The World Will Never Agree to Phase Out Petroleum. And That’s OK

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The world has failed to agree to stop burning fossil fuels. After two weeks of negotiations, Egypt A draft resolution at the United Nations COP27 climate conference in Sharm El Sheikh pledged to pay compensation for climate change damage, but a push by the United States and Europe for lower levels failed. oil gas and coal.

Actually, it’s worse than that. Last year’s Glasgow conference agreed to phase out coal, but other fossil fuels remain immune. Twenty years from now, We may yet see world climate meetings fail to agree to phase out fossil fuels. That’s right – because it’s not the words in an international agreement that matter. But are our carbon emissions falling enough? On this side, the prospects are better.

There’s a simple reason why it’s so difficult to reach agreement at UN climate meetings. The statement released at the end of the COP meetings is not just words, but a semi-official text highlighting the binding commitments of the 2015 Paris Agreement. If one of the 193 parties to the treaty objected to the conference decision, there would be no agreement to declare. Therefore, activists Fossil fuel lobbyists and diplomats fight very hard for any concern. Although the COP decision is not exactly law, it still influences the actions of governments and companies in the real world.

Lumberjacks on the road to net zero Many UN members are uneasy about the destination. The Organization of the Petroleum Exporting Countries ranks 13th in the OPEC+ group with 11 countries. Guyana Throw in non-OPEC+ countries that are heavily dependent on oil and gas, like Qatar and Turkmenistan, and you have about 50 delegates, depending on how you draw the line. For that group, A commitment to eliminate the equivalent of a quarter of UN member states’ oil is a commitment that will shrink their own economies.

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The oil and gas situation is different from coal. Difficult to transport complex and expensive; Solid fuel is more difficult to trade than oil. Only half a dozen countries are major exporters. Oil is not considered central to many countries’ economies. That makes it easier to negotiate less.

For decades, the main divide in the environmental debate has been between rich and poor countries. Because economic development is an energy-intensive process at one stage, this segment has remained stable for a long time. While fossil fuels remain the only low-cost energy source in the environment; A commitment to reduce emissions is a commitment to poor countries to stay poor.

What has changed is the dramatic rise of renewable technologies that can compete with conventional energy, which is costly as well as environmentally damaging. It has shifted the climate debate away from the old divide between rich and poor and into a new one between importers and exporters of fossil fuels. The best example of this was last year’s net-zero pledge from India, which for years has held the standards of emerging countries that endure until they become wealthy. The agreement to compensate rich countries for losses and damages caused by climate disasters is another sign of new diplomatic alliances emerging this year to compensate smaller and poorer countries. Opposition to the low-level language drew the ire of oil exporters.

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In learning who will win this battle between importers and exporters, one should consider the options available to each group. If you are a major oil exporter; There is no other viable business there. Oil makes your country rich. (If you like Saudi Arabia, it shapes your country as a country.) It’s a dominant trade that withers in the shadow of rival industries — the phenomenon of Dutch disease familiar to many commodity exporters.

The situation of importers is very different. What your population wants is affordable energy and food, and the fruits of development that come with it. For a century or so; Fossil fuels are the only way to support it—but if consumers run their scooters on oil or their air conditioners on gas. I don’t care if they use oil as long as it doesn’t cost too much. .

The events of 2022 have accelerated that trend. The last time the world faced an energy crisis like this was in the early 1980s, when the Iranian revolution and the Iran-Iraq war blocked oil supplies, while the U.S. central bank’s inflationary war cut demand and oil consumption fell by more than 10 percent. The three-year period up to 1982 remains the worst recession in history.

The difference now is that potential It is the availability of affordable alternative energy sources. Renewable energy, rather than coal or gas, is the cheapest way to generate new energy for two-thirds of the world’s population. In the major car market, new electric vehicles already cost less to own and operate than their combustion-powered equivalents. Even the gas that provides feed for the chemicals industry faces being cut off by green hydrogen before the end of the decade.

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A future that will deeply disrupt countries most dependent on fossil fuel exports—but ultimately consumers and importers will decide which energy source to rely on. The economy is already driving them relentlessly towards low-carbon alternatives. Russia’s efforts to weaponize Ukraine’s war and energy exports have added a powerful dash of national security to the mix.

The needs of the world’s countries are to reduce carbon dioxide emissions, not to mention the strong international agreements. Initiatives like this year’s loss and damage could certainly strain the alliance between rich fossil fuel importers and poor ones. The necessary change is far from the conference halls of Sharm El Sheikh and will continue regardless of the diplomatic situation.

More on Bloomberg Opinion

• How to fund climate measures amid the financial crisis: David Fickling

• Leave Africa’s Carbon Emissions Alone: ​​Eduardo Porter

• How a warming Yukon is adapting its farmers: Adam Minter

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

David Fickling is a Bloomberg opinion columnist covering energy and commodities. Formerly Bloomberg News; He has worked for the Wall Street Journal and the Financial Times.

More stories like this are available at bloomberg.com/opinion.

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