Energy transition and energy security – complementary or conflicting?

Energy transition and energy security – allianzgi.com complementary or conflicting? September 2022 The war in Ukraine has exposed key vulnerabilities in the world’s energy mix, bringing the issues of energy security, affordability, and resilience to the fore. However, this also heightens the near-term risks to energy transition and the Paris Agreement goal of limiting global warming to 1.5°C. A key question to explore now is whether the twin goals of energy security and energy transition can be complementary? Julien Girault Sustainability Key takeaways Analyst – War in Ukraine has accelerated the urgency to define the future energy mix, which requires a fundamental shift towards renewable energy sources by 2050 – A separation of energy consumption from GDP growth is required to reach a trajectory of global warming below 1.5°C – While there is agreement on broad trends, there is still a lack of consensus on the precise energy transition pathways – Prioritising short-term energy affordability over decarbonisation is a risk, although the exposed energy security vulnerabilities may aid the transition – Closing the energy transition funding gap will open the door to investment opportunities in three areas: fossil fuel reduction; transition to renewables; climate-focused solutions In April 2022, the International Panel on Climate has also served to highlight the need to invest Change (IPCC) confirmed that the critical target more in energy infrastructure. of limiting global warming to 1.5°C by 2050 Energy consumption is the starting point. To will be reached only if we halve CO emissions 2 reach the required trajectory, governments must by 2030. Although the world is not currently on decouple energy consumption and GDP growth track, the goal is still within reach if action is (see Exhibit 1). As economies grow, energy taken now – according to the IPCC. Russia’s war demand rises; when energy is constrained, GDP in Ukraine and the consequent threats to energy growth slows. Decoupling the two will enable security have heightened the risks of remaining one measure of the limiting of global warming. behind these targets and failing to fulfil national Further adaptation measures, behavioural pledges made at COP26 in Glasgow. Yet, the war changes and energy efficiency are essential to Value. Shared.