The competition for new minerals, developing countries’ clamour for climate justice and the current disruption to oil supplies are threats to the global energy transition movement, and these could leave Nigeria vulnerable.
An analysis by Daniel Yergin, vice chairman of S&P Global, published on the International Monetary Fund website, said despite a growing global consensus, obstacles to reducing net carbon emissions to zero are stark.
Oil markets tightened by lockdowns, in response to COVID-19 jerking up prices due to constrained supply. Years of underinvestment due to climate concerns and shareholder revolt have locked in new oil and gas resources and following Russia’s war against Ukraine, markets unravelled, forcing many countries to prioritise energy security.
Previous transitions unfolded over the course of centuries but Western countries were pushing for a rapid end to oil. According to Yergin, the objective of this transition is not just to bring on new energy sources, but to entirely change the energy foundations of what today is a $100 trillion global economy — and do so in little more than a quarter century.
Analysts say this leaves countries like Nigeria vulnerable. Etulan Adu, an oil and gas production engineer, said the call for an energy transition at a rapid pace without replacing existing systems that provide energy affordability would not only disrupt the energy mix but also create economic hardship and pressure on the masses both in the North and Southern hemisphere.
“The problem of switching to renewables without a stable supply of energy from these sources has created ripples in energy prices and thus inflicted inflationary pressure on the global economy,” he said.
Yergin said this is worsened by the sharpening divide between advanced and developing countries on priorities in the transition.
Rich nations are pushing for a rapid transition but developing countries, especially in Africa, say they need more time to exploit their resources.
“For developing countries, what seems a singular emphasis on reducing emissions needs to be balanced against other urgent priorities — health, poverty, and economic growth. Billions of people still cook with wood and waste, resulting in indoor pollution and poor health. Many of these countries are looking to increase use of hydrocarbons as integral to raising standards of living,” he said.
The split is particularly evident when it comes to financing. The S&P executive noted that Western banks and multilateral financial institutions have shut off finance for pipelines and ports and other infrastructure related to hydrocarbon development.
For resource-rich but poor countries like Nigeria, this situation would challenge current plans towards energy transition and bring shocks to the economy due to financing constraints for fossil fuels.
Jide Pratt, country manager at Trade Grid and energy analyst, said Nigeria needs a just transition inclusive of various energy sources while ensuring stability, affordability, reliability of supply.
“As we seek global funding, we must tie it not only to decarbonisation goals by index but to reducing energy poverty,” Pratt said.
He said the dearth of financing from Europe should lead policymakers to begin seeking opportunities for local or sub-regional financing. “We must find the opportunity in the threat,” he said.
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According to an S&P Global study on the future of copper, the demand for the mineral would have to double by the mid-2030s to achieve the 2050 goals.
Yergin believes the choke point is supply. Obstacles to expanding mining and building supply chains for the minerals needed for the net-zero objective remains a significant threat.
This has set off a competition between the superpowers, the United States and China, and poor countries like Nigeria, Chile, Congo and Peru with vast supplies of the new minerals are caught in the middle.
Pratt said critical minerals for the energy transition require extensive mining activities, which have a significant environmental impact on local communities in Nigeria.
Daramfon Bassey, manager at Clean Tech Hub, said clean energy production, particularly electric vehicles, solar PV systems, and windmills, require minerals like copper and lithium-ion.
“The increased demand for these products could potentially lead to the price of these resources increasing. This would have a domino effect and could result in an increase in the price of clean energy components. Which are already still out of the reach of the ordinary Nigerian,” he said.
