WEC's Bi-Monthly Commentary on Energy Issues, 15 February 2009

Cleaner Fossil Fuels Systems Committee Discusses Water

Most forms of energy supplies need water, and water supplies usually need energy. Today, energy and water shortages are commonplace in many countries around the world, and demand for both is set to grow, imposing increasing strains on the environment. The energy/water nexus is moving up the political agenda, and WEC's members are becoming increasingly interested in this subject.

The WEC Cleaner Fossil Fuels Systems Committee (CFFS), chaired by Barbara McKee from US DOE, organised a roundtable on "Water/Energy - Sustainable Together?" in Dubai, United Arab Emirates, on 5 February at the invitation of the UAE Member Committee and its Secretary, Dr. Zara Khatib. Participation was by invitation only in order to enable a close and informed interaction between the audience and the fourteen panelists, who included the Managing Director and CEO of the Dubai Electricity and Water Authority, H. E. Saeed Mohammed Al Tayer.

The roundtable generated an interesting discussion and provided insights into many related issues, such as energy and water supply security, complexity of resources availability and environmental concerns, to name just a few. Roundtable participants concluded that ad hoc policies are unsustainable and need to be replaced by sustainable, integrated policies encompassing the entire energy and water systems, including resource development, supply and end-use. The present focus on new generating capacities, for example, needs to be placed in the context of water availability and water management. In North Africa and the Middle East, 40% of drinking water and 50% of irrigation water are lost during transportation and distribution - an enormous wastage not only of water, but also of capital and energy used upstream. Hence, prices should be set at the appropriate level to signal true long-term marginal costs, both to investors and customers. Subsidies, which are likely to remain necessary for some time to come, need to be streamlined to support the truly poor and the local agriculture.

Regulators will have to play a growing role in securing supplies, standards, licensing, tariff setting and service and technical and environmental standards. Operators need to raise customer awareness, widely introduce metering and billing and address in-plant energy and water wastage, pipe leakages and customers' payment arrears and debt.
Significant benefits can be derived from economies of scale or from options such as cogeneration or cooling and seasonal replenishment of aquifers. The industry should also consider diversification of plant operations and supplies in response to differing customer needs, for example, irrigation or potable water.

Policymakers should promote and facilitate private-public partnerships, assist in project financing, encourage new technologies and establish non-discriminatory treatment of all energy technologies, including coal, nuclear, renewables and water resources: brackish water, retreatment, sub-surface irrigation, etc. The role of water-intensive agriculture should be reconsidered, and better coordination of energy-water policies in multi-jurisdictional states should be introduced. International cooperation should be taken to the next level, from exchanges of views and experiences to joint management of shared resources.

What contribution could WEC make to this? In her concluding remarks, Barbara McKee proposed that the CFFS Committee should initiate a follow-up study on "Climate Change and the Water/Energy Nexus".

Rules of Trade Task Force Meets

The Rules of Trade Task Force met on 11 February at the Canadian Mission to the WTO in Geneva, Switzerland, to review the draft report and gather further feedback from Task Force members for the final report, which they hope to present to the Studies Committee and the Officers Council at their May meetings in Paris.

The meeting was chaired by Tim Richards (General Electric, USA), with assistance from Study Director Lawrence Herman (Cassels Brock, Canada). Seven other Task Force members and two observers were also present. Canadian Ambassador (WTO) John Gero, a veteran of WTO negotiations and Canada's head of delegation in the Doha Round, welcomed the Task Force to the Mission (which he had kindly lent WEC for the meeting). In his informal comments, he noted that, although energy had been neglected in previous WTO trade negotiations, energy and trade were now emerging as an important set of issues in the organisation, particularly on such aspects as energy-related commodities trade, energy transportation issues (e.g., maritime, pipelines, rights of transit), trade matters related to energy goods and services and the financial aspects of energy trade.

Ambassador Gero also said, that after seven years of negotiations, the Doha Round had "brought the goal closer" to conclusion but had not achieved it. There is now a lull while the focus turns to the global political and financial situations -- in particular, the WTO is waiting to see how the trade policies of the new US administration will unfold. Ambassador Gero said the WTO hoped to have some indication by the time of the G20 meeting in April.

He also mentioned that one of the main hurdles to achieving success in the Doha Round is that the WTO has 153 members dealing with over 100 issues, all of which must be agreed by consensus, not by a vote. Given the disparate political agendas and priorities among WTO members, getting consensus can be very challenging, to say the least.

Following the ambassador's remarks, the Task Force discussed the draft report, agreeing that the 60-page draft would be pared down somewhat, with some specific recommendations folded together. They also confirmed that the final report would be aimed primarily at government policy-makers but that it could also serve as an information tool for CEOs. To that end, the Task Force agreed to produce a short executive summary which could be handed to policymakers and CEOs as part of the full report. The report will also be available on the WEC website, as will the background papers which Task Force members have spent the last 12+ months preparing.

In the afternoon, five outside experts, who had previously received a confidential draft of the report, came to the meeting to discuss it in an off-the-record session with the Task Force. The guests were: Gabrielle Marceau, Legal Affairs Counsellor in the Office of the WTO Director General; Jacqueline Cote, ICC Representative in Geneva; John Gault, independent energy consultant based in Geneva; Daniel Crosby, Budin & Associates law firm and Chair of the Geneva Forum on Energy, Environment and Trade; and Scott Andersen, Geneva-based partner of Sidley & Austin international law firm and co-chair of the International Bar Association's Trade and Customs Law Committee. The five guests spent almost two hours providing feedback and comments on the draft report in the off-the-record session. The Task Force was very pleased by the favourable reaction to the draft report of these experts and by their helpful suggestions on ways to disseminate the recommendations.

In the last hour of the meeting, the Task Force members gave their final suggestions to Study Director Larry Herman, who will be chiefly responsible for producing the final report.

As reported to the Studies Committee in November 2008 in Mexico City, the final document is not intended to be a detailed legal analysis or a comprehensive review of all energy trade issues but instead will cover five priority topics-- border measures; investment rules; trade in energy services; trade in environmentally-friendly goods and services; and movement of energy sector personnel. These were priority areas that the Task Force had identified when it began its work in early 2008.  Each topic was considered to be highly relevant to the challenges facing the international community and critical to the energy industry in reducing barriers and enhancing market access to the benefit of trans-border energy trade. Each of the five report sections contains an analysis and a set of Task Force recommendations for referral to governments. The Task Force also agreed that, since the world situation is changing so rapidly and since there are a number of other important energy and trade issues that are emerging, they would suggest to the Studies Committee that the Task Force be commissioned to carry out further work and would prepare a list of additional topics to be examined should the Studies Committee agree to extend their mandate.

Kieran O'Brien    
Acting Secretary General
World Energy Council     
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