It is generally accepted that any long-term energy policy must address three principal factors: security and reliability of supply; market competition; and the environment. Since the turn of the year the world’s largest economies, the US and the European Union, have both outlined their long-term energy policies. Both have focussed on the issues of security and reliability of supply, and market competition, but have been vague on correlating the impact on the environment within these policy outlines. The fundamental difference between the US and EU is that the US policy is being presented as a strategy to redress an impending energy crisis while the EU strategy makes no such assumptions.
Last month the new US administration forced the environment issue into the spotlight by announcing that it would not ratify the 1997 Kyoto Protocol. While the comments of president Bush are seen at best as insensitive and at worse potentially damaging, it has served the valuable service of pushing the environment into the public domain in a way that has not happened before. Now that it is in the public domain it needs to be debated maturely.
The response to Bush’s comments from European nations has been nothing short of damaging, both to the environment itself and the relations between the United States and the rest of the world. But to suggest, as some commentators have, that this date will be forever etched in history as the beginning of the end of the environment is pure hysteria. Now that the environment is firmly in the spotlight we should encourage proactive debate not reactive rhetoric.
It is worth pointing out that although Europe is aghast at the actions of the US it has yet to get its own house in order. European nations have yet to ratify Kyoto or introduce carbon dioxide emissions reductions programmes. The US, by comparison, has developed carbon dioxide emissions trading programmes and is the leading innovator in emission trading schemes.
The issue addressed by Bush is an important one. His rationale is that any carbon dioxide caps will cause economic harm to the US economy. As the US produces 25 per cent of the world’s GDP he has a valid point. But the United States also produces 25 per cent of carbon dioxide emissions and his argument that the US will not ratify Kyoto until other more populous states, such as India and China, make similar commitments is rather hollow and partly arrogant.
Although recent forecasts suggest that the carbon dioxide emissions of developing economies will increase disproportionately to those of the United States it is important that the more industrialised nations (US, Europe) play an active role in setting a positive example on emission reduction. To do otherwise sends the wrong message. The United States has to appreciate it is held as an economic role model and must act accordingly.
The contention of the US that it faces an energy crisis, which will be exacerbated by carbon dioxide caps on generating plant is misleading. The only “energy crisis” in the US is the California electricity crisis. It is accepted that there is a risk of the California syndrome permeating throughout the US, but it cannot be construed as a national energy crisis.
What is undeniable though is that any carbon dioxide caps will be detrimental to both oil and coal companies. The US generation market is dominated by coal-fired generation and the major financial backers of the Bush presidential campaign were these very same oil and coal companies. Bush’s actions are therefore seen as being political. Having secured election on a questionable vote he now appears only interested in paving his way to re-election in 2004. In doing so he appears to be focussing on a short-term energy policy without making commitments to the longer-term scenario. The risk is that the US will trade long-term pain for short-term gain.
If the United States does not introduce environmental legislation to combat carbon dioxide emissions it will risk limiting economic incentives to build greener generation plant. The knock-on effect is that it could limit the development of new generation plant, which could exacerbate the gulf between available generation capacity and the strong growth in US electricity demand. It is worth remembering that the California electricity crisis was due solely to the lack of generation capacity. The irony was that this shortfall was due to California, the most environmentally conscious state in the US, refusing to build new generation plant on the grounds of the environment.
The creation and sustaining of energy security and reliability of supply is best achieved through the development of a diverse and balanced energy supply market.
In terms of the generation market this means reducing the reliance on coal and increasing the proportion of gas, nuclear and renewable energy sources. And one approach to incentivise this energy diversity is to limit carbon dioxide emissions from less environmentally friendly generation plant and encourage these generation companies to invest in alternative generation energy sources. To do so not only improves security, reliability and the environment. It also enhances market competition and thereby satisfies the key principal criteria for a long-term energy policy.
Generation is one of the primary sources of carbon dioxide emissions. The consensus of scientists is that carbon dioxide emissions directly contribute to global warming, the results of which include raised water levels. With parts of Florida, which was pivotal in electing the Bush administration, susceptible to increased water levels it would be ironic if Bush’s intransigence on carbon dioxide emissions ultimately resulted in parts of Florida being consumed by rising water levels.
