Ukraine Archives - An Economic View of the Environment

Post-pandemic demand for energy combined with the war in Ukraine and subsequent oil and gas shortages have created a global energy crisis. That’s the core assessment offered by global energy expert Daniel Yergin in the newest episode of “Environmental Insights: Discussions on Policy and Practice from the Harvard Environmental Economics Program,” a podcast produced by the Harvard Environmental Economics Program. Our complete conversation is here.

It would be much too easy for a New York Times crossword puzzle to include the clue, “Twelve letters for a world-renowned global energy expert,” because the absolutely obvious answer would be “Daniel Yergin.” So, I was delighted to host Dan for my most recent podcast. As you probably know, in these podcasts, I converse with leading experts from academia, government, industry, and NGOs, who are working at the intersection of economics, energy, and environmental policy. Dan Yergin surely belongs in this group.

He’s known as an author, historian, educator, energy analyst, and the founder of Cambridge Energy Research Associates (or CERA), which was acquired by IHS Markit in 2004, which itself recently merged with S&P Global, of which Yergin is now Vice Chair. To some audiences, Dan is best known for his books, including The Prize: The Epic Quest for Oil, Money, and Power (1991 – Pulitzer Prize), The Quest: Energy, Security, and the Remaking of the Modern World (2011), and The New Map: Energy, Climate, and the Clash of Nations (2020).

But the book that first brought this remarkably productive gentleman to my attention was Energy Future (1979, co-authored with the late Professor Robert Stobaugh of Harvard Business School).

It’s striking that in his most recent book, “The New Map: Energy, Climate, and the Clash of Nations” (2020), Yergin writes prophetically that Ukraine would soon become a significant source of tension between Russia and the West.

“I could see that Putin did not accept the outcome of the end of the Cold War and he said Ukraine’s not a country. And it tied together geopolitics and energy in a very vivid way. And it just seemed to me that a collision was going to come,” Yergin says. “I wouldn’t have imagined a war that would go on more than a hundred days specifically, but I just could see that this was going to happen.”

He observes that the war in Ukraine, coming on the heels of the post-pandemic surge in demand, has further squeezed energy supplies around the world.

“We have … moved into a period of … shortage,” he says. “I think that right now at this point we’re in a pretty dire short-term energy situation. In fact, I would say that since last October, we’ve been in a global energy crisis.”

Yergin says he believes Russian President Vladimir Putin is seeking to test the strength and resolve of the West with his actions in Ukraine.

“It seems to me that the situation is going to get worse over the next several months. That’s because it’s not only the question of markets now and investment, but it’s also this clash with Russia, and Putin is doing what Russia … and the Soviet Union did not do for half a century. He is manipulating energy supplies to make the situation in Europe more difficult by cutting back on gas. And his strategy is pretty clear – which is to create shortages in Europe, which will cause fissures in the Western unity on Ukraine so that the Alliance falls apart.”

The energy crisis, Yergin notes, is forcing many governments to temporarily pause efforts to reduce CO₂ emissions with the short-term goal of increasing oil and gas supplies to offset the loss of Russian fuel.

“Natural gas is in short supply globally, and coal is in short supply, and you can’t build enough wind turbines and solar quickly enough to accommodate for that. And politicians react to voters, and voters react to their pocketbooks when these prices get as high as they are,” he states.

Yet Dan Yergin also says he believes that the clean energy transition is continuing to gain momentum, in part due to the current crisis.

“Europe has come out with even a stronger commitment to renewables. And so, I think that the longer-term outcome of this is an acceleration of renewables, renewable electricity as the longer-term alternative. So that’s why you’ve got to deal both with the short-term crisis, and at the same time lay the basis for a different kind of future,” he explains.

For all this and much more, I hope you will listen to my compete conversation with Daniel Yergin, which is the 37^th episode in the Environmental Insights series, with future episodes scheduled to drop each month. You can find a transcript of our conversation at the website of the Harvard Environmental Economics Program. Previous episodes have featured conversations with:

Gina McCarthy, former Administrator of the U.S. Environmental Protection Agency
Nick Stern of the London School of Economics discussing his career, British politics, and efforts to combat climate change
Andrei Marcu, founder and executive director of the European Roundtable on Climate Change and Sustainable Transition
Paul Watkinson, Chair of the Subsidiary Body for Scientific and Technological Advice (SBSTA) within the United Nations Framework Convention on Climate Change
Jos Delbeke, professor at the European University Institute in Florence and at the KU Leuven in Belgium, and formerly Director-General of the European Commission’s DG Climate Action
David Keith, professor at Harvard and a leading authority on geoengineering
Joe Aldy, professor of the practice of public policy at Harvard Kennedy School, with considerable experience working on climate change policy issues in the U.S. government
Scott Barrett, professor of natural resource economics at Columbia University, and an authority on infectious disease policy
Rebecca Henderson, John and Natty McArthur University Professor at Harvard University, and founding co-director of the Business and Environment Initiative at Harvard Business School.
Sue Biniaz, who was the lead climate lawyer and a lead climate negotiator for the United States from 1989 until early 2017.
Richard Schmalensee, the Howard W. Johnson Professor of Management, and Professor of Economics Emeritus at the Massachusetts Institute of Technology.
Kelley Kizier, Associate Vice President for International Climate at the Environmental Defense Fund.
David Hone, Chief Climate Change Adviser, Shell International.
Vicky Bailey, 30 years of experience in corporate and government positions in the energy sector.
David Victor, professor of international relations at the University of California, San Diego.
Lisa Friedman, reporter on the climate desk at the The New York Times.
Coral Davenport, who covers energy and environmental policy for The New York Times from Washington.
Spencer Dale, BP Group Chief Economist.
Richard Revesz, professor at the NYU School of Law.
Daniel Esty, Hillhouse Professor of Environment and Law at Yale University.
William Hogan, Raymond Plank Research Professor of Global Energy Policy at Harvard.
Jody Freeman, Archibald Cox Professor of Law at Harvard Law School.
John Graham, Dean Emeritus, Paul O’Neill School of Public and Environmental Affairs, Indiana University.
Gernot Wagner, Clinical Associate Professor at New York University.
John Holdren, Research Professor, Harvard Kennedy School.
Larry Goulder, Shuzo Nishihara Professor of Environmental and Resource Economics, Stanford University.
Suzi Kerr, Chief Economist, Environmental Defense Fund.
Sheila Olmstead, Professor of Public Affairs, LBJ School of Public Affairs, University of Texas, Austin.
Robert Pindyck, Bank of Tokyo-Mitsubishi Professor of Economics and Finance, MIT Sloan School of Management.
Gilbert Metcalf, Professor of Economics, Tufts University.
Navroz Dubash, Professor, Centre for Policy Research, New Delhi.
Paul Joskow, Elizabeth and James Killian Professor of Economics emeritus, MIT.
Maureen Cropper, Distinguished University Professor, University of Maryland.
Orley Ashenfelter, the Joseph Douglas Green 1895 Professor of Economics, Princeton University.
Jonathan Wiener, the William and Thomas Perkins Professor of Law, Duke Law School.
Lori Bennear, the Juli Plant Grainger Associate Professor of Energy Economics and Policy, Nicholas School of the Environment, Duke University.

“Environmental Insights” is hosted on SoundCloud, and is also available on iTunes, Pocket Casts, Spotify, and Stitcher.

Is the geopolitical crisis due to the Russian invasion of Ukraine likely to accelerate or retard the energy transformation in the European Union? This and related topics on decarbonizing Europe were central to the most recent webinar in our series, Conversations on Climate Change and Energy Policy, sponsored by the Harvard Project on Climate Agreements (HPCA). This time, we featured a conversation with Dan Jørgensen, the Danish Minister of Climate, Energy, and Utilities, who expressed his hope (if not expectation) that the tragic war in Ukraine will help accelerate the clean energy transformation by weaning Europe off Russian gas. A video recording (and transcript) of the entire webinar is available here.

As many readers of this blog know, in this webinar series I feature leading authorities on climate change policy, whether from academia, the private sector, NGOs, or government. In this most recent Conversation, I was fortunate to engage with someone who has had solid and important experience in government.

Dan Jørgensen, who played a significant role in maintaining the focus on reducing the rise of global temperatures during the 26^th Conference of the Parties (COP-26) to the United Nations Framework Convention on Climate Change (UNFCCC) in Glasgow last November, lauded the efforts of European countries like Greece that are proclaiming their intent to reduce their use of Russian gas in favor of other energy sources, although Greece has simultaneously announced that it will therefore have to increase its use of coal for electricity generation.

“One of the few positive things that might come out of a terrible situation is that we will now be forced to speed up the green transformation away from fossils in Europe,” Jørgensen says. “It has opened the eyes… I think, for decision makers all over Europe to ramp up the replacement of fossils – that’s gas, that’s oil, that’s coal, with renewables. And we have a lot of potential for that in Europe.”

Jørgensen talks about important legislation being negotiated in the European Union which would create new directives on energy efficiency and renewable energy that could, he states, help EU countries greatly reduce their dependency on Russian fossil fuel.

Much of the discussion also focuses on COP-26 and the decision by participating countries to agree on language calling for a “phase down” of unabated coal and to reduce inefficient fossil fuel subsidies.

“On one hand, I’m disappointed that the text is not stronger than it is on those issues. On the other hand, it is really huge progress that it’s now in the text, meaning that…[it will be] the starting point for the next negotiations [at COP-27 in Sharm el-Sheikh, Egypt],” Jørgensen remarks. “The overall result was a positive one. There was some real progress. But first and foremost, the aim of the COP-26 meeting was to keep 1.5 alive, so to speak. What does that mean? It means that if we hadn’t made the decisions that we actually made then…it would be almost impossible for us to keep the promise of staying below 1.5 alive, and it wouldn’t be credible.”

Looking ahead to COP-27, Jørgensen says negotiators will focus on the promise of more ambitious nationally determined contributions (NDCs) as well as questions surrounding finance for developing countries requiring short-term assistance to reduce their dependency on fossil fuels and adapt to climate change.

“I do understand how some of the growing economies of this planet that are also now amongst the biggest emitters, why they think it’s only fair that the richer countries of the planet help them in the transformation,” he states. “We have a climate problem because rich countries have been polluting for more than 100 years. Now, some countries are raising their standard of living and…starting to pollute more. But I don’t really think it would be fair for us to say, ‘You cannot have the same standard of living as we do.’ That would not be legitimate, in my point of view. And it wouldn’t be fair if we didn’t also offer help to mitigate the problem. So, we need to have a clear focus on the financing part.”

Jørgensen also shares his thoughts on the potential for carbon trading systems to reduce global emissions, arguing that pricing can be complicated but is absolutely necessary.

“We need clear price signals in the market,” he says. “It needs to be more expensive to produce in a way where you’re dependent on fossil fuels and less expensive to do the opposite.”

I ask Jørgensen about the European Union’s Emissions Trading System (EU ETS), established in 2005 as the first large greenhouse gas emissions trading scheme in the world, and which now covers more than 11,000 factories, power stations, and other installations in 31 countries, including all 27 EU countries.

“It is actually pretty incredible that we have this well-functioning system with 27 countries that is economically rational, that works, that cuts emissions, even in times of crisis where normally many countries will probably say, ‘Okay, well, we want to save the climate, but we need to get through this crisis first,’” he says. “In times of crisis like that, it’s extremely important that we have these systems. And what I like especially about it is that it’s a win-win. I mean, it is the cheapest, most efficient way of making a transformation.”

During the forum, Jørgensen also responds to questions from attendees from around the world, including questions focusing on carbon capture and sequestration, solar radiation management, methane, nuclear power, and the youth climate movement.

All of this and much more can be seen and heard in our full Conversation here. I hope you will check it out.

Previous episodes in this series – Conversations on Climate Change and Energy Policy – have featured Meghan O’Sullivan’s thoughts on Geopolitics and Upheaval in Oil Markets, Jake Werksman’s assessment of the European Union’s Green New Deal, Rachel Kyte’s examination of “Using the Pandemic Recovery to Spur the Clean Transition,” Joseph Stiglitz’s reflections on “Carbon Pricing, the COVID-19 Pandemic, and Green Economic Recovery,” Joe Aldy describing “Lessons from Experience for Greening an Economic Stimulus,” Jason Bordoff commenting on “Prospects for Energy and Climate Change Policy under the New U.S. Administration,” Ottmar Edenhofer talking about “The Future of European Climate Change Policy,” Nathaniel Keohane reflecting on “The Path Ahead for Climate Change Policy,” Valerie Karplus talking about “The Future of China’s National Carbon Market,” Laurence Tubiana reflecting on “A European Perspective on COP26,” and Congressman Garret Graves on “U.S. Climate Change Policy in an Era of Political Polarization.”

Watch for an announcement about our next webinar. You will be able to register in advance for the event on the website of the Harvard Project on Climate Agreements.

Tag: Ukraine

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