Energy: Are There Limits To Growth?

By Sergei Martynov, Minister of Foreign Affairs of the Republic of Belarus

Article to the challenges of future energy supply. (This article does not reflect the thoughts or opinions of the Austrian Energy Agency.)

In 1972, the Club of Rome, a famous global think tank, released its report entitled “Limits to Growth”, where it predicted that the world would run out of oil in the early 1990s. Fortunately, this dire forecast has not materialized. Nowadays, more than a quarter of a century after the report has warned about the impending resource predicament, we continue to try to discern beyond the horizon when the world will finally run out of fossil fuels, and whether the humankind has already passed the peak in their consumption.

Indeed, there is much uncertainty about how the energy situation will evolve in the years ahead. Various studies offer different scenarios. Some sound more optimistic, others – less. Yet, nearly all of them almost unanimously recognize that were the world economy to expand, the need for fossil fuels will only be growing in the coming decades.

Therefore, the conundrum of the global economic system that the “Limits to Growth” has posed – how to manage the finite natural resources if the survival demands an infinite use of such resources, is yet there for us to solve.
I. Energy Transforms International Politics: Global Paradigm Shift

Much has been said and written in recent years about how the issue of energy transforms contemporary international politics.

As a matter of fact, even throughout the past century energy has been a very useful and significant element of political and economic leverage. Great powers came early to realize that they could not fight total wars or emerge victorious unless their industrial economies were underpinned by sufficient energy resources.

Many would agree that scarce energy resources available to Germany and Japan during WWII were one of the serious factors that led to their ultimate defeat from their better resource-endowed adversaries. It was the consideration of energy that compelled the United States to set a permanent foothold in the Gulf in the wake of WWII, lest its bipolar rival should gain access to the region’s riches and achieve strategic superiority.

By the end of the XX century, as some political analysts point out, the Soviet Union disintegrated at the moment when the nominal price of oil dropped down significantly, thus contributing to economic bankruptcy of the USSR. The resultant paradigm shift was the end of the bipolar world, significant geopolitical changes and realignments around one polar. Of course, in this particular case energy was not the very and only important factor accounting for the collapse. Other factors, like ideological and political bankruptcy seem to have been not less significant.

Nowadays, the situation advanced fathoms further. It is energy, more than any other factor, that makes the world undergo another paradigm shift – from the unipolarity to a multipolar world.

China and India have been benefiting from globalization for some time. The two Asian giants have managed to ensure stable and high growth of their economies. One cannot but agree that their further economic development requires increased use of energy, while both Asian giants are not so much endowed with the resources thereof. Hence, the growing energy demand in China and India has emphasized the role (and revenues) of those countries that possess such resources. Against this background, the accentuated growth of both groups of states has been accompanied by the relative decline of the United States, whose stature in the world has been seriously undercut by some poorly-conceived foreign and domestic policies, as well as by failure to handle the growing dependence of its economy on imported energy.

Thus, the global playing field now seems to be more or less leveled – the new Asian economic giants, the energy powers, and the gradually loosing its influence hegemon – all came to constitute vital power centers in the new world of today.
II. Energy Transforms Domestic Politics: Legitimacy of State at Stake

It would be wrong to assume that energy transforms only international politics. Energy is also becoming a crucial issue for each and every country in terms of its domestic politics.

In the second half of the XX century states underwent significant changes in their nature. The perception of the role a domestic society should play within a state altered, bringing in a new notion of a country itself.

A modern state’s legitimacy in the eyes of its own population and partners abroad does not depend anymore on its ability to conquer or successfully fight other states.

The basis of the modern state’s legitimacy is its ability to create a living environment conducive to a consistent improvement of its population’s well-being.

A modern “consumer society” has got accustomed to high and steadily improving living standards and is widely opposed to any distempers like economic hardships, wars and human losses, which may undermine a satisfactory pattern of life.

To maintain such a pattern the state should continue to improve the context that allows for domestic economic growth and realization of other collective and individual opportunities of its population.

All this is hardly possible without securing access to sufficient energy resources. Otherwise, the state may fail to implement its welfare tasks and is risking to lose legitimacy. Further evolution of such scenario may trigger even more negative consequences, i.e. economic collapse, conflicts in the society, explosion of domestic crime, emergence of refugees and displaced persons, spill-over effects to neighboring countries, etc.

Thus, if in the area of international politics energy brings about a paradigm shift, in domestic politics it underpins or puts at stake the modern state’s legitimacy.
III. Future Energy Wars?

The rising importance of energy availability in terms of both international and domestic politics undoubtedly makes it one of the most contentious issues for the world to grapple with in the years ahead.

Uncertainty about the extent to which this crucial issue will affect our every-day life keeps the world at the crossroads. Where it will go thence is contingent upon how we assess energy-associated risks and what decisions we make today.

Basically, there seems to be two major scenarios possible – confrontational and collaborative.

Much of what happens in the world these days prompts one to anticipate the negative – confrontational outcome.

Indeed, competition for critical natural resources is getting stiffer every year. A number of powerful, but in other respects resource-poor countries are keen to “lock up” natural resources in resource-endowed developing countries and secure privileged access to them. The resource-rich countries can not feel safe under the risk to fall victim to the struggle for oil and gas between the great powers. In their turn, they tend to resort to the energy supplies as a tool to exercise influence both on the world market and in resource-poor countries.

Those who suffer most are the countries, which are unlucky to be both resource-poor and not powerful enough. The widening energy gap is one of the major obstacles preventing them from bridging the development gap.

The world’s states have come early to grasp the importance of the regulation of energy as a tool for preventing energy-driven conflicts. As a result, they have put in place some international mechanisms tasked with coordinating global policies in the area of energy. What is regrettable, however, is that none of them is universal in terms of both membership and the scope of energy-related issues covered. Indeed, OPEC is a closed club consisting of a number of oil producing developing countries. Largest gas producers attempt to set up a club of their own – akin to OPEC. Developed states, in turn, coordinate their policies within the International Energy Agency. In the European context, the issue of energy is addressed by the Energy Charter, which is not, however, ratified by all parties and, therefore, is limited in effectiveness.

There is a worrying and strong tendency exhibited by some big states – to deal among themselves and to continue the limitation of global decision-making on energy to close-knit clubs. For example, energy has become a permanent and, perhaps, the most important matter at the latest three G8 Summits.

Ideas were floated to set up new structures on energy and related issues, which would be managed by several most influential countries only. For instance, in 2007 the Brookings institution, a US-based think tank, sent a memo to the United States President advising to establish an E8 Group, comprised of Brazil, China, the European Union, India, Japan, Russia, South Africa, and the USA. It was suggested that the Group should tackle the issues of global energy and climate change (“Climate Change: Creating an E8”, by Brookings Institution, see at http://www.brookings.edu/articles/2007/01energy_stern.aspx). The authors premised their proposal on the view that the existing global mechanisms had proved incapable of addressing this set of intertwined issues successfully.

It is highly doubtful that such “reductionist” policies and ideas find universal approval. The major powers’ intention to arrive at an understanding on energy with the view to preventing possible future energy conflicts and frictions among themselves may be laudable. But it does not help in narrowing the energy gap and leaves out in the cold the majority of the world’s middle- and small-sized countries that are not less interested in avoiding conflicts and maintaining their domestic peace, stability and well-being.

The major powers should give a serious thought to whether continuation of such structural status quo will be conducive to the world’s security in the long run. Energy-caused disruptions of the established political, economic, and social patterns of life in the middle- and small-sized resource-poor states will inevitably affect the great powers, too. The latter will most certainly receive a fair share of trouble, at best, in the form of incoming refugees, migrants, diseases, interrupted trade and financial flows, etc. It will surely happen, because we all live in a highly interconnected world. As globalization has proven time and again, sometimes quite painfully, disruptions anywhere in the system can trigger a drastic effect on the rest of the world.
IV. Future Energy Co-operation?

Thus, if the world does not want to see the past wars for territory and the current war on terror to be replaced by energy wars or energy-related contingencies in the future, it should clearly grasp that there is no option other than to co-operate.

A possible starting point here could be to apply the logic of international security system to the energy area. Just like the global security can be achieved only collectively, energy security has to be achieved and enjoyed jointly as well.

In the area of security we have in place a global hierarchical system – the United Nations with its Security Council and an array of regional and sub-regional security organizations. In contrast, the area of energy has no “global umbrella”, but is dangerously fragmented, with a number of status-based institutions and groupings.

Rectifying this shortcoming is important. It may at some point prompt us to create a global institution on energy that will be universal in its membership, as well as in the scope of energy problematique to address.

In this regard full credit should be given to Dr. Mohamed ElBaradei, the Director-General of the International Atomic Energy Agency, for his recent initiative on a Global Energy Agency with membership for all countries of the world and a mandate covering all forms of energy (“A Global Agency is Needed for the Energy Crisis” by Dr.Mohamed ElBaradei, The Financial Times, 25 July 2008.). The initiative of Dr. ElBaradei recognizes the need to apply a comprehensive approach towards energy before this problem ultimately spirals out of our control.

The essentials of the above initiative is to set up a framework for global co-operation on energy. It may come into being or may not. Anyway, the initiative can provide a stepping stone, but not a solution to the conundrum posed by the “Limits to Growth”, i.e. how to preserve the established energy-intensive patterns of life against a background of fossil fuels that are increasingly being depleted.

It is clear that fossil fuels are finite and sooner or later they will run out. With this in view, development and application of alternative and renewable sources of energy becomes an imminent and increasingly feasible option both for the future global energy security and the world’s economic development.

According to the report of the International Energy Agency of OECD on perspectives of energy technologies prepared for the G8 Summit in July 2008, setting a limit on the rising demand for oil within 12 per cent by 2050 will require an investment of US$ 17 trillion. Meanwhile, an investment of US$ 45 trillion will be additionally required for development and introduction of technologies that will make it possible reduce the demand for oil by 2050 by 27 per cent compared with 2008.

In this respect, one could recall Belarus’ initiative announced at the UN General Assembly in 2007. The initiative calls upon the UN Member States to establish within the UN a global mechanism which would ensure access to technologies for alternative and renewable sources of energy for each and every country around the world. In Belarus’ opinion, these technologies are not accessible today even to the middle-income states, let alone the least developed ones.

Numerous discussions on the issue held in the corridors of the United Nations General Assembly show that the problem of accessibility and affordability of technologies for alternative and renewable energy sources could be solved with due regard to intellectual property rights. A new international mechanism in the energy sphere is required to ensure that both the developed and the developing countries join their efforts in this field.

In other words, Belarus proposes a way to refute the Rome Club’s main argument in the “Limits to Growth”. The situation so far should not be regarded as absolutely hopeless. A way for Growth not to reach its Limits is to make alternative and renewable sources of energy available to all on a fair and comprehensive basis.

Under the initiative of Belarus, supported by seventeen other countries from different regions of the globe, the United Nations General Assembly will hold a thematic debate this year with a view to moving ahead with a dialogue on this important issue.

It has become common these days to say with regard to many issues that the cost of inaction will be much greater than the cost of action. Precisely with this in mind, there is an urgent need to set in motion the initiative on access to alternative and renewable sources of energy. Rather sooner than later – before it is too late.
Austrian Energy Agency