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End of fossil fuel and fueling of innovations

By Dennis Pamlin (China Daily)
Updated: 2009-08-26 14:47

The most authoritative energy organization just indicated that the end of oil is much nearer than expected. The day we will see the end of the oil era can best be described as an oil-bomb implosion -more powerful than anything humanity has seen.

In a unique initiative the International Energy Agency in Paris has conducted its first study to assess the future oil supplies. The decision to survey supply - instead of just demand, as in the past - reflects an increasing fear among world leaders that oil reserves may dry up much sooner than expected.

Very soon the day will come when humanity will see the end of oil. If the response is strategic from Chinese companies and policymakers it could boost a shift from high-carbon goods "made in China" to smart 21st century solutions "innovated in China" that could help the world into a global circular economy.

At first thought the end of cheap oil may look like a good thing for the environment because much of the carbon emission that causes global warming comes from oil. The problem is that most of the international companies responsible for providing energy have shown they are not that interested in a sustainable future with renewable energy and energy efficiency. When oil prices were close to $150 a barrel last year we could see increased investments in renewable energy and energy efficiency, but the real investments were in more and dirtier fossil fuels.

Three areas received a lot of attention and investments from the fossil fuel industry last year: Tar sand, coal to liquid and carbon capture and storage (CCS).

Tar sand is dirty oil that requires a lot of energy to be extracted so it emits much more carbon than traditional oil. Coal to liquid is a method of extracting liquid fuel from coal, which again causes much higher emissions than traditional oil because it is a very energy intensive process. And CCS is an "end-of-pipe" technology where the problem is made marginally less destructive.

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From an economic and innovative perspective these investments make no sense. Their ways of providing energy are dirtier and more expensive, and they don't drive innovation or create any significant job opportunities compared with most other options.

Energy efficient buildings, or even carbon-positive buildings, new smart IT solutions that allow teleworking and smart public transport system can be built around renewable energy at the same or cheaper cost.

Why then big investments were not made in smart and renewable energy solutions? The reason is simple and important both. It is about business ideas and the will to keep on using an infrastructure that we sooner or later must leave behind.

The world, especially the industrial world, has such a strong addiction to oil that we will probably see wars over oil and more investments in climate destructive technologies if we don't start investing for a world beyond oil.

Since oil consumption in China is expected to increase by about 60 percent by 2020, according to studies conducted by Chinese Academy of Social Sciences, it can turn the crisis into an opportunity.

The country has the chance of shifting from a society built on oil and look at development beyond the "age of oil". Its focus should shift from increased oil exploration and more fossil technologies toward new smart technologies that also can be exported.

Smart public transport, teleworking and smart buildings can become the three pillars of an oil-free future for China and the rest of the world. But for that to happen we need new initiatives.

First and most important is to ensure that companies engaged in extracting, refining and supplying fossil fuel are not in charge of the development agenda. Many western governments have such companies as their main advisors on climate policy.

It's natural that these companies would want to protect their business model and sell as much energy as possible instead of helping people get the service they need in the most climate-efficient way. The companies want to protect the investments in the infrastructure they have built, too. That means they would use more fuel for their refineries, pipelines and power stations.

It is almost impossible for them to give up the use of fossil fuel both as a raw material and finished product because their knowledge and innovative power is almost totally limited to fossil solutions.

Second, no company should be supported or given permission to operate unless it demonstrates a plan for a fossil-free future by 2020. This would prepare society for the day oil prices shoot out of the roof or the existing distribution system collapses.

Third, China can lead the way in making other oil producing countries invest all the revenue earned by their companies after oil prices cross $70 a barrel in non-fossil-fuel solutions, with a strong focus on energy efficiency and system solutions.

It doesn't make any sense to allow companies to make record profits from our dependence on oil and use it to make us more wretched slaves of fossil fuel.

Fourth, China can take up the global challenge of building oil-free cities employing the best tools and practices from around the world, and then sharing the experience with other countries.

The end of oil can lead to harmonious innovation or more aggressive investments in fossil fuel. The development road China chooses - sustainable or destructive - will not only shape the 21st century's industrial development, but also humanity's future.

The author is adviser to various companies, governments and NGOs.