The Problem

Reliable and adequate energy supply is key to the socio-economic development of mankind. The existing energy networks have become highly integrated and achieved global scale, which is a positive trend. Unfortunately, the failure of one element in a highly integrated network inevitably affects the others. Parochial national efforts to ensure energy security have so far proved unsuccessful. A global challenge calls for concerted global action.

The known hydrocarbon resources and the existing investment and technological capabilities are sufficient to ensure the reliable and affordable supply of adequate amount of energy in the foreseeable future. This, however, will only come through an efficient system of global, regional, and local markets, in which the role of governments would be to set the rules, defend and protect key energy facilities, insure against market failures, stimulate technological innovation, and - importantly - ensure environmental sustainability of energy development.

Sustainable global energy security requires security of demand as well as of supply, which in turn implies a need for more transparent and predictable activities at the level of statistics and energy policies. This tremendous objective will be achieved through further producer-consumer dialog, fair distribution of investment risks, mutual openness to capital. More transparent, predictable, and stable energy markets are key to success.

Predictable government regulation in producer, transporter, and consumer countries will stimulate energy investment - provided multilateral market tools are effective enough and such key prerequisites as clear investment frameworks, consistent taxation, minimization of red tape, timely and full enforcement of contracts, and access to workable dispute settlement procedures be in place.

In stimulating investment, an important thing to look at is different investment sensitivity at the sending as well as the receiving end of the energy train. Possible ways to balance it off are long-term contracts and producer-consumer interdependence achieved, for example, through asset swaps.

Energy efficiency and energy saving represent another crucial dimension of global security as they help decrease power consumption, thus alleviating energy tensions. This objective can be achieved through national and multilateral energy intensity statistics, shared information of energy saving targets, comprehensive power consumption identification, and enforcement of energy efficiency standards.

In the energy industry, higher energy efficiency comes hand in hand with lesser impact on the environment. In this light, the industry is planning new efforts to increase oil and gas recovery, oil refinement ratio, petroleum gas utilization, and infrastructure reliability. Energy saving will become a priority issue for transportation, a sector responsible for 2/3 of global oil consumption.

Energy security will not become a reality without diversification, which most importantly means the expansion of types of energy in use into low-carbon alternative power, renewables, and innovations for conventional energy sectors. Nuclear energy is also a way but it requires appreciable efforts to ensure safety, environmental accountability, and rigorous international monitoring - something Russian and U.S. presidents have called for in their recent nuclear initiatives.

Diversification will also be promoted by an effort maintained by G8-encouraged international partnerships working on carbon capture, hydrogen economy, ITER and other projects.

Lastly, global energy security will only be possible provided two major international challenges - climate change and access of poorest people in developing nations to modern energy services - are properly addressed.

Climate change action has been expertly dealt with in the Gleneagles Action Plan adopted last year at the G8 summit under U.K. presidency. The key objective remains to reach out to and engage as many nations as possible, while already thinking over a concept for the post-Kyoto perspective.

The policy to eradicate energy poverty will include assisting developing nations to improve their energy self-sufficiency, first of all through promoting renewable and other local sources of energy and encouraging efficient energy policies through institutional action. This action for energy-starved developing nations will be supported through the Exogenous Shocks Facility, a fund that gratefully receives contributions from all countries irrespective of their G8 membership. 

Ultimately, the good news about G8 energy security strategy is that it does not proliferate international bureaucracy and relies exclusively on existing bi- and multilateral programs and institutions.

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