Sixty-first General Assembly

Second Committee

Panel Discussion (AM)

PANELLISTS IN SECOND COMMITTEE STRESS SHARED RESPONSIBILITY IN UPGRADING

ENERGY SUPPLY CHAINS AS SOLUTION TO CONFLICT, ENVIRONMENTAL DEGRADATION

Discussion Also Focuses on Need for Renewable Sources, More Transparency

Uncertainty over energy supply had sparked conflict among countries and contributed to environmental degradation, but, those consequences could be overcome, if consumers and suppliers agreed to a more reasonable give and take, and if the world could learn to share the responsibility of upgrading energy supply chains and infrastructure, delegates to the Second Committee (Economic and Financial) heard today.

Committee members were participating in a three-hour panel discussion on “Energy security and its implications for the future” moderated by Jomo Kwame Sundaram, Assistant Secretary-General for Economic Development in the Department of Economic and Social Affairs.  The panellists were Daniel Yergin, Chairman and co-founder of Cambridge Energy Research Associates; Masanori Kobayashi, Senior Policy Researcher with the Institute for Global Environmental Strategies, Japan; and Kui-nang Mak, Chief of the Energy and Transport Branch in the Division for Sustainable Development, Department of Economic and Social Affairs.

Mr. Yergin, who said his firm focused on understanding the politics and economics behind the energy industry, said 50 per cent of the growth in oil demand was likely to come from Asia.  As such, China and India must feature more prominently in ongoing international discussions on energy security, since they had rapidly become two of the world’s biggest oil consumers.  More fundamentally, however, the international community must agree on what “energy security” entailed.  For countries like Japan and the Republic of Korea, the absence of energy resources made improved trade and investment a prime concern.  For China, whose cities must absorb around 20 million people each year, security meant having enough energy to sustain.  For the Russian Federation, it meant being able to control energy export routes, while for Western Europe, the concern was determining the appropriate level of dependence on Russian oil.  Meanwhile, major exporters like Saudi Arabia needed reassurance that there was enough demand for their oil.

He warned that, unless the problem was more clearly defined, the world could face one of three scenarios:  Asian nations would clash with those of North America and Europe; low economic growth would result in a severe public backlash against Governments around the world; or consumers and producers would develop a common framework of understanding, leading to a shift away from oil and towards alternative fuels.

“Safety in oil lies in variety and variety alone,” he said, quoting Winston Churchill.  Anxiety over dwindling oil supply was unfounded and improved technology, coupled with the expansion of oil reserves, was likely to lead world oil capacity to grow by 20 per cent in 10 years.  In addition, the trade in liquefied natural gas, now a fledgling industry, would double in six or seven years.

Another panellist, Mr. Mak, pointed out that, with so much focus on what some called the “disruptive” effects that China and India had on the energy market, those countries -- home to 25 per cent of the world’s population -- were merely doing what they must to catch up with the rest of the world.  The enormous growth taking place in those two countries still left some 2.4 billion of the world’s people without access to basic energy needs, including some 1.6 billion with no access to electricity.

The energy industry, controlled largely by developed-world companies operating in developing countries, must do better in sharing their profits, he argued.  Oil companies often imposed costs on their host countries without offering any compensation.  For instance, by failing to clean up leaks from oil pipelines, they harmed the natural environment of those countries.  The United Nations must discover a way to put pressure on those companies so as to uphold corporate social responsibility.  Among the positive aspects of the energy trade, however, was its role in helping to nurture some technology transfer.  China, India, Brazil and South Africa now had oil exploration and extraction capacities that matched that of developed countries.

Mr. Kobayashi noted that developing countries, especially in Asia, were beginning to show improvements in energy efficiency, although a high intensity of greenhouse gas emissions per gross domestic product was still a problem for some of them.  Furthermore, coal and oil remained the dominant energy source for developing countries in Asia, though it was likely that the use of natural gases would increase in the coming decades.

Pointing to a nexus between energy security and clean energy, he stressed the need to diversify energy sources, reduce greenhouse gas emissions and develop renewable energy.  For instance, Asia had great potential in the biomass industry -- fuel derived from animal waste – but, there was still room to capitalize fully on it.

He said that as a policy tool, the Clean Development Mechanism -- an arrangement under the Kyoto Protocol to the United Nations Framework Convention on Climate Change -- had seen only limited application among developing countries in Asia, which had much to do with the limited institutional framework there, as well as a lack of funds, among other problems.  Incentive schemes needed better promotion.

Following the presentation by the panellists, delegates from both energy-importing and energy-exporting countries took the floor, including the representatives of Iran and Kuwait, who both pointed out that unstable prices also affected oil-producing countries, not just importers.  Yet, the rest of the world paid little attention when oil prices plummeted.

As other delegates asked how renewable energy could be made more competitive, Ethiopia’s representative said his fellow citizens were among hundreds of millions of sub-Saharan Africans without access to energy, and demanded to know why so little incentive was offered to companies for the development of cheaper fuel sources.

Finland’s representative confirmed that only 14 per cent of the world’s energy supply was renewable -- a level expected to remain unchanged.  However, a number of European Union initiatives had been launched, and €220 million allocated to related projects specifically focused on Africa.

In response to that point, Mr. Mak said the issue lay not in renewable energy being “cheap” or “expensive”, but in making it affordable.  In some countries, wind and solar power, though costly, were used widely because their citizens could afford them.  To that end, the United Nations was exploring an inter-agency coordination mechanism focused on developing biofuels.  It would be led by the Food and Agriculture Organization (FAO) and involve the United Nations Development Programme (UNDP), United Nations Environment Programme (UNEP), the Department of Economic and Social Affairs and the United Nations Conference on Trade and Development (UNCTAD).

The representative of Luxembourg said that while oil prices continued to rise -- and influence all other energy prices -- major oil companies were reaping great profits.  Governments should work with oil and gas suppliers to correct that situation.

Mr. Kobayashi responded by agreeing on the need for clear political articulation.  What countries needed were national policies on energy security issues and the removal of barriers to international cooperation on such matters.

Mr. Mak added that when it came to the energy industry, countries were all “exploiting each other”.  There was a need to make the industry -- especially the oil sector -- more transparent.

* *** *

For information media • not an official record