Columnists: Isadora Wronski, Greenpeace Nordic
Published on: 13 Nov 2023
A gloomy economic outlook requires smart long-term investments
While a bigger global recession has been averted, the pandemic, the invasion of Ukraine, the energy crisis and stubborn inflation have tested European economies. Member states are still currently ill equipped to deal with future shocks and the impacts on the cost of living. European gas wholesale prices (the marginal fuel affecting the market price for electricity) have come down from their skyrocketing mid-2022 levels, but are still above usual historic levels. In the last two years European households have been protected from high oil, gas, and electricity prices; €651 billion has been allocated to shield consumers from energy costs. As these untargeted temporary energy support measures are phased out, many Europeans will struggle, and as governments are put under pressure to exercise fiscal restraint to curb deficit levels many consumers will be left even more exposed to any ensuing austerity measures.
Even without a cold winter and potentially increased energy prices, Governments will have less money to solve more problems, and people will be affected.
Instead of eliminating the massive fossil fuel subsidies and prioritising measures that would have reduced energy demand, governments' crisis response measures were instead aimed at propping up consumption-driven energy demand which resulted in a 123 billion euro surge in fossil fuel subsidies in 2022 and massive windfall profits for the industry. Money that could have been spent on cost-competitive, technically available solutions that would have created new jobs and improved the economic outlook. If governments had invested that money in energy sufficiency, such as warm (or cool) communal facilities and free/cheap public transport; efficiency measures, such as renovation and insulation, heat pumps, and unlocking resilient renewables via communal solar thermal, photovoltaics and supporting energy communities and adapting grids, then household (and government) budgets would have been far better protected against energy bill volatility.
It makes economic sense for governments to prioritise investments that protect households against current and future cost-of-living crises by reducing their dependence on fossil energy consumption, whilst protecting the public purse from more emergency energy measures.
Does Europe need 51 new LNG terminals?
European gas storage was at 96% capacity when this year's heating period started. The fact that 2023 has been the hottest year on record since the measurements started has of course contributed, but significant demand reduction is also a key factor. LNG imports are still 28% above the 2015-2020 average, but seem to be coming down. In the EU27 gas consumption was 21% lower in the first half of 2023 than the 2019-2021 average with similar numbers in September. Despite the inadequate government’s support for demand reduction, the trend in big gas consuming countries is decreasing consumption levels.
If demand continues to decrease, the gas market will shrink by around a quarter this year (compared to the 2019-2021 average) which means that the uncoordinated, panicked plans for 51 new LNG terminals could be better left on the drawing board.
Politicians are elected to cater to people’s needs, not the fossil fuel industry’s greed
In 2022, governments failed to use the energy crisis to accelerate the energy transition. Instead, public money was siphoned into the obscene profits of the fossil fuel industry through untargeted support. One and half year into the energy crisis, after a summer full of heatwaves, fires and floods, energy giants are still being allowed to continue locking Europe into long lasting gas deals that will make it literally impossible to reach climate targets. ENI (Italy) and Total Energies (France) have just signed a 27-year LNG deal with Qatar and Shell has signed a beyond-2050 deal with the Netherlands. All three would run until 2053, making a mockery of the Paris Climate agreement. This is hardly surprising given the perverse level of influence of the fossil fuel industry over our decision makers.
As the polycrisis deepens and increases in scale and magnitude, it becomes increasingly important that governments invest in real energy security and household’s needs instead of fuelling the crisis.
The fossil fuel companies influence must be reined in and instead they must be held accountable, made liable and forced to pay for the harm and suffering they’re causing.
According to IEA “decarbonising the energy system begins with changes in demand”
The International Energy Agency (IEA) recently released an updated version of their net-zero roadmap. For a long time the IEA reports were criticised for underestimating the forecasts for renewables and efficiency and overestimating the role of fossil fuels, carbon capture and storage (CCS), and nuclear. The IEA is (was) traditionally an organisation promoting business as usual economics, set up by the OECD and not notable for its green agenda. Yet they’re now praising the development of solar and electric vehicles (EVs), and talking about a demand-led transition where there’s no room for any more fossil fuel exploration.
Its clear, structural demand reductions are unavoidable, urgent and are fast becoming the new business as usual.