28 November 2022

Jorick Albers

Geopolitical crisis may offer a more sustainable perspective

The war in Ukraine has created a new reality. The war is primarily a human tragedy. “But the geopolitical crisis can also provide a new and more sustainable perspective,” writes Jorick Albers, Account Director European Affairs at Hague.

Europe is pushing renewable energy to the maximum in order to get rid of Putin’s whims as soon as possible. But it is an illusion to think we can do without fossil fuels in the short term. Brussels wants to reduce Russian gas imports to zero by 2027 – which may happen much sooner. Insofar as that cannot be replaced with renewable energy, Europe must fall back on Liquified Natural Gas (LNG) from other countries. LNG is natural gas that is liquefied so it can be shipped by tanker. LNG shipping is expensive, so gas-rich countries in relatively nearby North Africa and the Middle East are first in the picture to do business with.

However, the European quest for LNG is making many gas-exporting countries suspicious. After all, if Europe wants to be climate-neutral by 2050, how steady will the trade relationship be? Countries like Qatar, Libya and Algeria are happy to do business, but can only justify high investments on their side by signing long-term contracts. Does that mesh with Europe’s ambition to phase out gas consumption as soon as possible?

Green hydrogen

Major economic and business interests are at stake in the new geopolitical reality. Fortunately, it is not just about gas contracts. The intended new trading partners are also extremely well positioned to play a role in the sustainable energy supply of the future. There are many opportunities for countries in North Africa and the Middle East to produce green hydrogen with cheap solar energy. Europe will produce some of the hydrogen itself – needed for chemistry, industry and transportation – but will certainly also need imports. Imports of natural gas will over time be replaced by imports of hydrogen, for example with ammonia as a carrier. This will create new trade relations in which Europe can shape the energy transition without letting those countries down.

This geopolitical crisis can thus provide a new and more sustainable perspective. The prerequisite is greater diversification, so that no single country can disrupt Europe’s energy supply for political reasons. This is also realistic, because there are more countries with abundant sunshine, than countries with oil and gas reserves.

New industrial revolution

The shifting panels on the world geopolitical stage have significant implications for businesses. Trade policy is primarily a task for government leaders, ministers and public servants. But for (international) business, it is important to understand market developments and to use your influence when the time is right. Companies must be careful not to stay on the sidelines for too long.

Waiting is the worst advice imaginable. European Commissioner Frans Timmermans rightly says that we are in the midst of an industrial revolution. Everything is being reformed to meet climate targets. Take aviation and shipping for example, there is real work to be done. In order to be climate-neutral in 2050, the right investment decisions must be made in those sectors now. The legislation to make that happen is being written now.

Brussels is not an impregnable bastion

Companies make investments with a 10 or 20-year horizon, or even longer. Clarity is therefore crucial. Does Brussels consider biomass sustainable? Are we going for nuclear power? Is blue hydrogen (made from natural gas, where CO2 is captured and stored) sustainable or not? CO2 storage: is that effective climate policy, or life extension of fossil industry? In short: which technologies can companies use in the energy transition? The longer Brussels waits with answers, the harder it becomes to be climate neutral in 2050.

It is sometimes difficult for companies to bring these concerns to the fore in Brussels. But European institutions are not an impregnable bastion. Policymakers are quite open to companies with good ideas. If you have a good story, there is plenty of room for constructive discussion. Coalitions of companies proposing how objectives can be realized, stand a good chance of a listening and sympathetic ear.

We are happy to help you

Consequently, your organisation needs to consider implementing an effective stakeholder management strategy, which is often part of your lobbying activities. Hague can help you to start this discussion with your stakeholders. We explore leads and identify shared interests and risks   that may harm your reputation. We find out what motivates your stakeholders, what they really think of you, and what you should do – or shouldn’t do – to turn them into allies.
Hague will investigate possible coalitions and opportunities and, together, we will take action to convince stakeholders. Curious how? Please contact Account Director Jorick Albers. He is happy to help you.

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28 November 2022

Jorick Albers

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