Scenario setting for policy planning
Scenario setting has been used by Shell for many years to help countries’ officials and their citizens anticipate the multi-faceted future and prepare them to understand the many decisions or challenges that have to be taken into account with every changing set of variables.
Indeed, the officials of various countries will find it useful to understand their correlations in the next 30-50 years to ensure that their strategic proactive economic plans will stay the course despite stresses that will emerge every now and then.
The presentations of Shell’s scenario projects have always been highly anticipated by senior people from businesses, policymakers, researchers as well as environmental and social experts worldwide.
In Europe, where I had the opportunity to be expatriated by Unilever a number of times, I was a witness to standing-room-only assemblies where Shell presented its Energy Scenarios and Global Scenarios.
Shell’s latest project called the New Lens Scenarios was presented a month ago in Manila by Dr. Cho-Oon Khong, the Chief of Shell’s Strategy and Scenario Team. The current environment, marked by deep uncertainties in political and resource fields, is causing environmental and social stresses which tend to shift the power base from West to East.
The world population is expected to reach 9 billion in 2050, with continuing deterioration in poverty levels. There is thus a call to improve governance in businesses, governments and society in general to increase opportunities for livelihood and narrow the income gap between the rich and the poor.
Competitiveness, productivity, freeing of markets, partnerships between public and private institutions and similar strategies will be the favorite battle cries of governments.
How will these factors shape the global energy and environment systems over the 21st century? The situation may be foggy but new lens have to be made available and wiped cleanly with the help of expert “window cleaners” like Dr. Cho to help us focus on the clear, true situations unfolding before our very eyes.
During its presentation in Manila, Shell invited resource persons from different sectors to help determine how choices made by governments, businesses and individuals might shape the environment and energy systems. These were Secretary Elisea Gozun of DENR and Presidential Adviser for Climate Change, b) Sophie Punte, executive director of Clean Air Initiatives with UN backing, c) Boo Chanco, business columnist with substantial experience in the Department of Energy, d) Cito Beltran, broadcaster and opinion columnist with broad expertise on crisis management, media training, energy utilization, and e) this writer.
Dr. Cho said that there were two distinct paths the world might take in the near- to medium-term, called MOUNTAINS and OCEANS.
MOUNTAINS describes a world of relative stability in which the world’s governments and multilateral institutions embark on a series of reforms (economic, political, financial). There is a persistent lock-in of preserving the status quo. The thinness of safety nets for the poor will not be offset by the growing trend of philanthropy. Government interventions will come at the price of moderating economic growth and delaying adoption of renewables and cleaner air.
The emerging economies might reach growth plateaus as they conquer the middle-income traps. However, the situation in industrialized countries might continue to be subpar which will move the power base from West to East.
Pressures from energy demands will be subdued as economic growth is moderated—further tempered by supply-side energy policies such as compact city development. I made a comment during the panel discussion that the MOUNTAINS scenario seems to be applicable to this part of the world in the coming decades since the countries in the region appear to be more concerned about maintaining stability rather than accelerating improvements for the poor which could be rather ‘messy’.
The increasing environmental stresses will be moderated by more efficient fuel technologies and renewables that are not going to spike the energy costs because the priority of countries such as the Philippines is to get its world-class products and services to reach rightful market shares with competitive energy prices. Another priority is to provide quality jobs and livelihood opportunities for their workers, eliminating the need to find work overseas to keep body and soul together. This dream will strengthen the national values, reduce poverty and make for inclusive growth.
The OCEANS scenario, on the other hand, depicts a more volatile and prosperous world.
The financial turbulence early in the 21st century sparked the aggressive drive for ambitious reforms as demanded by the frustrated middle-class which is expanding in size. Reforms raise aspirations and expectations of continuous improvements in quality of life and these will keep the policymakers busy. The tendency is to work more closely with multilaterals on a wider array of challenges. Globalization will strengthen and the emerging economies will move to more balanced growths, since governments will be working hand-in-glove with civil society which will be more demanding.
Power generation will be tighter due to increased economic demands so more attention will be given to alternatives and renewable fuels as there will be greater realization that utilities (energy, water, land, food) do not come from unlimited sources.
Global competition will drive end-use efficiencies such as in transportation, waste reduction and better controls (remote) in households. However the paucity of policy networks on resource developments and management of environment stresses will result in higher prices for fossil-based energy. Hence, “King Solar will replace King Coal” but at a slower pace at the instigation of civil society, which seeks more of social benefits, with cleaner environments lower on its list of priorities.
These counteracting demands will need a new set of strategic approaches by both governments and the business sectors in the field of energy utilization, and their impact on employment and ambitious growth targets must be clearly understood.
There will be a growing recognition of mutual interests between China and the United States as they form a de facto G2 to manage the global system, which is marked with fears of imminent conflict arising from aggressive diplomacy. International cooperation will face challenges such as climate change, which will further strengthen multilateral relations.
OCEANS is a world where many competing interests and diffusion of influence are met with a rising tide of accommodation. The energy trajectory is driven by the increase in population with multiplicity of constituencies and volatilities which impede cohesive policy setting. Hence, resources are unlocked primarily by market forces until a widely accepted set of policies are developed, lengthening the dominance of fossil fuels.
The future as envisioned by Shell is starting now and we are all going to be affected for better or for worse. It is up to us to look after our national welfare—and influence the course of developments either in the MOUNTAINS scenario or in the OCEANS scenario, to achieve our paramount objective of ‘inclusive growth’ through competitiveness which will create quality livelihoods throughout the country.
(The author is chairperson of the MAP Committee on National Competitiveness)