Growing cities, growing responsibility

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Growing Cities,
Growing Responsibility
Marvin Odum
Director, Upstream Americas
The International Economic Forum of the Americas: Toronto Forum for Global Cities
Toronto, Ontario
24th October 2011
Marvin Odum: Growing cities, growing responsibilities
Marvin E. Odum is President of Shell Oil Company and Director Upstream of Royal Dutch Shell’s
subsidiary companies in the Americas.
Odum holds positions of board leadership and participation in the Business Roundtable and the
American Petroleum Institute. In addition, he is a member of the Dean’s Council of the John F. Kennedy
School of Government at Harvard University and the Advisory Board of the Cockrell School of
Engineering at The University of Texas at Austin. He also serves on the University Cancer Foundation
Board of Visitors for MD Anderson Cancer Center and is involved with several other Houston-area
charities.
Odum earned a bachelor’s degree in mechanical engineering from The University of Texas at Austin
and a master’s degree in business administration from the University of Houston. He began his Shell
career as an engineer in 1982, and has since served in a number of management positions of
increasing responsibility in both technical and commercial aspects of energy.
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Marvin Odum: Growing cities, growing responsibilities
Introduction
The focus of today’s forum is an
important one. In North America,
conversations about population growth
and urbanization don’t get nearly the
attention they should.
And when they’re had, they’re often
more about Asia and the developing
world.
It’s rare that we look at our own growth
and our own infrastructure challenges
and examine how inter-related they really
are.
At Shell we are fortunate enough to be
able to support a global research team
to do just that.
They look at trends and data, and they
help us identify
 what the needs of our customers
are going to look like in the
future
 where the greatest challenges
may arise for us; and
 how we can use what we do as
a business to help meet them.
Something we’ve been talking about for
quite awhile is the “zone of uncertainty.”
The zone of uncertainty is simply this: an
unsustainable gap between the growing
demand for energy and the forecasts
about the supply available to meet it.
Now, this zone is “uncertain” because
the policy measures and behavior
changes necessary to address it have not
yet materialized to the extent they should
– from neither the demand nor the supply
side.
And at the same time, we’re seeing
volatile shifts – from the geopolitical to
the environmental – that are impacting
the world energy landscape as well.
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When we start to think about what needs
to be done to address this gap – and
what’s driving it in the first place – it
becomes very clear that the drivers of the
world’s energy challenges are the same
drivers of our environmental and
economic challenges.
There’s population growth: It’s estimated
that by 2050 the planet will be home to
more than 9 billion people; that’s an
increase of more than 2 billion over
today’s current population. It’s 800
Toronto’s.
Another driver is the growth of the
consumer class: Right now, there are
more people emerging from poverty than
ever before. This is good. But not
enough is being done to ensure their
position there isn’t short-lived.
The third major driver is urbanization.
Today 50% of the world’s population
lives in cities, and cities are responsible
for 80% of all CO2 emissions.
As this audience is aware, by 2050
three out of every four people on this
earth will live in cities.
It is absolutely essential to create cities
that will enable them to live proper lives
– to go to work every day, to breathe
clean air, to drink clean water, and to
rely on effective transit and public works
systems.
Right now, we’re nowhere near where
we need to be. And business most
certainly has a role to play in remedying
that problem.
How could we not? One recent study
estimated that more than $350 trillion
will be spent on global urban
infrastructure and usage between now
Marvin Odum: Growing cities, growing responsibilities
and 2040.1 A clear interest for
business…
At Shell, our approach has been to
produce more energy, cleaner energy
and smarter energy.
And that last point is important. “Smarter”
energy means things like biofuels, natural
gas and more energy efficient fuel
products.
Drivers of Energy Use
But it also means understanding the
drivers of energy use in the world’s cities
and then working collectively to deliver
the smart energy that future cities will
demand.
This is evident in four areas in particular:
The first is waste – and how to use
infrastructure to mitigate it.
Now, waste isn’t really a “driver” of
energy use, but instead, a huge
contributor to it.
Our scenario planners have highlighted
for us that in today’s cities, more than
half of primary energy ends up as waste.
And the biggest areas of waste are in
transport and in power generation.
We’ve seen that addressing waste in
transport can be accomplished through
smarter freight management and things
like CAFÉ standards and lighter, more
energy efficient vehicles.
Smarter, more efficient fuel products like
the ones we’re developing also play a
role.
Waste in the transport arena can also be
addressed through national public transit
1
http://www.booz.com/media/uploads/WWF_Low_Car
bon_Cities.pdf
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strategies – and I know policymakers
here in Canada are working on creating
this country’s first such strategy.
Some of the best ways to address waste
on the power generation side involve
energy-efficient generation approaches,
such as gas-fired power stations. This is
one of the reasons we believe so
strongly in our natural gas investments.
The second driver of energy use in cities
is population density.
Sprawling cities, like Houston where I
live, use a lot more energy than dense,
compact cities like those in Asia –
precisely because you have to expend
energy to move energy to homes and
businesses farther and farther out.
On top of this challenge, many cities
have infrastructures that are as old, if not
older, than you and I. It’s aging while
we’re asking it to do more than it was
designed to. And it’s telling us “no.”
The next, related energy driver is growth.
Our scenario planners tell us that more
than 80% of the expected growth in
cities will come in two forms.
Cities will undergo rapid urbanization –
like what we’re seeing in China right
now.
Or, already large and established cities,
which have in the past been
economically undeveloped, like
Calcutta, will experience a renewed
surge of economic growth, putting them
on the pathway to late-stage
development.
In the latter scenario, energy use on a
per-capita basis is higher because cities
are locked into their old and inadequate
infrastructures.
Marvin Odum: Growing cities, growing responsibilities
A fourth energy driver involves
understanding the water-food-energy
nexus – and how these inter-related and
essential commodities all depend on
healthy infrastructure.
When you think about it, the connections
here are obvious: moving and treating
water requires energy; water is needed
for almost all forms of energy production;
and producing food demands energy
and water.
Cities are going to need more of all of
these things. Our research teams have
found that smart and sustainable urban
design is one of the biggest influencers
of the water-food-energy nexus.
Clearly, a more sustainable energy future
requires that we consider all three of
these systems and how they relate to one
another.
Challenges for cities
Of course Canada’s cities are not
immune to the challenges I’ve described.
Since 2001, almost 90% of the total
population growth here has occurred in
metropolitan areas.
Like the U.S. and many countries in
Europe, Canada’s infrastructure is also
aging rapidly.
The Canadian Imperial Bank of
Commerce has identified an
infrastructure deficit of more than $300
billion, and it says the only way to get
new projects off the ground will be
through innovative public-private
partnerships.
We know electricity prices have been
rising in Canada. In 2011 alone,
Ontario’s retail electricity rates have
increased by 15-20%, while Alberta’s
rates are up by about 30%.
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The city-owned utility in Calgary
increased home electricity rates in
Calgary by 30% from January to August
this year.
I bring all this up, not to depress, but to
impress the urgency with which we must
confront these issues.
And they’re issues that all cities will soon
face – if they aren’t already.
It’s incumbent upon all stakeholders to
address them, and to do so quickly and
in collaboration with one another.
Toronto is one example of a city that is
taking steps in the right direction. From
an energy perspective, it has lowered its
greenhouse gas emissions by more than
40% since 1990. They did this by
focusing on innovative urban design and
by creating a supportive policy
environment.
Toronto’s Deep Lake water cooling
system is one example of innovative
urban planning in action. The system
draws upon the naturally low water
temperature at the bottom of Lake
Ontario to provide air conditioning to
downtown Toronto.
It saves enough power to supply nearly
7,000 homes each year. It saves 700
million liters of water per year. And
when it comes to greenhouse gas
emissions, the system’s impact is like
taking 15,800 cars off the road.
This is an example of what’s being done
right.
But whether we’re talking about an
increase in energy prices, or a greater
demand for infrastructure investment or
extreme weather events… these are big
issues. They require a big effort.
This is why it’s essential to have the
collaboration of the public and private
Marvin Odum: Growing cities, growing responsibilities
spheres to turn these challenges into
opportunities. And I believe we can. It
starts with understanding the challenges,
and then committing to their solution.
This is why conferences like this one are
so important; and I look forward to the
forthcoming discussions today.
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Thank you very much.
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Marvin Odum: Growing cities, growing responsibilities
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