Countries may turn to alternative energy sources amid rise in protectionism: Shell chief economist Ishwaran
Summary
Mallika Ishwaran, chief economist at Shell, said climate change would continue to be an issue of utmost importance and a matter of national interest for countries in a scenario where the global world is fragmented.NEW DELHI : At a time when protectionism is rising around the world, global trade is witnessing dynamic changes and several countries are moving away from globalization, Mallika Ishwaran, chief economist at Shell, said that countries are likely to turn towards alternative energy sources to achieve energy security on their own.
In an interview, the chief economist at the energy major said that climate change would continue to be an issue of utmost importance and a matter of national interest for countries in a scenario where the global world is fragmented.
Citing Shell's projection on energy security scenarios, which talks about the dynamics of interdependence among countries and the quest for energy security, she said, "A key scenario is 'archipelagos'. So, it's very much what you see today. There's a lot of geopolitical, geo-economic fragmentation that you're seeing, trading blocs forming, regional alliances forming. And what we also see is that the response to this fragmentation is protectionism."
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She noted that the cost of energy and technologies to implement alternative energies would rise amid the breakdown of the globalised supply chain.
“And again, this is a world where you know climate is seen as a matter of 'national interest'. So, countries are doing things like shifting away from fossil fuels if they are imported. It’s about reducing import dependence and shifting towards domestic energy, which in the global south is renewables," he said.
"It's not necessarily for solar or wind. So, we're seeing energy transition happen even in this world because of the energy security lens for reducing your dependence on imported gas, oil, etc., which is very true of India."
She, however, noted that the countries in the 'Global South' may not benefit from global action in terms of technological innovations, newer and alternative energy sources, and climate action.
Pockets of action
As action towards achieving energy transition and curbing climate change is expected in pockets without large-scale global coordination, Ishwaran said that the Paris Agreement target to limit the temperature increase to 1.5 degrees Celsius above pre-industrial levels may not be met in such a scenario.
"But th is still progress, because of energy security, there's a sense of ‘let's move away from imported fossil fuels towards domestic renewables, so that drives a lot of change. But in sectors like aviation and marine, you need more international cooperation on technology, deployment, and learning. And that doesn’t sort of get unlocked in this scenario...That is why it doesn’t meet the Paris goal."
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The projection gains significance as countries scrambled to secure energy supplies after the start of the Russia-Ukraine war in 2022 and the eventual volatility in oil and gas markets. Further, the push for green energy has also gained momentum, given several countries' high import dependence on oil and gas, including India.
The recent instances of changing dynamics in world trade, with the new US administration under President Donald Trump announcing sweeping tariffs and prospects of counter-tariffs by several other economies, have further raised concerns of a fragmented global order.
Another scenario she talked about is the 'Horizon' or the 'Sky 2050', in which long-term climate security is the primary anchor. Specific targets include reaching net zero by 2050 and ultimately bringing the global average surface temperature increase to 1.5 degrees Celsius by 2100.
She noted that in this scenario, although fragmentation would continue, countries are likely to cooperate on certain global welfare subjects, such as public health and climate.
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"Countries are still doing what's in their interest, but there's a recognition that some of their interest requires global action. So, if you have those topics, then you will get some interest and collaboration. Still, there is competition between different regional blocks or alliances, but the nature of competition is very different. So it's not protectionist, but it's competing on innovation," Ishwaran said.
Key takeaways
- Rising global protectionism and fragmentation are pushing countries to prioritize energy security by developing domestic energy sources to reduce reliance on imported fossil fuels.
- The shift towards renewables, especially in the Global South, is largely driven by national interest in energy independence rather than solely by global climate action commitments.
- This fragmented approach is expected to increase energy and technology costs, hinder cooperation needed for decarbonizing complex sectors, and make achieving the Paris Agreement's 1.5°C target unlikely.
- While pursuing domestic renewables for security, countries in the 'Global South' might miss out on the benefits of shared global tech innovation and coordinated climate action in this fragmented environment.
- An alternative future scenario exists where, despite fragmentation, countries cooperate on global challenges like climate change, competing through innovation rather than protectionism, potentially meeting long-term climate goals like net zero by 2050.
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