Energy transitions and energy security become more intertwined

But perhaps the most profound long-term impact of the crisis will be its effect on the pace of energy transitions globally, and on divergences in the speed of decarbonization and emission reduction between different regions of the world. In Europe, heightened energy-security concerns prompted by the Ukraine war have supercharged plans to expand the share of renewables in the energy mix, and to improve energy efficiency. This is the first major crisis of the energy-transitions era, and the availability of alternatives to hydrocarbons gives policy-makers new response options. The EU’s already ambitious green-transitions targets for 2030 will be brought forward to mid-decade where possible, and the region will become a laboratory for what is possible when political intent, the energy-security imperative, public support, and finance align.

Outside of the EU, the crisis might not propel decarbonization as much. European countries’ focus on LNG to provide a medium-term bridge between Russian gas and renewables will drive the cost of the fuel up in the medium term, making it prohibitively expensive for developing states that wanted liquefied gas to replace coal. China is already showing early signs of this impact, with Beijing re-prioritizing coal production and consumption, and temporarily eliminating intensity and emissions targets, as it seeks to protect its own energy and economic security. China remains wedded to capping emissions and transitioning its energy use in the longer term, but while LNG prices remain uncompetitively high, and it lacks sufficient renewables capacity to take up the slack, it will not jeopardize economic growth targets for decarbonization ones.

A similar pattern is likely to be witnessed elsewhere in Asia and in Latin America, with high LNG costs disrupting immediate energy-transitions plans. But high LNG prices will not necessarily prohibit energy transition altogether. Instead, they could encourage some countries to leapfrog directly to renewables, rather than transitioning through gas first. Much will depend on whether the investment for this transformation becomes available at affordable costs, with private-sector financial institutions set to play a determining role. If capital is made available for investment, some developing countries could follow Europe’s example and accelerate their decarbonization efforts, rather than being left behind. What is certain is that the next decade will be transformational for global efforts to achieve net-zero carbon emissions targets by mid-century.

About the author

Raad Alkadiri is managing director for energy, climate, and resources at Eurasia Group. He focuses his work on the nexus between politics, economics, climate, and the energy sector, as well as its effects on market behavior and investment risk. He works closely with clients to advise on capital-allocation options, risk-mitigation strategies, and policymaking. He also closely follows medium- and long-term geopolitical, energy, and climate trends, and their impact on the risk environment.

Raad has more than 25 years of experience advising senior executives and government leaders. He came to Eurasia Group in 2021 from BCG, where he was a senior director in the Center for Energy Impact, focusing on country dynamics. Prior to that, he was managing director for petroleum sector risk at IHS and a partner and head of markets and country strategies at PFC Energy. In 2003-2004, Raad served as assistant private secretary to the UK Special Representative in Iraq, and in 2006-2007, he was senior political adviser to the UK Ambassador in Iraq. He holds a doctorate in international relations from the University of Oxford. He also holds a master's degree in international relations and a first-class honors degree in psychology and international relations from the University of St Andrews.