• Tade Oyewunmi

Energy Transitions and Decarbonisation

One of the simplest definitions of 'energy' is “the capacity to do work” which takes various forms such as kinetic energy associated with motion, chemical energy stored in materials that is released following a chemical reaction such as in batteries, thermal energy associated with heat and temperature, electrical energy resulting from the flow of electric charge commonly referred to as electricity, and radiant energy associated with light and radiation e.g. solar. Electrical energy carried through electricity and created from the various primary sources such as natural gas and sunshine is arguably one of the most significant innovations of the past century. Electricity is a critical enabler of modern standards of living. It gives us the 'capacity' to turn on lights, cook at home and provide space heating in cold regions or cooling in temperate regions, supports economic and industrial processes, etc. As a system for meeting demand, energy supply comprises the extraction and processing of primary sources such as oil, water (hydro), wind and natural gas, followed by the conversion or processing, then transmission and distribution in a final and useable form such as electricity, heat or transportation fuel.

Depending on the context, some of the key factors driving the evolving energy systems transition(s) in several countries and regions globally include- climate change mitigation and the need to curb energy-related greenhouse gas emissions i.e. decarbonization, the falling costs of renewables (e.g. wind and solar) and emergence of advanced energy storage technologies, progress in energy efficiency and demand-side management policies, electrification of sectors such as transportation and residential energy applications, and organizational reforms and restructuring to enhance security of supply and viable markets. With such issues in mind, it was exciting to launch a research project about a year ago culminating in the forthcoming handbook on “Decarbonisation and the Energy Industry” Hart Publishing, Oxford, UK, fall 2020 (edited by Tade Oyewunmi, Dr. Penelope Crossely, Prof. Frédéric G. Sourgens, and Prof. Kim Talus).

The ongoing project adopts a 'law-in-context' approach and considered at least sixteen (16) issues bordering on the regulatory and institutional aspects of a complex subject, i.e.transitional energy markets and decarbonization. In the next couple of weeks, I will share two of my working papers on my ssrn page.

The forthcoming handbook comprises two parts and sixteen (16) chapters. The theme of the first part is ‘enhancing secure and reliable access to sustainable energy systems in the 21st Century’ while the theme of the second part is ‘energy transitions law and regulation in selected countries and regions’ including the US, China, Europe, Nigeria, and Southern Africa. In chapter one, Prof. David Spence examines the policy choices and trade-offs between affordability, security and environmental performance in the U.S. In chapters two and three I respectively discuss (i) the US gas supply boom under carbon-constraints; and (ii) power-to-gas, carbon capture, storage and utilization (CCUS), negative emissions technology and other innovative solutions for decarbonizing energy systems. Focusing on Texas and the US Permian basin in chapter 4, Prof. Talus underscores the imperative of properly curbing the economic waste and environmental pollution arising from natural gas flaring.

In chapter 5, Prof. Sourgens expounds on his concept of global governance networks for climate change and energy investments and discusses ideas that are reflected in chapter 6 which he co-authored with Prof. Diane Desierto on International Investment Law and decarbonization. In chapter 7, Prof. Emeka Duruigbo examines the potential for private mineral rights in Africa and shale gas development, while in chapter 8, Dr. Peter Oniemola takes a critical look at international oil and gas operations in the context of decarbonization and evolving scenarios. In the final chapter of Part I, Prof. Sourgens and Prof. Lori A. McMillan highlight the carbon taxation conundrum.

Commencing the second part of the handbook, Prof. Troy A. Rule writes a primer on the United States Energy and Decarbonisation Policy in chapter 10. Chapter 11 by Dr. Sirja-Leena Penttinen and Prof. Leonie Reins addresses the intriguing subject of renewable energy integration in the EU’s internal energy market. Dr. Philip Andrews-Speed considers the complexities of regulating energy supply in China in chapter 12.

I co-authored chapter 13 on the legal and regulatory dynamics of grid-based and emerging off-grid energy systems in Nigeria’s electricity supply industry with Ivie Ehanmo. In chapter 14, Prof. Crossley examines energy law and regulation in Australia, especially focusing on renewables and the promotion of decarbonized energy systems. In chapter 15, Prof. Rudiger Tscherning discussed Canada’s developing LNG export industry in the context of project approval challenges and issues. Highlighting the importance of factors such as affordability and universal energy access, Dr. Victoria R. Nalule, and Dr. Smith I. Azubuike explores energy transitions in the Southern African context and potentials for low-carbon energy developments in the final chapter 16.

Key highlights and concluding thoughts...

  1. It is pragmatic to expect and accept reasonable trade-offs between reliability and sustainability in the pathways to decarbonization and energy transitions.

  2. While regulatory institutions have an important role in guiding the energy industry towards decarbonization, there is a need for de-politicization as well as legal and policy coherence. All stakeholders need to work together effectively to solve the greenhouse gas emissions challenge.

  3. There is a need for a comprehensive approach to policymaking and regulatory solutions to enhance the full range of benefits and potentials of emerging technologies such as power-to-gas, biogas, hydrogen networks, CCUS, and negative emissions facilities.

  4. In the context of natural gas flaring, a longer-term view that balances the economic cost-efficiency objectives and the need for preventing environmental harm as well as climate change impact is critical. As seen in the US Permian Basin, gaps and ineffectiveness in applicable regulations and environmental standards will most-likely lead to increased waste of valuable resources, and greenhouse gas emissions and thereby contribute to climate change.

  5. Governance of decarbonization at the international and national levels will require the convergence of interests and interactions between governance networks made up of multiple actors.

  6. International Investment Law and energy regime should strive to act as a catalyst for human development rather than simply as an aggregator of economic growth. It is important to properly evaluate the role of investment law in global policy processes aimed at decarbonization. It may be useful to invoke international investment law for green energy development and incentivize “green” energy generation capacity transnationally.

  7. Civic shares could provide a valuable mechanism to unlock the potential of shale gas within the African region and thereby support sustainable energy for all and increase access to reliable energy sources. 

  8. A carbon tax approach leans on the prospects of internalizing the costs of emissions and spurring an efficient switch towards decarbonized technologies and energy systems. However, carbon taxation has significant difficulties in accounting for the deep disruptions that pricing carbon through taxation brings with it. For instance, carbon taxation often assumes certain economic and technological efficiencies that do not currently exist or do not exist at the required scale and scope. Hence, carbon taxation 'on its own' may not be an effective policy tool to support the decarbonization effort currently.

  9. In setting a carbon price through taxation, a price that is significantly less than the ‘true costs’ would most likely not achieve the necessary goals of decarbonization it sets out to meet. Rather it would create externalities of its own without absorbing the externalities of carbon emissions. Conversely, setting a price that is higher than the already exorbitant costs of decarbonization creates considerable equity and fairness implications which is often overlooked. For instance, how does a carbon tax affect poor communities and developing economies and what tools and measures are provided to address such impact if any?

  10. In a political environment where Federal Government support for decarbonization in the United States is waning, there are still significant gains being achieved at state and local levels

  11. The European Union has adopted significant legislative reforms to support the integration of renewable energy and decentralized energy resources, as well as increase the system flexibility of the grid.

  12. Significant progress and clean energy solutions are evolving in China through a combination of strategic industrial and energy policies. There is a pragmatic approach adopted in China via energy laws and policies towards achieving security of supply, energy self-sufficiency and abating pollution.

  13. The energy transition will prove particularly challenging in resource-rich developing nations and thus any approach to decarbonizing the economy will need to be fair, just, affordable and pragmatic.

  14. Countries are expected to integrate their energy and climate change-related laws and policies to enable efficient pathways towards decarbonization and the evolving energy transition.

  15. Crises of legitimacy can undermine public confidence in key approvals processes within the energy sector, which in turn may hamper global efforts to transition to low-carbon fuels

  16. While the energy transition and decarbonization present serious challenges for developing countries, it also presents new opportunities, particularly regarding access to energy for all, tackling climate change and improved regional cooperation.

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