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The two stages to a low-carbon future

22nd January 2010

By: Saliem Fakir

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The transition to a low-carbon future is inevitable and will involve two stages.

The first is one of continued fossil dependence and the second is a revolution in energy technologies and the way we manage energy usage.

The second is already happening, as no country that is strategically minded and cares about its economic and energy security will want to squander this defining moment through procrastination.

Both tendencies will be led by strong growth economies with versatile States and innovative scientific/technology institutions.

The stages will not straddle each other but the new will have to evolve out of the old on a parallel track.

Current trends in resource allocations for the development of the second are already speeding up this march to a new energy model.

Social pressure, too, will come to bear on the old as climate impacts and simply the externality costs of fossil-based fuels no longer become a tolerable social cost.

This pressure for a shift will increase from the bottom up and, in some countries, a point of no return has already been reached.

The first stage is already marked by an intensification of exploration and usage of fossil fuels before the natural limits of availability and recoverable resources impose themselves on the whole system.

It is also anybody's guess how long the use of fossil-based fuels will last, given the fact that technology continuously improves – so does the knowledge of new finds. Peak dates keep on shifting.

It is best to suggest that the predicted peaks are likely to be extended and not for too long, as every fossil source has natural, financial and technological limits.

Fossil fuels are often spread in geographic regions in which there is a great deal of political instability, so, despite resource availability, scarcities can occur as a result of supply insecurity or delays in investment because of financial risks.

This irony is also dawning on China. The country is said to have vast coal reserves, but a significant amount of these is in the Tibet autonomous region and a quarter of its oil and gas reserves are located in the Muslim-dominated Xinjiang province. Both regions are seeking independence from China.

As the scramble intensifies, cross-border or transnational transfers of energy become increasingly prone to security risk or political ransom, imposing significant transaction cost – often a hidden subsidy – in securing these resources beyond market prices.

Fossil intensification is also premised on the idea that the world has significant sunk costs in existing infrastructure and technology reliance on the old that these economic costs cannot be delinked automatically.

More and more investments are being made in oil/gas pipelines, refineries and other infrastructure in far more significant numbers than the new energy revolution.

Perhaps far more profoundly, the immediate leap to the second cannot be made with such certainty, given the global scale of future energy demand – which is expected to double – where all this demand cannot be met at once through new low-carbon energy technologies.

A certain precaution encumbers total confidence that the new will bring about the ultimate shift. There are also different competing low-carbon technologies and not all of them offer sure universal utility in terms of solutions and cost expectations.

There has to be, in some instances, more research and development, and investments have to escalate significantly to be able to completely displace the existing fossil-based system.

In an uncertain technology future, the natural tendency of energy strategists is to game the future – to rely on what you know and have and then build the unknown as fast as you can. We already see these strategies being implemented by no worse carbon emitters than the US and China.

A carbon-constrained world will, no doubt, impose limitations in the interim or in the near future, but it also offers immense new opportunities.

This two-stage approach is something that still needs to be part of the framing of South Africa's future energy security. The first seems quite evident as we deepen our exposure to carbon-based solutions; the second exists in a half-hearted way.

The two-stage model helps frame a pragmatic approach from one to the other.

 

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