The Implications of Ukraine-Russia Conflict on Green Energy Market

For more than three months, everyone wondered if Russia would attack Ukraine, as Putin decided to put troops around the borders. On the 24th of February, the invasion started with Russian missiles hitting Ukraine’s military installations and Russian troops crossing the border. The escalation of the conflict has brought NATO countries to react and inflict heavy economic sanctions on Russia and the rouble.

Europe, the UK, and the US have decided to impose sanctions on goods and assets of Russian oligarchs. Moreover, western companies such as IKEA, McDonald’s and Microsoft have left Russia.  The heaviest sanctions were inflicted on the Russian central bank with Western countries freezing its assets to stop it from using $630bn of foreign currency reserves. Some Russian banks are also being removed from the SWIFT, the principal messaging mechanism for payments across borders.

The US is banning all Russian oil and gas imports and the UK will phase out Russian oil by the end of 2022. This will target “the main artery of Russia’s economy” as said by the US President Joe Biden. Meanwhile the EU will try to switch to alternative supplies and make Europe independent from Russian energy “well before 2030” since it gets a quarter of its oil and 40% of its gas from Russia. Fossil fuels (oil and gas) still decide much of the political world.

In this situation of chaos and uncertainty, it is important to understand whether the green transitioning will accelerate. Investors have seen the conflict as a possibility to a faster green transition, after the 40% fall from the record high in January 2021.

European renewable stocks are rising as Russia-Ukraine conflict erupts
Source: Bloomberg

As we can see in the graph, on the 24th of February the “European Renewable Energy Index” surged as much as 9.3%.  In the meantime, Sunrun Inc. and Sunnova Energy International Inc., US largest residential solar firm, rose more than 13% in intraday trading. The index has been rising throughout March, peaking at 2400 index points, showing positive confidence of markets toward green transitioning.

This article will analyse the impact of the Russian invasion of Ukraine on clean energy adoption, arguing that there are many hurdles along the way. Despite positive investor sentiment in green markets, in the short-term European countries are likely to increase their dependency on fossil fuels to alleviate energy shortages during the war.

“Short-term Controversy”

According to IEA, after a drop during the pandemic year, CO2 emissions increased by 6% from 2020, reaching the highest annual level ever. Even before the start of the conflict, the US and European countries had increased oil and gas output because of increased demand for energy after the Covid-19 pandemic. The conflict has since worsened the situation.

Germany’s economy minister Robert Habeck stressed a point of concern regarding European energy markets. Due to the war in Ukraine as well as gas and oil price volatility, European countries may find it more convenient to burn coal rather than gas despite the cost of carbon. The switch to coal is an environmental problem that countries highly reliant on Russian gas, and in particular, Italy and Germany, are likely to face.

According to Eurostat, European Union countries get slightly more than 40% of their gas from Russia. Germany, for example, gets over half of its gas, about a third of its coal, and a quarter of its oil from Russia, according to official figures. In fact, it is planning to reduce its high dependence on Russian energy and wants to accelerate the transition to green and clean power, achieving the 100% target by 2035, as declared by its finance minister Christian Lindner. However, Germany in the short term is still buying Russian energy due to being highly dependent on it. This makes the transition difficult both in terms of the availability of resources and adaptability in changing the energy mix.

Clearly the energy crises have created an opportunity for the European continent to accelerate the transition to cleaner energy and to reduce the dependence on the importation of energy. However, several economists and experts warn that Europe has already lost a big chance with the Covid-19 pandemic. They see European countries increasing their reliance on coal and oil, and thus increasing drastically GHG emissions.

Europe has published a press release outlining its plan to reduce its reliance on Russian imports as well as to accelerate the transition to green energy. REPowerEU plan is aiming to Diversify gas supplies, via higher Liquefied Natural Gas (LNG) and pipeline imports from non-Russian suppliers, such as Qatar, the US, and Africa, and to produce and import larger volumes of biomethane and renewable hydrogen. Also, by boosting energy efficiency and increasing the use of renewables, it is expected to reduce faster the use of fossil fuels in homes, buildings, industry, and power systems. REPowerEU plan could gradually remove at least 155 bcm of fossil gas use, which is equivalent to the volume imported from Russia in 2021. Nearly two-thirds of that reduction can be achieved within a year.

In addition, on the 25th of March, the US and EU reached a new agreement regarding the supply of gas in Europe to help the old continent reduce its dependence on Russia. The agreement encloses an initial supply of 15 bcm, which will gradually increase up to 50 bcm way before 2030. The infrastructures used to supply gas to Europe will be powered using clean energy in order to be coherent with the objectives stipulated during COP26.


The views of experts and economists have a common theme: the conflict will reduce the dependence of Western countries on Russian fossil fuels export. However, the green transition is a long-term process and will face lots of difficulties in its path to realization as this article has shown.

Europe is acting with the development of the REPowerEU, while the US is sending messages on how the reliance on oil is bad for the economy and how Europe should move to greener energies. Losing this opportunity for Europe would make the transition longer and more costly, in times where there is less room to act. Western countries have the real possibility to change the energy market in favour of greener energies, but they must act as soon as possible. Hopefully the agreement between the US and the EU is a start to more ambitious future moves.

Author: Marco Cantonetti


Can Europe wean itself off its dependence on Russian fossil fuels

European Renewables Stocks Surge as Ukraine War Fuels Energy Reckoning

EU to buy gas jointly in push to reduce spiralling prices as US offers LNG

“Germany Says It Won’t Stop Buying Russian Energy Despite Moscow’s War in Ukraine”

IEA, Global Energy Review 2021

REPowerEU: Joint European action for more affordable, secure and sustainable energy

Russia to switch gas invoicing to roubles for European buyers

Ukraine Invasion Pushes Clean-Energy Transition

“What sanctions are being imposed on Russia over Ukraine invasion?”

“What does the Russia-Ukraine conflict mean for renewable energy?”

“Will the Ukraine war derail the green energy transition?”


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