All investment projects become more challenging when interest rates rise – either because financing costs increase or because developers with a lot of cash have many viable options for what to do with their money. To the extent that the energy transition implies additional investment, this also applies to them.

If the higher interest rates are accompanied by higher inflation, that could increase future revenue streams. It suggests that well-structured investment projects in this area should not necessarily be abandoned.

As I said, it depends on the extent to which future electricity tariffs have been influenced. If financing costs rise but revenue does not, some projects may no longer be viable. However, if the increase in interest rates only reflects higher inflation, the feasibility will not change much because electricity prices are linked to inflation. The impact of rising financing costs also needs to be considered when it comes to the practicality of other energy projects.

If there is a need for new energy sources because Europe no longer wants to rely on Russia, financing costs are likely to play a role even when it comes to oil and gas fields, nuclear, or renewable energy sources.

The recent British auction for offshore wind farms was disappointing. There were no bidders. But that was because the government set electricity tariffs too low. The industry had pointed this out before the auction. I expect that money will continue to flow into a range of renewable energy sources. We cannot afford for that not to happen.

I am not an expert when it comes to specific projects. But I would expect investments across a range of renewable technologies to be successful. I think marine energy has been underutilized due to the lack of return on investment, and I expect that to change in the coming decades. In the long term, the development of solar and wind power in Africa will be crucial.

By my calculations, 30% of the world's solar energy potential is in Africa. And I have seen similar calculations for wind energy. That's too much potential not to be developed.

Oil and especially gas will likely remain part of the energy mix for many decades. Nonetheless, I think their share will decrease, although investment will probably continue. Ultimately, due to climate change, it is necessary for the industry to gradually become less important.

Considering that climate change is likely the biggest externality we will face, we need a mechanism that ensures those responsible for emissions, which means all of us, incorporate the costs of these emissions into the price of goods and services. This could be done in the form of a carbon tax, but it is a blunt instrument.

The advantage of carbon pricing models is that they let the market determine the appropriate price for carbon emissions and push the least efficient firms, the biggest polluters, out of the market. Thus, I assume well-designed emissions trading programs are likely to be the most efficient from an economic perspective.

I do not have an opinion on that.

My observation is that concern about climate is increasing and decreasing with the economic cycle. In a challenging economic environment, it takes a back seat. So, it would not be surprising if that happens when the world is focusing on other things.

After the invasion of Ukraine, there was certainly a brief setback as Europe struggled to replace energy supplies from Russia. Gas was replaced by coal and oil to some extent. But if these geopolitical crises drive up prices for fossil energy sources, they will accelerate the introduction of cleaner energy sources. Their viability increases when oil and gas prices rise. At worst, it would be one step back and two steps forward.

I think it's dangerous to speculate on such things. But the risk exists.

The conflict between Hamas and Israel brings back memories of the 1973 Yom Kippur War, which led to a tripling of oil prices. There was another steep increase in the early 1980s. When expressed in today's prices, the price of US oil was $28 shortly before that war. It then rose to around $82, which is not far from the current level. Hence, the starting point today is much higher than back then. For that reason, I find it hard to imagine such a large increase. But if the conflict escalates, I would expect rising prices. This is partly due to the uncertainty about supplies from the Middle East. Supply routes could be disrupted. It is also possible that producers in the region will use energy as a weapon again.

Currently, it is difficult to imagine the end of a war that seems to have come to a standstill. Support in the United States and some European countries has apparently waned, although the election result in Poland could strengthen support from that country. The US presidential elections in November 2024 could be a complicating factor.

They could make it more difficult for President Biden to garner support in Congress for additional aid to Ukraine and Israel. A victory by Donald Trump could bring about a rapid change in the US attitude – and perhaps a faster end to the war, though not to the advantage of Ukraine.

War is never good. So, we could say there are no winners. But purely from an economic perspective, some have always found a way to profit from it. The obvious beneficiaries of a prolonged war are arms companies and energy suppliers that benefit from higher energy prices than usual. This applies to both companies and energy-exporting countries.

Other beneficiaries could be the shipping companies that own the oil and gas tankers needed for energy transport to Europe. Given the pricing power of food producers, they could profit from shortages caused by the war.

A quick end would clearly benefit Ukraine, as well as Russia and Belarus. It would also be a relief for European countries, especially those closest to the conflict zone. There are several reasons for this.

Firstly, trade with the warring countries has been disrupted, leading to revenue losses. How quickly trade with Russia will normalize remains to be seen. Secondly, the countries closest to Ukraine have borne the greatest burden in accommodating refugees. European countries and the USA have provided military aid. Thirdly, depending on how the war ends, there could eventually be a resumption of energy supplies from Russia to Europe.

It is unlikely that they will ever play such a significant role again. However, this should lower energy prices in Europe. Additionally, a lot of rebuilding will be required in Ukraine. This is likely to benefit European and American construction companies and building material companies, whose governments expect to be rewarded for their support. These industries will already experience increased demand due to adaptation to climate change and mitigation of its effects.

Paul Jackson initially gives the impression of teaching at Oxford or Cambridge. This is not only due to his preference for fancy shirts. The strategist at asset manager Invesco appears intellectual, collegial, and humble. Listening to him, one might think he is talking about more than just money. As Global Head of Asset Allocation Research, Jackson analyzes and comments on macroeconomic developments and their impact on capital markets. Before joining Invesco, he worked as an equity strategist and Head of Research for Société Générale. He regularly published market comments under the title "The Belgian Dentist." The career of the Oxford graduate, who had previously earned a bachelor's degree at the London School of Economics, began at Morgan Stanley in London.