The consequences of an ill-considered green strategy

• Europe’s push for renewable energy at the cost of conventional fuel may end up causing a global food crisis.
• Since August 2021, Western Europe has faced a problem with renewable energy – the wind doesn’t always blow when needed and the sun doesn’t always shine.
• Countries such as UK, Spain and Germany are relying more on natural gas to make up the electricity shortfall, causing a crisis that will be felt worldwide.

Effects of scramble for Natural gas

• Commodity markets across the world operate on a balance of demand and supply — even seemingly “small” changes in either side of a few percentage points can push the prices up or down sharply.
• Europe’s sudden appetite for natural gas has pushed up the prices of Liquefied Natural Gas (LNG), the form in which gas gets traded globally.
• The LNG price published by the Australian Competition and Consumer Commission (Australia is one of the leading global LNG exporters) is at US $30/mmbtu in January 2022 as against a long-term average of $7-8/mmbtu.
• Higher gas prices have pushed up energy bills for households and are expected to impact household spending and consumption as well.

Natural gas shortage and food crisis

• Natural gas is used to produce urea – if gas prices go up, fertiliser also becomes expensive.
• Urea prices are about three times the level of where they were a year ago.
• Expensive fertiliser means more expensive food – that will hurt the world’s poor disproportionately.
• The Food and Agricultural Organisation (FAO) food price index is already at a 10-year high.
• Some poor and middle-income countries are already starting to face problems of fertiliser availability — there are reports from several Indian states as well.
• The impact of expensive fertiliser will be felt some months down the line as expensive fertiliser and reduced harvests push up food prices.
• India is relatively less affected as the share of natural gas in the country’s energy mix is low but will still face problems due to high food prices.
• The food inflation will come at a time when the ongoing pandemic has disproportionately hurt lower income groups worldwide.

Important relevant past experience of food crisis

• In 2007-08, when oil prices were high, there was a push to use “biofuels” led by the US and Europe.
• Land was diverted to cultivate crops that could be converted to ethanol, leaving less for food crops.
• The effects of the 2008 food price crisis were felt around the world, especially by the poor.
• High price of food was one of the proximate causes of political unrest in the Arab world in 2011 — Libya and Syria continue to feel its aftereffects.
• A blind push to demonise and shut down traditional sources of energy and move to less reliable “clean” energy can have second and third order effects.
• Europe is rich enough to be able to buy its way out of self-created problems, leaving others to deal with the consequences.

Lessons for India

• A blind push to demonise and shut down traditional sources of energy and move to less reliable “clean” energy can have second and third order effects.
• Europe is rich enough to be able to buy its way out of self-created problems, leaving others to deal with the consequences.
• Promoting organic agriculture to make farming self-sufficient and high yield activity.