A year after Russian leader Vladimir Putin’s assault on Ukraine, deep fault lines are exposed in the global energy system, especially between rich and poor countries. Those who can afford to pay the rising prices buy energy resources such as natural gas, while preparing for climate change by developing renewable energies such as wind and solar. Those that can’t fall back into the grip of dirtier fuels – or darken.
“I think there will be bigger gaps between countries,” said Jane Nakano, senior fellow at the Center for Strategic and International Studies.
The impact of the war has also been felt in parts of Africa, where millions have lost power as rising fuel and food prices have compounded the effects of climate change and Covid. -19.
The rush by countries around the world for supplies of coal, gas and oil helped push greenhouse gas emissions near record highs last year, as time is running out for global efforts to matter of climate. Scientists say the world is nine years away at current emissions rates until the rise in global temperatures since the dawn of the industrial age eclipses 1.5 degrees Celsius, the threshold for serious harm to people, economies and ecosystems.
The emerging economies of South Asia, in particular, are vital to global climate efforts as their growing populations demand higher amounts of energy. They are also among the most vulnerable to the impacts of climate change.
Pakistan, a country of 220 million people, is perhaps the most dramatic example. The country, already in political turmoil, suffered devastating floods last year that caused more than $30 billion in damages.
The war made the situation worse.
More than a quarter of the gas Pakistan used for power stations, factories and cooking food in 2021 came from international LNG shipments, according to BP data. But last year, companies redirected much of it to wealthier European ports and wealthier Asian countries that could still afford higher prices.
Nine shipments bound for Pakistan were diverted to other countries, according to the Institute for Energy Economics and Financial Analysis. Imported coal prices have also soared, prompting Pakistan to increase domestic production of lignite, a carbon-intensive form of fuel.
It still wasn’t enough energy.
The shortage was met with an extreme heat wave whose impact, scientists say, was multiplied by human-caused climate change. As demand for electricity increased, Pakistan turned to emergency measures. The government ordered malls to close earlier, and he turned off the streetlights.
Then last month, an attempt to ration fuel backfired spectacularly: Coal and nuclear power plants that had been shut down overnight to conserve resources have not restarted. The nation shut down for 15 hours.
“When you’re desperate, you do what you have to do,” said Ahmad Faruqui, a Pakistani-born economist who tracks the country’s energy system.
Natural gas is going global
The world has seen global energy crises before, like the Arab oil embargoes of the 1970s. But Russia’s invasion of Ukraine spawned the first truly global gas crisis.
Gas is traditionally a regional product transported by pipelines. This is particularly true in Europe. The gas produced in Siberia is piped through Russia and into Europe, where it fuels power stations, factories and domestic furnaces. In 2021, around 40% of European gas consumption was supplied by Russia, according to the International Energy Agency.
Moscow launched its invasion in February 2022 at a time of transition in gas markets. Liquefied natural gas, which is cooled to minus 260 degrees Fahrenheit and loaded onto ships, was previously a niche market between countries like Qatar and Japan.
But LNG has gone global in recent years, fueled in part by a glut of cheap gas and new export terminals in the United States. The United States, which shipped its first LNG cargo in 2016, was the world’s largest exporter in the first half of 2022, before a terminal in Texas caught fire and cornered American shipments, according to the US Energy Information Administration.
So when Putin ordered the attack on Ukraine, Europe retaliated by turning to the United States and a few other countries to replace the gas it once received from Russia. U.S. shipments to Europe more than doubled in 2022, to 2.7 trillion cubic feet, according to Energy Department figures.
Europe’s efforts to store gas have stoked resentment in other parts of the world.
The frustrations came as US gas shipments bound for Asia were diverted to Europe, sending prices skyrocketing. In China, LNG demand fell 20% in the face of high prices and lower economic growth resulting from its pandemic shutdowns. The impact of high prices has been particularly acute in South Asia, where countries such as India, Pakistan and Bangladesh have seen demand fall by a combined 16%, according at the Institute of Energy Economics and Financial Analysis.
Before the war, analysts expected growing LNG demand in emerging Asian markets to rival that of China and India over the next 20 years.
Now the image is less clear. In his last world energy outlookthe IEA predicted a diminishing role for natural gas in developing Asia, in part due to concerns about affordability.
Future decisions for developing countries could depend on what type of fuel is affordable and available, said Sam Reynolds, energy finance analyst at the Institute for Energy Economics and Financial Analysis. “And as last year has shown, LNG does not meet any of these criteria.”
“Over-indebtedness” against the climate crisis
Some countries hedge their bets.
Coal production in India increased by 21% between April and July last year, when a heatwave ignited the country. Some officials say coal will remain an essential part of the country’s energy mix in the future. At the same time, India is working to build hundreds of gigawatts of renewable energy.
South Africa, Vietnam and Indonesia – all major coal consumers – have agreed to reduce coal use and cut carbon emissions in return for clean energy funding under the Partnerships for a Just Energy Transition, an initiative led by the United States and other Group of Seven countries.
Philippine authorities have also sought to increase their renewable energy targets, with the aim of generating more electricity domestically and reducing emissions. They say part of that strategy depends on having gas on hand.
But the war makes this difficult.
Several liquefied natural gas projects planned in the Philippines are being delayed, in part due to high gas prices and a lack of long-term contracts that would ensure a steady supply. This creates uncertainty for LNG investments.
“Our goal, if possible, is how to reduce the cost of energy,” said Michael Sinocruz, director of the office of policy and planning at the Philippine Department of Energy. “And to do that, we have to carefully study what would be the best combination for the Philippines.”
More renewable energy could save the Philippines from volatility in fossil fuel prices and supply. But if more renewables come online, the country will also need to invest in batteries, storage and backup power, Sinocruz said.
“So in this case we have to balance,” he added.
Analysts say more international financing and private sector investment is needed to accelerate clean energy transitions in emerging economies. Without it, countries could go the way of Pakistan.
Soaring fuel prices have emptied the country’s coffers. IEA estimates that at least 30% of Pakistan’s import payments went to oil and LNG in the last nine months of 2022 – revealing a desperate attempt to keep its economy running. The central bank now has enough foreign exchange reserves to cover just three weeks of imports, Reuters reported this month.
The economic crisis means Pakistan lacks the creditworthiness to attract private investment in renewable energy infrastructure, said Rishikesh Ram Bhandary, deputy director of the Global Economic Governance Initiative at Boston University.
“If you’re in Pakistan and you’re actually over-indebted, you can’t borrow to build these gigantic things,” Ram Bhandary said.
So the country turned to coal.
Pakistan plans to halt LNG imports and quadruple domestic coal production, says its energy minister told Reuters.
The announcement is all the more notable given that coal production was virtually non-existent in Pakistan as recently as 2010. That changed when Pakistan mined a domestic coal deposit with funding from China. Later, he started importing coal. Last year, coal accounted for 30% of Pakistan’s electricity generation, according to the IEA.
“Honestly, I don’t think they’re going to drop the coal. It’s a valuable resource for them,” said Faruqui, the economist. “Climate change is a long-term problem. In the short term, we have to keep the lights on.