Ladies and Gentlemen, Good morning and can I add my welcome to that of Mr Mattes to this APEC Energy Business Forum. Introduction Energy is the lifeblood of civilization. It fuels economic activity and growth, and it is essential for social development. Whether as electricity for households and businesses, transport fuel for commuters and commerce, or fuel for heating and cooking, energy is fundamental to society. Energy is also essential to APEC’s vision of “stability, security and prosperity for our peoples”. This vision, dating from 1993, is unchanged today, and remains highly relevant to meeting the challenges facing the world and the countries in this region. Today’s forum is a chance for us, the energy industry, to discuss key issues relevant to our own countries and companies, and to the Asia-Pacific region. We meet on the eve of the 8th Energy Minister’s Meeting of APEC, in recognition of the integral link between business and the public policy framework established by Governments. In my opening remarks, I’d like to introduce the key issues we’re here to discuss and outline the programme for the day. Crucial role of energy We’ve titled today’s forum “Coping with the double jeopardy of high energy prices and climate change”. These two issues, along with energy security and environmental considerations encapsulate the global challenge for business and government in the energy space. And the challenge will only get more intense. According to the International Energy Agency (the IEA): - global energy demand will increase by around 50% between now and the year 2030 (reference scenario);
- 70% of this increase will come from developing countries;
- power generation will account for half of the growth; and
- fossil fuels will remain the dominant source of energy, contributing around 80% of both the increase in and the total energy supply.
Challenge of climate change As energy demand grows, so too will the associated emissions. The IEA’s scenarios say CO2 emissions will grow between 35 and 55% in the period to 2030. I believe we’re now beyond debating the scientific links between CO2 emissions and climate change – it’s now time for action. The question is what sort of action, by whom and by when. Market mechanisms are likely to be the most effective means of implementing change. Capping of carbon emissions and trading of credits, such as has occurred under the EU emissions trading scheme since 2005, is a good start. But trading needs to become global to be truly effective and establish a clear market price for CO2 that will be factored in to the investment evaluations on the new technologies and energy conservation measures we need for a lower carbon future. Complementary government policies will accelerate society's search for CO2 solutions and greener fossil fuels. Let me give some examples. Setting standards early, can give industry incentive and time to innovate and develop new technologies.
Tightening regulations on the energy efficiency of everything from buildings to consumer appliances can help to encourage conservation. Take Japan, where energy conservation has been promoted through regulation since the 1970s energy crisis. Consumption was 2.8 tonnes of oil per person in 2004, compared to 5.4 tonnes in the US, according to the IEA.
Government/Industry partnerships could also pave the way for development of solutions. I’m thinking here of carbon capture and storage, where significant collaboration is needed as we work on proving this technology and reducing costs. Government policy should also keep long-term sustainability in clear focus. Let me use the example of biofuels, which can be produced from plants and organic waste, with the potential to lower transport emissions. Today, many first generation biofuels are made from food crops such as sugar cane, wheat or corn. Apart from raising the philosophical question of whether to ‘eat it or burn it’, they require lots of energy to produce. Although they can reduce emissions, second-generation biofuels, made from non-food sources, could offer even greater reductions. Sound Government policy would encourage the production and use of those biofuels that deliver the greatest CO2 savings at the lowest costs. While clear rules are fundamental to the framework of emission reduction, companies also, of course, have responsibilities. My own company and many others globally, have voluntary emission reductions goals and we report on progress towards meeting them. I have no doubt our efforts would be given huge impetus by clear and consistent regional and global rules that established a “level playing field”. Challenge of high prices This brings me to the other leg of the challenge and the reason for titling today’s forum “Coping with the double jeopardy of high-energy prices and climate change”. The high oil prices in the last few years have hardly been a secret. This has reminded us (not least business leaders and politicians!) of the global reliance on oil and its potential impact on the economies of countries, businesses and families. Now, I don’t believe anyone will ever know the exact timing of so called “peak-oil”, from which oil production is said to be in permanent decline, but a few things seem clear: Hydrocarbons continue to represent the most affordable and accessible energy source on the planet.
Unconventional hydrocarbon sources such as oil sands and oil shales will play an increasing role in meeting the world’s energy needs driven by their relative abundance as well as by technology developments that aim to improve recovery and reduce production costs.
Energy alternatives such as wind, solar, and 2nd Generation biofuels represent low CO2 sources of energy. However, today they are not economically competitive with conventional sources. Based on present trends, they may grow to supply approximately one third of the world’s demand for energy by 2050.
So we are left with multiple options - fossil fuels, renewables and alternatives – all with “pros” and “cons” - for dealing with the two-headed beast of reducing the impact of climate change at an affordable price. Outline Forum programme Today’s Forum is a chance for us to develop our thinking in this direction. Thinking that takes account of the regional and indeed global view, rather than remaining focussed solely on our company or our country. It’s also an opportunity to engage with Government decision makers; sharing this thinking and making suggestions on policy frameworks. The programme in your welcome packs, outlines our three sessions today. During the first two sessions, we will address the impacts of high fuels prices and climate change on the stationary and transportation energy sectors. During the third session, this afternoon, I will host a panel session aimed at engaging directly with some of our regional Energy Ministers, including The Honourable Ian Macfarlane, Minister for Industry, Tourism and Resources here in Australia. EBN recommendations With that opportunity in mind, I would encourage you to reflect, during the morning, on the APEC Energy Business Network (EBN) response to the APEC Leaders Hanoi declaration and recommendations to the EMM8 ministerial plenary. The EBN comprises representatives from the 21 member nations of APEC and is an advisory body to the APEC Energy Working Group of regional Energy Ministers. The EBN response urges ‘APEC Energy Ministers to recommend to APEC Leaders, that they should commit to a new resolve on effective regional action and reform of institutional arrangements, to progress their Hanoi declaration and to address the dual challenge of energy security and climate change. The response calls for concerted action by APEC Energy Ministers to: - increase the utilization of Mature Energy Supply and End-use Technologies that contribute to energy security, and climate change imperatives;
- implement New Energy Technologies that offer practicable advances in the management of energy security, and climate change;
- increase Public and Private Investment in energy efficiency, diversifying energy supplies, emissions abatement and cleaner energy technologies to address the dual challenges of energy security and climate change; and
- formulate appropriate cost-effective Energy Policies that will lead to the reduction of Greenhouse Gas emissions while enhancing energy security.
These statements offer a strong foundation for moving ahead and meeting the challenges we face together as businesses, governments and citizens of our respective countries and of this region. Today is a day for robust discussion and interaction. I look forward to hearing your views during the day and will aim to reflect them as I introduce the Panel session this afternoon.
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