Are World Events Stalling the Global Response to Climate Change?

With rapidly increasing gas bills and record-high prices at the pump, consumers around the globe are confronting a serious energy crisis in the midst of Russia’s war with Ukraine. Europe has been hit particularly hard, as 40% of its natural gas consumption comes from Russia. The Russia-Ukraine conflict has also disrupted global supply chains, logistics, and business operations, while creating no-fly zones and interrupting freight routing. This is all in addition to previous global supply chain disruptions, due to the COVID pandemic, spurring the highest inflation rates in 40 years.  

At the same time, the United Nations’ Intergovernmental Panel on Climate Change (IPCC), just released a new report indicating that “It’s now or never” for addressing climate change. The world is on track to blow through its 1.5 degrees C warming limit (proposed by the Paris Climate Agreement), and despite a brief decline due to the pandemic, it is forecasted to surge to 3.2 degrees C (5.8 degrees F) by the end of the century. The IPCC, which was formed in 1988, releases a new assessment every few years consisting of several reports generated by three working groups. Working Group I focuses on scientific evidence for climate change; Working Group II zeros in on the impacts, regional vulnerabilities, and adaptation, while Working Group III emphasizes mitigation. The latest version of the “IPCC mitigation” report was 2,913 pages with 278 authors from 67 countries (just the Summary for Policy Makers was 64 pages). U.N. Secretary-General Guterres noted at the report’s release that “current climate pledges would mean a 14% increase in emissions, and most major emitters are not taking the steps needed to fulfill even these inadequate promises.”

So where does all this turmoil and uncertainty lead? On one hand, respected business media outlets, such as the Wall Street Journal, are publishing op-ed after op-ed, calling for the business community to question climate reporting and press pause on climate response. Yet the IPCC is telling a different story. So how should companies respond? Are world events stalling the global response to climate change?

Undoubtedly, Europe and other affected regions will have to use common sense measures to achieve energy security during this tumultuous time. Homes are heated, industries are powered, and electricity is generated by natural gas. Maintaining energy security is especially critical in the winter. Understandably, countries that have prioritized cleaner fuels in the past are now considering burning coal for a bit longer than anticipated. These types of stop-gap energy security decisions are inevitable, as finding replacements for natural gas is difficult (more difficult than replacing oil). For example, without pipelines to deliver natural gas, specific technologies are needed for storing and transporting liquefied natural gas (LNG). The delivering country or entity must first liquefy the fuel (cooling it to -126 degrees C or -260 degrees F), put it in a special tanker for transport, and then the LNG must be shipped to a specialized facility that turns it back to natural gas. With all the current disruption to Europe’s energy supply lines, immediate decisions are expected to favor energy security, while longer-term European Union (EU) energy policies are indicating a major acceleration toward renewable energy. The EU has set ambitious climate targets for being climate neutral by 2050, while reducing greenhouse gas emissions by 55% by 2030. Furthermore, the EU has pledged to cut Russian gas imports by two-thirds this year, while ceasing the purchase of fossil fuels from Russia completely by 2030. For the U.S., Russian crude oil and petroleum products represented only about 8% of all imported oil and less than 2% of the U.S. supply (prior to President Biden’s ban on imports), while the UK, which also imports 8% of its oil and 18% of its diesel from Russia, has planned to phase out dependence this year.   

Despite near-term turmoil in the global energy markets and supply chains, ABI Research takes a long view on sustainability. Companies will have a better chance of surviving and thriving in the future by ensuring their resources are managed responsibly. This includes the consumption of raw materials, water, and the reduction of carbon emissions. This is important because a “take-make-waste” economy is not sustainable, and human lives are connected to every data point in those lengthy IPCC reports. The future is also sustainable because no sovereign nation owns the sun, and no ruler can broker the wind. The International Energy Agency (IEA) has declared that solar power systems now offer “the cheapest electricity in history” with the technology being cheaper than coal and gas in most major countries (in the last decade, the cost of utility-scale photovoltaics dropped 82%, while the cost of onshore wind fell 39%). Renewable technologies can mitigate a substantial portion of the world’s warming problems; they just must be used.

Moreover, other technologies will be essential for enabling the energy transition. A system powered by clean energy is significantly different from a fossil-fuel based system. For example, wind farms, solar photovoltaic (PV) facilities, and electric vehicles (EVs) all require more minerals to build, as the IEA reports that an EV requires six times the mineral inputs of a conventional car, while an onshore wind plant requires nine times the minerals of a gas plant. As the demand for raw materials soars, the metals and mining sector will need to innovate production to keep up with exponential growth (EV sales grew by 50% in 2020. In 2021, automakers sold 6.6 million EVs, more than double the 3 million sold in 2020.) As an example of how tech can solve some of our problems with energy-transition metals, McKinsey recently announced that direct lithium extraction (DLE) and direct lithium to product (DLP) technologies were looking promising as “driving forces” for responding quickly to increased demand for this critical battery mineral.  

Finally, there are technological, geo-political, and economic challenges ahead for a more sustainable future. There are mining and metal production hurdles to overcome, and electrical grids to be transformed. Global cooperation for climate response is also more difficult during conflict. Different countries have different economic interests. There is political gridlock in the U.S., and some sectors may choose near-term profits, while deferring sustainability efforts in the fog of the turmoil. However, despite setbacks, the movement toward a more sustainable future is happening, and companies that can optimize profitability, manage resources wisely, invest in sustainable technologies, and respond to climate change will ultimately prevail.