Energy Geopolitics — Kind of a Big Deal

 Professor Noel Maurer
Professor Noel Maurer

Germany recently decided to decommission all of its nuclear facilities.  Solyndra, a solar energy firm, which received a $500 million federal loan, declared bankruptcy amid scandal and multiple investigations.  The EU is in the midst of a debate to impose their tariff system on aviation emissions for non-domestic airlines, the results of which may shape carbon policy for the next two decades. Energy has become a global issue, fought on the global stage, and Professor Noel Maurer has become an important player in the game, through his continuing study of the politics behind energy policies. As Maurer described in an interview with The Harbus, there are strong barriers to a carbon policy in the U.S.  One of the many reasons is that the current political debate “gets the scientific debate wrong in a fundamental way…[and] it entirely ignores tail risks.”  The debate in the scientific community is to the degree that increased carbon dioxide concentration in the atmosphere will affect the planet, and in a downside-case or worst case scenario //, the results could be catastrophic.  Maurer described, “Standard discount rates go out the window” when dealing with such as situation which is so hard to even comprehend. Massive oil deposits recently found in North America have nullified the argument that renewable are necessary for U.S. energy independence, leaving many to wonder what could affect the political climate in the U.S. sufficiently to enact change.  If the EU fails in imposing emission tariffs on non-domestic airlines, it may take decades.  Maurer said, “This is sad…I suspect it would take that long for the effects of climate change to become so bad that you get political consensus in the United States that we’re facing an emergency.” In terms of base load power generation, Maurer sees nuclear as playing a key role in the future.  When asked about the German decision to decommission their nuclear power, Maurer adamantly declared that it was a poor decision. “My reaction to Fukushima…it was a worst case scenario.”  It was a strong earthquake combined with a tidal wave and poor reactor design.  The Germans overreacted. Maurer’s path to energy started off with his analysis of how companies protected their own property rights in politically unstable countries.  His research logically transitioned to what strategies businesses employed, especially oil and gas companies, in working with outside states to protect their rights in a politically unstable country. Maurer encourages students and industry leaders to attend the 2011 HBS Energy Symposium.  A few key insights that he hopes people will glean from the conference are:

  1. Many areas in the energy space which have traditionally been considered “boring” are actually strong and exciting venues.
  2. Governments are involved at a fundamental level in managing grid externalities, environmental externalities, and land rights.  Talking about getting government out of the way is meaningless.
  3. Many geopolitical conflicts are ultimately business disputes.  Use the Willie Sutton rule–energy is where the money is, and that is where the focus will continue to be.
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