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- A clear transition plan is needed so investors can avoid wild volatility in global energy markets, says Bassam Fattouh
RIYADH: COP26 organizers need to work towards a “just transition” away from hydrocarbon products towards new energy sources, or risk a “reallocation” of global wealth, a leading energy think-tank consultant told Arab News.
Bassam Fattouh, director of the UK-based Oxford Institute for Energy Studies, said: “The ‘Just Transition’ will be an important topic. Leaders from emerging economies will be keen to emphasize the different economic and energy starting points for their countries, and the need for this to be taken into account as decarbonisation targets are set.
“Financing will also be an important part of this debate, as developing countries are expecting developed countries to make a significant contribution (or at least to meet their $100bn pledge),” he added.
Radical policies on climate change could lead to a reallocation of global wealth, Fattouh said. “Oil and gas exporting countries are expected to experience a decline in their incomes and their wealth as the demand for their key export products is projected to fall.”
Fattouh was taking part in a survey of leading energy experts organized by Arab New ahead of the Glasgow meeting and G20 talks on climate in Italy that ended in late October.
He called for a clear plan for advancing the energy transition that could guide investors amid wild volatility in global energy markets, with prices of fossil fuels like gas and coal at all-time highs.
“The key issue will be whether a concrete plan for progressing the energy transition can be agreed which can give companies across the energy value chain some confidence in how they should be investing. Clear policies and firm commitments are needed,” he said.
Many countries would give commitments to achieve carbon neutrality, Fattouh said, but this might not be enough to stabilize energy markets.
“The short-term question of high energy prices at present could also overwhelm other topics if countries start to discuss security of supply concerns and the economic implications of the energy transition,” he said.
A division has emerged between different countries setting either 2050 or 2060 as the deadline for net zero, raising the prospect of a two-tier global energy economy.
Saudi Arabia recently opted for a 2060 date as part of its “green initiative”.
“I think that ‘laggard’ countries will be making a robust case for why they are moving more slowly and will also argue that there is more than one way to meet climate goals. There will be a strong case made for a technology-neutral approach and for allowing all routes to lower CO2 emissions to be explored.
“Commitments to net zero may be made, but I suspect that the time horizons will be beyond 2050. For example, India is talking about 2070 and of course, China has chosen 2060,” Fattouh said.
“In particular, countries that rely heavily on the hydrocarbon sector as the main source of their income and export revenues will have to undergo much deeper adjustments and transformations to reduce their emissions when compared to more diversified economies,” he said.
“This unevenness also applies to the ability to undertake these adjustments. This is the case even within the group of oil and gas exporters, where some are in a better position to cope with the challenges of reducing greenhouse gas emissions and investing in low carbon technologies” he added.