Energy transition is a global challenge that needs an urgent global response – Modern Diplomacy

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COP26 showed that green energy is not yet appealing enough for the world to reach a consensus on coal phase-out. The priority now should be creating affordable and viable alternatives 
Many were hoping that COP26 would be the moment the world agreed to phase out coal. Instead, we received a much-needed reality check when the pledge to “phase out” coal was weakened to “phase down”. 
 This change was reportedly pushed by India and China whose economies are still largely reliant on coal. The decision proved that the world is not yet ready to live without the most polluting fossil fuels. 
 This is an enormous problem. Coal is the planet’s largest source of carbon dioxide emissions, but also a major source of energy, producing over one-third of global electricity generation. Furthermore, global coal-fired electricity generation could reach an all-time high in 2022, according to the International Energy Agency (IEA).
 Given the continued demand for coal, especially in the emerging markets, we need to accelerate the use of alternative energy sources, but also ensure their equal distribution around the world.
 There are a number of steps policymakers and business leaders are taking to tackle this challenge, but all of them need to be accelerated if we are to incentivise as rapid shift away from coal as the world needs. 
 The first action to be stepped up is public and private investment in renewable energy. This investment can help on three fronts: improve efficiency and increase output of existing technologies, and help develop new technologies. For green alternatives to coal to become more economically viable, especially, for poorer countries, we need more supply and lower costs.
 There are some reasons to be hopeful. During COP26 more than 450 firms representing a ground-breaking $130 trillion of assets pledged investment to meet the goals set out in the Paris climate agreement. 
 The benefits of existing investment are also becoming clearer. Global hydrogen initiatives, for example, are accelerating rapidly, and if investment is kept up, the Hydrogen Council expects it to become a competitive low-carbon solution in long haul trucking, shipping, and steel production.
 However, the challenge remains enormous. The IEA warned in October 2021 that investment in renewable energy needs to triple by the end of this decade to effectively combat climate change. Momentum must be kept up.
 This is especially important for countries like India where coal is arguably the main driver for the country’s economic growth and supports “as many as 10-15 million people … through ancillary employment and social programs near the mines”, according to Brookings Institute.  
This leads us to the second step which must be accelerated: support for developing countries to incentivise energy transition in a way which does not compromise their growth. 
Again, there is activity on this front, but it is insufficient. Twelve years ago, richer countries pledged to channel US$100 billion a year to less wealthy nations by 2020, to help them adapt to climate change. 
The Organization for Economic Cooperation and Development estimates that the financial assistance failed to reach $80 billion in 2019, and likely fell substantially short in 2020. Governments say they will reach the promised amount by 2023. If anything, they should aim to reach it sooner.
There are huge structural costs in adapting electricity grids to be powered at a large scale by renewable energy rather than fossil fuels. Businesses will also need to adapt and millions of employees across the world will need to be re-skilled. To incentivise making these difficult but necessary changes, developing countries should be provided with the financial support promised them over a decade ago.
The third step to be developed further is regulation. Only governments are in a position to pass legislation which encourages a faster energy transition. To take just one example, the European Commission’s Green Deal, proposes introduction of new CO2 emission performance standards for cars and vans, incentivising the electrification of vehicles. 
This kind of simple, direct legislation can reduce consumption of fossil fuels and encourage industry to tackle climate change.
Widespread legislative change won’t be straightforward. Governments should closely involve industry in the consultative process to ensure changes drive innovation rather than add unnecessary bureaucracy, which has already delayed development of renewable assets in countries including Germany and Italy. Still, regardless of the challenges, stronger regulation will be key to turning corporate and sovereign pledges into concrete achievements. 
COP26 showed that we are not ready as a globe to phase out coal. The priority for the global leaders must now be to do everything they can to drive the shift towards green energy and reach the global consensus needed to save our planet.
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COP-26 Results: High Hopes for Low Temperatures
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Russia’s Yekaterinburg hosted the 7th meeting of the Russian-Pakistani Intergovernmental Commission on Trade, Economic, Scientific and Technical Cooperation on November 24–26, 2021. Chaired by Omar Ayub Khan, Pakistan’s Minister for Economic Affairs, and Nikolai Shulginov, Russia’s Minister of Energy, the meeting was attended by around 70 policy makers, heads of key industrial companies and businessmen from both sides, marking a significant change in the bilateral relations between Moscow and Islamabad.
Three pillars of bilateral relations
Among the most important questions raised by the Commission were collaboration in trade, investment and the energy sector.
According to the Russian Federal Customs Service, the Russian-Pakistani trade turnover increased in 2020 by 45.8% compared to 2019, totaling 789.8 million U.S. dollars. Yet, there is still huge potential for increasing the trade volume for the two countries, including textiles and agricultural products of Pakistan and Russian products of machinery, technical expertise as well as transfer of knowledge and R&D.
Another prospective project discussed at the intergovernmental level is initiating a common trade corridor between Russia, the Central Asia and Pakistan. Based on the One-Belt-One-Road concept, launched by China, the Pakistan Road project is supposed to create a free flow of goods between Russia and Pakistan through building necessary economic and transport infrastructure, including railway construction and special customs conditions. During the Commission meeting, both countries expressed their intention to collaborate on renewal of the railway machines fleet and facilities in Pakistan, including supplies of mechanized track maintenance and renewal machines; supplies of 50 shunting (2400HP or less) and 100 mainline (over 3000HP) diesel locomotives; joint R&D of the technical and economic feasibility of locomotives production based in the Locomotive Factory Risalpur and other. The proposed contractors of the project might be the Russian Sinara Transport Machines, Uralvagonzavod JSC that stand ready to supply Pakistan Railway with freight wagons, locomotives and passenger coaches. In order to engage import and export activities between Russian and Pakistani businessmen, the Federation of Pakistan Chamber of Commerce signed a memorandum with Ural Chamber of Commerce and Industry, marking a new step in bilateral relations. Similar memorandums have already been signed with other Chambers of Commerce in Russian regions.
— Today, the ties between Russia and Pakistan are objectively strengthening in all areas including economic, political and military collaboration. But we, as businessmen, are primarily interested in the development of trade relations and new transit corridors for export-import activities. For example, the prospective pathways of the Pakistan-Central Asia-Russia trade and economic corridor project are now being actively discussed at the intergovernmental level, — said Mohsin Sheikh, Director of the Pakistan Russia Business Council of the Federation of Pakistan Chambers of Commerce and Industry. — For Islamabad, this issue is one of the most important. Based on a similar experience of trade with China, we see great prospects for this direction. That is why representatives of Pakistan’s government, customs officers, diplomats and businessmen gathered in Yekaterinburg today.
However, the flagship project of the new era of the Pakistan-Russia relations is likely to be the Pakistan Gas Stream. Previously known as the North-South Gas Pipeline, this mega-project (1,100 kilometers in length) is expected to cost up to USD 2,5 billion and is claimed to be highly beneficial for Pakistan. Being a net importer of energy, Pakistan will be able to develop and integrate new sources of natural gas and transport it to the densely populated industrialized north. At the same time, the project will enable Pakistan—whose main industries are still dependent on the coal consumption—to take a major step forward gradually replacing coal with relatively more ecologically sustainable natural gas. To enable this significant development in the Pakistan’s energy sector, Moscow and Islamabad have made preliminary agreements to carry on the research of Pakistan’s mineral resource sector including copper, gold, iron, lead and zinc ores of Baluchistan, Khyber Pukhtunkhwa and Punjab Provinces.
A lot opportunities but a lot more risks?
The Pakistan Stream Gas Pipe Project undoubtedly opens major investment opportunities for Pakistan. Among them are establishment of new refineries; the launch of virtual LNG pipelines; building of LNG onshore storages of LNG; investing in strategic oil and gas storages. Yet, it seems that Pakistan is likely to win more from the Project than Russia. And here’s why. The current version of the agreement signed by Moscow and Islamabad has been essentially reworked. According to it, Russia will likely to receive only 26 percent in the project stake instead of 85 percent as it was previously planned, while the Pakistani side will retain a controlling stake (74 percent) in the project.
Another stranding factor for Russia is although Moscow will be entitled to provide all the necessary facilities and equipment for the building of the pipeline, the entire construction process will be supervised by an independent Pakistani-based company, which will substantially boost Pakistan’s influence at each development. Finally, the vast bulk of the gas transported via the pipeline will likely come from Qatar, which will further strengthen Qatar’s role in the Pakistani energy sector.
Big strategy but safety first
The Pakistan Stream Gas Pipeline will surely become an important strategic tool for Russia to reactivate the South Asian vector of its foreign policy. Even though the project’s aim is not to gain a fast investment return and economic benefits, it follows significant strategic goals for both countries. As Russia-India political and economic relations are cooling down, Moscow is likely to boost ties with Pakistan, including cooperation in economy, military, safety and potentially nuclear energy, that was highlighted by Russian Foreign Minister Sergey Lavrov during visit to Islamabad earlier this year. Such an expansion of relations with Pakistan will allow Russia to gain a more solid foothold in the South Asian part of China’s BRI, thus opening up a range of new lucrative opportunities for Moscow.
Apart from its economic and political aspects, the Pakistan Stream Project also has clear geopolitical implications. It marks Russia’s growing influence in South Asia and points to some remarkable transformations that are currently taking place in this region. The ongoing geopolitical game within the India-Russia-Pakistan triangle is yet less favorable for New Delhi much because of the Pakistan Stream Project. Even though the project is not directly aimed to jeopardize the India’s role in the region, it is considered the first dangerous signal for New Delhi. For instance, the International “Extended troika” Conference on Afghanistan, which was held in Moscow last spring united representatives from the United States, Russia, China and Pakistan but left India aside (even though the latter has important strategic interests in Afghanistan).
With the recent withdrawal of the U.S. military forces from Afghanistan, Moscow has become literally the only warden of Central Asia’s security. As Russia is worried about the possibility of Islamist militants infiltrating the Central Asia, the main defensive buffer in the South for Moscow, the recent decision of Vladimir Putin to equip its military base in Tajikistan, which neighbors Afghanistan, seems to be just on time. Obviously, Islamabad that faces major risks amidst the Afghanistan crisis sees Moscow as a prospective strategic partner who will help Imran Khan strengthen the Pakistani efforts in fighting the terrorism threat.
From our partner RIAC
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In two provinces of Viet Nam, a quiet transformation is taking place, driven by the power of renewable energy.
Thien Nghiep Commune, a few hundred kilometres from Ho Chi Min City, is a community of just over 6,000 people – where for years, people relied largely on farming, fishing and seasonal labour to make ends meet.
Now, thanks to a wind farm backed by the Seed Capital Assistance Facility (SCAF) – a multi-donor trust fund, led by the United Nations Environment Programme (UNEP) – people in the Thien Nghiep Commune are accessing new jobs, infrastructure and – soon – cheap, clean energy. The 40MW Dai Phong project, one of two wind farms run by SCAF partner company the Blue Circle, has brought new hope to the community.
For the 759 million people in the world who lack access to electricity, the introduction of clean energy solutions can bring improved healthcare, better education and affordable broadband, creating new jobs, livelihoods and sustainable economic value to reduce poverty.
“It’s not only about the technology and the big spinning wheel for me. It’s more about making investment decisions for the planet and at the same time not compromising on the necessity that we call electricity,” said Nguyen Thi Hoai Thuong, who works as a community liaison. “The interesting part is I work for the project, but I actually work for the community and with the community.”
While the wind farm is not yet online, a focus on local hiring and paying fair prices for land has already made a big difference to the community.
“I used the money from the land sale to the Dai Phong project to repair my house and invest in my cattle. Currently, my life is stable and I have not encountered any difficulties since selling the land,” said Ms. Le Thi Doan.
Powering change
The energy sector accounts for approximately 75 per cent of total global greenhouse gas emissions (GHGs). UNEP research shows that these need to be reduced dramatically and eventually eliminated to meet the goals of the Paris Agreement.
Renewable energy, in all its forms, is one of humanity’s greatest assets in the fight to limit climate change. Capacity across the globe continues to grow every year, lowering both GHGs and air pollution, but the pace of action must accelerate to hold global temperature rise to 1.5 °C this century.
“To boost growth in renewables, however, companies need to access finance,” said Rakesh  Shejwal, a Programme Management Officer at SCAF. “This is where SCAF comes in. SCAF works through private equity funds and development companies to mobilize early-stage investment low-carbon projects in developing countries.”
The 176 projects it seed financed have mobilized US $3.47 billion to build over one gigawatt of generation capacity, avoiding emissions of 4.68 million tons of carbon dioxide (CO2) equivalent each year.
But SCAF’s work isn’t just about cutting emissions. It is bringing huge benefits across the sustainable development agenda: increasing access to clean and reliable electricity and boosting communities across Asia and Africa. SCAF will be potentially creating 17,000 jobs.
This is evident in Ninh Thuan province, where the Blue Circle created both the first commercial wind power project and the first to be commissioned by a foreign private investor in Viet Nam.
Here, the Dam Nai wind farm has delivered fifteen 2.625 MW turbines, the largest in the country at the time. These will generate approximately 100 GWh per year. They will avoid over 68,000 tCO2e annually and create more than an estimated 302 temporary construction and 13 permanent operation and maintenance jobs for the local community.
Students from the local high school in Ninh Thuan Province were also given the opportunity to meet with engineers and technicians on the project, increasing their knowledge about how renewable energy works and opening up new career paths.
SCAF, through its partners, is supporting clean energy project development in the Southeast Asian region and African region. SCAF has more than a decade of experience in decarbonization and is currently poised to run till 2026.
UNEP
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Increasingly, compliance with US sanctions against Iran could emerge as a litmus test of the United Arab Emirates’ close ties to the United States.
At the sharp edge of a potential rift between the allies is a reportedly recently concluded agreement by a private UAE company to build gas-fired thermal, solar, and wind power plants with a total capacity of 300 megawatts in Iran’s hydrocarbon-rich province of Khuzestan.
Established in 2020, AJ Holding, the Dubai and Fujairah-based company, could not be reached for comment. The company website claims, without further detail, that its portfolio includes some 600MW of wind and solar power projects in Eastern Europe, the Baltics, and the Far East.
A picture attributed to Iranian energy news agency Bargh News appeared to show the company’s Danish CEO, Allan Jespersen, exchanging documents with an Iranian official.
The deal was signed as the United States warned that it would toughen enforcement of sanctions if multilateral talks in Vienna aimed at reviving the 2015 international agreement that curbed Iran’s nuclear programme failed.
A US delegation expects to visit the UAE, a major Iranian trading partner, this week to warn banks, petrochemical firms, and other companies that US authorities have evidence of their non-compliance with sanctions and that they could be penalized.
As the Vienna talks took place, Anwar Gargash, UAE President Khalifa bin Zayed’s diplomatic advisor, asserted that he did not “see further sanctions as a solution …There are already enough sanctions on Iran,” he said. At the same time, Mr. Gargash described the United States as the UAE’s “number one strategic ally.”
The United States has expressed support for the UAE’s diplomatic outreach to Iran that began in July 2019 after the US failed to respond to attacks on oil vessels off the coast of the Emirates, for which the Islamic Republic was believed to be responsible.
We welcome any direct talks that lead to greater peace and stability in the region,” said US deputy assistant secretary of state for Iran and Iraq Jennifer Gavito.
In the highest-level contact in a decade, Sheikh Tahnoon bin Zayed, the UAE national security advisor and brother of strongman Crown Prince Mohammed bin Zayed, met in Tehran last week with Iranian President Ebrahim Raisi.
“I expect that Iran will make demands which would be very difficult for the UAE to accommodate. They would be asking…to use UAE financial institutions to trade with the world. The UAE needs to find out for itself if it wants to help the IRGC (the Islamic Revolutionary Guards Corps) evade and bypass US sanctions to protect itself against potential future attacks,” said Iran scholar Ali Alfoneh in a recent webinar that was part of this year’s UAE Security Forum hosted by the Arab Gulf States Institute in Washington (AGSIW).
Mr. Alfoneh was referring to fears that Iran could target the UAE and Saudi Arabia in a possible military confrontation with Israel and/or the United States should the Vienna nuclear talks collapse.
The UAE’s concerns were magnified following last year’s establishment of diplomatic relations with Israel that Iran condemned.
The United States and the UAE are negotiating final details for the US$23 billion sale of F-35 fighter jets that would make the Gulf state the only Middle Eastern nation except for Israel to operate America’s most advanced stealth warplane. Earlier this month, the UAE agreed during a visit by President Emmanuel Macron to a $20 billion deal to purchase 80 French Rafale fighter planes.
“Officials in Abu Dhabi and (especially) Dubai are fully aware of the damage that would be caused to their brand as (relatively) stable hubs in an otherwise insecure region should the pattern of attacks seen in 2019 continue and/or escalate,” said Gulf scholar Kristian Coates Ulrichsen. Mr. Ulrichsen was referring to attacks on shipping in the UAE and Saudi oil facilities for which Iran was believed to have been responsible.
The UAE’s outreach to Iran amounts to a questionable bet that detente, against the backdrop of sustained social unrest driven by economic hardship, will induce the government in Tehran to modify its policies.
“What we’re hoping for is regime moderation…where we’re dealing with Iran as another state that we can deal with viably, and they can benefit from.  So, if they need leverage, they can get leverage, but it doesn’t have to be through military aspects… That’s the type of change that has not been explored a lot,” Mohammed Baharoon, the head of the Dubai Public Policy Research Center, said in the AGSIW webinar that also included Mr. Alfoneh.
Mr. Gargash expressed hope in his remarks to the security forum that Iran would respond to the “new environment” that the UAE and Saudi Arabia were trying to create. He suggested that Iran could signal its interest by helping achieve a ceasefire in the debilitating almost seven-year-long war in Yemen.
The UAE bet is that Iran, like the Gulf, will accept that to survive in the 21st century, autocratic regimes need to deliver public goods and can no longer depend primarily on a repressive security state. For Iran to do so, it needs a lifting of the sanctions.
Similarly, the bet further presumes that Iranian minority voices that argue that improved relations with Gulf states require a resolution of the nuclear issue and a lifting of US sanctions will resonate with policymakers In Tehran.
Majidreza Hariri, head of the Iran-China Chamber of Commerce, recently cautioned that Iran was at a trade disadvantage as long as the sanctions were in place.
“Our status is weakening daily … because when we’re absent from the international trade energy arena, our competitors in the Persian Gulf’s southern region take our place, and when they sell more oil to China, they’re obliged to buy more merchandise from it,” Mr. Hariri said.
Esfandyar Batmanghelidj, who heads the London-based Bourse and Bazaar think tank and is a visiting fellow at the European Council on Foreign Relations, noted that Iranian imports from the UAE projected at $12billion in 2021/2022 were set to exceed pre-2018 levels by March of next year, the end of the Iranian calendar year. The UAE is a major hub for re-export to Iran.
Mr. Batmanghelidj suggested that Iran’s increased spending power in the UAE was enhanced by oil sales to China in violation of the US sanctions that are mediated by the Emirates as well as Malaysia.
The AJ Holding energy deal, if confirmed, would, at the very least, grant Iran a symbolic victory, a contract with a company from a country closely allied with the United States that would snub US sanctions.
The UAE is unlikely to snub the sanctions that blatantly. More likely is that the contract is a further indication to Iran of what would be possible if it did its part to get US sanctions lifted. It’s a message Tehran has long been aware of but has so far refused to heed. So, the question is whether anything has changed from Iran’s perspective. There is no indication that something has.
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