Countries have since restricted trade in commodities, with a more than twofold increase in new policy measures relative to 2021.
Commodities, particularly minerals critical for the green transition and some highly traded agricultural goods, are especially vulnerable in the event of more severe geoeconomic fragmentation; emerging countries could face long-term gross domestic product losses of 1.2. percent on average, largely stemming from disruptions in agricultural imports.
Commodities fragmentation could hinder the global energy transition. To achieve net-zero-carbon emission targets, demand for minerals is set to rise severalfold in the coming years.
From the Paris Agreement, it is crucial to stay as far below 2°C warming as possible, thus immediate action is required including permanent cuts in fossil fuel use.
Source: DNV Pathway to Net zero
CO2 emissions are expected to reach record levels in 2023, but must decline 19% by 2030 and carbon pricing must disincentivize emissions.
DNV’s Energy Transition Outlook shows that expected economic, political and technological developments will lead to 2.2°C warming in 2100. In this forecast the global energy mix changes from 80/20 fossil/non-fossil today to a 52/48 split in 2050
In a Paris-compliant 1.5°C future the transition must be twice as fast, reaching 20/80 distribution in 2050. Most of the oil, gas and coal use must be stopped, and carbon capture and removal must compensate for the remaining emissions.
About half the world’s oil and gas comes from middle-income developing countries that depend on revenues from fossil fuels and face big obstacles to shifting away from them. In some emerging economies, real or perceived investor risks mean the cost of capital for a solar farm is up to three times higher than in rich countries.
Wealthy nations said in 2009 that they would be mobilizing $100bn a year in climate finance by 2020 to help poorer countries. But the money has yet to be officially confirmed and, even when it is, it will not be nearly enough.
Big names in the private sector have made bold claims about filling some of the climate funding gap. “We’re moving finance faster than any one of these environmental groups,” Larry Fink, head of the giant BlackRock money manager, told the BBC in 2021. But progress has been slow, even in richer countries.
Wind and solar energy alone will not be sufficient to break the dependence on fossil fuels in power systems. Even in the power sectors of the wealthiest countries in the world, no economy has succeeded in getting much more than about a third of its electricity from wind and solar combined. Therefore, nuclear energy represents a potential solution to two problems, providing a firm source of electricity that can complement the variable sources of renewable energy on electrical grids, and is almost entirely carbon free.
Clean hydrogen has the potential to upend the geopolitics of energy as we know it. New geographies of trade may emerge around clean hydrogen and its derivatives, such as ammonia. Countries blessed with abundant sun and wind could emerge as major exporters of green fuels or sites of green industrialization. In general, scaling up clean hydrogen could foster intense geo-economic competition, spur new alliances and collaboration, and beget new nodes of power along future centers of hydrogen production and use.
Crucially, hydrogen can replace fossil fuels for all those purposes without emitting carbon dioxide. It is a zero-carbon energy carrier, just like electricity, but it has an edge when it comes to decarbonizing sectors that are hard to electrify—think of heavy industry, long-haul transportation, or seasonal storage. The International Energy Agency (IEA) and the International Renewable Energy Agency (IRENA), for example, expect hydrogen to meet 12–13 percent of final energy demand by 2050, up from virtually zero today.
Beijing’s dominance of the clean technologies of the future has also helped to spur the US to pass the biggest climate law in its history. That in turn has prompted the EU to upgrade its green industrial policies. These moves should help to turbocharge the spread of cheaper, cleaner technologies that are already growing at exponential rates in some countries. And that could make it easier to dispense with fossil fuel subsidies and other blocks on the energy transition.
It is therefore imperative that the agreements from COP28 in Dubai help to accelerate the green transition industry. The more that green business revenues grow, the more momentum there will be. In other words, we may reach the point where the chief barriers to faster climate action are not financial or technological, but rather political risks emanating from the likes of Donald Trump and Geert Wilders.
