What environmentalists don’t understand when they talk about fossil fuels

The first data of the 2022 final balance show a slight increase in world energy consumption (+1 per cent), in parallel with contraction in economic growth. In this context, there was a sharp increase in electricity renewables, however an unexpected resilience of fossil fuels which they should have satisfied more than 80 percent of total world consumption, contributing to the further growth of emissions. The coal hit a new record of consumption exceeding eight billion tons, with the surprising contribution of hypocritical Europe (+6 percent) to reduce withdrawals of Russian gas; oil is back to pre-pandemic levels which it should exceed in the coming months; while only natural gas recorded a slight contraction in consumption, not due to the pressure of the energy transition, but due to the need to reduce it after the Ukrainian war.

At the origin of energy crisis, which exploded in 2021 even before the war, was the shortage of gas on international markets caused by the increase in demand in the face of insufficient production capacity, due to the collapse of mining investments. Scarcity that has allowed the blackmail of gas by Moscow. Investments that the oil companies, however, are reluctant to resume for various reasons, starting with the increasingly aggressive policies of Europe (Fit for 55 and REPowerEU) and the United States with the Inflation Reduction Act which has allocated 369 billion dollars of subsidies to favor of (national) renewables. Investing at the risk of incurring ‘sunk costs’ leads companies to prefer benefits to shareholders. Of the 200 billion in profits made last year by the five largest, only a minority will be translated into investments. Chevron has earmarked 75 of them for the repurchase of treasury shares.

However, building a future without fossil fuels does not free the world from the responsibility of avoiding a future “supply vacuum” if there is still a need, with the risk of creating deep tensions on the markets such as those experienced in 2021. Let me explain. If we imagine purely hypothetically that the world can do without fossil fuels in a few decades – many consider it probable – it would follow that their industries would have to contract investments right now that would bear fruit in that time horizon. Building new refineries, pipelines, ships, power plants requires huge costs and long lead times with their useful lives extending beyond the mid-century indicated as the date for the Net-Zero goal of energy systems.

What would happen if that hypothesis did not prove to be true ex-post? What consequences would there be if the supply of fossil fuels proved to be insufficient to satisfy a demand expected to grow in any case? Since fossil sources, starting from oil, are still the basis of modern society – from mobility to tablets to fertilizers – eliminating them or even drastically reducing them would have enormous impacts on the lives of societies and individuals.

A complexity that explains the contradiction between the growing awareness of governments about the critical nature of the climate issue and their inability to adopt effective contrast policies. Influencing market dynamics, the spontaneous tendencies of the economy, the search for individual well-being to bend them to distant though indisputable purposes of general interest would require a degree of legitimacy and a trust in the foresight of the decisions of the authority and a capacity for coercion, hardly recognizable in public opinion these days.