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NEW EUROPE

Issue # 965

A New Europe Special Edition

MIDDL E EAST

THE WORLD

ENERGY REVIEW

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December 2011

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nyone who follows world politics will not need telling of the importance of energy, and access to energy sources, such as oil or gas reserves, continue to inform strategic, geopolitical thinking from world governments. Europe, with its close proximity to both Russia and Central Asia, as well as North Africa, is understandably at the centre of things in this regard. On the one hand, instability in the wider world has in recent years forced Europe, in particular the European Union, to examine and develop indigenous sources of energy; fuel for homes, industry, transport and agriculture in the form of renewable energy, wind, solar, tidal and the like. But growing demand and consumption has led to very real fears of environmental degradation, from the likes of biofuels, and an increase in carbon emissions though increased electricity use. The articles presented in this special edition reflect the concerns and positions of various European stakeholders, from politicians, to activists to industry. The EU, with its 2020 targets has laid out its intentions for combating wasteful energy use, as well as promoting diversity of sources and the build-up of renewables. As Herbert Reul, Chair of the European Parliament’s Industry, Research and Energy Committee writes, “energy policy will surely contribute to climate protection but it is by no means a subtopic of climate policy. Security of supply issues and an affordable energy supply for example are core elements of energy policy at all levels.” But is it doing enough? Several pieces

in this edition look at the progress made so far by the European institutions, as well as the member states, in ensuring that climate and energy targets produce tangible results, and dissident voices from top European NGOs here present challenges to policy, and offer a reminder that in the current political and economic climate, certain policies, such as on energy efficiency targets, can often find themselves taking a back seat amid many conflicting debates. Looking at the wider world, and to Europe’s relationship with some of its near neighbours, Kjetil Tungland (14) and Konstantin Simonov (15) both, in different ways, look at EU-Russia relations though energy, in this case gas policy, and how it can affect top-level decision-making. Pages 16-18 take things a little farther geographically, and take a look at how Europe and the United States of America differ in their approach to energy policy. Few can doubt the growing importance of China on the global scene, and energy is no different. As the world’s biggest manufacturer of solar and wind energy, but also a massive energy consumer, the country has ambitious plans for the future, and on page 19, Song Zhe, Chinese Ambassador to the EU, outlines some of those plans as part of China’s 12th five-year plan. Finally, Christophe Pausch takes a look at how the energy needs of some of the world’s poorest people can be met (22). We hope that the reader will find this special edition informative, that it will help contribute to what is already a robust debate, and that, as we move into a new year, Europe, and the world, will go some way to establishing policies that will sustain the global population as it continues to grow and develop.
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NEWEUROPE

But growing demand and consumption has led to very real fears of environmental degradation, from the likes of biofuels, and an increase in carbon emissions though

EDITOR Dennis Kefalakos dkefalakos@neurope.eu SENIOR EDITORIAL TEAM Kostis Geropoulos (Energy & Russian Affairs) kgeropoulos@neurope.eu Andy Carling (EU Affairs) acarling@neurope.eu Cillian Donnelly (EU Affairs) cdonnelly@neurope.eu Ariti Alamanou (Legal Affairs) aalamanou@neurope.eu Alexandra Coronakis (Columnist) acoronaki@neurope.eu Louise Kissa (Fashion) lkissa@neurope.eu ONLINE EDITOR James Drew jdrew@neurope.eu

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ISSN number: 1106-8299

© 2011 New Europe all rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form by any means, electronic or otherwise, without the permission of New Europe.

NEW EUROPE
EUROPE

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11 December 2011

05 06 07 08 09 10 11

EU’s climate ambitions lagging

EU gas diversification: choosing realism over utopia

14 15 16 17 18 19 20 21
22 23

Looking to the energy future

Attempts by Russia and Europe to avoid each other

UNITED STATES

"Helios" is more than a project between Greece and Germany

US and European energy policies: Why so different?

Security of supply is best maintained by diversity
CHINA

New Energy Resolutions for the New Year

Are we a part of the Earth or are we its invaders?

Deepen Cooperation to Meet the Energy Challenge

Saving energy: A sensible response to the economic and climate crisis
WORLD

The rising green dragon

Saving energy: A sensible response to the economic and climate crisis

The Impoverished “Asian Century”

NEWEUROPE

11 12 13

EU split on energy efficiency

New Hope on Global Warming

The agrofuels deception

Microfinance provides the perfect partner for sustainable development

To frack or not to frack, that is the question

Shipping: Riding waves to a greener, more sustainable industry

NEW EUROPE

05
December 2011

nnual policy tracker highlights five instances of declining environmental standards in member states. Several European Union member states are failing to implement the kind of policies that will enable the EU to meet its climate goals, according to a new report. The latest edition of the EU Climate Policy Tracker, which examines energy and environmental policy across the EU has found that five member states have declined in policy standards since last year. On a more positive note, nine have increased, while the rest have stayed more or less the same. The report, which has been complied by the environmental NGO, WWF, and renewable energy consultancy ECOFYS, tracks the impact of EU and domestic environmental legislation across various sectors; electricity supply, industry, buildings, transport, agriculture, forestry, and general policy. Member state policies are graded on a scale ranging from A down to G, mirroring the scale by which the energy efficiency of products are graded. According to its findings, five member states, Bulgaria, Ireland, the Netherlands,

Several European Union member states are failing to implement the kind of policies that will enable the EU to meet its climate goals
Slovakia and Spain are all under-performing when it comes to environmental legislation. This can be contrasted with Austria, Denmark, Finland, Hungary, Portugal, Romania, Slovenia and Sweden, who have improved in the past year. According to Jason Anderson, Head of Climate and Energy Policy, WWF European Policy Office, there are two main messages to be taken from this year’s report; firstly, that close to 50% of environmental legislation now comes from the EU, policies that member states are free to go above and beyond, and secondly, the fact that certain EU cornerstone polices need to be improved; chief amongst these being the energy trading scheme (ETS), improved standards in car production and eco-design and better guidance for renovation in the energy performance of buildings directive. While, he says, standards in transport are going up, new policies to close gaps in existing policies are needed, particularly a concrete legal agreement on longterm targets beyond 2020, a greater ambition for energy savings for 2020 targets, laws explicitly targeting the redesign of products, legislation on freight transport, and a long-term climate perspective on agriculture policy. “While close to 50% of environmental policies come from EU legislation,” continues Anderson, “there is a certain level of scepticism towards the EU, for example from eastern Europe.” But, he says, member states are on the whole displaying a wide range of policy actions, even though in many cases they are doing the minimum amount required by laws from Brussels. The average score across the Union,

according to the report, is E. “Good actions are taking place in a spotty way,” Anderson says. The 2011 policy tracker comes as EU discussions on the energy efficiency directive continue, which sees member states split on the overall level of ambition of efficiency, and whether or not to introduce legally-binding measures or targets. The political will to push forward on this is “tepid” according to Niklas Höhne, Director of Energy and Climate Policy as ECOFYS Cologne, despite it being “a significant policy area that will have significant impact.” in addition, he says that current EU energy ambitions, including the 1205 roadmap, display a “low-level of planned ambition.” “Global willingness depends on an awareness of the urgency, opportunities and responsibilities that exist. A lot of countries were following the lead of the EU before Copenhagen [the global climate summit in 2009], with regards to targets and the like. Now, the will is lacking. But it should be seen for what it is: an opportunity for boosting the economy, an opportunity that can be seen in the real world. And that should be the role of the EU, to push ahead with its 2050 plans.”

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December 2011

NEW EUROPE

With an ever increasing amount of EU legislation and EU regulation, we need to pay more and more attention to unintended side effects and interactions between EU rules as well as between EU rules and national rules already in place
oth the European Commission and the European Parliament have been very active this year in terms of energy policy. Numerous own initiative reports and Commission communications or legislative proposals were presented, debated and some, like REMIT, also adopted. Currently work is continuing on the energy efficiency directive (more than 1800 amendments have been tabled!), the infrastructure package, external energy policy, offshore oil and gas drilling, ITRE will draft an opinion to MiFID, we are still awaiting the energy roadmap 2050. Next year we expect communications inter alia on the completion of the internal energy market and on renewable energies. At the same time, with an ever increasing amount of EU legislation and EU regulation, we need to pay more and more attention to unintended side effects and interactions between EU rules as well as between EU rules and national rules already in place. Let me provide just two examples. The Commission, in its reply to questions raised by ITRE members on the impact assessment admits that "the modelling exercises carried out in preparation of the [energy efficiency directive] (...) were not (...) conclusive regarding possible impacts on the price of ETS allowances" and thus intends to further monitor the situation. Thus we know that increasing energy efficiency will reduce energy consumption and thus reduce CO2 emissions - but we do not know to what extent this will in return have an impact on emissions prices under the ETS directive. Indeed, one model comes to the conclusion that the impact will be dramatic. But then, what

does "monitoring" mean? Does the Commission intend to set allowances aside and intervene in the market? Would such a policy driven interference undermine the trust into the Commission and the market instrument the EU has set up? What is the primary intention of the Commission? Is it to lower CO2 emissions or to secure high revenues for Member states? Such doubts of course have a negative impact on investment decisions in the EU and should therefore be dispelled as soon as possible. The second example concerns the interactions between national policies and EU instruments. The ETS directive allows trading in CO2 certificates. Thus if a Member state reduces its emissions quicker than others, it may sell the surplus certificates to others. Thus the very successful and expensive German support scheme for renewable energies has helped reduce CO2 emissions in Germany - but, due to the tradability of certificates, not necessarily in the EU! In a global ETS system, that the EU is striving to, such interactions will be even greater. I firmly believe that it will be essential in the future that the Commission pays more attention to such interactions also with national or even global instruments in the impact assessments. Another question concerns the regulatory depth of EU legislation. From the current debate on the draft energy efficiency directive (EED) it is clear that Member states are not willing to accept

mandatory targets and many also refuse to accept mandatory instruments. The debate on the EED is far from over of course and it is impossible to predict the outcome. But one option might be to rather impose binding targets and leave the choice of instruments to Member states in accordance with one of the main guiding principle of the EU: "United in diversity". One of the central questions remains the one of our future energy mix. I am certain the energy roadmap will also touch upon this subject. Commissioner Oettinger, during his visit in the ITRE committee on 23.11.2011 made it very clear that increasing the target for renewable energies under the current treaty would require unanimity between the Member states - and that this was not realistic given the large differences in their energy mix and the different potentials. Gas then is said to play a vital role in the transition to a low carbon economy, replacing coal and oil. But without tapping the potentials of shale gas, this is likely to further increase our energy dependence. This leads me to another topic: Diversification. Diversification is not only about energy sources but also about supply routes. Now everybody has heard about Nabucco. The project has been advocated at EU level for many years and still encounters many problems, not least the unresolved conflict about the status of the Caspian Sea. But few are aware of the fact that we are to preclude the import of oil

from Canadian tar sands. Alberta has however the second largest oil reserves in the world. In terms of security of supply such a ban would be nothing less than a fiasco. The completion of the internal energy market also encounters numerous problems that we need to tackle. The new Commission proposal on energy infrastructure for example foresees a dramatic reduction in time for authorisation procedures. Indeed, quite often they take more then years, far too long given the many challenges we face, not least the inclusion of intermittent renewable energies. Furthermore many Member states have yet failed to implement the third internal market package and thus deprive their citizen of numerous additional rights enshrined in this package. Parliament therefore presses the Commission to closely monitor the situation and, if necessary, to open infringement procedures. Consistency in energy regulation, a vision of the future that leaves room for new technologies, an open and rational debate on energy issues are key to ensuring an affordable and reliable energy supply in the future. Energy policy will surely contribute to climate protection but it is by no means a subtopic of climate policy. Security of supply issues and an affordable energy supply for example are core elements of energy policy at all levels. And their importance will grow in the future.

NEW EUROPE

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December 2011

he current crisis has brought to the forefront one of the basic structural weaknesses of the Greek economy - its inefficient growth model, which did not manage to develop the country's comparative advantages, despite being one of the richest in natural resources in Europe. Renewable energy sources are just one characteristic example. Greece has only recently started to develop its tremendous potential in wind, sun and geothermal energy. The creation of the Ministry of Environment, Energy and Climate Change two years ago intended to signal the prioritisation of "green growth" in the government's plans. Since then, Greece has committed to exceeding its RES target for 2020 and intensified efforts to speed up and simplify licensing processes and to tackle bureaucracy. For the whole Europe - and especially for Greece - the development of RES is crucial not only to tackle climate change and secure energy supply, but also for economic growth and job creation. In this context, the idea was born to produce massive amounts of solar energy in Greece and export it to countries with lower solar potential, such as Germany. The first references to this idea were in fact made by the German Finance Minister, Wolfgang Schäuble, who supported the prospect of exporting solar energy from Greece to Ger-

many as a concrete example of cooperation and a beneficial project for both countries and the EU as a whole. Later, Commissioner Oettinger, also expressed his support noting that "in Greece houses have PV panels mounted on both sides of the roof, while in Germany on only one". The idea is simple and smart. Investing in generation of solar energy in Greece, a country where the sun shines a lot - 50% more than Germany - would yield more kilowatt hours in comparison with the same investment in a northern country. For Greece the investment would create new jobs and a strong domestic PV industry. The importing country would be able to achieve its renewable energy target at a lower cost. The savings could in turn be invested in a sector where that country has a competitive advantage. This translates to more GDP growth for all the countries involved. The aim of the project is to produce up to 10 GW of solar energy generated electricity by providing potential investors with "turnkey" fully licensed projects in specific stateowned site locations, free of any administrative and bureaucratic barriers. The 10 GW of planned PV capacity exceeds daytime national energy demand and will make available a significant amount of energy for export to third countries. The exports to EU Member States can take the form of physical and statistical transfers, until the appropriate infrastructure is constructed, according to the cooperation

mechanism provided for by Article 6 of the Renewable Energy Directive (2009/28/EC). "Helios" is more than a project between two EU countries. Constructing the infrastructure for the physical transfer of energy is a catalyst for the EU's strategic priority to create a single European energy market. The Greek government in association with the Joint Research Centre are currently investigating various scenarios to allow the physical transfer of electricity to Germany and other interested countries. From a preliminary assessment there are four alternative routes - through the Western Balkans, the Eastern Balkans, mainland Italy and a new sub-sea interconnection via the Adriatic Sea. The latter alternative is especially attractive as it could provide an efficient interconnection capacity of up to 10 GW using the HVDC technology, which guarantees minor only losses on transfer. This alternative would in the long term also allow for the transfer of greater amounts of renewable energy from Italy, as well as from Northern Africa. The European Commission has recently put forward its energy infrastructure package, which sets interconnection priorities for the EU and proposes a new financing facility. In the short term, among the EU priorities proposed is the interconnection of central and south-eastern Europe to assist market and RES integration. In the long term the goal is the construction of elec-

tricity highways. The "Helios" project is a perfect fit for these priorities. Upgrading regional interconnections in south-eastern Europe would allow the transfer of solar power and would at the same time lay the foundations for the creation of an integrated regional electricity market interconnected with central Europe and an electricity highway from the South to the North. The "Helios" project is a characteristic example of synergies in the framework of the European Union to develop the different characteristics and potential of its regions. In the North Sea plans for massive production of wind energy and the construction of the Super Grid to bring it to mainland Europe have started with the cooperation of many countries. The same model could be duplicated in the South. At times of crisis it is evident that there will be many challenges in the development of such ambitious projects. However, we need to commit ourselves to not allowing the crisis jeopardise the Union's strategic choices and move forward with decisiveness to facilitate and speed up our exit from the crisis. At a time when divisions within Europe are widening, developing projects of common interest reminds us of the great added value of the European Union and the need for closer cooperation. European citizens expect the EU and the Member States to prove that great crises entail great opportunities and not only great difficulties.

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December 2011

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There is, of course, an inherent contradiction between these policy objectives if pursued in isolation and without consideration of the others

or a long time there have been three general aims for energy policy at the European level. Competitiveness, security and sustainability. Over time, the order of priority has changed as the desirability of achieving an open single market has given way to the perceived threat of climate change until the imperative of keeping the lights on has asserted itself. There is, of course, an inherent contradiction between these policy objectives if pursued in isolation and without consideration of the others. There is another contradiction which needs to be recognised and accommodated, namely the fact that energy policy remains a national responsibility whereas the objective of a single European policy remains an objective, not least because of the range of national situations and the potential for disagreement over what a single European policy should actually look like. Energy requirements differ markedly from north to south and east to west. For me, the maintenance of security of supply remains fundamental. Without energy, our society would disintegrate. I also believe that responsibility should remain where it is, at the Member State level, because of those differences between the energy supply situation from one country to another and because the risk to security is greater if only one body is making the decisions rather than 27 separate sets of decision makers. Just suppose if the decisions were determined by public opinion in Germany or Italy and imposed on everyone else? Put another way, I believe security of supply is best maintained by diversity. Diversity of energy mix, diversity of technol-

ogy, diversity of fuels, diversity of sources of supply, diversity of suppliers, diversity of planning models. Does this mean I think we should forget about climate change or competitiveness? Certainly not. Competitiveness is crucial to maintain that diversity and, indeed, to achieve CO2 emission reduction in the most efficient way. I do think we should draw back from what I call the religion of renewables which prescribes the solution before the problem is defined. I also think that if we really want to re-engineer our economy and society into a low carbon version, we should be realistic about targets and timing, especially in relation to the rest of the world, our competitors. And we should be open about the costs of this transformation with the people who must foot the bill, the consumers. What does this mean in practical terms? Modern industrial societies like the EU Member States are becoming increasingly dependent on electricity so let me start there. Drawing on figures for electricity production by fuel sourced from the EEA (European Environment Agency) 2008, the shares were oil 3%; coal and lignite 26.3%; natural and derived gas 23.6%; nuclear 27.3%; renewables 18% and other fuels 1.8%. Although these figures are 3 years old, they still give a good picture of the situation and a clue of the challenge we face. There have been some significant changes since 2008. The most significant,

in my view, has been the emergence of shale or unconventional gas as a major source of fuel. The other has been the very mixed reaction to the powerful earth-quake and tsunami experienced in Japan in early 2011. I remain astonished at the irrational response in Germany in particular. Fortunately, many other Member States have taken a more balanced position on the issue of nuclear energy and to long-term energy supply. Looking at the above figures it seems clear to me that we should be looking to reduce the share of coal, at least unless, or until, we can demonstrate CCS (Carbon Capture and Storage) on an industrial scale. We should continue to encourage a shift to renewables, but not at any price. We should intensify our efforts to replace ageing nuclear capacity and to increase it to a level where it provides virtually all base load. I offer my target numbers of 40, 30, 20, 10 by 2050; i.e. 40% nuclear, 30% renewables, 20% gas and 10% coal. These are ambitious, demanding, but achievable within 40 years. We are obliged to think long-term for such a major undertaking as achieving that low carbon economy. Of course electricity supply is only part of the equation. The really difficult bit of maintaining security of supply, while meeting climate change policy objectives, is how we tackle oil consumption in the transport sector. In 2009, oil supplied 41.9% of final energy consumption in the EU 27. Re-

member that in road passenger terms, vehicle transport supplies over 90% and the percentage for freight is in the high 80% range. Trains provide just under 10% of passenger traffic and just over 10% of freight, so that is a measure of the challenge. I do not see it as achievable to make the change as it can be for electricity, yet change we must if the scientists are correct about climate change. A range of solutions offer themselves such as electric cars, hybrids, hydrogen fuel cells, biofuels. Finally, let me touch on the other side of the equation, namely, energy efficiency and how to persuade people to change the way we use energy. In this regard, I share the estimate of the European Commission that savings of 20% final energy consumption are possible through energy efficiency. However, I differ from their approach of confusing savings with efficiency. Energy savings as called for in the draft energy Efficiency Directive just means consuming less. Efficiency means either producing a unit of gdp (gross domestic production) with less energy, or using the same amount of energy to produce higher gdp. Probably we will achieve efficiency gains through a mix of technology, such as smart meters and smart grids, regulation to enforce higher standards of insulation and buildings efficiency, and the price mechanism as energy costs rise inexorably people will be more efficient and use less. We shall see.

NEW EUROPE

09
December 2011

The EU has very often been the driving force in international negotiations, and it is for this reason a leader in environmental policies
s I contemplate COP17 in Durban, I reflect on previous COPs and the time that has passed so quickly. As if it were yesterday, I remember the frustrations 2 years ago in Copenhagen over the proceedings and the lack of results in. This was followed a year ago by the excitement in Cancun over the adoption of the text within the formal procedure of the United Nations. Since then the European Union (EU) has not stood still. Despite the enormous fiscal and economic problems, sustainable development has remained the focus of concrete initiatives. In times of economic crisis, it becomes more difficult yet more urgent to consider environmental needs within an energy policy. Every EU document on development indicates that the ‘’green economy’’ is the best possible solution to the crisis. The objectives of the EU 20-20-20 targets were: • A 20% reduction in greenhouse gas emissions • A 20% share of renewable energy sources by 2020 • A 20% reduction in primary energy use Despite our economic woes, we are now prepared for a 30% reduction in emissions by 2020 if other comparable economies would adopt similar environmental commitments. Since energy supply at an economic price is essential for the EU's economic recovery, steps must be taken carefully when deciding energy legislation in this far reaching area. Easy options can lead to added problems such as replacing coal with gas and then increasing gas dependency. We must also recognise that within the EU family, we have strong and weak members and the options for some are simply not available to others. After 2013 the new seven-year EU budget will come into force, and this is the

time to prepare many sectoral strategies. The "green" component remains a major factor in everything icluding: • Industrial policy, • Business development, • Energy policy • Research policy, • Cohesion and • Agriculture. In addition, we are drafting a strategy for sustainable development up to 2050, aiming to reduce our emissions to between 80% and 95%. This is under preparation for the EU to lead the climate negotiations. The EU has very often been the driving force in international negotiations, and it is for this reason a leader in environmental policies. This also economically problematic as we have international targets but no international agreements. So the most environmentally responsible countries risk weakening their global trade positions. In 2011 the EU stood almost alone in the desire for a globally balanced, decisive and legally binding international action. China, as the largest greenhouse gas emissions producer, is not required to reduce emissions under the Kyoto Protocol, while the U.S. has not even ratified the Kyoto Protocol even though they remain responsible for 18% of global CO2 emissions. Japan, Canada and Russia have indicated that they do not intend to honour the Protocol in the

future. In such circumstances, our unconditional commitment to continue with the second period of the Kyoto Protocol would thus cover only 11% of global emissions. What impact would a reduction of such a small proportion of emissions have on the global rise in temperature? Consequently, any commitment of the EU at this year's negotiations will not be unconditional. What do we expect? The short answer would be: the implementation of the arrangements, concluded in Cancun, but to be more specific : 1. We expect the Durban conference to adopt a roadmap for adopting a legally binding international agreement to reduce greenhouse gas emissions on a global level. The industrialized countries will have to adopt mutually comparable burdens. This new agreement would have to be adopted no later than in 2015 and would have to enter into foce no later than in 2020 ; 2. We expect to reach agreement on higher ambitions of other countries. Their current plans to limit global warming to 2°C are getting close to only 60 % of the target. There is in fact a wide gap between the Cancun commitment in principle and the actual assumption of burdens by individual countries ; And iin practical terms that requires: • An agreement on a common accounting system of measuring emissions to

ensure reliable and comparable data • An agreement on monitoring, reporting and supervising the implementation measures, in short, transparency and credibility • Progress in arrangements to reduce emissions in the maritime and air transport • Technical corrections to the Kyoto Protocol, which will enable its environmental integrity • An agreement on the contribution of developed countries to the climate fund. In the years 2010 ─ 2012, €30 billion should have been accumulated, and even more every year after that, and in 2020 the amount was expected to be as much as €100 billion. Sometimes I feel as if I live in a kind of virtual European environmental ideology. As if my colleagues and I are light years away from the reality of unemployed men and women of Europe, from the entrepreneurs whose services go unpaid and from the languishing banks which cannot finance innovative commercial projects. Unfortunately, other options, such as more efficient processes, better use of resources and promotion of creativity in the direction of sustainable society, are nowhere to be seen. Will the world be able to achieve "normalcy"? Can we again live ’’in harmony with nature’’? ‘Can we once again become a part of the Earth, or will we remain its invaders?’

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December 2011

NEW EUROPE

Not only is energy efficiency the sensible thing to be focusing on at times of economic hardship thanks to the savings on energy use and energy bills, but it is also a key to stimulating the economy through investment and job creation
ne of the defining challenges of our century is how to achieve new and better economic growth which significantly reduces social, economic, ecological deficits, in particular by cutting resource use and GHG emissions. The EU has gone some way to reduce its GHG emissions, but this is not sufficient to tackle the deficits. It is importing over half of its energy and wasting about a ¼ of the energy it consumes. This comes with considerable costs: every year, the EU spends over €350bn on energy imports while wasting more than €110bn worth of energy [Note: EU is halfway]. The EU decided that by 2020 it would get 20% of its energy from renewable sources and save 20% of its energy. Binding targets help focus policy makers’ attention and shape investment behaviours: they can be true engines of economic growth. The European renewable energy sector with its binding target and comprehensive regulatory framework currently employs over 1.5 million people, annual investment in the sector averages €35bn and represent over 60% of investments in new power installations. This contrasts with the energy efficiency sector: with no binding target and a piecemeal regulatory framework, the sector’s growth potential remains largely untapped and the EU is currently on track to achieve less than half of its energy savings target. In an effort to address this situation and make the case for an EU energy policy that puts equal weight on reducing energy use, energy efficiency stakeholders decided to join forces. They created The Coalition for Energy Savings , a gathering of 23 business, professional and environmental organisations. The Coalition believes that stepping up energy efficiency policy to deliver substantial energy savings is long overdue, and sees the new Energy Efficiency Directive as a unique opportunity for Europe to bring its 20% energy saving target within reach, putting it on course for a sustainable, ef-

ficient and renewable energy vision for 2050. Indeed, the Energy Efficiency Directive proposal, which tackles many of the barriers that stand in the way of energy efficiency, is the right place to do so. But as the Coalition’s assessment of the energy saving impact of the proposed efficiency measures, the Gap-o-meter, shows, the Directive as it stands would only close part of the remaining gap to the energy savings target (delivering up to 114.5 Million tonnes of oil equivalents (Mtoe) while the gap is 190 Mtoe). The Coalition believes that closing the gap is possible and that the energy savings target can be achieved if measures that will unlock investments are

strengthened and binding national energy saving targets that provide predictability and investment certainty are set. There is often talk of energy efficiency being the ‘low hanging fruit’ of the broader energy debate. While it is true, non-market barriers, like split incentives and perceived risks of upfront investments prevent energy consumers to pick the fruits Publicly organised financing and regulatory interventions have proven successful to overcome such barriers and leverage private investment. Efficiency obligations on energy suppliers as proposed in the EED generate stable investment and guaranteed energy savings by creating a market for energy efficiency

services and energy efficient goods. They are already being successfully implemented in 5 EU Member States, 3 States in Australia and 24 States in the US. The Coalition will build on its unique political and technical credibility provided by the cross-cutting nature of its membership to convince decision makers of the many benefits of energy savings and support policy makers in the design of policies that will save energy while stimulating growth. Throughout the legislative process around the Energy Efficiency Directive, The Coalition will organise a number of high-level events notably on the employment benefits and financial incentives of energy efficiency policies. It will act as a catalyst on behalf of its EU wide Members by raising awareness and building capacities to stimulate targeted regulatory action at EU level. Not only is energy efficiency the sensible thing to be focusing on at times of economic hardship thanks to the savings on energy use and energy bills, but it is also a key to stimulating the economy through investment and job creation. Earlier this year, the European Commission estimated that achieving the EU’s 20% energy savings target by 2020 would generate financial savings of up to € 1 000 per household every year, create up to 2 million jobs, and reduce annual greenhouse gas emissions by 740 million tonnes.

NEW EUROPE

11
December 2011

e shouldn’t invest in energy efficiency because it’s bad for economic growth”, Markus Pieper, Member of the European Parliament (MEP), recently said. All right, he was speaking in German and maybe the EU Parliament’s interpreters were having a tough day. But they can’t have got it completely wrong. He did say saving energy is a bad thing. Mr Pieper’s opinions are important, because he is the European People Party’s (EPP’s) lead MEP on the draft Energy Efficiency Directive (due to be adopted next year). And the EPP of course are the top boys in the EU Parliament at the moment, with a third of the seats. So presumably he represents the opinion of a lot of people. Pieper’s gaffe – for surely that’s what it is – is probably rooted in the instinctive association many of us have between energy efficiency and “rationing”. But energy efficiency has nothing to do with “rationing”. Quite the contrary. Saving energy will speed up economic recovery, not hinder it. Defending EU Commission analyses is not something any NGO watchdog does gladly, but in this case we have to say that the Commission has built up a solid case that saving energy is good for economic growth, jobs, the environment and lots of other important things. They call it

“less is more” and reckon, for instance, that the 20% by 2020 energy savings target will save Europe €220 billion every year. Let’s put that number into perspective. Le Monde recently added up the French government’s emergency economy measures for 2012. They came to annual savings of €11 billion. Now set this against France’s fair share of the €200 billion: more than two times more at

€25 billion per year. It’s common sense really, and Mr Pieper should have the savvy to see it. Improving Europe’s energy efficiency means cutting oil and gas import bills (we import over half of our energy). It means spending less to run a business and heat a house. Perhaps we can all – Mr Pieper, policymakers and NGO’s – agree in this case with Michael Douglas’s famous line in Wall Street:

“Greed is good, ladies and gentlemen”. Twisted morals, maybe, but it fits. Energy efficiency is the kind of greed that means warmer homes, less CO2 emissions – and more money to spend on other, more exciting or more useful things than energy. Can we agree on that, Mr Pieper? This article first appeared on the efficiency1st blog.

uropean energy ministers met in Brussels on 24 November amid the ongoing row over the introduction of binding targets for energy efficiency as part of the EU’s plans for a carbonreduced Europe for 2020. Ministers are gathering in the European Council to present a set of progress reports on how member states can best meet the challenge of reducing energy use by the end of the decade. Energy efficiency, one one of the key parts of the EU’s 20-20-20 plans for a carbon-reduced future, along with a 20% reduction in greenhouse gas emissions and a 20% increase in the use of renewables, has off-late being sidetracked from Europe’s climate plans in the wake of the financial crisis.

The European Parliament, currently processing a report on the subject authored by Green MEP Claude Turmes, is pushing for firm commitments; not only a legally-binding 20% efficiency target, but also a set of binding measures to help achieve that target. Effectively, this means obliging energy companies to change their business models, while at the same time finding a way to pay for energy efficiency adjustments without it coming from the government budget, as outlined in article 6 of the report. Certain member states, such as Denmark, and, to an extent, the UK, have done this, others, say campaigners, are simply failing to see the possible benefits for economic stimulation that a shift to more efficient business models can bring. In contrast to the parliament, the European council are rejecting the concept of both binding

targets, and binding measures, such as energy auditing, with even relatively sympathetic countries, like France, Germany and the UK, preferring to persist with their own domestic targets rather than see them expand on a European level. The commission sits somewhere in the middle, most likely favouring a binding target, but not so keen for binding measures. However, according to the commission’s own figures, between 108 and 118 million tonnes oil equivalent (mtoe) can be saved in 2020 alone with a 20% efficiency reduction. The problem is that EU member states continue to fail to see the benefits of such savings, and generally like the concept, but continue to fret over how they can be funded. Even the commission’s own analysis, which suggests gross domestic product goes up as energy

consumption goes down, largely falls on deaf ears, as governments focus on issues such as building renovation, and wonder how they can sell it to the public. Essentially, say those who want binding targets enforced, the commission is failing to make clear narrative links between each of its concepts, inadvertently allowing confusion to grow up around who is obliged to do what in the fight against climate change. It doesn’t help that both the parliament and commission are somewhat divided also. The Turmes report is currently considering amendments, and, following the passing of the 7 November deadline, no fewer than 1,810 had been received, a parliament record. The centreright EPP group, whose members are amongst the most critical and unsure of how to progress, have submitted the most; in once

case a single MEP put in 135 amendments with others submitting around 100 each. By way of contrast, the combined environment committee, which also has an input into proceedings, submitted in total 400 amendments for consideration. DG Energy is also divided on this, with commissioner Günther Oettinger, said to be essentially happy to go with what the member states want. Meanwhile, his Director-General, Philip Lowe, has been recently expressing his dissatisfaction with the situation. So far, there has been no date yet set for a committee vote, although most likely it will be before the end of January. After that, assuming the institutions go for a first reading agreement, trialogue discussions will begin in March. Adoption is not expected until 2013. This article first appeared on New Europe Online www.neurope.eu

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Amongst several false solutions on offer at the Durban climate talks, agrofuels are the most deceptive

arbon offsetting, nuclear energy, large hydroelectricity plants, carbon capture and storage, agrofuels. False solutions, all touted as convenient answers to the challenge of climate change. Their salesmen are out in force at the UN climate negotiations. But, whilst they all fail to address the problem, and divert precious investments and political attention from real solutions for curbing climate change and sourcing cleaner energy, agrofuels are one of the most deceptive – masquerading as ‘green’ but responsible for significant social and environmental damage, and higher greenhouse gas emissions to boot. Higher food prices and food price volatility, land grabs, displaced communities, deforestation and biodiversity loss are no longer worst case future scenarios, they are here and now. It’s no wonder that development and environmental organisations, including Friends of the Earth Europe, are up in arms about Europe’s plans to triple its agrofuel use by 2020. Here are some facts: • The World Bank estimates that in 2010, 21 to 35% of over 50 million hectares of land grabbed, mostly in Africa, was for agrofuels – with some of the world’s most vulnerable communities conned and dispossessed in the process. In Mali, of the 500,000 hectares of land recently leased or negotiated, more than 40% involved crops for agrofuels like sugarcane and jatropha: taking away land and water from food production in a country plagued by hunger. Poor smallholders with insecure land tenure, pastoralists, and indigenous populations are particularly vulnerable. Bad governance and irresponsible companies, yes. But,

also a consequence of our over-consumption and agrofuels demand. • Almost all analyses cite the boom in agrofuels, driven by political targets, as a major factor pushing both food prices and food price volatility upwards, spreading hunger. It stands to reason: the shock of expanding agrofuels creates extra demand on land and crops in an already tight supply and demand situation, strengthens the link between food prices and oil, and excites food commodity speculators. In June, the IMF, FAO, World Bank and seven other notable institutions concluded in their advice to the G20 that food prices are “substantially higher than they would be if no biofuels were produced”, such that “G20 governments [should] remove provisions of current national policies that subsidize (or mandate) biofuels production or consumption”. Brazil, Indonesia and Germany – all major agrofuel producers - we are told, were quick to shoot down this proposition when it came to the negotiations. • European Commission researchers calculate that over 80% of biodiversity will be damaged in areas of natural habitat that are converted to farmland as a result of EU agrofuels targets. Rapidly expanding the hectares of agrofuel feedstocks, like soy and palm oil, is a major

driver of deforestation in Latin America and South East Asia; soy and sugarcane are rapidly pushing the agriculture frontier into precious, wildlife-rich savannahs like Brazil’s Cerrado. • The EU’s targets to expand agrofuels will do little to reduce the growing climate impacts of Europe’s transportation – and, where they rely on biodiesels like palm, soy and rapeseed oil, will actually increase emissions more than normal fossil diesel. If the EU does not address the carbon accounting loophole from ‘indirect land use change’ in the Renewable Energy Directive the cost of carbon abatement with agrofuels would be around €2,500 per tonne of CO2. The 10% target for transport in the Renewable Energy Directive cannot with any sincerity be considered a climate mitigation measure. But wait. There are sustainability criteria to curb these side effects, right? Wrong. None of the documented effects above are currently prevented by the EU’s sustainability safeguards – which don’t even take into account major social problems or knock-on impacts, such as of the land rights of communities or higher food prices. Schemes that certify these ecocidal commodities as ‘sustainable’ only serve to mislead the public and defame the good name of ‘sustainability’. Funda-

mentally, the scale of demand is the problem. The only sustainable option for people and planet is to reduce our consumption of these commodities. It’s not hard to see why many of our decision makers are keen to believe the salesmen’s promises on agrofuels. They further subsidise Europe’s agriculture industry whilst offering the illusion of doing something green, without the need to confront the powerful car industry or Europe’s gluttonous driving habits. Arguably they may offer Europe some energy security – but only marginally, and at the expense of food insecurity. So what is to be done? Here the refreshing answer is that Europe’s demand for agrofuels is generated by a purely political fabrication: an artificial market that would not exist without subsidies or targets. Closing the carbon accounting loophole in indirect land use change, as hundreds of scientists have recommended, would help to make the policy more honest in its carbon claims and demote the most climate damaging feedstocks. A decision to drop the targets and subsidies would wean us off this false and distracting solution. Much cheaper and more effective ways exist to generate genuinely sustainable transport solutions that can actually reduce greenhouse gases. These must be pursued with urgency.

NEW EUROPE

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December 2011

Large-scale exploitation of unconventional gas resources such as shale gas in the US has had a dramatic impact on global energy markets, and there is strong interest in understanding its potential to play a similarly transformational role in Europe
he EU 2020 vision for Europe to grow out of the economic crisis is built in large part on a revolution in the EU’s approach to energy, described by the European Commission as “the life blood of our society”. Developing a fully-integrated, secure and lowcarbon internal energy market is now a mainstream objective of EU policy. To help this process, at the end of 2011 the European Commission will adopt an Energy Roadmap setting-out different scenarios for the path forward for Europe to build low-carbon, secure and competitive energy systems up to 2050. Given that almost 80% of the EU’s greenhouse gas emissions are energy-related, effective decarbonisation of Europe’s energy systems will be necessary to deliver the objective of reducing overall greenhouse gas emissions by 80-95% by 2050 (compared to 1990 levels). The pressure to get this right is considerable. Europe’s ability to meet the 2050 climate and energy targets will in large part depend on the policies and investment decisions of the next 5-10 years. The Commission’s own projections show that current energy policies – which stretch only to 2020 – will deliver barely half of the 2050 target. Earlier this year the International Energy Agency (IEA) posed the question as to whether we are entering a “Golden Age of Gas”. This question is particularly relevant to Europe. Gas, as the lowestemission fossil fuel, is certainly wellplaced to be the short-term beneficiary of climate change mitigation policies. However the longer-term outlook to 2050 is more uncertain. Supply disruptions, dwindling domestic gas production and an increasing reliance on imports - the Commission has identified that under a

business-as-usual scenario Europe’s import dependency for gas will rise to 7379% of consumption by 2020 and to 81-89% by 2030 - have up to now conspired to create lukewarm political support for gas, and thus one of the main focuses of EU policy is on supply diversification in order to secure its energy supply. Large-scale exploitation of unconventional gas resources such as shale gas in the US has had a dramatic impact on global energy markets, and there is strong interest in understanding its potential to play a similarly transformational role in Europe. Poland is the Member State which has granted the most exploration licenses.

Further explorations have been undertaken or are ongoing in Germany, Sweden and the United Kingdom, where shale gas resources have been found to be significantly larger than previously thought. And Spain has recently also revealed the existence of a gas reservoir capable of covering Spanish gas demand for five years. Shale gas exploration has proven highly-controversial, and Member States have very different positions on the issue. While France has imposed a moratorium, Germany is divided and Poland is enthusiastically pressing ahead. Indeed Poland, the current EU President, has called for shale gas to be designated a “common European project” to be prioritised under

the EU’s energy infrastructure development programme. The European Commission has avoided taking a firm position on shale gas. However it has commissioned a legal study to assess the appropriateness of the existing EU legal framework for unconventional gas. The study, originally due in October 2011 but still not published, looks at experiences in four Member States (Poland, France, Germany and Sweden). The Commission has also instructed the European Chemicals Agency (ECHA) to identify which registered substances (under the REACH Regulation) are used in shale gas exploration. And DG Climate Action has recently launched a call for tender to conduct a study "Climate Impact of Potential Shale Gas Production in the EU". The overall objective of this study, to be carried out in 2012, is to provide state of the art information to the Commission on climate implications of possible future shale gas production in Europe. A number of MEPs – including Environment, Public Health and Food Safety (ENVI) Committee Chair Jo Leinen – have called for EU measures to restrict or even ban shale gas exploration. Both the ENVI and Industry, Research and Energy (ITRE) Committees will draft owninitiative reports on shale gas. It can be expected that they will quite differ. The ITRE Committee will look at all sorts of aspects of shale gas, presumably taking a more balanced view towards shale gas exploration, based on facts and figures. And is that not exactly what Europe needs: An unprejudiced analysis of its resources, imported and indigenous ones, and their benefits? Shale gas cannot be ignored any longer. A scientific study commissioned by Polish think tank the Kosciuszko Institute comes to the conclusion that even if European shale gas exploration and production costs are 50% higher than in the US, gas prices may still be lower than with Russian gas, which currently accounts for a quarter of the EU's supplies. The decision whether to frack or not to frack should be made based on an objective assessment against certain criteria. Will it lead to decreased dependence on external energy suppliers? Will it lead to new markets, promoting competition and creating jobs? Will it help the EU to reach its low-carbon energy objectives? Provided these questions can be answered positively on the basis of sound cost-benefit analysis and on the basis of environmentally-sound exploitation, and provided a single internal gas market will be finally completed, shale gas could become a significant alternative to Russian gas supplies in Europe.

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December 2011

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Tapping into the abundant resources in
rojecting what the future has in store remains one of scientists’ favourite pastimes. The choices that Europe makes today regarding its energy mix will have a long lasting impact – as the International Energy Agency warned earlier this month, now is the time to act. Following the Fukushima crisis in Japan, Germany and Belgium have committed to a progressive nuclear phase-out and Italy has frozen its plans for nuclear energy development following a public consultation. As the International Energy Agency pointed out in its latest World Energy Outlook, natural gas, alongside renewable sources are becoming increasingly important to balance the European energy mix and fill the gap left by the expected drop in nuclear energy as a fuel source. In this context, the development of the Southern Gas Corridor (SGC), aiming to bring diverse energy supplies via a new transport route to Europe, becomes of paramount importance. Transporting gas by pipeline remains one of the easiest and most cost-effective alternatives and the EU is right to set this goal as a priority for diversification of gas supply. Tapping into the abundant resources in the Caspian basin will enhance European

the Caspian basin will enhance European energy security by providing an alternative to gas from Russia and Northern Africa

energy security by providing an alternative to gas from Russia and Northern Africa. Yet, to realise these benefits, it is important to choose the right pipeline for Europe. In the weeks before the year-end, the Shah Deniz consortium, led by BP PLC and Statoil, is expected to announce the winning project that will open this new route in the Southern Gas Corridor to transport the supplies from the Shah Deniz II field in the Caspian sea. The consortium is currently considering three pipeline projects, assessing criteria such as financial deliverability, operability, engineering design and scalability. The recently signed transit agreement between Turkey and Azerbaijan has

opened a direct route for the transport of Caspian gas supplies to the European Union, without the need for a dedicated pipeline. A milestone of historical importance, the agreement will facilitate the implementation of the Southern Gas Corridor and has only made the TransAdriatic Pipeline’s bid more realistic and pragmatic.

TAP is well-positioned due to its unique characteristics, above all, scalability. The only gas on sale today and available from Shaz Deniz II is 10 billion cubic metres (bcm) and this is the gas

that TAP proposes to bring to European consumers in the first phase. Yet, as additional gas volumes come on-stream after 2017, TAP is the only pipeline that can double its capacity to 20 bcm by simply adding compressors along the route. While bigger pipelines struggle to make their numbers add up TAP’s proposal is realistic, commercial and the most strategic option for Europe. That said, while supply diversification remains critical for Europe’s energy future, this goal should not be achieved at any cost. In today’s challenging economic climate it becomes more evident than ever that investments should be as costeffective as possible. The right pipeline for Europe should not require government subsidies, EU grants and, above all, contributions from the European taxpayer. From all the options currently on the table only one pipeline meets this requirement and that is TAP. It is heartening to see that more and more stakeholders understand this reality, and see the value in a smaller, cheaper and commercially sound alternative for opening the Southern Gas Corridor. With financial budgets under strain, practical and cost-effective projects should take precedence over grand, yet unsustainable dreams. Our security of gas supply depends on it.

NEW EUROPE

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December 2011

Since the beginning of the 2000s natural gas consumption in EU-27 has grown 14%, while production has been regularly dropping having lost over 36% or 64bn cubic meters over the past 10 years
he energy policy of Russia and Europe keeps surprising us. European officials have selected diversification of suppliers as their main target convincing themselves of the assumption that reducing dependence on Russian natural gas is the most efficient solution of problems of European energy security. Russian authorities are very much offended by distrust of the Europeans and suggest turning Russian energy supplies towards Asia, in particular China. Negotiations on natural gas deliveries to China through the Altai gas pipeline seem very symbolic in this regard. The matter is that it is to connect China and deposits in the Nadym-Purtazovsky district of the Yamal-Nenets Autonomous Area that have been the main resource base of our supplies to Europe over the past few decades. To call things by their proper names, it appears that the policy of the EU and Russia will directly lead to a catastrophe. Both the Europeans and Russians will lose. Let’s consider the risks of the EU and Russia. It is hard to say what the precise level of natural gas consumption will be in the EU in 2020. Let’s simply list the main drivers of growth in its demand. The first factor is the end of the “nuclear renaissance”. Germany decided to shut down all nuclear plants; if nuclear energy is fully replaced by natural gas, this will increase the demand for natural gas by 35 billion cubic metres in Germany alone. The second factor is a budget crisis in the EU. It questions plans of development of the renewables energy sector that rests on subsidies. Previously the EU maintained it following the end-justifies-the-means principle but now the European Union has to save on such expenses. Thus, many projects promoting energy generation on the basis of renewable sources will be cut. There are only four countries in the EU that can currently boast relatively serious level of renewable energy production (at least at the level of five million tonnes of oil equivalent): Germany, Spain, Italy and Great Britain. Spain and Italy are facing default; Great Britain is in a serious budget crisis that already triggered political unrest, while Germany is expected to become a financial saviour of Europe. Under such conditions they will have to forget about their

original plans on renewables development. The third factor concerns tougher ecological requirements that will make them decrease the coal industry contribution that will be substituted by the gas powered energy generation sector. Another important factor is the EU’s domestic gas production. It will be going down, which is a very alarming sign for the Europeans. Since the beginning of the 2000s natural gas consumption in EU-27 has grown 14%, while production has been regularly dropping having lost over 36% or 64bn cubic meters over the past 10 years. On the whole, that decrease was offset by growth in production and supplies from Norway. The total output in Europe and Turkey became less than 10bn cubic metres lower. However, Norway is not among world leaders in proven natural gas reserves – BP ranked it only 17th in 2010. There is a high possibility that already this decade Norway will be shelved. There is no ground for Europe to expect a possibility of imports of a shale gas revolution from the USA in the next decade. There are several crushing arguments against such an opportunity. There is no free land in the EU to conduct constant horizontal drilling. The EU does not have enough water for hydraulic fracturing. Finally, the EU will have to build infrastructure linking shale deposits to the gas supplies system. Shale gas may play its role but not in the next ten years. Norway may increase production by 2020 but not more than by 15bn cubic metres. There were big expectations concerning northern Africa, but the Arab Spring ruled

them out to a great extent. So, the output growth in northern Africa should not be expected. There is also Nigeria but its political risks are immense. No pipeline from this country will be laid in the next ten years; construction of new LNG plants has not been launched there either. Iran is under sanctions that will be lifted only after its political regime changes; however, the regime proved its steadiness and even the Arab Spring did not affect Iran. There are hopes for 15bn cubic metres of natural gas from Iraq that is starting to restore its oil and gas industry after the war. But this country needs natural gas to improve the domestic electrical energy production, which may consume the whole associated gas produced. It is doubtful that Turkmenistan will be connected through the Caspian Sea – otherwise this will mean serious drop in Russia’s influence in the Caspian Sea region (up to the level of completely ignoring its opinion) and withdrawal of China from this region that already considers Central Asian gas its own. Actually this is Central Asia where Europe sharply feels competition for natural gas against China, which may become a major trend in the next decade. This means that in reality only Azerbaijan remains out of all potential suppliers for Southern Corridor. This state can raise natural gas supplies by launching the second phase of Shakh Deniz. But this poses a lot of questions. Russia is also bidding for this gas suggesting a higher price. But Azerbaijan would like to have a direct access to the European market; besides, it counts on exchanging its

natural gas for Europe’s support in the Nagorny Karabakh issue. Yet, the potential of growth in Azeri gas deliveries to the EU can be estimated at 10bn to 15bn cubic metres. And it does not matter what pipeline project will be finally implemented. Europe does not want to resort to Russia’s services, which leaves it no choice but to consider the world LNG market. There are many speculations about LNG but not quite many investment decisions made. Over the past two years the LNG topic has been promoted mainly by Qatar. But Qatar decided not to make any investment decision on new projects until 2014. It is hard to predict what will happen after that. Now, let’s consider Russia. Swapping the European market for China is fraught with huge financial losses for Russia. China is not ready to pay the same price as the EU. Moreover, currently we are offering natural gas to China’s western provinces that do not really need it. They already receive gas from Turkmenistan; the two countries have recently signed a new contract on expanding supplies by another 25bn cubic metres. There is demand for natural gas in China’s eastern provinces where we originally wanted to deliver 38bn cubic metres but the East pipeline was gradually removed from the agenda of Russian-Chinese talks. Thus, the conclusion is rather simple. Refusing Russian natural gas will generate huge risks for Europe. Replacing the EU market with the PRC will create risks for Russia. The main task today is to avoid making a mutual mistake.

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December 2011

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arlier this year, in the European Parliament, I was honoured to address the European Energy Forum under the chairmanship of Giles Chichester MEP. For an American, this was both daunting in prospect and most pleasant during the event. My chosen topic was the same as the title of this short article and my first reaction was one of national pride that others should think we have an energy policy in the U.S. Not to be thrown off course by this compliment, I began to compare and contrast what has been happening recently either side of the Atlantic Ocean regarding energy, the environment, external dependency and economic recovery. In U.S. energy thinking, everything starts with oil: its cost, availability and growing import dependency. Looking at the trend in this graph, it is clear that something must be done to reverse it.

been ratified resulting, at best in our late arrival at discussions of the impact of greenhouse gas emissions. Then if you consider what any emission reduction policy would need - seeing it through is problematic simply because the U.S. has abundant coal and natural gas reserves, significant regional differences in renewable energy source availability and a transmission system that faces numerous and immense challenges to distribute renewable energy. Such a policy would mean high costs now and higher costs forever. Not an easy policy to set in times of economic recession and with significant elections every 2nd year. Perhaps the moral issue should be compelling since the U.S. has 5% of the world population and generates 25% of the global CO2 emissions. This figure shows how that situation has developed over the two centuries. A hard trend to reverse in a decade or two. The problem, however, is not just one of environmental morality. Certainly in

So it is hardly surprising that the U.S. Energy policy is built first on the need to decrease imported oil by: • Increasing automobile fuel efficiency standards • Increasing use of domestically produced biofuels • Substituting electrical and alternative fuel vehicles for petroleum fueled vehicles, and • Increasing domestic production of oil and natural gas Next in the priorities is to decrease costs of energy for consumers by: • Improving automobile fuel efficiency standards • Improving domestic appliance and building energy efficiency standards • Subsidizing improvements in energy efficiency

Finally, the policy is aimed at increasing the use of renewable and other clean energy by: • Increasing the use of solar, wind and geothermal energy • Increase the use of clean coal and • Encouraging new construction of nuclear power plants The attentive amongst you may have noticed no mention of CO2 reduction or any kind of carbon policy. That is no accident in the policy, nor is it a mistake on my part. In 2010, Congress was unable to agree on a legislative proposal to establish a policy on managing emissions of Carbon Dioxide and four years earlier they were equally unable to agree on a Renewable Energy Portfolio Standard for electricity production. Then, as we look at today and the future, it is clear that the national concerns over deficits are likely to dominate any consideration of new en-

ergy related expenditures. This has been and remains a sharp division between The White House rhetoric of what should be done and the ability to work with the United States Congress in order to implement specific actions. So now when I look at the energy policy initiatives for the European Union, I do see significant differences especially regarding environmental issues coming from energy options. So why have the two policies developed in such a different way? Perhaps this was born out of the way the EU embraced the Kyoto Protocol from the beginning in 1997 which was the same year The EU Energy White Paper included “Environmental protection at local and global levels” as one of its three pillars. Although the U.S. signed the Kyoto protocol at the end of 1998, it has never

the U.S. there are some significant problems to overcome in the electricity sector if Kyoto-encouraged policies are to be adopted. The decentralized electricity market is dominated by investor owned utilities which makes implementing policy changes difficult. There is also a trend in parts of the U.S. to a deregulated electricity market that has made it more difficult to build new generation. Finally, smaller market capitalization for many utilities makes major capital investments more difficult. So, in conclusion, whilst the EU energy policy seems to be environmentally based, that of the U.S. is clearly economically based. Major shifts in U.S. policy or new energy related initiatives are unlikely in the next 18 months due to the focus on economic issues in the U.S. and upcoming elections in 2012.

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December 2011

ith the end of the year approaching, it is time to take stock, look ahead and hope for a better future. At a global level, 2011 will go down on history as the year we realised we could no longer take energy for granted. With the United Nations poised to launch the International Year of Sustainable Energy, we can already foresee that in 2012 discussions will focus on clean energy and sustainability. As we get closer to 2020, the need to cut down on energy expenditure mainly by increasing energy savings is becoming even more pressing. If we look even further, we should already start laying the foundations for smart cities which are able to maintain and increase the level of comfort of their inhabitants while significantly cutting energy. But the 20-20-20 reductions target is nothing new. In fact, that clock started ticking long ago. However while the deadline may seem well into the future, it is just eight years from now. Will the EU be ready to achieve a 20% cut in emissions of greenhouse gases, a 20% increase in renewables and a 20% reduction in energy consumption in eight years time? If so, how? The future lies partly in technology. In this case, however, there is one important caveat. The technology able to contribute to energy efficiency gains is not a thing of the future; it already exists. We just have to implement it. The energy citizen In the quest to empower consumers to control their energy consumption, we need to provide them with the device which will allow them to effectively understand their use patterns and energy

expenditure. As Dr. Sarah Darby, research fellow at the Environmental Change Institute at Oxford University in the UK said, we are saying goodbye to the ‘energy consumer’ and encouraging the ‘energy citizen.” While consumers will be the bearers of change, if we are to achieve a safe, secure, sustainable and affordable energy supply for Europe regulatory support is paramount. Europe will not unleash its full energy potential until Member States modernise the energy infrastructure and take concrete actions such as accelerating smart metering roll out. The reasoning is simple: the achievement of all of these ambitious energy and environmental policy goals relies on the grid. The transformation into a truly “smart grid” depends on inserting intelligence to those sections that need it the most. Right now, the distribution network is blind from the substation to the home or building, yet everything that will allow us to achieve those 20-20-20 targets depend on having information and control exactly there: micro-generation, electric vehicles, and demand response The Energy Efficiency Directive proposal is a good start, but it needs to be more concrete in the areas of metering and consumer information. The proposal says that energy efficiency and consumer benefits should be taken into consideration when establishing minimum functionalities and deploying smart meters, but this is still too vague. European policymakers should take a practical approach and remove ambiguity. Legislation ought to ensure that the smart metering systems installed in Europe have the appropriate functionalities to promote and achieve energy efficiency increases. Otherwise, the maximum ben-

Legislation ought to ensure that the smart metering systems installed in Europe have the appropriate functionalities to promote and achieve energy efficiency increases
efits from deploying this technology will never be achieved. That is the beauty of smart metering, that as long as the system is equipped with the appropriate functionalities, benefits occur all along the value chain, from the generator, the network to the consumer. Regulators should continue pressing for technology which enables people to take an active role in controlling their consumption. Latest figures from a VaasaETT Global Energy Think Tank study on pilot projects around the world indicate that the display of almost realtime energy consumption data on inhome devices led on average to an 8.7% reduction in energy consumption. Lower but still significant reductions of 5%-6% on average were achieved through enhanced, more informative bills and access to usage data on websites. The different types of dynamic pricing mechanisms used in the pilots and roll–outs have all shown that energy loads up to 16% can be shifted (“peak clipping”) for the benefit of consumers and utilities. To make a real difference when it comes to reducing consumption and empowering consumers, the European Parliament and the Council should make the necessary changes to make the energy efficiency directive truly effective. Firstly, there should be a clear definition of smart metering and the functionalities that “benefit consumers and facilitate energy efficiency. The current EU legislation put requirements in place for Member States with regard to smart metering, but lacks a clear definition of what exactly is needed. Also, based on the information gleaned from the VasaaETT study, the requirements for consumer feedback on energy use and costs need to be sharpened. Feedback should be, as the EU regulators recommend, from two sources, but one of these should be direct feedback in the form of an In-Home Display, that gives accurate and timely information on energy consumption and costs. All these changes will help towards meeting the 20-20-20 goals. If reducing energy consumption is one of our New Year resolutions, we need the necessary tools to keep them warm all year round and not just when such pledges are in season.

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December 2011

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nergy is the key material basis for human survival and development. Upon entering the 21st century, profound changes have taken place in the global energy structure with matters related to global environment and energy supply, security, and efficiency becoming more and more pronounced. It has become widely recognized across the world that efforts should be made to increase energy efficiency, explore clean energy, protect ecological environment, and implement sustainable development. As a major energy producer and consumer, China is faced with grave challenges in securing supply, protecting environment, and addressing climate change as the country moves quickly in economic development. The Chinese government has made establishing a secure, stable, economical and clean modern energy industry as a key priority in the country’s 12th Five-Year Plan. According to the plan, efforts will be made on five aspects. First, conservation. We will accelerate the shift of economic and industrial structure, intensify the development of circular economy, increase energy efficiency, and put in place as soon as possible energy conserving and environment-friendly industrial structure, growth pattern, and consumption model. Second, diversification. In order to encourage energy complementarity, while we continue to pursue the orderly development

Looking ahead, China and Europe share a huge potential in energy cooperation. The combination of China’s 12th Five-Year Plan and Europe’s 2020 Strategy will create new spaces of cooperation in market, capital, technology and management
of traditional energies, we will also strengthen the development of renewable resources, steadily promote nuclear power generation, and work for moderate growth in alternative energy. Third, technology innovation. We will incentivise innovation and technological progress in the energy sector, step up the development of clean energy, and explore new avenues to develop energy resources. Fourth, environment protection. We will work actively to encourage the development of the energy sector in line with environment protection and promote an energy conserving and environment-friendly culture that attaches equal importance to economic development and environment sustainability. Fifth, mutually beneficial cooperation. We will strengthen cooperation with the international community on the basis of equality, mutual benefit and win-win progress. The European Union has a highly mature and advanced energy sector. As an important force in the international energy market, the EU plays an essential role in promoting clean energy resources and low carbon economic development. Over the last 30 plus years since the establishment of our diplomatic ties, energy sector has constantly remained the most important, active and effective area of cooperation between China and Europe. Our cooperation has demonstrated four distinct characteristics. First, a comprehensive mechanism. The China-EU Summit has played an important role in guiding the bilateral cooperation in the energy sector, and the China-EU Energy Cooperation Conference and the China-EU Energy Strategic Dialogue together constitute an effective platform for practical cooperation. Second, extensive coverage. Our cooperation covers strategic discussions, scientific research, technology development, practical cooperation, education and training. Government agencies and the private sector have forged a favourable partnership to make common progress. Third, effective results delivery. Through 30 years of cooperation in energy training programs, we have together trained over 5,000 people through eight training centres in China. Our cooperation has rewarded us leading capability in carbon capture and

storage and near-zero emission. The Clean Energy Center established through our cooperation will have much to contribute to energy conservation and emission cut. Fourth, mutual reinforcement. China’s cooperation with the EU and member states is complementary towards each other. The two sides have enjoyed substantial cooperation under the framework of ITER. Nuclear energy cooperation between China and France is constantly making head-ways, and collaboration between China and Denmark and others in renewable energies has created new highlight in our energy cooperation. Looking ahead, China and Europe share a huge potential in energy cooperation. The combination of China’s 12th Five-Year Plan and Europe’s 2020 Strategy will create new spaces of cooperation in market, capital, technology and management. Urbanization will certainly become a new area of growth in our energy cooperation. We are confident that as both China and Europe move to meet the climate change, our complementary strength will help foster new progress in the market of low-carbon technology and new energy. We believe that a fair, just, stable and orderly international energy market mechanism serves the fundamental interest of both China and Europe. Energy cooperation is an important bond to strengthen China-EU relations. China is willing to work more closely with Europe to upgrade practical cooperation in the energy sector and to deepen China-EU relations.

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ith $51.1 billion invested in 2010, a 30% increase in investment compared to 2009, China is now a central player regarding renewable energy. In particular in the photovoltaic solar sector, the overall production of models for this kind of power plants have exceeded the 8 GW (GigaWatts) throughout the whole 2010 year in China. Consequently, more than half of the total production of solar panels has come from China last year. This production volume is quite extraordinary, confirming that China's mentality is geared towards renewable energy and attests the emergence of an almost incontestable leadership in China. China's Five-Year Plan 2011-2015 also demonstrates that China is aiming to raise the proportion of renewable energy and is foreseeing to implement its 4045%carbon intensity reduction target first announced in Copenhagen and recently formalized in the Cancun Agreements.

It is easy to guess how important it is for the EU Member States to try to increase the cooperation with the Chinese collosus in the development of technologies with low energy consumption, in particular by investing in China
In the framework of the new Five-Year Plan, China will adopt a 17.3% energy intensity reduction target and by 2015 China should add 38 GW of nuclear power capacity (nowadays it is equal to 10 GW ), 140 GW of hydropower capacity (nowadays it is equal to 200 GW ) and 90 GW of wind power capacity. In order to achieve these targets China is preparing itself to launch a huge investment plan in the energy sector, which could inject an estimated $753 billion in the development of alternative energy in the next decade. It is easy to guess how important it is for the EU Member States to try to increase the cooperation with the Chinese colossus in the development of technologies with low energy consumption in particular by investing in China. China is indeed open to European investors. The aim is to attract investments from small and medium enterprises that have a strong expertise in the green technology sector in order to have an exchange of technological know-how, which is useful notably for improving environmental conditions. Indeed, if China keeps developing at the current rate of growth, the number of

vehicles on China's roads will more than double to at least 200 million by 2020. Moreover according to a study, if China's economy continues to expand rapidly and rely heavily on coal and other fossil fuels until the middle of the century, its power demands could exceed what the entire planet can withstand. This perspective leads both China and the EU to the conclusion that a new and sustainable model of growth is essential and should encourage European companies to have a stronger foothold in China's growing clean technology market. In this framework, the European Commission encourages the EU Member States to move towards the Chinese green economy by implementing a set of concrete actions such as the development of instruments or packages of policies which are meant to facilitate the settingup and the activity of European small and medium enterprises in China. Various bodies on the EU side play indeed a crucial role: the European Union Chamber of Commerce in China (EUCCC), the EU Chambers of Commerce and Eurochambers.

This article originally appeared in New Europe's - 2011 Greening Economies: China special edition

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y 2050, Asia will have more than five billion people, while the European Union’s share of the global population will decline from 9% to 5%. Annual economic growth in Asia over the past 30 years has averaged 5%. Its GDP is projected to increase from $30 trillion to about $230 trillion by 2050. The balance of power in the twenty-first century is shifting – in social, economic, and, arguably, political terms – from west to east. Western anxieties about a looming “Asian century” stem largely from the precedent of twentieth-century geopolitics, in which the West dominated lessdeveloped nations. But this dynamic is outdated, and Asia would suffer as much as the West from any attempt to emulate the British and American empires of the nineteenth and twentieth centuries. As Asian economic growth has increased, consumption in the region has also risen. Multinational companies and Western countries – both of which stand to benefit greatly from Asia’s increasing consumption – have encouraged Asians to aspire to a Western standard of living, with its high energy usage, electronic toys, and meat-heavy diet. Asian governments seem willing partners in this one-dimensional approach to development, and are eager to lead global economic growth. Yet it is neither desirable nor possible for Asians to consume in the way that Westerners do, and Asian governments should

But Western policymakers should not react negatively to these sorts of policy choices made by Asian governments, nor misconstrue them as anti-capitalist or anti-democratic
face up to this reality. In previous centuries, Western economic growth was characterized by a comparatively insignificant minority having unfettered access to resources, and was thus built on fueling consumption. This was, after all, the idea behind colonialism, which succeeded economically by underpricing resources or even obtaining them for free. But the planet simply cannot support five billion Asians consuming like Westerners. The earth’s regenerative capacity was exceeded more than 30 years ago, and we now use 30% more resources than the planet can sustain. Although we know this to be the case, the vast majority of Western economists and institutions continue to encourage China and India to consume more. Asian governments must reject this trend, but, having been intellectually subservient for so long, it is not clear that they will. Western governments, for their part, must stop being intellectually dishonest. Indeed, they must openly acknowledge the impossibility of supporting demands for ever-higher material consumption in Asia without irreversibly changing our planet’s climate and resource pool. Trade relations are far less important than establishing a dialogue between the West and Asia that addresses how to live within limits. For example, Western leaders concerned about climate change must understand that economic instruments like emissions trading are not a panacea. For Asia, resource management must be at the center of policymaking, which may include Draconian regulations, and even bans. Otherwise, resource shortages will push up commodity prices and create crises in food, water, fisheries, forests, land use, and housing, thereby leading to greater social injustice. The West must help Asia to challenge the idea that consumption-led growth is the only solution, or even a solution at all. And Asia must adopt three core principles to avert environmental and social crises. First, economic activity must be secondary to maintaining resources. Second, Asian governments must take action to

re-price resources and focus on increasing their productivity. Third, Asian states must recast their central role as being to defend our collective welfare by protecting natural capital and the environment. All of this implies that Asian governments will need to play a far greater role than officials in Europe or America in managing both the macro-economy and personal consumption choices, which will require very sensitive political choices regarding individual rights, as well as policies that powerful business interests – many of them Western – will resist. Asian governments will sometimes need to set strict limits on resource use – and have the tools to ensure that society respects these limits. They should begin, for example, by stressing that car ownership is not a human right. The debate about rights must emphasize constraints, not the utopian definitions of Western politicians. These policy options fly in the face of Western liberal-democratic orthodoxy. But Western policymakers should not react negatively to these sorts of policy choices made by Asian governments, nor misconstrue them as anti-capitalist or anti-democratic. The West must realize that its consumption-led economic system has exhausted the world’s resources, and that it is not a viable option for most Asian countries, whose governments must employ different political methods to create more equitable societies.

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n 1997, the United Nations Framework Convention on Climate Change (UNFCCC) adopted the Kyoto Protocol – an agreement among signatory states to reduce greenhouse-gas emissions. In 2012, however, the Clean Development Mechanism, a system of carbon credits in which each credit represents a country’s right to emit one ton of carbon dioxide (CO2), is set to expire. While policymakers struggle to extend it, carbon-finance specialists are seeking market-driven alternatives. Progress on the issue has stalled: at the last two UNFCCC conferences in Copenhagen and Cancún, members failed to arrive at an agreement on emission cuts. Reduction, or mitigation, of CO2 emissions is not easy. It is also expensive. The typical measures – carbon capture and sequestration (CCS), energy conservation, and greater reliance on renewable energy sources like solar and wind – are all costly enterprises, often out of reach for poorer countries, where air pollution can be a serious problem. But recent climate science may offer

Everyone wants cleaner air, but the costs of reducing air pollution are prohibitive in many parts of the world

hope. Research indicates that black carbon (the soot from inefficient combustion in stoves, fires, engines, etc.) belongs to a class of substances that have an extremely high global warming potential. In particular, black carbon absorbs sunlight and radiates heat, thereby melting ice and snow. Black carbon in the atmosphere also causes respiratory ailments, as Asian cities such as Shanghai, Bangkok, and Manila have shown. Fine soot particles can penetrate the upper defenses of the respiratory tract and settle deep in the lungs. Children, the elderly, and people with heart and lung diseases are at highest risk. These substances exacerbate climate change, but they linger in the air only for

short periods and are easy to remove. Black-carbon reduction thus offers developing countries an opportunity to mitigate climate change at a fraction of the cost of full CO2 reduction, while providing cleaner air for their people, simply by avoiding soot formation in engines, stoves, and other combustion devices. Moreover, Voluntary Emission Reduction (VER) credits are a potential new answer to the CO2 problem. VER credits are like carbon credits, but, rather than receiving funding from Kyoto Protocol sources, the private sector provides the financing. Driven by corporations and individuals tired of UN gridlock, VER credits offer an alternative way to pay for emission-reduction projects. Consider, for example, a Thai auto rick-

shaw or a Philippine jeepney, forms of public transportation used widely in those countries. Typically, these vehicles’ owners simply do not have the money to fix them. With VER credits, however, it is possible to fund the repair or replacement of defective engines as long as the emission reductions can be measured accurately. Several issues must be resolved to ensure the success of VER credits and the emission-reduction projects that they fund. First, procedures must be established that make these financial instruments acceptable in all countries. Second, there must be internationally verifiable measurement systems in each country that hosts a VER project. Finally, a technical standard on black carbon’s globalwarming potential is essential. Without internationally verifiable accurate measurements, the credits will be worthless. Everyone wants cleaner air, but the costs of reducing air pollution are prohibitive in many parts of the world. By providing a financial as well as an environmental incentive, VER projects make CO2 reduction more accessible to the world’s poorer citizens. Private individuals and corporations will have to initiate such projects; we can no longer afford to wait for the UNFCCC to do the job. Copyright: Project Syndicate, 2011

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Perhaps surprisingly, poor people also often end up paying more than the rich on their energy needs, both in terms of the proportion of their income and the time they spend collecting fuel

nergy for personal and productive use is vital for all people and is an important pre-requisite for the achievement of the Millennium Development Goals. 1.6 Billion people are thought to live without access to modern energy services; relying instead on traditional biomass which presents considerable respiratory health risks. Perhaps surprisingly, poor people also often end up paying more than the rich on their energy needs, both in terms of the proportion of their income and the time they spend collecting fuel. Renewables offer an important solution for the energy needs of poor communities. Not only are they cleaner burning (reducing respiratory health diseases associated with cooking) and more environmentally friendly, but many sources such as solar hot water heaters or small solar photovoltaic installations are actually cheaper over the lifecycle of the product than their fuel-fired alternatives. What’s more, the costs are not vulnerable to variable fuel prices and disruptions to supply. The most significant barrier to the wide-spread adoption of these technologies is their upfront costs. While they save money in the long-term, people find it difficult to raise enough funds to cover

the initial pay-out for the installation. This is why microfinance makes such an ideal partner for renewables – providing loans for the upfront costs that can be paid back over-time. In November at the European Microfinance Week, the European Microfinance Platform show-cased several projects from members that demonstrate the compatibility of microfinance and rural energy. Micro-lenders Micro-energy International (MEI) and ADA support microentrepreneurs in Peru by providing loans of between €100 and €800 for the purchase of clean energy appliances. The programme encourages the productive use of energy, for example; a small guest house owner in the small town of Callalli was able to take out a loan to buy a solar hot water heater, providing warm water for baths for their clients. This service enabled the guesthouse owners to increase their prices by 20%, helping them to pay back their loan and increase profitability in the long run.

MEI and ADA have also implemented projects that assist micro-entrepreneurs to purchase solar dryers for coffee production and improved cooking stoves and ovens. Another project, UNCDF’s Clean Start Programme started out as a carbon emission mitigation strategy, but having realised the economic benefits of renewables, the programme was reoriented towards supporting access to energy through pro-poor financial instruments. In additional to renewable energy, MFIs have also found other avenues for servicing environmentally beneficial products. For example, Madina, an MFI active in a mountainous area of Tajikistan, partnered with GIZ to initiate a credit programme for poor households to invest in house insulation. Villages in this area suffer winter temperatures of around -20 °C, requiring huge heating expenditures. Despite initial scepticism, villagers witnessed the long-term saving potential of the programme and are now queuing

up for insulation loans. Such success stories are notable in their achievement of the ‘triple bottom line’ – i.e. providing economic, social as well as environmental benefits. With the Green Climate Fund (currently being discussed at the Durban climate change negotiations) coming into play, Microfinance institutions should be looking for opportunities to attract funding and scale-up their activities in this area. Founded formally in 2006, The European Microfinance Platform [e-MFP] is a growing network of over 130 organisations and individuals active in the area of microfinance. Its principal objective is to promote cooperation amongst European microfinance bodies working in developing countries, by facilitating communication and the exchange of information. e-MFP members include banks, financial institutions, government agencies, NGOs, consultancy firms, researchers and universities.

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Historically, the shipping industry has been criticised for its lack of willingness to be a part of the solution to the energy problem contributing to climate change. However, this is slowly changing.
lthough around 90% of world trade is carried by the international shipping industry, only 3% of world emissions of greenhouse gases does the maritime transport account for. However, like the aviation industry, it does not have any targeted curbs on this pollution, an omission that green campaigners are fighting to change. A recent attempt by the EU to include the aviation industry in its Emissions Trading System has sparked a global 'dogfight' which include the US, China, Russia, India and Brazil. Nevertheless, it has yet to be seen whether a similar reaction would permeate if the shipping industry would be ushered into a scheme like the ETS. However, signs show that the industry is reacting positively to talks and negotiations, and is generally willing to reduce its overall carbon emissions. At the United Nations Durban Climate Change Conference, the global shipping industry took a definitive stance and joined with international nonprofit organizations to recommend that governments give the International Maritime Organization clear guidance on reducing emissions of carbon dioxide from commercial shipping. Although this is a positive step forward in the push to bind the industry to reduce its carbon footprint in the fight against climate change, perhaps more emphasis should be put on slowly eradicating the old ships and put on energy efficient design standards for newly built ships. This may be the only way to get the industry on board. Nevertheless, there are movements paving the way for focusing on the future of the shipping industry by looking at new ships rather than the existing ones. The International Maritime Organisation has already established international standards for energy efficient designs of new ships. Additionally, the Forum for the Future, which works with industry groups and government on sustainability, established the Sustainable Shipping Initiative (SSI). The SSI is a collaboration of NGOs and shipping-related companies working for the long-term economic and environmental sustainability of the industry. Recently, the SSI presented its vision for making the industry a more sustainable one by 2040. It pinpointed to four action areas, called ‘work streams’, which are: financing for new technology, reducing the life-cycle impact of ships, creating common standards for sustainable performance and promoting new innovations that will help transform the industry. All four areas have seen major leaps in the last few years, but the fourth one promoting new innovations – has been seen as the key to truly transform the industry and set it on a sustainable path.

Solar sail technology has been introduced to the shipping industry and has been the leading area for investment as it is seen as the most viable way to make the industry energy efficient. There have been many ideas and prototypes that show the innovative way of tackling the problem. For example, a Japanese company has come up with the concept of a solar sails propulsion system whereby giant solar panels are installed on ships. The company, Eco Marine Power Co. Ltd has called the technology the Aquarius Solar and Wind Power System. The system utilises the latest solar energy technology and computer systems, as well as several rows of solar sails that are installed on the deck of the vessel, positioned in such a way so as to make the most of the sun and wind energy. A prototype of the Aquarius solar sail system should be ready for sea trials by 2012. This system could pave a greener path for the shipping industry. Another example, but on a smaller scale, was launched by SolarLab in 2006. The Serpentine solar shuttle is entirely sunpowered, can carry 42 passengers, and has been operating on Lake Serpentine in the UK. SolarLab has another in its portfolio, the Constance, a solar shuttle operating on lake Constance, near the border between Germany, Austria and Switzerland. It carries up to 60 passengers at speeds of 15 kph.

The most interesting and logical, yet probably the most difficult to build and be effectively used, technology is wave-energy. This is the usage of wave action to produce energy. This technology would be latched on to the ship generating energy while being mobile with the ship. The recent unveiling of this technology revealed 50-metrelong ships that would harvest wave

energy via buoys attached to their sides by pivoting arms. While the hull remains relatively stable, the buoys would bob up and down on the waves, causing the arms to pivot back and forth and drive a generator producing up to 1 megawatt of electrical power. The batteries are planned to have a capacity of 20 megawatt-hours, so the ships would have to stay at sea for at least 20 hours for a full charge. Once their batteries were fully charged they would return to shore and feed the electricity into the grid. However, the next step for this technology would be to utilise the energy on the ship to make the ship more energy efficient with its emis-

sions. Nevertheless, by producing this energy and feeding it into the grid, at least the industry is contributing to reducing our insatiable appetite for fossil fuel based energies, and this has long term potential. Historically, the shipping industry has been criticised for its lack of willingness to be a part of the solution to the energy problem contributing to climate change. However, this is slowly changing as rising costs have forced it to look for alternatives, which would simultaneously help the fight in global warming. Just like our ancestors used the wind to steer their way to new shores, we are looking to abundant renewable sources to keep us going.

Photo: © Photoalto

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