When Russia invaded Ukraine, Europe expected to freeze. Instead, the war’s aftermath left numerous Asian countries in the dark.
After a year of conflict, Europe’s gas reserves are swollen, and its leaders are embarking on ambitious plans to green their economies. But, thousands of miles away, poor Asian countries are scrambling for fuel after liquefied natural gas cargoes were diverted to wealthier European markets.
Certain countries, such India and Indonesia, have increased their use of coal, which is a setback for the global fight against climate change. Others, such as Bangladesh and Pakistan, have experienced blackouts owing to sudden fuel shortages.
Deep fault lines in the global energy system are being exposed one year into Russian President Vladimir Putin’s war on Ukraine, particularly between affluent and poor nations. Those who can afford to pay growing prices are stockpiling energy supplies like natural gas and preparing for climate change by developing renewable energy sources like wind and solar. Those who can’t are either reverting to dirtier fuels or going dark.
“I believe there will be wider disparities between countries,” said Jane Nakano, senior fellow at the Center for Strategic and International Studies.
The war’s impact was also felt in regions of Africa, where millions of people lost power as rising fuel and food prices compounded the effects of climate change and Covid-19.
The global race for coal, gas, and oil resources pushed greenhouse gas emissions to an all-time high last year, just as the clock is ticking on global climate efforts. According to scientists, the world has nine years at present emissions rates before the rise in global temperatures since the dawn of the modern era exceeds 1.5 degrees Celsius, the threshold for catastrophic harm to people, economies, and ecosystems.
Southern Asian emerging economies, in particular, are critical to global climate efforts because their rising populations require more energy. They are also among the people who are most vulnerable to the effects of climate change.
Pakistan, with a population of 220 million people, is possibly the most striking example. Last year, the country was already in the throes of political uncertainty when disastrous floods struck, causing more than $30 billion in damage.
The conflict exacerbated the situation.
According to BP data, more over a quarter of the gas consumed in Pakistan for power plants, industry, and cooking came from international LNG supplies in 2021. But, much of cargo was redirected last year to wealthier ports in Europe and richer Asian nations that could still afford the higher costs.
According to the Center for Energy Economics and Financial Analysis, nine shipments destined for Pakistan were diverted to other countries. Imported coal prices have also risen, encouraging Pakistan to enhance domestic production of lignite, a carbon-intensive kind of fuel.
It was still insufficient energy.
The scarcity coincided with an unprecedented heat wave, the impact of which, according to scientists, was amplified by human-caused climate change. Pakistan took emergency measures as electricity demand increased. Malls were ordered to close early, and lighting were turned off.
Yet, last month, one attempt at fuel rationing backfired spectacularly: coal and nuclear units that had been shut down overnight to conserve resources were unable to resume. For 15 hours, the entire country fell dark.
“When you’re desperate, you do what you have to do,” Ahmad Faruqui, a Pakistani-born economist who monitors the country’s energy sector, said.
Natural gas has gone global.
Global energy crises have occurred in the past, such as the Arab oil embargoes of the 1970s. But, Russia’s invasion of Ukraine triggered the world’s first major gas crisis.
Historically, gas has been a regional commodity carried via pipelines. This is particularly true in Europe. Siberian gas is pumped through Russia and into Europe, where it fuels power plants, industry, and household heaters. According to the International Energy Agency, Russia will supply almost 40% of European gas consumption in 2021.
Moscow initiated its invasion in February 2022, at a time when gas markets were in change. Liquefied natural gas, which is refrigerated to negative-260 degrees Fahrenheit and transported on ships, was once a niche industry between countries like Qatar and Japan.
Nevertheless, in recent years, LNG has gone global, fuelled in part by a glut of inexpensive gas and new export facilities in the United States. According to the US Energy Information Administration, the United States, which transported its first cargo of LNG in 2016, was the world’s top exporter during the first half of 2022, when a Texas plant caught fire and restricted U.S. supplies.
As a result, when Putin launched the attack on Ukraine, Europe retaliated by turning to the United States and a few other countries to replace the gas it had previously received from Russia. According to Energy Department data, supplies from the United States to Europe will more than treble to 2.7 trillion cubic feet in 2022.
Several countries of the world were enraged by Europe’s efforts to stockpile gas.
The difficulties arose as US gas exports originally destined for Asia were rerouted to Europe, sending prices skyrocketing. In China, LNG demand fell by 20% as a result of high pricing and weaker economic growth caused by pandemic lockdowns. According to the Institute for Energy Economics and Financial Analysis, the impact of high prices was most severe in South Asia, where nations like as India, Pakistan, and Bangladesh saw demand plummet by a combined 16 percent.
Analysts predicted that expanding LNG demand in emerging Asian markets will rival that of China and India over the next 20 years before to the war.
The picture is becoming less clear. The International Energy Agency (IEA) projected a reduced role for natural gas in emerging Asia in its most recent world energy outlook, citing affordability issues.
According to Sam Reynolds, an energy finance specialist at the Institute for Energy Economics and Financial Analysis, future decisions by emerging countries may come down to whatever fuel is economical and available. “Unfortunately, as the past year has demonstrated, LNG does not fit any of those conditions.”
‘Debt anguish’ versus the climate crisis
Some countries are taking precautionary measures.
Coal generation in India increased by 21% between April and July of last year, when the country was scorched by a heat wave. According to some officials, coal will continue to play an important role in the country’s energy mix for the foreseeable future. At the same time, India is constructing hundreds of gigatonnes of renewable energy capacity.
South Africa, Vietnam, and Indonesia, all big coal consumers, have pledged to reduce coal use and reduce carbon emissions in exchange for clean energy assistance as part of the Fair Energy Transition Partnerships programme led by the United States and the Group of Seven countries.
Authorities in the Philippines have also attempted to increase their renewable energy targets in order to generate more power domestically while reducing emissions. They claim that having gas as a backup is an important aspect of their plan.
Yet, the war makes that harder.
Numerous planned liquefied natural gas projects in the Philippines have been pushed back, owing in part to high gas costs and a lack of long-term contracts that would provide constant supplies. This raises concerns regarding LNG investments.
“Our goal, if possible, is to minimise the cost of electricity,” said Michael Sinocruz, director of the Philippines Department of Energy’s policy and planning office. “And in order to accomplish so, we must carefully consider what is the right blend for the Philippines.”
Increasing renewables could protect the Philippines from the price and supply instability of fossil fuels. Nevertheless, when additional renewables come online, the country will need to invest in batteries, storage, and backup energy, according to Sinocruz.
“In such scenario, we must balance,” he continued.
More international finance and private-sector investment, according to analysts, are required to speed sustainable energy transitions in emerging economies. Without it, other countries may follow Pakistan’s example.
Fuel price increases have depleted the country’s coffers. According to the IEA, at least 30% of Pakistan’s import payments went to oil and LNG in the last nine months of 2022, suggesting a frantic attempt to keep the country’s economy running. According to Reuters, the central bank currently has enough foreign exchange reserves to finance barely three weeks of imports.
According to Rishikesh Ram Bhandary, deputy director of the Global Economic Governance Center at Boston University, Pakistan lacks the creditworthiness to attract private investment in renewable energy infrastructure due to the economic crisis.
“If you’re Pakistan and you’re in debt, you’re not going to be able to borrow to develop these massive things,” Ram Bhandary explained.
As a result, the country turned to coal.
Pakistan aims to stop importing LNG and quadruple domestic coal production, according to its energy minister.
The news is noteworthy because coal power was essentially non-existent in Pakistan until 2010. Things changed when Pakistan used Chinese money to explore a domestic coal seam. It later began importing coal. According to the IEA, coal accounted for 30% of Pakistan’s electricity generation last year.
“I don’t think, honestly, they are going to let go of coal. They regard it as a valuable resource, according to Faruqui, the economist. “Climate change is an ongoing problem. In the short term, we must keep the lights on.”
