The journey to ‘net-zero’ has been delayed

After major promises and fine intentions at the COP26 climate conference in Glasgow last year, the world has discovered that it is still very dependent on fossil fuels.

| 6 min read

At the time of the COP26 conference last summer, we saw peak enthusiasm by most governments for an accelerated path to net-zero emissions. There was general agreement on an early phase out of coal, on the gradual reduction of gas as a transition fuel, and the spread of the net-zero movement from electricity generation and heavy industry to the billions of worldwide consumers.

It is true Chinese President Xi Jinping did not attend in person and Beijing made no new commitments for the current decade. Russia was not volunteering to shut down its oil fields, and India was keen to seek more financial help from the advanced world before embarking on a rapid transition away from fossil fuels. Nonetheless, the world mood was in favour of more progress to net zero, to be led by the advanced countries. They also agreed to step-up aid and investment for lower-income areas.

No sooner were the tweets, blogs and social-media pages full of renewed determination to get to net zero faster, the world entered a period of energy shortage. Surging demand for fossil fuels as major countries unlocked encountered an OPEC that did not want to open the taps too far or too fast. The cartel fancied a period of rising and higher prices.

US drilling once more

US President Joe Biden had made his country into a strong convert to the cause in Glasgow, but he returned home to licence a lot of new oil and gas wells in an effort to combat inflation. The Chinese President soon hit shortages of electricity brought on by strict emission controls. Eager to keep the lights on, he allowed suspension of the environmental rules to get more coal power stations running and more mines producing coal. The new German government decided to confirm the closure of the remaining nuclear power stations in Germany, pushing more demand onto coal and gas-fired stations pending the installation of more renewables.

The absence of Russian oil for the advanced countries intensified price pressures on globally-traded energy.

These setbacks to the cause of carbon reduction were intensified by the decision of Russia to violently invade Ukraine. Advanced countries imposed a raft of sanctions on Moscow and many nations decided to remove Russia from their supply chains for oil – and to consider how to wean themselves off Russian gas. Whilst Russia has found some other buyers for the oil, it is at a discount and at lower volumes. The absence of Russian oil for the advanced countries intensified price pressures on globally-traded energy.

More oil required

As a result of these difficult pressures, the world has discovered that it is still very dependent on fossil fuels and that it needs new supplies this decade to ease price pressures. The rig count in the US is up 60% over the last year, recovering from the pandemic lows. China is opening substantial new coal-fired generating capacity and is promoting more mine output of coal. The country is still almost 60% dependent on coal as a proportion of her total energy. Even in Europe, where they remain keen on the net-zero policies, there is a growing fall back on gas. Investment will be made in more liquified natural gas (LNG) facilities to permit the substitution of gas from friendly countries.

These setbacks do not mean the end of the road for net zero. Most countries remain convinced of the cause and wish to find ways to get back on track with their decarbonisation programmes. They continue to major on getting coal, gas and oil out of their electricity-generating activities. There are plans for large increases in solar and wind power in most places. There is more work going on to see how wind power can be stored when the wind blows to tackle the problem of becalmed days when power is still needed. Hydrogen, pump storage and battery retention are all routes attracting investment.

Consumer-revolution needed

More difficult is the conversion of consumers to machines, vehicles and heating systems that use electrical power rather than gas or oil or coal. Whilst most countries want people to switch gas boilers to electrical heating, petrol cars to electric vehicles and solid fuel or gas cookers to electric, progress is slow. We await the entrepreneurs who can capture the imagination and deliver competitively-priced products that will do the job. It is true Tesla has captured the hearts and dollars of the rich with their expensive cars, but it still has not come up with an affordable people’s electric car. We await the answers on heating and cooking.

There needs to be a big expansion of cable and transmission capacity as well as of renewable generation.

This does mean the pressures all this will create on stretched electricity-generating systems will be deferred. There needs to be substantial advances in electricity capacity in many places against the day when the consumers do switch in large numbers from the gas cooker and boiler and the petrol car – and expect the electrical power to be available at the flick of switch. There needs to be a big expansion of cable and transmission capacity as well as of renewable generation. This all provides investment opportunities for the future.

In the meantime, the world is seeking out more oil and gas to deal with shortages, price pressures and the disruption of sanctions. The fossil-fuel producers are having a profitable time. They are picking up more investment opportunities to carry on meeting strong demand for oil and gas for everyday life whilst we await the consumer-electrical revolution.

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The journey to ‘net-zero’ has been delayed

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