Net Zero Dreams Meet Energy Affordability Reality
Tsvetana Paraskova

The pushback on the net zero ambitions of many countries has become increasingly evident since the energy crisis of 2022.

The surge in energy prices, especially in Europe, has forced governments to address immediate concerns about the cost of living and high energy prices rather than gain more support for net-zero goals and policies.

Households and businesses are now much more focused on energy affordability than on clean energy. As a result, voters in the developed nations in recent months have chosen to punish the politicians during whose tenure energy prices spiked in the aftermath of the Russian invasion of Ukraine, which coincided with a rise in energy demand after the initial Covid lockdowns.  

Sustainability and adoption of policies to advance net-zero goals were dominating energy policy and decision-making until the end of 2021.

But in early 2022, the beginning of the war in Ukraine, the subsequent end of decade-old energy routes, and the spike in oil and gas prices upended the energy debate and policy.

Of the so-called energy trilemma – security, affordability, and sustainability – security and affordability became more important for policymakers and for the voters than sustainability.

The most zealous advocates of the energy transition, even the International Energy Agency (IEA), admitted that the net-zero ambitions – while not scaled back by governments – have been superseded by the issues of affordability and energy access.

“Issues of affordability and fairness have moved towards the centre of debates about clean energy transitions in many countries,” the IEA said in a World Energy Outlook Special Report on affordable and fair energy last year.

In the report, the IEA defended its current stance of a proud champion and promoter of net-zero goals and criticized those blaming the high cost of living on more clean energy being rolled out.

“When people misleadingly blame clean energy and climate policies for the recent spikes in energy prices, they are, intentionally or not, moving the spotlight away from the main cause – the major cuts that Russia made to natural gas supply,” said the IEA.

But the agency acknowledged, “That said, there is still an important debate to be had about affordability and fairness in clean energy transitions – notably in terms of how the costs and benefits will be shared.”

The benefits are mostly shared by well-to-do households in developed countries—they can afford the high upfront costs of installing heat pumps or solar panels and, generally, of electrifying their homes. On the other hand, these high upfront costs lockout low-income households, even in developed economies, out of the transition.

The costs of net-zero and greener energy are shared by everyone, but poorer countries and households feel them the most as a proportion of their disposable income.

As is, the energy transition isn’t fair, and energy isn’t a universally accessible service. There are hundreds of millions of people without any access to energy, and most of these are in Africa, Southeast Asia, and many other developing countries, which lack the funding for a step change in investments. Here’s where the developed economies are asked to step in, but they haven’t been able to agree on how exactly the rich will fund the poor for energy access and clean energy.

Fairness and affordability, as well as energy security in an increasingly polarized world, are leading the energy debate now.

Net-zero goals aren’t deferred, but they aren’t preferred, either.

In the energy trilemma, sustainability has given way to affordability and security as the more pressing issues for both policymakers and energy consumers.

Energy producers are also acknowledging that clean energy will need more time to become a profitable business than initially expected. Since the energy crisis of 2022, the big European oil and gas firms have reduced investments in low-carbon energy and pledged to boost oil and gas production, in yet another U-turn of strategic priorities.

By Tsvetana Paraskova for Oilprice.com

Tsvetana is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

oilprice.com