We need a grand bargain on energy

Following the chaos of the war in Ukraine, Europe realizes that it needs more friendly, and fast, energy sources. Across the Atlantic, President Joe Biden should be able to fend off conservatives who claim he is guilty of inflation. It is in the interest of both America and the European Union to unite for economic security and competitiveness in a more polarized world.

It requires not only a smarter and safer plan for energy sources, but also a clear path to carbon neutrality and investment in the most strategic clean technologies – which will also drive 21st century jobs and growth.

In this crisis, there is an opportunity: that is, the possibility of a major deal between the US and the EU on energy security and climate change. Not to be missed.

Start with the most immediate problem, which is Europe’s dependence on Russian oil and gas. The EU has finally realized – and wisely – that there is no going back to relying on Russian energy. It is accelerating its transition to fossil fuel alternatives. But, for the next few years, there is no way around the fact that he will need some fossil fuels to bridge the gap. Can more come from the US?

The White House hopes so. At the CERAWeek Energy Conference a few days ago, the US Secretary of Energy Jennifer Granholm told oil executives (Though not in so many words) “Exercise, baby, exercise.” As it put it, the country is now “at war” and the industry needs to “produce more now, where and if you can”. She also said the administration would ease permits for new pipes, something Big Oil pushed for.

Clearly this is a huge U-turn for the president, who has built his campaign around a green energy transition. But even Democrats come to the idea that the war in Ukraine and the global fall are more important than environmental hopes in the sand, or at least in the short term.

Republicans already Blames Biden’s past limitations On new fossil fuel drilling for skyrocketing gas prices, which could severely hurt Democrats in the mid-November election. Now that the White House is telling the industry to produce more, he should hope that the progressives on the left will not neglect any new legislation that will help him do so.

Investors are another challenge. Wall Street has been down until recently in the energy sector, which is undergoing a surge in fixed capital expenditures and break cycles depending on the price of oil. the last one Production and exploration efforts Resulted in an exploding debt that shook the markets a few years ago.

This, coupled with the inevitable move toward clean technology, has made manufacturers more likely to prefer dividend payments and repeat purchases than to drill. According to the Global Energy Monitor, US $ 244 billion worth of liquefied natural gas projects are stuck because they are “struggling to find funders and buyers.” Investors are not interested in some of them because fossil fuels are on the way out.

This approach is now being attacked as unpatriotic. “I hope investors are listening,” Granholm said. “We can not have a single element that will delay the world.” But even if the administration creates a more environmentally friendly fossil fuel environment, production takes time.

While Europeans are not happy to get the dirtiest fuels like coal or shale shale, they will be happy to buy more liquefied natural gas in the US, which is set to skyrocket in supply by 2024. Germany has already pledged to build more terminals to get imported gas. Ideally, American businesses And the White House can work together to put more workers in countries that produce fossil fuels in workplaces that increase refinery capacity.

Of course the short-term crisis must not degrade the overall goal of moving to clean energy, where the jobs and innovation of the future are. But that requires the U.S. and Europe to be on the same page about metrics: how to measure greenhouse gases; how to set a market price for carbon. Without understanding where the floor is, moving to a net zero will not happen.

As much as these issues have been controversial, in fact there is already a process for such transatlantic harmonization. As part of the Article 232 trade tariff agreement reached by the US and the EU last October, there is a “global arrangement” provision stipulating that both parties must agree on a common way forward to deal with carbon power within 12-18 months from the date of signing the deal.

In such negotiations, Europe needs to remain flexible. It may not be possible to immediately destroy a common carbon price, but both sides can agree on at least one methodology for measuring greenhouse gases. The US and the EU can commit to joint research and development on a renewable basis. They can even unite on an industrial strategy for green batteries (lest this area be transferred to China). , And not to those who pay half of what they already earn (European companies sometimes Outsourcing such jobs to the US Because it is cheaper).

That’s a lot to deal with. But great thinking is the only way to get through this crisis without sacrificing the future of the planet.

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