The need to go beyond the 2° rationale

France, Egypt - Feb 25 2019

Analyst insight

The need to go beyond the 2° rationale

COP21 in Paris is approaching and calls are multiplying to policy-makers to make the 2° benchmark the very objective of the next round of negotiations. Consensus is growing that burning the entire fossil fuel reserves is definitely incompatible with such objective. While there is now no more uncertainty that the estimated 3,000 Gt of CO2 contained in those reserves is about three times the allowed carbon budget to meet the 2° objective, this diagnosis however suffers from two weaknesses. First, it considers the carbon issue as related to one single stock of carbon and does not make any distinction between fossil fuels, ignoring the long term issues, risks and opportunities, both on the supply and demand sides, specific to each of them. Second, it underestimates the critical role of energy as a pillar of economic development and social and political stability. Recent news and developments from two different countries such as Egypt and France however illustrate the much higher complexity of the carbon budget issue than what is usually presented.

In Egypt, the discovery of the Zohr natural gas field with an estimated 800 billion m3 off the coast has been confirmed in late August. As most of the natural gas is expected to be used to meet domestic needs, this field holds the potential to transform the Egyptian energy picture by alleviating the high constraints on the power sector, allowing gas to oil substitution in industrial sectors and contributing to energy independence in a highly volatile geopolitical context. In light of such potential improvements of the Egyptian energy scene, did anyone stand up to publicly call on Egyptian authorities to cancel the development of the Zohr gas field as it contradicts the obligation to keep underground the vast majority of world fossil fuel reserves if the 2° goal is to be achieved? No, as far as I know. I guess nobody will feel comfortable and self-confident enough to deploy convincing arguments that it is in the interest, on both the short and long terms, of Egypt to give up on what remains a significant and more than welcome opportunity given the dramatic challenges of all kinds this country is facing.

This is on the contrary precisely what took place in France a few days ago when several NGOs called on the government to cancel the decision to award three new exploration permits for conventional hydrocarbons and renew two existing. The rationale invoked is that the ultimate objective of any energy policy, whatever the context, should be to simply give up on 80% of the fossil fuels reserves. But comparatively to Egypt, estimated fossil reserves at stake in France are ridiculously low. With one of the lowest levels of energy related CO2 emissions, exploitation of domestic fossil reserves in France does not pose any threat to the 2° world objective. This does not mean, however, that there are not any missed opportunities in decarbonizing further the French economy and anticipating on the return of economically and physically challenging conditions of energy imports on which France is still highly dependent.

Both the Egyptian and French cases illustrate the need to go beyond the too simplistic approach of the 2° rationale if any success is to be expected from COP21 (and the ones most likely to follow…).

Olivier RECH
Head of Energy Research
Beyond Ratings

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