Shell CEO on oil and energy future
Two energy futures
By Jeroen van der Veer
By 2100, the world’s energy system will be radically different from today’s. Renewable energy like solar, wind, hydroelectricity, and biofuels will make up a large share of the energy mix, and nuclear energy, too, will have a place. Humans will have found ways of dealing with air pollution and greenhouse gas emissions. New technologies will have reduced the amount of energy needed to power buildings and vehicles.
Indeed, the distant future looks bright, but much depends on how we get there. There are two possible routes. Let’s call the first scenario Scramble. Like an off-road rally through a mountainous desert, it promises excitement and fierce competition. However, the unintended consequence of “more haste” will often be “less speed,” and many will crash along the way.
The alternative scenario can be called Blueprints, which resembles a cautious ride, with some false starts, on a road that is still under construction. Whether we arrive safely at our destination depends on the discipline of the drivers and the ingenuity of all those involved in the construction effort. Technological innovation provides the excitement.
Regardless of which route we choose, the world’s current predicament limits our room to maneuver. We are experiencing a step-change in the growth rate of energy demand due to rising population and economic development. After 2015, easily accessible supplies of oil and gas probably will no longer keep up with demand.
As a result, we will have no choice but to add other sources of energy – renewables, yes, but also more nuclear power and unconventional fossil fuels such as oil sands. Using more energy inevitably means emitting more CO2 at a time when climate change has become a critical global issue.
In the Scramble scenario, nations rush to secure energy resources for themselves, fearing that energy security is a zero-sum game, with clear winners and losers. The use of local coal and homegrown biofuels increases fast. Taking the path of least resistance, policymakers pay little attention to curbing energy consumption – until supplies run short. Likewise, despite much rhetoric, greenhouse gas emissions are not seriously addressed until major shocks trigger political reactions. Since these responses are overdue, they are severe and lead to energy price spikes and volatility.
The Blueprints scenario is less painful, even if the start is more disorderly. Numerous coalitions emerge to take on the challenges of economic development, energy security, and environmental pollution through cross-border cooperation. Much innovation occurs at the local level, as major cities develop links with industry to reduce local emissions. National governments introduce efficiency standards, taxes, and other policy instruments to improve the environmental performance of buildings, vehicles, and transport fuels.
Moreover, as calls for harmonization increase, policies converge across the globe. Cap-and-trade mechanisms that put a price on industrial CO2 emissions gain international acceptance. Rising CO2 prices in turn accelerate innovation, spawning breakthroughs. A growing number of cars are powered by electricity and hydrogen, while industrial facilities are fitted with technology to capture CO2 and store it underground.
Against the backdrop of these two equally plausible scenarios, we will know only in a few years whether December’s Bali declaration on climate change was just rhetoric or the start of a global effort to counter it. Much will depend on how attitudes evolve in China, the European Union, India, and the United States.
Shell traditionally uses its scenarios to prepare for the future without expressing a preference for one over another. But, faced with the need to manage climate risk for our investors and our descendants, we believe the Blueprints outcomes provide the best balance between economy, energy, and environment. For a second opinion, we appealed to climate change calculations made at the Massachusetts Institute of Technology. These calculations indicate that a Blueprints world with CO2 capture and storage results in the least amount of climate change, provided emissions of other major manmade greenhouse gases are similarly reduced.
But the Blueprints scenario will be realized only if policymakers agree on a global approach to emissions trading and actively promote energy efficiency and new technology in four sectors: heat and power generation, industry, transport, and buildings.
This will require hard work, and time is short. For example, Blueprints assumes CO2 is captured at 90% of all coal- and gas-fired power plants in developed countries by 2050, plus at least 50% of those in non-OECD countries. Today, none capture CO2. Because CO2 capture and storage adds costs and yields no revenues, government support is needed to make it happen quickly on a scale large enough to affect global emissions. At the least, companies should earn carbon credits for the CO2 they capture and store.
Blueprints will not be easy. But it offers the world the best chance of reaching a sustainable energy future unscathed, so we should explore this route with the same ingenuity and persistence that put humans on the moon and created the digital age.
The world faces a long voyage before it reaches a low-carbon energy system. Companies can suggest possible routes to get there, but governments are in the driver’s seat. And governments will determine whether we should prepare for bitter competition or a true team effort.
Jeroen van der Veer, Chief Executive of Royal Dutch Shell plc, is Energy Community leader of the World Economic Forum energy industry partnership in 2007-2008 and chaired this year’s Energy Summit in Davos. He also chairs the Energy and Climate Change working group of the European Round Table of Industrialists.
From: http://www.shell.com/home/content/aboutshell-en/our_strategy/shell_global_scenarios/two_energy_futures/two_energy_futures_25012008.html
For Peak Oil, Three’s a Crowd
Keith Johnson
Wall Street Journal [blog] 25 January 2008
Has the peak oil crowd added a new member?
An email written by Royal Dutch Shell CEO Jeroen van der Veer has sparked the latest round of debate over the state of oil supplies. In the email, which Mr. van der Veer told his employees to spread around, he says (HT to the Oil Drum. Here’s the whole spiel.):
Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand. As a result, society has no choice but to add other sources of energy - renewables, yes, but also more nuclear power and unconventional fossil fuels such as oil sands. Using more energy inevitably means emitting more CO2 at a time when climate change has become a critical global issue.
Other big energy companies, from France’s Total to Texas’s ConocoPhillips, have already painted a less-than-rosy outlook for world oil supplies. Even the National Petroleum Council, a proxy for the Big Oil fraternity, recently said that conventional oil and natural-gas supplies aren’t likely to keep pace with demand (study here).
The crux of the debate: How fast are existing fields actually declining, and how fast and economically can oil companies get new finds to replace that output? (Recent WSJ stories on peak oil here and here.)
Shell outlined two main scenarios for the energy future: a free-for-all for energy resources around the world, or growing international cooperation to soothe energy friction. Shell leans toward the latter:
Against the backdrop of these two equally plausible scenarios, we will only know in a few years whether December’s Bali declaration on climate change was just rhetoric or the beginning of a global effort to counter it.
Another interesting twist to the idea that oil and natural gas will become harder and more expensive to find and get out of the ground: It’s making coal pricier, because coal is still the go-to fuel source in the absence of a big nuclear build-out.
So the question is: Does Shell adding its voice to the growing chorus of naysayers mean anything for the viability of other energy sources?
Full text of Shell CEO’s email to employees:
Date: 22 January 2008
Subject: Shell Energy Scenarios
Dear Colleagues
In this letter, I'd like to share reflections about how we see the energy future, and our preferred route to meeting the world's energy needs. Industry, governments and energy users - that is, all of us - will face the twin challenge of more energy and less CO2.
This letter is based on a text I've written for publication in several newspapers in the coming weeks. You can use it in your communications externally. There will be more information about energy scenarios inthe months ahead.
By the year 2100, the world's energy system will be radically different from today's. Renewable energy like solar, wind, hydroelectricity and biofuels will make up a large share of the energy mix, and nuclear energy too will have a place.
Mankind will have found ways of dealing with air pollution and greenhouse gas emissions. New technologies will have reduced the amount of energy needed to power buildings and vehicles.
Indeed, the distant future looks bright, but getting there will be an adventure. At Shell, we think the world will take one of two possible routes. The first, a scenario we call Scramble, resembles a race through a mountainous desert. Like an off-road rally, it promises excitement and fierce competition. However, the unintended consequence of "more haste" will often be "less speed" and many will crash along the way.
The alternative scenario, called Blueprints, has some false starts and develops like a cautious ride on a road that is still under construction. Whether we arrive safely at our destination depends on the discipline of the drivers and the ingenuity of all those involved in the construction effort. Technical innovation provides for excitement.
Regardless of which route we choose, the world's current predicament limits our maneuvering room. We are experiencing a step-change in the growth rate of energy demand due to population growth and economic development, and Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand.As a result, society has no choice but to add other sources of energy - renewables , yes, but also more nuclear power and unconventional fossil fuels such as oil sands. Using more energy inevitably means emitting more CO2 at a time when climate change has become a critical global issue.
In the Scramble scenario, nations rush to secure energy resources for themselves, fearing that energy security is a zero-sum game, with clear winners and losers. The use of local coal and homegrown biofuels increases fast.
Taking the path of least resistance, policymakers pay little attention to curbing energy consumption - until supplies run short. Likewise, despite much rhetoric, greenhouse gas emissions are not seriously addressed until major shocks trigger political reactions. Since these responses are overdue, they are severe and lead to energy price spikes and volatility.
The other route to the future is less painful, even if the start is more disorderly. This Blueprints scenario sees numerous coalitions emerging to take on the challenges of economic development, energy security and environmental pollution through cross-border cooperation.
Much innovation occurs at the local level, as major cities develop links with industry to reduce local emissions. National governments introduce efficiency standards, taxes and other policy instruments to improve the environmental performance of buildings, vehicles and transport fuels.
As calls for harmonization increase, policies converge across the globe. Cap-and-trade mechanisms that put a cost on industrial CO 2 emissions gain international acceptance. Rising CO2 prices accelerate innovation, spawning breakthroughs. A growing number of cars are powered by electricity and hydrogen, while industrial facilities are fitted with technology to capture CO 2 and store it underground.
Against the backdrop of these two equally plausible scenarios, we will only know in a few years whether December's Bali declaration on climate change was just rhetoric or the beginning of a global effort to counter it. Much will depend on how attitudes evolve in Beijing, Brussels, New Delhi and Washington.
Shell traditionally uses its scenarios to prepare for the future without expressing a preference for one over another. But, faced with the need to manage climate risk for our investors and our grandchildren, we believe the Blueprints outcomes provide the best balance between economy, energy and environment.
For a second opinion, we appealed to climate change calculations made at the Massachusetts Institute of Technology. These calculations indicate that a Blueprints world with CO2 capture and storage results in the least amount of climate change, provided emissions of other major manmade greenhouse gases are similarly reduced.
The sobering reality is that the Blueprints scenario will only come to pass if policymakers agree a global approach to emissions trading and actively promote energy efficiency and new technology in four sectors: heat and power generation, industry, mobility and buildings. It will be hard work and there is little time.
For instance, Blueprints assumes CO2 is captured at 90% of all coal- and gas-fired power plants in developed countries in 2050, plus at least 50% of those in non-OECD countries. Today, there are none. Since CO2 capture and storage adds cost and brings no revenues , government support is needed to make it happen quickly on a scale large enough to affect global emissions. At the very least, companies should earn carbon credits for the CO2 they capture and store.
Blueprints will not be easy. But it offers the world the best chance of reaching a sustainable energy future unscathed, so we should explore this route with the same ingenuity and persistence that put humans on the moon and created the digital age.
The world faces a long voyage before it reaches a low-carbon energy system. Companies can suggest possible routes to get there, but governments are in the driving seat. And governments will determine whether we should prepare for a bitter competition or a true team effort.
That is the article, and how I see our challenges and opportunities. I look forward to hearing how you see the situation (please be concise).
RegardsJeroen van der Veer, Chief Executive
Oil Demand, the Climate and the Energy Ladder
Jad Mouawad
New York Times 19 January 2008
Energy demand is expected to grow in coming decades. Jeroen van der Veer, 60, Royal Dutch Shell’s chief executive, recently offered his views on the energy challenge facing the world and the challenge posed by global warming. He spoke of the need for governments to set limits on carbon emissions. He also lifted the veil on Shell’s latest long-term energy scenarios, titled Scramble and Blueprints, which he will make public next week at the World Economic Forum in Davos, Switzerland. Following are excerpts from the interview:
Q. What are the main findings of Shell’s two scenarios?
A. Scramble is where key actors, like governments, make it their primary focus to do a good job for their own country. So they look after their self-interest and try to optimize within their own boundaries what they try to do. Blueprints is basically all the international initiatives, like Kyoto, like Bali, or like a future Copenhagen. They start very slowly but before not too long they become relatively successful. This is a model of international cooperation.
Q. Your first scenario looks very similar to today’s world, with energy nationalism, competition for resources and little attention to consumption.
A. It depends where you live. I realize there are different opinions about Kyoto in the world. But if you think about Bali, Bali is a good outcome if people can agree how to have useful discussion in the coming two years and the United States, China and India are on board. The Blueprints world is maybe a world that starts slowly and is not that easily feasible, but you see some early indicators that it is a realistic possibility.
Q. The world seems to be at some form of inflection point with a big shift in demand.
A. The basic drivers are pretty easy and they are twofold. You go from six billion people to nine billion people basically in 2050. This combination of many more people climbing the energy ladder, which is basically welfare for a lot of people who live in poverty, creates that enormous demand for energy.
Q. How will the demand be fulfilled?
A. Many politicians think we have to make a choice between fossil fuels and renewables. We have to grow both fossil fuels and renewables. And that will be a huge effort for both.
Q. More energy means more carbon emissions. How do you deal with that?
A. That is absolutely the crux of the matter. The principal way we see is that in the very short term, man-made carbon emissions will increase. But over time people will figure out ways — and we work very hard on that — that while using fossil fuels you try to find carbon dioxide solutions. For instance, carbon sequestration. The problem is that many of the renewables, if you take the subsidies out, are still too expensive. That is the dilemma we face now.
Q. Fossil fuels are still going to represent the lion’s share of the energy mix in the next century?
A. First, there is no lack in itself of oil or gas, or coal for that matter. But the problem is that the easy-to-produce oil or easy-to-produce gas will be depleted or with difficult access. But if you look at difficult oil or difficult gas, which we in the industry call the unconventionals, such as oil sands or shales, they may be exploitable. But per barrel, you need a lot more technology and a lot more investments, and per barrel you need a lot more brain to produce it. It’s much more expensive.
Q. What kind of alternatives can compete?
A. The competition is partly true competition — markets, inventions — and part of it is governments. I think if you can price carbon dioxide, probably you can stimulate carbon capture and sequestration. If you tax a certain form of energy, over time it gets more expensive and you may use less of it.
Q. It still seems there is a gap that is hard to bridge.
A. If carbon is the real bottleneck, as a world it makes sense that we use our money where we get the biggest reduction for the lowest cost. You get more carbon reduction for less money by tackling the power sector and maybe the building sector.
Q. It is still hard to see that people are willing to pay more for greener energy.
A. I am a strong believer and strong advocate of free enterprise. If you would like to solve the carbon problem in the world, free enterprise has to work in close cooperation with governments to form the right framework. How you tackled the sulfur dioxide problem in the United States was the basic inspiration for the European trading system of carbon. So there are examples from the past we can apply to overcome that problem. But we can’t do it on our own as an industry. We need cooperation from governments.
Q. How close are we to an understanding globally that climate policy and energy policy are all interrelated issues?
A. Thanks to Al Gore, and many others, the awareness is there. There is a kind of sense of urgency. Secondly, there is a preparedness to do things. Thirdly, do we agree who has to take what action? I think that is still a huge problem.
Q. There was a lot of disagreement at the Bali climate conference.
A. That is correct. I realize that Bali is still very difficult. I am not a pessimist. I see it as a very difficult start-up. The crux of the matter is, if the people say, “Hang on, we are really concerned about the climate and we’d better do something on carbon emissions,” that is in the end the powerful force which politicians and companies cannot ignore. And I think we are past that point.
By Jeroen van der Veer
By 2100, the world’s energy system will be radically different from today’s. Renewable energy like solar, wind, hydroelectricity, and biofuels will make up a large share of the energy mix, and nuclear energy, too, will have a place. Humans will have found ways of dealing with air pollution and greenhouse gas emissions. New technologies will have reduced the amount of energy needed to power buildings and vehicles.
Indeed, the distant future looks bright, but much depends on how we get there. There are two possible routes. Let’s call the first scenario Scramble. Like an off-road rally through a mountainous desert, it promises excitement and fierce competition. However, the unintended consequence of “more haste” will often be “less speed,” and many will crash along the way.
The alternative scenario can be called Blueprints, which resembles a cautious ride, with some false starts, on a road that is still under construction. Whether we arrive safely at our destination depends on the discipline of the drivers and the ingenuity of all those involved in the construction effort. Technological innovation provides the excitement.
Regardless of which route we choose, the world’s current predicament limits our room to maneuver. We are experiencing a step-change in the growth rate of energy demand due to rising population and economic development. After 2015, easily accessible supplies of oil and gas probably will no longer keep up with demand.
As a result, we will have no choice but to add other sources of energy – renewables, yes, but also more nuclear power and unconventional fossil fuels such as oil sands. Using more energy inevitably means emitting more CO2 at a time when climate change has become a critical global issue.
In the Scramble scenario, nations rush to secure energy resources for themselves, fearing that energy security is a zero-sum game, with clear winners and losers. The use of local coal and homegrown biofuels increases fast. Taking the path of least resistance, policymakers pay little attention to curbing energy consumption – until supplies run short. Likewise, despite much rhetoric, greenhouse gas emissions are not seriously addressed until major shocks trigger political reactions. Since these responses are overdue, they are severe and lead to energy price spikes and volatility.
The Blueprints scenario is less painful, even if the start is more disorderly. Numerous coalitions emerge to take on the challenges of economic development, energy security, and environmental pollution through cross-border cooperation. Much innovation occurs at the local level, as major cities develop links with industry to reduce local emissions. National governments introduce efficiency standards, taxes, and other policy instruments to improve the environmental performance of buildings, vehicles, and transport fuels.
Moreover, as calls for harmonization increase, policies converge across the globe. Cap-and-trade mechanisms that put a price on industrial CO2 emissions gain international acceptance. Rising CO2 prices in turn accelerate innovation, spawning breakthroughs. A growing number of cars are powered by electricity and hydrogen, while industrial facilities are fitted with technology to capture CO2 and store it underground.
Against the backdrop of these two equally plausible scenarios, we will know only in a few years whether December’s Bali declaration on climate change was just rhetoric or the start of a global effort to counter it. Much will depend on how attitudes evolve in China, the European Union, India, and the United States.
Shell traditionally uses its scenarios to prepare for the future without expressing a preference for one over another. But, faced with the need to manage climate risk for our investors and our descendants, we believe the Blueprints outcomes provide the best balance between economy, energy, and environment. For a second opinion, we appealed to climate change calculations made at the Massachusetts Institute of Technology. These calculations indicate that a Blueprints world with CO2 capture and storage results in the least amount of climate change, provided emissions of other major manmade greenhouse gases are similarly reduced.
But the Blueprints scenario will be realized only if policymakers agree on a global approach to emissions trading and actively promote energy efficiency and new technology in four sectors: heat and power generation, industry, transport, and buildings.
This will require hard work, and time is short. For example, Blueprints assumes CO2 is captured at 90% of all coal- and gas-fired power plants in developed countries by 2050, plus at least 50% of those in non-OECD countries. Today, none capture CO2. Because CO2 capture and storage adds costs and yields no revenues, government support is needed to make it happen quickly on a scale large enough to affect global emissions. At the least, companies should earn carbon credits for the CO2 they capture and store.
Blueprints will not be easy. But it offers the world the best chance of reaching a sustainable energy future unscathed, so we should explore this route with the same ingenuity and persistence that put humans on the moon and created the digital age.
The world faces a long voyage before it reaches a low-carbon energy system. Companies can suggest possible routes to get there, but governments are in the driver’s seat. And governments will determine whether we should prepare for bitter competition or a true team effort.
Jeroen van der Veer, Chief Executive of Royal Dutch Shell plc, is Energy Community leader of the World Economic Forum energy industry partnership in 2007-2008 and chaired this year’s Energy Summit in Davos. He also chairs the Energy and Climate Change working group of the European Round Table of Industrialists.
From: http://www.shell.com/home/content/aboutshell-en/our_strategy/shell_global_scenarios/two_energy_futures/two_energy_futures_25012008.html
For Peak Oil, Three’s a Crowd
Keith Johnson
Wall Street Journal [blog] 25 January 2008
Has the peak oil crowd added a new member?
An email written by Royal Dutch Shell CEO Jeroen van der Veer has sparked the latest round of debate over the state of oil supplies. In the email, which Mr. van der Veer told his employees to spread around, he says (HT to the Oil Drum. Here’s the whole spiel.):
Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand. As a result, society has no choice but to add other sources of energy - renewables, yes, but also more nuclear power and unconventional fossil fuels such as oil sands. Using more energy inevitably means emitting more CO2 at a time when climate change has become a critical global issue.
Other big energy companies, from France’s Total to Texas’s ConocoPhillips, have already painted a less-than-rosy outlook for world oil supplies. Even the National Petroleum Council, a proxy for the Big Oil fraternity, recently said that conventional oil and natural-gas supplies aren’t likely to keep pace with demand (study here).
The crux of the debate: How fast are existing fields actually declining, and how fast and economically can oil companies get new finds to replace that output? (Recent WSJ stories on peak oil here and here.)
Shell outlined two main scenarios for the energy future: a free-for-all for energy resources around the world, or growing international cooperation to soothe energy friction. Shell leans toward the latter:
Against the backdrop of these two equally plausible scenarios, we will only know in a few years whether December’s Bali declaration on climate change was just rhetoric or the beginning of a global effort to counter it.
Another interesting twist to the idea that oil and natural gas will become harder and more expensive to find and get out of the ground: It’s making coal pricier, because coal is still the go-to fuel source in the absence of a big nuclear build-out.
So the question is: Does Shell adding its voice to the growing chorus of naysayers mean anything for the viability of other energy sources?
Full text of Shell CEO’s email to employees:
Date: 22 January 2008
Subject: Shell Energy Scenarios
Dear Colleagues
In this letter, I'd like to share reflections about how we see the energy future, and our preferred route to meeting the world's energy needs. Industry, governments and energy users - that is, all of us - will face the twin challenge of more energy and less CO2.
This letter is based on a text I've written for publication in several newspapers in the coming weeks. You can use it in your communications externally. There will be more information about energy scenarios inthe months ahead.
By the year 2100, the world's energy system will be radically different from today's. Renewable energy like solar, wind, hydroelectricity and biofuels will make up a large share of the energy mix, and nuclear energy too will have a place.
Mankind will have found ways of dealing with air pollution and greenhouse gas emissions. New technologies will have reduced the amount of energy needed to power buildings and vehicles.
Indeed, the distant future looks bright, but getting there will be an adventure. At Shell, we think the world will take one of two possible routes. The first, a scenario we call Scramble, resembles a race through a mountainous desert. Like an off-road rally, it promises excitement and fierce competition. However, the unintended consequence of "more haste" will often be "less speed" and many will crash along the way.
The alternative scenario, called Blueprints, has some false starts and develops like a cautious ride on a road that is still under construction. Whether we arrive safely at our destination depends on the discipline of the drivers and the ingenuity of all those involved in the construction effort. Technical innovation provides for excitement.
Regardless of which route we choose, the world's current predicament limits our maneuvering room. We are experiencing a step-change in the growth rate of energy demand due to population growth and economic development, and Shell estimates that after 2015 supplies of easy-to-access oil and gas will no longer keep up with demand.As a result, society has no choice but to add other sources of energy - renewables , yes, but also more nuclear power and unconventional fossil fuels such as oil sands. Using more energy inevitably means emitting more CO2 at a time when climate change has become a critical global issue.
In the Scramble scenario, nations rush to secure energy resources for themselves, fearing that energy security is a zero-sum game, with clear winners and losers. The use of local coal and homegrown biofuels increases fast.
Taking the path of least resistance, policymakers pay little attention to curbing energy consumption - until supplies run short. Likewise, despite much rhetoric, greenhouse gas emissions are not seriously addressed until major shocks trigger political reactions. Since these responses are overdue, they are severe and lead to energy price spikes and volatility.
The other route to the future is less painful, even if the start is more disorderly. This Blueprints scenario sees numerous coalitions emerging to take on the challenges of economic development, energy security and environmental pollution through cross-border cooperation.
Much innovation occurs at the local level, as major cities develop links with industry to reduce local emissions. National governments introduce efficiency standards, taxes and other policy instruments to improve the environmental performance of buildings, vehicles and transport fuels.
As calls for harmonization increase, policies converge across the globe. Cap-and-trade mechanisms that put a cost on industrial CO 2 emissions gain international acceptance. Rising CO2 prices accelerate innovation, spawning breakthroughs. A growing number of cars are powered by electricity and hydrogen, while industrial facilities are fitted with technology to capture CO 2 and store it underground.
Against the backdrop of these two equally plausible scenarios, we will only know in a few years whether December's Bali declaration on climate change was just rhetoric or the beginning of a global effort to counter it. Much will depend on how attitudes evolve in Beijing, Brussels, New Delhi and Washington.
Shell traditionally uses its scenarios to prepare for the future without expressing a preference for one over another. But, faced with the need to manage climate risk for our investors and our grandchildren, we believe the Blueprints outcomes provide the best balance between economy, energy and environment.
For a second opinion, we appealed to climate change calculations made at the Massachusetts Institute of Technology. These calculations indicate that a Blueprints world with CO2 capture and storage results in the least amount of climate change, provided emissions of other major manmade greenhouse gases are similarly reduced.
The sobering reality is that the Blueprints scenario will only come to pass if policymakers agree a global approach to emissions trading and actively promote energy efficiency and new technology in four sectors: heat and power generation, industry, mobility and buildings. It will be hard work and there is little time.
For instance, Blueprints assumes CO2 is captured at 90% of all coal- and gas-fired power plants in developed countries in 2050, plus at least 50% of those in non-OECD countries. Today, there are none. Since CO2 capture and storage adds cost and brings no revenues , government support is needed to make it happen quickly on a scale large enough to affect global emissions. At the very least, companies should earn carbon credits for the CO2 they capture and store.
Blueprints will not be easy. But it offers the world the best chance of reaching a sustainable energy future unscathed, so we should explore this route with the same ingenuity and persistence that put humans on the moon and created the digital age.
The world faces a long voyage before it reaches a low-carbon energy system. Companies can suggest possible routes to get there, but governments are in the driving seat. And governments will determine whether we should prepare for a bitter competition or a true team effort.
That is the article, and how I see our challenges and opportunities. I look forward to hearing how you see the situation (please be concise).
RegardsJeroen van der Veer, Chief Executive
Oil Demand, the Climate and the Energy Ladder
Jad Mouawad
New York Times 19 January 2008
Energy demand is expected to grow in coming decades. Jeroen van der Veer, 60, Royal Dutch Shell’s chief executive, recently offered his views on the energy challenge facing the world and the challenge posed by global warming. He spoke of the need for governments to set limits on carbon emissions. He also lifted the veil on Shell’s latest long-term energy scenarios, titled Scramble and Blueprints, which he will make public next week at the World Economic Forum in Davos, Switzerland. Following are excerpts from the interview:
Q. What are the main findings of Shell’s two scenarios?
A. Scramble is where key actors, like governments, make it their primary focus to do a good job for their own country. So they look after their self-interest and try to optimize within their own boundaries what they try to do. Blueprints is basically all the international initiatives, like Kyoto, like Bali, or like a future Copenhagen. They start very slowly but before not too long they become relatively successful. This is a model of international cooperation.
Q. Your first scenario looks very similar to today’s world, with energy nationalism, competition for resources and little attention to consumption.
A. It depends where you live. I realize there are different opinions about Kyoto in the world. But if you think about Bali, Bali is a good outcome if people can agree how to have useful discussion in the coming two years and the United States, China and India are on board. The Blueprints world is maybe a world that starts slowly and is not that easily feasible, but you see some early indicators that it is a realistic possibility.
Q. The world seems to be at some form of inflection point with a big shift in demand.
A. The basic drivers are pretty easy and they are twofold. You go from six billion people to nine billion people basically in 2050. This combination of many more people climbing the energy ladder, which is basically welfare for a lot of people who live in poverty, creates that enormous demand for energy.
Q. How will the demand be fulfilled?
A. Many politicians think we have to make a choice between fossil fuels and renewables. We have to grow both fossil fuels and renewables. And that will be a huge effort for both.
Q. More energy means more carbon emissions. How do you deal with that?
A. That is absolutely the crux of the matter. The principal way we see is that in the very short term, man-made carbon emissions will increase. But over time people will figure out ways — and we work very hard on that — that while using fossil fuels you try to find carbon dioxide solutions. For instance, carbon sequestration. The problem is that many of the renewables, if you take the subsidies out, are still too expensive. That is the dilemma we face now.
Q. Fossil fuels are still going to represent the lion’s share of the energy mix in the next century?
A. First, there is no lack in itself of oil or gas, or coal for that matter. But the problem is that the easy-to-produce oil or easy-to-produce gas will be depleted or with difficult access. But if you look at difficult oil or difficult gas, which we in the industry call the unconventionals, such as oil sands or shales, they may be exploitable. But per barrel, you need a lot more technology and a lot more investments, and per barrel you need a lot more brain to produce it. It’s much more expensive.
Q. What kind of alternatives can compete?
A. The competition is partly true competition — markets, inventions — and part of it is governments. I think if you can price carbon dioxide, probably you can stimulate carbon capture and sequestration. If you tax a certain form of energy, over time it gets more expensive and you may use less of it.
Q. It still seems there is a gap that is hard to bridge.
A. If carbon is the real bottleneck, as a world it makes sense that we use our money where we get the biggest reduction for the lowest cost. You get more carbon reduction for less money by tackling the power sector and maybe the building sector.
Q. It is still hard to see that people are willing to pay more for greener energy.
A. I am a strong believer and strong advocate of free enterprise. If you would like to solve the carbon problem in the world, free enterprise has to work in close cooperation with governments to form the right framework. How you tackled the sulfur dioxide problem in the United States was the basic inspiration for the European trading system of carbon. So there are examples from the past we can apply to overcome that problem. But we can’t do it on our own as an industry. We need cooperation from governments.
Q. How close are we to an understanding globally that climate policy and energy policy are all interrelated issues?
A. Thanks to Al Gore, and many others, the awareness is there. There is a kind of sense of urgency. Secondly, there is a preparedness to do things. Thirdly, do we agree who has to take what action? I think that is still a huge problem.
Q. There was a lot of disagreement at the Bali climate conference.
A. That is correct. I realize that Bali is still very difficult. I am not a pessimist. I see it as a very difficult start-up. The crux of the matter is, if the people say, “Hang on, we are really concerned about the climate and we’d better do something on carbon emissions,” that is in the end the powerful force which politicians and companies cannot ignore. And I think we are past that point.
posted by Silabilm at 10:44 AM
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