Climate action, especially over the last decade, has moved to the centrestage of global political engagement. The momentum has been galvanized recently by the consensus at the United Nations-led 28th Conference of the Parties (COP28) meeting in December 2023, where, for the first time since its inception in 1992, the need to “transition away from fossil fuels in energy systems” was acknowledged.
The transition challenges are, however, immense, especially from a geopolitical standpoint. But first, let us examine the relationship between fossil fuel commerce and geopolitics.
Geopolitics has been traditionally influenced by the uneven regional distribution of fossil fuel reserves and production centres and consequently lengthy chains linking producers to consumers. According to a recent study by the International Renewable Energy Agency (IRENA), 116 countries are net oil importers, 112 are net natural gas importers and 116 are net coal importers. The global fossil fuel markets are relatively centralized and concentrated and involve large scale movement over shipping lanes lines across the world.
About 40% of all maritime cargo currently is accounted for by fossil fuels. Therefore, the safety and security of sea lanes on which such cargo moves, adds to the inherent global fuel supply security issue. The recent spate of attacks by Houthi militants resulting in disruption in the shipping lanes through the Gulf is an example of supply carriage risks. This raised oil prices and transportation costs.
Another aspect of fossil fuel commerce is the dominant currency in which it is traded, namely, the US dollar. This gives the US an enormous advantage and leverage over both producer and consuming nations. Sanctions on oil producing countries like Iran and Venezuela and lately Russia have disrupted and distorted the market, adding to the supply and price risk.
The rising share of renewable energy in the global energy mix diminishes no doubt minimizes the traditional geopolitical risks borne by energy import-dependent nations like India since renewable sources of energy such as solar, wind, hydro, bio-mass or geo-thermal and cleaner sources of energy such as nuclear and hydrogen are harnessed largely within domestic and regional borders.
Energy security in a low-carbon economy regime with increasing use of renewables will, nevertheless, be governed by an altered set of dependencies that will influence geopolitics and, in turn, the energy supply and price risks.
For one, renewable power units like solar panels and batteries require extended supply chains for critical materials such as copper, nickel, lithium, cobalt and rare earths. Accessing these supplies involves commercial engagements with a new cluster of producer nations different from those blessed with oil and gas reserves.
For another, technological innovation and adoption are key aspects of the energy transition narrative. Countries that possess advanced technologies and have significant R&D programmes will be at the forefront of transition initiatives.
On both scores, China has a significant advantage. The world’s largest consumer of primary energy as well as the largest emitter of greenhouse gases is also a major producer and processor of rare metals and has cornered supplies elsewhere particularly in Africa.
On the technology side, it is the world’s largest solar panel producer and manufacturer of wind turbines. It has ample supplies of the critical materials required for ramping up renewable energy production. It has also emerged as the most competitive source of renewable energy products.
Ideally, China could significantly contribute to the global transition away from fossil fuels to a renewable energy-based energy system. However, geopolitics is slowing this transition because of growing tensions between China and the US and increasingly, involving too, with Europe as well.
India’s own solar energy expansion plans could benefit from cheaper supplies of panels from China. A significant ramping up in the initial phase would result in an expanded scale which would then make local manufacture more competitive. However, the renewed tensions between India and China have adversely impacted the national solar mission.
For India, energy security and climate change are two sides of the same coin. Given the country’s heavy, even overwhelming dependence on fossil fuel imports, especially of oil, it makes sense to plan for a transition to an economy based progressively on renewable energy and cleaner sources of energy such as nuclear energy. While this transition is already underway, it needs to be accelerated.
Transitions also entail enhanced risks because until the energy transformation is complete, both fossil fuels and renewable markets must function side-by-side efficiently and relatively free of disruption, since it otherwise blunts the efforts of nations to reduce their emissions.
In the recent past, we have witnessed a war-triggered disruption in Europe that set back the clock on the continent’s ability to reduce its carbon emissions. The Ukraine War has delayed Europe’s plans for decarbonizing its economy. Coal-based power has made a comeback in countries like Germany though this may be temporary.
Every country in the world possesses at least one if not more source of renewable energy -solar, wind, bio-mass or hydro. Therefore, relative energy independence is within reach of a larger number of countries, and this could potentially reduce one key source of geopolitical contestation.
In the transition to a progressively renewables-based economy, the risk of disruption of supplies of critical minerals and materials exists. However, such disruption will not lead to a sudden loss of energy availability since the materials are already embedded in renewable energy systems and hence will not immediately affect the power generation supplies. This is a major plus over fossil fuels.
On balance, one may expect a renewable energy dominated global economy to be less exposed to geopolitical contestation. Contestation may shift towards competition over rare earths and strategic minerals. However, its scale will be less than that experienced over fossil fuels.
Shyam Saran is a former foreign secretary and served as the prime minister’s special envoy on climate change (2007-10).
