According to the International Energy Agency, however, global energy-related CO2 emissions are in line for their second-largest annual increase on record, with demand for coal rising – expected to increase by 4 , 5% this year – surpassing the increase of all renewables by 60%. percent and underpins an emissions increase of nearly five percent. China is expected to account for more than 50 percent of this growth in demand.
The factors, but not the only ones, of energy shortages in Europe and China which are exported around the world in the form of soaring demand and prices for fossil fuels are historically weak winds in the North Sea and floods and droughts in China which left them with very low levels of energy reserves and exposed a continued dependence on fossil fuels which clashed with their ambitions to reduce the carbon intensity of their economies.
Europe, which has been the most aggressive in replacing fossil fuels with renewables, still depends on gas for almost a quarter of its energy needs, but after a hot summer gas stocks are at their highest low level for a decade.
The combination of dramatically skyrocketing energy costs and supply chain disruption is fueling inflation that was already at unprecedented levels in some key corners of the world, while restraining growth rates and sparking concerns about stagflation.
Maintaining Norway’s fields and treatment plants, Russia’s commitment to replenishing its own scarce national reserves (and leveraging its controversial North 2 pipeline to Europe) have dramatically reduced energy supplies. even as unusually light winds in the North Sea reduced it considerably.
The crisis has been made worse by the reduction in nuclear production in Germany and by price caps that are suppressed by price signals that would incentivize more coal and gas production by allowing producers to pass their significantly increased costs on to users. final.
China, much more dependent on coal – it accounts for about two-thirds of its electricity – faces a similar problem, with producers suffering heavy losses if they maintain production. Factories cut shifts or shut down production altogether, and local authorities ration electricity and even turn off their streetlights.
Beijing, which had pledged to reduce the carbon intensity of its economy by 3% this year, to reach a peak carbon by 2030 and carbon neutrality by 2060 as Glasgow approaches, orders hundreds of coal miners to increase production and buy as much coal and gas as he can get their hands on. Its increased demand is generating windfall gains for Australian coal producers which it banned a year ago, a ban it appears to have partially weakened recently in its desperate efforts to increase supply.
Keeping lights and radiators on and factories running thanks to increased reliance on fossil fuels will lead to uncomfortable conversations at the top of Glasgow. It will provide ammunition for those who emphasize the intermittence of renewables by advocating for a more thoughtful transition from fossil fuels to renewables.
The energy crisis highlights some of the short-term structural challenges of energy supply and the affordability of the transition.
In the longer term, the energy crisis could provide a price signal for more renewables and more and better renewable energy storage capacity, but politicians in Europe, China, the United States (where the gasoline prices are at their highest level in seven years) and elsewhere will be very sensitive to the implications of soaring prices and supply rationing on their economies and constituencies.
Put on an increasingly global energy crisis with the severe disruption of the supply chain (approaching Christmas, the peak demand period) and already high inflation rates and the prospect of recovery after as the pandemic is quelled, fears that inflation will take hold and force interest rates to rise – even as economies slow – looming on the horizon.
The Business Briefing newsletter features important articles, exclusive coverage and expert opinions. Sign up to get it every morning on weekdays.