Consequences on the Global Energy Transition in the Wake of Russia’s Invasion of Ukraine

The Russian invasion of Ukraine is, above all, a human tragedy and it may seem callous to consider anything beyond the plight of those affected. But it is also a watershed moment in post-Cold War history which will impact the fight against climate change in various ways. While clean energy sources will eventually become more attractive, there will be a short term increase in fossil fuel use. In addition, access to clean energy for consumers will reveal awkward questions for environmentalists.

The war and the preceding Russian squeeze on European energy markets have highlighted the political reality that viable energy policy has to consider availability and affordability as well as environmental issues. Some commentators argue that the Russian invasion proves existing fossil energy sources remain critical in the transition to a cleaner future. “Change Management 101” is that you should have the new system up and running before you close down the old one–and contingency plans in case anything goes wrong.

 While clean energy sources will eventually become more attractive, there will be a short term increase in fossil fuel use. In addition, access to clean energy for consumers will reveal awkward questions for environmentalists.

It is also true that renewables cannot immediately replace the potential loss of Russian energy to the EU or offset the impact of higher prices for global consumers. While the EU and U.S. will take steps to bolster fossil fuels supply (the EU expects to replace about half its historic Russian gas imports with liquified natural gas) and effectively subsidize consumption, these actions should be seen as speed bumps on their road to net-zero, not a permanent turning off that road. Despite the negative economic effects and the likely short term revival of fossil fuel use, even this overall energy picture has positive climate implications.

First, almost all of the planned climate actions are continuing. Indeed the EU is increasing its drive to boost renewables. The Biden administration’s program is largely unaffected–if to date, disappointingly ineffective due to insufficient Congressional support. 

Second, some fundamentals–security and cost–favor renewables. No one has figured out how to cut off the sun or wind yet–and such “fuel” is free at the point of generation. The more important issues are the time and the capital cost of making renewable power available and affordable to the final user.

Third, several EU countries will have to consider whether to continue to exclude nuclear power from their energy future. France, at least, is convinced that a new generation of nuclear plants should be part of the solution. 

While the EU and U.S. will take steps to bolster fossil fuels supply (the EU expects to replace about half its historic Russian gas imports with liquified natural gas) and effectively subsidize consumption, these actions should be seen as speed bumps on their road to net-zero, not a permanent turning off that road.

Last, the largely adverse fossil energy prices will likely boost energy efficiency and the use of electric vehicles. An oil price of $100 a barrel versus one of $50 creates the market price equivalent of a carbon tax of over $150 per ton CO₂, a level beyond the wildest hopes of most climate advocates. Painful as it is to individual consumers, if sustained over time, such prices would change consumer and business energy and purchasing choices.

Nevertheless, the short and medium term energy transition challenge of the current crisis is to ensure that more clean energy is made available and affordable to consumers. There are two major–and for some environmentalists, probably uncomfortable–problems: supply chain issues and infrastructure project costs and timelines.

Supply chains for renewables flow through China. China’s dominance of critical mineral mining and refining and its enormous presence in the manufacture of solar cells and wind turbines, pose difficult moral questions for project developers and consumers alike. But there is no realistic alternative today. Capital costs and materials prices of renewable projects will rise as the world seeks more. Supply chains from China will be subject to the same problems as the rest of the economy. It will take years–and unpopular new mine sites and processing plants–to bring even some of these clean energy supply chains “home.” 

Infrastructure is an even harder issue. While the loudest voices come from fossil fuel advocates, there is a genuine obstacle in the U.S. Federal permitting process, known as NEPA review. Currently, NEPA reviews are delaying three times as many renewable projects as fossil projects in the U.S. The EU wind industry regards transmission line permitting as the biggest obstacle they face. Such delays add to costs and time to respond to the current market–and make it harder to deliver renewable power to the consumer. The much hyped “hydrogen economy“ will create more permitting challenges. 

 An oil price of $100 a barrel versus one of $50 creates the market price equivalent of a carbon tax of over $150 per ton CO₂, a level beyond the wildest hopes of most climate advocates.

The international crisis over Ukraine is a significant factor in the next steps in the energy transition and will have ramifications in unexpected and uncomfortable places. We can only hope that a swift end to the conflict minimizes both the human and climate action impacts. 

Written April 2022

David Bailey is Research Director for the Climate Leadership Council, which seeks a bipartisan policy solution to the climate issue. He was formerly a partner in an environmental and energy consulting group, Element VI Consulting, and a Visiting Scholar at the Niskanen Center in Washington DC. He retired from ExxonMobile as Climate Policy Manager in 2012, and is a former member of the Board of the National Foreign Trade Council and of the State Department’s Advisory Committee on International Economic Policy. He is a Professor at Georgetown University School of Foreign Service & Department of History.