The question of gas as transition fuel: lessons learned from the current energy crisis
The Russian invasion of Ukraine has stirred a global social-political turmoil. Russia’s move to politicize their natural gas supply to the European Union caused a disruption to the global energy market, which in turn impacted the global trade of energy commodities. The price of energy commodities has risen to the level unprecedented before. The Brent crude oil price has soared in March 2022 coming close to its all time high of $147 a barrel after Russia’s invasion of Ukraine, reaching a milestone above US$100 per barrel for the first time since 2014. Other commodities, such as coal and liquified natural gas also saw an increase in price.
The rise of energy prices has also created trickle-down impacts to the global economy, plunging the already vulnerable communities further towards poverty and halting the post-pandemic growth and recovery. Low-income households must now pay more than what they can normally afford to keep their electricity and gas. Moreover, this condition is also exacerbated by surging food prices. To alleviate the impacts of rising energy prices, many governments are placing energy subsidies for consumers and energy providers alike. This energy subsidy policy aims to keep energy prices affordable for all layers of society. Keeping energy prices below market average will allow low-income households to afford the energy, especially in the face of the current energy crisis and to meet the ever-increasing demand for energy. However, this decision to increase energy subsidies for fossil fuels raises questions about how governments maintain their commitment to the Paris Agreement, while securing a stable and affordable supply of energy to the people.
The Government of Indonesia includes Sustainable Energy Transition as one of the thematic pillars in this year’s G20. Specifically, the Ministry of Energy and Mineral Resources (MEMR) as the leading ministry overseeing the theme of energy transition, has promoted the role of natural gas in the energy transition scheme, as shown during the Webinar G20 Side Event Series: Escalating The Role of Gas in Energy Transition. Natural gas is deemed as the answer to the challenge of balancing economic objectives with emission reduction targets. However, a recent publication by Climate Analytics shows that gas should be phased out 5-10 years after coal to stay within the 1.5C modelled pathway, rather than being chosen as the ‘bridging fuel’ to renewables.
Reflecting on the recent energy crisis caused by the Russian invasion of Ukraine, Indonesia and other countries may need to reconsider their strategy of choosing gas as transition fuel. In the case of the European Union, the reliance on fossil gas imports has created a condition of energy fragility, while shortcuts taken to ameliorate this situation could drive countries further away from their emission reduction targets, such as by expanding oil and gas import contracts or subsidizing energy bills. On the other hand, these shortcuts may guarantee energy supply with affordable prices that is needed to keep the economy afloat without burdening the low-income households. This dilemma presented the Indonesian presidency of G20 with a daunting task to deliver actions that cater to both elements of the economy and energy resilience within the current energy crisis.
To unpack the dilemma of gas as transitory energy options and to explore strategies in mitigating the crisis, the C20 Environment, Climate Justice, and Energy Transition Working Group along with Clean, Affordable, and Secure Energy (CASE) for Southeast Asia (SEA) programme would like to organize a discussion with energy experts from European Union (EU) countries and from Indonesia. During this discussion we want to facilitate sharing about the implications of the Russia-Ukraine war to the global energy transition progress and whether it still makes sense to think of gas as transition fuel.
Abra P.G Talattov - Head of Center of Food; Energy; and Sustainable Development INDEF
Dewan Energi Nasional
Dr. Hardiv Situmeang - Chairman of the Indonesian National Committee–World Energy Council
Gaurav Ganti - Climate Analytics*
laire Fyson - Climate Analytics*
Mia Moisio - New Climate Institute
Representative from C20 ECE WG