The way out of energy and climate change dilemmas

Providing energy to the poor does not make good business. Take electricity. Connecting the 2 billion in the world who do not have access to large fossil fuel-powered stations requires large investments in setting up grids. Moreover, the poor are not attractive clients -- many don't even have the ability to pay for the service. In India, expanding access has become low priority since the liberalisation process started in 1991

By Anju Sharma
Published: Saturday 31 May 2003

The way out of energy and climate change dilemmas

-- Providing energy to the poor does not make good business. Take electricity. Connecting the 2 billion in the world who do not have access to large fossil fuel-powered stations requires large investments in setting up grids. Moreover, the poor are not attractive clients -- many don't even have the ability to pay for the service (although this premise is questionable -- research indicates that they often end up spending more on alternatives to centralised supply of electricity).

In India, expanding access has become low priority since the liberalisation process started in 1991. Like all private investors, the World Bank, a major driver of the reforms, is more concerned with financial security of investments rather than expanding access. Bank conditionalities have focused on privatisation, elimination of subsidies, tariff rationalisation and establishment of electricity regulatory commissions. This is a global trend -- as governments step back to give way to private service providers without guiding policies to prioritise social concerns, expanding access becomes increasingly less important.

The issue of energy for the poor has become even more threatened with the realisation that use of fossil fuels, the major driver of development around the world, causes global warming. It has suddenly dawned on the developing world that meeting energy needs of the developing countries through use of fossil fuels -- which thanks to massive subsidies and investments are still the cheapest source of energy -- will lead to an increase in greenhouse emissions.

The poorest and most vulnerable people in the world thus face a terrible choice: do they want energy and development, or climate change which can cost them life and what little property and livelihood they have? They stand to suffer most from a problem that is not even their creation. The limited capacity of the Earth to absorb the harmful greenhouse gas emissions from fossil fuel has been used up by historical and current emissions of industrialised countries. Developing countries cannot enjoy the unrestricted fossil fuel-based growth that the industrialised countries have benefited from, and can soon expect to face serious curbs in the use of conventional energy technology.

This is really the crux of the problem, which should be the focus of the un Framework Convention on Climate Change (unfccc). Instead, the negotiations have been completely hijacked by the economic concerns of rich countries. Social concerns such as sustainable energy for the poor has been relegated to forums such as the Commission on Sustainable Development, which are not legally binding, and where complex changes in the world energy system are unlikely to amount to more than just talk. Ecological concerns -- to mitigate climate change and minimise impacts -- seem to have completely evaporated for the time being.

Ironically, the rising concerns for climate change and energy security in the West, post-September 11 and Iraq, could eventually lead to investments in decentralised energy technologies. There is already a perceptible interest in renewable energy technologies (rets) with several governments announcing targets. For instance, the uk has announced a target of 10 per cent renewables by 2010. The country is not on track to meet this target, for, as a House of Commons select committee pointed out, research and development is too low and market incentives to develop new technologies too weak. It will take a lot more to stimulate research and make rets commercially viable, but there are hopeful signs nevertheless.

Making sure that rets reach the poor, however, is a completely different ball game. It requires transcending national interests and rising above immediate profit-making urges of corporations, and prioritising needs of the have-nots. Such a vision may seem a laughable suggestion given the current political climate, but after all, a vision of what can be is most important at the most difficult and pessimistic of times.

To begin with, governments will have to drastically change their energy policies, and subsidise rets much in the same way that fossil fuels were and are subsidised, to make them affordable. Fossil fuel subsidies will have to be cut back, and replaced instead with taxes taking into account environmental and health impacts of using carbon-based fuels. Investments will have to be made in research and development of rets. Until these changes take place, industrialised countries will have to cut down their "consumption" of the global atmosphere -- a common property resource -- to make room for the poor in the developing world.

Industrialised countries will also have to give unprecedented support to developing countries by making renewable energy technologies available to them, and allowing them to leapfrog, instead of going through the incremental stages of environmental management that the Western world has been through. This would ensure that developing countries do not have to bear additional burdens, simply because a common resource (the global atmosphere) that could be used freely in the past by industrialising countries, has become scarce, and its use restricted. They will be taking an alternate, and possibly more expensive, path to development for global benefit and it is only fair that the costs are borne by all.

It is particularly important to ensure that the climate negotiations do not repeat the experiences of the Montreal Protocol, where an environmental negotiation was reduced to a business deal. Companies like Du Pont and ici, largely responsible for the problem of ozone depletion in the first place, were actually rewarded by the protocol and handed a global market for chlorofluorocarbons (cfc) alternatives, even though these alternatives were known to be ozone depleting -- only less so than cfcs. Meanwhile, developing countries will have to bear the cost of technological change twice under the provisions of the protocol -- once to an interim technology using hydrochlorofluorocarbons and then to hydrofluorocarbons or hydrocarbons.

There is a danger all this might reoccur in the case of climate change. Manufacturers in industrialised countries will rake in profits first by selling interim technologies to developing countries in the name of incremental improvements in emissions. The largest investment will be in energy technologies, which have a long life -- 30 to 50 years. Developing countries will then come under increasing pressure to take on reduction targets well before this. They will therefore have to junk these technologies before realising full benefits of their investments.

The other major issue is funding the shift to rets. There is an alarming trend today, where industrialised countries themselves are not willing to commit to any serious action to phase in rets, but are considering using funding conditionalities to force developing countries to make this shift. This is highly inequitable, and besides, such top-down approaches do not work. Such decisions have to be taken multilaterally, respecting everyones' development priorities.

The Clean Development Mechanism (cdm), which was to be one of the ways of facilitating technology transfer to developing countries, will not be effective in either providing funds, or in transferring renewable technology to the South. With the withdrawal of the us and Australia from the Kyoto Protocol, and new rules that allow industrialised countries to use forest management to sequester carbon to meet their commitments, the demand for carbon credits has fallen. This will now be almost entirely met by emissions trading with the "hot air" from Russia and Commonwealth of Independent States, and through Joint Implementation and domestic reductions.

As a result, the price for Certified Emission Reductions (cers) has fallen to as low as us $3-5 per tonne of carbon dioxide. After the reductions for the administrative expense of the cdm board, the 2 per cent for the adaptation fund, and the costs of validation and verification, developing countries stand to gain almost nothing. No surprises then, that there has been a very frosty response from governments in Asia to the World Bank's Prototype Carbon Fund and the Dutch Certified Emission Reduction Unit Procurement Tender programme. Anyway, such a low cost for cers will most certainly not pay the higher costs that are needed for renewable technology transfer, on a scale that is required to make any real difference.

The two billion in the world who lack access to electricity can therefore contribute to climate change mitigation by providing an ideal market for rets, but governments will have to work hard to ensure this by changing policies and turning the tide in favour of such technologies. Industrialised country governments will have to drastically alter their approach to technology and finance. Meanwhile, it is a challenge to the world's governments to view the energy and climate change dilemma from the point of view of the poor, who stand to be most affected from decisions taken on both, and ensure that it is not their right to development that gets trampled, to once again serve corporate interests.

Anju Sharma is Associate Director, Research, Centre for Science and Environment

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