Tony Hayward, BP’s chief executive, revealed some of his thinking on the big questions facing the energy industry in a speech this morning. First, he warned policymakers not to dilly dally lest they want to see the return of energy shortages that plagued the UK in the 1970s and California at the turn of this century.
BP estimates the world will need to spend more than $1,000bn each year until 2020, to meet the expected 45 per cent increase in energy demand. Reducing carbon also needed to be a priority, with governments giving a clear path forward.
“We can’t afford to wait. We need to begin now to begin taking carbon out of the mix today,” he told a conference in London.
But turning the global economy into a carbon-light one will be slow as turn over time of capital stock in the power sector was 30 years, and in cars is 15 years, he argued.
“We need to be realistic – the transition to a low carbon economy won’t happen overnight,” he said.
As if in a warning to Gordon Brown, UK prime minister, who yesterday said even more ambitious carbon reduction targets were needed, he said: “I believe that in the realm of alternatives, it’s dangerous to promise too much too soon. It risks rendering the entire global effort both politically and economically unsustainable.”
So how to do it, according to BP?: yes: cap and trade; yes: regulation and incentives; yes: more efficient and hybrid cars; yes: natural gas for power; yes: second generation biofuels. No: electric cars (too much need for electricity), no: CCS (too slow and costly).
But it’s not up to BP, it’s up to the governments, was the message (again) from the industry. Mr Hayward didn’t say whether he believed policymakers would meet the challenge if carbon reduction and energy security.
However one of his answers in the Q and A suggested he may have his doubt. When asked about the Canadian oil sands, he said he believed they would be developed. Because the oil sands are expensive and environmentally messy, with a high relative carbon foot print, that means he believes in at least some of the following: weak environmental regulation, high oil prices, and technology breakthroughs.
The easiest to admit to is of course technology advances, but the other two are likely to be part of his thinking too.
Tony Hayward’s speech is here.