Conference: Washington Summit on Climate Stabilization
September 18-21, 2006

International Efforts

Introduction | Corporate Involvement
A Role for the Government - State Initiatives Conclusion and Notes

Not only states, but other nations are providing leadership and taking the initiative on the climate issue. All over the world, governments are taking steps to reduce their greenhouse gas emissions and to decrease their dependence on fossil fuels. Countries in every continent are switching to alternative energy sources such as wind, bio-fuels and even hydrogen power. Other parts of the world, particularly Europe, are modifying current energy-generation practices to reduce their impact on the environment. Here we discuss some of the most groundbreaking and promising programs taking place throughout the world.

Iceland: A tiny island country that edges up against the Arctic Circle, Iceland is perhaps the leading candidate in becoming a carbon-free economy. This is due in part to a unique combination of characteristics found nowhere else in the world. Iceland is situated directly above the Mid-Atlantic Ridge, the ocean rift where two tectonic plates are slowly being pushed apart. As a result, Iceland is one of the most active volcanic regions in the world, and has the Earth’s highest concentration of readily available renewable energy resources—mostly in the form of hydroelectric and geothermal power.30 These two renewable energy sources alone provide over 95% of the heat and electricity used by Iceland’s 300,000 residents.31 And though Iceland satisfies almost all of its electricity and heating demands with its renewable resources, less than 20% of the renewable resources on the island have been tapped.30

However, despite the abundance of alternative energy sources, Iceland still must import petroleum to satisfy 30% of its total energy needs—to power the transportation sector. Both automobiles and the country’s “economically vital” shipping fleet are still dependent on imported oil, and have not made the switch to alternative fuels.31 But that may be changing shortly.

The oil supply shocks of the 1970s, the resulting price uncertainties and the Kyoto Protocol were all factors in the Icelandic government’s decision to pursue non-fossil-fuel alternatives for its transportation sector. In the 1990s an expert commission recommended that a hydrogen fuel system be developed to power automobiles: Soon after Iceland made this commitment, Icelandic New Energy (INE) was formed.31 INE is a public/private consortium that is developing Iceland’s hydrogen economy.

“Our goal is to eliminate oil imports to Iceland entirely within two decades,” explains INE’s executive vice president Bjarni Bjarnason,30 and by 2050 Iceland is expected to be a fully hydrogen-based economy.31

Already INE has introduced one hydrogen-fuel project. In 2003, the world’s first public hydrogen fueling station was opened in the nation’s capital, Reykjavik.30 The station services three hydrogen fuel cell buses that constitute 4% of the city’s public bus fleet.32 In the first nine months of their operation, the buses traveled over 40,000 kilometers and brought hydrogen fuel-cell technology into the public view.31

INE plans in the next decade to build a hydrogen production and storage center, to design a hydrogen-powered fishing vessel and to replace current batteries and fossil-fuel generators with fuel cells.32 INE and the Icelandic government are both optimistic about these projects, as the public response to the hydrogen economy has been overwhelming. Polls show that public acceptance of the hydrogen initiative is about 92%.33

In fact, Iceland may have the ability to create more hydrogen than the country can use. The abundance of clean electricity and energy is attracting aluminum producers to the country, but even the rapid growth in this industry will not use up all of the excess power.30 Iceland could export hydrogen to other nations, as one senior government minister suggested, but in order for this to be profitable, global hydrogen demand must increase dramatically.30

But even if Iceland does not export its actual excess hydrogen, perhaps its example will be “imported” and followed by the rest of the world.

Small Island States: Like Iceland, the Caribbean Small Island States (SIS) are working toward carbon-free economies as well. These island nations have made ambitious commitments to reduce greenhouse gas emissions and increase their use of renewable energy sources. This region is plagued by some of the highest energy costs in the world, paying as much as 20 to 30 US cents per kilowatt hour.34 Many rural people cannot afford this cost, and large parts of these islands remain without electricity.34 The governments of the Caribbean islands hope to bring power to many of these people using renewable energy.

The SIS governments have another incentive for using renewable energy. With much of their populace located only a few feet above sea level, these islands are particularly threatened by the effects of climate change, including increased hurricane intensity, larger storm surges and ocean level rise.35

Among the Caribbean nations, Grenada, Dominica and St. Lucia have emerged as leaders in switching to and utilizing alternative energy sources.

Grenada is currently assessing possible renewable energy sources that it could employ, including wind, hydroelectric, biomass and solar power.36 It plans not only to reduce its carbon emissions, but to reduce poverty and increase economic growth at the same time.37

Dominica has already employed renewable energy sources and plans to reduce emissions even more. Already, a third of Dominica’s electricity is generated by hydroelectric power, and Dominica is working to raise that percentage.37 It expects renewable energy sources to generate over 65% of the island’s electricity by 2010. Dominica is looking into small-scale hydro projects, geothermal systems and wind farms to meet this goal.36 Ambrose George, Dominica’s Minister for Agriculture and Environment, says he hopes that the geothermal energy “can be exported to neighboring islands” such as Guadeloupe and Martinique.34 He hopes that this will lower the costs for consumers while increasing the size of the project.34

In addition, the government is investing in “human capital” by creating programs to train its engineers in the use and maintenance of alternative energy systems.36

St. Lucia too has set goals to become less dependent on fossil fuels. It has adopted a ten year Sustainable Energy Plan that calls for renewable sources to generate at least 20% of its energy by 2010.37 This would amount to a 35% decrease in greenhouse gases, compared to a business-as-usual scenario.36

“Amongst the initiatives were wind energy development, geothermal, waste to energy and small hydro options and the promotion of solar hot water systems and energy efficient lamps” says Theophilus Ferguson John, St. Lucia’s Minister for Planning, Environment and Housing.

Stephen Probyn, a Canadian wind farm developer, has already offered to build a 13.5 Megawatt wind farm on the island.36 The facility would sell wind-generated electricity to St. Lucia’s electricity company, which would in turn provide the power to the residents of the island for less than the cost of current electricity generation.36 Despite this, the island’s only electricity company, which holds a government-approved monopoly on grid-generated electricity, has been slow to accept and incorporate the wind farm into its portfolio.36

All three of these islands face the same barrier to introducing renewable energy into their economies—their governments have all granted monopolies to single electricity companies. As a result, the monopolies in all of the island nations have “little economic incentive to encourage efficiency or reduce costs” by incorporating renewable power.36 Without government intervention, the switch to alternative energy sources may be more difficult than would otherwise be the case, given the perverse incentives now in place.

Brazil: Brazil is one of the few countries that has already entrenched the idea of renewable power into its entire economy. In addition to deriving the vast majority of its electricity from hydropower, Brazil uses renewable energy to fuel a large portion of its transportation sector. Ethanol, a bio fuel made from sugarcane (or in the United States, from corn), is used to power automobiles and other vehicles. It can be mixed with gasoline, and Brazil now requires that all automotive fuel must be at least 20% ethanol.38 This bio-fuel accounts for at least 40% of all passenger vehicle fuel consumed in the country.38

Brazil produces over four billion gallons of ethanol each year that is then sold at more than 30,000 service stations around the country.38 As a result of the accessibility of this fuel, 70% of new cars sold in Brazil are “flex cars” or vehicles that can run on pure ethanol or a combination of gasoline and ethanol.39 This way, consumers do not have to worry about fluctuating oil or ethanol prices; they can buy whatever fuel is the cheapest at the time.

The success of ethanol is partially due to Brazil’s ideal agricultural conditions: lots of rain, land and inexpensive labor.40 But it took time and investment; the switch to ethanol was a 30-year process that was, at least initially, heavily government directed.

The oil supply shocks of the 1970s hit Brazil hard; at the time, the country imported over 80% of its fuel as petroleum.40 As a result, the military leaders of the 1970s and 1980s decided to incorporate ethanol into the fuel infrastructure and began a series of government directives. These included mandatory mixing of gasoline and ethanol, loans to sugar companies to build ethanol plants, guaranteed prices for companies that produced ethanol, dictated production levels, requiring fueling stations to supply ethanol, and monetary incentives to car dealerships that displayed vehicles that ran on ethanol.40 It is estimated that between 1979 and the mid 1990s, the Brazilian government spent over $16 billion on the promotion of this bio-fuel, mostly in the form of loans and price supports.40 These policies did have an effect, however, as purchases of ethanol vehicles rose dramatically in the 1980s.40

With the hyperinflation of the 1990s, however, Brazil was forced to cut ethanol price supports. Ethanol automobiles became uneconomical and these vehicles all but disappeared from the roads.40 But one government mandate stayed: all gasoline still had to be mixed with ethanol.40 As a result, sugar companies continued to produce the fuel, and over the years they found less expensive and more efficient ways to create it.40 Now, rapidly rising oil prices and the widespread market penetration of “flex cars” have made ethanol a viable option again.

Although flex cars running on ethanol get 20% fewer miles per gallon of fuel, it is still cheaper to run a passenger car on the bio-fuel as long as the price of ethanol is less than 70% the price of gasoline.39 Recently, ethanol prices have been low, and it has been the fuel of choice.39

The country is also looking to double its exports of bio-fuel, which could rise to well over a billion gallons per year,39 and to help other nations begin ethanol projects of their own. Brazilian President Luiz Inacio Lula da Silva explains that “although Brazil is often seen as a model in the ethanol sector, it does not wish to achieve a dominant global position, nor would that even be feasible. Actually, it is important we have as many countries as possible producing ethanol.”38

Australia and India are two of the many countries that Brazil says may establish bio-fuel facilities in the future.39 Both India and China have sent officials to observe the Brazilian ethanol program, and India has even followed the South American example and required some of its states to add ethanol to all gasoline.40

The United States produces ethanol as well, but uses corn instead of sugar cane to create the fuel. As a result, the manufacturing process is more complicated and it is much more expensive to make ethanol in the US. In order to make domestic ethanol competitive, however, the federal government imposes a 54-cent tariff on each gallon of Brazilian ethanol that is imported.39

In January 2006, President Bush emphasized the role that ethanol can play in reducing the American “addiction to oil.” But consumers will only use ethanol in the United States if its price is competitive with gasoline, and currently American ethanol is not. The price of ethanol in the US will decrease only if the government removes the tariff on imported bio-fuels. Otherwise ethanol will become another empty promise, and the United States will likely become ever more addicted to fossil fuels.

Europe: European countries have recently received a great deal of attention for their use of renewable energy —particularly wind power—to decrease their carbon emissions. Europeans have also embraced the diesel engine as a way to conserve oil resources. Currently, 25 to 40% of all Western European vehicles run on diesel engines, and that number is expected to grow to 50% by 2010.52 Consumers are increasingly running these vehicles on biodiesel, which is an even cleaner and more environmentally sustainable fuel.53 However, a less-known trend in European energy generation involves the increased use of combined heat and power (CHP) facilities.

CHP, also called cogeneration, is the process of concurrent producing of heat and electricity. In normal power plants, the heat created during energy generation is usually released to the environment and lost. Cogeneration, however, captures the heat and distributes it to nearby consumers who use it, for example, to warm their homes. While a typical power plant has efficiencies of no more than 30%, a CHP operates with efficiencies of over 70%, thus saving fossil fuels and reducing emissions.41

The amount of cogenerated power has been growing, and in some western European countries, over 40% of all electricity is generated this way.42 In Europe as a whole, CHP accounts for about 10% of the electricity market and 10% of the heat market.43 The European Union hopes to increase those numbers to 18% by 2010,43 and recent trends show that the goal may be reached.

Many European electricity markets are undergoing deregulation and liberalization, which has increased the market for independently owned CHP electric power.42 Future deregulation is expected to particularly boost cogeneration in Belgium.42

Denmark is not undergoing liberalization of its electricity industry, but it is still considered the most advanced producer of CHP electricity.42 The Danish government is using cogeneration as an environmental tool, and is giving subsidies and tax breaks to encourage the building of CHP plants.42 Germany, the Netherlands and Finland are other leaders in cogeneration.

There is a limit to the amount of cogeneration that can exist in Europe, however, and there continue to be barriers to its development. Heat produced through cogeneration can only be transported short distances, and therefore the CHP plant must be located near the consumers of the heat. As a result, cogeneration is usually only economical in urban areas, where “large quantities of heat [can] be sold in a small geographical area, without the need to transport the heat long distances to scattered points of use.”41 Rural CHP would only be practical if much smaller, local cogeneration plants were built in individual towns and villages.44

But feasibility concerns are not the only barriers to the production of combined heat and power. Some argue that business is adverse to the idea of CHP, as it combines two industries that are typically separate—the generation of electricity and the generation of heat. One study found that “a technology which interconnects so far separated systems… will come up against much greater opposition than technology with…lies wholly within one or another production chain.”41 This is an example of producers attempting to retain vertical control over their industries, and historically, governments have intervened to protect producer interests.41 However, some European governments are beginning to view cogeneration as an environmental protection tool and are supporting it. If this trend continues, then CHP will play a greater role in European energy production and the EU target may be met.

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Next: Conclusion and Notes