War Calls for Europe’s Green Energy Transition

Author: Emma Eeckhout, Graphics: Bella Aharonian

The BRB Bottomline

Russia’s invasion of Ukraine has forced the EU and the United States to take real strides towards transitioning into green energy in the hopes of reducing their dependence on Russia’s fossil fuel exports. Did it have to take a war for governments to take green energy seriously?

Russia’s invasion of Ukraine has caused, among many other catastrophes, an increase in oil and gas prices worldwide. In response to the crisis, many countries have begun to decrease their long-term dependence on Russian energy by trying to find alternatives. European Union (EU) members and the US have started investing in renewable energies and finding other sources of natural gas. Did it have to take a war to rattle governments into action? 

Russia’s Chokehold

The EU talks about the effects of having to become less dependent on Russian exports but do we know the extent to which they have us in a chokehold?

In 2021, the European Union imported over $108 billion worth of energy which translates to 25% of Europe’s crude oil as well as 45% of coal consumption. On the other hand, even though the United States only imported 4% of their oil from Russia, 21% of its gasoline imports are Russian. Worldwide, Russia is the third largest producer of oil after the US and Saudi Arabia.  

Europe is currently in the trenches of trying to find a way out of their reliance. In the short term, this means looking for other sources of oil and gas such as the US, Qatar or Azerbaijan, as well as extending the lifespan of certain power plants. Yet, for the first time in a long period, there has been a continent-wide push towards renewable energy investment. 

The Green Machine

On March 25th, the EU proposed a plan to become completely independent from Russian oil imports by 2030. In order to accomplish this ambitious objective, the US and the EU have committed themselves to meeting the Paris Agreement goals by 2050. While natural gas will remain a significant part of the energy source during the green transition, the EU would take steps to ensure that the carbon intensity decreases over time. 

Furthermore, the United States and the European Commission have decided to establish a joint Task Force on Energy Security in order to set the parameters for their new cooperation in reducing dependence on Russian fossil fuels. This Task Force will focus on various climate and energy issues. For instance, undertaking efforts to reduce greenhouse gas emissions from new liquified natural gas (LNG) infrastructure through the use of clean energy to power onsite operations. There will also be an upgrade on the regulatory framework for energy security and storage. This will enhance the security of supply and storage needs and promote cooperation with the EU and its neighboring countries. Most importantly, they will start to use energy-efficient technologies such as demand response devices. For example, a smart thermostat that regulates a household’s power consumption to reduce energy misuse. Acts to expedite approval for renewable energy projects and developing a strategy to support the deployment of clean energy technologies through workforce development are expected to be passed. Finally, the Task Force is resolved to negotiate an emissions-based Global Arrangement on steel and aluminum trade that incentivizes industrial decarbonization and lower energy demand. 

The EU and the US are wasting no time in finding ways to reduce Europe’s reliance on Russia as well as isolate them in response to the Ukraine invasion. Thankfully, these efforts are towards green energy rather than a fear-induced reaction to consume more fossil fuels. 

Windfall Losses

As much as we want these changes, some windfall effects are inevitable. Firstly, Western firms will start to withdraw from the oil market because the policy changes will make production less profitable. This retreat will cause the OPEC and Russia to have an increased market share predicted to increase from 45% to 57% by 2040. Making production more concentrated increases the West’s dependency on these firms despite having access to renewable alternatives. Additionally, high-cost producing countries such as Azerbaijan and Angola will slowly be squeezed out, further increasing Russia’s market power. 

Secondly, emerging electrostates, states that collect minerals imperative for clean energy production,  will get the short end of the stick despite being able to export the new hot commodity, green metals. After two decades of investing in electric infrastructure spending on green metals is what has come in demand. This change in investment will amount to over $1 trillion dollars in expenses by 2040. Countries such as Australia can endure this burden but countries like Congo and Mongolia will face shock. Finally, the energy transition will come with higher costs, which neither consumers nor politicians will be keen about. 

Moving into green energy is an expensive and risky investment yet with it comes a safer planet and a sustainable means of energy production. The first step, however, is ending the reliance on Putin’s energy.

Take-Home Points

  • The world, and especially Europe, is extremely reliant on Russian exports of fossil fuels. 
  • To move away from this dependence, the EU and the US have decided to create a Task Force in order to cooperate in investing in green energy and innovative technologies. 
  • Although this energy transition is positive for climate change action it also means that Russia and OPEC will be able to secure a larger market share in the oil market giving them more power. 
  • Countries such as Mongolia and Congo will face severe impacts due to this transition. 

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