Statement by Mr. José Antonio Ocampo, Under-Secretary-General for Economic and Social Affairs to the OPEC Third International Seminar on "OPEC in a new era: challenges and opportunities"
Vienna, 12-13 September 2006

It is a pleasure to participate in this year’s OPEC Seminar and to have the opportunity to chair this session on energy for sustainable development. I am also delighted to be joined by a distinguished group of speakers.

Since the last OPEC Seminar, the world has witnessed a renewed interest in energy and its contribution to socio-economic development, as well as a more intense focus on dealing with the environmental aspects of energy use.

At the United Nations' 2005 World Summit, world leaders recognized meeting energy needs, promoting clean energy, and tackling climate change as interconnected challenges that must be approached in the wider context of sustainable development. And they stressed that access to energy facilitates the eradication of poverty.

Energy is also in the spotlight, this year and next year, in the Commission on Sustainable Development: a functional commission of the UN’s Economic and Social Council, which serves as the main intergovernmental follow-up mechanism to Agenda 21, approved in 1992 by the historic Earth Summit, and to the Johannesburg Plan of Implementation adopted at the 2002 World Summit on Sustainable Development.

The comprehensive character of sustainable development requires consideration of its three dimensions: social progress, economic development, and environmental protection. Let me refer briefly in these introductory remarks to each of them.

I will start with the social dimension, where we now have a broad consensus that access to modern energy services is important for achieving all the Millennium Development Goals (MDGs), especially poverty alleviation. Access to energy for the 1.6 billion people currently without electricity and the 2.4 billion people without modern fuels for cooking and heating would more than improve their every-day lives: it would also ease access to employment, education, and heath services; improve air quality both outdoors, but especially indoors; and foster gender equality, particularly by lifting from women and girls the burden of gathering traditional fuel sources.

The investment needed to bring electricity networks, LPG and kerosene, and improved transport systems to the poor is a fraction of the total investment in energy infrastructure that developing countries require. Yet all stakeholders must ensure that this socially essential aspect of the broader investment is duly undertaken and financed.

The economic dimension comes most visibly in the estimates of investment requirements. Excluding transport, total investment in energy infrastructure needed from now to 2030 to meet energy needs in developing countries is estimated at US$8 trillion. Along with the well recognized role here of the public sector, many countries are now involving private sector participation in various ways, such as through FDI and private international financing. It also involves at the international level public sector financing through multilateral development banks, and, in the case of the poorest countries, through ODA. The complex combination of private-public participation in the energy sector creates another requirement: improved regulation, which is surely a major challenge in most countries.

It is widely recognized that fossil fuel, including oil, will continue to play a significant role in the energy mix for some time. Estimates by the International Energy Agency point to oil, natural gas, and coal accounting for 81 per cent of total energy use in 2030—so, marginally more than today—and to a total energy consumption that would be higher than today’s level by roughly half. Much of this increase will come from developing countries which, as a group, are expected to see a 2.5 per cent annual increase in energy demand. As this is a much lower rate of increase than expected economic growth in developing countries, it indicates that the energy intensity of developing countries’ economies is expected to decline, as has already been happening rather steeply in some countries like China.

Exploration, development, and investment in oil and gas and other energy resources are needed given projected future demand growth and narrow margins of spare capacity. This poses a distinct challenge, given the rising prices seen in recent years. These higher prices have not resulted in a significant contraction of the world economy partly because they were accompanied neither by large-scale curtailment in global oil supply nor, until recently, by restrictive monetary policies, as was typical in the past. While several developing countries have benefited, the many oil-importing developing countries have been vulnerable to the higher oil prices and experienced both reductions in economic growth and lower investment levels.

Enhanced cooperation on many levels can help reduce price volatility and keep international oil and gas markets working efficiently. Less volatile prices would also help reduce uncertainty surrounding investment decisions and thus stimulate investments, not only in oil and gas, but also in energy efficiency and advanced and cleaner energy technologies. It would also help smooth out the effects of the uneven distribution among developing countries of the costs and benefits of high oil prices. The UN has engaged in some cooperative efforts on this front and stands ready to participate in new initiatives. We have been contributing, in particular, to the Joint Oil Data Initiative, which aims to provide consistent data and information in a transparent way and in which many other international organizations, including OPEC, are involved.

As the world continues to rely on petroleum and other fossil fuel energy and we confront simultaneously and boldly the global challenge of climate change, the transfer and use of cleaner technologies, improved energy efficiency, and enhanced cooperation have taken on even greater significance. This brings us to the environmental dimension.

Although greenhouse gases, to date, are to a great extent attributable to developed countries, expected growth in energy use by developing countries will contribute significantly to future emissions. Moreover, while the energy intensity of GDP is declining in developing countries, the CO2 emissions intensity of energy use has declined only slightly, and scope exists for further emissions reduction through improved energy efficiency.

We have come some way in the past few decades in implementing cleaner technologies and energy efficiency measures. But, in the light of the challenges we face, these efforts look insufficient and must be expanded. Many new technologies to address climate change are under investigation, development, and/or testing. One promising yet still very expensive technology is carbon capture and sequestration. Others have been commercialized, such as co-generation of electricity, which can reduce energy losses to a level of 20 to 30 per cent annually (down from today’s 65 to 75 per cent). Yet its share in global electricity generation remains small, at just over 7 per cent. Still other technologies, such as biofuels, can only prosper steadily in a stable price environment, as clearly shown by the oldest such effort, the Brazilian ethanol project.

Energy efficiency measures and technologies perhaps hold the greatest potential to enable economic growth in developing countries with far fewer environmental consequences. Success has shown, for example, in measures such as setting emissions and performance standards—sometimes on a voluntary basis—and launching appliance and equipment labelling programmes. We should build on these successes, while also working, where possible, to apply energy efficiency lessons learned from developed countries, such as employing improved building codes and zoning regulations.

Investment frameworks are now under review to ensure that funds are channelled to cleaner projects. The World Bank, for instance, is establishing an investment framework for clean energy and development. The international community could play a bigger role in improving developing countries’ capacities to ensure sound and capable decision-making with respect to energy project planning, implementation, and delivery. It can also help by facilitating the transfer of efficient and cleaner technologies, which would be enhanced with capacity building, training, and improved opportunities for financing.

Many oil-exporting countries have set a good example by generously providing development aid, including through the OPEC Fund for International Development; in the past 30 years, the Fund has provided more than US$8 billion to more than 100 developing countries. Continued assistance could also help in meeting the MDGs and the Johannesburg goals of improving energy access for the poor, promoting energy efficiency, and encouraging the use of advanced and cleaner energy technologies.

We cannot overemphasize the importance of energy in achieving the MDGs and sustainable development goals in developing countries. International cooperation can play an important role in facilitating access to clean, safe, affordable, and reliable energy as a basis for the progress in social, economic and environmental areas needed for sustainable development.