In mid-October the Paris-based International Energy Agency (IEA) published its flagship publication – World Energy Outlook (WEO). This annual report came at a perfect time, just a few weeks before the United Nations climate change conference (COP), to be held in Baku, Azerbaijan, 11-22 November and in the midst of two major wars, one in Ukraine and the other in the Middle East. Little wonder, the WEO highlights the strong connection between geopolitical developments, energy security and climate change.
Since the Hamas-led attack of October 7, 2023 that killed roughly 1,200 people, Israel has pursued the most devastating war in its history, killing tens of thousands of Palestinians and displacing roughly 2 million others. The war has extended to include Gaza, Lebanon, Syria, Iraq, Yemen and Iran. In solidarity with the Palestinians, the Al-Houthis in Yemen have attacked commercial ships crossing the Red Sea. Chokepoints are narrow channels along widely used global sea routes, and they are critical to global energy security. The inability of oil to transit a major chokepoint, even temporarily, can lead to substantial supply delays and higher shipping costs, resulting in higher world energy prices.
Given the Houthis’ attacks, some vessels have chosen to avoid Bab al-Mandab at the southern entrance to the Red Sea. Instead, they’re choosing to take longer, more costly routes around the Cape of Good Hope at the southern tip of Africa. Oil trade flows in the Red Sea have decreased significantly over the past year. Oil trade flows through Bab al-Mandab Strait average 4.0 million barrels per day (b/d) in 2024 through August compared with 8.7 million b/d in full-year 2023. Meanwhile, the volume of crude oil and oil products flowing around the Cape of Good Hope increased to 9.2 million b/d in the first eight months of 2024 from an average of 6.0 million b/d in 2023.
The Ukraine war marked not just the end for the vast bulk of Russian gas export volumes to Europe, but also sparked renewed determination by European policymakers to reduce reliance on natural gas in general. Europe’s plan to move away from unabated natural gas is in large part driven by the decarbonization and methane emission reduction strategy that is at the heart of EU climate policy. New green policy and regulations in Europe have made assessing gas demand more difficult and while there are significant variations between scenarios of decline in gas demand, the direction of travel for Europe’s long-term natural gas demand is clear. Europe’s gas demand dropped by over 100 billion cubic meters (bcm) between 2021 and the first of September 2024. While gas demand declined, the resumption of operation of French nuclear plants over the period, the continued build-out of Europe’s renewable power capacity and an improvement in the utilization of the continent’s hydro-electric assets could suggest a more structural squeeze to gas market share in the power sector is underway.
The Conference of the Parties or COP is an annual event that brings together the governments which have signed up to environmental action under the United Nations Framework Convention on Climate Change of the Kyoto Protocol (1997) or Paris Agreement (2015). World leaders, ministers and negotiators convene at the COP to negotiate plans to jointly address climate change and its impacts. Civil society, businesses, international organizations and the media normally observe proceedings to bring transparency, accountability and wider perspectives to the process. COP 29 will have a particular focus on how to make finance available to developing countries for climate action. Little progress has been made in the run-up to COP 29. Parties disagree on who should pay, how much should be paid, what forms the funding should take (loans or grants) and how the funds should be accessed. Also up for debate is how funds should be directed – towards mitigating the impacts of climate change (preventing climate change becoming worse), adapting to its effects, or compensating countries for loss and damage (climate impacts that have already happened or cannot be avoided).
The newly published WEO is a significant contribution to the on-going debate on energy security and climate change. The on-going wars in Ukraine and the Middle East have added serious challenges to national and international efforts to enhance energy security and have slowed down the momentum to address global warming.
