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Energy sustainability and the G20 agenda

By Maria van der Hoeven
Executive Director, International Energy Agency

The 2013 G20 Leader’s Summit will be an important one for international energy issues thanks to institutional, economic, and environmental reasons.

The G20 has been so prominent since 2009 because, in an era of tectonic economic rebalancing toward emerging markets, wider cooperation is necessary to conduct global economic management. Those broad economic shifts are naturally reflected in energy markets as well. Yet even as the G20 membership includes major energy consumers and producers of the new century, shifting patterns in consumption and production further complicate the broader trends.

energy-iea-2The global energy map is not just shifting east – traditional producers like Saudi Arabia are seeing booming demand, while heavily consuming markets such as North America are experiencing production revolutions thanks to new techniques and technologies.

New trading patterns and technological advances also mean new scope for market integration and reform at the international level – creating a common incentive for market stability and investment promotion. Meanwhile, the most complex challenge, mitigating global climate change, looks particularly urgent as decarbonisation of the global energy system stalls, and the effects of climate change become ever more widely apparent. Facing these common economic and environmental challenges will require international energy cooperation at the highest level, as well as strong mandates for international energy governance structures. For all these reasons, energy will ride high at St. Petersburg, where ‘Energy Sustainability’ has a key spot on the agenda.

When it comes to climate change, all eyes are on the next round of multilateral negotiations, set to take place in Paris in 2015. Already this year however, the stalling global effort to mitigate climate change passed a grim milestone, when carbon concentration in the atmosphere topped 400 parts per million. This is uncharted territory in the history of modern humans. In short, we are drifting off-track, and still two years out from negotiations in Paris (where no agreement can be guaranteed).

Amid concerns over global economic pressures, climate change has quite frankly slipped to the back burner of policy priorities. But the problem is not going away – quite the opposite. Now is the time to bring these policy priorities back in line with the scale of the challenge.

Achieving secure and affordable energy supplies across the economy in support of prosperity can present the appearance of a false trade-off with environmental sustainability and climate change goals. The reality is that those challenges can be met simultaneously with policy, technology, and industry working together. Responsible unconventional gas extraction has substantially cut North American carbon emissions while delivering affordable energy to the market, and renewable energy technologies are becoming increasingly competitive. Yet IEA analysis consistently identifies one policy area that stands to contribute the lion’s share of cuts to carbon emissions, reductions in local pollution, and cost-effective energy security – energy efficiency. Simply put, the cleanest megawatt will be the one we never need, and the most secure barrel the one we never burn.

In June, the IEA released a World Energy Outlook Special Report, ‘Redrawing the Energy-Climate Map’. The report examined four critical steps that can be taken before 2020, in the absence of implementation of a multilateral agreement on climate change, to keep the world on track to the 2-degree goal. Even if a deal is finally done in Paris, full implementation will take time. These time-critical measures, which incur zero net economic cost and use proven technologies, can help keep the fast-closing door open to that important international goal. Of the four (which also include limiting the construction of least-efficient coal power plants, minimising methane emissions from upstream oil and gas production, and accelerating the phase out of fossil fuel subsidies), energy efficiency measures accounted for nearly half of all carbon savings. These and other ‘stop-gap’ measures must be considered in the run-up to 2015, and we encourage G20 leaders to do so.

energy-iea-3Sustainability is not only about climate change, however. When it comes to economic questions (including improving the transparency, stability, and integration of markets), leaders at the G20 will be acutely aware that policy discussions are taking place within the context of a fundamentally shifting global energy map. The economic rise of emerging markets like China and India have signalled a global economic rebalancing, including within energy markets. IEA analysis shows growing non-OECD energy demand, particularly in China, to continue over time (despite the recent slow-down among the largest emerging economies). Meanwhile energy demand in Europe and the US is stagnating or falling. Much of the new oil and gas supply is expected from the Americas, and most of the new demand from Asia and the Middle East.
From changing trade and import patterns, to the global economic outlook, to the possibility of technological game-changers, uncertainty will mark the energy policy landscape in St. Petersburg. That is all the more reason for leaders to work to ensure that policy stability, for example with regard to low-carbon investments, is a priority at the national and international level.

The G20 meeting in St. Petersburg will not be the last one at which energy issues take a prominent role. The arc of global economic interdependence, and also the trajectory of energy market and technological advances, point to an ever-more important role for international energy governance. The IEA continues to provide a major focal point for global cooperation on such issues, and the G20 provides a unique platform for heads of state and government to consider them within the context of broader discussions on the global economy. As the future of that economy wavers, and as systemic shifts spread prosperity more widely, taking a global and cooperative approach to international energy issues will be crucial – with implications for international institutions like the IEA and the G20 itself.

 

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