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A moment of reckoning for Big Oil? The IEA’s bombshell and its aftermath

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Recently, the International Energy Agency (IEA) published a report sketching out a ‘net-zero-by-2050 scenario’ it deems still attainable. Clearly, this and similar proposal will not lead to any true change as long as growth relies on depletable resources. But last week has been an exciting one for energy analysts and environmental campaigners around the developed world. In a short period of time, green activists grew their ranks welcoming activist investors, national courts and international organisations. But is a revolution really in the making?

The IEA’s roadmap

In the last months, many governments vowed to make their economies net-zero, cumulating to a 70% reduction in global emissions. Yet, a number of experts believe limiting global warming to 1.5° by 2099 to be unfeasible as things stand now. In fact, the globe’s temperature has already raised by over 1° compared on preindustrial levels. existing commitments would allow enough CO2 emissions for the world’s temperature to rise by over 2° C.

Unexpectedly, the IEA’s latest report claims that the “a more contained increase of up to 1.5°” is not unreachable. Thus, with its news scenarios and recommendations, the agency has become epicentre of the energy markets’ ongoing seismic changes. Controversially, the IEA suggested that to achieve this goal, the world’s energy system needs an extensive, relentless transformation.

Cities, industries and mobility

According to the agency’s forecasts, the selling of internal combustion engine cars should come to a halt by 2035. Thus, electric vehicles need to jump from 5% of total sales to at least 60% of newly-purchased automobiles in 2030. Furthermore, cities’ landscapes will have to change massively, with 85% of all residential buildings becoming net-zero by 2050.

Nevertheless, the suggested overhaul of the industrial system is even more challenging. According to the IEA, all coal plants must shut down by 2040 if not equipped with carbon-capture technologies. In addition, renewable-energy production, now at about 280GW, must surpass the 1,000GW hit mark. Not to mention that energy efficiency should improve by 4% yearly — thrice as fast as now.

Energy generation

These changes have to go together with a massive growth in green investments from $2tln to $5tln annuum by 2030. The money will help develop experimental technologies like carbon capture, hydrogen electrolysers and high-performance biofuels for ships and airplanes. Moreover, governments should ban all further coal, gas, and oil exploration around the globe. In the words of a European sustainability strategist, at the EIA “they are calling time on the fossil fuel era.” 

Meanwhile, the world should build 10 industrial plants equipped with carbon-capture technology, three that are hydrogen-fuelled and start to produce at least two gigawatts of electricity though electrolysis each month in 2030–2050. To put these figures in context, China built 12 industrial facilities a month between 2000 and 2015. Whereas electrolysis for energy and hydrogen production is still at the prototype stage.

Boards and courts turn green

Corporate boards, established investment funds and courts across Europe and in the US are turning greener after the IEA’s report. The first sign of such a shift came from Warren Buffet’s BlackRock, the world’s largest wealth manager, allocating $8.67tln worth of assets. The fund forced London-based British Petroleum to enhance its commitment to climate neutrality and reach net-zero emissions faster. Although rejected, the motion was “a signal that a growing number of investors” want BP to reach net-zero by 2050.

Another news that attracted much attention regards Royal Dutch Shell, a $140bln oil company based in the Netherlands. The eco-friendly group Milieudefensie filed against Shell in a Dutch court along with over 17,000 Dutch citizens. The action also involved other NGOs like Greenpeace Netherlands, ActionAid, Both ENDS, Fossielvrij NL, Jongeren Milieu Actief and the Waddenvereniging. Eventually, the judges decided that the company has until the end of 2030 to reduce its emissions by 45%. This is the first such a judgement worldwide deeming oil companies responsible for their suppliers’ and buyers’ emissions too.

Any recap of those events must mention Engine No. 1, a hedge fund holding a tiny equity in Exxon Mobil. Despite controlling little more than $50mln on the company’s total $250bln capitalisation, the hedge found elected three new board members. Engine No. 1’s nominees won their sears thank to the backing of institutional investors upset with Exxon’s disappointing financial performances. Amongst them stood also BlackRock, the company’s second-largest shareholder, which supported all three of Engine No. 1’s candidates.

Governments’ climate ambiguity

In the meantime, governments are doing their best to make it look like they are following the new green tide. Thus, serious hindrances seem to be hindering Big Oil’s resolve to keep exploiting fossil fuels around the world. Still, there are reasons to doubt the veracity of their commitments.

Between lip services …

Recently, the G7 – a group of affluent liberal democracies – announced that all “international investments in unabated coal must stop now”. This declaration followed previous commitments by almost every leader of the richest economies to keep global warming within 1.5°.

The US will have “a net-zero energy grid by 2035, and a net-zero economy by 2050,” President Biden promised. In the UK, Boris Johnson launched a 10-point plan creating “green jobs, whilst making strides towards net zero by 2050”. The European Commission is studying measures for a bloc-wide 2050 net zero emissions target, under the December 2019 Green Deal. Even China is prioritising green energies’ role in the post-pandemic recovery as the virus recedes.

… and prudence

Nevertheless, at best governments have paid lip services to green ideas and the perspective of going net zero by 2050. Nowadays, many of the well-educated, middle-class and wealthier youngsters who defend the energy transition seem not to understand this reticence. But governments’ generalised unwillingness to comply with mounting pressures to decarbonise and reduce their economies’ environmental impact is reasonable. After all, there are many other interests that decisionmakers cannot simply side-line. In fact, the energy transition will put growing scores of workers out of their well-paying, stable jobs in established industries. Since greener economies will provide a few such posts, many will transition to temporary, badly paid, low-skill occupations.

For instance, in the US many are making efforts to safeguard mining, refining and non-renewable electricity production. Most recently, 15 state treasuries across the US menaced to withdraw several billion dollars from institutions divesting hydrocarbon companies. Meanwhile, there are serious doubts on the UK’s plans, and China is building new coal power plants to support growth. And the same foes for the EU’s proposed Green Deal, which according to many “doesn’t live up to its name”.

Conclusion: Going green, but not so fast

That governments and private actors alike are seemingly getting on board a greener energy future is apparent. And, the IEA has just given a perfect assist to those who campaign against the continued use of fossil fuels.

However, some of the targets the report sets are virtually impossible to achieve unless States take on the costs. Boosting the sales of electric vehicles will require more and more localities to install massive recharging infrastructures. Meanwhile, residential buildings’ decarbonisation may be almost impossible in countries where the property registers are outdated — both developed and poor. Finally, the closure of mining, refining and other activities related to fossil-fuel production may come at immense social costs. In the US, the likes of  Alaska, North Dakota, Texas, and West Virginia are greatly dependent on these labour-intensive sectors. Abroad, entire countries rely tremendously on oil and gas revenues: Saudi Arabia, Iran, Iraq, Nigeria, Russia, Venezuela, and many others. Even wealthy societies like Norway refuse to give up on their oil exports so easily.

The agency’s roadmap is especially important in that it does not rely on unproven negative-emission technologies compensating for polluting activities. Such an unabated sort of optimism had attracted a lot of well-founded criticisms to previous net-zero roadmaps. On the contrary, the IEA’s recommendations push mostly on the massive deployment of extant technologies such as wind and solar. Yet, governments’ lack the willingness and the ability to shoulder the financial and social costs of a green revolution. Therefore, energy markets will continue in this trendless fluctuation for quite a while.

Fabio A. Telarico was born in Naples, Southern Italy. Since 2018 he has been publishing on websites and magazines about the culture, society and politics of South Eastern Europe and the former USSR in Italian, English, Bulgarian and French. As of 2021, he has edited two volumes and is the author of contributions in collective works. He combines his activity as author and researcher with that of regular participant to international conferences on Europe’s periphery, Russia and everything in between. For more information, visit the Author’s website (in English and Bulgarian).

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Maximizing Nickel as Renewable Energy Resource and Strengthening Diplomacy Role

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Authors: Nani Septianie and Ramadhan Dwi Saputra*

The development of the times and technology, the use of energy in the world will continue along with the increase of population. Global energy demand is currently recorded to have increased three times since 1950 and its use is estimated to have reached 10,000 million tons per year. Most of the energy is produced from non-renewable materials such as coal, gas, petroleum, and nuclear energy. Besides being non-renewable, fossil-based energy is also not environmentally friendly because burning fossil fuels produces CO2 gas which can cause global warming. Based on the energy used previously, the world still uses fossil energy that used in conventional vehicles that still use gasoline as fuel. Where fossil energy itself is still classified as the energy that is not environmentally friendly because it produces carbon emissions that can pollute the environment. Therefore, the world is currently flocking to make renewable energy by electric vehicles that are more environmentally friendly.

In electric vehicles, batteries play a very important role in the components of electric vehicles. Currently, there are two types of batteries that are the most common and widely used for electric vehicles. The first is a lithium-ion battery and the second is a nickel-based battery. But keep in mind for the type of lithium-ion battery itself, nickel is also the main raw material needed. Lithium-ion batteries commonly used to store power in vehicles are Lithium Manganese Oxide (LMO), Lithium Nickel Manganese Oxide (NMC), Lithium Nickel Cobalt Oxide (LTO). The reason for using nickel as a raw material for electric vehicles batteries is more environmentally friendly, nickel is also considered to be more efficient. Because nickel is a metal that has a high energy density storage and cheaper than using other types of minerals such as cobalt. As the popularity of electric vehicles continues to climb due to their increasing demand, the future of nickel production will also be brighter in future. Demand for automatic mining commodities will continue to grow, to encourage companies and producing countries to be eager to increase production.

Reporting from Investing News, Monday (10/26/2020) there are 10 largest nickel producing countries in the world, namely the United States in the tenth position with total production: 14,000 Metric Ton (MT, the ninth position Cuban countries with total production: 51,000 MT, the ninth position is Cuba the the eighth countries are Brazil with total production: 67,000 MT, the seventh position is China with a total production of 110,000 MT, the sixth position is Canada with total production: 180,000 MT, the fifth position is Australia with total production: 180,000 MT, the fourth position is New Caledonia with a total production: 220,000 MT, the third position is Russia with a total production of 270,000 MT, the second position is the Philippines with a total production: 420,000 MT, and the first position is occupied by Indonesia with the largest total production of 800,000 MT. Indonesia has been used as a benchmark by many parties regarding the seriousness of a country to enter the Nickel trend. In 2019, it was reported that nickel production will be bigger than palm oil production, which is the second largest commodity to be exported. Its relatively affordable distance from China, which is a leading country in the production of electronic vehicle manufacturers, makes the export process of this commodity very ideal. Indonesia also still has nickel reserves of 21 million MT.

Nickel is an important component in the production of electric vehicles, which can be used as raw materials for long-term sustainable battery manufacturing to create a clean environment. Where nickel as the main raw material for the manufacture and operation of electric vehicles has contributed to reducing carbon emissions. Based on the Union of Concerned Scientist explains that battery production contributes of global warming emissions and decreases to 43% where this decrease depends on the chemicals used in the manufacture of battery raw materials. Making electric vehicle batteries is indirectly appropriate with the commitments of the Paris Agreement and the Sustainable Development Goals Agenda (SDGs) at point 13 to combat Climate Change in reducing carbon emissions to achieve a climate-neutral world. Therefore, each country is needed to cooperate and maximize diplomatic strategies between countries to fulfill the source of raw materials for the manufacture of electric vehicle batteries, especially nickel.

Countries are needed to maximize diplomacy activities to create an equal distribution of electric vehicle production

Therefore, the large production of electric vehicles shows that in the future each country will need a supply of raw material for the production of batteries, namely Nickel which is the main raw material for making batteries. electricity. This phenomenon shows that the largest nickel producing countries have an important role in achieving the contribution of raw materials for the manufacture of electric vehicle batteries. However, with the large production in each country that has an abundance of nickel, the country cannot stand alone. Instead, it is also necessary to distribute nickel production in other countries by sharing raw materials, which can be carried out using a diplomatic strategy.

Therefore, diplomatic activities between countries are very important to complete all the shortcomings possessed by each country. Each country can use its negotiation skills in achieving its national interests and the needs of each country. However, countries that have a large abundance of energy resources, especially nickel, which is the main raw material for the manufacture of electric vehicle batteries, should not continue to export excessively, but countries that have these energy sources must continue to limit the number of exports. Because nickel is an energy resource, the wealth of this energy resource must be maintained to prevent the depreciation of nickel reserves. Therefore, each country is required to carry out diplomacy, including strengthening the bargaining power of each country, negotiating to create an even distribution of nickel supply, complementing the needs that each country lacks in assembling electric vehicles, and Each country is required to form a sustainable plan as a long-term strategy to ensure that electric vehicles can continue to be produced in the future, especially nickel which is the main raw material in the manufacture of electric vehicle batteries.

*Ramadhan Dwi Saputra, Chemical Engineering Research Assistant at Universitas Islam Indonesia.

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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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