As the world struggles to adjust to the harsh new reality of Russia’s invasion of Ukraine, the most recent instalment of the Sixth IPCC Report slipped out almost unnoticed. And that is worrying, since the assessment in this section of the Report is even starker than previous assessments – noting in particular that in order to avoid global temperatures increasing by greater than 1.5 degrees C above preindustrial levels, the world needs to halve its emissions this decade: a reduction that the world does not currently appear to be remotely on course to do.
However, whilst the IPCC Report and the Russian invasion of Ukraine are not linked, Russian aggression in Ukraine may serve as a catalyst to speed up the European energy transition and accelerate its retreat from dependency on Russian gas and exposure to volatile international oil markets, which could in turn deliver a more rapid reduction in European emissions. In the process, perhaps setting the world on a path to achieving an outcome that currently seems unattainable.
What is the IPCC Report?
The Intergovernmental Panel on Climate Change (IPCC) is a panel of the world’s leading climate scientists. The Panel publishes regular updates of global knowledge on the climate crisis. These updates are designed to aid government policymaking. The updates are so comprehensive that each one takes between five to seven years to complete. The current Report is the Panel’s Sixth Report since its establishment in 1988, and commentators have noted it may be the last to be published while there is still some chance of avoiding the worst impacts from climate change.
This Sixth Report is being released in four parts between August 2021 to October 2022. The first part examined the physical basis of climate science (how the atmosphere is changing – and will change – and whether human influence is responsible). The second part, which was released on 28 February, assesses the effects of climate change, such as extreme weather, droughts, floods and temperature rises, and how best to adapt to these changes[i].
What does the Second Part Say?
The conclusions of the most recent instalment of the Sixth Report make for sobering reading:
- The risks associated with lower levels of warming are greater than the previous 2014 IPCC adaptation assessment had concluded;
- The window to adapt to climate change is “brief and rapidly closing”;
- The impacts on human systems, natural systems, and ecosystems are more widespread and accelerating;
- Ecosystems are reaching the limits of their ability to adapt to the changing climate, and the effectiveness of adaptation will decrease with increasing warming;
- Some losses are already irreversible;
- Sea-level rise is already inevitable, posing an existential threat for some small islands and increased vulnerability for infrastructure, including ports and energy systems;
- Up to 1bn people could be at risk from coastal flooding by 2060;
- Half the world’s population live in areas that are “highly vulnerable” to climate change;
- Even at 1.5 degrees or less, 8% of current farmland will become unproductive.
Given that the world has already warmed by 1.1 degrees since the pre-industrial period and that there is a lag in the world’s climate response to emissions, it is likely that the world will warm by 1.5 degrees within 20 years, even if deep greenhouse gas emissions cuts are achieved. As was said repeatedly at COP26, this decade is the decisive one: emissions must halve by 2030 for the world to have any chance of staying below 1.5 degrees of warming.
Failure to restrict global warming to below 1.5 degrees would trigger a catastrophic chain reaction of melting ice caps and glaciers; increasing wildfires and tree die-off; accelerating peatland dry-out and permafrost thaw – all of which would release additional carbon emissions further accelerating global warming.
The Report identifies five areas as priorities for future climate adaptation. One of those areas is the reform of energy systems, where the Report makes a number of recommendations:
- Energy generation diversification.
- Improved demand-side management through better storage, and energy efficiency.
- Climate responsive energy markets, smart-grids, robust transmission systems, and improved supply-deficits response capacity.
So How is the Russia-Ukraine Crisis Relevant?
A Commission Communication (“Joint European Action on Affordable, Secure and Sustainable Energy”) was due for release on 2 March; however, the Commission has announced a delay to the publication in order to revise it in light of the Ukraine crisis. A leaked draft of the original Communication set out a number of recommendations that were very closely aligned to the IPCC Report recommendations set out above – though the Communication’s conclusions were motivated as much by geopolitical and economic, as climate change factors.
It is likely that Putin’s aggression in Ukraine will shift the focus of the redrafted Communication to an accelerated switch to renewables, which would also help deliver against the IPCC Report’s demands. In his twitter feed, Commission Vice President Timmermans noted on 28 February: “It’s time we tackle our own vulnerabilities. Let’s now dash into renewables at lightning speed. Our own, clean, cheap, endless energy. The faster we move, the sooner we reduce dependency on others, the stronger we stand together.”
Whilst it is far from the only document setting out the EU’s path to its 2050 Net Zero goal and notwithstanding forthcoming changes, it is still instructive to look at the initial draft of the Communication, which clearly indicates the direction of the EU’s travel away from dependence on Russian gas and towards renewables.
The EU depends on Russian gas for 40% of its energy needs and had recognised its urgent need to reduce this dependency, even before the Russian invasion of Ukraine. The draft Communication stated: “The EU remains highly dependent on energy imports for power generation and heating. This is the case in particular as regards gas, where we rely on imports for 90% of our consumption… This dependency has aggravated the current situation of high energy prices.”
Even before the Ukraine crisis, the draft Communication was crystal clear on the dangers of European “dependence on a single supplier of fossil gas” demanding “diversification of gas supply and using the full potential of green and low carbon energy sources” including increasing the use of LNG to “reduce our dependence on imported Russian gas and strengthen security of supply.”
The draft Communication argued that “[s]ustained high energy prices are impacting the entire economy…. [H]igher gas prices…make investment in renewable clean energy even more profitable,” which means the “need for a rapid clean energy transition has never been stronger and clearer,” with higher gas prices shortening the “payback time of investing in the transition away from volatile fossil fuels and towards more affordable renewable energy technologies…reducing dependency on imports and driving down prices.”
The draft Communication built on this conclusion to focus on the importance of energy diversification. Mirroring the IPCC Report’s conclusions, the draft Communication made a number of recommendations about how to increase the use of solar power and promote increased production of biomass and hydrogen. The text argued that rapidly increasing the capacity for renewable electricity generation “is key for our energy transition to decarbonisation by 2050” and as “the vehicle for electrification of end-use sectors and the production of renewable hydrogen,” adding that diversification is the most effective means of reducing the continent’s over-dependence on Russian gas.
The draft Communication proposed a number of demand-side responses, including improving energy efficiency; the removal of regulatory barriers; and the acceleration of investment in gas storage. The motivation may be different – “to make Europe less vulnerable to fluctuations on the fossil fuel markets” – but the sense of urgency is the same “as soon as possible.”
Once again, mirroring the IPCC’s conclusions, the draft Communication proposed an “ambitious combination of funding and regulatory measures [to] accelerate the green transition.” Although it does not feature in the original Communication, it would not be a surprise to see the amended version place an expanded role for nuclear power as a green alternative back on the agenda again – not least given the recent announcement by the German Government that they would consider postponing the decommissioning of German nuclear reactors as part of the national response to the Russia-Ukraine crisis.
Although perhaps reached for different reasons, the conclusions of the IPCC Report and the Commission are identical: an accelerated shift away from dependence on hydrocarbons for energy and an increased focus on the rapid deployment of renewable energy is essential. For the EU, the shift is necessary not only for climate change reasons, but also for its long-term political, economic and social well-being.
The EU was already heading down the renewables path: the Russian invasion of Ukraine will accelerate that process in the medium- to long-term and will force the EU to seek other sources of natural gas in the short-term. The process of seeking new sources of gas will have an impact on global gas prices, which will in turn further accelerate the global shift to an increasing reliance on renewable energy.
No one should be under any illusion that the energy transition will be rapid, pain-free, or easy, but the EU’s experience with dependence on Russian gas demonstrates clearly one of the real geopolitical vulnerabilities of continuing to rely on the existing model.
Covington’s mixed teams of regulatory and public policy experts are uniquely placed to advise clients on how to navigate the turbulent geopolitics of international relations and their impact on the energy transition.
We would be happy to discuss with you how these complicated inter-relationships may affect your company and your business.
[i] The report of the third working group, which will examine how to cut emissions, will be released at the end of the second quarter. The fourth and final working group report, which will form a synthesis of the conclusions of the other three working groups’ reports, will be released in October, before COP27 – which is due to take place in November 2022.