Last year was supposed to have been a game-changer for climate action, with the US re-entering the Paris Agreement and the pandemic recovery funds of many countries aimed at “green stimulus”.
Much was accomplished, from the adoption of international carbon market accounting standards to a dramatic increase in net-zero commitments from countries and companies. Current climate pledges now put the world on track for 1.8°C of warming, a huge improvement over the projected 4 degrees of warming before the Paris Agreement was signed.
But it still was not the year many had hoped for, setting the scene for a tumultuous 2022.
As energy demand recovered from pandemic-induced 2020 lows, carbon emissions came roaring back and energy prices skyrocketed, becoming a major driver of inflation and highlighting the need to meet continued hydrocarbon demand while also dramatically reducing emissions. Natural gas prices in Europe hit record highs in December; Brent crude was above $90 at the time of publication; and coal demand, which was thought to have peaked globally in 2014, rose dramatically, signalling a possible record-breaking year in 2022. November’s Cop26 convening in Glasgow did not “resign coal to history” as the UK’s Cop26 president Alok Sharma had declared it would.
In 2022, geopolitics will also be increasingly volatile, with Russia amassing troops on Ukraine’s border, Iran ramping up uranium enrichment and tensions growing over Taiwan. The energy implications of these flash points are potentially dramatic.
For the second year in a row, the Atlantic Council Global Energy Centre surveyed a group of senior global energy leaders to better understand the key energy issues for 2022. This year’s respondents were far more ambivalent about the future, perhaps even pessimistic, than they were entering 2021. Last year, we concluded that “2021 could be an inflection point in the fight against climate change.” Three issues from this year’s survey show how much has changed:
While 36 per cent of 2021 respondents called the achievement of global net zero emissions by 2050 either somewhat or very likely, that figure dropped to 27 per cent in 2022.
Last year, 39 per cent of respondents thought that Covid-19 was the biggest geopolitical risk to energy supply and production, with cyber-attacks and intra-state conflict totalling 28 per cent. This year, cyber-attacks and inter-state conflict totalled 43 per cent, with Covid-19 only 11 per cent.
When asked to rank the outcome of Cop26 on a scale from “more blah, blah, blah” to “creating a foundation for achieving global net-zero by 2050,” 51 per cent of respondents chose the former and only 11 per cent the latter.
The silver lining in this data is that our respondents seem to think that the world can manage Covid-19, even as cases soar. But with their assessment of Cop26, skepticism about net zero, and serious geopolitical concerns, the results were a far cry from the optimism that kicked off 2021.
But the actual picture is not as clear as the dour mood might suggest. 2021 was a record year for deployment of renewable capacity, as well as for investment in clean-tech startups. While countries did not agree on a coal “phase out” at Cop26, they did agree on a “phase down,” the first time that fossil fuels were specifically mentioned in a Cop communique. And, crucially, Cop26 kept the goal of limiting warming to 1.5 degrees within the realm of possibility.
Perhaps a better interpretation of 2021, then, was that it was a sobering year, but also one that should hold out some hope. The work needed to reach climate goals while managing short-term energy needs is immense, but the current direction of travel is correct.
If there is a singular “energy agenda” for 2022, then, it is that policymakers and energy leaders must not lose track of the urgent need for climate action amidst the current uncertainty, but also must remain nimble and responsive to potential disruptions.
These are the key issues the Atlantic Council Global Energy Centre will explore these with leaders from around the world when it returns to the UAE for the Global Energy Forum this March 28-29. We hope to see you there.
This essay was adapted from the Atlantic Council Global Energy Centre Publication, “The 2022 Global Energy Agenda". The Atlantic Council’s Global Energy Forum will be held on March 28-29, alongside the World Government Summit at Expo 2020
