| || |
| || ||Edito || |
| || |
Energy and Agriculture : two strategic sectors for the future of humanity
by Éric Dyèvre,
Commissioner of the CRE (Commission for Energy Regulation)
1 - You are one of the seven Commissioners of the CRE (Commission for Energy Regulation) and you have agreed to sponsor WOAgri. Why and what parallels do you make between the energy and agricultural sectors?
The work I have been doing over the past several years involving the challenges faced by the energy sector could certainly be useful for world agricultural leaders.
The energy and agricultural sectors do in fact have many similarities, because of their product characteristics and political responses.
> The first similarity is the fact that both energy and agricultural products are vital for human beings. Energy and Agriculture are essential resources for life on earth, and are therefore strategic sectors for the sovereignty of States.
This fact will certainly be reinforced in years to come in view of the rise in power of China and India. The balance of energy and agricultural demands will be destabilized as the populations of these two countries experience an increase in their standard of living. To this we should add the geopolitical instability caused by the desire of several countries to equip themselves with nuclear weapons. It is clear therefore that tomorrow energy and agriculture can become powerful means of pressure.
In this respect, we see that Russia, in spite of economic difficulties and the weakening of its military forces, has joined the ranks of influential nations again, thanks to its abundant energy resources, particularly gas.
> Energy and agricultural resources are all distributed unequally between the different continents: there is therefore a structural discrepancy between supply and demand.
In the case of energy, the fact for example that electricity cannot be stored shows how difficult it is to balance supply and demand. As for agriculture, although products are “storable”, food supply is obviously insufficient because a third of humanity is suffering from malnutrition, about 850 million people are under-nourished, and one child dies of hunger or its consequences every five seconds.
> The result of this persistent inequality between supply and demand is price volatility, which in the case of essential products, calls for political action to regulate prices as well as flow.
> However, in both the energy and agricultural sectors, traditional theories focus on means (for example market regulations), which obscures the objective of satisfying essential needs. It is in fact simpler to negotiate quotas or prices rather than to deal with the fundamental right of each individual on earth to feed himself or to have access to energy for his daily or professional life.
To find answers to these fundamental questions, the best solution is regulation. It must nevertheless be explained that it is false to consider regulation as planning, just as it is irresponsible to say that regulation and liberalization are incompatible.
It is therefore essential to remember that the objective of regulation is to remedy inequality, and not to forget that one of the principles of regulation is to prevent the abuses of market domination, and thus guarantee the freedom of enterprise.
These factors demonstrate the complexity of the problems when it comes to defining national, even European or international policies. The difficulty increases even further when we include the difference between political time scales and those of the agricultural or energy sectors. In these two sectors of activity, we are working on horizons of 20 to 30 years, whereas democratic political systems rarely envisage horizons of more than 5 years.
This difference in time-scales is one of the main reasons why political decisions often clash with the needs for reform in the energy and agricultural sectors. We therefore end up discussing political actions in more general terms, which seem to me to be central to the debate.
2 - The arrival of the biofuel sector in political debate seems to confirm the shared fate of the energy and agricultural sectors. How do you see the stakes involved in the development of biofuels?
Since the escalation in petrol prices and the alarmist forecasts concerning energy resources, the biofuel sectors, in official talks, do in fact believe that the energy and agricultural sectors share a common fate. The development of “clean” energy is presented as the priority of all energy policies in developed countries. Without denying the importance of the environment, we are unfortunately aware that political commitments in this matter are not in line with the reality of the energy sector.
Nuclear and hydraulic power and renewable energy, which represent almost 15% of world energy today, will represent only 8% in 2030. The reality of these facts is not reflected in today’s debates. Wind and solar power, for example, only exist because the production of electricity from these two sectors is highly subsidised.
The development of the biofuel sectors does not however meet the necessary requirements for the environmental protection. They are sometimes a means of helping the agricultural sector without directly breaking European or world competition rules. Long-term existence of these sectors therefore cannot be guaranteed.
We must not allow farmers to believe that these new sectors can save their livelihood in the future. They could play an important role in some parts of the world, but they will never replace fossil fuels. Neither will these new markets be the regulation variable that will enable nearly 2 billion farmers in the world to make a living from their produce.
However, I remain convinced that these two economic sectors share a common fate, for the reasons that I mentioned above.
3 - The energy issue, particularly concerning electricity, shows that pure competition in certain cases can prove to be a dangerous path to take, if we judge by the black-outs that have affected the United States and of which Europe has recently had a taste.
It is in fact true that “pure competition” in the energy sector is still on the drawing board and not yet a reality.
It was considered during the 1980s that pure and perfect competition should be applied in an exemplary manner to the Electricity market to show its superiority.
Among the elements cited by experts to confirm that their analyses were correct, we found for example that the electron used for the production of electricity was of course always the same everywhere, wherever it was produced. It was the “common” product par excellence.
However, the same experts who, twenty years ago, advocated the economic theories of pure and perfect competition to define the strategic orientations of European energy, now admit their mistakes, at least those of them who are honest enough to do so. A small nucleus of diehards nevertheless persists in justifying the difference between their views in the past and today’s reality by all the evolutions that have affected the world.
Experience proves however that the specificities of the energy sector contradict this economic logic and call for a pragmatic approach.
If the market alone cannot manage the energy sectors in an optimal manner, it is because, for example, electricity cannot be stored. This implies that the supply of electricity must always be equal to the population’s demand for electricity. Any inconsistency in this, even if it were marginal, would lead to major disruption. Perfect balance is essential!
However, anticipating the flow of supply and demand in electricity year after year is becoming more and more complex. In fact, consumer life styles are leading to a growing demand for example in air conditioning, and to an evolution that could be termed as “erratic”.
Today, the ideal of pure and perfect competition has completely disappeared from people’s minds. And I hope we have entered into an era of pragmatism. It is with this in mind that European leaders have begun work on a geographical level to solve the difficulty of bringing together 25 countries with different problems to address.
In order to harmonize the energy sector, the Europe of 25 is divided into 7 areas for electricity and 5 for gas. Here we follow the “founders” of Europe who believed that only countries with similar levels of development can build compatible systems.
This is why I am interested in the work WOAgri is doing, which consists of setting up a world governance in agriculture on a regional level and on the basis of common development criteria. Regulation of international exchanges of agricultural products seems to me to be an ambitious task but necessary to stabilize the world, as is the case for the management of energy flow.
4 - What advice would you give to WOAgri?
World governance and regulatory rules necessarily imply the abandoning of sovereignty, which explains the reticence of political leaders to agree on these matters.
In the agricultural sector, only a consensus on the role of the farmer for the future of agriculture in the 21st century will dispel any fears people have.
The NAR economic model (New Agricultural Regulations) that you are developing could, therefore, be a tool to help formalize collective costs that the abandoning of agriculture in certain geographic regions would entail.
Finally, it is regrettable to see in Europe today the decline in popular support that farmers still had twenty years ago. So, to conclude with a personal wish, I hope that WOAgri will help to place world agriculture in line with today’s realities and to make our societies realise that agriculture is part of our nations values.