[Choi Ji-woong's Energy War] Two Things Carbon Neutrality Is Missing

'Carbon Neutrality' Frame That Equalizes Carbon Emissions and Absorption
Limitations of Solving Climate Change with This Concept

Asia Economy Newspaper publishes a monthly Thursday column titled 'Choi Ji-woong's Energy War,' diagnosing the energy industry undergoing a great transformation and examining the related changes in the international order. The author is an expert in the energy field who joined Korea National Oil Corporation in 2008, worked in the Europe and Africa Business Division and the Stockpile Business Division, and completed an MBA program in Oil and Gas at Coventry University in London in 2015. He authored the bestseller 'How Oil Rules the World,' which covers the modern history of oil. Last year, he gained readers' attention by serializing the column in this newspaper.

The word most frequently adopted and declared by governments worldwide to address climate change is 'carbon neutral.' It means balancing carbon emissions and absorption to achieve net zero emissions. Although this term is universally used globally, it is not the optimal phrase for solving the problem. Setting aside the difficulty of achieving 'neutrality' through carbon reduction actions, the problem lies in that it is not a term that boldly tackles the core of the issue.

How can an individual achieve net zero emissions as defined by carbon neutrality? If one drives a private car, they must plant trees to absorb the carbon they emitted after driving a certain distance to achieve neutrality. If one has traveled abroad, travelers should donate a certain amount to CCS (Carbon Capture and Storage) projects or similar initiatives that absorb the carbon emitted by aircraft, divided by 1/n of the fuel used. However, not all populations have enough land to plant trees or sufficient manpower and means to absorb carbon.

The term carbon neutrality implies that there are as many means to offset carbon emissions as there are emission sources, suggesting that carbon zero can be achieved through 'neutral' methods. However, in reality, aside from afforestation projects and early-stage CCS technology, there are few means to absorb carbon. Ultimately, the most direct and effective way to reduce carbon is to use less energy.

Nevertheless, pursuing carbon zero under the concept of neutrality is because various interests are entangled in carbon emissions. Especially in the energy sector, which is linked to economic growth and employment as a driving force of the economy. Electricity rates and gasoline prices are also sensitive issues. These factors prevent approaching the core of the carbon problem and lead to adopting the position of 'neutrality.' Within this ambiguous framework, expanding renewable energy is perceived as the only solution.

Expansion of Renewable Energy ≠ Decarbonization
China, with a high share of renewable energy, has even higher carbon emissions

Of course, expanding renewable energy is important. However, to replace all currently used energy sources with renewable energy, the capacity of renewable energy facilities must increase by several tens of times. This is an extremely difficult task and causes overlooking more important matters. Renewable energy itself does not reduce carbon emissions. Renewable energy also emits a small amount of carbon.

China's share of renewable energy generation was 29% in 2020, a fairly high level. It is higher than the United States' 20.6% and Japan's 21.7%. However, China is the world's largest carbon emitter by a wide margin. Even considering economic scale and population, China's carbon emissions are excessively high. China's GDP is about 70% of the United States, but its carbon emissions are twice that of the U.S. China accounts for about 18% of the world's population but about 29% of the world's total carbon emissions.

This phenomenon is not unique to China. Today, Germany leads in renewable energy use excluding hydropower. Germany's renewable energy share reached 46.7% in 2020. However, Germany emits about twice the carbon compared to France and the United Kingdom, which have lower shares of renewable energy. These cases show that expanding renewable energy does not directly lead to decarbonization.

The International Energy Agency (IEA) presented a roadmap in May titled ‘Net zero by 2050’ on what the world must do to achieve carbon neutrality by 2050. As expected, the report states that a rapid expansion of renewable energy is necessary. It also emphasizes one more thing. The total energy used worldwide is currently 425 EJ (exajoules), which must decrease by about 1% annually to reach 340 EJ by 2050. To achieve this, energy efficiency improvements and changes in people's behavior patterns are required.

Jiwung Choi, Researcher at the Petroleum Information Center, Korea National Oil Corporation

Energy Conservation Essential for Carbon Zero

Many organizations and media outlets emphasize the seriousness of climate change. Public awareness is rising, and an atmosphere emphasizing ESG (Environmental, Social, and Governance) is forming. How should this momentum be harnessed? Expanding renewable energy is certainly important. Especially, replacing coal-fired power generation, which emits the most carbon, with other energy sources is urgent. However, renewable energy expansion is inevitably a difficult path for countries with limited land, and it sometimes leads to controversies about reducing forest areas.

It is possible to increase nuclear power, which currently accounts for about 26% of power generation, but building additional plants in new locations would face tremendous opposition. Ultimately, one pillar of realizing carbon neutrality or carbon zero must be ‘energy conservation.’ And behavioral changes for this are possible only when presented as an active alternative.

There is one more reason why Korea must conserve energy. Under the carbon neutrality framework, global upstream investment in oil development last year remained at about $330 billion, the lowest in 15 years. The impact of this is easily overlooked within the carbon neutrality framework. Even this year, somewhat out of the pandemic, investment sluggishness is expected to continue due to carbon regulations and strengthened ESG, making bold challenges in oil business difficult as in the past. If a corresponding decrease in oil demand does not occur following the sharp decline in oil development investment, oil supply and demand will face enormous uncertainty.

Recently, major foreign media such as The Wall Street Journal reported that excessive underinvestment in oil development could lead to a supply crisis within a few years. Korea is a country that depends entirely on imports for its necessary oil. Increasing uncertainty in oil supply and demand poses a greater threat to Korea. In this situation, what Korea can do is strengthen energy security through securing overseas resources and conserve energy. Although a clich? expression, saving energy and striving to secure it in a ‘country that produces not a single drop of oil’ is necessary both for carbon reduction and energy security.