The world’s energy shortage… ESG gets caught before running [심층기획]

Photo = AFP Yonhap News

The global economy, which tried to move on a new path by declaring carbon neutrality and decarbonization, is suffering from severe pain. Content such as ‘Let’s avoid fossil fuels by increasing the proportion of new and renewable energy’ and ‘We need to move from the era of internal combustion engines to the era of electric vehicles’ has become a proposition rather than a controversy, but the actual situation is very different. Voices of fuel and energy shortages are heard from all over the world. Developed countries that have been at the forefront of being carbon neutral are also increasing their consumption of fossil fuels such as coal and natural gas on a whim. In emerging countries, the situation is even more serious, such as logistics difficulties and production disruptions. It clearly shows how deeply the carbon system has taken root in the present human race.

This situation is called ‘green inflation’ and is holding back the economic growth of many countries. In the process of increasing demand for eco-friendly energy (green), raw material prices soar and various industries are hit in a row, causing an overall economic price increase (inflation). It’s even more painful because we’re just transitioning to the normalization of the economy after spending nearly two years escaping the dark tunnel of ‘COVID-19’.

As a result, skepticism about eco-friendly policies and ESG (environmental, social, and governance) management is rising again. As it has been done many times in the past, it is a question of ‘What are you talking about when you are in a hurry to eat and live?’ Some view the current situation as a major crisis, while others view it as temporary and overcome. The blueprint of decarbonization is once again at a crossroads.

Coming out of the Corona 19 tunnel, raw material prices rise

According to Index Mundi, an international statistical site, on the 12th, West Texas Intermediate Crude Oil (WTF) for delivery on December 5 recorded $81.27 per barrel. After breaking above $80 a barrel last month, WTI shows no sign of falling below $80 a barrel even this month. Compared to the beginning of this year (average price in January), it has risen by nearly 40%.

The price of natural gas, considered an alternative to petroleum, is also on the rise. The global natural gas price was $5.516 per MMbtu (caloric unit) as of the 5th, more than doubled from the beginning of the year. In Europe, wind power generation, which was responsible for about 16% of electricity generation, was disrupted, and natural gas prices were raised by increasing the utilization rate of natural gas power plants to fill the power shortage.

In the case of the United States, the world’s largest oil and natural gas producer, demand for coal is increasing as the prices of these two resources have risen sharply. The U.S. Energy Management Agency (EIA) forecasts that coal consumption in the U.S. will reach 537 million tons this year, up 23% from the previous year. It is the first time in eight years since 2013 that coal use in the United States has increased. President Joe Biden faced this situation less than a year after he was elected with eco-friendly policies.

While the US is struggling with oil and gas prices in Europe, China is suffering from coal. Like other countries, China’s energy demand skyrocketed as it sought to normalize the economy after escaping the COVID-19 crisis. overlapped As a result, the producer price index (PPI) rose more than 10% in September compared to a year ago, setting a new high in 25 years since statistics began to be compiled in 1996.

The fact that winter is coming soon in the northern hemisphere, where the majority of the global population is concentrated, also raises the sense of crisis. The demand for these fossil fuels cannot be reduced due to heating in winter. In addition, as the economic recovery gains momentum, energy demand will inevitably increase.

The rise of raw materials was not limited to fossil fuels as an energy source. Demand is expected to continue to rise due to the expansion of eco-friendly industries such as electric vehicles and batteries. On the other hand, the price of metal resources such as copper and nickel has soared as supply is disrupted due to the effects of eco-friendly regulations and the unstable situation in major producing countries including the Congo. As of the 5th, copper price was $9587 per ton, up nearly 20% compared to the beginning of the year. Aluminum was $2595.75 per ton, up 30% from the beginning of the year. Aluminum is also used as a major material for electric vehicles and solar panels, and it is a metal that requires a lot of electricity in the production process. Analysts say that the price increase has accelerated as the Chinese government, the world’s largest producer, has begun to regulate production in response to environmental problems. This is being affected by rising prices of other raw materials such as zinc.

◆Energy, agricultural products, urea water… tribal dominoes

The rise in raw material prices also affected the production and price of various types of energy, including power generation. Not only this. An increase in daily necessities such as agricultural products is also inevitable.

First, the rise in natural gas prices triggered an increase in fertilizer prices. This is because ammonia, a key ingredient in fertilizers, is extracted from natural gas. Unable to cope with the soaring natural gas price, major European producers have cut production, and China, the largest producer of fertilizer raw materials, has restricted exports.

This increase in fertilizer prices will eventually affect the overall agricultural products. The average price of wheat in the United States in September was $269.73 per ton, up more than 30% from October last year. In the case of cotton, the average price per kg in September was $2.29, up nearly 40% from October last year. The damage caused by the rise in fertilizer prices has also affected diet and clothing.

On the afternoon of the 12th, at a gas station in Bucheon-si, Gyeonggi-do, a notice was posted indicating that urea water was sold out. news

In Korea, there is a growing sense of crisis about the shortage of urea water. Urea is produced by extracting ammonia from coal or natural gas. Korea, which relied on China for most of its supply, suffered an unprecedented logistical problem as China began restricting exports of urea after the price of coal soared. At the beginning of the crisis, the government mobilized military transport planes to urgently import urea water, resulting in a situation where the fuel cost was greater than the urea value.

The urea water crisis is said to be occurring in European countries as well. In Europe, with the introduction of ‘Euro 6’, an emission regulation in 2015, urea water became a necessity for the operation of diesel vehicles.

Eco-friendly policy, can it cruise?

As real problems such as rising prices come up, antipathy towards ESG management, including eco-friendly policies, is detected everywhere in each country. This is because, as volatility increases due to the rise of raw materials, not financial policies related to the escape of Corona 19, such as interest rate hikes, it affects every corner of the national economy, business activities, and households.

Concerns about this are growing, especially in business groups in Korea. Even after the 2030 Greenhouse Gas Reduction Target (NDC) was presented last month, voices from the business and industry circles rang out saying, “The price of raw materials has risen sharply compared to past economic crises such as the IMF and the global financial crisis, making it difficult for companies to respond.” Considering the reality of manufacturing-based exports so far, it is a significant burden on business activities, people’s lives, and jobs.

Photo = AP Yonhap News

There are also concerns that ESG management, which has been a hot topic in the business world, may lose its momentum. Even at the beginning of this year, the heads of companies and executives were mobilized to raise their voices about ESG management practices, but as the middle of this year passes, they say that they are less interested in various aspects, including marketing. An official from the business community said, “Unlike the fact that ESG was called for justification at the beginning of this year when there was less learning about ESG, recently, it is an atmosphere where people are learning by company and industry to strengthen their internality. said.

Some point out that the government’s interest has waned ahead of the presidential election. The Financial Services Commission, which is in charge of green finance, launched a special green finance department as a temporary organization during the reorganization process earlier this year. However, the organization has recently disappeared again. An official from the FSC explained, “The temporary organization that was created in the process of preparing policies such as the Basic Plan for Green Finance at the beginning of this year has returned to its original state.” In the process of declining interest in ESG, the industry is expressing concern over the disappearance of a dedicated organization due to the replacement of the Financial Services Chairman and the like. The government, which had not previously presented a specific vision, even eliminated the dedicated organization.

Despite these various circumstances, the perception that eco-friendliness is ‘the way to go anyway’ seems to be still dominant. Hyo-seok Lee, a researcher at SK Securities, said, “If we look at scenarios of transition to a decarbonization economy, there are no exceptions to the increase in energy prices. He continued, “After the outbreak of Corona 19 last year, like ‘What kind of electric vehicle is it when the economy is difficult,’ there may be talk of ‘What kind of ESG is it because it’s cold to death’? will be,” he added.

[ⓒ 세계일보 & Segye.com, 무단전재 및 재배포 금지]


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