Event Reports

ORF- GIZ Economic Policy Forum: Resources Policy

Experts from the BRICS countries and Germany discussed in Delhi 'Supply Side Economics and the Need for Energy Diversification'; 'The Future of Global Energy Systems'; 'Industrial Efficiency and Business Responsibility' and 'Energy Access in BRICS Nations'.

2014
Feb
28

The Economic Policy Forum (EPF) on ’Resources Policy’, designed as a collaborative research platform, was hosted by Observer Research Foundation in New Delhi on February 28, 2014. Supported by Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), the EPF facilitates research between think tanks from emerging economies and selected developed economies, with the objective to foster and support joint research among members on common challenges and issues of socio-economic development in their countries.

The workshop comprised representatives from the BRICS countries and Germany. The aim of the workshop was to facilitate discussions towards the production of a joint paper composed of four topics including: ’Supply Side Economics and the Need for Energy Diversification’; ’The Future of Global Energy Systems’; ’Industrial Efficiency and Business Responsibility’; ’Energy Access in BRICS Nations’. The workshop also included a presentation by the ORF India Datalabs team on energy access.

Future of global energy

The first session was a panel discussion on the Future of Global Energy. The keynote address was delivered by Mr J.M. Mauskar, former Union Secretary, Environment and Forests, and Advisor, ORF. Mr. Mauskar stressed on the fact that fossil fuels – coal, oil and gas — are likely to dominate the global energy mix in 2030. Linking availability of energy supply with a high Human Development Index, Mr. Mauskar underlined the urgent need to develop alternative renewable sources of energy and other energy efficiency initiatives. He further outlined energy security strategies for countries based on different levels of carbon emissions and energy supply. Talking about pragmatic policymaking, Mr. Mauskar highlighted the importance of incorporating both equity and technology in order to achieve a sustainable trajectory of development and growth.

The first two draft papers were presented by Dr. Rajan Gupta, Distinguished Fellow, ORF, and Thomas Elmar Schuppe, Senior Fellow, ORF. The key findings of the papers were – first, it is unlikely that there will be a global shortage of fossil fuels for the next 50 years; and second, while there is significant supply of unconventional energy, high energy prices are likely to persist for the foreseeable future. Elaborating on these conclusions, the authors discussed some caveats and notable findings. Chief amongst these was that even though the world will not run out of fossil fuels by 2050, the energy distribution among countries is likely to remain highly inequitable. To mitigate this, resource-poor countries like India will necessarily have to diversify their energy mix or create a way to fund potentially huge energy trade deficits. Mr. Schuppe further discussed some potential scenarios for individual economies such as China, Russia, the US and the OPEC. For example, among the OPEC, the rise in energy consumption is forecasted to be much higher than the rise in per capita GDP. This could have a potentially significant impact on the global oil market. However, tight oil and shale gas production in the North American countries is likely to make those countries net exporters by 2020.

In addition to technology, it was pointed out that demographic factors, economic growth as well as institutional regulations will also play a vital role in the evolution of global energy systems and future demand-supply scenarios. For example, urbanisation, ageing population in different parts of the world can create permanent changes in energy consumption patterns. The session was finally wrapped up with the participants unanimously acknowledging the need to involve different stakeholders (policymakers as well as technocrats) in similar discussions on a global platform in order to formulate pragmatic energy and climate policies.

Industry and policy experience on resource efficiency

The theme of the second session was Industry and Policy Experience on Resource Efficiency. Mr. Vivan Sharan from ORF presented the draft paper on ’Industrial Efficiency and Business Responsibility – Shared Experiences of Brazil, Russia, India and South Africa’. The aim of the paper is to highlight the measures that can be the lowest hanging fruit – simple regulatory interventions that will deliver huge gains – to improve energy efficiency. The study assessed the energy efficiency metrics of large energy intensive companies to discover some common trends. These trends include the prominence of a few major industrial subsectors accounting for a majority of energy consumption, increased private sector participation in power generation and fuel consumption efficiency as a key endogenous variable for businesses to improve their efficiency performance. The presentation then pointed out regulatory policies in each of the four countries that have targeted energy efficiency and their key takeaways. For instance, the PROCEL industrial policy in Brazil resulted in 9 terawatt hours of energy saving in 2012, equivalent to 2 per cent of the country’s annual electricity consumption and 624,000 tons of carbon dioxide equivalent of avoided emission.

This presentation was followed by an active discussion by the participants. Mr. Amit Kapur, a Partner at J Sagar Associates, spoke about the importance of incentives and accountability among businesses and consumers. Alexandre Gross from FGV, Brazil spoke about Brazil’s experience – for example, 31 per cent of energy emissions and consumption in Brazil is from the transportation sector making it a good target sector for government policy. Other discussants focussed on raising consumer awareness and the importance of including more stakeholders to affect real change. Creating support structures to reduce the cost of disclosure was mentioned as a potential way to include smaller companies in energy efficient initiatives.

Energy access

The third session was based on the theme of Energy Access. The session was led by Ms. Lydia Powell, Senior Fellow, ORF, who presented a draft paper on “Energy Access in BRICS Nations”. Ms. Powell examined initiatives for universal energy access in BRICS nations and identified country specific challenges and responses. For example, Brazil follows a system of ’performance based regulation’. This includes a price capped tariff regulation, which offers a 65 per cent discount on market tariff for energy consumption less than 30 KWh per month. In India, the multitude of challenges posed by rural electrification was discussed in detail. South Africa implemented prepaid meters to target capping monthly electricity consumption.

The discussion following the presentation brought out interesting points of concern regarding universalising energy access. A common theme among the discussants was prioritizing energy access vis-à-vis climate change policies and the need to create effective cost mechanisms required for universalising energy access. Mr. Hubertus Bardt of the Cologne Institute of Economic Research spoke against market price manipulation measures and subsidies and instead, focus on giving electricity vouchers to households with no access.

Using NSS as a tool

Mr. Saurabh Johri and Mr. Prashant Kumar from the ORF India Datalabs presented a selection of data on energy access from the India’s National Sample Survey (NSS). Using live data extraction, they demonstrated the ability of the NSS as a tool to investigate energy access across different regions, religions, income groups and social groups. One interesting statistic that emerged from the live exercise was that among the top 70 per cent households, most states have achieved 80 to 100 per cent electrification. However among the bottom 30, nearly 60 per cent are still dependent on kerosene for their energy needs.

The participants also had an opportunity to interact with Mr. Suresh Prabhu, former Union Power Minister. He gave an incisive talk on the ingredients of a comprehensive energy policy in India. This included policy implementation issues and opportunities in energy provision, energy security mitigation, climate change responses and renewable energy expansion. In his talk, he also emphasized the importance of incorporating geopolitics while developing an overarching national energy policy.

The session concluded with the closing remarks by Mr. Stephen Helming, India’s Country Director at GIZ and Mr. Sunjoy Joshi, Director of ORF, who thanked the participants for their inputs and encouraged more such discussions in order to share regional experiences for policy learning.

(This report is prepared by Manmath Goel, Research Assistant, Observer Research Foundation)