Beyond Oil and The $45 Trillion Challenge

Meir Javedanfar

07/06/2008

The new report from the International Energy Agency (IEA) does not mince its words. Released on Thursday 5^th of June, its major finding is that $45 trillion is needed for investment in non oil sources of energy in order to reduce carbon dioxide emissions by 50% by the year 2050.

As well as stating figures, the report gives an example of the infrastructure needed to achieve this goal. Amongst other thing, 32 new nuclear power stations will need to be built every year, for the next four decades.

The report also suggests that 215 million square meters of solar panels needing to be installed across the globe. A billion electric or hybrid cars will also be required.

To reach this goal, governments around the world will need to invest just over $1trillion every year. According to the London Times, this sum is equivalent to the gross domestic product of Italy.

This is a mammoth task, both financially and technically. Currently, the maximum number of nuclear plants built in the whole world per year, stands at 10. A huge increase in number of engineers will also be needed. They will need to be trained in Universities around the world to reach the required capacity to meet this goal.

There is also the question of proliferation. An increase in the use of nuclear energy will need a stronger mandate and inspection regime given to the International Atomic Energy Agency (IAEA) to ensure that such skills are not diverted for military use.

The same applies to the huge demands made from the solar power and car industry. Although both are taking strides in making non carbon emission sources of transportation and energy; it will take a long time and huge investments. For one thing, increase in demand for food means more land will be required for agriculture, thus making it difficult to find the massive amount of land required to implant the solar panels needed.

Price of failure, spelled out by the report is very simple. “Failure to act would lead to a doubling of energy demand and a 130 percent increase in carbon dioxide emissions by 2050”. This means even an increase of more than 50% in demand for oil, at a time when oil resources are depleting and prices reaching new highs.

Many of the Beyond Oil countries who are at the top of the “ Beyond Oil Index”, have better financial and governmental capacity to take the recommended path. It won't be easy and it won't be cheap. However with less corruption, more efficient markets and well established education systems, they are more prepared to meet the challenges ahead.

However the news for countries at the middle, to lower end of the chart is not good. While many of them are earning more income from oil, due to the current high prices, at the same time they have had to use their income to pay for higher food prices. This is in addition to new demands made from them (and the rest of the world) to spend significant amounts in their agriculture sector, to meet food demands for the future.

Therefore many such countries are likely to encounter an increase in demand for energy while their own sources are running out, together with increase in demand for food, without having the resources to produce sufficient amounts to produce locally or to import.

The foundation for this pessimistic prognosis is not based on lack of capability. It is more based on lack of willingness by the leadership of Beyond Oil countries which are run by corrupt officials and institutions. The only way they will be able to meet even half of the requirements for food and energy is through a massive spike in investment from outside of their own borders. The UN, other NGOs, nor donor countries simply do not have anywhere near the amounts required to provide as aid.

Investment companies will simply not be willing to risk their money in perilous environments. With the world facing a energy and food crisis, the focus should shift on the areas where it is legitimate to demand change, and that is corruption. This is the only chance we have to meet some of the institutional changes needed to meet the challenges ahead.

Without it, the instability which will be produced will not only create problems inside the countries whose leadership is corrupt. Such instability could very well spill inside their neighboring countries. Even for selfish reasons, Western countries should not allow this to happen. The first necessary steps towards the required solution are difficult, yet necessary. Just as the international community, especially Western countries are obsessed with Weapons of Mass Destruction (WMD) and countries on the path to acquiring them, they should start treating corruption and leaders who perpetuate them with the same attitude.

Meir Javedanfar, alongside Gordon Wollgam, is Project Manager and founder of the Beyond Oil project (http://beyondoil.net)