Rio+20 Business Focus: $1000 billion yearly for vital energy transition

Politicians make the policy. But it’s often left to business to implement it. For this reason RioPlus Business is featuring submissions from business across the globe in the lead up to Rio+20.

The aim is to demonstrate how Sustainable Development is becoming a reality on every continent, country and city.

Today Måns Nilsson, Deputy Director at Stockholm Environment Institute (SEI) talks us through the “Energy for All in the Antropocene” study and explains how an unprecedented energy transition is needed over the next decade to meet the world’s energy needs for economic development by 2050, while at the same time staying within a 2°C target and within environmental and resource constraints.

Today we talk about basic energy for the poor. In our study we look at the issue from a more far-reaching energy-use and a long-term perspective, when developing country economies start growing.

As energy needs grow further, we need to reduce energy in rich countries and redistribute energy use globally.

The SEI study talks of an unprecedented energy transition to take place over the next 10 years (© Gonzalo Deniz/Creative Commons)

Sustainable energy for all is one of the major development challenges globally. It will hopefully be discussed thoroughly at Rio+20.

What are the main challenges to this transition?

One obstacle is the coal; it is cheap and heavily subsidized. Another obstacle is that investments in energy are long-term, the investments we make today hold for 40 years.

The International Energy Agency (IEA) indicates that we are already locking us into a 4-degree world. This is the reason why it is so urgent.

How large are subsidies for fossil fuels, compared to investments in renewable energy?

Annual investments in low-carbon energy technologies were approximately $165 billion over the period 2008-2010. In 2011, a record-high total of $206 billion were invested in clean energy. By contrast fossil fuel subsidies amount to $400 billion per year globally.

What are the investments needed and the costs for this transition?

Investments are needed in many places: renewable power production, smart grids, new large transmission lines, retrofitting houses with efficient heating and cooling, electrified transport infrastructure, ensuring new buildings are energy efficient, planning urban infrastructures so that people do not depend on cars.

Our study has not quantified investment volumes, but the IEA has estimated that annual power sector investments are needed at the level of $500 billion USD from 2010 to 2050.

Additionally $150 billion USD per year is needed to reach the 2°C target. In buildings efficiency, the additional investment is around $300 billion per year. In industry, additional investment is $60 billion per year.

What policies and regulations are needed to get business onboard and attract investment?

To create investor confidence absolute regulations and standards which are long term and predictable are necessary, such as efficiency standards for cars and houses.

Second, public policies are needed to help new technologies through the “valley of death”, by supporting niche markets, public procurements and providing risk capital.

Third, we need market correction policies, to make the price of energy more in line with the real costs, including environmental and social costs.

A 'Blue Marble' image of the Earth taken from the VIIRS instrument abroad Nasa's Suomi NPP - 4/01/2012 (© NASA/NOAA/GSFC/Suomi NPP/VIIRS/Norman King)

What is required from the private sector?

Their responsibility is to create demand for new products that work within the concept of sustainable lifestyles, just as they create demand for iPads! The private sector must see business opportunities in shared value and have sustainability as a core part of their business strategy, not as marginal.

Is the so called “Green Race” sufficient as a driver in this transition?

The new economy is an extremely important driver – all countries see competitive opportunities in the clean energy technology, driven by limited fossil fuel resource becoming more and more expensive.

But if you talk about the national level, it is not sufficient. In negotiations between countries, national self interest will not be covered by a green race strategy.

Therefore, the countries that wish to advance the agenda need to find additional incentives, sticks as well as carrots – such as through trade agreements, investments funds and technological exchange arrangements.

Your study asserts that dramatic improvements in energy efficiency are needed to meet sustainable energy for all. How much are we talking about?

To meet the targets of the scenario, overall energy intensities need to decline at a rate of 2,8-3 percent per year.

Such numbers are very ambitious, and higher than most other global studies. But these efficiency measures actually represent major business opportunities, not only through new technologies, but also through improved organization, planning and smarter lifestyles.

Today, energy services companies are a fast-growing business sector around the world.

Finally, what are your hopes for Rio+20?

At national, European and global levels we need an overall view on where we are heading – a vision needs to be articulated and accepted by the public.

Few political leaders take bold and long-term decisions on sustainable development today.

I hope the Rio+20 summit can be the starting point for such a call and process.

Måns Nilsson is Deputy Director at Stockholm Environment Institute (SEI).

This article is part of a series commissioned by the Rio Conventions for their RioPlus Business project.


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