A new energy revolution (12 April 2006)

Energy is at the very core of a transition to a sustainable development pathway. This depends primarily on reducing our dependence on fossil fuels and developing new and alternative sources of energy which can meet our growing needs without unacceptable levels of damage to our environment. In the meantime, we must face the fact that the fossil fuels era is far from over.

Remarks by Maurice F. Strong at UNEP, Tongji, & HSBC Leadership Program: Environment and Sustainable Development

I am pleased and honoured to have this opportunity of addressing you as you begin this very timely and important conference. First let me congratulate its conveners and sponsors: UNEP, Tongji University, and HSBC, an auspicious combination of organizations each a leader in its field. They could not have selected a more appropriate theme than that of leadership. I especially welcome, too the opportunity to make my first visit to this great University whose reputation for excellence and leadership, have long admired.

The extraordinary progress that China has made, particularly in the last two decades, is a product of the remarkable leadership China has had in its historic transition from a country devastated by conflict to resume its place as one of the world's great nations. Much of that leadership has come from Shanghai - one of the world's most dynamic cities. It is clear, too, the future of China now depends on the nature and quality of readership it continues to receive which in tum will determine, perhaps decisively, the fate of the entire world community. I am so pleased to be sharing this experience with the person who has pioneered the leadership of its environment and sustainable development movement from inception - my great friend, wise counsellor, and mentor - Professor Qu Geping.

The new generation of China's leaders provides impressive and encouraging evidence that China will continue to progress, and to play a decisive role in shaping the dramatic changes now occurring in the world's geopolitical and economic landscape.

In the past, great individuals have emerged to lead the major events and transitions that have occurred in human history. The foundations of the remarkable new era of power and progress that China is experiencing were laid by its great leaders of the modern era, notably Mao Zedong and Deng Xiaoping. In today's more complex, globalized, and interdependent world, the leadership of great individuals can still have an important impact on the course of events. But as the events, which shape our future, are the product of a complex system of cause and effect, in which actions are often separated from their consequences by several dimensions of space and time, leadership must be exercised at key points in this system which can influence their consequences. This requires first and foremost an understanding of the nature and functioning of the system. It requires more informed, more skilled and prepared leadership at every level within the framework of a more collective, consultative system of leadership.

Open market economy

China's Communist Party has become a uniquely effective leadership system, identifying and preparing people for leadership at all levels of Chinese society. Leadership at the governmental level, is, of course, of primary importance. But with the rapid transition to a more open market economy designed to bring the benefits of China's dynamic growth to all of its people, the leadership of the private sector and of citizens at the community and grassroots levels is assuming more and more importance. It is thus very encouraging that China's educational system is being vastly expanded and improved to produce a new generation prepared to exercise leadership in every sector of its society.

Tcday, the changes which are determining the conditions of life and the future prospects of people everywhere are occurring within a global framework in which all contribute to and are affected by the cumulative results of our individual actions and behaviour. These phenomena know no boundaries. Within China, what happens in one city or region clearly affects others. The dust storms rising in Northern China undermine the productivity of its agriculture and pollute the air in many other regions of China and even beyond. The alarming destruction of China's rich biological resources, the ominous deterioration of water quality and shortage of supply in so many areas, the air pollution afflicting most Chinese cities, the threats to its plant and animal life, the contamination of coastal waters and the dangers to marine life, the unsustainable pace of urbanization are all issues in which China's actions are directly linked to the prospects for global sustainability. No country will be more affected by this than China, and none will benefit more from a transition to sustainable development.

Energy is at the very core of China's prospects for transition to a sustainable development pathway. This transition depends primarily on reducing our dependence on fossil fuels and developing new and alternative sources of energy which can meet our growing needs without unacceptable levels of damage to our environment. In the meantime, we must face the fact that the fossil fuels era is far from over. Coal is the principal energy resource of some of the main developing economies, notably China and India, as well as major industrial countries, such as the United States and Australia. These countries have strong incentives to devote more resources to research and development to reducing the environmental damage done by coal, the dirtiest of fossil fuels. It is encouraging to note that China is giving high priority to this.

Competition for oil and gas

Globally, it is clear that the Middle East will continue to be the main source of oil supply for the foreseeable future as well as a major supplier of natural gas. Elsewhere, while advancing technology is facilitating the discovery of new oil and gas reserves and increasing recovery from existing reservoirs, the costs of exploration, development, and transportation are orders of magnitude higher than those of the Middle East.

I foresee an intensification of competition for reliable access to oil and gas on the part of the countries most dependent on them. Competition is already emerging between Japan, China, and Korea for access to major new reserves of oil and natural gas developing in eastern and northern Russia. This competition is also a potential source of conflict as energy and resource hungry nations seek to secure the supplies vital to their futures. We can expect a revival of the nuclear power industry as public concerns about the greenhouse gas emissions of fossil fuels begin to counter concerns about nuclear safety and the disposal of nuclear waste. The nuclear power industry was brought to a virtual standstill in many countries, but substantial progress has now been made in the development of new, more compact, and safer plants and increasing public confidence in plans and procedures for the storage of wastes. The nuclear power industry thus seems destined to experience a resurgence of growth although in the near future, it is still likely to account for only a modest portion of the world's energy requirements.

Transportation is one of the main users of energy and the source of some of its most severe environmental impacts. China's State Environmental Protection Agency (SEPA) predicts that air quality in its cities will continue to degrade and by 2010, more than 60% will be caused by cars and trucks. China is becoming the world's most rapidly expanding market for motor vehicles and potentially their largest manufacturer and exporter. The Chinese people cannot be denied the right to own automobiles. But it is in China's interests to ensure that in their manufacture and use, environmental impacts are kept to the minimum. At this stage in the development of its automotive industry; China has a great opportunity to be a leader in developing and producing environmentally friendly vehicles. It is already taking some encouraging steps in this direction. An encouraging example is Chery Automobile Company in Anhui Province, which committed to industry leadership in this respect.

New technology

Beijing is one of a growing number of cities in the world which are effecting significant reductions in air pollution by using natural gas to fuel some 3,000 buses. I am pleased to say that a Canadian company, Westport Innovations, has developed a new technology which combines hydrogen with natural gas for improved performance. China's natural gas resources exceed its indigenous oil resources, and it is establishing new liquefied natural gas (LNG) terminals, which will greatly expand its access to imports of LNG, Natural gas produces only half of the polluting emissions of oil and is more economical to use. Thus, China has a great opportunity to reduce its oil imports and improve its environment by transforming its public transportation systems - buses, trucks, and taxis - to use natural gas as their fuel. If China is able to meet its stated goal of increasing natural gas use from 2% to 10% of its total energy supply, by 2020, mainly by shifting it as the primary fuel for·its public transportation systems - buses, trucks, and taxis - it will reduce air pollution and China's dependency on imports and more expensive energy sources.

Technology is an essential feature of the prospect for positive and sustainable responses to each of these challenges. China with its long history of scientific and technological innovation now has one of the world's most creative and respected science and technology communities. It is thus well-positioned to respond to the challenge of making the transition of a scientific approach to sustainable development to which its leaders are committed. China's scientific and technological community is increasingly linked with its global counterparts. Indeed, the President of China's Academy of Sciences, Professor Lu Yongxiang, co-chairs the Inter Academy Council through which the leading academies of science of the world cooperate to address major global issues. The organization deserves the full attention and support of governments, as well as business and the non-governmental community, as the most timely, authoritative, and objective source of guidance by the world's leading scientists, for those who are shaping the policies and taking the decisions which enable the world community to make the transition to the sustainable energy economy that is the key to our common future.

It is not easy to evaluate the availability of energy supplies over the next two decades and to project the demand for energy. But we must base our plans on the probability that both demand and supply will grow. Paradoxically, higher prices for oil, gas, and coal will provide strong incentives for more efficiency in the development and use of these resources, as well as for the development of alternatives. Energy demand and prices depend to a great extent on the state of world economy, Economic prospects are closely related to prospects for political stability. In both cases, what is most predictable is the prospect of continued uncertainty. Significant recession in the world economy which could arise from a political crisis, a currency crisis, a setback to markets, or a combination of these would substantially alter energy demand. We must prepare for the era in which oil and gas resources will inevitably become scarcer and more costly.

Large swings in oil prices

We can expect continued large swings in the price of oil as temporary disruptions of oil supply produce "spikes" of high prices for short periods white the long-term trend continues upward. These uncertainties must not deter a multi-fold increase in expenditures on research and development to increase the efficiency and improve the environmental performance of fossil fuels and develop alternative sources. There is no single potential energy source now available to replace oil. Hydrogen is a promising candidate, but its development to the point of general use is much farther away than most people realize - except when mixed with liquefied natural gas for motor fuel. Fuel cells are already in use on an experimental basis, but are still far from full-scale commercialization. Again, China is developing some promising technologies which could make it a leader in the field of fuel cells. Geothermal energy provides a locally significant source in some areas, but has limited potential to meet the needs of short-term expansion potential. Bio-mass and solar energy have the potential to meet the needs of rural areas and communities remote from other sources of supply. The oceans offer several potential sources quite apart from the oil and gas reserves that underlie them - tidal energy, wave energy, and thermal energy. All of these hold the prospect of adding to the energy mix in China and elsewhere and can be significantly enhanced by more research and development. I am intrigued, too, with the prospect of more exotic breakthroughs in energy technology, including versions of nuclear and cold fusion, which should be examined more seriously. Although in the aggregate all these potential resources are not likely to account for more than a modest proportion of overall energy needs in the near future, we must devote more attention to them.

One of the greatest challenges of the 21st century is to free vast numbers of the world's people who continue to suffer from poverty and to close the gap between the majority of the world's population that are still at the lower levels of the economic ladder as compared to those who are the prime beneficiaries of our industrial civilization. One of the most important achievements of China's economic revolution is that it has lifted more of its people out of dire poverty than any country has ever done. It continues to face the immense challenge of closing the gap between those who have enjoyed the benefits of this economic growth and those who have been left behind.

The claim of the poor to a growing share of energy resources deserves high priority and will require major support from the international community if it is to be met. Developing countries, notably China and India, are rapidly increasing their dependencies on imports and can be expected to add substantially to the world demand for oil and gas. Innovative practices and development support on a much larger scale will be needed to affect the immense increase in energy supplies required for the poor and disadvantaged at prices they can afford. Paradoxically, trying to do this from traditional energy sources, including renewable alternatives at the present state of the art, is bound to produce major increases in demand and drive prices upward. If we fail to address this dilemma in the immediate future, we will be sowing the seeds for a world-scale calamity which will threaten the peace, security, and stability of the entire international community.

Cooperation on an unprecedented scale

This will require international cooperation on an unprecedented scale. All must join in the mounting of an energy revolution, which will drive a radical transition from today's fossil fuel depended economy to a sustainable energy economy, which will meet our environmental and social, as well as our economic needs, on a continuing basis. Some initiatives are already underway which provide a promising basis for such cooperation. I have already referred to the world energy study now being undertaken by the Inter-Academy Council, which could produce an agreed agenda for the large-scale program of research and development on new and alternative energy sources which we must undertake.

In a period in which energy was still relatively cheap, it has been a complacent assumption that this will likely continue very much as usual. We now know that business as usual is not an option. If we do not act now to avoid the potentially catastrophic consequences of passivity or neglect, by the time the crisis that will result from this becomes more apparent, it will be too late to avert it.

The Kyoto Protocol of the Climate Change Convention provides an essential framework for international cooperation to deal with this critically important issue. It is far from perfect, but it is much better to make the changes required to improve its effectiveness rather than to abandon it or allow it to wither away.

As we know, renunciation of Kyoto by the United States as the world's "super polluter" in terms of greenhouse gas emissions has undermined its effectiveness and clouded its future. While it is unlikely that the United States will return to Kyoto, there are some encouraging signs in the actions being taken by states and cities and the prospect of further measures by the Federal Government to provide incentives for energy conservation and development of alternatives. In the final analysis, our efforts to counter global warming cannot succeed without the United States. The United States cannot escape - and I am confident will accept - its responsibilities to reduce its emissions. It is already clear that many countries will have great difficulty meeting their Kyoto targets by 2010 and some will fail to do so. Special efforts must be made to ensure its implementation. Trading of emission credits and the Clean Development Mechanism (CDM) provided for by the Kyoto Protocol promise to reduce the costs of limiting emissions.

A new generation of risks

China's participation in new international commitments to reduce greenhouse gas emissions, which will hopefully be based on a revitalized Kyoto Protocol, will be essential to its effectiveness. China's constructive role at the recent meeting of Parties to the Climate Change Convention in Montreal made an important contribution to the agreement reached there to continue the negotiating process, China is clearly taking the prospect of climate change very seriously. Its leaders and scientists realize that it has the potential to exacerbate some of China's most pressing resource and environmental concerns while creating a new generation of risks and vulnerabilities. China, already second only to the United States as a source of greenhouse gas emissions, is under growing pressure to accept specific targets to limit them. These pressures will increase. imposing a dilemma for China, which is understandably reluctant to accept limits that could freeze its development at levels well below those of the developed countries.

Energy is pervasive in its impact on virtually every aspect of sustainable development. Just as it is the key to our efforts to end and reduce the impacts of climate change, it is also an indispensable contributor to the prospects of success in China's management of its precious and threatened water and biological resources. The immense human and economic costs of air and water pollution, the unprecedented pace of urbanization, and its impact on the rural-urban balance are all matters of great and urgent concern. But they provide no basis for despair as your country's leadership has been very wise and prescient in recognizing them, undertaking substantial measures to deal with them, and fostering an extensive increase in public awareness. President Hu Jin Tao, in calling for implementation of scientific and harmonious development, stated that equal emphasis should be placed on the quality and the efficiency of development and to a more balanced development in economic, political, and cultural terms, as well as better coordination between cities and the countryside and between different regions. Jia Qing Lin, the Chairman of the National Committee of People's Political Consultative Conference underscored the case for a human-based scientific development concept that highlights "comprehensive, coordinated, and sustainable development of the economy, society, and every individual person."

This is clearly encouraging and demonstrates that the risks and vulnerabilities that accompany China's rapid development can be managed successfully. But the political will to do so must be supported by an aware and engaged public, and particularly important, the commitment and cooperation of business and industry. Despite progress, Chinese experts make it clear that the development pathway along which China has been moving cannot be sustained. For China, the transition to a sustainable development pathway is not an option; it is a necessity. It is also difficult. Changes in established habits and practices do not come quickly or easily. They require a combination of policies, incentives, and penalties, as well as a process of continuing education over time. China is already moving strongly in this direction. It is making encouraging progress in meeting the United Nation's Millennium Goals, which it helped to formulate and which it has accepted for its own national development.

Fundamental changes

The environment and energy and sustainable development cannot be dealt with separate from the management of the economy as a whole. Sustainable development requires fundamental changes in economic management to provide a positive synthesis between the environment and the social and economic dimensions of the development process. The experience of Japan and the most successful European economies demonstrates that industrial efficiency is a precondition to the successful transition to sustainability. Those countries that have succeeded in reducing the energy and materials component of a unit of GOP are the best performing in terms of both their economic and their environmental performance. They have also demonstrated that industrial efficiency can make an important contribution to competitive advantage, as well as to the sustainability of their economies. While China's economy is clearly the leader in terms of economic growth, it continues to lag in its efficiency. This is understandable because of the rapid growth China has experienced. At the same, continuation on this pathway is not sustainable. Fortunately, China has a win-win option, or I would say a compelling necessity, in according highest priority to the achievement of levels of industrial efficiency even beyond what has been achieved by other leading economies. I suggest that this be the next milestone on the China's long march to leadership in sustainable development.

The increasing number of initiatives undertaken by the Chinese government underscores the importance it attaches to the environment and sustainable development. Its Total Emissions Control (TCE) policy by which the government sets caps for total emissions throughout the country assigns responsibilities and sets high standards for achieving them. But entrenched attitudes, interests, and institutional rigidities continue to impair their enforcement. Promising progress has been made in establishing the Green GDP as the basis for measuring China's economic performance. Already, this has demonstrated that incorporation of environmental costs can reduce, and in some cases, negate, the real benefits occurring from the economic progress of many of China's most dynamically growing areas. However, difficulties in accounting for environmental, health costs, and resource degradation have inhibited more universal acceptance and implementation of the Green GDP as a framework for measuring China's real progress. China's Environmental Model City Program, sets high environment and development targets. It has been adopted by some 50 Chinese cities and urban districts and has proven to be an important instrument for creating and achieving high standards of environmental performance and sustainable development in these cities. Critics indicate that this is often done at the expense of their hinterlands, but the fact that so many cities have responded to this challenge has to be seen as an important step forward.

Encouraging evidence

These initiatives and others at the provincial and local levels are proof of the notable progress that China is making in dealing with the environmental and sustainability challenges it faces. The still limited results of such initiatives derive from difficulties in implementation. These difficulties are rooted in entrenched attitudes and special interests, as well as institutional inertia and incapacity. They illustrate the pressing need for informed, enlightened, and cooperative leadership at the provincial, local, industry, and civil society levels. As I move around China, I see encouraging evidence that these changes are taking place, but the speed of change needs to be accelerated.

China is also experimenting with market-based instruments to provide incentives for emission reductions, concentrating first on the control of sulfur dioxide emissions, in which it leads the world. It is now giving serious consideration to the introduction of a carbon dioxide emissions trading system, which could significantly reduce the costs of achieving domestic reductions, while making Chinese companies and communities eligible for credits under the Clean Development Mechanism of the Kyoto Protocol.

We have learned a great deal about the environmental problems we face since the Stockholm Conference in 1992 put this issue on the international agenda. We know a great deal, too, about what we should do to deal with these problems. Why then, are we not implementing what we know can and must be done? In the final analysis, implementation must be driven by motivation. The risks and vulnerabilities we face provide a strong motivation for action, but have not yet been sufficiently strong and immediate to compel us to act expeditiously. All people and societies are ultimately motivated by their deepest moral, ethical, and spiritual values, and the desire to ensure a secure and promising future for those who follow them. This is why I joined with a number of others in launching, following the Earth Summit in 1992, a worldwide movement to produce an Earth Charter, a basic statement of principles to guide the conduct of people and nations towards the Earth and each other. It has now been embraced by many leading organizations and literally millions of people throughout the world. I strongly commend it for more extensive consideration and dialogue in China.

As China acts swiftly and decisively to make its transition to sustainability through further development and better utilization of its own resources and more secure access to imports of energy and other essential commodities, its most immediate, and I would suggest urgent, opportunity is to reduce the rate of growth in its demand through conservation and efficiency in the development, transport, and use of energy and resources. China has already made significant progress in this respect, but it is still only some twenty-five percent as energy efficient as most other industrialized countries.

The importance of conservation and efficiency in the energy field can be illustrated from my own experience when as head of North America's largest electric power utility a massive system-wide program of energy efficiency within our own company and providing incentives for conservation on the part of our consumers, helped our company move from huge losses and escalating rates to the largest profit in its history and stable rates for its customers.

Changing mind-sets

China is now well-positioned to take a major leadership role in international environmental cooperation. Its experience in developing and managing its own environmental problems, the skills it has demonstrated in environmental diplomacy and the critical importance of China in achieving global environmental security and sustainability fit China for this role. No country is better positioned to fill the leadership vacuum which has developed since the retreat by the United States from international environmental cooperation, and none have a greater need and opportunity to place energy at the centre of its transition to a sustainable development pathway. China's leadership will be welcomed by the international community, which very much needs that leadership today.

To succeed in the transition to sustainable development requires that the environment be a full partner in planning and decision-making processes. Your environmental agency, SEPA, is one of the best and most respected of any in the world, and I am pleased that its role has been enhanced and its voice strengthened, It would clearly facilitate the transition to sustainable development if SEPA could become a full partner in the policy and decision-making process which affects the environment.

We must move away from the tendency to treat environmental protection and sustainable development as the source of extra costs and therefore impediments to economic development. In the early days of the environmental movement, conventional wisdom was that environmental problems needed to be tolerated and subordinated to the priority which must be given to economic growth. lt is now recognized that this approach is counter productive and for China, not feasible.

We must change that mind-set and see environment and sustainable development as opening up promising new areas of economic opportunity, opportunities for technological and institutional innovation, and for the development of environmental services and products. I am convinced that the new generation of economic opportunities for China can be driven primarily by its transition to a sustainable development pathway and that this represents the principal challenge to the continued development of the enlightened new generation of leadership that is guiding this transition.

I have great confidence in and admiration at the manner in which China has overcome the extraordinary challenges it has faced over the past half century. China is fortunate in having so many exceptionally enlightened and effective leaders at all levels of its government, in its business community, and other sectors of this dynamic society. I know that China is already on track to resolving the daunting challenges I have referred to. In doing so, it will fulfil its destiny as a truly great nation and help lead the world to a more promising and sustainable future to which all people aspire. This enlightened and timely initiative will make an important contribution to this prospect.