A case for inclusion, equity, justice in energy transition drive

Nigeria and other African countries recently raised concerns about the essence of equity, justice, and inclusion if investments in fossils are being sustained in wealthier countries, while pushing for a ban on gas investments in developing nations as the global community approaches the net-zero emission target of 2050. Though the world seeks a near-emission free world by 2050, the path to such aspirations leaves many developing countries behind and poorer if inclusion and equitable transition is not considered. FEMI ADEKOYA writes.

In its latest monthly oil report, the International Energy Agency (IEA) called on OPEC+ to increase production in order to counter higher demand in 2022.

The agency claimed that, based on current global economic growth expectations, demand for crude oil and petroleum products will be reaching pre-COVID levels by 2022. The Paris-based energy watchdog, which has come under fire after its shocking Net-Zero by 2050 report called for no more investments in oil and gas, stated that “OPEC+ needs to open the taps to keep the world oil markets adequately supplied”.

At the same time, the IEA has also reiterated that market realities are at odds with its proposed strategies to reach net zero-emission levels by 2050.

Indeed, a new report revealed that the G7 countries – the UK, US, Canada, Italy, France, Germany and Japan— committed $189bn to support oil, coal and gas between January 2020 and March 2021.

In comparison, the same countries spent $147bn on clean forms of energy.

The support for fossil fuels from seven of the world’s richest nations included measures to remove or downgrade environmental regulations as well as direct funding of oil, gas and coal.

The analysis from the development charity Tearfund, the International Institute for Sustainable Development and the Overseas Development Institute showed that the nations missed opportunities to make their response to the pandemic greener.

In most cases, money provided for fossil fuel industries was given with no strings attached, rather than with conditions requiring a reduction in emissions or pollution. The analysis found that eight in every 10 dollars spent on non-renewable energy came without conditions.

This included lifelines that were thrown to the aviation and car industries, which received $115bn from the G7 countries. Of that money, 80% was given with no attempt to force the sectors to cut their emissions in return for the support.

Only one in every 10 dollars committed to the Covid-19 response benefited the “cleanest” energies such as renewables and energy efficiency measures.

The present reality informed the decision by Nigeria and other African oil producers to renegotiate the terms of the Paris deal.

Vice President Yemi Osinbajo, in his keynote speech at the 7th yearly New York-based Columbia University Global Energy Summit organized by the Columbia Centre on Global Energy Policy, said: “the global energy transition must be inclusive, equitable and just, considering the different realities of various economies and accommodating various pathways to net-zero by 2050.

“Nigeria and countries across Africa are committed to a net-zero future, especially given their vulnerability to the adverse effects of climate change, and all have expressed commitment to their national development contributions under the Paris Agreement, however greater support in developing and implementing robust energy transition plans is needed.

“Clearly the Continent will require an unprecedented scale of investments. An energy mix compatible with a 1.5°C pathway would require $40 billion to flow into Sub-Saharan Africa annually; a fourfold increase compared to the $10 billion invested in 2018.”

The VP submitted “that a just energy transition for developing economies is central to the right to sustainable development and poverty eradication as enshrined in relevant global treaties including the Paris Agreement.

He then added with concern “that globally, we are seeing wealthier nations and institutions banning all public investments in fossil, including natural gas. Examples include the European Union (EU), the United Kingdom (UK) and Denmark to name a few, as well as specific institutions such as the Swedfund from Sweden, CDC from the UK, the European Investment Bank, and the Investment Fund for Developing Countries from Denmark.”

In a clear advocacy for a fairer approach, the VP said, “an inclusive and equitable transition will also take into account the principles of common but differentiated responsibility and leaving no one behind, that are enshrined into global treaties around sustainable development and climate action.”

In his argument, the Director/Chief Executive Officer of the Department of Petroleum Resources (DPR), Sarki Auwalu, attributed the energy transition debate to energy politics by developed countries.

He said: “The developed nations used brown energy to develop. They are the highest consumers of fossil fuel as we speak. But I can tell you confidently that oil would remain relevant for more than 50 years to come and everybody knows that.

“Africa in particular needs fossil fuel to develop. There is no industrialised nation in the world today that developed with renewable energy because renewable energy will only be developed with non-renewable means. What that means is that we should work towards diversifying our energy mix. You have to diversify the energy, use more gas, use the oil, that is crude oil, because we need to refine.

“If you want to build an electric car, you only get polyethylene, polypropylene, all the polymers from the refinery, you can’t get it from gas”.

Making a case for justice, social justice, and fairness, Osinbajo said “what is often not sufficiently considered in thinking through the transition to net-zero emissions is the critical role that energy, in our case, gas plays in catalyzing economic development and supporting people’s health and livelihoods, especially in poorer countries.

“Natural gas is currently used for industry, fertilizer manufacturing, and cooking – which are more difficult to transition than power generation.”

On the access element of the energy transition, the Vice President explained that “it must be linked with the emission reduction aspect.”

He noted that “pathways to reaching net-zero by 2050 have to include first ending energy poverty by 2030. If energy access issues are left unaddressed, we will continue to see growing energy demand being addressed with high polluting and deforesting fuels such as diesel, kerosene, and firewood.

Betting on the long-term business case
Despite setbacks in volatile markets and oversupply risks, there is still a lot of money to be made from extracting, producing and selling hydrocarbons. Demand for coal has plateaued, but oil and gas demand is predicted to rise at least for the next 15 to 20 years, particularly in emerging economies such as China and India.

This puts G7 leaders in an awkward position. On the one hand, governments need to reboot economic growth after the pandemic slowdown – a profitable energy sector nourished by rising demand abroad is welcome, even though hydrocarbon extraction can be especially polluting in developing countries.

Governmental support for the industry in the form of subsidies or tax breaks artificially inflates the profitability of fossil fuels, in turn making renewables a less attractive investment. Put simply, it is less risky and more profitable to – at least for now – invest in oil and gas.

Indeed, the Society of Petroleum Engineers (SPE) said that there are still opportunities for the profitable development of the country’s oil and gas sector notwithstanding the emerging energy transition.

According to the Chairman, SPE, Tunji Akinwunmi, there are lots of capacities for adaptation. He noted that there is still huge headroom for the nation’s hydrocarbon resources as fossil fuel remains the energy choice for transportation, aviation and feedstock for petrochemicals.

“The oil and gas industry is still vibrant and there is indeed a transformation that is underway where there is a movement from fossils to renewables. The huge contributor to energy as per current demand is from fossil fuels. As long as we have good policies in place that will add value to the upstream oil and gas sector, there is a scope for continued oil and gas development,” the SPE said.

On its part, the Organisation of the Petroleum Exporting Countries (OPEC) noted that Africa is in a fragile position, adding that the inequalities that were already in place before the pandemic are now in danger of being amplified.

OPEC Secretary-General, Mohammad Sanusi Barkindo, at the 1st high-level meeting of the OPEC-Africa energy dialogue, stated that with energy poverty in the continent, COVID-19 also serves as a vivid reminder of the need for deeper cooperation to prioritize energy access, to strengthen community resilience and to be able to use global energy resources to support the continent’s developmental aspirations and economic growth.

“Thus, going forward, OPEC will continue to advocate a balanced and inclusive energy transition that promotes all energy sources and prioritizes the investment needs of Africa”, he said.

Barkindo also noted that one major issue looming in the long-term horizon is the lack of adequate industry investment.

According to OPEC’s latest assessments, upstream capital spending is estimated to have fallen in 2020 by a staggering 30 per cent or more.

“Our 2020 World Oil Outlook estimates that $12.6 trillion will be required between now and 2045 in the upstream, midstream and downstream. We must continue to advocate a turnaround in this very upsetting trend. The very future of our industry is at stake. The fact is that oil and gas will continue to be a vital part of the energy needs to ensure future demand is met, and thus policies must change in this regard.

“Another issue of utmost concern in Africa is the scourge of energy poverty, which continues to impact millions across the continent. According to OPEC data, an estimated 47 per cent of the population in sub-Saharan Africa has no electricity and approximately 85 per cent of people lack access to clean fuels and technologies for cooking. Considering the richness of the continent’s resources, both conventional and renewable, this is simply hard to accept; he said.

“Energy stakeholders must unite on this issue to ensure an equitable distribution of energy that leaves no one behind. OPEC supports the first-ever universal goal related to energy, SDG7, which seeks to ensure access to affordable, reliable, sustainable and modern energy for all.

“Demand in developing regions, including Africa, with its rapidly growing population and dynamic demographic shifts, will be intensified, and all forms of energy will be needed, not only to support the post-pandemic recovery but to satisfy long-term energy requirements”, he added.