John Ashton: Norway must use oil fund to drive clean energy revolution

SPEECH: UK’s former chief climate diplomat offers reflections on Europe, energy and climate change

A leading oil and gas producer, Norway also has ambitions to be a carbon neutral country (Pic: Martin de Lusenet/Flickr)

A leading oil and gas producer, Norway also has ambitions to be a carbon neutral country (Pic: Martin de Lusenet/Flickr)

By John Ashton

Today we stand on the threshold of a second golden age of electricity. But facing us this time are two paths, heading in different directions.

If we follow the first path, we will electrify transport by road and rail, as well as heating.

We will achieve a step change in the efficient use of electricity, and of energy in all its forms.

We will take carbon emissions completely out of electricity, largely through the use of renewables. Access to affordable clean electricity will lift billions of people out of poverty.

And all this, on the first path, will be accomplished everywhere within a single investment cycle, that is, pretty much by the time the children of my generation reach our age. It is they after all who will have to reap the harvest we sow with our choices today.

There are no insurmountable obstacles on this path, unless they lie in our own nature. We have the knowledge, the technology, and the wealth to follow it all the way to its destination.

The company you are building here at Statkraft faces along the first path. Christian nailed your colours to the mast when he promised that all your new investment from now on would be in renewables.

You are broadening your offer beyond your core hydropower business, especially to onshore and offshore wind, including in Britain.

You are speeding the expansion of community-based renewables that is turning European electricity markets upside down and threatening to do the same in the US.

And you are building footholds in what will be an equally dramatic expansion in renewables in South America and South Asia.

At first sight, the second path bears some resemblance to the first, at least in its early stages. The rise of renewable energy continues. We redouble our efforts to waste less energy. Each generation of electric cars turns ever more heads.

Carbon bubble

But in reality the two paths could not be more divergent.

Recently two of the word’s biggest oil and gas companies have tried to reassure investors about the so-called carbon bubble.

Might today’s high carbon assets end up stranded by the combination of action by governments on climate change and the plummeting cost of renewables? And if so how should this risk be priced into the value of carbon-exposed portfolios?

The two companies solemnly declared that there is no bubble and that the business as usual risk to shareholder value is insignificant.

They did acknowledge that governments have committed themselves to keeping climate change within 2C.

And they seem implicitly to accept that if governments were to force a shift away from fossil energy fast enough to stay below that threshold, some of their assets would indeed be stranded.

But, the companies argue, there is no prospect of governments keeping this promise. They do not have the will. Electricity won’t displace oil and gas any time soon.

Nor will the disruptive advance of renewables continue.

That’s a – what shall we call it? – a courageous judgement in the light of growing expectations to the contrary in the City of London and Wall Street, and the wave of self-criticism by those utilities who so misread energy politics in Germany.

Even Statkraft burned its fingers there on gas.

But anyway by taking this position these two companies have also nailed their colours to the mast. They profess concern about climate change but want us to lower our ambition, to slow down the push to displace oil and gas.

Change in the energy system, they are saying, has its own rhythms and cannot be rushed by the choices people make through politics about what outcomes are merely in the public interest.

They have chosen the second path, and are betting the shirts on their own and their shareholders’ backs that we will all accept their invitation to travel along it with them.

This is an offer we must refuse.

Global governance

President Obama’s science adviser, John Holdren, says that when it comes to climate change we need to manage the unavoidable and avoid the unmanageable.

Governments promised to keep climate change within 2C because in their judgement that’s where the unmanageable begins. Nothing we have learned since then has made this look too cautious.

The world’s systems of food, water and energy are tightly linked.

They are already under stress, squeezed between rising middle class demand from China and other rapidly growing economies and extremes of temperature and rainfall that look like the early consequences of climate change.

There can be no food, water, and energy security without climate security. And a world without food, water and energy security is an unmanageable world.

It’s a world without the trust and confidence on which cooperation depends; where the willingness to align around agreed rules, so crucial for the open global economy, drains away; where political risk and instability stifle investment.

A world on a slippery slope to fragmentation and conflict.

Moreover, our dependence on fossil energy is at the heart of a growth model that is corroding the ecological fabric on whose integrity the entire economy depends.

It consumes resources that cannot be replenished or substituted; and it fouls land, air and ocean with its waste. A growth model that destroys the ecological foundation destroys itself.

This is a greater and more immediate threat than is widely realized. Here in Norway, looking towards the ocean and into the Arctic, you grasp this better than most, and have tried harder than most to tread lightly.

But there will be no prosperity or security anywhere if we cannot quickly stabilize the ecological foundation of the global economy. That will require a new growth model, liberated from the intellectually and politically bankrupt neoclassical dogma that defines the current one.

Security risks

Today’s borders in Europe and the Middle East are largely the product of the First and Second World Wars.

Revanchist forces in Russia are now picking holes in Europe’s frontier to the East. Our dependence on Russia’s gas weakens our hand in pressing it to respect its neighbour’s borders.

The way to reduce dependence on Russian gas is to reduce dependence on gas. It is not, as some would have us do, to lock ourselves further into gas-based energy by developing costly alternative sources including shale gas.

The Middle East, from Libya to Iraq, is in flames and the danger of a greater conflagration is plain. This poses new risks to security in Europe.

Our dependence on oil and gas from the Middle East limits our leverage with those from whom we buy it. The only way to free our hands is to reduce our dependence not just on Middle Eastern oil and gas but on oil and gas full stop.

So yes, the first path requires a clear choice. It invites us to draw on our values, mobilize all the forces at our disposal around a new vision for energy, summon the will to pursue that vision, and act to make it reality.

It requires us to make politics work to transform our societies in the public interest. It will demand struggle and sacrifice, because the forces of incumbency are strong and will stop at nothing to resist transformation.

But the first path takes us away from existential danger. And though the mounting geopolitical risks will not go away it’s the only path that will put us in a better position to manage them.

The trouble is, we are not on the first path; not yet. We are still on the second path. We are choosing only not to make a choice, acting only to avoid taking action. The two companies have noticed that and that is why they think we have no will.

Contrasting models

In Britain, yes, we have legally binding carbon budgets out to 2050. But we are not offering investors and households the certainty of outcomes and returns necessary to reach them.

And we have aroused unachievable expectations about shale gas, the pursuit of which, far from uniting the country around a single vision, is opening up new divisions.

Yes, we have a truly pioneering Green Investment Bank, the world’s first publicly-backed financial institution designed to draw private capital on a transformational scale into low carbon infrastructure.

It’s great that its representatives have been in meetings with Statkraft today. But we withhold from it the borrowing powers that would really give it leverage.

In Norway you already have carbon neutral electricity. Norwegians like electric cars. You have in the past been a champion of carbon capture and storage, another key piece of this jigsaw.

The oil fund may soon decide to dump its carbon assets. Your climate diplomacy has set a global example (and I am delighted that Minister Brende remains as committed to it as he was when I first met him as Norway’s Environment Minister).

But you are still, as a producer like Britain, deeply locked in to the oil and gas economy. Norwegian companies want to go on a frontier binge in the Arctic: it is madness to be developing new projects there that will only turn a profit above $100 a barrel.

On CCS you pulled the plug on Mongstad and seem to have run out of steam. There is no sign of a national vision for energy.

We may, each of us, be pointing hopefully towards the first path. But our feet are still firmly planted on the second. None of our mainstream political parties, yours or ours, is offering voters the choice of the first path or has even articulated that choice in meaningful political terms.

Those who want us to come to an accommodation with an unwelcome reality rather than changing it are still winning. But that is not the Norwegian way, nor the British one.

Future ambitions 

A journey along the first path will have many features. But one stands out. This is something we can only do if we do it together. This is about reaching outwards. It is about Big Norway, not Little Norway.

Ibsen, in Peer Gynt, puts into the mouth of the Mountain King the words “vaer deg selv nok”. He’s describing the attitude that makes trolls different from humans. I suppose you could translate this loosely as “why worry about others if you are OK?”

In truth the approach of European nations to energy has always displayed this kind of insularity.

We cannot do what I have been talking about unless we do it together as Europeans. It won’t work if we approach it in the spirit of “vaer deg selv nok”.

There is a particular complementarity in energy and electricity around the northern seas of Europe. And Britain and Norway each have starring roles to play in exploiting this.

We must now build a proper integrated grid, fully connected across borders. We must use that grid to smooth out peaks and troughs by trading electricity freely in real time, and by actively managing demand, across our continent.

We will incidentally get maximum value for cables between the UK and Norway if we route them past big wind sources in the North Sea, like Dogger Bank where Statkraft has a stake.

Your capacity to store surplus electricity generated elsewhere and sell it back into the grid when needed is a huge asset for Norway and for all of us. And when we really get moving on CCS we will wake up to the value of the storage capacity under the North Sea. Statoil has shown the way at Sleipner.

A project like this would require serious investment – perhaps some €100 billion over the next 15-20 years. But the benefits would be enormous.

This would not only usher in a new golden age of electricity.

It would provide the stimulus we need to get Europe moving again. It would put a new motor at the heart of a stronger more competitive economy, better able to withstand global shocks.

It would create high value real economy jobs spread across all regions, including where jobs are most needed like the East coast industrial ports of Britain. It would drive innovation, boost skills, grow new supply chains and give old ones, like those in offshore engineering, a new lease of life.

And politically this would offer a new prospect of progress, hope and common purpose across our continent, especially for young people. As we did after the War, we would be taking responsibility once again for our future.

It is for the Norwegian people to decide Norway’s national interest. But if I could be your Prime Minister for a day, I would deploy the oil fund actively and urgently to jump onto the first path. I’m sure that should include an injection of capital for Statkraft.

Christian, just say the word, I have the chequebook here.

And I would get on the phone to my Nordic neighbours, to Prime Minister Cameron, Chancellor Merkel, President Hollande, and to all their counterparts.

I would urge them to join me in building the shared political vision and mobilizing the unstoppable coalition that will persuade investors that the long-discussed plan to build an integrated European power grid is now a bankable opportunity.

John Ashton Oslo Speech August 2014

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