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Energy Security Is the Global Priority for 2023


As nearly 200 nations gathered for last week’s COP27 UN climate summit, Japan announced a little-known shift that reveals what’s going on behind the scenes in global energy and climate diplomacy. . The Tokyo government has renamed a state-owned natural resources company that helps local companies invest in overseas oil, gas and mining projects as the Japan Metal Energy Security Organization.

It may sound like a small name change, but it’s an important indicator of where priorities lie in many countries, especially in Asia. Energy security is a top priority.

It is also important that Japan leads such a focus. Because Tokyo gives her a powerful pulpit from which in 2023 she will chair the G7 countries and shape the global agenda. Japan has yet to announce its G7 priorities, but we have heard from Asian diplomats that energy security will be a major challenge.

In the world of natural resources, policy makers have long grappled with the trilemma of how to achieve supply security, keep prices low and protect the environment for commodities from crude oil to wheat to aluminum. Such a trilemma often means that one of the three replaces the other two.

In the 1970s and 1980s, there are fresh memories of the first and second oil crises, where security of supply and affordability trumps sustainability. For example, in 1979 her G7 countries pledged at their annual summit to “increase the use of coal wherever possible” to lower energy costs. The balance of the trilemma began to shift in the early 90s with the rise of the modern environmental movement. Over the past decade, climate change has taken precedence as evidence of global warming has grown.

The current energy crisis is forcing governments to rethink their priorities. Security and affordability are making a comeback. Indeed, policymakers insist there is no turning back in the fight against climate change. However, it is clear that the environment is no longer an absolute priority. At best, it is first among its peers. Worst, secondary.

Let’s take a look at the view of Japan’s Minister of Economy, Trade and Industry Yasutoshi Nishimura, a very powerful institution known by the acronym METI. “Countries share the goal of achieving carbon neutrality while ensuring a stable energy supply,” he explained at the Bloomberg New His Economy Forum conference in Singapore last week. . Notice how he puts climate change and energy security on the same level.

The renewed emphasis on security is largely why COP27 made so little progress on what is truly important to the fight against climate change: the need to reduce fossil fuel consumption and greenhouse gas emissions. is. Wealthy countries have taken the first steps to pay poorer countries for the losses they have suffered from climate change, but the summit has done little elsewhere. I had to threaten to withdraw because of this.

In many respects this is not surprising. Despite claims that the fight against climate change will not be derailed by the energy crisis, it is unlikely that governments will not rethink their priorities. Even the richest countries in the OECD club are suffering. The OECD calculates that 17.7% of gross domestic product will be spent on energy this year, the second highest on record and roughly comparable to the 17.8% during the second oil shock in 1980-1981.

Fortunately, today’s energy trilemma is no more daunting than when G7 policymakers ironically turned to coal as the solution at their 1979 summit in Tokyo. Four decades later, renewable energy has made it possible to both protect and make our planet more secure.

Fossil fuels offer no greater security than green energy, as Vladimir Putin showed this year when he weaponized gas supplies against Europe. , improve supply chains, increase R&D spending, and expedite project approvals. You should aim for the solar panel of each house. Nuclear power is also an excellent tool for linking the environment and security.

The greatest contribution Japan can make to resolving the energy trilemma is to focus on curbing demand. The best energy sources are those that are not consumed.

In the past, policymakers have erroneously attempted to address climate change by limiting supply, even as demand continued to grow. As a result, the global economy is underinvesting in new oil and gas supplies, and prices are likely to remain higher than they should be. and act quickly.

Of course, easier said than done. For now, demand for fossil fuels is on the rise, and oil, gas and coal may set new consumption records in 2023. As long as that is true, the world is heading in the wrong direction.

But Japan can show that there is another way. In 1979, it consumed 5.5 million barrels of crude oil per day. Only 3.4 million will be needed this year. This is a step towards solving the trilemma, but electrifying everything from heating to driving would be a huge and expensive undertaking. The G7 needs to step up again.

Bloomberg Opinion Details:

• Putin defies sanctions by boosting oil production: Javier Blas

• Gambling’s Global Coming Out Party in Qatar: Lionel Laurent

• Expect more atrocities against prisoners as Ukraine war drags on: Leonid Bershidsky

This column does not necessarily reflect the opinions of the editorial board or Bloomberg LP and its owners.

Javier Blas is a Bloomberg Opinion columnist for energy and commodities. A former reporter for Bloomberg News and his editor at The Times of Financials Commodities, he is co-author of The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources.

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