Experts in S&P Global have indicated a significant difficult situation around investment in energy transition without proper regulation and policy review.
According to them, the energy transition will be more difficult, costly, and complicated than expected.
This is contained in a new article by Daniel Yergin, the Vice Chairman, S&P Global; Peter Orszag, CEO and Chairman, Lazard; and Atul Arya, Chief Energy Strategist, S&P Global,
Writing in the March-April edition of Foreign Affairs, they say that it is time to rethink priorities, polices and investments in light of the complicated realities today.
“What is becoming clear is that the shift in the global energy system will not unfold in a linear or steady manner,” Yergin, Orszag and Arya write. “Rather, it will be multidimensional—unfolding differently in different parts of the world, at different rates, with different mixes of fuels and technologies, subject to competing priorities and shaped by governments and companies establishing their own paths,” he stressed.
It has not been and will not be the energy transition that many envisioned, they say.
The substantial (though temporary) reductions in energy demand and carbon emissions during the COVID-19 pandemic gave many the false impression that a rapid and singular transformation of the global energy system would be feasible.
“This ambition, however, has collided with the magnitude and the practical constraints of completely overhauling the energy foundations of a $115 trillion global economy in a quarter century,” they wrote.
The disconnect is evident. The world is far from on track to achieve the often-stated target of reaching net-zero emissions by 2050, and there is no clear plan for delivering the massive investment that would be required to do so, the authors say.
“Part of the problem is the sheer cost: many trillions of dollars, with great uncertainty as to who is to pay for it. Part of the problem is the failure to appreciate that climate goals do not exist in a vacuum. They coexist with other objectives—from GDP growth and economic development to energy security and reducing local pollution—and are complicated by rising global tensions, both East-West and North-South,” Yergin, Orszag and Arya write. And part of the problem is how policymakers, business leaders, analysts and activists expected the transition to go, and how plans were shaped accordingly, they stressed.
