The importance of sinks

March 2, 2021

A review of the 2018 IPCC Special Report on 1.5°C shows that all four archetype scenarios (P1, P2, P3 and P4) make use of sinks – or the ability to remove carbon dioxide from the atmosphere and store it geologically or retain it within the land. The reasons for needing to do this fall into two categories;

  1. The point at which net-zero emissions is required (i.e. 2050) comes before all anthropogenic emissions can be stopped, so remaining emissions have to be balanced with sinks to remove the same amount of carbon dioxide from the atmosphere as added by remaining sources.
  2. By the time net-zero emissions is reached, the carbon dioxide load in the atmosphere has exceeded that associated with 1.5°C of warming, so sinks are required to lower atmospheric levels at a faster rate than natural decline, ensuring a 1.5°C or lower outcome by the end of the century.

The four scenarios are shown below.

Diagram Description automatically generated
Source: IPCC SR15

In the P1 scenario sink use is minimal, highlighted by an end to land based anthropogenic emissions and the subsequent development of the land as an enhanced sink from mid-century on, at about 5 Gt per annum drawdown of carbon dioxide. P1 makes no use of geological storage. By contrast, the P4 scenario makes very extensive use of geological sinks with BECCS playing a substantial role even as land based emissions are eventually reigned in. But why is there such a difference in sink use between these scenarios?

A deeper dive into the four stories reveals an interesting trend – an almost linear relationship linking cumulative sink capacity to 2100 with the growth in final energy demand (measured as the increase in 2050 demand over 2010 demand).

This trend points to two aspects of the energy transition which are in turn related to the two reasons for needing sinks outlined above;

  1. As energy demand increases and emissions rise from sectors of the economy where no large scale mitigation solutions currently exist, perhaps a sector like aviation, greater and greater sink capacity will be required.
  2. With energy demand rising quickly and a starting dependency on fossil fuels to meet that demand, the carbon budget that equates to 1.5°C is exceeded well before the point of net-zero emissions, which then means extensive sink capacity is required to remove this carbon from the atmosphere and meet 1.5°C later in the century.

That then brings into focus the question of energy demand. In the Energy Transformation Scenarios released recently by Shell, all three scenarios show rising energy demand through the century, although in the Sky 1.5 story this is curtailed from the 2070s onwards due mainly to efficiency practices and rapid electrification (which can also lead to greater efficiency). 

Energy demand growth across all three Shell scenarios contrasts with the IPCC range, where the P1 archetype imagines a fall in energy demand. But a fall in energy demand over the next thirty years is in sharp contrast with history, where energy demand has only ever risen, even as very significant efficiency gains have spread throughout society.

For comparison, over the last 30 years (to 2019), world total primary energy grew by 68%. This derives from GDP growth of 180%, and a Shell assessment of total energy service growth of 130%. In a discussion on energy growth, it is important to focus on non-OECD countries, because that is where the relationship of GDP growth to energy service growth is strongest. OECD countries are not far from the point where energy service growth is matched by energy service efficiency improvement and hence energy demand stays flat. In the last 30 years, non-OECD primary energy growth was over 80% of the global total and in the next 30 years we may see non-OECD growth making up almost all of the global energy demand increase. But this is the portion of the word where population increase continues in many countries and where access to energy is growing at a rapid rate. This in turn creates new demand for energy services. In short, we are more likely to underestimate energy demand than overestimate it.

There are also other reasons for continued energy demand growth.

  • Efficiency rebound on a macro scale is widespread and often not recognised. For example, when I was growing up in Australia in the 1960s, air conditioned cars hardly existed. I still remember when we lived outside the country in an American community (in SE Asia) in 1967 and I got in my first air conditioned car; I really couldn’t believe such a thing was possible. Today, you can’t buy a car without air conditioning. So in the 1960s we had maybe 50 million upscale cars globally with expensive inefficient air conditioners, but now we have over one billion cars with cheap efficient air conditioners. That’s lots more energy than the 1960s.
  • Society continues to find and adopt new and interesting ways to consume energy. When energy is available, it gets used. Think how much more energy intensive our life is compared to our parents or grandparents. One example – millions of people around the world are starting to adopt and make use of Bitcoin, but the media recently reported that Bitcoin ‘mining’ at various sites around the world collectively consumes more electricity than the Netherlands.
  • Adoption of new technologies can lead to explosive growth in energy services. The internet and all the servers and devices connected to it is one such example. It didn’t really exist thirty years ago, at least not as a consumer service.

Even with significant energy efficiency improvement over time, the Sky 1.5 scenario which is comparable with IPCC P1 to P4 in terms of temperature rise (i.e. 1.5°C), sees final energy demand increasing by 49% in 2050 relative to 2010. The scenario also employs significant sink capacity globally to achieve an outcome of 1.5°C in 2100. The cumulative total across nature based and manmade carbon dioxide removal to 2100 is around 1,000 Gt for Sky 1.5. Plotting this on the chart above, we see that although Sky 1.5 has a similar, but slightly higher final energy demand than P4, it makes less use of sink capacity by about 20%.

Both Sky 1.5 and IPCC P4 demonstrate the considerable sink capacity required for a 1.5°C outcome, unless energy demand can be significantly curtailed in the near term and rapid solutions found and deployed for current hard-to-abate sectors.

Note: Scenarios don’t describe what will happen, or what should happen, rather they explore what could happen. Scenarios are not predictions, strategies or business plans. Please read the full Disclaimer here.

Electric vehicles and 2030

December 7, 2020

Over a decade ago in one of my very first posts in this blog, I responded to what appeared to be a working assumption in government that there would be between 1 and 2 million electric cars on the road in the UK by 2020. It was hard to imagine that this would be the case and harder to calculate a pathway that would deliver such an outcome. I noted at the time that after a dozen years and some significant stimulus, the number of hybrid vehicles on UK roads had risen to 300,000. So here we are in late 2020 and the number of battery electric vehicles on the road in the UK is around 200,000. There are plug-in hybrids in addition to this, roughly doubling the total population of plug-in vehicles to just under 400,000.

In recent weeks the UK government has significantly stepped up its ambition regarding passenger electric vehicle deployment, with a decision to ban the sale of internal combustion engine vehicles in 2030, albeit with some relaxation to 2035 for plug-in hybrid vehicles. The announcement prompted me to look back at the decade old post and to look at how the numbers stack up this time around.

With a population of some 67 million people, the UK has about 33 million cars or just under one car for every two people. This ratio has been rising slowly over the past few years, even as new car sales have edged downwards so we might expect something like 37 million cars in the UK fleet by 2030 for a population of 70 million. Assuming there isn’t a mad rush for internal combustion engine vehicles (ICE) in the years just prior to 2030, then in 2030 we could see some 2.6 million cars sold; more than in 2019 but only reaching the levels seen in 2015 and 2016 despite having 15-20% more cars on the road in total.

This means that in 2030, 2.6 million cars with a battery must be available for UK buyers. They could be pure battery electric (BEV) or plug-in hybrid (PHEV). While the PHEVs are popular today, will that still be the case in 2030? It could be that manufacturers are already abandoning that class of vehicle to simplify production lines, with a focus on ICE production for legacy markets and BEV production for the future. After all, there would be no place for the PHEV in the UK after 2035.

The UK buys about 3.5 – 4.0 % of global passenger vehicle production, so the purchase of 2.6 million vehicles would notionally require 70 million BEVs in production globally, or all passenger vehicle production. However, with a leading policy position on BEV uptake and local vehicle production of some 1.3 million vehicles per annum, the UK could be commanding a relatively higher percentage of the BEV market. This has been the case in Norway in recent years. Of course, other jurisdictions are also declaring earlier dates for the BEV transition, so there could be competition for the available vehicles. But let’s assume the UK can command 8% of BEV production in 2030, which would imply the need for global BEV production of 35 million vehicles in 2030.

Current global BEV production is 2-2.5 million per year, or 3.2% of total passenger vehicle production. That will need to grow by a factor of at least fifteen in ten years for the UK to meet its goal. If there is a limitation in the supply chain for BEVs it is most likely to be the battery. It won’t be the car body, wheels, suspension, electronics, steering system or even the motor (but it is a very different component to ICE) as the capacity for these exists today in one form or another. But large scale Li-Ion battery production is a new and growing industry that requires new supply chains, new sources of critical minerals like cobalt and new processing facilities to make compounds such as lithium hexafluorophosphate.

Cobalt supply might be challenging as most global production comes from one country, the Democratic Republic of the Congo. It is an important component of Li-Ion battery chemistry although battery manufacturers are taking steps to minimize the requirement. Early battery cathodes contained nickel, manganese and cobalt in equal proportions, but companies such as LG Chem are close to producing cathodes with 80% nickel and only 10% cobalt. Tesla’s first Model S, launched in 2012, was built with an average of 11 kg of cobalt per vehicle, but according to Benchmark Minerals that was down to about 4.5 kg in its successor car, the Model 3, which launched in 2018. Nevertheless, if production were to hit 35 million vehicles in 2030 and each vehicle required 5 kg of cobalt, that still amounts to 175,000 tonnes of cobalt. Current global cobalt production capacity is 150,000 tonnes but it is a widely used mineral.

BEVs aren’t the only products competing for Li-Ion batteries. By 2030 we should be seeing a variety of haulage trucks in the market, more electric buses, a continued escalation of consumer devices running on batteries and a surge in demand for grid scale battery packs to help manage renewable intermittency. While battery recycling will be a large industry in the decades ahead, this won’t be the case in 2030 as society will only just be starting the recycle the batteries being produced today, which represent a tiny fraction of 2030s demand.

Other factors will also come into play, but the size of the battery in every car will be important. Early BEV models were relatively small with limited range and had battery storage of around 25 kWh – the Nissan Leaf is a good example. That’s because batteries were very expensive. Today with battery prices falling rapidly, one Nissan variant known as the Leaf e+ has a 62 kWh battery pack. A review of multiple models from several manufacturers shows battery sizes heading towards 75-100 kWh. So let’s assume the average 2030 car has an 80 kWh battery with a range of around 500 kms.

Global Li-Ion battery manufacturing capacity today is around 400 GWh, or enough to make 6 million BEVs with a 62 kWh battery onboard. However, half that capacity is being split between consumer electronics, larger vehicles such as electric buses and home or grid energy storage. In the 2030 world of 80 kWh battery packs and production of at least 35 million vehicles, nearly 3 TWh of battery manufacturing capacity will be needed just for the BEVs. That might mean 5 TWh in total to cater for all the other applications. And therein lies the potential issue.

There is no doubt that battery manufacturing capacity is ramping up rapidly, but where might we be in 2030? A recent analysis by Wood Mackenzie looks at the current project pipeline for new manufacturing facilities and expects a quadrupling to 1.3 TWh by 2030. The same article that discusses the analysis also notes that this is not the most bullish forecast. Bloomberg New Energy Finance expects 1 TWh of battery production capacity by 2025, while Benchmark Minerals expects 1 TWh of capacity by 2022/2023, 1.35 TWh by 2025, and 2.5 TWh by 2030, with China’s CATL accounting for 332 GWh and Tesla, the fourth-largest producer, with 148 GWh of capacity in 2030. Based on current forecasts, nobody is expecting 5 TWh of capacity by 2030, although it is also fair to say that few in 2010 expected solar PV manufacturing capacity to be 160 GW per year by 2020.

So the bottom line for the  UK government and its ambitious plans means that not only must the UK command an outsize proportion of the BEV market, but that Li-Ion battery production is at least double the most ambitious current estimates for 2030.

Finally, assuming the needed rapid growth in BEV sales takes place and the UK reaches 100% sales by 2030, the number of vehicles on the road in that year would still be less than 10 million, out of a total of perhaps 37 million. It will take another decade or more beyond 2030 to turn over the whole fleet, which makes the recently announced 2030 goal of a 68% reduction against 1990 all the more difficult.

Carbon sinks and reform of the EU ETS

November 19, 2020

On Wednesday morning of this week, POLITICO held a virtual event: “Energy Visions:  Carbon removal and natural sinks in reaching climate neutrality by 2050”.

I was fortunate to have the opportunity to open the event with a few minutes of remarks to set the scene. This was followed by a discussion between the POLITICO moderator and Tina Bru, Norway’s Minister of Petroleum and Energy and then a panel session with;

  • MEP Bas Eickhout, Vice Chair of the Parliament’s Environment Committee and spokesperson for the Greens political group
  • Mauro Petriccione, European Commission Director General for Climate Action
  • Jannicke Gerner Bjerkås, CCS Director at Fortum
  • Gert-Jan Nabuurs, professor European Forest Resources, Wageningen University and Research IPCC Co-ordinating Lead Author

Although the panel couldn’t agree on how to handle the introduction of sinks into the EU as an emissions balancing mechanism, for me at least it is clear that the EU Emissions Trading System offers the simplest route forward. I have also written about this previously. See below for my opening remarks at the POLITICO event.

Good morning.
I want you to imagine for a moment that it is 2050, perhaps your autonomous electric car is already waiting in the driveway to shuttle you to the railway station, and as you step outside the house system shuts off most indoor electricity consumption. On your way to work you start thinking about an event your company had participated in a few days earlier; the last allowance auction under the EU Emissions Trading System. Now that the EU has reached net-zero emissions there would be no further allocation or auctions, in fact no more allowances.
But there is the familiar sound of planes at the nearby airport as the 787 and A350 departures continue, seemingly without pause. Although the first hydrogen fueled Boeing 808 and Airbus A500 planes can now be seen in the skies, a good proportion of air traffic still runs on jet fuel produced from crude oil. Biojet makes up the difference.
The railway station you use is in an industrial part of the city and the cement plant that was constructed there in 2030 using the most efficient process design of the day continues to operate, running on natural gas. It was built to supply concrete foundations for the gigantic 20 MW turbines in the burgeoning wind energy market.
These planes and industrial facilities are part of the 2050 EU landscape and continue to operate but do so in the absence of allowances under the EU Emissions Trading System. How will that be possible?
It is important to recognize that net-zero emissions in 2050 does not represent a point in time when there is no fossil fuel use and therefore no emissions. Today we are 70% dependent on fossil fuels for energy in the EU and although that number is clearly falling, it won’t be zero in 2050. In some cases the technologies required to remove dependence on fossil fuels don’t yet exist or are only at the earliest stages of their development. While some facilities using fossil energy should have carbon capture and storage operating by 2050, that won’t be true in all cases. Planes cannot do this and there will be regions within the EU where local at source carbon capture and storage either isn’t practical or cannot be implemented.
Rather, net-zero represents a balance between remaining emissions and the remote removal of carbon dioxide from the atmosphere. This can be achieved by 2050 in the EU, but we need the policy tools to guide us towards such an outcome. The EU Emissions Trading System is an excellent candidate for change.
Today the Emissions Trading System operates by surrendering allowances against emissions, but when the system ceases to have allowances in 2050, what happens? The Emissions Trading System needs to progress from an allowance-based system to one that manages net-zero emissions by requiring the surrender of sink based units against annual emissions. A sink unit wouldn’t be issued in the way an allowance is but would be created through projects that captured carbon dioxide from the atmosphere and permanently stored it. There are broadly three ways to do this;
One – through industrial projects that strip carbon dioxide from the atmosphere and store it geologically or use it in a way that offers near permanence, such as in making building materials.
Two – through the use of biomass to create energy but capturing and storing the carbon dioxide released in the process, which originated from the atmosphere as the biomass was grown. There is a bio-ethanol plant doing this today in the United States.
And three – by engaging in natural based projects such as rewilding and reforestation, or encouraging farmers to employ different grazing and cultivation techniques which help build soil carbon stocks.
Verified removal units from these types of projects will need to be part of the Emissions Trading System so that some parts of industry and various energy system services can continue operating past 2050. But the change to the trading system needs to be well before 2050, ensuring that enough capacity can be created by incentivising sink activity. A very early milestone would be establishing the certification process for removals within the EU.
Earlier this year Shell released a scenario Sketch illustrating a pathway forward for the EU to reach net-zero emissions by 2050. In that analysis, industrial bioenergy facilities with carbon capture and storage start to operate in the EU by 2035, which points to market signals emerging in the 2020s for project activity to start. We also showed that a gap between what can be achieved and what needs to be achieved for net-zero by 2050 also starts to emerge in 2035. This gap could be filled with nature-based sinks, at least until industrial capacity can catch up, but once again this will require a commercial carbon sink mechanism to incentivise action.
We shouldn’t forget about the period after 2050, at which point the world may require progressive regions such as the EU to extend their reductions into negative territory, in other words having more sinks than emissions. Trading of sinks could be a valuable export opportunity for the EU.
The EU Emissions Trading System is the right commercial lever to drive sink activity forwards, partly because of its carbon pricing structure but also because it must evolve to become a sinks and sources balancing system by 2050. As part of the current rethink of the trading system in preparation for 2030 and beyond, a sink mechanism should be included. Initially this could simply be the recognition of sink units from projects within the EU but should eventually be extended to global recognition of units. These would be transferred under Article 6 of the Paris Agreement along with the necessary safeguards to guarantee environmental integrity and the adjustment of trading partner carbon registries.
Without action in the 2020s to incentivise carbon sinks and subsequent follow-up in the 2030s, the EU may find itself unable to meet its net-zero emissions goal in 2050.
Thank you

An alternative to allocating removal quotas

August 12, 2020

Over the last few months I have posted a number of articles on carbon dioxide removal (CDR), highlighting the need for this set of practices and technologies in achieving the goals of the Paris Agreement. The discussion on CDR has also been growing in the academic community, as illustrated by a recent article in Nature Climate on equity considerations relating to the allocation of carbon dioxide removal quotas. Like many before it the article recognizes the necessity for CDR, but focuses on how to distribute the burden of implementing it at scale.

In calculating the required distribution of CDR quotas, the authors use a mid-range CDR cumulative allocation quota of 687 GtCO2 over the period 2018-2100  (as used in the IPCC SR1.5 P3 scenario) to 176 of the 197 UNFCCC parties following Responsibility, Capability and Equality principles. Under the Responsibility (or proportionality) principle, which relates historical emissions from a given country with responsibility to provide solutions to global warming, CDR efforts would increase with greater accumulated historical emissions. By contrast, the Capability (or ability-to-pay) principle establishes that countries better able to solve a common problem should contribute more, which implies wealthier countries are assigned a greater share of CDR efforts. Finally, according to the Equality (or environmental justice) principle, every individual should have the same right to be protected from pollution. Hence, equal per capita CDR is here enforced across countries irrespective of current (or past) emission levels and economic capability.

This is all well and good and the analysis is useful, but it falls foul of one major issue; the UNFCCC has almost no successful track record of distributing burden or enforcing compliance. The closest point that was reached in terms of targets and compliance were the requirements for developed countries within the Kyoto Protocol; unfortunately that didn’t end well. So while it is helpful to understand how the burden ought to fall, there is little chance of devising an international system of allocation to implement burden sharing. Rather, the world has settled on the architecture of the Paris Agreement which sees countries taking action according to their own nationally determined contributions (NDC) to the overall goal of limiting warming to well below 2°C. Nevertheless, within that structure there is some hope.

The Nature paper also makes the point that the capacity to implement CDR is not evenly distributed around the world. Geological storage of carbon dioxide is easier in some locations than others and the opportunity to pair bioenergy production with CCS for negative emissions may only reside in certain places. It is also clear that natural carbon storage through reforestation will only be possible at large scale in certain countries due to land availability and climate considerations. Small industrial states like Singapore are a great example of this. The country has set a course towards net-zero emissions in the second half of the century, yet its borders encompass significant hard to abate emissions and there is little or even no local capacity for CDR. What should they do?

So we have a problem of uneven supply and unclear distribution of demand, within the framework of the Paris Agreement. The solution to this problem is not one of allocation, but one of trade, making use of Article 6 of the Paris Agreement. It does of course depend on countries wanting the Paris Agreement to reach its goals, which requires that there is some sort of progressive implementation of a net-zero emissions goal within respective NDCs. The EU, UK, New Zealand and a handful of others have already set goals of 2050 for net-zero emissons. As noted above, Singapore is also on a pathway to net-zero, with current policy considerations placing that after 2050. By contrast, Bhutan is already carbon negative and Costa Rica plans to cross net-zero in the near term.

In a posting last year I showed how Article 6 and various forms of CDR could be used to reach net-zero emissions globally. The use of a trading option allows those with a clear goal of net-zero emissions to invest across borders to unlock removal potential that would otherwise remain dormant. There is no allocation or distribution of quotas, only the self-imposed requirement to reach net-zero emissions through a nationally determined contribution. We could imagine a gradation of such NDCs stretching from now (e.g. Bhutan) to 2100 (e.g. a heavily industrial emerging economy), but with all countries either investing in or delivering CDR capacity, driven by the market and its distributive capacity towards lowest cost outcomes.

The picture I developed to illustrate Article 6 starts like this, with no CDR in place;

Screenshot 2019-10-08 at 23.15.54

. . . and ends up like this, with significant CDR capacity realised through cross border trade and investment.

Screenshot 2019-10-08 at 23.17.18

While this is a simple illustration, it isn’t a world that depends on quotas and allocation, but it is a world that has a desire and willingness to get to net-zero emissions.