Author: dchone

I work for Shell International Ltd. and I am the Chief Climate Change Adviser for Shell, working in the Shell scenarios team. I joined Shell in 1980 after graduating as a Chemical Engineer from the University of Adelaide in Australia. I have worked in refinery technology, oil trading and shipping areas for Shell. I am a board member of the International Emissions Trading Association (IETA), was Chairman of IETA from 2011-2013 and I am also a board member of C2ES in Washington.

A chat with ChatGPT about emissions mitigation

dchone January 12, 2023

In a recent article from the World Economic Forum the authors made the point that artificial intelligence (AI) systems will be essential for the emissions mitigation task that society faces. In fact they go so far as to say that “without AI, we won’t meet ESG goals and address climate change”. In the article they refer to specific systems now coming into use, with different systems tasked with managing particular tasks within the overall mitigation journey. They conclude by noting;

Corporations that connect all their relevant data within a unified AI platform — not just ESG and financial data streams — will benefit the most. When corporations can see the entire picture and understand all the ESG metrics, only then will we produce goals that provide meaningful change and avoid the worst effects of climate change.

At the societal level, AI platforms are also starting to emerge and they are being designed to tackle a broad range of issues and questions by being introduced to huge amounts of data, such as you and I might come across if we sit all day and trawl through hundreds of internet sites and pages. The skill of the AI platform will be to integrate this data and use it to derive clear answers to questions and offer proposals for change so that progress can be made. Ideally the systems should develop insights that are not obvious to humans looking at the same data, perhaps because of the amount of data presented, which the AI system can easily handle.

Late last year one of the newest versions of such a system was made available for public testing. It is called ChatGPT and can be accessed here. To be fair this is a system that is designed more to engage in a conversation than to solve the world’s problems, but it does still draw on an immense data resource in compiling its responses. As such, I thought it would be interesting to engage with the system over the Christmas break and see what conclusions it might draw from a discussion on emissions mitigation. Note that the answers below are abbreviated, simply to limit the length of the blog post.

I started with posing a simple question;

Q: Atmospheric CO2 is now over 420 ppm. Why is this a problem?

A: Rising temperatures, changing climate, ocean acidification and therefore overall negative impacts on human health. Overall, it is important to reduce our greenhouse gas emissions and limit the concentration of CO2 in the atmosphere in order to mitigate the negative impacts of climate change and protect the health of people and ecosystems.

Q: So how might carbon dioxide emissions be reduced very quickly, say halved by 2030?

A: Increasing the use of renewable energy, improving energy efficiency, planting trees, electrifying transportation and making use of carbon capture and storage: Carbon capture and storage (CCS) is a technology that captures CO2 emissions from power plants and other industrial facilities and stores them underground. CCS has the potential to significantly reduce CO2 emissions from these sources, but it is not yet widely deployed.

So ChatGPT certainly understands the issue and is clear on the direction of travel. It also sees the importance of CCS without any prior reference to the technology by me (other than it may have read my blog posts as part of its learning), so that’s a good start. But getting it to be specific on how quickly these technologies could be scaled and how much difference they might make by 2030 turned out to be much more difficult.

Q: How quickly would these steps need to be scaled to cut emissions in half by 2030?

A: The rate at which these measures would need to be scaled up in order to cut carbon dioxide (CO2) emissions in half by 2030 would depend on the current level of emissions and the specific measures being implemented. For example, transitioning to electric vehicles (EVs) and public transportation could make a significant dent in transportation-related CO2 emissions, but it would require a rapid expansion of charging infrastructure and a significant shift in consumer behavior towards EVs. Improving energy efficiency in buildings and appliances and increasing the use of renewable energy sources could also make a significant impact on CO2 emissions, but again, it would require policy changes, infrastructure investments, and the deployment of new technologies. Planting trees and implementing carbon capture and storage (CCS) could also contribute to reducing CO2 emissions, but these measures alone are unlikely to be sufficient to achieve a 50% reduction by 2030. Overall, reducing CO2 emissions by 50% by 2030 would require a rapid and concerted effort across multiple sectors, including transportation, energy, and industry, and would likely involve significant policy and infrastructure changes, as well as the deployment of new technologies.

From this point the conversation became rather circular, with the system continually rephrasing the answer it had already given in different ways, depending on how I asked the question. More than once it said;

A: However, it is generally understood that the increased deployment of low-carbon technologies, such as EVs, solar PV, and advanced nuclear technologies, can make a significant contribution to reducing CO2 emissions.

A: However, if these technologies were widely deployed and powered by low-carbon energy sources, they could make a significant contribution to reducing CO2 emissions.

But the system was reluctant to offer a numerical assessment even when asked, although eventually it offered a number:

Q: By how much would global emissions fall if EV production, solar PV module production and nuclear power deployment all quintupled by 2030.

A: It is difficult to estimate by exactly how much global carbon dioxide (CO2) emissions would fall if electric vehicle (EV) production, solar PV module production, and nuclear power deployment all quintupled by 2030, as it would depend on a number of factors, including the current level of emissions, the specific technologies being deployed, and the mix of energy sources used to power these technologies.

Q: Can you make a numerical estimate of the likely reduction in emissions?

A: It is difficult to make a numerical estimate of the likely reduction in carbon dioxide (CO2) emissions that would result from quintupling electric vehicle (EV) production, solar PV module production, and nuclear power deployment by 2030, as it would depend on a number of factors, including the current level of emissions, the specific technologies being deployed, and the mix of energy sources used to power these technologies.

Q: Can’t you make an estimate based on some simple assumptions?

A: It is possible to make a rough estimate of the likely reduction in carbon dioxide (CO2) emissions that could result from quintupling electric vehicle (EV) production, solar PV module production, and nuclear power deployment by 2030 based on some simple assumptions. However, it is important to note that such an estimate would be highly speculative and would not take into account a number of important factors that could affect the actual reduction in CO2 emissions. For example, if we assume that:

All EVs are powered by electricity from low-carbon sources and replace gasoline-powered vehicles
All solar PV modules are used to displace coal-fired power plants
All nuclear power is used to displace coal-fired power plants

. . . . and we further assume that these technologies are able to completely displace the higher-emitting technologies they are replacing, we can estimate the potential reduction in CO2 emissions that could result from these measures. Under these assumptions, if EV production, solar PV module production, and nuclear power deployment were all quintupled by 2030, it is possible that CO2 emissions could be reduced by a rough estimate of around 15-20%. However, it is important to note that this is a highly speculative estimate and the actual reduction in CO2 emissions could be higher or lower depending on a range of factors.

Q: Do you mean 15-20% of total global anthropogenic CO2 emissions?

A: Yes, the estimate of a 15-20% reduction in carbon dioxide (CO2) emissions that I provided is based on total global anthropogenic CO2 emissions, which are emissions that are produced by human activities, such as the burning of fossil fuels and deforestation.

There we have it; after some pushing the AI system was able to determine that quintupling (5x) the current deployment of solar PV, EVs and nuclear power generation would give us a 15-20% reduction in emissions by 2030, although this is still along way from the 45% goal of the Glasgow Climate pact. With that in mind I asked a follow-up question.

Q: So what extra steps would need to be taken to get a 45-50% reduction in global emissions?

I was back in the same loop I had started with in that ChatGPT didn’t want to be specific on the measures. After some additional pushing I hadn’t progressed out of the loop, but one extra important insight emerged.

A: Implementing carbon pricing: Establishing a price on carbon, through mechanisms such as a carbon tax or cap-and-trade system, can provide incentives for businesses and individuals to reduce their CO2 emissions.

At least as a set of basic insights and discussion points, ChatGPT seems to have a grip on the climate issue, but it is far from making clear recommendations on what needs to happen, when and at what scale. That still seems to be a job for the energy modelling community . . . . . at least for now!!

ChatGPT is an open system to try and use, which is what I have done. This post isn’t meant as a recommendation or a criticism of ChatGPT, but just a look at how AI is developing.

Happy New Year!

New business models required

dchone December 6, 2022

With COP27 now behind us and no significant changes to Nationally Determined Contributions (NDC) on offer (e.g. from China), various commentators are now remarking that meeting the goal of 1.5°C may be in doubt. This means passing the 500 Gt carbon budget that the IPCC linked to the 1.5°C goal.

I have discussed this in many earlier posts, for example here and here. However, passing 1.5°C in the short term certainly isn’t the end of the story.

Many recent IPCC scenarios also show 1.5°C being breached, but deploying removals later in the century to draw carbon dioxide out of the atmosphere is then used in the scenario to reverse the balance and at least meet the 1.5°C goal by 2100. In the IPCC Special Report on 1.5°C released in 2018, all four model pathways required some form of future removal, ranging from very little in P1 to significant in P4, depending on the lifestyle and transition pathway the particular scenario embraced and the level of overshoot of 1.5°C. Both nature based and technological removals are required. In the 2018 report technological removals were shown as bioenergy processing with carbon capture and storage (BECCS), but today we could realistically envisage both BECCS and direct air capture with CCS (DACCS) playing a role. The latter has advanced considerably in just five years.

**Source: IPCC SR15 Summary for Policy Makers**

So as well as requiring CCS to get to net-zero emissions, society will almost certainly have to consider removals as a technology to deliver negative emissions globally, i.e. after the goal of net-zero emissions is achieved. Large scale removals might also offer the much longer-term prospect (i.e. in the 22nd century) of winding the atmospheric carbon dioxide levels back towards pre-industrial levels.

While global net-negative emissions on a scale that shifts the atmospheric concentration of carbon dioxide is technically possible, the contrast with the very limited scale of deployment of BECCS and DACCS today seemingly takes the task into the realms of science fiction. Yet a century ago the scale on which energy is generated now would also have seemed like science fiction, so the task should not be dismissed. Nevertheless, the longer term could require these technologies and changes in land use to scale to many billions of tonnes of carbon dioxide removal per year. The question this poses is not whether it is possible, but how can it be made to happen.

Carbon capture and storage has become a commercially available technology over the past twenty years, yet global deployment remains very limited. The technology itself isn’t the issue, it is the lack of sustainable business models for deployment. There is a carbon price in Europe, but for many years it languished at just a few Euros and other similar systems currently operating throughout the world typically maintain prices at levels well below what is required for CCS and therefore, not surprisingly, well below the levels required for a 1.5°C transition. Bespoke CCS deployment policies are almost non-existent outside the United States. In the USA a specific tax-credit mechanism exists at the Federal level and the California Low Carbon Fuel Standard will allow the use of credits based on DACCS. As a result the USA is the global leader in CCS deployment and the pipeline of projects looks impressive, largely based on the revised tax credit available through the Inflation reduction Act. There are also DACCS projects emerging and a BECCS ethanol facility has operated in Illinois for some time now.

CCS requires a very long term business model, based on some form of market pull. Today the support for CCS comes largely from direct government grants and support mechanisms for early stage technology, but there is always a limit to such incentives. However, with net-zero emissions now becoming a clear goal in most energy system policy frameworks, a more sustainable model is likely to emerge as businesses seek to mitigate their own emissions, either due to direct policy requirements or indirect consumer preference for zero carbon emission goods and services. A balance will be found between the cost of new technologies such as green hydrogen for industry and making use of CCS in industries that continue to use fossil fuels. Society will find ways to absorb these costs over time as net-zero emissions is reached and whether this results in large or small scale deployment of CCS remains to be seen, depending on the relative costs between competing pathways.

But the next stage of the CCS journey, possibly commencing as early as the 2040s for some, will be to deliver net-negative emissions via DACCS and BECCS, i.e. drawdown of carbon dioxide from the atmosphere. While this may seem like a long way off, the history of creating basic CCS business models points to the need for an early start. The journey probably commences at the UNFCCC level, where a framework for net-negative emissions would need to be established including a global goal, some form of burden sharing agreement between nations and a discussion on the role of nature versus the role of technological drawdown solutions. Unfortunately, with history as a guide, this could take some time. But perhaps the bigger challenge will be for national governments to cascade the need into the economy and find ways to spread the cost of net-negative emissions across society within goods and services and even through taxation. This may not be popular given the net cost of the task, yet with no immediate tangible benefit. Imposing deep emission reduction goals is still proving to be a difficult task in some economies today, let alone asking the population to pay for atmospheric drawdown of carbon dioxide. However, the very long term benefit can be measured in practical terms, such as avoiding metres of sea level rise.

With the prospect of a 1.5°C overshoot scenario looking likely, future biological and geological storage of atmospheric carbon dioxide becomes essential. This task may lead to the development of huge industries engaged in such activities, or very little activity at all, depending on the policy frameworks and business models that emerge.

Revisiting the climate budget maths

dchone November 7, 2022

As COP27 gets underway this week, world leaders will be descending on Egypt with a further round of speeches, promises and pledges to keep 1.5°C alive as a goal to strive for. But as each day passes and global emissions continue at around the rate of 40 gigatonne per year (Gt/y), the simple maths behind the carbon budget gets more and more difficult.

In the IPCC 6^th Assessment Report WGI summary the climate scientist authors developed Table SPM.2, shown below, which detailed the remaining carbon budget from 1^st January 2020 for a given eventual global warming, relative to 1850-1900. In the case of 1.5°C this is 500 Gt. The permitted budget changes depending on the level of warming and the likelihood of the outcome. So a 2°C outcome with a 67% likelihood offers a budget of 1150 Gt, or over twice that for 1.5°C at 50% likelihood.

***Source: IPCC 6th Assessment Report WGI Summary for Policy Makers***

While a number measured in hundreds of billions of tonnes (or half a trillion in the case of 1.5°C with 50% likelihood) may seem very large, when set against current annual global emissions of over 40 Gt/y, it is around a dozen years. This means we are knocking on the door of 1.5°C right now. In fact, the 1.5°C carbon budget is being consumed by society at such a pace, that just during the time COP 27 is held, another 1 Gt of the 500 Gt will have been used.

Over time, the consumption of the carbon budget is measured in terms of cumulative emissions, or in a chart of annual emissions vs. time in years it is the area under the line. This then gives us a simple way of looking at the carbon budget and establishing what different trajectories might mean in terms of outcome.

The chart above starts at 2020 and goes through to 2070. In each of 2020, 2021 and 2022 the emissions are either known or almost known, so they are represented in grey as budget consumed. The total is about 120 Gt, with 2020 being the lowest due to the sharp COVID related downturn in March, April and May of that year. With the simplified assumption that emissions won’t be negative at some future time (but of course they may be and undoubtedly will need to be), the linear trajectory for 1.5°C now requires a step down in emissions in 2023 to 40 Gt, then a rapid reduction to 20 Gt in 2030 followed by net-zero emissions in 2047. By contrast, a direct linear reduction from current levels to net-zero emissions in 2050 means a 1.6°C outcome.

Three other combinations are also shown:

A plateau in emissions to 2030 then a quick linear descent to net-zero in 2050 results in 1.7°C of warming.
A further rise in emissions to 2030, then a fall to net-zero in 2060 gives 1.9°C of warming.
If a further rise is followed by net-zero emissions in 2070, then we might expect 2°C of warming.

Given the acceleration of the energy transition in recent years and the new pressures now being placed on fossil fuel use through both price and supply concerns, there are reasons to believe that the transition could accelerate further. It will certainly need to. In the last 15 years the share of coal, oil and natural gas in the primary energy mix has dropped by just 2 percentage points, a trend that would require 600 years to get to zero. By contrast, a 1.6°C outcome requires that rate of change to rise by a factor of 20 to nearly 3 percentage points per year. This is the challenge that leaders at COP 27 need to focus on.

And just like that, zero emissions looms

dchone October 14, 2022

Some time ago I posted a discussion on the allowance decline within EU Emissions Trading System (EU ETS), with no new allowances available after 2058 based on the proposed linear rate of decline of 2.2% each year, but assuming that this would be brought forwards to 2050. Back in early 2020 the EU was in the first stage of laying out its ambition for the 2020s and I noted then;

Based on a continuation of the EU ETS under the current trajectory it won’t reach zero until the late 2050s. . . . Under a revised EU ETS, from January 1st 2050 (or perhaps 2051) there will be no further allocation of allowances, either by auction or freely given. Yet this may not be a time in which there are no emissions – thirty years is possibly insufficient time for the complete turnover of everything in the large emitters system.

A great deal of water has passed under the bridge since then and today as we look at the EU ETS, a radically different picture emerges. The EU has announced its Fit for 55 package and as part of that has also announced a significant change for the EU ETS. Notably, they have said;

In phase 4 of the EU ETS (2021-2030), the cap on emissions continues to decrease annually at an increased annual linear reduction factor of 2.2%. The Union-wide cap for 2021 from stationary installations is fixed at 1,571,583,007 allowances. The annual reduction corresponding to the linear reduction factor is 43,003,515 allowances. . . . . The Commission is proposing a new target to reduce emissions from the EU ETS sectors by 61% by 2030, compared to 2005 levels. This represents an increase of 18 percentage points compared to the -43% target under the existing legislation. To reach this target, the Commission proposes a one-off reduction of the overall emissions cap by 117 million allowances (‘re-basing’), and a steeper annual emissions reduction of 4.2% (instead of 2.2% per year under the current system).

The above is more easily viewed graphically and is shown below. As previously discussed, the original 2.2% line meant that the EU ETS finally reached zero new allowances in the late 2050s, but the changes proposed under Fit for 55 bring that forwards. Note that the rebasing proposal is a one-off reduction of 117 million allowances to bring the cap in line with a pathway that would have materialised if the 4.2% reduction factor would have been applied from 2021 onwards, but the chart below shows the new line as continuous from 2021.

The market doesn’t currently know what the plans are for post 2030 when annual allowance allocation will be around 800 million tonnes, but if the 4.2% linear reduction factor continues, then new allowance allocation will cease in 2041. That would bring the date for zero allocation forwards 17 years from the current 2.2% reduction factor line.

Zero emissions for the ETS sectors (power generation, industry, aviation and soon to include marine) in 2040 is incredibly ambitious and I could argue with some certainty that those same sectors won’t be emissions free in that time. There is no doubt that significant progress will have been made, but the idea that every plane will run on 100% sustainable aviation fuel or a new fuel, e.g. hydrogen, or that every cement plant will incorporate carbon capture and storage in just 18 years is unlikely. As such, the Commission will either have to alter the post 2030 trajectory or plan on a somewhat different outcome.

Altering the post 2030 trajectory such that the system reaches zero allowances in, say, 2050 may seem like the simple solution, but by the late 2020s when this could be under discussion, society may well be facing a situation where Europe both wants and needs to reach net-zero emissions prior to 2050. This would be linked with the global emissions pathway relative to the meagre carbon budget remaining for 1.5°C (now <400 Gt). In short, we will be heading for over-expenditure, which in turn means at least some regions reaching net-zero emissions even earlier than 2050. However, incorporating other sectors into the EU ETS, such as road transport, could also offer some flexibility with regards the decline rate of the cap.

The second approach is one that I have written a great deal about (e.g. here and here), but one that is still not part of the current EU ETS. It is to embrace net-zero and recognise that the ETS will need to become a platform for trading and surrendering carbon removal units against ongoing emissions. Removal units might come from within the EU in the form of units representing Direct Air Capture with geological storage (DACCS) or from outside under Article 6 of the Paris Agreement. The latter could include a much broader range of removals, such as the capture and storage of CO₂ from ethanol manufacture in a country such as Brazil. Whatever is included will need to be the subject of extensive consultation, but without it the EU ETS will likely become an infeasible system (meaning that the only option for emitters is to default or shut down) as the zero allowances point is approached. The earlier that zero allowances is set, the more likely is the infeasibility.

Removals are near to becoming essential in Europe and it is important that the Commission accelerates its thinking on incorporating them within the EU ETS. Removals need to form part of the system within the 2020s, such that during the 2030s the mechanisms to create them can flourish and deliver.

Refreshed climate ambition from two key countries

dchone September 23, 2022

In recent months, two key countries have sent revised nationally determined contributions (NDC) to the UNFCCC, notably my home country Australia and India. An NDC is a national submission to the UNFCCC outlining what steps that country will take in the near term (5-10 years) towards meeting the goals of the Paris Agreement. Australia might not seem important in the grand scheme of things, given its small population, but the new NDC seeks to change the national discussion on climate by setting an aggressively ambitious goal for 2030. This matters because Australia has often been cast as a laggard on reducing emissions, with the pace of change in that country having broader international implications politically than just domestic emissions at home. India is of course critical given it’s population and potential for significant use of fossil fuels to grow its economy over the coming decades.

In the case of Australia, the government has pledged to reduce national emissions by 43% by 2030 against a 2005 baseline. This target is building towards a goal of net-zero emissions by 2050. The previous 2030 goal was a 26-28% reduction.
In the case of India, the government has pledged to reduce Emissions Intensity of its GDP by 45 percent by 2030, from the 2005 level and to achieve about 50 percent cumulative electric power installed capacity from non-fossil fuel-based energy resources by 2030, with the help of transfer of technology and low-cost international finance including from Green Climate Fund (GCF). Both these elements of the NDC represent increases of some 10% points over the previous NDC. This represents the first major steps by India towards its goal of net-zero emissions in 2070, as Prime Minister Modi announce at COP26 in Glasgow.

These new NDCs are very welcome news, but how do they look when compared to an overall global decarbonisation scenario that limits warming to 1.5°C? Last year the Shell scenario team launched the Energy Transformation Scenarios, within which the Sky 1.5 scenario meets the Paris goal. The scenario includes data for Australia and India which provides an interesting comparison to the revised NDC announcements.

For Australia in Sky 1.5, the period from the late 2020s to 2035 is the inflection point for a rapid fall in emissions, but the actual scenario reduction in 2030 (23% fall), relative to 2005, does not match the ambition of the new Australian goal (43% fall). However by 2035 Sky 1.5 exceeds the revised 2030 goal (45%), hence the description of this period being an inflection point. It would appear that the government has matched the stretching ambition of COP26 in Glasgow with a similar stretching goal for Australia, which is commendable. However, even at 23% in 2030, significant change is required. For example, when comparing Sky 1.5 in 2030 to 2020, there is nearly five times the solar energy generated and over triple the electricity coming from wind. In Sky 1.5 electric passenger vehicles (EV) deliver over a quarter of the kilometres driven in 2030, which implies that by the late 2020s most sales in Australia are EV. Australia has long been a leader in managing land use towards greater carbon uptake using carbon markets, but even in this domain it will have its work cut out. By the late 2040s in Sky 1.5 it is land use change that delivers net-zero emissions overall, with fossil fuel emissions taking two decades more to reach net-zero in combination with carbon capture and storage.

The shift in primary energy required in Australia to underpin such a change is profound. Solar PV becomes the dominant source.

For India, the new NDC pledges represent an important first step towards their journey to net-zero emissions in 2070. Sky 1.5 also achieves this goal in 2070, but India needs to make large scale use of carbon capture and storage to do so.

In terms of emissions as a function of GDP, the chart above translates to a reduction of 36% in CO₂ per GDP by 2030 and 43% by 2035, which places India’s revised goal of 45% as quite stretching for which they should be thanked. This is based on the GDP assumptions underpinning Sky 1.5 and an analysis of potential land use change opportunities in India, so it may also be the case that the revised India NDC is assuming a higher GDP growth than Sky 1.5. Nevertheless, to achieve such an outcome India needs to continue its economic growth while introducing large scale change in the power sector. In Sky 1.5 the share of non-fossil generating capacity in 2030 is above 50% and over 60% in 2035, which is in the same range as the revised India goal. That compares with 21% in 2020.

In these times of uncertainty with regards energy security and energy costs, it is commendable that nations are building on the commitments made at COP26 in Glasgow with real action and therefore taking steps to increase the ambition of their NDCs.

Can the energy transition help EU energy needs?

dchone August 11, 2022

As the EU grapples with the challenge of displacing Russian oil and gas and meeting immediate needs as Russian supplies are cut, the question of the scale and speed of the energy transition emerges. How fast can Russian supplies be displaced by the transition itself?

The two charts below show the current situation. Prior to the Russian invasion of Ukraine, oil and gas supplies from Russia and into Europe contributed to about 40% of overall European demand, with local production making up much of the balance in the case of gas, but just about half the balance in the case of oil. In the case of gas, the flow to Europe is about a quarter of Russian supply, but for crude oil and oil products it’s nearly half.

Both charts show that European production has declined over twenty years and in the case of oil reached an apparent plateau around 2012. It’s unlikely that local production increases could make up for the cut in Russian supplies, so that leaves three immediate options;

Immediately cut overall energy demand, which in turn could translate to a reduced need for Russian supply.
Find supplies elsewhere.
Accelerate the energy transition to reduce the overall need for oil and gas in the energy mix.

While it’s clear from recent announcements that the EU strategy will embrace all three options in the short term, the longer term strategy will almost certainly rest with the transition itself. But such a transition could well take all of this decade, and probably longer, to complete.

Gas supply is perhaps the more problematic issue, as supply is less flexible globally than oil due to pipeline constraints, LNG capacity (the availability of shipping, liquefaction and regassification facilities) and long term storage. While gas has become a flexible commodity in the 21^st century, it still remains easier to reorganise, redirect and store oil. However, gas may be faster to displace than oil from an energy transition perspective.

The gas chart above also shows how the rapid deployment of wind energy across Europe could be used to offset Russian gas requirements, but it’s a journey that takes the best part of a decade. This assumes a compounding growth rate in wind deployment of 10% per year, slightly above current levels of 8%, but equivalent to the growth rate from 2010 to 2017. However, with a much larger installed base, 10% growth in 2029-2030 means installing some 50 GW of wind in that year versus the 15 GW installed in 2017 and again in 2021. So the annual installation rate has to at least triple. Of course wind isn’t the only technology, there is solar PV as well, at least for the southern latitudes of Europe.

Further to the above, if rapid growth in renewables is focussed entirely on displacing Russian gas or filling the void left by the absence of Russian gas, less progress will be made in displacing the current use of coal in the EU. This could make meeting the EU 55% by 2030 emissions reduction goal more challenging, as eliminating coal for a given electricity production can deliver twice the emissions reduction versus the same shift for gas.

By contrast, displacement of Russian oil through the energy transition looks to be a slower process, although it may turn out to be less necessary. Oil is a more flexible commodity in terms of source and destination, although there could still be pinch points in the system, for example inland east European refineries tied to Russian crude via pipelines. The largest portion of EU oil demand is for transport and within that the capacity for replacement in the 2020s sits with electrification of passenger vehicles, vans and city buses. Alternatives for larger trucks, ships, barges and planes are not yet mature enough for fast large scale deployment.

If we assume a very rapid deployment of electric vehicles (EV), to the extent that all new sales are electric by late in the 2020s (a rate faster than the current goal of 2035 for all EV sales), only about 50 million tonnes per year of oil is displaced by 2030, or about a fifth of the oil that comes from Russia. This is because of the time it takes to turnover the exiting stock of vehicles. Within Europe there are some 250 million passenger cars (Source: Eurostat), but new car sales are in the range 12-16 million vehicles per year, so in eight years only about half the total stock will be replaced anyway. With EVs currently comprising about 10% of new sales, albeit that share growing rapidly, replacing even half the total vehicle stock with EVs will take longer.

In the end, a rapid energy transition can contribute significantly to the EU weaning itself off Russian oil and gas, but this won’t happen in the next few years. By the end of the decade significant progress can be made, especially for gas, but it will likely be well into the 2030s before the same is achieved for oil.

Could the transition drive emissions up?

dchone July 12, 2022

One question that comes up quite regularly about the energy transition is the amount of energy, and therefore emissions, required for the transition itself. This is the energy required for making solar PV modules, wind turbines, batteries and so on. Further up the supply chain there is also the energy required for the additional minerals, such as the lithium, nickel, cobalt and copper found in an electric vehicle (EV). These not only have to be mined, but also go through extensive industrial transformation and refining processes to make the actual materials required for the end use. Today, most of these processes use oil, coal and gas for energy, giving rise to carbon dioxide emissions.

Perhaps the most energy intensive part of the energy transition is the manufacture of lithium-ion batteries, now being widely deployed in EVs. Some commentators have even questioned the effectiveness of the EV as a mitigation route, particularly when the battery is made in China (currently a heavy reliance on coal for energy) and the vehicle is driven in a country with a high electricity emissions intensity (e.g. a country like Poland still largely dependent on coal fired power stations). The problem with this argument is that transitioning in a series of steps (e.g. first decarbonise the electricity supply, then start deploying electric cars) would take decades longer than transitioning in parallel steps (i.e. decarbonising the electricity supply at the same time EVs are deployed). Nevertheless, the parallel approach could drive up emissions in the short term, the question is by how much?

The manufacture of batteries for EVs provides a good example of the problem. In a recent article, MIT report that the Tesla Model 3 holds an 80 kWh lithium-ion battery and the CO₂ emissions for manufacturing that battery would range between 3120 kg (about 3 tons) and 15,680 kg (about 16 tons), depending on the manufacturing location. The article notes that the vast majority of lithium-ion batteries—about 77% of the world’s supply—are manufactured in China, where coal is the primary energy source. That means most batteries are currently made with CO₂ emissions at the higher end of the range, although as battery factories spring up across the world and particularly in the EU and US, that picture will change.

Bringing together a few assumptions about battery manufacture, EV deployment and embedded CO₂ in both manufacture of EV batteries and driving EV cars, it is possible to get a back-of-the-envelope view of the scale of the issue. I will assume the following;

EV production rises from current levels (some 7 million vehicles per year) to all EV production globally by the mid-2030s (i.e. no more internal combustion engine cars are built after that time). This is an aggressive transition, but probably the minimum that is required for a 1.5°C goal.
Higher CO₂ emission battery manufacture is currently at 77%, but the share declines to 40% by 2060 and the higher CO₂ emissions also fall by 75% over the same timeframe as the manufacturing system decarbonises.
Lower CO₂ emissions manufacture is therefore 23% now, but rises to 60% by 2060 and the manufacturing CO₂ emissions fall to zero by 2050. Decarbonising industry to such an extent will require a variety of technologies, with carbon capture and storage playing a critical role.
The 80 kWh battery delivers 300 miles of range and the average vehicle travels 10,000 miles per year.
The electricity supply which EVs use is on average 0.4 tonnes CO₂ per MWh now, falling to zero by 2060. The actual global average grid intensity is higher than 0.4 today, but EVs tend to be driven in lower intensity regions at the moment, e.g. the EU, California etc.
An EV produced today has a 15 year life.
The EV mitigates emissions from internal combustion engine vehicles at a rate of 120 gms/km. As a simplification, this doesn’t change throughout the calculation. It assumes that smaller cars are replaced earlier and that the average fleet efficiency of internal combustion vehicles improves over time.
The battery represents a net increase in car manufacturing emissions with other emissions in the manufacturing process about the same for both EVs and internal combustion vehicles.

The calculation is for net-emissions, which is;

[Battery manufacturing emissions] + [Indirect EV emissions during driving] – [Gasoline / Diesel emissions backed out by EVs] = Net Emissions

What we see from the charts below is that global passenger car emissions rise before they start falling when net-emissions cross the zero line. This happens in 2035. Clearly the year in which this happens depends on the assumptions made, with the CO₂ from internal combustion vehicles not being used being a key determinant. For example, if this is raised to 180 gm CO₂/km, the crossover point is around 2030.

The outcome certainly points to the longer term benefit of the EV transition, with global cumulative emissions over 25 Gt lower in 2060 than they would otherwise be. This is a material reduction when thinking about a 500 Gt carbon budget for 1.5°C. However, it also highlights an issue with the current global goal to reduce emissions by 45% by 2030 relative to 2010, as set out in the Glasgow Climate Pact; the EV revolution that we are currently in the midst of is unlikely to contribute to that reduction. If anything, it could make the task even more difficult.

In a post some time back I noted that the only real opportunities for change which could make a material difference to global CO₂ emissions by 2030 are where replacement technologies are already being manufactured at scale or where governments are prepared to create social change. This quickly reduces the options to only three major opportunities:

Significantly curtailing coal-fired power generation through replacement with renewables;
Replacing internal combustion engine vehicles with electric vehicles; and
Ending deforestation.

Passenger vehicle emissions account for 4 Gt, or 10%, of global CO2 emissions today. If change in this sector can’t deliver any net reductions by 2030 and potentially adds to global emissions, then it calls into question any possibility of a 45% reduction in 8 years. Almost perversely, if EV production could be ramped up in the short term, the problem for 2030 gets worse while the longer term net global cumulative emissions picture gets better.

None of the above is to meant to argue against an EV transition, it is clearly the right way to go. But like many other aspects of the energy transition, it is more complex than it looks.

Article 6 and 1.5°C

dchone June 20, 2022

The 56th session of the UNFCCC’s Subsidiary Body for Scientific and Technological Advice took place in Bonn over the past two weeks and one of the features of the session was further progress in operationalising Article 6 of the Paris Agreement, particularly after completion of the rule-book at COP 26 in Glasgow. But like many other aspects of the Paris Agreement and the global effort to significantly reduce emissions, Article 6 is making good progress but not rapid progress, yet it is rapid progress that is needed. My colleague, Malek Al-Chalabi, was in Bonn for SBSTA 56 and together we thought it would be useful to reflect yet again on the critical importance of this somewhat overlooked corner of the Paris Agreement. Article 6 was the last piece of the Agreement to fall into place in December 2015 and the last part to have its rule-book agreed, taking three years longer than every other part of the Agreement (but addmitedly not helped by COVID-19).

The importance of Article 6 stems from the clear message delivered by WGIII of the recent IPCC 6th Assessment Report; that carbon dioxide removals (CDR) are vital if the world is to achieve 1.5°C, the more ambitious goal of the UN Paris Agreement. This includes direct air carbon capture and storage (DACCS), afforestation (NBS or nature-based solutions), and bio-energy with carbon capture and storage (BECCS).

Arguably, there is no net-zero emissions without Article 6. Not all countries will have the same geographic and geological ability to harness or deploy CDR options or reduce emissions at the same rate, and the majority of countries cannot expect to reduce emissions to zero such that CDR is not needed. This is where trade is relevant.

Trade underpins economic activity and offers society the flexibility to provide the wide range of goods and services that we all benefit from. Trade is often the underpinning reason for foreign direct investment. It encourages the business sector to engage in projects and activities outside their traditional base with a view to bringing goods and services into that base. Cooperation between nation states is often pursued through some form of trading arrangement.

Article 6 of the Paris Agreement is a tailored and comprehensive policy that can enable cost reductions for lowering emissions via trade between nations. It allows countries to work together via ‘cooperative approaches’ through its voluntary nature. An International Emissions Trading Association (IETA), University of Maryland, and Carbon Pricing Leadership Coalition (CPLC) study has shown that cost reductions from cooperative implementation under Article 6 can be achieved through improved economic efficiency over independent implementation of countries’ nationally determined contributions (NDCs). According to the trade models used by the University of Maryland, the potential benefit is up to ~$250 billion per year in 2030.

In addition to the direct commercial benefit, it is the ‘net’ of ‘net-zero emissions’ that Article 6 unlocks. Large scale cross border investment that would otherwise not take place can result from the development and trading of carbon removal units. This is why Article 6 is so important – it helps all sectors and Parties to the Paris Agreement reach net-zero emissions. This can be illustrated with a simple example shown below. The country and the aviation sector both have a target of zero emissions, but neither is able to realise that goal through direct reductions. A regional partner has untapped carbon removal potential, but no need to use it as emissions are already at zero. By cooperating through the trading provisions of Article 6, the end result is that net emissions of 200 units CO₂ across the three are brought to net-zero emissions.

While removals such as afforestation are well known, DACCS and BECCS have growing but still limited experience. That is why further international cooperation is needed alongside Article 6. In order to bring technologies like DACCS and BECCS to scale at an economic price and to further afforestation, cross border capacity building, joint research and development opportunities to pilot CDR options, and integrated policies and funding will also be required. This can make CDR more economically viable.

There are encouraging signs of international cooperation taking place, including countries agreeing to pilots and agreements using Article 6. However, these agreements are few and at the moment not used at scale. In order to maximize the use of Article 6, IETA has identified the following elements for governments to consider (see the full IETA paper here):

Announce whether and how the country will authorize Article 6 credits and/or accept towards the achievement of its NDC.
Provide a clear strategy and stable guidelines on which sectors, activities and vintages will be eligible for Article 6 credits.
Articulate how the use of Article 6 will help achieve the goals of the Paris Agreement.
Elaborate what policy framework the host country will adopt and how it will interact with the receiving country.
Establish an effective interaction between compliance instruments and the voluntary carbon market (VCM).
Support the emergence of a widely accessible traded market for carbon credits.
Ensure a suitable digital registry or other infrastructure for GHG accounting and reporting is in place.
Address key risks in the activity cycle and identify mechanisms to reduce them.
Emphasize the areas where capacity building is required and the role of international organizations.

Article 6 remains an innovative and new policy framework which has not been globally tested and used and it is understandable why some countries and regions may look to meet their own NDCs targets domestically instead of internationally. There are many areas to align, including how to formalize reporting mechanisms and ensuring that the deals that are made between countries (either directly or through business-to-business transactions) are set at prices and in frameworks that are transparent and benefit both.

However, if countries are to reach their NDCs independently of one another, it will be more expensive than working together and net-zero emissions will become an elusive goal. Article 6 has the potential to improve economic efficiency while helping reduce emissions across countries and sectors and provide access to opportunities only possible through cooperation. The opportunity exists to use it – and hopefully that can be maximized.

Blockchain, carbon emissions and NFTs

dchone May 16, 2022

At a recent emissions trading workshop, there was a great deal of discussion about the new kid on the block, carbon trading and non-fungible tokens (NFT). I should say up front that this is not a particular area of expertise for me, so this post represents my observations on the subject, however blockchain is becoming a tool to support the energy transition.

According to Wikipedia, an NFT is a non-interchangeable unit of data stored on a blockchain, a form of digital ledger, that can be sold and traded. The NFT can be associated with a particular digital or physical asset including but not limited to, art, songs, and sport highlights and a license to use the asset for a specified purpose. In the case of the voluntary carbon market, the NFT represents a carbon removal or carbon reduction. So it might represent the storage of carbon in a tree, or in a geological formation. NFT ledgers claim to provide a public certificate of authenticity or proof of ownership and a license to use the asset for a specified purpose. That use could be as an offset against emissions generated by the holder of the NFT.

There is no doubt that carbon markets, be they regulatory or voluntary, require a mechanism of some description to track creation, ownership and surrender of emission reduction units, credits and trading system allowances. This normally emerges as a transaction log and in the case of regulatory systems such as the EU Emissions Trading System, is centrally managed by government and also contributes to the compliance process where units must be surrendered against some obligation. Within the Kyoto Protocol architecture which spanned multiple countries and regulatory systems, an international transaction log (ITL) was created by the UNFCCC and it was used to track all cross border transfers of units available within that system (AAU, CER, ERU, RMU) and therefore effectively link the national registries. On their website the UNFCCC states that the International Transaction Log (ITL) connects registries and secretariat systems that are involved in the emissions trading mechanism defined under the Kyoto Protocol and its Doha amendment. One of the key mandates of the ITL is to ensure an accurate accounting and verification of transactions proposed by registries in order to support the review and compliance process of the Kyoto Protocol.

Within the voluntary carbon markets there is no such global registry, but rather a series of registries that align with the particular voluntary market platform used to create the credit. These are summarised here. For example, the Verra Registry was launched in April 2020 and is the cornerstone for the implementation of Verra’s standards and programs. It facilitates the transparent listing of information on certified projects, issued and retired units, and enables the trading of units. It is the central repository for all information and documentation relating to Verra projects and credits. The Verra Registry also ensures the uniqueness of projects and credits in the system.

So along comes blockchain and NFTs, which by all accounts at the workshop, can certainly do the job of tracking carbon units and ensuring integrity – but the current systems also do this and have been doing it satisfactorily for some time. It feels like the new kids on the block are a solution looking for a problem, but at least as far as unit tracking goes, there isn’t a particular problem. That isn’t to say that the current system is perfect, it isn’t, or that NFTs won’t be an improvement on the current processes, in fact they may well be more suited to the task.

But the problem that does exist is perhaps one that blockchain and its associated tools could solve, yet it is highly complex. It’s the core of the climate issue – the carbon budget. The carbon budget for a certain rise in global average surface temperature is the limit on the cumulative carbon dioxide release, less removal of carbon dioxide from the atmosphere, prior to the point of net-zero emissions. In August last year the Intergovernmental Panel on Climate Change (IPCC) informed readers of its 6^th Assessment Report that the carbon budget for 1.5°C of warming was now only 500 GT, based on cumulative emissions from 1.1.2020. Today, that will have reduced to about 400 GT. For 2°C of warming it is now about 1340 GT of carbon dioxide from now.

The risk associated with carbon markets based on a variety of different baselines, credit standards, allowance allocation mechanisms and even basic structure is that they don’t add up to anything close to the carbon budget available, so we collectively overspend the budget and therefore overshoot the temperature goal, even with supposed broad use of carbon units. In an extreme hypothetical scenario, we could end up with more voluntary market carbon credits than emissions, but with atmospheric CO₂ still rising. That risk doesn’t change simply by applying NFTs to the credits that are created. The risk also exists with the current Nationally Determined Contribution (NDC) process of the Paris Agreement, where each country has effectively determined their own carbon budget, their own national baseline year and their own pathway forward. The sum of the NDC carbon budgets does not currently equate to the task at hand. The Global Stocktake process that is now underway will highlight the mismatch, but the Paris process has no tools at its disposal to solve the problem other than peer pressure and diplomacy.

An alternate way for the global voluntary carbon market to evolve would be to use the tools associated with blockchain to tokenise the carbon budget, rather than tokenise the current credit system. A single global ledger would also resolve the current problem of having fragmented carbon registries. The carbon budget tokens would then act like allowances in an emissions trading system, with a surrender process linked to emissions taking them out of the market permanently. The value of a unit in a market is a function of its availability (or scarcity) and we know that the carbon budget has a defined limit in this regard. That immediately delivers scarcity and this scarcity is then enforced using blockchain which ensures that each unit of the carbon budget can only be claimed once. While the carbon budget can be expanded via removals, considerable effort is required to do this, with an associated cost. Two possibilities (and doubtless there are many others) for NFTs and carbon budgets are as follows:

Target the global carbon budget, effectively turning the budget into a global cap and trade system. But this is inherently difficult as there is no current mechanism to distribute the carbon budget between nations, companies or even people. However, fractionalized ownership of carbon credits could be an enabler for bringing more liquidity into the market. The further challenge with such an approach for the global carbon budget is the initial creation and distribution of the tokens. There will be a finite number, but no one party should benefit from the creation of the tokens; after all the carbon budget is a global commons problem. Further, there can’t be an agency such as the UN or UNFCCC selling the initial tokens as that would require a transfer of funds that many governments wouldn’t tolerate or is simply not feasible constitutionally. What if the global budget was tokenised by DAOs (Decentralized Autonomous Organization) on a piecemeal basis, with NFTs existing and available to use by those who chose? The DAOs might be companies, cities, states or even whole countries on a voluntary basis, with NFTs granted in return for the entity adopting a carbon budget.
Tokenise the implied carbon budget under an NDC, even though the sum of the current NDCs is leading to the global 1.5°C carbon budget being overdrawn. This approach could add considerable value to the voluntary market. A current issue in the voluntary world is the question of who owns and makes use of a carbon credit. Clearly if a project is launched in a particular country the emissions profile of that country will change, which in turn will be reflected in the reporting of its own emissions for the purposes of showing delivery of its NDC under the Paris Agreement. But if the reduction is contributing to a Paris Agreement objective, how can it also be made available to the voluntary market and in what context should the voluntary market use it? I discussed this issue in an earlier posting, but irrespective of how this matter is settled, a reduction unit is really only of value if more is known about the context of the reduction. This is why an allowance in an emissions trading systems has value – the market fully understands the context within which the unit was created and the scarcity associated with it. This is not the case with voluntary units extracted from a project that might represent a tiny part of the emissions of an economy, where information on total emissions is hard to come by. But if the project sat within an NDC and the emissions associated with the NDC sat in a clear accounting framework, then the reduction units would have context and the use of them either within the country or outside the country could be clearly understood by the market and priced accordingly.

None of the above would be simple to implement and option 1 might be impossibly difficult. But remaining within a carbon budget is entirely the purpose of emissions management and therefore the world needs some collective effort to achieve this. Management requires good accounting and transparency but today there is still very little management of carbon budgets, with systems like the EU ETS being the exception rather than the rule. While the workshop I attended was entirely about NFTs associated with voluntary reduction units, this feels like a rather simple problem for a sophisticated 21^st century digital mechanism to target. The much harder application would be carbon budget management and the benefit to society would shift from modest to immense.

Back to Antarctica

dchone April 22, 2022

As those familiar with this blog may recall, I have been fortunate to visit the Antarctic Peninsula on more than one occasion. These visits have been part of a long standing relationship between Shell and the 2041 Foundation. The 2041 Foundation is named for the point in time that countries may begin to consider reopening the Antarctic Treaty, or 50 years on from its agreement (2041) and eventual ratification (2048). The treaty currently prevents any use of Antarctica for commercial and development purposes, other than limited tourism and scientific research. The preservation of Antarctica has become 2041’s raison d’être, which also broadens into the subject of climate change given that surface temperature warming represents a direct threat to Antarctica.

In mid-March, after two years of COVID-19 deferments, a group of 170 people set off from Ushuaia in southern Argentina on board the Ocean Victory, headed for the Antarctic Peninsula. The group came from many backgrounds and countries, including entrepreneurs, venture capitalists, YouTube influencers, corporate staff, students, artists and academics and led by Robert Swan, the founder of the 2041 Foundation and the first man to trek on foot to both the North and South Poles. I was there, along with others, to give some talks on climate change and the energy transition to the broader group. Much of the material from various blogs I have posted over the last two years featured in the sessions.

While the learning opportunity is excellent and the group of people were outstanding in so many respects, the scenery, wildlife and conditions of Antarctica loom large over everything. The continent, and noting that we saw just a tiny fraction of it, is majestic and presents itself on a scale that is unmatched anywhere else I have ever been. Having crossed the infamous Drakes Passage and experienced 7+ metre waves, the relative calm of the Peninsula and its accompanying archipelago awaits. The sights are astounding, from vast ice formations slowly edging their way into the sea where they end their days as haunting sculptures on the shore line, to penguins in colonies going about their business preparing for the winter. Whales can be seen on a regular basis, although on this trip it was primarily humpbacks that were spotted. We even managed a very quick dip in the ocean at Deception Island, the site of a long abandoned whaling station in the caldera of a dormant volcano. The water was at 2°C, so when I say “very quick”, I mean it.

A particular highlight for me was to travel with my son, who took the spectacular sunset photograph below. It was good to see him relaxing after a long two years of COVID tension as an NHS Junior Doctor.

As someone who has been to Antarctica several times over the space of more than a decade, I am often asked if I have noticed a change in the environment. The honest answer is no, but on this trip we did experience something that nobody on board had ever experienced before in Antarctica, rain. That was highly unusual, even for Robert Swan who has been to Antarctica many times over a near 40 year time span. But perhaps we shouldn’t have been surprised as while we were there the deeper continent experienced the largest temperature anomaly ever recorded, a swing from -50°C to -10°C (see below). These anomalous readings are becoming more common as the global surface temperature rises, which could ultimately threaten the stability of ice shelves and lead to faster and earlier rises in global sea level. During my visit in 2015 we were passing by an Argentine weather station on the day and at the time it measured and reported the highest ever recorded temperature on the Peninsula.

*Image from Climate Reanalyzer (https://ClimateReanalyzer.org), Climate Change Institute, University of Maine, USA.*

For now, Antarctica remains a pristine and largely untouched wilderness, still looking the same as when explorers first sighted the continent and when intrepid expeditions led by the likes of Scott, Amundsen and Shackleton trekked across the continent. It’s important for the sake of all of us that we ensure this remains the case.

For additional photographs from the expedition, click here.