BAKU, Azerbaijan, May 16. The disruptions in energy supplies to Europe, due to the conflict between Russia and Ukraine, have complicated the energy transition agenda, Trend reports via Commodities Market research from the World Bank (WB).
According to the publication, several countries have already announced plans to increase fossil fuel production, which makes achieving climate change goals more challenging.
Conflict in Ukraine has urged many countries to think about their energy demand reduction. For example, China plans to increase coal production by 300 million tons, which is equal to its import volumes, and an 8-percent increase, compared to 2021 level. The EU, in its turn, eyes increasing LNG imports, which will reduce European reliance on Russian natural gas. Also, the EU plans on encouraging to the installation of heat pumps, which is a more efficient way of heating.
Meanwhile, “although some countries announced intentions to boost energy production from renewable sources or to revive or extend nuclear power plants, such projects take time to materialize,” WB noted.
The energy transition could also lead to additional volatility in energy prices in the short term if investments in fossil fuels decline before sufficient alternative renewable energy become available, the report added.
“Technological innovations are likely to lead to unpredictable changes in the supply and demand for commodities. Thus, although the overall nature of the energy transition may have a clear endpoint (a reduction in dependence on fossil fuels), the speed at which it occurs and the consequences for the demand for individual goods are very uncertain,” the WB said.
As the WB’s research said, currently, there is no much room to replace the most affected energy carriers, which are gas and coal since the price increase was widespread for all types of fuel. In addition, higher prices for some commodities, such as energy, have also led to increased production costs for other commodities.
Also, while many governments have introduced fuel subsidies or reduced taxes, fewer countries are pursuing policies aimed at eliminating the underlying imbalance of supply and demand, which can lead to a prolongation of the crisis, the WB concluded.