Page 20 - bneMag April 2022 Russia living with sanctions

20 I Companies & Markets bne April 2022
mobilising green investment, suggesting that it would easily fail to keep up the pace required to meet 2050 targets.
Coal’s return
There have been hints from governments and companies that coal could be the fuel to replace gas immediately.
The IEA admitted that coal could be used to displace large volumes of gas relatively quickly, even if it was costly.
Poland, for example, had banked on gas to replace coal as it advanced its coal phase-out. Poland plans to reduce coal’s share in the mix to no more than 28% by 2040 and zero by 2049. Any efforts to cut imports of gas would mean Poland would need to rethink its reliance on the fuel, with coal, nuclear and imported LNG and pipeline gas all possible replacements.
"If we want to do that in the short term, we're going to have to reconsider the plans we forged in the past. Looking at Poland's current legislative situation, it's pushing us very clearly towards more consumption of gas," Polish Climate Minister Adam Guibourge-Czetwertynski told a meeting
of EU environment ministers in Brussels, Reuters reported.
"We're looking at that again to see how we can reduce our dependence on gas during this transitional period."
Coal has strong advocates in Poland. “We have to start a real reactivation of coal extraction in Poland,” said former Polish Economy Minister Jerzy Markowski.
However, EU Green Deal Commissioner Frans Timmermans said earlier in March that although it might make sense for coal-dependent states such as like Poland and Germany
to keep burning coal for longer, rather than switching to natural gas before converting to renewable energy, it would be “an incredibly stupid choice” to open new mines.
RWE has also warned that coal was still an option, and that coal generation could replace Russian gas
CEO Markus Krebber said that decommissioned coal plants could be upgraded to reserve status, worth a total of 3.5 GW, of in order to maintain security of energy supply in the winter of 2022-23 and in the following years.
Indeed, the state secretary at the German climate ministry, Patrick Graichen, said this week that Russian aggression on Ukraine has broken the narrative of gas as "a bridging technology," which means that more coal could be burned in the short term.
Yet any role for coal would risk slowing down the pace of change required to boost renewables, reduce fossil fuel consumption and pare back emissions growth in the coming years.
Elsewhere, Belgium could extend the working lives of some its nuclear reactors by 10 years from 2025, alongside an increase in offshore wind and solar.
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Economic effect
Emissions could also suffer as global attention moves from the green agenda towards stemming economic decline and dealing with geopolitics and security in a bid to end the war in Ukraine.
For example, Oxford Economics cut its GDP forecasts for CEE countries by an average of 1 percentage point (pp) for 2022 and 0.5pp for 2023.
Meanwhile, the OECD warned that the war will have major economic and social consequences on its members, although it offered hope by suggesting that boosting green energy and diversifying away from Russian fossil fuels was needed to soften the blow.
It added higher LNG imports and nuclear power to its list of alternative energy sources, alongside renewables and bioenergy, again spelling bad news for climate change and emissions reduction.
EU targets
The EU has moved more cautiously than governments, and has as yet failed to adopt any EU-wide energy sanctions on the US or UK model, instead setting targets to reduce imports via demand reduction. Member state themselves, especially in Central and Eastern Europe, are divided on sanctions.
Before the war, the EU had instead set a target of ending dependence on Russian gas by 2030 by reducing imports of Russian gas by 100bn cubic metres per year – or two thirds of current imports.
However, in response to the war the EU on March 8 that it would raise this figure to 155 bcm via its REPowerEU programme, with the first 100 bcm of this being achieved in 2022.
However, it is open to question whether the EU would able to meet these aspirations, with the IEA saying only 50 bcm of Russian gas can be replaced in 2022, rather than the EU’s 100 bcm.
Part of the EU’s plans are eminently achievable, while others are more ambitious, according to the Oxford Institute of Energy Studies (OEIS).
The LNG and pipeline to replace 63.5 bcm of Russian gas is available, the OIES said, with cargoes redirecting from Asia to Europe, although European prices would need to remain high to attract such cargoes.
However, proposed 38 bcm reductions in gas demand, although feasible on paper, would be challenging.
A long list of policy reforms, good availability of wind and hydro, a warm winter and more coal nuclear would all be needed for any target to be met.