The Cop28 UN climate summit in December secured agreement from almost 200 nations to “transition away from fossil fuels in energy systems in a just, orderly and equitable manner” – a decision hailed by world leaders as “historic”.
But, while lots of countries are trying to reduce their use of planet-heating fossil fuels, only a handful have so far taken measures to produce less – particularly when it comes to oil and gas.
Last year, a United Nations report found that governments plan to produce more than double the amount of fossil fuels in 2030 than they should if global warming is to be limited to 1.5C. So they need to cut back.
The International Energy Agency (IEA) says no more new fossil fuel production projects are required, yet we will still need fossil fuels for the next few decades to keep economies running. That raises the question of who should get to drill, pump and sell those last supplies – and why?
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Climate Home looked at three key criteria for the production of oil and gas. Unlike the other dirtiest fossil fuel – coal – they tend to be located together and so are produced in the same regions by the same nations. And the IEA predicts that their use will outlive that of coal.
We’ve looked at whose oil and gas is the cleanest, whose is the cheapest, and whose economy could most handle losing out on oil and gas revenue. Depending on the metric, the results differ wildly.
The cleanest oil and gas comes from Norway and the Arabian Gulf, the cheapest is in the Gulf. But when global economic justice is considered, the fairest is in smaller nations in the developing world – the likes of Libya, Trinidad and Tobago, and Turkmenistan.
Cleanest production?
Given the world will be using oil and gas for some time to come, shouldn’t we use that which causes the least damage to the planet?
While all oil and all gas is equally damaging to burn as fuel, the process of pumping it up from the ground can be more or less harmful to the climate.
Norway and the United Arab Emirates make this argument, arguing their oil and gas is the cleanest – and a November 2023 report by the IEA backs them up.
It found that Norway’s oil and its gas were the cleanest in the world to produce, measured by emissions intensity, while supplies from the UAE and other Gulf nations like Saudi Arabia and Qatar were also among the least damaging.
Norway’s oil and gas are cleaner because it has strict rules in place, requiring oil and gas producers to capture any methane gas that leaks during the production process. This prevents it from reaching the atmosphere and making climate change worse.
On top of this, much of the machinery used to produce the oil and gas doesn’t run on fossil fuels itself but on clean electricity.
A handful of Gulf states – including Saudi Arabia, Qatar, Kuwait and the UAE – have lower-intensity operations in part because of their “easy to access” reserves. As the oil is nearer the surface, less energy-guzzling machinery is needed to pump it up.
But the emissions from producing the oil and gas need to be put in perspective. It is the use of those fuels that has the biggest consequences. Just 5-20% of oil and gas companies’ total emissions are from production, according to energy consultancy Wood Mackenzie.
Cheapest energy?
Or should we use the cheapest oil and gas? The cheaper those fuels are to produce, the cheaper it should be to use our power plants, polyester and petrol. Those savings should be passed onto consumers around the world when they fill up their vehicles or switch on their lights.
This was an argument deployed by Amin Nasser, the head of oil giant Saudi Aramco, who told reporters at Davos in 2019: “There will continue to be growth in oil demand … We are the lowest-cost producer and the last barrel will come from the region.”
Gulf nations like Saudi Arabia again score well on this. As their oil and gas is near the surface, it’s cheaper to pump.
In the IEA’s “low cost” scenario, in 2040, Qatar, Saudi Arabia, Iraq and Iran increase their oil and gas production the most. More expensive producers like Canada, Australia and China have to cut down how much they pump.
Fairness and capacity?
Or should the governments that cut back on oil and gas output first be the historically large emitters that can most afford to go without the money they get from selling fossil fuels?
It’s an argument made by many African nations. Ahead of Cop28, African negotiators unsuccessfully proposed a ban on developed countries exploring for fossil fuels “well ahead of 2030, whilst affording developing countries the opportunity to close the global supply gap in the short term”.
Climate Analytics analyst Neil Grant argues we must take “capacity to transition” into account when thinking about who should be the last producers. A Carbon Tracker report found at least 28 oil and gas-reliant economies would lose half of their expected revenues under just a “moderate-paced transition” – so there is a lot at stake.
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Greg Muttitt, from the International Institute of Sustainable Development, told Climate Home that if the transition is left to market forces, “a lot of people” in oil and gas-dependent economies will “get hurt”, either by losing their jobs, or experiencing a breakdown in public services.
At Cop28, a network of civil society groups published a report assessing which countries should be the last to extract fossil fuels, accounting for both economic dependence, and climate equity.
Using a measure of financial “capacity”, defined as surplus income above “what is required to meet people’s needs”, the report found that Libya, Iraq and South Sudan should be among the last countries extracting oil, while Algeria, Trinidad and Tobago, and Turkmenistan are among the last extracting gas. The likes of Norway, Canada and Qatar should stop first for both, it concluded.
Whichever answer you chose, Michael Lazarus, co-author of the UN report and U.S. director for the Stockholm Environment Institute, told Climate Home he was pleased that “we have finally gotten to the point in the global conversation where folks are asking the question…of what that ultimate transition looks like.”
The post Clean, cheap or fair – which countries should pump the last oil and gas? appeared first on Climate Home News.
Clean, cheap or fair – which countries should pump the last oil and gas?
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With the U.S. bombing Iran and the Strait of Hormuz closed, energy experts say countries transitioning to renewables will be more resilient in the “face of the shock.”
The United States’ war on Iran could fundamentally alter how countries consume and generate energy and hamper international progress in combating climate change, a panel of energy experts said today.
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One month into the US and Israel’s war on Iran, at least 60 countries have taken emergency measures in response to the subsequent global energy crisis, according to analysis by Carbon Brief.
So far, these countries have announced nearly 200 policies to save fuel, support consumers and boost domestic energy supplies.
Carbon Brief has drawn on tracking by the International Energy Agency (IEA) and other sources to assess the global policy response, just as a temporary ceasefire is declared.
Since the start of the war in late February, both sides have bombed vital energy infrastructure across the region as Iran has blocked the Strait of Hormuz – a key waterway through which around a fifth of global oil and liquified natural gas (LNG) trade passes.
This has made it impossible to export the usual volumes of fossil fuels from the region and, as a result, sent prices soaring.
Around 30 nations, from Norway to Zambia, have cut fuel taxes to help people struggling with rising costs, making this by far the most common domestic policy response to the crisis.
Some countries have stressed the need to boost domestic renewable-energy construction, while others – including Japan, Italy and South Korea – have opted to lean more on coal, at least in the short term.
The most wide-ranging responses have been in Asia, where countries that rely heavily on fossil fuels from the Middle East have implemented driving bans, fuel rationing and school closures in order to reduce demand.
‘Largest disruption’
On 28 February, the US and Israel launched a surprise attack on Iran, triggering conflict across the Middle East and sending shockwaves around the world.
There have been numerous assaults on energy infrastructure, including an Iranian attack on the world’s largest LNG facility in Qatar and an Israeli bombing of Iran’s gas sites.
Iran’s blockade of the Strait of Hormuz, a chokepoint in the Persian Gulf, is causing what the IEA has called the “largest supply disruption in the history of the global oil market”.
A fifth of the world’s oil and LNG is normally shipped through this region, with 90% of those supplies going to destinations in Asia. Without these supplies, fuel prices have surged.
Governments around the world have taken emergency actions in response to this new energy crisis, shielding their citizens from price spikes, conserving energy where possible and considering longer-term energy policies.
Even with a two-week ceasefire announced, the energy crisis is expected to continue, given the extensive damage to infrastructure and continuing uncertainties.
Asian crunch
Carbon Brief has used tracking by the IEA, news reports, government announcements and internal monitoring by the thinktank E3G to assess the range of national responses to the energy crisis roughly one month into the Iran war.
In total, Carbon Brief has identified 185 relevant policies, announcements and campaigns from 60 national governments.
As the map below shows, these measures are concentrated in east and south Asia. These regions are facing the most extreme disruption, largely due to their reliance on oil and gas supplies from the Middle East.
Nations including Indonesia, Japan, South Korea and India are already spending billions of dollars on fuel subsidies to protect people from rising costs.
At least 16 Asian countries are also taking drastic measures to reduce fuel consumption. For example, the Philippines has declared a “state of national emergency”, which includes limiting air conditioning in public buildings and subsidising public transport.
Other examples from the region include the government in Bangladesh asking the public and businesses to avoid unnecessary lighting, Pakistan reducing the speed limit on highways and Laos encouraging people to work from home.
Europe – which was hit hard by the 2022 energy crisis due to its reliance on Russian gas – is less immediately exposed to the current crisis than Asia. However, many nations are still heavily reliant on gas, including supplies from Qatar.
The continent is already feeling the effects of higher global energy prices as countries compete for more limited resources.
At least 18 European nations have introduced measures to help people with rising costs. Spain, which is relatively insulated from the crisis due to the high share of renewables in its electricity supply, nevertheless announced a €5bn aid package, with at least six measures to support consumers.
Many African countries, while also less reliant on direct fossil-fuel supplies via the Strait of Hormuz than Asia, are still facing the strain of higher import bills. Some, including Ethiopia, Kenya and Zambia, are also facing severe fuel shortages.
There have been fewer new policies across the Americas, which have been comparatively insulated from the energy crisis so far. One outlier is Chile, which is among the region’s biggest fuel importers and is, therefore, more exposed to global price increases.
Tax cuts
The most common types of policy response to the energy crisis so far have been efforts to protect people and businesses from the surge in fuel prices.
At least 28 nations, including Italy, Brazil and Australia, have introduced a total of 31 measures to cut taxes – and, therefore, prices – on fuel.
Even across Africa, where state revenues are already stretched, some nations – including Namibia and South Africa – are cutting fuel levies in a bid to stabilise prices.
Another 17 countries, including Mexico and Poland, have directly capped the price of fuel. Others, such as France and the UK, have opted for more targeted fuel subsidies, designed to support specific vulnerable groups and industries.
These measures are all shown in the dark blue “consumer support” bars in the chart below.
Such measures can directly help consumers, but some leaders, NGOs and financial experts have noted that there is also the risk of them driving inflation and reinforcing reliance on the existing fossil fuel-based system.
Christine Lagarde, president of the European Central Bank, spoke in favour of short-term measures to “smooth the shock”, but noted that “broad-based and open-ended measures may add excessively to demand”.
Measures to conserve energy, of the type that many developing countries in Asia have implemented extensively, have been described by the IEA as “more effective and fiscally sustainable than broad-based subsidies”.
So far, there have been at least 23 such measures introduced to limit the use of transport, particularly private cars.
These include Lithuania cutting train fares, two Australian states making public transport free and Myanmar and South Korea asking people to only drive their cars on certain days.
Clean vs coal
At least eight countries have announced plans to either increase their use of coal or review existing plans to transition away from coal, according to Carbon Brief’s analysis. These include Japan, South Korea, Bangladesh, the Philippines, Thailand, Pakistan, Germany and Italy.
These measures broadly involve delaying coal-plant closure, as in Italy, or allowing older sites to operate at higher rates, as in Japan – rather than building more coal plants.
There has been extensive coverage of how the energy crisis is “driving Asia back to coal”. However, as Bloomberg columnist David Fickling has noted, this shift is relatively small and likely to be offset by a move to cheap solar power in the longer term.
Indeed, some countries have begun to consider changes to the way they use energy going forward, amid a crisis driven by the spiralling costs of fossil-fuel imports.
Leaders in India, Barbados and the UK have explicitly stressed the importance of a structural shift to using clean power. Governments in France and the Philippines are among those linking new renewable-energy announcements with the unfolding crisis.
New renewable-energy capacity will take time to come online, albeit substantially less time than developing new fossil-fuel generation. In the meantime, some nations are also taking short-term measures to make their road transport less reliant on fossil fuels.
For example, the Chilean government has enabled taxi drivers to access preferential credit for purchasing electric vehicles (EVs). Cambodia has cut import taxes on EVs and Laos has lowered excise taxes on them.
Finally, there have been some signs that countries are reconsidering their future exposure to imported fossil fuels, given the current economics of oil and gas.
The New Zealand government has indicated that a plan to build a new LNG terminal by 2027 now faces uncertainty. Reuters reported that Vietnamese conglomerate Vingroup has told the government it wanted to abandon a plan to build a new LNG-fired power plant in Vietnam, in favour of renewables.
The post Iran war analysis: How 60 nations have responded to the global energy crisis appeared first on Carbon Brief.
Iran war analysis: How 60 nations have responded to the global energy crisis
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