Interview: Joan MacNaughton, Executive Chair of World Energy Trilemma

18th December 2013


The WEC trilemma team has focused the second half of this year on engaging decision-makers during the UN General Assembly, at the World Energy Congress, and at COP-19. Interview with Joan MacNaughton, Executive Chair of the study:

The findings of the Trilemma study were discussed at the Congress. What was achieved there?
At the Congress we established the concept of the trilemma in the minds of some important stakeholders. International organisations, ministers from several countries and business leaders all seem to grasp that it is important to address all three goals of the trilemma, and I think they understood that in a way that I hadn’t observed in previous years.

The phrase ‘energy trilemma’ entered normal conversation. Korean President Park and ministers routinely talked about it. The UNFCCC’s Christiana Figueres acknowledged the relevance of energy to all the work they are doing on climate change and encouraged ministers to get involved so we get a more rounded and coherent approach when looking at the climate challenge.

At the WEC’s official COP side event you said that “we may be sleepwalking into the next ‘too big to fail’ sector”. Can you explain that?
This followed on from a discussion around the amount of recoverable fossil fuel reserves, the amount of investment for recovering them, set against the emissions they will create.

If we were to exploit all those resources without controlling their emissions, we would not be able to keep to the goal of 2° temperature increase. The good news is that we can do that, and make use of the fossil fuels, provided we get on with demonstrating and deploying CCS for gas and coal.

A lot of companies making these big [fossil fuel] investments know that there are some reserves that will probably not be usable if we are to keep to the 2° goal. However, they continue with their activities without investing in emission control technologies because there isn’t a global climate framework. Some possibly believe that their assets risk becoming stranded but that governments would then bail them out, because in some countries dividends from fossil fuel companies are so important and the economy would be significantly impacted if they stop production.

So we may be sleepwalking into the next “too big to fail” scenario. We need to think through how we can ensure that we don’t invest into stranded assets, that we don’t lock ourselves into a high-carbon future.

How optimistic are you that we can achieve the 2˚ goal?
There is a commitment to reach an agreement at the 2015 COP in Paris. Between now and then business needs to send strong messages to
policymakers about the need for a clear and certain framework, and to convey to policymakers what was highlighted in the trilemma report last year – the fact that the energy sector has a very large ‘turning radius’. What is going to happen in 2020 for example, is already set. What we need to do to get emissions under control by the middle of the century is start investing in a new way now, but in order to do that we need the right framework and a global price on carbon.

The engagement of business with policymakers is central. We published the report ‘Agenda for Change’ at the Congress and that set out 10 areas for joint action, where policymakers and business can together address some of these issues and create the space for the right type of investment to happen.

What will the trilemma report focus on in 2014?
We will be looking at the 10 action areas from the Agenda for Change. One that we will definitely look at is the recommendation for greater engagement with the financial community. It is clear that there is a large part of the financial community that don’t really understand the energy sector. We know there are finance houses that are very expert on energy but there are large parts of the financial community which are not. They will build expertise as they become conscious of the huge opportunities for investment, but the idea is that by bringing energy experts together with the financial community we might help accelerate that process.

How can the WEC network help put the trilemma recommendations into practice?
It would be fantastic if our member committees could study the report and talk to key stakeholders about it. The study is meant to be a tool for policymakers in getting their decisions right, and it is relevant in different ways to different countries. MCs will know how they can best share it with their business community and policymakers. They could perhaps hold events to bring the two sides together and have the dialogue and work through what they can take away from it that will improve the investment climate in their country. ■

■ Read the Agenda for Change report.

Joan MacNaughton CB is Executive Chair of World Energy Trilemma.

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