Program

Energy around the Globe

Cover story, Centerpoint, February 2008

Feb 04, 2008

Policymakers across the globe confront the challenges of balancing energy, economic, and environmental interests. The cost, availability, and sustainability of energy resonate on every level, from nation to industry to individual.

Numerous Wilson Center programs have given serious consideration to this topic, exploring energy demand, the rising cost of fuel, environmental factors, alternative energy sources, and the regulatory role of government. Among them, the Kennan Institute, Canada Institute, and China Environment Forum have hosted meetings assessing energy trends in their regions. In addition, the Brazil Institute recently compiled an online resource for information concerning biofuels.

Working in conjunction with these and other Center programs is the Global Energy Initiative (GEI), which explores current and future prospects for energy security and sustainability through conservation as well as new and alternative energy strategies. Board of Trustees member Sander Gerber has been instrumental in founding and guiding this effort, which is directed within the Center by Kent Hughes, director of the Program on Science, Technology, America, and the Global Economy. In recent months, the GEI has partnered with Center programs on seminars that discussed energy realities and concerns in Canada, the United States, China, and Russia.

Canada and the United States
At the Canada Institute's eighth Cross-Border Energy Forum, with support from Chevron, more than 40 Canadian and U.S. government officials, industry representatives, and energy experts discussed issues facing North American policymakers and consumers. This event took place in San Francisco in collaboration with the Canadian Centre for Energy Information, Global Public Affairs, and the Canadian Consulate General in San Francisco.

"The era of easy access to energy is over," said Rhonda Zygocki, Chevron's vice president of policy, government, and public affairs. Drawing on conclusions of the National Petroleum Council's 2007 report, "Facing the Hard Truths about Energy," Zygocki said an expected increase in resource nationalism and escalating costs of producing oil and gas highlight the pressing need to find practical solutions to energy issues. She agreed with the report's findings: promoting energy conservation, finding new supplies of fossil fuels, and developing alternative energy sources will be crucial to meeting future energy demands.

In 2007, the United States imported the bulk of its crude oil and natural gas from Canada. Fossil fuels will continue to dominate the energy market for the foreseeable future. In fact, oil, coal, and natural gas are projected to provide 85 percent of global energy needs by 2025, a figure very close to today's energy mix. Producing enough alternative fuels to make a significant impact in North America, said Zygocki, will take a long time to develop, and such alternative sources would be used in conjunction with, not as a replacement for, traditional sources of energy.

While asserting that solving energy issues requires "a national framework with national policies," Zygocki acknowledged California as a leading model of energy efficiency. Dan Skopec, president of Climate and Energy Consulting, also praised California's government for using a mix of direct command and control regulations, market-oriented approaches to introduce performance standards, and strong incentives to spur research and for industry to use environmentally sound production methods.

Canada, at the national level, is working to reduce carbon emissions on research and development projects, such as clean coal and carbon capture and storage. Kristi Varangu, chief of international energy relations at Natural Resources Canada, highlighted Canada's $2 billion investment in eco-friendly initiatives. Such initiatives as well as Canada's recently announced regulatory framework that sets national emissions limits for large industries are at the core of the Canadian government's plan to reduce carbon emissions by 20 percent by 2020.

Clearly, there will be economic tradeoffs toward improving energy efficiency in environmentally sound ways. Jane Long, associate director at large at the Lawrence Livermore National Laboratory, suggested constituents in the energy, economic, and environmental sectors find approaches that benefit all three. She said one such example is developing renewable energy, which spurs economic development by creating new companies, promotes energy security by reducing the need to import fossil fuels, and satisfies the environmental community by developing energy sources that do not produce carbon emissions.

China
Perhaps the two biggest energy stories out of China last year were its surpassing the United States on greenhouse gas emissions and its failure to achieve its 2006 energy efficiency targets. Less often reported are examples of how China's serious air pollution has spurred major initiatives from the central and provincial governments, some in partnership with international organizations. Progressive energy laws continue to be promulgated, with the most recent being an Energy Conservation Law. China's top leaders are calling for rapid evolution of legal and regulatory institutions, but questions remain about implementation.

At a December 12 China Environment Forum meeting, Jonathan Sinton, China program manager at the International Energy Agency, presented findings from the IEA's 2007 World Energy Outlook. The report stated that 40 percent of the growth in global energy demand—75 percent of the growth in coal, and 25 percent of the growth in oil—comes from a rapidly industrializing China. Currently, per capita, China's energy consumption is just 11 percent that of U.S. consumers, but this will grow as incomes and car ownership continue to rise. Nevertheless, China's industry, which rates poor on energy efficiency, will remain the country's biggest energy consumer and main source of domestic air pollution.

China is the sixth largest oil consumer in the world. In fact, demand in Asia is expected to double that of North America and the Middle East combined. China will consume 17 million barrels a day more in 2030 than it does today, according to IEA statistics. Meanwhile, China is a leading emitter of carbon. To address this, Sinton recommended the global community focus on China's power generation sector as the coal-fired plants built today will be operational for decades. Such plants are the major source of pollutants threatening domestic health in China.

Robert Taylor, the energy sector leader in the transport unit of the East Asia and Pacific regional office at the World Bank, offered news on some progress. He said China has dedicated billions of Yuan toward promoting energy efficiency and renewable energy, through subsidies to encourage adoption of clean energy technology, investments in energy conservation projects, and campaigns to close high-energy consuming enterprises. Despite these efforts, China will remain heavily dependent on coal to fuel its economic growth for at least the next two decades, which underscores the need for cleaner energy sources to prevent worsening air pollution.

Russia and the region
The Kennan Institute has held numerous meetings on energy during the past year, covering such topics as oil and gas security in Eurasia, Caspian energy politics, Russia's hydrocarbon sector, and nuclear power security.

In the post-Soviet world, domestic societal and political realities shape energy security. As the energy sector in East European and Eurasian countries has become privatized, intermediary companies, such as Lithuania's Dujotekana and Ukraine's RosUkrEnergo, have taken on a larger role in transporting Russian and Central Asian gas to European markets. In many cases, said Margarita Balmaceda, who teaches at Seton Hall University and Harvard, the state has unofficially delegated energy policy to such intermediary companies, which are not transparent, play a vague role in energy transport, and often become sources of corruption and rent-seeking.

Transit countries are the weak link in the European energy infrastructure, Balmaceda said at a December 10 Kennan Institute meeting, and intermediary companies in these countries are the "weak links within the weak links" that discourage the diversification of the energy sector. Furthermore, since 2001, these companies have been used to pursue political goals in addition to profit, she said. The potential profits in Ukraine are much higher than in Lithuania, and therefore those seeking profit and influence pay more attention to Ukraine's energy market. But, she noted, good governance in the energy sector is critical. Greater transparency and accountability in Lithuania has already led to modest reforms.

By detailing energy developments around the world, Wilson Center programs shed light on the interrelationship among economic development, the environment, and international security, giving a nonpartisan perspective to the rapidly evolving geopolitics of energy.