A Tale of Two Transitions

In north London, Mary hops into her Tesla, oat milk chai latte in hand, and flicks on the radio. The news is dominated by a heatwave in Europe. Grannies are dying, reservoirs are drying up, and this time it really is our last chance, no really. The climate crisis is here, they say. We need to stop using fossil fuels immediately, they say.

How hard can it be? Mary laments. Most of her book club are also cutting down their meat intake and she graciously opted for a staycation this summer (couldn’t not go to Verbs in March, though). She sympathises with Extinction Rebellion and her wealth manager gladly ESG’d her retirement portfolio for only a 0.5% bump in the management fee. It’s just those dastardly, deceitful fossil fuel companies with their powerful lobbies and heartless execs that are standing between us and a green nirvana.

What a disaster. We’re heading for catastrophe.

Meanwhile, 3,906 miles always in Lahore, Mustafa has just moved into a new home. It’s a modest, pokey old thing in a tired tower block, but it sure beats the ramshackle, breathless slum he’s just moved from. Thanks to his new construction job and a booming economy, he and his family will have access to regular electricity and a gas stove for the first time in their difficult lives.

Tomorrow, Mustafa’s 11-year-old daughter will enjoy her first day at school and is besides herself with excitement. The dream of one day sitting in a classroom to learn science and maths kept her going during all those years foraging for scrap metal on the toxic landfill on the edge of the city.

The future, finally, is full of hope.

It indeed is the best of times and the worst of times. It just depends on who you ask.

When you hear the phrase “energy transition”, most reading this will resonate with Mary’s truth. You’ll conjure up images of solar panels, heat pumps and EVs. You’ll think of carbon emissions, burning rainforests, and scrawny polar bears.

But the reality for most of us earthlings is much closer to Mustafa than it is to Mary. For billions in the global south, “energy transition” doesn’t mean what you think it means. It means moving from carcinogenic firewood cooking to cooking with gas stoves. It means having electricity for the first time. It means being able to afford a bicycle or a scooter. It means rapid economic growth. It means better healthcare, better education, better jobs. It means better lives.

When you’re perched near the top of Maslow’s pyramid it can be hard to see all the poor souls way down at the bottom striving for better lives. But they’re there. Lots of them.

750 million people still don’t have access to electricity. Over 2 billion, billion with a ‘B’, used firewood and faeces today as their main source of household energy.

80% of the world’s population have never been on a plane. A single fridge in the USA uses 5x more electricity in a year than an average Ethiopian.

This is the energy transition that really matters. The one that’s dragging billions out of poverty. And until these people reach a better quality of life that comes close to what we enjoy, don’t expect them to spare a thought for climate and carbon emissions. I wouldn’t. You wouldn’t. They don’t. When you’re hungry, living day to day, struggling to feed your family, some abstract future concept of 2 degrees warming is laughably irrelevant.

Worrying about climate change is a rich man’s privilege. If you want the developing world to care, first make them wealthy.

These conflicting transitions regularly clash at the UN Climate jamborees. With ballooning populations and huge incoming economic growth, the front line in the battle against carbon emissions is in Asia and Africa. It doesn’t really matter what the US and Europe do if emissions aren’t kept in check in the developing world. The economic and population centers of gravity in the 21st century are far from the interfering reach of the G7:

The West obviously know this, which is why their diplomats clock in so many airmiles on their private jets to implore their counterparts in Asia and Africa to find ways to limit their carbon emissions. Unsurprisingly, this generous implication that these countries should forego the economic benefits enabled by abundant, affordable hydrocarbons isn’t received too well.

After all, the US and Europe have grown rich off the back of fossil fuels over the past 150 years. Most of the carbon dioxide currently sitting in the atmosphere has our name on it and if anyone has the right to the remaining “carbon budget” (the total estimated quantity of CO2 that we can collectively emit to remain under 2 degrees warning – staying below 1.5 degrees is never going to happen, hate to break it to you), it’s those who have yet to spend any of it.

The average American emits ~15 tCO2e/yr today, compared with just 2.2 tCO2e/yr for an average Brazilian. The West doesn’t have a wind turbine to stand on to suggest that poorer countries shouldn’t follow the same, proven path to riches.

And be in no doubt about it, they will. “It’s our turn to burn”, is the mantra you’ll hear in India’s corridors of power.

The typical retort to this discussion, usually made by someone sitting in their air conditioned ivory tower, is something along the lines “well can’t these countries just jump straight to wind and solar power?”. The short answer is no, solar panels and batteries are not a viable substitute for a hydrocarbon-fired power grid and industrial heat source for any country, let alone a developing country with hundreds of millions on the poverty line. For the longer answer, take a look The House That Hydrocarbons Built.

Mary and Mustafa’s transitions also come into conflict in our fungible, deeply connected international energy markets. Nowhere has this been more evident than in Germany, the poster boy for European energy insanity and hypocrisy. Having insisted on shuttering its world class nuclear fleet in favour of doubling down on unreliable wind and solar, and Vladimir Putin’s gas, Germany got caught with their Lederhosen round their ankles when the Russians invaded Ukraine in early 2022.  

A mad scramble ensued as Berlin sought to plug the gaping hole in its energy supply. And as the winter rolled in, when power demand peaks for central heating and solar panels are as useful as a condom in a convent, what did Germany do? Well, they did what every country would do when push comes to shove to keep the lights on: whatever it takes.

They restarted their dirty lignite coal plants, and in a move so beautifully ironic I nearly cried, they flattened a wind farm to make way for a coal mine expansion (pictured below). Well played Germany, well played.

But that wasn’t all. The desperate Germans also headed to global energy markets to buy up every hydrocarbon molecule they could get their hands on. Cost and carbon emissions be damned.

Global coal and gas prices went stratospheric, climbing by ~5x and ~10x respectively, smashing previous records. Some estimates suggest Germany spent an eye watering $500 billion on energy supplies for that winter – enough to build ~20 new nuclear plants.

Being a rich country, this hurt, but it wasn’t disastrous. Sadly the same can’t be said for less wealthy countries who also happen to participate in the same international energy markets that Germany had just detonated. Unable to afford natural gas and coal in this market, countries including Pakistan and Bangladesh suffered blackouts. And despite what some people might think, blackouts are extremely bad news that can lead to all sorts of nasty things like civil unrest. In the end, Germany didn’t avoid blackouts, it just exported them to poorer countries.

The longer term impacts of Germany’s desperate spending spree are even more severe. Every developing country quickly learned that it can’t rely on international energy markets and that beneath all the Energiewende nonsense, Germany, just like them, would always prioritize reliable energy supply above everything. And no energy source is more reliable than king coal.

So now, capitals around the world are reinvesting in coal plants and coal supply to make sure their energy transitions are never derailed in the same way again. Given the huge amount of economic development and energy demand growth coming from these countries over the next few decades, this is a disaster for global CO2 emissions.

Both transitions are unstoppable. The desire of Mustafa and his compatriots for a better standard of living is a basic human instinct that will prevail above all else. Meanwhile, the transition to a low carbon economy is well underway. But they are as inextricable as they are inevitable.

If Mary’s is to succeed, then it has no option but to make sure Mustafa’s succeeds too. If we in the West try to impose our version of the energy transition on the rest of world, not only are we are denying them theirs, but we also consign ours to failure.

Thanks for reading🛢️⚡⚛️