In 1709, an English metal worker discovered that coal could be used instead of wood and scrap as fuel for melting metal in a furnace. However, it was only at the end of that century that this discovery turned into an industrial revolution that overturned all the relations of the time. It took two centuries for coal to overtake wood and waste as the most important fuel in the world. And after the first oil discoveries in Pennsylvania in 1859, it took another century for oil to replace coal as the world's most important energy source. Compared to this, the changes that the climate change is supposed to cause have a dramatic pace.
The EU and the USA want to become climate neutral by 2050. And this despite the fact that more than 70% of the EU's total energy needs are still covered by climate-damaging fossil fuels. One thing should therefore be clear: the rapid energy transition will revolutionize our economy and our societies. Like the coal and oil revolution, this energy revolution will also dramatically change geopolitics.
"Climate change will have enormous economic consequences for the world, but it will also bring about major changes in the world map of power," writes Daniel Yergin, a world-renowned expert on the political implications of energy issues. He sketches this new world map in his book The New Map. Energy, Climate and the Clash of Nations. Quick summary: “China is poised to be the big winner, while Russia and Middle Eastern oil exporters will be the big losers. The US will probably be somewhere in between," predicts Yergin.
The same is likely to be true for Europe, according to a study by the European Council of Foreign Relations (ECFR). With its market power and pioneering role, Europe could indeed define global standards for the energy transition, but at the same time it would replace the current dependence on the fossil energy lifer - Russia - with a new dependence due to the raw materials needed for the energy transition. And most of them come from China, a country that, like Russia, sees itself as a systemic competitor to the West. Another risk factor for Europe is the destabilization of its neighborhood if energy exporting countries such as Algeria, Saudi Arabia or Russia fail to develop new business models.
The irony is that China, which currently refuses to set more ambitious climate goals, could become the biggest winner of the energy transition. Switching to renewable energy sources would reduce Beijing's strategic vulnerability. "Although China has a robust oil industry, and is realistically the fifth largest oil producer in the world, its production is far below what it needs to continue growing as the world's second largest economy. China imports about 75% of its oil needs and has become the world's largest importer of this raw material," writes Yergin.
Since the Korean War, the communist rulers in Beijing have recognized this as a strategic Achilles' heel and for the past few years have called it the "Malakka dilemma" because tankers from the Middle East or Africa have to pass through the strait of the same name between Malaysia and Singapore. In the event of a war with the US, Chinese industry could easily be cut off from its central energy source - by a simple US-Navy blockade.
A shift to renewable energy sources would reduce this vulnerability - and at the same time make China the new Saudi Arabia of a climate-cleaner world because Beijing is the planet's largest producer of lithium, currently an indispensable raw material for the production of batteries used in e-cars, e-bikes and e-bikes. -scooters.
According to the ECFR report, the EU procures more than 60% of the critical raw materials needed for the energy transition from China. This country also currently dominates the production chain for key elements of the energy transition. According to Yergin, 80% of all batteries in the world are produced in China, as well as 70% of solar cells. Which is indisputably an absolutely dominant market position. Despite its refusal to rapidly implement its own energy transition, Beijing will be well-positioned if the West is the first to take the Green Turn route.
For Europe, the conversion of its energy industry also offers opportunities. The most important thing is to become more independent from Russia - at least in the medium term. As the authors of the ECFR report write, it is unlikely that there will be a reduction in the amount of oil and gas that Europe receives from Russia until 2030, because the EU needs temporary solutions to get out of even dirtier coal.
After 2030, there will be a rapid decrease in imports from Russia. It is possible that the EU will switch from Russia to Saudi Arabia when it comes to oil imports "because oil production there emits 50% less CO2 than that in Russia", according to the ECFR.
Dependence on energy exports is a growing strategic problem for Moscow. In normal, non-pandemic times, "the energy industry fills 40% to 50% of Russia's state budget, accounts for 55% to 60% of Russia's export revenues, and accounts for 30% of Russia's gross national product," says Yergin.
Europe is one of the most important buyers of Russian energy exports. And if demand decreases, it will leave a clear mark on the Russian budget and economy. Moscow has therefore been trying to open new markets in Asia, such as China, for some time. But even if it succeeds, the dwindling world demand for fossil fuels will cause their prices to plummet, which in turn means that new deposits will not be profitable if their costs are higher than the prices that can be achieved on the world market.
Moscow's strategic importance will therefore decline and the aggressive foreign policy that Russia is currently pursuing will no longer be so easy to finance. This is good for the EU. The authors of the ECFR report, however, expect that the EU will have to prepare for significant resistance to its Green Deal from important energy exporting countries, as they have the most to lose.
In addition, the energy transition could destabilize Europe's neighborhood, not only energy exporters such as Russia and Saudi Arabia, but also North African countries whose economies are one-sidedly oriented towards income from raw materials. Like Algeria: the country is the third largest supplier of gas to the EU. Energy exports account for 95% of Algeria's total exports and account for 60% of the state budget. If this is completely or partially eliminated, there could be unrest and a movement of refugees: towards Europe.
Forced energy transition forces these countries to quickly establish a new business model. It seems advisable for Europe to help the sunny countries of the Maghreb and the Middle East in their transformation. The sun could be used to produce electricity or green hydrogen, which could be exported to Europe. After all, Europe will depend on energy imports even in the new Green World.
The climate change puts the EU not only in front of huge economic problems if it wants to maintain the competitiveness of European companies, but also in front of major foreign policy challenges because it will dramatically change the structure of power in the world. And that will not happen without geopolitical upheavals.
(Die Welt)
Translation: Mirko Vuletić
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