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Axios
26-06-2025
- Business
- Axios
Climate's out — but chaos is in — as a clean energy driver
Global upheavals — from supply chain woes to wars — may increasingly spur countries to replace some fossil-fuel imports with homegrown electrons, a new report finds. Why it matters: "2024 may well become seen as a beginning of a paradigm shift," the latest Statistical Review of World Energy finds. The energy transition is becoming "increasingly associated with a need to deliver energy security through energy independence to protect countries from the types of shocks and uncertainty that such events bring." The intrigue: It goes through 2024, but the idea is consistent with an emerging — if contrarian — school of thought about the Trump 2.0 era. While President Trump isn't interested in global warming and renewables, his foreign and trade policies could make him an accidental climate hawk, the thinking goes. Bloomberg columnist Liam Denning had a recent piece: "Trump Is Cementing the Green Energy Transition He Loathes." The big picture: "Investment in renewables in particular is increasingly being seen as a cornerstone of energy security, enabling countries to disconnect their energy systems from global fuel markets and geopolitical tensions," the World Energy report says. It cites Russia's war on Ukraine, Mideast tensions, COVID, extreme weather and more. That take is part of the huge annual data review from The Energy Institute, Kearney and KPMG. The report tells a wider story about what the global renewables surge is and isn't achieving. Solar and wind together grew nine times faster than fossil fuels, rising 18% last year. But the whole energy pie is still growing too, including fossil fuels, so global energy-related CO2 emissions ticked up 1% to set another record. As fast as renewables are rising, global energy thirst is still growing even more, notes the annual report that for decades was produced by BP until 2023. Zoom in: Low-carbon energy — renewables, nuclear and more — is avoiding lots of CO2 emissions that would otherwise occur. But it's still an addition — not a transition that's lowering total emissions yet. "This pattern, marked by simultaneous growth in clean and conventional energy, illustrates the structural, economic, and geopolitical barriers to achieving a truly coordinated global energy transition," a summary states. Reality check: Displacement of imported fossil fuels with renewable power is concentrated in select markets and a "largely untapped opportunity" elsewhere. Major energy importers — including Japan and South Korea — have made much less progress, it finds. And overall global demand for coal, oil and gas is still rising. Friction point: Trump's pullback from traditional alliances, trade wars, and use of fossil fuels as trade chips will help push countries toward domestic electricity sources, Denning writes. And don't forget veteran Carlyle analyst Jeff Currie's paper declaring the "New Joule Order." It similarly argues that risk and trade concerns — not climate policy — are driving countries to seek domestic sources instead of global commodities. My thought bubble: A related trend is low-carbon sectors like renewables and hydrogen adapting their domestic messaging to the Trump era. You hear much less about climate and much more about how they can help the U.S. become "energy dominant." For instance, check out the American Clean Power Association's statement on the Senate's version of the budget reconciliation bill. The bottom line: Sure, there's a case for Trump 2.0 — and the wider geopolitical landscape — creating momentum abroad for renewables and nuclear on security grounds.
Reuters
28-02-2025
- Business
- Reuters
Climate policy requires a more realistic approach
LONDON, Feb 27 (Reuters Breakingviews) - The pursuit of net zero carbon emissions has been a resounding failure. Despite trillions of dollars spent on renewable energy, hydrocarbons still account for over 80%, opens new tab of the world's primary energy and a similar share of recent increases in energy consumption, according to The Energy Institute. Coal, oil and natural gas production are at record highs. Emissions of greenhouse gases continue to rise inexorably. The financial markets were already losing confidence in the energy transition before Donald Trump returned to the White House. A more realistic approach to climate policy is urgently needed. Solar and wind power have grown to a mere 3.5% of primary energy production. The levelised cost of renewable energy – which measures of the net present value of electricity produced over a plant's lifetime – has declined sharply over the years. But this has not resulted into lower electricity prices. In fact, as the share of the energy mix provided by renewables has risen, electricity prices have tended to increase. That's because wind and solar power are intermittent. Since storing energy in batteries is uneconomic, traditional sources of power are still needed as backup, which is expensive. Germany and the United Kingdom, which get a relatively large share of their electricity from renewables, also suffer from the world's highest electricity costs. This is partly due to the Ukraine war, which exposed the risks inherent in Europe's historical dependence on Russian gas and domestic bans on hydraulic fracturing. High energy costs have crippled domestic manufacturing. German industrial production is down 15% from its peak, according to Andy Lees of MacroStrategy Partnership. German chemical company BASF ( opens new tab last year announced it was scaling back, opens new tab domestic production. Britain's last remaining blast-furnace steelworks at Port Talbot closed last October. 'The European Union and the United Kingdom present the sternest warning against attempts to force emissions reductions while neglecting the physical realities that distinguish hydrocarbons from modern renewables, such as wind and solar,' Chris Wright, then the CEO of Liberty Energy, wrote, opens new tab last year. Wright is now the U.S. energy secretary. At least the European countries pursuing net zero targets can take comfort that they're doing their bit to reduce global warming, whose effects are already showing up in more intense heatwaves, storms, and floods. That's an illusion, says, opens new tab the energy economist Dieter Helm. Targets for reducing greenhouse gas emissions are measured on territorial production. This incentivises countries to switch from domestic manufacturing to importing energy intensive goods, often from countries such as China and India, whose factories are largely powered by coal-powered electricity. Thus, the reduction in an individual country's emissions can lead to an increase in global emissions. There's another problem. Addressing climate change is a collective action problem, as hedge fund manager Paul Marshall recently observed. The benefits from lower emissions are shared by the whole world but the costs are borne by individual countries. Global deals like the 2015 Paris climate agreement were an attempt to solve this conundrum. However, they allowed countries like China to keep emitting more carbon, even as it simultaneously ramps up renewable power. The People's Republic currently consumes more than half the world's annual coal supply and last year started construction of coal-fired electricity plants with an output equivalent to twice Britain's total generating capacity. India, which like China gets most of primary energy from coal, is also rolling out many new coal-fired plants. Meanwhile Trump last month signed an executive order to withdraw the United States, the world's second-largest producer of greenhouse gases, from the Paris Agreement for the second time. The president wants to increase domestic production of oil and gas. His administration hopes cheaper energy – which includes some forms of renewable power - will encourage a U.S. manufacturing renaissance. It also plans to increase exports of natural gas, much of which will end up in Europe. The energy expert Vaclav Smil has likened, opens new tab the costs of the planned energy transition to those incurred by a nation fighting total war for decades on end. The era of zero interest rates created a sense that the supply of capital was infinite and its cost negligible. Rising interest rates dispelled that illusion. The economics of wind and solar power, with their large upfront investment costs and relatively low operating expenses, have been upended. Wood Mackenzie calculates, opens new tab that every 2 percentage point increase in the risk-free rate raises the levelised cost of renewable electricity by around 20%. Financial markets have got the message. The S&P Global Clean Energy Transition Index is down around 65% from its peak in early 2021. Over the same period, the S&P World Energy Index, comprised of oil and gas producers, has nearly doubled. Orsted ( opens new tab, the world's largest wind farm operator, recently slashed its capital spending plans and dropped its targets for delivering renewable energy. Not long ago, investors worried that traditional energy companies would be left with 'stranded assets' – oil and gas fields abandoned as demand for fossil fuels dried up. Yet earlier this month Shell (SHEL.L), opens new tab announced a near-$1 billion writedown for its investment in a wind project off the New Jersey coast. BP (BP.L), opens new tab is scrapping targets for increasing generation of renewable energy and cutting oil and gas production. As Lees writes, 'across the sector, oil majors that shifted their portfolios to green energy are now realising their mistake and are looking to rebuild their fossil fuel business.' As the energy companies change tack, institutional investors and banks are unlikely to stand in the way. Earlier this year, BlackRock (BLK.N), opens new tab announced it was withdrawing from the UN-convened Net Zero Asset Managers initiative, which prior to the giant fund manager's departure counted members overseeing some $57 trillion of assets. The largest U.S. banks, including JPMorgan (JPM.N), opens new tab and Citigroup (C.N), opens new tab, have withdrawn from the Net-Zero Banking Alliance. Energy transitions, as Smil has pointed out repeatedly, take a very long time. There have been successful earlier shifts – from wood to coal, coal to oil, and oil to natural gas. Each was accomplished by market forces rather than government fiat. The world still urgently needs an alternative to fossil fuels. The failure of net zero shows that the best governments can do is to encourage the search for viable new sources of energy. Human ingenuity was responsible for developing fossil fuels which delivered improvements in material prosperity while endangering the planet. It's up to human ingenuity to solve the problem. For more insights like these, click here, opens new tab to try Breakingviews for free.
