War in Ukraine is speeding a global energy transition, hobbling Russian exports, IEA says
Energize Weekly, November 2, 2022
Global fossil fuel consumption and greenhouse gas emissions are slowing with oil, coal and natural gas either peaking or reaching a plateau by 2030, according to the International Energy Agency (IEA).
The trend to cleaner energy sources and the use of electrical vehicles is being accelerated by the Russian attack on Ukraine, the agency said in its latest World Energy Outlook.
“The global energy crisis triggered by Russia’s invasion of Ukraine is causing profound and long-lasting changes that have the potential to hasten the transition to a more sustainable and secure energy system,” the report said.
The impact of the shifts in energy sources and consumption can already be seen in 2022 where greenhouse gas emissions are projected to rise just 1 percent when compared to 2021.
“The rise in global CO2 emissions this year would be much larger – more than tripling to reach close to 1 billion tons – were it not for the major deployments of renewable energy technologies and electric vehicles (EVs) around the world,” the EIA said in a separate report.
The IEA analysis of data from around the world shows that these CO2 emissions are on pace to increase by close to 300 million tons in 2022 to 33.8 billion tons – compared to nearly a 2-billion-ton jump in 2021, spurred by the rapid global recovery from a pandemic-depressed economy.
The main driver in the 2022 increase is a rise in the use of aviation fuels as air travel rebounds from pandemic lows.
The Russian invasion led to a spike in natural gas prices this year, and Russia reduced its gas export to Europe by 80 percent.
High gas prices promote fuel switching to coal in the utility industry and that did prop up coal prices in 2022, but the IEA said “the relatively small increase in coal emissions has been considerably outweighed by the expansion of renewables.”
The IEA’s World Energy Outlook, using a scenario based on existing government policies, is projecting coal use to start to fall in the next few years and natural gas demand to reach a plateau by the end of the decade.
The continued growth of the EV market will lead to oil demand leveling off in the mid-2030’s, before falling slightly by 2050.
Among the government policies the IEA cited for speeding the change and helping generate an estimated $2 trillion in clean energy investment by 2030 are the U.S. Inflation Reduction Act, European Union’s Fit for 55 package and Japan’s Green Transformation.
The war in Ukraine will also have long-term impacts for Russia as an energy exporter, the agency said.
“Russia has been by far the world’s largest exporter of fossil fuels, but its invasion of Ukraine is prompting a wholesale reorientation of global energy trade, leaving it with a much-diminished position,” the IEA analysis said.
Russian fossil fuel exports will never return – in any of the IEA’s scenarios – to the levels seen in 2021. Russian sales will be redirected to Asian markets, which is particularly challenging for natural gas, due to limited pipeline capacity.
Russia’s share of internationally traded energy, which stood at close to 20 percent in 2021, falls to 13 percent in 2030 under IEA projections.
“Energy markets and policies have changed as a result of Russia’s invasion of Ukraine, not just for the time being, but for decades to come,” IEA Executive Director Fatih Birol said in a statement.
“Even with today’s policy settings, the energy world is shifting dramatically before our eyes. Government responses around the world promise to make this a historic and definitive turning point towards a cleaner, more affordable and more secure energy system,” Birol said.
