A Robust Strategy for Sustainable Energy

Once again the debate has intensified over whether energy as a commodity is running out. Just six or seven years ago the world seemed awash in oil, yet today many pundits predict the end of oil and indeed the end of the fossil-fuel era.¹ With its recent merger with the California-based oil company Unocal, Chevron has placed a bet on ever-increasing oil prices.² Two other oil giants, BP and ExxonMobil, on the other hand, have publicly stated that resources appear plentiful.³

Even if the world's oil resources are indeed plentiful, world energy supply remains very much constrained. As a world population headed toward 9 billion strives for a standard of living that the industrialized nations take for granted, energy demand will increase rapidly, straining the entire supply chain from exploration to refining. To complicate matters further, oil and gas resources are concentrated in a small region of the world, leading to a more fragile and more volatile trading system that shows strong monopolistic tendencies. In addition to all of this, environmental concerns pose perhaps the toughest constraint of all.

Forecasts of future energy consumption and of trends in energy infrastructure development are fraught with enormous uncertainties.⁴ Strategies for long-term energy planning must be robust to unpredictable variations in the dynamics of world development. This paper develops robust strategies for maintaining economic growth and worldwide development while overcoming shortages in some of the raw resources, as well as supply constraints due to environmental concerns, that threaten to block access to most conventional energy sources.

The paper will make the case that the known energy resource base is more than sufficient to provide a growing world population with energy on the scale to which the industrial countries have grown accustomed and to which the developing countries now aspire—but only if far-sighted investments are undertaken in a timely way. Environmental constraints will be more difficult to overcome, but they, too, have promising solutions, and again a long lead time will be needed. The key to both the supply-side and the environmental concerns will be the timeliness with which decisions are made.

Today's technology base is insufficient to provide clean and plentiful energy for 9 billion people. To satisfy tomorrow's energy needs, it will not be enough simply to apply current best practices. Instead, new technologies, especially carbon capture and sequestration (CCS) at large industrial plants, will need to be brought to maturity. Fortunately, CCS and certain other needed technologies are already in early implementation. However, without substantial progress in the way energy is found, transformed, and transported, the world will indeed run into a severe energy crisis.

The main arguments of the paper can be stated as follows:

• — The use of large quantities of energy is central to the functioning of an advanced economy. There are severe limits to energy conservation even in the long run. Global economic growth will bring about significant increases in primary energy demand.

• — Energy resources are fungible, especially among the fossil fuels. For example, coal can be converted into liquid fuels such as gasoline at low cost. So, too, can other, nonconventional fossil fuels like oil sands and shale and potentially the methane hydrates that are abundant on the sea floor. Noncarbon energy sources such as nuclear and solar energy could each provide a substantial fraction of the world's long-term energy needs, but both present problems in the short term.

• — There are no serious long-term (century-scale) shortages of fossil-fuel supply once the interconvertibility of oil and other fossil fuels is taken into account. Even the arrival of "peak oil"—the point at which oil production reaches a maximum—would not mean a global energy shortage at today's prices. However, the transition from oil to other sources of liquid fuel will require a significant lead time, and engineering that transition should be part of public policy.

• — The greater constraints are likely to emerge from environmental concerns, especially the rising concentration of atmospheric carbon dioxide (CO₂) acting as a greenhouse...