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NS4054 Fall Term 2015 Climate Change and Energy Security Overview I • Peter Hartley, Climate Change and Energy Security Policies: Are They Two Sides of the Same Coin • Tony Blair Quote “We must treat energy security and climate security as two sides of the same coin” • His point: • Industrialized world would not be so concerned with Middle East politics if it were not so dependent on Middle East oil supplies • For ensuring energy security reducing oil consumption is a substitute for a military presence and military action in the Middle East • At same time fossil fuel combustion adds carbon dioxide to the atmosphere • Hence reducing fossil fuel consumption should increase energy security while also slowing climate change • The two policy goals should be treated as one 2 Overview II • Paper asks: should the two alternative policy goals be treated as once since one policy instrument can simultaneously further both goals. • To answer question need to • Be more specific on what we mean by energy security and climate policy • Also need to investigate the range of policies that could address the two policy goals • Only then can we assess whether: • Both goals are best addressed by the same policies or • Policies that are best to further one goal might compromise the attainment of another goal. 3 Energy Security I Possible meanings of energy security • Above argument identifies energy security with national security • Can associate increased energy security with a reduced need to maintain influence in countries such as those of the Middle East – substantial energy resources, but politically unstable or hostile to the West • Another connection between energy security and national security is fact that modern military forces require substantial refined oil products • Notion of energy security also has economic dimensions • Sudden large increases in energy prices have preceded most of the post World War II recessions 4 Economic Security • Large energy price increases are thought to retard economic growth via a number of mechanisms. • The need to spend more on energy commodities constrains household consumption of non-energy goods and services • Similarly to save on non-energy related costs, firms reduce employment and investments in non-energy related capital • Productivity also declines as resources are reallocated in response to the energy price changes. • Energy price variability also • Increases uncertainty about future energy prices which in turn • Deters investments in competing types of energy or competing high cost locations such as the deep water in the Gulf of Mexico 5 Hard Trilemma • Such investments typically are large and long-lived and thus made much more uncertain • Insofar as volatile energy prices reduce investments in domestic alternatives they exacerbate the initial instabilities by concentration in less stable region • Before share could argue a hard trilemma with reduced fossil fuels use increasing energy security and improving the climate. • Most cost effective strategy might have been to focus on R&D in lowering the costs of alternative fuels 6 Soft Trilemma • Being less dependent on ME over time should reduce oil price volatility since it is that region that has generated most of the oil price shocks • With shale oil and gas the trilemma softens and reducing oil use at least improves energy security and the climate • Shale oil is lighter with less CO2 component • Domestic production lessens imports • Cheap gas shifts reduces CO2 in power generation • The increased use of natural gas at the expense of coal will be a slowing in the growth of CO2 emission in a way • That does not raise energy costs and • Therefore is consistent with continued growth in economic prosperity 7 Energy/Climate Transition • Shale based natural gas will provide a period of transition for the development of alternative fuels • When gas is less abundant the shift to these technologies and alternative fuels can occur without economic dislocation. 8