The energy transition will be more difficult, costly, and complicated than expected, according to energy experts.
In the March-April issue of Foreign Affairs, in an article penned by Daniel Yergin, vice-chairman, S&P Global; Peter Orszag, chief executive officer and chairman, Lazard; and Atul Arya, chief energy strategist, S&P Global, the authors argue that it is time to reconsider priorities, policies, and investments in light of today's complex realities.
“What is becoming clear is that the shift in the global energy system will not unfold in a linear or steady manner,” Yergin, Orszag, and Arya write. “Rather, it will be multidimensional—unfolding differently in different parts of the world, at different rates, with different mixes of fuels and tech-nologies, subject to competing priorities and shaped by governments and companies establishing their own paths.”
They assert that the energy transition has not unfolded as many anticipated and will not do so. The significant, albeit temporary, drops in energy demand and carbon emissions during the COVID-19 pandemic led many to mistakenly believe that a swift and singular transformation of the global energy system was achievable.
“This ambition, however, has collided with the magnitude and the practical constraints of completely overhauling the energy foundations of a $115 trillion global economy in a quarter century,” according to the authors.
The world is far from on track to achieve the often-stated target of reaching net-zero emissions by 2050, and there is no clear plan for delivering the massive investment that would be required to do so, the authors said.
“Part of the problem is the sheer cost: many trillions of dollars, with great uncertainty as to who is to pay for it. Part of the problem is the failure to appreciate that climate goals do not exist in a vacuum. They coexist with other objectives—from GDP growth and economic development to energy security and reducing local pollution—and are complicated by rising global tensions, both East-West and North-South,” Yergin, Orszag, and Arya write. “And part of the problem is how policymakers, business leaders, analysts and activists expected the transition to go, and how plans were shaped accordingly.”
“A new North-South divide has emerged on how to balance climate priorities with the need for economic development. This is a key factor behind rethinking the pace and shape of the energy transition,” the authors wrote.
They continued that the path forward will require significant tradeoffs and a more pragmatic approach—one that considers a multitude of factors such as the need for economic growth, energy security, and energy access.
“The first step in this rethinking is understanding why the key assumptions behind the [energy] transition have fallen short,” they said. “That means grappling with the geo-political, economic, political, and material tradeoffs and constraints rather than wishing them away.”