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1、 January 2023 OIES Paper:SP 21 Key Themes for the Global Energy Economy in 2023 OIES i The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its members.Copyright 2023 Oxford Institute for Energ
2、y Studies(Registered Charity,No.286084)This publication may be reproduced in part for educational or non-profit purposes without special permission from the copyright holder,provided acknowledgment of the source is made.No use of this publication may be made for resale or for any other commercial pu
3、rpose whatsoever without prior permission in writing from the Oxford Institute for Energy Studies.ISBN 978-1-78467-215-7 ii Contents.ii Figures.ii Tables.ii 1.Introduction rebalancing the energy trilemma.1 2.Oil markets in 2023:the year of the aftershocks.4 3.European gas demand:key factors to keep
4、an eye on in 2023.6 4.2023:A year for the EU to deliver the legislative framework of the Green Deal.8 5.Storage as an indicator of European market tightness.10 6.Final agreement on wholesale gas price caps foreshadows future challenges for EU energy policy .12 7.The EU regulatory framework governing
5、 solidarity during a gas crisis.14 8.Where will Europe get its gas from in 2023?.16 9.China in 2023:A year of two halves.18 10.Indias G-20 Presidency.20 11.Revisiting the Africa-Europe energy relationship.22 12.The Global Stocktake A critical update on climate action,or lack of it.24 13.Progress wit
6、h climate finance ahead of COP28 will be vital in 2023.26 14.Article 6 post-COP27.28 15.Outlook for Carbon Removals Post-COP27.30 16.Methane emissions:the increasing importance of measurement,reporting,and verification.32 17.As China reopens,expect volatility.34 18.Electricity wholesale market desig
7、n in Europe.36 19.Nuclear power in 2023:the nuclear renaissance resurrected?.38 20.How will the US Inflation Reduction Act affect hydrogen developments in 2023?.40 Figures Figure 1:Balance of risks.4 Figure 2:Monthly gas demand in EU27+UK,2019-2022(Bcm).7 Figure 3:European gas storage stocks(Bcm).10
8、 Figure 4:Europe Balance 2023.17 Figure 5:Timetable for the Global Stocktake Process.24 Figure 6:Climate finance flows,actual and needed to limit warming to 1.5C.27 Tables Table 1:Canadian Methane Emissions Reduction Plan(megatonnes of CO2e).33 Table 2:Nuclear reactor plans,by country.38 Table 3:US
9、Inflation Reduction Act hydrogen tax credits.41 Contents 1 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.1.Introduction rebalancing the energy trilemma In this latest edition
10、 of our Key Themes series we examine a number of topics which we believe will be highly relevant to the global energy economy in 2023.The past twelve months have seen a huge re-prioritisation of energy policy away from environmental issues and towards energy security and affordability.Many of the ar
11、ticles in this document question whether this will be a long-term trend or whether sustainability will return to the top of the policymaking agenda once the short-term need to focus on security of supply has passed.Indeed,many of our contributors argue that the short-term rebalancing of the energy t
12、rilemma towards energy security may even bring environmental benefits in the longer term given the desire of many countries to reduce their exposure to hydrocarbons in the aftermath of the war in Ukraine and its energy-related consequences.The re-balancing of the energy trilemma The energy trilemma
13、has been a major plank of energy policy thinking over the past decade,focusing on the balance between achieving sustainability(decarbonisation of the energy system),equity(accessibility and affordability for consumers),and energy security(ensuring adequate supply).In developed economies,growing conc
14、ern about the environmental impact of the energy economy meant that sustainability had increasingly become the priority,especially since the Paris Agreement at COP21 in 2015,with affordability and accessibility being related concerns of the energy transition,while energy security was seen as a lesse
15、r issue thanks to the availability of diversified supplies delivered through increasingly fungible global markets.In contrast,in many parts of the developing world,energy equity and security arguably ranked above sustainability,although the growing frequency and impact of extreme weather events has
16、clearly placed the low carbon transition higher on policy agendas.Russias invasion of Ukraine has not only caused a dramatic reconsideration of this prioritisation,with energy security becoming the number one focus globally,but it has also highlighted the difference in perceptions of the trilemma ar
17、ound the world.In addition,a fourth dynamic government intervention is further highlighting the differences in perception and the difference in ability to manage the energy trilemma.The provision of finance is also a major topic of debate,especially in the Global South where countries are demanding
18、support from the developed countries which are seen as responsible for the current environmental issues.2023 will see further debate about the rebalancing of the energy trilemma from a global perspective,with a number of key themes set to dominate policymaking,corporate decision-making,and academic
19、debate.Differing regional perspectives In Europe,and especially the EU,the drive to diversify away from imports of Russian energy will continue.However,while the need to secure adequate supply for the winter of 2023/24 will necessitate a focus on short-term access to alternative sources of natural g
20、as,2023 could also be a year in which EU plans for a faster energy transition start to crystallise.The REPowerEU plan that was catalysed by the Russian invasion of Ukraine is based on the thinking that a more rapid decarbonisation of the European energy system can provide more energy security over t
21、he long-term as well as helping to achieve the continents climate ambitions.However,two key questions that will be intertwined in 2023 are firstly whether energy security issues will continue to dominate and distract politicians away from the longer-term sustainability goals,and secondly whether the
22、 longer-term goals themselves,especially the aim to reduce gas demand set out in the REPowerEU plan,could undermine efforts to secure new supplies in the short term.The theme of short-term energy necessity merging into longer term climate strategy is also seen in other regions which are struggling t
23、o balance the energy trilemma.In many Asian countries,for example,high energy prices and the reduced availability of LNG taken by Europe have forced a reconsideration of energy strategy.Development of domestic coal resources,although clearly less environmentally friendly than many alternative energy
24、 sources,is becoming a priority again as cost and 2 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.availability trump climate impact,at least in the short term.Meanwhile in Af
25、rica,the EUs search for new gas supply has rekindled the drive to develop new gas export projects that can also supply the domestic market.In this case,a dual desire to generate export revenues and to provide energy access means that the priorities of the trilemma are being rebalanced.Assessing tech
26、nology and financing options As the role of hydrocarbons is being reconsidered,and as the reality that they may remain important to the global energy system for longer than many would like becomes clear,so the sustainability element of the trilemma is being adjusted to cope.As evidenced at COP27 the
27、 development of carbon removal technologies,voluntary carbon markets,and carbon capture and storage business models is set to become an increasing theme in 2023 and beyond,at least with a medium-term perspective of facilitating a more orderly transition to a carbon-free energy system in the longer t
28、erm.This does not mean that the expansion of renewables as soon as possible is not critical it clearly is and 2023 will provide more evidence of how growth is accelerating.However,another dynamic that will be a continuing focus in the coming year is the financing of the transition to a zero-carbon e
29、conomy in the Global South.While rich OECD countries have the wealth to deal with a short-term energy crisis while also planning for a longer-term clean energy future,COP27 underlined that the developing world,where most of the growth in economic activity,population,and emissions will be seen over t
30、he next three decades,do not enjoy similar wealth and are demanding assistance from the Global North,which is the cause of the environmental problems in the first place.This finance dynamic that surrounds the energy trilemma in many regions of the world will be a huge focus in 2023,as the debate ove
31、r the provision of funds for mitigation,adaptation and loss and damage develops ahead of COP28 at the end of the year.Geopolitics will be critical Beyond this issue,the rebalancing of the energy trilemma to focus on energy security has also highlighted some of the key emerging risks in the energy tr
32、ansition.With relations between the worlds two largest emitters,China and the US,becoming ever more competitive and assertive,a race to be the technology leader of the energy transition is well underway,and has been ratcheted up by the recent US strategy to dramatically limit technology transfer to
33、China.While this will undoubtedly have a negative impact on Chinas ability to develop certain technologies it also highlights the cards which China has to play regarding security of supply of critical minerals and materials.Its dominance of the mining,and especially the processing,of key inputs to e
34、nergy transition technologies is becoming a major element of the energy trilemma and of geopolitical debate,which is a further destabilising factor in resolving the rebalancing question.Two final points can be made on the impact of this rebalancing process and the uncertainties surrounding it.The fi
35、rst is that it increases the risk of stranded assets a short-term focus on hydrocarbons to replace Russian imports could lead to the development of new resources that have a limited lifespan should the elements of the trilemma be rebalanced again in the near future.This leads to a second key commerc
36、ial risk for companies who are the key investors in the energy system.How do they balance short-term needs for energy security with longer term demands for a low or zero carbon environment?And how do they factor ESG requirements into their investment planning?One answer is that they will aim to deve
37、lop any energy resources,hydrocarbons included,with as low a carbon intensity as possible,but 2023 is likely to be another year where this assertion is severely tested by the competing interests of energy consumers,environmental NGOs,demanding shareholders,and policymakers with multiple short-and lo
38、ng-term objectives.As a result,in 2023,the energy trilemma will remain critical for a number of reasons and will provoke a wide range of vital questions.First,as European countries seek new LNG supplies,will these undermine policies aimed at advancing the energy transition?Related to that,will ambit
39、ious targets to reduce emissions through lower gas consumption limit Europes ability to secure long-term gas supplies?Next,how will European policies and commercial strategies impact the availability and affordability of energy 3 The contents of this paper are the authors sole responsibility.They do
40、 not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.in developing economies?Given sustainability concerns,can new hydrocarbon projectsrequired for supply securityget off the ground?And how will government policies impact these choices?Already,governm
41、ents(and EU institutions)have been instrumental in dictating storage trends(both oil stock releases and gas stockpiling),which have in turn impacted price signals.Government perceptions of market risks and global trends will therefore be critical in 2023 as they inform policy choices and balance the
42、 trilemma.Finally,and related to this,government choices will lead to financing priorities:will governments opt to subsidise end users to shield them from the impact of high energy prices,or will they proceed with taxing fossil fuels and imposing carbon tariffs?Will developed economies invest in new
43、 hydrocarbon projects,grids,batteries or critical materials at home or abroad and how will these investment choices be perceived in developing countries?To help in assessing these questions and to provide some initial responses we have grouped the articles in this Key Themes paper as follows.We star
44、t within an assessment of,and outlook for,the global oil market,before continuing with a series of articles on Europe,including the outlook for gas demand,the need for significant regulatory activity in the EU,the importance of monitoring gas storage levels,and the potential impact of prices caps.We
45、 also look at whether EU member states will respond to solidarity agreements in a crisis situation.Moving to a more global perspective we then review the availability of LNG to meet European demand and what this might mean for other importing regions before assessing the impact of the re-opening of
46、the Chinese economy,the energy implications of India taking over the G20 presidency,and the development of Africas hydrocarbon strategy as part of the energy transition.This takes us onto questions of a more environmental nature.We look at the issues that will likely be raised in the Global Stocktak
47、e which will take place in 2023 ahead of COP28 and also consider the critical financing issues that emerged from COP27 and need to be addressed during this year.We then review the need for further progress on Article 6 and the development of voluntary carbon markets,and related to this we consider t
48、he outlook for carbon removal technologies and the potential for further progress on the issue of accounting for greenhouse gas emissions in the energy value chain.We return to look at China,which has also pledged to issue a methane action plan this year but where a rapid rebound in energy demand co
49、uld delay climate action and lead policy makers to focus on avoiding power shortages.Moving to the electricity sector,another contribution outlines why 2023 will be an important year for electricity market design in Europe.We also consider the resurgence of nuclear power across the world and ask whe
50、ther 2023 will see a further acceleration of this trend.Finally,we discuss the impact of the USs Inflation Reduction Act on the development of hydrogen technology and ask whether it undermines activity elsewhere in the world.This list of themes is long but it is clearly not exhaustive.However,it hig
51、hlights many of the topics which we will be researching at OIES during 2023 and we would encourage you to access our written output at www.oxfordenergy.org.For further details about how to join the discussion at the many events which we hold for our sponsors and benefactors,where you can meet our fe
52、llows and address issues in more detail,please contact Kate Teasdale at kate.teasdaleoxfordenergy.org.James Henderson Michal Meidan Head of Research,Gas Programme Head of Research,China Energy Programme (james.hendersonoxfordenergy.org)(michal.meidanoxfordenergy.org)4 The contents of this paper are
53、the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.2.Oil markets in 2023:the year of the aftershocks Oil markets were subject to a series of large shocks during 2022:Russias invasion of Ukraine in late February
54、 and the ensuing sanctions,embargoes,and the price cap on Russian oil imports;a coordinated response by oil-consuming nations(led by the US)to control prices by a massive release of strategic stocks;recessionary and inflationary pressures weighing on the global economy;Chinas domestic demand shocks
55、from its strict zero-COVID policy;and the massive transformations in crude and products trade flows,to name but a few.Oil markets throughout the years have been subject to both supply and demand shocks,but 2022 also saw an increase in government intervention in global energy markets,including oil ma
56、rkets,as energy security and affordability concerns became key drivers of energy policy.These increased government interventions have elevated key uncertainties in the physical market,while oil futures have also witnessed a decline in liquidity and open interest,alongside rising costs of using these
57、 markets for risk management.These shocks and elevated uncertainties shaped balances and market expectations.That said,the global oil market adapted quickly and physical supplies were little affected.In fact the market built a small surplus of around 500,000 b/d in 2022 following a-2.3 mb/d deficit
58、in 2021.The unwinding of OPEC+cuts,the release of SPR oil,the ability of Russia to redirect its exports away from Europe,which limited the Russian supply disruption,and weak demand growth particularly in Q3 and Q4 all contributed to a fairly balanced market in 2022.The events that unfolded in 2022 h
59、ave set the stage for another unpredictable year.Figure 1 below shows the balance of risks surrounding our reference outlook for 2023(in our reference case,Brent averages USD92.7/bbl in 2023).Even in the bearish scenarios(e.g.,deeper and prolonged recession,lower realisation of Russian supply disrup
60、tions,stronger US production growth)the oil price remains supported at around USD70/bbl as the low buffers in the system(i.e.,low spare capacity and low commercial stocks)keep prices sustained.The bullish scenarios in which prices move above USD100/bbl capture a perfect storm where large supply disr
61、uptions from Russia amid heightened geopolitical risks elsewhere are confronted by a mild recession and a strong rebound in Chinas demand.Figure 1:Balance of risks Note:Brent price Source:OIES(Oil Monthly)In 2023,pressures on global oil demand are shifting from recessionary concerns to the uncertain
62、ty over the extent and duration of a global recession.And even though inflation is set to decline this year,it remains uncertain how soon central banks will feel comfortable about easing monetary policy as well 5 The contents of this paper are the authors sole responsibility.They do not necessarily
63、represent the views of the Oxford Institute for Energy Studies or any of its Members.as how much policy space there is to promote growth.But it is not all gloom for global demand prospects in 2023.The consensus continues to point towards only a mild recession in the US,and to Chinese demand growth i
64、n H2.Indian demand growth-a bright spot in 2022-is expected to soften slightly.In terms of oil products,the focus in 2023 will remain on middle distillates with jet fuel recovery a wildcard.Although jet fuel demand at the end of 2022 was only marginally improved from a year ago,estimated at around 2
65、0 per cent below pre-pandemic levels,we expect to see the recovery accelerating in 2023 even as the airline industry continues to face bottlenecks.Europe continues to rely heavily on Russian diesel imports(which accounted for an average of 45 per cent of the total in 2022).The upcoming embargo on im
66、ports of Russian products in February 2023 will force Europe to source supplies from other regions to substitute for nearly 500,000 b/d of Russian diesel import losses.Even the economic recession is unlikely to resolve the diesel supply deficit in Europe,while commercial stocks remain well below the
67、ir five-year average.On the supply side,Russia will remain centre stage in 2023 as the EU embargo on Russian crude and oil products takes full effect.In 2022,Russia redirected sanctioned crude particularly to India,China,and Turkey,allowing its domestic oil production to remain close to pre-war leve
68、ls.But with the EU embargo on crude and products exports in full force this could change.The full impact of the EU embargo and the price cap on Russias production and exports will not be fully understood at least until the end of Q1 2023 when the embargo on Russian products comes into effect on Febr
69、uary 5.With its October decision to cut output,OPEC+set the tone for 2023 and sent a clear signal that it is willing to act proactively and pre-emptively to balance the market.In the past,such moves were limited by weak cohesion within OPEC and the time it took to negotiate output cuts.As a result,O
70、PEC responses always arrived late after market balances had weakened sharply.But OPEC+cohesion is now stronger and the group can respond in a more timely manner.In the October meeting,OPEC+signalled that it will take action at any time by calling an extraordinary meeting.Also,the dynamics within the
71、 group are shaped by the fact that most OPEC+producers outside the Middle East are producing at maximum capacity and below their quotas.US shale continues to attract focus with the emergence of private operators as a new force within the shale industry while growth from public operators remains cons
72、trained due to investor pressure and bottlenecks,with US crude production growth projected to reach 800,000 b/d year-on-year in 2023 from 600,000 b/d in 2022.The use of the SPR as a tool for market management-a key feature in 2022-is likely to remain relevant in 2023.This includes announced buybacks
73、 but also potential releases should the market tighten.This reflects a more fundamental shift in US policy towards using the SPR to influence market balances and expectations.Lastly,geopolitical risks outside Russia in places like Libya also remain a wildcard,with a long speculated return of Iranian
74、 production now completely off the table in 2023.Last year also saw a massive and structural transformation in crude oil and products trade flows with US,West African,and Middle Eastern crudes finding their way into the Mediterranean and Europe,while Russian Urals crude has been competing in Asia wi
75、th Middle Eastern and West African crudes,as well as other sanctioned crudes from Iran and Venezuela.In terms of products,Europe has increased its imports of non-Russian products attracting supplies from more distant places including the Middle East,India,China,and Brazil.In effect,the oil market in
76、 its various layers has been performing the key function of redirecting crude and products in the face of a massive shock,but as the trade routes have become longer,the adjustment in price differentials sharper,the tanker market more segmented,a new class of trading practices and entities is emergin
77、g.Refineries are having to change their crude slates resulting at times in sub-optimal use of crudes.These shifts in trade flows will accelerate and consolidate in 2023,with wide implications for the structure of the market,geopolitical relations,and the dominance of the dollar in oil trade.Bassam F
78、attouh(mailto:bassam.fattouhoxfordenergy.org)Andreas Economou(mailto:andreas.economouoxfordenergy.org)6 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.3.European gas demand:ke
79、y factors to keep an eye on in 2023 European gas demand collapsed in 2022 on the back of mild temperatures,high gas prices,and changes in consumer behaviour(Figure).However,despite a strong decline in 2022,additional gas demand reduction will be needed in 2023 in preparation for winter 2023/2024 and
80、 even potentially for winter 2024/2025.Gas demand drivers are complex and specific,but there are a few key factors to keep an eye on during 2023.To begin with,the industrial sector has been the main source of gas demand flexibility in 2022,and it is expected to continue playing this role through vol
81、untary reduction and demand response.For most manufacturing production(the chemical sector being a clear exception),strong output in 2022 suggested that record prices have not had as dramatic an impact as one could have expected(yet?)with significant switching to alternative energy sources and impro
82、ved operational efficiency.However,after over a year of high prices,most of the low hanging fruit is likely to have been harvested by now,so it is unclear how easy it might be to further reduce gas use without reducing production.In addition,it seems likely that most of the decline has come from red
83、uction measures(as opposed to major demand destruction),which means that when gas/electricity prices go down,be it as a result of the market rebalancing or as a result of support measures from governments,a significant proportion of gas demand in the industrial sector(which seems to have gone down b
84、y about 15-20 per cent in 2022)could come back within a few weeks,as seen in October when gas prices reached their lowest levels in months and fertilizer producers restarted production in Europe.Secondly,warm weather at the beginning of the year and similarly at the beginning of the winter season 20
85、22/23,limited the need for gas use in space heating in 2022.Mild temperatures and continued high gas prices seem to have also facilitated an important demand response from small residential and commercial consumers,a usually rather inelastic sector in the short term,in the form of lower production a
86、nd fuel switching in small businesses and lower energy use in the buildings sector.Continued participation of consumers in demand saving measures in buildings is going to be essential throughout 2023.There are two main uncertainties:first,government intervention in subsidizing energy bills and campa
87、igns to save energy will need to send the right signals in order to keep consumption low;and second,temperatures:cold weather may erode consumers willingness to reduce their energy for heating (and possibly increase gas demand by up to 15-20 bcma).Finally,in contrast to the trends observed in the in
88、dustrial and heating sectors,gas used for electricity generation increased year-on-year in 2022.Three main elements influenced the need to use more gas in the power sector(despite aims to reduce consumption):continued high electricity demand in the first eight months of the year,before energy-saving
89、 measures and economic slowdown finally started to have an impact from September onwards,and the low availability of both nuclear and hydropower.French nuclear generation typically covers as much as 15 per cent of European electricity needs,but in 2022,the French utility EDF faced a wave of repairs
90、following the discovery of corrosion issues and also delays to its scheduled 10-year maintenance due to the COVID pandemic(as well as strikes in France in October).This forced a record number of reactors offline for most of the year.EDF is racing against the clock to put as many reactors as possible
91、 back in service as soon as possible.By late December the company had confirmed its expectations for 300-330 TWh of nuclear generation in 2023,which would still be relatively low for the French nuclear fleet but around 18-19 per cent higher than 2022 levels.However,uncertainties remain as the compan
92、y revised its predictions for nuclear generation downwards four times in 2022.In conclusion,the key issues to keep an eye on in 2023 will be the pace of return of French nuclear reactors,the willingness and ability of large and small consumers to continue adapting their usual behavior in order to us
93、e less energy(especially during cold days in the winter),and last but not least,the depth of a looming economic recession.And while the main drivers are largely similar across Europe,the evolution of gas consumption will continue to be diverse,which can be explained by a number of country-specific f
94、actors including the role of gas in the energy mix,access to alternative fuels 7 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.and the levels,and extent,of support measures f
95、rom governments to shield their national consumers from the worst impacts of high energy and gas prices.Figure 2:Monthly gas demand in EU27+UK,2019-2022(Bcm)Source:Data from Eurostat,IEA,Entsog,GRTgaz,Terega,THE,SNAM,Enagas,NationalGrid and Fluxys.Calculations and graph by the author Anouk Honor(mai
96、lto:anouk.honoreoxfordenergy.org)8 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.4.2023:A year for the EU to deliver the legislative framework of the Green Deal Since the Com
97、mission tabled the Fit for 55 packages in July/December 2021,the European Council(the Council)and the European Parliament(EP)have worked diligently to advance these initiatives.Besides the acts already agreed in November and December 2022,all the legislative acts of the two Fit for 55 packages,compl
98、emented by a new proposal regarding electricity market design and a Hydrogen Bank,need to be adopted by European legislators before the end of 2023.This timing is not only crucial in order to speed up the implementation of the Fit for 55 packages but is indispensable because the EP will not be able
99、to exercise its role as co-legislator after Q1 2024 due to the European elections in June 2024 and the start of the election campaign in April 2024.The following sections provide an overview of the legislative process that needs to happen in 2023 and highlights the major issues which are at stake in
100、 each area:Legislation adopted relating to the two Fit for 55 Packages and due to come into force in 2023 The Council and the EP reached a provisional political agreement on the reform of the ETS1 and the CBAM2 in November/December 2022 pending formal adoption by both institutions which is due in ea
101、rly 2023.The Council also formally adopted new measures on Joint Purchases of Gas and a Solidarity Mechanism in December 2022.In addition,in December 2022 the Council adopted a regulation that establishes a Market Correction Mechanism to protect citizens and the economy against excessively high pric
102、es.The regulation aims to limit episodes of excessive gas prices in the EU that do not reflect world market prices,while ensuring security of energy supply and the stability of financial markets.All three measures are due to come into force in 2023.Ongoing legislative debate relating to the two Fit
103、for 55 Packages Renewable Energy Directive:Discussions are continuing,with the key areas of debate being the headline renewables target,the obligation to replace 75 per cent of grey hydrogen in industry with renewable hydrogen by 2030,and the revision of guarantees of origin for renewable sources.RE
104、PowerEU Amendments:Discussions will start in January and the key issues are the renewable energy headline target,the framework for renewables permitting,and the definition of overriding public interests.Hydrogen and Decarbonised Gas Package:Discussions can only start once the EP and the Council have
105、 respectively adopted their report and general approach,likely in Q1.Methane Regulation:Discussions can start once the EP has adopted its report(likely in January)with the key issues being leak detection and repair obligations,monitoring and reporting obligations for underground coal mines,and the r
106、ole of the International Methane Emissions Observatory.Energy Efficiency Directive:Discussions are ongoing around the scope of the energy efficiency first principle and the EU-wide 2030 energy efficiency target.1 Emissions Trading System 2 Carbon Border Adjustment Mechanism 9 The contents of this pa
107、per are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Energy Tax Directive:Discussions within the Council are continuing with the main remaining issues being to allow more flexibility for Member States spe
108、cific national circumstances,potential exemptions for aviation and maritime,and a potential transition period for the increased taxation of fossil fuels.In addition,EP and Council have to start and finalise the discussions on the following legal proposals:Energy Performance of Buildings Directive;Al
109、ternative Fuels Infrastructure Regulation;ReFuelEU Aviation Regulation and ReFuelEU Maritime Regulation New legislative discussions to be started by the European Commission in 2023 Electricity market redesign:A targeted,structural reform of the EU electricity market framework was announced by the Co
110、mmission President in September 2022 as a reaction to criticism of the present system in the light of the current energy crisis.However,the Commission may well limit its proposal in Q1 to those elements that can be seen as an improvement on the Clean Energy Package,such as grandfathering the inframa
111、rginal clawback,consumer protection,notably against high energy prices,long-term contracts,and peak-shaving demand reduction.For the more controversial topics(notably the possible replacement or deeper reform of the merit order and the marginal pricing system,the introduction of a kind of nodal syst
112、em,and the EU wide introduction of capacity markets),more consultations and analysis are needed.The Commission might undertake such analysis in 2023/24,leaving the tabling of the legislative proposal to the new Commission in 2025.Hydrogen Bank proposal:this proposal was also announced by the Commiss
113、ion President in September 2022.Funding of around EUR 3 billion will be proposed,to be administered via the Innovation Fund.The pilot phase of the Hydrogen Bank would start in Q3 2023 with a CfD3 scheme allocated via a competitive bidding mechanism,with a view to covering the cost gap between renewa
114、ble hydrogen and methane or hydrogen produced from natural gas in the EU.Assessment This work program for 2023 represents a huge challenge for the European institutions.However,the EU must deliver on all its ambitious legislative actions if it wants to live up to its climate targets.This needs to ha
115、ppen at a time where the energy crisis is causing economic and social challenges in the shadow of the ongoing Russian war against Ukraine.If in previous times when the EU had to go through economic or political crises there was always the expectation that it would emerge even stronger from the crisi
116、s,this expectation cannot been taken for granted this time.The negotiations will show whether or not the Member States in the Council,the different political groupings in the EP,and the Commission are capable of striking compromises that truly deliver on all three overarching energy policy objective
117、s:fostering sustainability by agreeing on an ambitious but also realistic path toward a high level of renewable energy in the European mix;safeguarding the security of energy supply for all Member States by moving forward in solidarity and accepting hydrocarbons and technologies like CCUS as importa
118、nt stepping stones for reaching carbon neutrality without jeopardizing security of supply;and guaranteeing households and industries affordable energy prices by developing the necessary support instruments at EU and national levels,including targeted measures to help the most vulnerable and energy p
119、oor.Only if all actors conduct negotiations with all three objectives in mind can one expect an outcome that not only makes the European energy system more resilient and fairer but also lays the foundation for an acceleration of the decarbonisation of the European economy in future years.Klaus-Diete
120、r Borchardt(mailto:klaus-dieter.borchardtoxfordenergy.org)3 Contract for Difference 10 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.5.Storage as an indicator of European mar
121、ket tightness Gas storage,and its vital role in balancing the European gas market,increases in prominence during times of market imbalance.The rapid drawdown of stocks during a period of unusually cold weather in Europe(The Beast from the East)in Q1 2018 was followed by the use of storage to absorb
122、excess volumes from an oversupplied market in summer 2019 and summer 2020.In Q1 2021,rapid withdrawals from European storage offset the drop in European LNG imports,with cargoes being drawn away to northeast Asia by a spell of very cold weather and a related surge in regional demand.In each of these
123、 cases,the rate of storage injection or withdrawal,along with total stock level,has been an indicator of market over-supply or under-supply,with those injections and withdrawals motivated by pricing signals that themselves reflect market conditions.2022 was different,insofar as the period between 1
124、April and 1 October saw record net injections despite record high prices.It was not summer oversupply,low prices,and the promise of wide sesasonal spreads that motivated those injections,but a strong concern over likely future market tightness in winter 2022/23.Such was the level of concern that net
125、 injections continued throughout October and into mid-November.This record injection through into early winter was made possible by a combination of policy-driven and price-driven demand reductions,robust pipeline supplies from non-Russian suppliers,and record LNG imports with cargoes attracted by h
126、igh prices.Summer 2023 is likely to see a similar policy-driven push to replenish storage even if conditions for doing so are unfavourable.Figure 3:European gas storage stocks(Bcm)Source:Data from Gas Infrastructure Europe Aggregated Gas Storage Inventory.Graph by the author.In the period between 14
127、 November and 31 December 2022,European net storage withdrawals totalled 12.6 Bcm.This was 8.7 Bcm(41 per cent)lower year-on-year,and 5.5 Bcm(30 per cent)below the average for the same period in 2017-2021.Indeed,2022 was the first year since 2010 that stocks actually grew between 24 and 31 December.
128、This lower-than-average withdrawal reflects a market that remains relatively well-balanced,albeit with high prices necessary to continue attracting supply.Looking ahead,there are several signposts to look for.Firstly,storage stock levels in mid-winter(on 1 February 2023)will provide an indicator of
129、how much of a buffer remains to balance the market in the event of a late-winter surge in demand,as happened in late February-early March 2018.Secondly,stock levels at the end of winter(on 1 April 2023)will indicate how much would need to be injected during summer 2023,in order to bring stocks back
130、to capacity by 1 November 2023.Thereafter,stock levels will be monitored throughout the summer,to assess progress in bringing those stocks back to full capacity by 1 November.It should be remembered that Europe benefitted from 00708090100110 2017/18 2018/19 2019/20 2020/21 2021/22 2022/23
131、 11 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.unusually benign weather conditions in October and the first half of November 2022,and a repeat of such conditions cannot be
132、 guaranteed in 2023.Therefore,Europe needs to be as close to its storage target as possible by 1 October,with stocks as close as possible to filling the 105 Bcm storage capacity.On 31 December 2022,European storage stocks were just over 87 Bcm,which was almost 32 Bcm higher than on 31 December 2021
133、and just over 14 Bcm higher than the 31 December average for 2017-2021.The average storage withdrawal in Q1 in 2018-2022 was 37.4 Bcm,peaking at 48.1 Bcm in Q1 2018 and reaching a low of 28.1 Bcm in Q1 2022.If that Q1 2018-2022 average withdrawal were to be repeated in Q1 2023,Europe would have arou
134、nd 50 Bcm left in storage on 1 April 2023.If the maximum or minimum storage withdrawals(in the cold and mild Q1s of 2018 and 2022,respectively)were to be replicated in Q1 2023,Europe would be left with a minimum of 39 Bcm and a maximum of 59 Bcm in storage on 1 April 2023.Average withdrawals in Q1 2
135、023 would leave net injections of 50 Bcm sufficient to bring stocks back to full capacity by the start of winter 2023/24.The Mild Q1 or Cold Q1 withdrawals would mean summer net injections of 40 Bcm or 60 Bcm would be needed to bring storage back to full capacity.For comparison,European net injectio
136、ns in summer 2022 were around 72 Bcm.In Q1 2023,the supply-demand balance that will determine withdrawal volumes will be rather different to recent years.Demand looks set to be lower,Russian pipeline supplies also lower,and LNG imports higher.If pipeline supply from Russia remains at the December 20
137、22 level(78 MMcm/d),the year-on-year decline in Russian pipeline supply to Europe in Q1 2023 will be 19.2 Bcm.In a benign scenario,continued subdued demand and robust LNG imports could offset that loss.For example,if LNG imports in Q1 2023 were maintained at the level of Q4 2022,the year-on-year inc
138、rease in Q1 2023 would be 5.6 Bcm.Similarly,demand in Q4 2022 was 20 per cent lower year-on-year.Even if demand in Q1 2023 were just 10 per cent lower year-on-year,this would imply a drop of 14.9 Bcm.If non-Russian pipeline imports were to remain unchanged year-on-year,this balance -with lower deman
139、d and higher LNG supply fully offsetting lower Russian pipeline supply-would allow storage withdrawals in Q1 2023 to also remain virtually unchanged year-on-year,and the Mild Q1 scenario would be achieved.In a more challenging scenario,a surge in European gas demand and Asian LNG demand,combined wit
140、h the year-on-year decline in Russian pipeline supply,could make the drawdown of storage stocks more substantial.For example,if non-Russian imports(pipeline and LNG)and production remained at the level of Q1 2022(thus reversing the gains in LNG imports in recent months),demand returned to the level
141、of Q1 2022,and Russian pipeline supply remained at 57 MMcm/d(the average for the first half of January),a net withdrawal of 49 Bcm would be required to achieve a physical balance on the European market a withdrawal volume similar to the Cold Q1 scenario noted above.It is also possible to conceive of
142、 an extremely challenging scenario,in which cold weather across the northern hemisphere brings European demand back to the level of Q1 2018 and causes LNG imports to decline by 10 per cent year-on-year in the face of strong demand from Asia,while the other challenging scenario assumptions regarding
143、production and pipeline imports remain unchanged.This would require storage withdrawals of 72 Bcm.If Russian pipeline supplies halted in mid-January,Q1 2023 storage withdrawals in this extremely challenging scenario would rise to 77 Bcm.As a result,although prices remain of critical interest because
144、 they may rise or fall dramatically in the space of a day or several days,storage stocks are a more fundamental indicator of market balance even though they may take weeks and months to be accumulated or drawn down.If Europe were to approach mid-August with stocks well short of the 1 October target,
145、even a concerted effort to build stocks would be hampered by constraints on daily injection capacity.Conversely,if Europe were to begin winter 2023/24 with storage relatively full,this buffer would last for several months.This slow-moving nature of storage akin to a very large concert hall with very
146、 few,narrow entry-exit doors means that progress towards replenishing stocks in mid-to-late summer 2023 is likely to influence market sentiment(and,by extension,forward prices)for winter 2023/24.Jack Sharples(jack.sharplesoxfordenergy.org)12 The contents of this paper are the authors sole responsibi
147、lity.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.6.Final agreement on wholesale gas price caps foreshadows future challenges for EU energy policy In late 2022 the EU Council finally agreed on a wholesale gas price cap mechanism in resp
148、onse to the record high gas prices.However,the market correction mechanism is problematic as it does not address the underlying causes of high gas prices,primarily the reduction of Russian gas supplies from 41 per cent of the EU gas market to 9 per cent,and the lack of low-cost alternatives to fill
149、the gap.It serves as a warning that,even in the face of a serious and immediate emergency,the EU Council lacks either the will or the imagination to develop and implement policies which meet its stated objectives.This bodes ill for the decisions that the Council will need to take to transform the EU
150、s energy systems to meet its climate goals and it raises questions about what will happen in the EU gas market when the mechanism takes effect in February 2023.The Council was divided on the value of a price cap and its level.The Commission was against a price cap,and it tried to avoid one by creati
151、ng a framework without any detail.When this was rejected by several Member States,the Commission proposed a price cap at such a high level(275/MWh)that it would be unlikely to be triggered.This was also rejected prior to agreement on a price cap of 180/MWh at the TTF and if the TTF price was at leas
152、t 35/MWh above a benchmark price for LNG for at least three working days.The mechanism applies from 15 February 2023,and will last for at least twenty working days if triggered.If the TTF price falls below the cap for at least three consecutive working days,the cap is automatically deactivated.There
153、 are also safeguards so that the cap is deactivated if it causes an increase in gas demand,a reduction in LNG imports,a significant drop in TTF liquidity,or if the EU Commission declares a supply emergency.The Commission,and the European energy and financial market regulators,ACER and ESMA,are charg
154、ed with monitoring the functioning of the mechanism.If the mechanism causes market problems,the Commission will suspend it.The legislation makes grimly amusing reading.The drafters tie themselves in sophistic knots trying to justify the price cap,while at the same time explaining the need for all th
155、e safeguards to prevent it from harming the EU gas market.This is a circle which cannot be squared as the problems of a price cap are inherent to its nature.4 For the cap to have an impact it must override the prices which result from normal market functioning.Current prices are not caused by a mark
156、et malfunction,but by a fundamental change in the supply-demand balance.It is no wonder that prices have increased dramatically as the EU has lost a third of its gas supply.Moreover,the recent falls in gas prices have been driven by demand reductions as the consumers have reacted to price increases,
157、and the EU has been blessed with mild weather.Only by rebalancing supply and demand will prices be reduced sustainably.By implying that current prices are not a reflection of market reality,the very name of the market correction mechanism is disingenuous.Some may take comfort from the safeguards in
158、the package but in reality,the problem of the price cap has only been kicked down the road.At the lower level of 180/MWh,gas prices in 2022 would have been above the cap for a fifth of the time,compared to a fiftieth of the time with the Commissions original proposal of 275/MWh.If the price cap is t
159、riggered at any point after February 15 then the market will need to find some other way of balancing which makes it more likely the safeguards will be triggered.But if the cap is suspended and prices rise to their natural level the price cap proponents will likely cry foul.As a result,the agreement
160、 is fragile and could lead to significant political dispute during the year if prices rise about 180/MWh.Germany reluctantly agreed to the mechanism in return for more ambitious renewable targets,but Austria and the Netherlands abstained.Agreement seems to have been driven more by the need to unbloc
161、k the Councils agenda than any real meeting of minds.For example,price 4 For a detailed examination of the issues see Barnes(2022)EU Commission proposal for joint gas purchasing,price caps and collective allocation of gas:an assessment Oxford Institute for Energy Studies 13 The contents of this pape
162、r are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.cap discussions have delayed progress on key elements of the Fit for 55 package put forward by the Commission in 2021,including legislation on energy eff
163、iciency,renewables,reform of the gas market,and hydrogen.Therefore,it will be vital to monitor all reactions should gas prices start to rise towards the price cap level,not only from politicians from the various member states but also from market participants who will have to deal with the consequen
164、ces of their actions.As with all state-interventions in markets,the unintended consequences could be significant.Alex Barnes(mailto:alex.barnesoxfordenergy.org).14 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for E
165、nergy Studies or any of its Members.7.The EU regulatory framework governing solidarity during a gas crisis5 The EU has witnessed a severe gas(and energy)crisis since late 2021 and,in certain circumstances,the crisis could become more acute next winter.In this case,sharing of limited gas supplies acr
166、oss the EU could become a necessity.The Security of Supply Regulation(SOS Regulation,2017),the Gas Demand Reduction Regulation(GDR Regulation,2022),and the(draft)Enhancing Solidarity Regulation(ES Regulation,2022)all contain solidarity provisions,aimed at alleviating any such crisis.However,2023 cou
167、ld test the effectiveness of these provisions,particularly in respect of Germany,Czechia,Slovakia,Austria,and Hungary.SOS Regulation The SOS Regulation,adopted in 2017,introduced a solidarity obligation,under which a Member State which is directly connected to a requesting Member State,is obliged to
168、 reduce gas supplies to its own non-solidarity protected customers to support solidarity-protected customers in the requesting Member State.Solidarity-protected customers include all household customers connected to a gas distribution network and may include district heating installations in so far
169、as they deliver heating to households(thus excluding small or medium-sized enterprises)or essential social services(including services such as healthcare,essential social care,emergency and security services but excluding educational and public administration services),and essential social services,
170、as long as they are protected customers.A Member State can only request the application of the solidarity mechanism when the market cannot deliver the supplies for its solidarity-protected customers and after it has declared an emergency the highest crisis level(preceded by an early warning and an a
171、lert).Member States were required to conclude their bilateral solidarity agreements,stipulating technical,legal,and financial arrangements,by 1 December 2018 but by January 2023,only six such agreements have been concluded(between Germany and Denmark,Germany and Austria,Italy and Slovenia,Latvia and
172、 Estonia,Latvia and Lithuania,and Estonia and Finland).Enhancing Solidarity Regulation In December 2022,the EU adopted the ES Regulation,which alongside the joint purchasing platform and the price correction mechanism,included provisions on solidarity,complementing the SOS Regulation.In particular,t
173、he ES Regulation extended solidarity protection to critical gas volumes for security of supply of electricity.This obliges a Member State to reduce gas supplies to its own customers,except(essential)volumes to solidarity-protected customers,critical volumes for security of supply of electricity,volu
174、mes for the electricity needed for the production and transportation of gas,and volumes necessary for the operations of various critical installations and infrastructure for a requesting Member State that is unable to cover(the essential volumes of)its solidarity-protected customers and supply the c
175、ritical gas volumes for electricity security of supply.It has also extended the solidarity obligation currently applicable only to Member States directly connected to a requesting Member State to Member States with LNG facilities,provided that the necessary infrastructure is available.Importantly,th
176、e Regulation has introduced the default rules governing the implementation of the solidarity mechanism for those Member States which failed to conclude their bilateral solidarity agreements by the time of a solidarity measure being requested.GDR Regulation Following an estimation by the EC that a 15
177、 per cent reduction of gas demand would be sufficient for the EU to see through the winter of 2022/23 even if all Russian gas supplies were to be cut off in August 2022 the EU adopted the GDR Regulation,which stipulates a voluntary 15 per cent gas demand reduction by each Member State between 1 Augu
178、st 2022 31 March 2023(compared to their average consumption between 1 August and 31 March in the preceedeing five year period).It becomes mandatory when the Council,acting on a proposal from the EC and supported by a qualified majority,5 This article is based on Yafimava(2023 forthcoming)EU solidari
179、ty at a time of a gas crisis.15 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.declares a Union alert,obliging each Member State although exemptions are possible to reduce its
180、 gas consumption by 15 per cent,taking the already achieved reductions into account.EU gas demand had already declined by almost 15 per cent in 2022 compared to 2021,mostly due to very high prices(forcing industrial closures)and mild temperatures(leading to lower demand for residential heating).Shou
181、ld EU gas demand remain on this trajectory,an EU alert might not be triggered.The EC must propose triggering an EU alert if at least five Member States have declared a national alert,or if there is a substantial risk of a severe gas shortage or exceptionally high gas demand resulting in a supply sho
182、ck but where the market is still able to manage the disruption.As the criteria is not clearly defined,the EC has significant discretion over whether to make such a proposal,and the factors capable of prompting it to do so include a complete halt in Russian gas flows to Europe,a significant deviation
183、 from the 15 per cent demand reduction trajectory,lower LNG imports,and colder weather causing an accelerated storage depletion.Once the EU alert is declared,Member States would determine whose supplies get cut off,prioritising supplies to protected customers.Industrial consumers would likely be the
184、 first to experience reductions,but difficult trade-offs would have to be made with each Member State determining which industries are considered more critical than others.There would also be measures aimed at reducing gas consumption by the electricity sector.Overall,the process of implementing the
185、 mandatory gas demand reduction provision has a significant scope for disagreements within Member States,between Member States,and between Member States and the EC over who is going to be cut off and who is going to be exempted,thus potentially undermining its effectiveness during an actual crisis.C
186、onclusions:Possible Impact of Solidarity Measures During a Gas Crisis The solidarity measures stipulated in SOS,ES,and GDR Regulations would likely have a limited albeit not negligible impact on the gas supply situation for the central and east European sub-region,should Russian flows be cut off.Eve
187、n if these measures are agreed and implemented and there are significant difficulties associated with this process,some of which could be resolved by next winter infrastructure and capacity constraints would limit the volume of solidarity gas which would be freed up and which could flow to these cou
188、ntries from the adjacent Member States.In the short term possibly until 2025,by which time more LNG supply and more LNG terminals and interconnections are expected to be available even with maximum assistance from the other Member States,the central and east European sub-region could have problems c
189、oping with the consequences of any further significant reduction in Russian flows.Therefore,although gas rationing appears increasingly unlikely during the current winter,there is a significant risk that rationing will be needed in the winter of 2023/24,unless a recession triggers an even more signi
190、ficant gas demand reduction than is currently being observed in Europe.Katja Yafimava(mailto:katja.yafimavaoxfordenergy.org)16 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.8
191、.Where will Europe get its gas from in 2023?At the beginning of 2022,if someone had told you that European6 pipeline gas imports from Russia would decline by 55 per cent or some 83 bcm and that not only would gas supply to buildings be maintained in the depths of winter,but there would be record gas
192、 storage injections,you would have questioned their analytical capability and probably their sanity.While that is precisely what happened,Europe was very lucky in that the weather in 2022 was extremely warm at the beginning and end of the year,significantly reducing heating demand for gas,and the re
193、gion also managed to increase its LNG imports by some 63 bcm over 2021,a rise of over 60 per cent.The very high prices also significantly reduced gas demand in industry and probably also affected household behaviour to limit energy consumption as winter approached.The rise in LNG imports reflected n
194、ot only a rebound in global LNG supply of some 28 bcm(6 per cent),after the issues and constraints in 2021,but also diversions of cargoes away from other markets,especially China,where LNG imports were down by some 21.5 bcm,wiping out almost all growth since 2019.Europes overall 2022 balance saw the
195、 decline in pipe imports from Russia by 83 bcm being more than offset by a 74 bcm demand reduction,increased LNG imports of some 63 bcm,plus a slight increase in production and net pipeline imports from other sources which were higher by some 5 bcm.This additional supply of around 59 bcm enabled net
196、 storage injections of 32 bcm in 2022,compared to a net withdrawal of 22 bcm in 2021.7 Turning to 2023,we are already looking at a year-on-year reduction in pipe imports from Russia of around 40 bcm,assuming that flows continue at current rates via Ukraine and Turkstream.Even including flows to Turk
197、ey,pipe imports from Russia will be down to roughly 45 bcm,8 against 168 bcm in 2021.However,if gas demand were to remain at the same level in 2023 as in 2022(although this assumes another very warm year and no rebound in industrial gas demand)and the level of production,net pipeline imports(other t
198、han from Russia),and LNG imports were unchanged,then the reduction in pipe imports from Russia could be met by net withdrawals from storage of some 10 bcm(compared to the net injection of 32 bcm in 2022,so a net change of around 40bcm),as shown below.The net withdrawals from storage could be reduced
199、 by additional LNG imports,especially into Germany,with the new LNG import terminals coming onstream in 2023.The growth in overall LNG supply looks reasonably robust in 2023 with prospective growth of just under 30 bcm,although there are very few new export terminals coming onstream this year.The gr
200、owth mostly comes from technical issues being resolved at projects in Norway,Malaysia,and the US(Freeport),additional feedgas in Trinidad and Nigeria,and the ramp up of volumes from projects which started up in 2022,such as Calcasieu Pass in the US and Coral FLNG in Mozambique.Europe might be expect
201、ed to be able to get at least half the 30 bcm rise in LNG supply,which would eliminate the need for net storage withdrawals in 2023.However,LNG imports seem likely to bounce back in the rest of the world.China is likely to see some recovery in LNG imports even as domestic production and pipeline imp
202、orts are likely to meet much of the incremental demand.The emerging southeast Asian markets are also growing.Any recovery in the very price sensitive markets of India,Pakistan,and Bangladesh may depend on LNG spot price levels in 2023.6 Europe includes the EU27 plus the UK,Norway,Switzerland,Serbia,
203、Bosnia-Herzegovina,North Macedonia,Albania,and Turkey.7 The additional supply(based on changes in flows between 2022 and 2021)is 59 bcm(74 bcm lower demand plus 63 bcm more LNG,5 bcm more production and other pipeline imports minus 83 bcm loss of Russian pipe import)which accounts broadly for the ch
204、ange in the net storage injections/withdrawals of 54 bcm(32 bcm net injection in 2022 minus the 22 bcm of net withdrawals in 2021).8 Around 20 bcm to Turkey and 25 bcm to the EU and Balkans.17 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views
205、of the Oxford Institute for Energy Studies or any of its Members.Figure 4:Europe Balance 2023 BLUE demand is met by ORANGE supply Source:IEA,ENTSOG,KPLER data,NexantECA WGM,OIES estimates There are,however,some dangers to this potentially benign outlook for Europe,which has assumed that the other ke
206、y parameters in terms of supply and demand in Europe in 2023 remain the same as in 2022,plus a rising global LNG supply.The IEA,in a recent note,9 suggested that European gas demand could be higher by some 20 bcm as a result of slightly colder 2023 weather and avoiding production curtailments in ene
207、rgy-intensive industries.In addition,there remains a strong possibility that flows of Russian pipeline gas through Ukraine could be completely cut off as the war continues and if President Putin decides to tighten the energy screw even further.At current rates around 40 mmcmd the full year flows of
208、gas along the Ukraine route would be some 14.5 bcm.A shutdown for half the year would increase Europes need by some 7 bcm.This could also lead to Ukraine and Moldova requiring more imports from the EU,adding more supply requirements.If Europe were to need another 30 bcm in supply in 2023,compared to
209、 the initial relatively benign outlook,significant pressure would be placed on the LNG market and the level of global prices.LNG volumes to the more price sensitive Asian markets would be particularly at risk.Ultimately,Europe could be faced with an inability to refill storage during the summer and/
210、or more curtailments of industrial gas demand,if LNG could not be diverted from other markets.As a result,although the outlook for 2023 appears more positive than many might have thought even three months ago,the risks of a supply shortage and higher prices cannot be discounted and the key parameter
211、s will need to be carefully monitored throughout the year.Mike Fulwood(mailto:mike.fulwoodoxfordenergy.org)9 How to Avoid Gas Shortage in the European Union in 2023.IEA,Paris,December 2022 18 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views o
212、f the Oxford Institute for Energy Studies or any of its Members.9.China in 2023:A year of two halves A seemingly mundane announcement on 7 December 202210 effectively signalled the end of Chinas strict zero-COVID policy.The policy reversal has come as a surprise to many,especially given that the gov
213、ernment seems to have made few preparations for it,such as rolling out vaccinations for the elderly or preparing intensive care units.And with limited data,the severity of the impact remains unclear.Since early December,the virus has been spreading in Chinas large cities-with estimates pegging the n
214、umber of infected at around 250 million in the first twenty days of December11-alongside anecdotal reports of a spike in deaths.But the official death toll reported on 4 January 2023 was 5,253 since the start of the pandemic.Meanwhile,the economy continued to slow,with factory activity in December C
215、hina shrinking for the third consecutive month as COVID infections sweeps through production lines.This deceleration will likely continue through early 2023 as infections continue,although Chinas National Health Commission reportedly expects outbreaks to peak in January.12 What is clear,then,is that
216、 China is learning to live with COVID and that much of the economic fallout will be felt in the first quarter of 2023,with some lingering effects in the first half.Whether infections peak in January,as the government expects,or later in the winter,remains to be seen.This,in turn,will be critical for
217、 Chinas economic outlook as well as for its energy demand.But the longer the economic deceleration,the sharper the rebound is likely to be as the government seems to be switching to a pro-growth mind-set.The Central Economic Work Conference(CEWC)-the most important Party-led annual economic meeting-
218、which convened on 15-16 December,focused on the real estate sector and efforts to ensure that stalled construction projects are completed and that developers have sufficient credit to execute them.Bank funding and credit lines have since been made available to developers.The CEWC also gave a nod to
219、a more proactive fiscal policy and indicated potential support for the tech sector.Put simply,announcements in December seem to be hinting at the unravelling of almost three years of macroeconomic policies that squeezed the real estate sector and private entrepreneurs alongside the strict COVID cont
220、rols.The extent to which these are short term measures to support growth or a deeper U-turn in government priorities,will be a key question for 2023.The steepness of the recovery,after the initial hit,is also an open question.The Chinese government did not set a GDP growth target at the CEWC(it migh
221、t still issue one during the Parliamentary sessions in March),but the IMF now expects Chinas GDP to grow by 4.4 per cent year-on-year in 2023,after a weaker expansion of 3.2 per cent in 2022.13 To be sure,views of Chinas growth potential vary widely,with estimates ranging from 3 per cent to 5 per ce
222、nt for 2023.Proponents of lower growth rates highlight structural macroeconomic factors that will impede a return to the heyday of rapid growth,such as high levels of local debt and a long-term slowdown in housing demand which will hold back expansion in infrastructure that had served as a main grow
223、th lever for over a decade.But the domestic structural issues may not manifest themselves in 2023.The reopening of the country will likely result in a rebound in consumption and travel-with travel already beginning to recover in large cities-as well as fewer supply chain disruptions.As Chinas supply
224、 chains return to normal,business sentiment within China as well as international confidence in China as a manufacturing base could 10 National Health Commission,“Notice on Further Optimising and Implementing the Prevention and Control Measures of COVID-19”,7 December 2022,http:/ 11 Qianer Liu,Cheng
225、 Leng,Sun Yu,Ryan McMorrow,“China estimates 250mn people have caught Covid in 20 days”,Financial Times,25 December 2022,https:/ 12“Chinese Cities See Covid Peaking in January as Official Data Gets Obscured,”Bloomberg,26 December 2022,https:/ 13 Based on Xi Jinpings New Years speech,however,the econo
226、my grew in 2022 at over 4 per cent,Laura He,“Xi Jinping estimates Chinas 2022 GDP grew at least 4.4%.But Covid misery looms”,CNN,2 January 2023,https:/ 19 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Stu
227、dies or any of its Members.improve,leading not only to a catch-up in production,but potentially to a further boost in demand for manufacturing,even though the recession in Europe could dampen appetite for exports.The low growth forecasts may prove overly pessimistic,but equally,there are headwinds b
228、uffeting a very strong economic expansion.In light of this,energy demand is likely to remain subdued initially,and see a strong recovery in the second half of 2023.Both oil and gas demand are set to grow as economic activity rebounds.Oil product demand will see growth across the barrel:from industri
229、al fuels for construction activity through to transport fuels as domestic and international travel resume.At the same time,crude imports and product exports depend on quotas and licences.And in a pro-growth environment,the government may issue additional allowances for independents to import crude a
230、nd for the majors to export products as a means of boosting growth.Nonetheless,in the first half of the year,in the context of weak domestic demand,crude import growth could be muted even as product exports rise.What is more,it will be important to watch if environmental control policies and tax cra
231、ckdowns will be softened,allowing the Shandong independents as well as new refineries to thrive.If environmental protection takes a backseat to growth,crude imports and refinery throughputs will rise strongly this year,but domestic demand increases will moderate product exports in the second half of
232、 the year.Gas demand may only pick up later in the year,although spot LNG purchases are slowly resuming.Even though an uptick in industrial activity will support gas demand,it will only lead to more spot LNG purchases if prices do not spike.Indeed,with additional flows on the Power of Siberia and a
233、strong policy mandate to focus on domestic production,most of the incremental gas demand will be met by pipelines and domestic supply.That said,with new LNG terminals and SPAs starting up,LNG flows will pick up from their 2022 levels,rising by 6-8 bcm,after a close to 20 bcm drop in 2022.The potenti
234、al,at least for the second half of the year,is likely skewed to the upside.Michal Meidan(mailto:michal.meidanoxfordenergy.org)20 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members
235、.10.Indias G-20 Presidency The energy trilemma(balancing energy affordability and accessibility while maintaining security of supply and ensuring environmental protection)shifted in 2022 to an overwhelming emphasis on energy security,particularly in developed countries.This created negative conseque
236、nces for developing countries,regarding energy affordability and the 3Fs:food,fuel,and fertilizers.In light of these challenges,global dialogue and coordination fora have assumed added importance.The G-20 is a grouping of 19 developing and developed countries(including China),plus the EU.14 Together
237、 these countries represent 90 per cent of global GDP,80 per cent of global trade,and 67 per cent of the worlds population.India holds the G-20 Presidency in 2023 and will lead a nine-month global deliberation to shape the agenda for a September summit.Indias priority areas include the energy transit
238、ion,climate finance,clean technology-sharing instead of dominance,pursuit of the Sustainable Development Goals(SDGs)including the 3Fs,and digital public infrastructure.15 For the first time,all G-20 troika members are developing countries(Indonesia,India,and Brazil).16 They will reinforce a common s
239、et of relevant priorities,address the 3Fs,and seek more balance in the energy trilemma,away from energy security alone and towards a greater emphasis on affordability and access,as well as environmental protection.The work of the G-20 takes place on two tracks,leading up to the summit:the Finance tr
240、ack,and the Sherpa17 track.The latter will set the development and energy agenda for the G-20 leaders.Sherpa will lead 13 working groups covering:energy,trade,investment,development,employment,tourism,agriculture,digital infrastructure,health,education,culture,environment,and anti-corruption.India h
241、as planned over 200 meetings across 32 workstreams in 50 cities,involving ministers,government officials,and civil society members in the lead up to the summit.India aims to influence the global conversation in three primary areas:(i)energy transition,including pushing for equal treatment of all fos
242、sil fuels;(ii)multilateral development bank(MDB)reforms to support climate finance through new financial instruments that do not increase developing country indebtedness when borrowing for global public goods;and(iii)digital public infrastructure to support energy efficiency and SDG progress,through
243、 enabling adoption of emerging technology areas such as 5G,IoT,artificial intelligence,machine learning,blockchain,drones,robotics,additive manufacturing,nano-based devices,etc.India has some experience with digital technology in SDG applications in agriculture,health,cyber security,smart cities,and
244、 automation,with special focus on solving real-life problems with information technology leading to increased energy efficiency/carbon credits.18 Smart meters are another 14 Argentina,Australia,Brazil,Canada,China,EU,France,Germany,India,Indonesia,Italy,Japan,Mexico,Russia,Saudi Arabia,South Africa,
245、South Korea,Turkey,UK,and USA.15 Digital infrastructure refers to physical resources necessary for the use of data,computerised devices,systems for scaling and faster impact,and monitoring and verification.India has nearly half a billion internet users and many indigenous digital services,platforms,
246、and solutions it is willing to share with peers.16 The“troika”refers to the past,present,and next presidency of the G-20.Its mandated collaboration ensures continuity of initiatives underway,as well as buy-in to new areas.17 Sherpas are personal representatives of leaders of member countries at such
247、 international summits,with the term being derived from the Nepalese who serve as guides for mountaineers in the Himalayas.18 India has a large ongoing government program to reduce the use of fossil fuels(including diesel)in agricultural pumping and to incentivize farmers,through direct digital paym
248、ent transfers,to shift to solar powered pumps.There are also numerous ICT-based energy efficiency applications(apps)and pilot projects being tried in various parts of the country,for intelligent water management,smart buildings,solar powered refrigerated warehouses to reduce post-harvest losses,smar
249、t transport etc,all with a view to saving energy and realizing quantifiable savings.All these technologies use the internet for real-time communication and data capture,which is essential for entering these initiatives in the carbon credits market.India has frequently offered to share its digital te
250、chnologies with other developing countries at cost or as a donation,eg COWIN which is its Covid vaccine tracking portal that contains details of over 2 billion administered vaccinations.21 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of t
251、he Oxford Institute for Energy Studies or any of its Members.application that can lead to better energy management,provided that the underlying digital infrastructure is in place.India will support other developing countries by offering some of these digital technologies.Other priority areas include
252、:Green Grids Initiative/OSOWOG:19 Cross-border transmission networks for trade in solar energy during evening peaks,taking advantage of time differences e.g Oman/Qatar have afternoon sunshine when India and southeast Asia are dark;solar trade can avoid the use of fossil fuels at the evening peak.Glo
253、bal capacity building and climate resilience-building associations such as the International Solar Alliance;Global Biofuels alliance(Biogas,Ethanol);nature-based carbon sink solutions(e.g.,Mangrove Alliance);the coalition for Disaster Risk Reduction etc.These will be strengthened for continuity beyo
254、nd Indias presidency.Green hydrogen and shared R&D to lower costs in pursuit of clean fuels for industrialisation and transport needs.Innovative low-cost cooling technologies(in the face of life-threatening temperature rises).Adaptation in the face of climate hazards(heat,drought,flood,fires)that je
255、opardize food security and SDG nutrition achievements.2023 is the UNs international year of millets,a drought-and heat-tolerant crop.“Mission LiFE”which pushes climate action from the country level down to individuals,companies,and governments,with proposals for their respective roles India believes
256、 that todays energy transition by only those who can afford it must not continue to be the way forward.Mohua Mukherjee(mohua.mukherjeeoxfordenergy.org)19 One Sun-One World-One Grid,an initiative of PM Modi that is backed by several countries including the UK,currently at feasibility study.22 The con
257、tents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.11.Revisiting the Africa-Europe energy relationship Last year,Europes frantic search for alternative natural gas supplies to replace Ru
258、ssian gas imports led to an unexpected interest in African gas.Presently,Europe accounts for the bulk of Africas natural gas exports,and European governments are hoping to temporarily increase Africas share of these imports still further.Thus,an effective energy relationship between these two region
259、s is crucial.Until the eruption of the Russia-Ukraine war and the worsening of Europes energy crisis,this relationship was mainly conducted in a commercial way by European or international energy companies and relevant African hydrocarbon entities(national companies and/or national/international com
260、pany partnerships).This seems to be changing with the European Union(EU)taking a more interventionist role in the management of Europes gas imports.20 Unfortunately,there has been a lack of consistency in recent EU policies which is creating some confusion among gas suppliers.Two EU policy announcem
261、ents issued in December 2022 could raise tension this year between Europe and its non-EU gas suppliers.The first is the EU climate action regarding the Carbon Border Adjustment Mechanism or CBAM21 and the second is its gas price cap mechanism decision.22 Although the yet-to-be fully adopted CBAM doe
262、s not cover hydrocarbon imports,it does target energy-intensive products exported by African and Middle Eastern hydrocarbon producers.Nevertheless,it was the gas price cap decision,which directly relates to natural gas trade,which triggered immediate African reactions.Algerias energy minister was th
263、e first to respond by stating that Algeria does not support the idea of capping gas prices.The Algerian minister added that,open,transparent,non-restricted,and non-discriminatory gas markets are more than necessary.23 Interestingly,this was something the European Commission strongly pushed for a few
264、 decades ago during its gas market liberalization negotiations with gas exporters.Incremental African gas volumes are planned to be supplied to Europe starting this year and new international gas project investments are also expected to be sanctioned in 2023 and future years(e.g.,the final investmen
265、t decision-FID-for the next phase(s)of Mauritania-Senegals Grand Tortue Ahmeyim LNG project).The EU gas price cap is temporary,and it is not clear how it would be implemented,if at all.But it could unnecessarily affect FIDs of potential new or expanded African gas export schemes.Could 2023 bring the
266、 moment of truth for all the African gas supply plans and expectations announced last year?Could an increase in African gas exports to Europe and African gas project FIDs materialize this year?All this is taking place against the background of Africas search for an as yet elusive fair energy transit
267、ion.After the mixed results of COP27,the road to COP28 this year will again be a challenging one for African policymakers.Existing and future African gas exporting countries are at different stages in the formulation of their energy transition strategies,but for all of them,natural gas is expected t
268、o play a fundamental role not only in their energy transition strategies,but in their overall economic development.It would be nave and irresponsible to think that gas production in Africa could suddenly be stopped,significantly reduced,or avoided altogether.20 As formally framed in the EUs REPowerE
269、U plan and including the recent gas price intervention announcement(footnote 3 see below).21 European Council(2022).“EU climate action:provisional agreement reached on Carbon Border Adjustment Mechanism(CBAM)”,13 December.https:/www.consilium.europa.eu/en/press/press-releases/2022/12/13/eu-climate-a
270、ction-provisional-agreement-reached-on-carbon-border-adjustment-mechanism-cbam/22 European Council(2022).“Council agrees on temporary mechanism to limit excessive gas prices”,19 December.https:/www.consilium.europa.eu/en/press/press-releases/2022/12/19/council-agrees-on-temporary-mechanism-to-limit-
271、excessive-gas-prices/pdf 23 Algerie Presse Service(2022).“Arkab:lAlgrie ne soutient pas lide de plafonnement des prix du gaz naturel”,20 December.https:/www.aps.dz/economie/149037-arkab-l-algerie-ne-soutient-pas-l-idee-de-plafonnement-des-prix-du-gaz-naturel 23 The contents of this paper are the aut
272、hors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.However,the long-term uncertainties about the future of unabated gas supplies pose a problem not only for gas exports to Europe,but also for supplies to African domes
273、tic energy markets.It is highly likely that European or international companies investments in African gas development projects will be affected by future European decarbonization measures,and therefore both African gas producers and international investors will need to focus on carbon capture,stora
274、ge and utilization projects and the urgent reduction of associated gas flaring and methane emissions.Europe could play a role in assisting African hydrocarbon-producing countries in their energy transition strategies.A series of Africa-Europe initiatives,including the Africa-EU Energy Partnership,24
275、 were set up,but these have had limited impact so far.Initially,there were African concerns about the EU Green Deal,specifically that it was imposed on them and that it was focused on mitigation,circular economy,and carbon taxes.25 In some cases,attempts by EU governments to develop clean energy ini
276、tiatives in Africa have been based on old energy trade models applied to new clean products,such as the ambitious plans to export North African green hydrogen to Europe using massive dedicated renewable energy capacity in North Africa,while levels of clean electrification in Africa remain far from s
277、atisfactory.Therefore,the Africa-Europe energy relationship will need to be revisited to address not only Europes short to medium term gas import needs,but also Africas longer-term domestic energy consumption and energy transition concerns.Could 2023 be the trigger year for a more effective and sust
278、ainable Africa-Europe energy partnership or will it be a year of accentuated tensions between Europe and its African gas suppliers?Mostefa Ouki(mostefa.oukioxfordenergy.org)24 https:/africa-eu-energy-partnership.org/25 Hanne Knaepen(2020).“Barriers to Europe-Africa Cooperation on Climate Change”,ISP
279、I,21 December.https:/www.ispionline.it/it/pubblicazione/barriers-europe-africa-cooperation-climate-change-28645 24 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.12.The Global
280、 Stocktake A critical update on climate action,or lack of it COP27,held in Egypt in November 2022,boasted a few notable successes,in particular the establishment of a Loss and Damage Fund to compensate developing countries for the impact of climate change.However,one of the most obvious deficiencies
281、 was the lack of significant progress on setting and implementing more ambitious emissions reduction targets.Prior to the conference a series of IPCC reports had highlighted that the world is not on target to meet its 1.5o warming target and during the event itself the NGO Climate Tracker highlighte
282、d that on the basis of current policy implementation the world will warm by 2.7o by 2100.26 To mitigate this,countries had agreed at COP26 in 2021 to update their national plans(or nationally determined contributions,NDCs)during 2022 with more ambitious targets,but only 20 of the 193 parties had don
283、e this by November.27 As a result,UN Secretary-General Antonio Guterres felt compelled to warn,we are on a highway to climate hell with our foot still on the accelerator.28 This situation has highlighted the importance of a process established under Article 14 of the Paris Agreement known as the Glo
284、bal Stocktake(GST).Its purpose is to assess progress on mitigation,adaptation,and the means of implementation and support,and in the light of equity and the best available science.29 In other words how are countries doing in their efforts to bring down emissions,how prepared are they to adapt to a c
285、hanging environment,and what progress is being made to provide help to poorer countries,especially with climate finance.The GST takes place once every five years in tandem with the setting of new NDCs,as shown in the chart below.In the current cycle,progress on implementing the NDC targets set in 20
286、20/21(a process that was delayed by COVID 19)is being reviewed in 2022/23 ahead of the presentation of new NDCs in 2025.These will then be reviewed in 2027/28 ahead of a further set of new NDC targets in 2030,as part of the ratcheting process established in the Paris Agreement.Figure 5:Timetable for
287、 the Global Stocktake Process Source:Author COP27 marked the end of the second of three phases in the current cycle.Phase 1,which began at COP26,has involved the gathering of information,while phase 2 has been the technical assessment of that data and a review process which commenced at COP27.The Sh
288、arm El Sheikh Implementation Plan,published at the end of the conference,30 noted the importance of this periodic review and it is significant that the discussions around the GST took place at numerous roundtables that involved 26 Bloomberg,10 November 2022,“Climate Projections Again Point to Danger
289、ous 2.7C Rise by 2100”27 See Climate Action Tracker at https:/climateactiontracker.org/climate-target-update-tracker-2022/28 IISD Daily Report from COP27,Monday 7 November 29 https:/unfccc.int/sites/default/files/english_paris_agreement.pdf 30 Sharm El Sheikh Implementation Plan,Section XII,UNFCCC,a
290、t https:/unfccc.int/documents/624444 20202030202820252023NDC updates announcedNDC updates announcedNDC updates announcedGlobal Stocktake ProcessInformation collection and preparationTechnical AssessmentConsideration of OutputsCOP28COP35COP30COP33COP26(deferred from 2021 due to COVID)Global Stocktake
291、 ProcessInformation collection and preparationTechnical AssessmentConsideration of OutputsPublication of IPCC Synthesis ReportsPublication of IPCC Synthesis Reports 25 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute f
292、or Energy Studies or any of its Members.participants from a wide range of affiliations,underlining the intended inclusive and collaborative nature of the process.However,although the COP27 discussions on the GST were positive,despite some complaints about the presence of oil and gas industry lobbyis
293、ts,31 the real test of the process will come in 2023 when the results are made public and the political negotiations about how to respond to them begin.One major issue will be the pledge by developed countries to provide USD 100 billion of climate finance for the developed world by 2020.This goal ha
294、s already been missed,but a new promise to achieve it by 2023 will be reviewed in the GST and the outcome will no doubt be highlighted.Furthermore,although the performance of individual countries will not be a focus,in order to avoid excessive finger-pointing,it should also become abundantly clear w
295、hether the world as a whole is implementing emissions reduction plans and is on target to meet its climate objectives.As this is unlikely to be the case,controversial questions about why not and what can be done will no doubt be raised and vociferously debated.The first sign of results from the GST
296、process should start to emerge in February 2023 when the 193 parties in the UNFCCC process,as well as interested non-parties(such as NGOs)have been invited to offer thoughts on how the outputs should be considered.A more specific consultation process is then planned for April before an in-person wor
297、kshop in October,ahead of COP28 which is due to take place in the UAE from 30 November to 12 December.To further emphasize the importance of the GST,the UN Secretary-General has invited all parties to a climate ambition summit ahead of the conclusion of the GST to ensure that the outputs are fully u
298、nderstood and that resulting plans of action are considered.As a result,although the GST has been described as something of a sleeper issue its importance is set to become very clear in 2023 as it takes centre stage in the debate about the worlds progress,or lack of it,towards meeting climate goals
299、and about the plans that need to be put in place to close any gaps.This could therefore be the moment when the reality of the climate emergency is laid bare and could act as an important catalyst for policy-makers to start to make more concrete plans to rectify the situation,with significant implica
300、tions for countries and companies alike.James Henderson(james.hendersonoxfordenergy.org)31 https:/www.carbonbrief.org/cop27-key-outcomes-agreed-at-the-un-climate-talks-in-sharm-el-sheikh/#:text=Back%20to%20top-,Sharm%20el%2DSheikh%20implementation%20plan,last%20years%20Glasgow%20Climate%20Pact.26 Th
301、e contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.13.Progress with climate finance ahead of COP28 will be vital in 2023 One of the major themes for advancing climate mitigation and
302、 adaptation in 2023 will be the status and progress of climate finance.The years following the Paris Agreement in 2015 were marked by a sustained growth of capital allocation towards climate mitigation and adaptation,32 with major innovations also in terms of financing instruments adopted to channel
303、 capital.33 However,2022 marked a major break in this trend with the focus of global policy-makers moving from long-term environmental governance to short-term energy and debt affordability,while investors became less interested in pro-environmental investments and more concerned about inflation,int
304、erest rate,and currency risks.While the current energy crisis is likely to increase the longer-term motivation to develop low-carbon energy sources,it has also highlighted that the costs of the energy transition and of limiting climate change are far higher than previously thought.As a result,in 202
305、3 the challenges of navigating the current uncertain economic environment could undermine hope for any major innovations in climate finance,despite the fact that it will become increasingly clear that more finance is needed if the world is to get back on track to meet its climate goals.Looking back
306、at 2022,two main themes are particularly notable and whose consequences will be particularly relevant to monitor for 2023.First are the outcomes and consequences of recent international climate negotiations.A core objective of delegates at COP27,particularly those representing developing countries,w
307、as to bring the spotlight back onto the role of climate finance.The fact that COP27 was hosted in Africa gave major impetus for the host country to ensure this topic was high on the agenda,despite the major headwinds created by the energy and geopolitical crises in 2022.34 The main achievement was t
308、he announcement,on the final days of the conference,of the commitment to set up a fund for loss and damage arising from climate change.While the announcement has huge significance and reiterates once again the principle of common but differentiated responsibilities35,the operationalization and actua
309、l financial commitments still need to be agreed with the details expected to be part of more complex negotiations between developed and developing countries in 2023 and during future COPs.The second key issue for 2023 is whether there will be a recovery in the scale of climate financing,following a
310、sharp decline in global issuance volumes in 2022 as a result of the global economic headwinds.Recent developments in instruments such as green bonds(and more generally Green,Social,and Sustainability Bonds collectively referred as GSS bonds)and Sustainability-Linked bonds,have marked an important mi
311、lestone in facilitating the allocation of capital towards projects and assets for climate mitigation and adaptation.However,the current global economic environment,with rising interest rates in major economies,has created major challenges for the ability of emerging countries to attract investors an
312、d repay current outstanding debts due to the sharp appreciation of the US dollar against other currencies.Against this background,multilateral development banks(MDBs)can play an important role in supporting risk mitigation and promoting financing structures for developing countries.While MDBs have h
313、istorically mostly focused on private blended finance transactions,2022 marked the first transaction in which the World Bank supported the de-risking of publicly-traded green bonds issued 32 Global investment in assets and projects directed to climate mitigation and adaptation reached USD 650 billio
314、n in 2022 alone according to IMF estimates.The International Energy Agency(IEA)estimated total investments between 2016 and 2020 averaged USD 1.5 trillion.See:“Net Zero by 2050.A Roadmap for the Global Energy Sector”,2021,https:/www.iea.org/reports/net-zero-by-2050.33 For instance green and other th
315、ematic loans/debt market as well as carbon markets in its various forms.Green bonds grew as an important asset class in the same period reaching the milestone of USD 1 trillion of debt outstanding in 2021.34 Already ahead of COP27,developed countries had promised to meet their USD100 billion financi
316、ng target,as agreed in COP15 in Copenhagen,by 2023 at the latest after a delay from 2020 due to the covid pandemic.Limited results have been achieved so far on that front.35 The common but differentiated responsibilities in the United Nations Framework Convention on Climate Change acknowledges that
317、developed economies carry a major responsibility in addressing the current climate crisis 27 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.by developing countries.36 The role
318、 of MDBs globally will be carefully monitored in 2023,especially as the need for change was actively discussed at COP27.The global stocktake will also have significant implications for climate finance in 2023.It will review the performance of countries against their climate plans and will outline wh
319、at is needed to achieve the 2050 climate goals,most likely highlighting the need to scale-up investments(and thus financing)towards climate mitigation and adaptation.Current figures estimated by the IMF show a large gap between current commitments and the required scale.Only USD 630 billion were inv
320、ested in 2022 compared to the need to achieve stable flows of investments of the order of USD 3-6 trillion between 2030 and 2050,see Figure 1.37 With the total share of global financial assets at USD 470 trillion,38 the main challenge that policymakers will face in 2023 and for the years ahead is ho
321、w to shape incentives to direct capital towards climate mitigation and adaption assets and projects while navigating the current challenging economic and geopolitical environment.Figure 6:Climate finance flows,actual and needed to limit warming to 1.5C Sources:Georgieva K.,Adrian T.,Global Landscape
322、 of Climate Finance 2021,Climate Policy Initiative,IMF,August 2022,https:/www.imf.org/en/Blogs/Articles/2022/08/18/public-sector-must-play-major-role-in-catalyzing-private-climate-finance Andrea Maino(andrea.mainooxfordenergy.org)36https:/pressroom.ifc.org/all/pages/PressDetail.aspx?ID=26688 37 The
323、International Energy Agency(IEA)estimates that in a net-zero scenario(NZE),investments in the global energy system need to increase from the current level of USD 1.5 trillion a year to USD 4.55.0 trillion a year between 2030 and 2050.Total investments range between USD 100 trillion and USD 150 trill
324、ion between 2020 and 2050.See:“Net Zero by 2050.A Roadmap for the Global Energy Sector”,2021,https:/www.iea.org/reports/net-zero-by-2050.38 In 2020 total global financial assets exhibited strong growth in 2020,increasing by 11 per cent with the global non-banking financial Intermediation(NBFI)sector
325、,constituting mainly pension funds,insurance corporations,and other financial intermediaries experiencing asset growth of 8 per cent,reaching USD 230 trillion.See:https:/www.fsb.org/2021/12/global-monitoring-report-on-non-bank-financial-intermediation-2021/28 The contents of this paper are the autho
326、rs sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.14.Article 6 post-COP27 At COP26 in 2021 the rulebook for Article 6 of the Paris Agreement(which covered the creation of a market for carbon credits)was finally establi
327、shed,and the focus then shifted towards putting the crediting mechanisms and frameworks included in it into operation.However,despite the optimism in the lead-up to COP27,market participants were left with a bittersweet feeling,with the resolution of many key issues pertaining to Article 6 being pus
328、hed back to COP28 in 2023.Negotiations in the lead-up to and during COP28,alongside the recommendations of various initiatives such as the Integrity Council for the Voluntary Carbon Market(IC-VCM)and the Voluntary Carbon Markets Integrity Initiative(VCMI),will have important implications for the dev
329、elopment of wider carbon markets,including voluntary carbon markets(VCMs),and more generally,for the spectrum of policies that countries can implement to attract climate finance via carbon markets.In terms of advancing the operationalization of Article 6 in COP27,the Parties agreed on key reporting
330、templates,particularly the Initial Report and the Annex to the Bilateral Transparency Report.Some observers believe the finalization of these templates should enable countries to start developing cooperative approaches and signing bilateral and multilateral agreements under Article 6.2.Under Article
331、 6.2,a host country has the right to authorise the transfer of Internationally Traded Mitigation Outcomes(ITMOs)which can be used either by credit-buying countries towards achieving their nationally determined contributions(NDCs),in market-based schemes such as the Carbon Offsetting and Reduction Sc
332、heme for International Aviation(CORSIA)or by companies to offset their emissions.Perhaps the most contentious issue which remains unresolved is the optionality of host countries to revoke the authorisation for corresponding adjustments(CAs)of credits issued under Article 6.2(but also under Article 6
333、.4).This is particularly important for investors,project developers,and the wider market which need predictability to be able to attract the necessary finance for scalability and for carbon projects to be bankable.This issue also relates to host countries concerns of over-selling cheaper credits at the risk of increasing the cost of achieving their climate targets.This has led a few countries such