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Gas gasdotto Russia (La Presse)

Gas and renewables: the energy mix of the future?

The European Union seems intent on accelerating the times of the energy transition, but politics continues to step on the brake. The latest chapter concerns the taxonomy for sustainable finance, which decides which investments can be part of the ‘great European plan’ for a clean and sustainable environment. This fundamental step is currently still waiting for the go-ahead in anticipation of a new government taking office in Germany following the elections, the first in many years without Angela Merkel as favourite for the role of chancellor.

The taxonomy will have to indicate whether two forms of energy production that are important, in fact crucial today, namely gas and nuclear power, can be included among those in which investments can be made as part of the green deal. Having said this, it is clear that the importance of the taxonomy cannot be reduced to a choice between concentrating investments on renewable energy or also keeping them in hydrocarbons, because it involves the same EU energy system. And, in passing, about 800,000 workers in Italy alone are employed in the so-called ‘hard to abate’ sectors, meaning heavy industry and transport, where green solutions are still unable to meet energy needs.

Theoretically, the clash is between two concepts that are for the moment (only apparently) irreconcilable. On the one hand, there are those who believe that radical choices need to be made to complete the energy transition. On the other, there are those who identify natural gas – and nuclear power – as indispensable as supports for the inevitably gradual transition during the period when renewable energy cannot, on its own, guarantee all our energy needs.

The gift of green radicalism

The first approach is dominant at the moment in the debate not only in Italy but also other European countries, including Germany where the environmental theme was at the centre of its elections on 26 September. The programme of the Grüne, led by Annalena Baerbock, on climate issues was presented with slogans that could also prove fascinating to the Mittelstand, the numerous small and medium-sized German businesses. The policy of the ecological party has encountered an obstacle in one of the policies that is least acceptable to business, a carbon tax that already plans to raise the cost of emitting CO2 2023 to 60 euros per ton as from 2023. In future, actions for environmental sustainability could well run aground in the face of the economic costs necessary to put them into practice. The story is further complicated because the Green Party is seeking to introduce drastic reductions on greenhouse gases and rejecting the doubling of Nord Stream 2, a bone of geopolitical contention between Biden and Putin (and Merkel).

So the issue of the taxonomy for sustainable finance is a crucial issue. Unless resolved in a broadly agreed way, it will cause problems within the EU. One above all. If gas were to be excluded from investments considered virtuous (together with nuclear power and agriculture), it would undermine the process of replacing coal-fired power plants. And in Germany and all the East European countries, as well as Italy, coal is the main cause of pollution and the greenhouse effect.

The risks for Italy

This, finally, again raises the issue of the ‘hard to abate’ sectors, such as steel mills, power stations, cement factories, paper mills, steel and chemical plants. These are important sectors not only for Italy but the whole of Europe. In Italy they are the backbone of the fabric of small and medium-sized businesses, the flagship of Italian industry worldwide (think of the production chains in automaking, aerospace, pharmaceuticals, etc.).

If it is true that energy efficiency means using less energy to perform the same work, with the advantage of reducing greenhouse gases and the demand for energy imports, it is clear that we need viable solutions, not speeches. Some solutions are carbon capture and hydrogen: highly topical issues, as Joe Biden’s special envoy on climate, John Kerry, and his Chinese counterpart Xie Zhenhua agreed at a meeting in Shanghai in mid-April.

We need a sustainable and pragmatic energy transition based on an upstream energy-efficiency production cycle and on solutions that reduce downstream emissions. And at the same time we need to retrain workers for new skills. This was precisely one of the topics at the centre of the Offshore Mediterranean Conference, the global Mediterranean energy event hosted in Ravenna.