Do We Double-Down On Fossil Fuels Or Hasten The Move To Green Energy?

During economic distress or high inflation, there’s always pressure to develop new energy sources — typically coal, natural gas, or oil. But this weight is countered by the need to curb greenhouse gases and limit temperature increases. But the two forces are not necessarily contradictory.

It starts with the premise that not all fossil fuels are created equal. To that end, natural gas is replacing coal and reducing CO2 levels — a fuel that is also used to firm up wind and solar when the weather is not agreeable. At the same time, the cost of renewables is dropping, and utilities around the world are adopting them, leading to job creation.

“Coal and oil are different,” says Brenda Shaffer, senior energy advisor for the Foundation of Defense Democracies, at a symposium sponsored by Our Energy Policy. As natural gas prices spiked in the fall and winter, countries reverted to fuel oil and coal, which occurred because the market was deprived of natural gas, she adds. “We don’t want the energy transition going from natural gas to coal.”

The World Bank says that 90% of the globe’s population has access to electricity. But about 759 million do not, nearly all of whom live in areas with civil strife and economic despair. While those numbers are falling, the Intergovernmental Panel on Climate Change says that as many as 3.6 billion people live in low-lying geographic regions susceptible to rising tides and high temperatures that could lead to drought accompanied by water and food shortages.

The oil companies are diversifying their portfolios. They are all developing natural gas. But they are also going green to varying extents. While oil and gas are more volatile and generate greater returns, cleantech is a safer investment — a pursuit that also helps stave off the critics. As such, those companies are investing in such things as offshore wind energy, solar PV, and battery storage that are building economies of scale. Europe’s Equinor, Total, Shell, and Eni are all-in.

Those enterprises want to be agile — to have the ability to pivot from fossil fuels to other energy forms when the market demands it. Electric vehicles and hydrogen-fueled transportation are only going to expand. Moreover, airplanes and ships are using biofuels and hydrogen. For example, Maersk is ordering eight new vessels that will use only carbon-neutral fuels — demanded by such customers as Amazon, Disney, and Microsoft Corp.

“The trend (to go green) will endure,” says Dean Foreman, general counsel for the American Petroleum Institute, at the Our Energy Policy gathering. “But the energy transition is a process. Be realistic about the time scale of when this can occur,” he adds, primarily because of “energy poverty.”

Who is in the Driver’s Seat?

But time is of the essence. The International Renewable Energy Agency (IRENA) says that the window is quickly closing, and the aims of the Paris climate talks are vanishing. Irena Director General Francesco La Camera told a press gathering on Friday that investing in new fossil fuel infrastructure is expensive and a strategy that commits countries and companies to keep producing dirty fuels. Therefore, renewable energy should be scaled up to 40% across all economic sectors by 2030. That will require an investment of $5.7 trillion a year. Right now, green energy makes up 14% of the global energy portfolio.

That type of energy transition will lead to 85 million new jobs worldwide — a number that far exceeds the 12 million that would be lost, he says. Consider West Virginia, a state that has been reliant on coal: an energy start-up company named SPARKZ says that it will build an electric battery factory in the state this year. It will initially hire 350 people. It will work with the United Mine Workers of America to train workers, many of whom already have qualified skills. The batteries will power electric vehicles and store excess wind and solar energy.

“It is high time to act,” La Camera says, noting these are public policy choices. “Recent developments have clearly demonstrated that high fossil fuel prices can result in energy poverty and loss of industrial competitiveness. 80% of the global population lives in countries that are net importers of fossil fuels. By contrast, renewables are available in all countries, offering a way out of import dependency and allowing countries to decouple economies from the costs of fossil fuels while driving economic growth and new jobs.”

The elevated energy prices are pressuring global policymakers to plead with oil-producing countries to ramp up their supplies. And while this may be necessary to get past the current shortages, the constraints will ease, and prices will fall. Then what?

Natural gas will remain in the mix because it firms up renewables and replaces coal. But the master plan would minimize fossil fuels and Russia’s role in exporting them — money it now uses to finance its war with Ukraine. Rather than get seasick from the market gyrations and then pander to producers, the West should take the long view — one that curbs climate change and creates 21st-century jobs.