Page 31 - bne Magazine August 2022

bne August 2022 Companies & Markets I 31
in 2022 to $2.4 trillion, driven overwhelmingly by a 12% rise in clean energy spending, investment in coal is set to grow by 10% in 2022.
At the end of June, the G7 leaders called for research into how a cap on the price of Russian oil imports might work, involving allowing oil to be shipped on tankers if the oil is priced at an agreed maximum price.
Myllyvirta told bne Intellinews that “a price cap on oil purchases from Russia could curtail revenue for Russia before the EU oil imports ban kicks in.”
Germany
As well as oil, coal is a key concern, with the IEA noting that coal investment rose by 10% in 2021 and will climb by 10% again in 2022.
Germany has been the slowest country to support a gradual ban on gas, and it is considering switching some of its shuttered coal- fired power plants back on. Its hand was forced after Gazprom cut deliveries via the Nord Stream 1 gas pipeline in June.
The German government on June 23 said that despite its decision to rely more on coal for electricity generation until 2024, it would still meet its target date for a complete coal exit of 2030.
Myllyvirta was critical of Berlin’s behaviour, saying that, “Germany has dug a hole for itself in the past years. It has not been moving fast enough in green energy and has closed down nuclear plants. It has not been paying attention to reducing its reliance on Russia gas, especially in building and industry.”
He also noted that replacing gas with coal would only work in the short term, and was uneconomic when compared to cheaper renewables.
“You will have potentially a shift within the fossil fuel consumption in the power sector where you generate a bit more from coal and bit less from gas. It seems that coal is giving the power industry a bit more flexibility to manage their quandary.”
Russia itself has also reacted by slashing environmental protection rules and softening its emissions regulations and pollution standards.
A new law will allow the construction of pipelines and roads through protected areas with no environmental reviews. The government has also delayed by two years its flagship Clean Air Project, which aims to control pollution in cities.
Politics
On a Europe level, the energy price crisis makes it more complicated to harness the support from governments and industry to push through new policies, as industry seeks to combat higher energy prices and governments worry about the political impact of higher domestic heating and power bills.
For example, the new rules for the EU’s CBAM, which aims to introduce a carbon border tax and prevent imports of cheaper steel, chemicals and such like, were recently only passed by Parliament after opposition from industry and right-of-centre parties.
Myllyvirta stressed that the CBAM targets hard-to- decarbonise sector of industry, which have large emissions, but that such mechanisms to reduce emissions come at considerable cost to industry.
“Member states want to provide those sectors with free emissions allocations, and on the other hand they want to enact the CBAM to neutralise the carbon price they face. You can’t really do both. You can’t decide not to impose the carbon price, and on the other hand to impose countervailing duties to offset the carbon price.”
Myllyvirta said that these debates were part of long-term trends towards a green transition that in fact suffers little chance of being seriously held back by the impact of the war in Ukraine and the current energy price shocks. Indeed, he argues that high prices are more closely related to the continued reliance on fossil fuels, and that wind and solar offer cheaper power generation.
“The basic point being lost is that high prices are the result of reliance on fossil. The crisis means that the faster we can get off reliance on fossil fuels the faster we are going to
“The basic point being lost is that high prices are the result of reliance on fossil. The crisis means that
the faster we can get off reliance
on fossil fuels the faster we are going to have affordable, stable and predictable energy prices”
have affordable, stable and predictable energy prices. The way that politics is could make some politicians reluctant to put through the change, or could lead to political shifts, where parties just promise cheap gasoline for everyone."
He insists that the current shock cannot derail the underlying trend that the price of renewables is falling, as fossil fuels become more and more uncompetitive, despite any short-term policy choices by government.
“This political backlash is going to try to prevent economics playing out in the energy sector. But the economics are undeniable.”
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