Fighting Climate Change While Fighting Russia

By: Cameron Kinvig, PRACTICAL GUIDANCE

The European Union (EU) as a block of nations is the third largest greenhouse gas emitter in the world. However, European countries have long focused on alleviating climate change and have taken the lead on efforts to reach net zero emissions. 

AS EARLY AS 1970, PRINCE CHARLES OF THE UNITED Kingdom (now King Charles III) began to raise European awareness about climate change and how greenhouse gas emissions were causing global warming. Since then, albeit in fits and starts, Europe has taken the worldwide lead in fighting climate change. Now, as Europe collectively fights off the advances of a resurgent Russia and Vladimir Putin, the world will see if Europe can balance fighting climate change with the necessity of keeping its people and industries alive and healthy.

The EU Takes the Lead on Fighting Climate Change

By 1992, the United Nations had adopted its Framework Convention on Climate Change (UNFCCC), committing all 154 signatory countries to voluntary, non-binding efforts to reduce greenhouse gas emissions by the year 2000. The UNFCCC set the stage for the first conference of the parties (COP) in Berlin in 1995, where attendees began to discuss adopting stricter, binding, measures to combat climate change. These COP meetings eventually led to the adoption of the Kyoto Protocol—the world’s first legally-binding greenhouse gas reduction treaty—in 1997. Through the Kyoto Protocol, governments throughout Europe agreed to collectively reduce greenhouse gas emissions by 8% between 1997 and 2012.

EU countries were far ahead of their 8% greenhouse gas reduction goal by the time the Kyoto Protocol was fully implemented and became law in 2005. In part to inspire other countries to make greenhouse gas emission reductions, EU leaders agreed to more sweeping changes. In 2007, EU leaders committed to what they called their 20-20-20 by 2020 Strategy, whereby greenhouse gas emissions were to be reduced by 20% when compared to 1990 levels, 20% of all energy produced was to come from renewable sources, and the EU block was to consume 20% less energy in 2020 when compared to 2005 levels. These binding commitments put the EU on a path toward climate change leadership.

By 2015, EU member states were ready and willing to make additional climate change commitments. Through the Paris Agreement, EU states promised to reduce their carbon dioxide emissions by 40% by the year 2030. By November of 2019, the EU had increased its commitment further, promising in a non-binding resolution to commit to carbon neutrality by 2050 and a 55% reduction in carbon emissions by 2030. This resolution became legally binding in 2021 with the passage of the EU Climate Law. Germany went even further, passing laws promising to stop all coal-fired electricity production by 2038 and reduce greenhouse gas emissions by 65% by no later than 2030. The fight against climate change in Europe was real and it was significant.

Russia’s Actions Threaten the Worldwide Climate Paradigm

On February 24, 2022, Russia officially invaded the country of Ukraine. In doing so, it drew the ire of most of the western world—including the EU and most EU member states. Significant sanctions followed, with EU members banding together to punish Russia for its brazen invasion of its smaller, weaker neighbor. As the war has become a military and economic disaster for Russia and continues to drag on much longer than most commentators thought possible, these sanctions have begun to impose a price on all parties involved.

The EU is the largest importer of Russian energy products in the world—a trade worth over $100 billion per year. Pre-war, EU member states collectively imported roughly 40% of their natural gas directly from Russia. Countries such as Germany relied even more heavily on Russian gas, with the NordStream 1 and 2 pipeline projects designed to furnish enormous amounts of Russian natural gas directly to Germany. In response to a crippling sanctions regime, Russia struck back at sanctioning countries by threatening their energy supplies. Russia slowly decreased natural gas deliveries to European countries and has now all but halted them. With the recent destructive sabotage of both NordStream pipelines projects, this situation does not appear capable of change any time soon. While some alternate sources of natural gas—such as liquified natural gas (LNG) from the United States and the Middle East—do exist, many countries lack the sophisticated and expensive LNG terminals necessary to receive and process this form of natural gas. Storage facilities throughout Europe retain significant natural gas reserves, but those may quickly be depleted if the European winter turns severe. Rolling blackouts and industrial shutdowns are a very real possibility.

Europe Faces a Hobson’s Choice on Climate Change

The circumstances presented by Russia’s war in Ukraine have led EU leaders to a Hobson’s choice: do they allow their populace to freeze and their economies to fail, while  maintaining climate change goals, or do they ramp up energy production from non-green sources, including coal, in an effort to protect citizens and industry?

EU leaders first looked to existing LNG terminals as a possible savior. While countries like Germany do not have working LNG terminals they can utilize, others, like France, Spain, and Italy have significant LNG regasification capacity. In all, EU countries have enough LNG capacity to supply up to 40% of EU natural gas demand. Pre-war, this capacity was under-utilized, with some LNG terminals operating at 20% capacity. Post-war, they are operating at or near 100% capacity, with some agreements now in place to allow the transfer of natural gas between states like France and Germany. However, because Europe imports over 90% of its natural gas from abroad, and because excess LNG capacity is still not sufficient to fully replace Russian gas supplies, LNG cannot solve all of Europe’s energy problems.

Because of this fact, countries like Germany have had to walk back their recent climate-change initiatives and turn, in part, to nuclear plants and mothballed coal-fired power plants to help keep lights on and heaters working. These, of course, are not environmentally friendly when compared with wind and solar power generation technologies but offer consistent power generation that can act as a baseline for the EU power grid.

At least in the short term, Germany has brought back so-called brown coal power plants from mothball status and has extended the operating licenses for many cleaner lignite or hard coal power plants from sunset status in 2022 into early 2024. In total, it has taken steps to reactivate or extend the lives of more than 20 coal-fired power plants and its three remaining nuclear power plants, in an effort to save natural gas for residential heating and industrial processes this winter (and because it is now obligated to send electricity to France in return for LNG shipments). This effort is not being done to save money over hard-to-obtain natural gas supplies, as the price of coal has increased by over 600% in Germany this year. Instead, it is being done out of necessity, since many households rely on natural gas for heat throughout the winter months, and Germany’s industrial sector is a heavy user of natural gas—not just electricity—in its manufacturing processes. 

Germany may have relied more heavily on Russian natural gas than some, but it is not alone in taking evasive steps to reactivate coal-fired electricity generation. Austria, Poland, the Netherlands, and Greece have also moved to reactivate coal-fired electricity generation in an effort to replace Russian natural gas supplies, and Poland has sought to subsidize coal prices for its populace—many of which use coal for direct household heat.

Will This Last Forever?

German and other EU officials have sought to reassure the world regarding the Hobson’s choice they have made. They have publicly stated that there’s nothing to worry about—these emergency measures will only last a short time, and then Europe will be back to combatting climate change full time. Germany even moved up its coal-free climate goal from 2038 to 2030 and has forced any coal-fired electricity producers to use excess profits to build new wind and solar generating capacity. However, the answer to the question of how long this energy emergency will last may lie with Russia itself. As its war in Ukraine drags on with no end in sight, and with European efforts to import sufficient gas supplies struggling to gain traction, it may be a very long winter. If the Ukraine war lasts into 2023 with no Russian natural gas being supplied, the prospect of next winter may simply be untenable for even the staunchest climate change warriors in Europe. 

Cameron Kinvig is a Content Manager with Lexis Practical Guidance, and formerly served as general counsel and chief financial officer for X-Subsea, a multinational oil and gas services company.

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