What the future of energy looks like post COP26

The fanfare around COP26 has come and gone, but the energy conversation remains at the top of everyone’s agenda. Following the vague promises of the final agreement, a result of India and China’s last-minute politicking, the question of what the future of energy looks like is still largely undefined.

This period of reflection allows both governments and industry to consider the practicalities of, and how best to align themselves with, the COP26 commitments. However, in order to implement effective change and work towards sustainable, low-carbon, and integrated value chains, we cannot afford to sideline post-Covid market dynamics.

At the height of the pandemic oil futures dipped below $0 a barrel. However, I believe we were premature in focusing on a ‘post-oil’ future. A faster than expected recovery, with prices continuing to rise, has seen oil back at the centre of the conversation on recovering economies, growth and inflation. The need for fuel is a present and pressing challenge we must address.

18 months ago, the world came to a standstill: borders shut, flights grounded, supply chains stripped, and our professional, social and personal lives scaled back into the four walls of our homes. All these measures, intended to stem the spread of the virus, resulted in a 7 percent fall in global CO2 emissions in the past year. But this fall will only have a significant impact if countries prioritise realistic and achievable ambitions to ensure we see falling rates year on year. Countries and corporations must understand that oil is here to stay and will play a significant role in the energy debate for several years to come.

As the energy transition grows at pace, we cannot pretend that oil demand will simply disappear, or that the transition will happen overnight. The energy industry is far from a level playing field and while developed nations can, and must, focus efforts on technologies that provide renewable energy at the core of the transition. The international community must recognize that other countries, namely in emerging markets, are forced to balance sustainable growth and development alongside poverty eradication. Without prioritizing socioeconomic issues, a sustainable energy agenda will quickly fall very short of its lofty ambitions.

The ADIPEC oil & gas conference in Abu Dhabi, United Arab Emirates, the country chosen to host COP28 in 2023, is the first opportunity to hear from both industry and governments on how they will meet COP26 targets.

The UAE’s Minister of State, Dr Sultan Al Jaber, who is also CEO of the Abu Dhabi National Oil Company (ADNOC) spoke of the need to understand that while the transition will happen, it will take time. He shared the sentiments of several other energy ministers, including Saudi Arabia and India, who said that while they are committed to Net Carbon Zero within the next 40 years, their ambition has always been to reduce emissions, rather than eliminating the use of fossil fuels.

The Saudi energy minister, Prince Abdulaziz bin Salman is entirely right when he said that we must look at emissions, not resources, if we are to be fully inclusive in our approach, considering that fossil fuels are often many developing nations’ main natural resource and source of state revenue.

We have set targets and ambitions on decarbonisation. No-one can argue global leaders are not aligned on phasing out coal use, but what government’s lack is a clear strategy as to how these targets will be met. The transition debate today is not the same as it was in previous years. The pandemic has created a very different economic environment, with almost every government now working with greatly reduced budgets against the backdrop of economies and industries that were brought to their knees.

Millions have suffered loss of income and been pushed into poverty and government priorities have changed. We cannot expect policies developed and implemented at COP21 in Paris six years ago to be suitable for today’s challenges. While both private industry and public sector’s need to accept a more aggressive approach to cleaner energy sources, we must also shift gears back to the drawing board to focus on delivering an energy mix that includes oil. Only then can we meet future global energy requirements.

I believe a realistic and sustainable energy transition agenda needs to support, not penalise countries that need assistance. Many developing countries suffer the most from the effects of climate change, like heatwaves, increasingly longer droughts, tropical storms, wildfires and ever more frequent flooding. However decarbonising key industries is often not their primary focus in the grand scheme of a viable economy, adequate healthcare and more robust education system.

For these countries, cheaper energy coming from fossil fuels in the short to medium term is the route towards sustained growth. Socioeconomic stability will lead to developments in technology and increased buying power to invest in greener energy in the long term. It is these realities that we should acknowledged if we are to make meaningful progress, otherwise we’ll find ourselves having the same conversation at COP27 next year and countless more to follow.

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