ENERGY AND CLIMATE IN A TIME OF CRISIS: CUTTING DEMAND, IMPROVING SUPPLY, AND REDUCING CARBON EMISSIONS

(Published in a cross party pamphlet by several MEPs from different parties, to be presented on February 4th in Strasbourg)


Introduction

To deal successfully with climate change and with the energy crunch at the same time we need some challenging economic, regulatory and fiscal changes. This, however, is the challenge of our times.

Without overcoming the present, all-encompassing and superficial "green" thinking meeting that challenge will be impossible. Business as usual with just a few technical adjustments, some eco-marketing and an occasional solar panel is merely a recipe for further trouble. But we must be clear that there is no pure technological fix: there is no magic wand nor single invention that will help us confront the twin headed energy-climate monster.

In order to make progress we need to be prepared for serious social conflict and political controversy.

We need a complex mix of government policies, regulations, research funding and tax incentives, creating a system for innovating, generating, and deploying clean energy, efficiency, and productivity. Further, we desperately need an ethic of conservation and a new culture of sufficiency that calls into question many of the basic premises of our contemporary societies. We must learn that conservation is not necessarily the opposite of consumption. In order to consume more, we must conserve more.

The Economic Downturn: Eco-friend or Eco-foe?

To start with it would seem that the economic crisis has come to our rescue by sinking oil prices and reducing CO2 emissions. In 2008 world CO2 emissions will retreat by around 3%: the economic depression of the 30´s made emissions go down 35%. By cutting energy demand, the present recession may mean that many countries therefore have an easier time in meeting their Kyoto targets. But of course this ignores much of the South (and part of the North) that suffers energy poverty and totally overlooks the need for structural changes in our way of producing and consuming energy – and we need to address these things in order to be prepared for the next economic upswing. What the energy crunch does tell us is that our climate crisis is intimately entwined with our insatiable consumption patterns, the very force that until now has been the cornerstone of economic growth. We urgently need a way out of this destructive logic and into a "sustainable physical de-growth" that is compatible with a vibrant economy.

According to some voices the fight against climate change should be set aside until our economy improves. This is totally mistaken and utterly counterproductive. On the contrary, at the centre of our very response to the economic crisis should be a "green new deal" that regulates and channels public and private funding into clean development and industrial reconversion. Millions of new jobs can come from the green restoration of homes, from the building of public transport, from the massive extension of intelligent electricity grids and the retrofitting of our dirty and inefficient industrial base.

Tackling our energy-climate crisis is also about injecting our economy with real innovation, goods and services. By contrast, today’s economy has plunged into crisis thanks, in part, to financial speculation while simultaneously over-heating the climate. Junk loans have created literal junk by fuelling spending beyond real means, and toxic banks have funded toxic gases by promoting risky over-consumption that was not backed up by real spending power. Reorienting our economy to become carbon-conscious implies financial regulation that restricts irresponsible spending and fiscal policies that internalise hidden environmental costs.

A Carbon Tax: Funding the Affordable Alternative

In recent months many have been overjoyed at the news of oil prices plummeting in face of dwindling demand. Nevertheless, for renewable sources and energy efficiency measures to attract massive investment and really take off, we need a price floor on oil that will guarantee a degree of stability for investments in the alternatives. We cannot allow the price context for renewable energy to be constantly fluctuating on the unstable market price of oil. When oil goes under a certain price – say $100 a barrel - a special floating climate tax, on an EU level, should be levied. This would prevent the price of oil from falling further and provide badly needed public revenue for supporting economic recuperation for a post-carbon, and post-recession society in Europe.

This could also be a way of solving the EU´s lack of financial autonomy, providing no-strings-attached revenue and liberating it from the constant renegotiation of financial perspectives with member states. The proposal for a universal carbon tax has been supported by many of the world’s leading economists and the United Nations. It would be a way of helping the South make the jump to clean technologies and, additionally, it could provide financing for reaching agreed Millennium goals.

Beware of False “Friends”

We should also be cautious towards some possible false and bothersome "friends" of the climate-energy fix. Nuclear, agrofuels and carbon capture are three of them.

Nuclear: A massive switch to nuclear power would take all our investment and innovation power to build hundreds of new nuclear plants which would lead us to economic ruin and perpetuate a highly-centralised and dangerous source of energy that has simply too many problems and risks attached to merit our real consideration. The nuclear option is even less viable in the context of the economic recession due to their upfront costs and their capital-intensive, labour-poor nature when compared with other sources of energy.

Agrofuels for transport: This is the last resort to save the conventional internal combustion engine on the part of car manufacturers that are in deep trouble. Hybrid and electric cars hold out much more promise for reducing C02 emissions, taken alongside tax measures levied on high-carbon cars and the strong promotion of public transport. According to most studies many agrofuels make little or no dent in reducing climate change gases but, at the same time, can have very negative impacts on forests, farmlands and food prices.

Carbon capture and storage: Our present coal power plants must be modified to become much cleaner than they are at present. However, the promise of the still immature CCS technology is being used as a catch-all marketing spin to fool people into more and more coal power plants and irrational mining operations. Serious risks and technical problems remain. CCS might work - both environmentally and financially - but it will be ten years at least before we know for sure.

Demand and Supply: a Smart and Efficient Grid, Smart and Efficient Homes

One of our biggest challenges is distributing our electricity in an efficient and intelligent manner. Most of our present regulators and power utility operators follow a perverse and inefficient system. Currently, the more energy they sell the better. More power lines and power plants built means more clients signed up and more energy consumed. More investment is the result of greater consumption and there is little incentive for energy conservation. As the over-supply of energy mounts, so too do the profits.

For example, Spain produces around triple the amount of average energy consumed each year. They produce to serve peak demand of consumers instead of orienting demand to the times of peak production. It is generally a lineal, one way process on the grid. There is practically no feed back: there is very little energy contribution from consumers and practically no information on the energy consumption patterns of the consumer flowing back to the regulators. There are real advantages to saving, efficiency and renewable energy production, but maximising these is impossible when almost no economic dialogue exists between consumers and providers.

We desperately need a "decoupling" of consumption from the profits of energy suppliers. Energy auditors under EU or national guidance could establish compensation funds for achieving efficiency and savings for consumers. They should subsidise change in appliances, climatisers and light fixtures. It should be noted that the cost of generating each new kilowatt of electricity is more than five times that of saving one.

Especially important is the great void that exists in the integration of information technology and our daily energy system. Information technology and electricity convergence could reduce energy consumption radically in the building sector, which represents 40% of our current electricity consumption. IT could match electricity needs with the time when the energy is available. Why shouldn’t a washing machine or other appliances be programmed to work at off-peak hours when there is surplus production and supply of electricity? And why can’t we make alter the supply and demand pattern of electricity by using IT to create a modulated pricing system? Wouldn’t these ideas greatly reduce CO2 emissions and eliminate the need for hundreds of new power stations at a stroke?

Our homes can be the centre of our fight against climate change. The global production of cement produces around as much CO2 as all the passenger cars in the world. The standards for building homes (materials, energy efficiency, life-cycle analysis) should be as important as the CO2 emissions of cars. Too many of our buildings are enormous energy consumers when they could be net energy producers. This demands a clear tax structure to promote new bioclimatic designs, a new materials economy low in carbon, and an intelligent and informed exchange of electricity between homes and the grid.

The Firm Hand of the Law

Laws and regulations are primordial. For example, each Californian produces half the emissions as his or her fellow American, but this is not due to the triumph of personal choices. It is down to policies on CO2 emissions from cars, efficiency norms on appliances, and similar restrictions on machines. This has meant billions in savings and has had a positive effect on the economy.

Closer to home the difficulties of pushing a rational climate policy is becoming evident. The tremendous campaign against stricter car emission standards in the EU – waged by car manufacturers and some member states - has been successful in markedly weakening the EU Directive. This sad development is simply a reflection of the lack of political will on the part European politicians to take the energy-climate crisis seriously. At the time of writing the EU Council has just backtracked and watered-down key elements of the whole EU climate-energy package that must guide us toward the 2020 objective of a 20-30% reduction in CO2 emissions.

Conclusion: Looking Inward and Outward

Both within Europe and outside it, there exists a myth that the path to progress requires the right to pollute: we need to end that idea and create a sustainable future. That means action in our own backyard, but coupled with strengthened ties to the South of us, especially within the Mediterranean region, and embarking on clean energy integration and technology transfer projects that create common purpose and economic viability. It is possible to save the economy and the planet at the same time if we have the courage to propose a reorientation of our economy towards crucial environmental and social objectives. Determination, innovation, and legislation: we will need them all to make the progress that must be achieved.