Europe and Asia boost renewable energy in response to the US-Iran War
The U.S. and Israel war against Iran has lasted six months. Governments in Europe and Asia are now scrambling to build out renewables to?cut dependency on fossil fuel imports. This will provide a new impetus for the global energy transformation.
The effective closure of the Strait of Hormuz, which has slowed down a fifth of world oil and LNG shipments, has led governments from South Korea to Thailand and the European Union to pledge to increase funding to renewable energy sources.
Has the conflict benefited the transition to clean energy? Here are a few?ways? to measure the impact.
RENEWABLES SURGE, BUT COAL IS UP AS WELL
The output of renewable power is soaring around the globe, and according to the International Energy Agency (IEA), it will be the leading electricity source this year for the first ever time.
Rooftop solar has become popular since the start of the war because it's quick and easy to install. High power prices in the Philippines are driving households and businesses to solar. In Australia, a battery subsidy program is fueling a rooftop revival.
Since the start of World War II, demand for rooftop systems in Europe has risen.
But coal also is on the rise. Coal-fired power generation will grow with the Strait of Hormuz shut and renewables unable to provide round-the clock power.
Renewable energy generation in the United States has increased by 10% since 2025, when President Donald Trump was a vocal opponent of green energy.
EMISSIONS STILL ARE GOING UP
Despite the surge in renewable energy, the IEA predicts that emissions of greenhouse gases responsible for climate change will rise by 1.1% to a record high of 14,2 billion tonnes this year.
The IEA predicts that coal production will decline by 0.7% in 2027 but gas-fired electricity generation will increase 1.5% compared to this year. To combat climate change, we will need to invest in energy grids and storage and even more renewable energy.
ASIA BEARS THE BRUNT
The biggest shock has been felt by Asian economies that are most dependent on the flow of oil and gas across the Strait of Hormuz.
China has a'strong focus on solar energy, and its output increased more than three-times faster between March & July. India, Vietnam, and South Korea took the opposite route, increasing their coal consumption. Some European countries have also seen an increase in coal consumption, but according to the IEA, EU coal production will resume its decade-long downward trend in 2026.
The Vietnamese government announced last month that it is considering building new coal plants in order to ensure supply, despite its pledge at the U.N. Climate Summit of 2021 to not build any coal plants after 2030.
TRANSPORT
The majority of oil used in the world is consumed as fuel for cars, trucks and ships. Although the war hasn't collapsed demand, it has reversed growth forecasts.
The world will likely use less oil to transport goods than it did before the war due to higher prices, reduced air travel and the faster adoption of EVs. Goldman Sachs estimates that gasoline demand dropped by about 20% during the peak of disruption in April; GL Consulting places the drop closer to 15%.
China, the world's largest EV manufacturer, has seen its export value for EVs surpass $10 billion this year.
According to analysts at BofA, the number of electric models sold in China in June was up from 53% one year ago. They estimate that 'electrification' explains about a third in China's decline in crude imports over the past 12 months. Since the start of the war, EV sales in Europe have soared as high oil prices are causing pain at the gas pump.
How long will it last?
While the Hormuz is closed, oil and gas will continue to be high. This makes it more important for countries to invest into cheaper renewable energy and reduce their exposure. It is hard to predict whether the shift away from oil or?gas will gain even more momentum.
The cost of renewables and electricity grids will increase as interest rates rise. While the current conflict will likely favor decarbonization in the end, it's not a one way street, said Sverre Alik, vice president and director of energy transition outlook at DNV.
The Middle East is a major source of supply disruptions for many large Asian markets. However, the U.S. will be supplying more LNG between 2026 and 2030.
As this supply materialises LNG prices should fall, making it more affordable to Asian markets that rely on imports. This will reduce the incentives for a permanent switch away from gas, driven by the conflict. (Reporting from Kate Abnett in Brussels; Nina Chestney and Sudarshan Varadan in Singapore; editing by Conor Humphries).
(source: Reuters)
