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Energy war jeopardises progress

For years the superpower politics of the cold war blocked efforts to end global poverty. Today it is the hot war of energy economics and global warming that present an impossible obstacle. They also threaten something far worse - a great reversal of human progress.

We know that climate change already effects the poorest people in the poorest countries. We also know that from Nigeria to Latin America, extractive industries leave a wake of corruption and conflict. Now there is another problem. A consensus is growing that we are living on the cusp of the so-called Hubbert peak of oil production, suggesting the recent oil price spike will be the first tremor of an impending earthquake with oil production's long, slow decline coinciding with endlessly rising demand. The result? Global economic chaos.

After the 1979 oil shock, rich countries' fear of inflation created a triple blow for poor nations: falling demand, export price collapses and high interest rates setting off a debt crisis. Bad as it was, there were ways out that, owing to climate change and the Hubbert peak, are not now available.

Fossil fuels account for four-fifths of the primary energy supply. Oil is more than 40% of energy consumption. Without intervention, the International Energy Agency predicts, "a future in which energy use continues to grow inexorably [and] fossil fuels continue to dominate the energy mix".

The dominance of dirty energy is not a natural state. It is largely the consequence of perverse subsidies that have been poured into coal, oil and gas, and the failure to internalise the cost of environmental damage. Good estimates put the global scale of subsidies at a minimum of £130bn.

The share of energy research money going into renewables stood at just over 8% after the 1970s oil shocks. As awareness of climate change grew through the 1990s, it fell to just over 7%. As recently as 2003 fossil fuel projects represented 86% of the World Bank's spending on energy, and renewables 14%.

The situation is absurd because renewable energy is superabundant. Renewables account for about 13% of energy supply, though the cleanest forms of solar, wind, geothermal and tidal account for less than a quarter of that. They have the potential, however, to meet all human energy needs.

Small and medium scale applications are well placed to improve the lives of the 1.6 billion people who have no access to electricity, four-fifths of whom live in rural areas often remote from ailing national grids. The theoretical potential of the main clean renewable sources is more than 2m times greater than current use. Even the more limited technical potential means we could increase uptake by 120 times.

Renewables are much more than mere potential, as a set of awards for best practice run by the Ashden Trust announced this week will show. From saving the sight and lungs of urban street traders and home cooks by using solar lanterns and eco-stoves to solar powering communication systems for flying doctors in the rainforest, renewables are already delivering greater wellbeing in some of the most difficult human cir cumstances. They also inoculate against the economic, environmental and political shocks linked to fossil fuel use.

One obstacle remains to the mainstream uptake of renewable energy in the developing world, where they attract only 1%-3% of energy investment. Highly polluting fuels such as brown coal are plentiful and cheap. A global framework with big incentives is needed to encourage the shift. There has to be a managed withdrawal from fossil fuels to give developing countries their logical, equal per capita slice of the remaining carbon cake that it is safe to burn.

Being able to trade unused entitlements under such a framework, termed "contraction and convergence" by the Global Commons Institute, will also generate necessary income for development. Without it, the sense of historical injustice about rich countries' ecological debts will derail the dawn of renewables.

· Andrew Simms is policy director of the New Economics Foundation. The Price of Power is published today by NEF.

Editorial Notes: "Renewables ... have the potential, however, to meet all human energy needs." Which is not to say they will meet our current demand, but even the author's lesser claim is yet to be proven...

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