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CERAWeek 2022: Kerry says energy market disruption will affect global net-zero plans

07 March 2022 Amena Saiyid

US Special Presidential Envoy for Climate John Kerry began CERAWeek 2022 by S&P Global with acknowledging that the current global energy market disruption caused by the Russian invasion of Ukraine could throw countries off their goal to achieve net-zero carbon levels by 2050.

Citing the UN's September 2021 report, Kerry said on 7 March at the conference in Houston the world is on a pathway to achieve global warming of 2.7 degrees Celsius instead of the 1.5 degrees-target that the Paris Agreement sought, and the Glasgow Pact affirmed at the conclusion of the COP26 meeting in November.

At COP26, countries representing 65% of global GDP came out with plans to reach net-zero levels by 2050 in Glasgow, and 90% of GDP is now represented by nations with some type of net-zero plan. The International Energy Agency estimated that these plans if fully realized would result in a global warming of 1.8 degrees Celsius.

But that was before the invasion of Ukraine pushed oil prices above $120 per barrel with natural gas prices reaching record highs.

"Because of the disruption, we don't quite know where we come out next year," Kerry said in a discussion with S&P Global Vice Chairman Daniel Yergin.

He acknowledged that "gas will be key component of energy transition, not unabated gas though" during the energy transition from fossil fuels to renewables, especially in African countries.

Noting that "we're such a litigious society," Kerry said in the US transmission lines and pipelines have to be laid out to move the energy transition forward.

It's not just the African continent that is dependent on gas for lowering its carbon footprint.

At the COP26 meeting, European Commission Executive Vice President Frans Timmermans said natural gas would play a key role in helping wean some of the bloc member countries from dependence on coal.

Oil and gas still needed

In a separate discussion on energy transition at CERAWeek, Hess Corporation CEO John Hess cited the IEA Net-Zero by 2050 report that said a net-zero future will require oil and gas investments of $450 billion a year for the next 10 years to stay on track.

ExxonMobil CEO Darren Woods said the world cannot rely on renewables alone, agreeing with Daniel Yergin, who also serves as CERAWeek Chair, that the company is "more about molecules than electrons." This suggests Woods believes the company's future is cleaner fossil fuels, rather than renewable power. It will need solutions like carbon capture and storage, biofuels as well as hydrogen, Woods added.

He pointed to the company's recently announced plans to produce up to 1 billion cubic feet per day of blue hydrogen—hydrogen produced from the steam reformation process of natural gas that also is equipped with carbon capture and storage.

Woods said the problem does not lie with the oil and gas sector that is responsible for providing the products that people use everyday from cars and cell phones. The problem lies with the combustion of the fossil fuel products that needs to be addressed, he added.

Kerry warned that the energy markets would be turbulent for a while, "and we will have to live with it."

Posted 07 March 2022 by Amena Saiyid, Senior Climate and Energy Research Analyst

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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