The Kyoto protocol—a victim of supply security? or: if Maslow were ...

ARTICLE IN PRESSEnergy Policy 32 (2004) 1253–1256LeaderThe Kyoto protocol—a victimof supply security?or: if Maslow were in energy politicsChristoph W. Frei*World Economic Forum/Energy, DRAFT, V-18/12/03, 91-93 Route de la Captite, 1223 Cologny/Geneva, SwitzerlandAbstractHistory suggests that energy policy priorities can be stratified, similar to the way Maslow structured his famous pyramid ofhuman needs. The essay below claims that access to energy, supply security, energy costs, environmental issues and social acceptanceare not subject to trade-off, but to a hierarchy that underlies the importance of satisfying lower-order needs before addressing thehigher-order needs. The essay demonstrates the hierarchy with an ‘‘energy policy needs pyramid’’ based on historical evidence. Thepyramid is used to analyze the viability of current items of the energy policy agenda. Conclusions indicate that the Kyoto protocolmight be a victim of supply insecurity, that OPEC is good for the environment and that environmentalists should make the fightagainst energy poverty their first priority in order to achieve their overall goals.r 2004 Elsevier Ltd. All rights reserved.Introduction‘‘A person who is lacking food, safety, love, andesteem would most probably hunger for food morestrongly than for anything else’’, stated the Americanpsychologist AbrahamMaslow in 1954 and formulateda theory to explain the motivational structure of ahealthy person. He distinguished different groups ofneeds and defined the hierarchy now known asMaslow’s pyramid. Could there be a model similar toMaslow’s pyramid stratifying different groups of needsand explaining the motivations that determine acountry’s decisions regarding energy policy dilemmas?Countries have been struggling for decades with settingpriorities and continue to do so when confronted withdilemmas in the supply of energy to their people andeconomy. Is supply security the top priority? Whatdetermines the trade-off between evils: nuclear wasteversus greenhouse gas emissions versus high costs ofrenewables? The mixture of spices is very much acreative approach—no recognized concept exists thathelps getting priorities right. Surely, a country that lacksaccess to commercial energy, a secure energy supply,social and international recognition for complying with*Tel.: +41-22-869-1313; fax: +41-22-786-2744.E-mail address: christoph.frei@weforum.org (C.W. Frei).environmental standards, would probably prioritizeaccess to commercial energy before everything else.The ‘‘energy policy needs pyramid’’Historical observation of national energy policiesshows that once access to commercial energy 1 isobtained, the first priority is supply security, followedby cost efficiency. Since the end of the 1970s, industrializedcountries have begun to consider naturalresources efficiency (keyword: internalization of externalcosts), followed (in industrialized countries since the late1980s) by social acceptability (cf. Fig. 1). The last threeaspects explicitly reflect the pillars of sustainabledevelopment, which aimed at balancing rather thanstratifying the efforts made on each of the relevant1 Here we use a definition whereby commercial energy includes,besides electricity, energy products such as candles or lamp-kerosene.Consequently, where other energy products are available to substituteelectricity there is no access-void and substitution becomes anefficiency issue. Only for purposes where electricity cannot besubstituted (e.g. in a hospital) it becomes an access issue (that maybe solved by diesel generators if diesel is commercially available).Based on this definition it follows that supply security cannot beunderstood as a measure that is independent of a given energy system:if the given systemheavily relies on grid-distributed electricity (fromdiverse sources), supply security does as well. If the systemrelies onlamp–kerosene and decentral diesel generators, it is the availability ofthese energy products that determine the level of supply security.0301-4215/$ - see front matter r 2004 Elsevier Ltd. All rights reserved.doi:10.1016/j.enpol.2003.12.012

1254ARTICLE IN PRESSC.W. Frei / Energy Policy 32 (2004) 1253–1256deficit needs satisfiersno debatepossibledebatepossiblesocialacceptabilitynatural resourcesefficiencycost efficiencysecurityof supplyaccess tocommercial energyFig. 1. Energy policy needs pyramid.aspects. To what extent does political viability leaveroomfor trade-offs or for balancing needs?In Maslow’s pyramid, the hierarchy illustrates thatonly once the lower-order needs of physical andemotional well-being are satisfied, do we concernourselves with the higher-order needs of influence andpersonal development. Conversely, if the aspects thatsatisfy our lower-order needs disappear, we are nolonger concerned about the maintenance of our higherorderneeds. Can we observe similar patterns inhistorically observed energy policy priorities?It seems obvious that the question of supply securityonly matters to people who already have access tocommercial energy. Regarding the next higher level, itcan be observed that the question of supply securityprevails over cost-efficiency, environmental and socialissues. The US provides respective evidence, given thatover the past years concerns about decreasing supplysecurity have won out (not only) over environmentalissues such as climate change and Alaskan wildernesspreservation. Further, the increasing questioning ofelectricity market liberalization—with its promise ofcost efficiency in energy supply—following the 2003summer of blackouts, again indicates that supplysecurity takes precedence over the low-cost energy issue.A similar conclusion can be derived from the observationthat China has set up for its automotive industrystringent and cost-intensive constraints regarding theper mileage consumption (as of 2005). The driver behindthis is energy security (more than environmental)concerns in the context of a rapidly growing mobilitymarket and a just as rapidly growing foreign energy (oil)dependency. Again, supply security ranks over (here:mobility) costs. A number of economists promoteinternalization of external costs, i.e. the application ofthe polluter-pays principle, adopting the viewpoint thatthis would be economically efficient, while othereconomists promote market liberalization for preciselythe same reason. Reality shows that only the latter is onmost national policy agendas what suggests that lowcostissues prevail over economically justifiable environmentalconcerns. Likewise, President Putin illustratesthis point when he states that the domestic fight againstpoverty is more urgent than the ratification of the Kyotoprotocol (while at the same time liberalizing theelectricity industry). Finally, the nuclear waste problemor the esthetics of wind farms is debated only inindustrialized countries where the lower-order needsare satisfied. Social acceptance and environmentalissues are often closely related what indicates thatthe hierarchy among the top two issues is not verystrong.Besides confirming the historically grown ‘‘energypolicy needs hierarchy’’, the previous examples suggestthat balancing priorities may be politically feasible onlyto a limited extent, and only among the higher-orderneeds.One could argue that Italy is an exception to theabove-outlined rule—a country where the factualabandon of nuclear energy in 1987 without an appropriatereplacement has lead to a situation where thesecurity of today’s electricity supply is questioned as the2003 blackout has confirmed. Still, the decision ofstopping nuclear energy may have been taken by thedeciders (the people) without the full awareness andunderstanding of the problemof supply security and itsconsequences. It will be interesting to observe whatItalians will do in reaction to the recent blackout.This simple model can describe the motivationalstructure determining a nation’s policy that is concernedwith supplying energy to its economy and people. Thepyramid is based on observations and is therefore of apurely descriptive nature and it would be wrong tointerpret it as a normative hierarchy. In other words, thestatement that e.g. supply security issues would prevailover ecological concerns is purely based on observation—byno means does the hierarchy morally justifythis hierarchy. Further, by drawing a simple picture, wedid not consider the nexus with other policy domains—constraints frombudget policy, fiscal policy, healthpolicy, etc., which can have an important impact onenergy policy, both on a national and internationallevel. As an example, decisions related to ‘‘security ofdemand’’ in oil and gas exporting countries are drivenby budget policy and are not necessarily part of thenation’s policy that is concerned with supplying energyto its economy and people—but they clearly affectenergy geopolitics and thereby the supply security ofother countries.That said, the pyramid reflects a certain reality. Bylearning fromit we might avoid chasing illusions—desirable as they might be. Like a pianist, dreaming ofRachmaninov’s third piano concerto—choosing to playone of his preludes instead, being realistic about thelimits of his technique and finger ability, does not keephimfromdreaming and slowly getting closer to hisdreambut prevents himfrombeing frustrated fromhaving spent his talent and time on a failed attempt thataimed a level too high.

ARTICLE IN PRESSC.W. Frei / Energy Policy 32 (2004) 1253–1256 1255So, let us now extrapolate and behave as if thepyramid was to determine future energy policy priorities.Using the pyramid as a crystal ballFirst of all, the pyramid tells us that a good publicunderstanding of the supply security issue is crucial. Weshould bear in mind that security perception is based notonly on facts but is, to a certain extent, a socialphenomenon making the public understanding important.As long as no clear understanding and agreementon appropriate level of supply security exists, lobbieswho may be questioned by higher-order needs will usethe ‘‘fear-tactic’’. In other words, they will insist that theexisting level of supply security is inadequate therebysharpening the focus on pure supply/demand issues,away fromhigher-order needs. Thus good publicunderstanding of an appropriate level of supply securityshould be (at least for industrialized countries) thefoundation on which energy policy is built.The Kyoto protocol—a victim of supply security? Aslong as supply security is a dominant issue on theinternational energy policy scene, the attempt to reachinternational agreements regarding higher-order needs isseriously questioned. It may therefore be wrong to waitfor the Kyoto protocol to be ratified without startingparallel actions. Building ‘‘coalitions of the willing’’ tofight climate change—coalitions among those who canafford it, be it among industry leaders, among countriesthat are comfortable with their level of supply security,across consumers who can afford it, etc.—may be moreeffective in the short term.‘‘Poor people desperately want energy, electricityparticularly’’, according to Barbara Stocking, ExecutiveDirector, OxfamGB. Today, around 1.6 billion people,or one-quarter of the world’s population do not haveaccess to electricity. This energy divide has many faces.The standard of living improves with access tocommercial energy; electricity makes it possible to coolmedical drugs or to pump water. According to theWorld Energy Investment Outlook published in 2003 bythe International Energy Agency the cost of providingelectricity access by 2030 to the then estimated 1.4billion people without access is estimated at US$ 665billion (compared to US$ 9841 billion needed overallelectricity investments on a worldwide level over thesame time period). According to the same source, totalCO 2 emissions would increase by as little as 1.4–1.6%.Would you ask your co-citizen who has not enough tosecure a meal and a bed to spend his time and money forfire brigade contributions? No doubt, there may be a fireand there is a common interest in having a fire brigade.Is your conclusion that society should pay for such aservice while the worse-off should be exempted from anypayment? What about the case where the potential fire iscalled climate change and co-citizens are co-nations,some of which with a majority of the people still withoutaccess to commercial energy? We may consider that onlycountries that have secured a certain level of electricityat a reasonable cost would be willing to commit(intrinsically motivated) to an environmental agenda.For the opposite case, if coal is locally available andcheap, that is what will be used—full stop. IndiraGandhi captured this situation eloquently, referring topoverty as the ultimate pollutant (Stockholm, 1972).The pyramid would suggest that fighting energy povertyshould rank top on the world’s energy agenda beforeinternational agreements on higher-order energy needscan be achieved. Should this make the fight againstenergy poverty an environmentalist’s first priority?Is OPEC good for the environment? We all know therationale that OPEC helps preserving scarce resourcesby maintaining high prices—here we follow anothertrack to find a similar conclusion. We could observe thatOPEC has, during the Venezuela crisis in early 2003 andthe war in Iraq in 2003, contributed to maintain supplyand demand balanced at a surprisingly stable price—OPEC has thereby acted as an important contributor toenergy–geopolitical supply security. Would it have beena cartel-free market, we might have seen much higherprice spikes. This again made and makes it possible forindividual countries to continue to address higher-orderneeds. Doesn’t this make OPEC a facilitator of potentialenvironmental policy measures in the countries thatbenefit fromthe improved supply security (at least aslong as long-terminvestments are ensured even thoughthe lack of clear price signals may keep markets from anappropriate anticipation)? If we carry the same rationalea bit further, would a shift to a cartel-free, gas prevailedenergy picture question today’s level of environmentalpolicy?What if we go from cheap to expensive energy? This isevery environmentalist’s hope, as such a scenario islikely to increase efforts towards energy efficiencies andsavings. It is, therefore, also likely to go along withcapital-intensive high-tech solutions. Social acceptancewould probably lose weight in the policy agenda,helping controversial technologies such as nuclearpower to find their way back in the energy mix. Further,the high capital cost of advanced technologies would belikely to increase the divide between the energy-poor andthe energy-rich countries, making the bridging of theenergy divide an even more important issue.Does the pyramid advocate for the hydrogen economy?The vision of hydrogen as a storable and mobilesecondary energy carrier complementing electricity asthe stationary counterpart is considered to lay far in thefuture—is it 30 years, 50 years? If hydrogen (or anothersecondary energy carrier) can be produced, stored andtransported in large quantities fromworldwide welldistributedresources (be it coal, nuclear, or renewable

1256ARTICLE IN PRESSC.W. Frei / Energy Policy 32 (2004) 1253–1256energy) the energy–geopolitical risk could be significantlyreduced compared to today. Today’s known oiland natural gas reserves are geographically very muchconcentrated to a few (to a large extent considered‘‘unstable’’) regions. Even if expensive, the potential ofincreasing supply security could, as we are told by ourpyramid, be an accelerating advocate for this vision.Like many theories, Maslow’s hasn’t endured the testof time—it failed to explain the existence of poets. Poetswould probably not exist if their first preoccupation waslower order needs such as the health of their bankbalances. Yet, poets are a minority. They are just asmuch of a minority as countries that give equal priorityto environmental concerns and supply security issues.We may challenge our priorities (and the pyramids) withnew visions; and then, perhaps, there will be more poets.We may however decide to focus on visionary projectsaligned with how today’s world functions; and then,hopefully, there will be less energy poverty.One may expect that similar reflections can stormthe brain in the context of other economic factorsincluding labor, capital, information or resources suchas water.I owe gratitude for critical comments to Laura Cozzi,Gerald Doucet, Stuart Brooks, Ged Davis, JeremyJurgens and Andy Richards. The ideas and opinionsexpressed are those of the author who is solelyresponsible for mistakes and omissions.