Energy provide within the wake of Putin’s assault on Ukraine

Veronika Grimm holds the Chair in Financial Idea at Friedrich-Alexander-Universität Erlangen-Nürnberg (FAU). The power markets are one focus of her work. She has been a member of the German Council of Financial Consultants since April 2020. We requested the economic expert three questions.

Professor Grimm, you have got expressed the view that it will be doable to do with out Russian fuel at brief discover. How would that be achieved?
Inside the framework of the sanctions imposed in response to the Russian battle of aggression towards Ukraine, Europe ought to work in the direction of shortly and comprehensively decreasing its funds to Russia for power imports. Because of the newest worth rises, Russia receives roughly 20 billion euros monthly from the EU. Russia might simply reply to any makes an attempt by the EU to cease these fee flows by halting its deliveries of power sources. It’s subsequently vital to arrange for this state of affairs by assessing the financial penalties and analysing methods to cope with the state of affairs. Economists have explored these points in quite a few research, considered one of which I used to be concerned in. Our conclusion was that it will be a problem and would end in a big financial droop. If a supply ban couldn’t be prevented for causes of safety coverage, nevertheless, it will be manageable.

One purpose of Germany’s G7 presidency is: “Strong alliances for a sustainable planet”. Will the present developments not result in new dependencies?
That’s certainly one thing one ought to attempt to keep away from. The transition to local weather neutrality generates potential for diversifying our power imports: all over the world, there are much more international locations with glorious situations for renewable energies than these with accessible sources of fossil energies. We are able to receive hydrogen and artificial fuels from them. That gives rise to new possibilities. In the case of sources that might be vital sooner or later, we have to be certain that no dependencies emerge, although we’re already considerably late in doing this in some circumstances. We additionally must look intently at our commerce relationships. Nevertheless, one of many largest challenges of the approaching years might be that fossil fuels will grow to be dearer if we wish to be unbiased of Russia. This can pose a risk to our competitiveness in some respects.

Will the power transition now be given a lift?
I hope so. When fossil power sources are costly, it’s usually value switching extra shortly to renewables. In different phrases, renewables create a chance for reducing power prices. Dependable framework situations will must be put in place to set off the immense private-sector investments mandatory for the transition and to quickly develop the infrastructure required to move electrical energy and hydrogen. On this context, accelerating planning, approval and implementation processes might be of important significance.

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