The hunger for energy

Energy is at the heart of social and economic development worldwide.

If standards of living are to be raised - especially for the billions who live in poverty around the globe - a significant increase will be required in the amount of energy produced over the coming years.

The International Energy Agency (IEA) estimates that world energy consumption in 2030 could be 60 per cent higher than in 2003. And by mid-century, we could be using two to three times as much energy as we do now.

IEA executive director Claude Mandil cautions in the latest World Energy Outlook: "If we continue as before, the energy supply to meet the needs of the world economy over the next 25 years is too vulnerable to failure arising from under investment, environmental catastrophe or sudden supply interruption."

In terms of viable energy sources for the future, the number of options is limited: renewables, nuclear or fossil fuel.

The IEA expects that growth in renewable energy sources over the next couple of decades will be large in percentage terms, but from a small base. Nuclear energy, which today provides about 20 per cent of the world's electricity, will continue to play an important role.

Fossil fuels will continue to dominate the global energy mix to 2050. The IEA suggests that fossil fuels will account for 83 per cent of the overall energy demand increase between 2004 and 2030.

All these energy forms will be needed but each presents its own challenges. Nuclear energy involves a complex fuel cycle; it also gives rise to certain social and geopolitical concerns about reactor safety and the management of waste products. But nuclear has one of the lowest operating costs of all energy forms and low carbon emissions, and is well suited to baseload power generation.

The connection between fossil fuel energy and climate change is gaining widespread recognition. This has been especially evident in Australia and the US, where the political mood is shifting towards the concept of carbon pricing.

Renewable energy sources still require considerable development to bring costs down to competitive levels. Aesthetic and social concerns surround issues such as the siting of windmills or the building of dams for hydroelectricity. Better understanding of the CO2 implications of hydroelectricity is also needed. And practical solutions must be found to address the intermittent nature of many renewable energy sources.

Rio Tinto believes the energy challenge can best be met by companies, governments and society working together on all fronts: fossil fuels, nuclear and the so-called "new energy" sources. The goal in each case should be to continually improve the cost-security-cleanliness equation, by fully recognising and addressing the risks involved and benefits achievable.

We generally support the view expressed in the UK Government's Stern Review on the economics of climate change, published in October 2006, that action is needed now to promote cleaner energy and improve energy efficiency.

Technology development will be at the heart of improved energy solutions.

In the coal sector, for example, Rio Tinto is helping to develop technology for carbon capture and storage in the US and Australia, and increasingly in other parts of the world.

We are also expanding our interest in uranium, where we believe we can make a significant contribution through the development of better processes for product stewardship. With other uranium producers, we have formed a group to look at the implications of the entire fuel cycle.

In 2006 we also collaborated in the Australian Uranium Review, which published its report in December. The report endorses an increase in uranium production to meet the world's growing electricity needs while containing greenhouse gas emissions.

Another government initiative where we are especially active is the Asia-Pacific Partnership on Clean Development and Climate (AP6), inaugurated in January 2006. The partnership brings together the governments of Australia, China, Japan, India, Republic of South Korea and the US.

This joint effort aims to realise a shared vision: of emissions management, pollution reduction, clean development and energy security, implemented in ways that support economic development. Rio Tinto participates (either directly or through industry associations) in three of the AP6 public-private Task Forces focused on coal, aluminium and steel, helping to define action plans that will deliver the partnership's vision.