On June 28th 2011, more than 1,600 participants from 91 different countries signed up to join the world’s energy experts in a live interactive discussion on the future of energy organised by the Economist entitled “The Global Energy Conversation”. The discussion was very well organised and provided a full range of social media network facilities. Here is the summary.
Between 1990 and 2010, world energy consumption has increased by 45%, energy consumption in the United States, European Union, India and China has increased by 19%, 5%, 116% and 149%, respectively. The process of economic rebalancing from West to East will potentially create energy supply problems and there is strong tendency that increasing trends in energy prices will continue in the future. What will happen to the world’s energy system and what are the economic implications of the shift in energy demand patterns?
Manu Bhaskaran Director and Chief Executive Officer of Centennial Asia Advisors raised concerns over the simultaneous growth of large economies into an energy-intensive phase at the same time whilst the development of technology to provide renewable energy supply does not seem to keep up with increase in energy demand. Given the raising prices of energy, there is an economic incentive for people to conserve energy.
Demand and supply of energy will match but at much higher real prices of energy (Manu Bhaskaran, Centennial Asia Advisors).
Simon Trace Chief Executive Officer of Practical Action argued that discussion on rebalancing should not only be focused on between West and East but also North and South and problems with access to energy will have impacts on poverty reduction programs in developing countries.
Lord David Howell Minister of State Foreign Commonwealth Office viewed that given such a large incentive to improve efficiency, it is still reasonable to expect a decrease in real prices of energy in the future.
Pierre Noël Senior Research Associate at EPRG Judge Business School University of Cambridge argued that in many large emerging economies, governments keep the energy price low and this prevents ‘the magic’ of the price system from working (ie. increase in efficiency).
As energy prices continue to increase, it is politically more difficult to remove energy subsidies (Pierre Noël, University of Cambridge).
Lin Boqiang Member of Energy Consultation Committee and Director of China Centre of Energy Economics Research at Xianmen University viewed that energy subsidies in countries like China and India are difficult to remove in the short-term because of political and stability reasons.
John Sauven Executive Director Greenpeace emphasised the importance of energy efficiency. He said that the technology is there. The European Union has a good energy efficiency standard and so are the US and China.
Professor Stephen Lincoln School of Chemistry and Physics at The University of Adelaide warned the possibility of mismatch between supply and demand for energy in the future. According to the United Nations by 2050 the world population will be 9.2 bullion, now 7 billion. This will obviously drive energy demand. It is predicted that our energy demand will be doubled by 2050.
On the pessimistic side, it is predicted that current oil reserves will be gone in 46 years and natural gas will be gone in 58 years (Prof Stephen Lincoln, the University of Adelaide).
At the end of the day, there is no other way to deal with energy crisis but to improve efficiency and to find new energy resources. Large emerging economies should consider to gradually remove their energy subsidies. Subsidies are costly.
Indonesia is moving towards the suggested direction. In Indonesia, the share of energy subsidies was cut from 20% in 2005 to 10% of total government expenditure in 2009. Better targeted subsidies could reach sub populations who are at greater risks of poverty than universal energy subsidies. As the panelists suggested, the provision of subsidies remove the existence of economic incentive to improve efficiency.
According to Roesad, Jotzo and Yonnedi (2008), Indonesia has also begun a large power expansion program, based on standard coal-fired plants which are the lowest-cost option.
Yet, many challenges remain. Better coordination mechanisms for climate change policy and financing at the national level and improvements in conditions of carbon-efficient investment climate are some of the aspects that the country still needs to work on (Roesad et. al 2008).
As suggested by Lord David Howell, “low-carbon economies are more secured”.
This article is prepared by Risti Permani.