When I began working in the energy industry, it wasn’t a conscious choice — but the industry quickly became a part of my existence and purpose. What started as engagements on revenue improvements in failing utilities turned into specialization in power sector regulation and markets. And today, since I’ve extended my expertise into renewables, the energy transition and decarbonization, I’ve developed a passion for helping clients navigate environmental, social and governance (ESG) issues and climate change.
The global energy industry has a significant role to play in addressing climate change. While a recent Economist article suggested that the “E” in ESG should stand for “emissions”, I’ve come to realize it’s much more nuanced than that. Environmental and climate change deeply affect society, and their impacts are growing daily.
Energy’s impact in sustainable growth
Amidst many global economic challenges, innovation is going strong and helping to drive growth in an otherwise maturing world. For example, fascinating work in Web3 and blockchain could spur a whole new digital ecosystem, much as the original internet did. The physical and digital worlds have also come together in new ways, including through crypto, which has thrown new possibilities and challenges to the existing order.
Innovation is exciting, but such growth will inevitably be energy hungry. Even through tangible energy-efficiency gains, the world is witnessing a surge in energy demand. In a carbon-constrained world, it’s essential to understand how increased energy demands could impact geopolitics, climate and affordability. Climate is a relatively recent — but perhaps most significant — concern. Unless low-carbon resources propel energy, it may not be sustainable in a climate-challenged world. Indeed, asset financing will be difficult even from a practical standpoint if proponents can’t demonstrate that they comply with global standards of efficiency, emissions and broader ESG parameters.
Given the umbilical connection between energy and the environment, here are a few recommendations to help drive sustainable growth:
- Electrification has been globally identified as an essential means to decarbonize. It can be generated at scale from non-fossil resources and often brings in significant efficiencies.
- Energy supply must transform radically with incremental supplies primarily from clean energy systems and renewables, including wind, solar, biofuels and energy storage in various forms.
- Apart from energy supply, hard-to-abate sectors like heavy industries and transport should consider a range of solutions, including new production technologies, green hydrogen, biofuels and sustainable aviation fuels.
- The transition to electric vehicles will be critical because, if done correctly, the opportunities are enormous across the value chain.
- The circular economy holds excellent economic promise and will be key for decarbonization across the energy and industrial manufacturing sectors. This will require value chain management of the circular economy and building up institutions and processes.
- The focus must be on nature-based solutions, which can compensate for decades or centuries of biodiversity losses and be a key means to decarbonizing.
This will be a complex agenda with many moving parts that will often conflict or may not converge. It’s important to accept that now is the time to solve these challenges — because time is the least renewable asset we have. We should also be sensitive to the wider stakeholder community affected. Not the “not in my backyard” kind of stakeholders, but the population at large. Otherwise, it may not be a “just transition”.
While technical and engineering solutions will often underpin the energy transition, the commitment of leadership and structures to implement these solutions in earnest will be vital. We need to see genuine corporate leadership to transform businesses, products, supply chains and communities. While true for the world at large, it is especially so for developing economies where we deal with the twin objectives of economic growth and social protection, which can’t progress without being in lockstep.
As we look toward COP27 (7 to 18 November 2022) and beyond, we should explore ways to engage and find practical solutions for economic development with environmental and social protection and how global business leaders (along with individual nations and governments) can lead the way.