Category: United Kingdom

The UK 5th Carbon Budget

dchone July 7, 2016

In amongst the excitement created by the Brexit vote, on 30th June 2016 the UK Government met its statutory requirement and announced the details of the 5^th Carbon Budget which covers the period 2028-2032. The Government followed the recommendation of the Climate Change Committee and advised that the carbon budget for the 2028–2032 budgetary period is 1,725,000,000 tonnes of carbon dioxide equivalent. This assumes 590 MtCO2e covered by the EU ETS and subject to its carbon price and a nontraded share of 1,135 MtCO2e (excluding international shipping emissions). The overall budget represents a reduction of 56.9% below the 1990 baseline.

The UK is unique in the world with its carbon budget approach. This is the result of far reaching legislation enacted back in 2008 in the form of the Climate Change Act which requires the UK Government to establish a specific carbon budget for successive future periods. To date the UK is on track towards meeting the 2^nd Carbon budget, as described in a recently released summary of greenhouse gas emissions which covers the period up to the end of 2014. But the journey has been relatively easy so far. With the continued shift to natural gas and away from coal, the arrival of wind and to a lesser extent solar, the 2008-2009 recession and the higher cost of oil and gas in recent years driving real efficiency and demand reduction, UK emissions have fallen.

In 1990 UK CO2 emissions per kWhr of electricity generation were 672 grams, whereas today they are around 450 grams. As a result, emissions from power generation have fallen, even with current electricity demand higher than the 1990 level. By contrast, road transport emissions have remained about flat for 25 years although there has been a marked shift from gasoline to diesel. Another significant reduction has come from industry, but much of this is due to an overall reduction in heavy industry (steel making, refineries), in favour of services (media and finance) and high technology industry (e.g. aerospace).

With a large natural gas base and a diminished heavy industry sector, has the UK now reached an interim floor in terms of national greenhouse gas emissions? While there are still gains to be made in the electricity sector, future progress towards the goals of the 3^rd, 4^th and 5^th Carbon Budgets will require additional action in other parts of the economy.

The 5^th Carbon Budget requires nearly another 200 Mt per annum of reductions across the UK, compared to the 2^nd Carbon Budget period that we are currently in. Even with Hinkley Point nuclear and an ambitious renewables programme (which is reported as being off track http://www.bbc.com/news/science-environment-36710290 ), it is unlikely that power generation emissions would fall more than 100 MT per annum. A 200-250 gram per KWh goal by 2030, equivalent to about 50% natural gas and 50% nuclear/renewables would mean a fall of about 70 Mt. There may also be upward pressure on the sector as transport electrifies.

The above implies that the emission reduction focus will have to expand more rapidly into the transport and residential areas in particular. While the residential sector has been an area of action for some time with a focus on boiler efficiency and home insulation, the rate determining step here is turnover in housing stock or at least housing refurbishment, which can be very slow.

UK transport emissions have hardly budged over many years, although there has been some redistribution within the sector. A sharp single step reduction came during the 2008-2009 recession, but that fall has not been continued. Data since the late 2014 price fall in crude oil is not available yet, but that may put upward pressure on transport emissions. Between now and 2030 there is the opportunity for a single turnover of the vehicle fleet, but EV sales are still only very modest in the UK. In March 2016 there were some 67,000 registered plug-in cars in the UK, less than 0.2% of the fleet. During January to March 2016, some 11,750 new ultra low emission vehicles (ULEVs) were registered in the UK. Over the year to the end of March 2016, ULEVs represented 1.0% of all new registrations, compared with 0.8% over the previous year and 0.2% over the year before that.

The 5^th Carbon Budget represents a further landmark step for the UK, but it also means a shift in policy emphasis is required in the near term.

Professor Sir David MacKay FRS

dchone April 22, 2016

I was sad to hear of the recent death of Professor Sir David MacKay. I had met him at a few events over the years, but his real impact on me was through his book Sustainable Energy: without the hot air.

Hopefully everyone who reads this blog has also had the opportunity to read David’s book, if not I can highly recommend it. It is free to download here. The book is a wonderful tour of energy use, written in a language that everyone can understand. Most importantly, it seeks to challenge and correct the many assertions made about how quickly and easily we can change the energy system or how easy it would be to power everything from a particular source. Professor MacKay took exception to the loose talk and poor reporting around energy issues and sought to rectify it. In the opening lines of his book he notes;

Perhaps the worst offenders in the kingdom of codswallop are the people who really should know better – the media publishers who promote the codswallop – for example, New Scientist with their article about the “water-powered car.”

That single sentence sets the tone for a very entertaining and thoroughly informative deep dive into all things energy related, with the maths to back it up. He even delves into climate science and offers a wonderful analogy for why atmospheric carbon dioxide is rising when anthropogenic flows of the gas are so much smaller than natural flows (trees etc.). He compares the atmosphere to passport control at an airport!!

But the calculation that has stuck in my head over several years relates to hydroelectricity in the United Kingdom. I don’t know why I remember this story in particular, I am no more a hydroelectricity enthusiast than I am a nuclear enthusiast, but his explanation was just so elegant. Many people imagine that because it rains quite a bit in the UK that we ought to be able to power much of the country with hydro, particularly in Scotland where it is also quite hilly. Professor MacKay’s simple calculation involved the land area of the UK, the average rainfall, the average elevation and the wildly optimistic assumption (just to silence the optimists) that we would catch every drop of rain and then all the potential energy within that water as it drops from the point at which it initially hits the ground until it gets to sea level. The absolute upper limit for hydro comes out at less than 10 kWh/person/day, but the more realistic figure is <2 kWh/person/day. This is against energy demand of around 200 kWh/person/day. Actual hydro in the UK is just 0.2 kWh/person/day.

Sadly we have lost an inspiring energy enthusiast and an entertaining writer and speaker. RIP Professor.

Talking about climate change

dchone January 29, 2015

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.

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.

A sense of scale for 2015

dchone December 30, 2014

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)

The hairdryer conundrum

dchone September 8, 2014

Last week the UK media put a lot of effort into reporting on the EU ban on the sale of the most powerful vacuum cleaners and then extended the discussion to possible future action on other high end appliances that consume a lot of energy, such as powerful hair dryers, kettles, toasters and so on. This was also in a week when there was an extraordinary amount of other news to report on as well, ranging from ISIS to celebrity photo leaks, so it wasn’t as if they were short of content. Yet kettles seemingly won the day.

Some media outlets were just outraged at the broader idea of Brussels interfering yet again, but others began a discussion about the effectiveness of the measure, with The Guardian resorting to the headline “Will banning high-powered kettles and hairdryers help climate change efforts?”.

The intention behind the legislation stems from the EU Energy Efficiency Directive, which in turn is part of the 20/20/20 for 2020 package – i.e. 20% reduction in GHGs, 20% renewable energy and 20% improvement in energy efficiency. The package aims to meet a number of energy related policy objectives, but the big three are climate, competitiveness and security of supply.

The Telegraph also reported on the issue and was able to quote EU Energy Commissioner, Günther Oettinger, who said that legislation preventing consumers from buying high-wattage appliances was necessary to fight climate change. To quote;

“We haven’t got round to these devices yet, we want curb power consumption,” he told Bild newspaper. “All EU countries agree that energy efficiency is the most effective method to reduce energy consumption and dependence on imports and to improve the climate. Therefore there needs to be mandatory consumption limits for small electrical appliances.”

Unfortunately it isn’t quite this simple. While using energy more efficiently may well improve EU competitiveness and, provided there is no domestic efficiency driven rebound, might even lower the dependence on imports, the impact on “climate change” will likely be zero. This is because of the “stock” nature of the carbon dioxide problem in the atmosphere and the scale of energy demand globally. Nevertheless, there is the notion expressed by many, that as efficiency effectively drives down local energy use (e.g. in a household or factory), mandating efficiency must be part of the policy mix to reduce global carbon dioxide emissions. Efficiency is a vital part part of economic growth, but it’s relationship to carbon dioxide emissions is much more complex.

I have written about this many times before and perhaps the explanation that I keep returning to as to why people accept the above notion is an examination of the Kaya Identity, which although correct in its presentation of carbon dioxide emissions in the economy leads to a flawed conclusion as to what to do about them. The International Energy Agency (IEA) followed this line of thinking in their 2013 report, Redrawing the Energy-Climate Map. Like many others, they projected what business-as-usual emissions would be by 2020 and then argued that a focus on energy efficiency could reduce this, effectively claiming an emissions reduction. Nevertheless emissions continue to rise. This reasoning appears to show energy efficiency as the most important contributing factor to change, yet in reality the original projection represents a situation that may never have occurred. The economy requires improvements in energy efficiency to drive growth, which is why efficiency is so important, but that doesn’t mean emissions reduce in the sense that the eventual load on the atmosphere is impacted. If energy efficiency really is a route to a lower concentration of carbon dioxide in the atmosphere, then it needs to pass one clear test, i.e. which known fossil fuel resource will be left in the ground (or a proposed extraction project shelved) because of this? Only then are cumulative emissions potentially impacted, which is the real driver of the climate issue.

One unintended consequence of energy efficiency policy can be to exacerbate the emissions problem. In the worst case scenario, an energy efficiency improvement in the power generation supply chain can incentivize the resource holder (e.g. coal mine) to expand the resource base and therefore increase the potential tonnes of carbon that will be released into the atmosphere.

Efficiency mandates have had both positive and negative consequences over time.

In many instances they have spurred innovation, leading to the introduction of new products and also reducing the cost of energy services. Air conditioning is a good example, with innovation spurred by programs such as Japan’s Top Runner approach. But this has also made air conditioning much more affordable and therefore more widely available, which in turn has resulted in enormous demand for airconditioners, more settlement and development in hot arid areas and therefore more energy use. This efficiency drive has offered huge benefits to society, but one of them has not been to help manage the accumulation of carbon dioxide in the atmosphere.
In the USA, the introduction of tough CAFE standards for vehicles in the 1970s and 1980s was partly blamed for the rise of the SUV or light truck. As these were not covered by the standard, they offered a loophole for both the manufacturers and their customers to have larger vehicles without having to invest heavily in new technology to make them more efficient.

The vacuum cleaner mandate is already having a perverse effect. There is a rush to the shops to buy a powerful machine before they vanish, which rather undermines the whole effort . . . . . .

Communicating climate uncertainty in wet times

dchone February 13, 2014

As politicians from all parties don Wellington boots and wade through flooded fields and streets in southern England, the subject of climate change is rising up the agenda. While all but a very few have stayed away from direct attribution of the England floods to climate change, it is also clear that nobody has a good set of words that describe the current situation and the link, or otherwise, to the climate issue. Rather, politicians seem to be stumbling through the discussion, grappling for the correct language to talk about linkage but not to drift into attribution.

The starting point is somewhat loaded, in that the issue itself is now referred to more widely as climate change, rather than global warming. Although both have been part of the lexicon since the 1970’s, the climate reference has certainly won the day (Google Ngram Viewer, see below). It brings with it an expectation that change is underway, whether it is or isn’t for a particular location. Global warming more accurately describes the core issue, i.e. that the atmosphere / ocean system is warming in response to increasing levels of carbon dioxide, but it’s arguably less emotive and exciting. It also doesn’t fully describe the full scope of the CO2 issue.

Exactly how and by how much the climate will change as a result of ocean and atmosphere warming remains to be seen, although a wealth of science, analysis, and computer modeling certainly doesn’t point to a static situation. Some locations may see very distinct and obvious changes over time, others may see very little. The problem is that we are all very impatient, whereas warming and its consequences will be a long, slow drawn out affair with mixed impacts on specific locations. As a result, the temptation to jump to conclusions is almost overwhelming.

The MIT Joint Program on the Science and Policy of Global Change has been actively exploring how best to talk about uncertainty. Perhaps their most successful tool is the Greenhouse Gas Gamble “wheel of fortune”, which tries to put the uncertainty around warming into terms that people can understand. The Joint Program website offers a nice tool where the reader can “spin” the wheel and see the distribution of results through to 2100, both under a business as usual scenario and with a robust set of policy measure applied throughout the world.

As the wheel is spun more and more times, a distribution emerges, which then gives some sense of the changes that may be in store for us. Most importantly, one feature of the “With Policy” case that is highlighted is the complete disappearance of the tail of the distribution, which in the “No Policy” case shows that very high temperature rises are possible. By contrast, even in the world where we take no action on climate at all, there is still some chance, albeit vanishingly small, that the temperature rise will be modest.

Tools similar to this could be developed for regional issues, such as precipitation in the UK, drought in Texas and heatwaves in Australia. They won’t be perfect, but may help in better understanding and more importantly, explaining what is going on. For example, even a historical distribution of precipitation for the winter period in southern England with the current winter shown would do a far better job in contextualizing the deluge we are aving, than vaguely saying it was a record and arguing that it might be climate change. A single point sitting several standard deviations away from an otherwise normal distribution would put it in the same category as the 2003 European heatwave, whereas a marginal outlier in a tight distribution might be viewed with less concern.

It may well be the case that the flooding in England is a result of enhanced warming from higher levels of CO2 in the atmosphere. Equally, it may just be part of the chaotic system we call “the weather”. Either way, a more informed discussion needs to take place, supported by data and helpful tools to unravel the messages contained within it.

Is there cause for optimism on emissions?

dchone November 8, 2013

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

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

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

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

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

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

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

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

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

Thoughts on CCS coming from the European Parliament

dchone September 2, 2013

A rewind back to 2007 reveals an EU Parliament that was very keen on carbon capture and storage (CCS) and gave it tremendous support through the CCS Directive and the NER300 financing mechanism. Five years on and for all the reasons discussed in recent posts, only the UK looks likely to see any near term CCS development and this is entirely due to its own additional policy development.

In March 2007, the Presidency Conclusions of the Brussels European Council stated;

Aware of the huge possible global benefits of a sustainable use of fossil fuels, the European Council:

underlines the importance of substantial improvements in generation efficiency and clean fossil fuel technologies;
urges Member States and the Commission to work towards strengthening R & D and developing the necessary technical, economic and regulatory framework to bring environmentally safe carbon capture and sequestration (CCS) to deployment with new fossil-fuel power plants, if possible by 2020;
welcomes the Commission’s intention to establish a mechanism to stimulate the construction and operation by 2015 of up to 12 demonstration plants of sustainable fossil fuel technologies in commercial power generation.

CCS couldn’t have had a much harder push out of the starting blocks, yet none of this project activity has happened and CCS is virtually at a standstill in the EU. This has led the EU Parliament to look more closely at the issue and in the very near future we should see the Environment Committee release a report on CCS. In the meantime the Committee on Industry, Research and Energy (ITRE) has posted a short draft opinion on CCS on the EU Parliament website. This may give some early insight into the likely direction of the more critical Environment Committee report. Key findings from ITRE are as follows;

Failing to include CCS within a long-term energy strategy will severely hamper national, Union and global efforts to address climate change;
Believes that the EU’s mandatory renewable target has undermined investment in CCS, and calls, therefore, for a technology-neutral approach to the Union’s 2030 energy goals, in line with Article 194(2) of the TFEU, in order to create a level playing field and ensure effective competition amongst varying low-carbon energy technologies;
Calls on the Commission and the Member States to address the main barriers to the deployment of CCS, such as the granting of permits and funding, the establishment of a CCS skills base and the development and testing of technologies for effective capture, transport and storage;
Believes that incentives and policy measures should target both CCS demonstration as well as subsequent longer-term operational projects and must provide greater certainty for private sector investment; believes, furthermore, that incentives and measures should be split efficiently both within the power-generation sector and CCS within industrial production processes;
Considers that the low carbon price delivered through the EU’s Emissions Trading Scheme (ETS), and subsequent revenues generated from the sale of allowances under the New Entrants’ Reserve of the ETS (NER300), has failed to deliver an attractive business case for early long-term private sector investment in CCS;

This is all solid stuff and it would appear that ITRE have got to grips with both the important role that CCS must play and the challenges that CCS faces to deploy. Perhaps one surprise is the reference to Article 194(2) of the Treaty of the Functioning of the European Union (TFEU). It is difficult to see how this particular part of the treaty actually supports the need for CCS. Rather, it tends to support the set of actions that have contributed to the problems that CCS is having, namely the focus on renewable energy.

ENERGY

Article 194

In the context of the establishment and functioning of the internal market and with regard for the need to preserve and improve the environment, Union policy on energy shall aim, in a spirit of solidarity between Member States, to:
- ensure the functioning of the energy market;
- ensure security of energy supply in the Union;
- promote energy efficiency and energy saving and the development of new and renewable forms of energy; and
- promote the interconnection of energy networks.
Without prejudice to the application of other provisions of the Treaties, the European Parliament and the Council, acting in accordance with the ordinary legislative procedure, shall establish the measures necessary to achieve the objectives in paragraph 1. Such measures shall be adopted after consultation of the Economic and Social Committee and the Committee of the Regions. Such measures shall not affect a Member State’s right to determine the conditions for exploiting its energy resources, its choice between different energy sources and the general structure of its energy supply, without prejudice to Article 192(2)(c).

Many will argue that support for renewable energy is the right approach to address climate change, but as I have discussed in numerous posts, it’s not quite that simple. There is little doubt that renewable energy is part of our future and in the next century it may well be the major component, if not all, of our energy system. But in the meantime we are using fossil fuels to power pretty much everything and that is going to take a century to change. If we don’t capture the majority of the CO2 associated with that ongoing use (even with it declining throughout the century) then 2°C isn’t achievable, but nor for that matter is 3°C.

The TFEU doesn’t really give much guidance to help solve this, although Article 191 states;

. . . promoting measures at international level to deal with regional or worldwide environmental problems, and in particular combating climate change.

This then comes down to interpretation of the phrase “combating climate change”. A hardnosed analysis of the global emissions issue leads to the necessity for a CCS strategy, irrespective of any personal views on whether we should or shouldn’t power the world with fossil fuels. The fact is that we currently do and this existing reality won’t change anytime soon.

Top ten reasons for voting “yes” to “backloading”

dchone April 10, 2013

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

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

1. Market Confidence

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

2. Low carbon Investment

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

3. Jobs

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

4. Credibility

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

5. Leadership

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

6. Support

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

7. Europe

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

8. Growth

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

9. Environment

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

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

10. Economy and competitiveness

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

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

Encouraging CCS in Europe

dchone August 3, 2012

In a recent post I discussed the problems that the EU flagship programme to demonstrate CCS (carbon capture and storage) is having. With an allowance surplus building up in the ETS and a resulting low carbon price, the urgent need for commercial deployment of CCS has diminished. Furthermore, with natural gas availability growing and renewable energy becoming a sizable factor in the EU electricity mix, it may be well into the 2020s before large scale deployment of CCS is actually needed.

These developments might instill a false sense of security, in that we imagine there is no need to do anything now with regards large scale CCS commercialization. While it is clear that there is no immediate need for rapid rollout, every low carbon energy scenario still shows CCS as an essential component of energy delivery. In a posting late last year, I argued that global emissions are unlikely to be reduced at all without CCS.

Even with widespread deployment starting as late as 2030, action in this decade is still important. Early demonstration and commercialization of new technologies can be a long process. Take for example Shell’s own experience with Gas to Liquids technology. A very large scale plant is now operating successfully in Qatar, but the advanced catalysts used in the process started development in the 1980s and the small commercial scale demonstration plant in Malaysia was an early 1990s development. A final investment decision for the first full commercial deployment was made in 2006 and even then construction and startup took five years. A 10-20 year timeline for first commercial deployment is not unusual, which is one of the reasons why it takes 25+ years for new energy technologies to become globally material (>1% of the energy mix). I discussed this in a post back in late 2009.

All this still points to the need for some CCS activity in Europe this decade and for project development to proceed next decade for startup around 2030 (at the very latest). It may also be the case that a need for deeper cuts in emissions brings CCS forward.

The question of how to promote CCS activity today, in the midst of difficult economic times and carbon markets that are clearly not calling for it, is discussed in a new report issued today by the European Technology Platform for Zero Emission Fossil Fuel Power Plants (ZEP).The ZEP report, Creating a Secure Environment for Investment in Europe, looks comprehensively at short (through to 2020), medium (the 2020s) and long term (post 2030) measures. In the short term the focus must be on recalibrating the ETS, but the report also calls for a number of the measures similar (but not necessarily identical) to those being implemented in the UK as part of the Electricity Market Reform. CCS Feed-In Tariffs, CCS Purchase Contracts and CCS Capacity Payments are all discussed. These measures could also continue in some form into the 2020s, but securing early clarity on 2030 and 2040 EU carbon targets is seen as the key priority for the medium term. For the longer term, the 2050 emissions target is the key driver, but the introduction of an auction reserve price for ETS allowances post 2030 would provide investment certainty for large scale project decisions made in the 2020s. Such investments would be exposed to the prevailing carbon price in the 2030s and beyond.

The EU has put considerable effort into stimulating CCS, but the goal of early demonstration has proved to be intractable. The ZEP report provides some further thinking on the issue and because of the ZEP constituency, is backed by industry, academia and NGOs.