This was a difficult situation before Russia’s full-scale invasion of Ukraine. It is now untenable.

Ukraine has traditionally supported Moldova, at least commercially if not altruistically, as have other countries, but with the war ongoing to the east and a still unfolding global energy crisis, the need to become self sufficient is paramount. To fortify Chisinau, the international community must get serious about helping Western-educated Moldovan President Maia Sandu and her government achieve energy independence. For its part, Chisinau must reform its commercial and rule of law institutions to become attractive to foreign energy investment, and it must allow investors to function there.

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The international community has been involved in ongoing efforts to support Moldova’s energy sector. For example, the US government has given a total of $40.5 million in energy-related funding plus $30 million in budget support “to help ameliorate the energy crisis” since the Russian invasion of Ukraine. On February 24, 2023, the US announced an additional $300 million in energy support for Moldova. The EU has been similarly supportive, as have international finance institutions including the EBRD and the World Bank.

So far, this money has gone mostly to “capacity building” and technical assistance instead of structural reform, an approach that has proved ineffective. Critics have likened it to the proverbial pouring water into a leaky bucket. To some extent, it’s a problem of where to start when so much needs reform and restructuring. But the failure is also due to a focus on lower level changes, giving Moldova’s energy sector the equivalent of an oil change when a new engine and transmission system are required.

What is needed is a wholesale restructuring of Moldova’s energy sector to free it from legacy Soviet inefficiencies, and from modern Russian meddling. A few clear priorities should be construction of a power plant that is not within the breakaway region of Transnistria; ending Gazprom’s stranglehold on Moldovagaz, or if that is not reasonably achievable, breaking existing Moldovagaz contracts and establishing an alternative natural gas supplier; building Moldova a power market; and broadly, diversification of the energy mix.

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Despite political will since Sandu came to power and especially since the new government was seated in February 2023, critically with a new energy minister, Moldova has demonstrated little wherewithal to tackle these tasks. One big obstacle is money. Chisinau is living “paycheck to paycheck,” hence the annual emergency bailouts and budget support from Western governments, and emergency gas supplies from Ukraine. In this constant state of energy emergency, there has proved little capacity to learn to fish versus begging for fish. Structural reforms that, for example, empower an alternative agency to be the vehicle for natural gas contracts at the expense of Moldovagaz, could help break the cycle.

But to do this, Moldova needs money. Rather than being treated like a charity case with annual emergency bailouts from foreign governments which are counted on desperately every year but which are never guaranteed, the country needs to attract foreign investment to fuel its energy overhaul and solidify it. Only once private capital buoys Moldova’s energy sector will the country be able to earn the regular taxes and royalties necessary to build its own energy independence.

This is where Moldova has stood in the way of its own reform. Although under Sandu the perception of Moldova regarding corruption has improved, many barriers to foreign investment remain. The country ranks 48th on ease of doing business, with notably lower scores for contract enforcement and dispute resolution, two issues critically important to potential investors. It ranks 58th for rule of law adherence. A warmer welcome to private energy investors could be conceived.

Meanwhile, most of the few companies who have braved investment in the Moldovan energy sector have paid dearly for it. In 2016 Gas Natural Fenosa, a Spanish company and Moldova’s largest supplier and distributor of electricity, sued the government over “discrepancies” in electricity tariffs that cost it over €20 million. The EU Energy Community eventually brought a dispute against Moldova over the issue. In 2021, the Court of Justice of the European Union issued a final decision in Moldova v. Komstroy, a case arising from a Moldovan state-owned entity default on electricity contracts with a Ukrainian company. The private investor was left empty handed.

Currently, the Moldovan government is being sued by the largest private gas company in the country, Rotalin Gas Trading, the only private competitor to Russian controlled Moldovagaz, for gas tariff irregularities that are forcing it out of business. Rotalin claims to have lost many millions over two decades. These are just a few examples, and a fair warning to potential investors.

The merits of any of these disputes aside, any reasonable investor would understandably hesitate before risking money in the Moldovan energy sector. What amounts to an appearance of hostility to foreign investment and a lack of adherence to contracts must be overcome before private capital will seriously consider Moldova. Furthermore, if Chisinau is going to make a credible argument that it is being manipulated and abused by Gazprom, it must not appear to be doing the same to private energy investors in Moldova.

Until private investors enter the market in force, Moldova will be left at the mercy of generous foreign governments, which in turn will continue providing emergency assistance instead of actual, sustainable reform. Only private capital can break this cycle, and it needs to be able to turn a profit, however meager, before it will.

Suriya Evans-Pritchard Jayanti is a nonresident senior fellow at the Atlantic Council’s Eurasia Center.

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Both Xi and Putin have limited public appearances and abstained from traveling because of their fears of Covid-19, and Putin has become ever more isolated because of his war of aggression against Ukraine. Therefore, it was perceived as a great event when Xi Jinping went on an official three-day visit to Russia in March 2023. It was Xi’s first international meeting since his re-election as president during the 2023 National People’s Congress, and it offered Putin a rare break in his international isolation.

While we don’t know what the two leaders said in their long private meetings, nothing seems to have gone right for Putin. His big official project was a large second “Power of Siberia” gas pipeline from western Siberia to China, but Xi clearly said no, limiting Russia’s possibilities to export gas to China for the foreseeable future. Nor does Xi appear to have approved of arms or sensitive technology sales to Russia. Curiously, Xi had a separate meeting with Russian Prime Minister Mikhail Mishustin, contrary to strict Chinese protocol.

As a follow up, Chinese Prime Minister Li Qiang invited Mishustin, his Russian counterpart, to Beijing for an official visit in late May. Mishustin is the highest-ranking Russian official to visit China since the start of the Ukraine invasion in February 2022. On the second day of his visit, Xi Jinping received Mishustin at the Great Hall of the People, once again completely beyond the ordinary bounds of Chinese and Russian protocol.

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

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If there is a greater stickler of protocol than the Chinese leaders, it is probably Putin. In spite of all the greetings to and from Putin that Xi and Mishustin exchanged, the obvious question arises: Why was Mishustin invited and not Putin? This cannot have gone down well with the Russian leader.

Putin appears to have given his response. Mishustin is one of thirteen permanent members of the Security Council, Russia’s highest policy-making body which meets about every tenth day, always chaired by Putin. Usually all but one or two of the permanent members are present. Mishustin attended on May 15, the last meeting before his trip to China, but he was missing both on May 26 and June 2 after his return from his triumphant visit. Reasons for absence from a Security Council meeting are never officially given.

This old-style Kremlinology is perhaps the best evidence we have that China may be looking beyond Putin and seeking to cultivate alternative relationships in Russia. Such objective observations are better than dubious rumors and can potentially tell us a lot. First of all, it seems clear that China’s “friendship without limits” with Russia actually has many limits, as indicated above. China is presumably more afraid of US and EU secondary sanctions than interested in supporting Russia in its war against Ukraine.

Second, China does claim that universally recognized international law, including the purposes and principles of the United Nations Charter, must be strictly observed, which means that it opposes Russia’s invasion in principle. Third, the Chinese have indicated distrust in Putin and they may be looking to Mishustin as a credible alternative. Whether this is realistic is not all that relevant.

Fourth, by apparently excluding Mishustin from his two most recent Security Council meetings, Putin has indicated that he has paid attention and dislikes these recent developments. The standard procedure would have seen Putin calling Mishustin to the Security Council to report what he had learned in China.

Mishustin has carefully avoided saying anything in public about the war in Ukraine or his visit to China. His father is considered to have served in the KGB, and he has been both the head of the Russian tax service and a wealthy investment banker. Mishustin is often overlooked in analysis of power dynamics in today’s Russia, but his relationships with both Putin and China should be watched carefully.

Anders Åslund and Andrius Kubilius have just published the book “Reconstruction, Reform, and EU Accession for Ukraine.”

Beijing’s local air quality has improved nearly continuously since 2013 as particulate matter (PM) 2.5 levels decreased. The US Environmental Protection Agency defines PM 2.5 as “fine inhalable particles, with diameters that are generally 2.5 micrometers and smaller.” These particles can cause serious health problems after inhalation. PM 2.5 may be particularly harmful for children, and early-life exposure is associated with an increased risk of childhood asthma.

Publicly available measurements of particulate matter concentration from the US embassy in Beijing show that the city’s average annual air quality index (AQI) fell sharply from 2013 to 2019, the last pre-COVID year in Beijing. Higher AQI values correspond to greater air pollution.

Figure 1: Beijing’s average annual Air Quality Index (lower scores indicate less pollution)
(Source: U.S. State Department, author’s calculations)

Several factors have contributed to improving air quality scores. Lauri Myllyvirta of the Centre for Research on Energy and Clean Air identifies key drivers: implementing strong emissions standards and using of emissions-control technologies for power plants and high-emissions industries; eliminating coal-based heating and cooking in homes; and slowing growth in coal consumption.

An embrace of natural gas also undoubtedly played a major role in enabling Beijing to reduce local coal production while maintaining energy access. The city has shuttered over 2 gigawatts (GW) of local coal plant capacity, beginning in 2014, while opening nearly 6 GWs of cleaner natural gas capacity.

Figure 2: Beijing’s changing electricity generation landscape
(Source: Global Energy Monitor Global Coal Plant and Global Gas Plant Trackers, author’s calculations)

As local demand for natural gas rose, Beijing sourced more supplies from abroad. Pipeline natural gas imports along the Central Asia-to-China Pipeline (CACP) were particularly important. According to the Chinese National Petroleum Company, natural gas service enabled the shutdown of four thermal coal plants in 2015. The CACP’s Line C, which entered service in 2014 and has a capacity of 25 billion cubic meters (bcm) per year, undoubtedly played a role. The CACP’s A and B lines came online in 2009 and 2010, respectively, and have a combined capacity of 30 bcm per year.

Liquefied natural gas (LNG) imports also played an important role in Beijing’s clean air transformation. From 2013–2018, China opened five LNG import terminals near Beijing, with capacity just under 40 bcm. In addition, the increased adoption of natural gas in the adjacent Tianjin municipality and Hebei and Liaoning provinces have also helped reduce coal pollution in the greater Beijing area. It’s clear that natural gas imports, especially LNG, have played an enormously important role in reducing Chinese urban pollution. China’s total natural gas imports more than quadrupled from 2011 to 2021, while its LNG imports rose from just under 17 bcm to 110 bcm in this period.

Figure 3: Chinese natural gas imports, by source
(Source: BP Statistical Review, author’s calculations)

Yet China’s victory over urban air pollution has been costly. The central government has often simply transferred coal generation from its biggest cities to less-populated locations. Therefore, while urban air pollution has declined dramatically since 2010, China’s emissions from steam coal used to make electricity have risen by 28 percent. China’s strategy has been to use natural gas selectively, reducing air pollution in politically important urban areas while increasing emissions in other parts of the country.

China also negated the environmental benefits of coal-to-gas switching by turning to Turkmenistan, almost certainly the world’s most methane-intensive producer. While coal produces far more carbon emissions than natural gas, methane emissions from natural gas production undercut that advantage. Methane has a shorter lifetime in the atmosphere than carbon dioxide, but is more efficient at trapping radiation. China sources most of its Central Asian natural gas imports from Turkmenistan, which has a methane intensity of production of 1.37 kilograms of methane per gigajoule–a level more than six times higher than in the United States even before the IRA incentivized producers to slash methane output.

Worryingly, Turkmenistan has not agreed to any concrete steps to reduce methane emissions, despite growing evidence it will secure another pipeline deal with China. If a new, 30 bcm-per-year Turkmenistan-to-China pipeline comes online and Turkmenistan’s current methane emission rate remains constant, the pipeline’s raw methane content could exceed the methane emissions of the entire US LNG complex, which boasts an export capacity of around 150 bcm a year. If Turkmenistan’s methane emissions are not abated, China’s procurement of Central Asian gas may reduce local air pollution in its cities, but will ultimately raise global emissions and associated costs.

Natural gas should be a tool for both urban air quality and climate

While the overall impact of natural gas on the climate is currently somewhat ambiguous, due to the role of methane, there need not be a tension between urban air quality and decarbonization. While there is strong evidence that replacing coal with natural gas can help reduce urban air pollution in China, India, and other economies across the Indo-Pacific, natural gas’ climate impacts can be significantly mitigated.

LNG producers from the United States and elsewhere must reduce methane emissions by limiting flaring and venting, which contribute to GHG emissions. US natural gas producers are already cutting methane emissions ahead of implementation of a methane fee under the Inflation Reduction Act. More effort is needed to reduce US natural gas GHG emissions, including by storing carbon, but the world’s largest natural gas producer and LNG exporter is on the right path.

Natural gas production does incur carbon and methane emissions—but it’s also a tool for reducing air pollution and asthma rates in urban population centers in developing countries. Moreover, if methane can be abated, natural gas can reduce global emissions when replacing coal.

The US and other natural gas producers must therefore accelerate methane and carbon emissions reductions. Meanwhile, natural gas importers, including China, must also pressure producers to limit methane and carbon emissions. Washington and Brussels are working to ensure that responsible natural gas production and LNG exports serve as a climate bridge fuel and a tool for urban emissions reduction, but they will need cooperation from Beijing and other important natural gas stakeholders.

Joseph Webster is a senior fellow at the Atlantic Council and editor of the China-Russia Report. This article represents his own personal opinion.

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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.

The post Natural gas reduced China’s urban air pollution. Can it be a global climate solution? appeared first on Atlantic Council.

Hakimi quoted in Radio Free Europe/Radio Liberty: The limits Of China’s budding relationship with Afghanistan’s Taliban

Atlantic Council — Sun, 04 Jun 2023 19:41:28 +0000

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Central Asia’s clean energy opportunity: Hydropower

Maxwell Zandi — Fri, 02 Jun 2023 18:11:41 +0000

Central Asia holds some of the greatest potential for hydropower in the world. The Pamir and Tien Shan mountain ranges and vast river networks that form from glacier meltwater provide numerous locations for hydroelectric dams in Central Asia. Upstream republics, including Tajikistan and Kyrgyzstan, already receive nearly 90 percent of their electricity from hydroelectric production.

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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Green hydrogen: Loaded up and (long-haul) trucking

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The post Central Asia’s clean energy opportunity: Hydropower appeared first on Atlantic Council.

Through carbon markets, corporations have a role to play in Africa’s development. They should take it seriously.

Aubrey Rugo — Fri, 02 Jun 2023 14:22:45 +0000

Corporations are in a unique position to responsibly engage in the “wild west” that is the carbon-offset market, all while supporting Africa’s rising low- and middle-income populations.

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.

Workers walk near a hot spring at the Olkaria Geothermal power plant, near Naivasha west of Kenya’s capital Nairobi on October 10, 2014. Photo via REUTERS/Noor Khamis.

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.

The Africa investment imperative: Diversification and resilience amid economic downturns

By Aubrey Hruby and Guillaume Arditti

At a time when investors are faced with high risks due to a global economic downturn, African markets are a viable investment opportunity.

Africa Democratic Transitions

AfricaSource Jul 8, 2022

Europe’s Green Deal plan is Africa’s green finance opportunity

By Emilie Bel

Can natural gas and nuclear power be green? “Sometimes, and for a limited period of time,” said the European Parliament on July 6, as part of an ongoing negotiation over the EU taxonomy, a key component of the European Green Deal (EGD). The EGD is the European Union’s ambitious plan to create the first emissions-neutral […]

Africa Climate Change & Climate Action

AfricaSource Apr 23, 2021

Climate change will not be fixed without Africa

By Rama Yade

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.

Africa Climate Change & Climate Action

The Africa Center works to promote dynamic geopolitical partnerships with African states and to redirect US and European policy priorities toward strengthening security and bolstering economic growth and prosperity on the continent.

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.

The G7 can take NATO-EU climate cooperation to the next level

Francis Shin, Rachel Rizzo — Thu, 01 Jun 2023 23:37:57 +0000

Since Russia’s invasion of Ukraine, decarbonization has emerged as an increasingly high priority for the transatlantic community. The European Union’s (EU) early discontent with the US Inflation Reduction Act also demonstrates that transatlantic policy consensus will be essential to the success of any decarbonization strategy. In January, NATO and the EU released their latest joint statement on how the two organizations plan to cooperate in the years ahead, including expanding and deepening cooperation on “the security implications of climate change.” This is good news. Unfortunately, the same issues that impede increased EU-NATO cooperation on other projects will continue to affect deeper cooperation on climate and decarbonization strategies. However, the Group of Seven (G7) could be a good platform to help inform each institution on ways to better coordinate their individual strategies and work together where able.

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.

Discussing climate change from a security perspective will not be a matter of ‘mission creep’ for the G7.

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.

Russia’s new reality: Less Peter the Great, more Putin the Pariah

Peter Dickinson — Tue, 30 May 2023 20:40:09 +0000

Will Vladimir Putin dare to visit the BRICS summit in South Africa this August? In previous years, his attendance would have been taken for granted, but war crimes charges brought by the International Criminal Court in March 2023 are fueling speculation that he could face arrest if he decides to risk the trip. As a signatory to the Rome Statute that established the ICC, South Africa is technically obliged to arrest Putin.

Reports this week suggest the South African government may be seeking to bypass its obligations to the ICC by granting all summit participants diplomatic immunity, but officials also stressed that immunity “does not override any warrant that may have been issued by any international tribunal against any attendee of the conference.” Even if Putin receives assurances that he will not be detained in Cape Town itself, traveling to the summit would involve considerable uncertainty due to the potential for emergency landings in numerous other jurisdictions where apprehension would be possible.

Many commentators still regard the entire notion of arresting Vladimir Putin as somewhat far-fetched. Nevertheless, the fact that his travel plans are now being shaped by the likelihood of detention speaks volumes about the Russian dictator’s dramatic fall from grace. Ten years ago, Putin was a member of the elite G8 group of world leaders and a permanent fixture at the top table of international affairs. Today, he is a wanted war crimes suspect who cannot leave his own country without first checking that he will not end up in jail.

On the rare occasions when Putin has traveled abroad since launching the invasion of Ukraine in February 2022, his interactions with other heads of state have tended to underline his reduced status. For years, Putin was notorious for making world leaders such as Angela Merkel, Donald Trump, and Pope Francis wait while he arrived hours after the appointed time. With his position seriously undermined by the disastrous war in Ukraine, Putin is now the one doing the waiting. During a September 2022 conference in Uzbekistan, the leaders of Turkey, Azerbaijan, India, and Kyrgyzstan all left Putin standing as they arrived fashionably late for bilateral meetings.

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Putin’s geopolitical isolation looks even uglier when compared to the remarkable recent international ascent of his nemesis, Ukrainian President Volodymyr Zelenskyy. In recent weeks, Zelenskyy has been lionized during high-profile visits to Rome, Berlin, Paris, and London; he has grabbed the headlines at the Arab League summit in Saudi Arabia and was the center of attention at the G7 summit in Japan. While everyone apparently wants to be seen alongside the Ukrainian leader, very few appear eager to stand with Putin.

This is not just a problem for Putin alone. Indeed, the toxicity engulfing his personal reputation has also led to Russia’s international ostracism. When the owner of popular dating apps Tinder and Hinge announced its departure from the Russian market in May 2023, company officials made clear that they could not afford the reputational damage of association with Vladimir Putin. “It’s not a good look for a trusted brand to be continuing operations in a nation where the head of state has been indicted by the International Criminal Court,” commented Match Group executive director Jeff Perkins.

Dating apps are only the tip of the iceberg, of course. A long list of global brands including McDonald’s, Coca-Cola, Nike, and Starbucks have exited or begun the process of leaving Russia since the full-scale invasion of Ukraine began in February 2022. European countries have pivoted away from Russian energy imports, leading to an historic loss of market share for the Kremlin. Russia is also finding it increasingly difficult to source the spare parts it needs to keep its war machine rolling due to chronic shortages caused by the unprecedented sanctions imposed by the West over the attack on Ukraine.

None of this was anticipated by Putin when he first gave the order to invade Ukraine early last year. Based on his prior experience of Western weakness following the 2008 invasion of Georgia and the 2014 seizure of Crimea, Putin fully expected the democratic world to respond to his latest act of international aggression with vocal protests and symbolic sanctions before getting back to business as usual. This was an extremely costly miscalculation that has left Russia more isolated than at any time since the immediate aftermath of the Bolshevik Revolution one hundred years ago.

Eurasia Center events

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

Eastern Europe NATO Security & Defense Ukraine

As something of an amateur historian, Putin must be painfully aware that he has brought his own country to one of its lowest points in centuries. He has long been preoccupied with his place in Russian history and has authored a number of lengthy historical essays that have been carefully crafted to justify his own deeply revisionist worldview. This obsession with the past has defined Putin’s entire reign and lies at the heart of his fateful decision to launch the full-scale invasion of Ukraine.

Since coming to power at the turn of the millennium, Putin has consistently expressed his bitterness over the perceived historical injustice of the Soviet collapse. This has fed a vicious contempt for Ukrainian statehood, which he has come to view as the primary obstacle to his sacred mission of reuniting “historical Russia.” Putin is notorious for claiming Ukrainians are actually Russians (“one people”), and has called Ukraine “an inalienable part of Russia’s own history, culture, and spiritual space.” In February 2022, he resolved to settle the matter once and for all.

From the very beginning of Russia’s invasion, the baleful influence of Putin’s historical baggage has been abundantly clear. Russian Foreign Minister Sergei Lavrov acknowledged this on day one of the war, when he reportedly quipped that Putin only has three advisors: “Ivan the Terrible, Peter the Great, and Catherine the Great.” Speaking months later in summer 2022, Putin confirmed the accuracy of Lavrov’s observation by publicly comparing his invasion to the eighteenth century imperial conquests of Czar Peter.

With the war now in its sixteenth month, it is fair to say things have not gone according to plan for the would-be conqueror. Putin originally envisioned a blitzkrieg campaign that would rapidly extinguish Ukrainian independence and mark the dawn of a new Russian Empire. Instead, his soldiers have suffered a string of humiliating defeats that have shattered Russia’s reputation as a military superpower, and stand accused of sickening war crimes that have horrified the watching world.

For now, Putin remains defiant and insists his war aims will eventually be achieved, but it is difficult to see how Russia can hope to repair the damage done to its international standing. Instead, the decision to invade Ukraine looks set to be remembered as one of the greatest geopolitical blunders of the modern era. It has left Russia shunned and greatly diminished on the world stage, while earning Putin himself a place in infamy alongside history’s greatest criminals. He dreamed of emulating Peter the Great, but he has become Putin the Pariah.

Peter Dickinson is Editor of the Atlantic Council’s UkraineAlert Service.

The Right Honorable Grant Shapps MP, UK Secretary of State for Energy Security and Net Zero, discusses initiatives at the Department of Energy Security and Net Zero to bolster energy security and achieve net zero carbon goals.

Energy & Environment Energy Markets & Governance Energy Transitions Europe & Eurasia

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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Arslan joins Bloomberg to discuss the implications of the upcoming Turkish elections

Grady Wilson — Thu, 11 May 2023 17:54:53 +0000

The post Arslan joins Bloomberg to discuss the implications of the upcoming Turkish elections appeared first on Atlantic Council.

Russia’s invasion fails to prevent progress in Ukraine’s energy sector

Aura Sabadus — Tue, 09 May 2023 20:28:02 +0000

For the past seven months, Russia has been waging a campaign of airstrikes against Ukraine’s civilian energy infrastructure with the goal of plunging the country into darkness. These regular bombardments left millions without heating and electricity for much of the winter season but failed to break Ukraine’s spirit. Crucially, Russia has also been unable to disable the country’s energy system. On the contrary, recent months have witnessed a number of encouraging developments which promise to further integrate Ukraine into the wider European energy industry.

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.

Moldova’s gross domestic product (GDP) per capita is roughly $5,200 a year (one of the lowest in Europe), and its inflation rate peaked at 34 percent after Russia invaded Ukraine and reduced fuel supplies. Yet many Moldovans blame their own government, not the Kremlin, an indication of Russia’s disinformation efforts that inflame the already tense domestic political divide.

While it is landlocked, Moldovan territory includes the Prut, the Dniester, and the Danube rivers, which empty into the Black Sea. Moreover, because it borders Ukraine and is only fifty kilometers from Odesa (Ukraine’s largest seaport), instability in Moldova—especially in Transnistria, which is effectively controlled by Moscow—could directly impact its neighbor’s security. A Russian-dominated Moldova could effectively become a southern Kaliningrad, and in conjunction with Crimea, it could provide Moscow with more control over the northern Black Sea and also possibly the ability to hamper Ukraine’s maritime activities. And, should Russia gain access to more Moldovan territory and flip Chisinau in its favor, Moscow’s expanded presence would also threaten Romania’s security and put even greater pressure on NATO’s southeastern flank.

Moldova has maintained its neutrality, which it had enshrined in its constitution. Despite this sentiment, Moldova is a member of the Partnership for Peace, which allows cooperation with NATO on a variety of activities. Yet Moldova has starved its security sector for decades, hoping its neutrality and Ukraine would protect it. Since Russia launched its full-scale invasion of Ukraine last year, Chisinau has sought to reverse this neglect of its military; for example, it expanded its 2024 defense budget by 68 percent compared to its budget in 2022—but that’s still only an increase of approximately eighty million dollars, or 0.55 percent of its GDP.

On paper, Moldova can field a security contingent of 45,000 personnel; however, this force is poorly trained and equipped with virtually no air support. In Transnistria, Russia has 1,500 troops, mainly comprising local recruits. While Moscow might seek to augment these forces, that would be logistically difficult given its failure to take Odesa. Moscow does, however, have significant agents of influence in Moldova who could work more forcefully against the government.

Keeping Moldova out of the Kremlin’s grasp is vital to Eastern European security and NATO’s Black Sea mission. Moldova, NATO, and the West must send clear, unmistakable signals to the Kremlin:

The EU should approve the fast-tracking of Moldova’s EU accession, a plan for which Poland recently made the case.
While it would be problematic to offer Moldova a fast track to NATO membership—as the Alliance is viewed unfavorably in Moldova, and leaving the policy of neutrality is unpopular there—NATO or its members can take other actions. For example, the promise of air defense and heavy weapons and training in the case of conflict with Russia/Transnistria would be a deterrent.
Moldova and the West should provide Moldova’s armed forces with more training and modern equipment, ultimately to improve capabilities and interoperability. Ukraine demonstrated how a Western-oriented training program can give a smaller country’s military an edge over Russia’s armed forces. This could be accomplished without violating Moldova’s neutrality as it would not require deploying foreign forces on Moldovan territory.
Moldova should institute a robust strategic-communications and cyber-defense platform to counter Russian malign influence—and the West should help. A platform designed to counter misinformation and disinformation could help galvanize domestic support for greater alignment with NATO and the West.
Finally, Moldova is one of the world’s least energy-self-sufficient countries. While Chisinau, with the West’s support, has made progress in source diversification and sector reform, it should continue to wean itself off of Russian oil and gas and electricity from Transnistria. Moldova must build a more resilient energy infrastructure that is not dependent on Russia.

Through its energy manipulation, military intimidation, and official threats, the Kremlin is conducting a classic hybrid warfare campaign against Moldova. In comparison to early 2014—when the world stood stunned in the wake of ‘little green men’ and the effective dismemberment of Ukraine—NATO and Western allies have become more sophisticated in detecting and combating hybrid warfare tactics. Additionally, NATO members’ support to Ukraine, while belated and arguably still inadequate, has been instrumental in Kyiv’s successful defense against Russia’s full-scale invasion. The lessons in Ukraine are unmistakable and should not be lost on Western and Moldovan leadership. Strong leadership, a determined population, and NATO support are indispensable in halting Russian aggression.

Arnold C. Dupuy is a nonresident senior fellow at the Atlantic Council IN TURKEY, a faculty member of the US Naval Postgraduate School, and chair of the NATO Science and Technology Organization’s SAS-183, “Energy Security Capabilities, Resilience and Interoperability.”

The post To secure the Black Sea, the West must help Moldova stand up to Russian aggression appeared first on Atlantic Council.

Ukraine seeks more German support on Russia’s invasion and EU accession

Alyona Getmanchuk — Thu, 04 May 2023 16:16:31 +0000

Ukrainians have long admired Germany for its high standard of living and rule of law. However, for the past nine years, Berlin’s response to Russian aggression against Ukraine has often been a source of disappointment. With Ukrainian President Volodymyr Zelenskyy expected to visit Berlin on May 13, many Ukrainians are hoping Germany will soon be doing more to defeat Russia’s invasion and advance their country’s European integration.

The first major milestone in Ukraine’s disillusionment with Germany was the 2008 NATO summit in Bucharest, when German Chancellor Angela Merkel was instrumental in vetoing a membership action plan for Ukraine. At the time, this was justified by the need to avoid provoking Russia. The mood of disappointment in Kyiv grew with Berlin’s subsequent support for the Nord Stream II gas pipeline, which appeared designed to bypass Ukraine and promised to leave the country exposed to the threat of increased Russian aggression. Germany defended this decision on purely economic grounds, but many Ukrainians argued that the economic benefits did not justify the geopolitical risks.

Germany’s involvement in the Minsk peace process from September 2014 further strengthened perceptions in Kyiv that Berlin’s priority was to avoid any decisive split with Moscow, with limited support for Ukraine often balanced by efforts to accommodate the Kremlin. For many Ukrainians, Germany’s position highlighted the inadequacy of the wider European response to Russian aggression. It was yet another example of the West’s reluctance to do anything that might be considered provocative by the Kremlin.

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With the benefit of hindsight, it is now painfully clear that policies designed to avoid provoking Putin are likely to do exactly that. The refusal to grant Ukraine a pathway to NATO in 2008 confirmed the country’s vulnerability, while Germany’s continued commitment to Nord Stream II following Russia’s 2014 invasion of Crimea and eastern Ukraine reinforced the Kremlin’s conviction that hunger for profits outweighed any commitments to European values in Berlin. These developments helped set the stage for the full-scale invasion of Ukraine in February 2022.

Ukrainian frustration toward Germany has remained tangible since the start of Russia’s full-scale invasion, but has been tempered by Germany’s increasing willingness to cut ties with Russia and provide Kyiv with vital military aid. Berlin has faced significant criticism over the speed of weapons deliveries to Ukraine, but has emerged over the past fourteen months as a key partner. The early 2023 decision to provide Leopard tanks was a watershed moment in this process that reflected Chancellor Olaf Scholz’s talk of an historic “turning point” in relations with Russia almost one year earlier in the first days of the invasion.

In additional to military aid, Ukraine counts on German support in other areas. Post-war reconstruction is seen as a more straightforward issue for German involvement, with the Ukrainian authorities already expressing their gratitude for Germany’s readiness to contribute. However, any reconstruction requires a sustainable peace. This is simply not realistic until Ukraine defeats Russia militarily, which will not be possible without the expanded delivery of weapons from key Western partners such as Germany.

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

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Kyiv officials would also like to see Berlin adopt a more supportive stance on the issue of future Ukrainian EU membership. Germany has previously played this role for other countries seeking to join the European Union, but is still regarded by many in Ukraine as being somewhat skeptical of the country’s EU ambitions and was among the last to back EU candidate nation status for Ukraine in summer 2022. This is unfortunate. After all, Ukraine’s EU membership bid has major geopolitical and security implications for the entire continent.

As part of the EU, Ukraine would no longer be viewed as a potential component part of a revived Russian Empire. Progress toward Ukrainian EU membership would also fit well with Germany’s stated objective of a post-war Ukraine with less corruption, greater rule of law, transparent business climate, and resilient institutions. I am therefore convinced that Germany will match recent statements in favor of Ukraine’s EU accession with practical support.

In addition, there are hopes in Kyiv that German attitudes toward Ukrainian NATO membership will also change. On the positive side, Chancellor Scholz and other German leaders now appear to recognize that Ukraine’s NATO aspirations were not the cause of the current Russian invasion. The challenge is to convince them that the threat of further Russian aggression will continue unless Ukraine receives security guarantees equivalent to NATO membership, regardless of whether Putin himself remains in the Kremlin.

Any lasting peace settlement must also include justice for the Ukrainian victims of Russian war crimes. Kyiv expects Germany to back the push for accountability. Key issues include the establishment of a special international tribunal and the use of seized Russian assets to help finance the reconstruction of Ukraine. It seems highly unfair for the international community to pay for damage caused by Russia. Instead, Russia should fund efforts to rebuild Ukraine.

Rebuilding Ukraine will be an historic undertaking. German companies can be expected to play a major role in what promises to be the largest European construction initiative since the years following World War II. Reconstruction will enable millions of Ukrainian refugees to return home, while creating opportunities for thousands of German businesses.

Despite the disappointments and frustrations of the past fifteen years, Germany remains a key partner for Ukraine with a critical role to play in the twin tasks of winning the war and achieving a sustainable peace. The immediate priority remains weapons; Ukraine desperately needs everything from anti-aircraft systems to tanks and ammunition in order to defeat Putin’s invasion. Looking ahead, Berlin’s backing will be vital as Ukraine seeks to rebuild, integrate further into the EU, and attain the kind of comprehensive security guarantees through NATO membership that can prevent any repeats of Russia’s current invasion.

Alyona Getmanchuk is director of New Europe Center think tank and a nonresident senior fellow at the Atlantic Council’s Eurasia Center. An expanded German-language version of this article was originally published by Aus Politik und Zeitgeschichte (APuZ).

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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Joseph Webster

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Russian soldier allegedly captured in Ukraine claims Gazprom formed military units

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Lithium drives the energy transition. Will Chile’s plan to nationalize production be a speed bump?

Ignacia Ulloa Peters, William Tobin — Sat, 29 Apr 2023 00:37:16 +0000

Chilean President Gabriel Boric caused a jolt on April 20 when he announced plans to partially nationalize his country’s lithium industry. This decision would grant the government 51 percent control of the country’s lithium production via a state-owned company created to oversee and participate in the mineral’s entire production cycle. The announcement generated controversy in Chile and abroad, with a range of key players speaking in favor or against the initiative. While it is true that instances of nationalization of natural resources often result in debilitated industries, Chile’s strong institutions, recognition of the imperative to partner with private industry, and previous success with mineral nationalization ventures create a positive outlook for the country’s ability to deliver. While this may be the only path forward for the lithium industry to progress, policymakers should exercise caution with similar approaches to other industries.

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.

The expertise and infrastructure of existing private-sector enterprises will be a continuing feature of Chile’s lithium industry for the foreseeable future.

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.

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Russian War Report: Updated Google Earth imagery details destruction in Mariupol

Digital Forensic Research Lab — Fri, 28 Apr 2023 15:07:47 +0000

As Russia continues its assault on Ukraine, the Atlantic Council’s Digital Forensic Research Lab (DFRLab) is keeping a close eye on Russia’s movements across the military, cyber, and information domains. With more than seven years of experience monitoring the situation in Ukraine—as well as Russia’s use of propaganda and disinformation to undermine the United States, NATO, and the European Union—the DFRLab’s global team presents the latest installment of the Russian War Report.

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Google Earth updates to satellite imagery reveal destruction in Mariupol

Russia strikes residential building in pre-dawn missile barrage

Russian soldier allegedly captured in Ukraine claims Gazprom formed military units

A video has surfaced online showing a Russian soldier allegedly captured in Ukraine talking about military units formed by the state-owned energy corporation Gazprom. In the footage, he identifies himself as Alexei Tkachenko and claims to be a contractor for Russian private military company (PMC) Redut (“Redoubt”), where he “got through Gazprom.” Tkachenko claims that Gazprom created a military unit called Potok (“Stream”), which the energy corporation handed over to PMC Redut. He added that Gazprom also created two other military units named Fakel (“Torch”) and Plamya (“Flame”). According to Tkachenko, Gazprom handed over the Torch and Flame units to Russia’s Ministry of Defense, while giving Stream to Redut. The video footage then continues with Tkachenko telling a story on how he was wounded, left in the field by his compatriots, and crawled to Ukrainian positions. The author of the tweet wrote in the caption of the video that Tkachenko is a “first captured russian from the “Redut” PMC.”

It is unknown whether the soldier’s testimony is accurate or voluntary; as the Washington Post noted last year, the International Committee of the Red Cross considers the sharing of POW footage as prohibited by the Geneva Conventions. Ukrainian military intelligence previously claimed in February 2023 that Gazprom had created its own PMC.

According to Meduza, Novaya Gazeta was the first to report about Russian PMC Redut in 2019. Prior to Russia’s 2022 invasion of Ukraine, Redut was engaged in the protection of Stroytransgaz’s facilities in Syria, which is a Russian engineering construction company in the oil and gas industry. Based on sources that include “one of Redoubt’s own former commanders,” Meduza reported that “Redoubt, which still has a substantial number of combatants in Ukraine, is under the Russian Defense Ministry’s complete control.” According to an interview that the Gulagu.net project recorded with a former Redut contractor, the PMC was also backed by Russian oligarchs Oleg Deripaska and Gennady Timchenko.

—Eto Buziashvili, Research Associate, Tbilisi, Georgia

*A representative for Oleg Deripaska contacted the DFRLab and insisted that Deripaska has never provided any form of support, financing, or backing to any military companies or groups. He also took issue with referring to Deripaska as an “oligarch,” and added that Deripaska has consistently called for peace in Ukraine as well as for military spending to be reduced globally.

Google Earth updates to satellite imagery reveal destruction in Mariupol

Recently updated Google Earth imagery reveals the extent of the Russian bombing of Mariupol that occurred on March 26, 2022. The update, first reported by Meduza, also includes details of the dire condition in which the national drama theatre of Mariupol was left after the bombing. This facility was notably used for shelter by the civilian population and children, featuring the inscription “children” (“ДЕТИ“) in Russian in front of the theatre.

March 2022 Google Earth screengrab of the Mariupol drama theatre. (Source: Google Earth)

Other key locations featured in the imagery update include the Azovstal plant, which the Russian air force had struck. The plant operated as a stronghold for the Ukrainian resistance in Mariupol until May 2022. Google Earth imagery posted by Meduza also shows a line of civilians in front of the humanitarian aid established by United Russia.

The update also reveals how burial sites in Mariupol have expanded as a result of the Russian occupation of the city. Other OSINT sources including Planet Labs imagery posted on Twitter by Benjamin Strick of the Center for Information Resilience indicate how the Staryi Krym graveyard in Mariupol has been expanding under Russian occupation. According to estimates by the OSINT project GeoConfirmed, the cemetery could have grown by around 15,000 graves between May 2022 and April 2023.

Location of newly dug gravesites in the Starokrymske cemetery of Mariupol, Ukraine (Source: Google Earth; Annotations: DFRLab)

–Valentin Châtelet, Research Associate, Security, Brussels, Belgium

Russia strikes residential building in pre-dawn missile barrage

In the early hours of April 28, Russia launched a barrage of missiles on Ukraine, killing more than twenty people. A residential building was struck in the central Ukrainian city of Uman, leaving multiple people dead and wounded. In Dnipro, a woman and her three-year-old child were killed, according to the city’s mayor, Borys Filatov.

On April 27, the General Staff of the Ukrainian Armed Forces reported fifty-four attacks by Russian forces in Bakhmut, Marinka, and individual villages in the direction of Avda. On April 25, Ukraine said it recorded forty-three attacks by the Russian army over the preceding twenty-four-hour period. The geography of the attacks followed the pattern observed in recent weeks, with fierce battles continuing in Bakhmut and Marinka and separate assaults on positions around Avdiivka. Artillery shelling was recorded in the direction of Lyman and the area around Vuhledar, but Russian forces appear to be decreasing their attacks on Lyman.

According to an April 23 assessment from British military intelligence, the number of casualties among Russian personnel in Ukraine has likely decreased by about 30 percent in April compared to the high casualty period of January to March 2023. The reduced losses are likely due to the gradual curtailment of Russian offensive operations, which have failed to achieve their objectives, and the gradual transition to defensive operations.

Ukrainian forces shot down nine drones on April 24, six Iranian-made Shahed drones in the eastern direction, two Russian Lancet drones, and one operational-tactical drone in the southern direction. On April 25, one person was killed, and ten were wounded due to a Russian missile strike with an S-300 missile on the museum in central Kupiansk. A second body found later in the day was also attributed to the attack. On the same day, explosions were reported in the occupied town of Tokmak, according to Melitopol Mayor Ivan Fedorov, as well as in Kherson.

Meanwhile, five villages in Russia’s Belgorod region were left without electricity after Ukrainian shelling, according to Belgorod Governor Vyacheslav Gladkov. Reportedly, projectiles damaged power lines around Cheremoshnoe, Ustinka, Yasnye Zori, Bochkovka, and Rovenek.

Ukraine continues to diversify its arsenal with locally made weapons. Soldiers of the 68th Chasseur Brigade showcased the Ukrainian Shablya firing system. The remote-controlled robotic machine gun turret allows the operator to remain at a safe distance without exposure to return fire. These types of weapons are critical during military operations, such as those in eastern Ukraine, where soldiers are directly exposed to enemy fire.

Footage of newly produced Bulgarian Arsenal MG-1M machine guns, delivered by the Come Back Alive Foundation, has appeared online. The machine guns and ammunition were produced in 2023, with 1,460 guns purchased, and distributed to twenty-one combat brigades within the Ukrainian Army, along with 7.62 x 54r FMJ/SC ammunition. According to the foundation, the weapons were purchased for €6.5 million (USD $7.1 million).

Ukrainian engineers are closely examining Russian drones after changes in UAV design were observed. Serhiy Speshilov, head of the department studying robotic systems at the Center for Research of Captured and Advanced Weapons and Military Equipment within the Ukrainian army, said significant changes were noted in Iran-produced Shahed drones. According to Speshilov, the UAVs previously had relatively new microcircuits and chips, but recently there has been a degradation of components. Speshilov said this is due to the effect of sanctions. In one example, Speshilov’s team discovered a relay manufactured in Armenia in 1996. In addition, Speshilov noted the use of interference-proof satellite navigation receivers and said Ukrainian forces are working to counter the effects with anti-jamming equipment.

—Ruslan Trad, Resident Fellow for Security Research, Sofia, Bulgaria

The post Russian War Report: Updated Google Earth imagery details destruction in Mariupol appeared first on Atlantic Council.

Kazakhstan could lead Central Asia in mitigating the world’s energy and food shortages

Margarita Assenova, Ariel Cohen, and Wesley Hill — Fri, 28 Apr 2023 12:00:00 +0000

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Russia’s war against Ukraine has had significant economic and political repercussions across the globe, including energy shortages and growing food insecurity. The war has forced Central Asian states to emphasize their independence from Moscow and accelerate their economic diversification. Central Asia—comprising Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan—has the potential to mitigate global shortages of energy, food, and fertilizers, caused by Russia’s war of aggression.

The primary challenges for Central Asia and its Western partners remain diversifying export routes and expanding the capacity of alternative transportation corridors, especially the Trans-Caspian International Transportation Corridor, or the “Middle Corridor.” Kazakhstan is the leading producer of uranium ore in the world, grows 2 percent of the world’s wheat, and has major hydrocarbon reserves. Kazakhstan has the opportunity to lead Central Asia forward on the path to becoming an important supplier of energy, grain, fertilizers, and nuclear fuel to world markets.

The energy crisis in Europe spurred renewed interest in the long-planned Trans-Caspian natural gas pipeline. A potential United States and European Union ban on uranium civilian-reactor fuel exports from Russia could ensure Kazakhstan’s importance as a nuclear fuel exporter to Europe. To do this, Kazakhstan first needs to build its own conversion and enrichment facilities. This would allow it to double its share in the European market while utilizing the Middle Corridor.

By encouraging Western investment, the states of Central Asia can become an important force in global commodity markets. To this end, they should implement the recently signed far-reaching regional agreements on cooperation and integration, so that they are less susceptible to “divide and conquer” strategies from predatory foreign powers and can exercise greater leverage when negotiating as a bloc.

The US and the EU should also recognize that Central Asia’s energy and agricultural potential and resources make the region an area of strategic interest with promising business opportunities. The Central Asian states need to intensify their Western-oriented diplomatic outreach to attract support from state and private actors for investment and technological partnerships. Geographic proximity to Russia and China means Central Asian countries will always have economic relationships with Moscow and Beijing. But greater Western engagement in the region can diminish the chances for Russo-Sino cooperation in Central Asia.

Russia’s war against Ukraine has weakened its geopolitical position and the Western sanctions on its economy have opened up new opportunities for Central Asia to supply critical energy and food commodities to world markets. Kazakhstan, as the region’s largest economy and its largest producer of oil, uranium, and grain, is well-positioned to lead this transition.

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How can Kazakhstan and Central Asia help power and feed the world?

Central Asia has the potential to mitigate the global energy and food shortages that have been exacerbated by Russia’s war of aggression. What are the most significant challenges facing Central Asia’s energy and food export potential?

Central Asia Economy & Business Europe & Eurasia Geopolitics & Energy Security

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Between East and West

Central Asia

The Central Asian Republics—Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan, and Turkmenistan—are located at the nexus of Russia, China, South Asia, and the Middle East. Leveraging their critical geography, these nations are renewing their role as the crossroads of trade between the West and Asia—resulting in significant economic development, especially in the sectors of energy and natural resources. While moves toward reform and democracy have been made since independence in 1991, corruption and human rights issues remain prevalent throughout the region.

Explore Central Asia

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Kazakhstan’s recent decision to cancel the country’s annual WWII Victory Day parade was a small but significant indication of Nur-Sultan’s opposition to the Russian invasion of Ukraine.

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By Francis Shin

There is a strong chance to extend some of the regulatory reforms directed towards Russian oligarchs to also apply to the Nazarbayev family.

Central Asia Economy & Business

UkraineAlert Nov 30, 2022

As Putin retreats in Ukraine, he is also losing Kazakhstan

By Kamila Auyezova

Putin’s rapidly unraveling invasion of Ukraine is eroding Russian influence throughout the former Soviet Empire. This process of imperial retreat is nowhere more visible than in Kazakhstan, writes Kamila Auyezova.

Central Asia China

The post Kazakhstan could lead Central Asia in mitigating the world’s energy and food shortages appeared first on Atlantic Council.

Putin’s dreams of a new Russian Empire are unraveling in Ukraine

Mark Temnycky — Tue, 25 Apr 2023 20:09:04 +0000

Over the past year, Russian President Vladimir Putin has openly compared his invasion of Ukraine to eighteenth century Russian Czar Peter the Great’s imperial conquests, and has boasted of “returning” historically Russian lands. However, his dreams of a new Russian Empire are now in danger of unraveling as military setbacks in Ukraine undermine Moscow’s position throughout the entire former USSR.

The invasion of Ukraine has clearly not gone according to plan. Putin anticipated a short and victorious war that would extinguish Ukrainian statehood and force the country decisively back into the Russian orbit. Instead, his army has lost tens of thousands of soldiers and vast amounts of equipment while struggling to achieve its military objectives. With the war now in its fifteenth month, Russia is struggling to advance in Ukraine and finds itself subject to unprecedented international sanctions that pose a grave threat to the country’s long-term development.

Crucially, the faltering invasion of Ukraine has also undermined Russian influence throughout the post-Soviet region. Following the 1991 collapse of the USSR, Russia remained deeply reluctant to concede full sovereignty to the 14 non-Russian countries that emerged from the wreckage of the Soviet Union. While Baltic states Estonia, Latvia, and Lithuania soon began pursuing a path of Western integration leading to EU and NATO membership, Russia was initially able to maintain its dominant position in relation to most of the newly independent post-Soviet nations.

Over the past three decades, relations between Russia and its former Soviet vassals have varied greatly, with some welcoming continued strong ties and others seeking to turn away from Moscow. Putin has made no secret of his desire to revive Russian influence throughout his country’s former imperial domains, and has publicly lamented the fall of the USSR as the “disintegration of historical Russia under the name of the Soviet Union.”

The Kremlin has employed a mixture of carrot and stick tactics in order to retain and strengthen its influence across the former USSR. Measures have ranged from elite enrichment, customs unions, and security cooperation to trade wars, military interventions, and the creation of “frozen conflicts.”

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The 2014 invasion of Ukraine’s Crimean peninsula and Donbas region was a major landmark in Russia’s post-Soviet empire-rebuilding efforts, but the full-scale invasion of Ukraine eight years later was to prove the biggest turning point of all. Since February 24, 2022, countries throughout the former Soviet Empire have rallied in support of Ukraine and have sought to distance themselves from an increasingly isolated and humbled Russia.

Throughout the war, the three Baltic states have supplied large amounts of defense, financial, and humanitarian aid to Ukraine while welcoming thousands of Ukrainian refugees. Estonia, Latvia, and Lithuania have also been very supportive of Ukraine’s EU and NATO membership bids. During a recent Kyiv visit, Estonian PM Kaja Kallas underlined this backing, commenting, “For peace in Europe, we need Ukraine in the EU and NATO. The way to lasting peace is to end grey areas in European security.”

In the South Caucasus region, Russia’s status has clearly been diminished by the invasion of Ukraine and the embarrassing failures of Putin’s once-vaunted military. The Kremlin has long served as peacekeeper and arbiter between Azerbaijan and Armenia in the region, maintaining a significant military presence in Armenia. However, the war in Ukraine has prevented Russia from fulfilling its commitments, with Moscow unable to stop renewed fighting. This has encouraged the Armenians to reconsider their relations with Russia.

With Russian influence in decline, the Armenian government has deepened cooperation with both the United States and the European Union, including the opening of a new EU Mission in Yerevan. Armenia has also begun to distance itself from the Collective Security Treaty Organization (CSTO), the Russia-led military bloc bringing together six former Soviet republics.

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

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In Central Asia, the invasion of Ukraine has amplified existing distrust of Russia. This is most apparent in the region’s largest nation, Kazakhstan. Like Ukraine, Kazakhstan has a significant ethnic Russian population, leading to concerns that the country could become the next target of Russian imperial aggression. These fears have been further fueled by Kremlin propagandists, who have warned that Kazakhstan will pay a high price for the country’s alleged disloyalty to Moscow. Kazakh officials appear unmoved by these threats, and have recently canceled Victory Day celebrations for the second consecutive year in what many see as a direct snub to Putin.

Since the invasion of Ukraine began, Kazakhstan has attempted to strengthen ties with China, Turkey, the EU, and the US, while questioning its relationship with Russia and the CSTO. This geopolitical shift was perhaps most immediately obvious in summer 2022, when Kazakh President Kassym-Jomart Tokayev made international headlines by rejecting recognition of Russian territorial claims against Ukraine while standing alongside Putin at a flagship economic forum in Saint Petersburg.

Over the past fifteen months of the invasion, Kazakhstan has demonstrated its support for Ukraine via the donation of considerable quantities of humanitarian aid. Other countries throughout the former Soviet world have done likewise. Azerbaijan has sent nearly €20 million in humanitarian and medical assistance. Turkmenistan has dispatched a cargo plane filled with medicines and medical supplies. Uzbekistan sent several tons of humanitarian aid. Given continued Russian leverage in the region and Moscow’s traditional expectations of loyalty, these relatively innocuous moves should be seen as bold gestures that reflect a changing geopolitical climate.

The invasion of Ukraine has exposed the extent of Kremlin control over Belarus, with Russia using its neighbor as a platform for airstrikes against Ukraine and the failed Kyiv offensive of early 2022. However, Belarusian dictator Alyaksandr Lukashenka has so far resisted pressure to directly enter the war, despite being heavily dependent on the Kremlin for his political survival. With the Belarusian public and military both believed to be strongly against any direct participation in the invasion, Lukashenka finds himself in a difficult position. He understands that if he were to involve Belarusian forces in the war, this would likely lead to a strong and unpredictable domestic backlash.

Putin saw the invasion of Ukraine as a key step toward rebuilding the Russian Empire. Instead, it has forced countries across the former Soviet Union to distance themselves from the Kremlin. These countries feel able to do so in part due to the poor performance of the Russian army in Ukraine, which has made a mockery Moscow’s claims to military superpower status while reducing Russia’s ability to intimidate its neighbors. The invasion of Ukraine is still far from over, but the damage done to Russia’s regional influence and to Putin’s own imperial ambitions is already impossible to ignore.

Mark Temnycky is a nonresident fellow at the Atlantic Council’s Eurasia Center. He can be found on Twitter @MTemnycky.

Tantardini in Longitude on the geopolitics of energy.

Atlantic Council — Tue, 25 Apr 2023 13:56:00 +0000

In the April 2023 Issue of Longitude, Forward Defense Nonresident Senior Fellow Marco Tantardini published an article on the evolution of energy markets in the past decades and how they have reshaped global politics.

Energy independence not only has the potential to strengthen the US alliance with Europe, though an increasing amount of exported LNG [Liquified Natural Gas], but is also letting America pivot its focus to Asia, after decades of close involvement (and wars) in the Middle East

Marco Tantardini

Fellow

Marco Tantardini

Forward Defense Scowcroft Center for Strategy and Security

Italy Space

Forward Defense, housed within the Scowcroft Center for Strategy and Security, generates ideas and connects stakeholders in the defense ecosystem to promote an enduring military advantage for the United States, its allies, and partners. Our work identifies the defense strategies, capabilities, and resources the United States needs to deter and, if necessary, prevail in future conflict.

The post Tantardini in Longitude on the geopolitics of energy. appeared first on Atlantic Council.

Decarbonization solutions for addressing Europe’s green industrial policy challenge

Transform Europe Initiative — Tue, 18 Apr 2023 18:55:38 +0000

On March 20, the Atlantic Council co-hosted a high-level workshop on “Decarbonization solutions for addressing Europe’s green industrial policy challenge” in Paris with the German Council on Foreign Relations (DGAP) and Groupe d’études geopolitiques (GEG). The event was the second in a series of six (the first was held in Berlin in January) which aim to bring together policymakers, analysts, and the private sector to discuss decarbonization strategies in Europe.

Distinguished guests at the workshop included H.E Laurence Boone, Minister of State for Europe for the French Foreign Ministry; Ms. Kerstin Jorna, Director General of the Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (DG GROW); Mr. Olivier Guersent, Director-General of the Directorate General for Competition; Mr. Emmanuel Moulin, Director General at the French Treasury; and Mr. Benoît Potier, Chief Executive Officer of Air Liquide, among others. In addition to these guests, the Atlantic Council, DGAP and GEG were honored to host other key policymakers, analysts, and private sector representatives.

One year on from the Russian invasion of Ukraine, Europe has managed to mitigate the worst effects of the energy crisis and maintain its support for Ukrainians’ defense of their homeland. Participants noted the significant number of initiatives taken at the European level on a vast array of subjects, including diversifying imports, deploying clean energy, and building supply chain capacity. The conversation in Paris ranged from how to meet basic energy needs now to building a resilient net zero economy in the future, with a focus placed on industrial strategy, infrastructure needs, and scaling up public and private funding, and infrastructure needs.

Whereas participants at the first workshop in Berlin highlighted the successful cooperation between European member states in the face of the energy crisis, discussants in Paris underscored increasing tensions between member states on several vital issues. Attendees emphasized the crisis of trust between member states, evidenced by disagreements on electricity market reform, divergences on the role of nuclear and natural gas in the energy transition, state aid rules, and even the lack of progress made towards a Capital Markets Union. Some panelists argued that Franco-German disagreements on nuclear energy inhibit Europe’s ability to make progress in its energy transition, while others expressed concerns around the necessity of nuclear support schemes at the EU level. There were also diverging perspectives around how loosening the state aid rules would impact market unity.

Participants also emphasized the need for European cooperation, especially in building common energy infrastructure. Indeed, renewable energy deployment must go hand in hand with infrastructure investments, such as electricity grids, hydrogen pipelines, and electric vehicle charging stations. Panelists shared the view that, to meet these many goals, Europe would need to strengthen its infrastructure planning capacities, accelerate reforms in project permitting, and scale up access to funding if it is to meet its ambitious decarbonization objectives. Increasing and diversifying the number of long-term energy contracts signed with producers, such as contracts for difference and power purchase agreements, could help incentivize investments in clean power.

Looking beyond the continent, European participants described the United States’ Inflation Reduction Act (IRA) as a welcomed shift in US climate policy and positive shock for Europe’s own decarbonization efforts. Several participants argued that the IRA would encourage Europe to build its own resiliency in clean industry supply chains and open potential avenues of cooperation with the United States. But European panelists also expressed concerns regarding its impact on European industry due to the law’s national preference rules, seen as discriminatory against European manufacturers, even though the EU offers comparable, but perhaps harder to navigate incentives. This highlighted a remarkable shift in focus from the workshop in Berlin a few months prior, where policymakers and analysts had debated Europe’s capacity to meet energy demand. In Paris, however, the conversation focused not on energy supply, but on low-cost, low-carbon energy as a prerequisite for a competitive industry.

The Atlantic Council looks forward to continuing this workshop series throughout 2023.

Transform Europe Initiative

The Atlantic Council’s Transform Europe Initiative (TEI) is a critical element of the Europe Center’s drive towards structural reforms in Europe.

TEI leverages a robust body of work in strategic decarbonization.

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Providing expertise and building communities to promote transatlantic leadership and a strong Europe in turbulent times.

The Europe Center promotes the transatlantic leadership and strategies required to ensure a strong Europe.

The Global Energy Center promotes energy security by working alongside government, industry, civil society, and public stakeholders to devise pragmatic solutions to the geopolitical, sustainability, and economic challenges of the changing global energy landscape.

The post Decarbonization solutions for addressing Europe’s green industrial policy challenge appeared first on Atlantic Council.

Ukrainian victory “could help ensure Europe’s future energy security”

Diane Francis — Fri, 14 Apr 2023 23:37:20 +0000

Ukraine could become the next European energy powerhouse, with enough natural gas reserves to replace Russian exports to Europe as well as enormous potential in hydrogen and renewable energy. However, development of the country’s energy sector has been impeded by Russian invasions in 2014 and 2022.

Oleksiy Chernyshov, who serves as CEO of Ukraine’s state-owned energy giant Naftogaz, believes Ukrainian victory in the current war with Russia could help ensure Europe’s future energy security. “In terms of overall reserves, Ukraine is second or third in size among European countries after Norway and the United Kingdom,” he says. This estimate does not include undersea gas potential in the Black Sea off Crimea, where preliminary drilling some years ago by Western multinationals indicated “enormous” deposits.

Ukraine has continued to expand production since the onset of Russia’s full-scale invasion in February 2022, with the country set to become self-sufficient in natural gas this year. Looking ahead, Chernyshov believes Ukraine’s domestic gas production can be further increased to replace Russian gas exports to Europe. “Theoretically, we can double or triple the production of natural gas even without Crimea, but we need big investment to do so. We need partners to increase the speed.”

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There was good news for Naftogaz in mid-April when The Hague Arbitration Tribunal ruled that Russia must pay the company $5 billion in compensation for some of the energy assets it unlawfully expropriated following the Russian military occupation of Crimea in 2014. Chernyshov describes the ruling as a “key victory” and says refusal to pay will result in court actions to seize Russian assets around the world. Billions more in claims are pending concerning Crimea’s offshore gas potential as well as Russian seizures of energy assets in other regions of Ukraine.

Today’s war in Ukraine is not just a fight against the resurgent authoritarian imperialism of Putin’s Russia. Due to the country’s vast gas, hydrogen, renewable, and nuclear power potential, Chernyshov argues that liberating Ukraine will also help guarantee energy security for the whole of Europe.

At present, about 80% of Ukraine’s natural gas production is located at sites in the Poltava and Kharkiv regions in the northeast of the country, which are under Ukrainian government control. The remainder is produced in western Ukraine close to Lviv. Military realities create significant risks, with some production sites less than 50 kilometers from the fighting. Total Ukrainian gas production is currently estimated at 18.5 billion cubic meters per year, with 13.5 billion produced by Naftogaz and 5 billion by other producers. Chernyzhov notes that this is more than any other country in Europe except Norway, which produces 100 billion cubic meters annually.

Eurasia Center events

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

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Despite the ongoing war between the two countries, Russian gas continues to flow through Ukraine’s transit pipeline network to EU markets. However, with European customers increasingly looking elsewhere for their energy supplies, annual volumes have fallen to around 14.5 billion cubic meters.

Another major Ukrainian energy asset is the country’s natural gas storage capacity, consisting of underground facilities that were first developed during the Soviet era. “This is the biggest storage in Europe, is safe from attack, and could be used to store supplies from all over the world for use in European countries. Ukraine could be Europe’s energy bank,” says Chernyshov. “This would help provide energy security to landlocked countries like Austria, Slovakia, the Czech Republic, and others that have no sea access.”

Ukraine has asked the European Union to provide war risk insurance for this storage capacity in order to increase its use to pre-war levels. “Our storage is certified and in full compliance with the most recent European regulations,” notes the Naftogaz CEO. “The only thing missing is additional guarantees for commercial companies so that thousands will come back and utilize this capacity. This will allow Europeans to bank energy and save money.”

In addition to the country’s sizable untapped gas reserves, Ukraine’s other key energy advantage is likely to be hydrogen production, predicts Chernyshov. “This requires electricity and clean water, which Ukraine has in abundance. Ukraine is and will be a serious net exporter of electricity, but you cannot store it unless you convert it into hydrogen. And Ukraine has huge pipelines to Europe which can transfer hydrogen or anything in gas form. Hydrogen production is not cheap, but many countries want to get involved after our victory.”

Ukraine’s large land base and favorable climate also provide extensive opportunities for major wind and solar power projects. Chernyshov says the country’s enormous energy potential underlines Ukraine’s importance as a strategic partner for the EU. “Everyone must stop treating Ukraine as country that will require constant assistance in the energy sector. In fact, we are positioned to become an energy hub for Europe.”

Diane Francis is a nonresident senior fellow at the Atlantic Council’s Eurasia Center, editor-at-large with the National Post in Canada, author of ten books, and author of a newsletter on America.

Robert F. Ichord, Jr. — Wed, 12 Apr 2023 19:36:00 +0000

The March 20, 2023 summit meeting in Moscow between Chinese President Xi Jinping and Russian President Vladimir Putin, combined with the coinciding remarks of United Nations (UN) Secretary General António Guterres for a “G20 Climate Solidarity Pact,” provide important context for considering the role of South Asia and its energy position and prospects.

The countries of South Asia are caught in the geopolitics of “great power competition,” with India, Pakistan, Bangladesh, and Sri Lanka all abstaining on the February UN resolution condemning Russia’s invasion of Ukraine. They are also on the front lines of the climate crisis and are experiencing severe impacts from floods, droughts, and heat while continuing to grow their carbon dioxide emissions. As a low per capita income region, South Asia demands increasing energy supplies to foster economic growth for its large and growing population, which is approaching two billion people.

In its efforts to meet these needs, the region faces the triple challenges of energy security, energy equity, and environmental sustainability, termed the “energy trilemma” by the World Energy Council. This blog provides an overview of the difficult and complex situation faced by countries in the region and the market and geopolitical factors influencing developments there. It concludes that while countries are taking positive steps in the transition to a sustainable energy mix, they face the risk of backsliding in their policies and investment efforts.

While countries in Africa and Southeast Asia are entering into Just Energy Transition Partnerships with Western and international organizations, South Asian countries are instead being subjected to the consequences of China and Russia’s efforts to expand their political and economic influence in the region. In this complex geopolitical context, expanded US and G7 clean energy efforts are needed.

The state of play

Energy security
Energy security is an important concern since South Asia—a major importer of oil, gas, and coal—has become more dependent on the volatile global energy market in recent years. The region consumed about 7 percent of world primary energy in 2021, with about 85 percent of this in India. Growth in energy consumption since 2011 has averaged about 4 percent per annum.

India is the third largest global importer of crude oil and products with over 82 percent of its consumption imported. Liquefied natural gas (LNG) imports constitute about 45 percent of Indian domestic gas consumption, with the US providing about 17 percent of these imports. With the cut-offs of oil and gas exports to Europe after the invasion of Ukraine and ensuing sanctions packages, Russia has been desperate to find outlets for its oil, and India has used the opportunity to buy discounted Russian oil well below the $60 G7 cap price, saving last year by one estimate $3.6 billion in import costs. Reported crude oil imports from Russia in December 2022 were one million barrels per day or about 25 percent of India’s normal imports.

Pakistan and Bangladesh are looking at importing discounted Russian crude oil and refined products after March 2023, but it is not clear whether the discounts will match those of India. High LNG prices and lower demand resulted in decreased LNG imports by both (six and fifteen million tons reduction respectively in 2022 compared with 2021) as LNG suppliers were focused on replacing Russian gas in Europe. With China’s economic recovery spurring a rebound in LNG imports, Europe’s continuing efforts to diversify gas supplies and refill stocks, and no new major supply coming online until 2026 due to lead times in new liquefaction capacity projects (especially in Qatar and the United States, although the Freeport LNG facility in Texas recently returned to full production capacity after an explosion last summer), the prospects are for a tight LNG market in the next few years.

Although Bangladesh is moving to resume LNG imports with the recent easing of spot prices, it hopes to reduce natural gas imports and convert its regasification plants to handle green hydrogen by 2030. Pakistan is reconsidering its position on new gas power plants and further imports of LNG. India, however, seems to be continuing with plans to increase the role of gas in its energy mix with regasification capacity expected to increase from the current forty-two million tons to seventy million in 2030.

In the face of growing energy demand, increasing imports, and geopolitical and energy security concerns, South Asian countries need to ramp up their domestic clean energy development to limit import dependency, reduce poverty, and improve environmental performance.

Energy equity
Over seventy-seven million South Asians lack electricity. India, Bangladesh, Nepal, and Sri Lanka have all made major progress since 2010, connecting almost 350 million people. However, World Bank data suggests that Pakistan has made little progress in reducing its unserved population of around fifty-four million.

This problem stems from many factors, including the lack of a focused government effort, the financially weak position of Pakistan’s electricity distribution companies, devastating floods and glacial melt that have destroyed electricity infrastructure, widespread corruption, and the remote location and security issues of villages in the north and west. Proposals have been offered to create a Rural Electrification Board, as in Bangladesh, to spearhead a serious program to reach off-grid villages and introduce solar household and mini-grid systems. Yet progress remains slow.

In addition to conventional grid extension and the US Agency for International Development (USAID) and World Bank-supported system of rural electric cooperatives, Bangladesh also has pioneered a rural solar energy program. It is being carried out by the quasi-governmental Infrastructure Development Company Limited in cooperation with non-governmental organizations and local companies and with support from the World Bank, USAID, and other donors. This effort has helped to deploy over six million solar home and microgrid systems to over twenty million people. The World Bank believes it is the largest-off grid program in the world.

The Indian government also funds rural solar deployment, but private companies have increased their presence in this area. Notably, the Tata conglomerate has established a subsidiary, TP Renewable Microgrid, dedicated to microgrid development. They have installed 161 microgrids in their start-up phase and aim to deploy ten thousand.

Through its roll out of innovative business models and technology, the private sector has an important role to play when it comes to access and equity in the power sector, building on and stop-gaping government policies.

Environmental sustainability
The environment in South Asia is under tremendous pressure from industrial development, urbanization, population growth, and climate change. With the region accounting for about 8.6 percent of global energy-related carbon dioxide emissions in 2021, international attention has focused on the future of coal. India is the second-largest global coal consumer and where coal in 2021 accounted for 57 percent of primary energy and 71 percent of electricity generation. Although the Indian government is making progress on an ambitious diversification program, including five hundred gigawatts (GW) of renewables by 2030, the government does not envision the country reaching net-zero emissions until 2070. Further, the Central Electricity Authority’s plans call for twenty-five GW of new coal-fired capacity by 2027.

In Pakistan and Bangladesh, after building several coal plants with Chinese, Japanese, and Korean financing, the governments adopted coal moratoriums in 2021 and were on a path to substitute LNG, renewables, and nuclear for coal; however, energy security and price factors led Bangladesh in September 2022 to announce plans to add 4.3 GW of coal-fired capacity, and in February 2023, Pakistani Federal Minister for Energy Khurram Dastgir Khan reversed policy and called for ten GW of domestically-fired coal plants over the next decade. Whether these coal plant additions can be financed given these countries’ serious debt problems and the announced policies of China, Japan, and South Korea to stop financing overseas coal plants remains to be seen.

Despite these policy shifts, Pakistan continues to pursue the former Imran Khan government’s target of 60 percent hydro and renewable energy by 2030, while Bangladesh aims to reach 4.1 GW of renewables by 2030 and 40 percent clean energy (renewable, hydro, and nuclear) by 2041. The smaller countries of the region have set more ambitious targets. Nepal, with its large hydro capacity, has advanced its net-zero target to 2045 and Sri Lanka, despite its current dependence on oil and coal for two-thirds of electricity generation, embraced a 2050 target with 70 percent renewables by 2030.

The pursuit of nuclear power is a small but significant dimension of the energy transition plans in India, Pakistan, and Bangladesh, and these countries have turned to China and Russia for technology and financing. As part of an overall push to export its indigenous technology, China has supplied and brought online two Hualong One reactors in Karachi under a $6 billion loan. As part of its $120 billion global nuclear export program, Russia has provided two VVER-413 reactors which went into operation in 2013 and 2016 at Kudankulam and is working with India on four additional one thousand MW reactors. Russia loaned Bangladesh over $11 billion for two VVER-1200 V-523 units which are under construction at Rooppur and are expected to be completed by 2024 and 2025.

Protecting the region’s environment is critical for its human security; but cost and political interference make the line of equilibrium between clean and affordable energy hard to find—let alone to walk—for the countries of South Asia.

What should be done

In conclusion, global energy security and climate change issues will continue to play out in South Asia with Russia and China expanding their influence through oil, renewable, and nuclear technology exports and project financing.

As South Asian countries navigate the geopolitics of energy and address their energy trilemma challenge, it is critical that the United States, its allies, and companies expand their cooperation and energy investment in the region. The fall G20 meeting in India will be an opportunity to highlight Western intentions and offer concrete initiatives, such as when Japanese Prime Minister Fumio Kishida pledged $75 billion in regional investment for infrastructure and security as part of the “free and open Indo-Pacific” initiative during his recent visit to India.

As in the Indonesia Just Energy Transition Partnership agreement (co-led by the United States and Japan), Washington should partner with Japan and G7 allies on an expanded clean energy transition initiative in South Asia, with a possible endorsement at the G7 meeting hosted by Japan in May. Building on the US interagency Clean EDGE Asia Initiative and the five-year, $49 million USAID South Asia Regional Energy Partnership program, such an initiative might give special focus to the modernization and strengthening of the electricity transmission and distribution systems in the region. The goal should be to enhance reliability and resilience, improve financial viability, reduce technical and commercial losses, and increase system capacity to integrate the higher levels of intermittent renewables that the countries are aspiring to achieve.

The energy trilemma will represent a fundamental challenge to South Asia’s sustainable development for years to come. Strong government commitments, creative thinking and technology innovation, multilateral partnerships, increased Western support, and public-private collaboration can help this booming, emerging-market region power its people and industries in an efficient and affordable manner while also limiting damage to the environment and contributing to progress on global climate.

Dr. Robert F. Ichord, Jr. is a nonresident senior fellow at the Atlantic Council Global Energy Center.

The South Asia Center serves as the Atlantic Council’s focal point for work on the region as well as relations between these countries, neighboring regions, Europe, and the United States.

The geopolitics of the energy trilemma in South Asia” class=”gta-horizontal-featured–img” />

SouthAsiaSource Sep 9, 2022

Experts react: Catastrophic flooding in Pakistan

By South Asia Center experts

More than one-third of Pakistan is underwater amid catastrophic climate change-induced flooding. South Asia Center experts provide their analyses of the situation.

Climate Change & Climate Action Economy & Business

The geopolitics of the energy trilemma in South Asia” class=”gta-horizontal-featured–img” />

SouthAsiaSource May 23, 2022

South Asia’s climate crisis: Policymakers need to feel the heat

By Erum Haider

Few things unite South Asia more urgently right now than the climate crisis. We can only hope that policymakers are listening.

Climate Change & Climate Action Energy & Environment

The geopolitics of the energy trilemma in South Asia” class=”gta-horizontal-featured–img” />

SouthAsiaSource May 12, 2022

Rising sea levels and the climate crisis in Bangladesh, the Maldives, and Sri Lanka

By South Asia Center

The South Asia Center brings together a panel of experts to discuss the effects of climate change on the economy, food and energy security, and migration in Bangladesh, the Maldives, and Sri Lanka.

Bangladesh Climate Change & Climate Action

SouthAsiaSource Blog

The post The geopolitics of the energy trilemma in South Asia appeared first on Atlantic Council.

Ukraine’s energy sector survives winter

Suriya Evans-Pritchard Jayanti — Tue, 11 Apr 2023 20:28:00 +0000

The April 7 decision by Ukraine’s Ministry of Energy to reauthorize the export of electricity represents a symbolic victory on the energy front in the war with Russia. Ukraine banned electricity exports in October 2022 following the initial rounds of a Russian airstrike campaign that targeted the country’s civilian energy infrastructure in a bid to break Ukrainian resistance and freeze the country into submission. That the besieged country can now contemplate a surplus of power is cause for celebration after over six months of Russian attacks that left millions of Ukrainians in the dark.

With Putin’s invasion failing to make progress in the second half of 2022, Russia began systematically targeting Ukraine’s power and heating infrastructure in October with regular barrages of rockets, missiles, and drones. The impact of these airstrikes has been devastating. Every single Ukrainian thermal power plant (TPP) has suffered damage, along with most of the country’s hydroelectric plants.

In total, over 60% of Ukraine’s electricity generation capacity has been hit during the bombing campaign. A full 21 GW of generation capacity was offline as of March 2023. The Ukrainian electricity grid itself has been damaged repeatedly, with hundreds of transformers and transmission lines targeted.

Russia’s relentless infrastructure attacks have created challenging living conditions, with rolling blackouts regularly plunging much of Ukraine into darkness throughout the winter season. During the height of the airstrikes in December and January, Ukraine’s electricity deficit rose as high as 30%. Ukraine’s grid operator, Ukrenergo, imported emergency electricity from neighboring Slovakia, Poland, and Moldova. Shortages peaked in early February, when imports reached record highs.

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In March 2023, the United Nations Development Program (UNDP) estimated damage from Russia’s energy sector attacks at $10 billion and counting, of which $6.5 billion is damage suffered specifically by the Ukrainian power sector. As many as 12 million Ukrainians have been without power, water, or heating at any given moment throughout the bombing campaign.

Given the crisis conditions in the country amid the ongoing Russian invasion, the fact that Ukraine appears to have stabilized its power sector is astonishing. Even while Russia continues its energy infrastructure strikes, Ukraine’s power deficit has vanished, with a surplus of electricity reported in March 2023.

In part, this remarkable recovery is thanks to Ukrainian electricity consumption levels still being roughly 30-35% lower than before the war. This drop in demand is due to a combination of factors including the Russian occupation of entire regions of the country, damage to industrial activity, and a sharp drop in population as millions have fled for the safety of the EU.

However, Ukraine’s ability to stabilize the energy sector and restart nominal power exports of up to 400 MW is thanks to the country’s power sector workers. Ukrenergo has had over 1500 employees in the field at any given time over the past six months. Together with the company’s leadership, they have been performing grid acrobatics while implementing innovations and workarounds to keep the lights on across Ukraine.

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The private sector has also made a major contribution to Ukraine’s energy sector survival. DTEK, Ukraine’s largest private power company, has repaired over 700 energy facilities and 126 km of power lines during the past half year, with almost 200 teams of engineers working day and night. This has often meant taking risks and operating in extremely dangerous conditions. Three DTEK employees have died as a result of Russian airstrikes, while a further 28 have been wounded.

Ukrenergo, DTEK, and their energy industry colleagues have outperformed all expectations to prevent the collapse of the Ukrainian energy sector, but a huge amount of Ukrainian power infrastructure still requires repair before it can be used again. UNDP officials estimate that $1.2 billion is needed merely for emergency power infrastructure and equipment repairs.

Ukrenergo has been struggling especially to replace the large autotransformers that allow voltage transitions from transmission lines, with foreign partners failing to provide sufficient replacement equipment despite efforts. Repairing Ukraine’s energy sector is also considerably complicated by Russia’s precise repeat targeting of infrastructure already hit by drones and missiles. This makes reconstruction and maintenance a dangerous and continuing challenge.

Nonetheless, against the backdrop of an ongoing military conflict and a very difficult economic situation, Ukraine’s ability to reauthorize electricity exports, however nominal they may be, is deeply symbolic. In a war that has seen Ukrainian morale play a key role in keeping the country alive and fighting in defiance of Russia’s larger army and manpower, each victory such as this is crucial.

Suriya Evans-Pritchard Jayanti is a nonresident senior fellow at the Atlantic Council.

Ukraine resumes electricity exports in latest show of wartime resilience

Aura Sabadus — Tue, 11 Apr 2023 19:10:38 +0000

Ukraine’s state-owned energy sector operator Ukrenergo announced in early April that it was resuming commercial electricity exports to neighboring European countries for the first time since October 2022. The news has been widely touted as an example of Ukraine’s remarkable wartime resilience, and is also being seen as further evidence that Moscow’s six-month bombing campaign against the country’s energy infrastructure has failed.

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.

Webster quoted in Carbon Brief on Russian crude oil exports to China

mzandi — Tue, 11 Apr 2023 14:16:18 +0000

The post Webster quoted in Carbon Brief on Russian crude oil exports to China appeared first on Atlantic Council.

Wald in The Hill: Stopping America’s LNG exports would hurt producers and send Beijing to Russia’s doorstep

mzandi — Thu, 06 Apr 2023 16:48:21 +0000

The post Wald in The Hill: Stopping America’s LNG exports would hurt producers and send Beijing to Russia’s doorstep appeared first on Atlantic Council.

Webster quoted in Canary Media on Taiwan’s energy security

mzandi — Thu, 06 Apr 2023 16:45:28 +0000

Founding Chairman, Global Energy Center

The post Webster quoted in Canary Media on Taiwan’s energy security appeared first on Atlantic Council.

Accelerating the energy transition to strengthen European energy security: Key barriers to overcome

Richard L. Morningstar, András Simonyi, Olga Khakova, Paddy Ryan — Thu, 06 Apr 2023 13:55:12 +0000

More than one year on from Russia’s full-scale invasion of Ukraine, Europe must work diligently to prevent potential supply shortages ahead of a challenging winter, while embarking on a long-term transformation of its energy system to secure it against geopolitical volatility. Russia’s weaponization of fossil fuel exports demonstrates the security vulnerabilities inherent in a hydrocarbon-based economy and present an opportunity to accelerate Europe’s climate ambition while tying decarbonization inextricably to energy security fundamentals. By transitioning to a low-carbon economy, Europe can diversify its energy system and avoid dependence on foreign imports. By the same token, it must also build capacity in its clean energy value chain to avoid overreliance on China in a decarbonized future.

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.

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I. Introduction

More than one year on from Russia’s full-scale invasion of Ukraine, Europe has risen to the occasion to replace a majority of its Russian gas imports, reduce energy demand, and deploy clean energy in a remarkably short period of time. However, a more difficult winter looms on the horizon, as the global market for liquified natural gas tightens amid resurgent demand in East Asia. Uncertainty lingers as to whether Russia’s remaining exports will continue to flow and whether temperatures will remain mild. Europe must work diligently to prevent potential supply shortages while remaking its energy system to avoid reliance on Russia ever again.

This energy transformation presents an opportunity to accelerate Europe’s climate ambition while inextricably tying decarbonization to energy security fundamentals. As the events of the past year demonstrate, energy security is central to national security. Russia’s weaponization of fossil fuel exports demonstrates the security vulnerabilities inherent in a hydrocarbon-based economy. By transitioning to a low-carbon economy, Europe can diversify its energy system and negate the possibility of reverting to dependence on Russian fuels. By the same token, it must also build diversified capacity in its clean energy value chain to avoid overreliance on China in a decarbonized future.

Natural gas will continue to be important for Europe’s energy system and its energy transition, as the authors described in a previous issue brief, part of a larger project on reducing reliance on Russian energy sources.¹ This paper, part two of four in the project, examines how accelerating clean energy and increasing energy efficiency can defend Europe against Moscow’s weaponization of energy and ensure long-term security and affordability in line with climate targets. The paper also examines the United States’ impactful role in optimizing these efforts through transatlantic public-private cooperation on clean energy supply chains, financing, regulations, and standards.

Europe will remain a net-energy importer for the foreseeable future, but it can address a large portion of its gas supply insecurities by reducing import demand through localized clean energy generation, energy efficiency and other decarbonization measures. The EU demonstrated higher climate ambition with the updated renewables percentage target for 2030 in the Renewable Energy Directive, but targets alone are insufficient to drive faster deployment at the national level. Diversifying Europe’s energy mix while reforming the electricity market can lower prices, increase market stability, and maintain industrial competitiveness. This can insure Europe against backsliding toward Russian energy while also supporting European ambitions for climate neutrality by mid-century.

Decarbonizing electricity generation can be achieved relatively quickly compared to doing so for other energy systems. Already in 2022, wind and solar generated more electricity in Europe than gas for the first time. Notably, record solar generation of 203 terawatt-hours represented the equivalent of 35 billion cubic meters (bcm) of gas demand foregone last year.² Increasing clean baseload generation and energy storage is still needed to balance renewables’ intermittent generation on the grid. More must be done to ensure that hydropower, batteries, geothermal, and nuclear—among others—are expanded and extended to ensure a clean, reliable, and secure power grid in Europe.

In addition to expanding clean energy, other decarbonization strategies will be needed to bolster energy security. Retrofitting buildings to improve energy efficiency can further reduce demand for electricity and heat, thereby reducing reliance on Russian gas. Further down the line, electrifying transport and integrating low-carbon fuels into heat-intensive industry can further cut demand for Russian energy. Building supply chains is also necessary to ensure that Europe does not again become reliant on a single supplier for clean technologies and critical raw materials.

A clear roadmap for low-carbon energy security in Europe has emerged. To proceed at a pace demanded by the current crisis, a number of roadblocks to the deployment of clean energy and energy efficiency must be addressed. Transatlantic cooperation could play a pivotal role in doing so.

II. Regulatory Reforms

Two separate varieties of regulation are holding back investments in clean energy: permitting and electricity market design. Regulatory reforms can reduce investment uncertainty to accelerate clean energy deployment across Europe.

In its current state, the permitting process creates a significant hurdle for increasing the stock of clean power generation, much like in the United States. In Europe, permitting an onshore wind facility can take as long as a decade.³ Regulatory uncertainty took a significant toll on the wind power sector in 2022. Despite being the single largest source of renewable electricity in the European Union, only sixteen gigawatts of new wind capacity were added in 2022, only a modest increase from 2021. Moreover, turbine orders fell 47 percent and no single offshore wind project reached final investment decision.⁴ Creating faster and more predictable permitting procedures can get more projects past the final investment decision phase.

The European Union is aware of the permitting roadblock and has acted swiftly to address it. The Commission’s REPowerEU plan—unveiled in May 2022 and approved by the European Council in December—introduces emergency permitting regulations that require onshore wind and solar project decisions be made within two years and shifts the burden of proof away from developers and toward public agencies. In addition, the plan deploys geospatial data to outline areas of low environmental risk; in these cases, the permitting process may be further shortened to a single year.⁵ The proposed Net-Zero Industry Act would supercharge these efforts by further fast-tracking strategic clean energy technologies.

Europe’s emergency permitting measures are a good start, and offer a model for reform in places like the United States. More measures can add to this model’s success, including increasing staffing for permitting agencies—a perennial source of delay in the process—and broadening the scope of locally generated energy technologies relevant to the emergency measures.

Permitting is far from the only regulatory hurdle impeding clean energy deployment. Emergency measures at the EU state-level, including windfall levies, have created uncertainty for clean energy investments.Specific measures across member states compound the market distortion. Some member states have instituted different tax levels for different technologies, an arbitrary means for the state to pick winners and losers that can frighten investors. Other states have introduced levies that ignore the “profit” part of a windfall tax, often taxing the revenue of companies on long-term contracts that do not enjoy windfall-level profits.

Reforms at the European Union level are needed to create greater certainty in electricity markets. Efforts are underway in Brussels to restructure the electricity market to reflect the cost of production more accurately by removing gas as the de facto price benchmark. This change could remove the uncertainty created by price volatility and member states’ various consumer-support schemes, which introduced new taxes on clean energy producers, even though it could eliminate the large profits otherwise enjoyed by renewables producers prior to the imposition of the windfall levy, thereby potentially impacting investment capacity. To mitigate against this risk, EU member states will be able to offer long-term power purchase agreements and contracts for difference, which can spur investment through steady—if unspectacular—profit assurances, under the latest proposal. However, it will be important that these national-level support schemes do not distort the single market across Europe.

III. Public Financing

In addition to encouraging private investment, Europe must also boost public financing to achieve clean energy and energy efficiency objectives. Europe has a strong track record on energy subsidies and can build on that history to accelerate an energy-secure, decarbonized economy.

In 2020, EU and member state subsidies for renewables and energy efficiency totaled €95 billion, before falling slightly in 2021.⁶ Since then, the market environment has changed significantly with the introduction of the Inflation Reduction Act (IRA) in the United States, which provides $369 billion (€350 billion) in subsidies for clean industries by 2030. Although the intent of the IRA was not to threaten Europe’s green industries, its emphasis on onshoring the manufacturing of key clean energy technologies has invigorated trade tensions between the European Union and United States, as European leaders have raised concerns about investment flows moving across the Atlantic.

The European response to the US law—the Commission’s Net-Zero Industry Act, part of its Green Deal Industrial Plan—aims to marshal existing EU funding facilities toward producing 40 percent of EU cleantech demand within the bloc by 2030. The proposal does not include new funding to incentivize clean tech production, but instead leverages existing EU funding and relaxes state aid rules, which normally limit member-state subsidies to national industry to prevent distortion within the European Single Market. Additionally, the plan seeks to simplify project permitting and optimize approval for funding Important Projects of Common European Interest.

The state aid proposal may be the plan’s most contentious element. The capacity to finance industrial subsidies varies widely among EU member states, and the two largest member states—Germany and France—have accounted for nearly 80 percent of the European Commission’s state aid waivers since the rules were altered following Russia’s invasion of Ukraine.⁷ Italy, despite being Europe’s number two industrial economy, faces borrowing costs that are nearly 2 percent higher than Germany’s.^⁸ EU Internal Market Commissioner Thierry Breton has proposed EU loan guarantees as a way to level the playing field, but fiscally conservative member states have resisted.⁹

EU member states must also consider the joint public investments needed to enable decarbonization. Aging interconnections and insufficient capacity are impediments to the private investment needed to create secure, decarbonized energy systems. Massive quantities of renewable energy generation await interconnection; in Poland alone, solar capacity of twenty gigawatts is idle waiting for permits to connect to the grid.¹⁰ Beyond building out capacity, Europe must invest in new grid-management systems that can facilitate complex demand-response schemes and absorb generation from prosumers, which are households and businesses that contribute to energy supply with their own resources such as rooftop solar panels or batteries.

IV. Transatlantic Collaboration

The United States has a strategic interest in maintaining the cohesion of its allies to limit backsliding as the Russia-Ukraine war draws out. Also, to address climate change, the world needs to scale up clean industry in every jurisdiction possible. The United States thus has an interest in seeing its allies build up these industries in the same manner it aspires to under the IRA, and collaboration in these objectives can be of mutual benefit. By working productively with the EU and member states in support of Europe’s green industrial ambitions, Washington can help mend ties after the IRA and ensure that the law creates a “race to the top” on “friendshored” clean industry, rather than a transatlantic zero-sum game. Key to these efforts should be recognizing products from the other jurisdiction as friendshored under the respective legislation, as well as collaborating on upskilling workers for a low-carbon economy through partnerships on “Net Zero Academies.”

European states have the wherewithal to support industry and are supporting consumers through the current crisis. Member states have spent nearly €800 billion since the autumn of 2021 to subsidize energy bills. Redirecting that funding toward investments that can lower energy prices over the longer term can provide a more sustainable path toward energy-market normality. As gas prices fall, ending price-support subsidies and replacing them with subsidies for heat-pump installation or building retrofits can reduce the need for future emergency measures, particularly for politically sensitive users like industry.

While Europeans will bear the financial responsibilities for these measures, Washington can leverage the US private sector to great effect. The US Export-Import Bank should prioritize financing for exports to Europe of key technologies, like heat pumps, that the United States can provide cheaply and quickly to boost European supply. Ultimately, while the United States should respect Europe’s desire to grow its own on-shore clean industry, measures that focus on enabling a transatlantic cleantech trade will bring mutual benefit. Longer-term solutions should seek to enable an approach based on cooperation across the supply chain.

To enhance the energy security of its allies and turbocharge its global climate ambitions, the United States should collaborate with Europe on commercializing emerging technologies that can provide firm power to achieve a zero-carbon grid, including geothermal, carbon capture, advanced nuclear fission and fusion technologies, and many others. Such collaboration would be of mutual benefit, and by exchanging best practices both sides can find the right policy framework to bring new technologies to market at scale. For example, the European Commission’s announcement of a hydrogen bank that will connect consumers with producers offers a model for how to create the offtake necessary to commercialize new technologies.

Multilateral efforts exist to catalyze this exchange of technology and related policy, including the Three Seas Initiative, US-EU Energy Council, Mission Innovation, US-EU Trade and Technology Council and the Partnership for Transatlantic Energy Security and Climate Cooperation (P-TECC).

These multilateral forums can also facilitate the exchange of best practices on grid management and energy-efficiency standards. US National Laboratories can provide expertise and advise European governments on creating next-generation grid systems that can meet the demands created by electrification, intermittency, and cyber vulnerabilities. The United States and Europe can also strengthen cooperation on energy-efficiency investments by exchanging national and subnational best practices such as the United States’ standards-setting Energy Star program that signals to the private sector what to produce.

V. Clean Energy Supply Chain

Realizing a secure low-carbon European energy system requires a scaled-up and diversified supply chain for clean energy technologies. Already, supply chain bottlenecks are impeding the growth of renewable energy in Europe. In 2022, the European wind industry experienced cost increases of as much as 40 percent; contracts for wind power, however, have largely remained fixed, chilling investment.¹¹

The price stability of raw materials is now a key constraint in clean-power deployment. Nickel, a vital metal for wind turbines and batteries, is heavily impacted by the war in Ukraine. In 2021, Russia accounted for 42 percent of EU nickel imports.¹² In 2021, Russia supplied 17 percent of EU copper imports, a metal central to electrification, among other applications.¹³

Additionally, through its grip on uranium supplies, Russia also looms large in Europe’s nuclear energy sector. Russia supplies 20 percent of the uranium imports that power Europe’s nuclear reactors, the bloc’s largest source of carbon-free power, which are responsible for a quarter of the bloc’s electricity.¹⁴ Russia also has a monopoly over global commercial sales of high-assay low-enriched uranium (HALEU) needed for advanced reactors. New nuclear fuel supply chains are needed, and if the United States, Canada, and other like-minded partners are able to move forward rapidly on plans to deploy small modular reactors in Europe, advanced nuclear could weaken Rosatom’s influence over nuclear operations, despite the Russian state-controlled company’s plans to deploy small modular reactors domestically.

Russia’s central role in the nuclear supply chain has shielded Rosatom from international sanctions. A bid to introduce sanctions on the company at the one-year anniversary of the war failed to gain traction in the European Council.¹⁵ Rosatom operates eighteen reactors in the European Union, and has a monopoly on nuclear power in five EU member states. Two more Rosatom reactors are being constructed in Hungary, and an additional two are about to come online in Slovakia.¹⁶ Implementing enduring sanctions and providing long-term offtake agreements with alternative nuclear fuel suppliers can give investors the confidence to devote resources to this sector.

In addition, Russia enjoys a commanding position in the supply chain for more emergent clean technologies. In palladium and platinum, key components for hydrogen fuel cells, Russia accounted for 43 and 14 percent of global production, respectively.¹⁷ Russia could thus still play a pivotal role in the hardware for a European hydrogen economy, presenting a critical political risk that must be urgently addressed.

Europe’s divorce from Russian hydrocarbons must not merely swap a fuels dependency for a metals one. Nor should Europe swap one monopolistic supplier for another; where Russia does not dominate the European clean-technology metal supply chain, China has an even more formidable grip.

China controls most of the global midstream refining capacity of important clean-technology metals. It supplies the European Union with 47 percent of its natural graphite and 93 percent of its magnesium—both critical to battery technologies—as well as 98 percent of the rare earths elements that are used in permanent magnets for wind turbines and electric vehicle motors.¹⁸ Further along the supply chain, China accounted for 95 percent of Europe’s solar imports, and Europe’s own solar industry relies on chips and other inputs originating from China.¹⁹

Europe faces a significant dilemma. To reduce its demand for Russian energy, it must deploy cleantech as quickly as possible. At the same time, it must avoid becoming overly reliant on a single supplier that can provide these technologies—and the raw materials underlying them—at low cost and with high capacity. In other words, Europe needs China in the short term in order to limit the inflationary consequences of disengaging with existing market incumbents, but must build out its clean energy supply chain to reduce its reliance on China in the longer term. As European policymakers like Commission President Ursula von der Leyen have rightly noted, decoupling from China is not a realistic policy, but de-risking Europe’s economic relations with the country is a necessity.

Europe must be aware of the longer-term risks and act to mitigate them. A forthcoming Critical Raw Materials Act provides a starting point to remedy this situation. The act will aim to increase and diversify the supply of metals needed for the EU’s green and digital transformations by identifying new resources and projects inside and outside the EU. The plan sets a requirement that 10 percent of EU consumption of strategic raw materials be mined within the bloc and that 40 percent be processed within the EU.²⁰

On-shoring of strategic portions of the value chain in Europe, the United States, and other like-minded partners is important for energy security, setting standards on sustainable resource governance, and maximizing the economic benefits of localization for heavy and difficult-to-transport cleantech assets like batteries. However, that does not preclude cooperation on strategic supply chain issues.

The March 2023 agreement between Presidents Joe Biden and Ursula von der Leyen to explore allowing EU-produced minerals to qualify for IRA tax credits through a US-EU trade deal on clean-technology metals provides a valuable starting point for aligning transatlantic supply chains to emerge, where possible, and spur investments in both jurisdictions.²¹ The United States’ own efforts under the IRA and the previous Infrastructure Investment and Jobs Act to subsidize US-managed critical supply chains provide another boost to transatlantic trade in raw materials. Additionally, transatlantic cooperation on critical minerals will be vital to the EU’s goal to phase out the sale of new petrol and diesel cars starting in 2035.

By cooperating through multilateral initiatives like the US-led Minerals Security Partnership and Environmental Resource Governance Initiative (ERGI), the United States and Europe can work together to disseminate best practices in the sector and help partners in the developing world grow their own strategic mineral industries in alignment with these standards, diversifying the global marketplace and building the resource capacity needed to support global decarbonization efforts. By integrating these partnerships with investment initiatives like the European Union’s Global Gateway and the Group of Seven’s (G7) Build Back Better World, the United States and European partners can work to catalyze investment in clean energy resources across the world and outcompete China as it seeks to accumulate raw materials without regard for environmental and labor standards.

Post-war Ukraine can be an important source of metals to power Europe’s clean energy industry. Ukraine is the world’s sixth-largest producer of graphite, and with one of the world’s largest supplies of graphite reserves, Kyiv could increase output and chip away at China’s market dominance in Europe. Ukraine also has significant reserves of copper, lithium, and cobalt, which could be of strategic importance for Europe after the war.²² Looking ahead, Ukraine can be a critical player in Europe’s drive for decarbonized energy security, and this topic will be the subject of our third and final issue brief in this series.

V. Conclusion

To realize low-carbon energy security in Europe, policymakers must remove the roadblocks curtailing rapid deployment of clean energy. Chief among those roadblocks are the regulatory hurdles that slow down permitting and investment, market structures that discourage private capital investments in clean energy, and complications with the clean energy supply chain that make projects too costly. For each obstacle, the United States can play a positive supporting role in removing barriers and ensuring a speedy rollout of clean energy to stiffen its allies’ resolve against Russian aggression.

Europe needs to streamline and clarify its regulations to encourage investment in its clean energy sector. By streamlining rules and building capacity for quicker permitting, projects can be built in a timelier manner, and investors from the continent and beyond can proceed with greater clarity. Implementing market reforms at the European level can likewise create greater certainty for business and prevent the distortions created by unilateral member-state actions.

In tandem with Europe’s efforts, Washington can play a more significant role in catalyzing financing for projects on the continent, including through the Export-Import bank’s ability to steer the US private sector toward areas of significant strategic need in the European energy system. Such moves will help coalesce a common European green industrial strategy.

Transatlantic partnership to build capacity, resilience, and sustainability in the clean-technology supply chain can weaken adversaries’ control of the resources needed to achieve low-carbon energy security. By working at a global scale to set standards for resource governance and tie these standards to investments in clean energy metals and processing, the United States and Europe can diversify the market for these strategic commodities and ensure that supply chain complications do not provide an obstacle to energy security and decarbonization efforts.

Europe and the United States have a unique opportunity to work together amid a hydrocarbon supply crisis to build the foundations for a cleaner and more secure energy system to combat the specters of both climate impact and energy market volatility. To combat climate change and the threats of malign actors looking to bend the geopolitics of energy to their own ends, it is vital that partners on both sides of the Atlantic seize this opportunity with both hands.

Authors

Staff

Richard L. Morningstar

Geopolitics & Energy Security Oil and Gas

Fellow

András Simonyi

Deputy Director, European Energy Security

Energy & Environment Europe & Eurasia

Staff

Olga Khakova

Assistant Director, European Energy Security

Geopolitics & Energy Security Europe & Eurasia

Staff

Paddy Ryan

Energy & Environment Energy Transitions

ACKNOWLEDGEMENTS

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.

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

Webster in The Diplomat: Could the US block Russian oil exports to China? Yes, but it’s a bad idea

mzandi — Wed, 05 Apr 2023 16:40:45 +0000

The post Webster in The Diplomat: Could the US block Russian oil exports to China? Yes, but it’s a bad idea appeared first on Atlantic Council.

Wald joins NPR to discuss the cut in oil production and what it means for US-Saudi relations

mzandi — Tue, 04 Apr 2023 15:53:04 +0000

The post Wald joins NPR to discuss the cut in oil production and what it means for US-Saudi relations appeared first on Atlantic Council.

Khakova joins BBC World to discuss the US-EU Energy Council

mzandi — Tue, 04 Apr 2023 15:53:01 +0000

The post Khakova joins BBC World to discuss the US-EU Energy Council appeared first on Atlantic Council.

Ellinas in Cyprus Mail: Fears of an energy price surge are real

mzandi — Sun, 02 Apr 2023 16:56:56 +0000

The post Ellinas in Cyprus Mail: Fears of an energy price surge are real appeared first on Atlantic Council.

The US clean energy transformation can’t happen at the expense of national security

Francis R. Fannon — Thu, 30 Mar 2023 17:57:27 +0000

The greatest achievements in US history happened through considerable costs, shared sacrifice, and courage. Victory in World War II, the moon landing, and the defeat of the Soviet Union were years-long efforts that cost the nation greatly but have been celebrated around the globe for generations. During these great national challenges, US leaders were honest about the costs and grounded the country in shared ambition, girded with moral purpose.

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.

Meet the author

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Francis R. Fannon

Energy & Environment Geopolitics & Energy Security

EnergySource Mar 14, 2023

Harmonizing hydrogen ambitions and realities

By William Tobin, Joseph Webster

Hydrogen’s chemical properties determine its most optimal uses. Policymakers should orient deployment toward areas in which hydrogen makes the most sense as a tool for decarbonization and away from areas in which it does not.

Energy & Environment Energy Transitions

EnergySource Mar 10, 2023

Clean industrial policies: A space for EU-US collaboration

By Théophile Pouget-Abadie, Francis Shin, Jonah Allen

EU-US tensions over clean industrial policy could derail the energy transition. Collaboration on equal footing would bolster collective security and drive emissions reductions to new levels.

Energy & Environment Energy Markets & Governance

EnergySource Mar 6, 2023

Beauty and the beast: Implications of the US-China tech war on climate and energy

By Jennifer Lee

US-China tech tensions could have ripple effects on decarbonization efforts. Tech competition could provide benefits, but if left unmitigated, it could also hinder both countries’ energy transitions.

China Energy & Environment

Learn more about the Global Energy Center

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

Russia faces long economic decline as isolated Putin turns to China

Diane Francis — Thu, 30 Mar 2023 14:29:59 +0000

In a rare public admission, Russian President Vladimir Putin told government officials in Moscow this week that sanctions imposed over the invasion of Ukraine could indeed have a “negative impact” on the Russian economy. The warning is in stark contrast to Putin’s usual upbeat denials, and hints at Russia’s darkening economic outlook amid a perfect storm of mounting international isolation, rising costs, and falling revenues.

Russia’s economic woes are a result of the faltering Ukraine invasion, which is now in its second year with no end in sight. Western countries have responded to the war by imposing unprecedented sanctions on Moscow while also seeking to dramatically reduce their dependence on Russian energy.

The Kremlin now finds itself caught in an east-west vice, with the democratic world steadily cutting Russia off economically while China and India take advantage of Moscow’s weakened position to import Russian fossil fuels at deeply discounted prices. With access to Western technologies blocked and European customers turning away, Russia looks to be heading toward a future as a resource colony supplying energy and commodities to Asia’s biggest economies.

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Putin’s public acknowledgement of possible looming economic problems suggests the situation may already be far worse than previously thought. Just a few weeks ago on March 14, he was dismissing the impact of Western sanctions and boasting that Russia’s “economic sovereignty” was stronger than ever. Putin’s rosy assessment has been echoed by many international observers in recent months, but critics claim this is due to dubious data that creates an overly optimistic impression of Russia’s true economic health.

“The Russian economy is in a tailspin,” commented Yale University School of Management Professor Jeffrey Sonnenfeld in a recent interview with Germany’s DW. Sonnerfeld claimed that Russia has stopped submitting the required economic information to international financial organizations and accused the Kremlin of “pumping out false data,” which is then recycled by the media. “What we do know is that every key industrial sector in Russia is down,” he noted, before dismissing Russia’s employment figures and the country’s ruble currency exchange rate as “invented numbers.”

Meanwhile, economist Janis Kluge of the German Institute for International and Security Affairs (SWP) calculates that Western sanctions alone have “basically shrunk Russia’s economy by 10 percent,” a larger impact than the 2008 financial crisis. “The way I think about sanctions is that we are shaking the tree on which the regime sits,” said Kluge. “We can’t really tell what’s going to come out of it, what’s going to happen. We are not shaking it enough for it to fall down. But we’re creating problems for them. It consumes a lot of political energy in Moscow. And it makes it clear to everyone, to all insiders, that it was a huge mistake to start this invasion.”

Eurasia Center events

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

Eastern Europe NATO Security & Defense Ukraine

The key engine of the Russian economy has long been energy exports. Many economists now believe the impact of price caps imposed by the G7 group of nations on Russian energy exports has been underestimated. These caps replaced earlier energy sanctions that proved counter-productive because they caused oil prices to jump and delivered windfall profits to Russia in 2022. In contrast, there are indications that price caps, coupled with Europe’s switch from Russia to other energy suppliers, spell disaster for the Kremlin.

In February 2023, Russia’s oil export revenues fell to the lowest level in more than a year as buyers mostly complied with price caps and sanctions, according to the International Energy Agency (IEA), reported Bloomberg. Monthly revenues were reportedly down more than 40% year-on-year, despite Russia’s relative success in sustaining volumes. This is good news for China and India, with both countries seeking to take advantage of Russia’s drastically reduced bargaining power.

China and India are the key drivers behind rising demand for Russian energy exports that is helping to prop up the country’s besieged economy despite Western-led sanctions, Al Jazeera reported in February. The two Asian economic powerhouses became the biggest buyers of Russian crude oil last year as Western countries restricted imports and imposed sanctions.

While Indian and Chinese energy purchases are welcome news for the Kremlin, it takes capital to keep a commodity-based economy going. This is reportedly becoming a major issue. In March, Russian billionaire Oleg Deripaska warned that Russia is now in danger of running out of cash. “There will be no money next year, we need foreign investors,” the businessman told an economic conference.

More can be done to impose further costs on Russia for the ongoing invasion of Ukraine. In a recent report, the Kyiv School of Economics recommended reducing the current oil price cap to $50 or lower. Russia’s revenues from exporting hydrocarbons are already set to halve this year to about $180 billion, according to Jacob Nell, one of the authors of the KSE report. “Squeezing oil and gas revenues will put Russia on the back foot and shorten the war,” the report concluded.

German economist Kluge believes the impact of sanctions on the Russian economy will be long term, and points to the loss of access to Western technologies such as computer chips as particularly damaging for the country’s future prospects. “The business case for producing something sophisticated in Russia is gone, and it’s not coming back,” she noted.

The Russian economy is not yet in full crisis mode and still has significant resources in reserve to call upon. However, with most avenues for Western partnership now indefinitely closed and dependency on China growing rapidly, Putin’s talk of “economic sovereignty” is starting to sound very hollow.

Maia Sparkman, William Tobin — Tue, 28 Mar 2023 14:46:16 +0000

With renewed commitment to democratic principles, growing bilateral relationships with high-income countries, abundant clean energy potential, and critical resources necessary for the global energy transition, the country of Zambia is well positioned to leverage its strengths to build a low-carbon, reliable energy system to spur economic growth and close the poverty gap. President Hakainde Hichilema’s landslide victory over former President Edgar Lungu in August 2021 has placed Zambia back on a path towards inclusive economic growth through attempts to restructure debt, promotion of private sector interest in infrastructure and energy investments, and delivery of economic opportunities to rural communities across the country, where over half of the population lives below the poverty line. Given these developments, Zambia poses a model for expanded collaboration between African economies, the United States, and other allies, with partnership attributes which can be replicated elsewhere on the continent.

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.

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Staff

Maia Sparkman

Assistant Director

Africa Climate Change & Climate Action

Staff

William Tobin

Assistant Director

Africa China

EnergySource Mar 9, 2023

Sub-Saharan green hydrogen as a catalyst for development

By Daniel Helmeci

Green hydrogen has the potential to turn sub-Saharan Africa’s abundant renewable resources into fuel for a sustainable economy. If supporting infrastructure can be built to harness this potential, the entire region could see the benefits.

Africa Energy & Environment

EnergySource Feb 21, 2023

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

By Sharmila Bellur

Productive use appliances can mitigate emissions while encouraging climate adaptation and resilience in sub-Saharan Africa. They can push households up the energy ladder and stimulate economic development, if managed correctly.

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

Learn more about the Global Energy Center

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

Webster quoted in Axios on Russia-China relations

mzandi — Thu, 23 Mar 2023 18:00:46 +0000

The post Webster quoted in Axios on Russia-China relations appeared first on Atlantic Council.

Brown quoted in the Wall Street Journal on European gas

mzandi — Wed, 22 Mar 2023 15:29:22 +0000

The post Brown quoted in the Wall Street Journal on European gas appeared first on Atlantic Council.

Wald joins Bloomberg Surveillance to discuss global oil demand

mzandi — Tue, 21 Mar 2023 18:04:34 +0000

The post Wald joins Bloomberg Surveillance to discuss global oil demand appeared first on Atlantic Council.

Decarbonization solutions for addressing Europe’s green industrial policy challenge

Transform Europe Initiative — Mon, 20 Mar 2023 10:00:00 +0000

The Atlantic Council, the German Council on Foreign Relations (DGAP), and Groupe d’études géopolitiques (GEG) were honored to host “Decarbonization solutions for addressing Europe’s green industrial policy challenge,” a high-level workshop on decarbonization in Paris on March 20. The event promoted an open discussion between policymakers, analysts, and the private sector on Europe’s energy challenges, and to discuss what could be a common approach to on Europe’s energy security and climate challenges, and to discuss what could be a common approach to resolving threats to US-EU solidarity as well as Europe’s internal fissures.

Featuring

H.E. Laurence Boone

Secretary of State for European Affairs

Ministry for Europe and Foreign Affairs of the French Republic

Kerstin Jorna

Director General, Directorate-General for Internal Market, Industry, Entrepreneurship and SMEs (GROW)

European Commission

Fellow

Ben Judah

Director

Vice Chair, Scowcroft Center for Strategy and Security

Economy & Business European Union

Sena Latif

Acting Chief of Mission

Embassy of Romania in Paris

Benoît Potier

Chief Executive Officer

Air Liquide

Laurence Tubiana

Chief Executive Officer

European Climate Foundation

In conversation with

Board director

Ambassador Paula J. Dobriansky

Scowcroft Center for Strategy and Security

Latin America China

Guntram Wolff

Chief Executive Officer

German Council on Foreign Relations

Transform Europe Initiative

The Atlantic Council’s Transform Europe Initiative (TEI) is a critical element of the Europe Center’s drive towards structural reforms in Europe.

TEI leverages a robust body of work in strategic decarbonization.

Europe Center

Providing expertise and building communities to promote transatlantic leadership and a strong Europe in turbulent times.

The Europe Center promotes the transatlantic leadership and strategies required to ensure a strong Europe.

The post Decarbonization solutions for addressing Europe’s green industrial policy challenge appeared first on Atlantic Council.

Ellinas in Cyprus Mail: The gas needs of Cyprus

mzandi — Sun, 19 Mar 2023 18:15:57 +0000

The post Ellinas in Cyprus Mail: The gas needs of Cyprus appeared first on Atlantic Council.

Sullivan quoted in VOA News on the impact of the war in Ukraine on Egypt

mzandi — Sat, 18 Mar 2023 18:08:50 +0000

The post Sullivan quoted in VOA News on the impact of the war in Ukraine on Egypt appeared first on Atlantic Council.

How the war in Iraq changed the world—and what change could come next

Atlantic Council experts — Fri, 17 Mar 2023 12:00:00 +0000

How the war in Iraq changed the world—and what change could come next

Twenty years on from the US invasion of the country, Iraq has fallen off the policymaking agenda in Washington, DC—cast aside in part as a result of the bitter experience of the war, the enormous human toll it exacted, and the passage of time. But looking forward twenty years and beyond, Iraqis need a great deal from their own leaders and those of their erstwhile liberators. A national reconciliation commission, a new constitution, and an economy less dependent on oil revenue are just some of the areas the experts at the Atlantic Council’s Iraq Initiative highlight in this collection of reflections marking two decades since the US invasion.

What else will it take to transform Iraq into a prosperous, productive regional player? What can the United States do now, with twenty years’ worth of hindsight? And just how far-reaching were the effects of the war? Twenty-one experts from across the Atlantic Council take on these questions in a series of short essays and video interviews below.

Oula Kadhum on what March 20, 2003 was like for a young Iraqi

How the Iraq war changed…

Scroll and click through the carousel below to jump to a response:

The cause of democracy in the region

When the United States invaded Iraq two decades ago, one of the public justifications for the war was that it would help spread democracy throughout the Middle East. The invasion, of course, had the opposite effect: it unleashed a bloody sectarian conflict in Iraq, badly undermining the reputation of democracy in the region and America’s credibility in promoting it.

Yet the frictions between rulers and ruled that helped precipitate the US invasion of Iraq persist. The citizens of the region, increasingly educated and connected to the rest of the world, have twenty-first-century political aspirations, but continue to be ruled by unaccountable nineteenth-century-style autocrats. Absent a change, these frictions will continue to shape political developments in the region, often in cataclysmic fashion, over the next two decades.

The George W. Bush administration’s failures in Iraq severely set back the cause of democracy in the region. In the perceptions of Arab publics, democratization became synonymous with the exercise of American military power. Meanwhile, Iraq’s chaos strengthened the hand of the region’s autocrats: as inept or heavy-handed as their own rule might be, it paled in comparison to the breakdown of order and human slaughter in Iraq.

Citizens’ frustrations with their political leaders finally erupted in the Arab Spring of 2010 and 2011, but their protests failed to end autocracy in the region. Gulf monarchs were able to throw money at the problem, first to shore up their own rule and then other autocracies in the region. The Egyptian experiment with democracy proved short-lived; Tunisia’s endured far longer but also appears over. More broadly, the region has seen democratic backsliding in Lebanon and Israel as well.

The yawning gap between what citizens want and what they get from their governments remains. The World Bank’s Worldwide Governance Indicators show that, on aggregate, states in the region are no more politically stable, effectively governed, accountable, or participatory than two decades ago. Unless political leaders address that gap, further Arab Spring-like protests—or even social revolution—are probable.

Having apparently gotten out of the business of invasion and occupation following the wars in Iraq and Afghanistan, the United States could play a new and constructive role here. It could both cajole and assist the region’s political leaders to improve governance for their citizens.

The United States exacerbated political tensions in the region two decades ago; now it has an opportunity to help ameliorate them.

—Stephen R. Grand is the author of Understanding Tahrir Square: What Transitions Elsewhere Can Teach Us About the Prospects for Arab Democracy. He is a nonresident senior fellow with the Council’s Middle East programs.

State sovereignty

Since the seventeenth century, more or less, world order has been based on the concept of state sovereignty: states are deemed to hold the monopoly of force within mutually recognized territories, and they are generally prohibited from intervening in one another’s domestic affairs. The invasion of Iraq challenged this standard in three important ways.

First, the fact of the war represented a direct attack on the sovereignty of the Iraqi state, which undermined the ban on aggressive war. While the Bush administration cast the invasion as a case of preemptive self-defense, it was widely seen as a preventive war of choice against a state that did not pose a clear and present danger. Moreover, the main exceptions to sovereignty that have developed over time, such as ongoing mass atrocities or United Nations authority, were not applicable in Iraq. Thus, the United States dealt a major blow to the rules-based international system of which it was one of the chief architects. This may have made more imaginable later crimes of aggression by other states.

Second, the means of the war, and especially the occupation, powered the reemergence of the private military industry. Driven by the need to sustain two long wars in Iraq and Afghanistan, the US armed forces became dependent on military contractors, which sometimes involved authorizing paid civilians to kill. The US effort to (re)privatize warfare brought back into fashion the use of private military force, generating a multibillion-dollar industry that is here to stay. Over time the spread of private military companies could unspool the state’s exclusive claim to violence and hammer the foundations of the current international system.

Third, the consequences of the war led to the spectacular empowerment of armed nonstate actors in the region and beyond, who launched a full-frontal assault on the sovereignty of many states. The Islamic State of Iraq and al-Sham, of course, emerged amid the brutal contestation of power in post-invasion Iraq and pursued its “caliphate” as an alternative (Sunni) political institution to rival the nation-state. While the threat has been contained, for now, in the Middle East, it is only beginning to gather force on the African continent. In addition, because Iran effectively won the war in Iraq, it was able to sponsor a deep bench of Shia nonstate groups which have eroded state sovereignty in Lebanon, Syria, Yemen, and Iraq itself.

The US invasion of Iraq left us a world with less respect for state sovereignty, more guns for hire, and a dizzying array of well-armed and determined nonstate groups.

—Alia Brahimi is a nonresident senior fellow of the Atlantic Council’s Middle East programs and host of the Guns for Hire podcast.

Abbas Kadhim on the opportunities missed

US-Turkish ties

By launching a war on Turkey’s border, against Turkish advice, in a manner that prejudiced Turkish interests, the United States in 2003 upended a strategic understanding that had dominated bilateral relations for five decades.

During and immediately after the Cold War, Turkey and the United States shared a strategic vision centered on containing the Soviet Union and its proxies. In exchange for strategic cooperation, Washington provided aid, modulated criticisms of Turkish politics, and deferred to Ankara’s sensitivities regarding its geopolitical neighborhood. With notable exceptions (e.g., Turkish opposition to the Vietnam War and US opposition to Turkey’s 1974 Cyprus operation), consensus was the norm and aspiration of both sides. After close collaboration in the Balkans, Somalia, Iraq, and Afghanistan from 1991 to 2001, though, Ankara became increasingly alarmed about the prospect of a new war in Iraq.

Bilateral relations deteriorated sharply after the Turkish parliament voted against allowing the United States to launch combat operations from Turkish soil. The war was longer, bloodier, and costlier than its planners had anticipated. The Kurdistan Workers’ Party (known as the PKK and designated by the United States as a terrorist organization in 1997) ended a cease-fire in place since the 1999 capture of its founder, Abdullah Öcalan, and gained broad new freedom of movement and action in northern Iraq. US military aid to Turkey ended, while defense industrial cooperation and military-to-military contacts dropped. In July 2003 US soldiers detained and hooded a Turkish special forces team in Sulaymaniyah, Iraq, on suspicions that they were colluding with insurgents. This event, coupled with Turkish anger over the bitter conduct and conclusion of the prewar negotiations, helped fuel a sustained rise in negative views about the United States among the Turkish public.

Sanctions and the war in Iraq damaged Turkish economic interests, though these would rebound from 2005 onward. The relationship of the US military to the PKK—first as tacit tolerance of PKK attacks into Turkey from northern Iraq despite the US presence, and later with employment of the PKK affiliate in Syria as a proxy force against the Islamic State in Iraq and al-Sham (ISIS)—rendered the frictions of 2003 permanent. That US forces train, equip, and operate with a PKK-linked militia along Turkey’s border today is fruit of the Iraq war, because US-PKK contacts were brokered in northern Iraq, and US indifference to Turkish security redlines traces back to 2003.

The story of US-Turkish estrangement can be told from other perspectives: that Ankara sought strategic independence for reasons broader than Iraq, that President Erdoğan’s anti-Westernism drove divergence, that the countries have fewer shared interests now. There may be truth in these arguments, though they are based largely on speculation and imputed motives. Yet they, too, cannot be viewed except through the lens of the 2003 Iraq War, which came as Erdoğan’s Justice and Development Party was assuming power and greatly influenced his subsequent decision-making.

Many effects of the Iraq War have faded, but the strategic alienation of Turkey and the United States has not.

—Rich Outzen, a retired colonel, is a nonresident senior fellow at the Atlantic Council IN TURKEY and a geopolitical analyst and consultant currently serving private-sector clients as Dragoman LLC.

China’s rise

As George W. Bush took office in 2001, managing the US-China relationship was regarded as a top foreign policy concern. The administration’s focus shifted with 9/11 and a wartime footing—which in turn altered Beijing’s foreign policy and engagement in the Middle East.

A high point in US-China tension came in April with the Hainan Island Incident. The collision of a US signals intelligence aircraft and a Chinese interceptor jet resulted in one dead Chinese pilot and the detention of twenty-four US crew members, whose release followed US Ambassador Joseph Prueher’s delivery of the “letter of the two sorries.”

But after the September 11 attacks, the United States launched the global war on terrorism, and the ensuing wars in Afghanistan and Iraq became the all-encompassing focal points. While that relieved pressure on China, the US decision to invade Iraq raised serious concerns in Beijing and elsewhere about the direction of global order under US leadership.

American willingness to attack a sovereign government with the stated goal of changing its regime set a worrisome precedent for authoritarian governments. Worries transformed into something else following the global financial crisis in 2008. Chinese leaders became even more wary of US leadership, with former Vice Premier Wang Qishan telling then-Treasury Secretary Hank Paulson after the financial crisis, “Look at your system, Hank. We aren’t sure we should be learning from you anymore.”

The war in Iraq was especially troubling for Chinese leaders. Few believed that the United States would engage in such a disastrous war over something as idealistic as democracy promotion in the Middle East. The dominant assumption was that the war was about maintaining control of global oil—and using that dominance to prevent China from rising to a peer competitor status. The so-called “Malacca Dilemma” became a feature of analysis in China’s strategic landscape: the idea that any power that could control the Strait of Malacca could control oil shipping to China, and therefore its economy. Since then, China has developed the world’s largest navy and invested in ports across the Indian Ocean region through its Maritime Silk Road Initiative. Its defense spending has increased fivefold this century, from $50 billion in 2001 to $270 billion in 2021, making it the second-largest defense spender in the Indo-Pacific region after Japan, and higher than the next thirteen Indo-Pacific countries combined.

Since the Iraq war, the Middle East has become a much greater focus in Chinese foreign policy. In addition to building up its own military, China began discussing security and strategic affairs with Middle East energy suppliers, conducting joint exercises, selling more varied weapons systems, and pursuing a regional presence that increasingly diverges or competes with US preferences.

Would China’s growing presence in the Middle East have followed the same trajectory had the United States not invaded Iraq? Possibly, although one could argue that the same sense of urgency would not have animated decision makers in the People’s Republic of China.

—Jonathan Fulton is a nonresident senior fellow with the Atlantic Council and host of the China-MENA podcast. He is also an assistant professor of political science at Zayed University in Abu Dhabi. Follow him on Twitter: @jonathandfulton.

The country’s readiness to meet climate challenges

Over the course of the last two decades, Iraq has become one of the five most vulnerable countries in the world to climate change. It has been affected by rising temperatures, insufficient and diminishing rainfall, intensified droughts that reduce access to water, sand and dust storms, and flooding. Iraq’s environmental ministry warns that the country may face dust storms for more than 270 days per year in the next twenty years.

While not the sole cause of environmental mismanagement in Iraq, the muhasasa system of power sharing has exacerbated and contributed to a culture of corruption and political patronage that has undermined efforts to protect the environment and to sustainably manage Iraq’s natural resources. Muhasasa is an official system that allocates Iraqi government positions and resources based on ethnic and sectarian identity. It may have been a good temporary compromise to promote stability in the early 2000s, but today it is widely viewed as a harmful legacy of the post-invasion occupation period.

In the context of protecting the environment, the muhasasa system has led to a situation where some government officials are appointed to their respective positions without the necessary skills or qualifications to manage resources efficiently or effectively. Forced ethnosectarian balancing has encouraged natural resource misuse for political or personal gain to the immediate detriment of average Iraqis. While muhasasa was intended to promote political stability and prevent marginalization of minority groups, in practice it has contributed to a culture of corruption and nepotism, and undermined efforts to promote good governance and sustainable development.

To address its acute climate challenges, Iraq needs to move away from the sectarian-based power sharing and toward a more inclusive, merit-based system of governance. It must strengthen its environmental regulations, commit itself to sustainable development, and better manage its natural resources for the country and as part of the global effort to mitigate climate change. The international community has a role to play here through supporting technical assistance, capacity building, and providing financial resources to help address these concerns along the way.

—Masoud Mostajabi is an associate director of the Middle East programs at the Atlantic Council.

Iran’s regional footprint

From the outset of the invasion of Iraq, the United States’ decision was built on several dubious premises that the administration masterfully overhyped to build support for its aspirations of removing Saddam Hussein by force. The last two decades have tragically shown the consequences of this decision—with high costs of blood and treasure and a serious blow to American credibility. But from a strategic standpoint, one particular miscalculation continues to create blowbacks to US regional security interests: top US policymakers willfully ignored the need for an adequate nation-rebuilding strategy, leaving a power vacuum that an expansionist Iran could fill.

With the removal of the Baathist regime, Iran finally saw the defeat of a rival it could not best after eight years of one of the region’s bloodiest wars. This cleared the path to influence Iraqi Shia leaders who had long relied on the Islamic theocracy next door for support. Even as some Shia learning centers in Najaf and Karbala challenged (once again) Qom, new opportunities of influence that never existed before opened up for Iran.

By infiltrating Iraq’s political institutions through appointed officials submissive to its regime’s wishes, Iran succeeded in two goals: deterring future threats of Iraqi hostilities and preventing the United States from using Iraqi territories as a platform to invade Iran. Through its Islamic Revolution Guards Corps Qods Force, Iran trained and supplied several militia groups that later officially penetrated Iraq’s security architecture through forces called Popular Mobilization Units, which have repeatedly carried out anti-American attacks. Nevertheless, those groups would eventually prove valuable to the United States in the fight against the Islamic State in Iraq and al-Sham (ISIS)—yet even then Iran succeeded in appearing as the protector of Iraq’s sovereignty by immediately equipping the Popular Mobilization Units, unlike the delayed US response that arrived months later.

Regionally, Iran’s military leverage and political allies inside Iraq provided it with a strategic ground link to its network in Syria and Lebanon, where the Qods Force ultimately shifted the political power dynamics to Iran’s advantage, especially as they crucially strengthened engagement in recruiting volunteers to support Bashar al-Assad’s fighters in Syria. Through the land bridge that connects Iran to the Bekaa Valley, Iran has helped spread its weapons-trafficking and money-laundering capabilities while reinforcing an abusive dictatorship in Syria and a crippled state in Lebanon.

Twenty years ago, the United States went to liberate Iraq from its oppressive dictatorship. What it left behind is a void in governance and an alternative system that fell far short of what the United States wanted for Iraq. Meanwhile, the Iranian regime continues to base its identity on anti-Americanism while it gets closer to its political and ideological ambitions. With US sanctions having so far failed to halt Iran’s network of militia training and smuggling—and the attempt to revive the nuclear deal stalled, despite being the main focus of US Iran policy—the question remains: How long will the United States tolerate Iran’s regional ascendancy before it intensifies its efforts toward restraining it?

—Nour Dabboussi is a program assistant to the Atlantic Council’s Rafik Hariri Center and Middle East programs.

How governments counter terrorist financing

Without the experience of the war in Iraq, US and transatlantic economic statecraft would be less agile and less able to prevent terrorist financing. However, more work and continued international commitment is needed to ensure Iraq and its neighbors are able to strengthen and enforce their anti-money-laundering regimes to protect their economies from corruption and deny terrorists and other illicit actors from abusing the global financial system to raise, use, and move funds for their operations.

The tools of economic statecraft, including but not limited to sanctions, export controls, and controlling access to currency, became critical to US national security in the wake of 9/11 and the US invasion of Iraq in 2003. Sanctions and other forms of economic pressure had been applied against the government of Iraq and illicit actors prior to 2003. However, economic pressure and the use of financial intelligence to combat terrorist financing became increasingly sophisticated as the war progressed. Since 2001, the State Department and Treasury have designated more than 500 individuals and entities for financially supporting terrorism in Iraq. Following the money and figuring out how terrorist networks raised, used, and moved funds was a critical aspect in understanding how they operated in Iraq and across the region. Information on terrorist financial networks and facilitators helped identify vulnerabilities for disruption, limiting their ability to fund and carry out terrorist attacks, procure weapons, pay salaries for fighters, and recruit.

Sanctioning the terrorist groups and financial facilitators operating in Iraq and across the region disrupted the groups’ financial flows and operational capabilities while protecting the US and global financial systems from abuse. Targets included al-Qaeda and the Islamic State group, among others. For example, the US Treasury recently sanctioned an Iraqi bank moving millions of dollars from the Revolutionary Guard Corps to Hezbollah, preventing terrorists from abusing the international financial system.

Notably, the fight against terrorist financing set in motion the expansion of the Department of the Treasury’s sanctions programs and helped the US government refine its sanctions framework and enforcement authorities and their broad application.

Equally important, the US government’s efforts and experience in countering the financing of terrorism increased engagement and coordination with foreign partners to protect the global financial system from abuse by illicit actors. The Financial Action Task Force (FATF), the inter-governmental body responsible for setting international anti-money-laundering and counter-terrorist financing standards, strengthened and revised its standards, recommendations, and red flags to account for what the international community learned from the experience of combatting terrorist financing in Iraq. The United States and partner nations provided, and continue to provide, training and resources to build Iraq’s and its neighbors’ capabilities to meet FATF standards and address terrorist financing and money laundering issues domestically.

—Kim Donovan is the director of the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center.

—Maia Nikoladze is an assistant director at the Economic Statecraft Initiative within the Atlantic Council’s GeoEconomics Center.

The United States

Perhaps no event since the end of the Cold War shaped American politics more than the invasion of Iraq. It is fair to say that without the Iraq war neither Donald Trump nor Barack Obama would likely have been president.

Weirdly, the invasion of Iraq in 2003 is still almost a forbidden topic in GOP foreign policy circles. After the Bush years, a kind of collective-guilt omerta about the Iraq war took hold among Republicans. It was as if US-Iraqi history had started in 2005, or 2006, with Democrats and a few Republicans baying for a needed defeat. It never came. The 2007 surge, as David Petraeus’s counterinsurgency strategy came to be known, was the gutsiest political call by an American leader in my lifetime.

It happened also to be right when very little else about the war was: There were, of course, no weapons of mass destruction found. Iran did expand its power, massively. Iraq did not offer an example of democracy to the region: rather, it horrified the region. It became linked to al-Qaeda only after the invasion. The White House refused to take the insurgency seriously until it was very serious. Iraq pulled attention away from Afghanistan. And of course there were 4,431 Americans killed.

By 2016, the narrative favored by Republicans had become that the execution of the war was flawed. Paul Bremer, head of the Coalition Provisional Authority in Baghdad, was the villain in this story: But for Bremer’s incomprehensible decision to disband the Iraqi army and institute de-Baathification in early 2003, so the story went, the Iraq war could have succeeded. But in retrospect these decisions were defendable. Bremer was erring on the side of satiating the Shia majority, not the Sunni minority, and trying to reassure them that a decade after they were abandoned in 1991 the United States would deliver them political power. And the one real success of the Iraq war, beginning to end, is that the United States never faced a generalized Shia insurgency.

The other villain was Barack Obama, who played in the sequel. (Obama largely owed his electoral victory to the Iraq war, brilliantly using Hillary Clinton’s vote for the invasion to invalidate her experience and judgment and thus the main argument for her candidacy.) In this version of events, Obama’s precipitous decision to withdraw troops from Iraq in 2011 contributed to the country’s near-collapse three years later under the rise of the Islamic State of Iraq and al-Sham (ISIS). This was basically accurate. The withdrawal of US forces eliminated a key political counterweight from Iraq, and the main incentive for then-Prime Minister Nouri al-Maliki to hedge his sectarianism and friendliness with Iran. This accelerated political support for Sunni rejectionist movements like ISIS.

Both the Bremer narrative and the Obama narrative allowed George Bush’s Republican party to avoid revisiting the core questions of American power: intervention, exceptionalism, and its limits—precisely the same questions that had featured prominently in the 2006 and 2008 elections.

This was the broken market that Donald Trump exploited: that Republican voters’ views on Iraq after 2008 looked much like Democratic voters’, but the Republican establishment’s views did not. And it was no accident, in the 2016 presidential primaries, that the two candidates most willing to criticize the interventionism of the 2000s, Trump and Ted Cruz, were the ones who did best.

This debate remains critical. More than any other decision, Bush’s war created the contemporary Middle East. Above all that includes the unprecedented regional dominance of Iran, the power of the Arab Shia, and the constraints on American power in buttressing its traditional allies. That imbalance, combined with a decade-long sense that America is leaving the region and wants no more conflict, has led Sunni Arab states to look for their security in other places.

Especially in the wake of Russia’s war against Ukraine, which if anything has sharpened foreign policy divisions, the Republican party and the United States need a dialectic, not a purge; a discussion, not a proscription; and a reasonable synthesis of the lessons of Iraq. People want to vote for restraint and realism, as much as or more than they want to vote and pay for interventionism and idealism. Was the Iraq War a mistake? Let us start this debate there, and produce something better.

—Andrew L. Peek is a nonresident senior fellow at the Atlantic Council’s Middle East Programs. He was previously the senior director for European and Russian affairs at the National Security Council and the deputy assistant secretary for Iran and Iraq at the US Department of State’s Bureau of Near Eastern Affairs.

Andrew Peek on the historical context of the 2003 invasion

US foreign policy

The US decision to invade Iraq twenty years ago was, to use the words of Charles-Maurice de Talleyrand, a wily French statesman and diplomat of the Napoleonic era, “worse than a crime; it’s a mistake.”

While Saddam Hussein was a monster, and had ignored numerous United Nation-mandated commitments, the US-led effort in 2003 to topple him as president of Iraq was strategically unnecessary. It became the center of a failed mission in nation-building—one that has proved disastrous for US interests in the greater Middle East and beyond.

Iraq was at the center, but it was only one of four failed American interventions in the region. The others were Afghanistan, Libya, and, to a lesser extent, Syria. The operation to take down the Taliban was fast and efficient, but consolidation of a post-Taliban Afghanistan never occurred. Part of the reason for that was the United States’ war of choice in Iraq, which began less than eighteen months after Afghanistan. That sucked up most of the resources and attention for the rest of that decade. But the other reason for US failure in Afghanistan was that we were beguiled by the same siren song that misled us in Iraq: that we could overcome centuries of history and culture and create a stable society at least somewhat closer to US values. Failure on such a scale is not good for the prestige and influence of a superpower.

But that is not the end of it. There is also the domestic side. The misadventures in the greater Middle East were a failure not just of the US government but of the US foreign policy elite. It was a bipartisan affair. Neoconservative thinking dominated the Republican Party throughout the aughts, while liberal interventionism prevailed in the Democratic Party. They were all in for the utopian policies in Afghanistan, Iraq, Libya, and Syria.

While the failures in the greater Middle East were widely understood even before the unnecessarily embarrassing 2021 departure from Afghanistan, there has never been a public reckoning. There was nothing like the Church Committee, which in the mid-1970s shined a very harsh light on US failures in Southeast Asia. Few prominent thinkers or officials have publicly acknowledged their failed policy choices. And the same figures who led us into those debacles are still widely quoted on all major foreign policy matters.

This has had the consequence in the United States of providing ground for the growth of neoisolationist thinking. In running for the presidency in 2016, Donald Trump was not wrong in pointing out the failures of elites in both parties in conducting foreign policy in the greater Middle East. Since then, populists on the right have used this insight to undermine the credibility of foreign policy experts. And like generals fighting the last war, they have applied their “insight” from the Middle East to the latest challenges to US interests, such as Moscow’s war on Ukraine.

In this reading, US support for Ukraine is comparable to US interventions in Iraq and Afghanistan and will result in failure. There is no analysis—simply dismissal—of the dangers that Vladimir Putin’s war in Ukraine poses to US security and economic prosperity. No recognition that, as Putin has stated numerous times, he wants to restore Kremlin political control over all the states that used to make up the Soviet Union—which includes NATO and European Union (EU) member states. In other words, he seeks to undermine NATO and the EU.

Furthermore, there’s no understanding that despite the presence of American troops, the United States’ local allies in Iraq and Afghanistan could not win—but without one NATO soldier on the battlefield, Ukraine is fighting Russia to a standstill. Indeed, Ukraine has destroyed between 30 percent and 50 percent of Moscow’s conventional military capability. These analogies with the Iraq war ignore the reality that if Putin takes control of Ukraine, the United States will likely spend far more in financial resources and perhaps American lives in defending its NATO allies.

These failures of understanding are not simply or mainly a consequence of US errors in the Middle East. Utopian thinking in the United States and especially Europe was a natural consequence of the absence of great-power war since 1945. Especially since the fall of the Soviet Union, people on both sides of the Atlantic got comfortable with the notion that Russia was no longer an adversary. And isolationism also has a long pedigree in US society. So it would be vastly oversimplifying to blame the confusion of today’s neoisolationists exclusively on US failures in the Middle East. But the strong US response to the challenge of a hostile Soviet Union was possible because a bipartisan approach on containment was endorsed by leaders of both parties. After the United States’ misadventures in Iraq, such endorsements carry less weight today. In US foreign policy as elsewhere, we still do not know what the ultimate impact of the decision to invade Iraq will be.

—John Herbst’s 31-year career in the US Foreign Service included time as US ambassador to Uzbekistan, other service in and with post-Soviet states, and his appointment as US ambassador to Ukraine from 2003 to 2006.

What Iraq needs now

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William F. Wechsler on the future of Iraq

A reconciliation commission to rebuild national unity

One of the most devastating shortcomings of the 2003 Iraq invasion was the dismantlement of state institutions and the weakening of the Baghdad central government. That structural vacuum of power and services forced Iraqis back into tribal, religious, and ethnic allegiances, contributing to the nation-state’s fragmentation and exacerbating divisive sectarian discourses and intercommunity tensions. A quota-based constitutional system only served to institutionalize and legitimize the ethnosectarian distribution of power.

Conflicting groups grew further apart over the past two decades and became more motivated by accumulating political positions, hefty oil incomes, and territorial and symbolic gains rather than collectively seeking to rebuild their balkanized nation. Iraqi youth, on the other hand—who campaigned in the name of “We Want a Homeland” [نريد_وطن#] during the 2019 Tishreen (October) protests—seem to have understood what political elites might be missing: the necessity for national reconciliation and memorialization.

The bombing of the al-Askari shrine in Samarra in 2006 unleashed the chaos trapped inside Pandora’s box and resulted in violent Sunni-Shia confrontations, which pushed the country to the brink of civil war. Today, political elites, aware of the fragility and precariousness of the political consensus, pretend the time of friction is over. My firsthand work in Iraqi prisons and camps, and the research projects I led in the country’s conflict zones off the beaten path, such as west of the Euphrates, in Zubair, and in rural areas in the Makhoul Basin, prove the absolute contrary.

A flagrant example of the sectarian ticking bomb that persists in Iraq is the mismanagement of the Sunni populations in the aftermath of the war against the Islamic State of Iraq and al-Sham (ISIS). Many pretended that ISIS fighters came from some fictional foreign entity and refused to face the fact that most of them, including their leader, were Iraqi-born and raised, which I observed as an eyewitness working with the International Committee of the Red Cross during the ISIS war in Nineveh and Salahuddin. Many people who were accomplices of the atrocities even engaged in rewriting the narrative altogether after 2017 in the name of national unity.

A number of Sunni populations in Iraq were mystified by their sudden loss of power with the toppling of Saddam Hussein and were in disbelief that the Shia they stigmatized as shrouguis—literally, “easterners,” a derogatory reference used by Sunni elites to refer to Shia Iraqis from the southeast—became the new lords of the land. Instead of engaging in meaningful mediation and reconciliation to work through these social changes, the majority parties preferred to bury their heads in the sand. This tendency led them to allow militia groups to displace and isolate the Sunni inhabitants of a key city like Samarra, to submerge under water the citizens of northern Kirkuk and Salaheddin, or to conceal the evidence incriminating Tikrit Sunnis during the Speicher massacre, in which ISIS fighters killed more than a thousand Iraqi military cadets, most of them Shia.

These are not isolated examples in a chaotic political and constitutional system in which many communities feel persistently misunderstood, including Kurds, Assyrians, Mandaeans, Baha’is, Afro-Iraqis, Turkmen—and even the Shia themselves. The only possible and plausible pathway for the country to be one again in the next twenty years is to engage in an excruciating but indispensable reconciliation process, through which responsibilities are determined, dignity is restored, and justice is served.

—Sarah Zaaimi is the deputy director for communications at the Atlantic Council’s Rafik Hariri Center & Middle East programs.

A new constitution

Iraq needs a new constitution. A good constitution spells out the framework and structure of government. It provides essential checks and balances to prevent dictators from coming to power. It helps protect the people’s rights. It has measures to prevent gridlock or the collapse of a functioning government.

Judged by these standards, the 2005 Iraqi constitutionis only a partial success.

However, complaints have built up since 2005: over the muhasasa system under which the established political parties divide up ministerial appointments; over the failure of Iraq’s government or other institutions to deliver basic services like electricity and water; over perceptions of excessive Iranian meddling in Iraq’s politics; and over the inability of the government to provide meaningful employment for millions of young Iraqis—or to foster a private sector capable of doing so. These grievances came to a head in the 2019 Tishreen protests in which more than 600 Iraqis died.

The United States invaded Iraq in 2003 in part to bring democracy to Iraq, so it is ironic that Iraq’s 2005 constitution was the product of mostly Iraqi political forces unleashed by the failure of the United States to ensure a democratic transition. It was expected that the Kurdish political parties, which had worked closely with the United States for years, would insist upon a federal republic to ensure their autonomy from a central government whose long-term character and leanings in 2005 were far from settled. Beyond this, however, the small number of Americans actually involved in advising the key Iraqi players in the constitutional process—in the room where it happened—actually had relatively little experience in constitutional mechanics or modern comparative constitutional practice. The American sins of commission during the first two years after Iraq’s liberation were replaced by sins of omission during the crucial months of negotiation of the 2005 constitution.

Genuine constitutional reform in Iraq is not likely to be accomplished directly through the parliament, given the interests of Iraq’s political parties and the parliament’s need to focus on legislative responsibilities. Instead, Iraqi civil society—including scholars, lawyers, religious and business leaders, and retired government officials and jurists—should initiate serious discussions about constitutional reform. Many of these voices were not heard when the 2005 constitution was adopted. Their effort can be far more open and transparent than the process was in 2005.

Foreign governments should have a minimal role, limited to supporting and encouraging Iraqi-led efforts, without trying to broker a particular outcome. International foundations, institutes, universities, and think tanks can offer outside expertise, particularly in comparative constitutional law and other kinds of technical assistance. But the overall effort needs to be Iraqi-led, with input from a broad spectrum of Iraqi voices.

While civil society discussions in Iraq could begin with considering amendments to the 2005 constitution, US experience may be relevant. The US Constitutional Convention convened in May 1787 to consider amendments to the Articles of Confederation decided to completely redesign the government, resulting in a Constitution that, with amendments, has been in force in the United States for more than 230 years. Sometimes it’s better to start over.

Iraq’s path to constitutional reform is not clear today, but there is a path nevertheless. Incremental reform is possible, but reform on a larger scale may achieve a more lasting result. The more promising outcome could be for a slate of candidates to run for office with the elements of the new constitution as their platform. A reform slate is not likely to gain an absolute majority, but if its base of support is broad enough, it may be able to gain support in a new parliament needed to send a revised constitution to the Iraqi people for their approval. A new constitution, done right, could propel Iraq towards a better future.

—Thomas S. Warrick led the State Department’s “Future of Iraq” project from 2002 to 2003, served in both Baghdad and Washington, and was director (acting) for Iraq political affairs from July 2006 to July 2007. He is a nonresident senior fellow at the Atlantic Council’s Scowcroft Center for Strategy and Security.

Thomas S. Warrick on the need for Iraqi-led constitutional reform

An economy diversified away from oil

The post-2003 political order, based on the muhasasa system of sectarian apportionment, came with the promise of a complete break with the past. The 2005 constitution, drafted by the new order, promised: “The State shall guarantee the reform of the Iraqi economy in accordance with modern economic principles to insure the full investment of its resources, diversification of its sources, and the encouragement and development of the private sector.”

As with other bold promises made, the economic promise was broken as soon as the constitution came into effect, as the political order pursued a decentralized and multiheaded evolution of the prior economic model, and persistently expanded the patrimonial role of the state as a redistributor of the country’s oil wealth in exchange for social acquiescence to its rule.

Over the last twenty years the economy developed significant structural imbalances, and was increasingly bedeviled by fundamental contradictions. Essentially, it was dependent on government spending directly through its provisioning of goods and services as well as public services, and indirectly on the spending of public-sector employees. However, this spending was almost entirely dependent on volatile oil revenues that the government had no control over; yet the spending was premised on ever-increasing oil prices.

The political order had the opportunity to correct course and honor the original promise during three major economic and financial crises, each more severe than the last and all a consequence of an oil-price crash: in 2007 to 2009, due to the global financial crisis; in 2014 to 2017, due to the conflict with the Islamic State of Iraq and al-Sham; and in 2020, due to the emergence of COVID-19. Yet, paradoxically, the political order doubled down on the policies that led to these crises as soon as oil prices recovered.

On the eve of the twentieth anniversary of the invasion of Iraq, the political order—buoyed by the bounty of high, yet unsustainable, oil prices—is planning a budget that is expected to be the largest ever since 2003, to seek legitimacy from an increasingly alienated public. These plans will only deepen the economy’s structural imbalance and its fundamental contradictions, and as such could likely lead to even greater public alienation if an oil-price crash triggers yet another economic and financial crisis. Even if oil prices were to stay high, however, the country’s demographic pressures will in time create the conditions for a deeper rolling crisis.

—Ahmed Tabaqchali is a nonresident senior fellow with the Atlantic Council’s Middle East programs. An experienced capital markets professional, he is chief strategist of the AFC Iraq Fund.

Andrew Peek on the current state of Iraq and the US-Iraq relationship

An inclusive vision, representative of all its people

One of the enduring legacies of the 2003 invasion has been its deleterious effect on the many diverse ethnic and religious minority communities that make up the social fabric of Iraq. Yet it is that diversity and rich heritage that could now unlock a brighter future for the nation, if the political system can recognize and represent it.

Marginalized by an institutionally inscribed political system and few representative seats in parliament, Iraq’s minority communities have found themselves peripheralized by the state—and in the imaginations of the country’s future. Many have emigrated and now reside in diaspora, changing the ethnic and religious heterogeneity of Iraq.

Calculating the cultural toll of war goes beyond the destruction of shrines and artifacts, and the looting of museums and buildings: One of the biggest social and cultural losses for Iraq has been the exclusion of minority communities from the nation-building processes. This is a tragic state of affairs for Iraq, whose uniqueness, strength, and richness stems from its ancient histories and cultures, its religious, artistic, and musical traditions, and the languages that have contributed to its heritage and development. That heritage deserves to be protected and celebrated.

Until the day the muhasasa system is dismantled, and a new Iraq built on meritocracy can thrive, minority communities must be safeguarded and included in Iraq’s future. Yet, this can only be achieved through the protection of minorities’ rights in Iraq’s political life, and genuine and concerted effort to increase parliamentary seats and legal representation of minorities. Investment in areas destroyed by terrorism and conflict, more reparations for communities whose livelihoods and homes have been ruined, and more boots on the ground to protect communities and religious shrines should be a priority.

Twenty years of destruction, corruption, violence, and the subsequent emigration of many communities cannot be erased. Yet the twentieth anniversary of Iraq’s occupation ought to serve as a point of reflection for the kind of Iraq that Iraqis want now. There is certainly much hope in a new generation of Iraqis calling for new national visions, an end to muhasasa, more civil rights, and expanding economic opportunities.

Yet all of Iraq’s communities must be part of this conversation. A more inclusive Iraq that applauds its diversity and takes pride in difference could be the driving force needed to unify the nation.

—Oula Kadhum, a former nonresident senior fellow at the Atlantic Council, is a postdoctoral research fellow at Lunds University in Sweden and a fellow of international migration at the London School of Economics and Political Science in the United Kingdom.

Oula Kadhum on the reforms needed to reposition Iraq in the next twenty years

A new US Iraq policy focused on youth and education

As the global community reflects on the twentieth anniversary of the US-led invasion of Iraq and looks to the future, it is time for foreign policy toward Iraq to move beyond its traditional, security-heavy approach.

While security threats persist, including a potential resurgence of the Islamic State of Iraq and al-Sham (ISIS), and should be a priority, US aid to Iraq has historically been ineffective and financially irresponsible. Humanitarian assistance, meanwhile, tends to focus on short-term issues like the response to COVID-19 and assisting displaced individuals. And while such aid can be beneficial, continuing with the traditional avenues of support is not a sustainable solution to rebuild Iraq. The United States and the international community must begin to focus on long-term solutions that address human security, development, infrastructure, education, and the economy. At the center of all these issues are two key variables that must be the focal point of policy: education and the youth population.

A 2019 UNICEF report estimates that a staggering 60 percent of Iraq’s population is under the age of twenty-five. Learning levels and access to education in Iraq remain among the lowest in the region. The great challenges these two facts pose can also be seen as a unique opportunity: to place its large youth population at the epicenter of Iraq’s future through policy that increases the number of educators and trains them, ensures sanitary and competent learning conditions, and increases access to education.

The benefits of a long-term investment in Iraq’s education system and youth population go beyond simply educating its citizens: It would be the first step in unlocking the human potential of Iraq. More education means more qualified professionals; more doctors would increase the quality and access to healthcare, an increase in engineers will ensure that the country’s infrastructure continues to develop, and additional business leaders and entrepreneurs will assist in growing the economy.

To truly rebuild Iraq, the United States and the international community can no longer view the country as only a security issue. Rather, this moment must be seen as an opportunity to empower bright Iraqi youths, who hope to lead in rebuilding their own country—providing them with a fair shot of again being a cradle of civilization.

—Hezha Barzani is a program assistant with the Atlantic Council’s empowerME initiative. Follow him on Twitter @HezhaFB.

Iraq’s Deputy Prime Minister Fuad Hussein reflects on the twentieth anniversary of the invasion

What the United States can do now

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Recommit to the cause of Iraqi freedom

It’s hard to believe that it has been twenty years since the US invasion of Iraq. As I sat waiting to launch my first mission on March 20, the war’s historical significance was not my primary thought. How I found myself flying on the first night of the war in Afghanistan and Iraq was. That thought was accompanied by the tightness in the pit of my stomach that I always got before launching into the unknown.

We didn’t debate the case for the war among ourselves. It has been discussed thoroughly since, and I don’t claim to have any new insight to offer on that topic. We were focused on not letting down our fellow Marines and accomplishing our mission: to remove Saddam Hussein’s dictatorship and replace it with a democracy that would give the people of Iraq the freedom that people everywhere deserve as their birthright.

Did we succeed? We certainly succeeded in rapidly destroying the Baathist regime and its military, the third largest in the world. The answer to the second question is less clear. On my second and third tours in Iraq, I saw the chaos from the al-Qaeda-fueled insurgency in 2005 and 2006 and the dramatic turnaround following the al-Anbar “Sunni Awakening” in 2006-2007. From afar, I watched the horrors that the Islamic State in Iraq and al-Sham inflicted on its people after US troops withdrew without a status-of-forces agreement.

Today, Iraq is rated “not free,” scoring twenty-nine out of one hundred in Freedom House’s Freedom in the World 2022 report. Although not up to Western liberal democracy standards, this is an improvement over 2002, when it received the lowest score possible and was listed as one of the eleven most repressive countries in the world. Moreover, Iraq’s 2022 score is vastly better than most of its neighbors: Iran scored fourteen, Syria scored one, and Afghanistan scored ten.

Despite Afghanistan being widely seen as “the good war” of the two post-9/11 conflicts, where the casus belli was clear, today it is Iraq, and not Afghanistan, that gives me hope that twenty years from now, on the fortieth anniversary, we will see our efforts to promote democracy in Iraq come entirely to fruition. We owe it to the 36,425 Americans killed and wounded there, the thousands of veterans who took their own lives, and the many more still struggling with post-traumatic stress disorder to stay engaged in Iraq and the region to try and make sure that they do.

—Col. John B. Barranco was the 2021-22 Senior US Marine Corps Fellow at the Atlantic Council’s Scowcroft Center for Strategy and Security. These views are his own and do not represent those of the Department of Defense or Department of the Navy.

Balance confidence and humility

I officially swore into the military at Fort Hamilton, Brooklyn, on April 4, 2003, during the early stages of the US “shock and awe” campaign in Iraq. Having decided to join the Air Force following 9/11, the lengthy administrative process I’d endured to get to this point had been agonizing. I recall going through the in-processing line at Officer Training School on April 9, when an instructor whispered to us: “Coalition forces have taken Baghdad, stay motivated.” The thought that immediately went through my mind was: “I’m going to miss the wars.”

I had made the choice to pursue special operations and still had two years of training ahead of me. At the time, the war in Afghanistan seemed like it was nearing completion, and the swift overthrow of Saddam Hussein in Iraq had me convinced that, by the time I was ready to deploy, there would be no fighting left. Little did I know that the wars in Afghanistan and Iraq, along with their expansions across the Middle East and Africa, would end up consuming a large majority of my twenty years of service, take the lives of many of my special operations teammates, and impact the health and well-being of a generation of US service members and their families.

It’s impossible to know how the war in Iraq shaped other US endeavors in the region. Did it take our focus from Afghanistan and put us on a path of increased escalation and investment there? Did it set conditions for the Islamic State in Iraq and al-Sham to take root many years later, setting off another expansive counterterrorism campaign?

More broadly, did it allow adversaries the time and space to study US capabilities and ultimately inform their strategies for malign influence? I often think of this today when I’m asked about what’s going to happen with the Russian war in Ukraine, or how prepared the United States is to defend Taiwan.

The United States needs the confidence to confront global challenges to peace and prosperity, but also the humility to know we get things wrong, and mistakes involving direct military intervention can be catastrophic. Given the escalatory risks associated with the security challenges in the world today, our pursuit of a balance of confidence and humility has never been more important.

—Lt. Col. Justin M. Conelli is the 2022-23 Senior US Air Force fellow at the Atlantic Council’s Scowcroft Center for Strategy and Security.

William F. Wechsler on the current political discourse around Iraq

Recognize the successes as well as the failures

“Was the invasion of Iraq worth it?”

I’ve spent a great deal of my military and postmilitary career answering questions about Iraq, but this one—from a brigadier general in the audience—caught me off guard. It was 2018, seven years after the formal withdrawal of US forces from Iraq, and I found myself in front of a roomful of Army officers giving a talk on the future of US-Iraq security cooperation. By that time, such talks had become a little frustrating. The fight against the Islamic State in Iraq and al-Sham (aka the Islamic State group) demonstrated that Iraqi forces could rise to the immediate challenge; however, the conditions that led to their unceremonious collapse in 2014 had not much changed. As a result, there remained many questions about the best way to continue the security partnership to prevent future catastrophe.

The question I got that day, however, had little to do with how to partner with Iraqi forces. A co-presenter from Kurdistan jumped in immediately to answer the brigadier general’s question: the US invasion had removed Iraqi Kurdistan’s most significant threat—Saddam Hussein—and had provided opportunities for economic and political development it would not have had otherwise. Sensing a trap, I nonetheless walked right into it. While Iraqi Kurdistan was certainly in a better position, I pointed out that was not consistently so for the rest of Iraq. The US invasion had unleashed a sectarian free-for-all that allowed Sunni extremists, Shia militias, and their Iranian sponsors to fill the vacuum of oppression Saddam’s departure had left. Moreover, this vacuum had empowered Iran to challenge the United States and its partners regionally. So my answer was no, toppling Saddam likely did not outweigh the costs.

In previous years, the questions had been more policy-focused. For example, when I arrived at the Pentagon’s Iraq Intelligence Working Group in August 2002, the first question asked was how Iraq’s diverse ethnic and confessional demographics would affect military operations and enable—or impede—victory. By early 2003, the questions were about the larger effort to construct a new political order. Before long, we were asking how the confluence of Islamist terrorism, sectarian rivalries, and external intervention drove resistance to efforts to reconstruct Iraq.

In 2012, I became the US defense attaché in Baghdad, just after the last US service members withdrew. At first, the question I heard in this capacity was how to continue the reconstruction project with a limited military and civilian presence whose movement was often severely restricted in a sovereign, sometimes uncooperative, Iraq with frequent interference from Iran. Before I left, al-Qaeda had metastasized into the Islamic State group and the question became how to cooperate to prevent the group’s further expansion and liberate the territory it had seized. Meanwhile, Iran’s influence with the Iraqi government continued to grow.

In retrospect, the conditions I described in 2018 were accurate (and still largely hold today), but I wish I had given a more considered response. What I wish I had said was that a better question than “was it worth it” is: what have we learned about past failures to assess future opportunities? A prosperous Iraq that contributes to regional stability was not possible under Saddam. Now Iraq is an effective partner against Islamist extremists, and the Iraqi people, if not always their government, are in a position to push back on Iran in their own way, exposing Tehran for the despotic government it is. Moreover, Iraq’s hosting of discussions between Saudi Arabia and Iran was a catalyst to their recent normalization of relations.

The point is not to rationalize failure. Rather, the question now is: what have we learned from those failures to effectively capitalize on the success we have had, and how can we take advantage of the opportunities the current situation presents?

—C. Anthony Pfaff, PhD, is a nonresident senior fellow with the Atlantic Council’s Iraq Initiative and a research professor for strategy, the military profession, and ethic at the Strategic Studies Institute of the US Army War College in Carlisle, Pennsylvania.

Tony Pfaff on the future of US-Iraq relations

Remember the price of hubris

For me, the memories of those first days and weeks in Iraq remain quite clear. I remember calling my family from a satellite phone on the tarmac of Baghdad International Airport to let them know I was alive, late night meetings with Iraqi agents in safe houses, wrapping up Iraqi high-value targets, the fear amid firefights and the carnage on streets strewn with dead and mutilated bodies, and a confused Iraqi population that at the time did not know what to make of US forces who claimed to be liberating them from the regime of Saddam Hussein.

Upon arrival in Baghdad in early April, there were few signs of the resistance that would haunt the United States for decades to come. Yes, there were still combat operations underway, but that was against Iraqi military and paramilitary units. So, as we tracked down Iraqi regime targets one by one—members of the famed “deck of fifty-five cards” that US Central Command had dreamed up and distributed like we were trading baseball cards—we saw this as part of a new beginning.

Yet soon after, the wheels began to fall off. Orders came from Washington policy officials with absolutely zero substantive Middle East experience both to disband the Iraqi military and purge the future government of Baath party officials, which immediately put tens of thousands of hardened military officers, conscripts, and officials out of work and on the street. The CIA presence on the ground protested, but to no avail. I had never seen Charlie, my station chief, so angry, including face-to-face confrontations with senior figures in the Coalition Provisional Authority. Charlie—the most accomplished Arabist in the CIA’s history—sadly predicted the insurgency that was about to come. If only Washington had listened.

I rarely think of Iraq in terms of big-picture strategy. As a CIA operations officer, I was a surgical instrument of the US government, and I gladly answered the bell when called upon to do so. I am proud to have served with other CIA officers and special operations personnel who performed valiantly. I suppose I can defend the invasion on human rights grounds. It seems we forget that Saddam was one of the great war criminals in history, and Iraq has been freed from his depravity. Yet two numbers are haunting: 4,431, and 31,994. Those are the number of Americans killed and wounded in action, per official Department of Defense statistics.

War is a nasty business, and many times a terrible price is paid for hubris. The casualty figures noted above paint a stark picture of the historic intelligence failure that the analytic assessment that Iraq possessed weapons of mass destruction was. The CIA in particular suffered a credibility hit that has taken decades to recover from.

—Marc Polymeropoulos, a nonresident senior fellow at the Atlantic Council, served for twenty-six years at the CIA before retiring in 2019.

Thomas S. Warrick on the lessons to learn from the Iraq War

The post How the war in Iraq changed the world—and what change could come next appeared first on Atlantic Council.

The energy and climate challenge: How Europe can achieve decarbonization

Transform Europe Initiative — Tue, 14 Mar 2023 20:52:22 +0000

A week before the Franco-German Summit in January, the Atlantic Council proudly co-hosted with the German Council on Foreign Relations (DGAP) “A Grand Bargain for Europe’s energy and climate challenge,” a workshop on the European Union’s energy and climate policy from a geopolitical perspective. Distinguished guests at the workshop included H.E Laurence Boone, Minister of State for Europe for the French Foreign Ministry; Sven Giegold, State Secretary for the German Ministry of Economic Affairs and Climate Action; and Jörg Kukies, State Secretary for Financial Market Policy and European Policy for the German Federal Ministry of Finance. In addition to these guests, the Atlantic Council and DGAP were honored to host experts from EU institutions, EU member state governments, academia, and the private sector.

Europe faced a perfect storm in 2022, following the Russian invasion of Ukraine. Russia cut off gas supplies at a vulnerable time for Europe: a combination of low European gas storage levels and hindered domestic production capacities in nuclear and hydropower from climate change-related extreme heat and drought. Participants noted the war has challenged Europe’s prevailing energy and security policies, as well as the continent’s climate prestige and green industrial ambitions. It is also a challenge to achieving Europe’s climate change ambitions and green industrial growth. Several participants argued that Europe now faces a new impossible trilemma: to reduce greenhouse gas emissions, maintain continuity in its energy supply, and ensure the survival of industry and affordable energy prices for households. The last issue is especially difficult to navigate, as Europe’s industry is threatened by high energy prices, rendering it uncompetitive against US and Chinese counterparts with access to cheaper fossil fuel energy.

Participants agreed that while the energy crisis has affected individual member states in different ways, the response must be found at the European level. This requires increased coordination within Europe, notably on emergency measures to address the crisis, simplification of regulatory frameworks, enhanced energy interconnections, and agreements on how various clean energy and low-carbon energy sources can enhance security and decarbonization. In particular, while nuclear energy remained a point of contention, all participants stressed the need to move forward in a constructive and cooperative manner. Panelists widely shared the view that Russian aggression in Ukraine must “shift attention, not the priorities”, meaning that Europe’s climate objectives, in terms of renewable energy generation, energy efficiency and electrification, remain more relevant than ever.

Participants argued that, while Europe now looks to Africa as an alternative supplier of fossil fuels to replace Russian imports, Europe should increase cooperation with the African continent for clean energy imports, green hydrogen, and critical raw materials, all key components of Europe’s decarbonization trajectory. Looking eastwards, participants noted the importance of China in renewable energy supply chains, and warned against the threat that European industry faces in several key sectors including wind, noting China’s long-established near-monopoly in the solar industry as an example.

In 2022, Europe responded to Russia in a decisive manner, ensuring its domestic energy needs were largely met by attracting LNG cargoes (albeit at high prices) and reducing demand. Participants agreed that this was a result of critical policy decisions, combined with beneficial external factors: low demand in COVID-stricken China, and record-breaking warm weather over the European winter. Discussants acknowledged that Europe had narrowly avoided a catastrophe, but that coming winters would provide new challenges and opportunities due to resurgent demand from China and uncertainty over whether future winters will be so mild. In short, the energy crisis of 2022 has offered key lessons for Europe to continue its decarbonization journey.

Transform Europe Initiative

The Atlantic Council’s Transform Europe Initiative (TEI) is a critical element of the Europe Center’s drive towards structural reforms in Europe.

TEI leverages a robust body of work in strategic decarbonization.

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Providing expertise and building communities to promote transatlantic leadership and a strong Europe in turbulent times.

The Europe Center promotes the transatlantic leadership and strategies required to ensure a strong Europe.

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Putin failed to freeze Europe but Russia’s energy war will continue

Aura Sabadus — Tue, 14 Mar 2023 17:37:39 +0000

Vladimir Putin hoped to bring Europe to its knees over the winter season by drastically cutting Russian gas supplies. With spring now here, it is clear that he did not succeed. European consumers did not freeze in their homes and European economies are now beginning to show promising signs of recovery.

Good fortune helped Europe overcome Russia’s latest gas attack, with comparatively clement weather across the continent throughout the winter season. Careful preparation also contributed, with natural gas storage facilities already brimming at the start of the heating season last November. Crucially, there was no global competition for supplies during the winter months as China, one of the world’s largest buyers of liquefied natural gas, has been reeling in the aftermath of its extensive covid lockdown.

European countries also deserve credit for taking a number of effective measures in response to the energy crisis provoked by Russia and addressing some of their key vulnerabilities. The figures are impressive. In less than one year, the EU added eight new floating storage and re-gasification units, expanding its LNG importing terminals to 23. Thanks to these new terminals, Europe will be able to import 227 billion cubic meters of LNG in 2024, or nearly half of its total consumption in 2021. Overall, Europe increased its LNG imports by 68% in 2022 to compensate for falling Russian gas imports.

The measures adopted by Europe involved considerable costs. These included record gas prices, which took a heavy toll on industrial production. Nevertheless, thanks to falling demand, particularly in the industrial sector, gas prices were already at a 17-month low by the beginning of March 2023.

These positive trends create the strong impression that Russia’s energy offensive has failed. Far from obliging Europe to abandon Ukraine and accept the Kremlin’s terms, Putin’s increasingly overt weaponization of energy exports has deprived Russia of access to key European markets, forcing the country to find new outlets for its stranded gas production. However, the energy war is still far from over.

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Europe faces a number of energy sector-related risks in 2023. These include a rapid recovery in Chinese economic demand, which would bring the country back into the global market for LNG and increase competition for global cargoes. With LNG global production likely to remain limited throughout the current year and possibly into next year until new projects are commissioned, LNG supplies will be reduced.

The situation could be further compounded if another year of drought impacts hydro electricity production. There are also concerns over technical problems at France’s ageing nuclear power stations. If nuclear facilities are forced to undergo unplanned maintenance for an extensive period of time, Europe would be obliged to switch on its gas-fired generation, lifting demand for the fuel.

In early March, engineers discovered corrosion cracks at four French reactors. There are now fears that another 200 welding inspections at 56 reactors later this month could reveal even more problems. The news triggered a sharp increase in gas prices within a week. Announcements of more issues could further lift prices.

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

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Greater demand for electricity generation caused by a fall in nuclear or hydro capacity may force Europe to increase its gas imports at a time when global LNG supplies are limited. This, in turn, could open a window of opportunity for Russia to increase its flows to Europe.

The only other options would be for industrial and commercial consumers as well as households to reduce gas demand even more, and for investors to speed up the deployment of renewable capacity to compensate for falling nuclear or hydro generation. That may not be realistic. Between August 2022 and January 2023, Europe managed to save 42 bcm of gas. This dramatic reduction in demand would have to continue if Europe is serious about not increasing Russian imports.

Another risk lies in the fact that Turkey and Russia are now discussing the launch of a gas hub for supplies to Europe. Under this arrangement, Russia could sell gas to at least one Turkish buyer, which would then sell it further on to customers across southeastern Europe.

There are concerns regarding possible breaches of competition rules and even corrupt practices if whitewashed Russian gas enters Europe via Turkey, as there are no signs that Turkey and neighboring Bulgaria are preparing to provide transparent and verifiable information regarding the supplies. Europe cannot stop Turkey from selling gas to European customers, but the EU should insist that member states bordering the country provide transparent information on volumes entering their markets.

With Europe still facing relatively tight supplies in 2023, it will be difficult for policymakers to introduce a ban on remaining Russian pipeline gas and LNG imports, at least for the time being. In the current circumstances, the best way to discourage Russian gas imports is to continue reducing demand, ensure storage facilities meet fullness targets ahead of next winter, accelerate the deployment of renewable capacity, and send a clear message that buying Russian gas will bring strong reputational risks.

mzandi — Sun, 12 Mar 2023 18:18:46 +0000

The post Nesheiwat in Real Clear Energy: Twelve years after Fukushima, more US nuclear energy is a national security imperative appeared first on Atlantic Council.

Banks quoted in Español News: Why does the fossil fuel industry praise the Inflation Reduction Act?

jjoyner — Sun, 12 Mar 2023 15:44:54 +0000

Original SOurce

The post Banks quoted in Español News: Why does the fossil fuel industry praise the Inflation Reduction Act? appeared first on Atlantic Council.

Clean industrial policies: A space for EU-US collaboration

Théophile Pouget-Abadie, Francis Shin, Jonah Allen — Fri, 10 Mar 2023 14:47:35 +0000

Upon the passing of the US Inflation Reduction Act (IRA) into law last summer, a wave of panic shook European capitals over concerns that European green industries would relocate to the United States. The tension is understandable: while navigating an unprecedented energy crisis and a war at its border, Europe is finding its clean industries increasingly squeezed by US—and Chinese—industrial power.

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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Khakova quoted in the New York Times on US-EU climate relations

mzandi — Wed, 08 Mar 2023 19:23:13 +0000

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Chinese refining markets 101—and their implications for price caps on Russian oil

Joseph Webster — Wed, 08 Mar 2023 19:12:34 +0000

With Chinese refineries front and center amid price caps on Russian crude and products exports, this article provides fundamental analysis of Chinese refining markets.

Beijing has had a complicated history with its refiners: it attempted to shutter excess capacity at independent refiners (so-called “teapots”) in the 2000s and early 2010s, only to be largely thwarted by provincial and even county-level governments determined to retain the tax base and employment associated with the facilities. Beijing then acquiesced—to a degree—as it relaxed restrictions on import quotas for independent refineries while continuing to consolidate some of the smaller players. While the Chinese Communist Party (CCP) has not always achieved its objectives in China’s domestic oil market, it is nevertheless a very active manager, something Western policymakers should consider amid high volumes of Russian crude exports to China.

A brief history of contemporary Chinese refining markets

In 2022, China became the world’s largest refining market by capacity, at 18.8 million barrels per day (MMBPD) in 2022. This represents an astonishing increase from 2005, when capacity stood at only 8.5 MMBPD. And the surge is unlikely to stop any time soon, as capacity could grow to 20 MMBPD by 2025, although some analysts see a pullback in domestic refining capacity this year as several outdated facilities are phased out.

Source: BP Statistical Review of World Energy, EIA, CNPC ETRI, author’s calculations

Chinese refinery throughput, or crude oil intake used to produce refined products such as gasoline, diesel, and jet fuel, and more, has expanded along with capacity. While Chinese refinery throughput still lagged the United States in 2021, China is very likely to become the world’s largest refining market within the next two to three years, if it is not already. Chinese refinery throughput stood at just under 6 MMBPD in 2005, but in 2021 reached 14.5 MMBPD, a level just shy of the US throughput of 15.1 MMBPD in the same year.

Source: BP Statistical Review of World Energy

China appears well on its way to becoming the world’s largest and most important refining market, but its journey has been a bumpy one. China’s refineries have traditionally suffered from extremely low utilization rates and poor margins, especially among independent refiners. These refiners are often referred to as “teapot refiners,” due to their limited capacity and basic equipment, especially when compared to refineries run by Chinese national oil companies (NOCs).

These teapot refineries, which are generally privately owned and concentrated in central China’s Shandong province, have historically suffered from extremely low reported utilization rates—often as low as 35 to 40 percent. Extreme overcapacity ensured China historically suffered from ultra-low refinery utilization rates, especially when compared to its peers.

Source: BP Statistical Review of World Energy, author’s calculations

Dragged down by teapot refineries, from 2005-2014, Chinese refineries’ reported collective imputed capacity factors, or “run rates,” hovered at or around 65 percent, the threshold below which most individual US plants tend to shut down, at least temporarily, for economic and safety reasons. Since the entire Chinese refinery sector suffered from low refinery run rates for over a decade, the sector’s overcapacity issues were highly problematic.

Still, it is worth noting that Chinese refineries, especially the independents, are notorious for misclassifying production. There are also recent instances of refineries outright underreporting production to evade taxes. As with all Chinese economic data, one should take presented statistics with a grain of salt.

For much of the 2000s, Beijing struggled to reduce overcapacity. Erica Downs’ The Rise of China’s Independent Refineries traces how Beijing’s attempts to restrain or even constrict Chinese refineries often backfired. For example, in 2009, China’s National Development and Reform Commission (NDRC) ordered that all refineries with capacity under 40,000 barrels per day (bpd) be closed, merged, or upgraded, depending on their size. While the policy sought to shutter capacity, refineries, typically with the support of provincial or county-level governments dependent on their employment and revenue, responded by expanding capacity to avoid closure. Between 2005 and 2015, teapots’ refining capacity grew from 832,000 bpd to 4,175,000 bpd, according to Downs, suppressing China’s overall refinery utilization rates.

China’s refining overcapacity problems have abated in recent years due to stabilizing refinery capacity and, more importantly, greater crude imports. The Shandong-based teapots saw some closures and consolidations, including the September 2017 merger of the Shandong Refining Energy Group. Moreover, China allowed independent refiners to import more crude oil—and, typically, export refined products. While China’s four state-owned oil giants—Sinopec, PetroChina, CNOOC and Sinochem—have always enjoyed direct access to crude oil imports, other players, including the independents, are forced to secure import quotas from the central government. Luckily for the teapots (and China’s refinery utilization rates), Shandong’s crude import quotas nearly tripled from 2015 to 2019, while China’s overall crude imports rose from 6.7 MMBPD in 2015 to over 10 MMBPD in 2019. Despite a slight decline in domestic crude production and additional refinery capacity expansions, rising crude imports sent refinery utilization rates higher.

Chinese domestic politics and the oil sector

Chinese domestic also politics played an important role in the evolution of China’s refinery markets. Zhou Yongkang, a former member of the extremely-powerful Politburo Standing Committee, China’s former security czar, and former head of state-run China National Petroleum Company (CNPC, also the parent company of PetroChina), was purged in a Communist Party power struggle amidst the 18^th party congress in 2012. Immediately after ascending to General Secretary, Xi Jinping began consolidating power and eliminating rivals, such as Bo Xilai and Bo-affiliated figures, including Zhou Yongkang. The purges ultimately ensnared at least six senior CNPC executives linked to Zhou.

Interestingly, PetroChina’s refinery run rates continue to lag those of Beijing’s other state-run oil companies. Indeed, Shandong independents have occasionally outperformed PetroChina’s refinery utilization rates in recent years. The reasons for PetroChina’s lackluster performance are unclear. While PetroChina’s refining assets are concentrated in less-economically-dynamic north China, constraining its refining economics, the company’s association with Zhou Yongkang could also subject it to additional scrutiny and Beijing’s disfavor. Notably, PetroChina and three independent producers were penalized in early 2022 for “irregular trading.”

The CCP leadership follows oil markets closely

General Secretary Xi Jinping is not nearly as personally engaged with energy markets as his counterpart in Moscow, who has over two decades of experience interacting with Russia’s most important industry and (supposedly) wrote a doctoral thesis on Russia’s natural resources. Still, Beijing’s actions demonstrate is a highly active manager of its refining markets, as its recent decision to lift crude oil import quotas demonstrates. Moreover, Xi is familiar with the sector due to its economic centrality, as well as its role in the Zhou Yongkang affair. The CCP pays close attention to oil markets, something Western policymakers should keep in mind as they examine Sino-Russian energy ties.

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

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EnergySource Mar 6, 2023

Beauty and the beast: Implications of the US-China tech war on climate and energy

By Jennifer Lee

China Energy & Environment

EnergySource Feb 24, 2023

Lula is back. Are Brazil’s climate credentials?

By Lizi Bowen, Maia Sparkman, William Tobin

Lula’s return to office in Brazil heralded a renewed commitment to environmental stewardship. But steps must be taken to ensure that renewal becomes as concrete and effective as possible.

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Beauty and the beast: Implications of the US-China tech war on climate and energy

Jennifer Lee — Mon, 06 Mar 2023 20:00:00 +0000

Tensions from the US-China tech war have spilled over into green tech and climate efforts. Reports last month suggested Beijing has revised export/import guidelines to restrict the export of solar panel equipment (not the panels themselves). China produces and exports the most solar panels in the world and dominates the solar panel supply chain; the top ten suppliers of solar PV manufacturing equipment reside in China, and Chinese producers make up at least 80 percent of every step in the solar panel manufacturing process.

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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EnergySource Feb 24, 2023

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Ellinas in Cyprus Mail: Aphrodite low on list of Chevron’s gas plans for East Med

mzandi — Mon, 06 Mar 2023 19:36:08 +0000

The post Ellinas in Cyprus Mail: Aphrodite low on list of Chevron’s gas plans for East Med appeared first on Atlantic Council.

Webster in China-Russia Report: Will Beijing support Putin via Lukashenko?

mzandi — Wed, 01 Mar 2023 16:45:41 +0000

The post Webster in China-Russia Report: Will Beijing support Putin via Lukashenko? appeared first on Atlantic Council.

Webster in Eurasianet: China wants the Line D pipeline. Can Central Asia deliver?

mzandi — Tue, 28 Feb 2023 19:50:42 +0000

The post Webster in Eurasianet: China wants the Line D pipeline. Can Central Asia deliver? appeared first on Atlantic Council.

Khakova in Barron’s: Europe blunted Russia’s energy weapon this winter. Can it succeed twice?

mzandi — Tue, 28 Feb 2023 19:48:16 +0000

The post Khakova in Barron’s: Europe blunted Russia’s energy weapon this winter. Can it succeed twice? appeared first on Atlantic Council.

Goldwyn joins NPR to discuss the impact of the war in Ukraine on global oil markets

mzandi — Tue, 28 Feb 2023 17:07:44 +0000

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Goldwyn in Hellenic Shipping News: Biden faces ‘no good options’ to keep gasoline prices in check

mzandi — Mon, 27 Feb 2023 19:45:28 +0000

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Webster in the China-Russia Report: Beijing backed Moscow in oil markets in 2022, at seemingly great cost

mzandi — Sun, 19 Feb 2023 19:55:19 +0000

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Wald quoted in The Eastern Herald on Russian oil sanctions

mzandi — Sat, 18 Feb 2023 20:08:03 +0000

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Webster in The Diplomat: China’s growing economic support for Russia

mzandi — Mon, 13 Feb 2023 19:59:09 +0000

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TotalEnergies’ CEO: Europe should pass its own green subsidies to compete with the US

Katherine Walla — Fri, 10 Feb 2023 20:03:02 +0000

Since the passage of the Inflation Reduction Act (IRA), the United States is becoming a “land of excellence” when it comes to green energies and infrastructures, said Patrick Pouyanné, chairman and chief executive officer of French oil major TotalEnergies.

“It’s a good incentive… to invest in all these green infrastructures,” Pouyanné said at an Atlantic Council Front Page event on Thursday.

Pouyanné agreed with many Europeans that the IRA is protectionist and undermines the transatlantic relationship, saying that this is part of a “trend” in which the United States, by creating its own rules, seems to be believing less and less in the multilateral trading system built on World Trade Organization agreements. But he also said that the law is a “clear political decision by the United States” made because “they want that green industries will take place on their territory.” For example, he noted, nearly 90 percent of solar panels are manufactured in China, creating “another problem of dependency” for both Europe and the United States in the future.

According to Pouyanné, the United States took advantage of an “opportunity” in the energy transition by passing the IRA, so “let’s do the same in Europe.” To avoid a future in which Europe relies heavily on imports, he said, the continent “must take decisions” to guarantee “that green industries [will] be located in Europe.”

Below are more highlights from the event, moderated by Atlantic Council President and CEO Frederick Kempe, where Pouyanné discussed the role of oil and gas in the energy transition and the energy impacts of Russia’s war in Ukraine.

“No way to escape” natural gas

Pouyanné said that because this year’s United Nations Climate Change Conference of the Parties (COP28) in the United Arab Emirates is being hosted by a major oil-producing country, “it raises the bar for the whole oil and gas industry… [We have] to engage, as a lot of stakeholders are expecting us to do.”
At COP26 in Glasgow, US President Joe Biden released a plan to tackle methane emissions from the oil and gas industry; Pouyanné said that TotalEnergies can lower methane emissions by 80 percent by 2030, while keeping an eye on lowering all other emissions from the production process. “If I can produce oil and gas with no emissions, I’ve done my job in production” to cut emissions, he argued.
“Natural gas is a fundamental energy for the transition” because it emits half the methane that coal does, Pouyanné explained. Natural gas, he added, will also help provide a consistent source of energy to fill the gaps of intermittent wind and solar power while new infrastructure to support energy storage and transmission is brought up to scale.
This year, with Russia’s war in Ukraine raising questions about the global energy supply, Pouyanné said that the world discovered how important energy reliability, affordability, and sustainability are—and how much reliability depends on gas. “On one side, the Biden administration [said] one year ago, ‘you need to diminish your emissions,’ and then we hear ‘you need to drill more.’” That, Pouyanné said, shows how the world will “need gas for very long.”

The global divide

While TotalEnergies had invested fifteen billion dollars in Russia, it has begun withdrawing from its Russian investments. “We have impaired almost all of our Russian assets,” Pouyanné explained. “We have step-by-step progressively retracted from almost all of our business in Russia.”
As Russia’s war in Ukraine continues, Pouyanné warned, the West must “be careful” to avoid believing that the rest of the world sees the conflict as a fight between democracy and autocracy. “It’s not the dominant [narrative] today in the Middle East, in Asia, [or] in Africa,” he said, explaining that leaders in the Global South are more focused on developing their economies than the war. He recalled how there have been mixed responses from countries to imposing sanctions on Russia and to voting on condemning Russia in the United Nations.
Pouyanné noted that he sees a similar division between the West and the rest in the climate debate with each passing COP. “It should not be” so divided, he said, “Let’s avoid antagonism. Let’s keep humility. Let’s listen to these [Global South] leaders.”

Investing in renewables—and fossil fuels

A day after TotalEnergies posted a record yearly net profit, Pouyanné talked about the French oil major’s plan to spend the increased profits. The company plans to invest sixteen to eighteen billion dollars of its capital, with around five billion going toward low-carbon energies and about twelve billion going toward hydrocarbons. “With twelve billion dollars,” Pouyanné explained, the “objective is to continue to maintain… stable production for this decade and continue to grow our liquefied natural gas business.”
But, he noted, it will be “very important” to “continue to invest in oil and gas” to keep profits and investments high across the energy sector: “If I can invest five billion dollars in low-carbon energy in 2023, it is because I have made money from oil and gas,” he explained.
Pouyanné said that the biggest investment opportunities lie in emerging economies such as Brazil, India, and African countries. TotalEnergies, he explained, has invested in new oil fields in Brazil and new projects, including a $3.5-billion pipeline, in Uganda.
While people in the West “complain about the Chinese influence in Africa,” he said, that influence is growing because of China’s more long-term approach to investing in the continent—rather than exporting natural resources right away.
The TotalEnergies head said the company will take some of the profits made in Uganda, Mozambique, and elsewhere to “invest in Africa.” That includes the electric grid. “When you don’t have electricity in the country, it is difficult to [improve] economic growth,” he said.
Pouyanné explained that with technologies such as electric vehicles gaining in popularity, “the oil market at a certain point will begin to decline… this is why we invest in electricity, because this is a growing market.”

Katherine Walla is an associate director of editorial at the Atlantic Council.

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Goldwyn in The Hill: How to address vulnerability at our ‘third border’

mzandi — Tue, 07 Feb 2023 20:02:13 +0000

The post Goldwyn in The Hill: How to address vulnerability at our ‘third border’ appeared first on Atlantic Council.

Wald in The Hill: A misguided emissions rule could expose sensitive work by our military and scientific institutions

mzandi — Mon, 06 Feb 2023 20:05:01 +0000

The post Wald in The Hill: A misguided emissions rule could expose sensitive work by our military and scientific institutions appeared first on Atlantic Council.

Goldwyn quoted in the Wall Street Journal on Venezuelan oil and gas

mzandi — Fri, 03 Feb 2023 16:09:44 +0000

Explore the #BritainDebrief series

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#BritainDebrief – How does the Western price cap on oil work? | A Debrief from Eddie Fishman

Ben Judah — Fri, 03 Feb 2023 13:54:07 +0000

How does the Western price cap on oil work?

As the G7 and European Union implement their new restrictions on Russian oil and gas exports, Ben Judah spoke with Eddie Fishman, Senior Policy Scholar at the Center on Global Energy Policy at Columbia University and nonresident senior fellow at the Atlantic Council’s Eurasia Center, to discuss the price cap.

Has the price cap already had an impact on Russian oil exports at this early stage? Is the price cap a new tool of economic statecraft? And can the price cap be used in a way to accelerate ongoing efforts to improve renewable energy infrastructure?

You can watch #BritainDebrief on YouTube and as a podcast on Apple Podcasts and Spotify.

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

Robert F. Ichord, Jr. — Tue, 31 Jan 2023 15:27:02 +0000

The December 2022 US-Africa Leaders Summit hosted by President Biden in Washington highlighted the emerging role of Africa in global affairs, including in the competition with China and Russia. In his address to the Summit, President Biden endorsed the proposal for the African Union to join the G20 and pledged $55 billion in financing and investment over three years. This ascendant role was also evident at the November COP27 meeting in Egypt, where African countries enjoyed a much more active and forceful presence. Even though they are marginal contributors to global emissions (3.8 percent of carbon emissions) and world trade (3 percent of exports), Africa has experienced severe drought conditions as well as negative economic and social impacts from high energy, food, and commodity prices over the past year. An IMF report concludes that Sub-Saharan Africa is “the region of the world most vulnerable to climate change.” And Ghana’s representatives were leaders of calls by the G77 for loss and damage support, a facility for which was agreed to in principle at the last moment in the final COP27 statement.

Energy development and investment was one of the many important topics addressed in the Africa Leaders Summit, which took place in the context of the continuing war in Ukraine, high energy and commodity prices, and a serious debt problem in many countries of the region. As was the case in the first Africa Summit eight years ago, the US government emphasized renewable energy development and improved energy access, noting the over $1 billion provided thus far under the Biden Administration by the US Development Finance Corporation, US Agency for International Development, and other US government agencies for African projects in these areas.

Although African leaders are embracing the clean energy transition and the region has enormous, diverse renewable energy resources, they are also arguing that they must be able to develop their fossil energy resources to meet their economic development needs and provide access to modern energy for their populations. At COP27, the President of the African Development Bank supported the development of natural gas in the continent, noting that even a tripling of gas production would result in only a minimal addition to global CO₂ emissions. At the May 2022 Sustainable Energy for All forum in Kigali, Rwanda, ten Africa countries (Democratic Republic of Congo, Ghana, Kenya, Malawi, Morocco, Nigeria, Rwanda, Senegal, Uganda, and Zimbabwe) endorsed a statement calling for international support for “Africa in the deployment of gas as a transition fuel and the long-term displacement of gas by renewable energy and green hydrogen for industrial development, if financially and technically sustainable.”

The war in Ukraine and the high energy prices and tight supplies have encouraged international energy companies to consider oil and gas projects in Africa that did not appear viable a couple of years ago. There is a general expectation of continued tight global liquefied natural gas (LNG) supplies, reflected in analysis of the International Energy Agency, Bloomberg, and others, including the recent statement by Exxon Mobil CEO, Darren Woods, that the world will face a shortage of LNG until 2026. Europe’s efforts to replace Russia gas are the key driver, with EU LNG import requirements forecasted by Bloomberg to increase by 44 million metric tons by 2026.

Africa is a potential source of EU and world gas diversification and the May 2022 EU External Energy Engagement Strategy recognizes this potential. New Africa suppliers are emerging, with the first shipment of LNG from gas-rich Mozambique occurring in November 2022. According to the BP Statistical Review of World Energy 2022, Africa produced about 257 billion cubic meters (bcm) of natural gas in 2021 and exported 58.5 bcm of LNG (42 million tons), amounting to about 5.7 percent of global LNG exports. Some estimates see African LNG exports growing to 60 million tons in 2025 and 74 million by 2030. Major exports from the large gas reserves in East Africa, though, are not expected until 2026 in Mozambique and 2029-2030 in Tanzania. Bloomberg sees increases in LNG export capacity of 12.4 million tons during 2021-26 from Nigeria, Mauritania, Congo, Equatorial Guinea, and Mozambique. Africa could significantly increase its LNG exports if gas supply and other bottlenecks in using existing capacity can be overcome. According to Natural Gas World, Africa’s utilization of its 78 bcm liquefaction capacity was only 58 percent last year, with Algeria, Nigeria, and Egypt all operating below capacity.

Gas development potential exists in many other African countries, including Ghana, Senegal, and Côte d’Ivoire in West Africa. Ghana is one example with as much as 3 trillion cubic feet (tcf) of potential gas reserves, with 1.5 to 2 tcf possible in Tullow Oil’s offshore Jubilee and TEN fields. In Ghana, a long-time partner of the United States through its Power Africa program, domestic gas development has allowed it to increase gas use in the electricity sector, substituting for oil and complementing its hydro generation. The country, however, faces a serious debt situation, spurred in large part by the quasi-fiscal deficit in the power sector; and, on December 12, the IMF announced staff agreement for an Extended Credit Facility of about $3 billion. The government has committed in its nationally determined contribution (NDC) to reduce GHG emissions by 64 million tons by 2030 and has a renewable energy master plan that envisions adding 1390 megawatts of wind and solar by 2030. Renewable energy development, which is only at a very nascent state, can facilitate the diversification of Ghana’s electricity mix and with successful gas development achieve a position that would allow it to export gas for valuable foreign exchange.

African countries thus face the challenge of how to balance energy security, climate change, and sustainable development objectives. It is increasingly clear that Africa is critical to addressing global energy issues and should, as the President of South Africa has recently argued, have additional voices in the G20 and other international fora. It is increasingly clear that natural gas is a key means of quickly reducing global coal use, especially in the coal-intensive Asia-Pacific region, which accounted for half of global energy-related CO2 emissions in 2021. The expected higher prices from an LNG crunch may slow natural gas adoption, especially in Asian LNG importers (i.e., Bloomberg sees possible decreases in 2023 LNG import levels over 2021 planned imports in India, Pakistan, Bangladesh, Thailand, Vietnam, and the Philippines). Although renewable energy development is certainly desirable and economically viable in Africa as well as Asia, natural gas development in Africa can in the medium term help moderate LNG prices, assist Europe in replacing Russian gas, complement intermittent renewable energy supplies, and ensure both the continued transition from coal in Asia as well as critical revenues for economic growth in Africa.

Dr. Robert F. Ichord, Jr. is a nonresident senior fellow at the Atlantic Council Global Energy Center.

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By Leo Simonovich and Reed Blakemore

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Poland is leading Europe’s response to the Russian invasion of Ukraine

Diane Francis — Sat, 28 Jan 2023 22:37:48 +0000

Germany and the United States have recently made headlines by deciding to send tanks to Ukraine. However, the unsung hero behind this landmark decision was actually Poland. Polish leaders were instrumental in efforts to persuade Berlin in particular of the need to provide Ukraine with modern tanks. This was the latest example of Polish leadership over the past year as Europe has found itself confronted by the continent’s largest armed conflict since World War II.

Poland’s leading role in the European response to Putin’s invasion reflects the country’s extensive experience of Russian imperialism in both its Czarist and Soviet forms. Ever since Poland joined the European Union in 2004, politicians in Warsaw have been warning Europe of the growing threat posed by a resurgent and revisionist Russia.

The Poles have been particularly alarmed by indications of deepening ties between Berlin and Moscow, and were vocal opponents of German partnership in Russia’s Nord Stream II gas pipeline. Polish politicians saw this strategic energy infrastructure project as a modern-day successor to the 1939 Molotov-Ribbentrop Pact, which sparked the outbreak of World War II and the invasion of Poland by the Nazi and Soviet regimes. They warned that the pipeline allowed Putin to bypass Ukraine’s gas transit system and would expose the country to a full-scale invasion, while leaving the whole of Europe vulnerable to Russian energy blackmail. Germany chose to ignore these warnings until the eve of Russia’s February 2022 attack.

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Today’s prominent Polish role in European security policy is not entirely new. Since joining NATO in 1999, Poland has emerged as a security linchpin on the alliance’s eastern flank. This has been possible thanks to Poland’s strategic location and remarkable economic growth, which has helped fund the rapid modernization and expansion of the country’s armed forces. The Polish army is currently ranked as the world’s twentieth most powerful military.

Poland has in many ways set the standard for Europe’s humanitarian response to the Russian attack on Ukraine. Since the invasion began, Poland has welcomed more Ukrainian refugees than any other European country, while also providing a range of benefits such as access to healthcare and education along with employment possibilities. During the past year, the Polish authorities have registered more than 1.5 million Ukrainian refugees.

Poland is also a leading contributor of military aid to Ukraine. In per capita terms, Poland has actually sent more military aid to Ukraine than virtually any country other than the Baltic states. This aid has included hundreds of tanks and other crucial weaponry. Poland plays a vital role in the logistical efforts to deliver international military aid to Ukraine, enabling a global coalition of countries to supply the Ukrainian army with the weapons, equipment, and ammunition it needs.

Diplomatically, Poland has been at the forefront of calls for tougher sanctions against Russia. Most recently, Polish leaders pressed Berlin to deliver German-made Leopard 2 tanks to Ukraine and allow others to do so. When German Chancellor Olaf Scholz hesitated, Poland threatened to export dozens of German-made Leopard tanks in defiance of German re-export restrictions. “We will not just watch Ukraine bleed,” commented Polish Prime Minister Mateusz Morawiecki. “It now depends on Germany whether they want to join the mission and stop Russian barbarism, or whether they choose to silently observe and go down in history as those who were on the wrong side.”

Germany eventually relented but the incident, along with the Nord Stream 2 saga, has diminished Berlin’s stature. Germany’s apparent ambivalence toward a predatory Russia and Berlin’s ties to the Kremlin have allowed Poland to assume a position of moral leadership on issues of European security. This has included criticism of Austria and Hungary for allegedly pandering to Putin. Poland has also called out Germany for foot-dragging over sanctions. In April 2022, Polish Prime Minister Mateusz Morawiecki accused Germany of “standing in the way” of harder sanctions against Russia. “Anyone who reads the notes of EU meetings knows that Germany is the biggest impediment when it comes to more decisive sanctions,” he told journalists in Warsaw.

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Polish leadership is helping to fill a geopolitical vacuum created by the declining influence of Europe’s traditionally dominant foreign policy forces. Britain voted to leave the European Union in 2016, greatly reducing the UK’s ability to shape Europe’s response to the Russian threat. Meanwhile, throughout his reign, Putin has demonstrated an ability to co-opt French and German politicians and businessmen with trade deals, pipelines, and other incentives. It is no coincidence that the Russian dictator handpicked Germany and France in 2014 to participate in the Normandy Format talks to end the war sparked by Russia in eastern Ukraine. This approach resulted in the failed Minsk Agreements and set the stage for the full-scale invasion of Ukraine in 2022.

Poland is now attempting to warn the wider world about the danger posed by Putin’s Russia. “This is not just a regional conflict. Russia’s war against Ukraine is a potential source of global conflagration. This war will affect our countries as well as yours, if it hasn’t already,” Polish President Andrzej Duda told the United Nations General Assembly in September 2022.

Polish leadership of the European response to Putin’s invasion is forging unprecedented bonds between the Polish and Ukrainian people. These two nations have had their share of fights and historical disagreements in the past. However, they now find themselves united by the existential threat coming from today’s Russia. Ukrainian opinion polls regularly identify Poland as the country’s closest partner.

While the Kremlin cynically cloaks its genocidal invasion of Ukraine in the language of Slavic brotherhood, it is Ukraine’s fellow Slavic neighbors in Poland who have demonstrated truly brotherly support. This will shape the future geopolitical landscape of the region. Once Russia is defeated, Ukraine will likely deepen its partnership with Poland to form a powerful bloc within European politics. Together, the two nations will have an authoritative voice in the wider democratic world. Europe’s geopolitical center of gravity is shifting eastward, and Poland is leading the way.

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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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.

Grady Wilson — Thu, 26 Jan 2023 18:42:00 +0000

The post Eser Özdil quoted in Argus Media on the Bulgaria-Turkey gas agreement appeared first on Atlantic Council.

Experts react: The US opens up Caribbean energy supplies with a sanctions exception for Venezuela. What does it mean for the region?

Atlantic Council experts — Wed, 25 Jan 2023 21:44:26 +0000

The United States announced Tuesday that it would allow Trinidad and Tobago to develop a gas field located in Venezuelan territorial waters. The agreement would boost Caribbean energy supply while creating an exception for some US sanctions on Caracas—though the United States says no cash payments will be allowed to go to President Nicolás Maduro’s government as part of Trinidad and Tobago’s deal with Venezuela’s state-run oil company PDVSA. What does this mean for the US stance toward Venezuela, and for energy resources in the Caribbean? Our experts are on the case.

A welcome and necessary act of energy pragmatism

The Caribbean is suffering from the current energy crisis. Still dependent on heavy fuel oil and kerosene, high product prices translate to high electricity prices which undermine the competitiveness of Caribbean tourism and industry. One critical part of decarbonizing Caribbean energy and restoring energy security is enabling better access to natural gas, which helps provide cleaner electricity and cleaner fuels such as methanol and supports food security by producing ammonia for fertilizer. The Biden-Harris administration’s grant of a license to help Trinidad get access to Venezuelan gas, without a dime going to the Maduro regime, is a welcome and necessary act of energy pragmatism. Trinidad needs access to more gas as quickly as possible to produce liquefied natural gas (LNG) and clean fuels. Gas from new exploration could be seven to eight years in the future. The region needs a more secure supply of products now. And with Venezuela reviving the Petrocaribe agreement to again provide cheap loans for the sale of crude oil to its neighborhood, the United States needs to show it cares and can be relevant. Much more needs to be done to provide energy security to the Caribbean, but this license is a deft and critical first step.

—David Goldwyn is a nonresident senior fellow at the Atlantic Council’s Global Energy Center and co-chair of the Caribbean Energy Working Group at the Adrienne Arsht Latin America Center’s Caribbean Initiative. He is the president of Goldwyn Global Strategies, an international energy advisory consultancy.

A win for the Caribbean while continuing to isolate the Maduro regime

The US green light for Trinidad and Tobago (T&T) to begin development of a gas field in Venezuelan waters is a much-welcome step forward for Caribbean energy security. The Caribbean faces enormous short- and long-term energy challenges and needs this gas for its people and its economies. It has again become clear while I’ve been here in T&T this week that the country is well-positioned to process this gas for export to its neighbors and beyond. In an increasingly uncertain world, the stability of the United States’ Caribbean neighbors and a robust US partnership is increasingly critical for US security interests.

Importantly, the US license and the T&T authorities have stipulated that no cash payments will go to the Maduro administration as part of the Dragon gas field development. The Maduro administration must not financially benefit from any transaction while it continues to perpetuate its violations of human rights and its prohibition of personal liberties or of the free and fair democratic will of the Venezuelan people. This new US license is a win for the Caribbean while still keeping Maduro financially isolated.

—Jason Marczak is the senior director of the Adrienne Arsht Latin America Center.

What the agreement means for negotiations between Maduro and the opposition

There is no doubt that the new agreement will enhance the Caribbean’s energy-security policy, both the policy itself and the speed of its implementation, given other geopolitical factors including the recent announcements by the Maduro government to revive the PetroCaribe program with former Venezuelan Ambassador to Colombia Félix Plasencia appointed to lead the revival. However, Venezuelan experts and political representatives have been cautious about this new sanction exception given that crucial details from the negotiation between Trinidad and Tobago and the Biden administration, as well as the negotiations with the Venezuelan government, are still unknown.

Venezuelans are wary in reaction to this news due to the local context and the developments of the negotiation process between the Maduro government and the opposition. The first humanitarian agreement signed between the two parties last November requires a complex process to be implemented. And the Maduro government has used this obstacle as an excuse to try to reconfigure the terrain for the future of the negotiations, which should move to a second phase—but without further sanction relaxation, this is unlikely to happen. Without sanctions relief, the Venezuelan government’s economic adjustment program will be shipwrecked, a result that is already being seen in the return of hyperinflation, innumerable salary protests, and the end of last year’s optimism. Today, the government seems to be aggressively armoring its position ahead of future negotiations by threatening to intervene in the National Electoral Council and proposing a new law to further restrict nongovernmental organizations.

Therefore, the agreement coincides with an unclear political climate, which may influence the public’s perception that the sanctions relief is geared toward US interests rather than a solution that can be contributed to negotiations in Venezuela.

—Colette Capriles is a member of the Adrienne Arsht Latin America Center’s Venezuela Working Group and a professor and researcher in philosophy, politics, and social sciences at Simón Bolívar University.

The US delivers a major win for the Caribbean

US commitment to Caribbean energy security took a significant leap forward on Tuesday. Granting Trinidad and Tobago a license to develop the Dragon gas field is momentous for the country, and it creates endless opportunities across the region. In the short term, perhaps over the next half-decade, a portion of the gas will be used to service the energy needs of Jamaica and the Dominican Republic. Over a longer period, given the considerable oil and gas reserves Guyana and Suriname hold, the Caribbean is poised to become a globally competitive hydrocarbon player, potentially anchoring Caribbean energy security and meeting demand across the world. The license also opens the door to other gas fields bordering Dragon that Trinidad and Tobago can exploit over the next decade, which would provide the country and the region more time to facilitate its energy transition.

For the United States, the timing is important. Granting the license finally brings a tangible deliverable to Caribbean nations after a year of promises and discussions. With the Caribbean Community (CARICOM) inter-sessional meeting just around the corner—where all Caribbean leaders will convene—the US-Caribbean energy cooperation will be front and center of the Community’s agenda.

—Wazim Mowla is the associate director of the Caribbean Initiative at the Adrienne Arsht Latin America Center.

The post Experts react: The US opens up Caribbean energy supplies with a sanctions exception for Venezuela. What does it mean for the region? appeared first on Atlantic Council.

Webster in The Diplomat: Amid signs of softer foreign policy tone, is China about to shift its Russia policy?

mzandi — Tue, 24 Jan 2023 16:27:00 +0000

The post Webster in The Diplomat: Amid signs of softer foreign policy tone, is China about to shift its Russia policy? appeared first on Atlantic Council.

This is a make-or-break year for US-Caribbean relations

Wazim Mowla — Tue, 24 Jan 2023 15:46:43 +0000

Bahamian Prime Minister and Caribbean Community (CARICOM) Chair Philip Davis’s trip to Washington last week shows that, because the United States recently “reengaged” with the Caribbean, 2023 could be transformative for US-Caribbean cooperation. But for that to happen, the United States must change its Caribbean strategy by focusing on making good on its promises, letting the Caribbean lead, and updating security partnerships.

The United States has historically been the Caribbean’s preferred ally, mainly due to proximity. The movement of goods, people, and services to, from, and within the Caribbean often involves the United States. But despite the historical strength of the relationship, there remains a simmering frustration among Caribbean leaders about the United States’ empty and unfulfilled promises and an absence of consistent attention from US officials, which have kept the US-Caribbean relationship from truly deepening. The Caribbean has always seen the potential benefits of its relationship with the United States, but the same cannot be said the other way around.

Last year did see the United States making critical investments in its partnership with the Caribbean. In June, on the sidelines of the Summit of the Americas, US Vice President Kamala Harris announced the US-Caribbean Partnership to Address the Climate Crisis 2030 (PACC 2030)—a new framework created to support climate and energy resilience in the Caribbean. The next day, US President Joe Biden met with Caribbean leaders, and the convening was praised by many across the region. And in a show of the region’s appetite to work with the United States, five Caribbean leaders met with Harris in September to discuss improving future cooperation; at the meeting, the United States announced new commitments to support the region’s energy, food, and financial security.

Last year the United States was in listening mode, and US statements and policies reflected as much. But 2023 promises to be the year in which the United States can finally satisfy some of the Caribbean’s needs and calm its frustrations. Today, there is confidence in the Caribbean that the United States understands the region’s challenges and priorities. Caribbean governments are looking for action, and it will be important that the United States delivers in what is expected to be a pivotal year for the relationship.

With the challenges the region faces, the Caribbean no longer has time to wait on the United States for action—and the United States can’t keep putting it off. Davis, speaking at the Atlantic Council on Tuesday, explained that if the United States fails to pay attention, “someone else will pay the attention.” For example, while China’s influence in the Caribbean has diminished, large projects and new concessional loans are beginning to pop up again, such as a $192 million concessional loan to Guyana to finance a road project and a new agreement with Suriname to expand city surveillance. At the same time, many Caribbean governments have broken from the zero-sum US-China competition narrative that pervades Washington and are building bridges with others including India, the African Union, and the United Arab Emirates.

Furthermore, any further delays mean that potential policy shifts may have a vanishingly short shelf life, as the 2024 presidential election approaches. US policy toward the Caribbean has seen more change than continuity, as each administration brings its own different approach.

What should the United States focus on in 2023?

The United States must understand that showing up is only half the battle. Calls from Caribbean leaders demanding that the United States pay more attention to the region after decades of neglect have translated into more US officials showing up at Caribbean-wide meetings and has resulted in more government and private-sector visits. This should continue but it should not be considered sufficient for the US-Caribbean relationship, which requires policy implementation. Continuing to show up with little to show for it will only create more frustration among Caribbean leaders in the medium to long term.

In 2023, the United States should focus on three key areas:

The United States should fulfill its PACC 2030 promises. PACC 2030 requires a full interagency effort, so the United States should ensure the Treasury, State Department, and vice president’s office are aligned on how to move forward with this massive undertaking. US officials should work with Congress on legislation that enshrines PACC 2030 for the long term. Lawmakers should also allocate funding to each of PACC 2030’s four pillars—development finance, clean-energy projects, local capacity-building, and deepening collaboration.

Second, the United States should let the Caribbean lead in areas for which it has in-house expertise and support the Caribbean’s positions in multilateral organizations. Most Caribbean countries are dependent on imports for energy and food, making the supply squeezes caused by Russia’s war in Ukraine particularly devastating for the region. While US help is needed, regional leaders are pushing forward on their own solutions. CARICOM’s plan to reduce the region’s food-import bill by 25 percent by 2025 is one such example. Here, the United States does not need a food-security policy for the region but instead should provide technical expertise and financing for Caribbean-led solutions.

US advocacy for Caribbean and small-state priorities in multilateral meetings that include other wealthy and powerful actors, such as the Group of Twenty (G20) and international financial institutions, can move the needle on solutions to these countries’ economic challenges. International support is needed in tackling the Caribbean’s struggles with debt relief, financial de-risking (the loss of correspondent banking relations with overseas banks), and poor access to concessional financing. For the United States, there are inherent benefits because slow Caribbean economic growth drives migration; plus, stronger economies can help preserve the strength of the region’s democracies.

Finally, the United States should address the region’s growing security concerns. Rightfully, climate, energy, and financial resilience have all featured prominently in the Biden administration’s Caribbean policies, but this has also meant that security challenges have lost prominence. Crime, violence, and gang activity have skyrocketed across the region over the past year. Trinidad and Tobago’s homicide rate in 2022 reached its highest level in more than a decade, and a rise in gang activity pushed Jamaica to institute a state of emergency. And per capita, Saint Lucia now ranks in the top 5 of highest homicide rates in the hemisphere.

This increase has been fueled in part by small-arms trafficking, with illicit small arms being imported into the Caribbean from the United States. Caribbean islands have limited security forces with numerous unmanned ports of entry, making the region a hotbed for small arms trafficking. Increased US-Caribbean security cooperation is needed. But first, US policies and projects—such as the Caribbean Basin Security Initiative (CBSI)—should be updated to reflect the region’s current security concerns. The CBSI barely touches on illicit small arms, for example; the United States should work this year with Congress and the Department of Defense to refocus its current security efforts.

After the progress of 2022, Caribbean leaders expect action instead of just more promises. The region knows that to survive climate change, rising food inflation, and its vulnerability to global economic shocks, it’ll need to leverage a US partnership that is backed by technical and financial resources. It adds up to a make-or-break year for US-Caribbean relations. As the United States begins to show attention to the Caribbean and regional leaders continue to welcome more US support, the timing has never been better to see real action. Without it, Caribbean nations could seek out more willing partners.

Wazim Mowla is the associate director of the Caribbean Initiative at the Adrienne Arsht Latin America Center.

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Six ‘snow leopards’ to watch for in 2023

Andrea Ratiu — Fri, 20 Jan 2023 10:00:00 +0000

Six ‘snow leopards’ to watch for in 2023

We don’t see them, but they’re out there.

Rare, elusive, and well-camouflaged, snow leopards are exceptionally hard to spot. When sighted, these majestic cats seem to have come out of nowhere. And yet they were around us all along.

In the discipline of global foresight, as the Atlantic Council’s Peter Engelke wrote last year, a “snow leopard” is “a known but underappreciated—perhaps even forgotten—phenomenon” that has the potential to change the world and shape its future even though appearances might suggest otherwise.

The snow leopards discussed here are not predictions, but rather prompts for us to scrutinize overlooked phenomena. A technological breakthrough, for example, may not seem world-changing when still in development. Other phenomena might be so woven into our daily lives that they’ve become invisible to us, as with the recommendation algorithms highlighted below. The actors involved also influence how much weight we give to events and trends: If a head of state were to announce a country’s economic disengagement from China, we would sit up and pay attention, but companies deciding one by one to proceed with such “decoupling” may fly under the radar.

Our next-generation foresight experts at the Scowcroft Center for Strategy and Security brought a fresh perspective to the task of spotting the hard-to-spot. Check out their list of six snow leopards to watch closely in the year ahead.

The tightening regulation of algorithms

Algorithms are everywhere yet almost invisible, serving as the silent sifters and sorters of our lives. Their influence is baked into everything from email and smartphones to GPS and government services. On search engines and social media, “recommendation algorithms” leverage user data and history to curate information for billions of people. In their simplest form, algorithms are instructions or sets of rules—often used by computers—for completing a task. At their most complex, they drive machine learning and enable artificial intelligence (AI) to grow smarter and more sophisticated by the second.

With such sweeping capacity to shape how individuals and societies order and consume information—from the mundane recommendations of photo feeds and shopping lists to the grave amplification of extremist conspiracy theories that cause real-world terror—algorithms (and their designers) hold some responsibility for the social and political consequences of the content they propagate and the decisions they advance.

The need for AI governance, particularly to rein in algorithms, is increasing—and policymakers have demonstrated an appetite for it. This October, the White House published an AI Bill of Rights with a blueprint for addressing “algorithmic and data-driven harms” and potential remedies. Lawmakers in the US Congress have proposed legislation to limit algorithmic promotion of extremist content by holding social-media platforms liable if certain forms of amplified content lead to offline violence, with other bills on the subject under consideration as well. China implemented a law in 2022 to reduce algorithmic influence on public opinion by enabling users to decline algorithmic recommendations on websites and apps. (The law was part of China’s pursuit of “positive energy” online, under the country’s aggressive censorship.) The EU’s Artificial Intelligence Act, the first major, still-pending regulatory framework for AI that could set global standards, strives to curb algorithmic bias. The EU’s General Data Protection Regulation (GDPR) also offers guidelines on when companies can and can’t use algorithmic automated processing for decision-making—for example, regarding who to offer a loan to or at what interest rate.

Regulating algorithms is a broad and complex challenge, and pushback by the tech industry along with legal hurdles could halt even the most ambitious regulators. The public, and even policymakers, often lack the conceptual clarity to identify, define, and classify algorithms. And because it can be difficult to prove causation between algorithmic decision-making and the behavior or opinions of individuals influenced by it, accountability is hard to track.

Further breakthroughs may happen below the national level. New York City is reviewing the use of algorithms in decision-making across its government agencies and offices. The City Council curtailed the use of AI algorithms in decisions about hiring and promotion. And these steps are just the beginning, as state houses and activists energetically join the race to shape this new frontier.

Danielle Miller, Assistant Director, Scowcroft Strategy Initiative

Prior to joining the Atlantic Council, Miller worked in the US House of Representatives and was a research assistant at the University of California Berkeley’s Institute of European Studies.

The rise of preemptive corporate decoupling from China

In the days after the Kremlin launched its illegal war on Ukraine, Western companies based in Russia started fleeing the market, fearing unprecedented transatlantic sanctions, consumer backlash for continuing to do business with an invader country on an imperialist bender, and investor pressure to maintain profit margins. Now, as tensions between the West and China escalate, wary investors and multinational corporations may be starting to preemptively shift their market presence, supply chains, and investments away from China to insulate themselves from similar future impacts should the Sino-transatlantic relationship deteriorate.

Among the most interesting early developments: Apple, which has a huge production footprint in China, has decided to shift production of its iPhone 14 model to India, while some of Google’s production for the new Pixel phone will likely be heading to Vietnam. Another space to watch is pension funds, as growing concerns about political risks are prompting discussions about potentially exiting or at least reducing exposure to the Chinese market.

While it’s still early to call such decisions formal decoupling, these signs point to Western companies’ unease about the state of the Sino-transatlantic relationship, as well as a preemptive, corporate-led fragmentation of markets and supply chains in case tensions between China and Western countries bubble over. The private sector’s concerns about China’s restrictive zero-COVID policies, which have led to recurring lockdowns and disruptions at factories, may also be a factor in these developments, but the roots of these corporate moves can be traced back further to extensive tariffs and other economic tit-for-tat measures between China and the West—as well as nervousness about China’s own pursuit of self-sufficiency via efforts such as its “Made in China 2025” initiative. At stake in how these trends play out is nothing less than the future of globalization as we know it, along with the shape of the multipolar geoeconomic order, in which countries such as India will likely play an enhanced role.

Anca Agachi, Associate Director, Transatlantic Security Initiative

Previously, Agachi worked for the EU’s European Defence Agency on defense capability development projects in the information security and space domains, and served as a United Nations Youth Representative for Romania, focusing extensively on the UN 2030 Agenda and sustainable development goals.

The battery revolution that will democratize electric vehicles

The two main reasons why consumers are reluctant to buy electric vehicles? They cost a lot and can’t get very far on a charge. But a battery that could make electric cars cheaper, more efficient, and thus more popular may be on the horizon. The next breakthrough could come not by way of an updated lithium-ion battery—the kind that powers most electric vehicles on the road today—but rather by using current battery technology in different form through structural batteries built into a car’s frame. This has the effect of reducing the car’s weight (a chassis made of battery cells isn’t as heavy as a chassis plus a separate battery) and a lighter car can travel farther on a single charge. The potential benefits go far beyond increasing range. Integrating the battery into a car’s chassis could also cut down on manufacturing costs and make cars cheaper, while strengthening the body of the car as well.

Tesla has experimented with structural batteries in its Model Y cars and GM used them in the electric model of its Hummers, but their versions have yet to yield broader adoption. Yet technical development among automakers and other actors is ongoing and promising. Researchers at Sweden’s Chalmers University of Technology, for example, recently developed a more efficient structural battery that performs ten times better than its predecessors. Right now, electric vehicles are driven mostly by the wealthy: In the United States, for instance, 78 percent of federal electric-vehicle credits go to those with incomes over $100,000. If structural batteries can deliver on their promise, it will result in many more electric vehicles on the road around the world, democratizing ownership.

Imran Bayoumi, Assistant Director, Scowcroft Strategy Initiative

Bayoumi graduated with his master’s degree in global affairs from the Munk School at the University of Toronto where he held a Joseph-Armand Bombardier Canada Graduate Scholarship. He also holds a BA from Queen’s University in political studies.

The early glimmers of a global, platform worker-driven labor movement

An uneven post-COVID-19 economic recovery has stoked a labor-rights movement in the United States and efforts to unionize in some of the country’s largest corporations—from Starbucks to Amazon to Trader Joe’s. Around the world, meanwhile, similar fallout from the pandemic has produced another phenomenon: Platform workers—those who work for organizations that provide services directly to consumers through an online platform—are leading efforts to create better working conditions for themselves. Strikes and other protests from Brazil to the United Kingdom to the Philippines and beyond speak to rising unrest among these workers. The causes for disputes and the types of protest vary across regions, but concerns about pay are often a primary driver of the activity.

Such developments are significant in part because platform workers are a subset of the informal economy, which encompasses economic activities that are not monitored by the state. These activities include a wide range of work—from domestic labor to rideshare driving to market stands. More than 60 percent of the world’s adult labor force operates, at least part-time, in the informal sector, and on average that sector represents 35 percent of gross domestic product in low- and middle-income countries. In many cases, particularly in emerging markets and developing economies, platform workers are not aiming to formalize their economic activities. But their budding efforts to improve their working conditions could alter the world of work for the better, more strongly linking them with government protections and helping curb global poverty and precarious employment.

Caroline Multerer, Deputy Director of Operations, Scowcroft Center for Strategy and Security

Prior to joining the Atlantic Council, Multerer was a program associate at Jones Group International, a global consulting firm owned by General James L. Jones.

The risky promise of geoengineering

One approach to combating climate change is geoengineering, or deliberate, large-scale, technologically based interventions in the environment to mitigate some of the effects of climate change. These include removing carbon dioxide from the atmosphere and reflecting the sun’s rays back into space. Futuristic though it may sound, geoengineering is already here. China and the United Arab Emirates have undertaken efforts to “seed” clouds by artificially increasing the amount of precipitation they hold and creating rain. Researchers from the UAE’s National Center of Meteorology have looked into creating an artificial mountain that would induce cloud formation and rain. Other countries, including China, India, and the United States, are making steady progress in advancing their geoengineering capabilities. The 2022 federal appropriations act, for example directed the US Office of Science and Technology Policy to develop a multi-agency group for coordinating research on solar geoengineering. This form of climate engineering, where sunlight is sent back into space, seems most likely to have the biggest impact on limiting the consequences of climate change and thus most likely to be pursued.

But along with its promise solar geoengineering also brings numerous risks, including the potential alteration of regional weather patterns. There’s also the increasing likelihood that, given the pace of climate-driven impacts such as floods, droughts, severe storms, and heat waves, a country or multiple countries will attempt to geoengineer the planet unilaterally, before the underlying science is solidified and before adequate global governance mechanisms are in place.

Imran Bayoumi, Assistant Director, Scowcroft Strategy Initiative

The Japan-South Korea rapprochement that could shake up the Indo-Pacific

Although Japan and South Korea normalized diplomatic relations in 1965, their relations have continued to be complicated by the legacy of Japan’s colonization of Korea from 1910 to 1945, memories of World War II, and disputes over how to compensate Korean women who were forced into wartime sexual slavery by the Japanese military.

Despite this history, deeper reconciliation between the two countries, while politically difficult, is not an impossibility. In one indicator of a coming thaw, a meeting between South Korean President Yoon Suk-yeol and Japanese Prime Minister Fumio Kishida on the sidelines of the 2022 United Nations General Assembly, framed as a brief, informal gathering to avoid setting off domestic opposition at home, marked the first bilateral meeting between the leaders of these nations in three years. In another sign, the Japanese and South Korean publics are coalescing around concern about China. Were such a rapprochement to occur, it would dramatically alter the geopolitical environment in Asia while delivering significant benefits to both countries. Japan and South Korea face common and acute threats from China, North Korea, and Russia. With better relations, the two countries could pursue closer bilateral military ties, reach mutual understandings of regional threats, and develop responses to crises as they emerge. South Korea, one of the world’s leading advanced economies, could get more involved in the Quad grouping of Australia, India, Japan, and the United States. The United States would be able to count on both nations to counterbalance China’s influence in the region, while the three could promote shared values throughout the Indo-Pacific.

Imran Bayoumi, Assistant Director, Scowcroft Strategy Initiative

Global Foresight 2023

In this year’s edition of Global Foresight, the Atlantic Council’s senior experts identify the top risks and opportunities for 2023. Our foresight team spots “snow leopards” that could have major unexpected impacts in 2023 and beyond. And we share findings from our survey of global strategists and foresight practitioners on how human affairs could unfold over the next decade.

Learn more Full survey

Atlantic Council Strategy Paper Series Jan 9, 2023

Welcome to 2033: What the world could look like in ten years, according to more than 160 experts

To survey the future, we polled global strategists and foresight gurus on our most burning questions about the biggest drivers of change over the next decade. Check out their forecasts on everything from the prospect of nuclear proliferation to the probability of great-power war to the potential for more global volatility.

Atlantic Council Strategy Paper Series Jan 20, 2023

Six ‘snow leopards’ to watch for in 2023

Atlantic Council foresight experts spot the underappreciated phenomena that could have outsize impact on the world, driving global change and shaping the future.

Brazil China

Atlantic Council Strategy Paper Series Dec 23, 2022

The top 23 risks and opportunities for 2023

The war in Ukraine changed the world in 2022. How will it continue reshaping global affairs in 2023 and what else looms on the horizon? The Atlantic Council’s top experts brought their globe-spanning expertise to the task of forecasting the near future.

Africa Americas

The post Six ‘snow leopards’ to watch for in 2023 appeared first on Atlantic Council.

Bahamian prime minister urges action on climate change, financial inclusion, and regional cooperation

Nick Fouriezos — Wed, 18 Jan 2023 21:54:08 +0000

After three years of economic stress heightened by COVID-19 and international conflict, The Bahamas and the rest of the Caribbean are ready to move toward a future of energy security, economic development, and greater regional integration according to Philip Davis, prime minister of The Bahamas and chair of the Caribbean Community (CARICOM).

To get there, though, they’ll need other nations to provide more help than they have in the past, said Davis. “We are gratified that the United States has reengaged with us,” remarked Davis, referring to the United States as “kith and kin.”

Speaking on Tuesday at an Atlantic Council Front Page event, Davis was hopeful following a meeting with US Vice President Kamala Harris in Washington, DC.

Still, the Bahamian leader did not mince his words when speaking of the challenges the Caribbean faces, as climate change continues to increase the frequency of deadly hurricanes and global instability continues to drive some of the highest energy and food prices in the Western Hemisphere.

Read on for more highlights from his remarks and conversation with Jason Marczak, senior director of the Adrienne Arsht Latin America Center at the Atlantic Council.

“Climate change must be more than a buzzword”

“Small-island and developing states throughout the Caribbean must come to terms with the full extent of our vulnerability,” Davis said in light of the rising threat that climate change poses to the region. He cited the particularly grim challenge facing Dominica, an island nation in the Lesser Antilles, which is still recovering nearly five years after Hurricane Maria hit. Davis said that the hurricane inflicted so much damage that 50 percent of the country’s gross domestic product essentially blew away in a single night—a fate more Caribbean countries could face if climate change continues unabated.
As hurricanes and rising water levels further threaten Caribbean islands, it is becoming more urgent to fully fund climate initiatives. “What we need is more access to climate-change-specific funding to mitigate the damage being inflicted each day,” Davis said.
On working toward a switch to renewable energy: “We must first acknowledge that this is not a one size fits all discussion,” Davis said. The issues facing oil-rich countries, such as Trinidad and Tobago, are vastly different from those of his own country, Davis added, where the pivot to solar energy is more immediately necessary as energy costs soar.

More banks, more security

Since 2015, access to global finance has quickly worsened for many Caribbean countries and businesses as many international banks and financial institutions operating in the region have chosen to de-integrate and de-bank, cutting off their services from the region. Countries whose economic development depends on remittances, such as Jamaica and Haiti, or tourism, such as The Bahamas and those in the Eastern Caribbean, have been hit particularly hard, Davis explained.
“Sixty percent of unbanked adults in the region cite cost as a barrier to financial services,” Davis said, stressing the need to give Caribbean citizens access to financial services. “In the Bahamas, on less populated islands, people have been left without a single commercial bank.” He highlighted the work of the Atlantic Council Caribbean Initiative’s Financial Inclusion Task Force, calling it “a conduit for solving these persistent issues.”
Caribbean citizens are feeling the effects of global crises in the form of worsening financial access, high electricity prices, and food insecurity. “CARICOM suggests that as much as 57 percent of the English-speaking Caribbean faces food-security issues,” Davis said. Together, Davis said, CARICOM’s “work can save lives and livelihoods” as “we have an opportunity to make historic advancements in regional energy security, food security, and financial inclusion.”

A partner to the north

Davis was happy to be able to meet “one on one, face to face” with Harris, hoping that Washington and Nassau will continue to strengthen relations after a period of relative silence from the White House. “Nature abhors a vacuum,” Davis said, “and if attention is not paid, someone else will pay the attention.”
The Bahamas can also be a partner to the United States on regional security issues. “We are on the migratory path to the United States, and many don’t get there. They stay in The Bahamas,” Davis said, while referencing a recent wave of Haitian migrants making their way to the United States in the wake of severe political instability in Haiti.

Nick Fouriezos is an Atlanta-based writer with bylines from every US state and six continents. Follow him on Twitter @nick4iezos.

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‘Global collaboration is needed’ on critical minerals to support the energy transition, says Indonesian energy minister

Atlantic Council — Sun, 15 Jan 2023 14:53:08 +0000

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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

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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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Amos Hochstein on how critical minerals impact net-zero progress—and US national security

Atlantic Council — Sun, 15 Jan 2023 14:00:15 +0000

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2023 Global Energy Forum

Africa Americas Energy & Environment Energy Markets & Governance

Event transcript

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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.

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The lessons of COP27 and how they can apply to COP28

Atlantic Council — Sun, 15 Jan 2023 13:20:31 +0000

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2023 Global Energy Forum

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.

US climate envoy John Kerry outlines new principles for accelerating private capital needed for the energy transition

Atlantic Council — Sun, 15 Jan 2023 12:02:17 +0000

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2023 Global Energy Forum

Africa Americas Energy & Environment Energy Markets & Governance

Event transcript

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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.

Watch the full event

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Dispatch from Abu Dhabi: How to reduce carbon emissions without blocking progress

Frederick Kempe — Sat, 14 Jan 2023 18:01:29 +0000

This article was updated on January 16 to reflect the fact that the Abu Dhabi National Oil Company and Masdar, where Sultan Al Jaber serves as CEO and chairman, respectively, are sponsors of the Atlantic Council’s Global Energy Forum.

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.

Highlights from Abu Dhabi as policy leaders gathered for the Global Energy Forum

Atlantic Council — Sat, 14 Jan 2023 14:07:45 +0000

Call it a double whammy: The two-hit blow to the global energy system—dealt by the COVID-19 pandemic and Russia’s war in Ukraine—is wreaking havoc, bringing uncertainty about the future of energy security and the pace of the energy transition.

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

JANUARY 15, 2023 | 8:30 AM WASHINGTON | 5:30 PM ABU DHABI

European energy commissioner: Stronger green targets are coming amid gas supply challenges

“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.

At the #ACEnergyForum in Abu Dhabi, Commissioner for Energy @KadriSimson explains Europe’s three-pillar strategy to get rid of its dangerous dependence on Russian fossil fuels.

The first pillar is to diversify supply routes.

Learn more: https://t.co/pE56Irkjte pic.twitter.com/P56w7FoVIM
— Atlantic Council (@AtlanticCouncil) January 15, 2023

JANUARY 15, 2023 | 7:15 AM WASHINGTON | 4:15 PM ABU DHABI

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.

Global Energy Forum

‘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

JANUARY 15, 2023 | 7:00 AM WASHINGTON | 4:00 PM ABU DHABI

The next steps to harnessing hydrogen’s potential

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.

JANUARY 15, 2023 | 5:30 AM WASHINGTON | 2:30 PM ABU DHABI

Achieving net-zero will require rethinking supply chains. Here’s how to make it happen.

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.

JANUARY 15, 2023 | 5:30 AM WASHINGTON | 2:30 PM ABU DHABI

Nuclear energy is ready for a breakout moment—if it can find the fuel

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.

JANUARY 15, 2023 | 5:00 AM WASHINGTON | 2:00 PM ABU DHABI

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.”

The geopolitics of energy in the 21st century could look a lot like the 20th century, warns @amoshochstein.

Instead of a few countries controlling oil supply, we could now have one or a couple countries controlling supply chains for wind, solar, electric vehicles, and chips. pic.twitter.com/RM2rdHV6hd
— Atlantic Council (@AtlanticCouncil) January 15, 2023

Read the full transcript

Global Energy Forum

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

JANUARY 15, 2023 | 2:30 AM WASHINGTON | 11:30 AM ABU DHABI

How will the global climate effort change after the Inflation Reduction Act?

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.

JANUARY 15, 2023 | 1:00 AM WASHINGTON | 10:00 AM ABU DHABI

Overcoming the biggest challenges that stand in the way of a net-zero developing world

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.

JANUARY 15, 2023 | 12:15 AM WASHINGTON | 9:15 AM ABU DHABI

John Kerry on the carbon offset initiative that aims to bring renewable-energy investment to developing countries

“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.

Nobody is living by a law to hit 2050 net zero, said @ClimateEnvoy @JohnKerry today at @ACGlobalEnergy Forum.

“There’s no law. People are doing it because they are exercising a sense of public responsibility,” he added.

Learn more: https://t.co/c1a8XrhORa #ACEnergyForum pic.twitter.com/NkeIDZbiMD
— Atlantic Council (@AtlanticCouncil) January 15, 2023

Global Energy Forum

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

JANUARY 15, 2023 | 12:00 AM WASHINGTON | 9:00 AM ABU DHABI

COP28 leaders: Here’s how to spark a just energy transition that includes everyone

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.

Global Energy Forum

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

JANUARY 14, 2023 | 7:30 AM ET WASHINGTON | 4:30 PM ABU DHABI

How the UAE could tackle the tricky business of climate diplomacy

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.

JANUARY 14, 2023 | 6:15 AM ET WASHINGTON | 3:15 PM ABU DHABI

The role of natural gas vs. renewables sparks debate

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.

JANUARY 14, 2023 | 5:15 AM ET WASHINGTON | 2:15 PM ABU DHABI

Europe has taken major strides to reduce its dependence on Russian energy. How can it work for the long haul?

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

JANUARY 14, 2023 | 2:00 AM ET WASHINGTON | 11:00 AM ABU DHABI

What will it take to solve the energy trilemma?

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

JANUARY 14, 2023 | 1:30 AM ET WASHINGTON | 10:30 AM ABU DHABI

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.

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

Watch

A timely discussion today at #ACEnergyForum on oil price fluctuation with @amoshochstein and @_HadleyGamble. #oott

Tune in: https://t.co/94JdHyRRTR https://t.co/0KTl9xE1Gk
— Global Energy Center (@ACGlobalEnergy) January 14, 2023

JANUARY 14, 2023 | 1:00 AM ET WASHINGTON | 10:00 AM ABU DHABI

UK official: Cooperation on a low-carbon, secure energy future “makes us all more prosperous”

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.”

JANUARY 14, 2023 | 12:45 AM ET WASHINGTON | 9:45 AM ABU DHABI

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.

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

JANUARY 14, 2023 | 12:30 AM ET WASHINGTON | 9:30 AM ABU DHABI

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.

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

Watch

H.E. Dr. Sultan Al Jaber outlined his vision for #COP28UAE earlier today at #ACEnergyForum:

“We want it to be a practical COP. A COP of action. A COP for all. A COP that raises ambition and moves from goals to actually getting it done.”

Watch more: https://t.co/V0Y0DwZSBf pic.twitter.com/nVtQ5ilhki
— Atlantic Council (@AtlanticCouncil) January 14, 2023

JANUARY 13, 2023 | 3:00 PM WASHINGTON | JANUARY 14, 2023 | 12:00 AM ABU DHABI

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)

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.

How to finance a sustainable and just energy transition

Atlantic Council — Sat, 14 Jan 2023 13:26:28 +0000

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2023 Global Energy Forum

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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…

HADLEY GAMBLE: Thank you guys so much for joining.

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Why accessible and affordable gas plays a role in helping countries reach climate goals and expand renewable energy

Atlantic Council — Sat, 14 Jan 2023 11:22:34 +0000

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2023 Global Energy Forum

Africa Americas Energy & Environment Energy Markets & Governance

Event transcript

Uncorrected transcript: Check against delivery

Speakers

H.E. Eng. Suhail bin Mohammed Al Mazrouei
Minister of Energy and Infrastructure, United Arab Emirates

H.E. Saad Sherida Al-Kaabi
Minister of State for Energy Affairs, State of Qatar; President and CEO, QatarEnergy

Moderator

Frederick Kempe
President and CEO, Atlantic Council

FREDERICK KEMPE: It’s an honor to be with the two of you today, and thank you for helping us kick this off. Concerns around energy security and improving energy access in the developing world have been at the top of the agenda this year, with natural gas being a major area of attention given Europe’s efforts to rapidly diversify its natural gas imports.

So I actually have two questions. One of them is that we had a quite extraordinary 2022 in the energy world, and a little bit of reflection on that but what you expect for 2023. But then, on world natural gas questions, prices spiked this year but seem to be returning back to earth. And then, within 2023, in your eyes does it reflect an equilibrium of supply and demand balance for gas, or do you foresee in 2023 further imbalances on the horizon in the short term but—or through this year? So a look at the year ahead, a reflection on the year past, with a specific look at what you expect for natural gas. Minister.

MINISTER SAAD SHERIDA AL-KAABI: Well, first I’d like to thank you for hosting me and thank my very good friend His Excellency Suhail for inviting me to this event. It is a pleasure to be back in the UAE with such a distinguished audience.

I think if you, you know, look at the gas supply/demand and what happened last year, it started actually before the [war in] Ukraine, where a lack of investment in the oil and gas sector caused really a shortage in gas. And ahead of the [war in] Ukraine, the oil and gas prices, obviously, were clearly going higher due to lack of supply. And that lack of investment was driven by many factors, including, you know, the bigger push for the green without having a real plan for how the transition is going to happen. So there was a scarcity of investment over about five, six years. And then, when the Ukraine situation happened, you know, a big volume was taken out of the market, and obviously, that would take it even further up.

I think—and you know, 2022, the spike is very obvious why, but 2023, I think it has come down as everybody has witnessed. But you know, the mild winter, I think, in Europe is the biggest cause. And there is storage—I mean, ample storage—but luckily, they haven’t had a very high demand for gas due to the warmer weather. The issue is what’s going to happen when they want to replenish their storages in this coming year and the next year. There isn’t much gas coming into the market until 2025, 2026, 2027. So I think it’s going to be a volatile situation for some time to come.

FREDERICK KEMPE: And prices will be volatile with it, it’ll be going up and down, but—

MINISTER SAAD SHERIDA AL-KAABI: Yeah, prices are a factor of supply/demand. I think some people think that we are very happy for high oil prices and so on. The biggest worry that we would have, I think, as an oil and gas producer is demand destruction, and you can see that there is demand destruction with—whether it’s gas or oil. And, unfortunately, and I think of the wonderful speech that we heard from His Excellency Sultan, [he] talks about what we’re going to do, going forward, and we’re all for what he mentioned.

But you can’t have coal at record highs and say that we are going to achieve our targets. You know, 30 percent of the power in the world thus far uses coal, and all the countries that were calling for coal to be stopped are using it at record levels today.

So I think I we need to take very serious action and I think coal is the biggest emitter by far and I see a lot of [attacks] on oil and gas companies and demonizing oil and gas companies. I don’t see the same attack on the biggest polluter on the planet.

FREDERICK KEMPE: I’m really looking forward to coming back to you about the communication question.

Mr. Minister, you have lived through so much change and so much history since you took over as the minister, everything from OPEC+ to what we experienced last year, rolling off the war in Ukraine.

How do you look at 2022? What do you expect for 2023? And the same question, particularly with a particular focus on natural gas?

MIN. SUHAIL BIN MOHAMMED AL MAZROUEI: Well, first of all, it’s glad to see this crowd. I think probably this is the biggest Atlantic Council energy that we have ever since we started, and I’m grateful for His Excellency and for all of Your Excellencies for coming.

Actually, the—I would build on what His Excellency Saad mentioned. We’ve been talking about the lack of investments and the lack of interest from the financial institutions to finance fossil or oil and gas projects, and part of that is also the lack of understanding [of] what is the future for many countries when it comes to energy strategy, what contributions or what percentages they would have of gas or even the pace of reducing their coal.

It’s not clear. I mean, there are plans but those plans are not concrete and then that unclear long-term strategy by many countries put them in a situation where it’s very difficult for them to commit [to] long-term gas contracts, which has in return made the companies or those who are developing the gas at a very difficult position with their financiers because they would like to see long-term contracts and those long-term contracts are not there.

Everyone [wants] to buy, but they want to buy in a two-year or three-year span, and that is not enough for someone to develop gas. Gas is available and there are huge discoveries in recent history. But the development pace is not there, and the investment is not there.

So that is one of the problems or one of the issues that is causing the problem today. Of course, Russia is a major producer of gas and LNG, and when you shift from one location to another, trying to adjust, that takes time and that’s what happened in 2022 where some of that gas has been relocated to another market and other gas from other markets is [coming] to Europe, especially from the US.

But is that sustainable in the longer run? I think you’d need more collaboration between the European nations on agreeing on the optimization of the [Floating Storage Regasification Units (FSRUs)] that are also limited and also agree on some pipelines. I think one of the things that [contribute] to energy security is pipeline gas, and together with Qatar and with Oman we have established the first regional Middle East pipeline that is secured and made energy security affordable and available for the three countries, and I think in the future—if you ask me about the future, I think we need to do more of these projects.

There are countries [that] require gas and we cannot do everything as LNG. I think [the] state of Qatar and His Excellency personally is involved in some of the largest expansions of LNG. Dr. Sultan as well and ADNOC, they are also increasing their capacity of exporting. But even with that, with those investments, it’s not enough.

Gas has to be available, and it has to be affordable to secure and to become a base load that helps the renewable energy and helps [clean] up the environment and [reach] the COP goals.

And we are committed. We will do the investments. But I think the whole world needs to think about the resources and needs to think about how we enable the companies and the [international oil companies and national oil companies] to produce more gas to make it available and affordable.

FREDERICK KEMPE: Thank you for that answer.

Minister al-Kaabi, I want to come back to your comment about demonization. This is a country that’s one of the—I guess, OPEC’s third largest producer of energy. It’s also a country that’s been a pioneer. Dr. Sultan talked about Masdar in the renewable space at the same time.

In the COP process in the past, the climate community and the fossil fuel providers were rarely in the same room. Are you seeing a change?

The climate community seems to be more open now to, particularly, natural gas as a bridging fuel, more open to nuclear power as well, other solutions in decarbonizing carbon, and the fossil-fuel community is investing billions in new technologies and renewables, et cetera.

Dr. Sultan was talking about a paradigm shift. Is that too utopian to think that that’s where we’re going? Talk a little bit about how you think these two communities can come together and actually accelerate the reduction of emissions, not slow it down.

MINISTER SAAD SHERIDA AL-KAABI: If I can just be a little bit blunt, maybe, about this is the community that was driving the green was living in a dream that they realized they can’t achieve, OK, and, basically, if you want to achieve what we all want to achieve, I think—we’re the hottest place in the world, probably. So climate change affects us more than most. So, for us, it’s very important that we head in that direction. It’s very important that we achieve these goals.

But we need to be realistic about what we can and cannot achieve and we can’t be driven by just political agendas of people wanting to be elected. OK. It should be based on reality, based on what can be achieved. I’m an engineer. You tell me, I want to achieve an objective, I’ll tell you, OK, can I do it per the plan, what’s the budget, and [can] we achieve it at this timeline.

But just to talk about achieving net zero and the majority of the countries that you talk to they talk about net zero and you say how you are going to achieve it, they say we achieve 60 percent, 70 percent of it by 2040 by doing this, this, and that, and the rest is technology improvement.

So that—I’m not a native English speaker but that doesn’t mean we will achieve net zero. It means we will strive to, we’ll try, we’ll see what we can do to achieve it. OK.

So, to me, I think the realization of the need for gas because wind doesn’t blow all the time, solar is not available all day, and technology improvements in storage and so on is going to improve and there are a lot of things that will improve and, hopefully, help us in that scale.

But I think there are two sources that will be needed for the very long time for people that don’t have hydro and other, you know, renewable energies. You need nuclear for those that can afford it and are capable of building it and have the technology. And you need gas. And these two will have to be the baseload for countries for a very long time.

And I don’t agree that gas is a transition fuel. I think it’s a destination fuel until we have a realistic solution that can do away with gas. It’s a destination fuel that you will need for a very long time. And when we say we need more investment in gas—and as His Excellency mentioned, you know, they’re expanding in LNG. We’re building 65 million tons. We’re producing 77 million tons today. We’re building 65 million tons of LNG that has already been [through a flame ionization detector] OK? Now, so almost double. I mean, 48 million tons coming from Qatar and our investment in the U.S. is another, you know, 16 to 18 million tons. So we’re bringing, really, a lot of gas to the market, but it’s not enough.

And you can’t achieve what we need as humanity and the number of people that are going to grow. As His Excellency Dr. Sultan mentioned, we need growth. One billion people today are deprived of basic electricity that we all enjoy. So we need to be fair.

And I think one point I’d like to just add to that on the investment side; it’s very, very, very unfair of some in the West to say that African countries should not invest in oil and gas and they should, you know, remain green or whatever you want to call it while this is a God-given wealth that they can create for their national growth and for their prosperity. And it is oil and gas that is needed for the world. And we should not forget the oil and the petrochemicals and what you need there. People love kayaks. They love the coolers that they take for picnics. There is no renewable that can manufacture that. It’s oil-based solutions that get you there, OK? So it’s plastics and so on that are needed. I know we need to do a lot of work there, but let’s not forget reality of what we need. A lot of stuff that you have around you here, and the decoration and the flooring and all that, is oil and gas. We’re wearing, OK? So let’s be realistic while achieving the goals that we want.

FREDERICK KEMPE: Minister Suhail, I’d love you to build upon what you’ve just heard from your colleague with the question of: The climate community perhaps dreamt dreams that were inachievable, but also from the fossil fuel provider standpoint is enough being done?

MIN. SUHAIL BIN MOHAMMED AL MAZROUEI: No, I don’t think we are doing enough. But there is—there is a wave of new thinking. And I see it more in the IOCs, in the NOCs. Typically, the technology and all of that comes from you, Descalzi, and the others who are here.

But I am really glad to see companies now thinking of reducing their carbon intensity, to see state-owned companies seeking the highest technologies to reduce methane emissions. And that is a kind of a change in the industry that we haven’t seen. We need to remember that the cleanest hydrocarbon is probably produced here in the Gulf. If we compare the carbon intensity of what we produce as a barrel here and you compare it with barrels elsewhere, probably we have the cleanest barrels or the greenest barrels you can find. And that comes at an investment. It doesn’t come free. I mean, us and Qatar and—and same with gas. You could produce gas, but you could produce gas also with the intention in mind to reduce the carbon intensity. And that’s, I’m sure, what QP is doing and Qatargas and what ADNOC is doing.

The fact that we here… Abu Dhabi [walks] the talk and [says] that the only electricity we will use in the field to produce oil is going to come from renewable or clean sources, that’s by itself, it’s a commitment. It doesn’t come free. It comes, I’m sure, at a cost. But that’s the cost that we are willing to do our part. And I’m sure we will see more of these actions.

So we will do our part, but realistically, you need a base load. Until we reach a price for the base load to complement the hundred-percent renewable energy, whether it’s a battery or other technologies, we will need a base-load contributor. And I agree [with] what His Excellency said, for a very long time, gas will be there. Percentage-wise, it may reduce—and it will reduce, but in obsolete numbers, it will increase and it will increase significantly. What is the worry? The worry: with that increase in demand, we will not have enough supply. And gas and oil are finite resources; they are not going to stay there forever. We have seen countries going steeply in decline only—I mean, talking about oil, and gas is like oil—only within the twenty-three countries with OPEC+.

Since 2000, the reduction and the ability to produce is more than 3.7 million barrels. What does that tell you? That tells you that we are in a decline. Many countries, they are in the decline mode. Same with gas I am sure. So not every country has the resources that Qatar has, or [the] UAE has, or Saudi Arabia, or other countries. Many countries have started earlier, and they are [on] the decline more. Same with the United States. How many—how many years? And are we going to have enough batteries or technologies to assume that we will have it, and it’s going to be uniform everywhere? I think that’s a big assumption.

But at the same time, we need to do what Sultan has said, and we are committed to do it as a country. We can afford to do it, and many countries we do. But can we enable and be a platform for inclusiveness, so everyone is enabled to do it? How many companies like Masdar [do] we need? And how many alliances like the one with the United States [do] we need with the one hundred gigawatt?

India will need to install probably five hundred gigawatt in the next twenty to thirty years, and more in China, and many other countries. That’s I think where we are. More renewable energies will be installed, but we need a baseload, and for a base load, we need more investments in gas.

FREDERICK KEMPE: Thank you for that, Minister Suhail.

So Minister Al-Kaabi, I racked my brain last night about how to think about a question that linked the global energy market to the World Cup, and I couldn’t come up with it. And Lionel Messi just couldn’t get into any of my questions. But congratulations anyway on the World Cup.

MINISTER SAAD SHERIDA AL-KAABI: Thank you.

FREDERICK KEMPE: Give us your view of what you foresee in the global gas market that might be preventing the market from reaching equilibrium. Is it the resources? Is it the investment? You know, so much is being demanded of gas right now, so much is being demanded of LNG. If you had told me, you know, two years ago that suddenly Germany would have, within six months, three new import terminals brought into the market by the vice chancellor of Germany, who is the leader of the Green Party—it would have sounded preposterous.

So how do you see the future of equilibrium in the market? And what are the problems in getting there?

MINISTER SAAD SHERIDA AL-KAABI: Yeah, on the German side, we were negotiating with the Germans for about ten years, and suddenly they came to us and said, we want to build terminals. So, you know, the world changes.

I think, you know, the equilibrium will be achieved by hopefully some kind of a mediation or truce or some kind of a political solution where Russia and Europe get things, I think, sorted out, if you will, politically hopefully, and the sooner the better. I don’t think that—this war and this situation will not last forever. And I understand that the Europeans today are saying there is no way we’re going back to Russian gas. We’re all blessed to be able to forget and to forgive. And I think things get mended with time.

And I don’t think some of the countries that were depending 100 percent or, you know, a very large percentage on Russia will not go back to 100 percent or 80 percent or maybe 50 percent. They will diversify and they’ll learn from that situation, and probably have a much bigger diversity. But the Russian gas is going to come back, in my view, to Europe. It is next year? Is it in five years? I don’t know. But once the situation is sorted out. And that, I think, will be a big relief to the whole gas sector and to the whole market in Europe, and will stabilize prices. And again… on a big scale, our project from the United States is going to bring about eighteen million tons starting at the end of 2024 and then really peaking in 2025. And then QatarEnergy’s investment in our, you know, expansions in Qatar, 48 million tons are going to come. The rest are smaller projects that will come a little bit later. But other than that, that’s the volume that’s coming. And if governments and legislators do not promote additional gas investments, as His Excellency Suhail said, if I am being very selfish that’s good for us, but that’s not good for the development.

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The 2023 Global Energy Agenda

Landon Derentz, Christine Suh, Ameya Hadap, Paul Kielstra (Editors) — Fri, 13 Jan 2023 20:01:00 +0000

In 2022, Russia’s invasion of Ukraine undermined the global energy system’s return to pre-COVID-19 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.

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Foreword

The 2023 Global Energy Agenda

By Frederick Kempe

Last year in this space, I wrote that the world seemed to be in a holding pattern, as we worked together to exit the pandemic while keeping decarbonization targets within sight. The decarbonization imperative remains, but this year’s challenge is now focused on how new geopolitical threats will shape the energy future, precipitated by Russia’s invasion of Ukraine in February 2022. We can only accomplish the energy transition if we, at the same time, pay renewed attention to energy security.

It may seem expedient to treat Russian aggression as the immediate, near-term threat, while deferring the need for climate action. However, both challenges must be met simultaneously.

Although the energy future remains uncertain, many countries, especially those like Germany and Italy that were deeply dependent on Russian energy supplies, have started to chart a new path toward energy security through clean energy sources and more reliable and resilient supply chains. Even as we recognize the need for reliable and affordable energy, it was encouraging at COP27 to see the world come together once again to reiterate commitments to a sustainable and equitable energy transition.

In its third edition, the Global Energy Agenda has again taken the pulse of the global energy policy community, including contributions from leaders in governments, the private sector, and expert communities.

This year, their survey responses revealed new insights into the connections between geopolitics and energy security, the balance between the energy transition and fossil fuels, and challenges and opportunities along the path to net-zero. Respondents tended to vote together as blocs based on their geographic locations, their industries within the energy sector, and their views on the speed at which the energy transition will occur.

We noticed a few major changes between last year’s Global Energy Agenda survey and this year’s. Most interestingly, but not surprising, nearly half (47 percent) of respondents now believe that the greatest geopolitical risk is posed by conflict with a major energy producer, in contrast to last year, in which respondents were far more divided on their assessment of geopolitical risk with only 26 percent choosing a major cyberattack as the great risk.

There was also cautious optimism among respondents in their views of the likelihood of achieving net-zero by 2050. This year, 45 percent believe it likely that the world will attain net-zero by 2050, with 55 percent disagreeing. Although the hopeful still constitute a minority, their numbers are up from 27 percent last year. Meanwhile, a slight majority of 51 percent think that reaching net-zero would have at most a limited negative effect on GDP, or even a positive one.

The essays in this publication give voice to diverse perspectives. Coming from different segments of the global energy landscape, the authors naturally put forth divergent views on the future of their sector. But if there is a common thread among them, it is that now is the time to leverage today’s energy crisis for faster progress.

As Winston Churchill said while working to form the United Nations after World War II, “Never let a good crisis go to waste.”

In last year’s Global Energy Agenda, I wrote that “the course that we chart to net-zero must be steady but also ambitious enough to meet the challenge.” And after Davos last year, I wrote that I am going “short” on pessimism and “long” on optimism.

I think that’s the right note to hit in a year that will culminate with COP28. hosted by the United Arab Emirates, which will be colored by attainable, pragmatic solutions to achieve the inclusive and sustainable energy outcomes the world so urgently needs.

Frederick Kempe is the President and Chief Executive Officer of the Atlantic Council.

Introduction

In 2022, as the world was learning to cope with COVID-19 and its deadly toll, Russia’s invasion of Ukraine shattered hopes in the West for a return to normalcy. Over the course of the year, the unprovoked attack and Russia’s weaponization of natural gas rapidly reshaped interdependent energy systems around the world.

Although the humanitarian devastation and mass casualties caused by the war—including the displacement of millions of Ukrainians—have radically surpassed the economic and political challenges imposed on the global energy system, the ongoing energy crisis has and will continue to have far-reaching consequences.

With energy prices retreating from multiyear highs, an apparent calm has settled on the broader market outlook. On the horizon, however, stirs a more complicated future, as the energy crisis complicates the probability of a smooth transition.

Around the world, volatility from higher energy and food prices is further shrinking household budgets already stretched thin, forcing many people to choose between heating their homes and feeding their families. The International Energy Agency’s (IEA) 2022 World Energy Outlook estimates that seventy-five million people who have recently gained access to clean energy are likely to lose the ability to pay for extended electricity services, and a hundred million may no longer be able to afford clean cooking solutions.¹ Price and economic pressures associated with today’s energy crisis mean that “the number of people without access to modern energy is rising for the first time in decades.”²

Beyond these immediate impacts, the severe constriction of Russian natural gas flow to Europe has raised the question of the war’s long-term effects on the global energy transition and the overall fight against climate change. To make up for the void left by the near shutoff of Russian gas supplies, Europe has turned to the use of carbon-intensive coal and oil to generate electricity, a response criticized by some climate advocates as shortsighted in the face of worsening droughts, extreme heat, rising oceans, and other effects of planetary warming. The current surge in carbon-intensive fossil energy use, however, appears transitory. Laying bare just how tightly interconnected national security is to energy security, policies advanced in Washington and Brussels are emblematic of the urgency with which lawmakers are seeking to decouple their economies from reliance on foreign oil and gas imports. If anything, the war has heightened the urgency around accelerating low-carbon energy deployment as a critical tool for shoring up countries’ energy security.

The European Union’s RePowerEU strategy is expressly designed to make the continent “independent from Russian fossil fuels well before 2030” by empowering a clean energy economy anchored in deployment of renewable energy and energy efficiency.³ This comes in addition to the EU’s continued progress on its Fit for 55 plan to reduce emissions by 55 percent by 2030 compared to 2005 levels. The United States, meanwhile, is working to rapidly implement the nation’s most significant piece of climate legislation, the Inflation Reduction Act, which aims to reduce the country’s carbon emissions by 40 percent by 2030 compared to 2005 levels. As with all major legislation, the law has its detractors, but Congress’s incentive-laden approach, with its ample support for consumers and corporations, likely means the statute has staying power. And considering the United States’ status as the world’s largest economy, Washington’s massive investment in clean energy and corresponding supply chains will reverberate globally.

The 2023 Global Energy Agenda survey and expert perspectives

Given this context, it is unsurprising that energy leaders head into 2023 with a completely different outlook than a year prior. To gain insights into their thinking, the Atlantic Council conducted its third annual survey for its 2023 Global Energy Agenda. The survey was conducted from October 14 to November 23, a window that overlapped with the 2022 United Nations Climate Change Conference, widely known as COP27. This report distills the survey responses, drawing on the insights of energy stakeholders from more than fifty countries, and representing a variety of fields associated with the sector. An appendix provides additional demographic details. As with last year’s survey, the 2023 Global Energy Agenda continues a tradition of employing various questions and insights from prior years’ results and analyses to help hone key findings.

To complement our survey analysis, the Atlantic Council Global Energy Center invited global experts, corporate leaders, and government officials to con- tribute essays for this Global Energy Agenda to provide deeper insights into issues facing the energy sector and the world’s prospects for the energy transition. Our contributors span the globe and represent a diverse array of perspectives from energy leaders. The essays cover topics ranging from critical mineral supplies to advanced nuclear power to climate diplomacy, and altogether set the energy agenda for the year ahead as the world looks for a meaningful commitment to climate action on the road to COP28.

In this year’s edition, our analysis draws distinctions where significant differences existed between groups based on respondents’ geographic region; which industry they work in within the energy sector (oil and gas, nuclear power, renewables, etc.); and their views on when the world will reach peak oil demand. The latter group is further subdivided to provide key insights into those who see an accelerated energy transition (“energy transition bulls”) and those who predict a more enduring role for oil and gas in the global energy mix (“energy transition bears”). These categories tend to vote together as blocs in their responses throughout the survey.

Collectively, the survey results and expert essays that compose the 2023 Global Energy Agenda have yielded the following key insights.

The crisis in Europe is dusting off the playbook for geopolitics and energy

Russia’s war in Ukraine has recalibrated the contemporary wisdom on geopolitical risk that existed just a year ago. In the fall 2021 survey, which was conducted only a few months before Russia’s February 2022 invasion, the most frequently mentioned geopolitical risk facing the energy sector was a major cyberattack; however, at only about a quarter of respondents, there was no strong consensus. Additionally, a conflict including a major energy producer was at the top of the risk list for only 17 percent of respondents, despite mounting concerns in Western security circles at the time the survey was taken that Russia was preparing for an armed incursion into Ukraine.

Naturally, in our fall 2022 survey, nearly half of respondents say that the Russia-Ukraine war is the top risk. Representing one-tenth of global oil and gas supply in 2020, Russia has historically served as a meaningful contributor to global energy trade, making it impossible to divorce the Kremlin’s decision to invade Ukraine from the stability of global energy markets, especially in a moment of increased fragility in the wake of the pandemic. The consequences of this political gamesmanship on energy policy and trade are on par with the 1973 Arab oil embargo and 1979 oil crisis. The marked effect on energy prices, however, is expected to be temporary, according to survey respondents: a notable contingent sees oil demand ebbing in the next decade. This expectation is perhaps an indicator as to why just 23 percent believe that geopolitical leverage will be the primary cause of price volatility come 2030.

Midcentury net-zero optimism is on the rise

There is little consensus on the means of achieving net-zero emissions by 2050, but the number of respondents that see the world meeting its zero-emission aims by midcentury is rapidly growing. Although still in the minority, the percentage of survey respondents that believe net zero is within reach in the next thirty years has spiked to 45 percent, a sizable increase from only 27 percent of participants predicting this outcome one year ago. In recent years, the concept of a net-zero energy system has unquestionably gained traction in political and industry circles around the world. Even dedicated oil-producing countries such as the United Arab Emirates and Saudi Arabia have set net-zero benchmarks—2050 and 2060, respectively—with the Kingdom closely associating net-zero goals with its aims of promoting key domestic policies such as the circular carbon economy framework. Interestingly, however, optimism for a net-zero future is most subdued among those working in zero-carbon sectors (i.e., renewables, nuclear, and advanced energy technologies), with 73 percent responding that it is “unlikely” that the world will reach net-zero by 2050, higher than those in oil and gas (62 percent).

Global North-South divide on achieving the clean energy transition

While political will is widely recognized as the predominant obstacle to reaching net-zero emissions among those surveyed, the cost of clean energy and access to capital meaningfully weighs on those outside of the North American and European continents. A number of respondents from emerging markets, for example, view insufficient resources as another major factor hindering progress. This is consistent with perspectives on the overall energy transition as well, where Europeans and Americans see broad macroeconomic trends, such as recession risk or inflation, as the principal headwinds, while those in developing countries more frequently cite a lack of government investment. These perspectives underscore a growing debate within the United Nations Framework Convention on Climate Change (UNFCCC). During COP27 in Sharm el Sheikh, Egypt, the Global South found success in drawing a renewed focus on how climate change is impacting developing nations, ultimately enabling the introduction of “loss and damage” into a formal negotiation process. Efforts to address inequities in financing billions of dollars in clean energy infrastructure, which will be necessary to avoid the worst impacts of climate change, will remain in focus during COP28.

Natural gas’ appeal is ebbing in its most substantial near-term market

The roughly even division between those who see a long-term future for natural gas and those predicting a limited one remains consistent year-on-year, but with greater geographic variations. Of those surveyed, the majority see natural gas remaining a dominant—if not predominant—feature of the global energy mix. The vast majority of those remaining (40 percent of the total), think that natural gas will act as a long-term bridge fuel before disappearing. Only 3 percent see a minimal role for gas. While broadly consistent with last year’s analysis, Europeans—likely influenced by Russia’s weaponization of the resource—are increasingly resolute to wean their market from natural gas: now 49 percent say that the fuel will have a permanent role, down from 58 percent last year. Meanwhile, in the Middle East and North Africa—and, to a lesser extent, the United States—the anticipation that natural gas will remain a permanent fixture of the energy mix is growing, up to 40 percent from just 30 percent the prior year.

Taken together, we hope 2023 Global Energy Agenda survey responses, analysis, and essays will lay out the contours of the current energy system, assess the events and trends that will shape the energy system in 2023, inform fact-based debate and analysis about the best path forward, and set the shared energy agenda for the year.

Chapter 1: Geopolitics and energy security

Essays

Why today’s global energy crisis promises to be a turning point toward a cleaner and more secure future

By Fatih Birol

Post-war outlook on Russia as an energy power

By John E. Herbst

The geopolitics of energy

By Richard L. Morningstar

A precarious phase of war and Russian energy leverage

by Helima Croft

Nuclear energy is vital to ensuring energy security and an affordable, sustainable, and resilient energy system now and for the future

By Sama Bilbao y León

Russia’s invasion of Ukraine last February dramatically transformed political risk perceptions within the energy sector in 2022, surmounting even the most pressing global challenges from recent years, including the pandemic. Of course, current events often weigh heavily on public perception.

When the 2022 Global Energy Agenda survey was conducted in late 2021, the cyberattack on the Colonial Pipeline—which crippled fuel supply along much of the East Coast of the United States—had occurred recently and was front-of-mind for many respondents, while the specter of Russian aggression was still a distant-seeming possibility. It was therefore unsurprising that a military conflict was not a top concern among survey participants at the time, while the most frequently cited risk—according to 26 percent of respondents—was a major cyberattack.

Having now witnessed the brutality of Russia’s attack on Ukraine and the subsequent fallout impacting all facets of the global energy system, roughly half of the respondents name the war’s continuation or escalation as the dominant energy risk in geopolitics. Meanwhile, concern over cyberattacks to the energy system dropped by half, from 26 percent to 13 percent. Arguably, this decline is more of a testament to the enormous magnitude of the war’s impact on energy geopolitics rather than a diminishment in cyberattack risk.

Compared to the prior year’s response, however, most topics did not see drastic change in the face of Russia’s war. For instance, the percentage of respondents who envision a conflict in the South or East China Seas as the predominant risk rose from 7 percent last year to 10 percent this year. Additionally, trade-related disruptions still command roughly one tenth of respondents as well, shifting from 11 percent to 8 percent. It is worth noting that China and trade watchers represent well-defined communities with long-standing convictions regarding the risks and opportunities in their respective areas of expertise, lending some credence to why these respondents may be comparatively unmoved by the conflict in Ukraine in their assessment of future risks.

Meanwhile, two old worries fell off the radar of energy risks: Nord Stream 2 and COVID-19, after being collectively named by 17 percent of respondents as top concerns for the 2022 outlook. With one of the two Nord Stream 2 strings sabotaged in September 2022, the absence of the pipeline’s ranking this year is self-evident. COVID-19, in contrast, elicits deeper reflection. While generally there appears to be broad societal appreciation that the virus remains a feature of modern life, especially as China experiences a resurgence in infections resulting from the easing of Beijing’s zero-COVID policy, the fact that respondents no longer see the pandemic as a global risk illustrates how accustomed society has grown to the “new normal.”

Overall, other facets of the global geopolitical landscape may simply be outmatched now by Russia’s corrosive foreign policy and the irreparable harm it has brought to the stability of Europe. As the apex risk of 2022, it is worth diving deeper into how enduring Russia’s role will be in the European ecosystem and, by proximity, in the stability of the transatlantic partnership. Given the established history of energy trade between Russia as an exporter and European countries as consumers, understanding the perspective of survey respondents provides a glimpse into how the energy community sees Europe’s relationship with Moscow adjusting in coming years.

Even before February 2022, Russia had reduced energy exports to European customers in a presumed effort to exert political leverage. When the invasion started, sales contracted further and in response, European countries enacted a series of policies to reduce Russian oil and gas revenues. This includes the December 5, 2022, EU ban on Russian crude imports, a Group of Seven (G7) price cap on Russian seaborne exports, and a pending EU ban on Russian petroleum products, which is slated to go into effect on February 5, 2023. And while higher global prices enabled Russia to continue earning revenue from fossil fuel trading with European countries in 2022, the drop in European market share is significant. In 2021, Russia provided 40 percent of non-EU gas imports to the EU; by the fall of 2022, Russia’s share of EU imports had fallen to 7.5 percent.⁴ In the first half of 2022, Russian oil imports to the EU also declined.⁵

If survey respondents are right, the initial disruption to these markets will last through the end of this decade. The majority of respondents say that Russian exports to Europe of oil (58 percent of respondents) and gas (55 percent of respondents) will decrease substantially by 2030. Europe-based respondents are even more likely to forecast reduced fossil fuel imports from Russia. The horrors inflicted on Ukraine have forced a seismic shift in thinking about the costs—financial, social, and geopolitical—of energy security. There is less consensus, however, on how these events will shape the global energy transition. While respondents resoundingly agree that the war in Ukraine and Europe’s anticipated pivot away from Russia will have an impact on climate action, there is an equally stark divide on whether it is a headwind or tailwind for a zero-emissions future. Nearly 60 percent say it will accelerate the energy transition, while 40 percent say the war will impede it.

There are merits to both perspectives, of course, which are explored in more detail by our essay authors in this chapter. The war has highlighted the need for greater energy security, which could lead to increased investment in indigenous clean energy resources. However, the development of capacity from renewables and nuclear energy will take time, and the need to replace Russian gas is likely to lead to a boost to conventional energy resources in the face of few immediate alternatives for European importers, not to mention the corresponding implications for emerging markets that cannot financially compete with Europe for supply.

Leadership insight

Why today’s global energy crisis promises to be a turning point toward a cleaner and more secure future

By Fatih Birol

Russia’s invasion of Ukraine in February has thrown energy markets into turmoil, setting off the first truly global energy crisis, with impacts that will be felt for years to come. International trading routes and investment flows that had built up over decades are being profoundly reshaped. Households, businesses, and entire economies are struggling to pay for food and energy, leading to rising poverty and insecurity. Geopolitical risks are on the rise.

Despite these major difficulties, I’m optimistic about the long-term effects of the current crisis on the global energy sector. Thanks to the policy responses by many governments around the world, the crisis is set to accelerate our transition to an energy system that is not only cleaner, but more affordable and secure.

In our recent World Energy Outlook 2022, the International Energy Agency’s (IEA) analysis shows that for the first time ever, today’s prevailing government policies will result in a distinct peak in global demand for fossil fuels in the coming years as clean energy technologies expand. In this scenario, coal’s recent crisis-driven rebound is temporary, and its use falls back within the next few years; natural gas demand reaches a plateau by the end of the decade; and rising sales of electric vehicles mean that oil demand levels off in the mid-2030s before ebbing slightly to midcentury. This is nothing short of historic. Ever since the start of the Industrial Revolution in the 18th century, fossil fuel use and economic growth have risen in tandem. Now, they are parting ways. However, the transition to clean energy is not yet happening quickly enough to avoid severe impacts from climate change.

What we do see is increasing ambition and action around the world to accelerate the transition. While a lot of public attention has focused on the short-term measures many governments have taken to shield consumers and businesses from higher energy prices, many of those same governments are also taking longer-term steps to address the underlying fragilities of our energy systems.

The most notable responses include the US Inflation Reduction Act, the European Union’s Fit for 55 package and REPowerEU plan, Japan’s Green Transformation (GX) program, South Korea’s aim to increase the share of nuclear and renewables in its energy mix, and ambitious clean energy targets in China and India. The Inflation Reduction Act alone puts close to $400 billion on the table in the form of tax incentives, subsidies, and support for technologies ranging from hydrogen to solar to carbon capture—and this will mobilize far more in private sector investment. Taken together, these new measures by governments worldwide are set to help propel global clean energy investment to more than $2 trillion a year by 2030, a rise of more than 50 percent from today.

How has the current crisis accelerated these moves? With the droughts and floods we’ve witnessed in recent years highlighting the growing impacts of climate change, the environmental case for clean energy needed no reinforcement. But today’s soaring energy prices have made the economic arguments in favor of cost-competitive and affordable clean technologies stronger than ever. Now, with the war in Ukraine, the energy security case for clean energy has come to the fore, with countries recognizing the risks of relying too heavily on imported fossil fuels.

This alignment of economic, climate, and security priorities is moving the dial toward a better outcome for the world’s people and for the planet. If all countries achieve their current national climate pledges on time and in full, IEA analysis shows that it would limit the rise in global average temperatures to 1.7 degrees Celsius. The increasingly robust clean energy plans we’re seeing provide grounds for optimism that countries can move closer to delivering the concrete policies and implementation needed to make these ambitious pledges a reality. However, there still remains an “implementation gap” between today’s policy settings—which would most likely lead to a temperature rise of around 2.5 degrees Celsius, far too high to avoid severe climate risks—and what’s needed to achieve national climate pledges.

And we need even greater ambition and stronger implementation to reach net zero globally by 2050 and have a chance of stabilizing the temperature rise at around 1.5 degrees Celsius. This would require doubling global clean energy investments from the current projected level to around $4 trillion a year by 2030.

We can accomplish this faster progress if strong action is taken immediately. Investments in clean electricity and electrification, along with an expanded and modernized grid, offer clear and cost-effective opportunities to cut emissions more rapidly while bringing down electricity costs. Maintaining today’s growth rates for deployment of solar PV, wind, electric vehicles, and batteries requires supportive policies not just in the early leading markets for these technologies but across the world.

A major concern that demands urgent attention is the uneven distribution of clean energy investment around the world. If China is excluded, then the amount being invested in clean energy each year in emerging and developing economies has remained flat since the Paris Agreement in 2015.The cost of capital for a solar PV plant in 2021 in key emerging economies is between two and three times higher than in advanced economies. Today’s rising borrowing costs risk further exacerbating this divide.

International efforts, especially from multilateral development banks, are needed to step up climate finance in developing and emerging markets, and to tackle the perceived risks that deter investors. There is immense value in broad national transition strategies such as Just Energy Transition Partnerships, like the one announced by Indonesia and a group of leading economies at the G20 Summit in November, that integrate international support and ambitious national policy actions, while also providing safeguards for energy security and the social consequences of change.

What is undeniable is that energy markets and policies are changing dramatically before our eyes as a result of the war in Ukraine. And these aren’t just short-term blips, but changes that will play out for decades to come. I am convinced that when we look back, we will see 2022 as a historic turning point towards a cleaner, more secure, and more affordable energy system.

Fatih Birol is the executive director of the International Energy Agency.

Leadership insight

Post-war outlook on Russia as an energy power

By John E. Herbst

In the winter of 2005-2006, one year after the Orange Revolution, Moscow shut off the gas to Ukraine in an effort to punish Ukraine for rejecting Putin’s candidate for president, Viktor Yanukovych. Ultimately, Russia’s actions successfully coerced newly elected President Victor Yushchenko to accept a corrupt deal for the delivery of gas in the future. That did little to inhibit Moscow from shutting off the gas to Ukraine a second time in 2009.

As ambassador to Ukraine in 2005, I had warned of these very scenarios, sending formal messages back to Washington regarding the legitimacy of Moscow’s hints of shutting off gas supplies to Europe. Yet, European energy dependence on Moscow only grew after gas cutoffs to Ukraine, starting with the gas pipeline Nord Stream 1, which stretches from Russian to Germany and became operational in 2011.

Even after Moscow seized Crimea and began its hybrid war in eastern Ukraine, German Chancellor Angela Merkel in 2015 increased this dependence by signing a deal to construct another gas pipeline—Nord Stream 2—to bring more Russian gas to Germany. Plans to certify and put into operation this controversial pipeline proceeded throughout 2021, despite clear Russian manipulation of gas supply for political gain and its military buildup on Ukraine’s border in preparation for the massive invasion of February 2022.⁶ Only Moscow’s “annexation” of Ukraine’s occupied Luhansk and Donetsk Oblasts and then the invasion definitively stopped Nord Stream 2. The pipelines were ultimately sabotaged in September 2022.

All of this is a reminder that in the normal scheme of things, political economy trumps economics. Nearly forty years of growing European dependence on Russian hydrocarbons began with the opening of the Urengoi-Pomary-Uzhgorod pipeline in 1984. The economics of this growing dependence was obvious. Russia had major supplies, it was relatively nearby, and Russian hydrocarbons could be delivered by pipeline. While the early 1980s were still characterized by tense East-West relations, Gorbachev became the Soviet First Secretary in 1985; those relations warmed quickly; and six years later the Soviet Union collapsed. In the 1990s, a principal goal of the United States and its allies was to bring Russia fully into the international community, including membership in the International Monetary Fund (1992); the Group of Seven (G7), which became the G8 (1998); and the World Trade Organization (2012). In short, the clear improvement of political relations provided the right framework for closer economic ties.

This background is essential for considering what Russia’s role will be in world energy markets after its war of aggression against Ukraine ends. The answer to that question begins by asking how the war will conclude. This article is based on the presumption that US and Western aid either continues and even increases, in which case Ukraine will succeed in driving Russian forces out of all, or most, of its territory and negotiating a stable peace, even if some key questions, such as the status of Crimea, are left for future resolution. The second question is what sort of Russia emerges from this defeat. If it is a Russia seething with resentment—of the kind that characterizes major Russian media today—then the prospect of improved relations and growing economic ties is minute. The West would have to treat that Russia with great caution. But if it is a Russia recognizing that the invasion of Ukraine was illegitimate; that imperial polices to dominate its neighbors are a dispensable relic; and that Russia can only prosper if it empowers its people and seeks, in the twenty-year-old words of Russian analyst Dmitri Trenin, to become a normal country truly integrated into the international system, the circumstances will be very different.⁷

Before Moscow’s February invasion, the EU received approximately 40 percent of its gas sup- plies (plus more than 50 percent of its gas imports) and 25 percent of its oil from Russia.⁸ By October, approximately 9 percent of gas consumed in Europe (and 18 percent of gas imports) came from Russia, including gas going to Turkey and other non-EU members in the Balkans.⁹ Oil dependence also dropped in the fall of 2022 to 14.4 percent from over 24 percent in the previous year.¹⁰

Moscow’s oil future is also clouded by its declining reserves, which were 7 percent lower in 2020 than in 1991, and Russia’s Finance Ministry is projecting that 2023 production will drop by 7 to 8 percent.¹¹ Moscow’s ability to maintain its natural gas system and to find new supplies of oil and gas are also being hindered by the effective export controls introduced by the West since the February invasion. Russia needs Western technology to access harder-to-reach oil and gas.

In a postwar world, those controls will stay in place if Moscow is still perceived as a potentially aggressive actor. If the Kremlin makes a clear break with its past, those controls will begin to unwind, but, as a precaution, only over time. But they will come off—which will be good for Russian oil and gas production—and at the same time, the West, albeit with a certain degree of caution, will be looking for new economic opportunities with Russia and for ways to promote its reintegration into the global economy.

But Europe’s move to alternate supplies of gas, including decisions to build liquefied natural gas terminals, means that, in the future, Europe will have less need for Russia’s pipeline-supplied gas. Developments here will be determined by economic factors. But Moscow might be able to build on its ongoing energy relationships with countries, like Turkey and non-EU Balkan states, whose oil and gas purchases are not limited by sanctions. It may also do the same with landlocked EU states—Slovakia, Hungary, and the Czech Republic—that have received sanctions exemptions that allow them to purchase Russian oil and gas via pipelines. Similarly, Russia could continue its energy relationship with Bulgaria, which has an EU exemption to purchase Russian oil through 2024.¹²

Moscow, of course, will be able to market its hydrocarbons to China, India, and other customers, but transaction costs are likely to be higher than they were with Europe. The headwinds facing Russia’s oil and gas industry, even in the more optimistic scenario, are the reasons some observers believe Russia will drop from being a “strategic petrostate” to a “reduced energy power.”¹³

Ambassador John E. Herbst (ret.) is senior director of the Atlantic Council’s Eurasia Center and the former US ambassador to Ukraine.

Leadership insight

The geopolitics of energy

By Richard L. Morningstar

The world of energy changed on February 24, 2022. Moscow’s gas cutoffs, which aim to divide the West and break support for Ukraine, are the culmination of a strategy that has manufactured an energy crisis in Europe. Few knew then the depraved depths of the Kremlin’s plans. Now it is abundantly clear, as is the continuing importance of energy geopolitics.

The stakes of the great energy game are extremely high. Oil and gas exports provide revenue for the Kremlin to sustain its brutal and prolonged war—now approaching the one-year mark. Russian energy exports also undercut Western efforts to isolate Moscow, as the country pivots to new customers in the developing world. Moreover, the Kremlin’s increasing threats to cut supply could generate fresh chaos within already fragile global energy markets, and empower populist, pro-Russian sympathizers in democratic societies.

Such is the geopolitics of energy, the gray area between markets and power politics. Those in Europe who thought they knew Moscow best believed Russia would be a reliable supplier, because it had a business interest in keeping gas flowing. Economic interdependence—it was thought—would make Russia a normal European country.

But those who knew Moscow better understood the Kremlin has other interests, twisted and irrational as they may be. They understood energy is not just a market. It is power. By supplying low-cost gas to Europe, fueling the continent’s industry, and powering economic growth, Moscow had leverage. The European Union’s dependence on Russia enabled an autocracy to influence European politics and impose energy dysfunction on a democratic union.

Moscow did not maximize the economic benefits of this relationship. That was not the point. The point was to place Russia at the center of Europe’s economy—and therefore, its politics. This inoculated Moscow from the political consequences of its aggressive foreign policy, exemplified by the tepid reaction to the 2014 annexation of Crimea and invasion of the Donbas. Because of Russia’s energy—some thought—Moscow was too important not to have a seat at the table of global politics. Yet, last year may be remembered as the twilight for Russian energy leverage. After accounting for 40 percent of EU gas consumption, by the end of 2022, the continent was getting less than 8 percent of its gas from Moscow. Europe, nevertheless, is getting by. Moscow’s strategy is not working, and its ability to wield energy chaos as a geopolitical weapon is waning. EU aspirations to carry out a green transformation of its economic system have become an economic and security necessity, with the soaring cost of fossil fuels providing pressing incentives to decarbonize.

There is no better catalyst for the energy transition than the weaponization of oil and gas supply. Europe’s climate ambition has been galvanized by the crisis, increasing its 2030 emissions reduction target beyond “Fit for 55.” Europe needs to urgently degasify its industry to stay competitive as production costs become tied to LNG prices. Now, even the highest-hanging fruit for decarbonization, the hard-to-abate sectors, are immediate priorities for the continent.

Europe is determined to move rapidly and never be in a position of energy dependence again. Decoupling its economy from fossil fuel imports, through locally generated clean energy, is the surest way to do so. If Europe is successful in accelerating its green transformation, Russia’s days as an energy superpower will soon be behind it.

A page will have been turned—but not completely. Even as the global energy system transitions to a net-zero economy, the geopolitics of energy are not going away.

The geopolitical might once enjoyed by fossil fuel producers is shifting toward countries that produce clean energy metals and technologies. Russia’s influence over global hydrocarbon systems pales in comparison to China’s command of global critical mineral supply chains. In addition, energy is becoming a high-tech industry. As it does, intellectual property and complex manufacturing capacity will become a key factor in geostrategic energy competition among major powers. Ensuring that this competition is managed productively to combat the shared threat of climate change is the challenge of our time.

As the transition gathers momentum, it is paramount that policymakers heed the lessons offered by the current energy crisis and not allow old dependencies to be replaced by new ones. Diversifying sources and technologies remains the most tried-and-true method for neutralizing energy’s geopolitical power.

The geopolitics of energy are transforming, but they are not going away. Those who ignore this unwavering dynamic of the global energy system do so at their own peril.

Ambassador Richard L. Morningstar (ret.) is the founding chairman of the Atlantic Council Global Energy Center. He has served as the US ambassador to the Republic of Azerbaijan, as US ambassador to the European Union, and as the secretary of state’s special envoy for Eurasian energy.

Partner perspective

A precarious phase of war and Russian energy leverage

by Helima Croft

As the war in Ukraine enters its second year, a key question for market participants is whether Russia’s disruptive power is diminishing or whether it still has the capacity to cause significant pain for Western consumers by curtailing energy supplies. Has Moscow already played all of its strong cards by turning off the gas taps to much of Europe and in turn providing the catalyst for countries like Germany to seek new sources of supply and fast-track the buildout of critical liquefied natural gas infrastructure? Does President Vladimir Putin have any real economic option but to continue to sell oil at depressed prices in order to maintain the principal funding stream for his war machine? Or, have energy markets merely entered a fleeting period of calm as the Russian president prepares for another brutal winter campaign—with energy as an essential weapon—to test the resolve of the West to continue providing military and financial support for Kyiv?

From the start of the conflict, Western leaders signaled a clear concern about higher energy prices through sanction carve-outs and long lead timelines for the implementation of coercive measures such as the EU ban on seaborne oil imports. Russia has already made good on its threats to disrupt gas supplies, with piped flows to Europe currently down over 85 percent year-over-year. Gas has long been a weapon of choice for the Kremlin, given Europe’s high dependence on Russian supplies as well as its more modest revenue-generator role. Certainly, the remaining Russian gas flows through Ukraine would seem to be at elevated risk for curtailment, especially given the ongoing aerial bombardment of Ukraine’s energy infrastructure. With storage levels in Europe remaining relatively robust amid warmer weather and new sources of supply, the real challenge for the continent on the gas side could come toward the tail end of 2023 in the next storage-filling season, with no additional Russian volumes likely forthcoming.

Oil is a trickier card for Putin to play because of its centrality to state coffers. The architects of the Group of Seven (G7) price cap plan essentially wagered that Russia would have no option but to keep supplying that market at the $60 price point if it wanted to continue with the war effort. And yet, Putin at least continues to mount a rhetorical resistance to the price cap, pledging to cut supplies to any customer that participates in the plan from February onwards. India will likely be a key test case of Russian resolve to see this pledge through, as the country has emerged as the principal purchaser of distressed Urals barrels no longer welcome in the West. While Prime Minister Narendra Modi and Petroleum Minister Hardeep Singh Puri have publicly voiced opposition to the G7 plan, its refiners are still largely dependent on Western service providers to obtain their cargoes. Early indications are that these customers are continuing to avail themselves of Western services and therefore are presumably signing the requisite attestation that they were purchasing the barrels at or below the $60 cap.

There is certainly scope for Russia to engage in some symbolic export suspensions in order to create doubt about the viability of the G7 effort and attempt to drive oil prices higher. Unlike with gas, however, we think that Russian leadership will be much more strategic with their oil curtailments given the clear revenue imperative. Deputy Prime Minister Alexander Novak’s comments about a 5-7 percent reduction seemingly signals that supply restrictions will be deployed more like a scalpel than a blunt instrument. Moreover, a scenario could arise where the Kremlin seeks to rebrand disruptions due to compliance challenges and service provider problems as a deliberate policy choice. At the time of writing, we estimate that seaborne exports have fallen over 20 percent month-over-month in December, with lost flows primarily coming from Urals and East Siberia Pacific Ocean grades.

A crucial test for markets will come after the February 5 EU ban on the importation of Russian refined products. We have consistently maintained that the products ban will be more difficult to mitigate than the seaborne oil embargo. Asia has been the key release valve for crude, with India taking over 900,000 barrels per day more compared to historical levels. Even then, both China and India have seen month-over-month decreases in crude volumes last month following the embargo. There is no India market equivalent for seaborne diesel shipments, so a mass switch in crude supply like the one we saw with Asian refiners following the invasion is less likely. Moreover, replacing displaced product imports in Europe will also be more difficult given tight product markets; 500,000 barrels per day of diesel imports were still coming from Russia into the EU in October.

Another concerning scenario would be for Russia to disrupt oil supplies from other producers through sabotage or interference in internal affairs. There have already been a number of suspicious Caspian Pipeline Consortium (CPC) pipeline outages. In March 2022, loadings of Kazakh crude from the CPC were suspended at the Russian port of Novorossiysk, with Russian officials citing weather-related damage to loading berths as the cause for the weeks-long outages. However, senior energy officials from other governments have suggested that Moscow may have had an active hand in the CPC outage as part of a test run of its asymmetric disruptive capabilities. Hence, we would put CPC flows close to the top of a 2023 risk list.

Similarly, leading security experts contend that Russia has the ability to disrupt supplies from countries where the Federal Security Service (FSB) and Kremlin-linked mercenary groups maintain a significant presence, such as Iraq, Algeria, and Libya. Given that Washington has strongly signaled an aversion to higher oil prices, and has gone to quite extraordinary lengths to keep a lid on them, there remains an elevated risk that Putin will seek to exploit this pain point in 2023, even if it is principally through asymmetric action. Moreover, a case could be made that Moscow’s peak leverage point may be in the coming cold months, and once the green shoots of spring appear, many in the West may conclude that the worst is over from an economic warfare standpoint. Hence, our view is that we may be entering a particularly precarious phase in the conflict and that Putin may endeavor to demonstrate that he is not a spent force.

Helima Croft is the head of global commodity strategy and MENA Research at RBC Capital Markets, LLC. RBC Capital Markets, LLC, is a sponsor of the 2023 Atlantic Council Global Energy Forum.

Leadership insight

Nuclear energy is vital to ensuring energy security and an affordable, sustainable, and resilient energy system now and for the future

By Sama Bilbao y León

We keep hearing “Nuclear energy is back.”

I dare say nuclear energy has been here all along.

What is back is the recognition that nuclear energy is an essential element of our existing energy systems, with enormous positive impacts in terms of carbon-free electricity, energy independence, and accessible and affordable power. What is perhaps new is the realization from governments, large energy users, the finance community, the media, and the public that nuclear energy needs to play a greater role in the clean energy systems of the future if we are serious about reaching the Paris Agreement goals in a cost-effective and socially equitable manner.

Today, more than four hundred nuclear power reactors in thirty-two countries on every continent are quietly operating in the background, providing people across the world with 24/7 low-carbon energy, independent of geopolitical pressures, the weather, or the season. They have an incredibly small footprint, in terms of land, fuel, and raw material use, as well as the lowest lifecycle impacts of all electricity generation options.¹⁴

Nuclear energy is today the second-largest source of low-carbon electricity—the largest in OECD countries—and over the past fifty years, the use of nuclear power has reduced CO2 emissions by over 70 metric gigatons—nearly two years’ worth of global energy-related emissions.

Events during the second half of 2021 and the first half of 2022 have brought energy security firmly to the top of the political agenda. While the current energy crisis has been prompted by a series of extraordinary events, the vulnerability of many energy systems has long been predicted. Energy woes in many parts of the world are the result of decades of short-sighted policies, lack of investment in basic infrastructure, and dysfunctional energy markets. This has allowed the premature shutdown of nuclear power plants and an overreliance on intermittent renewables solely backed up by fossil fuels.

When the price of oil on world markets increased dramatically in 1973, several major energy importers reviewed their energy policies and took steps to reduce their vulnerability to political and economic uncertainties. Many countries rapidly adopted nuclear power for electricity generation, with construction starting on almost 200 gigawatts (GW) of nuclear power plants in the decade that followed. Although almost 50 years have passed since then, the lessons learned are now more pertinent than ever, with geopolitical, economic, and availability implications for countries that rely on energy imports.

Despite enormous investment in renewable energy and the carefree perception of much of the Western world that we are making progress in addressing climate change, the percentage of electricity that comes from low-carbon sources today (37 percent) is almost unchanged from the mid-1980s.¹⁵ Currently only countries that produce most of their electricity from hydropower, geothermal, or nuclear energy, or a combination of the three, have successfully decarbonized their electricity grids. With global electricity use expanding by at least 50 percent by 2050, and the global population projected to increase to almost ten billion, it is crucial to use cost-effective and proven solutions that provide secure access to 24/7 low-carbon electricity to everyone.

Historically, nuclear energy has proven to be the fastest way to increase populations’ access to low-carbon electricity, and a catalyst for socioeconomic development. Thanks to its energy density, nuclear energy is immune to severe fuel market fluctuations. It can also operate for at least sixty to eighty years, making nuclear one of the most affordable, secure, 24/7 energy sources currently available. It also generates thousands of long- term, high-pay, quality jobs, along with substantial socioeconomic spillover in local, national, and regional economies.

Beyond electricity, which accounts for only one-fifth of total energy use, nuclear enables the rapid decarbonization of the entire economy via dispatchable low-carbon heat. This heat is ideal for industrial processes, district heating, or hydro- gen and synthetic fuel production.

Ambitious yet realistic net-zero climate scenarios performed by reputable independent organizations such as the Intergovernmental Panel on Climate Change and the United Nations Economic Commission for Europe forecast a need for 1250 GW of nuclear capacity by 2050.

If we are to keep the Paris Agreement’s 1.5-degree Celsius target within reach—in a cost-effective and socially equitable manner—we urgently need significantly more nuclear energy. New build rates for nuclear need to ramp up to 50 GW per year over the next ten years and stabilize at that level through 2050.

Now more than ever, it is crucial for governments to put in place clear and pragmatic policy actions to facilitate and accelerate the deployment of nuclear energy. Such actions include establishing a level playing field for all low-carbon technologies and reforming energy and electricity markets to recognize the security and reliability of nuclear power. It is also very important to recognize nuclear energy as one of the investable technologies under the various environmental, social, and governance (ESG) and sustainable finance frameworks across the world.

Once the value of nuclear power is fully recognized by policies and markets as a way to provide price stability as well as long-term predictability of revenue, investment will flow into new nuclear energy projects and incentivize the development of stable supply chains.

When facing the challenge of COVID-19, the pharmaceutical community rallied researchers, regulators, policymakers, and industry, uniting them and enabling them to find a way to deliver lifesaving vaccines in record time. This energy crisis presents a similar opportunity, and nuclear is uniquely placed to contribute significantly to both clean electricity and non-electrical uses by 2050. To achieve this, the nuclear industry and decision-makers all need to work together with a fast-track “Apollo-style” program mindset.

We have less than thirty years to reach net zero. Nuclear energy offers a golden opportunity to build a cleaner, more equitable world, in which everyone has secure access to clean abundant 24/7 energy and a high quality of life.

Sama Bilbao y León is director general of the World Nuclear Association.

Chapter 2: The pursuit of market stability

Essays

It’s time to focus on making lasting carbon reductions

By Majid Jafar

Financing a sustainable and inclusive energy transition with an eye toward COP28

By Bernard Mensah

Tackling the global energy crisis in 2023 requires a greater emphasis on energy security

By Steven Kobos

Road to COP28: Why the growth of nuclear must be part of the net-zero solution

By H.E. Mohamed Al Hammadi

Electrification and decarbonization: the UAE as a springboard for action for 2023’s top two priorities

By Roger Martella

Since the onset of the pandemic, energy markets have experienced significant volatility, a trend that, under the current geopolitical climate, was sustained throughout 2022. And while oil and gas prices often garner the most headlines, the past year was unique in that electricity prices witnessed wild swings as well; at one point, European power prices reached the equivalent of $1,000 per barrel of oil.¹⁶ However, for the United States and, especially, for Europe, the underlying cause of what might previously be considered unfathomable power market prices points to an imbalance in the natural gas market.

While the increase in global natural gas and crude oil prices predates Russia’s invasion of Ukraine, there was an undeniable price spike after February 24, 2022. Following the invasion, a combination of constrained supply and international sanctions against Russia further affected prices, with the cost of natural gas in early autumn rising higher due to European efforts to fill its storage facilities before winter, including through imports of US liquefied natural gas (LNG). These challenging market conditions were com- pounded by weather-induced demand following record-busting summer heatwaves, including one that saw temperatures in the United Kingdom soar 36 degrees Fahrenheit (20 degrees Celsius) above normal for the country.¹⁷ As the war in Ukraine carries on, it is no surprise that, among survey respondents, the dominant explanation for price volatility in 2022 is the use of energy for political leverage, cited by 49 percent of respondents.

The events of 2022 illustrate how instability in conventional energy markets can weigh on the global economy and impact the public debate about how best to pursue an inclusive and equitable energy transition. Global upheaval in natural gas trade over 2022, however, did little to dissuade respondents of natural gas’ utility to global market stability. Respondents to the 2022 survey continue to see a long-term role for natural gas, consistent with the perspective of respondents in 2021. In fact, the majority (56 percent) believe that natural gas has a permanent future in the energy mix, although many also predict total consumption will decline somewhat. Meanwhile, among those who say the world will phase out gas, almost all think that the process will take decades.

While general consensus about the role of natural gas has not extensively changed over the past two years, the most recent survey did reveal pronounced geographic shifts. MENA respondents are now more likely than last year’s respondents from the same region to see gas as a destination fuel with a permanently large share of the market. The proportion of Europeans predicting that status for gas dropped markedly, from 15 percent to 6 percent, and now, for the first time, more than half believe that the fuel will eventually be phased out. The supply shock of 2022 may not just have an effect on the Russian market for gas in the region; from a European perspective, it could reduce the market overall.

Moving forward, the turmoil of 2022 has led to little change in the perception of the primary driver of energy price changes in the coming decade: about a third of respondents see unpredictable market fundamentals as the top cause of energy price volatility. As in the prior year, however, those who see a global shift away from fossil energy occurring in rapid fashion (energy transition bulls) more often point to the risk of countries seeking geopolitical leverage as the primary market driver. On the other hand, those who are skeptical of the world’s ability to wean itself from reliance on oil and gas (energy transition bears) more frequently point to a lack of investment due to environmental, social, and governance (ESG) factors and unpredictable market fundamentals, which they see as the leading cause of greater energy price volatility in the decade ahead. Interestingly, the total number of respondents citing use of energy for geopolitical leverage declined by six percentage points to 23 percent, a change that perhaps reflects the view that Russia’s shift from speculative to active hostility results in its diminished ability to leverage energy for geopolitical gain.

Starker differences in opinion emerge when looking at survey data through an industry lens (i.e., oil and gas respondents versus those from zero-emission industries such as renewables and nuclear). While about a third of both groups think that unpredictable fundamentals will be the biggest driver of volatility, their other responses diverge. Survey participants that work in the oil and gas industry reject the idea that profit seeking will be a leading issue in markets. Instead, they assert that green-driven underinvestment will play a more substantial role than even market fundamentals. Respondents working in clean energy see geopolitics as a major cause of market uncertainty, and one in six respondents also point to producer profit seeking.

Even assuming those in the clean energy sector are correct and the risk is diminishing, as 2023 progresses and Russia’s aggression persists, policymakers and the private sector would be wise to consider how to mitigate the geopolitical risks of energy. As our essay authors in this chapter explain, the antidote is investment.

Investing in the old energy system and the new is not an either-or proposition. New oil and gas projects are needed to avoid geopolitically motivated volatility and ensure as smooth an energy transition as possible. Stable energy markets are needed to guarantee societal buy-in for the transition and avoid empowering anti-decarbonization populists. Longer-term investments in clean technologies and their supply chains can maximize the geopolitical benefits of distributed energy production and avoid future supply shocks. In all cases, the diversification of all facets of the energy system is key.

Partner perspective

It’s time to focus on making lasting carbon reductions

For years, policymakers focused on novel solutions to tackle one leg of the energy trilemma—pushing renewables at the cost of hydrocarbons. 2022 taught us that real cuts to carbon emissions require reliability and affordability to also be in balance.

By Majid Jafar

The year 2022 will be remembered as one of economic pain and missed opportunities, as the first truly global energy crisis took hold. After years of pushing renewable energy projects at the cost of oil and gas development, almost every government from Europe to the Americas has found itself reversing some of those policies or putting them on hold to overcome the crisis. In turn, policymakers have turned to energy producers from Venezuela to the Middle East and North Africa to boost energy flows and even reopened old coal-fired plants.

In the United States, the Biden administration, which has promised a clean energy revolution, called for a suspension of gasoline taxes, and lobbied Saudi Arabia to pump more oil. In Germany, concerns that the Mittelstand would not be able to keep the lights on sent leaders scrambling to secure supplies of liquefied natural gas (LNG) on world markets, pricing out developing countries. And in the United Kingdom, mothballed coal power plants were restarted as policymakers urged residents to lower their thermostats in a bid to cut energy demand.

The biggest lesson in this human-made crisis is that the path to the carbon transition is just as important as the destination itself. Policies that glossed over the importance of resilience in the energy system meant supply shortfalls quickly had massive economic and political impact. That may ultimately hamper long-term efforts to make lasting reductions in the world’s carbon footprint, which is the ultimate goal.

The International Energy Agency estimates that, to reach net-zero emissions by 2050, annual investment in energy supply must reach $5 trillion a year; the energy crisis, and the chaotic response to it, may have dampened enthusiasm for that level of investment.

Like good health, it was easy to forget about energy supply when it was plentiful, but it became central as soon as shortages began in 2021. In the case of energy supply, however, shortfalls are experienced more like a heart attack to the economy.

Investment shortfall

Sadly, this was a predictable and preventable crisis. For years, an estimated $300-billion shortfall in investment in oil and gas has been met with warnings of impending shortages. On average, the world loses four to five million barrels a year from natural decline in existing oil fields, even if demand were steady. Significant investment is needed to maintain production levels, but that investment wasn’t being made to scale.

Worse, the focus on climate-lulled policymakers into believing that oil and gas will be obsolete, leading financial markets to shy away from long-term investments in the sector. This was common across the energy system: underinvestment in nuclear power, for example, meant even further energy supply shortfalls.

Investment in renewables did not keep pace with the lost energy supply either. In 2021, 13.5 percent of global primary energy came from renewable technologies, representing double-digit growth over recent years, but far from replacing any other source of energy. More significantly, two-thirds of that total actually came from existing hydropower, biomass, and other sources which have been impacted by drought and other weather challenges. Most projections agree that renewable energy sources will remain just one part of the energy mix.

The third major challenge has been the shutdown of nuclear power plants in Europe and the commensurate increased reliance on coal in some countries, which proved self-defeating just as energy demand rose in the post-COVID recovery period. As nuclear is phased out from some European countries, the United States, Japan, and others have taken a renewed interest in nuclear. However, it may take years to bring the next generation of reactors online.

By 2022, years of chronic underinvestment across the energy spectrum and rapidly growing demand, particularly from the developing world, turned a supply imbalance into a global crisis. The conflict in Ukraine simply accelerated the crisis just as demand began to spike due to the global economic recovery.

Putting the developing world up front

Nowhere will these factors have a bigger impact than in the developing world, where many view the energy crisis as a problem created elsewhere that they must now pay for. Policymakers in the developing world say they will ultimately bear the biggest burden in tackling the effects of climate change, despite having had a small, even negligible, role in creating it.

Unlike the rich world, developing countries face a notably different set of considerations. As energy demand in the developing world climbs at double digit rates, current systems remain highly centralized and inefficient. Traditional regulation has been ineffective, and basic access to energy remains limited, with many suppliers operating at a net loss. Many consumers are subsidized, but subsidies aren’t always well targeted, and can often lead to inefficient consumption patterns. Ultimately, the ability to pay for new infrastructure is limited.

With barely a fraction of the carbon footprint of developed countries, developing countries in Africa and Asia say they are being forced to give up access to traditional low-cost energy supplies just as they enter a stage of rapid growth. With more than one billion people still lacking access to basic electricity service, the pressure to eschew traditional energy systems risks dampening badly needed economic growth. The result, especially in the developing world, is an increase in energy poverty even as demand continues to rise.

It behooves policymakers to enable the developing world to move to lower carbon emitting fuels such as natural gas, as well as solar power, to begin the process of cutting emissions without burdening their economies with major costs they cannot afford.

Taking a more holistic view

There is another path forward to a more sustainable world. The global energy crisis has lent credence to the concept of the energy trilemma, which encourages a holistic view of the energy system to bring about real change to the system. The trilemma posits that healthy energy systems must be in careful balance with supply availability, affordability, and sustainability to work efficiently. Fundamentally, climate change is a matter of emissions, not of energy consumption. To reduce the world’s carbon footprint, we must cut carbon emissions for a given amount of energy consumed. Many policies in recent years have targeted energy production, effectively starving the world of supply even as demand continued to rise.

Maintaining this balance in the context of the energy transition is challenging as trade-offs between equally critical priorities become clear. By balancing resilience and affordability with sustainability, policymakers can ensure that the carbon transition process continues and the effects bring about true change.

Finding balance in the trilemma also helps clarify priorities and defines long-term roadmaps. For example, ensuring energy resilience, especially with cleaner burning natural gas, to avoid future supply shocks as energy systems are electrified will be crucial. Similarly, hydrogen from natural gas or electrolysis will further reinforce resilience in the system. So, too, will an embrace of modern nuclear power.

Finally, a more holistic view of the trilemma enables greater predictability in the energy system even as renewable energy adds further uncertainty due its intermittent nature. Spurring investment in resilience will require steadily extending measures with more certainty about which energy sources can be used, for how long, and for what purpose.

Politicians and policymakers, particularly in the West, must now confidently stand before voters to champion a more balanced energy system that includes oil and gas, nuclear power, and renewables. The net result of this balance is that real cuts in emissions will take hold; investment in renewables will continue, but not at the cost of resilience and balance.

The energy shock of 2022 will change the world in countless ways. But it can also be a moment to trigger smarter policy and the investment needed to resolve the conflict between resilient energy supply and lower carbon emissions.

Majid Jafar is the chief executive officer of Crescent Petroleum and a member of the Atlantic Council’s International Advisory Board. Crescent Petroleum is a sponsor of the 2023 Atlantic Council Global Energy Forum.

Partner perspective

Financing a sustainable and inclusive energy transition with an eye toward COP28

By Bernard Mensah

Climate change demands an urgent call to action. Identifying the problem—or indeed the solution—is the easy part. We must slash carbon emissions to maintain a livable planet.

Taking the goals set out in the Paris Agreement as the aspirational baseline, COP27 highlighted that there remain large ambition, policy, and implementation gaps. Crucially, COP27 underlined a lack of alignment between developed and developing countries regarding the best way forward with factors beyond climate coming into play. Before the climate talks even began, host nation Egypt said soaring food and fuel prices combined with ballooning foreign debt complicated its climate ambition.¹⁸

This lack of alignment across countries means that we are, at best, currently on a slow route to victory. However, finance can play a critical role in accelerating the path forward. Finding the right balance and interplay between public and private finance will be a key catalyst. And importantly, innovation in finance can help ensure a just transition that allows the developed and developing worlds to be better aligned towards our shared goals.

The needs are vast: worldwide, 770 million people still live without access to electricity.¹⁹ Alongside the expansion of renewables, significant investment will be needed to build sustainable grid capacity, introduce electric vehicles, and produce green hydrogen for industrial use.

According to a report commissioned by the governments of Egypt and the United Kingdom ahead of COP27, cutting carbon emissions, strengthening climate resilience, and dealing with historical loss and damage resulting from climate change will require an estimated total annual investment in developing countries (excluding China) of $1 trillion by 2025 and over $2 trillion by 2030.²⁰ While the bulk of that finance must come from the private sector, governments can enhance the effectiveness of each dollar of private capital raised.

For example, investors’ perception of risk is far higher in emerging markets. According to the International Energy Agency, the cost of capital for a solar project can be as low as 2.6 percent in Europe and as high as 10 percent in India— and that was before the recent Federal Reserve interest rate hikes.²¹ Arguably, on a climate risk-adjusted basis, this risk premium is much too high and leads, therefore, to a suboptimal allocation of resources and a slower route to our destination.

There are several ways governments can play a part in reducing this risk premium:

• Regulation. The UK is a world leader in off-shore wind, with around 13 gigawatts installed.²² Alongside its island geography, “contracts for difference” play a critical role in the UK’s regulatory framework. These incentivize private investment by providing revenue certainty, while being awarded through an auction system to keep costs down.
• Pricing. Carbon pricing tilts the market away from heavy emitters, but there are just seventy carbon taxes or emissions trading schemes worldwide, counting all country, city, and regional initiatives.²³ Most of these schemes currently price carbon below the $75 a ton the International Monetary Fund believes is necessary to limit global warming to 1.5 to 2 degrees Celsius above pre-industrial levels.²⁴
• Subsidy. The Inflation Reduction Act, the largest climate investment in US history, provides a range of green incentives, including tax credits for companies that build sources of clean energy, as well as extending and bolstering tax credits for the purchase of electric vehicles.

Public investment can also reduce the risk premium on private capital. The Just Energy Transition Partnerships—in which rich countries club together to speed the transition away from coal in developing nations—offer a model of how this can be done. The latest partnership to be announced with Vietnam brings together $7.75 billion in pledges from rich countries with a plan to raise a matching $7.75 billion from Glasgow.

Financial Alliance for Net Zero (GFANZ) institutions, including Bank of America.²⁵ This has been modeled on the partnerships announced between donor governments and both South Africa and Indonesia at COP26 and the 2022 G20 summit, respectively, providing a possible public-private template for achieving an accelerated phaseout of coal.

There is also an urgent need for multilateral development banks and other public international financial institutions to play a bigger role as facilitators in the public-private partnerships required to drive and achieve a just transition. As an independent report commissioned by the G20 noted recently in July, these institutions could successfully recalibrate and refine their risk appetite around these partnerships by paying less attention to ratings agencies and more attention to prioritizing the risks their shareholders specify.²⁶ Such recalibration would allow them to deploy more money, or to put capital to work with a higher risk appetite, mobilizing significant and much-needed private debt and equity capital as a result. Current capital mobilization ratios are around 1:1. These ratios need to be increased by an order of magnitude to 10:1 to successfully deliver the quantum of climate finance currently needed in emerging markets. The fact that reform of the public finance architecture was included in the cover text of the COP27 decision in Sharm el Sheikh suggests that there is now sufficient momentum to achieve the necessary reforms.

There is scope for further creative thinking around the relationships between rich countries and developing ones. UK Export Finance recently became the first export credit agency in the world to introduce a climate debt clause, thereby allowing low-income countries to defer repayment in the event of a climate shock.²⁷ The Seychelles has agreed to a debt-for-nature conversion, in which debt held by European countries was bought with funds from the Nature Conservancy, a conservation organization, freeing up finance to protect swaths of the Indian Ocean. Several other such deals are in the pipeline and offer opportunities to reduce debt burdens, protect marine livelihoods, and ensure that nature continues to play its vital role in regulating the climate.

The scale of the challenge is vast: globally, fossil fuels still account for more than 80 percent of energy consumption.²⁸ But the present challenges have their analogs in the past. During the first industrial revolution, banks played a critical role in supporting those entrepreneurs with the best chances of success and putting capital to work.²⁹ There is undoubtedly deep value to be unlocked in the net-zero transition, but it will only be released where innovation and collaboration happen at scale and speed.

That is both the challenge and the opportunity in the months between now and COP28: to drive reform, establish new partnerships and advance yet more public-private collaboration. We need to decarbonize the existing system as well as green the new one. We need to find an inclusive and just approach—an approach that reduces emissions at speed and scale while not holding back progress, especially in the developing world. We need to find a faster route to success.

Bernard Mensah is president of International for Bank of America and the chief executive officer of Merrill Lynch International (MLI). Bank of America is a sponsor of the 2023 Atlantic Council Global Energy Forum.

Partner perspective

Tackling the global energy crisis in 2023 requires a greater emphasis on energy security

By Steven Kobos

Today, the world is facing an energy crisis that is unprecedented and arguably the most significant energy market disruption since the 1970s. Although initial headwinds were seen in late 2021, Russia’s invasion of Ukraine and subsequent curtailment of gas flows into Europe exacerbated the situation, resulting in “the first truly global energy crisis,” according to the International Energy Agency (IEA). Many countries are adopting energy policies that take into consideration security of supply, food security concerns, and the advancement of climate change goals. It has become increasingly clear that tackling the global energy crisis will require policymakers to place a greater emphasis on enhancing energy security to navigate the challenges ahead.

Energy market outlook

With much of the global energy market still in flux, predicting how events will unfold in the year to come is difficult. However, based on what we know today, we can make some broad assumptions for the 2023 energy market.

The global liquefied natural gas (LNG) market is expected to remain tight in 2023, due to the lack of new liquefaction projects coming online over the next twelve months. Global gas markets will continue to balance demand destruction and inventories rather than LNG supply growth. Any additional natural gas supply disruptions in 2023 will increase volatility in an already tight market.

2023 will be the first full year that Europe will not have significant Russian pipeline gas imports. An increase in the deployment of flexible LNG import infrastructure will allow substantial access to alternative natural gas markets and help ease the import bottlenecks experienced in 2022—mainly in northwestern and southern Europe. As an example, on December 28, Excelerate’s floating storage and regasification unit (FSRU), the Exemplar, arrived at the port of Inkoo, Finland, to provide critical regasification services to Finland and the Baltic countries for the next ten years. Another Excelerate FSRU, the Excelsior, has been chartered to Germany on a five-year contract beginning in the first quarter of 2023.

China’s changing coronavirus policies will be an important factor in global energy demand. The country’s zero-COVID policy decreased China’s gas demand in 2022, providing some relief for global gas markets. The easing of China’s COVID restrictions, however, will generate greater energy consumption in the world’s most populous country. The repercussions will be felt in the Asia-Pacific region and beyond.

If the war in Ukraine extends well into 2023, the competition for finite LNG supply will remain intense. This will force spot-dependent importers in regions like Latin America and South Asia to look for alternative sources, including domestic gas production and other fuel types.

Food security

Too often, energy security is mistakenly viewed only through the narrow lens of being able to reliably power homes, businesses, and transportation. The actual implications of energy insecurity are much broader in scope. Energy is the driving force of transformative socioeconomic opportunities. It touches on every aspect of sustainable development—none more important than food security. Throughout the agro-industrial supply chain, energy is needed, from making fertilizer for growing crops to harvesting, processing, preserving, transporting, and cooking. It is inevitable that populations that lack access to secure and flexible energy infrastructure will experience some form of food insecurity.

Energy transition

The current energy crisis is also influencing global perspectives on the transition to a clean energy future. While higher fossil fuel costs may drive developed countries to accelerate their net-zero plans, it is likely that capital-constrained developing countries may revert to more carbon-intensive fuels like oil, coal, and even wood as major energy sources. Coupled with lingering effects of the global pandemic, the IEA estimates that the energy crisis means “75 million people who recently gained access to electricity can no longer afford it, and 100 million people may no lon- ger be able to make food with clean fuels, returning instead to biomass.”³⁰

As we gather in Abu Dhabi for the Global Energy Forum, we also look ahead to COP28 to be hosted in Dubai from November 30 to December 12. Between these events, this question must be addressed: can a just transition be achieved, one that allows governments to balance energy security with climate action?

If we are to tackle the global energy crisis in 2023, it is imperative that the energy industry and government leaders enter the year with a renewed focus on energy security. Policymakers must continue to equip their countries with the flexible infrastructure needed to weather the figurative and literal storms ahead. Through a collective partnership, we will all rise to meet the myriad challenges that remain at the top of the global energy agenda.

Steven Kobos is the president and chief executive officer of Excelerate Energy. Excelerate Energy is a sponsor of the 2023 Atlantic Council Global Energy Forum.

Partner perspective

Road to COP28: Why the growth of nuclear must be part of the net-zero solution

By H.E. Mohamed Al Hammadi

At the opening of COP27 in Sharm el Sheikh, UN Secretary General António Guterres warned world leaders that we are engaged in “the fight of our lives” for a safe and livable planet.

His pivotal address served as a stark reminder that despite years of climate policy, sustainability pacts, and carbon targets, global temperatures keep rising, greenhouse gases keep building up, and we are fast approaching the point of no return in our battle against global warming.

The UN Framework Convention on Climate Change (UNFCCC) recently stated that the combined pledges of 193 countries put the world on track for a temperature increase of 2.5 degrees Celsius by the end of the century—well short of the 1.5 degrees target needed to avoid the worst effects of climate change. In fact, the data from the UN’s Intergovernmental Panel on Climate Change shows that carbon emissions would need to be cut 45 percent by 2030 against 2010 levels to limit temperature rise to 1.5 degrees.

At the conclusion of COP27, despite the creation of a fund to help developing nations face the devastation of climate change, negotiations failed to secure stronger commitments on cutting greenhouse gas emissions enough for them to peak by 2025, or on phasing down unabated fossil fuels.

The message to the world was clear: we are failing to fulfill our net-zero promises and must take faster and more decisive action. We must use the realistic and feasible solutions we have in our hands today and adopt a transformational approach to change if we are to avoid a climate catastrophe.

Nuclear energy holds the potential to revolutionize our clean energy transition. Indeed, global experts agree there is no credible pathway to net zero without it.

The International Energy Agency (IEA) projects that nuclear-generated electricity must grow by more than 109 percent in order to achieve net-zero by 2050. And while we have seen a resurgence of support for investment into nuclear technologies in the past two years—spurred by unprecedented social and economic disruption—it is simply not enough.

While we saw a number of nuclear energy organizations represented at COP27, if we truly want to shift the dial on climate action toward the road to COP28, now is the time to completely clear the way to demonstrate the true role of nuclear energy today, and ensure it is supported to make an even greater contribution to our sustainable future.
The good news is the UAE provides the best-practice blueprint the world needs to get this done.

In little over a decade, our country has illustrated that nuclear as part of a balanced clean energy portfolio can rapidly decarbonize the power sector and deliver an economically viable and time-critical solution to clean energy security. Today, our plant at Barakah is the largest clean electricity generator in the Arab world, producing electricity 24/7 with zero emissions. Once all four units are fully operational in the near future, it will account for 25 percent of the UAE’s Nationally Determined Contribution for emissions reductions.

As an essential component of the UAE’s net-zero strategy, nuclear energy supports our nation’s energy security by diversifying our energy mix and freeing up natural gas that would have otherwise been used for domestic electricity production—an amount equivalent to around 200,000 barrels of oil per day. This achievement will allow us to double liquefied natural gas (LNG) exports and support our aim of becoming a net gas exporter by 2030.

The electricity generated from Barakah is also providing the clean electricity needed for local companies to access environmental, social, and governance (ESG) funding and investment. Through the Abu Dhabi Clean Energy Certification (CEC) program, domestic enterprises can demonstrate their green credentials and decarbonize their operations through the purchase of clean energy certificates of renewables and nuclear energy.

But the value of our investment in nuclear does not end there. We are building a thriving net-zero economy: creating entirely new value chains, opening new markets, and improving the intellectual wealth of our nation.

By incubating strategic investments in nuclear energy, we are accelerating research and development in nuclear science, small modular reactors (SMRs), and advanced reactor designs. We are also driving innovation in related fields and building crucial links to other clean fuels such as hydrogen, where nuclear is set to play a vital role in delivering the growing amounts of hydrogen needed for net-zero with the lowest carbon foot- print possible.

Our commitment to nuclear as part of a clean energy system places us at the forefront of clean energy leadership worldwide and is powering our sustainable growth. The UAE’s recent strategic partnership agreement with the United States to invest $100 billion to produce 100 gigawatts of clean energy globally by 2035 is a demonstration of this. We are looking forward to working with our US partners to promote advanced reactor designs and SMRs, and to promote nuclear energy as a clean energy solution to drive emissions reductions.

There is no doubt that our world needs large-scale decarbonization and energy security, now more than ever. By adopting a long-term, holistic, and data-based approach to energy policy that prioritizes diversification, decarbonization, and electrification, the UAE model has shown how this can successfully be achieved.

As we look ahead to COP28, my hope is that our experience can encourage others to move past the outdated misperceptions and politics that stand in the way of greater nuclear energy uptake and allow others to access the huge potential this technology offers as the net-zero solution our world so desperately needs.

H.E. Mohamed Al Hammadi is managing director and chief executive officer of the Emirates Nuclear Energy Corporation (ENEC). ENEC is a sponsor of the 2023 Atlantic Council Global Energy Forum.

Partner perspective

Electrification and decarbonization: the UAE as a springboard for action for 2023’s top two priorities

By Roger Martella

In 2023, the United Arab Emirates is taking center stage in the global efforts to address climate change and sustainability. Leaders will soon gather for Abu Dhabi Sustainability Week, kicking off a year of events leading up to the UAE-hosted COP28 at the end of the year. This momentum, following on the heels of the successful implementation COP27 in Egypt, will help continue driving positive action in emerging markets and globally for the decade to come.

The efforts that will be in focus at these events align closely with two key priorities in 2023: electrification and decarbonization. Private industry and governments must partner to make progress on both goals in parallel: growing access to electricity, while decarbonizing the energy, transportation, and industrial sectors.

Electrification

Entering the new year, access to reliable, affordable, and sustainable electricity is top of mind for billions of people globally—in a way that it has not been in decades. Nearly 775 million people lack access to electricity. However, even for those with more reliable access, extreme weather events, global conflicts, cybersecurity, and growing demand are increasingly raising questions about the security of supply. At a recent White House Summit, US Secretary of Energy Jennifer Granholm said the United States needs a “tripling” in the rate of electrification and “new architecture.” Many nations are looking at similar goals.

Access to power is a core sustainable development right. As the global community takes important action for climate change—which includes placing increasing demands on the grid by electrifying other sectors—we must make the right investments to ensure everyone has access to the lifeblood services associated with electricity. Thus, setting the right path for electrification is a 2023 priority.

In many countries, work must begin now on grid digitization and modernization to make grids smarter and more robust. That means adding advanced distribution networks, hybrid systems, and energy storage to manage the complex grid requirements of tomorrow’s renewables-heavy grid, as well as the even longer-term multifaceted, multi-directional grids of a net-zero future. An essential part of building this grid is cybersecurity and digital defenses.

Modernizing transmission and distribution infrastructure means using the latest protection, control, monitoring, and diagnostic technologies and software to monitor the health of equipment across the system and better manage key infra- structure, such as substations.

In other parts of the world, it’s not just about grid resilience. It’s about building the grid in the first place. These new systems can feature world- class digitization and resilience systems, leap-frogging older transmission and distribution infrastructure.

Fortunately, while the risks are significant, so is the sense of urgency and action. The International Energy Agency says that global investment in power grids should grow from $260 billion today to $820 billion in 2030. In 2022, GE saw nations increasingly prioritize grid infrastructure in unprecedented ways through investment. In 2023, the focus must be on how to deploy these commitments swiftly and strategically to ensure the grid is well positioned to meet growing demands and threats and to succeed in decarbonization goals.

Decarbonization

Building a more resilient grid enables success for the second priority: progress toward decarbonization goals. As a global energy company, we think of decarbonization in two ways: (1) deploying diverse generating technology today to make progress in lowering both emissions and carbon intensity, while (2) investing in the breakthrough technologies of tomorrow to achieve net zero.

The near-term reductions are dependent on investing in a portfolio of renewable energy, efficient gas power, and advanced nuclear to reduce emissions while generating more electricity. Our overarching goal is to grow wind as quickly as possible and in increasing amounts over this decade. Growing support for nuclear and hydro energy such as pumped storage in policies around the world is also welcome. All these technologies contribute to decarbonization by enabling energy production while lowering greenhouse gas emissions.

Importantly, efficient gas power also has a strong role to play in decarbonization plans. Deploying gas is frequently the fastest way to reduce emissions while enabling a strong foundation for building renewables and other generation assets. Gas turbines have a pathway to decarbonization—both pre-combustion with hydrogen and post-combustion with carbon capture and sequestration. Egypt should be applauded for a strong emphasis on pathways to decarbonizing fossil fuel technology at COP27—a theme we anticipate will continue at COP28.

While this diverse mix of assets will help decarbonize the energy sector this decade, these technologies will not be enough to meet net-zero goals. Research must continue on break- through technologies as well as implementation of pilot projects and full-scale deployments in areas such as low-carbon hydrogen and carbon capture utilization and storage (CCUS). Small modular reactors, an important technology for reliable, zero-carbon baseload electricity, also require more study and policy action to demonstrate government commitment and build public support for this safe, affordable, and nimble nuclear technology.

Taking action in 2023 to succeed for electrification and decarbonization

The start of a new year is always a time for reflection, for goal setting, and for optimism. The world is now three years into the “decade of action” on climate change, reinforcing the imperative for progress. For us to advance our goals of electrification and decarbonization, transitioning from discussion to implementation is essential. The actions we take now will set us up for success when we meet again in the UAE in November. In turn, that success will create the global momentum to carry us into future years, on a sustainable and equitable trajectory to deliver on a net-zero future for our communities and our planet.

Roger Martella is the chief sustainability officer of GE and vice president of GE Vernova Government Affairs and Sustainability. GE is a sponsor of the 2023 Atlantic Council Global Energy Forum.

Chapter 3: An inclusive energy transition

Essays

The year of COP28: Climate action requires financial empowerment and collaboration

By H.H. Sheikha Shamma bint Sultan bin Khalifa Al Nahyan

To travel the net-zero path, we must rethink international cooperation

By Francesco La Camera

The nexus between climate, water, food, and energy

By H.E. Yasmine Fouad

Just energy transition for Africa

By Kevin Kariuki

For a just energy transition, a new approach to mining is critical

By Adam Matthews

We can address climate change by accelerating the just energy transition

By Rajiv J. Shah

The landmark Paris agreement of 2015 set a goal of limiting warming to 1.5 degrees Celsius (compared to preindustrial temperatures) to avoid catastrophic effects of climate change. Six years later, during Glasgow’s conference in 2021, many countries made pledges to phase down coal, cut methane emissions, and stop public funding of overseas oil, gas, and coal development.

This year, the United Arab Emirates will take over the COP presidency from Egypt following COP27 in Sharm el Sheikh, where an agreement emerged to set up a “loss and damage” fund to support developing countries most impacted by climate change. The COP28 agenda includes a global stocktaking exercise that will review progress on nationally determined contributions (NDCs) to reduce emissions by 2030, which are intended to help ensure that the Paris Agreement’s goals remain within reach. The process, however, is likely to be a somber assessment of the world’s inability to act quickly enough; this could reinforce numerous UN Intergovernmental Panel on Climate Change (IPCC) reports noting that global efforts remain insufficient to limit global temperature rise to 2 degrees Celsius by the end of the century, much less 1.5 degrees Celsius.

The 2023 Global Energy Agenda survey respondents have taken note and are unimpressed with progress to date. When describing progress on climate pledges in their own words, responses generally fall into four categories, which are (with representative examples in parentheses):

Highly negative, in some cases even dismissive (“Impotence, feeble, tokenism”)
Mixed—more negative than positive (“Desultory but positive”)
Mixed—more positive than negative (“Steady but slow”)
Highly positive (“Optimism, politics, profit”)

Although the majority of responses to this question were rather negative, these views represent a very modest improvement in perceptions toward COP26. In the 2021 survey, respondents were about 4.5 times more likely to give a negative evaluation than a positive one. In the 2022 survey, that figure is down to 2.5 times. Interestingly, the tenor of responses is broadly similar across those surveyed. Approximately 77 percent of oil and gas respondents and 83 percent of renewables and nuclear energy respondents feel the world is not following through on climate pledges. Even 63 percent of government employees view progress as slow.

Where the biggest difference in response to this question comes into focus is among geographic and economic groups. When split into North American, European, and emerging market respondents, views on climate progress become more nuanced. While still generally negative overall, about a third from Europe and more than a third from emerging market countries say that the world is making headway on climate pledges. Survey participants in North America, however, have uniformly more negative views. This pattern demonstrates that expectations and perceptions of climate progress are more closely related to locality than industry profession.

The global stocktake, however, offers more than a below-average report card and will also result in a call to action. And it is safe to assume that the UAE aims to ensure parties to the UNFCCC leave Dubai hopeful and with a clear plan to put the world on track to achieve global climate ambitions. That means a comprehensive approach for closing the gap to 2030, one that will likely include an emphasis on mobilizing capital, scaling deployment of clean energy resources, and empowering a diverse and inclusive coalition of stakeholders from youth to industry.

Recognizing the challenges and opportunities ahead, the 2023 Global Energy Agenda survey asked all respondents to describe, in their own words, the key barrier to reaching net-zero emissions. To aid analysis, our team coded each reply into six categories: political will/other political priorities; popular attitudes; cost/insufficient resources; technology cannot fully deliver on future needs; entrenched interests/friction within the system; and general/practical difficulties. Because many answers reflected more than one of these concerns, percentages total greater than 100 percent. The same categories were applied last year to the identical question.

The clear message is that insufficient political will/governmental focus on the net-zero goal continues to act as a dominant barrier. Indicative of this line of thinking, one participant stressed the need to “move from lip service to actual implementation of policies that decarbonize.” Outside of political headwinds, however, respondents from developing nations diverged from their counterparts in the United States and Europe. Invoking the chorus of voices from the climate-vulnerable countries in the Global South that enabled the notion of “loss and damage” to formally enter the UNFCCC negotiations, respondents from emerging markets highlighted cost and insufficient resources as other significant challenges to achieving net-zero commitments. As one person from this group articulated, the quest for net zero will come up against “developing countries’ needs for cheap energy sources to feed and heat their populations.”

Unfortunately, optimism for achieving long-term net-zero targets echoes respondents’ views of progress in achieving COP targets to date. Indeed, the overall response to the 2022 survey on this topic is almost equally divided: 55 percent say attainment of net zero is unlikely, and respondents are evenly split on whether achieving net zero would slow economic growth. As in other sections, parsing responses by geography yielded interesting differences. Respondents from the United States were most pessimistic about reaching net zero by 2050, while those from the Middle East and North Africa (MENA) are the most optimistic.

When looking at respondents by profession, those working in government and collectively in academia, consultancy, and media hew closely to the overall sur- vey results. The big difference, almost predictably, is between renewable and nuclear energy, on the one hand, and between those in oil and gas, on the other. A surprising area of agreement is that both groups remain convinced that achieving net-zero emissions is unlikely (62 percent of oil and gas respondents, and an eyebrow-raising 73 percent of respondents from clean energy). But their views on the economics of the transition differ substantially. Of those in the renewable and nuclear energy sectors, roughly seven in ten think that the shift will not create adverse economic effects, while roughly the same proportion of those in oil and gas say the opposite.

While only time will lend credence to how the economy will affect midcentury goals, anticipating that respondents would have strong perspectives on the global economic outlook in a year defined by unrelenting inflation, the 2022 survey sought insights on which economic risk would most likely slow the energy transition. Survey participants indicate a range of risks, with no single one standing out as an obvious top concern. Most frequently mentioned is a possible recession (28 percent of respondents), while 19 percent say that inflation is a bigger concern. Central bank responses to inflation, which could exacerbate that problem or drive further recession, come in at 10 percent. These three—which collectively worry a majority of those surveyed—are not mutually exclusive; in June 2022, the World Bank highlighted the rising risk of stagflation.³¹

A closer look at the data reveals that Europeans are more concerned than others about a recession and far less about inflation. Respondents from the United States are almost evenly split over the two risks and also more likely to cite concern about the Federal Reserve response. Respondents in emerging market countries are almost as worried as Europeans about recession and as worried as Americans about inflation, but they see central banks as either unlikely or unable to exacerbate problems. Nearly a quarter of those surveyed from emerging market countries, however, are also more likely than other respondents to call insufficient government spending the top risk, a perspective that is consistent with emerging-market views on barriers to achieving net-zero emissions where costs feature heavily.

In an unusual result, a fifth of respondents answered “none of the above” to the question about potential economic barriers to the energy transition. For insight into this result, participants’ responses to related questions suggest that other factors, such as the lack of political will and the inability of technology to deliver net-zero emissions, could account for respondents’ decisions not to select an economic risk. While skepticism persists on whether the world can fully deliver on net-zero goals, without technology there will be no energy transition. To have its greatest impact, technology requires investment to develop, improve, and deploy new and existing low-carbon energy solutions. Two years ago, our survey asked which new fuel technologies would see the biggest rise in investment in 2021. This year, we posed the same question.

Fewer respondents this year chose hydrogen and energy storage than last year, although they still are the most common options. The biggest anticipated investment increase over last year’s responses is in advanced nuclear. Last year, it ranked seventh; this year, it is tied for third with solar power. A renewed interest in nuclear energy is consistent with the International Atomic Energy Agency’s high case projections (which are ambitious but plausible) that that global nuclear capacity could more than double by 2050.³²

Fields of employment show greater variances on the question of clean energy investment. Of those in oil and gas, 17 percent say that carbon capture, utilization, and storage (CCUS) will see the greatest increase in investment. Indeed, more than half of those giving this response in the overall survey are from the industry. Similarly, 34 percent of the clean energy group—the largest segment of whom work in nuclear power—opted for advanced nuclear, choosing it ahead of hydrogen. Interestingly, only 8 percent of observers and commentators from think tanks, consultancies, and media name advanced nuclear as the area likely to see the most growth. Once again, energy producers and industry watchers hold divergent views.

The lack of a clear favorite for clean energy investment is perhaps an indication that governments and private industry are applying an all-of-the-above strategy to address both the energy crisis and transition. As our authors in this chapter propose, however, what’s still needed is greater international trust and collaboration on an equitable transition that takes into account not just energy access, but also its relationship to food, water, and larger societal impacts.

Leadership insight

The year of COP28: Climate action requires financial empowerment and collaboration

By H.H. Sheikha Shamma bint Sultan bin Khalifa Al Nahyan

Climate change is impacting everything from our economies, to our cities and societies, and even geopolitics.

National emergencies such as wars, droughts, and floods have prompted near-term action to mitigate the immediate problem, while long-term food shortages, rampant malnutrition, disease, and other human crises have resulted in the donation of funds and resources to end suffering. This is human nature, and we are inclined to react to such tragedies that affect our fellow humans. However, the images of entire forests being felled, bees disappearing, and the loss of underwater flora and fauna do not necessarily invoke the same emotional or financial response. It seems we have forgotten that we, as human beings, are an integral part of the natural world.

We must, therefore, understand—and perhaps remind ourselves of—the underlying connectivity that environmental degradation has on this array of issues, our social fabric, and, indeed, our very future. We must recognize that we depend highly on our local environments and habitats, often much more than we initially comprehended, or appreciated.

According to the World Health Organization, climate change is expected to cause approximately 250,000 additional deaths per year, between 2030 and 2050, from heat exposure in elderly populations, diarrhea, malaria, and chronic childhood undernutrition.³³

Research by the Massachusetts Institute of Technology found the Middle East will be uninhabitable by 2100 if climate change is not addressed.³⁴

While these predictions may seem imminent, we have an opportunity ahead of us to take action today. It is crucial that we use the year of COP28 to focus on global decarbonization, unlock financial tools for the energy transition, and work for an equitable energy transition.

Decarbonization challenges

Decarbonization is a mammoth task that countries need to grapple with. In 2022, we witnessed just how unprepared our world is, as we face a global energy crisis. Over the years, there have been many promises from nations to invest in the Global South, with not enough being done to support their energy transition. This is partly due to a lack of criteria on where to invest and deploy funds where they are needed.

As much as there are challenges, the present global scenario means we can approach and utilize finance innovation in a very different way. What we need are proper mechanisms in place to finance the journey of decarbonization globally.

We cannot look at decarbonization through a single lens; but rather, we need to take a multidimensional view that includes social, geopolitical, and environmental considerations.

One way for us to unlock these financial mechanisms is by providing early-stage funding for emerging climate solutions and their commercialization. Philanthropists are well-positioned to help find solutions to issues resulting from climate change at a greater scale, thus enabling these platforms to become affordable and readily accessible. Eventually, these solutions have the potential to become more economical than less climate-friendly options, as we have seen occur with solar, wind, and other clean energy sources, thereby becoming the mainstream.

Another area that has been overlooked is human resources; in particular, the ideas, abilities, and efforts of women. In the United States, only 2.4 percent of venture capital funding goes to female founded start-ups, highlighting the distinct imbalance in where capital is funnelled. As the founder of a number of sustainability ventures, I have seen, first-hand, the power of women in government, business, and my field of expertise, sustainable development. If we could attract venture capital and other financing mechanisms to support women, I believe we would witness a paradigm shift.

The road to COP 28

At the heart of tackling climate change is an important word: “collaboration.” We have a long road ahead of us, and one that cannot be travelled alone. This only way to create true impact is for us to interconnect and make a conscious effort to move away from working in silos.

Progress will only be achieved by enabling and energizing an ecosystem that actively participates in realizing one shared vision. I founded the UAE Independent Climate Change Accelerators (UICCA) to be the nucleus that will bring this ecosystem to life, providing advice and recommendations to stakeholders on positive climate action that will facilitate the transition to a green economy. By leveraging innovation with technology and actively engage with the private sector, our aim is to harness a cohesive and integrated way forward. By doing so, we can look beyond our national borders and look to the geographies that need our attention the most. As a matter of urgency, we must prioritize the Global South, as these countries are already experiencing the damaging effects of climate change now, despite the region’s negligible contribution to its cause.

COP28 presents an unparalleled opportunity to break down silos, invest in global climate solutions, and ensure a sustainable energy transition. It is now up to us to leverage the full potential of this opportunity, as we work toward building a greener and more secure future for all.

H.H. Sheikha Shamma bint Sultan bin Khalifa Al Nahyan is the president and chief executive officer of the UAE Independent Climate Change Accelerators. She is also chief executive officer of Alliances for Global Sustainability, co-founder of Aurora50, founder of RESET MENA, and founder of the Sheikha Shamma bint Sultan Sustainability Initiatives.

Leadership insight

To travel the net-zero path, we must rethink international cooperation

By Francesco La Camera

Ending global fossil fuel dependency is a daunting task. The moderate outcome of COP27 is a clear expression of competing priorities and the conflict of interest that countries face in responding to the immediate struggles of energy security, the abundantly evident impacts of climate change, and the shrinking timeline to 2030 by which the Sustainable Development agenda needs to be realized. But knowing and acting are two different things.

How does the world accelerate progress? And ensure net-zero pledges are implemented on the ground?

As the International Renewable Energy Agency’s (IRENA) World Energy Transitions Outlook states, anything short of a radical and immediate energy transition action will defeat our chances of reaching a climate-safe 1.5 degrees Celsius. IRENA sees efficiency and electrification as primary drivers, enabled by renewable power, green hydrogen, and sustainable modern bio-energy. The world must push for renewables as multiplier solutions, available today for a rapid scale-up.

Today, renewables are cost-effective. IRENA estimates that the new renewable capacity added in 2021 could have reduced electricity generation costs in 2022 by at least $55 billion. This is a compelling fact amid concerns around energy prices and the security of supply. Net zero means tripling the annual deployment of renewable power between now and 2030. The technology solutions to take us to 2030 already exist. The immediate next steps need a holistic policy framework and finance at scale to ensure these technologies are deployed strategically and worldwide.

I believe that only through solid partnerships and international cooperation can world governments effectively contribute to the global net-zero ambition and keep development high on the agenda. A new multilateral compact among nations, global finance, and the private sector is needed to deliver systemic change and advance the renewable-centered energy system with opportunities for developed and developing countries alike. Doing this means reimagining the way international cooperation works.

It is evident that energy supply—power in particular—is shifting toward renewables. But the demand side must also change. It requires an end to our ceaseless hunger for new fossil fuels that perpetuate the risks of climate change and threatens to leave behind those who do not have access to modern technologies and finance. IRENA’s Outlook sees investment needs of $5.7 trillion per year until 2030. Hence, investment decisions taken today, particularly the long-lived ones, must be climate-proofed.

Eighty percent of the global population lives in countries that are net importers of fossil fuels. By contrast, renewables are available everywhere, offering a way out of import dependency, decoupling economies from the costs of fossil fuels, and driving energy security, new industrial value chains, and jobs.

A successful transition, however, not only depends on strategies that grow renewables worldwide. We need a new system that is built on the corresponding infrastructure—physical, regulatory, and institutional. This will require all hands on deck to reimagine the system of the future, forge new partnerships, build the interconnectors that link supply and demand, and share know-how to accelerate the global learning curve.

Hydrogen is a good example. IRENA has been at the leading edge of knowledge about hydrogen for many years now. Collaboration is of paramount importance to accelerate the production, delivery, and use of green hydrogen. This will not work without greater connectivity. Countries and industry must collaborate to develop common frameworks to ramp up global hydrogen markets and build trade routes through shipping and port infrastructure to transport hydrogen and its derivatives such as green ammonia.

What the world achieves in the coming few years defines whether its leaders live up to the promise made to the peoples of the world: nobody will be left behind in a climate-safe world. For the energy transition to be fair and equitable, investments must be directed to countries that have not been able to attract investments. A shift to renewables holds a huge potential particularly for Africa, where the GDP could be 6.4 percent higher compared to current policies, enabling a truly green deal for the continent. Only 2 percent of global investments in renewables in the last two decades were made in Africa, with significant regional disparities. This must change. Developing countries need resources to build infrastructure. They need the know-how to develop enabling policies and the human capacity to play their part in the global energy sector’s transformation. Multilateral banks and international financial institutions must not only scale up their green investment portfolios, but also operationalize financing to adequately address capacity and infrastructure gaps with greater results including private capital mobilization.

This is particularly acute in view of rising financial costs associated with loss and damage for developing countries, resulting in a growing debt burden to adapt to climate change impacts.

We understand where the problems lie, we have the solutions, but a fresh look is needed to deliver new approaches and strategies. IRENA’s Assembly in January 2023, which gathers energy leaders from its global membership and partners in Abu Dhabi, will be the first milestone on the global agenda to identify energy transition priorities in preparation for the UAE-hosted COP28 later this year.

Transforming the energy system is an urgent and difficult task. It requires farsighted choices, discipline, and wise investments. Above all, it requires the world to deliver radical action and extraordinary levels of international cooperation. If we don’t put the pieces of the puzzle together, we risk catastrophic failure.

Francesco La Camera is the director-general of the International Renewable Energy Agency (IRENA).

Leadership insight

The nexus between climate, water, food, and energy

By H.E. Yasmine Fouad

The term “nexus” is commonly used to portray interactions between water, food, climate, and energy.³⁵ Each aspect within the nexus either contributes to the production of another or impacts its existence.³⁶ In the 2013 UN General Assembly, the inter-linkages between water and energy sectors in framing the post-2015 development agenda were highlighted.³⁷ Water needed for energy extraction and processing accounts for 2 percent of the sustainable supply in the Middle East and North Africa (MENA), while water abstraction, desalination, and waste-water treatment constitute energy-intensive processes.³⁸ Food is the third pillar for human survival where agriculture is the largest consumer of the world’s freshwater resources. Ultimately, energy, water, and food all impact and are impacted by climate change. I would argue that the famous nexus, commonly referred to WEF (water-energy-food), needs to be rebranded as C-WEF (climate-water-energy-food).

Unfortunately, choices related to management and use of energy, land, and water are taken in isolation and without adequate consideration of the inter-sectoral implications. C-WEF nexus is imperative in devising an integrated framework that would allow for effective monitoring, legislative and control systems.³⁹

Transforming the conventional processes of production and consumption of water, food, and energy is at the heart of climate action. Demand for all three is increasing rapidly. As conventional oil reservoirs in the MENA region get depleted, extraction methods shift to more water-intensive technologies.⁴⁰

Even with improved efficiency alongside a transition to renewable energy sources, water consumption for energy is expected to double by the end of the century.⁴¹

Furthermore, the demand for electricity is expected to more than triple between 2005 and 2050, and without the adoption of end-user efficiency for water applications, electricity demand will increase by a factor of 5.6.⁴²

Water extraction, treatment, and production, as well as end-user and commercial consumption, are energy-intensive processes, making energy and water conservation strategies top priorities. To address growing water demand, renewable energy technologies to extract water, such as solar water-pumping, are implemented in Egypt. In turn, improved water conservation practices can save electricity. A study showed that under a water-saving scenario, 22 percent of electricity could be saved in 2050.⁴³ Employing climate smart agriculture, for example, would result in considerable energy savings. Hence, to withstand current and future pressures, governments must ensure integrated and sustainable management through a C-WEF nexus to balance the needs of people, nature, and the economy.

While achieving net-zero emissions by the middle of this century is critical to limiting climate change, this alone is simply not enough. We must ensure that the clean energy systems are equally available to everyone in the world and that everyone has access to reliable energy that provides a decent quality of life.⁴⁴ Meeting this urgent and massive challenge requires an ambitious, pragmatic, and multi-pronged approach. Because of this nexus’ crucial role in many sustainable development goals (SDGs), decision-makers in all three domains must cooperate and coordinate climate action in an integrative approach.⁴⁵ Developing countries need to hold on to their rights in access to finance and to call for just energy transition pathways that are realistic. It means that both financial and technical support are needed to ensure that new energies are successfully deployed, integrated, and consumed in developing countries.

As one of the most vulnerable countries to climate change, Egypt is taking a leading role toward combatting the global crisis, as it adopts an integrated approach highlighting the C-WEF nexus. The WEF Nexus index value for Egypt is 53.1, placing the nation in the 125th position out of 181 countries for WEF security.⁴⁶ As we adopt the COP27 priority of “Together for Implementation,” we have set an ambitious national program called the Nexus of Water, Food and Energy (NWFE). NWFE package is our flagship bundle of nine projects that reflects a Green Transition for Sustainable Livelihoods built on the nexus that hits all Paris agreement targets, while ensuring human development through touching on SDGs. Hence, NWFE is an implementable and replicable example for the C-WEF nexus approach when human needs are at the heart of climate action.

H.E. Yasmine Fouad is minister of environment of the Arab Republic of Egypt

Leadership insight

Just energy transition for Africa

By Kevin Kariuki

I foresee an African just energy transition that is anchored on the continent’s vast renewable energy sources as well as grid interconnections of intra- and inter-regional power systems, complemented by natural gas as a transition fuel, pending the development of cost-effective green hydrogen and affordable energy storage systems and other clean sources of flexible generation. Moreover, the transition must be facilitated by adequate financial resources as well as technical capacity to efficiently develop, operate, and maintain the emerging technological solutions.

The transition must, however, also proceed in the context of synergizing climate action and socioeconomic development agenda, including increasing access to quality electricity supply and providing access to clean cooking.

This context is vital, given that in 2021, nearly half of all Africans did not have access to electricity while a billion people did not have access to clean cooking.⁴⁷ At the current rates of investment in energy systems on the continent, Africa will thus not achieve affordable, reliable, sustainable, and modern energy for all, as encapsulated by SDG7, a UN Sustainable Development Goal.⁴⁸

Also, at 500 kWh—and even lower in Sub-Saharan Africa—the per capita electricity consumption across the continent remains a tiny fraction of consumption levels in developed countries. Africa’s just energy transition must focus on addressing the continent’s energy poverty.

However, one size does not fit all. There are some countries that have carbon-intensive economies, while others produce minimal greenhouse gas emissions. South Africa and Egypt, for example, contribute 1.17 percent and 0.67 percent of global carbon dioxide emissions respectively from fossil fuels and industry, whereas most other African countries, especially in Sub-Saharan Africa, such as Ethiopia, Zambia, and Mali, hardly contribute anything toward the continent’s current 4 percent of global greenhouse gas emissions. Approaches to the transition must therefore be specific to a region and country.

Thus, while the few African countries with higher carbon intensities and near-universal access to modern energy must focus on decarbonization, most countries on the continent will concentrate on increasing access to quality electricity supply and providing access to clean cooking for the billion Africans who rely on wood- or charcoal-burning fires for cooking.

Thankfully, Africa is endowed with abundant renewable energy sources, that remain largely untapped. These must be harnessed to anchor low-carbon development pathway. At the same time, the security of the continent’s energy supply must remain sacrosanct, the socioeconomic impacts of the energy transition must be addressed, and the achievement of sustainable development goals related to energy as well as the African Union’s Agenda 2063 must be guaranteed.

These aspects must inform the transition, which is also predicated on (i) access to adequate financial resources, (ii) the availability of cost-effective technologies, and (iii) the technical capacity of the countries to efficiently develop, operate and maintain emerging technological solutions. It is not simply a matter of Africa “leap-frogging” fossil fuels as the often-quoted cliché suggests.

Availing African countries with adequate concessional financing in a timely manner will enhance their trust in developed economies, thereby strengthening confidence in, and sustainability of, Just Energy Transition Partnerships (JETPs) and other transition plans. In my mind, Special Drawing Rights are an ideal way to finance the Africa’s JETPs and climate action in general.

To further embed a low-carbon trajectory, it will be necessary to accelerate the development of (i) cost-effective green hydrogen as an alternative to fossil fuels in power production and as feedstock for harder-to-abate sectors such as steel, cement, and long-haul transport, and (ii) affordable energy storage systems and other clean flexible generation. Meanwhile, the capacity of African countries to efficiently develop, operate and maintain the emerging technological solutions must be strengthened.

The foregoing will also determine the speed of Africa’s energy transition and, therefore, the continent’s ability to complement global ambitions toward the attainment of the Paris Agreement goal of limiting the increase in global average temperature to 1.5 degrees Celsius.

Energy transition is not a step-function. Instead, the energy mixes characterizing Africa’s just energy transition will evolve with time, depending on access to the drivers mentioned above and the speed at which viable cleaner energy alternatives are developed. Hence, in line with the Paris Agreement, the African Development Bank intends to continue to strategically support Africa’s natural gas sector, to facilitate the transition to clean energy, and to promote climate adaptation and resilience. This approach recognizes that, in addition to grid interconnections, gas is an important enabler for increased integration of renewables in the energy mix, as its flexible generation readily compensates for loss of solar and wind generation in case of sudden weather changes. It also supports the use of natural gas to increase access to clean cooking and the health benefits thereof.

Moreover, there is a remaining carbon budget of 400 gigatons of CO2 equivalent emissions compliant with the 1.5-degrees Celsius goal. This budget should be allocated in inverse proportionality to the historical emissions of regions, thus enhancing the fairness of the energy transition from a global perspective, while enabling increased renewable energy penetration in developing countries, which have contributed the least to historical emissions. This principle is enshrined in the Paris Agreement.

In this regard, who would begrudge tiny Gabon if it exploited its gas to boost its baseload power generation, increase access to electricity, and provide a source of clean cooking while continuing to absorb almost a third of France’s annual total greenhouse gas emissions? On the same token, would it not be beneficial if Tanzania used its natural gas to increase its population’s access to clean cooking from the current 4 percent, while reducing emissions from use of biomass or charcoal and curbing deforestation? Also, why shouldn’t South Africa use its new gas finds or imports from Mozambique to safeguard its security of supply by converting its newer coal plants to run on gas—thereby reducing emissions by about 40 percent in the medium to long term, pending development of cost-competitive green hydrogen?

To answer these questions, what is required is a holistic, honest, and pragmatic consideration of the energy quadrilemma, i.e., the need to find balance between energy reliability, affordability, and sustainability, as well as its impact on the social dimensions of energy. This approach is tantamount to synergizing climate action and socio- economic development and is key to a just energy transition.

In the meantime, developed nations must simply reduce greenhouse gas emissions.

Kevin Kariuki is the vice president for Power, Energy, Climate and Green Growth at the African Development Bank.

Leadership insight

For a just energy transition, a new approach to mining is critical

By Adam Matthews

The global energy transition is unquestionably gathering pace, but one particular emerging constraint has the potential not only to disrupt the transition, but to also cause significant conflict: the role of the mining sector to meet the demand for minerals. This is not just a challenge of being able to extract more from the ground, but also of the industry’s ability to address the range of issues that continually call into question the sector’s social license. A new approach is needed, and one is beginning to take shape.

Put simply, without critical minerals and metals for batteries and a host of other transition infrastructure, we will not limit warming to 2 degrees Celsius, let alone 1.5. Even with much greater recycling, substitution of products, innovation, and efficiency, the increased demand will require both more greenfield mining and the expansion or extensions of existing operations.

Scale of the demand challenge

The World Bank has estimated that production of some key critical minerals could skyrocket by nearly 500 percent by 2050 under a 2-degree scenario to meet demand for low-carbon technologies.⁴⁹ To keep to 1.5 degrees would put even more formidable demand on the mining industry, with wind, solar, and electric vehicle (EV) technologies together representing a massive emissions reduction potential at low cost, but carrying huge mineral dependencies.⁵⁰ There are increasing warnings of a looming disconnect between mineral supply and climate ambition. Earlier this year, S&P Global signalled that the world could face a historic copper deficit by 2035, and the World Economic Forum warned of lithium shortages in just three years’ time. Supply is also easily affected by faulty waste management practices, as demonstrated by the recent production pause at a Tesla-backed nickel mine due to a leak at a waste (tailings) dam.⁵¹ Part of the challenge is a lack of investment in supply chains. An injection of $42 billion is needed in lithium alone if it is to meet 2030 demand, while $325 billion is needed to plug a potential 16 million metric ton copper shortfall by 2040.⁵² The investment gap is particularly acute upstream, leaving downstream players without raw material supply—already, in 2022, the global anode pipeline capacity has doubled, but cannot access the necessary raw graphite feedstock. With greenfield mines taking an average of six- teen years to become fully operational according to the International Energy Agency (IEA) (although some estimates are shorter), a lack of investment now could result in huge production gaps further down the line.

Some governments in the West have also been very late to respond to the concentration of mineral processing in China. Mineral security is rising up the political agenda and western governments are playing catch-up against a multi-decade strategy that has positioned China at the heart of many mineral-based value chains. This is leading to dramatic interventions, such as Canada’s instruction to Chinese owners to sell their shares in what the government has perceived as three critically important mining companies.

Mining’s social license to operate

It is not just financial investment that is lacking. Questions about avoiding societal and cultural harm need answers. Will society at large continue to accept electric vehicles made on the backs of child labor, from minerals from conflict zones, or in a manner that creates huge tailings (mining waste) dams that can collapse? Will we accept the development or expansion of mines that result in the destruction of 46,000-year-old heritage sites, as happened in Australia a couple of years ago, or that conflict with indigenous or First Nation communities, or that result in the loss of biodiversity? Add to this other challenges such as the benefits of automation that can increase efficiency and improve safety but potentially challenge the relationship of mines in their host communities if jobs are lost. The closure of mining courses and colleges also calls into question if the future pipeline of engineers has been invested in as an industry-wide priority, and we are only beginning to understand the realities of the change needed in some mining operation workplace cultures.

While there is unquestionably good practice in a number of mining companies and in a new emerging generation of mining leaders, when taken as a sector as a whole, the record of addressing systemic challenges is wanting. The challenge is, when something goes wrong in mining, society at large and increasingly those invested in it through their pension funds do not differentiate between companies, and the sector as a whole is tarred with the same brush.

It should also be noted that those that demand the products of mining have failed to align behind best practice standards to incentivize the scale of shift needed across the sector. This will be even more critical to give mining companies the confidence that their investment in driving best practice will not price them out of the market.

Investors have long remained silent observers and failed to see the interconnection between this sector and every other they are invested in. Too often the solution is to exclude and exit the sector when what is called for is a long-term investment in driving genuine real-world change. Running away from the sector as an investor is easy, but irresponsible.

A different approach

With energy transition plans hinging on global capacity to scale up low-carbon infrastructure, and with many resource-rich nations hoping their mineral resources will be a lever for development and a just transition, investors, governments, and companies need to rethink how mining will play the role it needs to.

Therefore, to meet future mineral demand, we will require a very different approach that demands zero harm to people and the environment. The nature of that approach could be grounded in the intervention that institutional investors are continuing to lead, working together with industry and the United Nations, and informed by the voices of impacted communities, following the horrific disaster that killed 270 people when a tailings dam collapsed in Brumadinho, Brazil.

Following this tragedy, investors intervened. They were no longer willing to only engage individual companies involved in the disaster, but they drove a sector-wide response. This has led to the creation of the first Global Tailings Standard—endorsed by seventy-eight mining companies representing over 70 percent of market capitalization—entailing the public disclosure of key information about the dams companies have and the standards they heed. An additional vital piece of the puzzle will shortly be added with the creation of a Global Tailings Institute that will ensure independent audits are conducted to bring the standard to life. This is a long-term engagement by investors, but one that puts in place the pieces needed to address the issue and eliminate waste as an unsubstantiated risk and externality.

Based upon this approach, the lessons are clear. The need to work collaboratively to recognize challenges, identify global best practice, and align the application of standards across investors, banks, and insurers, enabled by thorough mine-site audits, is apparent.

A new bottom-up landscape can emerge. Investors will also need to work with those sectors that demand mineral resources so that they too reinforce alignment to global best practice standards. This is the basis for the Mining 2030 Investor Agenda that will be set out by investors in January.

This is not an easy path, but it is a necessary one to ensure that through collaboration and standard-setting, the mining sector is not one that has its social license continually questioned, but is instead recognized for the vital role it plays in the future we want.

Adam Matthews is the chief responsible investment officer of the Church of England Pensions Board.

Leadership insight

We can address climate change by accelerating the just energy transition

By Rajiv J. Shah

The sun was setting when I stopped by a remote village in the Indian state of Bihar.

On a typical evening, the central power grid would shut off around dusk. Market stalls would close, and darkness would fall across town.

But not on that night. I was there to see a recently installed a solar mini-grid project sponsored by The Rockefeller Foundation (the Foundation) to bring reliable electricity to an area that had never had it before. It is one of thousands of projects the Foundation has supported for more than a century to leverage science and technology to advance the well-being of humanity.

That night in Bihar, the lights kept shining, market stalls stayed open, and customers shopped. I caught a glimpse of a more sustainable and equitable future when I met Ruby Kumari, a widow, a mother of two girls, and an expert seamstress. The new electricity empowered Ruby to walk the streets more safely. It allowed her daughters to continue their education after dark. And it enabled Ruby to use her skills to build a viable business: a sewing school.

Not long after my visit to Bihar in late 2019, COVID-19 hit that region of India, as it did Beijing, Brooklyn, and everywhere in between. Today, the virus is one of many crises increasing the suffering of vulnerable people around the world: the poor, hungry, unhoused, under-educated, and infirm.

One such crisis, climate change, poses a singular threat to humanity. We must confront it directly. Fortunately, as Ruby’s experience demonstrates, there is a way to make climate action about more than just taking molecules out of the air—it can also be a vehicle for uplifting the world’s most vulnerable people. By scaling technologies like solar mini-grids, the world can finally end energy poverty, empower millions to compete in the global economy, and reduce the likelihood of a climate catastrophe.

If humanity continues with business as usual, the planet will warm by about 3 degrees Celsius. At that temperature, life for billions of people will be harsher, poorer, and more fragile. But that future is not inevitable. Humanity could come together to achieve the Paris Agreement’s goal of limiting warming to 1.5 degrees Celsius, building a world where people have the opportunity to pursue their dreams.

This is the choice facing us at the Global Energy Forum and the rest of this year’s international convenings. If we want to keep the 1.5-degree dream alive, we must do more than talk. We must put people like Ruby at the center of our efforts to mitigate and adapt to climate change.

New partnerships and new innovations can help us mobilize the capital needed to meet this challenge. The Global Energy Alliance for People and Planet (GEAPP) is one such partnership. The Alliance is a collaboration between three philanthropies—The Rockefeller Foundation, the IKEA Foundation, and the Bezos Earth Fund—as well as multilateral development banks, development finance institutions, technology providers, delivery partners, and nations themselves. Together, Alliance partners are working to accelerate just energy transitions in a dozen emerging and developing economies.

Since its inception, GEAPP has committed more than $350 million, both directly and via partners, accelerating initiatives worth many times more in value. Currently, Alliance partners are building 10,000 solar mini-grids that will power homes and businesses in Nigeria. We are supporting an innovative project to stimulate energy demand through micro-entrepreneurship in Haiti. And we are deploying small scale solar faster than ever before, driving equitable economic growth for rural businesses across India.

To scale these green technologies and avert emissions, the world must develop new means of financing. At COP27, US Special Presidential Envoy for Climate John Kerry, The Rockefeller Foundation, and the Bezos Earth Fund announced an effort to expand voluntary carbon markets: the Energy Transition Accelerator (ETA). Our intent is to start a process to design an ETA that produces verified greenhouse gas emission reductions that developing countries will have the option of issuing as marketable carbon credits. The credits could then be purchased by companies, including through advanced purchase agreements, creating a predictable finance stream to de-risk and leverage other forms of finance.

New initiatives often come with hard questions and some risks, but it is important to remember that ambition is not a bad thing. It has helped humanity address development challenges for decades, from slowing the spread of HIV/AIDS to vaccinating the world’s most vulnerable children. And decades from now, I believe we will see that the Alliance, the ETA, and other ambitious initiatives proved essential to averting 3 degrees of warming.

For more than one hundred years, The Rockefeller Foundation has been committed to doing whatever it takes—finding new ideas, taking new risks, making big bets—to address global challenges. At the Global Energy Forum this month, and at COP28 later this year, we hope to establish and strengthen partnerships that will help the world meet the most important challenge of our time.

Rajiv J. Shah is the president of The Rockefeller Foundation. From 2010 to 2015, he served as administrator of the US Agency for International Development.

Conclusion

The political and economic landscape of 2023 is vastly different than a year prior. At its core, this sentiment is captured through feedback from a dynamic community of Global Energy Agenda survey respondents. Undeniably, Russia’s invasion of Ukraine is the prevailing story of 2022, and although it has colored how individuals, companies, and countries are adapting to facets of political and economic risk that were previously thought outdated by some, it is striking that the views of the energy transition by this year’s respondents are increasingly undeterred by such near-term belligerence.

A year ago, we noted growing “ambivalence,” if not pessimism, about the outlook for the transition to an emissions-free energy system. Predictions of peak oil demand and timelines to net zero were contracting. Almost instinctively, one might assume the havoc sown by Moscow this year—chaos that has compounded stress on an energy system working to rebound from the pandemic—would serve to amplify doubts about the energy transition. However, that is not the case. The response to our survey, as 2022 was coming to a close, shows expectations of peak oil demand steadied, while hope that the world can achieve net zero accelerated.

Participants’ views on pathways to a zero-emissions future are not uniform, however. This feature is apparent in the international reach of the Global Energy Agenda and the corresponding geographical distinctions that emerged from the survey data.

Across the world, there is a consistent call for financing the energy transition, and nowhere is this more acute than in the developing world. And while the voice of the Global South was well represented at COP27, the urgency of the climate challenge means financing access to affordable and reliable clean energy cannot be left to diplomacy alone. Honest dialogue around the tangible impacts of climate change on impoverished communities throughout Africa, Latin America, and the Asia-Pacific region should remain a fixture of the UNFCCC process, but this discourse should be matched by equally impassioned efforts to deploy energy technologies that keep costs down, boost political stability, and achieve international climate goals.

It is therefore fitting that COP28 will take place in the United Arab Emirates, a country that is a major oil producer but also the Arab world’s first provider of nuclear energy and a significant advocate for renewable energy.⁵³ To achieve the aims of the Paris Agreement, all segments of the global energy system must work concurrently to enhance energy security while stemming global greenhouse gas emissions. The COP28 presidency provides the UAE an opportunity to advance an inclusive energy transition that helps achieve such an approach, one that is emblematic of the country’s own diverse energy commitments. The defining aspect of the 2023 energy landscape will be whether the global community can come together to seize this opportunity.

Appendix

In what country do you live?

(Grouped by region outside North America)

Respondents to this year’s Global Energy Agenda survey form a group more global than ever, living in fifty-one countries, compared to forty-one in last year’s survey and thirty-nine in the one before that. Just over half (53 percent) are based in the United States, 20 percent in Europe, and 10 percent in the Middle East and North Africa, with the remainder spread across the rest of the Americas, Asia, Africa, and Australia.

In which sector do you work?

Respondents represent various sectors, and primarily fall into four groups: 44 percent are associated with academia, think tanks, consulting, and media; 16 percent work in government; 14 per- cent are associated with low-carbon energy production, including from renewables, nuclear, and advanced energy technologies; and 13 percent are involved in the oil and gas industry.

What is your age?

Respondents range from eighteen years to over seventy-five with the mean age (again) of fifty-six. Younger, middle-aged, and senior respondents do not vary significantly in their answers. As a result, respondent ages do not feature in our analysis.

PREVIOUS GLOBAL ENERGY AGENDA

Global Energy Agenda

Jan 19, 2022

The 2022 Global Energy Agenda

By Randolph Bell, Jennifer T. Gordon, Ameya Hadap, and Paul Kielstra (Editors)

The second 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 2022.

Energy & Environment Geopolitics & Energy Security

EDITORS

Landon Derentz is senior director at the Atlantic Council Global Energy Center; Christine Suh is the managing editor for the Atlantic Council Global Energy Center; Ameya Hadap is an Assistant Director for the Atlantic Council Global Energy Center; and Paul Kielstra is a freelance editor, analyst, and writer based outside of London.

Staff

Landon Derentz

Senior Director

Managing Editor, Global Energy Center

Energy & Environment Middle East

Staff

Christine Suh

Energy & Environment French

Former staff

Ameya Hadap

Energy & Environment Energy Transitions

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The Atlantic Council Global Energy Forum is the premier international gathering of government, industry, and thought leaders to set the energy agenda for the year.

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The post The 2023 Global Energy Agenda appeared first on Atlantic Council.

Eser Özdil joins TRT World to the Turkey-Bulgaria gas interconnector

Grady Wilson — Tue, 10 Jan 2023 21:38:00 +0000

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How NATO can keep pace with hybrid threats in the Black Sea region and beyond

Arnold C. Dupuy — Wed, 04 Jan 2023 18:51:59 +0000

Russian attacks on Ukraine’s infrastructure in recent months have highlighted the devastating impact of twenty-first-century warfare and the resulting vulnerability of civilian life. A major component of modern warfare is the hybrid threat, in which Russia is a most aggressive perpetrator.

Indeed, the Kremlin effectively implemented hybrid warfare in the 2014 annexation of Crimea and continues to use similar tactics to influence political outcomes in Moscow’s favor. Hybrid warfare, which includes cyberwar and malign influence, allows states and non-state actors to impact the political stability of adversaries with limited or no use of conventional military forces. This is significant as it gives states, as well as terrorist and criminal organizations, a low-cost method to influence the politics and policies of other states or even capture territory.

An important aspect of hybrid warfare is the ability to attack and disrupt civilian infrastructure—in particular the power grid and fuel distribution systems that form the backbone of a country’s energy sector. One only has to remember the persistent Russian attacks on Ukraine’s energy infrastructure, starting with the December 2015 cyberattack using the BlackPower malware. More recently, the Colonial Pipeline ransomware hack in the United States in May 2021 also served as a glaring example of this phenomenon.

The battlefield setbacks in Ukraine notwithstanding, Russia’s cyber-military dominance looms over the wider Black Sea region, particularly among the smaller states of NATO and its Partnership for Peace (PfP) program that have limited resources and vulnerable energy infrastructures. The Russian war in Ukraine has created conditions that demand greater NATO attention to this dynamic, particularly in what is called operational energy—the energy needed to perform military operations.

It is imperative that national security experts continue to analyze this vital field and concentrate on developing NATO’s operational energy capabilities, resilience, and interoperability.

Capability refers to the requirements NATO must focus on to meet its objectives and operate more effectively and efficiently in an energy-constrained environment. Enhanced capabilities can take the form of strengthening NATO’s intelligence, surveillance, and reconnaissance, as well as its cyber defense. This includes advanced warning technologies and streamlined strategic communications. This concept aligns closely with the NATO Defense Planning Process, an analytic framework that matches capabilities to mission requirements.
Resilience is the ability of NATO member states collectively or individually to deter, detect, withstand, and recover from a variety of hybrid tactics launched against their energy infrastructure. Greater resilience would allow NATO members to take a blow to the energy sector and recover in a timely manner. They should consider hardening energy sector assets as much as possible, as well as creating alternate supply chains. Additionally, this should entail a deeper assessment of malign influence in the energy sector.
Interoperability permits member states to interact seamlessly in different environments, conditions, and platforms. It allows member states to work more efficiently together and operate under an agreed set of NATO standards, with the aim of building familiarity and a common operating picture. This is accomplished through continual interaction between Alliance members and PfP members, notably through joint exercises and NATO/PfP engagement.

Preparing for the future

In October, the NATO Science and Technology Board authorized the formation of Systems Analysis and Studies (SAS)-183, entitled “Energy Security and Building Capabilities, Resilience and Interoperability.” I serve as chair of this effort. It is a continuation of the predecessor study, SAS-163, “Energy Security in the Era of Hybrid Warfare,” which concluded in December. The new study, scheduled to commence this month, will concentrate on cross-cutting analyses highlighting the themes of capability, resilience, and interoperability with a focus on the Black Sea, Baltic Sea, and Arctic Sea. Attention will be particularly devoted to the Black Sea, which is at the center of the current military conflict between Russia and Ukraine, and which deserves priority focus.

Another area of concentration in SAS-183 is advanced early warning cyber defense, whereby the study’s cyber team will create a prototype to improve maritime security by protecting critical energy infrastructure from cyberattacks. The study will integrate exercise results into its final analysis. The study’s authors recognize the importance of exercises as cost-effective ways to prepare for and respond to a variety of kinetic and non-kinetic contingencies, and for this reason, we anticipate more reliance on exercise results. For instance, in the previous study, SAS-163, team members contributed to several NATO and PfP member state exercises, and those of us working on SAS-183 anticipate continuing this activity.

SAS-183 will include numerous subject matter experts representing nearly a dozen NATO members, PfP states, and organizations, indicating the importance with which the Alliance and its partners view the growing challenge. Ultimately, the study will provide enhanced regional analysis, greater insight into cyber early-warning technologies, and a deeper assessment of the continued threat posed to NATO member state security by the threat of hybrid warfare on the energy sector.

As the Kremlin and other NATO foes look to evolve their hybrid warfare practices, especially given the Alliance’s superior capabilities in the traditional military sphere, such forward-looking research is vital. Russia’s shifting tactics in Ukraine, as seen by its deliberate attacks on energy infrastructure, offer a window to the future of warfare. NATO must stay several steps ahead.

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Zagorodnyuk in Foreign Affairs: The Case for Taking Crimea

Atlantic Council — Mon, 02 Jan 2023 17:02:00 +0000

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Will Putin force Belarus to join the Russian invasion of Ukraine?

Alesia Rudnik — Thu, 22 Dec 2022 21:49:54 +0000

Vladimir Putin visited Minsk for the first time in three-and-a-half years on December 19. This rare international trip sparked speculation that the Russian dictator may be seeking to personally pressure his Belarusian counterpart into joining Moscow’s faltering invasion of Ukraine.

Monday’s meeting between Lukashenka and Putin came following weeks of reports indicating a growing Russian troop presence in Belarus, and as the Belarusian military was completing national battle readiness exercises. Ukraine is certainly taking the issue seriously, with Kyiv strengthening its defenses along the Belarusian border on the eve of Putin’s Minsk trip.

Ukrainian officials are increasingly voicing concerns that Moscow may be preparing to repeat the February 2022 offensive against Kyiv, which saw Russian troops use Belarus as a launchpad for an assault on the Ukrainian capital. In a recent interview with Britain’s The Economist magazine, Valery Zaluzhny, the head of Ukraine’s armed forces, said he had no doubt Russia “will have another go at Kyiv” in the first few months of 2023.

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Following their three-hour meeting, Putin and Lukashenka did not make any major announcements. Instead, they spoke of ongoing negotiations over a series of bilateral trade, economic, and defense issues. Putin noted that both countries would proceed toward deeper security integration and said they would continue intensifying joint military exercises. Meanwhile, Lukashenka confirmed that Belarus has received Russian missile and air defense systems.

Both strongmen played down earlier suggestions that Russia was poised to annex Belarus or was planning to force the country to join the invasion of Ukraine, with Putin instead speaking of the strategic partnership between the two authoritarian regimes. These denials were echoed by Kremlin spokesperson Dmitry Peskov, who appeared to rule out the possibility of full-scale Belarusian involvement in Russia’s ongoing invasion.

There remains no real clarity over what was discussed behind closed doors in Minsk. Many observers believe talks regarding a possible join offensive against Ukraine must have been the focus of negotiations and note that Putin’s presence would hardly have been required for the official agenda of relatively routine discussions on non-essential matters. However, others have suggested that the Minsk meeting may have been nothing more than an opportunity for both parties to demonstrate their loyalty to each other at a time when each ruler is confronted by deepening international isolation.

If military matters were indeed discussed, this does not necessarily indicate plans for Belarus to directly participate in a new Kyiv offensive. Other options could include an expansion of the current Belarusian role as a base of operations for the Russian military or the provision of armor and ammunition from the Belarusian arsenal. Alternatively, the entire episode may be part of an elaborate ruse to pin down Ukrainian forces and prevent their redeployment to current invasion hot spots in southern and eastern Ukraine.

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Lukashenka is already widely seen as a party to the conflict after allowing Putin to use Belarus as a gateway for the initial invasion of Ukraine in February 2022. For the past ten months, he has permitted Russia to base troops in Belarus and launch airstrikes from the country against Ukrainian targets. Following the announcement in September of Russia’s first mobilization since World War II, Belarus also began to serve as a training base for mobilized troops.

Despite this obvious involvement, the Belarusian leader bristles at claims that he is a junior partner in Putin’s invasion. Ever since the outbreak of hostilities, he has denied that Belarus is actively participating in the conflict and has instead sought to position himself as a potential mediator. At the same time, in an apparent nod to his Kremlin patrons, Lukashenka has made a number of public declarations acknowledging the need to support neighboring Russia.

This awkard balancing act is understandable. There is little public enthusiasm in Belarus for the invasion of Ukraine, leading to doubts over the reliability of the Belarusian army if Lukashenka does give the order to cross the Ukrainian border. However, the Belarus dictator is almost entirely dependent on Moscow for his political survival and risks becoming expendible if he refuses direct Russian demands to join the war.

For the time being, Putin and Lukashenka’s intentions remain shrouded in mystery. Few are prepared to take their denials at face value, but it is still too early to identify any specific preparations for a major new offensive. Ukrainian military planners certainly cannot afford to dismiss this threat. They will be spending the Christmas holiday period watching the situation closely while preparing for a potential escalation on the northern front.

For Putin, forcing Belarus to join the war would be a desperate gamble that could easily backfire. He has already suffered catastrophic losses in Ukraine and can ill afford another humiliating military defeat. However, with his invasion plans rapidly unraveling and his options narrowing, Putin may decide that it is worth the risk.

Alesia Rudnik is a PhD Fellow at Karlstad University in Sweden and a Research Fellow at Belarusian think tank The Center for New Ideas.

Natural gas should be freely imported, traded, or exported by dozens of companies. That kind of trading structure can generate a reference price without any government intervention and turn a country into a hub. Henry Hub in Louisiana, National Balance Point (NBP) in the United Kingdom, and Title Transfer Facility (TTF) in the Netherlands are good examples of this.

Turkey’s hub dream

In Turkey the gas hub concept is a rare issue that state institutions and the private sector agree on, at least in principle. Negative impacts of the pandemic on energy markets, followed by skyrocketing gas prices due to Russia’s war in Ukraine as well as a lack of investments in upstream activities, caused the hub concept to lose its former popularity in the country. However, after Turkish President Recep Tayyip Erdogan’s warm welcome of Putin’s statements, Energy Minister Fatih Dönmez stated that the proposal should be studied. A few weeks later Dönmez said that a gas hub roadmap would be completed by the end of the year and that an international conference will be held in Turkey early next year, bringing all stakeholders together.

In fact, the idea of a hub is one that has been talked about and studied for a long time by the stakeholders of the Turkish natural gas market. When I was the general secretary of PETFORM, which is one of the largest energy NGOs in Turkey, we carried out in-depth studies on the establishment of a gas hub in Turkey compared to developed Western hubs such as NBP, TTF, and Henry Hub. Between 2013 and 2020, PETFORM prepared detailed proposals and presented those to decisionmakers. Some of these proposals have been realized, and some are waiting to be realized. They can be summarized under four key themes.

1. Infrastructure

Infrastructure investments are the first and the most important issue. In 2013, Turkish daily send-out capacities of liquefied natural gas (LNG) terminals was 36 million cubic meters (mcm) per day, and its overall gas injection capacity to grid was 185 mcm/day, not allowing for the coverage of peak demand in winter. This changed dramatically after a Turkish Air Force plane downed a Russian fighter jet in November 2015. Back then, Russia was supplying almost 55 percent of Turkey’s gas demand, and Russia’s share was reaching as much as 65 percent during wintertime peaks. But the fighter jet incident led to strained political relations, and thus increased supply security concerns among Turkish decisionmakers, who started investing in diversification and flexibility—and LNG emerged as the fastest and most appropriate solution. Since then, Turkey’s LNG re-gas capacity has reached 131 mcm/day, and soon it will rise to 156 mcm/day after a new floating gas terminal in the Gulf of Saros is commissioned.

With ongoing underground storage investments (Tuz Gölü and Silivri), Turkey’s total withdrawal capacity will increase by around 150 mcm/day in 2023. In the meantime 10 mcm/day will start flowing in from the Sakarya Gas Field in March 2023, a volume that is expected to reach 40 mcm/day in 2025-2026. When we also count pipelines in, Turkey’s gas import capacity will exceed 500 mcm/day soon—unmatched by any other country in Southeastern Europe.

Considering all these investments, as of 2023, Turkey will have enough flexibility to supply gas to Southeastern European countries—even in the coldest days of the winter—where a lack of infrastructure is the main problem. For this, signing interconnection agreements with neighboring countries and opening key infrastructure such as LNG terminals and underground storage to third parties and enabling their use based on liberal market principles may boost cross-border gas trade and empower Turkey’s role as a gas hub.

2. Regulations

Turkey’s Energy Market Regulatory Authority has been proactive in completing the legislative processes that could help the country emerge as a gas hub. These include measures ranging from spot imports to the establishment of continuous gas trading platforms, and from simplifying import licensing processes to the establishment of spot and futures markets. Further steps might be taken to decrease the market share of BOTAS in imports and domestic sales based on the gas market law as well as the implementation of regulations on opening LNG terminals to third parties. These measures will attract more traders to sell their gas as well as consumers to manage their risk via various contracts and financial tools, eventually increasing the depth and liquidity of a Turkish gas hub.

3. Independence

The fact that BOTAS is not only the largest importer and wholesaler of gas in Turkey, but also is the sole transmission system operator, is problematic. Just like developed hubs, Turkey needs the transmission system operator to be an independent company. Ownership unbundling would be the most appropriate structure, serving all parties under the commercial confidentiality conditions. Thus, the transmission system operator needs to be separated from the existing structure of BOTAS and become independent.

4. Commercial woes

Although the natural gas market law that came into force in 2001 sets clear targets for the liberalization of the market, very few of them have been achieved so far. More than 90 percent of the imports and domestic sales of Turkey are carried out by BOTAS.

Mass subsidization—which is carried out from time to time for various purposes such as supporting exports, lowering electricity prices, or protecting residential consumers—completely disrupts the price formation in the market. The de-facto closure of LNG terminals to third parties, the closure of Greece and Bulgaria interconnections for exports, and BOTAS’s dominant role restrict liquidity.

This in turn reduces transactions and prevents the formation of a reference price—the biggest obstacle to Turkey becoming a hub. Once trade barriers are eliminated, a long-term gas reference price could be formed and Turkey would rapidly move on its way to becoming a hub.

Putin’s proposal

Putin said Russia would consider building another gas pipeline and “creating a gas hub in Turkey for sales to third countries, especially, of course, the European ones, if they are interested in this.” I don’t think that he meant a gas hub similar to TTF, NBP, or Henry Hub where gas-on-gas competition and the free import and export of gas are ensured.

It is highly probable that after the South Stream project—meant to take Russian gas to Bulgaria and Serbia through the Black Sea—was canceled in 2014 due to pressure from the European Commission, the TurkStream Project came to the fore. TurkStream was built as a pipeline that bypassed Turkey and directly sold Gazprom’s gas to European consumers. Turkey would do well to remember that Putin’s motivations might once again lie in revitalizing the legacy of the South Stream project—and not in developing Turkey into a hub.

In other words, while Turkish decisionmakers aim to establish a fully fledged hub, Russians might just be looking for a new route to Europe. Yet even if Russia’s perspective aligned with Turkey’s, challenges tied to accessing the needed material, technology, and financial resources could limit the supply of Russian gas to a Turkish gas hub in the short term.

Still, that pales in comparison to the biggest consideration that Turkish policymakers must keep in mind: They need to remember that liquid and reliable energy hubs are established by the market. The role of politicians here is simply to level the playing field.

Eser Özdil is a nonresident fellow with the Atlantic Council IN TURKEY. He is the founder of GLOCAL Group Consulting, Investment, and Trade, where he advises energy companies on issues that include public policy, government relations, and commercial diplomacy. Follow him on Twitter @eserozdil.

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Sullivan quoted in VOA on Egyptian natural gas

jjoyner — Mon, 19 Dec 2022 16:43:00 +0000

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Webster in China-Russia Report: China reportedly planning to boost economic ties with Russia

jjoyner — Sun, 18 Dec 2022 16:59:56 +0000

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Morningstar in Foreign Policy: Why the oil price cap won’t hurt Putin

mzandi — Thu, 15 Dec 2022 16:44:00 +0000

Public Event Mon, December 5, 2022 • 2:00 pm ET

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AC Selects: Conference Highlights: Central Europe Week & 360/StratCom

rcasberg — Tue, 13 Dec 2022 22:08:19 +0000

Catch highlights from the 2022 Central Europe Week on the EU’s response to the ongoing war in Ukraine from European Commission Vice-President Věra Jourová and European Commissioner for Energy Kadri Simson. Meanwhile, the DFRLab hosted their annual government-to-government forum, 360/StratCom, featuring cyber and technology strategist and policy leader Camille Stewart Gloster.

2022 Central Europe Week

A week of hybrid programming highlighting how the United States and Central Europe can together lead in shaping transatlantic responses during times of war and geopolitical crisis, while also underscoring our unique cultural connections. The 2022 Central Europe Week will take place from December 5 – 9, 2022.

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Online Event Wed, December 7, 2022 • 9:00 am ET

360/StratCom 2022

The Atlantic Council’s Digital Forensic Research Lab (DFRLab) hosts a virtual version of its annual government-to-government forum, 360/StratCom.

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Roberts in Natural Gas World: Europe and the Caspian: The gas supply conundrum

mzandi — Tue, 13 Dec 2022 17:22:00 +0000

original Source

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Vladimir Putin: 2022 Loser of the Year

Peter Dickinson — Tue, 13 Dec 2022 09:13:22 +0000

For the first time since the event was launched a decade ago, Vladimir Putin will not hold his flagship end-of-year press marathon this month. The surprise cancellation is the latest indication that all is not well in the Kremlin. For the past ten years, Putin’s annual press marathon has been a carefully curated propaganda spectacle allowing the Russian dictator to demonstrate his mastery of world affairs. However, with his invasion of Ukraine unraveling amid unprecedented losses and mounting military defeats, Putin is clearly in no mood to face even the most docile of audiences.

While Putin hides from the cameras, his arch-rival is ending the year on a wave of international acclaim. Ukrainian President Volodymyr Zelenskyy has already been named Person of the Year by an ever-expanding list of media outlets including TIME magazine and the Financial Times newspaper, and is now being routinely touted as one of the world’s most influential politicians. Zelenskyy’s rising profile is recognition of his wartime leadership and also reflects global admiration for Ukraine’s courageous resistance to the Russian invasion.

The contrasting fortunes of the Russian and Ukrainian leaders underline the self-defeating folly of Putin’s decision to launch Europe’s biggest conflict since World War II. His original plan envisaged a short and victorious war that would extinguish Ukrainian independence and force the country permanently back into the Kremlin orbit. Instead, he now finds himself an international pariah with his country’s reputation as military superpower in tatters and his Ukrainian enemies looking forward with growing confidence to the very real prospect of an historic victory in the coming year. By almost any measure, Vladimir Putin is comfortably the biggest loser of 2022.

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Putin’s woes can be traced directly to the battlefields of Ukraine. His invading army has performed disastrously over the past ten months and has lost a series of key engagements including the Battle of Kyiv, the Battle of Kharkiv, and the Battle of Kherson. More than one hundred thousand Russian soldiers are believed to have been killed or wounded, while thousands of Russian tanks and armored vehicles have been captured of destroyed. These losses have forced Putin to launch his country’s first mobilization since 1945, a move that has destabilized Russia and brought the war home to previously supportive domestic audiences.

Russia’s international image has also been badly tarnished by revelations of widespread war crimes committed against the Ukrainian civilian population. Russian troops stand accused of carrying out mass executions and engaging in sexual violence, abductions, and torture throughout occupied Ukraine. Millions of Ukrainians have been subjected to forced deportation, while policies of indiscriminate bombardment have left tens of thousands dead and reduced dozens of Ukrainian towns and cities to rubble. In recent months, Russia has begun the methodical destruction of Ukraine’s civilian infrastructure with the express intention of depriving Ukrainians of access to heating, electricity, and water during the depths of winter.

Many international observers see these policies as nothing short of genocide, especially as they have been accompanied by a steady stream of openly genocidal invective from regime propagandists and Kremlin officials in Moscow. Others have been appalled by Putin’s readiness to engage in nuclear saber-rattling. On multiple occasions, the Russian leader has issued thinly veiled threats alluding to the possible use of his country’s vast atomic arsenal. This nuclear blackmail has provoked a strong backlash, with US officials promising “catastrophic consequences” and even the normally supportive Chinese rebuking Russia.

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