The strategic issues embedded in our energy future

Last week two energy strategies, next week a White Paper titled “Our future with Asia”. What do these have in common? And is there a place for Europe?

One clue comes from Australia, now heading into a crunch election.

A new study by the Australian Strategic Studies Institute (ASPI) states that we are in “the third energy shock of the post-war [post-1945] era”. This differs from those of 1973 and 1979 in being driven by rapidly rising demand, not constraints by suppliers.

Demand, the report says, has gone on climbing despite a huge rise in oil prices. Neither consumers nor governments have responded as they did in the 1970s shocks.

“The conservation urge has been muted,” says author Michael Wesley, director of the Asia Institute at Griffith University. “Nor have states responded with the [same] sense of urgency. So far no major international institutional responses to the oil demand squeeze have been championed, no major national initiatives have been launched and no significant international tensions over energy supply and pricing have emerged.”

Yet “the adequate supply of affordable energy will become increasingly a part of most states’ security calculations in the coming decades”.

Actually, in one country it already has. George Bush is massively subsidising corn farmers to produce ethanol, to lessen dependence on imported oil and to avoid importing ethanol from low-cost Brazil — incidentally, also distorting world food prices. Coal interests have won over a Congress minority to subsidies for coal-to-gasoline production.

Why go down that route? Because affordable energy is a core ingredient of Americans’ material comfort.

Affordable energy is also critical to economic growth. If Asian countries are to catch up to the North Atlantic countries’ material standard of living they need assured energy supplies, which for now means mainly oil and coal.

New Zealand’s interest in Asia is principally in its enrichment. Our economic development mantra reflexly intones that as Asians get less poor, then better off, they demand higher-quality food.

So we have a vested interest in Asians having access to affordable energy. The richer they get the richer we are.

Moreover, there is for now peace in most of Asia. Even the Koreas seem to be edging towards accommodation. If energy shortages destabilise that peace, we here will live less well.

That (temporary?) calm may be the reason for the near absence in New Zealand senior ministers’ foreign policy speeches of discussion of the potential for conflict or tension. A test of the completeness of next week’s White Paper will be if, and how well, it canvasses that potential.

Note that China, while having recently swapped belligerent gestures and rhetoric for “good international citizen” behaviour, has serious internal tensions and long-term designs on Taiwan. Central Asia, not long freed from Moscow, is not settled. And there is the Pakistan-Afghanistan mess.

But for now there is peace, so ministers have felt able to focus their energy concerns more on climate change than on security of supply. Accordingly, the efficiency and conservation strategy had more meat than the energy strategy.

In fact, in this emphasis David Parker has some support from ASPI’s Wesley. The other difference Wesley noted between this energy shock and those of the 1970s is “a near-total acceptance of the severe environmental consequences of fossil fuel use”. John Howard’s flip on this (among many desperate flips, last week’s being on indigenous rights) plus Kevin Rudd’s commitment to ratify Kyoto help make Wesley’s point.

In most countries this new climate excitement has produced a flight to nuclear energy, which is good for uranium-producing Australia. Here the flight is to water, tides, steam, wind and biological options, with a highly ambitious wish to have cars 60% electric by 2050.

Of course, Parker could say that cutting back on gas-fired electricity (if gas has to be imported) and on oil for cars increases energy self-sufficiency and thereby enhances energy security. And energy security is mentioned. But it is not the central driver it was a few years back.

This climate focus brings Europe into the frame.

Clark is a Europhile. She is serious about Asia but has to make an effort. Connecting with Europe requires no effort.

Little noticed during this month’s trip to the fountainhead was her musing on the potential for a free trade agreement with the European Union.

Europe, free trade and New Zealand in the same sentence? You’ve got to be joking.

Not so, says former trade supremo and now National trade speaker Tim Groser. Europe is reaching out. Dairy and meat are accommodated in protocols. And New Zealand lines up with Europe on climate change and labour protections.

For Europe a deal with New Zealand could be a template for others. For New Zealand it could mean being whacked less hard if Europe puts up climate change trade barriers.

That’s strategic. Can Clark make it happen?