The Energy Crisis Won’t Sabotage Climate Goals

In the wake of Russia’s invasion of Ukraine, many countries immediately sought to cut ties with Russia’s economy and its main exports: oil and gas. Several European Union countries, which have long relied on Moscow to meet their energy needs, have gone so far as justifying reopening old, polluting coal-fired power plants, even though they had reached an agreement at the United Nations Climate Change Conference last November to rapidly phase out coal. Panic-stricken governments trying to defuse political discontent over soaring fuel prices are even considering gasoline subsidies, seemingly sidelining their climate commitments.

At first sight, it may seem that the energy crisis will sabotage the goal of reaching net-zero carbon emissions by 2050, kicking the issue of climate change yet again into the long grass. Such climate despair is understandable but misplaced.

Some observers worry that in response to the crisis, oil and gas companies as well as governments worldwide will increase fossil fuel exploration and extraction, further entrenching these energy sources in the global economy. But although we are seeing some of this in the short term, the crisis will not undermine the world’s overall green transition as long as governments remain firm in their commitments to long-term climate targets, which they are likely to do given the political capital they have put behind decarbonization pledges, both at home and abroad.

In some jurisdictions, including Britain and the EU, reaching carbon neutrality by 2050 is enshrined in law. And the fundamental building blocks of the green transition remain in place, including key regulations, such as Britain’s ban on the sale of new combustion engine cars by 2030, and carbon pricing mechanisms, such as the EU’s Emissions Trading System, which sets a hard limit on the amount of greenhouse gases that can be produced by the power sector, manufacturing industry, and airlines operating in Europe. Watering these down would require substantial legislative action, which cannot simply be done at the stroke of a pen in a knee-jerk reaction.

Conversely, after initial panic subsides, it will be evident that few incentives exist for investing in polluting energy sources that would take several years to pay off and that risk becoming rapidly obsolete as energy prices normalize and green policies become more stringent.

There are three main reasons we can even expect the crisis to lead to greater climate action.

Soaring oil and gas prices will likely have a similar effect on economies as a carbon tax.

First, soaring oil and gas prices will likely have a similar effect on economies as a carbon tax, which economists have long identified as a key tool in addressing climate change. Essentially, the high prices will make both alternative energy sources and energy efficiency measures more commercially appealing than fossil fuels to consumers, firms, and governments. For instance, at current gasoline prices, it’s three to four times cheaper to drive a kilometer in an electric vehicle than in an internal combustion engine car. And heat pumps, which heat homes very efficiently and run entirely on electricity, will become more appealing. In Europe, demand for heat pumps is already on the rise as a result of the conflict in Ukraine.

Second, the energy crisis will give a sense of urgency to slashing fossil fuels. Climate action notoriously suffers from the problem of generating payoffs only in the medium to long term. But as security expert Anatol Lieven wrote in his 2020 book Climate Change and the Nation State, support for renewable energy rises greatly when it aligns with national security concerns. These days, it’s not just Western urban elites who care about green policies. It is not even necessary to believe in climate science to support ending dependence on Russian energy, including by investing in alternative energy—even in countries where climate mitigation is highly polarizing, such as in the United States.

Third, high fossil fuel prices will foster and accelerate funding for so-called green innovation—new technologies that will help countries decarbonize. Usually, funding for these technologies depends on politicians’ farsightedness, angel investors, or visionary philanthropists. But as governments increasingly see energy independence as important to their security, they will prioritize green innovation in their national security budgets.

Military investments and national security concerns have helped accelerate the commercial development of a new energy source in the past. As scientist and policy analyst Vaclav Smil recounted in his timeless Energy and Civilization, the Manhattan Project, a U.S. government-led military undertaking, produced the first nuclear weapon by 1945. Building on that acquired knowhow, by 1957, the United States had harnessed the same technology for commercial power generation.

Today’s crisis will likewise fast-track pioneering energy research, which is often slow moving due in part to how large initial investments have to be. But now, research in green technologies, such as green hydrogen or nuclear fusion, is moving well beyond academic interest or the typically risk-averse innovation of large commercial players. The energy crisis will likely plant the seed to expedite the development of these technologies and potentially deploy them at a commercial scale in the not-so-distant future.

The crisis may also lead to innovation in how countries find and use the critical minerals that are essential to building alternative energy sources, such as cobalt, nickel, and copper (all of which Russia exports in great quantities). In the face of sanctions against Russia, these metals’ prices have soared. Yet high prices will likely incentivize greater mining in other jurisdictions, such as nickel in Indonesia, and spearhead more policies around their use that prioritize extensive recycling and reuse.

And should high prices last for long, researchers will likely find substitutes to certain minerals, as they have in the past. For instance, in 2010, China imposed a temporary ban on exports of rare earth minerals to Japan due to a territorial dispute. Within five years, Toyota and Honda developed new hybrid car models that greatly reduced or even eliminated the use of heavy rare earth elements, making those models lighter and cheaper. Indeed, new sodium ion batteries for electric vehicles that do not contain cobalt or nickel could enter production by 2023.

If history is any guide, these structural changes instated to reduce fossil fuel consumption in response to Russia’s war will become entrenched, transforming economies profoundly for decades to come.

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The 1970s oil crisis, when the price of a barrel of oil tripled, brought radical long-lasting shifts to the economy and society. In an effort to break its oil dependency and sidestep blackmailing from OPEC, France invested heavily in nuclear energy. Now, half a century later, the country derives more than 70 percent of its electricity from nuclear energy and has one of the lowest greenhouse gas emissions per capita of an industrialized nation (roughly a third of the United States’ in 2019).

The Netherlands, a small, flat country, responded to the oil crisis with an unprecedented push toward bicycles. The country now has more bicycles than people, and according to the U.N. Environment Program, has avoided emitting 1.41 million metric tons of carbon dioxide each year (the equivalent of planting 54.4 million trees) by being a world leader in cycling.

More broadly, in Europe and the United States, cars became much more fuel efficient. Between 1973 and 1987, the average fuel economy of new cars in the United States rose from 13.3 miles per gallon to 27.4 miles per gallon. Smaller cars became more popular, paving the way for the success of Japanese automobiles, which featured smaller engines and higher fuel efficiency. The U.S. economy also became less oil intensive overall in the aftermath of the oil crisis. By 1985, $1 of U.S. GDP could be produced with 37 percent less oil than in 1970—a trend that continued even as oil prices normalized. By 2014, $1 of U.S. GDP could be produced with 62 percent less oil than in 1970.

Then, like now, critics argued that instating solutions to respond to the OPEC oil crisis would take time and could hardly solve the problem of high energy prices in the short term. Then, like now, short-term drivers brought sizable changes in the long term—ones that are evident to this day.

Still, policymakers should not be complacent. Unlike a steady, managed green transition, skyrocketing fossil fuel prices have brought ongoing and widespread disruptions. The International Energy Agency has suggested that energy rationing in Europe may be necessary by next winter. Economic stagnation and high inflation are serious possibilities, with negative repercussions on purchasing power, public finances, unemployment, and social stability.

As I argue in my latest book, Growth for Good, the green transition can be a great opportunity to generate economic growth and jobs. While this remains true, in light of the energy crisis, policymakers must be particularly careful not to underestimate the macroeconomic challenge ahead. They will need to tread the difficult terrain of cushioning the impact of temporary economic hardship while preserving investors’ confidence in renewable energy and retaining public approval.

The good news is that, depending on their political views, citizens in nations that were already prioritizing decarbonization before the war broke out—such as Japan, South Korea, Britain, and EU member states—will likely see the need to look elsewhere for energy either as a price worth paying to protect liberal democracy or as something to be blamed on an aggressive pariah state. But they will not call into question the need to accelerate economic independence from Russia—and therefore from fossil fuels. Whether in war or peace, the future will be green.