Curbing global emissions: The 'what' is obvious, the 'how' isn't

Warren Fernandez , For the Straits Times 24 Nov 09;

BIG screen television sets are likely to see some action in the battle to boost energy efficiency. California has just passed laws that will require new TV sets to use one-third less energy by 2011, and half as much by 2013.

This is a sequel of sorts to the stringent standards for refrigerators imposed by the state in the 1970s. Manufacturers moaned then that the efficiency gains demanded would put the price of fridges beyond the reach of the average American household. The typical fridge today, however, is 10 per cent larger, costs half as much and uses two-thirds less energy than those in the 1970s.

This story of how governments can prod businesses towards more sustainable products was recounted by United States Commerce Secretary Gary Locke at a business meeting on the sidelines of the Asia-Pacific Economic Cooperation summit earlier this month. This was one of a series of meetings here over the past fortnight when the 3Ses confronting the energy sector - supply, security and sustainability - kept resurfacing, especially during the Singapore International Energy Week, which wrapped up last Friday.

Human wit and ingenuity would ensure a transformation in the energy sector, Mr Locke argued, provided it was backed with the necessary political will. Energy industry guru Daniel Yergin, delivering the Singapore Energy Lecture on Monday last week, shared this sentiment.

'This intense push for innovation is driven by two powerful forces - the quest for clean energy and the need to provide energy for economic growth,' said Dr Yergin, chairman of Cambridge Energy Research Associates.

Indeed, sheer need would demand it. By 2050, world energy demand is expected to double. Supplies of easy-to-access energy would struggle to keep up with this demand.

The environmental implications of this surging demand were framed starkly last week with the launch of the International Energy Agency's 2009 World Energy Outlook. The report calls for urgent action to limit greenhouse gas emissions to levels spelt out in the Asian Development Bank's (ADB) 450 scenario, which aims to stabilise the concentration of carbon dioxide in the atmosphere to 450 parts per million. This would limit to 50 per cent the likelihood of global temperatures rising beyond 2 deg C above pre-industrial levels, which most scientists accept as the threshold beyond which it is unsafe to venture.

Such deep emission cuts would call for big gains in energy efficiency and technological innovation. According to the ADB, investments of US$10.5 trillion (S$14.5 trillion) will be required by 2030, with energy efficiency contributing over half of the carbon dioxide (CO2) abatement. Further reductions could come from the use of renewable energy sources and carbon capture and storage.

Energy efficiency, the ADB has declared, is the 'win-win' option in tackling climate change. The Singapore Government has also put energy efficiency at the heart of its blueprint to promote sustainable development.

A McKinsey report, which Shell supported, found that the US could cut its energy usage by a quarter by 2020 through efficiency gains. It dubbed energy efficiency the 'low hanging' fruit of carbon abatement measures. US Energy Secretary Steven Chu has taken this further, saying this was not just 'low hanging' fruit, but ones that had already fallen to the ground.

So the critical question that arises is how to ensure that these efficiency gains are tapped in a timely fashion. A panel discussion on the issue that I chaired last Thursday noted that doing so was often hampered by a lack of capital, low risk appetites and long pay-off times for such gains to be enjoyed.

Touching on this theme at the Shell-ESI Energy Dialogue, organised jointly with the Energy Studies Institute, Shell executive vice-president for global business to business Tan Chong Meng cited several technologies, products and services developed by the company to help customers 'get the most out of every drop' and boost the efficiency of their energy use. These included Shell Thiocrete, a concrete substitute which can be mixed at lower temperatures, thereby cutting emissions, and without using up scarce water supplies.

But as several participants noted, the benefits of such new technologies and processes were not immediate - they often accrue to someone or somewhere else or at some time down the road. To help unlock the value from energy efficiencies and green products and technologies, some form of carbon pricing would have to be introduced, suggested the ESI's Principal Fellow, Dr Michael Quah.

How best to do so was a subject of much debate at various sessions over the week. Some speakers, such as ExxonMobil's chairman and chief executive officer Rex Tillerson, called for a carbon tax, saying this would give companies greater certainty over carbon pricing.

Others took a different view. Economist Amanda McCluskey from Colonial First State Global Asset Management, as well as Shell's senior climate change adviser David Hone, argued that a cap-and- trade system offered the best way to price carbon at the lowest cost to societies. It gave companies a strong incentive to adopt the cheapest CO2 abatement solutions and to innovate.

Singaporean participants at these sessions might have felt a sense of deja vu. After all, parallels of both measures have been tried in this country to curb growth in the vehicle population. A system of road taxes and registration surcharges failed to check the surge in car numbers in the 1980s, prompting the introduction of a vehicle quota system, with a limited number of certificates of entitlement for car ownership sold on the market.

This, in effect, was an early version of a cap-and-trade system. It put a lid on rising vehicle numbers in the 1990s and helped keep the roads relatively free flowing. Similarly, a network of state and national cap-and-trade systems on C02 will help the world put limits on emissions and check the rise in global temperatures.

While a broad consensus appears to be emerging on what needs to be done in Copenhagen and beyond, the how remains a challenge. Governments, businesses, consumers and communities will have to play their parts if the 'low hanging' fruit that everyone seems to be eyeing are not left to wither on the branches, or fall by the wayside.

The writer, the former deputy editor of The Straits Times, is regional director (Asia Pacific) of Shell's global communications network and a member of the board of the Energy Studies Institute.