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World Politics and Energy Developments.
Comment by The Rt.Hon.Lord Howell of Guildford at the Centre for Global Energy Studies fifth one-day Seminar at The Ballroom, Carlton Tower Hotel. 21st March 2007
An Unnecessary Conflict Ahead
The message I bring this morning is about a looming conflict, although a conflict which is completely unnecessary. I refer to the growing clash between those who give an absolute priority to measures aimed at reducing carbon emissions into the atmosphere, and those who give first priority to plentiful , secure and reliable energy supplies to underpin world economic growth. This is a conflict which is not only avoidable ,it is also highly destructive. Yet regrettably it is one which is being exacerbated by current policies and political postures being taken up on both by national governments and at the international level. Currently we are being presented with two seemingly polarised scenarios. At one extreme are those who insist that carbon emissions must be rationed, priced, traded and policed – if possible across the whole planet, so as to make all energy from the consumption of fossil fuels –that is, oil, gas and coal (and many other activities) - much more expensive and therefore much more limited. In fact the most extreme carbon doctrines demand the phasing out of all fossil fuel burning entirely. These aims are put before everything else, including the immediate needs of the developing and the poorest countries for cheap and plentiful energy to enable them to lift themselves out of poverty . Their pursuit has already given birth to a plethora of schemes for pricing carbon and for imposing mandatory targets for carbon reduction. These begin with the Kyoto protocols but have been built upon by various international carbon permit allocation and trading mechanisms. Here in Europe we have not only the EU Commission raising the targets for decarbonisation, but in the UK, for example, all three main political parties eagerly backing and elaborating them. As Martin Wolf, who will speak to you later this morning, has pointed out with his usual perspicacity , such schemes, if extended to the issue of individual carbon permits, and individual green air miles allowances, and if made world-wide, would require bureaucratic controls on an unworkable scale. This would be truly the birth of a new Leviathan. Where they have already been attempted, such as with the present EU Emissions Trading Scheme, they have proved highly erratic, sending the price of carbon permits soaring then crashing and leaving investors, particularly investors in energy production and transmission, in a near impossible position. But worse than all this, the prioritising of carbon reduction is in direct conflict with the urgent needs of developing economies, as well as with the needs of some of the less well-off EU economies. At least twelve of the twenty five member states have expressed deep reservations about mandatory carbon reduction targets which would not only slow their growth and raise their existing energy costs , but compel them to turn to renewables of unproven and sometimes dubious commercial worth. As for the lower income societies which are struggling to embrace growth and must have energy to achieve higher living standards , to raise the quality of life, meet water shortages and health standards – well they just get pushed to the back of the queue by the climate-first zealots. We all know that the overriding need of the developing world is for cheap energy supplies. The obvious and cheapest route for many of them is to burn coal, of which, for example, China and India have about half the world’s copious reserves, as well as to use gas efficiently – although that costs more. Of course they will want to supplement their energy needs as well with plant-based oil - from maize, cassava, soya , as well as from sugarcane and palm oil. But in every case there are costs, including in the case of sugarcane and palm oil quite severe environmental costs – all of which will impede, rather than ease the growth process they so desperately want.
A Different Starting Point A more balanced approach to the world’s future energy mix would, I believe, begin from a different starting point. I do not pretend that there is a simple path forwards, an easy way out of the labyrinth of conflicting interests. But there does need to be a sensible recognition that if our commitment to reduce world poverty and our commitment to curb greenhouse gases are not to clash head-on then fossil fuels will have to play a part and cannot just be banished from the growth process. This more balanced approach should switch the emphasis away from extra burdens, charges and taxes, which most people, even in richer societies, let alone in poorer ones, can ill afford, and focus far more on the gains, benefits and growth opportunities available to all from a careful transition to a new energy pattern. Crude oil and gas are by most people’s standards expensive enough already, (and in Europe, for ground transport taxed enough already) and are probably going to stay that way for the obvious reason that the days of super-cheap and easily extractable oil from the Middle East’s enormous reserves are coming to an end. There remains plenty of oil and gas around both the Middle East region and the rest of the planet. We are certainly not going to run out, as some suggest. But it is bound to cost more to produce and it is probably healthy that it should be at the more costly end of the fuel spectrum. Indeed, part of a more stable energy future should certainly involve renewed efforts to bring consumers and producers together in a common bond of security of supply and demand to ensure that while oil and gas will never be cheap again, they should certainly remain reasonably stable. This was a concept that I explored years ago with His Excellency Sheikh Yamani, although neither of us succeed then in producing results. But it is a cause we should undoubtedly pursue today. The role of Russia in ensuring stable and secure oil and gas supplies, particularly to Northern Europe, is also now crucial, and here, too, common interests should be more strongly identified through dialogue and agreement. But beyond oil and gas, and their secure transmission and delivery the policy emphasis should be on making energy cheaper to use, not more expensive, and doing so by encouraging every kind of energy-efficient product and technique and every kind of energy innovation . The engine for this transition should not be subsidy and government favouritism, or that dismally inefficient process of ‘picking winners’, which nearly always goes wrong , but the colossal power of enterprise and free markets in meeting the world’s new needs. On the supply side there probably are some genuinely commercial renewable energy sources, especially with oil at $60 or more a barrel , as well as some ‘unconventional’ although not so renewable sources like the Canadian tar sands and Venezuela’s heavy mineral oil. There are also big shale oil resources. These do not need subsidies any longer but they do need encouragement in the sense that the many existing obstacles to their development, both planning problems and regulations, should be minimised.
The Best Low Carbon Prospect The best low-carbon prospect of all is ,of course, civil nuclear power. We frankly do not know just how competitive electricity from nuclear power really is in present conditions. Most of today’s operating nuclear plants were designed and built before the computer age. It could well be that with new streamlined designs, and serial construction methods , together with vastly lower radioactive waste and start of the art storage technology ,nuclear power can be truly competitive. Nobody yet knows because of course political pressures and environment al concerns can inflate costs and screw up all calculations. But if safe, cheap nuclear power can bring low cost energy to the developing world, and with it low-cost desalination to meet perhaps the greatest need of all, fresh water, then that is something to be warmly welcomed. But you don’t hear much about that from the carbon enthusiasts. I think they should pay much more attention to the crucial power needs of developing societies, both to meet our moral obligations to them and to gain the world-wide acceptance of the energy transition which lies ahead. Universal acceptance of that transition is indeed the key, and this brings me to my final point this morning. If the message is going to be all about penalties and taxes and extra burdens, with a measure of guilt thrown in, that may have resonance with the better off in the world, but it is not going to produce results.
Wanted: A More Compelling Message. A far more compelling message is going to be needed, and one which recognizes people’s immediate needs as well as those of future generations. Most people, most families, most businesses run on tight budgets. The prospect of being taxed even more, and of higher costs and charges all round , is not welcome, even in the richer countries. And if that is all that can be offered then the chances of getting on the path to a low-carbon age are going to be zero. All the brave targets will just not be met. By contrast , if hope can be held out that energy will be affordable and secure, that money will go further, that the liberating comforts of life such as cheap air travel and car mobility can be made available to all, then the chances of progress to a greener age will be greatly enhanced. In short we must combine the nearer term aims of energy security with the longer term ambitions for climate security. This will be the grand union of motivations which will truly drive the world forward to a better age, in the way that pure carbon rhetoric and supposedly binding emission-reduction targets will not. That will be the practical way out of the conflicts and complexities of which I have spoken With my co-author Carole Nakhle I have tried to trace out this path in a book which will shortly appear and I naturally hope you will all read . It is called ‘Out of the Energy Labyrinth’ and it is an optimistic work. It says there need be no conflict between energy needs and climate security , no new barriers to development and that there can be gains and rewards , rather than just losses and extra costs, from the energy transition ahead. It explains how we can avoid extremes and how the future energy balance will have a place for both fossil fuels, new clean-burn technologies, renewables and nuclear power in a suitable pattern of diversity, both between fuels and between nations and societies. In ancient times Ariadne’s thread led Theseus out of the Labyrinth of King Minos. I hope you will find at least bits of the thread in what we have written. When I listen to some of the poorly-thought–through ideas and initiatives coming from today’s opinion and policy formers I frankly see no sign of any thread at all. Ends
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