Clean energy: Pressure on Asia will grow

Michael Richardson, Straits Times 12 Nov 08;

UNITED States President-elect Barack Obama is coming to power on a torrent of promises and high expectations.

Yet as recession bites deeper in the world's biggest economy, investment slumps, jobs are lost, and tax revenues fall, the US budget deficit is growing ever larger. It is expected to more than double next year to around US$1 trillion (S$1.5 trillion).

Will Mr Obama be able to deliver on his expensive campaign promises or will he have to phase them in? The outline of his priorities that has emerged in recent days is important for Asia.

His top priority, of course, will be an economic recovery programme. But he has also said the US cannot afford to wait on moving forward on other key priorities, 'including clean energy, health care, education and tax relief for middle-class families'.

Clean energy means reducing US dependence on oil and boosting renewable energy. With less than 5 per cent of the world's population, the US consumes about 25 per cent of the world's oil.

Recent high prices for oil, followed by the economic crisis, have reduced oil use in America. If the Obama programme is successful, there may be less US demand for the commodity when global growth resumes, keeping the price lower for Asian oil importers.

But that will accentuate the increasingly prominent role of big emerging economies in general, and those in Asia in particular, as sources of global warming gases. These come chiefly from burning fossil fuels, and from clearing forests for farming. Recent studies have concluded that China has overtaken the US as the largest emitter of carbon dioxide, the main greenhouse gas. If the US re-engages constructively in international negotiations on climate change, as Mr Obama has promised, the pressure will grow on all countries, not just developed economies, to control their emissions.

Alone among advanced economies, the Bush administration had refused to ratify the Kyoto Protocol to limit greenhouse gases, arguing that it would hurt the US economy and that it unfairly excluded big developing country emitters such as China and India. Now that a successor treaty is being negotiated to replace Kyoto when it expires in 2012, US participation is seen as key to a comprehensive global deal.

But what will the US undertake to do and what will it expect from its negotiating partners? Mr Obama says he wants to bring in a market-based cap-and-trade system to cut carbon emissions by the amount scientists say is necessary to prevent potentially catastrophic climate change: 80 per cent below 1990 levels by 2050. He also says his administration will establish strong annual reduction targets in the US and implement a programme to bring emissions back to 1990 levels by 2020.

To build a clean energy future, he says, his administration will invest US$150 billion to expand wind, solar, geothermal and other renewable power in the 10 years from 2009. The aim is to create five million new 'green' jobs and require 25 per cent of US electricity to come from renewable sources by 2025, while promoting energy efficiency and conservation.

To try to hasten an international consensus on how to combat climate change and share the costs, Mr Obama says he will create a global energy forum of the largest greenhouse gas emitters, consisting of the Group of Eight countries plus Brazil, China, Mexico and South Africa.

Mr Jason Grumet, the President- elect's energy and climate change adviser, explained last month that the US had to 'move quickly domestically so we can get back in the game internationally. We cannot have a meaningful impact on the international discussion until we develop a meaningful domestic consensus'.

However, putting a price on greenhouse gas emissions and making polluting companies pay would add costs to the economy and is likely to be unpopular. While renewable power may one day compete with coal, gas and nuclear power, it is currently more costly and less reliable.

Meanwhile, China and other developing countries expect substantial aid from the developed world if they are to curb emissions without sacrificing economic growth.

At a conference in Beijing last weekend, Chinese officials said wealthy nations should divert up to 1 per cent of their gross domestic product to pay for clean technology transfers and help the Third World cope with damage caused by climate change. This would amount to about US$284 billion a year if member countries of the Organisation for Economic Cooperation and Development paid up, based on the size of their economies last year.

As always, the devil is in the details.

The writer is an energy and security specialist at the Institute of Southeast Asian Studies.