With Vladimir Putin’s devastating war in Ukraine now well into its second week, news coverage and commentary are turning to the steps other European countries can take to break their dependence on Russian oil and gas, once and for all.
While the fossil industry tries to spin the war as justification for a new round of exploration and development, and Europe looks to alternate sources of gas for short-term relief, renewable energy and energy efficiency are dominating much of the conversation as a more practical, affordable solution.
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Two intertwined issues brought into focus by the invasion of Ukraine are the 40% of European Union gas supply that comes from Russia, and the corresponding US$720 million in daily gas revenue that Russian President Vladimir Putin is using to finance his war. While sanctions and divestment are hitting broad swaths of the Russian economy, “in gas the flow continues unabated and, with European customers now paying even more exorbitant prices, Russia is benefiting from a staggering surge in revenue,” writes British historian and European Institute Director Adam Tooze, citing Bloomberg columnist Javier Blas.
“At the start of the year, Russia was earning $350 million per day from oil and $200 million per day from gas,” Tooze says. “On March 3, 2022, Europe paid $720 million to Russia for gas alone.”
Bruegel analyst Simone Tagliapietra puts the daily total closer to $1.1 billion, the Globe and Mail says.
Fossil Dependence as ‘Achilles’ Heel’
That dependence “has proved the Achilles’ heel of security for Europe and, by extension, the United States,” writes the Washington Post editorial board. “Quite simply, Russia has fossil fuels in abundance and has used this as a geopolitical tool to influence consuming countries such as Germany and Italy, blunting their willingness to take a stand against Mr. Putin’s aggressive policies until it is too late.”
Citing German Marshall Fund senior fellow Joerg Forbrig, the Globe and Mail agrees that past aggressive moves by Putin “met with muted responses from the West, largely because of the [fossil] energy implications. Those included Russia’s 2008 invasion of Georgia, its 2014 annexation of Crimea, and the 2019 assassination of Zelimkhan Khangoshvili, a Georgian-Chechen man, in a Berlin park—which a German court ruled last year was orchestrated by the Kremlin.”
But now all that has changed. Since the invasion, “there is absolutely no taboo in reconsidering reshaping relationships with Russia,” Forbrig said, “including the energy relationship.”
To make that happen, western countries need “an energy policy that is not only environmentally sustainable but geopolitically sustainable as well,” the Post editors write. And demands to end relatively modest U.S. oil imports from Russia are “no substitute for a long-term approach, which will have to carefully balance urgency and realism.”
The short-term “realism”, they say, is to ensure enough gas supply from “politically compatible” countries to avert “shortages and crippling cost increases”. But the urgency is that “the case for shifting from fossil fuels to renewables was already strong,” and the dependency on Russia “only strengthens it. European Union countries are already investing heavily in renewables; the United States still has an opportunity to follow their example by approving the green energy programs in President Biden’s Build Back Better plan or, even more usefully, enacting a tax on carbon.”
Over the short to medium term, Tagliapietra said Europe can expect to import large volumes of (non-Russian) gas, since the continent “cannot realistically think of going fully green in a matter of five years.”
That assessment “is not just about money,” the Globe writes. “The EU will also need to tackle practical problems, such as increasing solar panel manufacturing capacity and finding qualified installation workers.”
But that doesn’t mean embracing new oil, gas, or pipeline projects that would take up to a decade to finance, approve, litigate, and build—and far longer to pay back the billions of dollars of investment they would require.
New Fossil Capacity Solves Nothing
Those small practicalities haven’t stopped fossil fuel boosters in Canada and elsewhere from trying to turn a terrifying human tragedy into a new lease on life for a declining industry.
“As always, petroleum is driving geopolitics,” said Conservative Party leadership candidate Pierre Poilievre (CPC, Nepean-Carleton). “Canada has what Europe needs and lots of it.”
“If Canada really wants to help defang Putin, then let’s get some pipelines built!” enthused Alberta Premier Jason Kenney—just three years, environmental journalist Arno Kopecky writes for the Globe, after he praised the Russian dictator for jailing climate activists.
But smart analysis from within Canada’s oilpatch takes a different view.
“Unfortunately, there is little Canada can do in the short term,” writes Energi Media CEO Markham Hislop. “Pipelines to get oil to market take the better part of a decade to build, while LNG plants and the gas pipelines to supply feedstock are roughly the same.”
The federal government won’t be inclined to “run roughshod over its new environmental assessment legislation and accelerated climate targets” to speed up those timelines, and “nor should they be,” Hislop adds. “The shrill demands emanating from Alberta should be viewed within the context of the global energy transition, which the Prime Minister says Canada must adapt to post haste.”
With the 2020s shaping up as a decade of disruption and transition for the industry, “does this seem like a good time to double down on what is surely a sunset industry?” he asks. “To build 50-year infrastructure with a significant risk of becoming stranded assets? To divert time, energy, and resources away from building the emerging clean energy economy that will dominate the 21st century?”
Without even factoring in the climate emergency, or the astonishing affordability of renewable energy and energy efficiency, Kopecky says it’s “cartoonishly wrong” to think that fossil fuel production ever had anything to do with peace. “From the moment they were discovered, fossil fuels have been intimately tied to the largest outbreaks of violence in our species’ history,” he writes. “A brief scan of this century alone reveals how myopic it is to think otherwise. Remember Iraq?”
Building Energy Independence for Europe
The International Energy Agency (IEA) spent much of last week focused on the short-term pieces of the EU’s energy independence puzzle. On Thursday, the Paris-based agency released a 10-point plan to reduce the continent’s dependency on Russian gas by about one-third by lining up new suppliers, increase minimum gas storage requirements, speeding up wind and solar development, maximizing electricity supply from available bioenergy and nuclear plants [because that’s working so well in Ukraine—Ed.], and introducing a windfall profits tax on fossil fuels to shelter European consumers from high power prices.
Three of the IEA’s 10 measures focused specifically on energy efficiency, with steps to speed up the replacement of gas boilers with heat pumps, along with efficiency improvements in buildings and industry, and prevail on consumers to do their bit by turning down their thermostats by 1°C.
By the end of the week, the IEA had organized more than two dozen countries to release a total of 61.7 million barrels of oil from their emergency reserves, and Germany had promised to speed up construction of two new LNG terminals.
But beyond the immediate crisis, “Russia’s war in Ukraine could have a huge, albeit unwitting, consequence: It could hasten Europe’s transition away from fossil fuels,” writes New York Times climate correspondent Somini Sengupta, after viewing a 26-page draft action plan under development by the EU.
“If it goes through, it could significantly blunt one of the Kremlin’s most formidable economic weapons: piped gas to heat and power the continent,” Sengupta writes. “It also raises an uncomfortable question: Why did it take a full-blown attack on civilians to speed up climate action?”
Echoing elements of the IEA plan, the European Union draft calls for member countries to speed up energy retrofits, simplify regulations for renewable energy investment, boost rooftop solar, and make more extensive use of biomass for energy.
“The developments in the energy markets over the last months have underscored the necessity to accelerate the clean energy transition and reduce permanently our dependence on imports of natural gas,” the document states. “Diversifying supplies, frontloading renewable energy, and improving energy efficiency is the best insurance against price shocks.”
Divestment Has Its Limits
While a cascade of divestment from the Russian economy is taking its toll, according to multiple news reports, it won’t necessarily reduce fossil extraction, at least in the immediate future. Colossal fossil BP’s announced departure from Russia may just mean that it sells its 20% share in state exploration company Rosneft PJSC back to the company itself—at a huge discount, but not with any immediate effect on Rosneft’s activities. China may be all too happy to buy up Russian oil if sanctions slam the door for other buyers, Bloomberg reports, and Grist says multinational fossils may see their climate footprints increase if they trade in their Russian investments for more carbon-intensive projects in other parts of the world.
“When someone sells a fossil fuel asset, it doesn’t necessarily stop that asset from polluting. That’s why there have been arguments for holding on to carbon-intensive assets to try and steer companies to be greener,” writes Bloomberg Green columnist Kate Mackenzie.
But “the dumping of Russian-owned investments shows that sometimes the conundrum is resolved with breathtaking speed. This is because it’s actually governments who ultimately make these big decisions for companies. When sentiment really shifts, assets can be stranded very quickly.”
Seeing that dynamic play out after the Russian invasion “crystalizes the longstanding dichotomy between climate-focused investing done for ‘moral’ reasons (harming the planet is a bad thing to do) versus ‘financial’ reasons (harming the planet means less profits),” Mackenzie adds. “If investors had found their moral compasses earlier, they may have avoided losses arising from BP’s Rosneft writedown, and sent a powerful message to others, too.”
Citing last week’s devastating climate impacts and adaptation report from the Intergovernmental Panel on Climate Change, she warns that “time is running out on dirty assets from a moral perspective, not just a financial one. The space to explain away compromised investments as ‘business not politics’ is rapidly shrinking.”
(That was just a short summary of Mackenzie’s analysis, but the full column is a great read. You can find it here.)