G8 energy ministers meeting in Rome on 24-25 May called for continued investment in oil and discussed energy policies that will help weather the financial storm.
The impact of volatile oil prices on all energy sectors emerged as the most important topic on the table despite the intended focus on tackling climate change, according to reports from Rome.
The ministers’ agenda was initially geared towards addressing climate change by rallying investment in low-carbon technologies.
Bu they ended up urging the oil industry to invest in new capacity despite the financial crisis, Reuters reported.
The warning came as Saudi Arabia warned G8 ministers that oil prices could hit 2008’s record levels of close to $150 again within three years.
“We are aware that despite diversification strategies, fossil fuels will continue to be a key component of the energy mix in most countries, developed and developing, for many decades to come,” the ministers said in a statement.
The ministers found common ground on clean coal technologies, declaring their support for launching 20 large-scale CCS demonstration projects worldwide by 2010. They also endorsed the nuclear option, stating that a growing number of countries now find that it can contribute to both energy security and the fight against climate change.
IEA says support best given to renewables
The calls for energy investment came as a report from the International Energy Agency (IEA) showed that global energy investments were plummeting in the wake of the worst recession since the Second World War. In particular, falling demand in OECD countries has had a considerable impact on international oil, natural gas and coal prices, it argued.
The IEA estimates that upstream oil and gas investment has already been scaled down by about 21% compared to last year. Meanwhile, investment in coal could drop by 40% from the exceptionally high levels of the past few years, it said.
Renewables, however, are likely to suffer most from the credit crunch, the IEA argued. Investment slowed down last year after a record 85% growth in 2007, and could contract by 38% this year, it said.
The agency expects annual electricity consumption to drop for the first time since WWII, by 3.5% in 2009. Should the recovery take longer than expected and energy prices remain low, there could be a shift from capital-intensive power generation options like nuclear and renewables to coal and gas-fired plants, it says. Nevertheless, this depends on how different countries decide to support the various technologies.
To secure energy supply and to keep global warming at a sustainable level, the IEA called for a ‘Clean Energy New Deal’. Such a deal would seize the opportunity presented by the financial crisis to move permanently to a low-carbon society, primarily by increasing funding for clean technologies and energy efficiency.
Call for a green technology platform
The G8 ministers sought to accelerate the implementation of energy-efficiency measures by formally launching the International Partnership for Energy Efficiency Cooperation (IPEEC). The IPEEC was established in 2008 as a forum of strategic cooperation on energy efficiency, complementing the United Nations Framework Convention on Climate Change (UNFCCC) process.
“This partnership can help lead the world toward greater energy efficiency,” US Energy Secretary Steven Chu said. “It will facilitate greater cooperation on our shared goals: a healthier planet and a stronger global economy,” he added.
The G8 ministers also lent their support to creating a global low-carbon energy technology platform. “IPEEC is a major step forward along this direction,” they said in a joint statement with EU Energy Commissioner Andris Piebalgs.
It is hoped that such a platform would lead to convergence of international fora and initiatives. It would enable all countries to work out their needs for low-carbon technologies at both national and international level, and estimate what the costs of developing and deploying these technologies are, the ministers said.
The G8 ministers asked the IEA to make proposals for its design during 2009, focusing on “key technologies” such as solar and wind energy, smart grids, low-carbon vehicles, nuclear energy and carbon capture and storage (CCS).