The World Economic Forum’s recent annual meeting was held against the backdrop of a post-COVID-19 economic rebound, the Russia-Ukraine war, higher global energy prices, and energy supply shortages in Europe. This is creating an interesting debate among delegates in Davos, Switzerland over the pull between the need for energy security and sustainability at the same time.
The pandemic recovery and the war in Europe have exposed an underlying weaknesses of global energy supplies, with these tensions providing valuable lessons on how a smooth transition to green energy should look like. The world faces polarized challenges as it navigates a path toward green energy and its net zero goal.
Any solution will need to address urgent climate change energy transition issues. But at the same time, these answers must avoid energy shortages and must provide resiliency in the face of energy-related political tensions, such as the Russia-Ukraine war.
Key discussions at the Davos meeting are focusing on energy security, amid conflict in Ukraine and rising prices, as European nations search for alternatives to Russian gas.
WEF executive chairman Klaus Schwab opened the meeting, which is running from May 22 to May 26, and said: “The return of war, epidemics and the climate crisis, all those disruptive forces have derailed the global recovery. Those issues must be confronted in Davos, and the global food crisis, in particular, needs our immediate attention.” He added that the world is “deeply stuck in crisis management”.
However, Schwab also said that this year the forum would be a “climate summit” that would “bring together some most relevant actors, and it will drive action for all the forum’s initiatives in this field.”
During the Glasgow COP26 meeting last October, the UN urged the world to reduce carbon emissions to as close to zero as possible to mitigate the climate crisis and keep global warming to 1.5°C above pre-industrial levels. COP26 called for global cooperation between governments, industry and scientists to mount a united response to the worst pandemic in living memory, which in turn raised hopes that net-zero goals could be met by 2050.
However, the world looks different six months later in Davos. Higher energy prices around the world have led to rising inflation, while at the same time there is a new realization in Europe of its over-dependence on Russian gas supplies, raising energy security concerns.
“There will be pain in the process” of getting to net zero and a nature-positive world, said Kjerstin Braathen, chief executive of Norway’s DNB Bank, citing energy shortages and inflationary pressures at the WEF. “We need to start talking about that because if we don’t there’s no business, there’s no economy, there’s no welfare.”
The International Energy Agency executive director Fatih Birol warned in Davos that the energy security crisis since Russia’s invasion of Ukraine must not lead to a deeper dependence on fossil fuels. He said: “The right investments, especially in renewable energy and nuclear power, mean the world need not choose between energy shortages and accelerated climate change due to fossil fuel emissions. We need fossil fuels in the short term, but let’s not lock in our future by using the current situation as an excuse to justify some of the investments being done, time-wise it doesn’t work and morally in my view it doesn’t work as well.”
But the chief executive of Saudi Aramco Amin Nasser, warned during the WEF meeting, that the world is facing a major oil supply crunch as most energy firms are afraid to invest in the oil and gas sector, which faces green energy pressures. Nasser said that dialogue between the oil industry and policymakers over the transition from fossil fuels to cleaner energy has been tricky. He added that last year’s message from the IEA that world oil demand was falling and no new investment in fossil fuel was needed had impacted the industry negatively.
Nasser said missteps during the global energy transition would only encourage greater use of coal by many Asian countries. He said: “For policymakers in those countries the priority is to put food on the table for their people. If coal can do it half the price they will do it with coal”.
Nasser added Saudi Aramco was in a different position from many other energy firms as it invested in both fossil fuel and energy transition projects.
Perhaps, this is what the world needs. A balanced approach where investment in oil and gas needs to continue to meet rising global energy demands, which will add resilience to global supplies, especially in times of political tension.
To reach net zero emissions by 2050, annual clean energy investment worldwide will need to more than triple by 2030 to around $4 trillion. But renewables are still well below the growth rates required for net zero. The IEA has said previously that almost two-thirds of electricity generation needs to be renewable by 2030 to achieve the 2050 Paris agreement target.
Achieving net-zero emissions means that some greenhouse gases will still be released, but these will be offset by removing an equivalent amount of greenhouse gas from the atmosphere, storing it in the soil, plants, or materials.
Countries and companies are increasingly committed to hitting net zero — removing as much CO2 as they produce — by 2050. Reaching net-zero means achieving a balance between the amount of greenhouse gas produced and the amount removed from the atmosphere. Companies will need to set short and medium-term emission reduction goals that are consistent with the Paris agreement to limit global warming to 1.5°C to eliminate the worst impacts of climate change this decade.
The use of renewables in the energy mix is needed to hit climate goals. But we should not forget fossil fuel technologies — such as carbon capture, utilization and storage — that make the use of fossil fuels greener and cleaner. CCUS technologies, in combination with hydrogen and other production processes, offer great potential to reduce emissions. However, more cooperation between producers and consumers is needed to make technologies like CCUS safe and cost-effective to boost their reach.
There is no single path to hit net zero emissions. Solutions require broad-based and inclusive approaches rather than ideological positions. Cooperation between producers and consumers is needed to address climate change and maximize mitigation options.
The WEF meeting in Davos will show if the world is willing to unite to find a pragmatic and balanced approach in its quest for clean energy and the drive toward net zero.
• Fuad Al-Zayer is an independent energy consultant with expertise in energy transition, digitization, and innovation. He is the former Head of the Data Services Department at OPEC and a former Global Coordinator of the JODI Data Transparency Initiative at the IEF.”
