Rhein on Energy and Climate

Policy makers should stop talking about “climate policy”. It is energy policy that matters to preserve the global climate. It should secure our energy supply without causing havoc to environment. It is still too much focused on providing low-priced energy.

Climate scientists tell us convincingly that Humanity must stop emitting greenhouse gases long before the end of the century in view of preserving healthy living conditions on earth. That means ending the consumption of fossil energies, especially coal, between 2050 and 2100. That is not far away, contrary to our perception. In order to attain that objective Humanity must therefore start as of today and pass through a difficult transition process that has hardly started.

The energy sector that thrives essentially on fossil resources considers this to be impossible to achieve. The World Energy Council (WEC), the major global energy organisation, expects global energy demand to continue rising between 27 and 61 per cent until 2050 and fossil energies still to contribute between 50 and 77 per cent of global energy consumption. This scenario, however plausible for the industry, is unsustainable and policy makers should openly say so.

To be compatible with rapidly growing environmental and climate constraints all countries must formulate energy policies that aim at:

  • reducing energy demand as much as possible;
  • satisfying the remaining demand from renewable sources.

This is a terrific challenge that most of us do not realise and that prosperous countries with high per capita C02 emissions have a special responsibility to address.

It should be possible to avoid up to half of the energy presently consumed by thriftier consumption habits and much higher energy efficiency.

Energy policy should therefore aim at preventing demand from rising any further.

USA and EU have started acting in that direction by fixing stricter fuel efficiency/emission standards for automobiles and buildings. But they need to redouble their efforts; and all countries, in particular China, must follow them.

Higher energy efficiency is by far the cheapest way to reduce energy consumption and carbon emissions. It cuts both internal and external costs. The higher the energy costs the more profitable it is to invest in energy efficiency.

High energy prices are an optimal incentive for reducing consumption and raising energy efficiency. Under pressure from business and consumers policy makers are reluctant to tax the use of fossil energy and even to abolish subsidies for fossil energies.

Instead of permanently pleading for low energy prices policy makers should look into the future when fossil energy prices will be substantially higher because of rising production costs and demand. By projecting much higher gas, oil and coal prices they will impact on profit expectations of investors and encourage them to invest much more in energy efficiency than they will by extrapolating present price levels.

Emission trading may help in this direction, but it is no panacea, as EU experience has shown. It is only effective if emission quotas create sharp scarcities. Otherwise low carbon prices will encourage the use of cheap coal. The EU must urgently take the necessary steps to restrain the volume of emission allowances and aim at market prices beyond € 25/ton of C02 instead of € 4 presently. Unfortunately this is much easier said than done because of built-in inertia and vested interests.

Renewable energies, above all wind and solar, are the only sustainable energy sources. During the last two decades they have achieved remarkable progress in improved technology and significantly lower costs. As they attain “grid parity” they will replace fossil energy, first in optimal locations competition. But with the past rate of progress it will take an eternity to replace all fossil energies, presently covering 85 per cent of global energy demand.

Without well-designed subsidy schemes progress risks being too slow. This also goes for the EU that aims at reducing its CO2 emissions by more than four fifths until the middle of the century.

All IEA member countries should develop appropriate strategies and serve as “pilots” for the international community.

What is ahead of us, must be a veritable “energy revolution”. Energy ministries therefore deserve to be the most prominent departments and cover all environmental and climate issues related to energy, whether electricity, industry, transport, buildings, agriculture or energy research.

As long as policy makers continue to focus on abstract notions like greenhouse gas emissions they evade the real policy issue of how to phase out burning coal, oil and gas in the coming 60-70 years.

That is why we should not expect much, if anything, from the international climate conference in Warsaw next month or the international climate compact to be signed in Paris in 2015 and enter into force from 2020 onwards.

We have seen these mass spectacles for the last 20 years without measurable progress and the climate change accelerating rather than slowing down. Heads of government have to make climate-friendly energy policy their top priority. Otherwise future generations will have serious reasons to reproach them with utter irresponsibility.

Eberhard Rhein, Brussels, 21/10/2013


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