Archive for the ‘Low carbon economy’ Category

The US Submission on Elements of the 2015 Agreement has recently appeared on the UNFCCC website and outlines, in some detail, the approach the US is now seeking with regards “contributions”. Adaptation and Finance are also covered, although not to the depth of the section on Mitigation.

The submission makes it very clear that the US expects robust contributions from Parties, with schedules, transparency, reporting and review. There is also a useful discussion on the legal nature of a contribution. None of this is surprising as the US delegation to the recent COPs and various inter-sessional meetings has made it very clear that real action must be seen from all parties, not just those in developed countries.

But the submission makes no reference to the role of carbon markets or carbon pricing. Only in two locations does it even refer to market mechanisms and this is only in the context of avoiding double counting. This is coming from the Party that gave the world the carbon market underpinning of the Kyoto Protocol, which in turn has given rise to the CDM, the EU ETS, the CPM (in Australia) and the NZ ETS to name but a few, so perhaps reflects the current difficulty Parties are having keeping carbon price thinking on the negotiating agenda. 

I would argue that without a price on carbon emissions, the CO2 emissions issue will be much more difficult to fully resolve. Further to this, while individual countries may pursue such an agenda locally, the emissions leakage from such systems could remain high until the carbon price permeates much of the global energy system. This then argues for an international agreement that encourages the implementation of carbon pricing at a national level. The Kyoto Protocol did this through the Assigned Amount Unit, which gave value to carbon emissions as a property right. While there is no such “Kyoto like” design under consideration for the post 2020 period, the agreement we are looking for should at least lay the foundations for such markets in the future. The question is, how??

In the post 2020 world, carbon pricing is going to have to start at the national level, rather than be cascaded from the top down. Many nations are pursuing such an agenda, including a number of emerging economies such as China, South Korea, South Africa and Kazakhstan. Linkage of these carbon price regimes is seen as the key to expansion, which in turn encourages others to follow similar policy pathways and join the linked club. The reason this is done is not simply to have carbon price homogeneity, but to allow the transfer of emission reduction obligations to other parties such that they can be delivered more cost effectively. This allows one of two things to happen; the same reductions but at lower cost or greater reductions for the expected cost. The latter should ideally be the goal and is apparently the aspiration the USA has, given it states that the agreement should be “designed to promote ambitious efforts by a broad range of Parties.” The carbon price is simply a proxy for this process to allow terms of trade to be agreed as a reduction obligation is transferred.

All of this implies that the post 2020 agreement at least needs a placeholder of some description; to allow the transfer of reductions to take place between parties yet still have them counted against the national contribution. As it stands today, it is looking unlikely that explicit reference to carbon pricing or carbon markets will make its way into the agreement, but perhaps it doesn’t need to at this stage. On the back of a transfer mechanism, ambition could increase and a pricing regime for transfers could potentially evolve. If that happens to look like a global carbon market in the end, then so be it.

A flawed prediction?

One of the comments I quite often get at external events is that “The oil and gas industry has only got 20 years”. This doesn’t just come from enthusiastic climate campaigners, but from thoughtful, very well educated people in a number of disciplines related to the climate issue. A report by WWF a few years back took a similar but slightly less aggressive line, through the publication of an energy model forecast which showed that the world could be effectively fossil energy free as early as 2050.

It’s hard for anyone who has worked in this industry to imagine scenarios which see it vanish in a couple of decades, not because of the vested interest that we certainly have, but because of the vast scale, complexity and financial base of the industry itself. It has been built up over a period of 120+ years at a cost in the trillions (in today’s dollars), provides over 80% of primary energy globally, with that demand nearly doubling since 1980 and market share hardly budging. Demand may well double again by the second half of the century.

So why do people think that all this can be replaced in a relatively short space of time? A recent media story provides some insight.

As if often the case with the turn of the year, media outlets like to publish predictions. Once such set that appeared on CNN were by futurist Ray Kurzweil. He is described by CNN as:

. . . . one of the world’s leading inventors, thinkers, and futurists, with a 30-year track record of accurate predictions. Called “the restless genius” by The Wall Street Journal and “the ultimate thinking machine” by Forbes magazine, Kurzweil was selected as one of the top entrepreneurs by Inc. magazine, which described him as the “rightful heir to Thomas Edison.” Ray has written five national best-selling books. He is Director of Engineering at Google.

Kurzweil claims that:

By 2030 solar energy will have the capacity to meet all of our energy needs. If we could capture one part in ten thousand of the sunlight that falls on the Earth we could meet 100% of our energy needs, using this renewable and environmentally friendly source. As we apply new molecular scale technologies to solar panels, the cost per watt is coming down rapidly. Already Deutsche Bank, in a recent report, wrote “The cost of unsubsidized solar power is about the same as the cost of electricity from the grid in India and Italy. By 2014 even more countries will achieve solar ‘grid parity.'” The total number of watts of electricity produced by solar energy is growing exponentially, doubling every two years. It is now less than seven doublings from 100%.

That gives us just 14 years! But maybe not.

Kurzweil has compared the growth of the energy system to the way in which biological systems can grow. With huge amounts of food available, a biological system can continue to double in size on a regular time interval, but the end result is that it will either exhaust the food supply or completely consume its host (also exhausting the food supply), with both outcomes leading to collapse. Economic systems sometimes do this as well, but collapse is almost certain and there have been some spectacular examples over the last few centuries.

The more controlled pathway is one that may well see a burst of growth to establish a presence, followed by a much more regulated expansion limited by resources, finance, intervention, competition and a variety of other real world pressures. This is how energy systems tend to behave – they don’t continue to grow exponentially. Historically there are many examples of rapid early expansion, at least to the point of materiality (typically ~1% of global primary energy), followed by a long period of growth to some level which represents the economic potential of the energy source. Even the first rapid phase takes a generation, with the longer growth phase stretching out over decades.

Energy Deployment Laws

The chart above was developed by energy modelers in the Shell Scenario team, with their findings published in Nature back in 2009. The application of this type of rule gives a more realistic picture of how solar energy might grow, still very quickly, but not to meet 100% of global energy demand in just 14 years. The “Oceans” scenario, published last year as part of the Shell New Lens Scenarios, shows solar potentially dominating the global energy system by 2100, but at ~40% of primary energy (see below), not 100%. A second reality is that a single homogeneous system with everybody using the same technology for everything is unlikely – at least within this century. The existing legacy is just too big, with many parts of it having a good 50+ years of life ahead and more being built every day.

Solar in Oceans-2

As the EU Commission gears up to release its 2030 Energy and Climate White Paper in Davos week, there is considerable discussion regarding the emissions reduction target that will be recommended. Historically the EU has been keen on multiple targets, but in recent years this has backfired, with conflicting goals and multiple policy instruments leading to a weak carbon market and a lack of investment in one critical climate technology in particular, carbon capture and storage (CCS).

For the period 2020-2030, it is hoped that the EU will retreat on the number of targets and focus instead on a single greenhouse gas target that then becomes the main driver of change in the energy system. Such an approach could help restore the EU ETS and ultimately deliver the key carbon emissions goal at a lower overall cost, therefore also helping restore some EU positioning in terms of international competitiveness.

Most commentators are expecting the GHG target to be in the range of 35 to 40% from a 1990 baseline (vs. 20% for 2020), but there is very little discussion on how that target might be structured. There are two basic approaches;

  1.  Emissions must meet a particular goal in a given year.
  2. Cumulative emissions over a period of time must be below the baseline year on an average basis.

While a single statement such as “Emissions in 2020 must be 20% below 1990” is often used to cover both these cases, the goals are very different. This is a critical consideration as the EU sets out its position for 2030, but perhaps more importantly as future goals are tabled for the UNFCCC in Q1 2015.

The UNFCCC has, to date, monitored and reported on national objectives through the Kyoto Protocol, which is based on the second approach given above, i.e., cumulative emissions. In the Doha Amendment to the Kyoto Protocol, the EU commitment for the period 2013-2020 is a reduction of 20% below 1990. This is because the Kyoto Protocol is based on allowances (Assigned Amount Units or AAUs) and that these must be surrendered for each tonne emitted over the period. This is also how the atmosphere sees CO2 emissions – cumulatively. Every tonne matters as CO2 accumulates in the atmosphere over time. It doesn’t matter at all what the emissions are in a given year, only that the cumulative amount over time is kept below a certain amount. The EU ETS works in the same way – every tonne counts.

However, as if to confuse, the Doha Amendment also gives the EU Copenhagen pledge of a 20% (or 30% under certain conditions) reduction in greenhouse gas emissions by 2020 as a percentage of the reference year, 1990. In the particular case of the EU, due to the expectation of relatively flat emissions over the period 2013 to 2020, these two goals are very similar, such that the difference issue hasn’t really seen the light of day. Further to this, the Kyoto Protocol allows for carryover of AAUs from 2008-2012 into the 2013-2020 period, so the difference is further dampened. But when it comes to 2030, big differences could show up (see chart below).

 Eu Emissions Goal 2030

 In the case of a 35% target (for example), the brown line shows a pathway to this as a fixed goal in 2030, but equally any pathway would be okay as long as the emissions are 35% below 1990 levels in 2030. But on a cumulative emissions basis, assuming a linear reduction, this is only a 28% reduction for the period 2021 to 2030.

The green line equates to a 35% cumulative emissions reduction for the same period, but in the year 2030 a reduction of about 47% is actually needed to achieve this, a much more ambitious requirement then a simple 2030 goal.

Exactly what the EU says on January 22nd remains to be seen, with considerations such as the high level number itself and domestic vs. international action being the main discussion points. But the big difference might just lie in the eventual wording (“by 2030” or “through to 2030”) and the need to table commitments with the UNFCCC at some point, particularly if the latter still works on a cumulative basis after a global agreement is reached.

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.

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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!