We are seeing what a serious response to a crisis looks like, let's apply this focus to energy transition

This column is an opinionby Yrjo Koskinen, the BMOprofessor of sustainable and transition finance at the Haskayne School of Business, University of Calgary.For more information aboutCBC's Opinion section, please see theFAQ.

When Russia invaded Ukraine, the West's reaction appeared to surprise everybody, including Russia.The United States, the European Union and others responded quickly and decisively by imposing punishing economic sanctions, by targeting Russian assets abroad and by sending Ukraine significant supplies of weapons.

The most consequential actions were freezing the Russian Central Bank's gold and foreign exchange reserves and limiting Putin's access to the Russian sovereign wealth fund's assets. Russia had prepared its banking sector for being barred from using the SWIFT global messaging system, but going after its foreign assets was likely unexpected and clearly devastating. There's probably more to come.

This is what a serious response to a crisis looks like.

Also recently, the Intergovernmental Panel on Climate Change (IPCC) released its 2022 report on impacts and adaptation to climate change and as a result, well, not much happened. In the middle of the invasion, hardly anybody even noticed.

• What the new IPCC report says climate change could and is costing Canadians

The truth is, geopolitics eats climate change for breakfast.

An urgent crisis creates the incentive for action. Even though we claim that we are in a climate crisis, people don't really believe it. Its impact seems less urgent; the deadlines far away.

Nonetheless, we ignore climate change at our peril. Long-term consequences of inaction could be devastating, as the February IPCC report points out.

Virtue signalling

The energy transition must still remain a priority, but we need to get much smarter about it. Climate emergency declarations have been pure virtue signalling, followed with little action as governments pass the ball to their successors by agreeing to long-term goals and only putting forward hazy paths to meeting decades-away commitments.

First of all, no more false promises. Next, we have to admit to ourselves that there will be no orderly energy transition.

Transition will be volatile, full of surprises and will bring unintended consequences. The process is just far too complex for anybody to figure out all the contingencies. Pretending otherwise just leads to disappointments and backlash.

As Europe sought to lead in renewable energy usage, it continued buying most of Russia's oil and gas because even world leaders in wind and solar power need reliable baseload power in order to meet energy demands when the sun doesn't shine and the winds don't blow. Europe ended up financing the Russian war machine. Ukrainians are paying the price.

In the short and medium-term, we should admit something too few leaders are willing to say publicly: fossil fuels are a significant part of the energy mix.

Currently, fossil fuels provide over 80 per cent of the world's energy. We can't wish that fact away, even if we wanted to. That number will go down, as the world's energy use is forecasted to grow nearly 50 per cent by 2050 and the growth is largely coming from renewables. But most likely the world will still consume considerable amounts of hydrocarbons then.

The path forward

What to do? We need to make sure that natural gas the cleanest of fossil fuels is as clean as possible and control its methane emissions. Next, the West needs to relearn how to build nuclear reactors on time and with controlled costs. Even France, the only Western country with a serious nuclear industry, is struggling: witness the cost overruns and delays at its newest nuclear power site at Flamanville.

Oil and gas companies should also use their windfall profits wisely. Shareholders are already enjoying massive gains, there is no need to increase stock buybacks any further. Instead, those profits should be invested in making fossil fuels as clean as possible as quickly as possible. There is already one example of oil produced carbon-neutrally Lundin Energy's barrels from the Johan Sverdrup oil field in the North Sea. Others should follow suit. Not in 2050, but much earlier.

Finally, it matters where oil and gas come from: reduce the supply from dangerous authoritarian states, increase it from stable democracies.

In the coming years and decades, we need to massively scale up alternative power sources such as green and blue hydrogen, geothermal power and renewable fuels. These could be transformative, because they are not intermittent power sources like solar and wind are. Also, we need breakthroughs in energy storage, so that intermittent wind and solar can play an even bigger role.

Even though climate change poses a truly wicked challenge, we cannot afford to lose hope. Just over two years ago, leading scientists said it might not be realistic to create a safe and effective vaccine against the SARS-CoV-2 virus in less than five years since the previous record for vaccine development was four years for the mumps vaccine. But the pandemic concentrated our minds and resources, and brought our attention to the issue. The result was a safe and effective vaccine in just one year.

Imagine if we could muster the same focus to energy transition.

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