Saturday, January 26, 2008

Energy Futures: The Scramble and the Blueprints

Shell Energy Futures: The Scramble and the Blueprints

A recent letter from the CEO of Shell, Jeroen van der Veer, to the company's employees, reproduced at TOD January 25, notes the challenges coming in the future of energy, particularly the two-pronged dilemma: supply and demand, on the one hand, and carbon dioxide emissions, on the other. How is Shell, and indeed the world, going to proceed in the face of these challenges? What are the options for action? Van der Veer paints a picture of two models for the future, which he calls “Scramble” and “Blueprints”.

"In the Scramble scenario, nations rush to secure energy resources for themselves, fearing that energy security is a zero-sum game, with clear winners and losers. The use of local coal and homegrown biofuels increases fast.

Taking the path of least resistance, policymakers pay little attention to curbing energy consumption - until supplies run short. Likewise, despite much rhetoric, greenhouse gas emissions are not seriously addressed until major shocks trigger political reactions. Since these responses are overdue, they are severe and lead to energy price spikes and volatility.

The other route to the future is less painful, even if the start is more disorderly. This Blueprints scenario sees numerous coalitions emerging to take on the challenges of economic development, energy security and environmental pollution through cross-border cooperation.

Much innovation occurs at the local level, as major cities develop links with industry to reduce local emissions. National governments introduce efficiency standards, taxes and other policy instruments to improve the environmental performance of buildings, vehicles and transport fuels.

As calls for harmonization increase, policies converge across the globe….

The world faces a long voyage before it reaches a low-carbon energy system. Companies can suggest possible routes to get there, but governments are in the driving seat. And governments will determine whether we should prepare for a bitter competition or a true team effort."

Hard-nosed realism meets enlightened liberalism, surely: “bitter competition or a true team effort”. As any student of international relations knows, these two scenarios do not cover the range of options for analyzing the situation. Yet they do point to two distinct policy directions, which themselves suggest two quite different futures for global politics. Does peak oil portend a period of resource wars and muddling through, or an era of cooperation in the common interest?

Surely, the future reality is likely to be somewhere between these extremes. Regional energy agreements will generally be easier to construct, and more effective, than global ones. This does not necessarily bode well for world peace, of course. And there is no doubt that even within cooperative arrangements, competition is a fact of politics, and will be a fundamental element of whatever cooperative arrangements are made.

In the interests of opening this up a bit, this blog site will begin a list of nodes for “Energy: The Prospects for Cooperation”. Rather than trying to distinguish regional from global agreements, the entries will indicate the number of states that are party to the agreements.

One intergovernmental agreement worth checking out is the Energy Charter Treaty ( The ECT seeks to regulate investment and supply issues in the field of energy, with a nod to environmental concerns, especially via efforts to improve “efficiency”. It currently has 52 signatories (EC + 51), and entered into force in 1998. A review was conducted in 2004.

As the ECT Secretary General, André Mernier, noted in a recent speech (Nov 2007):

“With increasing reliance upon internationally traded energy, the rules and disciplines that apply to energy trade are of great strategic significance. Considerations of security of supply/demand and need of investment require predictability and transparency that could be achieved most effectively through a multilateral legal framework. At the same time energy markets and trade are constantly evolving, so it is a real challenge to negotiate multilateral rules for trade in energy.”

As indicated in this speech, the ECT has a working relationship with another group, a London-based “NGO” by the name of the World Energy Council. The WEC has member committees in 94 countries of the world. The mandate of WEC is 'To promote the sustainable supply and use of energy for the greatest benefit of all people'. They have conducted a regular “Survey of Energy Resources” since 1934, which they claim is “the prime global compilation of energy resources and reserves… Other compilers of energy statistics, such as the United Nations and the International Energy Agency, rely on this WEC data.”

We’ll be looking into this further… but my daughter is due to wake up any second…

1 comment:

pkoilpirate said...

Though, as was mentioned, the two alternatives represent but polarized positions in the face of such a task, there can be little doubt that the blueprint scenario appears as the increasingly enlightened approach and certainly the one that holds the most potential for progressive and inclusive responses to the looming oil shortage. However, the overwhelming question it gives rise to, in my opinion, is the question of where the impetus for the "emergence" of such coalitions (who address the requisite innovation etc.) is likely to come from. The most compelling feature of the Scramble scenario, from a practical perspective, emerges from the fact that there isn't likely to be any great political imperative for action until the effects (of the shortage) on the average consumer-citizen are great enough to warrant one. Perhaps a valuable question in this regard is whether the exists a way to foster a sufficient degree of political pressure that might get a head-start on practical responses to the problem before the absolute necessity to do so, and ensuing scramble begins.