From Deep Crisis, Profound Change

With his barbaric war on Ukraine, Vladimir Putin has set in motion every outcome he dreaded, including shaking up global energy markets. Now, energy security is at the forefront of the minds of national and regional policymakers, investors, businesses, and consumers alike. It’s now time to act with speed, agility, coordination, and a broadened and integrated vision to create a prosperous, climate-safe and energy-secure world.

Russia is the world’s largest exporter of oil, gas, and total fossil fuels. In 2020, Russia supplied nearly twice Saudi Arabia’s fossil fuel exports (which are just oil, while Russia adds gas and coal), or 15 percent of international energy trade. Now Russia is being cut out of markets, creating a classic supply-side shock. High fossil fuel prices make them lose out to renewables earlier and more broadly, while long-neglected energy security reinforces climate and public-health imperatives to galvanize political change. As Europe finds new solutions to reduce its fuel dependency, the Global South too can leapfrog to cheap, stable, and domestic renewable energy. Rising energy efficiency and quicker renewable growth will put the peak of world fossil fuel demand behind us. Policymakers should speed the shift to efficiency and renewables and resist the siren song of a return to the fossil fuels that had lost their rationale even before Putin’s War, and that are now losing any remnants even faster.

This external shock has pushed the future of fossil fuels into a new direction, illustrated by the conceptual chart below. Rather than coasting gently into a slow decline, fossil fuel demand now faces the prospect of prompt, rapid, and sustained decline, driven by three imperatives no longer at odds but now fully aligned: security, climate (and health), and economics. The energy trilemma has been solved by the synergistic pairing of efficiency with renewables.