Q: The ECE has a long history going back to the very beginning of the UN, and it’s known to be a technical body. To what extent has it already dealt with energy questions during its long history?
Energy has always been important for the UNECE. When the Commission was founded in 1947, it took over the European Coal Organisation that had been created urgently towards the end of the Second World War. The ECE was launched as a two-track organisation providing a policy dialogue in the annual Commission sessions and practical work through technical committees. The first practical task of the UNECE Coal Committee was to help alleviate acute post-war coal shortages. East-west energy cooperation expanded thereafter to include work on the production, consumption and trade of coal, electric power and natural gas. Energy security arose as a priority during the 1970s ’energy crisis’ as east-west energy trade and cooperation allowed western consuming countries to diversify their sources of oil and natural gas supplies away from the Middle East. As energy security has risen to the top of the economic agenda again during the last few years, the UNECE Committee on Sustainable Energy has responded with both a forum for an intergovernmental dialogue and practical work through its expert groups and technical assistance projects.
Q: Energy security is not a clearly defined concept. What exactly does the ECE mean by this?
There are a number of key reasons why energy security has emerged again as an overriding economic concern. Since 2003 steeply rising oil import demand in developing countries and the narrowing margin between oil supply and demand have driven up prices. The volatility of oil prices is further aggravated by international tensions, terrorism and potential supply disruptions. Hydrocarbon reserves and resources are abundant globally, but they are concentrated in a few geographic regions some of which are economically vulnerable and unstable. Even developing these reserves in some countries is difficult because of the restricted access of oil and gas companies. While energy-consuming countries seek the security of energy supplies, energy producers seek the security of energy demand to diminish the risks associated with large long-term investments.
Clearly the range, magnitude and complexity of these problems are daunting. Sustainable energy development is just as challenging. Ensuring the environmentally benign use of energy resources and their availability for future generations will not be easy to achieve. But it does offer a positive long-term dimension to the urgent need for secure energy supplies. In fact, a sustainable energy future is most likely to be a consequence of prudent energy security polices pursued today.
Q: Apart from projects working on standards for pipelines, what else do you do in this field?
The Committee on Sustainable Energy is structured to promote international cooperation on exactly these polices and measures:
Energy security, so vital to member countries, has been addressed through the Energy Security Forum that brought together highlevel representatives of the energy industries and the financial sector under the auspices of the Committee. In 2006 the Committee decided to pursue this important matter directly during its annual meetings.
Energy reserves and resources need to be classified and evaluated using a reliable, global common system, such as the United Nations Framework Classification, so as to increase transparency and knowledge on the future availability of fossil energy and mineral resources as well as to better manage these resources over time, which is the subject of much interest and work by one of the expert groups under the Committee.
Energy efficiency can both reduce import dependency for importing countries while freeing up additional resources for export in energy exporting countries. The UNECE Energy Efficiency 21 Project, as well as Regional Advisory Services, provides selffinancing methods for reducing greenhouse gas emissions through energy efficiency improvements that can also reduce import dependencies and alleviate fuel poverty.
Coal, one of the most secure sources of energy, can provide energy security as an indigenous fuel in many ECE countries so long as its production and use can be made environmentally acceptable by introducing clean coal and zero emission technologies. This forms part of the Committee’s work on Cleaner Electricity Production from Coal and Other Fossil Fuels as well as a UN Development Account project.
Coal Mine Methane can enhance energy security by providing opportunities for inter-fuel substitution and indigenous energy production while at the same time reducing emissions of methane to the atmosphere, a potent greenhouse gas. This is one of the newer avenues of work under the Committee that is also supported by a technical assistance project.
Natural Gas, today’s fuel of choice and the so-called transition fuel providing the bridge between the present and a much cleaner, environmentally benign energy future, is an important activity of the Working Party on Gas and the UNECE Gas Centre.
In every important respect, the need for secure and sustainable energy supplies pose problems that will not go away and that probably cannot actually be solved. Member States can only hope to manage them better. However, in order to do this they will need open a new chapter in international energy cooperation.
A New Energy Dialogue At its annual session in November 2006, delegations recommended that the Committee on Sustainable Energy undertake a broadly shared intergovernmental expert dialogue on energy security in one or more of the following areas:
data and information sharing and increased transparency;
infrastructure investment and financing; legal, regulatory and policy framework;
harmonisation of standards;
research, development and deployment of new technologies, and
investment/transit safeguards and burden sharing.
It agreed that enhanced expert dialogues on energy security be conducted during the annual session of the Committee with the participation of representatives of governments, energy industries, financial community and relevant international organisations.
Q: The specialists say that the oil will only last until 2050, unless major new reserves are found, and even then, most of the oil easy to get at has already been extracted. Do you have programmes looking at alternative sources of energy?
Thirty five years ago, the energy crisis was ’supplydriven’ by the OPEC oil embargo. It ended with increased deliveries on the international oil market. Today global energy security risks are ’demanddriven’, having increased sharply because of steeply rising oil import demand largely in developing countries. For example, the United States currently consumes about 21 million barrels of oil per day while China consumes about 8 million. But Chinese oil demand is expected to double by 2015. This would amount to the total current oil output of Saudi Arabia.
Growing energy demand is most unlikely to diminish any time soon. Indeed, global energy needs are expected to increase by more than 50 per cent by 2030 according to the International Energy Agency.
The narrowing margin between oil supply and demand has driven up hydrocarbon prices. The volatility of oil prices is further aggravated by international tensions, terrorism and the potential for supply disruptions. Although hydrocarbon reserves and resources are abundant globally, they are concentrated in a few geographic regions some of which are economically vulnerable and unstable. Even developing these reserves in some countries is difficult because of the restricted access of international oil and gas companies.
During the 1970s ’energy crisis’, east-west energy trade and cooperation allowed western consuming countries to diversify their sources of oil and natural gas supplies away from the Middle East. Today the Russian Federation, Eastern Europe and Central Asia are strategically important energy suppliers and transit countries for Western European energy security. For example, Russian oil and natural gas exports account for 20 per cent or more of the oil and gas consumed in 20 Eastern and Western European countries.
The ECE Committee on Sustainable Energy has responded to this challenge by launching an intergovernmental dialogue between producers and consumers on energy security with practical work through its expert groups and technical assistance projects.
Q: We hear a lot about energy efficiency. What is the Energy Efficiency 21 Project, and what would you like to achieve?
The ECE Energy Efficiency 21 Project promotes the formation of an energy efficiency market in Eastern Europe so that cost-effective investments can provide a self-financing method of reducing global greenhouse gas emissions.
During the last few years, the ECE and other international programmes have demonstrated that it is possible to identify, develop and finance energy efficiency investment projects that reduce greenhouse gas emissions in Eastern Europe. But it has also shown that this is a time consuming and labour intensive process that needs to become much more fluid or business-asusual in order to succeed on any meaningful scale.
The market for energy efficiency projects with a payback period of less than five years is estimated to be between EUR 5 and 10 billion. But the capital investment requirements needed to tap this potential are so large that only commercial sector finance on a significant scale can actually deliver meaningful results. This market will need to provide opportunities for the commercial sector to make large investments with low transaction costs that make adequate returns at acceptable risk within a reasonable period of time.
The ECE energy efficiency market formation activities involve capacity building to develop investment projects, assistance on government policy reforms and opportunities for project finance through externally managed public-private partnership investment funds. One investment fund has already been established and another is under development. The SwissRe European Clean Energy Fund is one of the largest funds for financing environmentally sound energy technology in Europe. It has been successfully raised by SwissRe and Conning Asset Management under a mandate of the Energy Efficiency 21 Project. The EUR 354 million fund provides capital for clean energy projects that reduce greenhouse gas emissions in Central, Eastern and Western Europe. It is now financing energy efficiency and renewable energy investment projects that reduce CO2 emissions and generate carbon credits or tradable certificates.
The SwissRe European Clean Energy Fund offers attractive returns to institutional investors in Europe, Canada and the United States for financing energy efficiency, wind, solar, hydroelectric, geo-thermal projects while providing carbon market services. The ECE is currently assisting in the development and launching of a new investment fund to reduce greenhouse gas emissions in twelve countries in Eastern Europe, Central Asia and South- Eastern Europe. The ’Financing Energy Efficiency Investments for Climate Change Mitigation’ project is supported by the United Nations Foundation (UNF), Fonds Fran?ais pour l’Environnement Mondial (FFEM) and the Global Environmental Facility (GEF). It will launch a publicprivate equity Fund, assist local experts to develop investment projects for financing and work with local authorities on the energy policy reforms to support these investments.
The Eastern European Energy Efficiency Fund will be a Euro denominated public-private partnership Fund with capital commitments from both the public sector and the private sector for approximately Euro 250 million. The Fund will be designed to make Euro denominated mezzanine and equity investments in energy efficiency and/or renewable energy projects or companies developing, manufacturing, distributing or installing energy efficiency and/or renewable energy equipment or services in the twelve participating countries.
Q: What do you consider to be the main challenges in the years to come, and do you really think that we are facing this huge energy crisis that the media is talking so much about?
The main challenge will be to identify and promote policies and new forms of industrial cooperation on energy security and sustainable energy. New strategic alliances are being developed between major European natural gas companies on the formation of joint venture energy efficiency companies. Indeed, the government of the Russian Federation is now supporting an ECE project on increasing energy efficiency to generate greater hydrocarbon availabilities for additional exports. This project reflects the Decision of 4 June 2008 of President Medvedev related to energy efficiency in Russian markets. This project provides the opportunity for government and energy industry experts to work on energy efficiency improvements in the Russian Federation and Central Asian energy exporting countries. At the same time, a global consensus among governments seems to be growing that energy efficiency is the most effective method of mitigating climate change. This is because there is a vast potential for efficiency improvements to reduce CO2 emissions which can be implemented very quickly, cheaply and reliably. While energy efficiency can reduce carbon emissions, it can also contribute to ensuring the energy security of the European region. The strategic interest of energy importing countries is for exporting countries to produce and use hydrocarbons as efficiently as possible. Indeed, the Declaration from the recent Summit on Financial Markets and the World Economy – the G 20 meeting in Washington – stated that Heads of State remained “committed to addressing other critical challenges such as energy security and climate change, …”
Western importing countries have the technology, management practices, policies, regulations, standards and experience in financing efficiency improvements. Energy exporting countries generally do so much less. They tend to use their energy less efficiently keeping domestic energy prices below world market levels. Harnessing the mutuality of interests of both industry and governments from both importing and exporting countries on efficiency improvements for secure energy supplies is a striking new development that fits exceptionally well within the tradition of eastwest energy trade and cooperation of the ECE. This is a good example of the correlation between energy security and sustainable energy policies that emerged so prominently during the 2007 session of the Committee on Sustainable Energy. In November 2008, the Committee received reports on two studies supported of the European Business Congress.
One study is examining how sustainable energy policies can mitigate energy security risks and the role of financial markets on energy security. The second study is focussed on perceptions of energy security risk. I mentioned earlier that the ECE energy security dialogue brings together key experts from governments, energy industries, the financial community and relevant international organisations. But each of these four groups perceives energy security differently and can contribute to reducing risks in different ways. Therefore this analysis will involve a consensus building Delphi Study drawing on the views of experts from each part of the Committee on Sustainable Energy constituency. This innovative way of working will provide for a more profound exchange of views than the usual annual Committee sessions can offer. It is also one of the most promising ways to reconcile divergent views in order to accomplish common goals. In the end, energy security and sustainable energy development are problems that cannot actually be solved. There is only the hope they can be better managed over the long term. This is the opportunity that the ECE provides to all participants in its work.
