JPMorgan’s calls for a “reality check” on the goals and path of the global energy transition are “reasonable,” the UAE’s energy minister told CNBC.
“We always have to, whenever we release forecasts, especially long-term ones, be faced with reality,” Suhail Al Mazrouei told CNBC’s Dan Murphy in Riyadh, Saudi Arabia, on the sidelines of the World Economic Forum .
In a recent note to its client, JPMorgan warned that the world needs a “reality check” on its efforts to transition from fossil fuels to renewable energy, stressing that it could take “generations” to achieve net zero emissions targets.
Rising interest rates, inflation and ongoing wars in Ukraine and the Middle East are hampering efforts to reduce the use of fossil fuels like oil, coal and gas, the report said.
“I think it’s a very sensible article,” Al Mazrouei said. The minister stressed, however, that the circumstances and financial capacities of each country to achieve energy transition objectives will vary.
The world is no longer the same… Some can afford it. They worked on tax changes, they adjusted their energy costs. Others did not.
Suhail Al Mazrouei
Minister of Energy of the United Arab Emirates
“The world is not the same anymore… Some can afford it. They have worked on tax changes, they have adjusted their energy costs. Others haven’t, (they) can’t afford it. allow it,” he added.
Governments around the world agreed in the 2015 Paris climate agreement to limit the global average temperature to well below 2°C above pre-industrial levels and to continue efforts to limit temperature rise at 1.5°C. To achieve this, emissions must be reduced by 45% by 2030 and reach net zero emissions by 2050.
A higher interest rate environment also makes the global transition to a net-zero global economy more costly, energy consultancy Wood Mackenzie said in a recent note.
Higher interest rates disproportionately affect renewables and nuclear power, said Peter Martin, economic director at Wood Mackenzie, adding that high capital intensity and low returns mean future projects will be at risk.
“The higher cost of borrowing negatively affects renewable energy and emerging technologies, compared to the more established oil and gas sectors, as well as the metals and mining sectors, which remain somewhat isolated,” he said. -he declares.
This month the Scottish Government abandoned its 2030 climate target, with Net Zero Minister Mairi McAllan saying the target was “out of reach”.
She added that “the severe budgetary restrictions imposed by the British government” played a role in this withdrawal. The country has committed to reducing its greenhouse gas emissions by 75% by 2030, compared to 1990 levels.
Major oil companies such as BP and Shell have also reduced their climate targets this year.
The UAE is one of the countries committed to tripling global nuclear power capacity by 2050.
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