From the rarefied atmosphere of the Swiss Alps to a small London theatre, there has been a lot said about climate change over the last couple of weeks.

The World Economic Forum held its annual retreat at Davos, with climate change high on the agenda. Much of the discussion was about building additional momentum towards a UNFCCC led agreement in Paris at the end of this year. Business leaders, politicians and other prominent people from civil society reiterated the need for a strong outcome. World Bank President Jim Yong Kim was more specific and called on leaders to “break out of the small steps of business as usual and provide that structure, first and foremost by putting a price on carbon”. The call for more emphasis on carbon pricing has been a strong World Bank theme for a year now.

While there was good talk emanating from Davos, in Brussels the scene was very different. The EU Parliament ITRE Committee (Industry, Research and Energy) was apparently not listening to the calls from Davos and instead ended up with “no opinion” on the important proposals required to support the carbon price delivered by the EU ETS, through the early implementation of the proposed Market Stability Reserve (MSR). The “no opinion” outcome was the result of not supporting the need to start the MSR early and use the 900 million backloaded allowances as a first fill, but then rejecting an alternative proposal on how the MSR should be taken forward. The only silver lining in this otherwise dim cloud is that the debate is about the proposed structure of the MSR, rather than whether an MSR should be present at all. Nevertheless, it is disappointing that some industry and business groups in Brussels did not seem aligned with the recognition that many of their member CEOs were giving to the carbon pricing discussion in Davos just a few hundred miles away.  The proposals for the MSR now have to go to the important ENVI (Environment) Committee in Parliament as well as to the Member States, where there is cause for optimism that they will adopt a position in favour of a stronger MSR reform.

One business group did give very strong support to the MSR proposals, the UK and EU based Corporate Leaders Group (CLG). This organisation started its life 10 years ago, which means it is also celebrating a landmark birthday along with the EU ETS. The CLG sits under the Cambridge University Institute for Sustainability Leadership, with the Prince of Wales as its patron. This is a group that has been talking about the need for a robust carbon price in the EU for many years and backing that talk up with strong advocacy in Brussels and various Member State capitals. Birthday celebrations were held in London to mark the occasion, with the Prince of Wales in attendance. The CLG was a step ahead of the World Bank with its own Carbon Price Communique back in 2012. While the World Bank effort has garnered greater support than the original CLG effort, it is worthy of recognition that the current push for this important instrument had its roots in the business community.

Despite the important talk in Brussels and Davos, the real talk on climate change came from a small theatre in Sloan Square, London. Climate change might seem like an odd subject for the London theatre scene, but nevertheless there it was. Chris Rapley, former head of the British Antarctic Survey, more recently the head of the Science Museum and now Professor of Climate Science at University College London, staged an engaging one man show to talk about the climate. This wasn’t the Inconvenient Truth with its high profile narrator and 200 odd PowerPoint slides, but more a fireside chat about paleo-history, the atmosphere, trace gases and the global heat balance. Here was a man who had spent the majority of his life studying this issue, from field measurements in Antarctica to computer analysis of satellite observations and his message was very clear; we are in trouble. There was no alarm, no hysteria and no predictions of an apocalypse, but just a softly spoken physicist explaining his job and describing with great clarity what he had learned over the course of some forty years of hard work. The audience was engrossed by the monologue and the gently changing backdrop of graphs and charts that seemed to envelop the speaker.

Chris Rapley 2071

This production is a unique approach to communicating the climate change issue to a new audience. It is small in scale, but it will get people thinking about the subject and hopefully discussing it in less partisan terms. The show, 2071, has now completed a second short run in London but may be destined for some other venues. I would highly recommend it.

Ten years of the EU ETS

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

Check-under-the-hood

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

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

10 Years of the EU ETS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Carbon pricing in 2014

While there was a great deal of focus throughout 2014 on the road to Paris and the UNFCCC process that is taking us all there, the real developments of the year were around carbon pricing. But it wasn’t all smooth sailing.

From my own perspective, going through the discipline of producing an e-book on the climate issue helped me think through the real rationale for a carbon price. I had always looked at it through the “Pigouvian Tax” lens (a pricing correction for a negative externality), which is certainly a good one, but it doesn’t really frame the issue in terms of resource extraction economics and the stock nature of CO2 accumulation in the atmosphere. My slightly different take on all this is explained in my book and is based on a simple relationship between resource availability and eventual warming of the climate system. I concluded that;

Extraction economics and warming

In short, the eventual temperature rise is directly linked to the size of the global fossil fuel resource base (in GtC) multiplied by some extraction fraction which in turn is a function (f) of the difference between the price of energy and the extraction cost. In a world of sunk infrastructure costs, the marginal extraction cost might be very low, which either means that the energy price has to fall very low to limit temperature rise or another factor has to be introduced to shift the extraction economics, i.e. a cost for emitting carbon dioxide from energy use, or what is now simply called “a carbon price”.

Extraction economics and warming with carbon price

Not surprisingly then, putting a price on carbon is arguably the most important step that can be taken to limit warming. Trying to drive the price of energy down with alternatives is another option, but success is less than assured.

While the carbon pricing story has long been recognised, it is nevertheless proving difficult to implement. In the UNFCCC process it has been getting almost no airtime at all, at least until 2014. This was the year that the World Bank picked up the story in big way and by the time of the September UN Climate Summit in New York managed to have it solidly on the agenda. This was supported by their Statement on Carbon Pricing, signed by some 70+ governments and 1000+ companies. The World Bank effort picked up where the UK Corporate Leaders Group on Climate Change had taken the issue two years earlier with its Carbon price Communique.

Nevertheless, while the fact that a good portion of the UN Climate Summit and its multitude of side events was about carbon pricing and therefore deserves applause, the difficulty of translating well-meaning macro level support into granular policy implementation remains both very challenging and time consuming.

The unfortunate event of the year was the repeal of an active carbon pricing framework by the Australian government, particularly after the decade of effort and political capital that had gone into establishing it. Although Australia isn’t large in terms of global emissions, as a leading resource producer and developed economy it tends to punch above its weight in terms of external influence. Fortunately this event was eclipsed by a much bigger development that came a bit later in the year and may well be the one that sets the scene for real action on emissions in the 2020s. China announced that a single national carbon pricing system would be implemented from 2016, presumably replacing the multiple trials now underway. This system would mature over the following years such that it will be fully operational from 2020, which is when the expected Paris agreement will also become operational.

Mexico also established a modest carbon price in its economy and the Chilean government approved a pricing system from 2018 within the power generation sector. Korea proceeded with its plans for an emissions trading system, agreeing to a formal start this January. Discussions hotted up in North America, with Oregon and Washington considering pricing and Ontario in Canada also starting to think about possible options. The Quebec-California link, formalised in 2013, went into operation.

Another noteworthy event of the year was the shift in stance by the European Institutions and Member States on the role that government needs to play once carbon pricing markets and mechanisms are established. As the price in the EU ETS has fallen over recent years, many have argued that the market should be left to correct over time. But with a structural surplus showing no sign of disappearing, that view is changing. With the support of the Commission the EU Parliament approved the backloading of allowance auctioning to later in the current ETS Phase (i.e. from 2014 to 2018-2020) and is now in the process of developing and gaining approval for a permanent mechanism, the Market Stability reserve, to do a similar job. Timing is of the essence and the EU Institutions and Member States need to implement such reforms as soon as possible, and no later than 2017, to incentivise real investment in lower carbon technologies over the next decade.

Bringing all this together and catalysing the development of a global carbon market remains on the the “to-do” list, with the UNFCCC in a prime position to take the lead as part of the Paris process – but more on that another day.

Slowly but surely the map is changing colour, although much remains to be done. Carbon pricing remains contentious, both in its implementation and ongoing management.

Carbon pricing 2015

Carbon pricing 2014

Carbon pricing 2013

Carbon pricing 2012

A sense of scale for 2015

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The year 2014 saw this blog grow to become an e-book, which looked at the huge challenge of limiting warming to a global 2 °C temperature rise. The book is available on Amazon, here (or in the USA, here).

As we head into 2015, the opening chapter of the book perhaps provides a useful backdrop to the UNFCCC deliberations to come in the lead up to Paris. In this excerpt, I discussed the enormous scale of the global energy system;

. . . . not everyone has the opportunity to witness large-scale energy production first hand, so perhaps a few examples will help. In the hour or two that you might spend with this book, a lot will happen in the world. It’s become a very busy place powered by a lot of energy. Just to keep up with current energy demand, the next two hours will see;

  • Four VLCCs (Very Large Crude Carrier) of oil loaded somewhere in the world. That’s more than enough oil to fill the Empire State Building.
  • About two million tonnes of coal extracted. Much of this moves by rail, but if it were a single train it would be about 200 miles long.
  • 800 million cubic metres of natural gas produced, which under normal atmospheric conditions would cover the area enclosed by London’s M25 to a depth of about a foot; i.e. after half a day everyone in London would be breathing natural gas.
  • 8-10 cubic kilometres of water passing through hydroelectricity stations, or enough water to more than fill Loch Ness.

Our immediate contact with this is the fuel for our cars, the electricity that lights our homes and powers our stuff and the oil or natural gas we use in our boilers. But there is more, much more. This includes the unappealing, somewhat messy but nevertheless essential chemical plants where products such as sulphuric acid, ammonia, caustic soda and chlorine are made (to name but a few). Combined, about half a billion tonnes of these four products are produced annually. Produced by energy intensive processes operating on an industrial scale, but concealed from daily life, these four products play a part in the manufacture of almost everything we use, buy, wear, eat and do. These core base chemicals rely on various feed stocks. Sulphuric acid, for example, is made from the sulphur found in oil and gas and removed during refining and treatment processes. Although there are other viable sources of sulphur, they have long been abandoned for economic reasons.

Then there is the stuff we make and buy. The ubiquitous mobile phone and the much talked about solar PV cell are just the tip of a vast energy consuming industrial system that relies on base chemicals such as chlorine, but also  materials such as steel, aluminium, nickel, chromium, glass and plastics from which the products are made. The production of these materials alone exceeds 2 billion tonnes annually. All of this is made in facilities with concrete foundations, using some of the 3 to 4 billion tonnes of cement that is produced annually.

The global industry for plastics is also rooted in the oil and gas industry. The big six plastics* all start their lives in refineries as base chemicals extracted from crude oil.

All of these processes are energy intensive, requiring gigawatt scale electricity generation, high temperature furnaces and large quantities of high pressure steam to drive big conversion reactors. The raw materials for much of this come from remote mines, another hidden key to modern life. These, in turn, are powered by utility scale facilities, huge draglines for digging and 3 kilometre long trains for moving the extracted ores. An iron ore train in Australia might be made up of 300 to 400 rail cars, moving up to 50,000 tonnes of iron ore, utilising six to eight locomotives. These locomotives run on diesel fuel, although many in the world run on electric systems at high voltage, e.g. the 25 kV AC iron ore train from Russia to Finland.

This is just the beginning of the energy and industrial world we live in and largely powered by utility companies burning gas and coal. These bring economies of scale to everything we do and use, whether we like it or not. Not even mentioned above is the agricultural world that feeds 7 billion people, uses huge amounts of energy and requires its own set of petrochemical derived fertilizers and pesticides.  The advent of technologies such as 3D Printing may shift some manufacturing to small local facilities, but even the material poured into the tanks feeding that 3D machine will probably rely on sulphuric acid somewhere in the production chain.

On that note, happy New Year and enjoy the complete book. Hopefully more will follow in 2015.

* These are, polyethylene (PE), polypropylene (PP), polyvinyl chloride (PVC), polystyrene solid (PS), polyethylene terephthalate (PET) and polyurethane (PUR)

Putting the Genie Back

Yes, Virginia, there is CCS

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

Yes,Virginia,ThereIsASantaClausClipping

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

Dear Editor—

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

Virginia from Lima

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

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

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

VCM Process

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

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

Merry Christmas

See you in 2015, David.

Finding the way to Paris from Lima

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With the choice of a high road and a low road from Lima to Paris, the Parties seem to have selected the dirt track off to the side, replete with rocks, obstacles, difficult terrain and an uncertain destination. However, the map they have crafted in Lima, while full of options and dead ends, does at least have some clear pointers to the outcome that is actually needed. The question is whether or not these are followed.

The Lima call for climate action turned out to be a hard won outcome, with the talks extending into Sunday morning as negotiators struggled to reach agreement over one issue in particular that has dogged the process since its very beginnings in 1992 – the respective roles of developed and developing countries. Many commentators believed that the negotiations in Durban in 2011 had, at least to some extent, relegated this issue to the history books.

In particular, Professor Robert Stavins of the Harvard Kennedy School in Boston, said in his 2011 report on Durban;

It focuses instead on the (admittedly non-binding) pledge to create a system of greenhouse gas reductions including all Parties (that is, all key countries) by 2015 that will come into force (after ratification) by 2020. Nowhere in the text of the decision will one find phrases such as “Annex I,” “common but differentiated responsibilities,” or “distributional equity,” which have – in recent years – become code words for targets for the richest countries and a blank check for all others.

In the aftermath of Lima, the flavour of differentiation has reappeared and even some of the words. The call for climate action now incorporates a clear reference to “common but differentiated responsibilities“, albeit with the addition taglines of “respective capabilities” and “in light of different national circumstances“. Professor Stavins was quick off the mark with an assessment of Lima, but still maintained that the intent of Durban remained;

. . . . the fact remains that a new way forward has been established in which all countries participate and which therefore holds promise of meaningful global action to address the threat of climate change.

It is difficult to agree with this given the recent negotiations. By contrast, Jonathan Grant of PWC referred to the final day of Lima as “trench warfare mentality”. While it is certainly the case that all countries are still required to submit INDCs of some description, the allowable range of options and structure to pick from has broadened considerably. Notably, Parties “may include” details such as quantifiable information and time frames, rather than the previous wording of “shall include”.

Adaptation planning is strengthened considerably, with this subject now highlighted in the opening lines of the Lima text and also referenced clearly in the context of INDCs. For developed countries this probably has little meaning in terms of their own actions, but for a number of developing countries this could be interpreted as a call for additional financial assistance from developed countries simply to build national infrastructure. The Loss and Damage issue also resurfaced with specific mention in the Lima text. These two apparent concessions may turn out to be a high price to pay for retaining some semblance of the Durban mitigation philosophy.

The intensity with which the developed / developing country issue erupted in the last hours of the Lima COP raises valid questions about the negotiations over the coming year. Leaving this particular issue still looking for a solution in Paris itself may be a burden too great for those final days, but it could also be that no matter how much effort is put into solving it in the interim, it will nevertheless emerge again in the last hours in 12 months time simply because negotiations tend to do things like this.

Looking more positively at the Lima call for climate action, the 40 page annex, “Elements for a draft negotiating text“, throws up some interesting tidbits but also a host of negotiating options which will need to be resolved. Two tidbits of note are;

  1. The mention of carbon pricing in the text; “Acknowledging that carbon pricing is a key approach for cost-effectiveness of the cuts in global greenhouse gas emissions.
  2. The reference on several occasions of an end-goal of net-zero anthropogenic emissions; “Also recognizing that scenarios consistent with a likely chance of holding the global average temperature increase to below 2 °C relative to pre-industrial levels include substantial cuts in anthropogenic greenhouse gas emissions by mid-century and net emission levels near zero gigatonnes of carbon dioxide equivalent or below in 2100.

The carbon pricing mention is almost certainly the result of the recent tireless work of the World Bank in getting this critical subject back on the global agenda, but the reference is rather empty in that no strong follow-up text supports it. Rather, there are several vague references to the use of markets and mechanisms.

The “net zero” reference though is quite bold, in that even if this century sees a sharp reduction is emissions, a net zero goal is much more challenging. Residual emissions from agriculture, industrial processes, land use changes and some level of direct fossil fuel use will likely remain well into the 22nd century if not beyond that, which means at a minimum some large scale application of carbon capture and storage at some point in the future.

There was much more to Lima than just the last hours of tense standoff politics, but that is what the world will likely focus on in the coming days. The draft negotiating text sets out some clear options for the future, although if the weakest of these is picked in every instance the end result will have hardly been worth the effort. However, there is also text there that doesn’t have options, so that may well see the light of day in Paris. This is the case for some of the “net zero emissions” wording and also the need for Parties to “develop low emission strategies” and “maintain commitments / contributions / actions at all times“.

As such, there remain a few reasons to be hopeful.

Wandering the COP20 campus, listening to side events and hearing senior political, business and NGO representatives talk about the climate issue results in a mild reality distortion field impairing your judgement; you start to feel sure that we must already be on a new energy pathway, that global carbon pricing is just around the corner and that the Paris deal will deliver something approaching 2°C.

Then something happens to shatter that field and realisation sets in that there is still a long way to go before a truly robust approach to the climate issue emerges. On Tuesday evening the field was disturbed by tweets from a colleague at PWC @JG_climate reporting on negotiators squabbling over INDCs, with Brazil’s concentric differentiation approach causing some angst amongst a number of developed countries and the proposed text describing the nature of an INDC expanding by some thirty pages. This negotiation is far from over and the road ahead to Paris will likely be very bumpy. There will be a few dead-ends to watch out for as well.

Another reality hit home on Monday afternoon with the recognition that many people in the civil society groups here in Lima just don’t want to hear about the reality of carbon capture and storage (CCS). The Global Carbon Capture and Storage Institute (GCCSI) held an excellent and well attended side event on Monday afternoon which was initially mobbed by some 100+ demonstrators and their press entourage. The demonstrators crowded into the modest sized room and the hallway outside, waited for the start of the event and then promptly left as Lord Stern opened the side event with his remarks on the need for a massive scale-up of CCS. Arriving and then departing en masse allowed them to tweet that civil society had walked out on Lord Stern. The demonstrators were equally upset that Shell was represented at the event with my presentation on yet another sobering reality; 2°C is most likely out of reach without the application of CCS; also a finding of the IPCC in their 5th Assessment Report. They also took exception to flyers for my book which carries the same message.

CCS Event (small)

What was really concerning about this walk-out was that the younger people who made up the group would rather protest than listen and learn. Had they stayed they would have heard a remarkable story by Mike Monea of SaskPower who talked about the very successful start-up of the world’s first commercial scale coal fired power plant operating with carbon capture, use (for EOR) and storage. This technology needs some form of carbon pricing structure for delivery and in the case of this project the bulk of it came from the sale of CO2 for EOR. There was also a capital grant from the government. Importantly, SaskPower noted that a future plant would be both cheaper to build (by some 30%) and less costly to operate. This potentially points the way to a technology that can deliver very low emission base load electricity at considerably lower CO2 prices than the ~$100+ per tonne of CO2 that current desktop studies point to. That may also mean CCS appearing without government support sooner rather than later. Of course, the actual construction and delivery of second generation projects will still be required to confirm this.

A minor reality distortion arose from a question directed at me during the GCCSI side event. One audience member asked me about Shell’s membership of ALEC, a US organisation that operates a nonpartisan public-private partnership of America’s state legislators, members of the private sector and the general public.  ALEC doesn’t seem to think that a carbon price should be implemented in the USA, hence the question to me given Shell support for carbon pricing.  Responding to the Climate correctly reported on my response, which was along the lines of “. . that despite their position  on climate issues we still placed a value on their ability to convene state legislators”, but DeSmogBlog had their own interpretation of this. They reported on this under a headline which stated “Company ‘Values’ Relationship with Climate-Denying ALEC”.

It’s also proving a challenge to gain acceptance for the reality of markets and the role they are likely to have in disseminating a carbon price throughout the energy system. This means that carbon market thinking is still struggling to gain a foothold in text proposals for Paris, with one negotiator commenting at an event I attended that “we don’t see much call for markets at this time“. Silence on markets is the preferred strategy for some Parties, with others taking the view that specific mention and some direction is a must. More on this at another time as the Paris text develops further.

The evenings in Lima have been filled with some excellent events. With so many people in town, dinner discussions are convened by the major organisations represented here, which results in great conversations, useful contacts and plenty of new ideas to think about. The Government of Peru have organised and run a very good COP, despite early concerns that there were initially no buildings on the site they chose for the event.

Brazil is back; but are they a decade late?

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COP20 in Lima ended its first full week on a mixed note, but with some positive signs for the ongoing process. The detailed discussions on the role of carbon markets under the SBSTA ended in disagreement and postponement which was disheartening, but there remains hope that this key subject will still see the light of day under the ADP during the coming days. Curiously, China (and others) opposed deepening the market discussion at SBSTA because of a lack of guidance from the ADP itself, but according to the Earth Negotiation Bulletin they stated in the ADP when reflecting on the Paris Agreement non-paper (ADP.2014.11.NonPaper) that “sections on market and non-market approaches, and new market-based mechanisms could prejudge discussions under the Subsidiary Bodies”. They seem to be setting themselves up for their own private Catch-22 there. It was also unfortunate that those who will pick up the ongoing challenge posed by carbon emissions and climate change were reported on as follows; “YOUNGOs noted that markets have not delivered what they promised and called for a moratorium on markets.” Perhaps they have been reading Naomi Klein’s book “This Changes Everything”.

One document in particular that drew attention was a paper circulated by Brazil, detailing an idea they had proposed at the October ADP meeting. Brazil have a long history of creative intervention in the process, being the country that “invented” the Clean Development Mechanism (CDM), which over the decade of its operational life has delivered tens, if not hundreds of billions of dollars (depends on your measurement definitions) of carbon finance to developing countries. It appears that Brazil is back to its creative best with a paper on “concentric differentiation”, which draws together both the concept of CBDR-RC* and the need for universal acceptance and eventual implementation of absolute targets as the route to atmospheric stabilisation of carbon dioxide.

The paper is best described by referencing a diagram included by Brazil (see below). Initially the INDCs** of various parties are scattered throughout the circles depending on their capabilities, with all developed countries starting in the middle. The crucial change to previous attempts at agreement is the inclusion of the proposal;

“developing country parties are expected to include in their respective NDC a type of economy-wide mitigation targets, leading to absolute targets over time”

This means that everyone migrates inwards as their capabilities allow, but that developing country parties at least start with an emissions goal, albeit intensity based, per capita based or based on a business-as-usual (BAU) deviation. Least developed economies start in the outer ring and are encouraged, but not required to present an INDC. Eventually all parties end up with absolute targets in the middle.

Brazil concept

This is a very encouraging proposal by Brazil and it also includes an extensive reference to markets, cap-and-trade, a reformed CDM and so on. But without wanting to take away from the importance of their thinking, it does raise the question of whether it is a decade or more too late. This is the proposal that should have come when parties were negotiating onward commitment periods of the Kyoto Protocol (KP), thereby giving that agreement new life and making it fit for purpose in the 21st Century. Almost all the necessary pieces were already in place, it simply (!! – nothing is ever that simple) required the addition of the middle ring and the provisions for promotion.

In KP language, the centre ring is the AAU (Assigned Amount Unit) world, now only home to the EU, Norway, Australia and Ukraine. Even Japan has left. The outer ring is the CDM world, which relies on financial flows from the inner ring. A renegotiation and addition to KP could have inserted the middle ring and promotion requirements and even developed a new carbon accounting unit for intensity based targets. With all three rings based on carbon units, the much needed “global carbon market” could have taken off relatively quickly. Such a design might have even brought back countries such as the USA given that its objections regarding developing country actions would have been addressed.

One aspect of the Brazil proposal that has some traction in the ADP is the idea that “backsliding” on INDCs won’t be permitted. In other words, once you have declared an INDC with an absolute target, that is where you stay.

The Brazil proposal is for the ADP and not for the KP; which means that parties will have to reinvent everything from scratch. But at least Brazil is there with its creative input leading the way. On to Week 2 in Lima where the Parties are at least into the process of negotiating text, rather than negotiating the procedures under which they would even consider text.

 

* Common but differentiated responsibilities and respective capabilities

**Intended nationally determined contributions

 

COP20 is now underway in Lima and I have been on the newly created site for two days. Less than three months ago this was apparently an empty piece of land in a large Peruvian government complex, but now it is a bustling and well fitted out set of temporary buildings for housing negotiators and observers from some 190 countries; plus of course their entourage, a large security contingent, caterers, support staff and voluntary guides. The facilities are good and the meetings have started, but solid progress is hard to identify. There’s a lot resting on Lima as Carbon Visuals have clearly shown!!

Lots resting on Lima

Although the ADP (The Ad Hoc Working Group on the Durban Platform for Enhanced Action) is charged with the unenviable task of producing an agreement text for Paris in just one year and has been running for three years with this in mind, the opening days here are once again like watching the opening rounds of a chess match, with the Parties positioning themselves for later confrontation rather than attempting to clear the way and open up the game. This isn’t to say that nothing has happened since Durban; there is at least a non-paper on elements of a draft negotiating text and this is where the discussions for this COP have started.

While the ADP continues its discussions, the various strands of other dead or dying negotiations continue on, although to what end it is sometimes hard to see. Sitting within the technical bodies are the remnants of the LCA (the failed Copenhagen agreement), which includes the Framework for Various Approaches (FVA) and New Market Mechanism (NMM). This is where the main discussion around the use and expansion of carbon markets and mechanisms sits, but progress here has been close to zero since the discussions fell apart in Warsaw as I reported last year. No progress is being made in Lima, with a standoff between parties preventing any further discussion based on objections from Brazil, China, Bolivia, South Africa and Saudi Arabia to this work continuing in the absence of a mandate from the ADP. They have argued that until the ADP takes shape and sets the scene for the development of a carbon market framework, then there is no point having discussions on this subject on the sides. The problem is that unless these side negotiations make some progress in defining what a carbon market framework might look like, the ADP can’t really incorporate the necessary hooks within its structure to give the mandate to the FVA and NMM workstreams to continue their deliberations. Catch 22 comes to mind!

Perhaps on a brighter note, an active side event schedule is well underway. Attendance at these events, often lacklustre in the first few days, appears to be good, with an IPCC event that I spoke at on Wednesday afternoon playing to a nearly full house in quite a large room. This was an event about how people use and interpret the findings of the IPCC, rather than what the IPCC itself had to say in its 5th Assessment Report. But even here the differences in how people view the world show up. I spoke about the key role that CCS plays in scenarios that are targeting aggressive reductions (i.e. 430-480 ppm CO2e) and how a particular table in the IPCC report showed the sharp increase in costs if CCS was unavailable.

IPCC WGIII Table SPM2

My point was not just to highlight this table, but to use it to illustrate a problem the IPCC has in taking complex information and bringing it to the surface. The table was my case study. While it represents the actual findings of the IPCC, it seems to have little bearing on what people think (see below for my key slide from the presentation I gave) they said and I argued that the IPCC and UNFCCC are part of the problem in the way they summarise, shorten, tweet and disseminate the data. Deep down in the 5th Assessment Report it is very clear that a 2°C outcome is very (perhaps totally) dependent on the deployment of CCS, but this wasn’t even discussed in the high level summaries and press releases that were put out at the time. As I mentioned back in September, when the UN Climate Summit took place in New York, CCS wasn’t even on the agenda but a whole session was devoted to renewable energy. While renewable energy (solar / wind) is important in the context of energy access, the table clearly highlights that it isn’t really key to 2°C.

Declining facts

As if to underscore the point, the panellist from Climate Action Network took the stand and said that the IPCC work helped him realise that the world should and could be running on 100% renewable energy by 2050. It wasn’t at all clear to me where this realisation came from in the actual IPCC work, but you can probably guess who had the longest line of audience members wanting to be met with after the event – it wasn’t me.

Let’s hope for some greater enlightenment in the days to come.