Plunging into Islands?

I, no doubt like you, am deeply concerned about Russia’s war against Ukraine and horrified at the resulting loss of life and humanitarian crisis enveloping millions of people. The protection of people should be everyone’s primary focus. But we are also seeing the impact of the situation on the world’s energy supply.

Just over a year ago the Shell Scenarios team launched the Energy Transformation Scenarios. The set of scenario stories looked at three possible pathways forward, built on societal trends that we saw emerging from the pandemic in our earlier work, Rethinking the 2020s. Those trends, illustrated below, were Wealth First, Security First and Health First, described as follows;

  • Wealth first: A focus on wealth and economic recovery, but this results in a late start to the rapid transition required to reach net-zero emissions around the middle of the century. Rather, the energy required to support growth in the 2020s comes from conventional sources. This led to the Waves scenario.
  • Security first: National sentiment shifts inwards and security issues prevail. The transition slows along with economic growth. Domestic energy resources prevail and while some countries proceed with a transition, the global pace of change required for the Paris Agreement just isn’t there. This thinking underpins the Islands scenario.
  • Health first: The pandemic leads to structural change across society, significant green investment and a realization that the broader health and well-being of society is fundamental. In this context the goals of the Paris Agreement are met under the Sky 1.5 scenario.
Shell Energy Transformation Scenarios

Islands always struck me as being a rather dystopian view of the world, but it emerged from a robust scenario development process as a very possible world. In more recent publications, such as our Singapore Sketch, it has been featured and discussed but not particularly emphasized. Both Waves and Sky 1.5 seemed more in tune with the times. Yet here we are, looking at the prospect of a world becoming very distracted from the energy transition by security issues.

While Islands is framed in the context of the pandemic and how it is dealt with, it nevertheless points to trends that are becoming visible in the world order as each day passes. As a nationalistic islands-type mentality takes hold in the scenario, growth in the global economy begins to stagnate, and efforts to address the climate challenge slow. Islands involves the triumph of the nation state and nationalism, while the forces behind globalization weaken. It is a more challenging economic environment where technology innovation and its diffusion are slow, and efforts to address climate change fragment. Geopolitics are re-calibrated and shift in tandem with increasing attention on national security and trade barriers. Security of energy supply and domestic socio-economics dominate agendas.

Even in Europe, with its strong focus on climate action, efforts to reduce emissions slow in Islands, particularly compared to Sky 1.5. Coal in primary energy remains high through to 2050 and the electric vehicle revolution stalls badly with no significant uptake until the late 2030s.

These trends may feel extreme in that, for example, there is already a visible shift towards electric vehicles in Europe. But scenarios are designed to push thinking to extremes, not forecast the future. Importantly, because they aren’t forecasts, we shouldn’t sit back and just imagine that Islands in now inevitable. Rather, we should take heed of the signals it is giving. There is the very real possibility of domestic security issues enveloping the world and slowing the energy transition, particularly if governments choose a path of rearming and shoring up their own borders. But other outcomes are also possible.

Sky 1.5 is built on strong international cooperation, which could be a possible silver lining in the current crisis. We imagined when developing the story that such cooperation emerged through actions related to the pandemic, but actions in response to the Russian invasion of Ukraine could also bolster the focus required for a major energy transition. What is hard to imagine is a rapid energy transition when governments are also deeply focused on security matters. That is perhaps the underlying Islands story.