We live in a global energy market that requires broad-based, global solutions. This is an opportunity for America to demonstrate our leadership in innovation and solve what is not solely an American challenge, but a global one. Open markets, expanded trade, and the elimination of tariff and nontariff barriers are necessary for a more resilient energy market and the worldwide availability of much-needed clean technologies, especially to aid developing nations.
To achieve immediate environmental benefits, we must find ways to share U.S. best practices and existing regulatory approaches to reduce air pollution wherever possible. We must exercise effective and consistent U.S. leadership to achieve a sound global framework to address the environment and issues associated with climate change. This framework must include all major emitting economies and be compatible with the economic aspirations of the world’s less developed nations, while looking after the well-being of the American people.
Recognizing that we live in a global energy market demanding global solutions presents a real opportunity for America to exhibit its innovation and provide global solutions. Energy security and climate change are by their very nature global issues. Energy is a fundamental driver of growth and development around the world, and the use of energy has been steadily expanding along with the world’s economies.
Our policies must recognize—indeed, embrace—the aspirations of people everywhere for economic growth, abundant and affordable energy, an improved quality of life, and a clean environment. IEA estimates that more than 1.5 billion people lack access to modern energy services. Providing these energy services is a priority for many governments around the world to lift people out of poverty.
Greater wealth and prosperity may enhance national security by providing the underpinnings of more peaceful, democratic, and cooperative relations. But they also bring increasing pressure on world energy markets, particularly markets for oil, on which most of the world’s transportation depends, and natural gas, on which a growing share of the world’s electric power production depends.
Tight oil supplies in the face of rapidly growing demand have led to an historic rise of world oil prices that could in the long run curb economic growth and adversely affect the U.S. trade balance. At the same time, some longtime traditional oil suppliers are facing declining production, and new replacements of conventional oil supply are lagging. Investments are needed to unlock new supplies of oil and natural gas and to improve or prolong the lifespan of existing sources. Attractive trade and investment policies that promote the expansion of oil and gas production capacity around the world are necessary to match demand in developed and developing countries alike.
Because oil and gas production is projected to become more concentrated in the Middle East, North Africa, and Central Asia over time, the risks to our economy and security will become more pronounced unless supplies can be enhanced, new supply sources opened, alternative fuels found and fostered, and the efficiency of energy use improved—both at home and abroad. At the same time, the security concerns associated with tighter energy supplies can be adequately addressed if nations diversify energy supplies and supply routes and increase the use of environmentally sustainable sources.
Tighter supplies also require greater protection of the infrastructure that ensures the transportation and delivery of energy around the world. The protection and enhancement of the global energy infrastructure has several major dimensions. It involves defending the free flow of oil and gas supplies around the world, over pipelines and sea lanes. It involves maintaining a robust emergency response posture to deal with oil supply disruptions, as both a deterrent to and a response to such disruptions. It involves strengthening and protecting the infrastructure of pipelines, terminals, and transmission lines over which oil, gas, and power are transported. This also means increasing nonproliferation efforts to significantly enhance national security.
The world has changed considerably since the establishment of many of the institutions that have a global focus on energy and environmental issues, including the IEA launched in 1973 and the United Nations Framework Convention on Climate Change (UNFCCC) launched in 1992. The old model of donor and recipient countries reflects neither the current state of affairs nor the future very well.
Indeed, significant transitions are occurring and will continue in world energy markets, especially in developing countries, that are changing the structure of energy markets dramatically. By 2030, global energy demand could be 50% higher than in 2005 (Figure 13), with the vast majority of this growth—roughly three quarters—coming from developing countries. The anticipated growth in energy demand from large developing countries is quite astonishing. For example, between 2005 and 2030, the increase in energy demand from China alone (88.1 quadrillion Btu) is expected to be nearly twice that from developed countries (45.0 quadrillion Btu).
This growth in energy usage is expected to increase global emissions of CO2. In many developing countries, providing citizens with energy services is a much more pressing need than addressing climate change and even air pollution, although the latter is changing rapidly as countries recognize the almost immediate benefits of reducing air pollution levels. Developing countries make up the largest projected source of future global GHG emissions, especially the large emerging economies such as China and India (Figure 14). More than 80% of the increase in CO2 emissions from energy between 2005 and 2030 is expected to come from developing countries. To be effective in reducing global emissions, therefore, any new international arrangement addressing climate change must include active participation from developing countries. In this regard, the Bali Roadmap that emerged from the UNFCCC talks in Indonesia in 2007 was a welcome development because developing countries agreed to consider actions that are measurable, reportable, and verifiable.
It is a simple fact that energy is needed to power economic growth and lift people from poverty, and much of that energy will likely be supplied by fossil fuels. Many developing countries have large resources of coal, natural gas, and oil, and it would be naive to believe that they will not use it. However, the increased use of existing and advanced new technologies can limit the environmental impact of using these fuels, reduce demand for them through efficiency, and provide alternate sources of energy. That is a goal all countries can share.
We have seen through the experiences of centrally planned economies and the Kyoto Protocol that top-down approaches do not work. The United States should work to promote a more bottom-up international approach to energy security and climate change that considers growing energy needs; sets realistic goals; ensures global participation, including major developing countries; promotes the development and commercialization of, and trade in, clean energy technologies and services; protects intellectual property; and maintain U.S. competitiveness.
The fact is that many countries—both developed and developing—find it difficult to reconcile addressing climate change and meeting increasing energy demand at an affordable price. Strategies that recognize these realities can raise the level of trust among developed and developing countries and win international support. Energy security must be viewed as a set of complex interlocking challenges. Energy requires us to tap our technological, political, financial, and security strengths in a new, coordinated approach.
We should look to capitalize on significant opportunities to work together with developed and developing countries alike to tackle the common problems of energy security, economic growth, air pollution, and climate change. In particular, voluntary sectoral partnerships should be pursued to enhance the effectiveness of emissions reduction policies and to engage emerging economies on a lower emissions path. Innovative financing and free trade in clean energy technologies, goods, and services also should be pursued vigorously, as should joint R&D of promising clean energy technologies. We must be equally clear that international or domestic climate policy should not be used as an excuse to erect barriers to free and open trade or as a way to gain competitive advantage or redistribute wealth.