There are a lot of people who write about climate change, energy, and geopolitical dynamics over natural resources. Few understand these issues better than Jason Bordoff and Meghan O’Sullivan, both leading academics with experience advising American Presidents.
Imagine my excitement when the two co-authored a publication in Foreign Affairs earlier this month, titled The Age of Energy Insecurity: How the Fight for Resources Is Upending Geopolitics. It’s a lengthy article with fantastic insights. To save you time, I’ve distilled down their publication into key insights for our Decarb Digest community.
The past 18 months have highlighted the intersection of geopolitics and the energy transition, revealing concrete and evident dynamics that were once seen as theoretical or hypothetical. Traditional producers of oil and gas who were facing poor returns, uncertainty about future energy demand, and pressure to divest from fossil fuels saw their power and influence increase due to the shocks of extreme weather and the world's emergence from pandemic slowdowns that boosted demand for natural gas.
This resulted in inadequate energy supplies that failed to meet demand. Russia took advantage of this by draining its European gas storage sites and slashing sales while meeting long-term contractual commitments. The average natural gas prices tripled, granting Russia a feast of annual revenues that were 50 percent higher than what the Kremlin had expected.
Moreover, the past year and a half demonstrated that some oil and gas producers were still prepared to use their energy prowess to ruthlessly advance their political and geostrategic objectives, as seen with the brutal Russian invasion of Ukraine in February 2022.
Russia gradually cut its pipeline gas deliveries to Europe by more than three-quarters, triggering a crisis that led European governments to spend a staggering 800 billion euros shielding companies and households from higher energy costs. This weakened the global response to the invasion, as Russian oil flows were initially exempt from European sanctions and Russian gas sales have still not been sanctioned (the EU still imports significant volumes of Russian liquefied natural gas).
Before the Russian invasion of Ukraine, European countries and the United States were committed to achieving net-zero carbon emissions in the coming decades. Russia's actions, funded by fossil fuel receipts, reinforced the determination among many in Europe and the United States to move away from oil, gas, and coal. However, some American officials worry now that a more accelerated energy transition will necessarily involve greater dependence on China, given its dominance of clean energy supply chains.
Such fears led Congress to create incentives (like through the Inflation Reduction Act) for the North American production, refining, and processing of critical minerals now centralized in China. These moves were then perceived as acts of U.S. protectionism by much of the world, stirring talk of climate-provoked trade wars.
The global energy system is facing significant stressors that threaten energy security in the years to come. Three main factors are driving this trend: the return of great-power rivalry, efforts to diversify supply chains, and the realities of climate change.
The confrontation between Russia and the West, exemplified by Russia's invasion of Ukraine, has shown how the ambitions of a single leader can create energy insecurity for broad swaths of the world's population.
Meanwhile, the intensifying rivalry between the United States and China is remaking supply chains and reinvigorating industrial policy. Even with efforts to produce more clean energy at home, countries such as the United States will still depend on China for critical minerals and other components, creating vulnerabilities to Chinese-induced shocks.
Climate change also poses a significant threat to energy security in the coming decades. The world is decarbonizing, and an energy system less reliant on hydrocarbons will depend more heavily on electricity. Beyond the challenges of increased electricity demand, climate change will make it harder to cool power plants, transport fuels, and rely on hydropower. Extreme weather events such as droughts will become more common, and infrastructure for electricity generation, transmission, and distribution will be vulnerable to damage.
Policymakers need to redefine the concept of energy security and develop new means of ensuring it. Four principles should guide this process: diversification, resilience, integration, and transparency. Although these principles are familiar, traditional methods of applying them will be insufficient.
Policymakers must be open to new ideas and techniques that respond to the evolving energy security landscape. For example, the energy transition could be accelerated by developing new technologies that reduce the carbon footprint of existing energy sources or by investing in energy storage technologies that enable greater use of intermittent renewable energy sources. Moreover, policymakers must be willing to embrace a more cooperative approach to energy security, recognizing that no country can achieve it alone.
Energy security was once taken for granted in a world of abundance and well-functioning global energy markets, but now policymakers must modernize their toolkits to combat new risks. This shift is central to the fight against climate change, as energy crises could derail efforts to achieve net-zero emissions.
In the past, excessive fears about energy security were thought to hinder the fight for climate change, but now the opposite is true: as the transition to a net-zero world proceeds, the bigger danger to the climate will be insufficient attention to energy security.
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