Archive for the ‘Low carbon economy’ Category

The other end of the spectrum

With Warsaw now a fading memory and the meager outcome still cause for concern that there really isn’t enough substance to build a robust global agreement upon, I signed up for The Radical Emission Reduction Conference at the Royal Society. This was held in London and put on by the Tyndall Centre for Climate Change Research. Given the academic reputation of the Tyndall Centre and of course the credentials of the Royal Society, I was hoping for a useful discussion on rapid deployment of technologies such as CCS, how the world might breathe new life into nuclear and other such topics, but this was far from the content of the sessions that I was able to attend.

Rather, this was a room of catastrophists (as in “catastrophic global warming”), with the prevailing view, at least to my ears, that the issue could only be addressed by the complete transformation of the global energy and political systems, with the latter moving to one of state control and regulated consumerism. There would be no room for “ruthless individualism” in such a world.  The posters that dotted the lecture theatre lobby area covered topics as diverse as vegan diets to an eventual return to low technology hunter-gatherer societies (but thankfully there was one CCS poster in the middle of all this).

Much to my surprise I was not really at an emission reduction conference (despite the label saying I was), but a political ideology conference. Although I have been involved in the climate change issue for over a decade, I had not heard this set of views on the issue voiced so consistently in one place. This was a room where there was a round of applause when one audience member asked how LNG and coal exporters in Australia might be “annihilated” following their (supposed) support for the repeal of the carbon tax in that country. A few of the key points coming from both the speakers and audience in the sessions I was able to stay for were;

  • The human impact of development is a function of three variables; population, technology and affluence (another version of the Kaya Identity), which therefore argued for affluence to be reduced, given that population couldn’t be and technology was in a progression of its own.
  • The recent World Trade Agreement in Bali was anti-climate in that the removal of further trade barriers would simply offer more opportunity for consumerism and therefore more emissions. This was cited as a “neo-liberal elitist trade agenda”.
  • The current energy system is “a lousy way of powering our economy”.
  • A climate movement is rapidly evolving and could be likened to the global anti-apartheid movement that developed throughout the 1970s and 1980s. This includes the current fossil fuel divestment advocates.
  • Markets would not and could not deliver the necessary changes to the current energy system, even with the introduction of carbon pricing.
  • Small and renewable is good. Even large scale renewable projects run by major utilities are seemingly unacceptable – local community generated renewable electricity is the only answer.

Another feature of the discussion was the view that like apartheid or the Berlin Wall, the change from the current state of the energy system to a zero emissions one (there is no 40% or 50% or even 80% reduction talk here) can happen overnight and be triggered in a similar way, i.e. a popular but peaceful uprising, hence the talk of a rapidly evolving “climate movement”.

The above is a flavour of the sentiment and there was plenty more, all articulated with great passion and deep concern. This is all very well and of course this group have every right to express their view, but for me the event highlighted one of the real problems associated with climate change; that it is an issue with a chasm between the two ends of the spectrum and the rest of us are left in the middle watching the exchange. Problematically, the chasm is a deeply rooted political one which questions the very role of government and the economic structure of society. Could anything be more difficult to arbitrate? Thinking back to Warsaw and although the UNFCCC is a more contained (and constrained) stage, elements of this divide play out there as well, which perhaps speaks to why there has been such limited progress.

None of this need be the case, which is probably why I felt a level of discomfort in the conference and why the UNFCCC process feels frustrating. Carbon pricing can make the difference, but we need to see it evolve and mature without the systematic attack it has endured to date (from all sides). Technology does have a key role to play, but it will take time for deployment on the scale necessary and both ends of that spectrum are essential – CCS on one side and zero carbon fossil fuel alternatives on the other. Finance is important, but big energy projects have attracted capital for decades so we shouldn’t position a required change in this as the critical enabler for success. Finally, patience is a virtue, like it or not this is now a project for the whole of the 21st century.

Perhaps the BBC and others are having a fit of pre-COP optimism, but two recent stories would lead the reader / listener to the view that the world is at last turning the corner on emissions.

This started with BBC coverage of a report from the Netherlands Environment Agency which provided an assessment of global emissions for 2012, one of the most up to date reviews of global greenhouse gas emissions. While the report showed actual global emissions of carbon dioxide from fossil fuel use and limestone calcination (cement) reaching a new record of 34.5 billion tonnes in 2012, it noted that the increase in  emissions in that year slowed down to 1.4% (corrected due to the leap year), which was less than half the average annual increase of 2.9% over the last decade. The BBC argued that this development signals a shift towards less fossil-fuel-intensive activities, more use of renewable energy and increased energy saving.

 Global CO2 Emissions

Not to pour cold water on this, but the recent publication by BP of their Statistical Review of World Energy didn’t show such a marked change, although the rate of increase was certainly down. The chart below shows how the rate of increase (according to BP) has changed over the years, but it’s hard to argue that we have broken out of the long term range.

CO2 Emissions year on year change

The BBC followed this with a BBC World report, including an interview with David Kennedy, CEO of the UK Committee on Climate Change, where they argued that the world is turning a corner in terms of climate cooperation, clean energy deployment and ultimately emissions. The evidence for this was rather scant, but included a look at a very sophisticated heat capture system in Norway which exchanges heat from waste domestic water in Oslo. They also presented a chart which showed the world decarbonisation trend, i.e. CO2 per GDP, and drew solace from the fact that the Chinese decarbonisation rate was increasing (note that CO2 per GDP requires estimates of both global CO2 emissions and global GDP and that these numbers can vary from source to source). The BBC did note that the world “has much more to do”, but that there is finally cause for optimism.

The reality check on all this comes from PWC, with their new report Busting the Carbon Budget. They also focus on decarbonisation rates, but looking forward rather than back (where, unlike the BBC, they had no cause to celebrate at all). PWC note that if the world maintains the current decarbonisation rate of about 0.7% per annum, the global carbon budget for a 2°C pathway (IPCC RCP2.6 scenario) will be depleted by 2034, just 20 years away. Meeting RCP 2.6 now requires a decarbonisation rate of 6% per annum. Meeting the budget for the less ambitious RCP 4.5 scenario requires rates of 3% and even “meeting” the RCP 8.5 (4°C) scenario budget still requires decarbonisation rates which are double current practice.

The PWC report delves into national data as well and notes that Australia, the USA and Indonesia are the only three countries that have recently come close to the needed decarbonisation rates but that not one country has managed to sustain such a rate for five years. PWC finds that energy efficiency is the bright spot in that almost all of the change in carbon intensity can be attributed to efficiency improvements. For me, this is a cause for concern, in that intensity improvements are therefore masking that lack of progress on real energy mix decarbonisation. Efficiency will drive GDP, which in turn can give the appearance of decarbonisation when in fact there isn’t any. PWC note that CO2 per unit of energy consumed has remained at approximately the same level for five years.

The PWC review of mitigation highlights a number of home truths;

  1. The shale gas revolution in the USA is causing US coal to shift to other parts of the world (which highlights the need for more widespread adoption of carbon pricing).
  2. Biofuels consumption is largely confined to the Americas.
  3. There is a slow rise in renewable energy but reliance on fossil fuels is effectively unchanged.
  4. Nuclear is losing ground following Fukushima.
  5. There has been negligible progress in the deployment of CCS technology.

PWC conclude with the statement “Crucial is the collective will to act.” According to the BBC and the UK CCC we may be turning the corner in the regard, but let’s wait until COP 19 in Warsaw next week to see how that one develops.

Realities in the energy mix

There is an interesting article in The Economist this week which discusses the impact that renewable energy is having in Germany. As renewable energy use grows, there is the perverse effect that coal is staying put and natural gas is getting backed out. As a result, German emissions aren’t really doing much at the moment. They certainly aren’t continuing to fall.

 German Emissions

This is just one example of the overall challenge of actually seeing a sustained fall in fossil fuel use and therefore emissions. Another was highlighted in last week’s Economist, but not as an article, rather a call for tender in the rear of the magazine. India coal

 

Two Indian states called for interested parties to pre-qualify for the construction of 8 GW of coal fired power stations – just two examples of many similar cases around the world. These power stations, once constructed, might run for up to 50 years, delivering some 2.5 billion tonnes of CO2 to the atmosphere or nearly 700 million tonnes of carbon. Against a global cumulative limit of 1 trillion tonnes of carbon (for 2°C), of which 570 billion tonnes has been used, this one set of tender documents represents nearly 0.2% of the all-time remaining carbon emissions.

They will likely be built, as will many others, bringing much needed electricity to rapidly emerging economies. In this particular case, this development will deliver about the same electricity as all the currently installed wind and solar capacity in India. That’s about 22 GW, but with a load factor of about 0.3, gives something similar to 8 GW of coal.

Given its longevity, this facility should be built with carbon capture and storage, but there is no sign of that happening. While India has made great strides in renewable energy investment and energy efficiency, it has yet to tackle CO2 emissions from fossil fuel use. Given the growing Indian economy, fossil fuel use is also growing and alternatives aren’t even close to keeping pace with the overall demand. So far this century (13 years) Indian CO2 emissions have approximately doubled.

With COP19 in Warsaw just around the corner and then only two years before a comprehensive global deal is supposed to be agreed in Paris, developments like this raise the question as to what could possibly happen in such a short space of time to fundamentally turn the corner.

Despite the efforts made and the best of intentions, is it really conceivable that the deal in Paris in 2015 will change the terms of this tender, and others like it, to ones that requires CCS?

A very different pathway forward

During a future energy workshop that I attended recently the audience heard from Professor Jorgen Randers, from the Center for Climate Strategy at the Norwegian Business School. Although Professor Randers has been involved in scenario planning for many years, he introduced his lecture by saying that it was time to just do a realistic forecast of what is “going to happen” and be done with it. He held out little hope for any sort of coordinated global action on emissions, which basically meant that the world would just have to come to terms with its higher atmospheric CO2 future. What was interesting though was the forecast that he then proceeded to give – it certainly wasn’t the runaway apocalypse that some will have us believe we are in for. I should say that Professor Randers earnestly thought we need to do better than this, he just couldn’t see how it might come about.

The forecast he presented is available on his website (www.2052.info). He uses a very small number of key metrics to establish his outlook, but takes a different view on how they might develop. The starting point is population, which he sees reaching a plateau of 8 billion in 2040, at the low end of UN forecasts (but not outside the forecast) . This is because of declining fertility rates as women increasingly move into the workforce and seek careers. As the existing population ages the global death rate increases as well. This population trend is, not surprisingly, a critical assumption for his forecast.

Randers - population 

The next key assumption is that global GDP will begin to slow down, linked in part to the population assumption (the number of people in the 15-65 age bracket actually falls after 2035) and a second critical assumption that continuous improvement in labour productivity will eventually end as this metric plateaus (he noted that it has already started to). The result is global GDP also reaching a plateau in the 2050s and beyond. Linked to this is a plateau in consumption which is dampened by the need to spend a non-trivial amount of global GDP on adaptation and reconstruction (coastal cities etc.) as the climate changes and sea levels continue to rise. This latter point is an important self regulating part of the analysis.

Randers then turned his attention to energy use, shown in the chart below. With energy use per unit of GDP (efficiency) continuing its downward trend, global energy use peaks in 2040 and then declines.

Randers - energy 

The energy mix also changes over the period, with renewable energy coming on strongly, oil use reaching a long plateau around 2020 then declining quite quickly and both coal and natural gas use peaking in the 2030s. As a result CO2 emissions peak in 2030 and decline, dropping 10 billion tpa over the subsequent 20 years.

Randers - CO2 

All of this then feeds through to an eventual plateau in atmospheric CO2 and therefore temperature. Randers clearly recognizes that we shoot through 2°C, but the end point in his forecast is about 3°C, not the much higher levels of 4, 5 or even 6°C that some are concerned about. In effect, this is now a self regulating system, albeit one that has to deal with significant changes in sea level and other impacts.

There was no attempt to endorse any of this, quite the opposite. Randers also noted that some of his assumptions are seen as politically or socially unacceptable, such as the declining birthrate and an eventual plateau in GDP. As such, the forecast itself becomes something of a political hot potato.

Whether he is right or wrong isn’t really the point, what is interesting about the analysis is that some very small changes in basic assumptions can have a profound effect on the outcome. Pretty much anybody that has constructed even the simplest spreadsheet with built in growth rates recognizes this, but I hadn’t seen it applied in this manner before. Even though they may be outside our normal expectation, all of his assumptions fall within the bounds of credibility, so the forecast is essentially a valid one. A 3°C world is far from where we are today, but it is useful to recognize that our global climate / economic system is now essentially a single entity and that there may be an outcome which is very different to the alternate vision of “meltdown”.

In my posting last week I talked about the climate action paradigms that exist. This followed on from a business association meeting where it was clear that there were two very different schools of thought on the issue of reducing emissions. One is to focus on energy efficiency and renewables and attempt to race fossil fuels out of the market. This felt to me as rather wishful thinking, given both the scale of the existing industry and its competitiveness. The other is to recoginise the reality of the fossil fuel industry and begin to impose an increasingly stringent requirement on it to manage (i.e. capture and store) emissions, ideally through a carbon price. This would then draw in energy alternatives and accelerate improvements in energy efficiency.

I can certainly understand those who take the view that the promotion of renewable energy is a must. While I don’t agree that it will significantly (if at all) drive down global fossil fuel consumption (and therefore emissions) in the short to medium term, it is nevertheless clear that this energy is essential to help bolster overall global supply and therefore meet development needs.

But some seem to take the view that energy efficiency itself is a viable emissions reduction strategy and therefore interchangeable with technologies such as carbon capture and storage (CCS). I saw an example of this at another industry group meeting very recently. In a discussion about energy efficiency a guest speaker talked about the closure of older less efficient power stations in China. A slide was put up which claimed emission reductions in China of 100 million tonnes as a result. Of course China’s emissions haven’t reduced at all and I doubt very much that even one gram less of coal is being burned as a result of these closures. The likely reality is that the same coal is being used more efficiently in newer power stations to generate even more electricity. Nor is the move likely to result in a long term emissions reduction as the coal system in China (mines, railroads, import terminals etc.) is pretty much at maximum capacity all the time, so there is a huge incentive to make better use of the available coal. At least for a Chinese power generator, waiting for more coal supply may not be the favoured route for generating more electricity. 

This is not unlike government attempts to cut deficits. Many countries have seen deficits rise constantly in absolute terms since the idea of deficit spending was first introduced. Yet successive governments have all implemented efficiency drives to “reduce the deficit” and claimed some success. The problem is that the reductions are more often than not against projected spending rather than current spending, so a reduction can be claimed at the same time as the reality of an absolute increase in spending. As such, the total deficit continues to rise. Real deficit reduction will probably only come with major structural changes in government policy (e.g. welfare, defense etc.), but these are much more difficult to implement. At least with government spending there is a relief valve of sorts in that the economy can grow and therefore the cumulative deficit can shrink as a fraction of GDP. Unfortunately this isn’t the case with the atmosphere.

The IEA did a bit of this in their recent report, Redrawing the Energy-Climate Map. They projected a particular “business as usual” emissions by 2020 and then illustrated how a focus on energy efficiency could reduce this. Nevertheless emissions continue to rise, but the chart seemingly shows energy efficiency as the most important contributing factor to change. The question that really needs to be asked is “Which fossil fuel production actually declined or new project shelved because of this?”. Only then are cumulative emissions potentially impacted. A further perverse outcome is that when viewed in such a short timeframe, when technologies like CCS can make almost no difference because of the implementation time lag, some observers leave with the message that energy efficiency is the major contributor to tackling global emissions.

 IEA Energy Efficiency

 

One unintended consequence of energy efficiency policy can be to exacerbate the emissions problem. A colleague of mine produced an analysis of this about a year ago and I wrote about it in a post at that time. In the worst case, an energy efficiency improvement in the power generation supply chain can actually incentivize the resource holder (e.g. coal mine) to expand the resource base and therefore the potential tonnes of carbon that will ultimately be released into the atmosphere. This won’t always be so, but it’s an interesting take on the issue.

Energy efficiency is a key driver for development, primarily through the reduction in cost of energy services. This increases access and availability of energy and therefore spurs development. Arguably it has been the single most important element of the industrial revolution, underpinned of course by key inventions along the way. But we now seem to have got it into our heads that this is also a critical part of the solution set for climate change, when it may not be at all.

Last week I attended the official launch in London of a book I reviewed recently, The Burning Question. Both authors were at the launch and they gave a great overview of the energy and climate predicament we have collectively managed to get ourselves into. Key to their message is that carbon emissions are growing exponentially and that no amount of energy efficiency or alternative energy investment is going to change that pathway anytime soon, rather both approaches may be exacerbating the problem. Of course they did make the point that all exponential systems eventually collapse or at best plateau, but in the meantime emissions continue to rise with no immediate sign of change. As I noted in my initial review, the authors paint themselves into something of a difficult corner and don’t give a great deal of insight as to how to get out, but carbon capture and storage looms large in their thinking. The book follows a line of thought that I have been developing in this blog over the last couple of years, best described here and here.

The morning after the book launch I found myself at a business association meeting where the subject of climate action was top of the agenda for the day. As if in follow-up to the previous evening, we quickly got on to the role of carbon capture and storage (CCS) for mitigation, vs. the apparently more attractive premise (to many people) that the focus must be on energy efficiency and renewables, with carbon capture and storage in more of a mop-up role at the end. The efficiency / renewables approach has been played out in numerous scenario exercises, most notably in that presented by WWF (with the support of Ecofys) in their 2011 report “100% Renewable Energy by 2050”. In all such cases and particularly that one, a natural progression of change within the energy system doesn’t feature, rather a “war time footing” scenario is advocated. This specific report was also presented to the meeting.

I contrast this with the recent Shell New Lens Scenarios which I discussed in a March posting. These do follow a natural progression forward, driven by social concerns, legislative change and energy economics. The conditions behind the Oceans scenario result in higher uptake of efficiency and much faster renewables deployment.  However, these are not strong enough to offset all of the extra pressures for energy demand growth from developing markets in particular.  As a result, fossil energy growth is similar to that of Mountains for the next several decades, and so without the strong stimulus for CCS in Mountains, the Oceans scenario results in higher cumulative CO2 emissions over the century and therefore additional warming. The reasons are somewhat similar to those articulated in The Burning Question.

This leads to thinking about climate action in terms of two paradigms. One recognizes the sobering reality of the global energy system as outlined in The Burning Question and seeks to address the issue through a combination of measures, prioritizing a robust carbon price in the energy system and placing a strong emphasis on carbon capture and storage. This tackles the issue from the fossil fuel end, which has the consequence of managing emissions directly (the CCS bit) and drawing in alternatives and reducing demand as pricing dictates (the carbon price bit). The other approach is to tackle the issue from the alternatives end, which results in forced efficiency measures and subsidized renewable energy coming into the mix. Following the logic of The Burning Question, this is like putting the energy system on steroids which pumps up global demand and potentially even forces emissions to rise.

Back then to the business association meeting which, at least in part, was also attended by a prominent official in the global climate process. The inevitable question as to the role of CCS arose and a debate around mitigation priorities got going. Many, including the official present in the room, took the view that efficiency and renewables were critical to the change process required and that this is where the emphasis must be.

 Of course the real sweet spot is somewhere in the middle, where there is a strong attack on emissions through carbon pricing and CCS, but in combination with a more rapid displacement of fossil energy with alternatives such as solar and nuclear. This isn’t easy to achieve as the social conditions for one are somewhat counter to those needed for the other. This is one paradox that also comes out of the New Lens Scenarios. Nevertheless, if those in leadership positions are sitting at one end of this spectrum rather than squarely in the middle, will we ever get a solution that actually addresses the problem head on? Perhaps The Burning Question needs to be distributed more widely!

Redrawing the Energy-Climate Map

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The world is not on track to meet the target agreed by governments to limit the long term rise in the average global temperature to 2 degrees Celsius (°C).

International Energy Agency, June 2013

The International Energy Agency (IEA) is well known for its annual World Energy Outlook, released towards the end of each year. In concert with the WEO come one or more special publications and this year is no exception. Just released is a new report which brings the IEA attention back squarely on the climate issue, Redrawing the Energy-Climate Map. The IEA have traditionally focused on the climate issue through their 450 ppm scenario. While they continue to do that this time, they are also going further with a more pragmatic model for thinking about emissions, that being the “trillion tonne” approach. I have discussed this at some length in previous posts.

The report looks deeply into the current state of climate affairs and as a result fires a warning shot across the bows of current national and UNFCCC efforts to chart a pathway in keeping with the global goal of limiting warming to 2 °C above pre-industrial levels. The IEA argue that we are on the edge of the 2 °C precipice and recommends a series of immediate steps to take to at least stop us falling in. With the catchy soundbite of ” 4 for 2° “, the IEA recommend four immediate steps in the period from now to 2020;

  1. Rapid improvements in energy efficiency, particularly for appliances, lighting, manufacturing machinery, road transport and within the built environment.
  2. Phasing out of older inefficient coal fired power stations and restricting less efficient new builds.
  3. Reductions in fugitive methane emissions in the oil and gas industry.
  4. Reductions in fossil fuel subsidies.

These will supposedly keep some hope of a 2°C outcome alive, although IEA makes it clear that much more has to be done in the 2020s and beyond. However, it didn’t go so far as to say that the 2° patient is dead, rather it is on life support.

I had some role in all this and you will find my name in the list of reviewers on page 4 of the report. I also attended a major workshop on the issue in March where I presented the findings of the Shell New Lens Scenarios and as a result advocated for the critical role that carbon capture and storage (CCS) must play in the solution set.

As a contributor, I have to say that I am a bit disappointed with the outcome of the report, although it is understandable how the IEA has arrived where it has. There just isn’t the political leadership available today to progress the things that really need to be done, so we fall back on things that sound about right and at least are broadly aligned with what is happening anyway. As a result, we end up with something of a lost opportunity and more worryingly support an existing political paradigm which doesn’t fully recognize the difficulty of the issue. By arguing that we can keep the door open to 2°C with no impact on GDP and by only doing things that are of immediate economic benefit, the report may even be setting up more problems for the future.

My concern starts with the focus on energy efficiency as the principal interim strategy for managing global emissions. Yes, improving energy efficiency is a good thing to do and cars and appliances should be built to minimize energy use, although always with a particular energy price trajectory in mind. But will this really reduce global emissions and more importantly will it make any difference by 2020?

My personal view on these questions is no. I don’t think actions to improve local energy efficiency can reduce global emissions, at least until global energy demand is saturated. Currently, there isn’t the faintest sign that we are even close to saturation point. There are still 1-2 billion people without any modern energy services and some 4 billion people looking to increase their energy use through the purchase of goods and services (e.g. mobility) to raise their standard of living. Maybe 1-1.5 billion people have reached demand saturation, but even they keep surprising us with new needs (e.g. Flickr now offers 1 TB of free storage for photographs). Improvements in efficiency in one location either results in a particular service becoming cheaper and typically more abundant or it just makes that same energy available to any of the 5 billion people mentioned above at a slightly lower price. Look at it the other way around, which oil wells, coal mines or gas production facilities are going to reduce output over the next seven years because the energy efficiency of air conditioners is further improved. The fossil fuel industry is very supply focused and with the exception of substantial short term blips (2008 financial crisis), just keeps producing. Over a longer timespan lower energy prices will change the investment portfolio and therefore eventual levels of production, but in the short term there is little chance of this happening. This is a central premise of the book I recently reviewedThe Burning Question.

Even exciting new technologies such as LED lighting may not actually reduce energy use, let alone emissions. Today, thanks to LEDs, it’s not just the inside of buildings where we see lights at night, but outside as well. Whole buildings now glow blue and red, lit with millions of LEDs that each use a fraction of the energy of their incandescent counterparts – or it would be a fraction if incandescent lights had even been used to illuminate cityscapes on the vast scale we see today. The sobering reality is that lighting efficiency has only ever resulted in more global use of lighting and more energy and more emissions, never less.

doha_skyline_560px

An analysis from Sandia National Laboratories in the USA looks at this phenomena and concludes;

The result of increases in luminous efficacy has been an increase in demand for energy used for lighting that nearly exactly offsets the efficiency gains—essentially a 100% rebound in energy use.

 I don’t think this is limited to just lighting. Similar effects have been observed in the transport sector. Even in the built environment, there is evidence that as efficiency measures improve home heating, average indoor temperatures rise rather than energy use simply falling.

The second recommendation focuses on older and less efficient coal fired power stations. In principle this is a good thing to do and at least starts to contribute to the emissions issue. This is actually happening in the USA and China today, but is it leading to lower emissions globally? In the USA national emissions are certainly falling as natural gas has helped push older coal fired power stations to close, but much of the coal that was being burnt is now being exported, to the extent that global emissions may not be falling. Similarly in China, older inefficient power stations are closing, but the same coal is going to newer plants where higher efficiency just means more electricity – not less emissions. I discussed the efficiency effect in power stations in an old posting, showing how under some scenarios increasing efficiency may lead to even higher emissions over the long term. For this recommendation to be truly effective, it needs to operate in tandem with a carbon price.

The third and fourth recommendations make good sense, although in both instances a number of efforts are already underway. In any case their contribution to the whole is much less than the first two. In the case of methane emissions, reductions now are really only of benefit if over the longer term CO2 emissions are also managed. If aggressive CO2 mitigation begins early, and is maintained until emissions are close to zero, comprehensive methane (and other Short Lived Climate Pollutants – SLCP) mitigation substantially reduces the long-term risk of exceeding 2˚C (even more for 1.5˚C). By contrast, if CO2 emissions continue to rise past 2050, the climate warming avoided by SLCP mitigation is quickly overshadowed by CO2-induced warming. Hence SLCP mitigation can complement aggressive CO2 mitigation, but it is neither equivalent to, nor a substitute for, near-term CO2 emission reductions (see Oxford Martin Policy Brief – The Science and Policy of Short Lived Climate Pollutants)

After many lengthy passages on the current bleak state of affairs with regards global emissions, the weak political response and the “4 for 2°C “ scenario, the report gets to a key finding for the post 2020 effort, that being the need for carbon capture and storage. Seventy seven pages into the document and it finally says;

In relative terms, the largest scale-up, post-2020, is needed for CCS, at seven times the level achieved in the 4-for-2 °C Scenario, or around 3 100 TWh in 2035, with installation in industrial facilities capturing close to 1.0 Gt CO2 in 2035.

Not surprisingly, I think this should have been much closer to page one (and I have heard from the London launch, which I wasn’t able to attend, that the IEA do a better job of promoting CCS in the presentation). As noted in the recently released Shell New lens Scenarios, CCS deployment is the key to resolving the climate issue over this century. We may use it on a very large scale as in Mountains or a more modest scale as in Oceans, but either way it has to come early and fast. For me this means that it needs to figure in the pre-2020 thinking, not with a view to massive deployment as it is just too late for that, but at least with a very focused drive on delivery of several large scale demonstration projects in the power sector. The IEA correctly note that there are none today (Page 77 – “there is no single commercial CCS application to date in the power sector or in energy-intensive industries”).

Of course large scale deployment of CCS from 2020 onwards will need a very robust policy framework (as noted in Box 2.4) and that will also take time to develop. Another key finding that didn’t make it to page one is instead at the bottom of page 79, where the IEA state that;

Framework development must begin as soon as possible to ensure that a lack of appropriate regulation does not slow deployment.

For those that just read the Executive Summary, the CCS story is rather lost. It does get a mention, but is vaguely linked to increased costs and protection of the corporate bottom line, particularly for coal companies. The real insight of its pivotal role in securing an outcome as close as possible to 2°C doesn’t appear.

So my own “ 2 for 2°C before 2020“ would be as follows;

  1. Demonstration of large-scale CCS in the power sector in key locations such as the EU, USA, China, Australia, South Africa and the Gulf States. Not all of these will be operational by 2020, but all should be well underway. At least one “very large scale” demonstration of CCS should also be underway (possibly at the large coal to liquids plants in South Africa).
  2. Development and adoption of a CCS deployment policy framework, with clear links coming from the international deal to be agreed in 2015 for implementation from 2020.

But that might take some political courage!

In recent months there has been a renewed look at the idea of a financial carbon bubble, or unburnable carbon reserves. Most recently, a report from The Carbon Tracker with a forward by Lord Stern of the Grantham Research Institute on Climate Change (London School of Economics), argued that serious risks are accumulating for investors in high carbon assets, such as coal mining companies and the oil and gas industry.

The idea of the “carbon bubble” is based on a concept that I have discussed many times in this blog: that there is a finite limit to the “atmospheric space” for CO2 while still ensuring that warming does not rise above 2 °C. That limit is about one trillion tonnes of carbon.

Towards the trillionth tonne

The issue of the bubble arises because the combined proven oil, gas and coal reserves currently on the books of fossil fuel companies (and governments in the case of NOCs) will produce far more than this amount of CO2 when consumed. This implies that in a world where the 2 °C limit is imposed and achieved, most of the future value generation of the companies involved will never be realized and therefore investors in them today are looking at a financial bubble that may well burst in front them. According to my analysis and the global reserves data in the BP Statistical Review of World Energy, we get to about 1.6 trillion tonnes of carbon as shown below. This equates to the use of total current fossil energy reserves of about 900 billion tonnes of carbon equivalent (the balance comes from the use of cement and land use change).

 Towards two trillion tonnes

 The report clearly sets out the global carbon budget, the reserves outlook, the current capital flow being consumed to expand those reserves and comes to the additional conclusion that this part of the global energy system will also waste trillions in capex over the coming decade as it develops more reserves that could also become unburnable. The report authors argue that even the massive application of carbon capture and storage will do little to help the situation.

There is really nothing to argue about in terms of the CO2 math itself. It is certainly the case that current proven reserves will take us well past 2 °C if completely consumed and the CO2 emitted. But now comes the reality check!

What is missing in the report is any discussion about the dynamics of the global energy system, the need to meet energy demand and of course the rapid growth we are seeing in that demand. To bring all this math into the equation it is probably best to turn to the new Shell Energy Scenarios, released about two months ago. I discussed these at some length a few weeks back.

In the context of this discussion, the initial focus should probably be on the Oceans scenario in that it sees the very rapid introduction of solar energy, with eventual large scale displacement of fossil fuels in the second half of the century. Global energy demand rises from 535 EJ in 2010 to 777 EJ in 2030 and 1056 EJ in 2060. Although solar (mainly PV) is the largest single energy source by that time, total carbon consumed through fossil fuel use amounts to 800 billion tonnes carbon by the end of the century, just a bit less than current proven reserves (900 billion tonnes as indicated above). The large consumption of fossil fuel is required simply to meet energy needs as renewable energy attempts to catch up with overall demand (which it won’t do until sometime in the 22nd century). This change is purely through the market and social dynamics present in the Oceans scenario, which sees strong growth, improved energy efficiency driven by higher prices and solar eventually dominating. CCS comes in later in the century, removing about 100 billion tonnes of carbon.

NLS Cumulative Emissions

By contrast, Mountains is a fossil fuel scenario, but with heavy reliance on CCS from about 2030. Total fossil fuel use is over a trillion tonnes of carbon equivalent, which exceeds current proven reserves. However, CCS removes some 300 billion tonnes of carbon, giving an overall accumulation of 1.25 trillion tonnes by 2100 (current accumulation plus fossil use to 2100 plus land use change and cement). This is still above the trillion tonne limit, but is the overall lower emissions outlook.

The key lesson from the scenarios in this regard is that both a rapid growth in renewable energy and the early use of CCS are required to manage emissions throughout this century. The paradox is that these exist in different scenarios with entirely different underlying economic and social drivers. It’s quite hard to have both – a world that likes fossil fuel readily gives permission to CCS going forward, but doesn’t really see huge segments of the nergy market taken by renewable energy. Nuclear is strong though. Conversely, the distributed energy solar world of Oceans doesn’t want to hear about CCS and therefore leaves it until physical climate pressures (e.g. extreme weather events) force action.

The reality check for the “carbon bubble” proponents is that global energy demands still need to be met and that there are limits to the growth rate of fossil energy substitutes, even as climate goals come under pressure.

 

After a day in Brussels listening to European MEPs, it is clear that the Parliament vote next week on the Commission proposal to backload the auctioning timeline in Phase III of the European Emissions Trading System (EU ETS), is going to be very close. This is a policy proposal that was born out of the call by many participants in the EU ETS, as well as the European Parliament, to address the chronic allowance surplus and therefore begin to steer the CO2 price into a more useful range in terms of real action and investment. A positive vote on the proposal would also be the start of a more structured reform of the policy package designed to reduce emissions across the EU over the coming decades.

But in the frantic days left before the vote, clarity and reason are struggling to be heard over the clamour of opposition, so here are the top ten reasons why an MEP should vote to support the “backloading” amendment next week:

1. Market Confidence

The current CO2 price in the ETS is just a few euros. Even the assumption that there will be a robust price by 2030 (enough for deploying CCS in 2030s for example), but discounted back to now, should result in a higher price than the one we have. That means the market is discounting the ETS itself, in other words questioning its very existence in 2030. Nobody will invest given such an outlook. A positive vote for backloading will signal that the Parliament is prepared to act on the ETS and begin to restore confidence for energy investment decisions.

2. Low carbon Investment

Apart from its annual compliance function, which the ETS is delivering, its purpose is to provide an investment price signal. This in turn steers long term investment in the covered sector, providing support and justification for lower emission investment opportunities. The near zero price signal being seen today means the EU has returned to “business as usual” energy investment, which is even resulting in a resurgence of coal based power generation projects. This will just put upward pressure on EU emissions in the 2020s. 

3. Jobs

Rewind to 2008 and the €25-30 CO2 price, which in combination with the NER300 saw some 20+ CCS projects being considered. The construction of the world’s first CCS network was a real possibility. Today, with the exception of the UK where the necessary investment signal has been created in a national level “carbon policy bubble“, these projects have been shelved. So too have the jobs that would have been created had they gone ahead.

4. Credibility

Investment depends as much on long term credibility of the policy structure as the policy itself. Business investment will not proceed unless there is a belief that the supporting policy framework is robust and long lasting and therefore able to deliver the necessary return on that investment.

5. Leadership

While there is an issue with the EU over leading on actual emissions reduction, this isn’t the case with leadership on policy development to reduce emissions. Today, many states, provinces and countries have implemented or are in the process of implementing an ETS on the back of the initial success in the EU. They are now watching developments here closely as the EU debates the future of the system. A decision to reject the backloading proposal will potentially undermine the implementation of emissions trading globally (see 10 below).

6. Support

There is a noisy opposition to this proposal, as there was opposition in 2003 to even having an ETS and again in 2008 to building a full policy framework for managing emissions over the longer term. But many companies, institutions, business associations and individuals see the clear merit of a functioning market based approach for reducing emissions and strongly support the proposal. The voice of some European business associations on this issue is not necessarily the consolidated view of business in Europe. 

7. Europe

The ETS was designed to build on the strength of a single EU market and deliver through the synergy that it offers. A weak ETS is leading to fragmentation of this goal as national policies are developed to fill the gaps. Just look at what the UK government is having to do to shore up investment cases which would otherwise be supported by the ETS. This only means a less effective and ultimately more expensive route to the same goal. 

8. Growth

This is all about investment in the EU energy system. Without investment guided by credible policy and clear market price signals, growth stalls.

9. Environment

The carbon price delivered by the ETS is the only mechanism in place to drive the development and deployment of carbon capture and storage. Without this one critical technology, the climate issue simply doesn’t get resolved. The demand for, abundance of and low cost of extraction of fossil fuels may well be unassailable this century, so atmospheric CO2 will continue to rise. 

. . . and most importantly at #10 (well it’s actually #1)

10. Economy and competitiveness

An emissions trading system can deliver the lowest cost emission reduction pathway for the economy, but to do this it needs to be left to do the heavy lifting. The very low price of CO2 in the EU today is not a sign of low cost abatement, but quite the opposite. Abatement is being driven by other policies, with the cost to the economy probably much higher than necessary. The ETS needs to be restored as the principle driver of change in the EU energy system. This will lower energy costs in the EU, which in turns helps competitiveness.

Supporting backloading now won’t deliver all this in one go, but it will get the wheels of change in motion and importantly, signal an intent on the part of the Parliament to correct the energy and climate policy framework and make the EU ETS central to the overall delivery of current and future emission reduction goals.

Climate lock-in wedges

Nearly a decade ago the then CEO of BP, Lord John Browne, gave a landmark presentation on climate change mitigation in the City of London. He introduced to the broader interest group (the work had already circulated in the academic sector) the idea of stabilization wedges, which had been developed by Stephen Pacala and Robert Socolow at Princeton within a research program supported by BP. Each wedge represented one of a number of quantifiable actions that together were necessary to move from a business as usual (BAU) global emissions trajectory to a given atmospheric stabilization of CO2. In the initial study that stabilization was 500 ppm.

Wedges

Wedges were on a very large scale (up to 1 GtC/annum) and consisted of actions such as:

  • Increase fuel economy for 2 billion cars from 30 to 60 mpg
  • Replace 1400 GW 50%-efficient coal plants with gas plants (four times the current production of gas-based power)
  • Introduce CCS at 800 GW coal or 1600 GW natural gas (compared with 1060 GW coal in 1999) power plants.
  • Add 700 GW (twice the current capacity) of nuclear fission capacity

This was the first real attempt to quantify the physical changes required in the energy system and turn that into an overriding story which people could actually understand. Many variations on the approach followed in subsequent years. More recently, researchers from universities in the USA and China looked again at the wedges and concluded that the scale of the issue had grown and that an even more ambitious set of wedges would be required to address the climate issue. The team behind this analysis introduced the concept of “phase-out” wedges, or wedges that represent the complete transition from energy infrastructure and land-use practices that emit CO2 (on a net basis) to the atmosphere to infrastructure and practices which do not. But this raises the major issue of stranded assets, or assets that have to be abandoned before their useful life has ended, typically because of economic impairment.

An alternative way of looking at this issue is to consider “lock-in” wedges. Each represents a chunk of infrastructure in use today that is very likely to continue operating until the end of its normal life, emitting CO2 while doing so and therefore adding to the growing accumulation of CO2 in the atmosphere. According to the Oxford University Department of Physics, cumulative carbon emissions today stand at some 567 billion tonnes (since 1750). Limiting the global temperature rise to 2°C requires limiting cumulative carbon emissions to one trillion tonnes. Each wedge adds towards a total committed block of emissions, which in turn would lock us into a 2°C or greater outcome should that commitment block be greater than 433 billion tonnes (1 trillion less 567 billion). Major wedges are described below:

  1. The largest existing commitment is coal fired power stations. While the next generation of facilities may well be fitted with Carbon Capture and Storage (CCS) or at least be “CCS ready”, existing power stations may never be retrofitted. Today there is some 2000 GW of coal fired capacity, with each GW emitting about 6 million tonnes of CO2 per annum. More than half of this has been built in this century, so we might assume an average age of 16 years for the existing facilities. That leaves about 30 more years of operation. Even assuming that no more are built, that means cumulative CO2 emissions of 300 billion tonnes, or 80 billion tonnes of carbon. But we could well build another 1000 GW without CCS, so that alone adds another 225 billion tonnes of CO2, or 60 billion tonnes of carbon.
  2. There are about 1 billion passenger cars in the world today and production is now over 60 million per annum. Assuming the average age of a current world car is 7-8 years and the average lifetime of a car is 15 years, this population could emit a further 10 billion tonnes of carbon. We will almost certainly build another billion internal combustion engine cars, which in turn will add a further 16 billion tonnes of carbon to the atmosphere.
  3. Natural gas use in power generation is growing rapidly, with some 1600 GW in use today, growing to 2000 GW over this decade. By the early 2020s, only a tiny fraction  of this capacity will have CCS. Given that a gas fired power station emits less than half the amount  CO2 compared to a similar sized coal plant, this fleet could see a further 140-150 billion tones of CO2, or about 40 billion tonnes of carbon emitted prior to retirement.
  4. According to the IEA, residential use of gas results in 1 billion tonnes of CO2 emissions per annum. This is somewhat hard wired into cities, so difficult to dislodge any time soon (although having replaced our gas boiler at home with an electric one because of new UK flue regulations, it’s clearly not that difficult). Nevertheless, this could well continue for 30-40 years, so perhaps another 10 billion tonnes of carbon.
  5. Aviation and shipping have both an existing fleet and show almost no sign of finding viable large scale routes to zero emissions (but biofuels may be the solution for both). Expect another thirty years of emissions at a minimum, which is another 10 billion tonnes of carbon.
  6. Finally, there is manufacturing industry which emits 6 billion tonnes of CO2 per annum globally. This includes refineries, ferrous and nonferrous metal producers, cement plants, chemical plants, the pulp and paper industry and various other sectors. Capacity is renewing rapidly both because of growth and development but also because of the gradual decline of developed country capacity in favour of much larger and more efficient production in regions such as the Middle East. New capacity will operate for thirty years at least, so this sector could be responsible for another 120 billion tonnes or more of CO2 or about 32 billion tonnes of carbon.

The sum of these “climate lock-in wedges” now looks something like this:

Climate lock-in wedges (II)

This picture includes the major sources of emissions (e.g. oil fired power stations not included) and probably represents the best case in terms of retirement of existing assets. Staying within the trillion tonne limit therefore leaves little room for complacency with regards the next generation of assets and particularly the use of CCS in power generation. An alternate view of this would be to just look at the current proven reserves of oil, gas and coal which amount to about 1.3 trillion tonnes (BP Statistical review of World Energy). If totally consumed without the application of CCS, they would result in over 1 trillion tonnes of carbon emissions, bringing the total accumulation since 1750 to 1.7 trillion tonnes.