'Thinking slow in our energy policy'

ONS 2012 Summit– The Geopolitics of Energy - Session: Perspectives on resource development in the Arctic, Monday 27 August, Norway, Stavanger

Ladies and gentlemen,

The human brain is a marvellous instrument. It allows us to make sense of the world, imagine new possibilities and post tweets while driving a car – which you shouldn’t do, of course. We take the functioning of our brain for granted. But Nobel Prize winner Daniel Kahneman suggests that our brain has two distinct ways of forming thoughts: a slow one and a fast one.

In his 2011 book Thinking, Fast and Slow, Kahneman says that all of us – experts in particular – are overconfident in our ability to understand the world. We tend to make decisions in a fast, intuitive and subconscious way, which leads to irrational outcomes and a distorted view of the world.

Which is exactly why, Kahneman argues, we should practice slow thinking. A more conscious and analytical approach that allows us to question stories that seem true, because a complex situation has been oversimplified. I want to explore with you today how Kahneman´s advice can apply to, first, the role of gas in the future energy mix, and second, developments in the Arctic

Gas in Europe’s future energy mix

For the last two years, the European Commission has been elaborating the Roadmap 2050, which was partly based on scenarios developed by the European Climate Foundation and renowned consultants, institutions and European universities.

The experts saw wind and solar power as the pillars of Europe’s future energy system. Gas was virtually absent and in my view this was a serious omission.

To borrow from Kahneman, important participants in the debate showed overconfidence in the role of non-fossil energy sources in our future energy system. A clear case of fast thinking that denies two things:

  • First, that the wind doesn’t always blow and the sun doesn’t always shine. Gas provides the flexibility that renewable forms of energy cannot. 
  • Second, gas is the cleanest fossil fuel. It is significantly cleaner than oil and coal, as well as abundantly available, reliable, and affordable.

In other words, there is no sustainable energy future without gas.

Fortunately, the gas industry introduced slow thinking. It organised debates and studies that show how gas can contribute to a sustainable energy system and to a reduction of emissions. By doing so, it claimed a role in the energy transition of the next decades.

And rightly so, considering the state of Europe’s economies. The gas industry can provide much needed growth and jobs. And it has already invested billions of euros in gas production, gas storage, LNG-terminals, pipelines and gas-fired power plants.

These investments need to be paid back over the course of decades. In other words, the position of gas in Europe´s future energy mix has implications for our economies as a whole. Such considerations challenged us to think slower and to be less confident about the potential of non-fossil fuels in Europe´s future energy mix.

Gas producing countries from outside the EU also contributed to the Roadmap 2050 debate, arguing they need Europe to endorse gas as a vital part of our energy future. For its part, the Netherlands argues that gas can help us reach a low carbon economy by 2050 in a cost-efficient way. Gas is the cleanest fossil fuel and our approach is analytic and rational, ‘slow thinking’ so to speak.

This is why I´m pleased with the outcome of last June´s Energy Council in Luxemburg. My colleagues and I discussed the Roadmap 2050 and acknowledged the key role of gas in the transformation of the energy system. That means gas is here to stay!

Europe´s recognition of the role of gas is in synch with the International Energy Agency´s conviction that the 21st century will be ‘the Golden Age of Gas’. The IEA has good reasons to say this. Both gas demand and supply are expected to increase worldwide by over 40 percent by 2035.

And this is good news for our host, Norway. And also for the Netherlands! We have been a gas-producing country for over half a century and today we are a major gas-trading country that is connected to the global gas market. We are now becoming the central gas hub for Northwest Europe.

This is in part because Dutch and international companies have invested billions of euros in gas exploration and production, transport infrastructure and gas-fired power plants. I have also recently signed an innovation contract that stimulates the gas industry and knowledge institutions to co-operate on gas R&D. Innovation is key to a sustainable energy future and new technologies will allow us to explore and exploit new gas fields, create new applications for gas and reduce our carbon footprint.

Golden rules for the Arctic

Last May, the IEA released a report entitled Golden rules for a Golden Age of Gas. This encourages the energy sector in general and the gas industry in particular to avoid fast steps in the exploitation of gas, especially unconventional gas. Instead, they are invited to embrace slow thinking and to explore new ways of operating.

The IEA argues that natural gas will fulfil its potential if we develop a significant proportion of unconventional gas in a profitable and environmentally sound manner. The IEA also pinpoints challenges, such as social and environmental concerns. These require the industry to conduct environmental impact research, be transparent, engage stakeholders, and develop technologies for producing gas in an even cleaner and safer way.

The Norwegian and Dutch government intend to co-operate more closely on the development of such technologies. We are currently working on an agreement that will allow IEA Member and Non-Member countries, as well as the industry, to collaborate on R&D. This is especially relevant in relation to today’s topic, the Arctic.

The exploitation of the Arctic reserves is a matter of time, and most of these reserves are located within the borders of the Arctic countries. But we still need to minimise the risks of exploitation and foster good governance. Speaking of which, the Dutch government considers those parts of the Arctic outside the jurisdiction of the Arctic nations as Global Public Goods, an area that needs protection for the sake of future generations. We also believe that Arctic allow us to see whether global climate change policies have any affect.

The Netherlands has been active in the European sector of the Arctic ever since the epic journey of captain Willem Barentsz over four hundred years ago. He searched for the Northeast and Northwest passages to Asia but instead ‘found’ Bear Island, Spitsbergen and a harsh winter at Novaya Zemlya in 1596-1597.

We learned that the Arctic is to be approached with respect.

To safeguard the Arctic today, we need to implement existing treaties. At the same time, we need to be aware of the gaps -- gaps in the subjects and in the geographical area covered by the existing treaties. That is why we favour additional binding international rules based on the precautionary principle, to provide better protection of the Arctic and its fish reserves. We think the Arctic Council is the best forum for this.

In a paper prepared for this session, risk management firm DNV and the Fridtjof Nansen Institute said that - and I quote –

“ large areas towards the North Pole remain challenges in terms of regulatory frameworks for search, rescue, evacuation, environmental clean-up, and liability for oil spill damages.”

I agree with this. We have to be realistic and avoid being overconfident with regard to industry self-regulation. Considering the disparity of commercial and geo-political interests, I am convinced we need new international regulations.

We also need technology and innovation policies that can handle the physical challenges of the Arctic. The Netherlands is doing its part. Since 1984 we have been conducting polar research and the Dutch government is supporting a proposal of the Project Delta Group for an innovative approach to the exploitation of gas in Yamal, Russia.

The truth is that right now we cannot foresee all consequences of Arctic exploitation. Many questions still need to be answered, such as:

  • Should we allow unlimited exploitation of gas and oil in such fragile environment? 
  • Do we know enough about the impact of a major oil spill on freezing or frozen water? 
  • Are there effective methods of containing and cleaning up an oil spill in the Arctic, with its long periods of darkness and extreme temperatures?

These questions warrant a broad dialogue and slow thinking. In fact, we have a duty to develop golden rules for the Arctic to bolster social acceptance, and use innovations and new technologies for eventual production activities in this fragile part of our planet.

That is the only way to get a ‘license to operate’.

If gas is to play a prominent role in our future energy mix, we need strong policies, innovation, co-operation and transparency. Gas can help us boost our economies and make our energy system more sustainable.

I started my talk by saying that our brain has two ways of thinking: a fast and a slow one. In my opinion, companies and governments need slow thinking to ensure a sustainable energy future. This is especially true of the Arctic.

So thank you for your time. I wish you a lot of slow thinking.