1. Energy Needs for Sustainable Human Development

CARLOS E. SUEZ¹

During the 1970s and 1980s, it became fashionable to think of energy as a goal in itself. The vagaries of the international oil market put energy development on a par with socio-economic development and environmental protection. More recently, many people take the opposite position that energy is simply one more product to be obtained through the market. My view, despite being an energy specialist, is different from both of these extremes. The most important goal is integrated sustainable human development for each and every person, male and female.

Energy is a fundamental and strategic tool to attain a minimum quality of life. This chapter examines how and why energy can contribute positively to sustainable development, and assesses how the potentially negative impacts of energy systems on human and natural environments can be minimized.

Human Development and Energy Consumption

The Human Development Index (HDI) developed by UNDP is one way of measuring how well countries are meeting, not just the economic, but also the social needs of their people, that is, their quality of life. The HDI is calculated on the basis of a simple average of life expectancy, educational level, and per capita gross domestic product (as measured by purchasing power).² The HDI measures performance by expressing a value between 0 (poorest performance) and 1 (ideal performance).

It is useful to look at the historical influence of energy consumption on the achievement of certain levels of human development or quality of life. For this purpose, HDI values were analyzed in relation to per capita commercial energy consumption for all countries, developed and developing, for which data on both variables were available. Only commercial energy was used for this analysis because the data available for non-commercial energy (mainly biomass) are not of the same quality. Moreover, because non-commercial energy sources are used with low efficiency, the results of combining the two could be contradictory.

Figure 1.1 - Estimated Relationship Between HDI and Per Capita Energy Consumption 1991-1992

Note: Data for 100 developed and developing countries.

Source: Author's calculations based on data in United Nations Development Program, Human Development Report, 1992, 1993, 1994 editions (New York: Oxford University Press).

The statistical analysis presented shows clearly that energy has a determinant influence on the HDI, particularly in the early stages of development, in which the vast majority of the world's people, particularly women and children, find themselves (see Figure 1.1). It also shows that the influence of per capita energy consumption on the HDI begins to decline somewhere between 1,000 and 3,000 kilograms of oil equivalent (koe) per inhabitant. Thereafter, even with a tripling in energy consumption, the HDI does not increase.³ Thus, from approximately 1,000 koe per capita, the strong positive covariance of energy consumption with HDI starts to diminish. Additional increases in HDI are more closely correlated to the other variables chosen to define it (life expectancy, educational level, and per capita income).

A similar diagram for the period 1960-65 for the same countries makes the point even more dramatically (see Figure 1.2). During this period, HDI also increased more rapidly than energy consumption and then stabilized, beginning at about 3,000 koe per capita.⁴

Figure 1.2 - Estimated Relationship Between HDI and Per Capita Energy Consumption 1960-1965

Note: Data for 100 developed and developing countries.

Source: Author's calculations based on data in United Nations Development Program, Human Development Report, 1992, 1993, 1994 editions (New York: Oxford University Press).

Figure 1.3 - Comparison of HDI/Per Capita Energy Consumption Relationship, 1960 and 1991

Note: Data for 100 developed and developing countries.

Source: Author's calculations based on data in United Nations Development Program, Human Development Report, 1992, 1993, 1994 editions (New York: Oxford University Press).

Figure 1.3 shows the distribution curve for the two periods (1960-65 and 1991-92). Although there is a general increase in HDI in the thirty years between the two periods, the level of energy consumption, at which further increases in HDI no longer occur, is virtually the same. On the other hand, a level of 1,000 koe per capita per year could be enough to support a reasonable level of development if it could be used efficiently from a technological point of view in both developing and industrialized countries.⁵

The developing countries are all located in the first part of the curve; this is particularly true of the lower income sectors in developing countries. It is, therefore, essential to find ways of increasing their (useful) energy availability On the other hand, the industrialized countries are located in a section of the curve where an increase in energy consumption not only does not improve life quality, but can even deteriorate it; this is also true of the higher income sectors in some developing countries. Thus, there is need for strict energy conservation policies in high-energy-consumption areas.⁶

In the face of these realities, does it make sense to continue to project increases in commercial energy consumption for the countries that consume the largest amounts of energy (sometimes estimated to reach 10,000 to 15,000 koe per capita by the year 2025)? Today, there are still 81 countries, with a total population of 4,750 million people (87 per cent of the world's population) that have not yet reached 3,000 koe per capita, and 62 countries, with a combined population of 3,800 million people (70 per cent of the world's population) that do not use even 1,000 koe per capita and have an HDI ranging from 0.19 to 0.80.

The duality that already exists between rich and poor will only increase if the world does not secure a more equitable distribution of resources in general, and energy in particular. The result will be a majority that cannot meet even its most basic needs and a minority that diminishes its quality of life (as measured in HDI and other indicators) through overconsumption and the resulting environmental deterioration. This reality can already be observed today in large urban areas, which are being choked by air pollution.

The trend toward increased duality and inequity is already evident. Income disparity, in both developing and industrialized countries, is growing, as studies on HDI and distribution of wealth have demonstrated.⁷ In 1960 and 1970, the ratio of the world income share between the richest 20 per cent and the poorest 20 per cent of the world's population was approximately 30 to 1, during a period when there was a high rate of global economic growth. In 1980, that ratio increased to 45 to 1, and by 1990, it had reached 61 to 1, with a simultaneous decrease in global economic growth (see Figure 1.4).

This means that inequity in income distribution has grown almost constantly since 1960, but especially since the 1980s. Moreover, this deterioration has not only affected the poorest 20 per cent; the next 60 per cent have drastically reduced their participation in the economy as well (see Table 1.1). If the socio-economic and energy strategies of the last ten or fifteen years are not rapidly modified, it will be impossible to lower the income and energy consumption gaps between the highest and lowest income level.

These analyses of income distribution and relative levels of consumption in developing and industrialized countries do not, in any way, mean that rational use of energy, or conservation based on efficient energy use, is not a necessary policy for developing as well as industrialized countries, in order to avoid repeating in the future the mistakes made in the past by the industrialized countries.

Figure 1.4 - Evolution of Global Per Capita Income Disparity, 1960-1991 (poorest 20% = 1)

Table 1.1 - Global Income Disparity, 1960-1991 (percentage of international income)

World population percentage	1960	1970	1980	1991
Poorest 20%	2.3	2.3	1.7	1.4
Middle 60%	27.5	23.8	22.0	13.6
Richest 20%	70.2	73.9	76.3	85.0
Gini's coefficient	0.69	0.71	0.79	0.90
Richest 20%
Poorest 20%	30.5	32.1	44.9	60.7
Richest 20%
Middle 60%	2.5	3.1	3.5	6.5

Source: Author based on United Nations Development Program, Human Development Report, 1992, 1993, 1994 editions (New York: Oxford University Press).

Energy Consumption and Population

One issue that has received much attention during recent years is the relationship between population size and growth rate on the one hand, and energy production and use on the other. This issue has been particularly raised in the context of gas emissions contributing to the greenhouse effect. Figure 1.5 shows the relationship between energy consumption and per capita income for an urban area of Ethiopia in the early 1980s. It illustrates the inverse relationship that exists between family size and per capita energy consumption for the same income level; the smaller the size of family, the larger the total energy consumption in a system with a similar number of people with a specific income level. Those advocating population control measures should recognize that the consequence of aggressive policies to reduce population size may not produce a proportional decrease in the consumption of energy and other resources.⁸

In addition, the strong urbanization process taking place in nearly every developing country will lead to additional increases in energy needs. Urbanization creates substantial increases in energy consumption per capita, particularly of commercial energy; this is due to residential consumption as much as to transportation and production activities. This increased consumption is generally accompanied by a change in the structure of energy sources, increasing the demand for oil products, gaseous fuels, and electricity.⁹

Figure 1.5 - Relationship Between Consumption of Useful Energy and Per Capita Monthly Income, Ethiopia, Urban Area

Notes: Mcal = Mega calories = 1 billion calories. Birr = local currency in Ethiopia.

Source: Author's elaboration based on Energia Domani, CESEN, Vol. VI, No. 31/32 (February 1983).

These problems are not new, but analysis of the population problem and its deep roots seems to be moving backward instead of forward in recognizing them. Attention to population in recent years has moved too much toward simply promoting birth control, by more or less voluntary clinical methods; it has moved away from a comprehensive approach to human development. Even the attention to the need for improved education for women is more related to the possibility of success in using clinical birth control methods than to a vision of total and sustainable human development.

Twenty years ago, the Latin American World Model, developed by Fundaciariloche under the direction of Dr. A. Herrera, clearly set forth this issue: ".... the demographic variable is influenced by concrete factors like housing, education and food. Therefore, for economic growth to have an influence on population evolution, it is necessary to direct it specifically to the satisfaction of the basic needs of the majority of the community members.... Historical evidence and demographic development in the countries... suggest that the improvement of general welfare conditions is the most important factor in order to reduce fertility." The report's conclusion stated: "The model also shows that population growth can be controlled until it reaches the state of equilibrium, by means of a general improvement in life conditions, especially those related to basic needs. "¹⁰

Unfortunately, during the last twenty years, the world has pursued a different path. It would be most desirable if the United Nations would take steps, beginning at the U.N. Conference on Women and Development in Beijing in September 1995, to move toward a path of sustainable human development for the majority of the world's people.

To move in this direction, economic growth must be oriented to the satisfaction of basic needs, and not to overconsumption. This will require an adequate quantity of useful energy (i.e., energy services) that is not substantially higher than the present world average (1,500 koe per capita). This, however, is much higher than the global average for developing countries (500 koe per capita).

Energy Requirements in Developing Countries

In developing countries, energy requirements must be distinguished from energy demand, which only reflects transactions taking place through a market. However, a large proportion of total energy consumption in developing countries does not take place through commercial markets. Additionally, some requirements are not met because of supply restrictions or because potential consumers have physical or economic restrictions that make access to energy sources impossible.

Social and economic systems and conditions in developing countries are highly diverse, and these distinctions must be taken into consideration in discussing energy needs. Conditions vary between urban and rural areas and between income levels, with marginal sectors having totally different requirements. Modes of production vary considerably. In rural areas, they may range from subsistence farming, to intermediate commercial systems that supply local requirements, to modern export-oriented systems. In manufacturing, modes of production can range from craft activities, to small- and medium-sized industries, to large high-technology industries. Transportation can range from traditional informal systems based on human and/or animal energy, to organized public and private systems using modern technology in large urban areas. Similarly, the services sectors include everything form informal, individual activities to modern services utilizing sophisticated technology.

This diversity means that analyses that consider developing-country energy needs simply in terms of cooking and fuel-wood use miss the full scope of the energy problem. They cannot possibly recognize the enormous gap that exists between current consumption levels and the minimum reasonable requirements of the many sectors in which developing-country populations are engaged.

To adequately determine the energy requirements of the domestic sector of developing countries, it is necessary to consider: a) the distribution of present and future income; b) the population distribution between rural and urban areas, including migration; c) the demographic characteristics that determine family size and population growth; and d) human needs in general, not simply basic needs. Attempting to estimate energy consumption on the basis of income and population alone is reductionist and can lead to serious mistakes.

The same activity, product, or service can be obtained through a variety of production modes, each of which has different levels of energy consumption that can be obtained from a variety of sources. Thus, what is required is a detailed study of the technology associated with each production mode, taking account of not only specific energy inputs, but also the energy associated with other inputs or production factors. Thus, for example, in the agricultural sector, attention should be given to use of human and animal energy in order to assess the likelihood of eventual substitution or of efficiency improvements in utilization.

Studies of rural areas should not look at energy in isolation, but should look at prospects for integrated rural development in which energy is an instrument of development, not an end in itself. This means simultaneously considering problems of water supply, increased productivity, marketing, business organization, etc.

In the industrial sector, it is necessary to examine which technologies are most suitable to the particular conditions and the available natural and energy resources of a country. In addition, it must be recognized that agro-industries are a significant industrial sector whose energy requirements must be carefully assessed (just as the energy requirements of steel or petrochemicals are assessed in industrialized countries).

Other examples could be cited. But the main point is that energy problems of developing countries must be assessed from their own real situations. It is not enough to simply transplant analytic frameworks, technologies, or solutions that were developed for the very different conditions, resources, and social and cultural patterns of the industrialized countries.

Figure 1.6 - Global Reductions in Carbon Dioxide Emissions, 1970-1985 (Tn c/Toe)

Note: Tn c/Toe is tonnes of carbon released as carbon dioxide per tonne of oil equivalent of energy con-

Energy Supply in Developing Countries

Similarly, the particular characteristics of developing countries must be considered in assessing energy supply. These characteristics frequently include: a) highly dispersed demand, which in turn complicates supply systems; b) insufficiently developed local energy sources; c) diversity of available systems and technologies (including, for example, such old technologies as firewood stoves and such new technologies as micro computers); d) dependence on foreign appliances and research and development; and e) lack of adequately trained and experienced human resources.

Many developing countries have energy resources (such as biomass, hydroelectricity, coal, hydrocarbons, solar energy, geothermal energy, and uranium) that are not developed because they are not large enough or positioned in the wrong location to have economies of scale of interest to the international market. Yet from a local viewpoint, they could contribute to increasing energy self-sufficiency and to reducing the impact of energy on the country's balance of payments. These local resources have the additional advantage of being renewable if they are properly managed; they also provide additional benefits that contribute toward achieving integrated development.¹¹ These energy sources also play a role in controlling greenhouse gases, both locally and globally.

The Environmental Impacts of Energy Systems

The reasons for building and running an energy system are to produce a positive impact on the human environment, to improve the quality of human life, and to achieve sustainable and integrated human development. But there are no "free meals" in any human activity. Energy systems also create negative impacts on nature and on human beings, and these must be reduced to a minimum.

All forms of energy have some kind of negative impact on the natural and social environment. The existence, magnitude, and scope of these impacts are not always recognized by those evaluating energy systems. For many years, thousands of miners and laborers were killed or injured in different stages of exploiting conventional energy sources, and few voices were raised in protest. Today, the potential risk that nuclear energy poses to the inhabitants of large urban areas provokes angry protests.

One objective in developing energy systems must be to minimize the negative impact of energy use on nature and on human beings, no matter what their social condition and status. Examples of energy use with potentially large negative impacts are: a) the demand for firewood and charcoal in urban areas in countries where these energy source predominate, and b) the construction of hydroelectric dams.

Yet hydroelectricity and other renewable sources of energy, including wind and solar energy, have the potential to help reduce the emission of greenhouse gases. In fact, in Latin America and the Caribbean, the massive development of hydro-electricity between the 1960s and 1980s made that region the lowest in the world in terms of carbon dioxide emissions per unit of energy consumed. Between 1975 and 1985, Latin America and the Caribbean attained the greatest reduction in the index measuring carbon dioxide emissions (see Figure 1.6 and 1.7).¹² Unfortunately, progress in this area has slowed, in large part because of the economic and financial crisis linked to the external debt, currently evident in Mexico. Institutional changes (discussed below) have also contributed to slowing progress in this area.

The best means of preventing the negative impacts of energy consumption on the natural and human environment is not consuming or producing energy. But as the chapters in this volume make amply clear, developing countries must increase their level of energy services - i.e., their useful energy consumption - if they are to achieve sustainable human development. Thus, the solution must not necessarily be to increase supply, but to focus on a Rational Use of Energy (RUE), energy conservation, and adequate Demand Side Management (DSM). This is particularly true in urban areas and in activities related to transportation, industrial production, and services.

Rational use of energy and energy conservation are not contradictory with the need to increase energy services. Moreover, it is both possible and necessary to apply these principles not only in developing countries, but in industrialized countries as well.

Figure 1.7 - Global Decarbonization of Energy (Tn c/Toe)

Note: Tn c/Toe is tonnes of carbon released as carbon dioxide per tonne of oil equivalent of energy consumed. Source: C.E. Suz et al., La Energen el Mundo (Bariloche: IDEE/FB, 1994).

Energy and Institutional Policies

Integral energy planning is essential to overcoming the many limitations that inhibit sustainable energy strategies. These limitations include:

· the complex relationship between the need to provide better energy services and the need to limit total energy consumption;

· the inertia in current supply patterns and in the cultural and social patterns that determine consumption;

· the limited human, natural, and financial resources available to developing countries for addressing energy problems;

· the inability of imperfect or non-existent markets to ensure a just balance between energy requirements and energy supply, at least in the short term; and

· the difficulty, even in perfect markets, of balancing the needs of present and future generations or of considering environmental problems associated with energy production and use.

If developing countries are to adequately pursue Integral Energy Planning, based on their own resources, interests, and problems, they must form technical teams that are well trained for these tasks and that have access to the centers of government, where decision-making power rests. Moreover, planning must be a participatory process in which all those affected take part, including users, producers, workers, professionals, enterprises, and local, regional, and national interest groups.

Planning must be a continuous, iterative process that first assesses energy requirements consistent with sustainable human development objectives and the lifestyle preferences of the whole population. These objectives and preferences should then be pursued through a supply system that is autonomous, safe, and fair and that limits as much as possible the socio-economic costs of doing so. The supply and consumption systems must try to maximize the positive effects on the social and economic systems, and to minimize the negatives ones. Implementing the resulting plans will require preparing concrete projects, designing suitable policies, and having an effective and efficient system of management control.

These recommendations are consistent with recent documents published by the World Bank and the Inter-American Development Bank. But they seem contradictory to the current environment in which governments and international organizations are promoting privatization, deregulation, and indiscriminate openness to other countries, not only in developing countries, but in some industrialized countries as well. Nevertheless, the recommendations outlined here are not only appropriate, but essential. In the case of energy, ownership of the means of production, transportation, and distribution is not sufficient to ensure adequate performance (which entails much more than just microeconomic efficiency); it can, in fact, be self-defeating in terms of such important criteria as equity, solidarity, and adequate satisfaction of basic needs.

In addition, the concepts of privatization and deregulation are contradictory in the case of the energy sector, where, despite recent technological advances, markets are still basically monopolistic, monopsonistic, or oligopolistic. Privatization generally requires even more and more complex regulations, as well as the technical and economic capacity, and the economic and political power, to implement it. All of these are rare in developing countries.

With respect to indiscriminate opening to the external market, it is useful to observe that every industrialized country, at the moment of its economic take-off, erected tariff barriers to protect its nascent industries, just as the economic unions currently forming in many geographic regions are establishing a common external tax. These same countries also subsidize agricultural products and hinder international commerce through custom duties and other measures. Today, industrialized countries are expanding these measures to include taxes on labor and environmental violations, on the basis of defending human rights or protecting the environment, even though these same countries historically made extensive use of slavery and indiscriminately exploited nature.

Finally, there is a basic issue that the proponents of deregulated privatization ignore. The problems of protecting the natural and social environment, the sustainable exploitation of renewable and non-renewable resources, the conservation and rational use of energy, and the development of new and renewable sources of energy (hydro, solar, wind, biomass, and geothermal), all require high initial investment that is recuperated over the system's lifespan with a reduced operating cost.

This implies that, for these issues to be addressed and new technologies and energy sources to be pursued, there must be reduced profit rates. This is directly and clearly contradictory to the fashionable international recipe for deregulated privatization, which would require a high internal race of return in order to pursue a search for alternatives instead of the low internal rates of return that are needed to develop environmentally sound and sustainable solutions.

This assertion is not simply theory or ideological opinion. It is confirmed by the experience of two recent cases of privatization of electric systems, in Argentina and the United Kingdom. In both cases, the utilities shifted all new investment to gas turbines fueled by natural gas, open cycle in the first case and combined cycle in the second. In Argentina, gas turbines replaced the previous options of hydroelectric and/or nuclear power plants; in the United Kingdom, they replaced nuclear power plants.¹³ Both decisions were contrary to the objective of reducing emissions of contaminating gases into the atmosphere - decisions to which their governments had agreed at the U.N. Conference on Environment and Development in Rio de Janeiro in 1992.¹⁴

Sustainable, integrated, equitable human development will remain impossible as long as short-term, market criteria prevail, and as long as societies and their governments lack adequate mechanisms to prevent common resources (air, water, lands, renewable and non-renewable natural resources, and general health) from being appropriated for private benefit. Positive aims - proclaimed in speeches, declarations, development proposals, and supposedly compulsory international agreements - are regularly contradicted by the policies and behaviours pursued by national governments and international agencies.

The root causes of poverty, misery, marginality, and exploitation continue to prevail in most of the world today, although the mechanisms are subtler, consisting of economic and technological control rather than geopolitical colonialism, and labour flexibility rather than slavery. If we do not analyze these root causes, understand them, and fight them, no real solutions will be possible. We will continue, just as in the past, to propose only local and marginal charitable measures that attack only the most visible manifestations of the problems caused by current policies.¹⁵

This view will be regarded by some as scandalous and irrelevant, but it is essential to examine the underlying causes of problems, to identify them honestly, and to address them in entirety, not just their most visible consequences.

NOTES

¹ Carlos E. Suz (Chem. Eng.) is Full Professor at Instituto de Economia Energca (IDEE/FB) and Executive President of Fundaciariloche.

I wish to thank Roberta Kozulj and Fabiana del Poppolo's contribution to the analysis and study of the relation between HDI, energy consumption, and gross domestic product. I am also grateful for the very valuable comments of Hor Pistonesi, President of IDEE/FB. However, the errors and omissions are the sole responsibility of the author, and so are the opinions expressed in this paper.

² See United Nations Development Program, Human Development Report, 1994 (New York: Oxford University Press, May 1994). The HDI is calculated on the basis of a simple average of life expectancy, educational level and GDP/capita for each country

Ideally, both commercial and non-commercial energy consumption should be taken into account, but there are no homogeneous data available to do so. The general conclusions would not be significantly modified.

The relation between HDI and energy consumption per capita was derived on the basis of the model HDI = a + b (EN/H)^1/3 . Using HDI data for 1992 and data on energy consumption per capita for 1991, the results were the following:

HDI = 0.999 - 2.551/(EN/H)^1/3; R² = 0.81

³ Albany, Gabon, Iran, Malaysia and Syria consumed approximately 1000 koe per capita in 1991. Belgium, Ireland, Oman, Poland, Rumania, and Venezuela consumed approximately 3,000 koe per capita in 1991. Canada, the United States, and Norway consumed approximately 9,000 koe per capita in 1991.

⁴ In this case, a semi logarithmic model was utilized. The results were the following:

HDI = -0.261 + 0.122 (EN/H)^1/3 R²= 0.78

⁵ J. Goldemberg et al., "Basic Needs and Much More with One Kilowatt Per Capita," Ambio (1985), pp. 190-200.

⁶ C.E. Suz, "Human Development and Energy: A View from the Developing Countries," in Carlos Chagas and Umberto Colombo (eds.), Energy for Survival and Development (Study week of the Pontificiae Academiae Scientiarum, June 11-14, 1984), pp. 93-116. (Spanish version available, CIAS, Desarrollo Humano y Energ Un Enfoque Desde los Pas en V de Desarrollo, Vol. XXXIII, No. 334, July 1984, pp. 5-29).

⁷ United Nations Development Program, Human Development Report (1992, 1993, 1994 editions).

⁸ C.E. Suz, "Human Development and Energy."

⁹ C.E. Suz, "Presiones Demogrcas y UrbanizaciSus Efectos Sobre la Demanda y la Sustitucinergca," presented at the Seminar on Energy and Economic Development in the Third World, Quebec, October 24-26, 1990.

¹⁰ A.O. Herrera, Catastrophe or New Society: A Latin American World Model (Ottawa: International Development Research Centre, 1976). Versions available in Dutch, French, German, Japanese, Rumanian, and Spanish.

¹¹ C.E. Suz, "Human Development and Energy."

¹² C.E. Suz et al., La Energen el Mundo (Bariloche: IDEE/FB, 1994).

¹³ It should be noted that, in the case of Argentina, the decisions were made prior to the move toward privatization. In the case of Britain, from an environmental standpoint, the natural gas option was better than an equivalent coal plant.

¹⁴ "Les rltats de la rrme de l'industrie ctrique en Argentine", Graciela D de Hasson, in Revue de I'Energie, N° 465, janvier-fier 1995.

¹⁵ J.L. Coraggio, "Las Nuevas Polcas Sociales: El Papel de las Agendas Multilaterales," prepared for a workshop conducted by CEUR-UNBA, Buenos Aires, October 26-28, 1994; and F. Malimacci, "Estrategias de Lucha Contra la Pobreza y el Desempleo Estructural: Dise Gestie Polcas Sociales en un Marco de Globalizaciconomica e Integraciegional," October 26-28, 1994.