Jay Chittooran is a research associate at the Council on Foreign Relations. A version of this article appeared on Il Politecnico and in print form in La Repubblica.
Energy is a primary issue in today’s global economy. Not only is this the case because of the need to quite literally fuel continued economic growth, but also because access to energy is the ace in the hole in a geopolitical map that is rife with potential conflict.
The developed economies currently consume 5527.7 million tonnes of oil equivalent (mtoe) — the world demand is 12274.6 mtoe — and U.S. energy demand is 2269.3 mtoe, or nearly 19 percent of the world total. Global energy consumption has increased by about 30 percent over the past ten years and is estimated to increase at that same rate to 2035.
With the volatile energy prices and the ever increasing threat of climate change, energy discussions that previously focused primarily on crude oil have shifted theme. Now, these same conversations are on promoting efficiency in developed and developing countries, which includes engendering a commitment to renewable energy sources.
New government policies are being created with the end-goal of maximizing efficiency by promoting technological investment and more thorough resource development. Governments at the international, state, and local level are taking action to produce laws inspired by efficient energy practices. For instance, minimum energy efficiency standards and efficiency labeling programs are in place in almost all countries as are tax credits for energy efficient programs. Many countries, including Austria, Tunisia, and the United Kingdom, also have taxes on inefficient cars and appliances. Even American energy companies are committing to diversification. In conversations with senior leadership at a major American power company, this company, as well as other large power and utility companies, are looking for more clean and efficient methods of power generation.
In developed countries, primary energy demand is on a downward trend. Specifically, the United States is consuming far less, but their practices are becoming more energy intensive. That is, the United States is following more energy efficient practices. For instance, vehicles, as mandated by laws passed in 2007 and in 2009, are becoming more efficient, which in itself has spurred job growth, automotive industry growth.
Emerging countries are also getting into the mix. In recent years, China has committed the most to clean energy investment and will continue to do so in the coming years. Specifically, China has made huge commitments to wind power, electric vehicles, and clean carbon technology. At the same time, China has actively increased access to energy sources. This summer, CNOOC and Sinopec, both Chinese-owned energy companies, bought Nexen outright and purchased a large minority stake in Talisman Energy, respectively, which will give China more access to energy supplies.
Other emerging markets are also investing in clean energy practices. India has recently launched the National Solar Mission, a thirty-year, $19.25 billion project aimed at increasing Indian solar energy capacity to 20 gigawatts by 2022. India is also investing heavily in wind power and is home to internationally competitive wind turbine exporters. Brazil is also taking action, committing action in the biofuels area.
But this doesn’t exactly mean that China, India, Brazil, or any other country is a leg-up of the United States. Why should the developed countries not worry about these emerging countries? While some are worried, the United States stands in a better position than all other countries.
The emerging markets energy demand remains high, and this will remain true as each country advances through the industrialization process — where it is commonplace to use more energy. These countries’ manufacturing sector still relies very heavily on dirty energy sources, most of which are being imported. And those that are being produced domestically are being done so in is less than efficient manners. At the same time, the developed economies are grounded in the service sector, a far less energy intensive sector, and thus, is more conducive to cleaner and more sustainable energy sources.
The U.S. government can simply support clean energy technology by creating such policies that incentivize the use of low-carbon technology and renewable energy sources, lower the costs of these practices, and then accelerate additional innovation going forward. Further, the United States is able to encourage investment by creating governmental policies that can show domestic companies how attractive this is. The lack of openness and transparency, troubles within the business community (i.e., little to no intellectual property rights protection), and vacillating governmental support make China, Brazil, and India poor options to challenge the United States in this regard. Because of these problems in these emerging countries, no company would want to develop there, which makes the United States, which has everything it needs in spades, an easy choice.
Additionally, it must be noted that the United States is in quite an enviable position. While investments are made in the clean energy side, the United States can rely on its massive natural resource wealth. The United States has over 5.3 billion barrels of available crude, a ridiculous amount of natural gas, and the space and appetite for solar and wind with a growing gung ho nature about these clean sources, places the United States in a dream situation.
To win the future, to take the Obama administration’s favorite saying, there must be sustained commitment to technologies, new energy sources, and governmental practices that encourage and elicit innovation. If we don’t do this, then we’ll face a crisis bigger than anything ever.