IEEJ：September © IEEJ 2022
Special Bulletin
A Japanese Perspective on the International Energy Landscape (604)September 28, 2022

Participating in Int’l Energy Symposium Featuring IEA Chief Birol’s Lecture
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn September 27, the Institute of Energy Economics, Japan, sponsored an internationalenergy symposium featuring a lecture by Dr. Fatih Birol, Executive Director of International Energy
Agency, who was visiting Japan. The hybrid symposium combined a face-to-face conference at theKeidanren Hall with online participation. Some 90 people attended the Keidanren Hall conference,with online participants numbering about 350, indicating robust interest in the symposium, which also
included a panel discussion attended by three panelists: Jun Arima, project professor, Graduate Schoolof Public Policy, University of Tokyo; Keisuke Sadamori, director, Office for Energy Markets andSecurity, IEA; and Jun Nishizawa, executive vice president and group CEO, Natural Gas Group,
Mitsubishi Corp. I moderated the panel discussion. At a time when the world was required to strike abalance between energy security and decarbonization in the international energy situation shaken by
the Ukraine crisis, the symposium with the lecture by Dr. Birol was a timely one. In the following, I
would like to summarize my personal comments on the symposium including the lecture.
First, it was impressive that Dr. Birol indicated an extremely serious view of the current
energy situation. He emphasized the current crisis as the first ever global-level energy crisis. Thismeans that the energy situation under the Ukraine crisis, which is often compared with the first oilcrisis, represents a grave global crisis covering all energy sources from oil to gas/LNG, coal andelectricity. The first oil crisis was an extremely grave event that became a turning point in theinternational energy situation, but the current crisis is likely to have even greater impacts. Dr. Birolalso emphasized that while energy security has become a top priority challenge under the crisis,climate change is in critical condition and should be tackled as a grave issue.
Dr. Birol impressively pointed out that the following three points should not bemisunderstood. The first point is that the Russian energy sector has plunged into a critical condition
as seen from various viewpoints, although Russia’s oil revenue has been expanding due to crude oil
price spikes and increasing Russian oil exports to China and India even under Western economic
sanctions. This is because Russia has been losing the European market as its key sales channel and is
expected to see stagnant oil and gas production over a medium to long term. The second point is thatthe most important factor behind the crisis is insecurity about or an actual decline in Russian energy
supply, rather than decarbonization initiatives. The third point is that the current crisis, like the first oilcrisis, may become a turning point for energy transition that could accelerate decarbonization.
Dr. Birol pointed out that efforts and initiatives to accelerate energy transition are emerging
in Japan, North America and Europe. As is well known, the European Union has come up with theREPowerEU Plan to phase out dependence on Russian energy and is working to implement it. In theUnited States, the Inflation Reduction Act has been enacted under the Biden administration to promoteclean energy under massive funding. Japan has adopted the Green Growth Strategy as a priority policy
to promote innovation and other initiatives mainly in the energy sector.
1

IEEJ：September © IEEJ 2022

Dr. Birol also pointed out that key moves towards innovation in various energy areas are
emerging in the market under these policy initiatives. They include the further spread of renewableenergy including wind power and solar photovoltaics, the accelerating diffusion of electric vehicles
and growing momentum for promoting nuclear energy as a recent key change. Moves towards theutilization of nuclear energy emerged amid international energy price spikes since the second half of2021. The significance of nuclear energy as a stable baseload, zero-emission electricity source wasreaffirmed then. France and the United Kingdom announced plans to build new nuclear reactors.
Belgium decided to extend the life-time of nuclear plant operations. Germany came up with a plan tomaintain two nuclear reactors that had been planned to be decommissioned. Moves to promote thedevelopment of small modular reactors also emerged. Recently, China has clarified its policy of
promoting nuclear energy. Earlier, it had temporarily decelerated its nuclear energy promotion.
Dr. Birol’s following analysis and findings regarding these moves were also interesting. His
conclusion is that the first most important driver of the abovementioned clean energy promotion
initiatives is the enhancement of energy security in response to the current crisis, followed by theenhancement of climate change countermeasures as the second most important driver. Anotherimportant driver is a kind of industrial policy or growth strategy approach, meaning that countries in
the world are taking industrial policy or growth strategy measures to catch up with or survive theglobal energy transition trend.
As a matter of fact, energy price spikes and economic deterioration feature regressivity,
exerting greater adverse effects on lower-income groups or countries. Therefore, it is uncertain
whether transition to clean energy would make quick or easy progress in the world including
developing and emerging countries. Amid the geopolitical chaos and deepening divides in the worldand society, the world may grow interested in steady and pragmatic decarbonization, rather than quickand difficult decarbonization, and in the appropriate utilization of fossil fuels. However, we may haveto pay attention to the possibility that both energy security and decarbonization could promote energytransition.
Recently, news about serious damage to the Nord Stream 1 and 2 pipelines, a mainstay gas
supply channel from Russia to Europe, swept the world, providing a new matter of concern in theinternational energy market. Irrespective of any cause or reasons for the incident, the serious damage
to the pipelines is destined to severely tighten the gas supply-demand balance in Europe in the comingwinter. The situation may differ depending on whether the coming winter is warmer or colder. If theserious damage is coupled with accidents or troubles at non-Russian gas/LNG supply sources, or withmalfunctions or accidents at variable renewable energy and other major electricity sources, however,gas prices may shoot up far beyond record levels seen last summer, with the supply-demand balancetightening further. Even if Europe tides over the coming winter thanks to higher temperatures, gas
supply may depend heavily on inventories. In early next spring, European gas inventories may bedepleted. As the year 2023 starts with extremely low gas inventories, the European gas market mayremain in an extremely tight situation. European gas price spikes could invite not only Asian LNG
spot prices but also prices of oil and coal as alternatives to gas to shoot up. The future internationalenergy situation will remain subject to close attention. How to strike a balance between energy security
and decarbonization will remain an extremely important but difficult challenge.
Contact: report@tky.ieej.or.jp
The back issues are available at the following URL
http://eneken.ieej.or.jp/en/special_bulletin.html
2