Author: dr Kori Udovički

 

In Serbia worries about the energy crisis are fading. However what remains is the mistaken idea that green energy is to blame. Even worse is the notion that it is good for Serbia not to give up its coal. In Serbia, only a few weeks before the Global Summit in Glasgow there had not been a single mention of the Summit. It is true that some of the recently adopted green European polices have contributed to an additional jump in energy prices, but the causes of the crisis lie elsewhere. One cause is the unpredictability of supply and demand not only in terms of energy but within the context of the global recovery from the crisis brought about by the pandemic, especially in the case of China. Another is the intensified manifestation of climate change that can only be dealt with by focusing on green energy. Still, even if it were true that green policies are to be blamed, it would be a big mistake to cheer having ignored this problem for so long. The last train is leaving for humanity to be able to contain climate warming to somewhere between 1.5 – 2.0 C – the limit beyond which our life on earth would become unimaginable. In the event we miss the train Jeff Bezos is “getting ready for Mars”. But where will Serbia go?

The pandemic and the unstoppable growth of Chinese demand

During last year’s lockdown, fossil fuel prices plummeted– to the point of the price of oil even turning negative! Just as then this could not be blamed on the slow global transition to green energy sources, now a presumable rush in that direction should not be blamed for their dizzying growth. This time, the difficulties in forecasting the demand for everything, including energy, were followed by unexpected, record high, growth of China’s demand for thermal energy (gas, coal, nuclear energy). In the 12 months to August, Chinese consumption went up by as much as 14 percent compared to the previous period, although economic growth was relatively slow. The Chinese demand for gas was increasing even faster, not because China had given up coal, but because its record-breaking production has been growing more slowly. Coal production would have gone up more if coal-mine safety standards had not been strengthened following a series of accidents leading to loss of life for the miners.

China has not (yet) phased out coal, nor is it cutting down its production. For now it is only (reasonably and understandably) trying to meet its voracious growth in energy demand by increasing the share of renewables and the much slower growth of coal consumption. There is no doubt that China has embarked on a path of renewables because of its well-known long-term view of the future. The pollution of Chinese cities has provided an additional sense of urgency. It is also obvious that in this particular case, the problem lies primarily in the imbalance in the Chinese energy market, to which the Chinese authorities have responded in the only way possible at present: by raising the price of electricity for industry and quietly announcing a price increase for households as well.

 

Extreme climate and geostrategy

Meanwhile, throughout the past year global warming brought about an extraordinary number of examples of extreme climate events affecting the rise in demand and a drop in fuel production. First, the winter was extremely cold and the summer was extremely hot, thus causing a rise in energy consumption, gas especially, for heating in the winter and for cooling in the summer. At the same time, due to extreme rainfall and floods coal production declined in Indonesia and Columbia, the key global market suppliers, whereas drought (yes, you guessed it–extreme again) in Brazil reduced the Brazilian production of hydro-energy and drastically increased their demand for coal and gas on global markets. All of this was followed by declining wind farm production in the North Sea due to unusually mild winds.

Here we need only briefly mention geostrategic factors as they are not the focus of this text. It is quite certain that Russia was somewhat hesitant about supplying gas hoping that this would bring forward the launching of the Nord Stream 2 gas pipeline. At the same time, the sanctions imposed by China on imports of Australian coal (which are now being quietly bypassed) contributed to China’s problems.

We can only wish the problems derived from the accelerated transition to green energy! To the contrary, global greenhouse emissions stand at record-high levels. An accelerated construction of renewables facilities is the only possible long-term response to this crisis, and even beyond, to the climate crisis. The International Energy Agency (IEA) has estimated that the current construction effort by the global public sector is currently three times lower than required to keep the global warming below the desired limit. Luckily, the EU response to the ongoing crisis is to announce higher investments in energy transition. Still, it is questionable whether the current crisis will weaken the measures the world would be ready to commit to in Glasgow. These measures need to finally and effectively change the ways in which we are living today.

Fallacy instead of clarification

In this regard (and in many others), Serbia is persistently being fed a red herring.

“Coal ensures our energy independence.” And why would it be a problem to “independently” rely on our own renewable energy? By relying exclusively on coal, we can secure demand for the next 30 years, while entering into conflict and showing no solidarity, with the accountable world and our offspring.  By relying on renewable resources, Serbia can secure its “independence” for the centuries to come, given that Serbia is abundantly endowed (despite still not having a fair estimate of just how much and at which cost).  Just to make this clear, for the time being, “relying on renewable sources” surely implies a necessary reliance on thermal energy for the so called “baseline production”. “With coal we can sell electricity when the price is high and buy it when it’s cheap.” We can do the same if we start gradually phasing out coal and switching to renewables.

True energy independence is a privilege of a small number of countries, and Serbia is surely not one of them. However, even such countries, not only the US, but for instance Saudi Arabia as well, have started heavily investing in renewables. It is a fact that renewable energy calls for intensified trade in energy, and, in our case, this means deeper integration with the European energy market. Relying on gas, highlighted these days as a positive trait, and let alone oil, will not bring energy independence either. I am not convinced we are getting gas at an extremely favorable price, but if that were true, this would only corroborate the non-existence of independence. Nothing comes for free in economics and politics.

The actual reason underlying the resistance to green energy in Serbia is the political economy. One of the aspects is that (for now) it unquestionably costs more than coal-based energy. The other is that coal is linked to a whole range of strong, even corrupted, vested interests. All these are difficult factors for a populist government to handle. Still, they are not insurmountable – we just need to take into account the fact that the price of fossil energy should include the cost of our health and the cost of corruption.

The responsibility of “common” citizens

 

An essential issue remains – accountability. It can be debated how big should the contribution of “small and poor” Serbia be in fighting climate change. However, we cannot simply ignore this fight. It would be irresponsible, and also wrong, to lull ourselves in the notion that the green transition is something imposed on us by the “evil West”. Quite contrary to that, the strongest pressure for action was created by green parties protesting for years against global capital and the powerholders. For years, these were not mainstream forces. The facts about climate change have been persistently stressed by the United Nations panel convened three decades ago, comprising nowadays more than 600 of the most eminent global experts                

 

The most affected by climate change are actually the poorest- small poor island countries that will, for    instance, be entirely flooded, or tortured semi-desert-based agriculture that will become completely thwarted.

The awareness about the necessity for change penetrated the mainstream in full force with the adoption of the UN 2030 Agenda, namely of the Sustainable Development Goals back in 2015. Serbia, however, is still ignoring them. Luckily for our grandchildren, “ordinary” Westerners are becoming increasingly engaged, and the awareness is now reaching more and more people in power. This May, in a single regular day, an “ordinary” judge in the Netherlands had ruled that the Royal Dutch Shell company ought to reduce their net emissions by 45% by 2030. At the same time, a small, so called “activist” hedge fund “Engine No 1“  won in the fight for a similar change in the policy of ExxonMobil, the largest oil company in the USA. The Fund achieved this by engaging in raising the awareness of the major shareholders- these are the pension funds of “ordinary” people- to vote in favor of a change at the company assembly session. On the same day, the shareholders of Chevron, the second largest US company, voted for the emission reduction. It doesn’t matter anymore if the vote of the shareholders is cast this way because of the future of their own children or because it feels stupid to hold the shares of a company not accepting the fact that the demand for their products is declining, so it may as well disappear one day. What matters is that the change is not doubted any longer.

I made a joke at the beginning of this text. The richest man in the world, the owner of Amazon, Jeff Bezos, recently took his first cosmic flight in his private rocket: he didn’t say he was planning to flee to Mars, but that, in his view, mankind will have to move their polluting production “somewhere out there”. I truly believe this will not be needed. In any case, Serbia cannot and should not try to remain “independent”, while actually being isolated and poor. The green transition is leading us to the future. It would be much better to steer this journey on our own, in a smart and accountable way, using our own potential, than to be forced to do so while lagging behind the others.