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TANAP Is Inaugurated: What Southern Gas Corridor Promises To The Europe And Stakeholders?

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Ever since the creation of mankind, human beings have always been in search of energy. Several conflicts and wars happened over energy resources for many centuries. Depletion of energy resources is the most important challenge that the major powers are struggling for. Energy policy is a big issue for almost any country in the world which is dependent on external resources. Energy consumption in the EU is more than any other region in the world while being poor in terms of energy sources. Implementation of renewable alternative energy projects requires proper and expensive infrastructure, which not all of the states are capable of it in an economic context. Therefore, alternatives and new routes in the traditional energy sources are vital priorities for the EU.

Since the last gas dispute with Russia, the EU has started to build effective policies to bring energy sources safely to the internal market by efficient transportation. Thus, the EU is trying to reduce energy dependency level on Russia by using geographical proximity advantage to the energy centres. In this sense, the Caspian region offers more stable and secured energy flow considering the fact that the Southern Gas Corridor (SGC) project is designed for this purpose between the region and the EU. Therefore, the EU is providing substantial support for the reconstruction and development of the infrastructure of gas pipelines, which passes from transit countries such as Georgia and Turkey and brings energy resources to Europe. There are several important reasons that the EU took into consideration while implementing SGC. Firstly, the 2006 and 2009 gas dispute showed that Ukraine is not a reliable transit country anymore. Instead, Turkey can be the more optimal alternative route as it has a desire to become a regional power. Secondly, Azerbaijan offers more stable and secured energy supply by using its foreign energy relations experience from 1994. Also, Azerbaijan is more interested in to cooperate with the West in energy relations rather than sticking into one direction and using intermediary actors. Because having reliable and effective transportation networks for easy access to the world market is essential for economic development and security of Azerbaijan due to its geographical location as a landlocked state. Thirdly and most important factor is security. In the modern era, the prior direction of the states’ foreign policy is the solution of the security problem. Eastern part of the EU, especially CEE countries, are highly dependent on Russian gas, which makes them go under both political and economic pressures from time to time. Therefore, the principal direction of the EU is to ensure energy security as well as the national security of the Member States by diversifying their economic trade partners. Energy security can be described either additional category of the national security or a category which is based on the synthesis of economic and political security. Thus, as the energy security has both economic and political implications, the EU makes great efforts to protect its borders from any threat by addressing to the issue in two ways; international aspect which is targeted to provide reliable, cost-effective and low-risk energy imports to the domestic warehouses, and local aspect which is intended to establish uninterrupted supply of energy with affordable price for the population and industrial workers (consumers).

TANAP AND AZERBAIJAN-EU ENERGY RELATIONS

In 2011 Azerbaijan and the EU signed a joint declaration on the Southern Gas Corridor. SGC was more an optimal and promising version of the Nabucco pipeline project. The direction of the project was also crucial for Europe because the Trans Adriatic Pipeline (TAP) and Trans-Anatolian gas pipeline (TANAP) in the SGC will deliver Azerbaijani gas to the South of Europe. Thus, this pipeline both will meet the gas needs of these regions and diminish Europe’s energy dependence on Russia slightly. Unlike Nabucco, the SGC is a more promising and strategic start to bring gas resources from the Caspian Sea, Middle East, and Central Asia. The primary purpose of this project is to diversify energy routes by using completely new and alternative directions. The geopolitical significance of the TAP project is quite high in terms of diversifying energy sources. Although the main direction of the TAP project is Italy and Greece at initial stage, the pipeline can supply Azerbaijani gas to several European countries, such as Austria, Central Europe region, Bulgaria, Balkan countries, Southern Croatia, Albania, Montenegro, Bosnia and Herzegovina as well as United Kingdom, Germany, France and Switzerland.

The project was announced on November 17 2011 at the Third Black Sea Energy and Economic Forum held in Istanbul and following this a memorandum of understanding was signed between Azerbaijan and Turkey on December 26 2011. The opening ceremony of TANAP was held on November 30, 2019, in Ipsala of Turkey’s Edirne province. Ipsala is located near the Turkey-Greece border, and TANAP is connected to the TAP, which will bring Azerbaijani gas to European region directly. TANAP is the largest and central segment of SGC and has strategic importance for both Azerbaijan and Turkey. First and foremost, Azerbaijan will be able to transfer its natural resources directly into the European market for the first time in history. Second, by joining this project, Turkey reaffirms its position in the regional security by becoming a reliable regional energy hub. Third, European states support the energy supply from the Caspian Sea to the European market and by providing economic and political support. Thus, SGC is a multinational natural gas pipeline supported by the European Commission and financed by the World Bank, European Bank for Reconstruction and Development, and Asian Infrastructure Investment Bank. Despite the US has not invested and will not get any commercial benefit from the project, Washington supports TANAP due to its promotion of diversification of energy supplies.

The EU is making significant efforts to diversify its energy supply and deliver Caspian gas to Europe without Russian intervention. On the other hand, procedures between the EU and Azerbaijan show that Azerbaijan is interested in independent cooperation with the EU. Although the Nabucco project failed, with the choice of TAP and TANAP projects, Azerbaijan proved its pragmatic partnership and its aim to increase revenues. At the same time, from its independence, the absence of internal conflicts in Azerbaijan, continuous promotion of peace, active involvement in international missions resulted in a robust, durable and stable economy and political system. In fact,as long as Azerbaijan is interested in delivering energy to the West by supporting transit projects, the EU does not face any difficulties in the region.

In order to describe the big picture, as presented by the EU Commission prior to the global financial crisis and alternative energy routes, it is essential to note that volume and cost are not the only elements at stake in the SGC.It has crucial geopolitical consequences. Building East-West transportation corridor passing through South Caucasus to connect Europe to Asia offers to establish new infrastructures, railways, highways and pipelines, new job opportunities, security as well as different transport facilities. This corridor sits right at the intersection of both politics and economics. In terms of economics, it creates new chances for the regional countries to connect to global markets and to stimulate economic development by fostering integration with the global economy. On the other hand, politically, it enhances the strength of sovereignty of both sides by opening new supply routes. Because the creation of transit corridors requires diversified access to the international arena considering the fact that being dependent on a single route may emerge potential blockade by the exporter.

Azerbaijan is one of the main actors of this corridor and can supply gas to the European market by improving European energy security and without creating additional geopolitical tension. Azerbaijan has experienced energy trade with Europe by implementing the BTC pipeline. Alternative supplies remain its significance by building affordable and relatively more feasible projects with necessary investments. Azerbaijan, in this picture, emerges as the most reliable supplier and trade partner with a clear understanding of supply, demand and transit routes. Therefore, the initiative of SGC, TANAP and TAP together with the EU aims to hinder Russia’s dominance in the European gas market. To put it briefly; SGC offers more benefits rather than its predecessors due to several reasons:

Energy resources in the Caspian Basin are important for the EU, and the geographical location of Azerbaijan makes it ideal and more optimal point for the transportation of these resources;

SGC is not long-distance route as Nabucco, therefore, it is affordable in terms of costs;

SGC will create competitive prices in the energy market, especially for Southern Europe at the first stage, and later for CEE countries;

SGC will strengthen Turkey’s position as a transit country, and enhance the EU-Azerbaijan relations.

In the future, it is planned to give life to the Trans-Caspian energy pipeline by connecting to the SGC. In this context, the legal status of the Caspian Sea defines the strategies of the five Caspian littoral states. Convention on the Legal Status of the Caspian Sea gave a ground that the other countries cannot intervene in the projects unless they are official partners. It means that by signing this convention, the five Caspian littoral states can build their energy strategies and policies independently. Thus, if the Trans-Caspian project is to be implemented in the future, it will be able to transport gas to Europe from other regions. The central part of this route will be the Southern Gas Corridor. Thus, Azerbaijan will also play a role in the region as a bridge to connect Europe with Asia, becoming a transit country. This means more investment, stronger infrastructure and well-built East-West relations.

TURKEY IS THE ‘KEY FOR THE ENERGY’

Turkey has limited natural resources which makes it dependent on external energy sources. As energy demand and dependency rate on external sources is increasing, energy issues have increased their weight by becoming the determinant of the dynamic of Turkish foreign policy gradually. The main objective of Turkey’s energy policy is to provide energy promptly to ensure economic growth as well as sufficient, reliable, competitive prices. Turkey imports its 98% energy demand from its energy-rich neighbours such as Russia, Iran, Azerbaijan thanks to its geographical location. On the other hand, Turkey is the vast market for these exporter countries. Therefore, the TANAP project has specific importance and means more than an energy project for Turkey. TANAP will not only diversify energy routes but also will contribute to the security of supply. Turkey considers this pipeline as an important project with its economic dimension because it will lead to the development of economic and political relations between Turkey and regional states. TANAP will improve the effectiveness of Turkey in the region as well as its position in the global energy projects. Another critical point is that Turkey aims to become an energy centre as Austrian Baumgarten if manages to involve as much as energy directions. This is important for the EU as well because by turning into an energy hub, Turkey can ensure Europe’s energy security and provide securitization of energy supply and formation of a market structure in which gas competes gas. Since TANAP offers regional prosperity and security, Turkey takes a critical role in every point of the value chain extending from producer to final consumer.

Since the dissolution of USSR, the Azerbaijan-Turkey axis has brought positive trends both in the political and economic fields. For instance, despite several issues and obstacles at the end of XX century, Azerbaijan and Turkey managed to implement the Baku-Tbilisi-Ceyhan (oil pipeline), Baku-Tbilisi-Erzurum (gas pipeline), and Baku-Tbilisi-Kars (railway) projects and strengthen their geopolitical benefits in the world arena. Following this, TANAP project Turkey will gain a strategic momentum against Russia in the context of ensuring energy flow, especially to Europe in the near future.

In conclusion, since the restoration of state independence in 1991, the Republic of Azerbaijan has defined the integration and expansion of cooperation with the EU as one of the strategic directions of foreign policy. The economic integration interests of Azerbaijan towards Europe are shaped by geopolitical and geoeconomic position and socio-economic development of the country.The SGC is particularly vital in terms of EU’s energy security. The interest of the European countries in this project results in the construction of new infrastructure for the secure supply of energy resources from the Caspian region to Europe.Additionally, TAP and TANAP will have a positive impact on Europe’s as well as Turkey’s energy economy, while diversifying energy routes because these projects will create competitive prices in energy markets. Also, SGC is considered to be profitable for both the participating countries and companies directly involved in its implementation.

Mr. Aliyar Azimov is Senior Specialist in the Institute of Caucasus Studies at Azerbaijan National Academy of Sciences. He is an honored graduate student of Pécs University. He got his Bachelor degree at Baku State University from International Relations and Economics programme. His main research fields concern on energy politics and security, international security and foreign policy issues, peace and conflictology, political economy, and internal/external affairs of South Caucasus. He is successful participator of Essay Contest, titled Russia’s actions against the Southern Gas Corridor and potential impacts in this direction, held by UNEC Research Foundation. He was honored as the best student of year in 2013 at Baku State University. Mr. Aliyar worked as a program manager at Hungarian NGO – Subjective Values Foundation. Currently, he is also External Relations Manager at Technote, which is the biggest tech media company in Azerbaijan.

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Gas doom hanging over Ukraine

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The long history of gas transit across independent Ukraine began with Kiev’s initial failure to pay anything for Russian natural gas, both intended for transit to Europe and for domestic consumption, on the pretext of fraternal relations between the former Soviet republics. Later it cost the Ukrainians a meager $25 for 1,000 cubic meters of Russian gas, and that ridiculously small sum remained unchanged for quite some time. The sizeable amount of Russian gas provided at a discount price, plus domestically available oil resources, were distributed by the country’s greedy elite the following way: domestically produced gas was used on utilities, proceeds from the transit of Russian gas went to the state budget (minus the money that lined bureaucratic pockets), and Russian gas – to the industry (plus the corruption component).

Then came the Ukrainian revolutions and Kiev’s desire to join “Euro-Atlantic structures” and the desire to “get off the Russian gas needle and prevent the Kremlin from using energy as a weapon.” Ukraine has tried and is still trying to believe in all this by playing up to the collective West and hoping that the West will compensate Kiev for the losses caused by its revolutionary endeavors and anti-Russian antics. As a result, we see gas prices going through the roof, an energy crisis in Europe, and the completion of the Nord Stream 2 gas pipeline.

Those in power in Kiev hoped for the very last moment that the West valued their country more than it did the energy security of European countries. Much to their surprise (and only theirs), this is not so. It looks like the Europeans are interested in Russian gas supplies and are not so eager to keep Ukraine as the main transit country. Moreover, having “democratized Ukraine” to the state of an openly anti-Russian country, the West turned it into a country, whose leadership the Kremlin does not really want to talk to simply because it does not see any point in doing this. This is the reason why third countries care (or rather pretend to care) about Ukraine. Thus, in July of this year, there came out the “Joint Statement of the United States and Germany on Support for Ukraine, European Energy Security and Our Climate Goals.” According to it, Germany pledged to do everything in its power to make sure that the agreement between Moscow and Kiev on the transit of Russian gas across Ukrainian territory was extended for up to ten years. The statement came when it was already obvious that the construction of Nord Stream 2 would be completed, Germany resisted US pressure on this issue, Moscow paid no attention and Washington, exhausted by the battles of the presidential elections and the search for new strategies in the Old World, was trying to pit America’s European friends against Russia.

It has never been a secret that the West needs reliable transit, and this is something that Ukraine also insists on. However, Kiev has officially labelled  Russia as an “aggressor country,” which means that this very “aggressor” must ensure this transit and bring billions of dollars in revenues to the Ukrainian budget. This looks like a kind of “Euro-schizophrenia” where Ukraine is an anti-Russian country and simultaneously serves as a reliable transit country for Russian gas. Things do not work this way, however, and it looks like Europeans are beginning to realize this. Therefore, most of the European consumers support Nord Stream 2 even though they do not show this in public. Suffice it to mention the recent conclusion of a years-long contract for gas supplies to Hungary.

Vladimir Putin’s statement, made amid soaring gas prices and growing threats to European industry, came as an energy lifeline for all Europeans.

“Russian President Vladimir Putin supported the initiative of Deputy Prime Minister Alexander Novak to increase gas supply on the market amid rising energy prices in Europe… Novak said that Russia can stabilize the situation with prices by providing additional volumes of gas on the exchange, adding that this country’s main priority is to accommodate domestic demand,” Lenta.ru reported.

Commenting on the possibility of increasing gas supplies via Ukraine, President Putin recalled that Ukraine’s gas transport system had not been repaired “for decades” and that “something could burst” there any time if gas pressure goes up.

“At the same time, it is more profitable and safer for Gazprom to operate new pipeline systems,” he added. Putin thus confirmed what is already clear to all that Ukraine is an unreliable and, in fact, an extra link, and that Europe can get gas bypassing technically and politically unreliable Ukrainian pipes. He also pointed out that Gazprom would suffer losses from an increase in gas transit via Ukrainian territory, while new gas pipelines offer cheaper transit options. He added that Gazprom is saving about $3 billion a year by using new pipelines and that Russia was ready to increase gas supplies and make them cheaper for European consumers.

Gas shortages have already forced the Ukrainian government to freeze gas prices for household consumers, but prices for gas for industrial enterprises are rising along with those on European exchanges, where on October 6, they reached a very impressive $ 2,000 per thousand cubic meters and went down only after Putin’s statement came out.

Meanwhile, the head of Ukraine’s Federation of Glass Industry Employers, Dmitry Oleinik, said that this [rise in gas prices – D.B.] would lead to an inevitable rise in prices. However, producers will not be able to jack up prices indefinitely, because at some point buyers simply will not be able to cover production costs.

“The Ukrainian consumer will not even be able to cover the cost of production. Plants and factories will slowly shut down and people will lose their jobs – this is already very serious. Budget revenues will “plummet,” and expenses will skyrocket… The issue of bankruptcies is just a matter of time,” Oleinik warned.

If Ukraine continues to follow the chosen course, it will face de-industrialization. By the way, this will suit the West, but certainly not the Ukrainian industrial oligarchs, who have long been eyeing agriculture, including the prospect of turning themselves into land barons. However, the farming sector will not be happy about the high prices on gas that bakeries, sugar factories and greenhouses run on. There will be nowhere to run.

Apart from purely practical realities, the conclusions I can draw from the current energy situation in the world and Vladimir Putin’s statements regarding the Ukrainian transit, are as follows:

  • Gas supplies through Ukraine and to Ukraine are not solely an economic issue, given Kiev’s endless anti-Russian escapades;
  • This problem affects the energy security of Europe;
  • Since there are several angles to this problem, it must be solved in a comprehensive manner;
  • At the same time, this cannot be done exclusively in the interests of the West and Ukraine to the detriment of the interests of Russia.

As you can see, it is once again up to Kiev and its shadow patrons to decide. And winter is just around the corner…

From our partner International Affairs

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Russian Energy Week: Is the world ready to give up hydrocarbons?

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In an official message to mark the opening of the Russian Energy Week international forum on 13-15 October in Moscow, Russian President Vladimir Putin stressed that there are numerous issues on the agenda related to current trends in the global energy market, including improvements to industry infrastructure and the introduction of modern digital technologies into its operation.

“The efficiency of energy production and consumption is the most important factor in the growth of national economies and has a significant impact on people’s quality of life. Many countries have already adopted policies to accelerate the development of clean energy technologies,” he wrote in the message to guest and participants.

“The forum business programme is therefore set to look in detail at the possibility of developing green energy based on renewable sources and the transition to new, more environmentally friendly fuels. I am confident that the events of the Russian Energy Week will allow you to learn more about the achievements of the country’s fuel and energy sector, and that your initiatives will be put into practice,” Putin said.

Leaders of foreign states have also sent greetings to the participants and guests. For instance, President of the Republic of Angola João Manuel Gonçalves Lourenço, Prime Minister of Vietnam Pham Minh Chinh, Crown Prince of Abu Dhabi Armed Forces Mohamed bin Zayed bin Sultan Al Nahyan, and Vice Premier of the State Council of China Han Zheng.

In their greetings, it generally noted the importance of the topics to be discussed at the forum as well as the need to build an international dialogue and consolidate efforts to achieve the sustainable development goals, including as regards climate change.

The programme covers a wide range of issues of transformation and development in the global energy market. In the context of energy transition, the issues of energy development are inextricably linked with the introduction of new technologies, and the transformation aimed at reducing greenhouse gas emissions into the atmosphere. Climate protection is a task that cannot be solved by one country; it is a global goal, which can be achieved through building dialogue and cooperation between countries.

The participants in the discussion will answer the question: Is the world ready to give up hydrocarbons? In addition, during the panel session, the participants will discuss whether oil, gas and coal are really losing ground in the global energy sector; whether the infrastructure will have time to readjust for new energy sources; how long will there be enough hydrocarbons from the field projects that are being implemented; and whether an energy transition using fossil fuels is possible.

The international climate agenda is forcing many countries to reform their carbon-based energy systems. For Russia, which holds a leading position in the global hydrocarbon markets, the transition to development with low greenhouse gas emissions presents a serious challenge, but at the same time it opens up new opportunities for economic growth based on renewable energy, hydrogen technologies, advanced processing of raw materials and implementing green projects.

The Climate Agenda included sessions dedicated to the operation of the Russian fuel and energy sector in the context of energy transition, the impact of the European green pivot on the cooperation between Russia and Europe, as well as the session titled ‘The Future of Coal in a World Shaped by the Climate Agenda: The End, or a New Beginning?’

Sessions of the ‘New Scenarios for the Economy and the Market’ track are dedicated to the global challenges and opportunities of the electric power industry; the impact of ESG on the Russian fuel and energy sector; the potential for the renewable energy sources; and other issues of the future of energy.

The Russian Energy Agency under the Ministry of Energy brings together experts from key international analytical organizations to discuss the future of world energy during the session titled International Energy Organization Dialogue: Predicting the Development of Energy and Global Markets.

The Human Resource Potential of the Fuel and Energy Sector, participating experts will discuss the prospects for developing the professional qualification system, and a session titled Bringing the Woman’s Dimension to the Fuel and Energy Sector. Optimizing regulation in the energy sector and organizing the certification and exchange of carbon credits in Russia are the basis of the Regulatory Advances in Energy. 

Anton Kobyakov, Advisor to the Russian President and Executive Secretary of the Russian Energy Week 2021 Organizing Committee, said “the level of various formats of international participation testifies to the importance of the agenda and Russia’s significant role in the global energy sector. We are a reliable strategic partner that advocates for building international cooperation based on the principles of transparency and openness. With the period of major changes in the industry, it is particularly important to engage in a dialogue and work together to achieve both national and global goals.”

The forum, organized by the Roscongress Foundation, the Russian Ministry of Energy, and the Moscow Government, brought together many local and foreign energy and energy-related enterprises. The speakers attending included  Exxon Mobil Corporation Chairman of the Board of Directors and CEO Darren Woods, Daimler AG and Mercedes-Benz AG Chairman of the Board Ola Kallenius, BP CEO Bernard Looney, and TotalEnergies Chairman and CEO Patrick Pouyanné.

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World Energy Outlook 2021 shows a new energy economy is emerging

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A new energy economy is emerging around the world as solar, wind, electric vehicles and other low-carbon technologies flourish. But as the pivotal moment of COP26 approaches, the IEA’s new World Energy Outlook makes it clear that this clean energy progress is still far too slow to put global emissions into sustained decline towards net zero, highlighting the need for an unmistakeable signal of ambition and action from governments in Glasgow.

At a time when policy makers are contending with the impacts of both climate change and volatile energy markets, the World Energy Outlook 2021 (WEO-2021) is designed as a handbook for the COP26 Climate Change Conference in Glasgow, which offers a critical opportunity to accelerate climate action and the clean energy transition. The new analysis – which the IEA is making available for free online – delivers stark warnings about the direction in which today’s policy settings are taking the world. But it also provides clear-headed analysis of how to move in a well-managed way towards a pathway that would have a good chance of limiting global warming to 1.5 °C and avoiding the worst effects of climate change.

The WEO-2021, the IEA’s annual flagship publication, shows that even as deployments of solar and wind go from strength to strength, the world’s consumption of coal is growing strongly this year, pushing carbon dioxide (CO2) emissions towards their second largest annual increase in history.

“The world’s hugely encouraging clean energy momentum is running up against the stubborn incumbency of fossil fuels in our energy systems,” said Fatih Birol, the IEA Executive Director. “Governments need to resolve this at COP26 by giving a clear and unmistakeable signal that they are committed to rapidly scaling up the clean and resilient technologies of the future. The social and economic benefits of accelerating clean energy transitions are huge, and the costs of inaction are immense.”

The WEO-2021 spells out clearly what is at stake: what the pledges to reduce emissions made by governments so far mean for the energy sector and the climate. And it sets out what needs to be done to move beyond these announced pledges towards a trajectory that would reach net zero emissions globally by mid-century – the Net Zero Emissions by 2050 Scenario from the landmark IEA report published in May, which is consistent with limiting global warming to 1.5 °C.

As well as the Net Zero Emissions by 2050 Scenario, the WEO-2021 explores two other scenarios to gain insights into how the global energy sector may develop over the next three decades – and what the implications would be. The Stated Policies Scenario represents a path based on the energy and climate measures governments have actually put in place to date, as well as specific policy initiatives that are under development. In this scenario, almost all of the net growth in energy demand through 2050 is met by low emissions sources, but that leaves annual emissions still around today’s levels. As a result, global average temperatures are still rising when they hit 2.6 °C above pre-industrial levels in 2100.

The Announced Pledges Scenario maps out a path in which the net zero emissions pledges announced by governments so far are implemented in time and in full. In this scenario, demand for fossil fuels peaks by 2025, and global CO2 emissions fall by 40% by 2050. All sectors see a decline, with the electricity sector delivering by far the largest. The global average temperature rise in 2100 is held to around 2.1 °C.

For the first time in a WEO, oil demand goes into eventual decline in all the scenarios examined, although the timing and speed of the drop vary widely. If all today’s announced climate pledges are met, the world would still be consuming 75 million oil barrels per day by 2050 – down from around 100 million today – but that plummets to 25 million in the Net Zero Emissions by 2050 Scenario. Natural gas demand increases in all scenarios over the next five years, but there are sharp divergences after this.

After decades of growth, the prospects for coal power go downhill in the Announced Pledges Scenario – a decline that could be accelerated further by China’s recent announcement of an end to its support for building coal plants abroad. That move may result in the cancellation of planned projects that would save some 20 billion tonnes in cumulative CO2 emissions through 2050 – an amount similar to the total emissions savings from the European Union reaching net zero by 2050.

The differences between the outcomes in the Announced Pledges Scenario and the Net Zero Emissions by 2050 Scenario are stark, highlighting the need for more ambitious commitments if the world is to reach net zero by mid-century.

“Today’s climate pledges would result in only 20% of the emissions reductions by 2030 that are necessary to put the world on a path towards net zero by 2050,” Dr Birol said. “Reaching that path requires investment in clean energy projects and infrastructure to more than triple over the next decade. Some 70% of that additional spending needs to happen in emerging and developing economies, where financing is scarce and capital remains up to seven times more expensive than in advanced economies.”

Insufficient investment is contributing to uncertainty over the future. Spending on oil and natural gas has been depressed by price collapses in 2014-15 and again in 2020. As a result, it is geared towards a world of stagnant or even falling demand. At the same time, spending on clean energy transitions is far below what would be required to meet future needs in a sustainable way.

“There is a looming risk of more turbulence for global energy markets,” Dr Birol said. “We are not investing enough to meet future energy needs, and the uncertainties are setting the stage for a volatile period ahead. The way to address this mismatch is clear – a major boost in clean energy investment, across all technologies and all markets. But this needs to happen quickly.”

The report stresses that the extra investment to reach net zero by 2050 is less burdensome than it might appear. More than 40% of the required emissions reductions would come from measures that pay for themselves, such as improving efficiency, limiting gas leakage, or installing wind or solar in places where they are now the most competitive electricity generation technologies.

These investments also create huge economic opportunities. Successfully pursuing net zero would create a market for wind turbines, solar panels, lithium-ion batteries, electrolysers and fuel cells of well over USD 1 trillion a year by 2050, comparable in size to the current oil market. Even in a much more electrified energy system, major opportunities remain for fuel suppliers to produce and deliver low-carbon gases. Just in the Announced Pledges Scenario, an additional 13 million workers would be employed in clean energy and related sectors by 2030, while that number doubles in the Net Zero Emissions by 2050 Scenario.

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