at the  Multi-stakeholder forum on sustainable energy in a competitive market: forging partnerships on the  occasion of the tenth session    of the Committee on Sustainable Energy (31 october - 2 november 2000)

Distinguished panellists and delegates,

It is with pleasure that I welcome you to the Forum on Sustainable Energy. This Forum is a crucial element of "the energy week" we are having here in the United Nations Economic Commission for Europe in Geneva. We need a debate that could contribute to what the Committee on Sustainable Energy will discuss and adopt tomorrow. We need this debate also in the context of the ninth annual session of the UN Commission on Sustainable Development. So, as you see, it is not a sheer coincidence, this meeting has been organized to coincide with the tenth session of the Committee on Sustainable Energy.

At last year’s session, the Committee on Sustainable Energy decided to contribute a regional perspective to the preparations and lead-up to the 2001 annual session of the UN Commission on Sustainable Development. CSD-9, as it is commonly known, will address sustainability issues related to environment and energy as well as transport. This Forum is also intended as a contribution to these preparations.

Tomorrow you will be discussing and adopting a declaration, a policy statement on sustainable energy development in the ECE region. You will also decide on follow up initiatives for your Committee. I hope that today’s presentations and debate will help to frame this policy statement as well as to provide suggestions on follow up actions.

As you are aware, a number of documents are available to guide your deliberations today and tomorrow. These include: a paper providing an overview of the key energy sustainability issues confronting ECE countries; a document addressing, in greater detail, two of these key issues, namely, (a) energy intensity and efficiency, and (b) energy pricing, subsidization and internalization of externalities; and a paper on five specific follow up initiatives for the Committee’s consideration. I would also like to draw your attention to the already mentioned draft proposal for the Policy Statement on Sustainable Energy Development which was made available to you as a room document yesterday.

One should be humble and modest when speaking on energy to such a forum of most knowledgeable officials and experts. Nevertheless I would like to take some of your time and comment on a number of policy challenges that you will be addressing during the course of the next two days. I will deal briefly with four issues. These are: (1) the changing policy and market environment; (2) sustainable development; (3) energy efficiency; and (4) the internalization of externalities. The latter two topics will be the subject of your deliberations during the course of this Forum.

Energy has been and will be the issue on policy and development agenda for years. The "winds of change", not only European, but also global are buffeting energy markets, industries and enterprises. Governments in central and eastern Europe as well as in central Asia are busy reshaping, restructuring and, in some cases, privatizing their energy industries. In western Europe and North America, governments are aggressively opening up and liberalizing energy markets, notably the natural gas and electricity markets. These processes do take place also in some central and eastern European countries. At the same time, liberalization and globalization are favouring the concentration of capital and labour into ever larger and larger multinational energy companies, raising concerns about excessive market power.

Environmental and health concerns, and to some degree safety concerns, continue to challenge energy industries. World oil prices are once again volatile, affecting other energy prices and raising concerns about inflation and economic growth. Energy taxation, which was never very popular with energy producers and consumers, is increasingly coming under scrutiny and a source of discontentment among some groups in society. Anxiety over energy security, which abated in the 1980s and 1990s, is once again re-emerging, and receiving increasing public and policy attention.

Indeed, energy market, energy industries and government energy policies are in a significant state of flux. Strategic choices are being made, there is certainly the opportunity to take advantage of some of these developments to facilitate the transition to a more sustainable energy future. There are also developments which work against such transition.

But despite the uncertainty, contradictory tendencies and to some extent anxiety generated by these evolving changes, it is important to take stock of the progress made so far and what lies ahead. Furthermore, it is imperative to press on with national and global efforts to chart a path to a more sustainable energy future. This is precisely why we are assembled here today. Hopefully, we can agree over the next two days to take one more step along this path.

Indeed, a lot of progress has already been made in that direction. For example, the natural environment today in many ECE countries is in a much better shape than it was just a few years ago as a result of the efforts of private individuals, governments, international community, industry and non-governmental organizations. In this regard, I should mention our work here, in the ECE, which through the development of international legal instruments, norms and standards as well as through the harmonization and convergence of policies and practices, has significantly contributed to this positive record.

We all know that significant strides to control pollution and protect the health of individuals and the environment have been made by energy industries. But there is still a long way to go to achieve a sustainable energy future. What helps is that today we know that energy can be made sustainable.

Sustainable Development

The concept of sustainable development has fundamentally changed the way we view the relationship between energy, the environment, and the economy. The old paradigm emphasising the trade off between a healthy environment, a secure energy future and a prosperous economy, emphasising that a choice needs to be made among the three when decisions are taken - has now been discarded. While we continue to have different definitions of precisely what sustainable development means, the bottom-line is that high levels of environmental quality, the availability of energy at reasonable prices, and economic prosperity are complementary and mutually reinforcing.

We also know that there is no conflict between environmental protection and economic competitiveness. This false dichotomy stems from a narrow view of the sources of prosperity and a static view of competition. No longer is it questioned today that standards in areas such as health, safety and the environment can play an important role in promoting competitiveness and prosperity by stimulating innovations in products and processes that are highly valued in international markets.

I raise these issues because income disparities within countries and across countries in the ECE region are large and rising. Therefore, there could be the temptation to ascribe environmental protection as a rich country preoccupation. This would be wrong and short-sighted. It is not a luxury, it is the best investment in the future.

ENERGY EFFICIENCY

This morning you will be focussing your attention on the issue of energy intensity and energy efficiency. One of the main avenues for curbing energy-related environmental problems is to improve energy conservation and efficiency. The issue is most acute in countries of central and eastern Europe and of central Asia where energy intensity levels are so much higher than those in western countries of the ECE region.

In today’s world, this is both an economic as well as an environmental liability. The need to improve overall energy conservation and efficiency is well recognized by all governments in countries with transitional economies. There is full awareness of a huge economic potential for reducing energy intensity and improving energy efficiency. But, unfortunately, energy saving is not altogether a costless endeavour even though the potential is vast and payback periods short in economies in transition. Energy saving usually requires some investment. Moreover, the lack of capital, poorly functioning financial markets and liquidity constraints have hampered progress in this area.

Nonetheless, it is imperative for countries in central and eastern Europe and central Asia to use the momentum, the window of opportunity that transition generates and implement energy efficiency measures precisely now when economic structures are being transformed and modernized so that the resulting new infrastructure is as energy efficient as it can be. More generally, it is important to encourage countries with transitional economies to liberalize energy markets, to implement market based pricing structures, to foster private ownership, to introduce other economic reforms and to make use of up-to-date technologies and procedures in order to enhance a better allocation of national resources and the more efficient production and consumption of energy.

But sustainable development cannot become a reality on a global scale without further marked improvements in energy efficiency in western ECE countries. This is in spite of the high energy efficiency levels already achieved in those countries. The rate of decline in energy intensity in western countries has slowed down markedly over the last decade. Ways will have to be found to accelerate the decline in energy intensity and to improve energy efficiency.

Internalization of Externalities

Energy prices play a critical role in bringing energy supply and demand into balance, and in affecting consumer behaviour. Hence, energy pricing can potentially be a potent instrument for affecting behaviour. In a market economy, prices seldom reflect the social and environmental costs, commonly referred to as negative externalities, attributable to the production and use of commodities and resources. In essence, the marketplace frequently fails to reflect the true value of environmental resources, especially those that are held in common, such as air or water resources.

Herein lies the problem that has preoccupied governments since the advent of the environmental era and, perhaps, even before. How best to ensure that such external costs are fully and systematically taken into account in everyday decision making.

In the past, governments have favoured mandatory norms, standards and regulations. In recent years, more attention has been paid to the use of economic instruments, including fiscal measures, such as, emissions trading, energy taxes and environmental levies. These work through the market to give producers and consumers the incentive to include environmental considerations, in making their choices.

Currently, most western governments are pursuing energy policies underpinned by three basic principles:

- that consumers should have as much choice as possible in terms of fuels and sources of supply;

- that the best way to promote greater economic efficiency and reduce costs is by enhancing competition in the marketplace; and

- that the economic dividends, resulting from increased efficiency, should be passed on to consumers in the form of lower energy prices. At least, consumers are demanding that this is so.

The problem is that these policies are more likely to increase energy demand than to depress it. To counteract this tendency, governments have been examining the use of economic instruments, yet, they have only been sparingly used so far, as compared to regulations and standards. Energy taxation in particular has been quite controversial.

In countries with economies in transition, governments are confronted with difficult choices. Broadly speaking, energy prices have been significantly increased in recent years in most transitional economies, in some of them energy prices have been dramatically raised, contributing to inflation and deterioration of the living standard. In spite of that they are still below economic levels and the cross-subsidization of households continues. A radical change is not feasible because of the impact that energy price increases have on inflation, on disposable household income and on employment in vulnerable industries. However, this situation cannot be sustained for long.

This afternoon, you will have the opportunity to debate these rather thorny and difficult issues related to energy subsidization, energy pricing and the internalization of externalities, notably environmental externalities. If there are divergent points of view among this audience, it is certainly on these issues.

To be successful, the transition to a sustainable energy future has to be viewed as a "projet de société". In other words, it must be a collaborative effort by all partners of the civil society. The ultimate objective will only be achieved if all contribute, collaborate, give and take, and are respectful of each other’s point of view. Tomorrow, you will be asked to adopt a policy statement on sustainable energy development in the ECE region. You will also be asked to consider some follow up initiatives. Here also choices will have to be made since it will not be possible to undertake every suggestion. Your resources as well as those of the Secretariat are limited. I trust that your wisdom and imagination will help you make the right choice – this is not going to be easy because we all know that everything matters.

In conclusion, I would like to express my appreciation to all of you, representing ECE Governments, the business community, non-government organizations and other international organizations, for your participation at the Forum and the valuable support you have given to the Committee and its subsidiary bodies over the years.

In particular, I would like to thank the panellists that will speak this morning and this afternoon. We appreciate very much your readiness to share your precious time with us and, what is more important, to share your views on the challenges facing ECE countries on these very important matters.

Ladies and gentlemen, I thank you for your attention and I wish you much success in your deliberations.