In my most recent post outlining ten reasons why the global 2° C goal is more difficult than most commentators imagine, I referenced a new MIT report, Expectations for a New Climate Agreement, which looks at the prospects for the expected Paris COP21 agreement actually changing the current global emissions pathway. The findings don’t give a lot to be hopeful about, but nevertheless are worthy of further review.

The work has been carried out by the MIT Joint Program on the Science and Policy of Global Change, a unique coming together of disciplines ranging from atmospheric chemistry to macro-economics, all under one roof. The team has developed considerable modelling expertise, which also combines the aforementioned disciplines to allow policy feedback to impact emissions and therefore the climate model itself. For the sake of transparency, Shell is a sponsor of the Joint Program.

The first stumbling block the researchers hit in trying to assess what Paris might deliver was the current lack of detail or even a basic outline of the scope of the deal; this with just 15 months to go. While it is now widely assumed that COP21 will deliver a bottom up agreement based on contributions at a national level, there is almost no information available on accounting periods, review options, the nature of a contribution (e.g., reduction quantity, mitigation action, adaptation effort, financial aid, capacity building, technology transfer, R&D effort), terms of compliance, extension provisions and so on. Rather, all this had to be assumed, with the consequence of considerable uncertainty around the MIT findings. For example, MIT focus on a target date of 2030 for the first round of contributions, but continue the simulation of the effects of assumed contributions through to 2050.

A reference case is presented which sits within the RCP 8.5 range, the equivalent of atmospheric concentrations of CO2 exceeding 1000 ppm over the long term. This represents a 4+°C scenario by the end of the century.

Electricity generation is the single largest emitting sector in most countries and therefore features first in the resulting analysis. The MIT team argue that the majority of policy effects on emissions can be covered with just two options: controls on coal-fired generation and renewable energy mandates. In the case of coal, various regions and countries are assumed to pledge restrictions in coal generation, as outlined in the table below. Crucially though, large future users such as India are not expected to make a pledge of this type.

MIT Coal Assumptions

Renewable energy is also expected to grow strongly, with the EU reaching a 35% share in electricity generation by 2050, with other regions following, albeit not as aggressively.

MIT Renewable Portfolio Assumptions

In the transport sector, efficiency is the trend to watch, with vehicle efficiency improving by 2% per annum from 2020 in developed countries and by 1% per annum in the rest of the world. Similarly, in the commercial transport sector, a constant focus on efficiency in trucking fleets sees emissions between 10 and 20% lower than the reference case by 2050. However, the sector remains oil based for the entire period.

Efficiency is also the major driver in reducing household emissions from the reference case, with developed countries leading the way and achieving a 20% differential by 2050. However, for other parts of the world this falls to as low as a 5% improvement over 30 years.

Significant improvements are also assumed for land use change emissions and methane emissions.

The effect of all this is noticeable, but growth in global emissions still continues through to 2050, although at a slower pace than the reference scenario. MIT have 2050 CO2-eq emissions at about 71 Gt, vs. their estimate of 56 Gt in the year of the agreement, i.e. 2015. This outcome is compared with two other projections in the figure below. One is the Reference case used throughout this analysis. Also shown, for comparison purposes, is their estimate of emissions to 2050 if commitments made in Copenhagen are met in 2020 and sustained thereafter. By this analysis, the expected contributions from current negotiations will bring the nations part way toward an RCP 4.5 pathway (a median global temperature increase of 1.8°C over this century or about 2.6°C above the pre-industrial level) but will also leave much to be done in subsequent efforts.

MIT Reductions

The issue of subsequent efforts and the nature of any review process is where the MIT analysis carries its starkest warning. The paper notes that if an agreement is reached in 2015, going into effect by 2020, the earliest review of performance along the way might not be before 2025. In this case, an effort to formulate the next agreement under the Climate Convention, or a tightening of COP-21 agreements, would not start until 2025 or after, with new targets set for a decade or more after that. If this expectation is correct, then global emissions as far out as 2045 or 2050 will be heavily influenced by achievements in the negotiations over the next 18 months.

Finally, the analysis calls for a common pricing regime as a preference to individual national actions conducted in isolation. The benefit here is a simple one, a lower overall cost for the global economy. Alternatively, for the same cost, greater ambition could be realized.

Based on the MIT work it would appear that negotiators and their national governments still have a long way to go to be able to say that they have a deal and set of actions that is effectively dealing with anthropogenic warming of the climate system.

A recent story in The Guardian expressed some optimism that “humans will rise to the challenge of climate change”. Ten reasons were given to be hopeful, but not one of them mentioned the climate basics such as a carbon price or carbon capture and storage. Rather, the offerings were largely tangential to the reality of rising CO2 emissions, with the hope that because European homes are using less energy and solar prices are dropping, then ipso facto, atmospheric CO2 levels would somehow stabilize (i.e. annual CO2 emissions falling to zero).  Without wanting to be pessimistic, but rather realistic, it may not be the case that emissions just fall and here are ten reasons why not. For those who visit this blog more regularly, sorry for the repetition, but hopefully this is a useful summary anyway.

1. There is still no carbon price

Although discussions about carbon pricing are widespread and there are large systems in place in the EU and California, pervasive robust pricing will take decades to implement if the current pace is maintained. Yet carbon pricing is pivotal to resolving the issue, as discussed here. The recent Carbon Pricing Statement from the World Bank also makes this point and calls on governments, amongst others, to work towards the goal of a global approach.

2. Legacy infrastructure almost gets us there

The legacy energy system that currently powers the world is built and will more than likely continue to run, with some parts for decades. This includes everything from domestic appliances to cars to huge chemical plants, coal mines and power stations. I have added up what I think is the minimum realistic impact of this legacy and it takes us to something over 800 billion tonnes carbon emitted to the atmosphere, from the current level of about 580 billion tonnes since 1750. Remember that 2°C is roughly equivalent to one trillion tonnes of carbon.

3. Efficiency drives growth and energy use, not the reverse

The proposition that energy efficiency reduces emissions seems to ignore the cumulative nature of carbon emissions and is apparently based on the notion that energy efficiency is somehow separate to growth and economic activity. What is wrong with this is that the counterfactual, i.e. that the economy would have used more energy but grown by the same amount, probably doesn’t exist. Rather, had efficiency measures not been taken then growth would have been lower and energy consumption would have been less as a result. Because efficiency drives economic growth, you have to account for Jevons Paradox (rebound). After all, economies have been getting more efficient since the start of the industrial revolution and emissions have only risen. Why would we now think that being even more efficient would somehow throw this engine into reverse?

4. We still need a global industrial system

In a modern city such as London, surrounded by towns and idyllic countryside with hardly a factory in sight, it’s easy to forget that an industrial behemoth lurks around the corner producing everything we buy, eat, use and trade. This behemoth runs on fossil fuels, both for the energy it needs and the feedstock it requires.

5. Solar optimism

There’s little doubt that solar PV is here to stay, will be very big and will probably be cheap, even with the necessary storage or backup priced in. But it’s going to take a while, perhaps most of this century for that to happen. During that time a great deal of energy will be needed for the global economy and it will come from fossil fuels. We will need to deal with the emissions from this.

6. Developing countries need coal to industrialize

I talked about this in a very recent post – developing countries are likely to employ coal to industrialize, which then locks the economy into this fuel. One way to avoid this is to see much wider use of instruments such as the Clean Development Mechanism, but at prices that make some sense. This then comes back to point 1 above.

7. We focus on what we can do, but that doesn’t mean it’s the best thing to do

Methane emissions are currently attracting a great deal of attention. But cutting methane today and not making similar reductions in CO2 as well means we could still end up at the same level of peak warming later this century. It’s important to cut methane emissions, but not as a proxy for acting on CO2.

8. It’s about cumulative carbon, not emissions in 2050

Much of the misconception about how to solve the climate issue stems from a lack of knowledge about the issue itself. CO2 emissions are talked about on a local basis as we might talk about city air pollution or sulphur emissions from a power plant. These are flow problems in that the issue is solved by reducing the local flow of the pollutant. By contrast, the release of carbon to the atmosphere is a stock problem and the eventual stock in the atmosphere is linked more to the economics of resource extraction rather than it is to local actions in cities and homes. Thinking about the problem from the stock perspective changes the nature of the solution and the approach. One technology in particular becomes pivotal to the issue, carbon capture and storage (CCS).

9. Don’t mention CCS, we’re talking about climate change

Following on from the point above, it’s proving difficult for CCS to gain traction and acceptance. This is not helped by the UN process itself, where CCS doesn’t get much air time. One example was the Abu Dhabi Ascent, a pre-meeting for the upcoming UN Climate Summit. CCS wasn’t even on the agenda.

10. We just aren’t trying hard enough

A new report out from the MIT Joint Program on the Science and Policy of Global Change argues that the expected global agreement on climate change coming from the Paris COP21 in 2015 is unlikely to deliver anything close to a 2°C solution. At best, they see the “contributions” process that is now underway as usefully bending the global trajectory.

The analysis shows that an agreement likely achievable at COP-21 will succeed in a useful bending the curve of global emissions. The likely agreement will not, however, produce global emissions within the window of paths to 2050 that are consistent with frequently proposed climate goals, raising questions about follow-up steps in the development of a climate regime.

Perhaps of even greater concern is the potential that the UNFCCC process has for creating lock-in to a less than adequate policy regime. They note:

Nevertheless, if an agreement is reached in 2015, going into effect by 2020, the earliest review of performance along the way might not be before 2025. In this case, an effort to formulate the next agreement under the Climate Convention, or a tightening of COP-21 agreements, would not start until 2025 or after, with new targets set for a decade or more after that. If this expectation is correct, then global emissions as far out as 2045 or 2050 will be heavily influenced by achievements in the negotiations over the next 18 months.

 

 

While all fossil fuels are contributing to the accumulation of carbon dioxide in the atmosphere, coal stands apart as really problematic, not just because of its CO2 emissions today (see chart, global emissions in millions of tonnes CO2 vs. time), but because of the vast reserves waiting to be used and the tendency for an emerging economy to lock its energy system into it.

Global energy emissions

Global emissions, million tonnes CO2 from 1971 to 2010

I recently came across data relating to the potential coal resource base in just one country, Botswana, which is estimated at some 200 billion tonnes. Current recoverable reserves are of course a fraction of this amount, but just for some perspective, 200 billion tonnes of coal once used would add well over 100 billion tonnes of carbon to the atmosphere and therefore shift the cumulative total from the current 580 billion tonnes carbon to nearly 700 billion tonnes carbon; and that is just from Botswana. Fortunately Botswana has quite a small population and a relatively high GDP per capita so it is unlikely to use vast amounts of this coal for itself, but its emerging neighbours, countries like Zimbabwe, may certainly benefit. This much coal would also take a very long time to extract – even on a global basis it represents over 25 years of use at current levels of production.

This raises the question of whether a country can develop without an accessible resource base of some description, but particularly an energy resource base. A few have done so, notably Japan and perhaps the Netherlands, but many economies have developed by themselves on the back of coal or developed when others arrived and extracted more difficult resources for them, notably oil, gas and minerals. The coal examples are numerous, but start with the likes of Germany, Great Britain, the United States and Australia and include more recent examples such as China, South Africa and India. Of course strong governance and institutional capacity are also required to ensure widespread societal benefit as the resource is extracted.

Coal is a relatively easy resource to tap into and make use of. It requires little technology to get going but offers a great deal, such as electricity, railways (in the early days), heating, industry and very importantly, smelting (e.g. steel making). In the case of Great Britain and the United States coal provided the impetus for the Industrial Revolution. In the case of the latter, very easy to access oil soon followed and mobility flourished, which added enormously to the development of the continent.

But the legacy that this leaves, apart from a wealthy society, is a lock-in of the resource on which the society was built. So much infrastructure is constructed on the back of the resource that it becomes almost impossible to replace or do without, particularly if the resource is still providing value.

As developing economies emerge they too look at resources such as coal. Although natural gas is cleaner and may offer many environmental benefits over coal (including lower CO2 emissions), it requires a much higher level of infrastructure and technology to access and use, so it may not be a natural starting point. It often comes later, but in many instances it has been as well as the coal rather than instead of it. Even in the USA, the recent natural gas boom has not displaced its energy equivalent in coal extraction, rather some of the coal has shifted to the export market.

Enter the Clean Development Mechanism (CDM). The idea here was to jump the coal era and move directly to cleaner fuels or renewable energy by providing the value that the coal would have delivered as a subsidy for more advanced infrastructure. But it hasn’t quite worked that way. With limited buyers of CERs (Certified Emission Reduction units) and therefore limited provision of the necessary subsidy, the focus shifted to smaller scale projects such as rural electricity provision. These are laudable projects, but this doesn’t represent the necessary investment in large scale industrial infrastructure that the country actually needs to develop. Rooftop solar PV won’t build roads, bridges and hospitals or run steel mills and cement plants. So the economy turns to coal anyway.

This is one of the puzzles that will need to be solved for a Paris 2015 agreement to actually start to make a difference. If we can rescue a mechanism such as the CDM and have it feature in a future international agreement, it’s focus, or at least a major part of it, has to shift from small scale development projects to large scale industrial and power generation projects, but still with an emphasis on least developed economies where coal lock-in has yet to occur or is just starting.

As governments struggle to find practical routes forward with positive outcomes for CO2 mitigation, attention is turning to dealing with other greenhouse gases, particularly methane. A number of methane emission initiatives are now underway or being planned, for example those within the Climate and Clean Air Coalition.

Methane seems like an obvious place to start. Anthropogenic emissions are about 250 million tonnes per annum. A tonne of methane emitted now has a short term (20 years) impact on atmospheric warming which is some 80 times greater than a tonne of CO2. This means that over the period of twenty years, the methane will add 80 times the amount of heat to the atmosphere as the carbon dioxide. But methane breaks down in the atmosphere quite quickly with a ‘half life’ of about seven years, so on a 100 year basis (with the methane effectively gone) the impact of a tonne of methane emitted now compared to a tonne of CO2 is much less. The factor falls to about 28, but even with a lower multiplier reducing methane still seems to be a worthwhile endeavour. While agricultural methane may require real lifestyle changes to bring down, e.g. less meat consumption, industrial methane emission management looks like something that can be done. Often mitigation may be a case of good housekeeping, such as monitoring and maintaining pipelines to minimize fugitive emissions.

While most articles about methane simply use the GWP (Global Warming Potential over 100 years) of 28 and present data and economics on that basis, a few dig deeper. Of note is the work of the Oxford-Martin School who present a number of policy papers on methane. In the more popular press, Burning Question author Duncan Clark has written about methane.

Both follow a similar line of reasoning. They note that methane and CO2, while both greenhouse gases, behave very differently with regards their impact on the actual goal of the UNFCCC, to limit eventual peak warming to 2°C or less. As noted, methane is a relatively short lived gas in the atmosphere, whereas CO2 is a long lived gas that accumulates in the atmosphere. This means there is another dimension to the issue, time. The point in time at which they are emitted relative to each other and the shape of any reduction pathway relative to the other is important. Duncan Clark describes this in the following way:

The difference between carbon dioxide and methane is a bit like the difference between burning coal and paper on a fire. Both generate plenty of heat but whereas the coal burns steadily for a long time and accumulates if you keep adding more, the paper gives an intense burst of warmth but one that quickly disappears once you stop adding it.

Their conclusions are similar. Peak warming is largely dictated by the cumulative amount of CO2 emitted over time. If a certain amount of methane is also emitted, the timing of that emission is what matters. Methane that is emitted today will immediately impact the rate of warming, but long before we reach peak warming (assuming CO2 emissions are eventually brought under control and warming actually peaks) the methane will have left the atmosphere and been converted to carbon dioxide, in which case it’s impact on peak warming is based only on the CO2 that remains from the methane. We may have accelerated warming in the short term but peak warming will remain largely unchanged. In this case, the warming potential of methane expressed in terms of its impact on peak temperature falls sharply and comes close to the stoichiometric conversion of methane to carbon dioxide, which is about 3, i.e. a tonne of methane when combusted or oxidised in the atmosphere gives rise to about three tonnes of carbon dioxide. Conversely, methane that is emitted much later, say when we are close to peak warming, will directly add to whatever level of temperature we happen to reach.

Does this mean that we shouldn’t bother about methane today? Unfortunately the answer is an ambiguous one. If we are confident that the world will quickly and decisively reduce CO2 emissions then of course we must also be reducing methane and other greenhouse gases as well. If we don’t, then we will still have a methane problem at the time peak CO2 induced warming occurs, in which case we will almost certainly overshoot our peak warming goal, i.e. 2°C, with the additional warming from the other greenhouse gases. But if we don’t address the CO2 issue, then addressing the methane issue now doesn’t offer a lot of benefit for later on. Instead, the benefit that we do get is less short term warming as we will have removed the intense burst of warming that the methane is providing.

Of course, since we don’t know how well or otherwise the task of CO2 mitigation will proceed (despite the fact that the track record is pretty poor), we feel obliged to act on methane now in case the CO2 mitigation picks up.  At least we know that we will slow down the near term rate of warming by doing so.

Not surprisingly, it turns out that dealing with methane and atmospheric warming is just as complex as dealing with CO2. In the case of CO2, many are convinced that steps such as efficiency measures can curtail warming, when all they are probably doing is geographically or temporally shifting the same CO2 emissions such that the eventual accumulation in the atmosphere is unchanged. In the case of methane, treating it as if it were interchangeable with CO2 but with a convenient and high multiplier may make us feel that modest effort is delivering great benefit, when it may be the case that little benefit is being delivered at all.

In both cases it is the science that we have to look at to decide on the appropriate strategy, not expediency and certainly not sentiment.

As we head towards COP21 in Paris at the end of 2015, various initiatives are coming to fore to support the process. So far these are non-governmental in nature, for example the “We Mean Business”  initiative backed by organisations such as WBCSD, CLG and The Climate Group. In my last post I also made mention of the World Bank statement on Carbon Pricing.

2 C Puzzle - 3 pieces

This week has seen the launch of the Pathways to Deep Decarbonization report, the interim output of an analysis led by Jeffrey Sachs, director of the Earth Institute at Columbia University and of the UN Sustainable Development Network. The analysis, living up to its name, takes a deeper look at the technologies needed to deliver a 2°C pathway and rather than come up with the increasingly overused “renewables and energy efficiency” slogan, actually identifies key areas of technology that need a huge push. They are:

  • Carbon capture and storage
  • Energy storage and grid management
  • Advanced nuclear power, including alternative nuclear fuels such as thorium
  • Vehicles and advanced biofuels
  • Industrial processes
  • Negative emissions technologies

These make a lot of sense and much has been written about them in other publications, except perhaps the second last one. Some time back I made the point that the solar PV enthusiasts tend to forget about the industrial heartland; that big, somewhat ugly part of the landscape that makes the base products that go into everything we use. Processes such as sulphuric acid, chlorine, caustic soda and ammonia manufacture, let alone ferrous and non-ferrous metal processes often require vast inputs of heat, typically with very large CO2 emissions. In principle, many of these heat processes could be electrified, or the heat could be produced with hydrogen. Electrical energy can, in theory, provide this through the appropriate use of directed-heating technologies (e.g. electric arc, magnetic induction, microwave, ultraviolet, radio frequency). But given the diversity of these processes and the varying contexts in which they are used (scale and organization of the industrial processes), it is highly uncertain whether industrial processes can be decarbonized using available technologies. As such, the report recommends much greater efforts of RD&D in this area to ensure a viable deep emission reduction pathway.

Two key elements of the report have also been adopted by the USA and China under their U.S.-China Strategic and Economic Dialogue. In an announcement on July 9th, they noted the progress made through the U.S.-China Climate Change Working Group, in particular the launching of eight demonstration projects – four on carbon capture, utilization, and storage, and four on smart grids.

Reading through the full Pathways report I was a bit disappointed that a leading economist should return to the Kaya Identity as a means to describe the driver of CO2 emissions (Section 3.1 of the full report). As I noted in a recent post it certainly describes the way in which our economy emits CO2 on an annualised basis, but it doesn’t given much insight to the underlying reality of cumulative CO2 emissions, which is linked directly to the value we obtain from fossil fuels and the size of the resource bases that exist.

Finally, Sachs isn’t one to shy away from controversy and in the first chapter the authors argue that governments need to get serious about reducing emissions;

The truth is that governments have not yet tried hard enough—or, to be frank, simply tried in an organized and thoughtful way—to understand and do what is necessary to keep global warming below the 2°C limit.

I think he’s right. There is still a long way to go until COP21 in Paris and even further afterwards to actually see a real reduction in emissions, rather than reduction by smoke and mirrors which is arguably where the world is today (CO2 per GDP, reductions against non-existent baselines, efficiency improvements, renewable energy goals and the like). These may all help governments get the discussion going at a national or regional, which is good, but then there needs to be a rapid transition to absolute CO2 numbers and away from various other metrics.

There is a well-known saying that “Politics makes strange bedfellows”. In recent weeks, carbon pricing has seen its share of media exposure and strange bedfellows, although this shouldn’t come as a surprise given that it is all about politics anyway. The good news is that this much maligned and misunderstood subject is finally getting some solid airtime, albeit from some interesting supporters.

The re-emergence of this subject has been building for some time now, but perhaps was highlighted by the June 21st op-ed by Hank Paulson in the New York Times. Paulson served as Secretary of the Treasury during the recent Bush administration, following many years at the helm of Goldman Sachs. Although his article was in part directed at the launch of the recent Risky Business report, Paulson used the opportunity to reach out to the Republican side of the political spectrum in the US and argue that a carbon price (a tax in this case) was “fundamentally conservative” and “will reduce the role of government” rather than the opposite which many opponents argue. At least in my view, he is right. Intervening in the energy mix, forcing certain technology solutions, requiring a given percentage from a particular energy source and so on are all big government steps towards addressing emissions. A carbon price is clean and simple and can get the job done.

On the opposite page of the New York Times was the reality check from Nobel Prize winning economist Paul Krugman. While Krugman made it clear that Paulson had taken a “brave stand” and that “every economist I know would start cheering wildly if Congress voted in a clean, across-the-board carbon tax”, the sobering reality from Krugman is “we won’t actually do it”. Rather, he imagines a set of secondary measures, the “theory of the second best” as he calls it, including vehicle efficiency standards, clean energy loan guarantees and various other policy measures. My view is that while all of these are important parts of a coherent energy policy, they are approaching third best when it comes to CO2 emissions.

Meanwhile, another strong advocate of carbon pricing has emerged, namely the World Bank. They have never been silent on the issue and indeed have pioneered policy approaches such as the Clean Development Mechanism of the Kyoto Protocol, but this time they have gone much further and are being considerably louder and bolder. The World Bank have produced a statement, “Putting a Price on Carbon” and have called on governments, companies and other stakeholders (e.g. industry associations) to sign up to it. The statement calls for:

. . . the long-term objective of a carbon price applied throughout the global economy by:

  • strengthening carbon pricing policies to redirect investment commensurate with the scale of the climate challenge;
  • bringing forward and strengthening the implementation of existing carbon pricing policies to better manage investment risks and opportunities;
  • enhancing cooperation to share information, expertise and lessons learned on developing and implementing carbon pricing through various “readiness” platforms.

This is all good stuff, but of course now it needs real support. A further look at the World Bank website illustrates the growing patchwork of activity around carbon pricing. It’s quite heartening.

cq5dam_resized_735x490!

To finish where I started, the strange bedfellows, perhaps nothing could be closer to this than seeing Australian mining magnate and now Member of Parliament, Clive Palmer, on the same stage as climate crusader Al Gore. Only weeks before Mr Gore had made the very clear statement that “We must put a price on carbon in markets and a price on denial in politics”, but nevertheless stood with Palmer as he announced that he would support the Government’s decision to repeal the Carbon Pricing Mechanism (there isn’t a colour for repeal on the World Bank map). I don’t think Mr Gore was particularly happy about that bit, but hopefully was there for the follow-on, where Palmer announced that his party would require a latent ETS to be established in Australia for use once Australia’s main trading partners were also pricing carbon. Given PUP’s (Palmer United Party) hold on the balance of power in the Australian Senate, this might at least mean that Australia will stay in the ETS club and emerge again as a player in the years to come. However, considering the fact that New Zealand, the EU, parts of China, Pacific North America (i.e. California, British Colombia), Japan and (soon) South Africa all have some sort of carbon price, latency may indeed be short lived.

One point of note on the annual calendar of energy events is the release by BP of their Statistical Review of World Energy. The data, all available to download in Excel format, covers the period up to the end of the previous year (i.e. the current data is to the end of 2013) and as such is about 18 months ahead of the equivalent data from the IEA (which is currently up to 2011 but will be updated later this year). Just about anything you might want to know on energy supply, energy consumption, CO2 emissions, fossil fuel reserves etc, is there for the interested user. In recent years BP have updated the tables to include a more comprehensive look at renewable energy as well.

The most recent release by BP was just a couple of weeks ago, so here are a few key energy/climate home truths within it;

Global CO2 emissions just keep on rising: This is hardly a surprise, but given the recent burst of capacity from the renewable energy sector there might be some sign of some levelling off at least. OECD emissions are at least flat now, but non-OECD emissions continue to rise sharply as coal use increases in particular (chart below in millions tonnes CO2 per annum).

Global emissions

 

The global CO2 intensity of energy isn’t budging: This is a bit more surprising given the influx of natural gas into the global economy and the build rate of renewables. But coal continues to surge and quite some nuclear has been shut down in Japan. The chart below shows the OECD intensity falling as renewables take off in Europe and natural gas increases in the USA, but non-OECD intensity offsets this to give a flat picture overall (chart below is in tonnes of CO2 per barrel of oil equivalent).

Global CO2 intensity of energy

 

The annual increase in fossil fuel use far exceeds the increase in renewable energy production: While many will readily quote the annual increase in renewable energy investment or annual increase in renewable energy capacity as evidence of turning the corner, the reality in terms of renewable energy produced is somewhat different. The chart below compares the annual coal increase with global solar and wind increases. For reference, the total fossil fuel increase from 2012-2013 was 183 Mtoe (million tonnes oil equivalent). The whole picture is rather distorted by the global financial crisis, but coal alone is increasing by something like 100-150 Mtoe per annum. At least for the last couple of years solar has been flat at about 7 Mtoe annual increase.

Increase in coal use

Solar and wind are growing rapidly, but the fossil fuel share of global primary energy is high and steady: Both solar and wind are in their early rapid growth phase where double digit annual increases are expected, but as they become material in the energy system at around 1% of global energy production, don’t be surprised to see this start to level off. The chart below has a log scale (otherwise solar and wind are barely discernible) and shows fossil fuel up in the mid 80′s as a percent of the global energy mix.

Energy mix fraction

Even in Germany it is taking a while for solar to make a showing: While solar PV in Germany is having a profound impact on electricity generation on long sunny days in June, the annual story when looking at total energy use is different. Solar has reached about 2% of the mix (i.e. reached materiality) and might even be showing some signs of slowing up and growing at a more linear rate (but a few more years data are needed to see the real trend). Again, this is a log chart.

German solar

 

Thanks to BP for the time and effort they put into this work every year.

With the USA (at a Federal level) going down the regulatory route instead, the Australian Prime Minister touring the world arguing against it and the UNFCCC struggling to talk about it, perhaps it is time to revisit the case for carbon pricing. Economists have argued the case for carbon pricing for over two decades and in a recent post I put forward my own reasons why the climate issue doesn’t get solved without one. Remember this;

Climate formula with carbon price (words)

Yet the policy world seems to be struggling to implement carbon pricing and more importantly, getting it to stick and remain effective. Part of the reason for this is a concern by business that it will somehow penalize them, prejudice them competitively or distort their markets. Of course there will be an impact, that’s the whole point, but nevertheless the business community should still embrace this approach to dealing with emissions. Here are the top ten reasons why;

Top Ten

  1. Action on climate in some form or other is an inconvenient but unavoidable inevitability. Business and  industry doesn’t really want direct, standards based regulation. These can be difficult to deal with, offer limited flexibility for compliance and may be very costly to implement for some legacy facilities.
  2. Carbon pricing, either through taxation or cap and trade offers broad compliance flexibility and provides the option for particular facilities to avoid the need for immediate capital investment (but still comply with the requirement).
  3. Carbon pricing offers technology neutrality. Business and industry is free to choose its path forward rather than being forced down a particular route or having market share removed by decree.
  4. Pricing systems offer the government flexibility to address issues such as cross border competition and carbon leakage (e.g. tax rebates or free allocation of allowances). There is a good history around this issue in the EU, with trade exposed industries receiving a large proportion of their allocation for free.
  5. Carbon pricing is transparent and can be passed through the supply chain, either up to the resource holder or down to the end user.
  6. A well implemented carbon pricing system ensures even (economic) distribution of the mitigation burden across the economy. This is important and often forgotten. Regulatory approaches are typically opaque when it comes to the cost of implementation, such that the burden on a particular sector may be far greater than initially recognized. A carbon trading system avoids such distortions by allowing a particular sector to buy allowances instead of taking expensive (for them) mitigation actions.
  7. Carbon pricing offers the lowest cost pathway for compliance across the economy, which also minimizes the burden on industry.
  8. Carbon pricing allows the fossil fuel industry to develop carbon capture and storage, a societal “must have” over the longer term if the climate issue is going to be fully resolved. Further, as the carbon pricing system is bringing in new revenue to government (e.g. through the sale of allowances), the opportunity exists to utilize this to support the early stage development of technologies such as CCS.
  9. Carbon pricing encourages fuel switching in the power sector in particular, initially from coal to natural gas, but then to zero carbon alternatives such as wind, solar and nuclear.
  10. And the most important reason;

It’s the smart business based approach to a really tough problem and actually delivers on the environmental objective.

Steps towards Paris 2015

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National climate negotiators and a number of Energy/Environment Ministers are currently meeting in Bonn as the global climate deal process slowly edges forward. Whether the steps being taken are big or small remains to be seen, but there are at least steps, so that is a start. The most well publicized have been those of the United States and China who are both active domestically with action on emissions. In the case of the USA this is the EPA rules that gained heavy media coverage and for China it is the notion that they will peak their coal use at some point in the reasonable future, perhaps as early as 2020. The idea of peak coal in China is also starting to appear in government conversations and is not just something emanating from the Chinese academic community.

But another step was also taken in Bonn last week when Ministers were in town as part of an ADP Dialogue; a new business coalition reared its head. Called “We Mean Business”, this is a coalition of a number of existing business linked organizations and has been established to demonstrate to government that a broad business base sees the need for action on climate change and is prepared to support their actions in creating the necessary policy frameworks under which emissions can then be reduced. “We Mean “Business” has started life with seven supporting organizations;

We Mean Business
The question that needs to be answered is how important is this and can such a group exert any influence over the process at all. Looking back, one parallel that comes to mind is USCAP (Unites States Climate Action Partnership), a group of some 25 companies and NGOs that coalesced around the 2007-2009 US process to implement climate legislation, but most notably a cap-and-trade bill. This was a detailed federal legislative process and USCAP certainly got into the weeds of it, with a comprehensive manifesto of requirements. When the Waxman-Markey Bill did eventually pass through the House there were many elements within it that aligned with the USCAP manifesto, so arguably that organization did have some influence on content. More importantly perhaps, the very existence of USCAP helped create the political space in which comprehensive legislation could be considered, even though the process eventually stalled and ultimately failed in the US Senate.

But Waxman-Markey was a specific piece of national legislation; at the international level the process is more complex. While a cap-and-trade system is a very tangible policy outcome with a set of well understood rules and metrics, the likely outcome from Paris may be far less defined. One aspect that is common to both is the need for political space in which to act. While the majority of this will come from the Parties themselves, business can play a role here. However, such a business coalition will have to act at both national and international levels to be truly effective, in that delegations are most likely given a certain negotiating mandate within which they can operate before they leave for the COP. As such, simply showing that business supports the process at the international level will probably not be enough.

The second area for business advocacy comes in terms of content. This is more difficult in that the business coalition will be made up of a broad range of constituents acting in many different sectors of the economy. While a cap-and-trade system may be ideal for one company in a given sector in a particular country, another company might prefer financial incentives to help it develop a particular technology. Further, the nature of the international agreement won’t include specifics such as cap-and-trade, but will be much more about the process of establishing suitable national contributions and commitments. However, a business coalition could at least ask for some basic building blocks to be included, such as the use of market instruments and the ability to transfer some or all of a national contribution between Parties , both necessary precursors to the longer term development of a global carbon market.

It is early days for “We Mean Business”, but it at least exists and is starting to mobilize resources and interest. But the hard work hasn’t started; what it will actually do and how it might positively influence the process and eventual outcome is for the days and months ahead.

Scaling up for global impact

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A visit to Australia offers a quick reminder of the scale to which Liquid Natural Gas (LNG) production has grown over recent years. This was a technology that first appeared in the 1960s and saw a scale up over the 1970s and 1980s to some 60 million tonnes per annum globally. As energy demand soared in the 1990s and 2000s, LNG production quickly rose again to around 300 million tonnes per annum today and could reach 500 million tonnes per annum by 2030 (see Ernst & Young projection below).

2012OGJcolors

Flying into Australia we crossed the coast near Dampier in Western Australia, which is currently “Resource Central” for Australia. The waters were dotted with tankers (I counted 14 on the side of the plane I was sitting on) waiting for loading, many of which had the distinctive LNG cryogenic tanks on their decks. Two days later the first shipment of LNG from the new Papua New Guinea project took place and this received considerable coverage in the Australian media. Clearly LNG is booming in this region, with even more to come. Most major oil and gas companies have projects in development and there are several LNG “startups” considering projects.

This is a great example of technology scale up, which is going to be key to resolving the climate issue by progressively shifting energy production and use to near zero emissions over the course of this century. Carbon capture and storage (CCS) is one of the technologies that needs to be part of that scale up if we are serious about net zero emissions in the latter part of the century.

There are many parallels between LNG production and CCS which may offer some insight into the potential for CCS. Both require drilling, site preparation, pipelines, gas processing facilities, compression and gas transport, although LNG also includes a major cryogenic step which isn’t part of the CCS process.

LNG production and CCS are both gas processing technologies so the comparison between them needs to be on a volume basis, not on a tonnes basis. CO2 has a higher molecular weight than CH4 (methane), so the processing of a million tonnes of natural gas is the same as nearly 3 million tonnes of CO2. As such, the production scale up to 500 million tonnes of LNG by 2030 could be equated to nearly 1.5 billion tonnes of CO2 per annum in CCS terms, which is a number that starts to be significant in terms of real mitigation. The actual scale up from today to 2030 is projected to be 200-250 million tonnes of LNG, which in CCS terms is about 700 million tonnes of CO2.

This is both a good news and bad news story. The scale up of LNG shows that industrial expansion of a complex process involving multiple disciplines from across the oil and gas industry is entirely possible. LNG took two to three decades to reach 100 million tonnes, but less than ten years to repeat this. In the following ten years (2010-2020) production should nearly double again with an additional 200 million tonnes of capacity added. These latter rates of scale up are what we need now for technologies such as CCS, but we are clearly languishing in the early stages of deployment, with just a few million tonnes of production (if that) being added each year.

What is missing for CCS is the strong commercial impetus that LNG has seen over the last fifteen years as global energy demand shot up. With most, if not all, of the technologies needed for CCS already widely available in the oil and gas industry, it may be possible to shorten the initial early deployment stage which can last 20 years (as it did for LNG). If this could be achieved, CCS deployment at rates of a billion tonnes per decade, for starters, may be possible. This is the minimum scale needed for mitigation that will make a tangible difference to the task ahead.

The commercial case for CCS rests with government through mechanisms such as carbon pricing underpinned by a robust global deal on mitigation. That of course is another story.