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Business takes the lead on fighting climate change

Governments didn't take any major steps at Cancun to fight climate change, but business leaders across the globe are not waiting to act. Oleg Deripaska writes.

india Updated: Dec 14, 2010 11:10 IST
Oleg Deripaska
Oleg Deripaska
Hindustan Times

It is easy to be disheartened by the failure at Cancun to take major steps towards an international agreement on fighting climate change. Despite apparent broad consensus on the threat that global warming poses and the need for urgent action, short-term national interest is still being put before the long-term collective good.

Fortunately, business leaders across the globe are not waiting to act. And, cooperation on the regional level such as that between Russia and China demonstrates there is will to combat climate change.

At the talks, national governments, for various reasons, are resisting the concessions needed to break the log-jam. Regional blocs appear more interested at apportioning blame than finding solutions. International organizations, however
well-intentioned, seem so far unable to bridge the divides.

But away from the international arena, there is reason for optimism. Businesses are not waiting for global agreement to reduce energy consumption. The need to cut costs, as well as to help safeguard the environment, is making energy conservation a major priority for companies in Russia and around the world.

At home, national governments the world over are re-examining their sources of energy and generation capacity Renewable energy is also attracting Government support. The US is spending $66 billion, as part of its overall stimulus package, to develop and harness alternative fuel sources. The EU wants to generate 20% of its power renewably by 2020. China has passed a $47 billion green energy bill and is using subsidies and other financial tools to boost investment in wind and solar power.

And, as the world's largest producer of greenhouse gases, enabling China to continue developing its economy without a huge increase in carbon emissions is critical to tackling climate change. Even if its per capita levels are still way below American levels, China has now overtaken the US as the world's largest greenhouse gas emitter.

But here, too, there is reason for optimism. China is very much aware of the challenge and has promised & as part of its attempt to kick start the post-Kyoto talks - to reduce emissions per GDP unit by as much as 45% by 2020.

To deliver these cuts, China is overhauling and replacing older coal-fired stations and is a leader in carbon-capture technology. And, China is ahead of the global trend in renewed attention to nuclear power - a reliable, clean and safe source of energy; building more nuclear power stations within the country than the rest of the world combined. This kind of interest and investment in nuclear power must be at the heart of reducing our reliance on fossil fuels.

But of all the sources of clean energy, it is hydro-electricity, a mature technology, which holds the greatest promise. Already, hydroelectric output was the world's most rapidly-growing major fuel in 2009. With major projects like the
Three Gorges Dam in place, China generates over 16% of its electricity from hydropower. But this has to be increased sharply to meet its emissions target while driving economic growth. So, along with speeding up new hydropower projects within the country, China is looking across its border to Russia to help meet its need for clean energy.

Russia has among the greatest untapped hydropower resources in the world. Even better for China, the greatest potential for growth is in Siberia and Far East Russia, close to the Asian markets.

Electricity generated by hydropower is also ideally suited to meeting the big fluctuation in demand between on and off peak times. Hydropower can be brought online in minutes, avoiding the need to keep coal power stations producing surplus energy and emissions 24 hours a day.

This explains why the Russian and Chinese Governments have such big ambitions for energy cooperation. Energy exports from Russia to China are now expected to increase 60-fold over this decade. To help transfer the power efficiently, China is investing the equivalent of $250 bn in improving its national grid.

And, with prices being up to three times higher in China than across the border in Russia, a compelling business case for both countries to co-operate is clear. The ongoing debate in China on the introduction of an internal carbon price will only make Russian hydro even more attractive.

But, while our Governments can set bold targets, it is businesses that will deliver. The recent agreement between EuroSibEnergo, part of the EN+ Group, and China Yangtze Power Co, the country's largest listed hydropower corporation, to develop hydro-electricity projects in Russia demonstrates the progress already underway. This is by no means the only example of large-scale cross border cooperation. The EU is considering super-grids to enable the continent to benefit from solar power generated in North Africa. Norway and Denmark are collaborating on the interchange of hydroelectric, thermal and wind power to lower cost of electricity production. And, there are plans for Mongolian wind energy to be transmitted to South Korea and Japan. This is just the kind of activity that should help lift the gloom from Cancun.

We must keep pressing for a global climate change agreement. But progress on the ground, fortunately, is running ahead of international talks.

(Oleg Deripaska is the CEO of the EN+ Group, a Russia-based mining, metals and energy group, and a member of the WEF Low Carbon Prosperity Task Force. Views expressed are personal).

First Published: Dec 14, 2010 11:06 IST