The Pozna? climate negotiations should maintain “realistic” expectations and focus on defining the issues that must be addressed once the new US administration has taken office and all interested parties are sitting at the table, William Ramsay, formerly deputy director of the International Energy Agency (IEA), told EURACTIV in an interview.
William Ramsay is a former deputy executive director of the International Energy Agency (IEA). He is now a senior fellow at the Paris-based Institut Français des Relations Internationales (IFRI), where he directs the institute’s energy programme.
There is concern that falling oil prices will have an effect on the financing of energy projects. What do you think is going to be the impact on renewables projects?
There is a serious risk that it will be the same. There is a considerable risk that renewables, which already cost a premium per BTU or per kilo an hour, are going to be put under stress by the fact that credit becomes more difficult and government budgets become tighter.
All the conditions that could erode support for those low-carbon technologies are present. So it’s going to require fairly active government policy to find ways to avoid having a collapse in the support for the carbon alternatives because they need to be promoted in these early phases; promoted carefully, promoted smartly but promoted.
The current EU framework is still under discussion right now, but do you see it developing in the right way? Different ways of supporting renewables are being discussed, such as the use of ETS auctioning credits. Do you see major threats or no-go areas for policymakers, considering pressure from Polish electricity producers, for example?
I don’t know whether I can be particularly enlightening on that point. I know that we have gained a lot of experience from the ETS system. The Europeans have provided a major service to those of us interested in cap-and-trade: some of the traps, some of the pitfalls, some of the issues around auctioning and how much you auction and how you auction.
There are a lot of things that you need to get right or you convey the wrong signals into the market place. You can reward the wrong kind of behaviour. I can’t pretend to be an expert on those, but I think those who study these issues have drawn very good lessons and when we move on to the next phase of ETS and when we look to connecting ETS to other systems around the world, I hope we get those right. There are mistakes to be made.
Some have started making comparisons between the 1970s and now, in that back then very high oil prices suddenly tumbled, bringing to an end all the hype that there was over renewable energies at the time. Do you think this threat remains today or has the situation changed?
No, totally. That threat is out there. I really believe that there is a high risk that the incentives that we have been able to put psychologically into renewables and non-oil options are going to be lessened by the fact that oil prices are as low as they are.
Does that mean I think that oil prices should go higher? They are still higher than they were historically but are they high enough to achieve all of the policy variables that are at play out there, bringing on an incremental capacity of oil and gas, providing a stimulus to efficiency and to more economic use of that resource and providing some degree of stimulus to alternative fuels because we have to move into a de-carbonisation phase. Maybe you don’t want oil prices to do all of that, but you would like it to contribute or too low oil prices will operate to the contrary.
But we now have clear frameworks, at least in Europe, where we have a target for renewables for 2020 and a target to reduce CO2 emissions.
Targets are meaningless. I am really tired of targets. Targets that are out to 2020 or 2030 or 2050 are meaningless. Targets have got to have measurable way points within the political cycle so that the politicians who put these targets into place can be held accountable for whether or not they are being achieved. A 2020 target is meaningless. A 2010 objective, a 2012 measuring point, a 2014 measuring point, I’d look forward to that.
You said there is something beautiful about the financial crisis. Could you elaborate on that?
The issue that we were raising there was the efficiency of the US automobile fleet. There are technologies out there available to the big three that have been on the shelf that they are using in other countries. They have got vehicles operating in other countries that have tremendous efficiency.
Those things could be operating in the US economy and in US vehicles, even without necessarily standing down from the SUV that people find efficient because you can do so many things in the course of the day. There are ways to have SUVs that run much more efficiently than they do now. Why not hybrid SUVs or why not plug-in SUVs?
Let’s get on with putting the technologies that are there available on the shelf into the fleet and I should think the opportunity of the big three coming to the government for help, the pressure for climate change purposes and for other economic efficiency purposes, we have a perfect storm, an ideal crisis to allow us to move forward on that.
Such as raising taxes in the US?
No, not taxes. We have made the point that we have gone all the way down to 47-dollar oil before we began to see any reaction from consumers. You are not going to get consumers with taxes. You cannot pass a tax in congress because it is such an unpopular thing.
Unfortunately, even as much as I am a get-the-government-out-of-business in my attitude, I think the governments are going to have to regulate this issue and have to say simply: here are the fuel standards that we expect to see in automobiles, trucks, light trucks and light duty vehicles; these are the standards and they have got to be hard standards.
How do you see the Pozna? conference in December helping to shape an agreement that will help move towards these more efficient vehicles?
I hope the Pozna? agreement can begin to define clearly enough what issues need early decisions, so that when the new US administration is in place and a team has been fielded, everybody can be around the table.
I think the advances that have been made in building a dialogue with India, with China, with Indonesia and other countries are very important to having them at the table. They recognise their equities in this. They are not prepared to clean up the industrialised world’s mess, but they are prepared to participate in the future because they know they have a major stake in the future. You get the US into that context and you get a dialogue really focused on what needs to be done and when and broadly around the world.
Progress can be made, perhaps even as early as Copenhagen. Pozna? should keep its expectations realistic. Unfortunately, it is not ideally timed.
There is a lot of talk about technology transfer because we all know that the bigger challenge comes from the developing world. However, these technology transfers do not seem to be happening.
The very use of the word ‘technology transfer’ means that you are on the wrong path because there is no such thing as tech transfer. There are ‘tech-purchases’. People own technologies and we have to structure markets so that they are capable of buying the technologies that we need to move to a lower carbon environment.
If that means carbon incentives, if that means joint ventures, if that means manufacturing in country (whatever that may mean), whoever owns the technologies, they want to sell them and we need to create the conditions within which the major users in the first instance of coal and power generation will adopt those technologies because they find it in their interests.
How can this framework be put together very simply?
Simply, it can’t be put together. It requires that meetings like Pozna? define what the real issues are and get past some of the rhetoric.
We have spent a long time around the Kyoto protocol engaged in rhetoric and one-upmanship and virtuous posturing. Now, we have to get down to the issues. What are the impediments to the deployment of the appropriate technologies? They are in large measure financial, they are in large measure the price of the kilowatt hour in consuming markets. They are not virtual.