During the next 20 years, global demand for energy will grow by approximately 30%. The two main reasons for this are the continuously high population growth rate and the raising of the standard of living in developing countries. Today, about 80% of the world’s primary energy is generated from fossil fuels (oil, gas and coal). Because the known energy investments used to satisfy the global demand for energy will not change the current energy production structure, the CO2 emissions will continue to grow at the same rate as the demand for energy. This is a fact that must be recognized and acknowledged in climate policy so that we can find the correct means to achieve sustainable development.
The majority of the world’s population — about four billion people — is living on less than five euros a day. In the global economic system, their quest to raise their standard of living cannot be prevented. Instead, we can develop new sustainable means to produce energy so that raising the standard of living of these people is not solely based on the utilization of fossil energy. The work to reduce population growth must be set as a priority for international cooperation. The single most effective measure is to improve the position of women in developing economies.
Regarding the production of renewable energy, we must utilize research and development to discover entirely new solutions that enable replacing fossil fuels at a sufficient scale. This goal can be achieved only if the largest companies of the world are fully committed to participate in this work and use their resources in the best possible way. Because adequate levels of research and development efforts cannot be reached voluntarily, an Investment Obligation System (IOS) for renewable energy is required. Global system should be ultimate goal, but realistically, an area like the EU could be a reasonable start.
Every company producing or selling fossil energy in the EU has to comply with IOS. In cases where the same fossil energy is sold multiple times in the value chain, IOS applies only to the first company in the chain, thus ensuring actual investments in production capacity. IOS governs companies not Member States. The base level for IOS is the annual average amount of fossil energy to be produced or sold by a company during 2018-2020.
The company is obligated to invest a minimum of 5% of the Base level in new, renewable-energy production capacity, and to physically deliver corresponding amounts of new renewable energy to the market by 2030. The company is free to select the technical solution, the form of renewable energy and in which Member State to invest. The IOS investment can be carried out in a 3rd party balance sheet.
In case of non-compliance, a significant penalty will be imposed on the company. The penalty level should be sufficient enough to force the company out of business. EU Institutions can control the speed of development by regulating the %-levels of the IOS, successively imposing mandates to ensure early implementation and adequate sustainability criteria to be applied on such production.
• Strong growth of market based R&D will materialize.
• Best practices and most cost-efficient solutions will be winners.
• An increased global demand for EU-based expertise will be created, resulting in a strong boost to the EU economy.
• Enables the dismantling of undesired or overlapping incentive structures.
In Finland, a few investments in line with IOS have already taken a place. Ethanol production based on different types of waste materials is the most efficient way to reduce CO2 emissions from traffic. St1, an energy company, already has five different types of plants in operation, and in autumn 2016, the world’s first sawdust-based ethanol-production plant will start production in the city of Kajaani in Finland. The ethanol produced from waste material is almost carbon neutral and the production process is smart waste management at the same time. Ethanol fuel can be distributed through existing station network in various blends up to E85.
Another example, is a deep-heat production plant. The idea is to drill two adjacent holes in hard bedrock. Water is fed down one hole and it flows through rock fissures at a depth of 6 to 7 kilometers where the temperature exceeds 100 °C. The hot water rises up out of the ground through the other hole that is in direct connection with a district-heating network. Geothermal heat is emissions-free energy and one industrial-scale heat plant can provide heating for approximately 20,000 dwellings.
Ethanol from waste and deep-heat production are good examples of investments that enable replacing fossil fuels at a sufficient scale and they can be put in practice quickly. At the same time, these investments generate sustainable growth and expertise that will have strong demand globally. With the introduction of IOS, we will create a roadmap that will give the results the climate needs.
This post is part of a “Nordic Solutions” series produced by The Huffington Post, in conjunction with the U.N.’s 21st Conference of the Parties (COP21) in Paris (Nov. 30-Dec. 11), aka the climate-change conference. The series will put a spotlight on climate solutions from the five Nordic countries, and is part of our What’s Working editorial initiative. To view the entire series, visit here.
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