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THE ENERGY INDUSTRY TIMES -NOVEMBER 2023
2
Junior Isles
Resistance from some of the leading
oil, gas and coal producers could un-
dermine chances of reaching a new
climate pact at the upcoming UN
COP28 climate summit in Dubai.
Already Russia has warned it will
oppose a global deal to reduce the use
of fossil fuels, as tensions rise with
western powers following Moscow’s
invasion of Ukraine.
In a submission to the UN’s climate
body last month, Russia said: “We op-
pose any provisions or outcomes that
somehow discriminate or call for
phase-out of any specic energy
source or fossil fuel type.”
Russia’s position is in clear contrast
to that of the US, which says unabat-
ed emissions from fossil fuels need to
be rapidly reduced to achieve a net
zero energy system by 2050.
More than 180 countries and other
global bodies are setting out their
views as they prepare to undertake
tough negotiations ahead of COP28,
with the submissions compiled by the
UN in a “blueprint” report published
in October. Already more than 80
countries backed a proposal at COP27
in Egypt last year to phase-out fossil
fuels.
The UN’s report also exposed an
emerging clash between wealthy and
developing countries. Many devel-
oped countries, where greenhouse gas
emissions peaked decades ago, have
set a target to reach net zero emissions
by 2050. This is the same timeframe
as many developing countries, where
funding to nance the green transition
is more difcult to access.
Simon Stiell, UN climate chief, said
there was “divergence” among coun-
tries over “who should carry the
weightier burden in terms of action”
to limit warming. But Stiell said the
report was clear that the world was
“off-track to achieving the goals of
the Paris Agreement”.
The so-called stock-take, which will
be agreed at COP28, will look at ac-
tions countries have taken since the
2015 Paris Agreement and what still
needs to be done in order to tackle
global warming.
The blueprint report said some coun-
tries wanted the COP28 stock-take to
acknowledge that the rich nations’
commitments were “grossly lacking
in ambition”.
Dan Jørgensen, Denmark’s Minister
for global climate policy, who is one
of two politicians leading discussions
with other countries on the stock-take,
said countries would have to agree a
“broad compromise” on a host of top-
ics at COP28, including how to miti-
gate climate change, how to adapt
economies for the impact of global
warming and how to nance the green
transition.
“There’s a momentum that this will
be the most important COP since
Paris,” he said. “Not only is this where
we take stock and look each other in
the eyes and say, ‘OK, so where are
we and where are the gaps between
action and ambition?’. Also, we need
to look forward. What are we to do
now to close these gaps?”
Oil and gas companies have a key
role to play in closing that gap. Sultan
al-Jaber, President-designate of this
year’s UN climate summit, said he is
in talks with fossil fuel producers
about an initiative focused on cutting
greenhouse gas emissions. This is due
to be launched at COP28.
More than 20 fossil fuel-intensive
companies, encompassing up to a
quarter of all oil and gas production,
are in active talks to sign up to the
initiative already, he said.
Jaber – who is also head of the Abu
Dhabi National Oil Company, one of
the world’s biggest oil and gas groups
– said: “I don’t want this industry to
be seen in any way, form or shape that
they are going against the phase-down
[of fossil fuels]. This [phase-down] is
happening. “And what they need to
do is start investing in the decarboni-
sation of the current energy system.”
Jaber also recently hit out at rich
countries for failing to support the
UN’s Green Climate Fund (GCF), the
world’s largest fund dedicated to tack-
ling climate change in developing
countries. The fund pulled in a total
of $9.3 billion from 25 countries by
the close of its one-day pledging con-
ference held in Bonn, Germany, last
month. Notably, the US failed to
pledge money.
He said the GCF’s “current level of
replenishment” was “neither ambi-
tious nor adequate to meet the chal-
lenge the world faces”.
red power generation in China in
2030 compared with a scenario
based on today’s policy settings.
Electricity generation from coal and
natural gas across Latin America,
Africa, Southeast Asia and the
Middle East would be a quarter
lower.
The WEO also shows that the
share of fossil fuels in global energy
supply, which has been stuck for
decades at around 80 per cent, de-
clines to 73 per cent by 2030, with
global energy-related carbon diox-
ide (CO
2
) emissions peaking by
2025.
However, even stronger measures
would still be needed to keep alive
the goal of limiting global warming
to 1.5 °C. A separate report from the
US Energy Information Adminis-
tration (EIA) noted that non-fossil
fuel-based resources, including
nuclear and renewable energy, will
produce more energy through 2050,
but that growth will likely not be
sufcient to reduce global energy-
related CO
2
emissions under current
laws and regulations.
“Every country needs to nd its
own pathway, but international co-
operation is crucial for accelerating
clean energy transitions,” said IEA
Executive Director Fatih Birol. “In
particular, the speed at which emis-
sions decline will hinge in large part
on our ability to nance sustainable
solutions to meet rising energy de-
mand from the world’s fast growing
economies. This all points to the
vital importance of redoubling col-
laboration and cooperation, not re-
treating from them.”
WEO 2023 proposes a global
strategy for getting the world on
track by 2030 that consists of ve
key pillars, which can also provide
the basis for a successful COP28
climate change conference. They
are: tripling global renewable ca-
pacity; doubling the rate of energy
efciency improvements; slashing
methane emissions from fossil fuel
operations by 75 per cent; innova-
tive, large-scale nancing mecha-
nisms to triple clean energy invest-
ments in emerging and developing
economies; and measures to ensure
an orderly decline in the use of fos-
sil fuels, including an end to new
approvals of unabated coal red
power plants.
The WEO 2023 considers in detail
a major variable for energy markets
in the coming years. China, which
has an outsize inuence on global
energy trends, is undergoing a major
shift as its economy slows and un-
dergoes structural changes.
Notably, China’s total energy de-
mand is set to peak around the
middle of this decade, the report
projects, with continued dynamic
growth in clean energy putting the
country’s fossil fuel demand and
emissions into decline. As the larg-
est energy consumer in the world,
the country’s transformation will
“ripple through the entire energy
system”, according to the IEA.
Continued from Page 1
EU energy ministers have struck a
deal to reform power market subsi-
dies, ending a stand-off between
France and Germany over the future
competitiveness of industrial sectors.
The deal focused on a section of the
law spelling out how state aid can be
used to support power projects. Talks
had stalled for months because of con-
cerns, especially from Germany, that
the scheme could distort competition
and favour France, which has the
world’s second biggest nuclear eet
after the US.
Last month Germany gave way,
agreeing to a deal that allows France
to use government support to nance
its largely state-owned nuclear plants,
which generate about 70 per cent of
its electricity.
The proposal had also been strongly
opposed by Austria and Luxembourg,
which have both been historically op-
posed to nuclear power but also feared
that allowing Paris to subsidise its
nuclear plants would provide French
industry with structurally lower en-
ergy prices, giving it a competitive
advantage.
As part of the new EU rules for the
bloc’s electricity market, France will
be allowed to use contracts-for-differ-
ence (CfDs) to nance new nuclear
build. These CfDs set a minimum
price guarantee for power providers,
as well as a ceiling above which the
state can recover any revenue.
Paris, however, did not obtain a fur-
ther concession, for the EU to allow
revenues from those schemes applied
to existing power plants to be refunded
to industrial consumers. The agree-
ment also gives greater power to the
European Commission to assess state
aid benets.
Agnès Pannier-Runacher, the
French Energy Minister, said that the
agreement was “a compromise which
sets out a balance” that “allows mem-
ber states to have room for manoeuvre
and take action on the basis of their
own energy mix”.
The reform aims to steady long-term
electricity markets by boosting the
market for power purchase agree-
ments (PPAs) generalising two-way
CfDs and improving the liquidity of
the forward market.
Two-way CfDs would apply to in-
vestments in new power generating
facilities based on wind energy, solar
energy, geothermal energy, hydro-
power without reservoir and nuclear
energy. This would provide predict-
ability and certainty.
Germany’s Environment and Econ-
omy Minister Robert Habeck said in
a statement: “Despite great stress, we
managed to do it together. With the
new electricity market design... con-
sumers in particular will benet from
the cheap production costs of non-
fossil fuel energies. This is also im-
portant to ensure the transition to
competitive prices in Europe.”
Germany, Europe’s biggest econo-
my, is on the edge of a recession after
losing access to the ample supply of
cheap Russian gas it received before
Moscow invaded Ukraine last year.
Europe will rely on US gas for decades
as it winds down its dependence on
Russian gas and accelerates the shift
to renewables in an effort to improve
energy security.
Ditte Juul Jørgensen, Director-Gen-
eral for energy in the European Com-
mission told the Financial Times that
the EU “has the instruments” it needs
to endure another winter energy crisis
in the aftermath of the Russia-Ukraine
war. These included conservation and
more renewable energy.
She said, however, that the bloc’s
reliance on exports of US liqueed
natural gas would persist. “We will
need some fossil molecules in the sys-
tem over the coming couple of de-
cades. And in that context, there will
be a need for American energy,” said
Jørgensen.
After Russia’s of Ukraine, the EU
struck a pact with the Biden adminis-
tration to work towards securing an
additional 50 million m
3
a year of US
LNG until at least 2030. The agree-
ment was made on the basis that it was
consistent with EU and US climate
goals and both parties would work
towards reducing gas demand.
Several EU governments came un-
der re for what many saw as it sleep-
walking into an over-reliance on Rus-
sian pipeline gas.
Last month Angela Merkel’s former
chief economic adviser acknowl-
edged that her policies left Germany
overly dependent on Russian gas, and
in hindsight the country should have
done much more to diversify its en-
ergy supply.
“If we’d known then what we know
now, we would of course have acted
differently,” Lars-Hendrik Röller told
the FT.
But he insisted that cheap, abundant
Russian energy exports had delivered
a huge boost to Germany’s economy,
helping to ensure 10 consecutive
years of growth.
“It helped to deliver us strong
growth rates that paid for things we
otherwise wouldn’t have had, for a
period of 10-15 years, things which
would otherwise not have been pos-
sible,” he said.
Röller also insisted that Merkel, who
served as Chancellor from 2005 to
2021, had little choice but to bet big
on Russian gas after deciding to
phase-out nuclear energy. “You can
argue whether that was the right thing
to do, but it was the consensus in so-
ciety at the time,” he said.
Headline News
EU countries break deadlock on power market reform
Europe will rely on US gas for decades
Fossil fuel phase-out will
Fossil fuel phase-out will
be major stumbling block
at COP28
Birol says the world must not
“retreat” from collaboration
and cooperation
n Russia says it will oppose calls for fossil fuel phase-out
n Oil and gas companies urged to invest in decarbonisation