Global energy transition: From the main determinants to economic challenges

Equilibrium. Quarterly Journal of Economics and Economic Policy Volume 18 Issue 3 September 2023 p-ISSN 1689-765X, e-ISSN 2353-3293 www.economic-policy.pl Copyright © Instytut Badań Gospodarczych / Institute of Economic Research (Poland) This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. EDITORIAL Citation: Balcerzak, A. P., Uddin, G. S., Igliński, B., & Pietrzak, M. B. (2023). Global energy transition: From the main determinants to economic challenges. Equilibrium. Quarterly Journal of Economics and Economic Policy, 18(3), 597–608. doi: 10.24136/eq.2023.018 Contact to corresponding author: Adam P. Balcerzak, [email protected] Article history: Received: 20.07.2023; Accepted: 1.09.2023; Published online: 30.09.2023 Adam P. Balcerzak Brno University of Technology, Czechia Centre for Business Research, Pan-European University, Czechia orcid.org/0000-0003-0352-1373 Gazi Salah Uddin Linköping University, Sweden orcid.org/0000-0002-5744-0192 Bartosz Igliński Nicolaus Copernicus University in Toruń, Poland orcid.org/0000-0002-2976-6371 Michał Bernard Pietrzak Gdansk University of Technology, Poland orcid.org/0000-0002-9263-4478 Global energy transition: From the main determinants to economic challenges Dynamic global energy transition has been accelerating for the last decade. Interestingly, the energy transition is multidimensional and concerns both the dimensions of technique/ technology and the economic, social, institutional, and legal spheres (Shuguang et al., 2022; Tzeremes et al., 2022; Ramzan et al., 2022; Tzeremes et al., 2022). The literature also points to the significant impact of the digitization of the global economy on accelerating energy transition processes (Shahbaz et al., 2022; Yi et al., 2022). It can be ex- Equilibrium. Quarterly Journal of Economics and Economic Policy, 18(3), 597–608 598 pected that due to the currently observed "Artificial Intelligence Revolution," this factor may gain even higher importance. From the normative perspective, it is commonly assumed that the energy transition should proceed according to the idea of the energy trilemma, which emphasizes three key aspects: ensuring energy security, fair access to energy, and environmental sustainability (Liu et al., 2022). However, reaching this objective is one of the biggest challenges for highly developed societies; specifically, supporting this process is the greatest challenge for current science. Energy security is about securing stable energy consumption for each economy while reducing the use of dirty energy and systematically expanding the resources of the renewable energy mix (Amigues et al., 2015; Nasir et al., 2022; Taghizadeh-Hesary et al., 2022; Ainou et al., 2023; Farid et al., 2023). Fair access to energy at the microeconomic level is associated with the risk of energy poverty in households, which may significantly limit their functioning (Davidson et al., 2021; Batool et al., 2022; Fraser et al., 2023). From the macroeconomic perspective, energy security is related to the principal of building high-security national energy system, which must be characterised with maximum resilience to geopolitical treats (JonekKowalska, 2022). In turn, the idea of environmental sustainability is not only related to eliminating the negative impact of energy transition processes on the environment, but also to obtaining positive effects of the transition, both in environmental and socio-economic aspects, defined as part of the implementation of the sustainable development goals set by the United Nations (Tzeremes et al., 2022, Gao & Chen, 2023). Therefore, the energy transition process which is understood in this way is crucial for all three basic dimensions of a sustainable economy (social, environmental, and economic dimensions) and for increasing economic resilience both at the micro and macroeconomic level as well (Skvarciany et al., 2021; Matuszewska-Pierzynka, 2021; Richterová et al., 2021; Stjepanovic et al., 2022; Kowalska & Bieniek, 2022; Dvorskey et al., 2023; Balcerzak et al., 2023). It should be emphasized that the currently progressing energy transition process results from many socio-economic phenomena, which have gained importance for the last 30–40 years. During this period, a whole set of changes occurred that enabled and positively influenced the systematic development of energy transition processes. The key determinant here is Equilibrium. Quarterly Journal of Economics and Economic Policy, 18(3), 597–608 599 the processes of globalization, which have been developing systematically and dynamically since the end of the 20th century (Li et al., 2021; Ramzan et al., 2022; Ahmed et al., 2022). The increase in interdependence resulting from globalization has contributed to the dynamic development of markets and their significant unification in terms of functioning, interrelations, and institutional changes (Fałdziński et al., 2016; Boateng et al., 2022). In this context, the growing role of the financial market is often pointed out, whose instruments are used to finance the implementation of energy transition (Shuguang et al., 2022; Ramzan, et al., 2022; Al Mamun et al., 2022; Lee & Lee, 2022; Zheng et al., 2023). Additionally, globalization processes have influenced the significant economic growth of world economies and increased their competitiveness and innovation. Significant social changes have occurred in most countries, influencing pro-environmental changes in consumption patterns (Cong Doanh et al., 2021), including energy consumption. All the phenomena mentioned above have influenced the course of energy transition (Tzeremes et al., 2022; Sun et al., 2022; Mujtaba et al., 2022; Adebayo et al., 2022; Liu & Feng, 2023). On the other hand, the currently observed retreat from that period of vigorous globalization and the time of growing protectionism opens a new chapter for the energy transition process, with the growing role of energy interdependence and energy security. The sudden change we have observed for the last two years confirms that these processes are directly or indirectly related to the changes in modern economies, societies and, obviously, politics, and are, therefore, difficult to control. However, despite this change in attitude to unrestricted globalization, the measurable impact of the development of the international financial markets and the involvement of transnational policy in shaping the energy transition processes is emphasized (Shuguang et al., 2022; Ramzan et al., 2022; Al Mamun et al., 2022; Lee & Lee, 2022). Some new financial instruments are constantly created as part of the functioning of financial markets. These processes tend to structure state policy; legal solutions and public finances should support investments in energy transition processes (Lindberg et al., 2019; Shuguang et al., 2022; Shahbaz et al., 2022; Mahmood et al., 2022; Liu & Feng, 2023; Lee et al., 2023). This is extremely important because, on the one hand, access to financial market instruments and, on the other hand, access to modern infrastructure seem to be a necessary condition for the energy transition processes and enable, in the long term, the Equilibrium. Quarterly Journal of Economics and Economic Policy, 18(3), 597–608 600 unwavering development of modern technologies and the implementation of sustainable development goals. Therefore, it seems necessary for individual countries or international organizations to establish long-term energy strategies. From this last perspective, the mentioned determinants of energy transition are institutionally strengthened by the cooperation of countries at the international level and the creation of international legislation. In this case, the newly created institutions and legislation should ensure the socially fair nature of energy transition processes and, as far as possible, a positive impact on implementing sustainable development goals. From this last perspective, the plans of international institutions are ambitious and assume that in the coming decades, the energy transition processes will positively impact changes in most countries' energy policies. In the case of analyzing the course of energy transition, it is assumed that it should be consistent with the sustainable development goals set out in the 2030 Agenda for Sustainable Development (Brodny & Tutak, 2023). International organizations point out that the energy transition related to implementing the Sustainable Development Goals will involve enormous economic effort, problems with society acceptance, reconstruction of markets, legislation, and institutions associated with investment expenditure that has yet to be recorded. From the European perspective, the ambitious plans of the European Commission, carrying out an energy transition based mainly on renewable energy sources, are aimed to lead to a situation where, by the end of 2050, we will have a decarbonized energy system. Thus, as already mentioned, these factors force the implementation of substantial investment programs at the level of individual enterprises, entire economies, and even more blocs of countries. Achieving the indicated goals will not be possible without the active involvement of public funds, which in turn may force the need to change the recently widely accepted consensus regarding the foundations of the economic role of government, required or acceptable economic intervention of the state in a general sense, as well as the principles of a well-conducted fiscal policy in details (Balcerzak et al., 2016; Balcerzak & Rogalska, 2016). From the more technical market perspective, an essential aspect of the energy transition processes is the creation of the renewable energy sector and its dynamic and systematic development (Wang et al., 2021; Agyekum et al., 2021; Calvo & Valero, 2022). In the case of the renewable energy sector, the most significant expectations are related to environmental protec- Equilibrium. Quarterly Journal of Economics and Economic Policy, 18(3), 597–608 601 tion (Ibrahim et al., 2022), socio-economic development (Gyimah et al., 2022), and the implementation of sustainable development goals (Bei & Wang, 2023). The energy transition based mainly on using renewable energy sources allows for the reduction of pollutant emissions, which have contributed most to the degradation of the natural environment over recent decades (Shuguang et al., 2022). Currently, electricity production, as well as the entire energy sector, is primarily based on the use of fossil fuels, the combustion of which is believed to be responsible for most greenhouse gas emissions. Therefore, the need to improve the energy production process is emphasized, where energy transition, including renewable energy sources, is expected to significantly reduce greenhouse gas emissions and pollutants in the coming decades. Finally, it is believed that it should translate into an improvement in the condition of the natural environment (Olabi & Abdelkareem, 2022). Due to availability, the most important for the renewable energy sector are solar energy, wind energy, and biomass (Olabi & Abdelkareem, 2022; Chang et al, 2022; Chang et al., 2022; Amjith & Bavanish, 2022). However, it is essential that the renewable energy sector cannot be based on one energy source. Each country's energy system should be built on an energy mix based on a portfolio of renewable energy from various sources (Yana et al., 2022l; Bashir et al., 2022). Additionally, the production of renewable energy to replace energy based on fossil fuels will require enormous challenges for societies in terms of technology, technical, infrastructure, and resilience of economies, which will, in turn, be associated with challenges related to legal regulations, sources of investment financing and social issues (Boot-Handford et al., 2014; Abbasi et al., 2022). There is still a technological problem of using the short-term oversupply of energy from renewable sources. The solution to this problem is undoubtedly the use of green hydrogen. The economically practical production of hydrogen from the oversupply of renewable energy and its storage, and then the conversion of hydrogen into energy, fuels, and valuable chemical compounds, is expected to become of the most significant importance in the energy transition processes shortly (Capurso et al., 2021; Boot-Handford et al., 2021; Lebrouhi et al., 2022; Hermesmann & Muller, 2022; Qureshi et al., 2022; Amin et al., 2022). Within this context, the last, but not most minor issue to consider — critical after 24 February 2022 (Fiszeder & Małecka, 2022) — is the new role of nuclear energy, which can become the crucial factor in the actual decar- Equilibrium. 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