SERIES – The Net-Zero Transition in the Wake of the War in Ukraine: A Detour, a Derailment, or a Different Path? PART 8

In this series, we attempt to offer a more granular view of what might be in store. We examine the possible effects of the war and its ramifications on the key requirements for a more orderly net-zero transition. We explore the war’s potential effect on key sectors and how shifts in energy and finance markets could play out in the aggregate, both globally and within major regional blocs. Finally, we suggest steps that stakeholders could take as they navigate this turbulent period while continuing to drive toward as orderly a transition as possible. 

To get a clearer idea visit PART 7 of the series, SERIES – The Net-Zero Transition in the Wake of the War in Ukraine: A Detour, a Derailment, or a Different Path? PART 7 – Earth5R.

For government leaders, a more active role in energy markets seems natural in light of conflict. The rise in energy and commodity prices, as well as in concerns about energy security, gives leaders an unprecedented opportunity to accelerate the deployment of net-zero technology. Governments could consider three sets of actions in particular:

  • Develop an integrated economic and national resource strategy. This could include working closely across departments and with industries to develop a roadmap identifying and coordinating the policy, innovation, infrastructure, and financial inputs necessary to achieve decarbonization and energy security commitments. This would also include developing plans for facilitating the retirement, and minimizing the impact, of stranded assets (and very carefully optimizing and guiding the deployment of the new high-emissions assets that may be required in the short term in certain geographies). Finally, this would mean accelerating efforts to project future mineral resource requirements under various scenarios and defining as resilient and diversified an approach as possible to securing those resources.
  • Establish clear demand signals. This could entail putting in place or enhancing a range of incentives and requirements for the deployment of key net-zero transition technologies, accelerating emissions-reduction (and therefore energy security) commitment timelines, and deploying regulations to price or phase out emissive assets over time. However, it is critical that demand signals be coordinated with a supply strategy in the spirit of the previous two points. And all of this is of course in the context of managing the short-term risks that energy systems face.
  • Deploy (further) financial incentives/guarantees and enhance guardrails. This could mean deploying public funds and creating financial incentives to accelerate the deployment of proven net-zero technology, particularly across energy efficiency and renewable generation. This would also mean reforming permit and approval processes to deploy net-zero technologies and infrastructure faster, for example, the installation of wind and solar farms. In parallel, this could mean tightening the permit and approval processes for the development of emissive assets that would be “stranded on arrival.

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Source: McKinsey

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