I analyze energy economics and related public policy issues.
How refreshing! Africa’s top energy official, Amani Abou-Zeid, the African Union Commissioner for Infrastructure and Energy, said earlier this month that African countries will use the UN’s COP27 climate talks in Egypt next month to advocate for “a common energy position that sees fossil fuels as necessary to expanding economies and electricity access”. No longer can it be taken for granted that countries in sub-Saharan Africa – where 600 million people lack access to electricity and use fuelwood and charcoal for cooking and heating indoors with horrendous impacts on respiratory health and mortality — will follow the International Energy Agency’s and the World Bank’s policy advice on pursuing renewable energy which is best described as magical thinking.
Shun fossil fuels, African policy makers are told, since the wind and the sun will power the continent’s quest for industrial development and higher standards of living. This policy advice is backed by coercion via vetoes in public finance and investment in fossil fuel projects by multilateral development agencies including the World Bank. But there is every hope that African countries, like China and India, will not be thwarted in their climb up the very same energy ladder from wood and coal to refined oil and natural gas derivatives that the West used in its ascent to human betterment.
Climate change models that predict an impending apocalypse with absolute certainty lack credibility among policy makers in the developing countries where the real environmental problems are linked with poverty and the lack of economic development. The West’s carbon imperialism, the corollary of the climate alarmist and Net Zero movements that has reigned in Western capitals over the past two decades, is increasingly challenged by the developing countries.
As COP26 held in Glasgow last year headed for its final day, a negotiating group of 22 countries including China and India called the “Like-Minded Developing Countries” objected to the “mitigation centric” approach of the US and EU. Diego Pacheco, Bolivia’s lead negotiator representing the LMDC said that “the developed countries are pushing this narrative of 1.5 degrees CelsiusCEL -3.3% very hard. We know that this narrative will lead them to control the world once again”.
N. J. Ayuk, Executive Chairman at the African Energy Chamber, is forthright in his view: “Africans don’t hate Oil and Gas companies. We love Oil and today we love gas even more because we know gas will give us a chance to industrialize. No country has ever been developed by fancy wind and green hydrogen. Africans see Oil and Gas as a path to success and a solution to their problems. The demonization of oil and gas companies will not work.”
Asking Africans to leave their fossil fuels resources in the ground in return for charitable handouts and “development finance” from virtue-signalling Western governments and multilateral agencies such as the World Bank to invest on unreliable solar and wind power is not only immoral and unconscionable but plainly unworkable. As the work of Vaclav Smil has irrefutably demonstrated, no country in the world has developed without the dense energy available from fossil fuels.
Claims to the contrary by the likes of the IEA’s chief Fatih Birol seem little more than exercises in propaganda on behalf of a compromised institution that cannot be relied on for even the most basic energy policy intelligence. In a recent op-ed, Birol said “I talk to energy policymakers all the time and none of them complains of relying too much on clean energy. On the contrary, they wish they had more. They regret not moving faster to build solar and wind plants, to improve the energy efficiency of buildings and vehicles or to extend the lifetime of nuclear plants.”
Perhaps Mr. Birol needs reminding that the decimation of German industry seems all but assured by the fait accompli presented by the sabotage of both the Nordstream pipelines last month and what could be a permanent loss of the bulk of Europe’s piped gas imports from Russia whatever the outcome of the Russia-Ukraine war. No amount of solar and wind can save Germany from an ignominious retreat from its quixotic Energiewende as its citizens look for fuelwood to keep warm this winter as the shortage of natural gas tightens. Last week, German Chancellor Olaf Scholz announced that five lignite-fueled power plants – the dirtiest means to produce electricity — will be reopened, “temporarily” of course.
But most revealing of all is the sheer hypocrisy of Western European governments in doing a complete about-turn in their approach to African energy projects when faced with an energy crisis of their own making, having self-sanctioned the EU from Russian gas supplies. According to the New York TimesNYT +1.8%, no slouch in the push for renewable energy and the climate crusade, “European leaders have been converging on Africa’s capital cities, eager to find alternatives to Russian natural gas.” So now that Europe needs natural gas, it is perfectly alright to override the World Bank’s refusal to fund fossil fuel investments in the continent (as elsewhere).
What Goes Around Comes Around
The critical awareness of the fossil fuel-development nexus among African leaders such as Amani Abou-Zeid and N. J. Ayub has been quickened by the energy crisis besetting the West, especially in Europe and Great Britain. Political leaders who were once spouting their virtuous commitments to the net zero policies now worry about keeping the cost-of-living crisis at bay and their citizens warm (by using fuelwood even) while asking for voluntary “demand reduction” and planning mandatory energy rationing policies. Newly installed Prime Minister Rishi Sunak is standing by predecessor Liz Truss’s decision to stop climate zealot King Charles from attending the COP27 climate summit despite the King’s ‘champing at the bit’ to go. The Prime Minister himself will also not attend due to “pressing domestic engagements”.
European leaders are now clamouring for favoured trade and pricing terms in global gas markets. French President Emmanuel Macron lashed out recently at U.S. trade and energy policies which he said have created a “double standard”, with Europe left paying higher prices for its natural gas. Meanwhile, nearly a dozen US Senators are calling for the Biden administration to curb liquified natural gas exports as Americans face a surge in home heating prices this winter. EU leaders are now faced with the prospects of the Biden administration considering a moratorium on oil and gas exports to Europe to contain price pressures at home. Some might call this being “pushed under the bus” or “thrown to the wolves”.
If the depressed economic conditions during the Covid lockdowns posed profound challenges for the COP26 negotiators, the proxy war between Russia and Ukraine’s NATO backers has pushed COP27 into the geopolitical whirlwinds. As global prices for fuel, fertilizers and food surge to unprecedented levels on the back of the anti-Russia energy sanctions and decades of green energy policies, the siren song of the climate crusade against fossil fuels will dissipate at least while hard times prevail in the West. Whether it loses its grapple-hold over the affluent West’s angst-ridden psyche remains to be seen.
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I have worked in the oil and gas sector as an economist in both private industry and in think tanks, in Asia, the Middle East and the US over the past 25 years. I focus on global energy developments from the perspective of Asian countries that remain large markets for oil, gas and coal. I have written extensively on the areas of economic development, environment and energy economics. My publications include “Singapore in a Post-Kyoto World: Energy, Environment and the Economy” published by the Institute of Southeast Asian Studies (2015). I won the 1984 Robert S. McNamara Research Fellow award of the World Bank and received my Ph.D. in Economics in 1992.