A Nuanced Analysis of Climate Change & Global Energy Transition
On the 1st of November 2021, the 26th United Nations Climate Change Conference, also known as COP26 which stands for ‘Conference of the Parties’, is scheduled to be held in the City of Glasgow from 1-12 November under the presidency of the United Kingdom.
Source: Courtesy of UN Climate Change Conference in 2021
For nearly three decades the UN has been bringing together almost every country on earth for global climate summits. In that time climate change has gone from being a fringe issue to a global priority.
During COP21 which took place in Paris in 2015 the Paris Climate Change Agreement was born. For the first time ever, something momentous happened: every country agreed to work together to limit global warming to well below 2 degrees and aim for 1.5 degrees to adapt to the impacts of a changing climate and to make money available to deliver on these aims.
Under the Paris Agreement, countries committed to bring forward national plans setting out how much they would reduce their emissions.
They agreed that every five years they would come back with an updated plan that would reflect their highest possible ambition at that time, hence the Glasgow conference in November.
So as momentous as Paris was, countries must go much further than they did even at that historic summit in order to keep the hope of holding temperature rises to 1.5 alive. COP26 needs to be decisive.
Climate change is no longer a fiery apocalypse that we expect to happen in the far-off future. It is real and devastating. Rising sea levels, wild-fires, heatwaves, and extreme weather events are already wreaking havoc everywhere and could cost the global economy a staggering $1 trillion dollars over the next five years in crumbling infrastructure, reduced crop yields, health problems, and lost labour according to the Carbon Disclosure Project (CDP). 1
Since January 2019, we have recorded no less than three dozen extreme weather events across the globe, exacerbated by climate change. Each event caused more than $1 billion in damage. According to NASA, the earth's average surface temperature in 2020 tied with 2016 for the hottest years on record, making the last seven years the seven hottest on record. 2
Unfortunately, any discussion about energy transition usually pits fossil fuels (oil, natural gas & coal) against renewables and quickly degenerates into another predictable polarization story.
There's little doubt that large-scale use of fossil fuels tops the list of factors contributing to climate change (see Figure1).
Source: Courtesy of Brooking.edu, accessed on 24 May 2021
This begs the question that if there is such concrete evidence that fossil fuels contribute to climate change and other environmental problems, then why do we still use them? Why haven’t we already quit using them? Why is it roving so hard to replace them?
However, the issue isn’t that simple. In order to have a nuanced discussion of climate change and global energy transition, we should objectively discuss claims about excessive weather conditions caused by climate change, drop unsubstantiated claims based on dogma by environmental activists and divestment campaigners and accept facts as basis of the discussions.
If we go back in history to when records started we could easily find that the very same rising sea levels, wild-fires, heatwaves, and extreme weather events which are already wreaking havoc everywhere had also happened years before. Environmental science has yet to establish unequivocally whether these were caused by human beings using fossil fuels or as a result of natural developments or both.
However, some distinguished scientists don’t believe that man’s actions including the use of fossil fuels are solely behind climate change and global warming. For instance, Robert B. Laughlin, co-winner of the 1998 Nobel Prize in Physics says in an essay titled: ”What the Earth Knows” that “what it knows is this: What humans do to, and ostensibly for, the earth does not matter in the long run, and the long run is what matters to the earth. We must think about the earth's past in terms of geologic time.” 3
Damaging this old earth is, Laughlin says, "easier to imagine than it is to accomplish." There have been mass volcanic explosions, meteor impacts, "and all manners of other abuses greater than anything people could inflict, and it's still here. It's a survivor." 4
Laughlin acknowledges that "a lot of responsible people" are worried about atmospheric concentrations of carbon dioxide from burning fossil fuels. This has, he says, "the potential" to modify the weather by raising average temperatures several degrees centigrade and that governments have taken "significant, although ineffective," steps to slow the warming. "On the scales of time relevant to itself, the earth doesn't care about any of these governments or their legislation."
Someday, all the fossil fuels that used to be in the ground will be burned. After that, in about a millennium, the earth will dissolve most of the resulting carbon dioxide into the oceans. (The oceans have dissolved in them "40 times more carbon than the atmosphere contains, a total of 30 trillion tons.") The dissolving will leave the concentration in the atmosphere only slightly higher than today's. Then "over tens of millennia, or perhaps hundreds" the earth will transfer the excess carbon dioxide into its rocks, "eventually returning levels in the sea and air to what they were before humans arrived on the scene."
People can cause climate change, but major glacial episodes have occurred "at regular intervals of 100,000 years," always "a slow, steady cooling followed by abrupt warming back to conditions similar to today." 5
When a celebrated environmentalist like Michael Shellenberger who was nicknamed by Time magazine as ‘Hero of the Environment’ finds himself forced to apologize on behalf of the environmentalists for the climate alarmism they had propagated over the past three decades and also for misleading the public about the imminent existential threat of climate change, it speaks volumes about the unsubstantiated claims made by the environmental lobby.
The renewables conundrum
Yet, environmentalists who call for an abrupt end to fossil fuels and a sudden adoption of renewable energy fail to recognize the obvious lack of logic in this. It is not possible in this particular reality to simply ditch fossil fuels for renewable energy in what is called a global energy transition.
The global energy transition aims to: (i) replace fossil fuels by renewables, (ii) achieve zero emissions by 2050 and (iii) limit global warming to well below 2 degrees and aim for 1.5 degrees.
In sum, the story of energy transitions through history has been a constant move toward fuels that are more energy-dense and convenient to use than the fuels they replaced.
Fossil fuels are simply more energy dense than other energy sources. At 53.1 MJ/kg, natural gas boasts the highest energy density of any fossil fuel, followed by gasoline at 45.8MJ/kg and coal at 30.2MJ/kg. By comparison, Lithium-ion batteries--one of the most effective ways to store renewable energy--can only afford an energy density of 0.50 MJ/kg.6
Renewables are part of the answer but not the whole answer. On their own, they aren’t capable of satisfying global energy demand because of their intermittent nature. Moreover, global energy transition won’t succeed without major contributions from both natural gas and nuclear energy. 7 Furthermore, the global economy will come to an immediate standstill without oil.
Oil Is Here to Stay
At the height of the COVID pandemic there was a lot of talk by environmental activists and vested interests on how the pandemic could accelerate global energy transition from hydrocarbons to renewables and also speed up the peaking of global demand for oil. Nothing is further from the truth.
If anything, the pandemic has proven irrevocably the inseparable link between the global economy and oil. By destroying one you destroy the other and vice versa. There could neither be a global economy nor a modern civilization as the one we know and enjoy without oil. The global economy operates on oil and gas and will continue to do exactly that well into the future.
There will be no post-oil era throughout the 21st century and probably far beyond. It is very doubtful that an alternative as versatile and practicable as oil could totally replace oil in the next 100 years and beyond.
Also there will be no peak oil demand either. Global oil demand will continue growing well into the future underpinned by growing population projected to rise from 7.9 billion today to 9.7 billion by 2050 and a growing economy projected to grow from $91 trillion in 2021 to $271 trillion also by 2050. 8
While an increasing number of electric vehicles (EVs) on the roads coupled with government environmental legislations could slightly decelerate the demand for oil, EVs could never prevail over internal combustion engines (ICEs). As a result, ICEs will continue to be the dominant means of transport throughout the 21st century and far beyond.
Moreover, when oil majors like BP and Shell talk about an approaching peak oil demand, they mean their own peak and not the world’s. Oil supermajors have oil reserves projected to last only 8-10.5 years and they are finding it extremely difficult to replace what they have already used because of resurgent resource nationalism. Shell, for instance, expects to have produced 75% of its current proven oil and gas reserves by 2030, and only around 3% after 2040. 9
Oil and gas will continue to be the core business of the global oil industry well into the future. US oil giant ExxonMobil CEO Darren Woods and Occidental Petroleum CEO Vicky Hollub succinctly and eloquently made their position very clear on peak oil at the CERAWeek conference in March this year when both said that “reducing carbon emissions from fossil fuels and not the actual use of fossil fuels, offers the best way to combat climate change”.
If this is the case, then why don’t we stop this nonsensical talk about ditching oil and natural and focus instead on reducing the emissions occurring during the production of oil and gas.
The call by the International Energy Agency (IEA) for an immediate halt to oil exploration and financing of new oil and gas projects as a roadmap to net-zero emissions is reckless and futile. There is no way the IEA or any other single agency could force oil-producing countries to stop boosting their oil production as long as there is demand for it. 10
Moreover, why don’t we accept that we are now in an era of energy diversification where alternative sources to fossil fuels, notably renewables, are growing alongside and not at the expense of the incumbents?
The Hype about EVs
There is extraordinary hype about EVs by the media. But when Akio Toyoda, the President of Toyota, the world’s biggest car company, says there is too much hype surrounding EVs and also notes that the electricity needed to charge electric cars would strain grids and increase carbon emissions, the world should listen attentively. 11
The ease of charging and also the availability of charging points are always on EV drivers’ minds particularly when they are embarking on a long journey of hundreds of miles. Therefore, it is not surprising that 18% of EV drivers and 20% of plug-in buyers in California are switching back to gasoline cars. 12
This is one very major reason why EVs will never prevail over ICEs. The other is the need for global expansion of electricity generation costing trillions of dollars to be able to charge the supposedly millions of EVs that will be on the roads. How would this expansion come by: solar, nuclear or hydrocarbon?
Is There a Future for Hydrogen?
Hydrogen whether green, blue or grey is a nonstarter. It is more expensive to produce than natural gas. Furthermore, it needs far more energy to produce than it will eventually provide.
If this is the case, wouldn’t be far more economical to skip the production of hydrogen altogether and use natural gas directly to generate electricity while employing carbon capture technologies to prevent CO2 being released?
Why not use the solar electricity or nuclear energy used in producing hydrogen by electrolysis to enhance current electricity generation and make it cheaper to customers rather than using a convoluted process of electrolyzing it and then use it to generate electricity thus adding to customers’ costs. 13
Furthermore, steam generated from high temperatures produced by nuclear reactors could be used to generate more electricity in a combined cycle for use in industrial plants instead of hydrogen.
The only country in the world where a hydrogen economy could possibly succeed is Iceland. The reason is that it has plentiful geothermal power and water. Geothermal power already generates virtually all Iceland’s electricity. 14
Climate change is a reality and its effects are devastating. Moreover, there's little doubt that large-scale use of fossil fuels tops the list of factors contributing to climate change.
Yet, environmentalists and divestment campaigners who call for an abrupt end to fossil fuels fail to recognize that renewables on their own aren’t capable of satisfying global energy demand because of their intermittent nature. Moreover, global energy transition won’t succeed without a major contribution from natural gas and the global economy will come to an immediate standstill without oil.
There will neither be a post-oil era nor a peak oil demand throughout the 21st century and probably far beyond. It is very doubtful that an alternative as versatile and practicable as oil could totally replace oil in the next 100 years and beyond.
Moreover, the notions of an imminent global energy transition and zero-emissions are illusions. Global energy transition can only be gradual with natural gas being the pivot for the transition.
Therefore, the best way to combat climate change is to focus on reducing carbon emissions from fossil fuels and not their actual use.
The views and opinions expressed in this article are those of the author and do not necessarily reflect the position of ESCP Business School.
- “Is It Possible to Have a Nuanced Discussion about the Energy Transition?” posted by oilprice.com on 23 May 2021 and accessed on 23 May 2021.
- George F. Will, “Earth Doesn’t Care What Is Done to It”, published in Newsweek Magazine on 12 September 2010, p.25.
- “Is It Possible to Have a Nuanced Discussion About the Energy Transition?”
- “EU Admits It Can’t Go Net-Zero without Natural Gas”, posted by com 26 April 2021 and accessed on26 April 2021.
- Data from the World Bank & the IMF accessed on 24 May 2021.
- Mamdouh G Salameh, “The Battle for Reserves & Dominance between IOCs & NOCs: Wo Will Prevail?” an article posted by the Hellenic Association for Energy Economics (HAEE) on 26 April 2021.
- “The IEA May Have Given OPEC a Huge Gift”, posted by oilprice.com on 19 May 2021 and accessed on 19 May 2021.
- “Toyota Says Most of Its US Cars Will Still Run on Gasoline in 2030” posted by oilprice.com on 12 May 2021 and accessed in 2021.
- “18% of EV Drivers in California Switched Back to Gasoline Cars” posted by oilprice.com on 3 May 2021 and accessed on 3 May 2021.
- “The Nuclear Option for Hydrogen” posted by oilprice.com on 4 May 2021 and accessed on 4 May 2021.
- “How Viable Is the Hydrogen Economy? The Case of Iceland” a paper published by the Energy Forum of the IAEE in the second quarter of 2009.