• Sustainability
    • Transition to Net Zero

Energy crossroads

  • Article

Europe’s energy re-think.

Energy is taking centre stage. Energy is fast becoming the most important policy area for world economies with a multitude of factors from supply disruptions, geopolitics, inflation and climate objectives all at play – triggering short-term as well as long-term energy considerations.

Could the security ‘shock’ risk kicking climate targets to the kerb? A burning question will be if, and how, Europe’s goal to be the leading region for climate action can be squared with its new, and urgent, need to secure its short-term energy needs.

Or could the war serve as a climate-action accelerator in Europe? The long-term goal of removing risks from fossil fuel exposure – such as price volatility, supply uncertainty and geopolitical counterparty risk – is, in our view, consistent with the underlying goals of Europe reaching ‘net zero’ emissions by 2050, albeit the two may appear to be at odds in the shorter term.

Options at hand; but change on the ground will be hard to implement overnight. Europe cannot replace all of its Russian natural gas without significant disruption; it currently represents around 40 per cent of European consumption. Diversifying supply is an option. Reducing consumption is also an approach – advocated recently by the International Energy Agency. Renewables, hydrogen, nuclear energy, energy storage and efficiency measures can all help to wean Europe off natural gas but are not overnight, let alone like-for-like, fixes – reflecting the structural rigidities in the European energy complex.

First published 5th May 2022.
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