Article by Mr. Peter Voser, Chief Executive of Royal Dutch Shell plc
We are seeing early signs of a far-reaching shift in our world’s energy system. Desire for secure energy supplies and concern over global warming have consumers, companies and governments embarking on a long journey toward a more sustainable energy future.
Government policymakers are currently in the best position to accelerate our trip. Starting with the climate change summit in Copenhagen this month, they will largely determine whether society steps on the throttle, or idles along at the current speed.
Building a new energy future will take huge effort. But it will be a boon for consumers, thanks to a great proliferation of energy types, from cleaner fossil fuels to renewables such as biofuels, wind and solar, to nuclear and hydrogen. Everything from cars to fridges will be much more efficient than what we know today.
Some people hope that future can arrive as fast as the next big hit in consumer electronics. That’s unrealistic. Over the past century each new energy technology, once it was proven, has taken about 25-30 years to grow to providing 1% of the world’s energy. Biofuels are just now reaching that mark. Wind could be there by 2015, 25 years after the world’s first big wind parks went up in Denmark and the USA.
It simply takes time to build the industrial and people capacity needed to produce energy on a massive scale. And to learn by doing. Today’s largest wind turbines have nearly 100 times the generating capacity of the ones available in the mid-1980s.
Society’s great hope for accelerating the pace of change lies with aggressive government policies, incentives and financial support for new energy technologies – from the lab all the way through commercial deployment. Indeed, every major new energy source since coal and oil has flowered thanks to extensive government support and a regulatory framework conducive to private investment.
This isn’t about government handouts to business. It’s about spurring innovation and encouraging companies to invest in technologies that can help reduce emissions, but are still far from able to make money.
Support must be tailored to individual technologies, depending on their stage of development. Take the promising technology to capture carbon dioxide emissions from power plants and other industrial facilities and store it safely underground. The know-how exists, but remains to be proven in practice. Governments in Europe, the USA, Canada and Australia have pledged more than $20 billion to support some two dozen pilot projects with the hope of having at least 10 running by around 2015.
In the longer term, the main factor encouraging deployment of low-carbon technologies will be a price on emitting carbon dioxide. The most effective pricing mechanism is a system that caps CO2 emissions and allows companies to trade emission allowances, as the European Trading Scheme already does.
However, when carbon markets like Europe’s are still young, they may not produce a carbon price high enough to prime the technology pump. Governments may need to intervene in early years with policies that give additional support to a range of technologies. For instance, Europe has already done so for pioneering carbon capture and storage projects by offering them bonus emission allowances to sell.
Companies are already taking important steps toward a more sustainable future. They are improving the efficiency of facilities and reducing emissions. For instance, Shell chemical plants are nearly 8% more energy efficient than they were in 2001. And we are providing energy-saving advice and products to our customers.
We are also raising production of cleaner-burning natural gas. When used to generate electricity, natural gas emits 50% less CO2 than coal. It can help build a bridge to a future when renewable energy comes of age. By 2012 more than half Shell’s production will be natural gas.
In Copenhagen governments can lay the foundations of a global policy framework that would help the world move toward a more sustainable energy future. That’s a tall order, given divergent views. But the world needs, and deserves, real progress toward a final deal with binding commitments for emission reductions and funding to help developing nations do their part.
With government’s lead, society can jump-start the development of new technologies with potential to reduce greenhouse gas emissions. Let’s get going. ###
* First printed in the UK Times on December 5, 2009
