Rhein on Energy and Climate

Not everything has become dark on the climate front after the disappointing outcome of the Copenhagen Climate Talks three months ago.

In procedural terms, the Mexican hosts of the Cancun meeting in November/December have multiplied their contacts with main players to insure a more successful outcome.

But more important, there many signs that the business, consumers and governments across the world continue pushing energy efficiency and non-fossil energy sources: the vast majority of people continue to believe that climate change remains the most serious problem in the years ahead.

First, the drive for renewable energies seems unbroken, even if 2009 has not been brilliant in terms of investments.

The new International Renewable Energy Agency (IRENA) formally established in early 2009, has enlisted more than 140 member countries since. This demonstrates the strong interest world-wide in renewable energies. The new Agency will be the focal point for technologies and policies promoting renewable energies. It will establish a network of the best experts for advising countries on how to best exploit their potential for renewable energies.

The private sector continues to push wherever there are ideal conditions for investment. Thus Iberdrola, the world’s biggest wind – power utility, unimpressed by the stalemate of US climate legislation, will continue to invest heavily in wind farms in the USA, the country offering the best opportunities for wind energy.

And the two huge long-term European programmes, DESERTEC and the North Sea off-shore wind investments, involving the leading utilities will of course continue whatever the still stand at the global level.

Second, the gasoline has stopped rising, at least in the West. People drive less and in more fuel-efficient cars, thanks to efforts undertaken by the automobile industry to introduce more energy-efficient models. Car dealers world-wide prepare for the gradual transition towards hybrid and electric plug-in cars.

Governments have encouraged this process. The US government has imposed new fuel efficiency standards that will raise fuel-efficiency for new cars by 40 percent as of 2016.

Similarly the Chinese government has systematically pushed its car makers to build small fuel-efficient cars. It is in this perspective that one has to see the most recent decision by Chinese regulatory authorities to block a deal between General Motors and a Chinese engineering company to build the Hummer jeep, a notorious gas-guzzler

High budget deficits will also help to restrain gasoline consumption. Many governments will have to abolish subsidies or to raise taxes on gasoline.

India, where all subsidies combined account for more than 10 percent of government expenditures, plans to overhaul its energy subsidies which would lead to an increase of gasoline and fuel prices.

Greece will have to raise its excise tax on gasoline to restore fiscal stability.

And should one exclude that even the USA with its huge budget deficit may one day be obliged to raise federal taxes on gasoline?

Third, the private sector continues its drive for higher energy efficiency and lower C02 emissions, if only in order to cut costs.

Thus several Dutch companies are introducing incentives for sustainability and lower green house gas emissions by linking bonus payments to progress in emissions or sustainability. DSM, a big chemical country, intends to pay full bonuses only if the company succeeds in substantially reducing green house gas emissions. AKZO NOBEL, another chemical company, calculates bonuses in relation to the company’s position in the Dow Jones sustainability index for chemical companies.

Brussels, 25.02.10 Eberhard Rhein

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