Archive for April, 2011

Carbon Pricing – a “must have” for WBCSD’s Vision 2050

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In the past few months I have written quite a bit about carbon pricing, both from the perspective of regions that already have it and are debating its future and regions that don’t but are considering implementation – in some cases in the midst of a political firestorm over the issue.  This leads me to the newest publication by the World Business Council for Sustainable Development (WBCSD), Carbon Pricing – The role of a carbon price as a climate change policy instrument. This isn’t a deep 50+ pager, but a short overview of the issue, explaining how it works and why it’s needed, how it can be implemented and some of the ways it interacts with the economy. 

In 2010 the World Business Council for Sustainable Development released its Vision 2050 report. The Vision 2050 study lays out a pathway leading to a global population of some 9 billion people living well, within the resource limits of the planet by 2050. The report was released at the 2010 World CEO Forum in New Delhi, India. Vision 2050.

Vision 2050 identifies a number of elements on its critical pathway, foremost of which is “Incorporating the cost of externalities, starting with carbon . . . . . “. Vision 2050 has also been illustrated with a sweeping wall mural, which also includes the carbon price message.

The Carbon Pricing publication builds on this need and discusses ways in which a carbon price can be imposed on an economy. Although Vision 2050 is explicit in seeking “a network of linked emissions trading frameworks”, the publication explores both explicit and implicit ways of arriving at a carbon price in the economy. Several of these approaches were discussed in this blog back in November 2010.

The publication can be downloaded from WBCSD.

Greener Britain: Is there a winning technology?

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I recently participated in The Economist debate, Towards a Greener Britain: Is there a Winning Technology? The video is now available online.

It was an interesting evening featuring a range of speakers from academia, the NGO community and industry (me). The question “Is there a winning technology” was posed to both the panel and the audience and for the most part the response was a list of such candidates as smart grids, CCS, wind power, electric vehicles and so on. There is no doubt that some combination of all these technologies will be part of Britain’s future, but identifying the winner is much more than just picking a favourite or guessing about where the world might head.

As you will see from the video, I took a somewhat different perspective on the question and argued that the winning technology is the one that is most cost effective. This is what is really going to matter over the coming years, particularly as government budgets are strained to the limit and many family budgets likewise. Yet, at least in Britain, there are signs that we may not be going for the most cost effective approach at all. As noted in a recent post on this blog, the UK is proposing a carbon price bubble within the broader EU-ETS and the recent release of the 4th Carbon Budget proposal by the Climate Change Committee references a 60% reduction by 2030, by which time the UK will have a near zero emissions power sector (-91% according to the medium abatement scenario, below).

This appears to be out of line with the EU proposals in its recently released 2050 Roadmap, where the power sector will have decarbonised by 54% to 58% by 2030 and won’t reach the levels desired by the UK Climate Change Committee until nearly 2050. This implies that the UK will have to maintain a set of policy measures to drive a change that isn’t aligned with the EU-ETS, which in turn implies a less cost effective outcome for UK consumers. Of course there is the possibility that the most cost effective reductions to be found in the EU are in the UK, but we can’t really know that in advance – hence the reason for choosing an emissions trading system as the principal policy mechanism for Europe, including the UK.

The outcome for the UK is that it will be running ahead of the general EU trend, but the outcome for the EU is unchanged because EU allowance flow between the UK and the rest of the EU will re-balance the situation. The UK may well get its zero emissions power sector, but at what cost?

In terms of the most cost effective technology today, the current winner appears to be natural gas. As I illustrated for the US recently, natural gas backing out coal offers a relatively quick win for many economies and certainly is compatible with the EU 2030 goals. Longer term it must of course be linked with carbon capture and storage, so developing a natural gas plus CCS technology pathway is essential. In the shorter term gas also sits well with the many national targets to expand renewable energy given its ability to respond quickly to changes in electricity supply-demand during periods of peak load and/or low renewable electricity output.

Finding the most cost effective route forward, whatever it may be, is the job of the EU Emissions Trading System. Without wanting to sound like a broken record (I have no idea what the 21st century MP3 version of that is), the ETS is here to stay and needs to be left to do that job. Even the recent argument for recalibration following the allowance surplus generated by the recession seems less relevant today following the German nuclear decision. However, looking at the EU chart above, current policy (the red line) would appear to be insufficient for the desired 2050 environmental goal, so such proposals to make EU ETS more stringent in Phase IV should still be on the table for discussion.

Our fate on the toss of a coin?

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Perhaps in response to the initial findings of the Berkeley Earth Surface Temperature project and the reported disappointment of some climate skeptics after the lead of the project testified before a Congressional committee, the Wall Street Journal Europe published an article on April 5th (click here for those without a WSJ subscription) by former commodity market statistician Douglas Keenan which questions the significance, in statistical terms, of the warming of the planet over the last century.

With Keenan trying to explain the significance of the global temperature anomaly in terms of a series of coin tosses and the Berkeley project examining billions of pieces of historical temperature data, much (layman) attention now seems to be on the statistical evidence buried in the many collected actual and proxy temperature series, rather than attempting to think about the issue in basic physics terms. This brings me back to a book I read last year by renowned climate scientist James Hansen, titled Storms of My Grandchildren. Hansen clearly and simply explains the notion of the earth’s heat balance and the very subtle changes that humankind is making to it by adding CO2 to the atmosphere. But, as he clearly illustrates, these changes, while small in comparison to the total heat flux of the planet, will lead to very significant long term impacts if left unchecked. He argues that the current shift in heat flux is already greater than the difference between recent glacial and interglacial periods and we know that difference corresponds to some 100 metres of sea level change (over a long period – see chart below). 

Therein lies the dilemma of this issue. A simple physics based model using well understood and universally accepted parameters such as Planck’s constant leads to the view that even a small variation in the global heat balance has the potential to shift sea level by many metres. Rather than acting on our understanding of this problem, it has instead sent us rushing to our thermometers to check and see what might actually be happening and whether we can discern a trend upon which we should then act. But waiting for that trend to become blindingly obvious, even to the likes of Douglas Keenan, is folly in itself, given the almost irreversible nature of the build-up of CO2 in the atmosphere and the response of the climate system to the resulting change in surface heat flux.

While examining the temperature record is a vital part of the process, we should also remember that this issue is not one we just happened to stumble across when looking at temperature. There is a clear physical basis for what is going on, identified long before there was any sign of it in current records.