9 billion reasons to address global energy challenge

MANILA, Philippines - Recently, our world reached a significant milestone: Somewhere, most likely in Asia, a mother gave birth to Earth’s seven billionth inhabitant, the United Nations estimates.

At this rate, Earth will be home to more than nine billion people by 2050 – a number with enormous potential impact on global demand for energy, water and food.

Planning wisely for their future energy needs is one of the most important challenges our generation faces. It is challenging, in part, because the issues and solutions cross traditional political, geographic and industry boundaries.

Indeed, we face far more than just an energy issue. Our future energy challenge is a global security issue, an environmental issue, an economic and jobs issue.

Our global energy system already is in the early stages of a fundamental transformation. The future will see expanded use of renewable energy and cleaner fossil fuels. We will have more energy choices, but those choices will be more costly, so we will all have to become smarter about using energy efficiently.

Despite the enormity of the challenge, I’m confident human ingenuity and technological innovation can make it happen. What’s lacking today is the common will to act. Getting where we need to go will require a new level of leadership and global collaboration on multiple fronts.

But the leadership triangle of government, business and society is increasingly ineffective. We need to rekindle the spirit of global cooperation and leadership that was evident in dealing with past challenges.

Simply put, our challenge is to produce far more energy for a world with far more people. At the same time, we need to reduce CO2 emissions and get smarter about how we extract and use our resources. And we will need to do this against a backdrop of almost constant volatility and change.

A big part of a broader global energy mix will be the rapidly expanding contribution of renewable energy resources. We think up to 30 percent of the world’s energy mix could come from renewables by 2050. But that target assumes a very rapid growth rate; it will require significant effort and sustained investment. Even if the world gets there, all forms of energy will need to be developed to meet future demand.

Among fossil fuels, natural gas will play an increasingly important role. It is the cleanest-burning and the best ally of wind and solar power, which need a highly flexible backup supply when the wind stops or the sun goes down.

Gas also is an ideal alternative to coal-fired power plants, emitting 50 to 70 percent less CO2. Replacing coal with gas to produce electricity is, by far, the fastest and least expensive way for the world to reduce CO2 emissions in the energy sector. Gas is affordable, its resource base is vast and widely dispersed, and it can help diversify energy supplies – all of which enhances energy security.

There’s a growing awareness that the path to a more sustainable energy future will require society to balance the needs of these systems by thoroughly understanding how they relate to one another. At the same time, we cannot lose sight of carbon emissions and other resource stresses.

So Shell has brought together specialists from various fields to map the links and better understand the trade-offs. It is a tremendous undertaking.

Our early findings have identified two important factors that could help avoid a future water-energy-food crisis: “smart” urban development and greenhouse gas regulation and pricing.

Cities today hold half of the world’s population and generate up to 80 percent of its CO2 emissions. The proportion of people in cities is expected to grow to 75 percent by 2050. So the way in which our cities develop will greatly affect energy and water demand.

“Smart” cities technology holds tremendous opportunity, through more efficient public transport, energy-efficient buildings and designs that utilize waste heat and efficient energy sources. By investing heavily to upgrade our infrastructure, we can offset some of the growth in energy demand while creating new jobs.

Fortunately, we already have the tools and knowledge to address this issue. What’s still urgently needed is a global consensus on greenhouse gas regulation and pricing.

Shell already factors in a price for CO2 when making major investment decisions. If a project does not make sense when that price is factored in, it does not move forward. But widespread adoption of the most cost-effective CO2 reduction measures will only occur when governments promote frameworks to price C02.

With effective rules in place, business can harness its immense resource of human talent and creativity to apply innovation, technology and investment capital to the challenge.

I’m optimistic we will address this challenge, despite the difficulties. Past examples of global leadership should give us hope. The coordinated response to the 2008 financial crisis is one. The international agreement to ban substances blamed for depleting the ozone layer is another.

Today we have a major opportunity to address this challenge in a way that avoids unnecessary pain in the future. Let’s not waste it.