This article is part of the World Economic Forum's Geostrategy platform
The world is experiencing a profound energy transition, shifting from an energy system based on fossil fuels, to one based on renewable energy. The Director-General of the International Renewable Energy Agency, Adnan Z. Amin, speaks to Gitika Bhardwaj of Chatham House about how this transition is set to impact the geopolitical landscape.
The world is undergoing an energy transformation, from a system based on fossil fuels to a system based on renewable energy, in order to reduce global greenhouse gas emissions and avoid the most serious impacts of a changing climate.
How does this transition have the potential to reshape the geopolitical landscape and how does it compare to the impact of the last transition from traditional biomass energy 200 years ago?
The last transition created an energy system that was based on resources that are geographically concentrated. This allowed the exercise of geopolitical power around the distribution of those resources which, in turn, had economic advantages for those countries that extracted those resources.
But we are now moving from an energy system of scarcity to one of potential abundance for almost every country around the world. This is because almost every country will have some degree of energy independence in the new energy system we are moving to since almost every country will be able to harness renewable energy.
This shift is a fundamental change for the world and it’s going to have a profound impact on the global economy. That’s why I believe that the energy transition we are going through is going to be as consequential, if not more, than the last one we experienced 200 years ago.
How do you anticipate countries, particularly those that have benefitted from fossil fuel production in the past, to respond to these geopolitical changes, given that it could potentially disrupt existing power dynamics and trade patterns?
One of the greatest challenges that the energy transition presents is for fossil fuel-producing countries, many of which are countries that have run their economies on these resources in the past, to adopt a new, diversified, economic model.
We are beginning to see the emergence of this around the world. In the United Arab Emirates, for example, there is an energy strategy in place that is calling for 70% decarbonization and 44% clean energy power generation by 2050. This is at the base of an economic diversification strategy to move away from their reliance on one particular resource – which currently is oil.
I think this is a critical challenge for many countries who are in the same situation. For example, although Saudi Arabia is trying to diversify its economy, it faces immense challenges, although it’s Vision 2030 strategy points the way towards moving in a positive direction.
But there are other countries that are unprepared. If you think of the possibilities that a fast-moving energy transition has for the prices of fossil fuel resources, and the impact it could have on countries like Nigeria, Angola, Gabon and others that are highly dependent on these resources, then unless they have ambitious strategies of economic diversification, they could face some severe challenges in the near future.
In terms of the geopolitics, the trade in oil and gas has been at the base of the geopolitical system we have today, but if you think of the fact that we are moving away from these resources into a much more electrified world with power movements across borders based on electricity from renewable energy, there is an enormous opportunity for fossil fuel-producing countries.
This is because many of them are rich in renewable energy resources,too,so there is a chance for them to remain as energy players. However, it needs leadership and it needs vision to make it happen.
How are emerging economies across South America, Asia and Africa responding to the global energy transition at a time that they are seeking to develop their economies?
One of the most exciting things is that they are already responding well. What has happened over the last four years is that renewables have formed the majority in new capacity addition to the global power sector – which is remarkable.
Furthermore, the majority of renewables capacity addition has been in emerging economies and developing countries, so some of these countries are really pointing the way towards a very exciting future.
You have leaders in this field, like Morocco, which is coming from a 90%energy import dependency to a target of having 52%renewables in their electricity mix by 2030 – which is an extraordinary achievement. I’ve seen some of their installations and they have state-of-the-art technology and low-cost power generation that’s competitive with any fossil fuel power generation in the country.
Chile, too, has some of the lowest prices for renewable electricity in the world and it’s quickly moving to a zero-carbon energy economy.
What these countries are showing, is that this is the development strategy of the future, especially for emerging economies. It’s not merely about the replacement of one fuel for another – it’s a whole new paradigm of development that is emerging based on the current global energy transition.
In a recent report, the transition to renewables is said to be set to reduce the risk of energy-fuelled conflicts, and as such, you recently said that renewable energy is the ‘defence policy of the future’. Can you explain this in more detail particularly given the increasing security concerns posed by climate change?
Fossil fuels, particularly oil, have had a marked imprint on patterns of conflict over the last 100 years. As the world shifts to renewables, and the relative importance of fossil fuels declines, a geopolitical shift in the frequency and location of conflict is likely to occur.
The risk of confrontation over contested hydrocarbon reserves, such as in the Middle East or in the South China Sea, may diminish. To this extent, the global energy transformation could generate a ‘peace dividend’.
Climate change poses an existential security threat to humanity but renewable energy serves as a defence policy for the future as it plays an essential role in all strategies to combating climate change.
The latest IPCC report set out evidence of the need to limit global warming to a maximum of 1.5°C above pre-industrial levels in order to prevent irreversible changes to the Earth. But unless urgent steps are taken to decarbonize the energy sector, the world will remain way off this target. This is because pathways to a low-carbon economy require a rapid deployment of renewable energy and a doubling of energy efficiency – given that the energy sector accounts for two-thirds of global greenhouse gas emissions.
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Renewables have the added potential to mitigate against wider socio-economic stresses and shocks that can lead to conflict too: by improving access to energy to the 1 billion people who are energy-poor, by creating jobs, reducing local pollution, promoting sustainable development and alleviating competition over scarce natural resources.
The renewable energy sector has achieved a number of milestones and currently employs over 10 million people globally. Are there any challenges presented by the global energy transition that need to be considered, for example, safeguarding those currently working in fossil fuel industries?
There is a lot of discussion about the disruption of the energy transition, which is correct, that’s why I think it should be a priority for policymakers and decision-makers to understand how the transition to renewable energy will impact everyone.
If the energy transformation begins to permeate into industrial sectors that have traditionally been dominated by fossil fuel energy, there could potentially be severe social disruption, and we are currently seeing the fear of this disruption playing out in the coal industry.
However, there are some innovative models, like a model that has recently emerged in Spain to enable a just transition in the coal sector. Social arrangements have been made to accommodate Spanish coal workers in the future as the country moves towards its renewable energy transition.
But then if you think about how technology is beginning to reshape the global economy, if we move rapidly into the renewable energy-based electrification of the economy – where major sectors like mobility become increasingly electric – then you could see the whole supply chain of conventional vehicles, that employs millions of people around the world, with hundreds of billions of dollars of investment, very quickly begin to experience significant challenges.
So there is a lot of work to be done in terms of developing a cross-understanding of industrial policy and social policy. For example, understanding the scale of this energy transformation, how it will affect significant sectors in the economy, what kind of coping strategies there are and how we can create a workforce fit for the future which will involve reskilling the present workforce. I believe this has to be at the centre of thinking for policymakers and decision-makers today.
I wholeheartedly believe that we have the opportunity to move to a decarbonized society that can at least keep us below 2°C. But, unless we have the will at different levels of society – from politics to industry – that incentivizes investment in low-carbon growth, then I fear we may not achieve the goals of the Paris Agreement.
How the global energy transition is set to disrupt the geopolitical landscape, Adnan Z. Amin, Director General, International Renewable Energy Agency, with Gitika Bhardwaj of Chatham House