On 21st May 2022, the Forum for Global Studies, New Delhi, a multidisciplinary global think tank, hosted an interactive session on “Zero Carbon energy and reshaping 21st Century Geopolitics” by Dr. Elai Rettig. Dr. Rettig is an Assistant Professor in the Department of Political Studies at Bar-Ilan University, specializing in energy security and foreign policy in the Middle East. His research examines patterns of conflict and cooperation over shared energy resources, and the role of oil, natural-gas, and renewable energy in shaping national security policy in Israel and its surrounding region. Prior to joining Bar-Ilan, Dr. Rettig was the “Israel Institute Fellow in Israeli and Environmental Studies” at Washington University in St. Louis, and taught courses on energy geopolitics in the Jones Graduate School of Business at Rice University in Houston.
He was joined in this discussion by FGS team led by Dr Sandeep Tripathi – the Founder President of FGS, Col. Manoj Kumar Singh (Retd.) is an Honorary Director of Research and Mr Ankur Singh Suryan. This session was moderated by Mr. Gaurav Singh who is an Honorary Fellow at FGS. The session began with a brief introduction of the participants and a welcome note to Dr. Rettig by Dr. Sandeep who handed over to Mr. Gaurav who initiated the session with the first question. Mr. Gaurav enquired how Dr. Rettig sees the emergence of decarbonized energy economy and for his opinion on the speculation that Fossils might become a thing of the past. Dr. Rettig began by stating that eventually world will have to move on from fossil fuels, but he does not see this as a realistic possibility at least in the next 100 years. He stated that there is a big gap in reality vs perception on this issue, especially with regard to timelines. For this, he cited the fact that in the global energy pie, 82% of the global energy is coming from fossil fuels which is the same as in 1970s. With nuclear at just 5% and other sources comprising of the remaining miniscule share. Further, he pointed out that renewable sources like solar, geothermal etc are just 2.5%.
Dr. Rettig gave three reasons for his argument. Firstly, he said that is essentially a western discourse and has fundamental flaws in its assumptions as most energy consumption is not happening in the west unlike in the 1970s when OECD consumed 75% of the global energy, which today is just 33%. China and India alone consume 33% of the world’s energy today and burn more coal than rest of the world combined. Thus, the discourse needs to focus more on the rest of the world. Secondly, Dr. Rettig also pointed out that the media created perception also contains many flaws. For Example, in popular discourse energy is conflated with electricity for which sources like wind, solar etc are discussed. But most fossils burnt are not for electricity, which is just 20% of why they are used. 80% of the time fossils are burnt for non-electrical usage.
Finally, he stated that only 3% of Oil is used for electricity generation. Thus, a move to renewables will not stop use of oil. He illustrated this with factoids like even if only electric cars sold by 2040, only 7% of oil consumption will be reduced. Oil remains an essential ingredient in plastics, in computers, nylon, rubber, cement, make up, cleaning products, asphalt etc. In fact, even if it was not an ingredient even then it is brought to the market by trucks, planes and ships which consume the lion’s share of total global oil consumption. Therefore, unless one grows an organic carrot in his/her backyard, he said that everything is brought to us by oil. By this, he concluded that oil rich countries have much time to adjust than the media perception. Mr. Gaurav proceeded to ask about the pressures in the international political economy that Dr. Rettig feels which might emerge as renewable energy increases its share of consumption. He also sought his opinion on what might be the fate of the petrodollar and if this would put significant pressure on global standards of trade as the dollar loses its relevance.
Dr. Rettig replied that he agrees that strength of dollar depends on fossil fuels. But he observed that the petrodollar might come under threat sooner than later not because of technological but geopolitical reasons. As Russia has started demanding its domestic currency for oil purchases through alternate mechanisms, there is a threat of proliferation of such dollar independent fossil fuel trade. Dr. Retting stated that he is of the opinion that the world is better off with US as a hegemon and there no major power that can ensure global stability and order feasibly. He said that the US needs to strengthen its alliances in the Middle East because if the system of petrodollar becomes weak, it will not only diminish its standing as the hegemon to leading to economic crisis on a global scale but might lead to US becoming preoccupied with its domestic issues that would likely crop up due to this global economic uncertainty. Dr.Rettig pointed to the fact that, with its Middle Eastern partners refusing to increase production in the wake of Russia Ukraine war it is clear that US foreign policy in the Middle East is showing signs of fragility. He pointed that this was even more so as the US is seen to be retreating from its security role in the Middle East.
To this Mr. Gaurav moved to the next question wherein he pointed out that since it is clear that Solar and wind alone cannot meet the rising global energy needs, does Dr. Rettig feel that there would be a revival of nuclear energy? and more precisely if he sees a 1970s-80s like rush among countries to build more nuclear power plants and if yes, does he feel this would be a healthy trend or a bottleneck to decarbonzation. Dr. Rettig replied to this by saying that he can’t exactly predict if, but he thinks that nuclear should make a comeback. He stated that nuclear technology today is very safe compared to the 1970s and that much more people die due to coal mining and other activities then those involved in the nuclear industry. He pointed to emerging technologies like modular reactors that can fit on a truck as a great source of non–CO2 energy generation.
However, he cautioned that the biggest challenge to nuclear energy is the aversion of the free market towards it. This is majorly because of high insurance premiums coupled with high operating and security costs, making it unprofitable for entrepreneurs. Besides this, very long periods of construction which requiring very heavy investments at the initial stage make it clear that the only way forward in this sector is through government subsidies and state initiatives. He pointed to the example of China and France where state led nuclear sector has achieved great results. Mr. Gaurav then proceeded to enquire from Dr. Rettig about the impact of decarbonisation on a geopolitically volatile middle east region. Besides this, what geopolitical impact of the emergence of decarbonization does he foresee on the Oil dependent Economies in the Middle east and that how does he think OPEC and OPEC+ states would respond to this pivot of the world towards Zero Carbon energy?
To this Dr. Rettig pointed to the fact that Oil countries are not a monolith. He feels that some are more vulnerable than others based on several factors like how much oil they have, how cheap it is to produce, and the forex reserves they hold to mitigate emerging issues. He thinks that the Middle East should be fine as they have the cheapest reserves due to its less sulphur content and shallowness. Dr. Rettig maintained that this will hold even as the consumption of oil decreases, leading to a reduction in demand and price. He stated that Saudi Arabia would make do even as Oil drops to $10 a barrel due to economies of scale it can achieve. Dr. Rettig feels that arab states need to pursue 2 progressively linked strategies namely mitigation and adaptation. He said that mitigating would be is to delay change and to remain the last man standing while maximising exports and start creating oil products like plastics and rubber since their cost of production will be low in the region and win them markets ultimately buying them time.
Dr. Rettig stated that since the social contracts in many of the oil economies of the middle east based on the trade-off of democracy with welfare which is leading to a population explosion and a culture of wastage and hence, they must find others to generate other ways to get electricity so that they can give for free energy and free up more oil and gas to export.
Dr. Rettig said that the time bought through mitigation can be used for next stage of adaptation for a new reality of becoming a non–oil economy. This would involve serious social and religious reform towards which MBS in Saudi Arabia is moving forward. However, he said that these countries have generous timelines to implement these reforms unlike other oil–based economies like Nigeria, Venezuela, Ecuador, Chad, Gabon etc. They would be under threat of a collapse unless they received international support as they do not have large forex reserves and they sustain dollar to dollar. Moreover, he felt that hould this support could also come from an alternate superpower like China which can trigger a new geopolitical competition. Mr. Gaurav followed up on this enquiring about views on the reforms being undertaken by MBS in Saudi Arabia in the form of vision 2030 and if feels that it would lead to some actual progress in the transformation of Saudi Arabia as an economy independent of oil.
To this Dr. Rettig replied that the vision might be behind schedule, but it has started a movement towards the goal. This effort he feels will prove helpful in changing the mindset of the people. Although he pointed out that MBS has 2 main challenges namely the domestic opposition and criticism from the west. He said that West needs to swallow a frog on this that the path to reform might be bloody and this reflected in aggressive foreign policy of MBS towards Yemen, Iran to balance the domestic opposition. Finally Mr.Gaurav put forth a question to Dr. Rettig using a factoid that renewables infrastructure depends heavily on rare-earth minerals, whose production China almost entirely dominates. Apart from this, over the past decade, China has also been willing to use this control as a geopolitical weapon, imposing an export ban on all rare earth to Japan in 2010 after a conflict about a fishing trawler in the East China Sea. He asked if Dr. Rettig thinks China would emerge as the next energy superpower. If yes, what can be the response of the western world and the QUAD towards this threat to energy security.
To this Dr. Rettig pointed to the fact that rare earth minerals are in fact not that rare and that China would come to dominate this industry only if it was allowed to do so. Rare earth minerals are found all over the world, but it is the cost of extraction and production the drives the production. It is here that countries like China and Congo which have limited workers’ rights are able to significantly reduce costs and allow for the end products like smart phones and other electronic appliances to be cheaper in the international market. The story has been kind of similar in the solar panel and turbine industry which is dominated by China today. Therefore, he said that it is a call for the West to make that if it does not want China to dominate such a critical sector, it needs to look for alternative sites for production which might not be as cheap as China but might not be that expensive either. He pointed out that countries like India can easily replace China for production of things like solar panels and wind turbines where production costs might not be as low as China but not as high as the West either.
Therefore, unlike oil, its policy much more than geography that will be driving outcomes in this scenario. He pointed to the fact that at some level China also has a realization of this and that it needs to present itself as a reliable supplier of these products in the international market. This was the reason that China quickly overturned its embargo on Japan as it realised that it was giving a negative signal to the market and that Japan might start looking for alternative sources. So if China does come to dominate this market it would be because of strategic inaction from the West rather than fate accompli of geography. With this the session moved to the Question & Answer phase wherein Dr Sandeep asked for views on green hydrogen as an alternative energy resource. To this the learned Dr. Rettig replied that while there is lot of genuine hype around electric vehicles, he pointed to the important distinction that they do not reduce CO2 emissions that much but they do reduce pollution so there are in a way great. But it will not solve our fossil fuel addiction or the atmospheric CO2 problems but just put a dent on it. Regarding green hydrogen, he said that we are trying to jump a few steps and that we should first focus on making simply hydrogen more economic and create a market for it before moving on to the more expensive green hydrogen technology which in any case won’t be able to compete with fossil fuels. To this, Col. Manoj followed up with fact that he was skeptical of the efficacy of grey and blue hydrogen and green was the only one with long term benefits.
To this Dr. Rettig opined that he sees grey and blue hydrogen as a gateway or a bridge to get to the green hydrogen even as grey and blue will not solve the fossil fuel addiction. Moreover, both the eminent persons agreed that hydrogen still has enormous logistical challenges with respect to storage and transportation. After this intensely illuminating discussion on a very relevant contemporary issue, Dr. Sandeep Tripathi thanked Dr. Rettig for his time on behalf the FGS team for his enlightening lecture and invited him again for future such initiatives from FGS. Col. Manoj echoed similar gratitude which was gracefully acknowledged by Dr. Rettig.