G8 Summit. In Search of Energy Stability

Posted in Russia | 07-Jul-06 | Author: Dmitry Udalov

"Each of these alternative sources of energy is a locomotive of scientific progress."
"Each of these alternative sources of energy is a locomotive of scientific progress."
The upcoming summit of the Group of Eight (G8) is to be a notable event for several reasons. It will be the first G8 summit in Russia, a country whose policies are often opposed by many throughout the world. The agenda will deal with controversial global issues: Energy security, infectious diseases and education. In addition, top world leaders will inevitably discuss the world hot spots (Iraq, Iran, North Korea etc.). All of this will bring the world to focus in on the Constantine Palace on the outskirts of St. Petersburg.

This WSN newsletter outlines the major concerns to be discussed during the summit and will focus specifically on energy security.

The G8 is a unique forum whose credibility is sometimes higher than that of the UN. What began as an elite discussion club has evolved into an influential policymaking body. Thus, membership in this elite club entails significant political weight in the world. But in contrast to the UN Security Council, the G8 wasn’t formed solely on the principle of political weight; the G8 also symbolizes a set of values and principles – democratic ones – that distinct its members from other nations and are to be promoted by G8 members to the rest of the world.

Russian authorities also expect that the first G8 summit to be held in Russia will demonstrate Russia’s growing importance in the global arena and even its return to the world stage as a renovated superpower capable of solving problems at an international level. This can be explained by Russia’s steady development as a G8 nation from being invited as a guest in 1991 to now presiding over this club in 2006.

Originally, the USSR (now Russia) was invited to the Group of Seven(G7) summit at the end of the Cold War to support its democratic transition. Russia’s dialog with the G7 began in 1991, being invited to the "G7 plus 1" meetings and its admission to what is now known as the G8 in 1997 was an attempt to enforce Russia’s reforms by integrating it into this group of the most powerful democratic nations. At that time, the West couldn’t offer anything more significant then G8 membership and the Kremlin accepted the invitation with pride and a growing sense of self-importance. But membership in the G8 is not only a privilege. It is also a responsibility - a difficult one for Russia, primarily due to the poor state of its own economy and political system. For example, Russia was officially excluded from discussions on financial matters, as its own financial situation was in great demand of foreign help. Only in 2003 was Russia first allowed to enjoy full membership and discuss all financial issues as an equal partner.

Dmitry Udalov is Editor Russia of the World Security Network and Assistant in the Department of Economics in the Institute…
Dmitry Udalov is Editor Russia of the World Security Network and Assistant in the Department of Economics in the Institute for US & Canadian Studies of the Russian Academy of Science in Moscow: "Global critical dependence on fossil fuels must be a matter of serious concerns."
Gradually, Russia has gained experience and trust within the G8. The G8 Global Partnership Against the Spread of Weapons and Materials of Mass Destruction launched during the 2002 summit in Kananaskis was perhaps the best way for Russia to contribute to G8 initiatives and to gain valuable international support (in addition, this program is also aimed at the reduction of Russian arsenals of biological and chemical weapons).

Since the Russian economy started to improve, Russia has become more determined in writing down its debts and donating money to developing countries. Russia tried to push its own initiatives in countering terrorism, poverty and organized crime. Russia has supported all G8 positions regarding ecological issues. Russia has increasingly become an important member of the G8 since joining 9 years ago, and Russian participation in G8 summits has become more credible in terms of foreign financial help, new initiatives and programs.

We shouldn’t expect quick solutions from any G8 summit as the issues discussed are very complicated. Not all G8 initiatives are easy to implement even if consensus was achieved. The summits are designed to outline world hot topics and promote global discussion on how to solve them. This year, it will be very difficult to gain a consensus or even a common view on a number of issues, but primarily with regard to energy. However, it is excellent that behind the safe doors of the Constantine Palace ,world leaders will have an opportunity to speak freely and exchange their views even when these views are sometimes very different from one another. In particular, this open way of discussion among leaders is the main advantage of the G8, while other world forums lack this non-biased, direct way of discussing tough issues.

It makes some analysts propose that the G8 plus China and India might form a new powerful political body - more efficient than the UN. In a way, this process has already begun as we expect strategic policymaking from the G8 rather than from the UN. The theory of separation of powers helps us to come conclude that the UN and the G8 might balance each other and be mutually complementary. The point is that the G8 is an efficient but not institutionalized organization. This prevents it from being the chief responsible body in world affairs, whereas the UN is over-institutionalized but less efficient. Thus, the advantage of one organization is a disadvantage of the other. So why not let them supplement each other?

Perhaps the G8 plus China and India could have enough capabilities to form a shadow world government together with the IMF and the World Bank. But the mechanisms of the G8 are consensus and confidence. With China and India, consensus on critical issues would be almost impossible and real confidence among China’s dragon, the US hawk and the Russian bear is not likely to be true.

On the other hand, the vacuum of UN ineffectiveness must be filled. The G8 according to its past and present activities is the best body to do this. So in the near future, major global political decisions should be discussed within the G8 framework rather than in the UN.

Energy

The situation in the energy sector is a matter of global concern. To draw political conclusions, one has to analyze energy data and figures. If we want to see the clear unbiased global energy picture, we must face some truthfully painful data. Although there are a lot of analytical agencies that monitor the situation in the energy sector and there are a great number of figures and analytical reports, their assessment usually differs greatly. Thus, the lack of information in itself is one of the menaces to energy security. Today we don’t have totally true information on energy reserves, consumption and production. This keeps the stock market unstable and misleads state authorities when they decide what strategic steps to take to define state energy policy. In this report, figures from various sources will be used. However, the point is not to give the reader the precise numbers but to outline the scale of problems we face in the energy sector.

World history can be seen from an energy dimension. Global energy crises forced humans to find new sources of energy and thus to revolutionize everything from all kinds of mechanisms to lifestyle. The use of wood and fire enabled the creation of civilization out of wilderness. The wood production crisis in medieval Europe led to the discovery of coal which created the industrial world. The use of oil forms the basis of our modern society of mass production.

As our energy appetite grew, old sources were unable to satisfy demand. So we passed through several energy transformations. Each of these energy shifts from one dominant energy source to another was very complex and difficult. They influenced not only the economy but the political field as well. Those energy transformations promoted the growth of some nations and the weakening of others. If it had not been for coal, the British Empire and its global dominance in the 19th Century would have been impossible. Another example is the US, which rapidly accelerated its development with the beginning of the massive use of oil in the early 20th Century. The collapse of the USSR was accelerated by the rapid fall of oil prices in the 1980s.

Though one can find a lot of reasons for the rise and fall of great powers, energy undoubtedly has played a sufficient role in this process. The point is that in the near future, we are likely to enter the next energy stage as our present sources of energy are unable to satisfy our future needs.

Present energy paradigm

Throughout the 20th Century, global energy consumption grew constantly, having increased 14 times up to 13,5 billion tons of coal equivalent (TCE)i

Energy consumption started to increase dramatically in the 1960s, growing by 2 billion TCE per decade. From 1950—1960 the increase of energy consumption was 0,8 billion TCE, from 1960—1970 — 2,1 billion, from 1970—1980 — 1,9 billion, 1980—1990 — 2,1 billion, 1990—2000 — 2,7 billion. Visually this can be seen on diagram 1.ii

As we see, the rate of energy consumption growth was 2,5(!) times higher than world population growth for the same period; thus, energy consumption per capita increased rapidly.

By the mid-1970s, energy growth didn’t experience serious difficulties. This was possible due to cheap oil production promoted by transnational oil corporations. As they controlled oil production, transportation and refining, these corporations were interested in the rapid increase of oil production and kept oil prices low.

The era of cheap energy ended in the mid-'70s not only because of the Arab embargo but also due to a number of systematic reasons. An oil price increase of nearly tenfold was a real shock but it forced Western economies to look at energy from a completely different angle and work out a great number of energy saving technologies and practices. Thus technology has become an additional energy source. As a result, after the first oil crisis GDP growth of developed countries started to exceed energy consumption – an important factor for sustainable development. It helped to ease the situation in the energy sector and throughout the 1990s we didn’t see rapid energy shakes.

But step by step, a new tendency emerged in the late 1990s. Rapid economic growth in developing countries provoked increasing energy consumption. China has become the locomotive of oil consumption growth. Its energy demands grew about 10% annually, compared with a world average growth of 2%.

"Natural gas is likely to be a dominant energy source by 2025."
"Natural gas is likely to be a dominant energy source by 2025."
While OECD countries share in global energy consumption, their share has decreased from 61% in 1973 to 51% in 2003. China increased its share from 8% to 12,5%, other Asian countries from 7% to 12%, Middle East countries from 0,9% to 4%iii. This tendency is on the rise. It indicates that there are more and more serious players to bid for world energy resources.

At the same time, the geographic distribution of world energy consumption reflects and proves the theory of the so called “golden billion.” A sharp contrast in regional energy consumption is one of the most evident features of the modern world. Developed countries with a total population of approximately 1 billion consume 9,6 billion TCE. The remaining approximately 5 billion people in the world consume 4 billion TCE. The average US citizen consumes annually 8 TCE, Canadian 7,8 TCE and in France 4,2 TCE. Experts believe that 3 TCE is enough to satisfy a minimum level of comfort. But reality shows us that in developed countries (especially in North America), energy consumption is far beyond rational standards.

Developing countries try vigorously to reach those standards and the world community is likely to support them in their move for a better life. There are simply not enough energy resources on our planet for everybody to live as an average American. If everyone consumed the same amount of energy as an American we would have needed at least twice as much energy as we consume today. Our present sources of energy can’t provide us with that luxury and even if they could, it would have been the greatest danger to our environment.

But developing countries do whatever they can to enhance their energy production, not caring about its effectiveness, future needs and the effect this has on the environment. While developed countries were forced to work out and implement energy saving technologies whenever it was possible, developing countries today are ignoring the experiences of developed countries, trying to gain as much energy as possible to support their economic growth.

G8 leaders seek to work out mechanisms to make developing countries follow their policies of rational consumption and use technology as their additional source of energy. Otherwise, extensive energy consumption will continue to jeopardize energy stability.

Coal, oil, natural gas - what’s next?

If we look at the structure of global energy consumption, we will notice that we are completely dependant upon fossil fuels: Coal, oil and natural gas. It can be explained by the relative cheapness of their production, transportation and use as well as relative safety. But is this structure ideal? The creator of the periodic table of elements – one of the greatest chemists – D. Mendeleev used to say that "burning fossil fuels is equal to burning banknotes." Why?

Structure of Global Energy Consumptioniv

It took millions of years for nature to transform uncounted billions of kilowatt hours of solar power into highly concentrated and exceedingly useful forms — coal, oil, or gas. Thus when we burn them we reverse the photosynthetic process, producing water and carbon dioxide and releasing this stored — and very old — solar energy.

But nature's method of storing solar energy as hydrocarbons is not terribly efficient: The average leaf converts less than 1% of the solar energy it receives into chemical energy in carbohydrate form, and more than 90% of that stored energy is lost during the long process by which carbohydrate is later cooked into coal. Oil and gas are even less efficient: Less than a tenth of 1% of the energy contained in the original ocean plankton winds up in the oil or gas we extract from the groundv. As a consequence, it takes many hundreds of thousands of watts of solar energy, accumulating over many years, to produce the energy stored in a gallon of gasoline. Still, even grossly inefficient systems can, over hundreds of millions of years, put away a great deal of energy. Fortunately for us, if humans hadn't found such an accessible and concentrated form of energy our industrialized civilization could never have come so far so fast.

But getting all our energy this way entails great disadvantages. First of all, the supply of hydrocarbons is finite. In less than 150 years, we have managed to use up much, if not most, of an energy source that took several hundred million years to store. Secondly, burning hydrocarbons produces a whole host of noxious substances, ranging from sulfur, which destroys forests, to carbon dioxide, which has serious climatic consequences. Thirdly, hydrocarbons, for all their concentration and convenience, are not the most efficient energy carriers. The problem, it turns out, is the carbon. Carbon binds with oxygen and releases energy during oxidization. But pound for pound, carbon actually carries less stored energy than hydrogen does.

So the strategic exit out of an energy gridlock is to use pure hydrogen. So called hydrogen fuel cells are designed to get energy out of a chemical reaction between hydrogen and oxygen. As a result, fuel cells produce nothing but water vapor and are viewed as the key to a prosperous future. Since the early 1980s, engineers have worked hard to make fuel cells commercially effective. Though we may notice some optimism in the plans of some car producers concerning the use of fuel cells in the near future, we have to admit that a lot must still be done in order for fuel cells to be able to replace fossil fuels.

"Rapid economic growth in developing countries provoked increasing energy consumption"
"Rapid economic growth in developing countries provoked increasing energy consumption"
Yet the strategy of changes in energy sources is clear: COAL – OIL – NATURAL GAS – HYDROGEN. And while hydrogen fuel cells are still our cherished dream, natural gas has been named a “bridge fuel.” Natural gas is likely to be a dominant energy source by 2025. In many respects, the rise of natural gas matches that of oil half a century ago. It is now the abundant fuel: By some estimates, we have enough proved reserves to fuel the world for half a century. Siberia, Iran, Qatar, Saudi Arabia and Nigeria are the regions of strategic significance in terms of natural gas.

Natural gas is very versatile. It can be used in everything from power plants to gas-powered transport. It can be converted to liquid fuels and thus transported over distant ocean routes. But its main advantage is that it contains less carbon than oil and coal so it emits less pollution and CO2. It also helps to refine natural gas to pure hydrogen to power energy technologies of the future. For these reasons, natural gas was named a “bridge fuel” as it can simultaneously power much of our present needs and future power systems.

As for other non-fossil energy sources like nuclear energy and all kinds of alternative sources of energy, it is clearly seen on the table that on a global scale, their role is very unlikely to become a dominant source in the near future. But their usage in developed countries must be a clear example for the rest of the world. Besides direct energy output, each of these alternative sources of energy is a locomotive of scientific progress that can be applied not only in the energy sector. Thus, G8 countries must keep their technological leadership in alternative energy production and persuade other countries to follow their example.

Nuclear power is likely to increase its importance in near future. The US, China, Russia and other countries in their recent energy doctrines have emphasized the development of nuclear energy and the construction of new plants. While nuclear energy in theory is the most rational way known to humanity of getting energy in big quantities and it is an important chain in further scientific development, the final price of energy is relatively high. This is not only due to costly safety measures and accident prevention appliances. The point is that no one has ever tried to utilize a nuclear station, as we don’t possess that technology, and knowledge we have makes it extremely expensive. Today it is the major obstacle for the successful development of nuclear energy.

Recommendations

In dealing with the outlined major energy tendencies and facts, the following recommendations might be useful:

  1. As energy has become an indicator of economic and political wealth, more attention from different angles should be paid to this issue
  2. Global critical dependence on fossil fuels must be a matter of serious concern
  3. Science and technology are the keys to diminish that dependence. Governments are to help scientific institutions in dealing with energy problems as it is a matter of public concern
  4. There should be measures taken at the international level to provide transparency in the energy sector
  5. Clearness of data and figures is crucially important for the predictability of the situation in the energy sector
  6. Developed countries should persuade developing states to implement rational, technological and ecologically friendly energy policies
  7. Global technological cooperation must be enhanced to avoid energy gridlock in the near future

i Tons of coal equivalent (TCE) - is a unit of energy with the energy release of 7,000,000 Gcal per 1kg.
ii “Energy – facts and figures” – Ministry of Energy of Russia, 2005
iii Key World Energy Statistics -- 2005 Edition, International Energy Agency
iv Global Energy Report http://geo.1september.ru/articlef.php?ID=200203103
v “Buried Losses: The Journey from Plant to Coal”

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