More than a cap on oil prices, Europe needs a clean energy plan

The weekly round-up on the climate crisis and data on carbon dioxide levels in the atmosphere.

December 5th has entered into force the $60 per barrel cap on Russian oil transported by sea imposed by the G7 countries, the European Union (with the exception of Bulgaria, which was given a longer period to comply) and Australia.The measure allows Russian crude to be shipped to third countries using tankers, insurance companies and G7 and EU lenders, only if the cargo is purchased at or below the price cap.Given that major shipping and insurance companies are based in G7 countries, the imposed limit could make it difficult for Moscow to sell its oil at a higher price.The level of the cap will be reviewed by the EU and the G7 every two months.The first review is scheduled for mid-January and “will need to take into account the effectiveness of the measure, its implementation, international take-up and alignment, market developments and the potential impact on member countries and coalition partners ”, the European Commission said in a statement.The limit will not be applied to oil transported by land, including through pipelines.

Russia has already announced that it will continue to export its oil even if it is cut off from Western insurance markets and that it will not deal with any country that respects the cap.Selling oil and gas to Europe has been one of Russia's main sources of foreign currency earnings since Soviet geologists found oil and gas in Siberia soon after World War II.So far, Moscow's overall oil exports have held up, standing at 7.7 million barrels per day in October, according to the International Energy Agency.This is only 400,000 barrels per day lower than pre-war levels in Ukraine.

However, with the price limit set at $60 a barrel, not far below last Friday's $67, the EU and G7 countries expect Russia to continue selling oil while accepting smaller profits.

In any case, already this year, Russian exports to the EU have fallen sharply, shrinking by 1.5 million barrels per day, for a total of 3.95 million barrels per day in October, according to the IEA.Most of Europe's supplies were diverted to China and India.Because of this, he commentedor a Political Claudio Galimberti, analyst at energy research firm Rystad, the impact of the sanction could be rather modest.

The Chinese Foreign Ministry commented hotly that Beijing will continue energy cooperation with Russia on the basis of respect and mutual benefit, while the Indian Oil Minister he declared that the cap will have no impact on India and that “the South Asian economy intends to continue purchasing from Russia for the time being.”

Western oil tankers stopped in Turkish territorial waters and Russian strategies to circumvent sanctions

Under EU sanctions, tankers loading Russian crude cannot be covered by Western marine insurance unless the oil is sold below the established cap.For this reason, reports The Financial Times, a traffic jam of oil tankers has formed in Turkish waters.Around 19 ships were waiting to cross Turkish waters on Monday.The ships dropped anchor near the Bosphorus and Dardanelles, the two straits that connect Russia's Black Sea ports to international markets.The first tanker arrived on November 29th and has been stuck for six days.

According to ship brokers and TankerTrackers.com, which track global oil shipments, much of the oil on ships off Turkey is of Kazakh origin.Kazakh oil arrives at Russian ports via pipelines and, therefore, is not subject to Western sanctions.However, authorities in Ankara have asked all oil tankers passing through the Turkish Strait to provide letters from their suppliers confirming that insurance coverage will remain in full force to cover incidents such as oil spills and collisions.However, ships carrying refined products such as petrol and diesel were allowed to pass as EU sanctions on these fuels will not come into force before February.

According to the International Group of P&I Clubs – which represents 13 insurance companies covering around 90% of global maritime transport – the Turkish request goes “well beyond” the general information normally requested. Shared location also by some US and UK Treasury officials.

The risk of incurring sanctions or damaging their reputation is, in fact, pushing many Western shipping and maritime services companies to stay away from Russian oil in any case.This situation had a twofold effect:on the one hand, new companies have jumped into the void and are purchasing old oil tankers, now close to demolition;on the other hand, Russia appears to have put together a "shadow fleet" of over 100 ships that can operate without insurance.

In recent months, reports Reuters, obsolete oil tankers were sold by Greek and Norwegian shipowners at record prices to Middle Eastern and Asian buyers who took advantage of skyrocketing charter prices for vessels destined to transport Russian oil to India and China.Tanker rates have jumped to levels not seen since 2008, except for a brief period in 2020 when oil companies scrambled to find tankers to store fuel amid a pandemic-related slump in demand.“Tanker owners can earn more than $100,000 a day for some trips,” he told the Reuters Omar Nokta, analyst at investment bank Jefferies.“An incontrovertible effect of the price cap on Russian exports is that the oil tanker fleet is expanding and traveling longer distances,” he added.

A greater number of tankers is now used for weeks-long voyages, carrying Russian oil from the Baltic and Black Seas to Asia, whereas previously Russian oil was mainly sold in Europe and the voyages lasted only a few days.

And then there is the so-called "dark fleet", which represents around 10% of the world's oil tankers according to some sources in the maritime sector and is made up of ships already used in other embargo cases, such as to circumvent export sanctions of oil from Venezuela and fromIran.At least 21 tankers have switched to carrying Russian oil after previously being used for Iranian shipments, said Claire Jungman, chief of staff at the U.S. advocacy group United Against Nuclear Iran (UANI), which monitors the trafficking of nuclear-related tankers. 'Iran.Of these ships, at least four have changed ownership in recent months.

What consequences will there be?

Western leaders are walking a fine line between trying to reduce Russia's oil revenues and prevent an oil shortage that would cause prices to spike and worsen the inflation that already plagues economies and hurts consumers everywhere. the world, writes AP. 

However, according to the comments of several analysts, the effects of the measure could be modest.“The EU will import crude oil from other countries”, explains to Political Simone Tagliapietra, senior fellow at the Bruegel think tank.“Russia will likely increase crude exports to China and India, which will reduce demand for Middle Eastern oil and, in turn, Europe will get more oil from the Middle East and other countries.Market conditions are expected to remain fairly similar.We shouldn't notice."

The cap on the price of Russian oil has always been intended by the G7 countries as a means of reducing Russia's oil revenues without causing major disruption to the global market, effectively blocking the export of huge quantities of oil from Russia to the world.In its current form, the $60 per day limit has become an inflation control measure to counter the impact of EU sanctions, as well as a way to reduce Russia's oil revenues, Claudio Galimberti adds. Political.

Much more significant could be the sanctions on refined products, such as petrol and diesel, scheduled for February 2023, continues the Rystad analyst.“60% of the diesel we consume in Europe comes from Russia.There are no easy alternatives,” explains Galimberti.“There will be a potential shortage of diesel for Europe in the middle of winter, used almost everywhere from cars to industry and heating.”Furthermore, unlike crude oil, China and India will not be there to make up for the lack of European imports, as they have their own refining sectors.

And so Russia may have to look for new buyers in North Africa and Türkiye, but not in the same volumes as its exports to Europe.“This means it will reduce its crude oil production,” observes Galimberti.“Crude oil must be refined into petroleum products.If you can't find a market for petroleum products, you either consume it or store it.But Russia does not have significant storage capacity."

In its November monthly oil report, reports Political, the IEA he predicted that Russian oil production could decline by 1.4 million barrels per day in 2023, potentially driving up global prices.

The search for alternative routes and possible impacts on the climate

European countries are trying to follow alternative paths to become independent from Russian fuels. According to an article by Energy Monitor Norwegian oil production is set to increase by 13% next year.The Norwegian government has forecast a cash flow of $119 billion through oil and gas supplies for 2022 and has emphasized its central role in European energy security, foreseeing new exploration and extraction of fossil fuels in the Arctic, in conflict with commitments to reduce production to achieve net zero emissions by 2050.

Meanwhile, in recent days, the Prime Minister of Slovenia, Robert Golob, he stated in an interview with Financial Times the intention to build a pipeline that would transport Algerian gas to Hungary, thus helping Budapest reduce its dependence on Russian fossil fuels.In November, Slovenia signed an agreement with Algiers to import gas through existing pipelines in Italy which would allow the Eurozone member country to import 300 million cubic meters per year and reduce imports of Russian gas by a third.Golob added that the Algerian route would also allow hydrogen to be transported.

“Europe urgently needs an industrial plan around low-emission sources,” he commented in this regard the executive director of the IEA, Fatih Birol.“The inconvenient truth is that, for decades, the business model of many European industries has been based on the availability of abundant and cheap supplies of Russian energy.This business model fell apart when Russia invaded Ukraine.And he won't come back,” writes Birol.The example to follow is the United States Inflation Reduction Act which “changed the game, channeling hundreds of billions of dollars into building the energy and manufacturing industries of the future”.The United States is not alone in this transition:“China has been at the forefront of developing domestic production of clean energy technologies, while countries such as Japan, Korea and India are increasing investment in this direction.”

For Europe, Birol concludes, all that remains is to raise the ambitions of the policies already outlined by Fit for 55 and the REPowerEU plan towards the ecological transition:

“This means increased demand for clean energy technologies – such as electric vehicles, solar panels and wind turbines – and for key materials such as steel, aluminum and concrete that can be produced with substantially lower emissions than current.In the electricity sector, solar and wind energy are already the cheapest options, which offers strong economic incentives that favor their deployment.But the situation is different in other sectors of the economy, such as long-distance transport and heavy industry, where more work needs to be done to improve the competitiveness of low-emission options.With offshore wind, Europe has demonstrated that it can be a world leader in clean technologies.It now needs to get much stronger in areas like batteries, electric vehicles, hydrogen electrolysers, heat pumps and more.And it faces strong competitive challenges, with China, the United States, Japan and many others seeking to lead the next generation of clean industrial and manufacturing technologies.”

Europe has its strengths:the large domestic market, the skilled workforce, the extensive network of research institutes and competence centers and the long history of producing high value-added products.But these strengths will need to be accompanied by a strong push, in the form of a new industrial policy, from the European Commission and EU member states."If the European Union wants to remain a global industrial power, it will have to be clear and courageous in the actions it takes."

COP15 on biodiversity kicks off in Montreal:the goal is to protect 30% of land and sea by 2030

The fifteenth Conference of the Parties to the United Nations Convention on Biological Diversity will be held from 7 to 19 December in Montreal, Canada.Led by China, it arrives two years late due to the pandemic.This is a very important appointment because it will have to define the objectives to be pursued to halt the loss of biodiversity between now and 2030.The latest commitments made by governments, during the COP10 in Nagoya, in 2010 in Japan, to halve the loss of natural habitats and expand nature reserves to 17% of the world's surface by 2020, have been completely disregarded.

According to experts, the Earth is experiencing its sixth mass extinction, which threatens the foundations of human civilization.The way we farm, pollute, drive, heat our homes and consume is increasingly unsustainable for our planet.Scientists and activists are pushing for countries to adopt a “Paris Agreement for Nature,” referring to the 2015 climate negotiations that agreed a path to hold the rise in global temperatures to within 1.5°C of pre-historic times. -industrial.The hope is that States will commit to ensuring that, at the end of this decade, the world will have more "nature" - healthy animals, plants and ecosystems - than there is now.A good agreement would mean setting targets that are easy to measure and monitor, and a commitment from individual countries to regularly report on their progress in protecting nature.[Continue reading here]

The Council and the European Parliament reach a provisional agreement to reduce global deforestation

Council and Parliament of the EU have reached a agreement to pass a new law that ensures that products sold within the European Union are not linked to the destruction or degradation of forests.Companies will have to show when and where the products were made and provide "verifiable" information proving they were not grown on deforested land after 2020.They must also demonstrate that the rights of indigenous peoples were respected during the production of the products.[Continue reading here]

According to the International Energy Agency, growth in global renewable capacity is expected to double over the next five years

In its annual renewables outlook report, the International Energy Agency (IEA) says global capacity is expected to grow by 2,400GW, reaching 5,640GW by 2027.The increase, according to IEA scenarios, is 30% higher than the growth expected a year ago.

Today's staggering new @IEA renewable forecast in numbers:

🌄76% more growth than thought 2yrs ago
⏩more growth in next 5yrs than last 20
🌞solar GW overtakes gas, coal by 2027
📈renewables to add 3,900TWh (=🇪🇺+🇯🇵)
🏭saves 4GtCO2 (if offsetting coal)https://t.co/WPXvo1NiLD pic.twitter.com/o4YaMLddDe

— Simon Evans (@DrSimEvans) December 6, 2022

High gas and electricity prices resulting from this year's global energy crisis have made renewable energy technologies more attractive.Renewable energy growth is also being driven by the United States, China and India implementing policies and market reforms aimed at supporting the deployment of renewable energy more rapidly than previously expected.Over the next five years, renewables will make up more than 90% of global electricity expansion, overtaking coal to become the largest source of global electricity by early 2025, the report says.[Continue reading here]

IEA:Heat pumps are the “essential technology” for low-carbon heating

According to the International Energy Agency (IEA), heat pumps they will provide a fifth of the world's heating needs by the end of the decade, if states follow their plans.Switching from gas and other fossil fuel boilers to heat pumps is expected to reduce annual greenhouse gas emissions equivalent to Canada's output by 2030.[Continue reading here]

Vanuatu has published a draft resolution calling for climate justice at the UN tribunal

Vanuatu has published a draft UN resolution seeking an advisory opinion from the International Court of Justice (ICJ) on the legal obligations of states regarding climate action and the consequences of the damage caused.Although the Court, which is the main judicial body of the United Nations, does not have binding authority, its opinion could become relevant for future legal actions and strengthen the position of vulnerable countries in international negotiations.[Continue reading here]

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