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ECONOMICS

«If you want to hurt Putin, save energy»: The green future as a side effect of anti-Russian sanctions

Anna Efremova

The war in Ukraine has distracted the general public from another anthropogenic disaster: global climate change. It could be said that greenhouse gases are no longer a pertinent issue in the face of a nuclear holocaust, but paradoxically, the war and the West’s subsequent refusal to procure Russian oil, natural gas, and coal may provide the long-anticipated impetus for the green transition. While some call for leveraging this opportunity to end the hydrocarbon dependency once and for all, others doubt their ability to rein in energy prices and achieve climate goals. One thing is clear: the war in Ukraine has dispelled the last illusions anyone may have had about the security of relying on fossil fuels.

ALL CARDS
  • Pushing towards green energy

  • The Molotov–Ribbentrop pipeline

  • Sanctions: expectations vs. reality

  • The EU at a gas crossroads

  • «If you want to hurt Putin a little, then save energy»

  • The prospects of the green transition

  • Is coal coming back?

  • A milestone decade

Pushing towards green energy

On February 28 – only a few days into Russia’s invasion of Ukraine – the UN Intergovernmental Panel on Climate Change (IPCC) released its sixth report on the impacts of climate change across the planet’s ecosystems. The IPCC is the most credible scientific commission for the assessment and forecasting of the ramifications of human interference in the Earth's climate. The tone of its reports is growing more somber and urgent by the year. In the latest one, 330 scientists from all over the world warn that we are running out of time to remedy the situation.

At the moment, around 40% of the planet's population is in an “extremely vulnerable” position: floods, droughts, storms, and other adverse weather events caused by climatic shifts are resulting in much greater damage to people and animals than anticipated. United Nations Secretary-General António Guterres described the report as “an atlas of human suffering”. Brought about by the anomalous saturation of the planet's atmosphere with greenhouse gases and rising air temperature, the suffering is ultimately the result of mining and burning fossil fuels.

At the moment, around 40% of the planet's population is in an “extremely vulnerable” position

Having read the first five reports, many European politicians have already prioritized combating climate change in their domestic agenda. The European Union intends to abandon fossil fuels and reach net-zero emissions of greenhouse gases by the mid-21st century. To that end, Europe has adopted the Green Deal – a set of policies to ensure carbon neutrality, which implies a complete transition from fossil fuels to renewable energy. Reaching such ambitious goals requires ubiquitous use of solar panels and wind turbines, heat insulation of buildings, installation of heat pumps, and most importantly, cutting the coal industry by 70% and lowering oil and gas consumption by 30%. By the late 2030s, Europe plans to obtain 40% of its energy from renewable sources. Admittedly, such a drastic transition requires the overhaul of the entire European economy.

For now, clean energy capacities are insufficient for a full replacement of hydrocarbon fuels, so European leaders hope to continue using the latter for central heating, cars, and electricity production, gradually decreasing its consumption. Moreover, sunlight and wind are subject to change, so instances of overcast skies or the dead calm will still force us to resort to burning good old fossil fuels – most likely, natural gas.

The EU imports 45% of its natural gas from Russia, with the main consumers being Germany and Italy, where Russian gas covers around 50% and 40% of domestic consumption, respectively. Other countries, like Latvia and Czechia, were fully reliant on Russian gas, which did not stop Latvia from joining other Baltic countries in giving up Russian imports entirely once the war broke out. Russia is also the EU’s largest oil supplier (a third of its market), in addition to exporting millions of tonnes of petroleum products.

Russia is the EU’s largest oil supplier, in addition to exporting millions of tonnes of petroleum products

However, the European Commission intends to treat natural gas as a green and sustainable fuel. Were it not for the war, Central European states would hardly stop purchasing Russian gas in the short term, despite the impetus provided to European leaders by the growing gas prices, the simmering Ukrainian crisis, and the exacerbating tensions between Russia and NATO to review the intensifying dependence of their bloc from Russian energy carriers. For one, Germany, the largest importer of Russian hydrocarbons (apart from natural gas, it also buys half of its coal and one-third of its oil from Russia), had expected to have completely weaned its economy off fossil fuels by 2050 even before the war and is investing hundreds of billions of euros in renewable energy production. In light of this policy, some German officials understandably view the construction of Nord Stream 2 as a costly and pointless endeavor because Germany will be needing less and less natural gas in the future.

The Molotov–Ribbentrop pipeline

And yet, Olaf Scholz, the current Chancellor of Germany, and his fellow party members supported the project of an additional pipeline and generally favored the strengthening of ties with Russia. Over the last few years, Germany has set itself apart from its European neighbors by showing a lack of enthusiasm for anti-Russian sanctions, refusing to supply Ukraine with weapons despite the threat of invasion, and even restricting the import of German weapons to Ukraine from other countries. Critics slammed Germany for prioritizing its energy needs over European unity, ignoring or choosing to ignore that German was deliberately forging new commercial links with Russia.

Germany showed little enthusiasm for anti-Russian sanctions despite the threat of Russia invading Ukraine

Economic ties based on energy source supplies served as a safeguard against war – a thread connecting Russia to European nations. Germany viewed this as a way of appeasing Russia’s aggression, and consequently, approved the construction of Nord Stream 2, notwithstanding the USA's objections. As a result, up to the very beginning of the war, the world's leaders struggled to reach a consensus and form a united front to counter the Russian invasion.

Poland and the Baltic states, whose benefits from the new pipeline would have been doubtful, have been challenging its construction for years. Sidelined from all discussions, Warsaw even compared Nord Stream 2 to the Molotov–Ribbentrop Non-Aggression Pact, signed by the Soviet Union and Germany in 1939 to split Poland in half ahead of the Second World War. The current Russian-German energy partnership reminded the Poles of the historical “agreement over everyone else's heads” that preceded the largest war of the century. In late 2021, the pipeline was ready for launch, and early in 2022, Russia invaded Ukraine.

Sanctions: expectations vs. reality

Svitlana Krakovska, a leading Ukrainian climate scientist and an author of the IPCC’s Assessment Report, defines the ongoing conflict as a “hydrocarbon war”. Indeed, the EU (and to a lesser extent, the UK) buys hundreds of millions worth of oil and gas from Russia every day. The first month of war alone brought Moscow 35 billion euros in energy proceeds. Europe’s dependency on Russian fossil fuels is almost unparalleled and, for want of a better metaphor, also pours oil on the fire of conflicts along its eastern borders. Scholz admits that Europeans won't be able to procure alternative energy sources for heating, transportation, energy supply, or industrial needs, which means they will have a hard time trying to weaken Russia’s economic grip.

Had politicians listened to biologists, ecologists, climate scientists, geologists, physicists, and ocean scientists at least ten years ago, energy carriers would have hardly become weaponized in today's world and definitely wouldn't have made the West so vulnerable. Professor of political science and expert in environmental geopolitics François Gemenne, who also co-authored the IPCC's latest report, believes that the Russian president “made the decision to invade Ukraine because he did bet on the fact that sanctions against him, or against Russia, would be light, given the huge dependence of European energy systems on Russian gas in particular”.

Putin decided to invade Ukraine because he bet on the fact that sanctions against him would be light

The sanctions, however, have been nothing short of brutal. The U.S. has banned the imports of all Russian energy carriers, even though they do not buy any natural gas, and Russian oil accounted for only 3% of the American market. The UK announced its commitment to phase out Russian petroleum products before the end of the year; it used to import 8% of its oil from Russia and only 5% of its gas. Admittedly, changing the supplier is hardly an insurmountable task: the global oil market is marked by high liquidity and flexible shipping options thanks to tankers. Germany, for one, expects to fully phase out Russian oil by the end of the year. Pipeline gas is more complicated: it is normally supplied under long-term bilateral contracts. These contracts form a strong link between European nations and the country that unleashed the war.

The EU at a gas crossroads

EU member states have already agreed to lower their consumption of Russian natural gas before the end of the year and ensure independence from Russian fuel supplies “long before 2030”. To that end, they hope to arrange natural gas supplies from elsewhere, accelerate the transition to renewable energy, invest in hydrogen fuel, and manage energy carrier prices. Replacing the share of Russian natural gas in the European market will take at least a few years. However, the war in Ukraine has rung the alarm bell for all of Europe to focus their efforts on securing energy independence in the long term.

For a start, the European Commission has suggested purchasing gas collectively to mitigate competition and price growth and fill gas storage facilities to 80-90% of their capacity before the next heating season. With that in mind, European leaders will spend the next few months searching for new pipeline gas suppliers, for instance, in Norway, Algeria, or Azerbaijan. Meanwhile, the EU plans to increase its imports of liquefied natural gas (LNG) from the U.S., Qatar, Egypt, or Australia. Cooled LNG can be shipped by sea from anywhere, so the EU has signed a contract with the U.S. on the supply of 15 billion cubic meters of liquefied gas.

Replacing Russian pipeline gas is also a challenge because most LNG manufacturers worldwide are already working at their maximum capacity, so procuring larger amounts of the substance will be hard. In other words, there is almost no gas in the open market. Furthermore, shipping LNG is not enough; it also needs “unpacking” – transforming it back into gas in specialized regasification terminals, which are scarce in Europe (Germany has none, for instance). So even if the EU gets its hands on a sufficient amount of gas, it does not have enough terminals to process it and will have to build more.

Even if the EU gets its hands on a sufficient amount of gas, it does not have enough terminals to process it

This threatens Europe's plans to abandon hydrocarbons and achieve net-zero emissions by 2050. The situation calls for a milestone decision. At the time of construction, European natural gas infrastructure was oriented mostly on Russian hydrocarbon exports, and today the question is whether it is practical to invest in the declining gas industry to replace Russian shipments in the short term. Or will investment in costly, morally outdated infrastructure projects without a future result in the same dependence on fossil fuels?

Scholz, who has already announced the construction of Germany’s first two LNG terminals, suggested the possibility of their further reuse for hydrogen fuel storage (although experts doubt it will be feasible). One way or another, the chancellor of Germany declared that Europe’s struggle for independence from Russian natural gas has become irreversible and would come to a conclusion sooner than anticipated – in no small part thanks to the development of clean energy initiatives.

«If you want to hurt Putin a little, then save energy»

Under the current law, the EU has to cut its greenhouse gases emissions by 55% before 2030. The UK and the U.S. are also taking steps towards decarbonization, with intermittent success. The war in Ukraine may well become a turning point in the international struggle against climate change. François Gemenne notes it has already made obsolete several large investment projects in the area of fossil fuels. Thus, Germany has suspended the certification of Nord Stream 2, and the probability of the pipeline being put into operation in the foreseeable future is almost nil; Russia will most likely have to handle its stillborn project on its own. As Gemenne hopes, the crisis will accelerate the transition to renewable energy sources and revive the nuclear power industry.

The ‘peaceful atom’ is about to be deemed green in the EU, despite the lack of enthusiasm from some. Italy, for instance, has shut down all of its nuclear power plants; Germany, too, announced the cessation of its nuclear programs in the wake of the Fukushima accident in 2011. In the meantime, France already draws 70% of its energy from nuclear power plants and plans to expand its application to enhance the country's energy security in the face of turbulent gas prices. In light of recent events, the UK too will revive its interest in nuclear energy. To overcome the crisis, the EU will most likely have to bet on nuclear power plants too. That said, while nuclear energy can replace gas for electricity production, the question of gas cookers and heaters remains open.

According to estimates from the International Energy Agency, if EU residents adjust their thermostats by a mere 1°C, this will cut the yearly natural gas consumption by 10 billion cubic meters. If they are willing to lower the temperature in their residences by several degrees, Europe can even do without all the LNG it plans to hastily purchase. Although politicians (even European ones) are hardly thrilled with the prospect of having to tell their population to lower their consumption, such appeals are already being voiced. European Commission President Ursula von der Leyen is convinced that lower household consumption is key to independence from Russian fuel. Similarly, German Minister for Economic Affairs and Climate Action Robert Habeck was candid - «If you want to hurt Putin a little, then save energy.”

The prospects of the green transition

Finally, the energy crisis may serve as an impetus for Europe to accelerate its transition to renewable energy sources. In the first two weeks of the Russian invasion, the EU announced its plans to install unprecedented numbers of solar panels, wind turbines, and heat pumps. As combustibles, Europe intends to use two types of presumably clean fuel: biogas and hydrogen. More and more European officials regard green energy as the only practical solution to their predicament. The right response to the crisis is definitely “more green energy, not less”, according to Kadri Simson, the European Commissioner for Energy.

However, this commitment is challenged by the imperfection of energy storage technologies: the volatility of solar and wind energy must be compensated for with special storage units, but their development has been the main stepping stone in the renewable energy industry. Furthermore, manufacturing solar panels, wind turbines, and electric car batteries requires rare non-ferrous metals, supplied mostly by Russia and Ukraine. The conflict between the two countries threatens to also deadlock technologies enabling green energy.

The conflict between Russia and Ukraine threatens to deadlock technologies enabling green energy

Russia is the world's second-largest producer of platinum and palladium, precious metals used in hydrogen fuel generation equipment. Batteries need nickel and cobalt, and Russia is also the world’s second-largest cobalt supplier, along with providing 12% of the world’s nickel (which drove nickel prices up in early March to an exorbitant $100,000 per tonne). Ukraine, in turn, is the world’s largest exporter of so-called noble gases: neon, krypton, and xenon. They are used in the production of semiconductor chips, an essential component of all electronic devices.

Consequently, the war in Ukraine has exposed many countries’ need to reinforce their domestic green technology potential. The growth of prices for rare minerals has boosted their mining and production outside Russia. Thus, the U.S. and Australia are investing in the exploration of new critical element deposits and processing, while the Philippines plan to launch 12 more nickel mines.

Having learned the hard way the perils of dependence on Russia, the countries that have embarked on the path of decarbonization have to avoid falling into the same trap in the future. Carnegie Europe visiting scholar Olivia Lazard points out that the EU signed an agreement with Ukraine on the supply of materials critical to decarbonization and digitalization efforts in 2021, which is why Russia’s invasion of Ukraine could be motivated by its desire to hoard additional mineral resources, thus exacerbating Europe's raw material dependency.

Is coal coming back?

Some experts and politicians are nevertheless inclined to think that energy security and decarbonization cannot go hand in hand for now. Introducing renewable energy sources takes time and cannot compensate for the fuel shortage in the short term, so the current top priority is the energy crisis, while climate change will have to be addressed further down the line. For instance, such is the stance of the U.S., China, and to a certain extent the UK, which have prioritized upping their domestic production of oil and gas. The U.S. is also trying to get Venezuela and Iran to increase their oil production.

Whereas President Joe Biden’s administration has made bold promises of net-zero carbon emissions by 2050 and suggested allocating $500 billion to combat climate change, his green agenda has remained only moderately popular. At the moment, U.S. natural gas and oil production is on the increase, approaching record levels, according to the White House Press Secretary Jen Psaki (who also underlines that “the only way to protect the U.S. over the long term is to become energy independent”). The U.S. plans to pave the road toward energy security through unprecedented domestic drilling.

However, the least expected and the most worrisome environmental impact of Russia’s invasion of Ukraine is the possible comeback of coal, the most outdated and the ‘dirtiest’ fossil fuel, to the European energy industry. Burning coal produces twice as much СО2 as burning natural gas and 50% more CO2 than burning oil. Over the last decade, the EU has been gradually shutting down coal-fired power plants and intending to phase out coal imports. The coal industry did not seem to have a future in Europe – at least, not until the pandemic. In 2021, many economies were in a drastic need of revival, and the energy demand predetermined the Western countries’ interest in coal. Last year for the first time since 2021, the share of the coal industry in Europe surged (by an incredible 18%). Meanwhile, the U.S. produced more electricity by burning coal than it had during Donald Trump’s presidency, despite him favoring this industry. These developments immediately impacted global yearly carbon emissions.

The most worrisome consequence of the invasion of Ukraine is the possible comeback of coal in Europe

Today, when the energy carrier market is going through a profound crisis, and the world risks being cut off from Russian natural gas, certain European countries see it practical to return to coal for a while. Germany has suspended the dismantling of its coal energy industry; Italy cannot eliminate the possibility of relaunching its coal power plants; Czechia and Bulgaria have resumed burning coal; Romania will boost its coal mining capacity in the short term. China may too expand its coal production; despite buying only 5% of its gas and 10% of its oil from Russia, China will most certainly turn to its favorite energy carrier if faced with a shortage of gas. The advocates of this strategy argue that, even though greenhouse gases emission may rise in the short term, it will get us closer to a sustainable economy in the long term because countries will be actively developing their renewable energy sector in the meantime.

A milestone decade

The difficult choice between ensuring energy security and combating global warming has become the central item of the climate agenda. In an attempt to distance themselves from Russian raw materials and fill in the supply gap, Western nations are willing to let their emissions grow – an approach António Guterres denounces as “madness”. The only way to shake off the hydrocarbon yoke is to switch the economy to “no-one’s” solar and wind energy, which the German Minister of Finance Christian Lindner dubbed “the energy of freedom”. The EU rolled up its sleeves to finalize the legislation that will usher in a green economy, but the irony is that the region is pioneering the transition to renewable energy either way.

U.S. politicians are also voicing calls for a transition to clean energy to never again get entangled in a conflict fueled by fossil energy carriers. Most of them are Democrats, including the authors of the Green New Deal, a doctrine that suggests dedicating the next two decades to the legislative framework for sustainable development. However, green narratives are making considerably slower progress in the U.S. than in Europe. China, India, and Australia are also known for their lack of enthusiasm for climate action. Meanwhile, the world is still getting 80% of its energy by burning coal, oil, and natural gas. “The fossil fuel industry’s so-called solution to this crisis is nothing more than a recipe to enable fossil-fueled fascists like Vladimir Putin for years to come,” says Jamal Raad, executive director of American climate change advocacy group Evergreen Action.

“As long as our economy is dependent on fossil fuels, we will be at the mercy of petro-dictators.”

Lately, climate issues have been more and more prominent in international relations. The EU’s powerful climate action agenda impacts its agreements with neighboring countries, such as the Eastern Partnership states (including Ukraine). Rachel Kyte, Dean of the Fletcher School at Tufts University in the U.S. and a former high-ranking World Bank climate expert, believes it was the EU’s commitment to reach carbon neutrality in 20 years that pushed the Russian President to invade Ukraine sooner rather than later because “every step towards clean energy in Europe diminishes his economic hold over EU states”.

Climate awareness and democratic principles are more interconnected than one may see at first glance. “Many of the strategies to lower dependency on Russia are the same as the policy measures you want to take to lower emissions,” remarks Thijs Van de Graaf, Associate Professor of International Politics at Ghent University. Not only does reliance on hydrocarbon fuel approximate the climate crisis, but it also weakens the political system, the economy, and ultimately, society at large.

Scientists have been warning us for a long time: if we want to avoid a climate disaster, it is best to leave fossil fuels where they belong: under the ground. Now we have yet another incentive to do so. Despite calling many climate change consequences “irreversible” in its latest report, the IPCC still describes the next decade as a window of opportunity, a period that offers us a chance to avoid the worst possible outcome.

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