Special Report: Peak Oil

A Sensible Alternative: Toward an International Energy Transition Plan

We need international and multilateral institutions and measures to deal with the terminal crisis of cheap fossil energy. Part One of a two-part series.

By Andrew McKillop
Published September 20, 2006

The ideological trap of market-only mechanisms is one reason the Kyoto Treaty is likely unworkable.

Kyoto's original goals of reducing greenhouse gas emissions to the 1990 levels of its signatories by at latest 2012 while increasing renewable energy production and sustainable economic development are supposed to be achieved almost exclusively by a small number of gimmicks such as so-called 'carbon trading'.

Now embodied by the World Bank's Carbon Finance Corporation, these measures, which are essentially porkbarrel gifts to market traders and players, started in February 2005 and are already an opaque, unproductive but very profitable sideshow, operated by a happy few with a licence to print money and a supreme disinterest in achieving real world reduction of greenhouse gas emissions.

Any kind of constraining legislation for reducing emissions is treated as Stalinist interference with freedom. When the Peak Oil crisis hits, this ideological handicap will surely be thrown aside and replaced by 'courageous' - Stalinist - heavy-handed legislation to cut oil use by forced rationing.

Oil prices will zigzag to far-out highs, and the economy will crash. The economy will stay down because world oil supply will fall every year.

What we need instead of this scenario are international and multilateral institutions and measures to deal with the terminal crisis of cheap fossil energy, including both demand side and supply side action. Demand side cuts are urgent in the high-energy economies and supply side action in the shape of coordinated, big-scale, international development of renewables is necessary worldwide.

A Difficult Transition

In a period of at most thirty to thirty-five years, the world will have to make a huge shift away from oil and gas. Within fifty years the transition will have to be nearly complete.

The difference between what is needed and what is actually happening is almost total. Currently the world's appetite for oil, gas, coal and electricity is growing at its fastest rates since the 1970s.

Market signals for energy transition are at best weak, contradictory and wrongly interpreted, partially because high oil and energy prices drive economic growth.

The collective whine by a few die-hard energy 'experts' that high oil prices hurt economic growth is contradicted every day. At some point on the 'price curve', however, they will finally be proved right, but that will be meager consolation for us all, exposed to a classic economic slump complete with job losses, brownouts and blackouts, world and regional conflict for remaining oil and gas resources, and all the other consequences of doing nothing about energy transition.

Solving the Energy Crisis

The solution is a world plan and program for energy transition. This plan can not be expected to spontaneously arise, dusted off to the last dot and comma, from the ashes of the growth economy.

The International Energy Transition Plan (IETP) must first be discussed, proposals will have to be analyzed, and serious negotiations by all countries on targets and measures must take place in suitable forums, especially at the United Nations.

Automatic and adequate funding mechanisms will have to be proposed, negotiated and agreed. Technical means, including heavyweight engineering and infrastructure development and supply, will have to be set up and coordinated for a really long-term program.

Currently, there is not a trace of any serious move towards discussing these concepts and pursuing these goals.

Building the Plan

To a certain extent, the Kyoto Treaty's negotiation and drafting process could serve as a model for the IETP. After that, the Kyoto process has nothing to offer if we want serious results starting in the short time we have remaining.

There is simply not enough time to replicate the entire Kyoto start-up process, which in total took thirteen years from first proposals and debates in 1992 to first application by ratifying states in 2005.

The IETP must inventory all major energy resources, both fossil and renewable; fix targets for reduction of fossil energy intensity in the economies and societies of the most wasteful countries; fund and organize national efforts in pursuit of national targets for intensity reduction, while also funding and organizing the planned growth of renewable energy production; and create the bases of long-term sustainable, resource- and energy-conserving economies and societies.

As well, urgent and special attention must go to restructuring agriculture, transport and the human habitat.

The First Target: Oil and Gas Intensity Reduction

World average oil intensity per capita is around 4.8 barrels/year and gas intensity per capita is around 2.75 barrels of oil equivalent/year.

These averages hide huge and unbridgeable North-South and rich-poor disparities. There is no possibility of the poor world ever attaining the current fossil energy intensities of developed countries such as USA, Japan, South Korea, Germany or the other European Union countries.

Pretending this isn't true, which is official economic 'development' doctrine, only ensures an increase of exposure, by more persons in more countries, to the economic, political and social shocks that will come after Peak Oil and Peak Gas.

There will have to be large cuts in the fossil energy intensity of rich countries: this can come through crisis or it can be planned or programmed. We still have the choice but soon won't.

For the poorer countries, however, the inertial effect of conventional economic growth, industrialization, urbanisation and population growth make it certain that their fossil energy intensity will be impossible to cap as quickly as that of the rich countries.

The first targets for poor countries, and especially the giant and populous emerging economies of China, India, Brazil, Pakistan and others, will be to slow the growth of fossil energy use in their economies and societies, then also shift towards renewables.

Electricity in the poorer countries may or may not be fully included within the IETP at the beginning, for a number of reasons: the current very high level of thermal-based electricity production in these countries, their current extremely low electricity consumption per capita (sometimes 100 times less than electric power intensity per capita in the North), and their often very high potential for development of renewable-based electricity production.

In general, there will be two basic types of country profile for the IETP:

  1. Oil and gas intensive economies currently using more, or much more, than the world averages for oil and gas intensity.
  2. Lower energy economies currently using less, or much less than these averages.

The Second Target: An Inventory of World Energy Reserves

Accurate, clear and transparent data is needed on real inventories of remaining oil and gas reserves, as well as coal and nuclear minerals.

The IETP Authority will have United Nations status and a permanent Secretariat, and automatic financing. It will draw on multiple data sources and commission its own independent surveys and reviews to provide clear information and periodic updates to all governments, organizations, and the public.

Oil and gas producing countries and the world's major oil and energy corporations will be encouraged to supply information on remaining reserves, and facilitate inventories by IETP-designated missions, without blame for any previous overestimation and overstating of remaining national or corporate owned reserves.

The great need for oil and gas exporter countries to cap production and conserve remaining resources will be formally recognized in the IETP.

All renewable energy resources, in all countries, will also be inventoried. The highest potential resources, notably undeveloped hydropower, direct solar and ocean thermal (OTEC) resources in the South will be given special study and urgent, coordinated development attention.

(In Part 2, Andrew McKillop continues to describe his vision for an International Energy Transition Plan.)

Andrew McKillop is a writer and consultant on oil and energy economics. Since 1975 he has worked in energy, economic and scientific organizations in Europe, Asia, the Middle East, and North America. These include the Canada Science Council, the ILO, European Commission, Organization of Arab Petroleum Exporting Countries, the UN Economic and Social Commission for Asia and South Pacific, and the World Bank. He is a founding member of the Asian chapter of the International Association of Energy Economics. He is also the editor, with Sheila Newman, of The Final Energy Crisis (Pluto Press, 2005).

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