Archive for December, 2009

In his celebrated, recent book, Sustainable Energy — without the hot air , David MacKay shows what a zero-carbon energy system for the UK looks like.  Whilst theoretically possible, it is daunting: the plan needs just about every option on the table, and in large quantities. A quick calculation for the rest of the world leads to the same conclusion.  So how quickly can we build this new energy system?

In 2008, Shell presented two scenarios of how the world’s energy system could develop to 2050 .   Blueprints was the more environmentally-conscious scenario.  Yet one of the most frequent criticisms has been that “Blueprints isn’t good enough” because the rate at which the emissions profile turns round “is too slow”.*

Two colleagues of mine in the scenario team, Martin Haigh and Gert Jan Kramer, have written an opinion piece for Nature, looking at this question.  It was published in early December (Click for the Nature Article).

In the paper, they have looked at humankind’s historical best efforts for deploying new energy technologies.  There are some sobering conclusions.  When things have gone well, it has taken around 30 years to move from the first pilot plants outside the laboratory, to reach a ‘material’ scale, which we define as delivering about 1% of the world’s energy supply.  This still follows an exponential curve running at an average of 26% growth per year for those 30 years.  It is simply that it has to climb three orders of magnitude in scale.

After that, growth slows down and runs on a linear course until the energy reaches its ultimate market share in the total energy mix.

They also explain why this historical evidence is something policymakers need to take seriously before aiming for overly ambitious targets.  Their view is that these ‘laws’ are going to be a challenge to beat.  Blueprints does look at conditions where we might be able to exceed them, but a good number of inputs in their modelling are stretching.  Going even beyond these is going to be a herculean challenge.

Finally, what does this mean for policy?  They argue it will need to be tailored for technologies at each stage of the deployment curve.  Much discussion assumes that after a few pilot projects, the world will be ready to build the new energy technologies, competitively, at the large-scale, linear rate.  However, CCS will not move beyond demonstrations if its cost must be recovered through a generic trading price.  PV development will stall if it is treated on a par with wind.  So whilst early-stage R&D and late-stage CO2 pricing will have critical roles to play, many technologies are going to need project and then later product support for some considerable time if they are not to lose their way on the path.

 * Using IPCC’s yardsticks for emissions and atmospheric concentrations, Blueprints would have emerged as being around 500 ppm CO2-only and 550 ppm CO2e (all GHGs).  MIT’s climate science team analysed the Shell scenarios, and incorporated the latest research since that considered by IPCC.  Blueprints is assessed as a stabilisation pathway of 540 ppm CO2-only and 650 ppm CO2e (all GHGs).

Copenhagen – One small step for mankind

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Our first true view of the planet in its entirety came during the Apollo missions, with one picture taken during the Apollo 17 mission becoming the opening slide of Al Gore’s Inconvenient Truth presentation. It was forty years ago that mankind took that giant leap and set foot on the moon.

 Earth

Copenhagen presented a very different view of the world. Dogged for nearly 10 of its 11 days by political infighting, the eventual arrival of some 100 Prime Ministers and Heads of State finally forced an outcome of sorts, with many brave faces appearing in front of the media in the late hours of Friday and during the day on Saturday to attempt to explain that progress had indeed be made.

But has it? The weekend was certainly full of talking heads condemning the Accord for its lack of ambition and failure to set targets and it is true that it dodged that issue almost entirely, but I would argue that it sets the scene for sustained action in the years to come on the basis of a single principle that has delivered a great deal in the past – “Trust, but verify”. Ronald Reagan used this on many occasion, usually in relation to talks with the then Soviet Union and typically in the context of strategic arms limitation and reduction talks. The principle has not completely solved the issue of the nuclear arms build up, but it has allowed sustainable progress over more than twenty years, resulting in a significant reduction in nuclear weapon stockpiles. Importantly, the trust gap between the USA and the Soviet Union was bridged and ultimately sealed through verification.

 US_nuclear_warheads_1945-2002_graph

Today, the gap to bridge on climate change exists between the United States and China and the “I won’t move until he does” syndrome is strangely reminiscent of the last years of the Cold War. The Copenhagen Accord hopefully goes some way to bridging that with the text of Paragraph 4 on targets for Annex I Parties and in Paragraph 5 on implementation of mitigation actions and verification for non-Annex I parties. The main deliverable from this text may well be a US cap-and-trade system in 2010 leading to a steady decline in US emissions over the coming decades. China of course must also clearly show that it is delivering on the carbon efficiency of its economy, as promised.

But the Accord does more than deliver a single outcome, whilst at the same time it fails to deliver on numerous important issues – presumably this is what the negotiations throughout 2010 will focus on. In terms of success I list three major achievements (there are others, but these are mine);

  • The need for developing countries to take verifiable mitigation actions, agreed up front.
  • The creation of a specific action focussed fund – the Copenhagen Green Climate Fund.
  • The identification of the need for a forestry mechanism to incentivise REDD+.

On the still to be resolved side I have another three (apart from the obvious lack of an actual global emissions pathway);

  • The Accord does not deal with the Kyoto Protocol in any way other than allowing it to persist. Whilst I have argued in previous postings that Kyoto has many strengths, the reality is that it is not a sustainable approach.
  • There is scant mention of the need for a global carbon market – not one set by the Accord itself, but one that the Accord would enable through underlying structure. This is the main strength of Kyoto, but of course the USA is not a participant.
  • There is no mention of aviation and shipping or how international bunkers should be treated. In fact by perpetuating the Kyoto Protocol, international marine and aviation emission reductions could remain limited to Annex 1 country actions.

Much remains to be done in 2010 – starting on January 31st when the Accord requires that nations submit their commitments through to 2020. The Accord as it stands today does represent a small step forward and perhaps even a giant leap for President Obama and Prime Minister Wen Jiabao, but at this early stage it still lacks the true substance necessary to deliver significant and sustainable reductions through to 2020 and beyond.

Copenhagen – Now a closed shop

Even at the best of times the UNFCCC process is a challenge for business and civil society. After all, it is an intergovernmental negotiation and there is no formal role for anybody else other than governments. But we all head to the negotiations anyway, in part to try and follow the process but also to talk to the various participants. The UN oversees all this and on a regular basis, this time being no exception, the UNFCCC Executive Secretary Yvo de Boer encourages non-government parties at the conference to “contribute to the process” or “explain what is needed” or even “offer negotiating text”. Of course it isn’t just business trying to get thinking across, there are also a vast array of environmental, political, religious and civil society representatives there all trying to share their perspectives with the delegations. But the process itself isn’t really designed for such interaction.

At each UNFCCC meeting one or two major business organisations are given an opportunity to address the plenary and on every occasion that I can remember this seems to get reduced to one or two minutes as the time approaches – so the carefully worded business statement that didn’t say a whole lot anyway suddenly gets trimmed from a couple of pages to a few bullet points and that is it. But the process roles on and through painstaking repetition and endless hallway discussions the messages on levels of investment needed to achieve the needed emission goals, the capital flows, technology, intellectual property, competitiveness, carbon markets and so on sink in. We all know that many people aren’t happy with even this level of influence in the process, but the reality is that business is an important part of the way our economies function and that any new constraints placed on the economy, such as emissions limitations, need to be able to work and deliver within the system that we have.

The new reality, at least for this week, is that this is a now closed shop. Whereas last week anybody that turned up with accreditation could enter the Bella Centre, on Tuesday just 7000 non-government people were allowed in. By Friday it will be literally a handful of NGOs allowed in the centre as over 100 heads of government and many more ministers arrive for the final showdown. After many years of participating in this process it’s a pity to miss the last hurrah, but given how it is all going, there will be plenty more opportunity in 2010 (and beyond I suspect). So it is time to leave Copenhagen to the government and media and watch it all on CNN at home . . . .

With the second week of Copenhagen now upon us and the days rapidly counting down to the conclusion of the summit, the true meaning of climate change politics is showing its hand – money. At issue are two things; how much should developed countries effectively compensate developing countries for past emissions by helping them adapt to the changing climate and how much should developed countries pay developing countries to get them to reduce future emissions. The first of these I find impossible to make any judgement on at all, in part because I struggle to understand just what such money might be spent on (save for the expatriation of residents of some island states now literally disappearing) and then how it might be divided so that the world gets meaningful benefit that is actually related to the issue at hand.

But the second issue is not quite as difficult, so I will venture an opinion on it. A view on this comes from considering the abatement curve (a chart of cost and volume for emission reduction activities, see below) for the potential emission reduction opportunities in developing countries.

Abatement Curve

The left side of the chart (A) shows a range of projects that give positive returns over time. They are largely energy efficiency plays in one form or another and are things we should be doing anyway at current energy prices, but we shy away from them for all sorts of reasons ranging from capital allocation to plain laziness. Such projects exist in every country (well perhaps not Denmark which seems to thrive on finding energy efficiency opportunities) and are found in every sector. They range from home insulation to excellence in operation of industrial facilities.

The right hand side of the abatement curve (C) features projects that really need a carbon price to deliver positive returns over time. The best example is carbon dioxide capture and storage (CCS), which can never be revenue positive without a carbon market. A number of renewable energy technologies will continue to need the additional revenue that a carbon market can deliver, at least for some years, as might advanced biofuels with their low carbon footprint and more distant technologies such as hydrogen.

Coming back to the issue at hand, money, the abatement curve offers a mechanism for judging just what type of help should be given to the rapidly developing economies (for the poorest countries help is desperately needed simply to provide energy in the first place, which is yet again another issue and arguably not one for a climate change conference). Energy efficiency projects should not really be funded by the developed economies given that they are attractive projects to do anyway. So the emphasis here needs to be on accelerating the uptake of such actions through loans, foreign investment and domestic policy initiatives.

But projects requiring a carbon price are different. A carbon price is an artificial construct, which effectively delivers actions that the economy would not otherwise take. This does impose a cost on the economy and it is this cost that could be borne for a period of time by the developed countries for developing country projects. With per capita incomes often a fraction of those in developed economies it is a big ask to expect a developing economy to do this itself. But as incomes rise there should also be an expectation that developing countries eventually implement their own carbon price policies.

Looking at a technology such as CCS, this would mean developed country cap-and-trade systems accepting credits from CCS projects in developing countries as well as providing some up-front capital for the early projects (depending on the cost of abatement and the prevailing cost of carbon). The story would be similar for some renewables. Possibly the simplest way to steer this is to focus the money flow to developing countries on the electricity sector only, with the aim of accelerating decarbonisation. This has a number of benefits; results are likely to be very tangible for questioning voters in developed economies (e.g. xx coal fired power stations in South Africa had CCS fitted this year),  major project opportunities result for technology companies and it has limited impact on competitiveness concerns emanating from developed countries – i.e. there is little appetite to fund projects in developing economies which simply enhance their industrial competitiveness. All of this means that future offset mechanisms should be targeted on the electricity sector and not across all emission activities within a developing economy.

Finally, there is the major issue of forestry / deforestation (B). This will also require assistance from developed economies in that it is really about land and land has a value. Dictating how land should be used changes its value, so some compensation will be necessary in that area. This can come both through government-to-government deals and via the private sector using carbon markets.

As the debate in Copenhagen continues, there is some sense of this structure. Developing country NAMA (Nationally Appropriate Mitigation Actions) are broadly seen as A, although the AWG-LCA draft text does link the transfer of money with their implementation. The REDD discussion is of course B. Finally, there is the discussion about the carbon market mechanisms, but important technologies like CCS and Nuclear are hotly contested as being suitable, yet these are the two big low carbon electricity base-load technologies. A distinct focus on electricity in developing countries is also lacking.

So much remains to be done in just four days.

The first Tuesday in Copenhagen saw the leak to the Guardian newspaper  of a document called “The Copenhagen Agreement”, a proposed political agreement prepared by the Danish hosts, supposedly in consultation with the USA, the UK and some others. This may be one of several such texts in circulation. Neverthless, it raises a challenging issue. As has already been widely discussed by many parties and observers, the text proposes a 50% reduction in global emissions by 2050 when compared to 1990, with developed countries reducing emissions by at least 80% by 1990. That presumably leaves the balance to developing countries, which is where the arguements started.

According to the Guardian, developing countries took this to mean a limit on their emissions of 1.44 tonnes per person, but only 2.67 tonnes per person for developed countries, a situation that was seen as unfair. Based on International Energy Agency data I can’t reproduce this precisely because it depends on assumptions made about the location of non-energy emissions, but an approximate calculation shows the issue very clearly.

Global Reduction 1

Assuming that emissions from deforestation are in developing countries and that international marine and aviation fuel use starts off largely allocated to developed countries but shifts increasingly to developing countries over 60 years, then my quick analysis shows a similar outcome – by 2050 developed country energy emissions are still nearly double per capita compared to developing countries, even though the developed countries have reduced emissions by 80%. The end result is that developing countries get a 16% increase in energy emissions by 2050 compared to 1990, but must reduce by about 45% compared to 2007 levels – and this can only happen if big reductions are made in areas such as deforestation. Hence the problem of “fairness”!

The real issue is that the overall target may just be too difficult, although we know that this is the direction we must go in. Let’s assume equality in emissions per capita by 2050, in which case the outcome looks something like this.

Global Reduction Equal

The developed countries reduce by 88% overall, which equates to a reduction in energy emissions of some 93%. Even then, developing countries can only increase total energy emissions by about 40% relative to 1990 and it still means a reduction of some 30% compared to current levels. This remains a very challenging target given the development needs of some 5+ billion people today. Much of the energy they will need is quite likley to come from resources such as coal. The only “wiggle room” lies with emissions from deforestation, international aviation and marine bunkers and other sources, which mainly includes agriculture and non-CO2 GHGs. If much bigger reductions can be achieved here then energy related emissions can increase – but not by that much.

A further potential solution lies with net removal of CO2 from the atmosphere using capture and sequestration to make greater room for other emissions, but there is currently little clarity on how best to do atmospheric capture on a large scale. Alternatively, developing countries will also have to deploy carbon capture and storage on a large scale to allow the continued use of resources such as coal.

Of course this isn’t the end of it. Emissions will need to be lower still in 2060 and even lower in 2070 and so on. Assessing what is fair is going to present the delegates in Copenhagen with a mounumental challenge.

Trouble “down under”

As an Australian living in London and subject to the market forces that an emissions trading system brings to the economy, I watch with great interest as Australia wrestles with the Carbon Pollution Reduction Scheme (CPRS), or “cap-and-trade” by another name (or emissions trading by another).

Since Kevin Rudd became Prime Minister just days before the Bali UN Climate Change Conference in 2007, he has ratified the Kyoto Protocol and tabled legislation to introduce an economy wide cap-and-trade system. The legislation has passed through the House of Representatives but is now stuck in the Senate where the Rudd government does not have a working majority. Over recent weeks the government has been negotiating with the leading opposition party to try and find a workable consensus and deliver the bill before Copenhagen.

This week that failed spectacularly. The nature of the legislation has also split the conservative opposition, with the result that the parliamentary leader of the party was deposed by a one vote majority and the new leader, Tony Abbott, has now made it clear that no immediate deal will be done and as expected, the legislation has now been rejected by the Senate. This potentially paves the way for a double dissolution of parliament and what could truly be the world’s first “climate change” election, although the government has indicated that it will reintroduce the legislation in February after Copenhagen and the summer recess of parliament. Abbott has also been labelled by some media outlets as a “climate sceptic” .

Australia has seen a number of weather extremes in recent years. A prolonged drought has brought despair to much of the rural sector, water restrictions are now common in places such Adelaide, temperatures in Melbourne hit a record 47 degrees C last February, the list goes on. Whilst all or none of these may be related to a changing climate (and Australia is a country of climate extremes), there is little doubt that they have raised the awareness of the issues we may all face in the decades to come. Both party leaders now claim the ear of the public on the issue, with the government arguing that the majority of Australians want to see the country act on climate change and the opposition leader claiming that the majority of Australians are opposed to the cap-and-trade legislation. Contrast all this with the reality that, according to the International Energy Agency, Australia has the highest per capita emissions in the world (apart from a handful of countries with small populations and a particular concentration of industry). It is also a country with huge solar resources, significant wind opportunity, ample uranium and over the last few years a very aggressive development programme for carbon capture and storage.

Whilst there will doubtless be short term political winners and losers in Australia, the real issue here is that there may be significant impairment to the long term policy solution set for managing emissions - with cap-and-trade at the heart of it. In turn, the environment itself suffers as widespread policy action is weakened. The development of a global carbon market, built by linking together various national trading schemes, is arguably where the world needs to go. Energy pricing is global, so injecting a carbon price into the mix will, over time, deliver change at a global level. Whilst there are many ways of creating a carbon price, cap-and-trade is designed to do it through a market based approach at lowest cost to the economy – things that should be attractive to legislators in market based economies.  It’s really that simple, although as Australia is showing, simple is not always as simple as it seems.

 

ETS in Australia