Weekly Dose of ESG — Energy Pickle Continued
Energy Pickle — Continued
Friday, 12th March 2022
What is going on?
The war in Ukraine has revealed Europe’s fragile energy security and the need for energy independence. With over 40% of Europe’s gas imports coming from Russia, our heating can now be tied to financing the Russian military activities. To put matters into perspective, the EU is currently paying Russia about $118 million a day for gas trades.
If you have been following our newsletter for a while, you might remember that we highlighted the worsening energy situation in the Self-Inflicted Pickle piece in September 2021. As of now, we are further down the energy rabbit hole than ever before. Energy demand is soaring due to the post-pandemic economic recovery. Previously, the increased demand would be addressed by additional coal-burning but coal is now being replaced by gas as a cleaner alternative. Russia, aware of its geopolitical energy power, tightened the flow of gas to Europe by a quarter in the months prior to the Ukraine invasion, leading to gas prices rising even further. As such, European consumers are currently getting a taste of what the fossil fuel phase-out will do to their wallets as many received letters from the energy providers announcing the increase in energy tariffs.
Why does it have to do with sustainability?
Russia’s ability to wage this war is linked to its profits from oil, coal and gas. So European countries are trying to kill two birds with one stone and decrease dependency on Russian fossil fuels to:
1. Stop funding Putin’s aggression
2. Accelerate green energy transition
Indeed, Ursula von der Leyen the president of the European Commission stated that “We are determined to limit Putin’s capacity to finance his atrocious war”. However, some things are easier said than done and Europe’s move away from Russian fossil fuels is one of the trickier cases. In the near term, the complete ban of Russian commodities is unrealistic as Europe’s key energy policy choices in the past decade intertwined the continent with Russia even further. Yes, we are speaking of building a gas pipeline Nord Stream 2 rather than directing that capital to nuclear or hydrogen energy facilities. Germany’s economy minister acknowledged that the country is likely to burn more coal, given the war and rising gas prices. A bizarre place to be, given the net-zero commitments countries so proudly paraded only a few months ago at the COP26 conference.
What needs to be done next?
Just as climate crisis, energy is a matter of national emergency and Europe needs to quickly review the energy policy of the block. Germany as the key player needs to do a rapid U-turn on years of anti-nuclear policy based on emotions rather than academic evidence. They need to do it for the sake of the European continent as in the short-term the energy question boils down to nuclear versus Russian gas.
We loved an open letter to Financial Times from one professor at Oxford University that shared our sentiment on the topic:
“Given the objectively outstanding safety record of nuclear power, this fear (of nuclear) is irrational. Fear of nuclear power accelerated climate change because it ended the planned expansion of nuclear power to replace coal-fired power stations 40 years ago … Continuing to indulge this fear increases the risk of catastrophic climate change.”
See you next week!
Paula & Philipp
