Item 5 (a) of the Provisional Agenda
UNEP Governing Council IX / Global Ministerial Environment Forum

Environmental protection and energy for development are crucial and interwoven elements of sustainable development.   In this regard, ICC welcomes UNEP's contribution on the environmental aspects of these issues, and encourages UNEP to work with other multilateral organizations with expertise and mandate for energy such as IEA, and with other IGOs, such as UNDP, to promote mutually reinforcing international cooperation on energy for sustainable development.

Businesses and industries of all sizes all over the world depend on energy, and energy is delivered by businesses and industries.  ICC regards business views, expertise and engagement as essential in these discussions because of the business community's central role in policy implementation, economical development and technological innovation, and more specifically because of its role in developing, delivering and utilizing energy.

ICC has been a longstanding participant in most international fora and meetings on energy, and its members interact with national governments and other stakeholders on many energy, development and environmental issues.  Most recently, the International Chamber of Commerce (ICC), the World Business Council for Sustainable Development (WBCSD) and the World Energy Council (WEC) have established Business Action for Energy (BAE).  BAE is an ad-hoc, temporary business initiative to support business input into the 14th and 15th sessions (April 2006 and 2007) of the UN Commission on Sustainable Development (UNCSD) and to other important forums in that framework.  Supported by many international federations, producers of energy and energy services, energy consuming industries, and energy efficiency businesses, BAE brings together a comprehensive network of businesses from around the world to recall that business is:

• a constructive contributor and indispensable participant in the effort to  deliver sustainable energy - alongside governments and civil society. 
• a willing partner through the provision of resources, the development and deployment of technologies.
  

ICC believes that the UNEP Executive Director's "Background paper on energy and environment for development"  is a balanced and comprehensive text that sets the scene in the context of development, and highlights priority environmental aspects. ICC wishes to underline some of the paper's key elements and respond to the document's discussion questions as part of the solution.

ICC concurs with the paper's key message: access to reliable, affordable energy is fundamental to economic growth and sustainable development. Energy poverty contributes to poor living conditions and low prospects in many developing countries. The transition from poverty will require concerted effort to address a wide range of urgent needs, such as clean water, healthcare, sanitation, education and communications - and energy is a critical enabler of many of these.

In light of expected growth in world population and energy demand, long-term energy access and security will be critical.  According to the 2004 WEC Survey of Energy Resources, energy is global, and energy resources are abundant around the world. Energy production, conversion and transport technologies are improving rapidly, making it possible to transport energy more efficiently over longer distances and creating favourable logistical conditions. Yet despite all this, energy accessibility both in technical and economical terms has not improved enough.

Maintaining and growing the energy supplies required to provide access to those lacking it and to meet future demand with reduced environmental impacts will require significant investment in the long term on every element of the supply and use chain. Access to secure and affordable energy involves a wide range of business actors in addition to the traditional sectors of power generation, utilities and natural resource extraction. Transport, grid maintainers, automotive and energy intensive sectors are also essential parts of the energy supply and use chain.  Their needs and operating realities should be taken into account by decision-makers.

Energy efficiency is a critical component of any comprehensive sustainable energy strategy. Governments should continue to promote and support energy efficiency among producers and consumers of energy.  While this can make a major contribution to limiting growth in energy demand, growing energy supplies and access to them is still essential.

How to integrate energy, environment and development policy making? (Question a.i)

Energy supply and use poses political and economic issues related to economic growth, security, employment, investment, climate change, environmental impacts and trade.  Consequently, energy challenges should be addressed through integrated policies reflecting:

• Development priorities and needs;
• Social conditions and aspirations;
• Trade rules;
• Environmental policies including climate change, air /atmospheric pollution policies;
• Innovation opportunities;
• Technology development and transfer policies (Export, Finance, Removing trade barriers and Intellectual Property policies); and
• Energy efficiency.

For markets to work efficiently and effectively, prices should give customers a clear basis for their decisions while ensuring optimal resource allocation. In many energy markets, distorted signals are being sent by counter-productive subsidies.  Working outside of free open markets tends to result in inefficiencies in the supply and use of energy, waste of energy resources, and finally adverse environmental effects.

Furthermore, efficient implementation of these integrated policies requires enabling frameworks  supported by good governance that provide an attractive and secure investment environment. Required enabling framework conditions include:

• transparent and stable economic and uniformly enforced regulatory systems based on sound science, risk management and cost/benefit analysis;
• rule of law;
• protection of intellectual property;
• safe and stable communities;  
• free markets and fair competition;
• efficient financial markets;
• effective and innovative financing schemes.

Consumer understanding, behaviour and choices are key factors of success for addressing energy challenges. The way consumers use energy and maximize the recovery of energy through, for example, recycling, has the potential to impact significantly on the supply side. Therefore, consumers have to be educated about and be provided with choices and options for energy that is more sustainable.

2) The role of various energy sources and the energy-mix in providing energy for development. (arising from Questions a-ii, and c)

In light of growing energy demand and security concerns, all energy options should remain open, and policymakers should avoid choosing "winners" and "losers."  There is no one-size-fits-all solution.  Clearly, a broad variety of energy resources and technologies will be required to meet the varying needs of individual countries or markets.  Keeping all energy options available will enable every nation to tailor addressing energy needs in the most efficient way, in alignment with respective resource base and long-term strategic development objectives.  All energy sources should be assessed on their merits and relative attributes, recognising that each faces issues, barriers and opportunities including cost, performance, safety, environmental impact, primary resource depletion and energy security. Public acceptance should be considered in this approach, and be motivated by pertinent and complete information. Furthermore, energy efficiency is critical to any comprehensive sustainable energy strategy as mentioned earlier and should be considered as an integral part of the energy mix.

To enable the full potential of energy options, all relevant stakeholders should allocate resources to research and development of new technologies all along the energy chain. Businesses already dedicate substantial resources in technology advancement and the development of innovation. Business should also be a partner in defining mechanisms to identify, develop, commercialise and transfer technologies aligned with national priorities and development strategies.

3) Attracting necessary financial resources - from public and private sources - for more sustainable energy technologies and systems. (arising from questions b-ii-iii)

While the world's energy resources are sufficient to meet projected demand, mobilising required investments will be the key challenge for the coming decades and underlines the importance of a competitive energy sector that can attract the necessary investment. Financing for energy investment cannot be taken for granted, and the key question will be whether conditions in any given country's energy sector are right to attract the necessary investment.

Investment in energy projects is a long-term venture with investors facing considerable risks and challenges, which vary by region and the stage of the energy chain. Overall, investment conditions must be appealing and returns high enough if they are to trigger the necessary investment.  For energy producing and large energy-intensive industries, capital equipment lifetimes range from 30 to 50 years. With regular maintenance and newly available technology, capital stock can often last decades longer than its expected/proposed lifetime.  New process technology, i.e., technology that improves the efficiency and cost effectiveness of a factory or power plant, requires performance improvements of an exceptional magnitude to induce a firm to retire equipment where capital costs have already been paid.

Many options for evolution in energy systems involve considerable time and expense to alter energy and raw material inputs, operations and products and to develop and introduce technological innovations, as well as to establish the infrastructure to support them. Policy makers should strive for a consistent framework over the period of investments, which, in the energy sector, can amount to several decades.
Furthermore, the planning basis for business development, investment decisions, and cost-recovery may be profoundly affected by governmental commitments and changes in the international framework in the longer term. Uncertainty regarding longer term time frames has already introduced concerns and delays in decision making, especially regarding international investments for energy production and distribution projects to develop long-lived infrastructure.
Policies should take these long term considerations and realities into account, and strive for consistency and predictability over the corresponding time span.

In countries with limited capital, and specifically for least developed countries, the role of Foreign Direct Investment should be complimented by Inter-Governmental Organisation funds (World Bank, GEF, UN Agencies etc.), Official Development Assistance (ODA), and local private funds. Through such innovative financing solutions, project creation and implementation benefit from a variety of sources of funds, which are mutually reinforcing, each fund being adapted to the type of investment and risks it covers.

Enabling frameworks are a prerequisite for developing and attracting investment in sustainable energy systems. Due to its unique relationships with governments, concerted anti-corruption, solicitation and bribery efforts in the energy industry remain a priority. To promote investment in the energy sector, the business community sees a strong need to eliminate acts of bribery and corruption, which is a shared responsibility. Governments have an important role to play in assisting companies in the prevention of bribe solicitation as well as in prosecuting offenders. ICC at the international level is strongly involve in raising awareness and promoting good practices.

Governments, national or local, businesses, and other key stakeholders need to partner in order to achieve sustainable energy services, including through projects realised through Public Private Partnerships that bring together the best of each partner's capacities. To be successful, these partnerships should reflect the skillsets and resources of each partner, and be developed within the long term process of energy investment.