Energy Nationalism: A Stumbling Block to Net Zero… | ENGIE Impact

Energy Nationalism: A Stumbling Block to Net Zero Ambitions?

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Energy Nationalism
Net Zero
Sustainability Transformation

Troublesome shifts in global economic, supply chain, or geopolitical uncertainties can lead to organizations and governments looking inward to reflect on how these external changes may impact their own responsibilities and future ambitions. In these moments of uncertainty, it is only natural for many to seek stability.

But as comforting as that stability can be, it may not be the path to long-term success—especially if it means reverting back, even in the short-term, to old, damaging, carbon-based energy tactics.

The Drive for Energy Nationalism

The terrible consequences in recent months of the war in Ukraine will continue to have long-term implications and ramifications—not just for those directly involved, but across the world, far from the epicenter of combat.

Energy as a political and economic tool is nothing new but has come to the fore once again. This time, the weathervane may swing back toward a more nationalistic need for energy security—that countries need to be wholly, or mostly, self-sufficient for their energy needs. This energy nationalism is born out of the understanding that not all international energy partners are going to be safe to work with, and that limiting international exposure to a smaller number of partners is a recipe for trouble.

With an urgent need to address affordability and security of supply, many countries may embrace energy nationalism by restarting old carbon-centered programs. Governments and companies may be drawn back to what they perceive as more stable options—coal plants, oil and gas—like in the United States where strategic fuel reserves were made available.

Not only are these countries looking after their own needs, but they are also looking to help supplement the needs of other countries and companies that have relied on, or arguably over-relied, on a few partners, as they too move away from sanctioned sources. While this may not lead to an overall increase in energy consumption—it should be noted no one has actually stated they are ramping down production, only ramping it up—it may possibly increase the carbon emitted in the short term globally.

The echoing impact is not limited to the environmental impact either, as it also raises issues with the energy portfolio strategies of countries and companies and the financial implications for a number of institutions.

The Potential for Transition Procrastination

Countries and companies for a number of years have made public promises and pledges on their decarbonization journey and are working hard to make them a reality in the timeframes stated. They’re working to hold themselves accountable for the goals they’ve set. But even a short-term embrace of energy nationalism could get them off track if they start adjusting goals or pushing timelines. But I would suggest that given all the science and data available on the acceleration of our impact on the climate of the planet, any delay, especially when agglomerated with other organizations’ actions, could be catastrophic.

It would be one thing if it was just a matter of delayed progress but reacting to uncertainty by relapsing back to fossil fuels doesn’t simply postpone the achievement—it possibly undoes advances that have been made and makes the end goal ever harder to reach.

Putting a pause on or slowing their Net Zero ambitions may be an enticing option for countries and companies. Whether positioned as a temporary pause or a more defined postponement, the allure of once again embracing heritage carbon-sourced energy—which for some is a self-protectionist necessity—may be too much to pass up.

But there are additional pressures and options to consider, which will hopefully encourage more positive decision-making.

Corporate Pressures: Transparency and the Competitive Edge

Stakeholders—investors, customers, staff and other vested parties—continue to demonstrate that a robust plan to achieve Net Zero operations is now a corporate necessity. Related reporting has moved from voluntary, PR-led sustainability reports to more germane capital market briefings. This is in addition to increasingly mandatory requirements from the likes of the SEC and other financial regulators globally.

These disclosures impact how other bodies, such as tax authorities, may now look at operations—which notably increases the gravity of this issue and potential risks in playing a PR game with a decarbonization strategy. Investors are looking for comfort that their current and future investments have robust, defined strategies to manage future climate scenarios, as well as a good plan how to make the transition happen.

While our current moment creates an easy excuse to pump the brakes—triggering a reflex to decrease capital expenditures around sustainability infrastructure and technology as companies seek greater comfort in the future—procrastination of efforts and investments could actually put an organization at a competitive disadvantage.

Now is Not the Time to Brake, but to Accelerate

Given the increasing stakeholder pressure, long-term growth impact and established science, companies should not take the current environment as an opportunity to delay the creation or implementation of their decarbonization strategy. In fact, a better approach is to use this time to actually increase capital expenditure and build a more sustainable, energy portfolio—particularly in renewables. This effectively embraces the positive side of energy nationalism, while still ensuring a greener future.

This can be difficult, as the need right in front of us feels far more pressing, and a robust strategy and the implementation roadmap takes time, but temporary shifts in geopolitical or economic realities don’t need to make that journey longer. Companies that haven’t started should start now. A formalized, board-sponsored decarbonization strategy is the beginning, but defining the ‘how’ of implementation is just as important. Those in the middle of their journey should continue.

The Net Zero transformation is not a choice; it is a business imperative. In moments of uncertainty, which we face now and will again in the future, reverting to the comfort of what you know is human nature. But companies that make the choice to not start, or significantly slow investment in their low-carbon transformation, will quickly become uncompetitive, unattractive and, it could be argued, irrelevant.

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Consumers will opt for their more sustainable, greener competitors—those who were able to weather the storm, stand as stalwarts during uncertainty, and emerge from the chaos well on their way to their established goals.

Energy nationalism puts a spotlight on energy at the nexus of affordability, security and decarbonization. Current pressures are forcing the hand of many. And while the short-term presents numerous economic realities and geopolitical uncertainties, we would all be failing in our long-term responsibilities to our children’s children not to focus on a proven carbon-negative portfolio of sources—ensuring any future chapters of energy disruption can be addressed without panic or uncertainty.

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