Under the 2015 Paris Accords, 196 countries pledged to reduce greenhouse gas emissions with the goal of limiting global temperature increase to 1.5 degrees Celsius by 2030. Since then, a tension has emerged between meeting the world’s energy demands and reducing emissions.
On one hand, there is a critical need for an energy system that pollutes less. On the other, renewable sources don’t offer the scale or reliability to meet current or future energy demand.
Ralph Eads, Vice Chairman and Global Head of Energy Investment Banking at Jefferies, believes there are opportunities to build a cleaner energy system beyond simply transitioning to renewables. In this interview, he outlines a demand-forecasted strategy for move the needle on global emissions.
The Thin Margin of Global Energy Supply
Eads began by addressing risks to global energy supply.
“Right now, global supply and demand are balanced. The world consumes about 102 million barrels a day and productive capacity is 104-106 million barrels,” he explained. “That’s a very thin cushion. Considering the political instability in producing regions, the risk of disruption is cause for real concern.”
Two years ago, these concerns materialized when the Russia-Ukraine war severely disrupted natural gas supply to Europe. Russia reduced its pipeline gas deliveries to the EU by more than half in 2022, sending shockwaves through the global economy.
Growing power demand from artificial intelligence and cryptocurrency puts further strain on supply. The global electricity needs of data centers, AI technologies, and cryptocurrency are expected to double by 2026. The power consumption of Nvidia’s graphics processing units alone in the coming year will be comparable to that of Houston, Texas.
“Many people push to ban hydrocarbons for environmental reasons, which is understandable,” Eads said. “But without them, we can’t produce enough affordable energy to meet global demand and ensure economic prosperity, especially for the poorer nations. We need a different path forward.”
Beyond Renewables: The Path to A Clean Energy Future
A sweeping transition to renewables is often seen as the only path to a cleaner energy system. Eads argues that a viable path to reducing emissions must include multiple energy sources. He highlights the rise of natural gas in the U.S. as an example of achieving environmental progress without jeopardizing supply.
“The fastest way to help the planet is by eliminating coal consumption. If you replace coal with natural gas, you significantly reduce emissions,” Eads shared. “In the United States, we’ve moved from coal to natural gas and cut emissions more than any other country in the world over the last 15 years. A key part of this switch is to make the production of natural gas even cleaner which is 100% feasible.”
“People often group natural gas with oil and coal, but it’s significantly cleaner. Innovations in natural gas present real opportunities to both benefit the environment and sustain production,” he explained.
Eads also emphasized the importance of nuclear power in the future energy mix. He referenced a new type of reactor that uses salt to cool uranium, significantly reducing the waste produced by conventional reactors.
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The push to reduce emissions is crucial, but with economic well-being and energy consumption so closely linked, a cleaner energy system cannot come at the cost of global supply. Fortunately, innovations, particularly in natural gas, are creating opportunities for clean energy solutions that can scale with increasing demand.
As political instability and AI place pressure on global production, a strategy that incorporates both clean technologies anda diverse power mix may prove the most effective way to achieve progress across multiple fronts.
For more insights from Ralph Eads and Jefferies, the leading advisor on M&A transactions in the energy sector for the last decade, visit the firm’s dedicated thought leadership site.
