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Posted on Aug 5th, 2022

The Quest for Renewables: Energy Transition in Russia

A world powered exclusively by renewable energy is a worthwhile goal, but one that can’t happen overnight. Energy transition is not just a matter of introducing more renewable energy sources around the world to replace emissions-intensive ones. In many cases, global geopolitical issues and economic market structures serve as barriers to creating a world today with net zero fossil fuels.

That said, carbon neutrality is not impossible and could in fact be achieved by 2050, according to recent studies by the World Economic Forum (1), but reaching this would require significant transformation of our way of life, society, and the economy.

In this new content series, we’ll shed light on different countries' initiatives and challenges in their quest to carbon neutrality. In this article, we highlight Russia.

Key Takeaways

  • Net zero fossil fuels could be achieved by 2050, but geopolitical issues and market structures are currently challenging this goal.
  • 40% of the natural gas in Europe was previously supplied by Russia; these countries are now left with no choice but to revert back to coal consumption as a source of energy in the meantime.
  • With Russia’s introduction of the ‘Power of Siberia 2’ pipeline to China, major trade relations among the U.S., China, and countries across Europe are at risk.

The Russia-Ukraine War

The recent Russia-Ukraine war has forced countries to reimagine their energy transition plans, with the fear of compromised energy security. Many countries, especially those within the European Union (EU), have found themselves reliant on Russia as a source of energy, which will have to change if Putin continues to use the revenue to fuel this war.

The war between Russia and Ukraine has caused massive disruptions in the global supply chain, as Russia is one of the world’s largest exporters of oil and gas. Germany, for instance, is the largest user of coal in the EU, in hand with being the largest importer of Russian liquefied natural gas (LNG). Without imports from Russian, Germany is left with no choice but to continue using coal, causing its plans for decarbonization to be at risk.

40% of Europe relied on Russia as their primary source of natural gases, and without it they are in search of alternative options. While weaning off Russia’s energy supply may very well fast-track the global transition to renewable energy, it may also hinder it on a global level.

For instance, Southeast Asia is a very prominent user of LNG as a source of energy, with prominent imports coming in from the U.S. With the EU looking towards the U.S. and away from Russia’s fossil fuel supply, Southeast Asian countries find themselves in significant competition with multiple European countries. Because of this, Southeast Asian countries may begin to revert to coal supplies for energy, essentially promoting a backtrack in progress.

In addition to this, with Russia being one of the largest countries in the world, their transition to renewables would have made a notable impact, but this vision is now very doubtful to come to life. With lack of political and economic support and participation, Russia’s decarbonization plan as of now may be non-existent. For more information regarding the implications of the Russia-Ukraine war on renewable energy.

The Power of Siberia 2

In more recent news, Russia and China signed a new 30-year agreement for Russia to supply China with gas through a new pipeline deemed the ‘Power of Siberia 2,’ which would export gas from Russia to China through Mongolia at a higher concentration (2).

Figure 1: Power of Siberia 2 Pipeline Route

The construction of this pipeline serves to benefit Russia, Mongolia, and China, leaving the U.S. and the EU behind. Following the ongoing war between Russia and Ukraine, this new agreement will strengthen energy relations between Russia and China, given the fact that countries across Europe have cut ties with Russia. Russia was the EU’s cheapest and largest source of natural gas, so these countries are now in continuous search of other suppliers to sustain their energy needs. While they may be receiving imports of LNG from the U.S., it is nowhere near enough to sustain their needs.

The U.S. was China’s largest supplier of LNG, but now they have lost a major trade connection. As the pipeline is being built, fears arise that the pipeline may overpower the LNG market and negatively affect the U.S.’ future of LNG exports. (3)

Reaching Net Zero

The hard truth is that reaching net zero fossil fuels will require much more effort than anyone could imagine, simply because political and economic circumstances aren’t exactly easy to overcome.

While studies may show that it could be possible to reach no carbon emissions by the year 2050, this goal can only really be achieved with severely dedicated changes in countries around the world. The question left now is whether or not countries will truly pledge to a greener world and apply these drastic modifications, or if overcoming these barriers will pose as too large of a task.

Moving Forward

The quest to achieve carbon neutrality in the face of these obstacles will challenge countries, industries, and business models around the world. As a result, the energy transition sector is becoming a priority for countries around the world and the face of the future for many industries, presenting a source of new job opportunities and economic growth.

Adjusting to this new reality will present obstacles to some industries and enable the growth of others, creating winners and losers within sectors as businesses race to adapt and innovate. But while the challenge we face is massive, so is the investment opportunity.

If you’re interested in learning more about a fund designed to capture the tailwinds from the fight against climate change by investing in transformational technologies, energy transition opportunities, and sustainability leaders across the world, check out the Purpose Global Climate Opportunities Fund.



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