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Global Energy Trends Remain Largely Unchanged – Where does this Leave Renewable Energy?

The global crisis, now well-rooted in its third year, continues to rock the world’s political and economic foundations. Regimes have been replaced, capitalism has shifted gear, and even the future of the European Union is being tested.

But for the executive director of the International Energy Agency, Nobuo Tanaka, who spoke at length with Energy Tribune last week, global energy trends remain largely unchanged. “The economic crisis is everybody’s concern, and even with slow economic activity, the price of energy is very high; the fundamentals are getting tighter, and you still need huge investments. This will not change as radically,” Tanaka said.

That growth, though, will be sustainable, Tanaka said in reference to the “energy revolution” he has been championing since late 2007 when he took the helm of the IEA coinciding with the beginning of the slump. Tanaka spoke to ET in Valencia after launching the IEA’s new roadmap on solar energy. It was an uncomfortable setting considering that Spain, until recently heralded as a model for renewable energy policy, was recently forced to backtrack on some of its support for solar power.

He chose his words carefully to avoid criticizing any of its OECD member countries’ policies and addressed the contradictions that have arisen from the crisis, namely second-doubting of climate change as a global priority. “Yes, the economic crisis impact is big, but the future is energy security, efficiency and environmental sustainability. That is our strong belief. We have to continue to face this. As a policy, we have to encourage that direction.”

“Even in crisis we say spend your money wisely. If you try to create jobs, create them in a sustainable manner. We haven’t changed that message because it is necessary and feasible,” he said. “We should not change our policies because of the temporary economic slowdown. We will return to growth.”

Investment in low-carbon industries, including nuclear, renewable, and carbon capture and storage, tumbled in 2008 and only partially recovered in 2009. The Copenhagen summit late last year failed to bring about global consensus and many green energy policies drawn up before the crisis haven’t materialized. To be sure, countries that until recently thrived on revamping their energy sectors with climate-friendly technologies, especially in Europe, are now reconsidering their energy future. Biofuel, CCS and renewable industries are struggling for some clear guidance. In addition, the crisis has exposed the failings of over-generous renewable policies, of dysfunctional cap and trade mechanisms, and of security of supply concerns that have illustrated the world’s dependence of fossil fuels, especially coal, oil, and gas.

But Tanaka remains “cautiously optimistic” that major economies, not only OECD ones advised by the IEA, will continue to support a greener transformation of the world’s energy fundamentals. “I don’t think sustainability and economic stimulus are mutually exclusive. We can do both things at the same time,” he said. “There is a very strong move from government and private industry in this direction.” He continued, “To make the economic recovery viable, you have to invest. The stimulus packages must concentrate on a sustainable way. By doing so, you stimulate the economy, you create jobs.”

That wasn’t the case in Spain, though, where more jobs were lost in subsidizing renewable energy than those created. While conceding little in terms of global trends, he criticized unbalanced policies, such as the Spanish one.

“The Spanish government learned it was too favorable to investors and industry. It was a bubble. There was oversupply because the incentives they gave were too comfortable. They must be high enough to attract, but also predictable into the future.” Nevertheless, he rejected the notion that countries would revisit their renewable energy commitments because of the crisis. “Certainly its more expensive and sometimes more difficult to sustain,” he said, but “investment in economic sustainability is still going on quite strongly. There is generally good support for renewable energy and OECD countries have been supportive in that direction.”

“Climate change is the most difficult negotiation on earth. It’s not easy to see achievements of negotiation. But there’s a good understanding of necessity of sustainability and of moving toward a low carbon society.”

Citing the American and Chinese examples, he stressed how both “countries can no longer return to original place.” He highlighted how the debate over climate change has recently shifted toward energy security. “It certainly enhances it and that is the interest of your own country.”

President Barack Obama’s decision to include climate change as part of the energy security debate made it “more acceptable to the public and to Republicans.” Tanaka backed Obama’s energy policies, including nurturing nuclear to fight climate change, the likely opening up of offshore oil exploration, and the proposal to create a cap and trade system much like the European one, including the bill introduced in the US Senate last week.

“There are a lot of ways … to set a carbon price. You can use the carbon tax, stringent regulations, or global efficiency standards, but cap and trade is the most economically efficient way to allocate quotas, if it’s harmonized around the world. The best way is full coverage, but certainly it’s difficult to manage.”

Tanaka also criticized European temptation to cut taxes in the energy sector and suggested that the US should indeed increase their own.

“In crisis, European countries want to reduce taxes, but for the sake of efficiency you have to maintain the current system. Don’t undermine the energy market, is our strong suggestion. The US can do much more, although it is politically difficult. Carbon taxes are inevitable to improve efficiency and the current administration probably learned a lot from Europe.”

Still, he brushed aside the failings of the European Trading Scheme, the world’s biggest semi-functioning carbon market. “Nobody expected this crisis, so we have to discount this factor. We learned lots from this experiment. It provides good data and we have to improve on it.”

The oil well blowout in the Gulf of Mexico could negatively impact short term exploration policy in the US, he said, but “we want to recover soon from the oil spill business. We want the US to keep the good policy to open up its offshore.”

As for biofuels, he hinted on the need to cut subsidies, like Europe has but the US hasn’t, to test the different options available in terms of technology and raw materials, whether its sugar cane, corn, or non-food sources. Europe is “getting more cautious about holistic sustainability.” He went on, “The US has to have these subsidies. The question is whether they can be phased out. Just continuing to subsidize is not sustainable. That is the test.” But when it comes to biofuels, Tanaka concluded, “not much more than sugar cane is sustainable.”

By. Andres Cala

Source: Energy Tribune

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