A law of
energy

 
Pieter van Geel
says that poor people must have access to clean and sustainable energy if the Millennium Development Goals are to be met

Developing countries have a right to economic growth, and to achieve that they need energy. Without it they cannot bring about poverty reduction or meet the Millennium Development Goals. Two billion people have no access to modern forms of energy. Private enterprise cannot operate without it. Research shows that recurrent power outages inflict severe financial damage on businesses. And schools and health care institutions can clearly provide better services if they have access to power supplies.

At the same time, we have to realize that our growing energy consumption is already causing environmental and health problems and damaging our economies. Poorer populations tend to use wood and charcoal as their main energy sources, but indoor wood fires lead to health difficulties, especially among women and children. According to the World Health Organization (WHO), around 1.6 million people die every year as a result of indoor air pollution. Use of fossil fuels for large-scale power generation and transport is also a source of air pollution, especially in cities in developing countries. According to the World Energy Assessment (2000), urban air pollution caused primarily by emissions from fossil fuels and motorized transport leads to around 800,000 deaths a year worldwide. Consumption of fossil fuels also leads to emissions of the greenhouse gases that cause climate change.

Knock-on damage
Moreover, health and environmental problems inflict knock-on economic damage. According to a recent World Bank estimate, pollution and associated health problems now cost China some 8-14 per cent of its annual GNP. Though the pollution is not caused solely by China’s energy consumption, the figure suggests how great the economic damage can be.

This damage is set to increase, as shown, for example, by recent scenarios published by the International Energy Agency (IEA). Based on its reference scenario, the IEA expects energy demand to rise by approximately 60 per cent by 2030 if government policies do not change. Since fossil fuels will be the main source of energy, the IEA expects carbon dioxide (CO2) emissions to increase in parallel. These are worrying trends. But an alternative scenario is possible.

If governments take energy security and efficiency measures, worldwide energy demand could decline by 10 per cent and CO2 emissions by 16 per cent. The potential for energy efficiency measures is enormous; for developing countries savings are estimated at 30-45 per cent. Governments can also encourage the major new advances in technology that will be necessary to reduce demand beyond that point.
More effort is needed to promote the use of renewable energy sources
More effort is needed to promote the use of renewable energy sources, so that they can eventually meet a greater proportion of our needs. For the next 30 to 50 years, however, there will be no realistic prospect of meeting all of our energy requirements through renewables. So we must also work on energy efficiency, cleaner fuels and modern fossil fuels.

To stimulate debate on this whole range of issues, I and my colleague Agnes van Ardenne, Minister for Development Cooperation, organized a World Conference on Energy for Development on 10-12 December 2004. It focused primarily on the energy needs of developing countries, with the aim of making energy a higher priority on the international development agenda.

Four years ago, government leaders around the world endorsed the Millennium Development Goals. Although these do not include a specific energy goal, the goals for poverty reduction, education and health will not be achieved without increased access to energy supply services. Yet many developing countries’ national policy plans ignore the issue – especially the Poverty Reduction Strategy Papers drawn up to obtain loans from the World Bank and the International Monetary Fund (IMF).

Disappointing investment
Over the last 10 years, donor countries have also shown a less lively interest in the subject of energy. This has been partly due to a general belief that private investment would take their place. But the level of private investment remained disappointingly low in the run-up to the millennium: indeed it declined. The reasons were that, in general, the restructuring of the energy sector proceeded less rapidly than expected; it proved more difficult than anticipated to cover costs (partly because of the inability of local people to pay); and the risks were significantly greater than foreseen. Increasing access to energy will require vast investment. According to the IEA, $5 trillion will have to be invested in power generation, transmission and distribution between now and 2030 to meet the demand for electricity in developing countries. Two thirds of this demand will come from Asia. Clearly, this will exceed the resources of the public sector, even with the help of Official Development Assistance (ODA): total world ODA, after all, amounts to only around $50 billion. So private sector investment will be essential.

The conference brought together the public and private sectors, non-governmental organizations and other relevant institutions to examine possible ways of increasing such investment. Success will crucially depend on evidence of good governance and sensible policies in the developing countries themselves. Private sector investment will not be attracted without a stable and transparent investment climate. The bulk of the investment capital will have to come from the local and international private sector. The performance of the energy sector must also be improved. Government must back off from markets so that companies can generate the cash flow they need to make the necessary investments.

Public sector finance in both developing and donor countries can be used more effectively to attract private sector capital. Developing countries can cut their spending in other areas to provide microcredit for households and small businesses. There are countless examples of success: the Grameen Bank in Bangladesh is probably the best-known lender to the poor, but similar systems are also operating successfully in other countries. If they are to work, however, governments must create conditions that enable banks to operate; otherwise, cuts in their spending will not have the desired effect. International organizations, like UNEP and the World Bank, are also supporting and launching projects of this kind.

ODA can be used more effectively to attract private capital, for example through public-private partnerships. Donor countries can do more to provide guarantee capital for businesses. The challenge is to combine available public and private sector resources more effectively to create sustainable power supply services. Carbon-finance initiatives should be expanded so that they can be used to finance environmentally friendly forms of power generation and energy consumption. Emissions trading and associated instruments – such as Joint Implementation and the Clean Development Mechanism – should be used more widely.

Smarter subsidies
Meanwhile, experience shows that subsidies on energy consumption in developing countries more frequently benefit the rich than the poor, for whom they are intended. Subsidies can be useful in encouraging certain developments, but they must be used in such a way that they benefit the right target groups and do not have too many unintended side effects. Industrialized countries also need to learn this lesson, and can also use subsidies in smarter ways to achieve sustainable energy provision.

The Kyoto Protocol – about to come into effect since Russia’s welcome ratification – is a major step forward, but it will not lead to significant reductions in CO2 emissions without further steps. We hope that the results of the World Conference on Energy for Development will work in parallel to Kyoto, helping to produce a greater awareness of the issues, more synergy between development and environmental goals, and creative approaches and solutions


Pieter van Geel is State Secretary for Housing, Spatial Planning and the Environment in the Netherlands.

PHOTOGRAPH: M. Loquet/UNEP/Topham


This issue:
Contents | Editorial K. Toepfer | Strengthening the rule of law | Partners in law | Justice can be shortsighted | Force of law | A matter of judgement | A law of energy | People | Rule of man, or rule of law? | At a glance: The rule of law | Sebastião Salgado | Sustainable development comes from Saturn! | One planet, different worlds | Nature’s wisdom | Kickback fightback | Conflict and cooperation | Holistic landmark | Empowering the poor | Legal climate | Small is effective | Building the framework


Complementary issues:
Climate Change 1997
Climate and Action 1998
Poverty, Health and the Environment 2001
Energy 2001
World Summit on Sustainable Development 2002
Globalization, poverty, trade and the environment 2003
Energy 2003