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From Energy Core to Currency War

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A multi-spectrum war is being waged against Moscow by Washington. If there are any doubts about this, they should be put to rest. Geopolitics, science and technology, speculation, financial markets, information streams, large business conglomerates, intelligentsia, mass communication, social media, the internet, popular culture, news networks, international institutions, sanctions, audiences, public opinion, nationalism, different governmental bodies and agencies, identity politics, proxy wars, diplomacy, countervailing international alliances, major business agreements, non-governmental organizations (NGOs), human rights, prestige, military personnel, capital, and psychological tactics are all involved in this multi-spectrum war.

On a daily basis this struggle can be seen playing out on the airwaves, in the war theaters in Ukraine and the Middle East, through the statements and accusations of diplomats, and in the economic sphere.
Additionally, the debates and questions on whether a new cold war—a post-Cold War cold war—has emerged or if the Cold War never ended should be put to rest too. The mentality of the Cold War never died in the Washington Beltway.

From the perspective of Russian officials, it is clear that the US never put down its war mace and continued the offensive. The dissolution of the Warsaw Pact, defeating the Soviets and Eastern Bloc, and seeing the Soviet Union dismantled into fifteen republics was not enough for the Cold War warriors in the US. The newly emergent Russian Federation had to be placated in their views.
Petro-politics have been a major feature of this multi-spectrum war too. [1] Not only have energy prices been a factor in this struggle, but so are financial markets and national currencies. The manipulated decline in the price of energy, which has been driven by the flooding of the global market with oil, is now being augmented by a siege on the value of the Russian ruble.
This is part of what appears to be a deliberate two-pronged attack on the Russian Federation that seeks to cut Russia’s revenues through market manipulation via economic sanctions and price drops. It is what you would call a «double whammy». While sanctions have been imposed on the Russian economy by the US and its allies, including Australia, Canada, the European Union, and Japan, offensives on Russia’s main source of revenue — energy — and its national currency have taken place.

Currency Warfare and Inflation
The price of the Russian ruble begun to drop in December 2014 as a consequence of the economic siege on the Russian Federation, the drop in global energy prices, and speculation. «Judging by the situation in the country, we are in the midst of a deep currency crisis, one that even Central Bank employees say they could not have foreseen in their worst nightmares». Interfax’s Vyacheslav Terekhov commented on the currency crisis while talking to Russian Preisdent Vladimir Putin during a Kremlin press conference on December 18, 2014. [2] Putin himself admitted this too at the press conference. While answering Terekhov, Putin explained that «the situation has changed under the influence of certain foreign economic factors, primarily the price of energy resources, of oil and consequently of gas as well». [3]
Some may think that the drop in the Russian ruble’s value is a result of the market acting on its own while others who recognize that there is market manipulation involved may turn around and blame it on the Russian government and Vladimir Putin.

This process, however, has been guided by US machinations. It is simply not a result of the market acting on its own or the result of Kremlin policies. It is the result of US objectives and policy that deliberately targets Russia for destabilization and devastation. This is why Putin answered Terekhov’s question by saying that the drop in the value of the Russian ruble «was obviously provoked primarily by external factors». [4]
Both US Assistant-Secretary of State Victoria Nuland — the wife of the Project for the New American Century (PNAC) co-founder and neo-conservative advocate for empire Robert Kagan—and US Assistant-Secretary of the Treasury Daniel Glaser told the Foreign Affairs Committee of the US House of Representatives in May 2014 that the objectives of the US economic sanctions strategy against the Russian Federation was not only to damage the trade ties and business between Russia and the EU, but to also bring about economic instability in Russia and to create currency instability and inflation. [5]
In other words, the US government was targeting the Russian ruble for devaluation and the Russian economy for inflation since at least May 2014.

It appears that the US is trying to manipulate the Kremlin into spending Russia’s resources and fiscal reserves to fight the inflation of the Russian ruble that Washington has engineered.
The Kremlin, however, will not take the bait and be goaded into depleting the approximately $419 billion (US) foreign currency reserves and gold holdings of the Russian Federation or any of Russia’s approximately 8.4 trillion ruble reserves in an effort to prop the declining value of the Russian ruble.

In this regard, while holding a press conference, President Putin has stated the following on December 18, 2014: «The Central Bank does not intend to ‘burn’ them all senselessly, which is right». [6] Putin emphasized this again when answering Vyacheslav Terekhov’s question by saying that the Russian government and Russian Central Bank «should not hand out our gold and foreign currency reserves or burn them on the market, but provide lending resources». [7]
The Kremlin understands what Washington is trying to do. The US is replaying old game plans against Russia. The energy price manipulation, the currency devaluation, and even US attempts to entrap Russia in a conflict with its sister-republic Ukraine are all replays of US tactics that have been used before during the Cold War and after 1991.
For example, dragging Russia into Ukraine would be a replay of how the US dragged the Soviet Union into Afghanistan whereas the manipulation of energy prices and currency markets would parallel the US strategy used to weaken and destabilize Baathist Iraq, Iran, and the Soviet Union during the Afghan-Soviet War and Iran-Iran War.
Instead of trying to stop the value of the ruble from dropping, the Kremlin appears to have decided to strategically invest in Russia’s human capital. Russia’s national reserve funds will be used to diversify the national economy and strengthen the social and public sectors.
Despite the economic warfare against Russia, this is exactly why the wages of teachers in schools, professors in post-secondary institutions of learning and training, employees of cultural institutions, doctors in hospitals and clinics, paramedics, and nurses—the most important sectors for developing Russia’s human capital and capacity—have all been raised.

The Russian Bear Courts the Turkish Grey Wolf
The Kremlin, however, has an entire list of options at its disposal for countering the US offensive against Russia. One of them involves the courting of Turkey. The Russian courtship of Turkey has involved the Russian move away from the construction of the South Stream natural gas pipeline from Russia across the Black Sea to Bulgaria.
Putin announced that Russia has cancelled the South Stream project on December 1, 2014. Instead the South Stream pipeline project has been replaced by a natural gas pipeline that goes across the Black Sea to Turkey from the Russian Federation’s South Federal District.
This alterative pipeline has been popularly billed the «Turk Stream» and partners Russian energy giant Gazprom with Turkey’s Botas. Moreover, Gazprom will start giving Turkey discounts in the purchase of Russian natural gas that will increase with the intensification of Russo-Turkish cooperation.

The natural gas deal between Ankara and Moscow creates a win-win situation for both the Turkish and Russian sides. Not only will Ankara get a discount on energy supplies, but Turk Stream gives the Turkish government what it has wanted and desired for years.
The Turk Stream pipeline will make Turkey an important energy corridor and transit point, complete with transit revenues. In this case Turkey becomes the corridor between energy supplier Russia and European Union and non-EU energy customers in southeastern Europe.
Ankara will gain some leverage over the European Union and have an extra negotiating card with the EU too, because the EU will have to deal with it as an energy broker.
For its part, Russia has reduced the risks that it faced in building the South Stream by cancelling the project. Moscow could have wasted resources and time building the South Stream to see the project sanctioned or obstructed in the Balkans by Washington and Brussels.
If the European Union really wants Russian natural gas then the Turk Stream pipeline can be expanded from Turkey to Greece, the former Yugoslav Republic (FYR) of Macedonia, Serbia, Hungary, Slovenia, Italy, Austria, and other European countries that want to be integrated into the energy project.

The cancelation of South Stream also means that there will be one less alternative energy corridor from Russia to the European Union for some time. This has positive implications for a settlement in Ukraine, which is an important transit route for Russian natural gas to the European Union.
As a means of securing the flow of natural gas across Ukrainian territory from Russia, the European Union will be more prone to push the authorities in Kiev to end the conflict in East Ukraine.

In more ways than one the Turk Stream pipeline can be viewed as a reconfigured of the failed Nabucco natural gas pipeline. Not only will Turk Stream court Turkey and give Moscow leverage against the European Union, instead of reducing Russian influence as Nabucco was originally intended to do, the new pipeline to Turkey also coaxes Ankara to align its economic and strategic interests with those of Russian interests.
This is why, when addressing Nabucco and the rivalries for establishing alternate energy corridors, this author pointed out in 2007 that «the creation of these energy corridors and networks is like a two-edged sword. These geo-strategic fulcrums or energy pivots can also switch their directions of leverage. The integration of infrastructure also leads towards economic integration». [8]
The creation of Turk Stream and the strengthening of Russo-Turkish ties may even help placate the gory conflict in Syria. If Iranian natural gas is integrated into the mainframe of Turk Stream through another energy corridor entering Anatolia from Iranian territory, then Turkish interests would be even more tightly aligned with both Moscow and Tehran.

Turkey will save itself from the defeats of its neo-Ottoman policies and be able to withdraw from the Syrian crisis. This will allow Ankara to politically realign itself with two its most important trading partners, Iran and Russia.
It is because of the importance of Irano-Turkish and Russo-Turkish trade and energy ties that Ankara has had an understanding with both Russia and Iran not to let politics and their differences over the Syrian crisis get in the way of their economic ties and business relationships while Washington has tried to disrupt Irano-Turkish and Russo-Turkish trade and energy ties like it has disrupted trade ties between Russia and the EU. [9]

Ankara, however, realizes that if it lets politics disrupt its economic ties with Iran and Russia that Turkey itself will become weakened and lose whatever independence it enjoys
Masterfully announcing the Russian move while in Ankara, Putin also took the opportunity to ensure that there would be heated conversation inside the EU. Some would call this rubbing salt on the wounds. Knowing that profit and opportunity costs would create internal debate within Bulgaria and the EU, Putin rhetorically asked if Bulgaria was going to be economically compensated by the European Commission for the loss.

The Russian Bear and the Chinese Dragon
It is clear that Russian business and trade ties have been redirected to the People’s Republic of China and East Asia. On the occasion of the Sino-Russian mega natural gas deal, this author pointed out that this was not as much a Russian countermove to US economic pressure as it was really a long-term Russian strategy that seeks an increase in trade and ties with East Asia. [10]
Vladimir Putin himself also corroborated this standpoint during the December 18 press conference mentioned earlier when he dismissed—like this author—the notion that the so-called «Russian turn to the East» was mainly the result of the crisis in Ukraine.
In President Putin’s own words, the process of increasing business ties with the Chinese and East Asia «stems from the global economic processes, because the East – that is, the Asia-Pacific Region – shows faster growth than the rest of the world». [11]
If this is not convincing enough that the turn towards East Asia was already in the works for Russia, then Putin makes it categorically clear as he proceeds talking at the December 18 press conference.

In reference to the Sino-Russian gas deal and other Russian projects in East Asia, Putin explained the following: «The projects we are working on were planned long ago, even before the most recent problems occurred in the global or Russian economy. We are simply implementing our long-time plans». [12]
From the perspective of Russian Presidential Advisor Sergey Glazyev, the US is waging its multi-spectrum war against Russia to ultimately challenge Moscow’s Chinese partners.

In an insightful interview, Glazyev explained the following points to the Ukrainian journalist Alyona Berezovskaya—working for a Rossiya Segodnya subsidiary focusing on information involving Ukraine—about the basis for US hostility towards Russia: the bankruptcy of the US, its decline in competitiveness on global markets, and Washington’s inability to ultimately save its financial system by serving its foreign debt or get enough investments to establish some sort of innovative economic breakthrough are the reasons why Washington has been going after the Russian Federation. [13]
In Glazyev’s own words, the US wants «a new world war». [14] The US needs conflict and confrontation, in other words. This is what the crisis in Ukraine is nurturing in Europe.

Sergey Glazyev reiterates the same points months down the road on September 23, 2014 in an article he authors for the magazine Russia in Global Affairs, which is sponsored by the Russian International Affairs Council—an think-tank founded by the Russian Foreign Ministry and Russian Ministry of Education 2010—and the US journal Foreign Affairs—which is the magazine published by the Council on Foreign Relation in the US.
In his article, Glazyev adds that the war Washington is inciting against Russia in Europe may ultimately benefit the Chinese, because the struggle being waged will weaken the US, Russia, and the European Union to the advantage of China. [15]

The point of explaining all this is to explain that Russia wants a balanced strategic partnership with China. Glazyev himself even told Berezovskaya in their interview that Russia wants a mutually beneficial relationship with China that does reduce to becoming a subordinate to Beijing. [16]
Without question, the US wants to disrupt the strategic partnership between Beijing and Moscow. Moscow’s strategic long-term planning and Sino-Russian cooperation has provided the Russia Federation with an important degree of economic and strategic insulation from the economic warfare being waged against the Russian national economy.

Washington, however, may also be trying to entice the Chinese to overplay their hand as Russia is economically attacked. In this context, the price drops in the energy market may also be geared at creating friction between Beijing and Moscow.
In part, the manipulation of the energy market and the price drops could seek to weaken and erode Sino-Russian relations by coaxing the Chinese into taking steps that would tarnish their excellent ties with their Russian partners.
The currency war against the Russian ruble may also be geared towards this too. In other words, Washington may be hoping that China becomes greedy and shortsighted enough to make an attempt to take advantage of the price drop in energy prices in the devaluation of the Russian ruble.

Whatever Washington’s intentions are, every step that the US takes to target Russia economically will eventually hurt the US economy too. It is also highly unlikely that the policy mandarins in Beijing are unaware of what the US may try to be doing. The Chinese are aware that ultimately it is China and not Russia that is the target of the United States.

Economic Terrorism: An Argentina versus the Vulture Funds Scenario?
The United States is waging a fully fledged economic war against the Russian Federations and its national economy. Ultimately, all Russians are collectively the target. The economic sanctions are nothing more than economic warfare. If the crisis in Ukraine did not happen, another pretext would have been fund for assaulting Russia.

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Both US Assistant-Secretary of State Victoria Nuland and US Assistant-Secretary of the Treasury Daniel Glaser even told the Foreign Affairs Committee of the US House of Representatives in May 2014 that the ultimate objectives of the US economic sanctions against Russia were to make the Russian population so miserable and desperate that they would eventually demand that the Kremlin surrender to the US and bring about «political change».
«Political change» can mean many things, but what it most probably implies here is regime change in Moscow. In fact, the aims of the US do not even appear to be geared at coercing the Russian government to change its foreign policy, but to incite regime change in Moscow and to cripple the Russian Federation entirely through the instigation of internal divisions.

This is why maps of a divided Russia are being circulated by Radio Free Europe. [17]

According to Presidential Advisor Sergey Glazyev, Washington is «trying to destroy and weaken Russia, causing it to fragment, as they need this territory and want to establish control over this entire space». [18]

«We have offered cooperation from Lisbon to Vladivostok, whereas they need control to maintain their geopolitical leadership in a competition with China,» he has explained, pointing out that the US wants lordship and is not interested in cooperation. [19]
Alluding to former US top diplomat Madeline Albright’s sentiments that Russia was unfairly endowed with vast territory and resources, Putin also spoke along similar lines at his December 18 press conference, explaining how the US wanted to divide Russia and control the abundant natural resources in Russian territory.

It is of little wonder that in 2014 a record number of Russian citizens have negative attitudes about relations between their country and the United States. A survey conducted by the Russian Public Opinion Research Center has shown that of 39% of Russian respondents viewed relations with the US as «mostly bad» and 27% as «very bad». [20]
This means 66% of Russian respondents have negative views about relations with Washington. This is an inference of the entire Russian population’s views.
Moreover, this is the highest rise in negative perceptions about the US since 2008 when the US supported Georgian President Mikheil Saakashvili in Tbilisi’s war against Russia and the breakaway republic of South Ossetia; 40% viewed them as «mostly bad» and 25% of Russians viewed relations as «very bad» and at the time. [21]

Russia can address the economic warfare being directed against its national economy and society as a form of «economic terrorism». If Russia’s banks and financial institutions are weakened with the aim of creating financial collapse in the Russian Federation, Moscow can introduce fiscal measures to help its banks and financial sector that could create economic shockwaves in the European Union and North America.
Speaking in hypothetical terms, Russia has lots of options for a financial defensive or counter-offensive that can be compared to its scorched earth policies against Western European invaders during the Napoleonic Wars, the First World War, and the Second World War.
If Russian banks and institutions default and do not pay or delay payment of their derivative debts and justify it on the basis of the economic warfare and economic terrorism, there would be a financial shock and tsunami that would vertebrate from the European Union to North America. This scenario has some parallels to the steps that Argentina is taken to sidestep the vulture funds.
The currency war eventually will rebound on the Washington and Wall Street. The energy war will also reverse directions. Already, the Kremlin has made it clear that it and a coalition of other countries will de-claw the US in the currency market through a response that will neutralize US financial manipulation and the petro-dollar.

In the words of Sergey Glazyev, Moscow is thinking of a «systemic and comprehensive» response «aimed at exposing and ending US political domination, and, most importantly, at undermining US military-political power based on the printing of dollars as a global currency». [22]
His solution includes the creation of «a coalition of sound forces advocating stability—in essence, a global anti-war coalition with a positive plan for rearranging the international financial and economic architecture on the principles of mutual benefit, fairness, and respect for national sovereignty». [23]

The coming century will not be the «American Century» as the neo-conservatives in Washington think. It will be a «Eurasian Century». Washington has taken on more than it can handle, this may be why the US government has announced an end to its sanctions regime against Cuba and why the US is trying to rekindle trade ties with Iran.
Despite this, the architecture of the post-Second World War or post-1945 global order is now in its death bed and finished. This is what the Kremlin and Putin’s presidential spokesman and press secretary Dmitry Peskov mean when they impart—as Peskov stated to Rossiya-24 in a December 17, 2014 interview — that the year 2014 has finally led to «a paradigm shift in the international system».
 

Repost from the MD’s partner the 4th Media.
 
NOTES
[1] Mahdi Darius Nazemroaya, «Oil Prices and Energy Wars: The Empire of Frack versus Russia,» Strategic Culture Foundation, December 5, 2014.
[2] Official Kremlin version of the transcribed press conference — titled «News conference of Vladimir Putin» (December 18, 2014)—has been used in quoting Vladimir Putin.
[3] Ibid.
[4] Ibid.
[5] Mahdi Darius Nazemroaya, «Psychological War In The Financial Markets And The Sino-Russian Gas Deal,» Mint Press News, May 29, 2014.
[6] Supra. n.2.
[7] Ibid.
[8] Mahdi Darius Nazemroaya, «The ‘Great Game’ Enters the Mediterranean: Gas, Oil, War, and Geo-Politics,» Global Research, October 14, 2007.
[9] Mahdi Darius Nazemroaya, «Oil Prices and Energy Wars,» op. cit.; Mahdi Darius Nazemroaya, «Turkey & Iran: More than meets the eye»RT, January 20, 2014.
[10] Mahdi Darius Nazemroaya, «Psychological War In The Financial Markets,» op. cit.
[11] Supra. n.2.
[12] Ibid.
[13] Sergey Glazyev, «Alyona Berezovskaya interviews Sergei Glazyev,» Interview with Alyona Berezovskaya, Ukraine.ru, July 17, 2014: .
[14] Ibid.
[15] Sergey Glazyev, «The Threat of War and the Russian Response,» Russia in Global Affairs, September 24, 2014.
[16] Sergey Glazyev, «Alyona Berezovskaya interviews,» op. cit.
[17] Mahdi Darius Nazemroaya, «WWIII aimed to redraw map of Russia?» Strategic Culture Foundation, September 10, 2014.
[18] Sergey Glazyev, «Alyona Berezovskaya interviews,» op. cit.
[19] Ibid.
[20] Всероссийский центр изучения общественного мнения [Russian Public Opinion Research Center], «Россия-США отношенияв точке замерзания» [«Russia-US Relations at Freezing Point»], Press release 2729, December 4, 2014: .
[21] Ibid.
[22] Sergey Glazyev, «The Threat of War,» op. cit.
[23] Ibid.

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What would it take to limit the global temperature rise to 1.5 °C?

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Authors: Laura Cozzi and Tim Gould*

Every year, the World Energy Outlook scenarios are updated to take into account the latest data and developments in policies, technology, costs and science. The major new scientific element for this year’s WEO was without doubt the Special Report on Global Warming of 1.5 °C, which the Intergovernmental Panel on Climate Change (IPCC) published in late 2018.

The IPCC report contains a wealth of new information about the risks of global warming, underlining that many of the physical impacts of climate change escalate in a non-linear fashion in relation to increases in global temperature. In other words, the impacts of 2.0 °C of warming are far worse than those of 1.5 °C.

The energy sector is at the front line of this issue, as it is by far the largest source of the emissions that cause global warming. As a result, this year’s WEO explores in detail what a pathway consistent with capping the temperature rise at 1.5 °C would mean for the energy sector. The discussion goes to the heart of energy’s dual role in modern civilisation: it’s essential to all the comforts of modern life – our homes, workplaces, leisure and our infrastructure – but the way it’s largely produced and consumed at the moment damages the environment on which we all depend.

Although the task of tackling climate change is huge, it is relatively simple to define. Global emissions need to peak as soon as possible and then fall rapidly until they hit zero – or, as the Paris Agreement puts it, until there is a “balance between anthropogenic emissions by sources and removals by sinks,” a situation sometimes called net-zero.

It’s not the only variable that counts, but the year at which global emissions reach net-zero is a critically important indicator for the prospects of stabilising global temperatures. The Paris Agreement specifies that this needs to happen “in the second half of this century.” The IPCC’s 1.5 °C report underlines that there is a major difference between reaching net-zero in 2100 versus 2050, and attention in many countries is increasingly focused on earlier dates.

After the UN Climate Summit in September, at least 65 jurisdictions, including the European Union, had set or were actively considering long-term net-zero carbon targets, including efforts to reach net-zero in 2050 or sooner. These economies together accounted for 21% of global gross domestic product and nearly 13% of energy-related CO2 emissions in 2018.

The Sustainable Development Scenario

The Sustainable Development Scenario relies on all of these net-zero targets being achieved on schedule and in full. The technology learning and policy momentum that they generate means that they become the leading edge of a much broader worldwide effort, bringing global energy-related CO2 emissions down sharply to less than 10 billion tonnes by 2050, on track for global net-zero by 2070.

There are no single or simple solutions to achieve this result. Rapid energy transitions of the sort envisaged by the Sustainable Development Scenario would require action across all sectors, utilising a wide range of energy technologies and policies. Energy efficiency improvements and massive investment in renewables – led by solar PV – take the lead, but there are also prominent roles in this scenario for carbon capture, utilisation and storage (CCUS), hydrogen, nuclear and others.

Among the range of technology solutions proposed for global emissions, there is one category that is used only very sparingly. These are the so-called negative emissions technologies, which actually remove CO2 from the atmosphere. Examples are bioenergy used in conjunction with CCUS (often called “BECCS”) and direct air capture. These technologies may yet play a critical role, but the level at which they are deployed in the Sustainable Development Scenario (0.25 billion tonnes in 2050) is lower than nearly all of the 1.5 °C scenarios assessed by the IPCC.

The Sustainable Development Scenario and the pursuit of 1.5 °C

If emissions were to stay flat, at the net-zero level, from 2070 until the end of the century, then the Sustainable Development Scenario is “likely” (with 66% probability) to limit the rise in the average global temperature to 1.8 °C, which is broadly equivalent to a 50% probability of a stabilisation at 1.65 °C.

If negative emissions technologies of the sort mentioned above could be deployed at scale, then emissions could actually go below zero – meaning that carbon dioxide is being withdrawn from the atmosphere on a net basis. This is a very common feature of the scenarios assessed by the IPCC in its special report: 88 out of the 90 scenarios in the IPCC’s report assume some level of net negative emissions.

A level of net negative emissions significantly smaller than that used in most scenarios assessed by the IPCC would give the Sustainable Development Scenario a 50% probability of limiting the rise in global temperatures to 1.5 °C.

It is technically conceivable that the world will reach a point where large quantities of CO2 are absorbed from the atmosphere, but there are uncertainties about what may be possible and about the likely impacts. As we have pointed out in previous WEOs, when designing deep decarbonisation scenarios, there are reasons to limit reliance on early-stage technologies for which future rates of deployment are highly uncertain. 

That is why the WEO has always emphasised the importance of early policy action: the pathway followed by the Sustainable Development Scenario relies on an immediate and rapid acceleration in energy transitions.

With the same precautionary reasoning in mind, the WEO-2019 also explores what it would take to achieve a 50% probability of stabilisation at 1.5 °C without net negative emissions.

A 1.5 °C scenario that does not rely on negative emissions technologies implies achieving global net-zero emissions around 2050. This in turn means a reduction in emissions of around 1.3 billion tonnes CO2 every year from 2018 onwards. That amount is roughly equivalent to the emissions from 15% of the world’s coal fleet or from 40% of today’s global passenger car fleet.

The year by which different economies would need to hit net-zero in such a scenario would vary, but the implication for advanced economies is that they would need to reach this point in the 2040s. The difference, compared with the Sustainable Development Scenario, would be much starker for many developing economies, which would all need to be at net-zero by 2050.

A zero-carbon power system would need to become a reality at least a few years before the entire economy reaches net-zero. This implies moving to a zero-emissions electricity system in the 2030s for advanced economies and around 2040 for developing economies.

Discussing target dates in this context is useful, but the really tough part is working out how to get there. That requires credible plans to actually reduce emissions quickly across the entire economy, pathways that work not just from the perspectives of technical feasibility or cost-efficiency (although these are important) but also take into account the need for social acceptance and buy-in.

The technical solutions in the power sector, at least, are well known, although the scale and speed at which clean energy technologies would need to be deployed – and existing facilities either repurposed, retrofitted with CCUS, or retired – is breath-taking. But any economy-wide net-zero target also needs to find answers quickly for sectors that are much harder to decarbonise, notably buildings, heavy industries like cement and steel, aviation and freight transport. Achieving such an outcome, without compromising the affordability or reliability of energy, represents an extraordinary challenge.

The energy sector is rightly at the heart of the climate debate, but it cannot deliver such a transformation on its own. Change on a massive scale would be necessary across a very broad front. As the IPCC 1.5 °C report says, this type of scenario would require rapid and far-reaching transitions not only in energy, but also in land, urban infrastructure – including transport and buildings – and industrial systems.

In its 2019 edition, the World Energy Outlook once again puts the spotlight on the huge disparity between the kind of transformation that is required and the pathway that the world is on, according to our assessment of today’s policy plans and ambitions and the rising energy needs of a growing global population and economy.

As the IEA’s Executive Director, Dr Fatih Birol, commented at the WEO launch this week, the world urgently needs to put a laser-like focus on bringing down global emissions.

“This calls for a grand coalition encompassing governments, investors, companies and everyone else who is committed to tackling climate change,” Dr Birol said. “Our Sustainable Development Scenario is tailor-made to help guide the members of such a coalition in their efforts to address the massive climate challenge that faces us all.”

*Tim Gould, Head of Division for Energy Supply Outlooks and Investment.

IEA

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World Energy Outlook 2019 highlights deep disparities in the global energy system

MD Staff

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Deep disparities define today’s energy world. The dissonance between well-supplied oil markets and growing geopolitical tensions and uncertainties. The gap between the ever-higher amounts of greenhouse gas emissions being produced and the insufficiency of stated policies to curb those emissions in line with international climate targets. The gap between the promise of energy for all and the lack of electricity access for 850 million people around the world.

The World Energy Outlook 2019, the International Energy Agency’s flagship publication, explores these widening fractures in detail. It explains the impact of today’s decisions on tomorrow’s energy systems, and describes a pathway that enables the world to meet climate, energy access and air quality goals while maintaining a strong focus on the reliability and affordability of energy for a growing global population.

As ever, decisions made by governments remain critical for the future of the energy system. This is evident in the divergences between WEO scenarios that map out different routes the world could follow over the coming decades, depending on the policies, investments, technologies and other choices that decision makers pursue today. Together, these scenarios seek to address a fundamental issue – how to get from where we are now to where we want to go.

The path the world is on right now is shown by the Current Policies Scenario, which provides a baseline picture of how global energy systems would evolve if governments make no changes to their existing policies. In this scenario, energy demand rises by 1.3% a year to 2040, resulting in strains across all aspects of energy markets and a continued strong upward march in energy-related emissions.

The Stated Policies Scenario, formerly known as the New Policies Scenario, incorporates today’s policy intentions and targets in addition to existing measures. The aim is to hold up a mirror to today’s plans and illustrate their consequences. The future outlined in this scenario is still well off track from the aim of a secure and sustainable energy future. It describes a world in 2040 where hundreds of millions of people still go without access to electricity, where pollution-related premature deaths remain around today’s elevated levels, and where CO2 emissions would lock in severe impacts from climate change.

The Sustainable Development Scenario indicates what needs to be done differently to fully achieve climate and other energy goals that policy makers around the world have set themselves. Achieving this scenario – a path fully aligned with the Paris Agreement aim of holding the rise in global temperatures to well below 2°C and pursuing efforts to limit it to 1.5°C – requires rapid and widespread changes across all parts of the energy system. Sharp emission cuts are achieved thanks to multiple fuels and technologies providing efficient and cost-effective energy services for all.

“What comes through with crystal clarity in this year’s World Energy Outlook is there is no single or simple solution to transforming global energy systems,” said Dr Fatih Birol, the IEA’s Executive Director. “Many technologies and fuels have a part to play across all sectors of the economy. For this to happen, we need strong leadership from policy makers, as governments hold the clearest responsibility to act and have the greatest scope to shape the future.”

In the Stated Policies Scenario, energy demand increases by 1% per year to 2040. Low-carbon sources, led by solar PV, supply more than half of this growth, and natural gas accounts for another third. Oil demand flattens out in the 2030s, and coal use edges lower. Some parts of the energy sector, led by electricity, undergo rapid transformations. Some countries, notably those with “net zero” aspirations, go far in reshaping all aspects of their supply and consumption.

However, the momentum behind clean energy is insufficient to offset the effects of an expanding global economy and growing population. The rise in emissions slows but does not peak before 2040.

Shale output from the United States is set to stay higher for longer than previously projected, reshaping global markets, trade flows and security. In the Stated Policies Scenario, annual US production growth slows from the breakneck pace seen in recent years, but the United States still accounts for 85% of the increase in global oil production to 2030, and for 30% of the increase in gas. By 2025, total US shale output (oil and gas) overtakes total oil and gas production from Russia.

“The shale revolution highlights that rapid change in the energy system is possible when an initial push to develop new technologies is complemented by strong market incentives and large-scale investment,” said Dr Birol. “The effects have been striking, with US shale now acting as a strong counterweight to efforts to manage oil markets.”

The higher US output pushes down the share of OPEC members and Russia in total oil production, which drops to 47% in 2030, from 55% in the mid-2000s. But whichever pathway the energy system follows, the world is set to rely heavily on oil supply from the Middle East for years to come.

Alongside the immense task of putting emissions on a sustainable trajectory, energy security remains paramount for governments around the globe. Traditional risks have not gone away, and new hazards such as cybersecurity and extreme weather require constant vigilance. Meanwhile, the continued transformation of the electricity sector requires policy makers to move fast to keep pace with technological change and the rising need for the flexible operation of power systems.

“The world urgently needs to put a laser-like focus on bringing down global emissions. This calls for a grand coalition encompassing governments, investors, companies and everyone else who is committed to tackling climate change,” said Dr Birol. “Our Sustainable Development Scenario is tailor-made to help guide the members of such a coalition in their efforts to address the massive climate challenge that faces us all.”

A sharp pick-up in energy efficiency improvements is the element that does the most to bring the world towards the Sustainable Development Scenario. Right now, efficiency improvements are slowing: the 1.2% rate in 2018 is around half the average seen since 2010 and remains far below the 3% rate that would be needed.

Electricity is one of the few energy sources that sees rising consumption over the next two decades in the Sustainable Development Scenario. Electricity’s share of final consumption overtakes that of oil, today’s leader, by 2040. Wind and solar PV provide almost all the increase in electricity generation.

Putting electricity systems on a sustainable path will require more than just adding more renewables. The world also needs to focus on the emissions that are “locked in” to existing systems. Over the past 20 years, Asia has accounted for 90% of all coal-fired capacity built worldwide, and these plants potentially have long operational lifetimes ahead of them. This year’s WEO considers three options to bring down emissions from the existing global coal fleet: to retrofit plants with carbon capture, utilisation and storage or biomass co-firing equipment; to repurpose them to focus on providing system adequacy and flexibility; or to retire them earlier.

IEA

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Is OPEC stuck in a cycle of endless cuts?

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In its latest annual World Oil Outlook (WOO) report, published last week, the Organization of the Petroleum Exporting Countries (OPEC) predicted its oil production and market share to fall in the years to come.

This view of the future says a lot about the cartel’s policies in facing the ever-growing U.S. shale which is casting a dismal shadow over the future role which OPEC members are going to be playing in the global oil market.

According to the latest WOO report, OPEC expects its production of crude oil and other liquids to decline to 32.8 million barrels per day (bpd) by 2024 from its current 35 million bpd. This means that the cartel plans to go further with its plans for cutting production even after the current pact is over in 2020.

Considering the significant growth in U.S. shale production over the past few years, and to be exact, since the OPEC decided to cut production in order to relieve the negative impact of U.S. shale’s flow on oil prices, it seems that although OPEC efforts have paid off partially but they have also supported the further expansion of shale production by giving them more market share.

How OPEC sees the future of oil market and its own condition in the future, raises the question that for how long is the group going to continue these “cuts”? And is it going to be enough to maintain the significant role which the cartel has had as an influential body in the global oil market? 

The report

Before we go through the above-mentioned questions and discuss some possible answers, let’s take a look at some of the important information presented in recent WOO.

Two major aspects of the market are import to take into consideration here, first of which is production, and the second is consumption.

In the production part, as we mentioned earlier the organization sees its own production falling about seven percent in the mid-term. While according to the data provided, the cartel expects U.S. shale output to reach 16.9 million bpd in 2024 from the current 12.0 million bpd. 

This prediction means that the Middle East-dominated group has accepted defeat against U.S. shale producers and sees no way forward except further contracting to prevent the prices from falling.

In the consumption part on the other hand, once again, OPEC sees demand for its oil diminishing in the mid-term and cites rising climate activism and growing use of alternative fuels as some of the reasons for the reduction in mid-term oil demand. The true reason, however, lies somewhere else.

The producer of one-third of the total global oil expects oil consumption to reach 103.9 million bpd in 2023, down from 104.5 million bpd in last year’s report. Longer-term, oil demand, however, is expected to rise to 110.6 million bpd by 2040, although still lower than last year’s forecast.

Further cuts

In the past few years, OPEC has been reducing its oil output under a pact with the support of Russia and some other non-OPEC nations to rebalance the oversupplied market. 

Many oil experts and analysts have been recently arguing for an extension in the cuts deal, considering the emerging signs of a slowdown in global economic growth under the shadow of the U.S.-China trade war and a subsequent slowdown in oil demand.

Back in October, OPEC Secretary-General Mohammad Barkindo had announced that deeper cuts in the organization’s oil supplies were one of the options for OPEC and its allies to consider in their upcoming gathering in December.

It should be noted that Russia and Saudi Arabia as two main poles of the OPEC and non-OPEC alliance (known as OPEC+) have slightly different views about the need for further extension of the pact. Russia sees the current range of prices at about $60 good enough while the kingdom requires higher prices to go through with its ambitious Aramco IPO.

The broken cycle

What OPEC has presented in its latest report suggests that the cartel’s policy of controlling production is having an opposite impact. The skyrocketing U.S. shale production levels indicate that OPEC cuts are positively encouraging shale producers to increase their output more and more, and that will not only halt prices from rising but will also reduce OPEC’s share of the global market day by day.

In this regard, many analysts believe that OPEC should once again take into account the warnings of the former Saudi Oil Minister Ali al-Naimi, who had previously predicted that “OPEC’s production cuts only creates more production opportunity for U.S. shale oil and consequently the organization would be caught up in an endless maze of production cuts.

Final thoughts

With OPEC’s report pointing to several production challenges from its competitors, the cartel doesn’t seem to be much concerned about the demand side. 

According to the report, world crude oil consumption will continue to grow up to 2040, so that by 2024 the demand for crude oil will increase one million barrels a day to reach 104.8 million bpd. The demand growth will then continue at a slower pace, reaching 110.6 million bpd by 2040.

OPEC’s share of the mentioned 110.6 million bpd will be 44.1 million bpd, the report says.

So, it seems that OPEC believes it should continue holding its pact with the non-OPEC allies for a few more years when the growth in global oil demand would offset the increase in U.S. shale production and once again rebalance the market. 

From our partner Tehran Times

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