Articles – The Centre for Independent Studies

It’s nowhere near curtains for oil

Tom Switzer

15 June 2021 | The Australian

Great efforts are under way to decarbonise the global economy. It’s not just that Western political leaders pledge commitments to net-zero emissions by 2050 or shortly thereafter. Corporations are also investing in a green-energy future as if a carbon-free world is a fait accompli.

The trends are clear. Oil and gas companies lose shareholder battles to climate activists. Automakers plan to go electric in the next decade. And financial institutions divest their managed funds from corporations invested in fossil fuels.

However, reports of carbon’s death are greatly exaggerated. Although it seems sensible to wean the world off oil, coal and natural gas, the transition to 100 per cent renewable energy is almost certainly unrealistic. Indeed, notwithstanding the construction of new wind turbines and solar farms, the world will need fossil fuels for many more decades.

As one of the world’s most distinguished energy analysts, Daniel Yergin, argues, the shift to a net carbon-zero world “is likely to take longer, to be more expensive and to require more technical innovation than many now anticipate”.

The world depends on fossil fuels for about 80 per cent of its energy. And in the 2020s, government budgets promoting the energy transition will be constrained by the heavy debt burden accumulated in the wake of the coronavirus crisis and the world’s worst recession in seven decades.

According to the International Energy Agency, carbon emissions will increase by 5 per cent in 2021, with huge investment in coal-fired power stations across the non-OECD world.

Simply put, the policy to eliminate coal and especially oil and natural gas within three decades is not a cost-free-exercise: it would hurt nations in terms of higher costs up and down the energy chain and countless lost jobs in carbon-intensive industries.

The green lobby claims that fossil fuels are on borrowed time and that wind power and solar panels will transform the energy landscape.

But they are mistaken.

Writing in The New Map: Energy, Climate and the Clash of Nations (Penguin, 2020), Professor Yergin argues that “oil will maintain a pre-eminent position as a global commodity, still the primary fuel that makes the world go round”.

Solar and wind power still provide just a tiny share of the world’s total energy. They also struggle to replicate the reliability of oil and gas: today’s best rechargeable batteries for renewables have only a fraction of the energy density of hydrocarbons from gas and oil; so until this problem is rectified, there will always be a place for gas and oil.

As the US states of California and Texas experienced last northern summer and winter respectively, power grids became less reliable due to growing reliance on wind and solar that is not capable of providing power 24/7. As a result, it was (of all things) coal power and diesel-fuel generators that were deployed to rescue both states. It is true that renewable prices have fallen dramatically in recent times. However, as Professor Yergin argues, the supposed affordability of renewables is often due to taxpayer-subsidy programs.

Ditto electric vehicles.

None of this is to deny that the developed world has reduced its carbon footprint. Take the US: since 2005, emissions have declined by 15 per cent thanks to not just increases in solar and wind but the “shale revolution”, otherwise known as fracking, as natural gas has replaced coal as the top fuel source for electricity generation. As a result, America is not just the world’s largest oil producer, ahead of Saudi Arabia and Russia, but it is also energy independent for the first time in generations.

‘Oil will maintain a pre-eminent position as a global commodity, still the primary fuel that makes the world go round’

– Professor Daniel Yergin, energy analyst

Despite much criticism, Australia has also reduced its emissions in the past decade by investing heavily in renewables, especially solar energy.

At the same time, Australia holds the biggest reserves of high-quality coal and gas. And, as even federal Labor resources spokeswoman Madeleine King has made clear, Australia will export coal beyond 2050.

In any case, the declining emissions of the developed world are likely to be dwarfed by the increasing emissions of the non-OECD world. These nations account for about 65 per cent of annual global emissions, as they try to grow their economies, reduce poverty and raise living standards.

These poorer nations, moreover, won’t decarbonise unless richer ones pay them huge sums. The amount the UN Green Climate Fund requests is a whopping $129bn a year, every year. But the money plainly does not exist. Nor is there a mechanism that compels the poor nations to cut their emissions in a legally binding, enforceable and verifiable manner.

Xi Jinping has pledged that China will go carbon-neutral by 2060. Yet that has not stopped China, which accounts for nearly a third of global emissions, from approving coal-fired power plants and supporting fossil-fuel projects through Beijing’s signature global infrastructure-building program, known as the Belt and Road.

It is true China dominates the production of clean energy goods, including solar panels. But that should not disguise the fact that China is addicted to coal.

According to Carbon Brief, in 2019 58 per cent of China’s energy use came from coal. And according to research group Urgewald, China accounts for the world’s largest fleet of new coal-fired power plants and burns half the world’s coal. The point here is that although Western enthusiasts for green energy remain committed to a zero-emissions future, fossil fuels still have a long shelf life, especially among poorer nations.

Print Friendly, PDF & Email