As oil prices spike, new investments in fossil fuels could be disastrous

Energy security is in the spotlight as many countries seek to reduce their reliance on foreign fossil fuels due to rising fuel prices spiked by the war in Ukraine, and the resulting geopolitical uncertainty.

Yet, as the recent Intergovernmental Panel on Climate Change (IPCC) report shows, existing and planned fossil fuel projects will push the world beyond 1.5 °C, so producing more fossil fuels could be a recipe for disaster.

With oil prices at their highest in nearly a decade, several oil-producing countries have increased fossil fuel production, which United Nations Secretary-General Antonio Guterres says, will only make matters worse in the long run.

The use of strategic stockpiles and additional reserves could help to ease the energy crisis in the short term. But experts say countries must push for transformational change, progressively phasing-out coal and other fossil fuels and accelerating the deployment of renewable energy.

We spoke to Mark Radka, head of the UN Environment Programme’s (UNEP’s) Energy and Climate Branch to find out more about the rise in renewable energy and what can be done to move away from fossil fuels.

Are you surprised that we are seeing pushback from energy companies and oil producers regarding reducing fossil fuel production? 

Mark Radka (MR): It’s not surprising, but it is important to distinguish among companies because neither companies nor countries are monolithic. There will be some opportunism, and it would be surprising if there wasn’t. But the more thoughtful companies are committed to an energy transition, and I think they are going to stay the course, even if there are short-term fluctuations.

It takes time before money put into a new oil or gas field produces hydrocarbons, so these are long-term investments. It’s not something that occurs overnight; they require a lot of money, a lot of engineering, and a lot of infrastructure to be designed and built. Companies don’t make those kinds of decisions based on the politics of the moment.

Are we seeing a decrease in the appetite for climate action when it hits the public in the pocket?  

MR: That is a false narrative. Renewables to date have largely provided energy in the power sector, while coal use in electricity production has declined. There is a welcome rise in the production and acceptance of electric vehicles (EV), although the EV market is still small but growing rapidly.  

There is a distinction between oil and gas and renewables. There is more and more convergence in the energy system. But it has not occurred to the extent that you could say “it’s the pro-climate renewable energy policies that are responsible for high gasoline prices.” That’s a falsehood.

Some oil-producing nations have said that without energy security, countries will lose the means to tackle climate change – what would you say to that? 

MR: The premise that if you move too quickly away from fossil fuels, you will reduce your economic means of combating climate change is an odd logic. The costs of the energy transition will not be small. But the costs of inaction far exceed the costs of taking action. We need energy, but we also need a healthy climate for the planet to function: we need an energy transition that is climate compatible.

The technology exists – not in all sectors yet – but we shouldn’t use that as an excuse for not moving aggressively in other areas. This transition is already underway. We just need to accelerate it, which definitely can be done. I would be surprised if any hydrocarbon producing government claimed they should stop producing hydrocarbons, but I think market forces will dictate that these producers find a shrinking market.   

Are renewables inherently more geopolitically stable than fossil fuels?

MR: It’s clearly much easier for some countries to be self-sufficient [when it comes to renewables] than others. If you are in a very sunny location, the cost of solar energy is attractive, whereas other countries might have better wind resources. The vast majority of countries have some good renewable energy sources. If the wind is blowing somewhere and it’s overcast elsewhere, you can export the energy. Logically, you would like there to be sharing of resources, allowing for a balancing of supply.

This sort of energy sharing is possible in Nordic countries because their electricity grids are largely interconnected. There’s also a proposed high voltage line between Scotland and Norway that will allow trading of Scottish wind energy and Norwegian hydropower. This type of project is good as it reduces overall costs and increases reliability. The world is getting more and more electrified – but electricity is not like oil; you can’t store it in large amounts, so more interconnection is important.

Given the stark warnings in the most recent IPCC report, are we in danger of moving backwards this year? 

MR: There’s enough momentum to keep moving forward when it comes to decarbonization, but there might be short term reversals. I use the analogy of the temperature in spring. There may be some reversals, but ultimately, you know that the temperature is only going one way, and it will be on average hotter in July than it is in April, at least in the northern hemisphere.

What possibilities exist to maximize energy efficiency and thus consume less energy to reduce dependence on fossil fuel imports? 

MR: The major frustration of people who worry about energy and climate change is the huge untapped potential for reducing energy needs through energy efficiency. Half of the near-term reductions in emissions in the energy sector can be achieved through energy efficiency, for example, by using more energy-efficient appliances and lighting and more efficient motors.

These are all out there, but they are just not adopted widely enough. Largely, it’s government policies that drive more efficiency. For example, in the European Union, you can’t buy a refrigerator today that would have been considered top of the market in 1990. So, those technologies have advanced, driven by regulations that spur innovation. People pay a little more for a better appliance, but they save money through their energy bills, often enough to pay off the increased cost quickly.

What would you say to those looking to expand fossil fuel production?

MR: We need to point out that this would be a false economy. It could lead to investment that needs to be retired early, as the definite trend is towards decarbonization in the energy sector. We need arguments to combat the idea that the climate is no longer such a priority with facts. We don’t need to panic, but we should not be complacent either.

UNEP