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Russian gas exodus will lower European carbon emissions, analysis suggests

Europe’s pivot away from Russian gas in the wake of the Ukraine invasion will accelerate the continent’s move towards a greener energy grid, a new analysis has suggested.

The research from DNV Energy estimates that 34 per cent of the energy mix in Europe will come from non-fossil fuel sources in 2024, two percentage points more than the pre-war forecast. 

Overall, gas use is expected to drop an additional 9 per cent in 2024 compared to the pre-war model. The biggest percentage increase in alternative energy sources will be solar – up by 20 per cent in 2026.  The delayed retirement of some of the continent’s nuclear power plants is also an important component of filling the gap, DNV said.

According to the research, although some coal is needed in the short term to meet Europe’s energy demand, by 2024 postponed retirements and higher nuclear utilisation will be important to cover the shortfall of natural gas. 

Emission levels from energy are estimated to be 2.3 per cent lower in Europe in the period 2022-2030, compared to a pathway without the Ukraine war. This is due to the increased prominence of low carbon energy, more energy efficiency and, in the short to medium term, lower economic growth.

However, fossil fuel producers from friendly countries have looked again at expanding production in the wake of high prices caused by the war. The US has already said it will ramp up natural gas exports to the EU, while Shell is reconsidering its decision to pull out of the controversial Cambo oil field project in Scotland as oil prices spike.

DNV estimates that Europe itself will overall produce 12 per cent more gas in 2030 as the industry reacts to higher oil and gas prices in the short term and as a response to the pledge from EU to deliver more gas.

“As they did during the Covid-19 pandemic, Europe’s leaders have applied clarity of thought during a crisis to accelerate the continent’s energy transition. This time Europe is increasing energy security whilst reducing emissions,” said Remi Eriksen, CEO of DNV.

The research also found that while Russia will look to sell more oil and gas to countries like China as a way to replace lost demand from the European market, this will not fully compensate for the reduced gas exports due to limited infrastructure in the East.

There is a projected risk of overcapacity in the oil and gas sector towards the end of the decade as companies look to capitalise on the high prices and supply gap, DNV warned. This increased capacity towards 2030 could also lead to lower prices which will likely increase global use in the 2030s by a small amount. 

“The war in Ukraine has shaken the energy markets but decarbonisation remains the central theme. Energy companies will have to strike a careful balance between meeting the short-term supply gap for oil and gas whilst avoiding stranded assets in the longer term,” said Sverre Alvik, director of energy transition research at DNV.

Unfortunately, DNV predicts that there will be no immediate end to high electricity prices for consumers, which will be 12 per cent higher in Europe in 2024 than if the continent did not transition away from Russian energy. This could lower the adoption of electric vehicles as battery costs rise, meaning that half of new car sales are estimated to be electric in 2028 instead of 2027, although this could be overcome by new policy incentives.

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