This Global business paper, prepared by ICC and WBCSD was presented to ministers meeting in Norway for informal discussions to begin the process to set the agenda for the Rio+10 Summit in 2002.
About 20 percent of the world's population, slightly more than one billion people living in industrialized countries, consume nearly 60 percent of the total energy supply. The remaining five billion people in developing countries consume just 40 percent.
In the case of water supply, 25-35 percent of people in developing countries still do not have access to safe drinking water. The situation is even worse with regards to basic water sanitation.
Business as usual will not meet the needs of those currently unserved, let alone the 2.5 billion new individuals expected within the next 25 years.
These dramatically uneven resource distributions support the argument that the number one priority in sustainable energy and water development today -- for all decision-makers in all countries -- is to extend access to commercial energy services and safe water to the people who do not have it now…and to those who will come into the world in the next two decades, largely in developing countries.
Business and industry, with its store of managerial, financial, and technical expertise and experience, are prepared to play a leading role in assisting communities, societies, and economies adapt to and adopt a sustainable growth path.
Coupled with cooperation from governments to create stable and predictable investment conditions, we can begin to implement investment programs and achieve our goals for sustainable access to energy and water.
For energy, the broad goals are: accessibility to modern, affordable energy for all; availability in terms of continuity of supply and quality of service; and acceptability in terms of social and environmental goals.
It is critical to overcome energy poverty wherever it occurs, to enhance the quality and reliability of delivered energy, and to minimize the negative environmental and health impacts of energy development.
For water, the world must work towards water security as an overarching goal, where every person has access to enough safe water at affordable cost, while ensuring that the natural environment is protected and enhanced.
Our objectives should be to provide access to hygienic sanitation facilities; provide access to adequate quantities of affordable and safe water; increase water productivity for food production; and implement national standards to ensure the health of freshwater eco-systems.
Future Investment Needs:
To achieve these overarching objectives, various investment estimates have been put forward -- none of which carry a small price tag. As much as $15 trillion will need to be invested in the energy sector alone--two-thirds of which is needed in the developing countries.
The total annual investment in water in developing countries is currently around US$70-80 billion per year, with necessary investments increasing to US$180 billion per year in 2010.
However, contrary to the current distribution needs for global resource investment, over 90 percent of all Foreign Direct Investment (FDI) takes place between OECD nations or with 13 other rapidly developing nations - effectively leaving a small portion of global FDI for the majority (and largely lesser-developed) nations.
Despite these imbalances, there is an abundance of capital in developed markets and business will go wherever there is an opportunity for profits.
Historically most this investment has been domestic where business leaders are very familiar with the framework conditions, including laws and regulatory requirements.
Reasons why many countries have been unable to attract foreign direct investment, include not only the fact that markets may be too small to earn a reasonable return, but because there may be social or cultural restraints inhibiting a secure and predicable environment necessary to attract private capital investment.
The Case for Investment:
Investment is the direct path toward tackling the global resource challenges for energy and water.
Accessibility and affordability will be dependent upon investment in new infrastructure, introduction of new technologies, and maintenance of deteriorated systems.
Investment policies should be guided by three principles:
rehabilitating rather than creating new investment when possible;
selecting cost-saving technologies suited to particular conditions;
developing a participatory approach.
There are a number of energy technologies that offer the potential to assist progress in rural areas.
They span generation, transmission, storage, metering and billing, and include lower capacity limited-current supplies, Single Wire Earth Return systems, gasifiers, certain hybrid systems and, longer term, small gas turbines and fuel cells.
Energy investment should be directed toward providing modern energy service either as connection to a reliable, affordable electricity supply, or as stand-alone energy sources which are not necessarily grid-based, such as renewable energy systems or other forms of distributed generation.
Water investment should be directed toward developing new distribution infrastructure, improving the efficiency and productivity of irrigation services, cleaning up contaminated waters, and protecting surface waters through the treatment of municipal and industrial discharges to watercourses or aquifers.
In doing so, we can provide access to hygienic sanitation facilities and adequate quantities of affordable and safe water.
Investing in Energy:
The energy industry is obviously the key provider of wider accessibility to commercial energy services, of the availability of uninterrupted supply, and of more socially and environmentally acceptable energy products.
The speed, scale and nature of these developments depends in part on enabling frameworks, the wishes and support of other social actors, and the deployment of the required technologies and financing.
Lack of awareness, education and commitment relating to clear energy policy goals, as well as the basic requirements for achieving them, are among the largest barriers to success.
These barriers affect policy-makers, public authorities, industry and the general public.
They increase the reluctance to support innovative policies geared to promoting more sustainable energy development.
They discourage consumers from changing attitudes and habits. They inhibit shareholders and other investors from supporting change.
Measures needed to secure additional and more effective private investment include:
Continued market reforms (liberalization, trade, privatization) open up energy service (within effective regulatory frameworks) to undistorted price signals, international trade and investment.
Substantial and lasting benefits will result if national and regional markets are stabilized through basic public rules which respect specific local, national and regional circumstances and apply to all the players involved in them.
These rules should be set and overseen by independent regulators with minimal political interference.
Ultimately, market criteria must prevail in the development of all energy resources.
As such, it will be necessary to keep all energy options open in order to balance the development of new (renewable) energy sources with, for example fossil fuels, large hydro, and nuclear energy -- which will remain important components of the near to mid-term energy mix.
Investing in Water:
It is crucial that water be treated as an economic good and financial practices be realigned accordingly.
Sound and fair financial management - based on full cost pricing - is needed to improve the efficiency of services, provide additional resources for reinvestment, encourage demand management, and promote pollution control and prevention.
Governments must introduce pricing of water and pollution charges to support investments in water resources, while protecting the poorest citizens.
Where water is scarce, this will also require the formalization and clarification of property rights for water.
Government should attempt to put these mechanisms in place as soon as possible but not later than 2015 in order to establish full cost pricing for water services in all countries.
Measures needed to secure additional and more effective private investment include:
Strengthen national institutions, with donor support for developing countries, to attract and benefit from private funds; water pricing and a stable investment framework are precursors to attracting private finance.
Develop guidelines for good practice and support capacity building, training and pilot programs for new efficient management.
Introduce economic instruments (charges and tariffs), and use micro-credit and other innovative financing mechanisms to encourage investment at community level.
Establish, in partnership with international organizations, a private sector led International Research Foundation or Water Innovation Fund to carry out research and training.
The Way Forward: Strategy for International Cooperation:
Energy: As the scale of continuing rural energy poverty makes clear, very limited progress has resulted from all the well-intended efforts made to date.
A better way forward must be found for the effective use of scarce development resources, in particular:
Energy development must be accorded higher priority by policy makers. Hoping that improvement will "trickle down" from more advanced sectors of the economy or that rural energy poverty can be solved by a "technical fix" is untenable.
Energy development must be decentralized to place rural people themselves at the heart of planning and implementation.
Biomass supply and demand, for example, is inherently local in nature and is best understood by the local people. They also have the best insights into rural needs and priorities.
Bottom-up, people-led development shows the best promise of achieving sustainable development.
© 2000 Mena Report (www.menareport.com)