January 2023
Key Themes for the
Global Energy Economy in 2023
OIES Paper: SP 21 OIES
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 (c) 2023
Oxford Institute for Energy Studies
(Registered Charity, No. 286084)
This publication may be reproduced in part for educational or non-profit purposes without special
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permission in writing from the Oxford Institute for Energy Studies.
ISBN 978-1-78467-215-7
i
Contents
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 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 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. India’s 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 with 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 design 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
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 1.5°C ......... 27
Tables
Table 1: Canadian Methane Emissions Reduction Plan (megatonnes of CO2e) ..... 33
Table 2: Nuclear reactor plans, by country .............. 38
Table 3: US Inflation Reduction Act hydrogen tax credits ............ 41
ii
1. Introduction – rebalancing the energy trilemma
In this latest edition 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 articles 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 trilemma 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 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 concern 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 lesser 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 clearly placed the low carbon transition higher on policy agendas.
Russia’s 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 around 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 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 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 gas, 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 the long-term as well as helping to
achieve the continent’s 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 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 to 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 sources, is becoming a priority again as cost and
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.
availability trump climate impact, at least in the short term. Meanwhile in Africa, the EU’s search for new
gas supply has rekindled the drive to de