Next week the XVII Congress of the Association for the Economy of Energy is organized in my beloved University of Alcalá, with the same motto as the title of this article. The objective of mitigate the effect of rising temperatures of the planet at 1.5 degrees above the pre-industrial era was signed in the Paris Agreement in 2015 and was approved by 193 countries under the auspices of the United Nations the following year. The goal was very ambitious since the temperature has already increased 1.2 degrees and the commitment supposes stopping the increase in temperature in the following decade.
The world today has little to do with the world of 2015, and Congress is very timely. Donald Trump arrived at the White House in January 2017 and everything changed. Trump not only called into question the Paris Agreement but also the United Nations and the entire world system of global governance since the Second World War. Started a trade war with China which continues today. He supported Brexit and clashed head-on with his European partners. He threatened to radically reduce the funds that the US contributes to NATO and approached Putin.
To the effects of right-wing populism in the US and Europe, we must add the global pandemic that has had a strong impact on geopolitics world, further distancing China from the US and Europe, increasing global insecurity and with a strong effect on the world economy, with an economic depression in 2020 and a subsequent global crisis of inflation, supplies and raw materials. And now we must add the war in Ukraine on the border of the European Union.
The question that interests public opinion is whether the commitments made in Paris in 2015 are still viable or should we be realistic and update them. No doubt that will be talked about a lot in Congress. For economists, the academic debate on the costs of non-decision is very relevant, especially in terms of society and citizens. Also the opportunities that arise. Crisis is synonymous with change and opportunitiesnot just risks.
The energy crisis has caused a sharp rise in oil prices and inflation. Central banks have been forced to put an end to its policies of massive debt purchases and raise interest rates. And its effects are already visible; the technology bubble has burst and Aramco, the Saudi oil company, is once again the company with the largest market capitalization, ahead of the Silicon Valley giants. interest returns to exploit oil and, above all, gas wells and global fund managers that only recently talked about sustainable investments are once again including oil companies and polluting companies in their portfolios.
The Bank of Spain has just published a recommendable complete chapter in its annual report dedicated to the costs of climate change. The report includes an analysis with the main topics to be discussed. I am going to rule out the social effects of inaction which is a more likely scenario since the invasion of Ukraine began in February.
If the increase in temperature is greater than that promised, Spain would be the most affected country in Europe. The main problem would be that there would be less rain and less water and it would have a strong impact, especially on the agricultural sector and depopulated Spain. agriculture in Spain it accounts for 3% of GDP and employment but consumes 70% of water for irrigation. The scarcity of water will increase its price and many of the crops and industrial uses will not be viable. The effect will be much more intense in Africa, a continent in the midst of a demographic boom. Droughts and natural disasters there will result in famines and migratory exodus whose main destination will be Europe. Immigration is the most complex problem to manage in the European Union and it is the oxygen of the extreme right.
Today Spain is the world elite in engineering and technology of new primary energy sources that are renewable.
The story until before the pandemic was that the transition to renewable energies was and continues to be the solution, but costs were minimized. Today, we citizens are already aware of these costs and, as the Bank of Spain points out, are more intense in low income that tend to coincide with workers with less qualification and more vulnerable to losing their jobs or intensifying their precariousness.
When the human being has faced a crisis of scarcity, he has always used his intelligence. And the university occupies a crucial role in the debate and diagnosis of the problems and, above all, in the proposals to solve them. The congress brings together a lot of talent and it will be a luxury to learn and debate. As Giner de los Ríos stated, “Spain did not lose the war in Cuba because it had worse soldiers. We lost because we had worse engineers and electricians.”
Today Spain is the world elite of engineering and technology of the new primary sources of energy that are renewable and that will be the solution to the crisis. The solution to the crisis will be multidisciplinary and the role of economists will be to analyze the different regulatory proposals and policies that manage to align the incentives so that the private sector makes millions of decisions that are compatible with the objectives.
Spain must manage the crisis in the short term like the rest of the countries, with a global and especially European vision where we form part of the institutions where decisions are made. Reducing dependence on Russian gas implies advancing in renewable energies. Spain has twice as many hours of sunshine and that is already a reality and does not need subsidies or European funds. Amazon has announced the investment of 2,500 million in data center of access to the cloud mainly because of the cost of producing electricity with photovoltaic plants. Volkswagen chooses Sagunto for its battery factory also because of the lower cost of electricity.
in wind Spain is a world power with 29 gigawatts installed. Iberdrola is a world leader and installs mills in the main countries and behind them there is a cluster of Spanish suppliers that are in charge of the engineering, installation and industrial production of a large part of the technology and components. Ferrol or Cádiz were cities in decline with their shipyards and now they are being converted into production centers for offshore wind platforms.
The sun and wind produce electricity intermittently and need the gas as a backup. The gas substitute will be hydrogen. And again Spain is the most competitive place in Europe to produce hydrogen. Can you imagine why? Because electricity consumption is needed and Spain is the cheapest place to produce it with photovoltaics. This is already a reality in Puertollano, another city in industrial decline. Iberdrola and Fertiberia have developed the largest green hydrogen plant for industrial use in Europe to produce fertilizers. 1,000 jobs are going to be created with that plant and another 200 plants like those are needed in Spain. Hydrogen is not yet produced at competitive prices but with European funds, industrial and technological policy could be a reality in 2027. And Spain would be a world power, as we are in wind energy.
We are going to talk about all this in this congress at the university and we hope that soon it will also be talked about in the media and public opinion. if we succeed we will put an end to unemployment, we will improve the salaries of our young people, we will have more resources for health and pensions and we Spaniards will reconcile ourselves with our institutions.
Yes you can.