Pexels/ThisIsEngineering
It has long been apparent that the simplistic formulae of the extreme environmentalist camp – Just Stop Oil etc – are totally out of kilter with economic and energy reality, but now the energy realists can refer to a definitive piece of work when they seek to refute the absurdities.
In 5,000 crisp words in Foreign Affairs magazine, Pulitzer prize-winning historian Daniel Yergin, along with financial expert Peter Orszag and energy strategist Atul Arya, lay bare the gigantic holes in the environmentalist cause, and call for a rethink of the whole concept of “energy transition” and many of the assumptions that underlie it.
This is not some Trumpian climate change denialist rant, but an authoritative and data-based call for an injection of pragmatism into arguably the most important issue the world faces today.
Yergin et al begin with a conundrum: over the past 15 years, renewables as a proportion of global electricity generation have come from zero to around 15 percent in 2024. But in the same year, the amount of energy derived from oil, gas and coal was at an all time high. Hydrocarbons still account for 80 percent of global primary energy.
What we are experiencing is not an “energy transition”, Yergin writes, but an “energy addition”. New forms of energy are simply being piled on top of the old as humankind’s demand for energy rises inexorably.
We should not be surprised at this, because this is exactly how it has been in historical times of energy change.
Coal took the best part of two centuries to replace wood and other forms of biomass as the world’s main energy source. Oil, first drilled commercially as fuel in the middle of the 19th century, did not replace “king” coal until 1960.
There is no such thing as a linear transition, just different energy sources existing side by side. Thirty percent of the world’s population still uses wood for cooking, for example.
One reason is that non-renewable sources are still more efficient and relatively cheap, while the cost of transition to renewables is mind boggling.
The Independent High Level Expert Group on Climate Finance (a UN affiliated body) estimates that transition will cost $6.7 trillion per year by 2030, rising to $8 trillion by 2035.
Alamy via ReutersMost of that would have to go to the Global South, which would mean the North would have to spend roughly 10 percent of GDP on transition – or roughly three times what the US spends on defence. It is simply not going to happen, even under a different White House regime.
Developed countries are too indebted, poorer countries don’t have the resources, and the private sector would struggle to make any inroads into the deficit.
In the energy “trilemma” – the contest between security, affordability and sustainability in energy supply – sustainability usually takes a back seat when the chips are down.
Take, for example, the Russian invasion of Ukraine, which sent energy prices sky-high and Western governments back to fossil fuels to ensure cheap and reliable supplies.
In the South, this is even more imperative. In the words of Anwar Ibrahim, prime minister of Malaysia, “the need for transition must be balanced by the need to survive”.
To achieve any sort of transition, let alone one that delivers Paris Agreement goals, would require “rewiring the entire global economy” to remove the barriers to trade and investment, such as the EU’s carbon border adjustment mechanism, which discriminates against poorer countries’ exports.
Poorer countries feel, with much justification, that the rich world is “drawing up the ladder” of hydrocarbon energy that allowed them to reach affluence before the Global South can step on the first rung.
At the same time, the energy transition will have to deal with geopolitical and macroeconomic complications including the expense, rarity and Chinese domination of rare earth minerals used in electrification processes such as EVs; the growing demand for electricity to fund data centres for artificial intelligence and cryptocurrency mining; and the controversial role of natural gas and nuclear power in the move away from fossil fuels.
For all these reasons, it is obvious that the transition will not be inevitable or straightforward, but will be complex and multi-directional, requiring trade-offs and compromises.
“The scale and variety of the challenges associated with the transition mean that it will not proceed as many expect or in a linear way: it will be multidimensional, proceeding at different rates with a different mix of technologies and different priorities in different regions. That reflects the complexities of the energy system at the foundation of today’s global economy,” Yergin says.
To combat climate change effectively, it is about time policymakers recognised that.
Frank Kane is Editor-at-Large of AGBI and an award-winning business journalist. He acts as a consultant to the Ministry of Energy of Saudi Arabia and is a media adviser to First Abu Dhabi Bank of the UAE
