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The International Energy Agency (IEA) has secured new mandates
to promote a net-zero transition to counter climate change, with
minerals and metals critical to the transition highlighted as an
area of focus.
The development comes amid mounting concerns from government
officials and business executives that countries are pursuing
policies that will push up demand for fossil fuels when dealing
with potential energy supply shortages in the fallout of
Russia-Ukraine war.
Founded by some Organisation for Economic Co-operation and
Development members during the 1973-1974 oil crisis, the IEA was
officially tasked with securing energy supplies, even though its
research areas expanded to cover the low-carbon transition in
recent years.
After a ministerial meeting 23-24 March, the Paris-based
organization's 31 member states said in a joint communique: "In
addition to ensuring global energy security, the IEA has a new
guiding principle: supporting countries in the global effort to
attain net-zero greenhouse gas emissions in the energy sector by
mid-century.
"Recent volatility in markets has placed a burden on consumers
at a critical moment of economic recovery. However, we resolve to
accelerate clean energy transitions as a lasting solution to
prevent energy price spikes, such as the recent ones, and to ensure
sufficient affordable energy supply," the communique added.
In a press briefing, Executive Director Fatih Birol said the IEA
is taking on the new task as energy policymakers face "a turning
point … in the history."
"I believe the fight against climate change shouldn't be a
victim of Russia's invasion … We have to make sure that the energy
security concerns that all the countries have today should be an
additional driver to reach our clean energy goals," said Birol,
adding that the IEA will help countries develop net-zero
roadmaps.
Member states agreed to add another €20 million ($22 million) to
the funding for the Clean Energy Transitions
Programme, which focuses on green energy investments in
emerging economies.
To promote the energy transition, the IEA will have new mandates
that include finding ways to ensure the "availability, security and
responsible sourcing" of critical materials like lithium, cobalt,
copper, nickel, and rare earth used in batteries and renewable
equipment, according to the communique.
In a study published in May 2021,
the IEA said the average amount of minerals needed for a new unit
of power generation capacity had increased by 50% since 2010 amid
renewables expansion.
"In the context of clean energy transitions, inadequate mineral
supply could result in more expensive, delayed or less efficient
transitions. Given the urgency of reducing emissions, this is a
possibility that the world can ill afford," the report said.
US Energy Secretary Jennifer Granholm, who chaired the
ministerial meeting, said a supply chain bottleneck for critical
material will hamper the low-carbon transition. The IEA will make
sure that "we've got those critical minerals that are sustainably
extracted and processed," she added.
Dependence on fossil fuels
But the IEA's more immediate task is to mitigate potential
energy supply shortages, with disruptions of oil, coal, and natural
gas flows from Russia, one of the world's largest exporters of the
fossil fuels,
Earlier this month, the organization proposed 10 energy
conservation ideas that could reduce crude oil demand by 2.7 million barrels per day
(b/d), including more car sharing and lower speed limits on
highways.
Separately, IEA member states have released 61.7 million barrels
from their emergency oil stocks to
the market, the largest release in the IEA's history.
At the country level, however, some national policies designed
to counter high energy prices and low supply could result in higher
GHG emissions.
Some European nations, including Germany, are considering more coal power generation to
reduce their reliance on Russian gas. In the UK, the government has
cut the fuel duty by 5 pence per liter.
On the supply side, US crude production will increase from 11.6
million b/d in December to an average of 12 million b/d this year
before a further hike to a record 13 million b/d in 2022, according
to the Energy Information Administration. LNG
exports are expected to average 11.3 billion cubic feet per day
this year, a 16% increase from 2021, with record flows to
Europe.
"We do what we can to increase supply, so that those who have
been very reliant on Russian fossil fuels have other places to turn
to," Granholm said.
But UN Secretary General António Guterres suggested countries'
fossil fuels-friendly policies might not be reversed even when the
crisis eases, putting the world on track to climate disasters later
this century.
"As major economies pursue an all-of-the-above strategy to
replace Russian fossil fuels, short-term measures might create
long-term fossil fuel dependence," Guterres said in a web forum earlier this
week.
"Countries could become so consumed by the immediate fossil fuel
supply gap that they neglect or [renegade on] policies to cut
fossil fuel use. This is madness.
"Addiction to fossil fuels is mutually assured destruction, as
current events made all too clear our continued reliance on fossil
fuels puts the global economy and the energy security at the mercy
of geopolitical shocks and crisis."
Some from the private sector suggested governments should seek
to facilitate more low-carbon investments rather than fill the
supply gap with fossil fuels.
"Wasting what will surely be billions in alternative fossil fuel
supplies by prospecting new sources, re-opening uneconomic oil and
gas fields or coal mines, fracking, or re-commissioning decrepit
nuclear plants is as mad as burning dollar bills," said Michael
Jansen, founder and CEO of US-based tech firm Cityzenith.
"These were on the way out anyway as cleantech leaps ahead, so
we would never recover that short-term outlay; it could be invested
instead in energy transition technologies," he added.
Nigel Green, CEO of financial advisory deVere Group, said green
energy should remain investment focus despite the current
geopolitical crisis.
"We are in extraordinary times, but these do not last
forever—as financial history teaches us—and investments
should remain future-focused," he said. "Climate change remains the
greatest risk to economies and communities around the world—and
there are major opportunities and high rewards for those who invest
in a more sustainable future."
"A flip side"
Some officials from IEA member states believe countries can
produce more fossil fuels while concurrently developing emissions
abatement technologies.
"I think there's always concern about increasing infrastructure
that would lock in problems related to greenhouse gas emissions.
But there is also a flip side," Granholm said. "This accelerates
the movement towards technologies like carbon capture and
sequestration."
Angus Taylor, Australia's Minister for Industry, Energy and
Emissions Reduction, suggested that governments and
the private sector can work together to increase the deployment of
low-carbon technologies.
"Along with securing supplies of gas and oil, low emissions
technologies are essential to long-term energy security and are the
cornerstone of practical emissions reduction strategies," he said.
"An acceleration in the deployment of low emissions technology will
only be achieved by driving the costs of these technologies
down."
Posted 24 March 2022 by Max Tingyao Lin, Principal Journalist, Climate and Sustainability
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.