This article is part of our special report European Business Summit.
Nobuo Tanaka, executive director of the International Energy Agency (IEA), urged world governments to ensure that stimulus packages aimed at restoring growth also embrace low-carbon technologies. He spoke to EURACTIV in an exclusive interview ahead of the European Business Summit, which opens today (26 March) in Brussels.
As the financial crisis dries up funding for energy projects, Tanaka called on governments across the world not to overlook the energy and climate crisis when devising economic recovery plans.
Speaking ahead of the G20 meeting in London on 2 April, he urged “governments worldwide to ensure that stimulus packages embrace low carbon technologies, what we are calling a ‘clean energy new deal'”.
Tanaka will be a speaker at this year’s European Business Summit (EBS) in the Belgian capital (26-27 March).
His comments echo pleas by socialists and the European Commission, who have called for economic recovery plans to promote the transformation to a low-carbon economy. In the United States, President Barack Obama pledged to create up to five million ‘green collar jobs’ during his campaign promises.
Risk of under investment
According to Tanaka, the world is facing a serious threat of under-investment in clean energies and risks turning to dirtier sources instead. “Reduced credit access makes capital-intensive projects such as nuclear and renewables more difficult to finance,” he said, warning that “lower energy prices make fossil-fuel power generation more competitive in comparison”.
“The current credit crunch, along with lower energy prices, could give a boost to coal and gas supply investment in the power generation sector, which would put us on a higher emissions trajectory than would otherwise have been the case.”
“One of the biggest dangers,” he said, is that the world could lock itself into dirty energy sources due to the long lifetimes of energy stock. Pointing out that power plants have an average lifetime of 60 years, he warned that the “consequences of investment decisions made today will be with us for many years to come”.
The IEA chief says he believes financial resources at a global level are sufficient to finance the projected $26 trillion in energy investment which the world will need to invest by 2030 to meet its growing energy demand. Although he said more of the capital will come from the private sector, he says “there will always remain a role for public money in the energy sector – particularly to develop projects needed to meet energy security and environmental objectives”.
Tanaka expressed his confidence that the energy sector will be able to mobilise the investment resources needed, saying it “has been able to mobilise the required financing in the past”.
However, he warned “it will be able to do so in the future only if financing mechanisms are in place, investment returns are high enough and investment conditions are appealing”.
“Today’s crisis is somewhat different from that of the 1970s. Currently, there is a temporary period of surplus in the oil market, but we should not be complacent. Investment needs to be sustained through the current crisis to meet renewed demand growth in the future.”
Developing countries urged to raise their game
Tanaka warned about uncertainties in the developing world, where the IEA estimates that more than half of global energy investments will need to be made if growing demand is to be met.
“The uncertainty about whether developing countries will be able to mobilise this level of investment is significant, particularly for Africa and India.”
“In most developing countries, power sector investment needs to rise well above current levels if we are to meet economic growth, environmental and social development goals.”
Pointing out that power utilities in the developing world are “often state-owned,” he said “investment capital typically has to come from the government and in the form of loans from multilateral lending agencies”.
And with the vast majority of energy demand growth in the coming decades due to come from IEA non-member countries such as China, he said developed nations must work more closely with developing countries to address energy security.
Asked whether the IEA itself was considering inviting China to join, Tanaka said: “Due to China’s increasingly key role in global energy markets, we are extremely interested in continuing to work closely and further build co-operation, when conditions permit.”
“The first condition would of course be China’s desire to join the IEA.”