David Hone

Recently the Guardian newspaper in the UK launched into that much discussed topic of peak oil  in response to a recent report Heads in the Sand issued by Global Witness. I will pass on the topic of peak oil, but look more at the energy use solutions that we should be thinking about to better manage demand for oil. The Guardian article concludes with a discussion about the need to “go hell for leather for renewable energy sources”. Whilst this may well be needed as part of the overall global need to meet growing energy demand, it won’t necessarily address the issue of oil demand.

In my view, the key to oil demand  lies with transport, not really with overall energy demand. Over the past 35 years the percentage of the usable barrel of oil (oil less processing energy less bitumen/asphalt demand) going to transport has risen from 41% to 61%  and continues to increase (see figure). Increasing amounts of the heavy end of the barrel are being upgraded to transport fuels even as heavier and more difficult crudes make up more of the overall oil supply available. The only real transport fuel that “leaks” out of the system and into the broader energy arena is gasoil. It’s use is split between residential, commercial and agricultural sectors for heating, small generators, construction equipment and so on. Some gasoil is also used for electricity generation but with pressure from the transport sector this will slowly be returned, although it only represents about 5%  of global demand for gasoil in transport.

Source: IEA & BP Statistical Review of World Energy Use

Some 20 years ago when I first worked in Shell Trading and was involved in the trading of Far East crudes, I remember that quite a bit of heavy Indonesian crude went to Japan for burning in power generation. This type of activity just doesn’t happen today – it is predominantly used for transport.

Oil and transport are inextricably linked. To manage oil demand we have to get a grip on the transport system.

In the short term the answer must lie with energy efficiency in transport, particularly road transport. Although electrification will start to shift transport energy demand across into another sector, the rate at which this will happen is limited (see earlier posting). But efficiency, both in the vehicles we use and the way in which we use transport is available today. In addition, we can also supplement the transport fuel pool with biofuels and although this is happening faster than electrification, it will also have its short term limits as well, at least until some more advanced bio technologies arrive on the scene.

Right now there is a unique opportunity at hand to address energy efficiency in transport. Vehicle production has suffered dramatically as a result of the financial crisis so that could well mean a surge in demand over the coming few years as those who put off a car purchase catch up. If government policy encourages a more efficient choice of vehicle, we will all ultimately benefit.

After a short telephone interview yesterday, I was quoted in the Guardian newspaper today, but unfortunately completely out of context. Based on the interview, The Guardian chose to position Shell as opposing action in Copenhagen, which couldn’t be further from the truth. In fact the conversation was about the application of a floor price for the EU-ETS.  You may be interested in my reply which I hope will be published on Monday.

Dear Sir,

In today’s article “Shell opposes moves to reform carbon trading”, you chose to open with the assertion that Royal Dutch Shell is opposing moves to overhaul Europe’s carbon trading scheme at the crucial climate change summit in Copenhagen in December. This statement is incorrect on several counts;

1. Copenhagen is not and will not be a forum for discussion on the detail of the EU Emissions Trading System (EU-ETS). Copenhagen is a United Nations Framework Convention on Climate Change (UNFCCC) meeting where we, along with many others, hope that our political leaders can agree a broad, workable framework within which nations and regions can seriously address the issue of climate change. The EU-ETS is one element of the domestic policy arrangements that the EU have put in place to meet their proposed goal of a 20% reduction in emissions by 2020, in comparison with 1990. Its structure and design is a domestic discussion, not a discussion for UNFCCC meetings, although elements of how it may link to other domestic approaches (such as that being developed in the USA) could possibly be discussed at the UNFCCC.
2. Shell, initially as almost a lone voice but now with others, has supported the EU emissions trading approach since the first draft Directive was circulated for consultation in 2001. In 2008, when the EU-ETS was overhauled as the EU Commission crafted Phase III of this legislation (to run from 2013-2020), Shell maintained its strong support for the development of the system. Whilst we have not agreed with every part of every article within the Directive, we have maintained the view that industry should engage in a constructive dialogue with the EU Commission on this legislation.
3. There are no moves to overhaul the EU-ETS as this has just been completed. The legislation was passed by the EU Parliament in December 2008 and was published in the Official Journal of the EU Parliament only four months ago.

However, the quote that you did include from me was correct. Shell does not support a floor price within the EU-ETS. This is a market based system and the market needs to be left to find the price that is required to deliver the necessary reductions to meet the clear environmental objective of the system. Today, as a result of the financial crisis and a consequent reduction in emissions across the EU due to lower industrial activity, the market is telling us that it can meet the 2020 20% reduction objective at a price of around EUR 15. We should respect this and allow the market to do its job. The lower price is coming at a time when EU consumers are tightening their belts so they may welcome this reduction in price, which feeds primarily into their cost of electricity.

 We also note that there is no specific mechanism within the design of the EU-ETS to set a floor price. However, EU governments do auction allowances into the system so they could choose to set a reserve price at those auctions. But the majority of allowances are still provided free of charge to EU emitters and that practice will continue for three more years. By then, we may be seeing quite a different set of market conditions and even a different overall 2020 target, as the EU has a provision to shift this to 30% should it be a signatory to a new international agreement.

 Yours sincerely,

David Hone

Senior Climate Change Adviser

Shell International

One of the most important moments at the recent Bangkok UNFCCC meeting was the release by the IEA of its Climate Change Excerpt to the World Energy Outlook 2009. The full World Energy Outlook will be released in November as usual, but the pre-release was done to coordinate with the talks in Bangkok.

The excerpt lays out a possible 450 ppm energy scenario, built in part on the fact that the recession has given us something of an emissions break, with the IEA estimating that global emissions have fallen some 3% as a result. Whilst emissions will start growing again (and probably already have), the drop is akin to at least a 3 year reprieve, which means that the window of opportunity for 450 ppm is slightly open. But this is no easy scenario and in fact doesn’t plateau at 450 ppm, but overshoots it and reaches some 510 ppm in 2035 before beginning a gradual decline from about 2045. Global energy emissions must peak just before 2020. By contrast, the reference scenario sees atmospheric levels of CO2 eventually rising to over 1000 ppm and 2030 emissions some 14 GT greater than the 450 ppm scenario.

Key mitigation approaches are shown in the chart, but energy efficiency is clearly a major part of the pathway forward. The assumptions are very challenging and will really test our capacity for change.

But the evidence we can do this is starting to appear. Whilst in Abu Dhabi this week I was taken on a short tour of the construction site that will become Masdar City. This will be the worlds first carbon neutral, zero-waste city. It will have a working population of 90,000 of whom 40,000 are residents and be powered entirely by renwable energy. The city is being built in traditional Arabic style, with narrow streets and natural shading and with a number of features to improve the circulation of air and therefore energy efficiency of the buildings.

Masdar City CO2 compared to a conventional city.

The transport infrastructure of Masdar City is also different to every other city in the world. There are no cars, just light rail and personal rail transport (PRT) – in effect small capsules on a rail system for individual and family use. The railway system is starting to appear on the construction site and a test PRT capsule has been delivered.

Masdar still faces challenges, particularly water supply. There is none, so pretty much all the water comes from desalination plants, which also means that the water has a high energy footprint. But tremendous efforts are being made to conserve and recycle, so net use will be low.

Masdar represents a truly large scale working demonstration of what is possible if we are prepared to invest in infrastructure and push technologies and design well beyond business as usual. Demonstration is also a vital step in the commercialisation of new technologies and approaches and Abu Dhabi Future Energy Company know this – I am sure they will build a flourishing business on the back of the techniques they develop in Masdar City. A truly remarkable transformation is taking place in this arid region.

A final interesting observation (at least to me) from the excerpt is that IEA have started showing total cumulative emissions since 1890 and national shares of the accumulation. This is important as the real measure should not be the particular level of emissions in any given year but the total cummulative emissions compared to the carrying capacity of the atmosphere, which is about 1 trillion tonnes of carbon (3.7 trillion tonnes of CO2). The figures shown are of course energy emissions and do not account for other gases, forestry and agriculture.
 
Photos and charts: Abu Dhabi Future Energy Company & International Energy Agency

I had never intended this blog to be about climate science, but every now and again something comes along which changes that. Recently that something was a book by an Australian geologist, Ian Plimer, Heaven and Earth – global warming the missing science. The book sets out to deconstruct every single aspect of climate change science (even to the point of arguing that CO2 levels may not actually be rising). The book cites over 2000 scientific papers. It was sent to me by a colleague who I have known for many years – other colleagues also received copies from the  same person. Added to this was the fact that the author comes from Adelaide University, where I studied chemical engineering.  So I feel compelled to reply.

There is no doubt that this is a very heavily researched book, quoting over 2000 sources and scientific papers. The papers quoted, as far as I can tell based on the ones that I recognise, represent the peer reviewed findings of scientists from around the world, but I think Plimer has been somewhat disingenuous  in the way he has picked pieces from a variety of papers on a subject, quoted them all en masse, but then not actually represented the full findings of those papers in the text that he writes on a given subject. I can only come to this conclusion based on papers I actually know and that sample represents a small fraction of the totality of papers cited, but I am concerned that this approach may be common throughout the book.

This is best illustrated with an example. On pages 405 to 410 Plimer discusses hurricanes and as is typical throughout every other part of the book seeks to deconstruct so called popular thinking about this issue in relation to climate change. He claims that tropical hurricanes and cyclones are not increasing in number, that there is no change in strength linked with temperature rise and that any variation we may have seen in hurricanes is due to a multi-decadal oscillation that exists as a background to hurricane activity. He twice quotes (and I am sure correctly) papers published in Natureby Dr Kerry Emmanuel, a well known researcher into this subject. I had the privilege of listening to a presentation by Dr Emmanuel on this paper and what was said in person bears little resemblance to the conclusions Plimer comes to, even though the paper is mentioned. Rather, Dr Emmanuel presented statistical evidence that hurricane strength is increasing as the oceans warm and that this is unrelated to any background oscillation. They did concur on the point that the number of hurricanes appears to remain the same globally, although Plimer puts “increasing numbers of hurricanes” forward as an issue that needs debunking, rather than an issue on which there are either no findings or possibly just a media finding.

It also appears to me that there is a faulty logic running throughout the book. It runs something along the lines of “I grow yellow flowers in my garden, this is a yellow flower, therefore it must have come from my garden”, or perhaps an alternative along the lines of, “When I last looked in my garden there were red flowers, this flower is yellow, therefore it couldn’t have come from my garden.” Over and over the reader is reminded that because certain sets of conditions have existed in the (long distant) past that we can’t be in the situation today where rising levels of CO2 can be linked with any change in temperature. For me this isn’t a valid argument. I can well imagine any number of steady states existing at quite different combinations of CO2 level and temperature, driven by the position of the continents, the type of biosphere at the time, orbital variation, solar activity and so on.

Other arguments seem just plain wrong. For example, he makes a constant mockery of Al Gore and his matching saw tooth graphs of CO2 and temperature. With hindsight, I suspect even Al Gore would probably agree that this wasn’t the best example to use, in that at least part of the phenomena he was highlighting is most likely CO2 degassing of the oceans as temperature rises (e.g. as a result of orbital variation) rather than rising CO2 driving temperature. There is a multi-century time lag involved for rising temperatures to lead to significant ocean degassing, simply because of the size of the oceans and the rate at which they take up heat. But Plimer then goes on to link (as a possibility) the current rising CO2 level (which in other parts of the book he even refutes is happening) to the Medieval Warm Period. Surely CO2 degassing will only take place after many hundreds of years of constant warming, i.e. a constant higher heat flux into the ocean, not as a delayed response to a temporary warming blip some 700 years ago, following by a cold period as well. This seems like pretty basic heat transfer thinking to me.

Perhaps the weakest part of the book is the discussion around CO2 absorption in the infra-red, which of course is critical to the whole issue. Having cited endless papers on everything else, he finally gets to this key point and cites almost nothing at all. He claims that the greenhouse gases that already exist in the atmosphere absorb most of the infra-red which means there is nothing more to absorb so there need be no fear of rising levels of greenhouse gases. I have spoken to colleagues who study the science very carefully and external climate scientists and this issue has long been put to rest. The reality is the opposite, i.e. that rising levels of trace gases are contributing to increased infra-red absorption. More importantly, the trace gases are driving (forcing mechanism) the change as they accumulate in the atmosphere, whereas water vapour, which Plimer talks about as the only greenhouse gas that really matters, is responding as a feedback mechanism with rising temperature. Water can only ever act in this way as it cannot accumulate in the atmosphere. If there is too much it rains. It is even possible to see all this from satellite data, which shows the difference in absorption spectra as seen from above our atmosphere over the period 1970 to 1997 (although presumably Plimer wouldn’t like this study as quite a bit of data processing has been done – seems to be a pet hate of his).

 One other issue that particularly bothered me is his criticism of the measurement of CO2 and his claim that CO2 levels in the atmosphere have been much higher even in recent times. He notes that 19th Century CO2 measurements show periods at over 400 ppm, so why worry now about 390 ppm and rising. The reality is that since the late 1950s a very accurate system of global monitoring of CO2 levels has been put in place. These CO2 measurements are done in remote locations based on the techniques developed by Charles David Keeling. The measurements represent the background CO2 level of the atmosphere, not some local spot number. Local spot data can vary significantly for all sorts of reasons and is the most likely contributor to significant variations in atmospheric CO2 levels reported over the last 150 years. Plimer doesn’t even discuss this. More recently, ice core data has shown that the long term background level is very stable during inter glacial periods.

It is also important to mention another Plimer perspective – this is where he seems to get angry. He relentlessly attacks the IPCC as if it were a monolithic block of scientific thinking that is intolerant of any findings that deviate from “climate doctrine”. That is far from any reality I have seen. Whilst nobody would claim IPCC is perfect or free from political interference, it is a body that seeks to pull together peer reviewed literature, not generate such material itself. For example, IPCC have no computer climate models, although Plimer constantly refers to the “IPCC models” and their “doubtful findings”. Rather the models exist in the various research institutions that IPCC draws on. On the subject of political interference, demonisation of sceptics and witch hunts (of climate sceptics) I suspect that some scientists would claim the opposite, i.e. that their disturbing findings on what we are doing to our atmosphere and the impact that will have, were undermined by some governments in recent years. I have heard first hand such sentiments expressed from the podium in scientific gatherings.

Over a period of about ten years now Shell has supported the MIT Joint Program on the Science and Policy of Global Change. The researchers there also contribute to the IPCC process and they have an increasingly sophisticated climate model. In the time that I have been attending the meetings there has been a steady progression of new findings and advances in many fields, including aspects such as clouds, aerosols, volcanoes and the like, all of which contribute to the overall thinking on the climate issue. The MIT forums do not seek to promote climate scientists nor to demonise those that have alternative view points, rather they serve to discuss findings and promote thinking and understanding of the issues we face. I am at a loss to understand why Ian Plimer has set out to invalidate everything that such people have contributed and why he thinks that his view of this issue is the correct one, let alone that all others are simply wrong.

Finally, let us not forget the political reality of all this. Governments in all parts of the world are acting on the issue of climate change. For this and many other reasons, some good and some not so good, they want to see a shift in the make-up of the energy system and the way in which we use energy. It is hard to see that the energy status quo will persist, even despite the Ian Plimers of this world.

As for a book I would recommend, try The Long Thaw, by David Archer. It is based on many of the same papers that Plimer cites, but perhaps not surprisingly the conclusion is very different.

One of the less discussed and least used features of the Kyoto Protocol is the tradability of the Assigned Amount Unit or AAU. This is the instrument that national governments use for compliance and it functions in pretty much the same way as allowances do in a cap-and-trade system. If a Kyoto signatory country emitted 500 million tonnes CO2e in 1990 and agreed to a 10% reduction, then the UNFCCC would grant that country 5*(500-50)=2250 million AAUs for the period 2008-2012. The country can of course emit whatever it wants, so long as it can surrender sufficient AAUs or related units such as CERs from the CDM. The AAU is backed by a certain set of definitions that establish the measurement and reporting protocols for the emissions they represent.

One option open to a country is to buy from or sell AAUs to another country, depending on its overall position, i.e. in surplus or deficit. But the AAU can also transfer through other means. The EU-ETS is underpinned by the AAU, such that if an EU allowance was bought by a participant in a linked ETS, say the upcoming Australian system, then an AAU would quietly make its way from the EU account to the Australian one on the International Transaction Log (ITL) to keep everyone whole at the international level. Of course there is only one AAU backed ETS today and nobody is linked to it, so none of this has actually happened yet, but the principal is important to the long term goal of building a global carbon market.

I am in Bangkok this week at another round of UNFCCC talks in the lead-up to Copenhagen and one issue that has suddenly leapt out of the dark is the often ignored AAU. The US delegation has made the point that as they are not a signatory to the Kyoto Protocol and don’t intend to be, the AAU will not feature in the US view of a future agreement. By contrast, the Kyoto signatories whose (future) emissions trading systems are built around the AAU see this as the undermining of their hopes for a growing market. Other nations simply saw it as a brazen US attempt to tear up the Kyoto Protocol and said so in no uncertain terms – so the negotiations go on!

Despite this, the US delegation made it clear that they see linking to the EU-ETS (and others) as an important goal for the future. I for one can’t see this happening whilst the AAU is still part of the system, or at least part of some of the system. The problem is that there are a finite number of AAUs that represent the cap on those countries with targets on the basis of a certain measurement protocol. Typically, a national emissions trading system (cap-and-trade) is a cascade down into the economy of the AAU, but with a name change and revised legal definition on the way such that trading rules can be crafted for particular national circumstances. Nevertheless, there remains a one-to-one alignment between the two. When two trading systems are linked the AAUs move back and forth as described above. But if a US system were to link, trade between the two would be very limited. Certainly EU allowances could flow to the USA as this would be the same as retiring AAUs from that part of the system and just lowering the defined cap. But US allowances couldn’t flow back as this would bring unknown allowances into the system, raising the cap by the same amount. The exception would be if the US registry had a bank of AAUs from previous trades from the EU or if both recognised the same project mechanism and the US had a bank of these instead – but once the bank ran out that would be it, no more trade.

There are probably constructions around this, such as special recognition of US allowances (given that their cap is known and presumably agreed), but perversely the US is then effectively recognising AAUs within its system, which it didn’t want to do at the outset. The systems would also have to adopt the same definitions throughout, such that allowance arbitrage did not take place, which means that any change in the US system (and vice versa) at any point in time would have to be internationally ratified, which isn’t that different to recognising AAUs in the first place. The sensible thing to do is to back all the national targets with a single underpinning currency but this looks impossible from the discourse in Bangkok – for the US it would mean recognising some aspect of the Kyoto Protocol, which it just can’t do or for the Kyoto countries it would mean dismantling the Protocol, which is a non-starter for most participants.

A further casualty of an AAU free agreement could be a cap-and-trade approach for sectors such as shipping and aviation. The approaches described in my previous posting both rely on a carbon currency exisiting in the international agreement. The units are used as the basic building block of the shipping approach.

So, is the notion of a future global carbon market under threat? Perhaps not, but it will be quite a bit more difficult getting there given the current sentiment. The irony of the situation is that apparently some time back in 1997 it was the US delegation that invented the AAU in the first place!!!

Late last week a significant development came from an equally significant slice of the global shipping community – support for action to reduce CO2 emissions from international shipping in the form of a global cap-and-trade system. International marine and aviation bunkers were excluded from the Kyoto Protocol, but if there is one thing I can be sure of seeing from Copenhagen is that this exclusion will no longer be the case. Shipping emissions will almost certainly be included and the shipping community will either grasp the opportunity to shape its future in terms of policy or it will have its future shaped for it by national governments and the UNFCCC.

The announcement comes in the form of a discussion document released by the British, Australian, Belgian, Norwegian and Swedish ship owners associations. The document clearly outlines the issue and challenges, spells out the advantages of a trading approach and then outlines two different constructions for a possible system. At this stage the document doesn’t discuss the scale of reductions, but I don’t think that is important right at this moment. Rather, the industry is taking a major step into the policy arena with a view to charting its own course foward (pun intended, sorry).

What really differentiates the two models in the document is the flow of money. In the “sectoral” approach, the industry pretty much creates its own allowances (although they originally come from the UNFCCC in the form of AAUs), auctions them, manages the revenue from the auctions and establishes registries and compliance mechanisms. Revenue management is not discussed in great detail, but it is clear that some portion is directed towards technology development. By contrast, the “distibuted” approach sees national governments being issued additonal AAUs to cover international marine bunkers (but only those governments with national targets also underpinned by AAUs)  and the shipping market buying either CERs from developing country projects or AAUs from government auctions. The industry maintains its important role in the compliance process but has little control over the money flow. That rests largely with governments.

The flow of money is bound to be a divisive issue, with many shippers, as with big emitters in land based systems, arguing that they should be in control of the auction revenue raised. It is difficult not to be sympathetic with this, but the reality of our world is that governments control the money flow, not sectors or industry associations or even banks. This is almost certainly a subject for further postings.

I will certainly write more about shipping in the weeks ahead, but in the meantime I would recommend reading this document. The shipping community that put it together deserves a round of applause for taking on a difficult subject at a pivotal moment for the industry.

I was speaking on a panel in Oxford last week and the subject of greenhouse gases other than CO2 came up with one of my fellow panelists. It seems we can add a “new” one to the list of recognised greenhouse gases, Nitrogen Trifluoride. NF3 has a global warming potential (GWP) some 17,000 times that of CO2 with an estimated atmospheric lifetime of about 700 years. Like many of these high GWP compounds, NF3 finds a home in the electronics industry. It is not a listed Kyoto gas.

Global production of NF3 has grown from some 100 tonnes in 1992 to an estimated 4000 tonnes in 2007 and is projected to reach 8000 tonnes a year by 2010. The electronics industry tells us that only a very small (~2%) of global production is released into the atmosphere and that most industrial processes result in its destruction. However, not all observers agree on such levels (claims of up to 16% released).

Neverthless, the issue here is not NF3 itself, but the much more important need to keep a check on all the greenhouse gases. This point was really driven home for me when the Shell scenario team submitted the two Shell Scenarios, Scramble and Blueprints, to analysis by the MIT Integrated Global System Model of the Joint Program on the Science and Policy of Global Change.

Just a quick scenario synopsis first:

• Scramble sees the world taking a more reactive approach, first focussing on increasing the energy supply and then facing the consequences later.
• In Blueprints, the difficult decisions are taken sooner rather than later, leading to revolutionary changes and a better balance of economic and environmental needs.

The analysis is described very thoroughly in the MIT paper The Influence on Climate Change of Differing Scenarios for Future Development Analyzed Using the MIT Integrated Global System Model. In Blueprints the emission of non-CO2 gases is kept in check at about current levels whereas by 2100 the same gases under Scramble are some two and a half times current levels and still rising, even though Scramble has finally managed to see CO2 emissions plateau by the second half of this century.

The impact on atmospheric concentration of GHGs is even more marked. By 2100 Blueprints sees CO2 levels in the atmosphere plateau at about 550 ppm and total GHGs plateau at 630 ppm CO2e. In Scramble, CO2 is nearing 700 ppm and still rising, but total GHGs are now over 1000 ppm CO2e and rising. The latter translates into a near quadrupling over the 21st century of the net radiative forcing due to all long-lived GHGs, sulfate and black carbon, aerosols, and ozone which translates again to an increase, by 2100, in the Global Mean Temperature in degrees Centigrade (relative to 2000) of some 4.5 deg.C.

Whilst even the concerted mitigation efforts of Blueprints may be insufficient overall, the stark message of the analysis is “watch out for the other gases”. As we head towards Copenhagen, all eyes will be on the energy sector and CO2 emissions. NF3 and its cohorts may well miss the party, but to our long term detriment.

At a recent UK Government stakeholder meeting in London the issue of transport and electric cars came up. Based on information from an adviser on climate change to the government, there seems to be a working assumption that electric cars will take hold in the market with significant sales and that by 2020 we could have between 1 and 2 million such cars on the road in the UK.

Today the UK car population is some 28 million, so this would represent nearly 7% of the total fleet if we actually reach 2 million vehicles. We have just 10 years to 2020 and the statement really made me think about the feasibility of such an achievement.

A few years back when developing the WBCSD publication Facts and Trends to 2050, I did some calculations on vehicle fleets to illustrate the scale of change needed to turn over the entire global fleet. We assumed the following;

• An “alternative (e.g. electric) vehicle” was available for large-scale manufacture in 2010.
• Initial production would be 200,000 units per annum and production would increase by 20% per annum until the entire world’s manufacturing capacity was making this sort of vehicle.
• The global vehicle fleet would be growing at 2% p.a.
• Global manufacturing capacity would be increasing at 2% p.a.

This very simple calculation resulted in the adjacent chart, which shows that it is not until 2040 that the total traditional vehicle fleet start to decline, but then it falls very quickly. The point of this calculation was to illustrate that unless we start now, it will not be possible to achieve significant CO2 reductions by 2050 given the scale of the energy system we live with today and the lag before it really starts to change.

So getting back to the UK, what might be achievable by 2020. There are in fact two issues; the vehicles themselves and the necessary infrastructure to support an electric fleet. I will just look at the number of vehicles for this posting.

Today in the UK there really aren’t any electric cars. Although I met someone who bought a Tesla Roadster and there are a few mini-electrics in London, principally to avoid the Congestion Charge, I don’t think this really constitutes a “fleet” as such. But at least we do have a number of manufacturers showing prospective cars; the Chevrolet Volt, the Nissan Leaf, the Daimler Smart and several others talking about their plans. It looks like we might have some global manufacturing capacity by 2011.

An electric car in London today

To get to around 1.8 million by the end of 2020, the UK would have to put 10,000 cars on the road in 2011 and grow that number by some 60% per annum, such that by 2020 about a quarter of all car sales (i.e. 680,000 out of 2.5 million per annum) are electric. Assuming no cars are lost along the way, the cummulative total comes to 1.815 million.

The 2011 start won’t be easy either; this is the equivalent of the total annual UK sales of the Smart car. However, cities like London are ideal places for electric cars so there may well be the demand here, particularly with policies such as the Congestion Charge.

Globally, there are about 70 million cars produced annually. The UK takes in 2.5 million of these or less than 4%. An electric car manufacturer isn’t going to direct all its sales to one market, but let’s assume that the UK is a premium market and can attract 8% of the production of these models – i.e. double its normal market share.

If we want 10,000 cars on the road in 2011, that means global production must be 125,000. Assuming a number of manufacturers start off with modest production lines (i.e. 20,000 vehicles, similar to the initial production of the Prius), we would need at least six big launches followed by immediate production in the next 18 months. By 2020, global production would need to be nearly 10 million cars per annum, which is the equivalent of about 100 major production lines.

In 1998 annual Prius production was about 17,000 vehicles. Just prior to the recession it was close to 300,000.

Somehow I think that the UK assumption is quite a bold one.

A tectonic shift may be underway in Japan, but not of the sort normally associated with this country and its frequent earth tremors. Rather, a new era in climate politics may dawn as a result of the recent win by the DPJ in the national elections. This is because within the manifesto pledges of the DPJ sit two key policy choices, now (Monday September 7^th) formally announced by incoming Prime Minister Yukio Hatoyama;

1. A commitment to reduce national emissions by 25% by 2020, relative to 1990 – this compares with the proposal by the LDP of an 8% reduction, one which was heavily criticised internationally as being insufficient support for the developed country contribution to an agreement in Copenhagen.
2. A commitment to implement a cap-and-trade system within the Japanese economy. Although the previous government had talked about this policy instrument, little progress was made in implementing it given the negative position that some business groups took towards it.

Whilst much domestic “nemawashi” is still to take place, this shift could be critical for the success of an agreement in Copenhagen.

But Japan already finds itself an international leader in energy management, given the energy legacy inherited from the previous administration. However, the CO₂ story in Japan, whilst positive, has not delivered an overall drop in emissions. Whilst energy diversity and efficiency have been key policy objectives for many years now, absolute CO₂ emissions have risen by nearly 15% from 1990 (to 2006, IEA). At the same time emissions in the EU-27 have fallen, but only slightly. Over the same time period CO₂ emissions in the USA have risen by just over 19%. 

A big difference lies in the power sector, with Japanese power emissions staying at around 430 gms CO₂ per kWh over a 20 year period, but EU power emissions falling from over 430 gms per kWh to some 350 gms per kWh in the same period. This is due to the continuing rise of nuclear power in the EU, the influx of natural gas and the more recent aggressive build of renewables in countries such as Germany and Denmark.  By contrast, Japan has seen emissions from coal grow by 45% over the same period, much of that in the power sector.

With a transport sector already one of the most CO₂ efficient in the world and an efficient manufacturing base, the power sector will become a particular area of focus.  But efficiency alone is not going to deliver the necessary change, so fuel switching (i.e. more natural gas), renewables and international offsets will all play important roles.

The last item above will be critical to the strategy. But to be truly effective, the tougher target must be backed by an emissions trading system, which is also a preferred policy position of the DPJ. A Japanese emissions trading system, with very open access to international markets will allow the domestic target to be met but importantly will direct significant funding to developing countries.

Some quick numbers – let’s assume domestic emissions in 2013 are down to 1100 MT (with the Kyoto target met through CER and AAU purchases) and that the country can reduce this to 1000 MT by 2020 (i.e. a ~20% reduction from 2006 to 2020). Therefore, meeting a 2020 target of 810 MT CO₂ (i.e. 25% lower than 1990) could mean the purchase of over 800 million tonnes of international credits from projects between 2013 and 2020.

Between Japan, the USA, the EU, Canada, Australia and New Zealand, six cap-and-trade systems could be buyers of some 10 billion tonnes of international reductions in the period 2013-2020, giving rise to not only a very large and liquid global carbon market but also an ability to fund very significant step changes in developing country emissions. In tandem, new avenues of supply would have to be rapidly developed, including a mechanism that supports some kind of sectoral crediting, although this will likely be more successful as an outgrowth of the CDM through the creative use of methodologies rather than an entirely new approach.

The announcements by the new government in Japan, if put into practice over the next three years, could have very far-reaching effects. Rather than facing the prospect of a lone EU-ETS struggling to hold the fort for this powerful market instrument, we instead head rapidly into the brave new world of a global carbon market.

During my second year at University I worked for two months in a cement plant as part of the “practical experience” element of my chemical engineering studies. This was about 30 years ago and in those days nobody talked about CO2 – I don’t recall any mention of the CO2 footprint of cement or the overall impact of the industry on the environment (nor, for that matter, when I worked for the local electricity generator – mainly coal – a year later).

Today, CO2 emissions have a very high profile in the cement industry. The CO2 intensity of cement manufacture is one of the main issues being addressed by the Cement Sustainability Initiative (CSI) formed under the auspices of the WBCSD. Of course there are good reasons why this is necessary – the manufacture of a tonne of cement can deliver up to three quarters of a tonne of CO2 released into the atmosphere. This comes from two sources;

1. The chemical reaction that converts limestone into cement, which results in ~0.42 tonnes of CO2 per tonne of cement produced;
2. The energy required in the cement plant to drive the conversion, which varies significantly depending on efficiency and fuel types, but for a modern cement plant 0.3 tonnes of CO2 per tonne of cement is probably a fair number. Some are better but equally some are worse, although the CSI is doing much in this area.

I think that the issue with cement is not so much the impact it is having today (although with global production of some 2.7 billion tonnes total emissions are about 4%) but the impact this industry will have over the rest of this century. A simple analysis shows that the industry must also deliver on some very substantial reductions in the relatively near future.

Cement (and the concrete it is used to make) is quite literally the backbone of our civilization. It is hard to imagine the cities we have built existing without cement. But with production growing rapidly as new cities spring up across the developing world, a very substantial emissions impact is in store for us.

Current estimates show cement production reaching over 5 billion tonnes per annum by 2030. Let’s also assume that after that it continues to grow, but plateaus between 7 and 8 billion tonnes per annum in the second half of the century. That will mean a total cumulative cement production between now and the end of the century of more than half a trillion tonnes.

In a previous posting I discussed the issue of cumulative CO2 emissions as the better measure of what must be managed, rather than emissions in any given year. The researchers who presented this concept made the point that to stay under 2⁰ C we should limit total carbon emissions to 1 trillion tonnes, or 3.7 trillion tonnes of CO2 – of which we have now used half. So we have 1.8 trillion tonnes of CO2 emissions left at the very maximum (there were various confidence level reasons why they thought we should actually aim for less than this, but I will work with the upper limit).

Society has now recognised that the oil, gas and coal industries must develop technologies such as carbon dioxide capture and storage (CCS) in response to this. But the fossil fuel industry won’t be on its own. Industries like cement are going to have to respond as well, and energy efficiency is not going to get them there.

The half trillion tonnes of cement could lead to total CO2 emissions this century of some 400 billion tonnes, or about 22% of the available emissions space. Even the chemical process emissions on their own would use up some 13% of the total (assuming a zero emission alternative fuel is used – e.g. bio derived).

So it seems to me that the cement industry and probably some other industries as well are also going to have to develop CCS solutions. One of the issues faced by this industry could be cost. Whilst sequestering all the CO2 emissions associated with a barrel of oil might amount to a third or less of the cost of that barrel (assuming $60 per tonne for CCS in the long term and 0.3 tonnes of CO2 per barrel and oil at current prices), in the case of cement which costs something like $60 per tonne, the implication is an 80% price rise.

This presents the industry with quite a challenge.