Originally posted in EURACTIV on 26 July 2022
Europe’s increased demand for fossil gas has caused a hike in fossil fuel prices and energy shortages in the Global South. EU leaders must avoid long-term gas deals and invest in renewables to secure a fair and lasting transition away from fossil fuels, writes Khondaker Golam Moazzem.
Dr Khondaker Golam Moazzem is Research Director at the Centre for Policy Dialogue (CPD).
The pressure on European leaders to curb their demand for Russian gas has reached a fever pitch. This week’s temporary shutdown of the Nord Stream pipeline has forced Europe to consider the ‘nightmare scenario’ of a complete halt to the flow of Russian gas.
Europe has side-stepped calls for the mass implementation of energy efficiency measures ahead of winter in the EU and instead embarked on a dash for new gas supplies from the rest of the world.
Its imports of liquefied natural gas (LNG) – natural gas cooled for transport – have skyrocketed by 50% compared to a year ago.
That upswing in demand made an already-competitive global gas market even tighter, sending energy prices and the cost of living soaring. Due to their complementary nature, the price of other fossil fuels such as petroleum and coal also shot up.
In countries like Bangladesh, we are priced out of the energy we need – plunging millions into darkness. This year, a look at gas trading in the Global South tells a story of failed deals, rocketing prices, and cash-strapped countries outbid in a frantic market.
In recent years, Bangladesh has increasingly sourced LNG from the last-minute spot market, but it was forced to stop after prices almost doubled. Nearby, Thailand’s LNG imports halved in a month as prices skyrocketed, and Pakistan attracted just one offer for a long-term gas deal.
In all these countries, energy shortages, shutdowns and planned blackouts result from suppliers turning to higher-priced markets in Europe, leaving the Global South starved for gas.
These countries are an extreme example of the insecurity of natural gas. Parts of Pakistan are facing extended blackouts, so air conditioning often failed during this year’s record-breaking heatwave, where temperatures routinely rose above 40°C.
In response to the energy shortage, the Pakistani government redirected some supplies away from fertiliser manufacturers, meaning the country could face a weaker harvest. In Bangladesh, many of the country’s gas-fired power plants have been shut for extended periods.
Hours of blackouts a day are common: state company PetroBangla says it can only service three-quarters of the daily demand for gas. A new mother in the capital recounted her newborn baby sweating all night as blackouts knocked out fans.
Nobody puts it more directly than Shell’s executive vice president: “Europe is sucking LNG from the world, which means less LNG flowing into developing markets.”
EU policymakers need to face reality about their role in the escalating cost of living crisis in overseas countries. In doing so, they must accept that gas cannot provide lasting energy security.
Instead, today’s market traps rich countries in a hamster-wheel effort to secure short-term supplies while poorer countries are repeatedly outbid.
Gas is the wrong way for least-developed countries to grow their economies. For years, fossil fuel businesses and rich countries have pitched natural gas as a reliable, secure fuel that brings prosperity.
They have encouraged countries like Bangladesh to build their energy system around the promise of imported gas, often relying on the volatile spot market for last-minute supply deals. But now, the Global South is the first to be left out in the dark, outbid by the world’s wealthiest countries as soon as the going gets tough.
European leaders must accept that energy security and climate policy are two sides of the same coin. Securing energy supply without acknowledging climate change means entangling ourselves with erratic fossil fuel markets prone to shocks.
As governments and investors crack down harder on fossil fuel extraction, these markets will only become more volatile as they reach their death throes.
Luckily, the paths to energy security and climate stability are one and the same. European leaders and the EU need to do two things: reduce gas demand through energy efficiency and speed up the deployment of renewable energy technology.
Europe should also come forward with technologies, resources and investments in renewable energy for the Global South to address the energy crisis.
That will secure a fair and lasting transition away from fossil fuels – one that works for vulnerable and developing countries and doesn’t shift the burden and responsibility from Europe to the Global South.
It means that European leaders weighing up new long-term gas deals or considering funding new LNG import terminals must think again. Pursuing gas would fire up an overheated market, undermine Europe’s climate promises, and trigger more energy shortages for developing Asian countries.
COP27 presents a powerful deadline for European policymakers to change their approach. That summit cannot be a success unless Europe shows solidarity to vulnerable countries facing severe climate, COVID and war impacts.
Europe has shown real climate leadership in the past: it pioneered the phase-out of dirty coal. Now, it needs to do the same for gas to show solidarity with developing countries in the south.
Until that happens, Europe will be remembered as the continent that gobbled up the world’s gas, leaving the rest of us in the dark.