Editorial: COVID-19 and the Energy Transition
Article from: OGEL 5 (2021), in Editorial
The coronavirus (COVID-19) pandemic has and continues to impact livelihoods and economies dramatically. The pandemic has also profoundly impacted and is disrupting energy markets. The shocks from the pandemic have led to reductions in fossil fuel investments, consumption and emissions in 2020. OPEC, which controls about 42% of global crude oil supply[1] and 80% of crude oil reserves[2], in its 2020 World Oil Outlook indicated that oil demand would plateau in the late 2030s. This potentially reflects a lasting impact of the pandemic on the global economy and consumer habits.[3]
The pandemic is catalysing the energy transition, which in some respect was already well underway before COVID-19, albeit at a slow pace. Various nation states have announced a range of stimulus (fiscal and monetary) packages to mitigate the significant uncertainties that the pandemic poses. Some of these economic relief packages include trillions of dollars of new investments into low and zero-carbon technologies and infrastructure under a "green and sustainable growth agenda". [4] Such investments have the potential to catalyse or accelerate the energy transition forward by several years, changing the very fabric of the current fossil-based energy landscape. Further driving the transition pressure is increased investor and regulatory pressure, under the broad term ESG. Various major development financial institutions (DFIs) and multilaterals have been asked stop financing fossil fuel projects[5]. They are instead being asked to support a post-pandemic sustainable development model based on transitioning away from fossil fuels.[6]
All the above raises interesting questions: firstly, what will be the COVID-induced longer-lasting implications for the energy transition away from fossil fuels? Secondly, will the temporary pandemic-induced reductions in fossil fuel consumption and emissions be enough to put the world on a path to meet the 1.5-degree centigrade global warming target? While the desire, determination, and diligence to switch is not conjectural, the key challenges of how to transit, the rate of transition without disrupting global economies, and the unintended consequences remain debatable.
Within this broader context, we edited this Special OGEL Issue to examine and discuss the legal, regulatory and socioeconomic implications of COVID-19 vis-à-vis the energy transition. In particular, this OGEL special considered the following topics and themes: (1) global energy transition implications and possible transition pathways for developed and emerging economies - for example, domestic (diversification and job creation) and external drivers (low demand for oil, stalling of fossil-based investments, among others); (2) how the energy transition will play out at regional and national levels; (3) strategic options for countries concerning resource exploration and extraction policies; and (4) policy responses and initiatives by governments to attract investment inflows into the energy sector post-COVID, among others.
This Special Issue contains eleven (11) contributions from fifteen (15) authors based across the globe who bring a wealth of expert knowledge and relevant experience.
Miguel Ángel Marmolejo Cervantes begins the special issue assessing Mexico's "Green deal recovery plan", which seeks to position the country to recover from the economic effects of the COVID-19 pandemic while increasing sustainability and resilience of the country's energy sector. He also assesses the impacts that such a green transition will have on the Mexican workforce. Miguel asserts that while a just and green transition is possible in Mexico, political will is lacking. Merve Ergun follows this with a paper entitled "Post COVID-19 global energy transition & energy nationalism", which assesses the post-Covid-19 energy transition and its interrelation between energy transition and nationalism. She asserts, among others, that energy transition also requires energy security. However, rising resource nationalism and energy security concerns will likely force governments to continue pursuing carbon-intensive energy generation methods regardless of international law obligations and sustainable development goals. Solomon Nwaulikpe Obulor, in his paper, "Stabilisation clauses as an impediment to energy transition in petroleum-producing Sub-Saharan African countries in post-COVID-19", examines how the transition will impact international petroleum agreements in terms of internationalisation of contracts, stabilisation clauses, and international arbitration. Obolor argues that petroleum-producing developing countries could become more embroiled in investment disputes with International Oil Companies (IOCs), including the former being contractually liable to compensate the IOCs for loss of profit due to the energy transition.
Philip Andrews-Speed, in his article, "Renewable Energy in Asia-Pacific During COVID-19 in 2020 and Short-Term Outlook", analyses the extent to which the pandemic has catalysed moves to a low-carbon economy in seven Asian middle-income countries, namely: China, India, Indonesia, Malaysia, the Philippines and Vietnam. He argues, among others, that n one of the economic recovery plans of these seven Asian countries studied was explicitly 'green'. In a similar vein, Francisca Kusi-Appiah, in her piece, "Energy Transition in West Africa During the COVID-19 Pandemic", examines measures some West African countries put in place to enhance electricity security before and during the pandemic while promoting energy transition. Francisca finds that most countries subsidised electricity before and during the pandemic. Additionally, some implemented short-term measures to support energy transition during the pandemic. Likewise, Lovelace Oforiwaa Gyebi, Ishmael Ackah and Samuel Gyabaa-Adjei, in their paper "Implications of the COVID-19 pandemic on the Revenues of Electricity Distribution Companies: Evidence from Ghana", examine the relationship between the COVID-19 pandemic and revenue performance of utilities in the Greater Accra Region of Ghana. They find that a 1 per cent increase in the COVID-19 infections leads to a 0.38 per cent decrease in the revenue of ECG during the period in question.
In "COVID-19, Climate Change and the Role of Nuclear Power in the Transition to Renewable Energy Sources to Achieve Carbon Neutrality by 2050", David M. Ong examines the prospects for reviving investments in the civilian nuclear power industry and highlights the viability of the nuclear industry as part of the measures of transitioning towards carbon neutrality in a post-COVID world. Using real-life examples of disputes, Martin Valasek, Cara Dowling, and Alexa Biscaro, in their paper entitled "Foreign Investment and the Energy Transition: Booms, Busts, and Battlegrounds", analyses the potential risks faced by foreign investors as in global energy projects and show how contractual and non-contractual mechanisms can be used to mitigate those risks. They further show how investors and host governments can take steps at early project stages to resolve disputes that may arise without damaging relations.
In "COVID-19 and the 'Great Reset': Responding to Energy Transition and Sustainable Development Challenges in Sub-Saharan Africa", Theophilus Acheampong and Bridget Okyerebea Menyeh review the implications of the pandemic and energy transition for developing Africa's energy and extractives industry - mining and oil and gas industry - and broader economies. They assert that in the context of the energy transition and attainment of sustainable development goals, African governments are increasingly prioritising their transition responses based on using conventional and renewable energy resources at their disposal. Finally, Tina Soliman Hunter, in her paper "COVID-19 and the shift towards net-zero emissions in Australia: Challenges, opportunities, and responses", assesses the extent to which the pandemic has catalysed Australasia's transition. She asserts that Australia's attempts at energy transition before the COVID-19 pandemic was weak compared to other developed nations. However, recent post-COVID government initiatives such as the Low-Emissions Technology Roadmap prioritise carbon capture and storage (CCS), hydrogen, and energy storage in Australia.
In effect, what the contributions highlight in this OGEL Special is this: the pace of the energy transition will not be uniform across the world.
The editors would like to thank all the contributors for their thought-provoking and well-researched articles. We are also indebted to OGEL team for the opportunity to edit and publish this Special Issue.
Dr.Theophilus Acheampong & Professor Tina Soliman Hunter (Editors)
Aberdeen, Scotland and Sydney, Australia
November 2021
Footnotes
[1] Sharma, R. (2020). OPEC vs. the US: Who Controls Oil Prices? Available at: https://www.investopedia.com/articles/investing/081315/opec-vs-us-who-controls-oil-prices.asp (Accessed: 13 November 2021).
[2] OPEC (2018). OPEC Share of World Crude Oil Reserves. Available at: https://www.opec.org/opec_web/en/data_graphs/330.htm (Accessed: 13 November 2021).
[3] Lawler, A. (2021) OPEC, in major shift, says oil demand to plateau in late 2030s. Available at: https://www.reuters.com/article/us-oil-opec-outlook/opec-in-major-shift-says-oil-demand-to-plateau-in-late-2030s-idUSKBN26T24C (Accessed: 13 November 2021).
[4] S&P Global (2020). The Energy Transition And COVID-19: A Pivotal Moment for Climate Policies and Energy Companies. Available at: https://www.spglobal.com/ratings/en/research/articles/200924-the-energy-transition-and-covid-19-a-pivotal-moment-for-climate-policies-and-energy-companies-11651888 (Accessed: 13 November 2021).
[5] Green, M. (2020) As World Bank faces scrutiny, U.N. chief warns lenders over fossil fuels. Available at: https://www.reuters.com/article/us-climate-change-banks/as-world-bank-faces-scrutiny-u-n-chief-warns-lenders-over-fossil-fuels-idUKKBN26X2PB?edition-redirect=uk (Accessed: 13 November 2021).
[6] Pullella, P. (2020) Pull investments from companies not committed to environment, pope says. Available at: https://www.reuters.com/article/climatechange-pope-idUSKBN26W034 (Accessed: 13 November 2021).