Category: Mitigation

Feasibility and affordability of reducing greenhouse gas emissions

By Ajay Gambhir, Research fellow on mitigation policy at the Grantham Institute

wind turbines300The United Nations Climate Summit 2014, to be held in New York on 23rd September, comes at an important point in the calendar for discussions on how to address climate change. Next year will see nations submit pledges on their future greenhouse gas emissions levels, as part of the United Nations process culminating in the 21st Conference of the Parties (COP) in Paris at the end of 2015, the ambition of which is to secure a global agreement to tackle climate change.

There is now a rich body of evidence on the implications of mitigation at the global, regional and national levels. This note presents some of the evidence, revealed by research in the Grantham Institute over recent years, which supports the view that mitigation remains feasible and affordable.

Technologies and costs of a global low-carbon pathway

The Grantham Institute, in partnership with Imperial College’s Energy Futures Laboratory (EFL) demonstrated a relatively simple, transparent analysis of the relative costs of a low-carbon versus carbon-intensive global energy system in 2050. The report concluded that mitigation in line with a 2 degrees Celsius limit to global warming would cost less than 1% of global GDP by 2050 (excluding any potentially significant co-benefits from improved air quality and enhanced energy security).

Joint Grantham and EFL report: Halving global CO2 by 2050: Technologies and Costs

The importance of India and China

The two most populous nations, India and China, have undergone rapid economic growth in recent decades, resulting in significantly increased demand for fossil fuels, with associated increases in their CO2 emissions. Mapping pathways towards a low-carbon future for both regions presents challenges in terms of technology choices, affordability and the interplay with land, water and other resources. The Grantham Institute, in partnership with other research groups (including IIASA and UCL), has produced long-term visions of both regions using energy technology modelling and detailed technology and resource assessments, to set out pathways to very low-carbon economies which can be achieved at relatively modest costs. In addition, the Institute has undertaken assessments of the feasibility and cost of achieving the regions’ near-term (2020) Cancun pledges.

Grantham Report 1: An assessment of China’s 2020 carbon intensity target

Grantham Report 2: China’s energy technologies to 2050

Grantham Report 4: An assessment of India’s 2020 carbon intensity target

Grantham Report 5: India’s CO2 emissions pathways to 2050

Key sectors and technologies

Reports have been produced on a number of key technologies across all economic sectors and on the role that these can play in a low-carbon world: electric and other low-carbon vehicles in the transport sector; low-carbon residential heating technologies; other building efficiency and low-carbon options; and a range of technologies and measures to reduce emissions from industrial manufacturing.

The successful development and deployment of a range of low-carbon power sector technologies will be central to decarbonising the power generation sector over the coming decades, thereby providing the basis for low-carbon electrification in the building, transport and industrial sectors. The Institute has produced briefing papers on the technological status, economics and policies to promote solar photovoltaics and carbon capture and storage (including with bioenergy to produce net negative emissions).

Grantham briefing paper 2: Road transport technology and climate change mitigation

Grantham briefing paper 3: Carbon capture technology: future fossil fuel use and mitigating climate change

Grantham briefing paper 4: Carbon dioxide storage

Grantham briefing paper 6: Low carbon residential heating

Grantham briefing paper 7: Reducing CO2 emissions from heavy industry: a review of technologies and considerations for policy makers

Grantham briefing paper 8: Negative emissions technologies

Grantham briefing paper 10: Shale gas and climate change

Grantham briefing paper 11: Solar Power for CO2 mitigation

Grantham Report 3: Reduction of carbon dioxide emissions in the global building sector to 2050

Competitiveness

A critical consideration in any nation or region’s mitigation strategy is the degree to which a low-carbon transition might put its industries at risk of losing competitiveness against rivals in regions with less stringent mitigation action. In a landmark study using responses from hundreds of manufacturing industries across the European Union, researchers at the Institute, in partnership with the Imperial College Business School and Universidad Carlos III de Madrid, have produced robust evidence to support the contention that the EU’s Emissions Trading System has not produced any significant competitiveness impacts or industry relocation risks.

On the empirical content of carbon leakage criteria in the EU Emissions Trading Scheme – Ecological Economics (2014)

Industry Compensation under Relocation Risk: A Firm-Level Analysis of the EU Emissions Trading Scheme – American Economic Review (2014)

Global energy governance reform

The energy policies of governments around the world will, to a large extent, determine global greenhouse gas emissions.   Western governments cooperate on their energy policies through the International Energy Agency (IEA), which is a powerful advocate and analyst of low carbon energy strategies.  Unfortunately the IEA excludes developing nations, such as China, India, Brazil, Indonesia, from its membership.  The Grantham Institute is working with China’s Energy research Institute (ERI) to advise the Chinese government on China’s options for greater engagement in international energy cooperation, including closer association with the IEA.   China’s participation is important for world energy security and affordability – the other main objectives of energy policy –   as well as for climate mitigation.   A consultation draft report published by this ERI/Grantham project is at Global energy governance reform and China’s participation. An earlier report by the Grantham Institute with Chatham House is at Global energy governance reform.

Stranding our fossil assets or stranding the planet

By Helena Wright, Research Postgraduate, Centre for Environmental Policy

Earlier this month Carbon Tracker came to Imperial College London to discuss their report on ‘Unburnable Carbon’.  The report outlines research which shows between 60-80% of coal, oil and gas reserves of publicly listed companies are ‘unburnable’ if the world is to have a chance of keeping global warming below the globally-agreed limit of 2°C.  The event was followed by a lively debate.

The research, led by the Grantham Research Institute at LSE and the Carbon Tracker Initiative, outlines the thesis that a ‘carbon bubble’ exists in the stock market, as companies with largely ‘unburnable’ fossil fuel reserves are being overvalued.

In fact, the OECD Secretary-General Angel Gurria recently said:

“The looming choice may be either stranding those [high carbon] assets or stranding the planet.”

Digging a hole: ever deeper extraction, ever higher risks

The report found that despite these systemic risks, companies spent $674 billion last year to find and ‘prove’ new fossil fuel reserves.  Capital expenditure has been increasing, while production has been decreasing, with reserves ever harder-to-reach.

Companies like Exxon and Shell have been spending record sums trying to prove reserves, that ultimately risk being stranded in future. The research by Carbon Tracker suggests this is a faulty business model, and in fact risks inflating the ‘carbon bubble’.

If these high levels of capital expenditure continue, we will see over $6 trillion allocated to developing fossil fuel supplies over the next decade – a huge sum of wasted capital.  Luke Sassams outlined evidence that some companies are now starting to pick up on this and rein in their CAPEX spending.

Investors and regulators are now picking up on the issue.  A Parliamentary Report on the ‘carbon bubble’ was released last week, and Chair of the House of Commons EAC, Joan Walley MP, said: “The UK Government and Bank of England must not be complacent about the risks of carbon exposure in the world economy”.

Carbon Entanglement: Getting out of the bubble

One issue that has been highlighted is the fact that some OECD governments receive rents and revenue streams from fossil fuels.  There is also a policy and credibility issue.  If businesses do not believe governments are serious about tackling climate change, they may carry on investing in fossil fuels and perpetuate the entanglement.

It seems that investors are currently backing a dying horse. But continued expenditure on finding new fossil fuel reserves might also be testament to the failures of recent climate policy.

Some have argued the ‘carbon bubble’ thesis relies on the assumption that governments will act on climate change. But arguably, there is not a question of ‘whether’ this government regulation will happen, but merely a matter of ‘when’.   There is a systemic financial risk to fossil assets, whether the necessary government regulation happens pre-emptively, or as a result of severe climatic disruption.

In the discussion that followed, the audience discussed whether the ‘carbon bubble’ will actually burst, and several participants suggested it was likely to burst unless it is deflated in a measured way. An audience member asked: “Don’t the investors have the information already?” and various participants felt they do not, demonstrating the need for enhanced disclosure on carbon risk.

Finally, the discussion turned to institutional investors who are investing in fossil fuels.  Some commentators recognise the irony.  How can a pension fund claim to be helping pensioners, while potentially risking the lives of their grandchildren?  It has also been found that several universities invest in fossil fuels, including Imperial College, sparking a recent petition. The risks of climate change highlighted in the recently released IPCC AR5 report, are driving calls for all types of investors to recognise the risks of high carbon investment.

2014 – A pivotal year for CCS?

By Dr Niall Mac Dowell, Centre for Environmental Policy

For centuries, all of the world’s economies have been underpinned by fossil fuels.  Historically, this has primarily been oil and coal, but since the mid-1980s natural gas has become increasingly important. Over the course of the last decades, there has been an increasing focus on electricity generation from renewable sources, and since about 1990 carbon capture and storage (CCS) has become an important part of the conversation around the mitigation of our greenhouse gas (GHG) emissions.

The role of CCS in addressing our GHG mitigation targets is clear and unambiguous – see for example the IEA CCS technology roadmaps which show that by 2050, almost 8 GtCO2/yr needs to be sequestered via CCS; a cumulative of 120 GtCO2 in the period from 2015 to 2050. Tellingly, this means that we need to see real action on the commercial scale deployment of CCS globally by 2015 such that we have at least 30 installations around the world actively capturing and sequestering CO2 from a range of industrial and power-generation plants. Currently, there are 8 CCS projects around the world which are actively capturing and sequestering CO2 – primarily in North America (Shute Creek, Val Verde, Enid Fertilizer and Century Plant in the US and the Weyburn-Midale project in Canada) and Europe (Sleipner and Snøhvit in Norway), although Algeria have also been operating the In Salah project since 2004.

However, it is notable that none of these plants are capturing CO2 emitted from power stations; rather they are capturing from industrial sources from which CO2 arises in a stream suitable for transport and storage. This is particularly important as CO2 emissions from power generation represent the single largest source of global emissions.

For this reason, it is particularly encouraging to note the UK’s leadership position in this area. Following from our signing into law the mandate to mitigate by 80% our GHG emissions by 2050, the Department of Energy and Climate Change (DECC) have recently signed agreements for Front End Engineering Design (FEED) studies for two commercial scale CCS projects; the Peterhead project and the White Rose project.

These are two really exciting projects, both of which represent real world firsts. The Peterhead project is a collaboration between Shell and SSE and is a retrofit of post-combustion capture plant to an existing power plant. This project is intended to operate in a base-load fashion and follows on from the Boundary Dam CCS project in Canada which also uses Shell technology. However, a key distinction between the Boundary Dam and Peterhead projects is the CO2 source; Boundary Dam is a coal-fired power plant whereas Peterhead is a gas-fired power plants. From an engineering perspective, these plants present significantly distinct CCS challenges, and therefore the Peterhead project represents a real step forward.

It is, of course, important to emphasise the importance of the Boundary Dam project. Returning to the IEA’s CCS technology roadmaps, we can see that CCS on coal-fired power plants is of vital global importance; potentially contributing to about 40% of emission mitigation in both OECD and non-OECD countries.

The White Rose project on the other hand is an example of oxy-combustion technology applied to a coal-fired power plant. This project is a collaboration between Alstom, Drax Power and BOC. Here, instead of performing a retrofit, the White Rose project is building a brand new, state-of-the-art 450MWe super-critical power plant which has the capacity to co-fire biomass and coal which, when combined with CCS can lead to the plant producing carbon negative electricity. Importantly, the White Rose plant will have an emphasis on the generation of flexible power; something which is key as we have more and more intermittent renewable energy in our energy system.

Thus, 2014 is the year where CCS on power generation becomes a reality. Given the fact that fossil fuels will remain a vital part of the world’s energy landscape for some time to come, with some sources indicating that they will account for over 66% of the world’s energy by 2100, it is almost impossible to over emphasise the importance of our ability to utilise them in an environmentally benign and sustainable way. For this reason, I believe 2014 represents a pivotal year; one which, in time, we will look back on as being the dawn of the age of sustainable fossil fuels.