IHS CERAWeek 2013 – Climate Change and Energy Transition: The Long View

The following is a summary of the session entitled Climate Change and Energy Transition: The Long View which took place on Day five of IHS CERAWeek 2013. You can access more summaries like this through IHS CERAWeek On Demand.

Atul Arya, Senior Vice President, Energy Insight, IHS, (pictured) chaired the session "Climate Change and Energy Transition: The Long View". Joining Mr. Arya were Samantha Gross, Director, Integrated Research, IHS; Dr. Richard Newell, Director, Duke University Energy Initiative, and Professor, Duke University; Xihong Li, President, Economics & Development Research Institute, Sinopec; and James L. Connaughton, Executive Vice President and Senior Policy Advisor, Exelon Corporation.

Mr. Arya explained that the purpose of the session was to introduce and discuss new ideas on the global energy transition that is currently under way, specifically some of the key challenges and opportunities presented by technology, policy, and markets. He asked his colleague Samantha Gross to summarize the findings of the recent report Energy Transitions: Past and Future, issued jointly by IHS and the World Economic Forum. The report examines historical energy transitions in order to offer insights on how to address some of the current challenges facing the world's energy system, Ms. Gross said. A key finding was that while most past transitions were driven by new resources that were cheaper, more abundant, and more versatile, today's transition is being driven more by environmental challenges that require both policy and market solutions.

Mr. Newell noted that meeting the world's energy transition challenges effectively requires integrated solutions and thinking that allow for progress in new initiatives and endeavors while not hindering ongoing progress in strategies that are already working. He pointed out the historical decline in energy demand growth and environmental impacts as a result of ongoing advances in efficiency, use of cleaner fuels, and effective regulatory policies. However, he also raised an important point about the critical features of the energy system, including the immense size and scope of the industry, the long life of much of the infrastructure, and the tremendous cost and value of this physical stock for companies and countries. He added that meaningful technological innovation required to meet the world's energy challenges needs a framework to attract private interest and investment, driven in part by policies that provide substantial and sustained research and development support, as well as robust market competition.

Mr. Li emphasized the importance of striking a balance between the need to meet future energy demand and support economic growth and the need to ensure a clean and healthy environment. He stressed the importance of conservation and efficiency that is being promoted in China to decrease energy use, slow demand growth, and reduce conventional pollution and carbon emissions. He described the advances being made in China in the use of hydro, nuclear, and renewables and a more diverse carbon fuel mix that includes a larger share for natural gas.

Mr. Connaughton stressed the importance of more efficiently and profitably using currently available technologies and practices in order to make progress in the most commercially and politically sensible way. He pointed out that the positive social benefits that energy provides to society greatly outweigh the negative aspects of producing energy and advocated "following the money" in finding the most prudent, effective, and market-friendly ways of improving the environment while also meeting the world's growing energy needs. He warned against overregulating, saying that "top-down methods have been tried and [have] failed" and that we now need to try a bottom-up approach that is more market driven and can be built up sector by sector.

Mr. Arya asked the panelists about the political realities of meeting the world's energy transition challenges and wondered "are we being complacent" in our approaches and actions regarding climate change. The response was that industry and governments are actively involved and real progress is being made, but that leaders and advocates need to be practical about their approaches by taking into account the political and market realities and finding the best solutions at the lowest cost to society, the economy, and the environment.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.