Interview: Energy in a global context

07 Oct 2020

Prof Mike Bradshaw (Warwick Business School), interviewed by Dr Phil Heptonstall (Imperial)

Can you provide a brief sketch of what the Theme will be doing?

The theme evolved out of the previous Phase of UKERC. We now have a Theme all to ourselves, in part because we are against a backdrop of the UK leaving the EU. The UK will no longer be part of the EU bloc when dealing with the global energy system, and we will instead have to fend for ourselves.

There are two main projects, one looking at Brexit and the politics of net zero. Given the topic and all that has happened since the beginning of Phase 4, we have had a busy running to try to stand still. However, I am going to focus on the other project which looks at the geopolitics of energy system transformation.  We have spoken about just transitions, and the potential impacts on energy-intensive industries, among other things, this project will provide insights into the impact of the energy transition on countries that rely on fossil fuels.

We are trying to develop a whole systems perspective on geopolitics, so the project will focus on the low carbon transition, but also the high carbon transition, considering the economies that depend on the production and export of fossil fuels.

What impacts might the transition have on for those countries that rely on fossil fuel production?

Fossil fuel economies face significant challenges, but we should also remember that 85% of the world’s primary energy consumption still comes from fossil fuels, posing significant challenges to those that rely on importing them. A leader in last week’s Economist on ‘Power in the 21st century’, points out that since 1970, fossil fuel prices have swung over 30% over a six-month period, 52 times. We are well aware of the resource curse that is associated with managing volatile rents, the energy transition presents an existential threat to petro-states, as there may be no fossil fuel rents in the future – the impact of Covid-19 meant that the Saudi government’s revenues fell by 49% in the first part of this year. Thus, the energy transition poses a major threat to petro-states – it is not sufficient to demonise them, as some are weak and failing states and face significant challenges.

The Economist identified the plight of the petro-states as the first major geopolitical threat associated with the energy transition.  Those states account for about 8% of global GDP, and 900M citizens – a consequence of not dealing with this issue could well be conflict in exporting countries. This could lead to yet another set of price spikes, at a time when we are trying to recover from the pandemic, so it is crucial we understand the challenges that they face.

Some petro-states are suggesting that they will be refocusing on plastic production, will this be enough?

Some states are moving away from the export of fossil fuels, but many are not. One thing producer economies have done is to move down the value chain, producing things like petrochemicals. Even in the USA – thanks to the shale revolution – this has resulted in re-industrialisation. The Carbon Tracker Initiative has recently published a report looking at the anticipated reduction in the use of plastics, but we know that the pandemic is increasing the use of single-use plastics, so in the short-term at least, it may be that use of non-combustible plastics will increase.

How is Covid going to change geopolitics as it applies to fossil fuel producing countries?

In seeking to address this issue, one thing we have done is to create a virtual network of experts, looking at whether the pandemic will accelerate or retard the speed of the transition. At BP’s recent Energy Outlook launch, they conducted a straw poll, and 60%+ thought that it would accelerate the transition. I am more doubtful about the green recovery; particularly on a planetary scale, and caution this with my geographer’s hat on, that this is very much an OECD view of the world. There needs to be a real understanding that the impacts will be very different for different parts of the world.

For example, in Europe natural gas is now seen as part of the problem, in the UK it will soon be the most carbon-intensive part of our power generation mix. However, in Asia, natural gas is seen as solving the problem of air pollution – in China during lockdown the sky turned blue for the first time in a long time. Thus, in other parts of the world, gas is seen as a key part of the energy transition, but in Europe, it is seen as a problem. The IEA perspective is still that when natural gas replaces coal it delivers a net decarbonisation benefit. At the same time, we must not forget the more than 1 billion people who do not have access to modern energy services.

China recently made their net zero announcement, what is your opinion of this? 

It is a good thing, there is no way that it could not be a good thing. It does turn the spotlight on the USA – the November Presidential elections will determine what their next move will be. Going back to the Economist article it highlighted a second geopolitical threat, where China comes to dominate low carbon technology supply chains. It is great China has net zero ambitions, but they are not acting out altruism. They see this as a major industrial opportunity. The pandemic has highlighted the extent to which we rely on global supply chains, many of which are based in China – including raw materials, transformation, and production – this is something that the EU is very concerned about, particularly the raw materials critical to low carbon technologies.