Archive for the ‘Carbon capture & storage’ Category

August 3rd saw the Obama Administration release its long awaited Clean Power Plan. The plan partly underpins the current US COP21 INDC (Intended Nationally Determined Contribution) to reduce emissions by 26-28% by 2025 compared to 2005. It also indicates that by 2030 the power sector emissions in the USA will be 32% lower than 2005 levels, which presumably is the beginning of the next phase of their national contribution. However, this plan if for electricity only, consumption of which represents a bit less than a quarter of final energy use in the USA.

Much of the media attention was on the proposal for existing power plants, but the rule comes in two parts; one for existing sources and a second one for new sources. For existing facilities the emphasis is on the near term (i.e. through to 2030), with the rule focussed more on portfolio transition than radical adjustment. As has been seen in recent years, the US is already on a journey of portfolio change, with significant retirement of older coal fired power stations underway and much greater utilization of surplus natural gas power generation capacity. This has been largely driven by the development of shale gas, which came at an opportune time given the age of the coal fired fleet. Back in 2010 I posted the two charts below, which contrast the ageing coal fleet (median build year around 1970-1975) with the relatively new natural gas infrastructure (median build year around 2000). The whole process has quickly and efficiently reduced emissions across the United States – a phenomena also seen in the UK in the 1990s as North Sea natural gas overwhelmed the older coal based infrastructure.

US Coal Fleet

US coal generation capacity

US Natural Gas Fleet

US natural gas generation capacity

The US journey of substitution continues today, but augmented by considerable solar and wind capacity. The new rule for existing plants encourages that transition to continue, focussing on energy efficiency in coal fired power plants (Building Block 1), continued substitution of coal by natural gas (Building Block 2) and a further push on renewables (Building Block 3). But the rule puts significant near term emphasis on renewable energy development rather than further encouraging the further uptake of natural gas. In fact, through the use of a crediting mechanism (Emission Rate Credits) within the EPA rule, the efficient displacement of coal by natural gas is curtailed, possibly even leading to a similar outcome as experienced over recent years in the EU, a higher overall energy cost and some coal growth. This happened in the EU because of near term renewable energy policies bringing more distant and costly projects forward, which in turn supressed the carbon price and the otherwise successful switching away from coal to natural gas that the carbon price was driving at the time.

In any plan to manage power sector emissions, carbon capture and storage (CCS) is almost certainly a long term requirement, so it should be encouraged from the outset. In the case of the existing source rule, there is no particular steer towards CCS. Although CCS is mentioned about sixty times in the 1,500 page document, there is a significant caveat; cost. While the rule makes several references to the cost of CCS, this is much more in the context of retrofit of facilities that have limited remaining shelf life. Although CCS is critically important over the longer term, it doesn’t make much economic sense to retrofit old facilities with the technology and as can be seen above, the new build coal fleet is relatively small.

But CCS does come into the picture when looking at the construction of new coal fired power plants. These will operate for up to fifty years, well into the period when the USA may want to reduce national emissions to very low levels, yet still make use of the vast fossil fuel resources that is has at its disposal. The EPA rule finds that the best system for emission reduction (BSER) for new steam units is highly efficient supercritical pulverized coal (SCPC) technology with partial carbon capture and storage (CCS). In such cases, the final standard is an emission limit of 1,400 lb CO2/MWh‐gross, which is the performance achievable by an SCPC unit capturing about 20 percent of its carbon pollution. This offers some opportunity for CCS to develop in the near term, depending of course on the rate at which older coal fired power stations are displaced and new ones are proposed. That in turn may be hampered by the Emission Rate Credit mechanism. A flaw in the thinking on ERCs (and also for much of the push towards renewable energy as a means of dealing with atmospheric CO2) is the assumption that a tonne of CO2 not emitted now by generating electricity from renewable energy or improving efficiency equates to a lower eventual concentration of CO2 in the atmosphere.  This may not be the case, a point I discuss at some length in my e-book, Putting the Genie Back. Given that both geographical (used elsewhere) and temporal (used later) displacement of fossil fuel is a reality, the actual offset of CO2 by using renewable energy is dependent on the future energy scenario. By contrast, a tonne of CO2 stored is over and done with. Renewable energy should certainly be encouraged, but not at the cost of pushing CCS out of the picture.

The USA is now heading towards an electricity mix that consists of efficient natural gas generation, some legacy coal, renewables, some nuclear and possibly coal with CCS. It has taken a long time to get to this position and doubtless there will be challenges ahead, but the direction appears to be set. However, I will always argue that a well implemented emissions trading system could have achieved all this more efficiently, at lower cost and therefore with less pain, but at least for now that is not to be (or is it – there are a legion of trading provisions within the rule).

Four demands for Paris

The call was very clear, here were “four demands” for Paris COP21 being presented to a group in London. But the surprise was the presenter; not a climate focussed NGO or an activist campaigning for change, but Fatih Birol, Chief Economist for the International Energy Agency. He was in an optimistic mood, despite the previous two weeks of ADP negotiations in Bonn that saw almost nothing happen. He opened the presentation by saying “This time it will work” (i.e. Paris, vs. Copenhagen and all the other false starts).

On June 15th Mr Birol launched the World Energy Outlook Special Report: Energy and Climate Change. The IEA usually launch a special supplement to their annual World Energy Outlook (WEO) and this one was the second to focus on the climate challenge and the policy changes required for the world to be on a 2°C emissions pathway. It was also something of a shot over the bow for the Paris COP21 process which had just completed another two weeks of negotiations in Bonn, but with little to show for the effort. Mr Birol is a master of such presentations and this one was memorable. He focussed almost entirely on the short term, although the publication itself looks forward to 2030 for the most part. With regards to the energy system, short term usually means 5 years or so, but in this case short term really meant December but with the resulting actions being very relevant for the period 2016-2020.

Mr Birol outlined four key pillars (as they are referred to in the publication) for COP21, but restated them as “demands”. They are;

  1. Emissions must peak by 2020. The IEA believes that this can be achieved with a near term focus on five measures;
    1. Energy Efficiency.
    2. High efficiency coal, both in new building and removing some existing facilities. IEA proposed a ban on building sub-critical coal.
    3. An even bigger push on renewable energy, with an increase in investment from $270 billion in 2014 to $400 billion in 2030.
    4. Oil and gas industry to reduce upstream methane emissions.
    5. Phasing out fossil-fuel subsidies to end-users by 2030.
  2. Implement a five year review process for NDCs (Nationally Determined Contributions) so that they can be rapidly adjusted to changing circumstances. I discussed the risk of a slow review process when MIT released a report on the possible COP21 outcome.
  3. Turn the global 2°C goal into clear emission reduction targets, both longer term and consistent shorter term goals.
  4. Track the transition – i.e. track the delivery of NDCs and transparently show how the global emissions pathway is developing as a result.

Interestingly Mr. Birol didn’t mention carbon pricing once, at least not until a question came up asking why he hadn’t mentioned carbon pricing – “Is carbon pricing no longer an important goal, you didn’t mention it?” asked a curious member of those assembled at the Foreign Office. He said yes it was, but given his focus was on Paris and that he saw little chance of a global approach on carbon pricing being agreed in that time-span, he didn’t mention it! I think this represents a major oversight on the part of the IEA although there is at least some discussion on carbon pricing in the publication. While it is true that a globally harmonised approach to carbon pricing won’t be in place in the near term, I would argue that an essential 5th pillar (or 5th demand) for Paris is recognition of the importance of carbon pricing and creation of the necessary space for linking of heterogeneous systems to take place. This looks like the fastest route towards a globally relevant price.

Mr. Birol didn’t mention CCS either, which is perhaps more understandable given the 5 year focus of much of the publication. However, Chapter 4 within the publication deals extensively with CCS and the IEA highlights the importance of CCS in their 450 ppm scenario through the chart below.

IEA CCS

Finally, there was some discussion around the climate statement made by the G7 the week before and their commitment out to 2100. Looking at the statement released by the G7, they said;

“. . . . .we emphasize that deep cuts in global greenhouse gas emissions are required with a decarbonisation of the global economy over the course of this century. Accordingly, as a common vision for a global goal of greenhouse gas emissions reductions we support sharing with all parties to the UNFCCC the upper end of the latest IPCC recommendation of 40 to 70 % reductions by 2050 compared to 2010 recognizing that this challenge can only be met by a global response.”

My reading of this is that the G7 are recognizing the need to be at or nearing global net zero emissions by 2100. However, this isn’t how the statement has been reported, with several commentators, media outlets and even one of the presenters alongside Fatih Birol interpreting this as an agreement to be fossil fuel free by 2100. These are two very different outcomes for the energy system; the first one potentially feasible and the second being rather unlikely. Both the Shell Oceans and Mountains New Lens Scenarios illustrate how a net zero emissions world can potentially evolve, with extensive use of CCS making room for continued use of fossil fuels in various applications. The core driver here will be the economics of the energy system and the competitiveness of fossil fuels and alternatives across the full spectrum of needs. It is already clear that alternative energy sources such as solar PV will be very competitive and could well account for a significant proportion of global electricity provision. Equally, there are areas where fossil fuels will be very difficult to displace; I gave one such example in a case study I posted recently on aviation. Energy demand in certain sectors may well be met by fossil fuels for all of this century, either with direct use of CCS to deal with the emissions or, as illustrated in the IPCC 5th Assessment Report, offset by bio-energy and CCS (BECCS) elsewhere. Unfortunately the nuances of this issue didn’t make it into the IEA presentation.

That’s it from me for a couple of weeks or so. I am heading north on the National Geographic Explorer to see the Arctic wilderness of Svalbard and Greenland.

The past few weeks, highlighted by the Business & Climate Summit in Paris and Carbon Expo in Barcelona, has seen many CEOs, senior political figures and institutional leaders call for increased use of carbon pricing. This is certainly the right thing to be saying, but it begs the question, “What next?”. Many countries are already considering or in the process of implementing a carbon pricing system, but still the call rings out. While uptake of carbon pricing at national level certainly needs to accelerate, one critical piece that is missing is some form of global commonality of approach, at least to the extent that prices begin to converge along national lines.

On Monday June 1st six oil and gas companies come together and effectively called for such a step in a letter from their CEOs to Christiana Figueres, Executive Secretary of the UNFCCC and Laurent Fabius, Foreign Minister of France and President of COP 21. Rather than simply echo the call for carbon pricing, the CEOs went a step further and specifically asked;

Therefore, we call on governments, including at the UNFCCC negotiations in Paris and beyond – to:

  • introduce carbon pricing systems where they do not yet exist at the national or regional levels
  • create an international framework that could eventually connect national systems.

To support progress towards these outcomes, our companies would like to open direct dialogue with the UN and willing governments.

The request is very clear – this isn’t just a call for more, but a call to sit down and work on implementation. The CEOs noted that their companies were already members of, amongst other bodies, the International Emissions Trading Association (IETA). IETA has been working on connection of (linking) national systems for well over a year (although the history of this effort dates back to the days of the UNFCCC Long Term Cooperative Action – LCA – workstream under the Bali Roadmap) and I am co-chair, along with Jonathan Grant of PWC, of the team that is leading this effort.

Late last year IETA published a strawman proposal for the Paris COP, suggesting some text to set in place a longer term initiative to develop an international linking arrangement. I spoke about this at length to RTCC at Carbon Expo in Barcelona.

DCH Interview

The strawman is what it implies, an idea. It could be built on to develop a placemarker in the Paris agreement to ensure that the framework mentioned by the six CEOs actually gets implemented in the follow-up from Paris – as the CDM was implemented in the follow-up from Kyoto.

From my perspective, this week wasn’t just about carbon pricing, but also about climate science. On the same day that the FT published its story on the letter from the oil and gas industry CEOs, The Guardian chose to run a front page story implying that I had tried to detrimentally influence (apparently being a former oil trader!!) the content of the London Science Museum’s Atmosphere Gallery, a display on climate science that Shell agreed to sponsor some years ago. The reporter had based his story on exchanges between Shell and the Science Museum staff when the gallery was looking to do a recent refresh.

I did engage in such a discussion and I did make some suggestions as to content which I thought was new and interesting since the Atmosphere Gallery was first established. Unfortunately The Guardian wasn’t able to publish my proposals as they were put forward during a meeting between me and two staff members from The Science Museum, so to complete the story I will publish them here. Although this particular piece of science dates back to a 2009 Nature article by Oxford University’s Professor Myles Allen and his team, it didn’t feature in the Gallery when it was first put together (the Advisory Panel met during 2009 as part of the design phase of the Gallery). But today, it is the foundation work behind the concept of a global carbon budget which has become a mainstream topic of discussion. My angle on this was to illustrate the importance of carbon capture and storage in the context of this science, but with an emphasis on the science itself. My discussion with The Science Museum staff members took place on 23rd June 2014 and I asked them to consider the following for the refresh of the gallery:

1. As background, three papers that have come from Oxford University:

  • Warming caused by cumulative carbon emissions towards the trillionth tonne

Myles R. Allen, David J. Frame, Chris Huntingford, Chris D. Jones, Jason A. Lowe, Malte Meinshausen & Nicolai Meinshausen

  • Greenhouse-gas emission targets for limiting global warming to 2°C

Malte Meinshausen, Nicolai Meinshausen, William Hare, Sarah C. B. Raper, Katja Frieler, Reto Knutti, David J. Frame & Myles R. Allen

  • The case for mandatory sequestration

Myles R. Allen, David J. Frame and Charles F. Mason

2. Consider using (or adapting) a trillion tonne video made by Shell where Myles Allen talks about CCS in the context of the cumulative emissions issue:

3. Consider putting the Oxford University fossil carbon emissions counter in the Atmosphere Gallery as this would help people understand the vast scale of the current energy system and the rate at which we are collectively approaching the 2°C threshold;

Trillionth Tonne

4. Reference the Trillion Tonne Communique from Cambridge:

5. Offer the use of the Shell “CCS Lift” (an audio-visual CCS experience) to help explain this technology to the gallery visitors.

My pitch to The Science Museum was that this approach offered a real opportunity to feature the Science Museum and the Atmosphere Gallery in the very public discussion on carbon budgets, get some good media attention in the run-up to Paris 2015 (e.g. through the very visible counter), tell the CCS story in context (the Myles Allen video and the CCS audio-visual display) and raise awareness of the cumulative nature of the problem (i.e. the science). In the end they decided not to use this material, but I stand by the proposal.

A new report from the IMF

Last week many representatives of the global business community gathered at UNESCO Headquarters in Paris for the Business and Climate Summit, a prequel of sorts to the main COP21 event in December, but with only the business community involved. The goal was to demonstrate the involvement of the business community in the climate change issue and to set the stage for the business response to whatever is agreed by the Parties to the UNFCCC in December.

The event had significant political backing, with President Hollande speaking at the opening session. His speech went straight to the heart of the issue, with very matter of fact references to the important role of carbon pricing and the need for carbon capture and storage. Even UNFCCC Executive Secretary, Christiana Figures, endorsed CCS, not something she is known to do very often. The remarks by the President were backed up by many speakers, but Angel Gurria, Secretary General, OECD was perhaps the most memorable with his call for “a price, a price, a big fat price on carbon.”

The opening on May 20th set the scene for a major session on carbon pricing the next morning, with the World Bank and various business leaders taking the podium. While these speakers were all in agreement on the importance of carbon pricing, the harmony of the day before wasn’t quite as strong, with something of an argument between Tony Hayward, Chairman of Glencore and Kerry Adler, CEO of Skypower (solar) over the respective role of solar and coal in the coming decades. Mr Hayward saw little possibility of solar filling the breadth of industrial needs currently fulfilled by coal (and other fossil fuels).

The economic purpose of a cost on carbon dioxide emissions (carbon price) is as a response to the externality presented by our collective use of fossil fuels. This externality (the impact related to rising levels of carbon dioxide in the atmosphere) was discussed on several occasions during the Summit with regular reference to a new IMF report which argues that fossil fuel subsidies now stand at $5.3 trillion per annum. The vast majority of this arises from unaccounted externalities, such as the emissions of carbon dioxide and the impact of black carbon. Given that global fossil fuel production is some 10+ billion tonnes of oil equivalent per annum, then $5 trillion of externality equates to a charge for each tonne of production of some $500. The IMF report says that about a quarter of this relates to carbon dioxide emissions.

The publication of this number caused some excitement at the Summit and of course it got picked up in the media very quickly, in many cases with very little explanation as to its meaning. The IMF paper dwells at length on the need to cost in the externality and argues that despite a huge rise in energy costs that would result from such a charge, there would be a net welfare benefit to society at large. The report discusses the work of 19th Century Economist Arthur Pigou, who introduced the concept of externalities and proposed that negative externalities could be corrected by the imposition of a tax, now known as Pigouvian taxation. In the case of the climate issue, a carbon tax or the need to purchase emission allowances from the government are examples of Pigouvian taxes. The IMF report notes;

When the consumption of a good by a firm or household generates an external cost to society, then efficient pricing requires that consumers face a price that reflects this cost. In the absence of a well-functioning market for internalizing this cost in the consumer price, efficiency requires the imposition of a Pigouvian tax equal to the external cost generated by additional consumption.

. . . . . . 

. . . . . .

Eliminating post-tax subsidies in 2015 could raise government revenue by $2.9 trillion (3.6 percent of global GDP), cut global CO2 emissions by more than 20 percent, and cut pre-mature air pollution deaths by more than half. After allowing for the higher energy costs faced by consumers, this action would raise global economic welfare by $1.8 trillion (2.2 percent of global GDP).

But it is also important to consider the current value that is delivered by the availability of energy, a point also made by Tony Hayward on the carbon pricing panel. From an economic standpoint, it is worth taking this a step further. After all, why would the world be producing and using a fuel that brings such apparent economic hardship to society (i.e $5 trillion per annum worth of hardship)? The answer to this question implies that a positive externality must be outweighing this factor.

Although the IMF report doesn’t mention it, Pigou didn’t just talk about externalities in the negative sense, but also in the positive sense. Someone creating a positive externality—say, by educating himself and making himself more interesting or useful to other people—might not invest enough in education because he would not perceive the value to himself as being as great as the value to society. Pigou even advocated for subsidies for activities that created such positive externalities.

Despite the issues associated with using them, fossil fuels have brought tremendous value to society and continue to do so. Almost everything we take for granted in modern society from the food we eat to the iPhone we constantly use are here because of fossil fuels. This wealth creation that is tied to their use but not reflected in the price is a positive externality. Such a positive externality should be apparent in the price of fossil fuels, but because of their relative abundance around the world and the dislocation that often exists between extraction and use, this may not be the case. The positive externality is potentially so large that it is likely the root cause of some governments offering real incentives and (Pigouvian) subsidies to promote additional fossil fuel production. The IMF report calls these Producer Subsidies, but notes that they are relatively small.

None of the above is meant as an argument for not dealing with the environmental externalities associated with fossil fuels use. As noted many times during the Summit and as I have discussed often in the past, a carbon price is essential. But as other forms of energy scale up to the level at which we use fossil fuels, new externalities will present themselves. There will of course be the ongoing positive externality associated with energy provision, but negative externalities will almost certainly make themselves known as new industries emerge and new materials are introduced into society for everyday use (e.g. very large scale use of lithium). Perhaps the lesson from the IMF report is to start dealing with externalities much earlier in the cycle of production, before they reach a level which challenges our economic system to correct.

The last days of March have seen the start of submissions of Intended Nationally Determined Contributions (INDCs) to the UNFCCC. The United States, Switzerland, European Union, Mexico and Russia have all met the requested deadline of the end of Q1 2015. As is expected and entirely in line with the UNFCC request, the INDCs focus on national emissions. After all, this is the way emissions management has always been handled and reported and there is no sign of anything changing in the future.

As was to be expected, the United States submitted an INDC that indicated a 26-28% reduction in national emissions by 2025 relative to a baseline of 2005. This is an ambitious pledge, and highlights the changes underway in the US economy as it shifts towards more gas, backs out domestic use of coal, improves efficiency and installs renewable generation capacity. So far the USA national inventory indicates that the 2020 target is being progressively delivered, although it will be interesting to see whether this trend changes as a result of the sharp reduction in oil prices and a couple of summer driving seasons on the back of that.

US 2020 and 2030 Reduction Target

My own analysis in 2011 (see below) was that the USA would come close to its 2020 goal, but may struggle to meet it. The different overall level of emissions in the charts is the result of including various sources (e.g. agriculture) and gases, or not.

US 2020 Goal with 2010 data

Direct emissions represent just one view of US emissions. Some would argue that the national inventory should also include embedded emissions within imported products, but this introduces considerable complexity into the estimation.

Another representation of US emissions which is perhaps more relevant to the climate issue is the actual extraction of fossil carbon from US territory. As the climate issue follows a stock model, the development of global fossil resources and subsequent use over the ensuing years is a measure that is closer to the reality of the problem. The larger the resource base that is developed globally, the higher the eventual concentration of carbon dioxide that the atmosphere is likely to reach. This is because the long-term accumulation will tend towards the full release of developed fossil fuel reserves simply because the infrastructure exists to extract them and as such they will more than likely get used somewhere or at some time. This isn’t universally true, as the closure of some uneconomic coal mines in the USA is showing; or are they simply being mothballed?

A look at US carbon commitment to the atmosphere from a production standpoint reveals a different emissions picture. Rather than seeing a drop in US emissions since 2005, the upward trend that has persisted for decades (albeit it a slower rate since the late 1960s) is continuing.

US emissions based on extraction

In the case of measured direct emissions, reduced coal use is driving down emissions. But for the extraction case, additional coal is now being exported and the modest drop in coal production is being more than countered by increasing oil and gas production. Total carbon extraction is rising.

While there is no likelihood that national emission inventories will start being assessed on such a basis, it does nevertheless throw a different light onto the picture. In a recent visit to Norway it was interesting to hear about national plans to head rapidly towards net-zero emissions, but for the country to maintain its status as an oil and gas exporter. This would be something of a contradiction if Norway was not such a strong advocate for the development of carbon capture and storage, a strategy which will hopefully encourage others to use this technology in the future.

Getting to net-zero emissions

It is looking increasingly likely, but not a given, that a reference to global net-zero emissions or even a specific goal to achieve net-zero emissions by a certain date (e.g. end of the century) will appear in the climate deal that is expected to emerge from the Paris COP at the end of this year. But like many such goals, it is both open to interpretation and raises questions as to how it might actually be achieved.

The background to this is that the issue itself implies that this outcome is necessary. The IPCC says in its 5th Assessment Report;

Cumulative emissions of CO2 largely determine global mean surface warming by the late 21st century and beyond. Limiting risks across RFCs (Reasons for Concern) would imply a limit for cumulative emissions of CO2. Such a limit would require that global net emissions of CO2 eventually decrease to zero and would constrain annual emissions over the next few decades (Figure SPM.10) (high confidence).

However, the term net-zero needs some sort of definition, although this is currently missing from the UNFCCC text. One online source offers the following;

Net phase out of GHG emissions means that anthropogenic emissions of greenhouse gases to the atmosphere decrease to a level equal to or smaller than anthropogenic removals of greenhouse gases from the atmosphere.

The above effectively means stabilization of the atmospheric concentration of CO2, which also aligns with the ultimate aim of the UNFCCC Convention (stabilization of greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system). This could still leave room for some level of emissions in that climate models show atmospheric concentration of carbon dioxide will decline if anthropogenic emissions abruptly stopped. In a 450 – 500 ppm stabilization scenario emissions could remain in the range 7-10 billion tonnes CO2 per annum without driving the atmospheric concentration higher. This is far below current levels (35 billion tonnes per annum from the energy system alone), but it isn’t zero. It can be classified as net-zero though, in that the atmospheric concentration isn’t rising.

However, such an outcome, while stabilizing the atmospheric concentration may not be sufficient to prevent dangerous interference with the climate system. In that case an even lower level of emissions may be required, such that atmospheric concentrations do begin to fall and stabilize at a lower concentration.

Another definition of net-zero may simply apply to anthropogenic emissions directly, irrespective of what the concentration in the atmosphere might be doing. In this case, any remaining emissions from anthropogenic sources (and there will be some) would have to be offset with sequestration of carbon dioxide, either via CCS or a permanent forestry solution. In the CCS case, the carbon dioxide would need to come from a bio-source, such as the combustion of biomass in a power station. This is what the IPCC have termed BECCS.

A final step which goes beyond net-zero, is to have an anthropogenic net-negative emissions situation, which is drawing down on the level of carbon dioxide in the atmosphere through some anthropogenic process. This would be necessary to rapidly lower the concentration of carbon dioxide in the case of a significantly elevated level that comes about in the intervening years between now and the point at which the concentration stabilizes. Very large scale deployment of BECCS or an atmospheric capture solution with CCS would be required to achieve this.

Finally, there is the consideration that needs to be given to greenhouse gases other than carbon dioxide. Methane for example, while a potent greenhouse gas, is relatively short lived (a decade) in the atmosphere so will require some thought. Even in a zero energy emissions system, methane from agriculture and cattle will doubtless remain a problem.

Both of the Shell New Lens scenarios end in a  net zero emissions outcome by the end of the century, but this is within the energy system itself and does not encompass the full range of other sources of CO2 emissions and other long lived greenhouse gases. Nevertheless, with extensive deployment of CCS the Mountains scenario heads into negative emissions territory by 2100 and the Oceans scenario soon after that (which means there is potential to offset remaining emissions from very difficult to manage sources). Oceans relies on this approach in a major way to even approach zero in the first instance

Many look to renewable energy as a quick solution to the emissions issue, but the reality is far more complex. While we can imagine a power generation system that is at near zero emissions, made up of nuclear, renewables and fossil fuels with CCS, this is far from a complete solution. Electricity currently represents only 20% of the global final energy mix (see below, click for a larger image: Source IEA).

Global final energy 2012

Solutions will need to be found for a broad range of goods and services that give rise to greenhouse gas emissions, including non-energy sources such as limestone calcination for cement and cattle rearing for dairy and direct consumption. While we can also imagine a significant amount of global light transport migrating to electricity, shipping, heavy transport and aviation will not be so simple. Aviation in particular has no immediate solution other than through a biofuel route although there is some experimentation underway using high intensity solar to provide the energy for synthesis gas manufacture (from carbon dioxide and water), which is then converted to jet fuel via the well-established Fischer–Tropsch process. There are also dozens of industrial processes that rely on furnaces and high temperatures, typically powered by fuels such as natural gas. Metal smelting currently uses coal as the reducing agent, so a carbon based fuel is intrinsic to the process. Solutions will be required for all of these.

Whether we aim for a very low level of emissions, true net-zero anthropogenic emissions or negative emissions is somewhat academic today, given the current level of emissions. All the aforementioned outcomes are going to require a radical re-engineering of the energy system in a relatively short amount of time (< 80 years).

Fifty shades of grey?

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The tension was building throughout the week, but finally just before Valentine’s Day weekend the negotiators in Geneva completed the first draft of a Paris negotiating text and released it at the end of the eighth part of the second session of the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP). Contained within this 86 page document, replete with perhaps 400 or so carefully worded options to select from and 1,234 square brackets, is supposedly the necessary political recipe for addressing the climate issue over the coming decades. Or were we presented with the greyness of diplomacy and compromise, which may be the best that can be managed for now, but doesn’t incorporate the necessary toolkit to drive down emissions in the decades to come?

The text certainly contains sufficient versions of one important overarching requirement; that being the need to reach net zero emissions at some point in the future. In the context of the level of greenhouse gas emissions, the word zero appears in the text seven times, from a non-specific reference of “net zero greenhouse gas emissions in line with the ultimate objective of the Convention“, to the highly ambitious proposal for “zero emissions of CO2 and other long-lived greenhouse gases in the period 2060–2080“. I discussed this at some length in my previous post, with the conclusion that an end of the century net zero emissions objective is perhaps achievable, but much earlier than this looks unlikely. Even a timeframe of 85 years will require enormous effort, including extensive use of carbon pricing and the widespread deployment of carbon capture and storage (CCS). This view received quite a number of comments on The Energy Collective. My post wasn’t to argue that nothing would happen or that no progress could be made, but to point out the difficulty of rapidly slowing down and turning a system that has such enormous momentum. All of the suggested technologies that filled the comments section will almost certainly play a role, but the challenge is the time it takes to do all this. My own experience in the energy industry tells me the timeframe is decades, not years. In my view, the text now taking us forward to Paris doesn’t present the necessary conditions for a strong response, but it is only part of the story and much more will be revealed over the coming weeks and months as the INDCs (Intended Nationally Determined Contributions) are also published. This text seems to be more about achieving some diplomatic harmony around the climate issue and at least trying to get everyone marching to the same tune.

But returning to the text itself, the other area that needs considerable support and diplomatic effort is seeing a carbon price emerge within the global energy system. The phrase “carbon pricing” gets two mentions in the 86 pages of text, but there are many options presented on the “use of markets”. To some extent, “markets” is UNFCCC code for a carbon price, but not in all cases. It can also mean the further development of market mechanisms (such as the CDM) and the ability for developing countries to sell credits from these mechanisms to developed countries as a means of securing clean energy investment. While many variations around this theme are presented, there is no proposed language in the current text that really sets out to establish a full global carbon pricing regime – although Option 4 on page 17 perhaps comes closest by trying to resurrect something that operates along the lines of the Kyoto Protocol. A global carbon market seems to be a step too far for most countries at the moment, even though it is an essential part of the solution set. Rather, a proxy based approach is being proposed through multilateral institutions such as the World Bank, which hopes to see a global market develop over time through the linkage of various national and sub-national emissions management approaches and the interchange of the domestic units, quotas and allowances on which they are based. In the World Bank model, this would be governed by an exchange rate mechanism. This week also saw the UK House of Commons Energy & Climate Change Committee launch a report on the linking of emissions trading systems. The report concluded that;

Any agreement reached at the UNFCCC COP 21 in Paris at the end of 2015 should promote the use of carbon markets and facilitate the future linking of emissions trading systems.

One final reality check on the paris text is that nowhere in the 86 pages is CCS mentioned. While the UNFCCC is always very careful about featuring a specific technology and understandably so, the clear advice from the IPCC 5th Assessment Report was that 2°C cannot be reached without it, at least not within reasonable cost bounds. The IPCC does get mentioned 23 times.

In contrast with the events in Geneva, BP published their Energy Outlook 2035 which showed both overall energy demand and demand for fossil fuels rising in the outlook period (see chart; source: BP). The corresponding rise in energy system emissions is also given, reaching some 40 billion tonnes per annum by 2035. This is in contrast to the IEA 450 Scenario which argues for a fall in emissions to nearly 20 billion tonnes by 2035. However, the outlook does include a rising carbon price through to 2035, when it reaches some $40 per tonne CO2. Judging from the data presented, the main impact of this seems to be to bring coal growth to a near halt, but that’s all. The BP analysis presents a very different outlook to the one we need to stay within the 2°C threshold agreed by governments at the Cancun COP back in 2010. It also argues for a clear and robust outcome from Paris, although the current text doesn’t point in that direction.

BP Demand to 2035

BP Emissions to 2035

Ten years of the EU ETS

This month the EU Emissions Trading System is ten years old – which in itself is quite an achievement as there were those at the start who said it wouldn’t last and any number of people over the years who have claimed that it doesn’t work, is broken and hasn’t delivered. Yet it stays with us, continues to be the bedrock of the EU policy framework to manage CO2 emissions and despite issues along the way, is now likely to receive a significant overhaul in time for 2020 when a new global deal on climate change should kick-in.

Check-under-the-hood

The ETS started life as a relatively short draft Directive (EU ETS Draft Directive 2001) back in 2001 and has expanded since then with appendages such as the linkage Directive and the 2008 Energy and Climate package (e.g. NER300) and will likely expand again with the proposed addition of the Market Stability Reserve. But the simple concept of a finite and declining pool of allowances being allocated, traded and then surrendered as CO2 is emitted has remained and despite various other issues over the years the ETS has done this consistently and almost faultlessly year in and year out. The mechanics of the system have never been a problem.

The one issue that has plagued the ETS has been the price – from some arguing it was too high at the start to many now concerned (including me) that the surplus of allowances and consequent low price has stopped all direct investment in emission reduction projects.

10 Years of the EU ETS

With investment as a goal, the heyday of the system was 2007-2008 when Phase II was underway and confidence was rising that a long term carbon price signal had emerged in Europe to guide decarbonisation efforts going forward. There was plenty of evidence that this was really the case. Fuel switching to gas was gathering pace, innovative projects were being considered in many industrial facilities and when the European Parliament agreed the NER300, some 20 CCS projects were initially tabled with the Commission for consideration. After all, at a CO2 price of ~€30 that meant ~€9 billion  of project funding and sufficient support for the operational cost of CCS. But as the price fell to a low of <€4 in April / May 2013, everything evaporated. The ETS became more of a compliance formality than an investment driver.

Last week I participated in a lunchtime seminar on the Future of the ETS held within the European Parliament in Strasbourg. Unlike some lunchtime events I have attended over the years, this one was packed, with standing room only. There is real and genuine interest amongst many MEPs to reform this instrument and return the CO2 price to its rightful position as the key market signal to drive change in the energy system. After all, there are plenty of good reasons to do this, starting with the most important reason of all – it’s the most economically effective way of doing the job.

The seminar focussed primarily on the proposed Market Stability Reserve (MSR), which is an intended pool of allowances that can be drawn on in the event of excessive tightness in the allowance supply / demand balance or added to when a surplus prevails. The conceptual design of this mechanism now seems to be largely agreed, but the operating parameters are still being negotiated between Member States. Most importantly is the question of a “first fill” of allowances and the intended start date of the process. Given the significant surplus that now exists, it makes sense to do the “first fill” with the 900 million allowances withheld from auctioning under the backloading initiative and to start the MSR much earlier than 2021 (i.e. 2017) so that it can continue to absorb the current overhang.

Recalibrating the EU ETS and having it fit for purpose as other countries implement their UNFCCC INDCs (Intended Nationally Determined Contributions) to also reduce emissions will offer the EU a true competitive advantage in a challenging global economy. It will allow the EU to achieve similar or even greater reductions than others, but at lower cost.

The global energy system works on timescales of decades rather years. When considering the changes required in managing the climate issue, the short to medium term takes us to 2050 and the long term is 2100! As such, drawing long term conclusions based on a 2050 outlook raises validity issues.

A new Letter published in Nature (and reported on here) discusses the long term use of fossil fuels, further exploring the notion that certain reserves of oil, gas and coal should not be extracted and used due to concerns about rising levels of CO2 in the atmosphere. But the analysis only looks to 2050 in its attempt to quantify which reserves might be more penalised than others, assuming we are in a world that is actually delivering on the goal of limiting warming to 2°C. The authors drew on available data to establish global reserves at 1,294 billion barrels of oil, 192 trillion cubic metres of gas, 728 Gt of hard coal and 276 Gt of lignite. These reserves would result in ~2,900 Gt of CO2 if combusted unabated, with approximately two thirds of this coming from the hard coal alone.

The Letter draws on the original work of Malte Meinshausen, Myles R. Allen et. al. which determined that peak CO2 induced warming was largely linked to the cumulative release of fossil carbon to the atmosphere over time, rather than emission levels at any particular point in time. They determined that surpassing the 2°C global goal could be quantified as equivalent to the release of more than 1 trillion tonnes of carbon (3.7 trillion tonnes CO2), with their timeframe being 1750 (i.e. the start of the modern use of coal) to some distant point in the future, in their case 2500. Precisely when CO2 is released within this timeframe is largely irrelevant to the outcome, but very relevant to the problem in that the continued release of carbon over time, even at much lower levels than today, eventually leads to an accumulation with the same 2°C or higher outcome (the slow running tap into the bathtub problem). Hence, the original work gives rise to the sobering conclusion that net-zero emissions must be a long term societal goal, irrespective of whether the whole issue can be limited to 2°C. “Net-zero” language has now appeared as an optional paragraph in early drafting text for the anticipated global climate deal currently under negotiation.

As a point of reference, the associated Trillionth Tonne website shows the cumulative release to date (January 2015) as 587 billion tonnes of carbon, which leaves 413 billion tonnes (~1.5 trillion tonnes CO2) if the 2°C is not to be breached (on the basis of their midrange climate sensitivity). The chart below is extracted from the original Meinshausen / Allen paper and illustrates the relationship, together with the inherent uncertainty from various climate models.

Peak warming vs cumulative carbon
Further work was done on this by Meinshausen et. al. They attempted to quantify what the results mean in terms of shorter term greenhouse gas emission targets, which after all is what the UNFCCC negotiators might be interested in. While the overarching trillion tonne relationship remains, it was found;

. . . .that a range of 2,050–2,100 Gt CO2 emissions from year 2000 onwards cause a most likely CO2-induced warming of 2°C: in the idealized scenarios they consider that meet this criterion, between 1,550 and 1,950 Gt CO2 are emitted over the years 2000 to 2049.

This focus on a cumulative emissions limit for the period from 2000 to 2049 (which is arguably a period of interest for negotiators) has been picked up by the most recent Letter and it is the starting point for the analysis they present, although slightly refined to 2011 to 2050. The Letter has concluded that;

It has been estimated that to have at least a 50 per cent chance of keeping warming below 2°C throughout the twenty-first century, the cumulative carbon emissions between 2011 and 2050 need to be limited to around 1,100 gigatonnes of carbon dioxide (Gt CO2). However, the greenhouse gas emissions contained in present estimates of global fossil fuel reserves are around three times higher than this and so the unabated use of all current fossil fuel reserves is incompatible with a warming limit of 2°C. . . . . Our results suggest that, globally, a third of oil reserves, half of gas reserves and over 80 per cent of current coal reserves should remain unused from 2010 to 2050 in order to meet the target of 2°C.

Further to this, the Letter also deals with the application of carbon capture and storage (CCS) for mitigation and finds that;

Because of the expense of CCS, its relatively late date of introduction (2025), and the assumed maximum rate at which it can be built, CCS has a relatively modest effect on the overall levels of fossil fuel that can be produced before 2050 in a 2°C scenario.

The choice of 2050 is somewhat arbitrary, in that while it may be important for the negotiating process, it is largely irrelevant for the atmosphere. But running a line through the middle of the century and drawing long term conclusions on that basis does change the nature of the issue and potentially leads to high level findings that are linked to the selection of the line, rather than the science itself. Most notable of these is the finding regarding the use of oil, coal, and gas reserves up to 2050 rather than their use over the century as a whole.

The study notes that current global reserves of coal, oil and gas equate to the release of nearly 3 trillion tonnes of CO2 when used and based on this draws the conclusion that two thirds of this cannot be consumed if a global budget were in place that limits emissions to 1.1 trillion tonnes of CO2 for the period 2011 to 2050. The problem here is that the current reserves are unlikely to be consumed before 2050 anyway. The Shell New lens Scenarios contrast a high natural gas future with a high renewable energy future, but in both cases the unabated CO2 (i.e. before the application of CCS) released from energy use over the period 2011-2050 is about 1.6 trillion tonnes. Using this as a baseline reference point for the period to 2050 rather than total global reserves, would then lead to a different conclusion and a much lower fraction that cannot be used. In the case of the Shell Mountains scenario which has both lower unabated CO2 (high natural gas use) and high CCS deployment, the net release of CO2 from energy use over the period 2011-2050 is about 1.5 trillion tonnes. Of course we should add the other sources of CO2 (i.e. cement and land use change) to this for a complete analysis and also recognise that neither of the New Lens scenarios can resolve the climate issue within the 2°C goal (discussed in an earlier post here), but both are close to net-zero emissions by the end of the century.

Looking out to the end of the century also changes the findings with regards the application of CCS. Any energy technology, be it solar PV or CCS, will take several decades to reach a scale where it substantively impacts the energy system. During that build up period, its impact will therefore be modest and this is the observation made in the Nature Letter. But by 2050 CCS deployment could be substantial and in the Mountains scenario CCS reaches its peak by the end of the 2050s decade. Therefore, it is the use of CCS after 2050 that really impacts the total use of fossil fuels this century. From 2050 to 2100 net fossil fuel emissions in Mountains are ~560 billion tonnes CO2, far less than the period 2011-2050 and similar in scale to a post 2050 “budget” that would be remaining in a world that limited itself to 1 trillion tonnes CO2 over the period 2011-2050 (i.e. for a total of 1.5 trillion tonnes as noted above).

With such CCS infrastructure in place and given the size of the remaining ultimately recoverable resources (which the Letter puts at ~4,000 Gt for coal alone), fossil fuel use could continue into the 22nd Century hardly impacting the level of CO2 in the atmosphere, assuming it remains competitive with the alternatives available at that time. CCS in combination with biomass use, also offers the future possibility of drawdown on atmospheric CO2.

The big challenge is the near term, when fossil fuel use is meeting the majority of energy demand, alternatives are not in place to fill the gap and CCS is not sufficiently at scale to make a truly material difference. Of course if CCS scale up doesn’t start soon, then the long term becomes the near term and the problem just gets worse.

Yes, Virginia, there is CCS

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In 1897, Dr. Philip O’Hanlon, a coroner’s assistant on Manhattan’s Upper West Side, was asked by his then eight-year-old daughter, Virginia, whether Santa Claus really existed. O’Hanlon suggested she write to The Sun, a prominent New York City newspaper at the time, assuring her that “If you see it in The Sun, it’s so.” So with thanks and apologies to “Is There a Santa Claus?“, September 21, 1897, The New York Sun, staying true to the original text where possible and in the spirit of the festive season . . . .

Yes,Virginia,ThereIsASantaClausClipping

We take pleasure in answering thus prominently the communication below, expressing at the same time our great gratification that its faithful author is numbered among our friends:

Dear Editor—

I was at COP20 in Lima. Some of my friends in Lima said there is no CCS. But many big companies say, “It’s now a commercially available technology.” Please tell me the truth, is there CCS?

Virginia from Lima

Virginia, your friends are wrong. They have been affected by the scepticism of a sceptical age. They do not believe what they see. They think that nothing can be which is not comprehensible by their minds. All minds, Virginia, whether they be men’s or children’s, can ask such questions. In this great universe of ours, man is a mere insect, an ant, in his intellect, as compared with the boundless world about him, as measured by the intelligence capable of grasping the whole of truth and knowledge.

Yes, Virginia, there is CCS. It exists as certainly as amine separation, compressors and drilling rigs exist, and you know that they abound and give to your life energy and mobility. Alas! how dreary and warm might the world be someday be if there is no CCS! It would be as dreary and warm as if there were no wind turbines. There may be more extreme weather then, to further concern us in this existence.

Not believe in CCS! You might as well not believe in 100% renewable energy. You might get your friends to watch all the chimneys in case some CO2 escapes, but even if you did see some CO2 being released, what would that prove? Nobody sees CO2, but that is no sign that there is no CCS. The most real things in the world are those that tend to be hidden away. Did you ever see a vinyl-chloride monomer plant? Of course not, but that’s no proof that they are not there. Nobody can conceive or imagine all the wonders there are unseen and unseeable in the world.

VCM Process

You fret that the continued use of fossil fuels will damage the atmosphere such that even the united strength of all the strongest men that ever lived could not repair. But fear not, as carbon pricing develops so too will the deployment of CCS, such that we really can have net zero emissions by the end of the century? Ah, Virginia, in all this world there is nothing else real and abiding.

No CCS! Thanks that this technology has now been developed. A decade from now, Virginia, nay 10 times 100 years from now, it will continue to make glad the CO2 level in the atmosphere.

Merry Christmas

See you in 2015, David.