The constrained role of biomass

The role of biomass in the world energy system looks likely to be constrained, so there will be a need to focus on high value applications where there are few low-carbon alternatives.

This is the second of two posts looking at the role of biomass.  Here I focus on potential resource constraints.

A wide range of possibilities

The amount of biomass available to provide energy depends a lot on the amount of land available to grow energy crops, and how much that land can yield.   Different assumptions on these variables produce quite different estimates of the total resource, and numerous studies over the years have produced a wide range of results.    The amount of waste biomass available also matters, but potential availability from this source is smaller.

A comprehensive review of estimates of the biomass resource was carried out two years ago by researchers at Imperial College[i] (see chart).  It showed a variation in estimates of a factor of around 40, from of the order of 30 EJ to over 1000 EJ (1EJ =1018 J, or a billion GJ, or 278 TWh).  This compares with total world primary energy demand of just under 600 EJ, transport demand of around 100 EJ, and at least 250 EJ to produce present levels of electricity, assuming biomass combustion to remain relatively inefficient[ii].

Estimates of available biomass resource

biomass chart processed

Source: Slade et. al. (2014)

The authors examine reasons for differences in estimates, which I’ve summarised in the table below.  The differences are largely assumption driven, because the small scale of commercial bioenergy at present provides little empirical evidence about the potential for very large scale bioenergy, and future developments in food demand and other factors are inevitably uncertain.

Reasons for variation in estimates of total biomass supply

Range Typical assumptions
Up to 100EJ Limited land available for energy crops, high demand for food, limited productivity gains in food production, and existing trends for meat consumption.  Some degraded or abandoned land is available.
100-300 EJ Increasing crop yields keep pace with population growth and food demand, some good quality agricultural land is made available for energy crop production, along with 100-500Mha of grassland, marginal, degraded and deforested land
300-600EJ Optimistic assumptions on energy crop availability, agricultural productivity outpaces demand, and vegetarian diet
600 EJ + Regarded as extreme scenarios to test limits of theoretical availability

 

Reasons for caution

In practice there seem to me to be grounds for caution about the scale of the available resource, although all of these propositions require testing, including through implementation of early projects.

Land Availability

  • There will rightly be emphasis on protection of primary forest on both carbon management and biodiversity grounds, with some reforestation and rewilding.
  • There is little evidence of a shift away from meat consumption. With the exception of India, less than 10% of people in  most countries are vegetarian despite many years of campaigning on various grounds[iii].   In China meat consumption is associated with rising living standards.
  • Demand for land for solar PV will be significant, although a good deal of this will be on rooftops and in deserts

Yield

  • The nitrogen cycle is already beyond its limit, constraining the role of fertiliser, and water stress is a serious issue in many places (agriculture accounts for 70% of current fresh water use). The UN Food and Agriculture Organisation has projected fairly modest increases in future yields.

Policy support

  • Difficulties in limiting lifecycle emissions from biofuels are likely to lead to caution about widespread deployment.
  • Concerns about food security may limit growth of biofuels.

Small scale to date, despite many years of interest

  • There has been little progress to date compared with other low carbon technologies. Though traditional biofuels remain widely used, modern biofuels account for a very small proportion of demand at present.  World biofuels consumption currently accounts for only 0.2% of world oil consumption[iv] .  Many biofuels programmes have had subsidies cut and there is still limited private sector investment.

In this context some estimates of the potential for biomass to contribute to energy supply seem optimistic.  For example, Shell’s long-term scenarios (Oceans and Mountains) show biomass of 74 EJ and 87 EJ respectively for commercial biomass, 97-133 EJ including traditional biomass by 2060[v].  These totals are towards or above the more cautious estimates for the resource that might ultimately be available (see table above).  A recent review article[vi]  suggested that by 2100 up to 3.3 GtCp.a. (around 12 billion tonnes of CO2) could be being removed, and producing around 170EJ of energy.  However the land requirements for this are very large at about 10% of current agricultural land.  The authors suggest instead a mean value for biomass potential of about a third of that, or 60EJ.

On balance it seems that biomass is likely to account for at most less than 10% of commercial global energy (likely to be around 800-900EJ by mid-century), and potentially much less if land availability and difficulties with lifecycle emissions prove intractable.

It thus seems likely that biomass energy will be relatively scarce, and so potentially of high value.  This in turn suggests it is likely to be mainly used in applications where other low carbon alternatives are unavailable.  These are not likely to be the same everywhere, but they are likely often to include transport applications, especially aviation and likely heavy trucking, and perhaps to meet seasonal heat demand in northern latitudes.  For example, according to Shell’s scenarios aviation (passengers + freight) is expected to account for perhaps 20-25EJ by 2050, and biomass could likely make a useful contribution to decarbonisation in this sector.

None of this implies that biomass is unimportant, or has no role to play.  It does imply that policies focussing on deploying other renewable energy sources at large scale, including production of low carbon electricity for transport, will be essential to meeting decarbonisation targets.  And the optimum use of biomass will require careful monitoring and management.

Adam Whitmore  – 11th April 2016

 

[i] Slade et.al., Global Bioenergy Resources, Nature Climate Change February 2014

[ii] Data on final consumption and electricity production from Shell and IEA data.  35% efficiency for biomass in electricity is assumed, which is likely to be somewhat optimistic, especially if CCS is employed.

[iii] https://en.wikipedia.org/wiki/Vegetarianism_by_country

[iv] BP Statistical Review of World Energy

[v] http://www.shell.com/energy-and-innovation/the-energy-future/shell-scenarios.html  These totals include biofuels, gasified biomass and biomass waste solids, and traditional biomass.

[vi] Smith et. al., Biophysical and economic limits to negative CO2 emissions, Nature Climate Change, January 2016.  The paper estimates land requirement for 170 EJ of 380-700 Mha, around 10% of total agricultural land area in 2000 of 4960Mha.

Deploying CCS on fossil fuel plant is more of a priority than implementing negative emissions technologies

The potential for biomass with CCS and direct air capture of CO2 should not distract from deployment of CCS on fossil fuel plants over the next few decades.  Among other things, learning from CCS on fossil fuels will help make eventual deployment of CCS on biomass cheaper and more effective.

There appears to be increasing likelihood that atmospheric concentrations of greenhouse gases will grow to exceed levels consistent with the target specified in the recent UNFCCC Paris agreement of limiting temperature rises to “well below” two degrees.  Such an outcome would require CO2 to be removed from the atmosphere faster than natural sinks allow, in order to restore concentrations to safe levels.  Near zero net emissions in the latter part of this century will also be needed to stabilise concentrations.

Many models of future emissions pathways now show negative emissions technologies (technologies that result in a net decrease in CO2 in the atmosphere) needing to play a major role for in meeting climate goals. They have the potential to remove carbon dioxide from the atmosphere in the event of “overshoot” of target atmospheric concentrations, and to balance remaining emissions from sectors where abatement is difficult with a view to achieving net total emissions of close to zero.  But the application of such technologies should not be considered in isolation.

Bio Energy with CCS (BECCS)

Bio energy with CCS (BECCS ) is the most widely discussed approach to negative emissions.  BECCS is not a single technology but a combination of two major types of CO2 removal.  Bioenergy from burning biomass to generate electricity or heat emits a substantial amount of CO2  on combustion – around as much as a coal plant.  However much of this can be captured using CCS.  More carbon dioxide is reabsorbed over time by the regrowth of the plants, trees – or perhaps algae – that have been harvested to produce the bioenergy.  Together, the capture of the CO2 from the flue gas and the subsequent absorption of CO2 from the atmosphere by regrowth of biomass can lead to net removal of CO2 from the atmosphere, although this takes time.  (The net amount of CO2, that is emitted on a lifecycle basis from burning biomass without CCS depends on the type of biomass and is subject to considerable variation and uncertainty – a controversial topic that would need another post to review.)

However at an energy system level, where the CO2 is captured – biomass plant or fossil fuel plant – is less relevant than the total amount that’s captured.  Broadly speaking, if there is a biomass plant and fossil fuel plant both running unabated the same benefit can be achieved by capturing a tonne of CO2 from either.

Indeed there may be advantages to putting CCS on a conventional plant rather than biomass plant.  It may be technically more tractable.  Furthermore, CCS require a lot of energy to capture the CO2 and then to compress and pump it for permanent storage.  Biomass is likely to be supply constrained (again, this is an issue that requires a post in itself), so using biomass rather than fossil fuels to provide this energy may limit other applications.  Only when there are no fossil fuel plants from which to capture CO2 does biomass plant become unambiguously a priority for CCS.  This is clearly some way off.

Furthermore biomass with CCS for electricity generation may not be the best use of bioenergy.  Converting sunlight to bioenergy then turning that into electricity is a very inefficient process.  Typically only 1-2% of the sunlight falling on an area of cropland ends up as useful chemical energy in the form of biofuels.  There are various reasons for this, not least of which is that photosynthesis is a highly inefficient process.  Burning biomass to make electricity adds a further layer of inefficiency, with only perhaps a third or less of the energy in the biomass turned into electricity.  Sunlight therefore gets converted to electricity with an efficiency of perhaps 0.5%.  This compares with around 15- 20% for solar cells, implying that scarce land is often likely to be best used for solar PV.  (The calculation is closer if solar PV is used to create storable energy e.g. in the form of hydrogen).   For similar reasons the use of biofuels rather than electricity in transport is inefficient, in part because internal combustion engines are less efficient than electric motors.

Limited available biomass may be better used for those applications where it is the only available lower carbon energy source, notably in aviation and (likely) heavy trucks, or for other applications such as district heating with CCS, where the ability to store energy seasonally is especially valuable.

At the very least, detailed system modelling will be required to determine the optimal use of biomass.  Suggesting that BECCS should have a major role to play simply because in isolation it has negative emissions may lead to suboptimal choices.

Direct Air Capture (DAC)

Direct Air Capture (DAC), where carbon dioxide is chemically absorbed from the atmosphere and permanently sequestered, can also reduce the stock of CO2 in the atmosphere.  However the typical concentration of CO2 in a flue gas of a power plant or industrial plant is several percent, about a hundred times as great as the concentration of 0.04% (400 ppm) found in the atmosphere.  This makes the capture much easier.  Furthermore, millions of tonnes can be captured and piped from a single compact site using CCS, generating economies of scale on transport and storage.  In contrast DAC technology tends to be more diffuse.  These considerations imply that CCS from power plants and industrial facilities is always likely to be preferable to direct air capture until almost all the opportunities for CCS have been implemented, which again is a very long way off.

Uncertainties and optionality

There are many uncertainties around negative emissions technologies, including the availability of biomass, cost, and the feasibility of reducing emissions in other sectors.  For these reasons developing optionality remains valuable, and research to continue to develop these options, including early trial deployment, is needed, as others have argued[i].

One of the best ways of developing optionality is to deploy CCS at scale on fossil fuel plants.  This will reduce the costs and enable the development of improved technologies through learning on projects.  It will also help build infrastructure which can in turn benefit  BECCS.  This needs to run in parallel with ensuring that the lifecycle emissions from the bioenergy production chain are reduced and biodiversity is safeguarded.

Negative emissions technologies may well have a role to play in the latter part of the century.  But they seem likely to make more sense when the economy is already largely decarbonised.  In the meantime deployment of CCS, whether on industrial facilities or power plants, needs to be a much greater priority.

Adam Whitmore – 21st March 2016

[i] Investing in negative emissions, Guy Lomax,  Timothy M. Lenton,  Adepeju Adeosun and Mark Workman, Nature Climate Change 5, 498–500 (2015)  http://www.nature.com/nclimate/journal/v5/n6/full/nclimate2627.html?WT.ec_id=NCLIMATE-201506

 

 

BP’s view of electric cars looks unrealistic

BP’s latest long term outlook for the energy sector looks particularly unrealistic in its projection of a “most likely” case of almost no uptake of electric vehicles by 2035.  This needs to change in their next review.    

Electric vehicles (pure EVs and plug-in hybrids) will make almost no difference to the transport sector until beyond 2035 – that is according to BP in their latest long term projections for the energy sector[i], which were published last week.   It is easy – and perhaps accurate – to dismiss this view simply as an incumbent not facing up to the effects of a disruptive new technology, the equivalent of a  silent movie producer suggesting in the late 1920s that talking pictures were a merely a fad which would never catch on.

However sales of electric vehicles remain a small proportion of the market, with continuing challenges around cost, range and charging infrastructure.  And they are presently a relatively expensive way of reducing CO2 emissions.

So why does the BP analysis look to be so far from being the most likely outcome that it’s presented as?   There are several reasons for this.

The trend is of rapid sales growth

Although small, the market for electric vehicles looks to be growing exponentially at present.  Annual sales have grown from almost nothing 5 years ago to approaching 1% of the total market of just over 70 million cars p.a.[ii].  Sales have roughly doubled every 18 months over the last three years, which is similar to the growth rate of solar PV in its early years.

Simply extrapolating this growth rate would imply annual sales of nearly 5 million vehicles in 2020, with a cumulative total of about 13 million vehicles, or 1% of the world stock which is currently about 1.3 billion vehicles[iii].  Even a slower rate of growth, with sales doubling every two and a half years, would imply annual sales of over 2 million vehicles by 2020 (about a 3% annual market share), and a cumulative total of 7.8 million.  This figure is close to Bloomberg’s projection of 7.4 million electric vehicles by that date.

Annual global sales of plug-in vehicles in thousands [iv]

Sales of EVs

New models are increasingly coming on line

Growth in sales looks likely to be sustained by new models.  Pure electric vehicles with mainstream market prices and a range of around 200 miles are expected over the next couple of years or so, including new versions of the Nissan Leaf and Chevrolet Volt, and the new Tesla E, while in China BYD is introducing its e5 300 EV.  General Motors also plans to produce its first fully electric car, and Apple is widely understood to be undertaking a major programme to produce an electric car.  Meanwhile major manufacturers including BMW, Mercedes and Porsche are gradually migrating plug-in hybrid drive train options across their ranges.  These developments should greatly increase the number of customers who can find a model that fits their needs.

Battery technology is improving rapidly

This growth is being underpinned by rapid improvements battery technology, with cost and weight per kWh halving or more in the last five years.  This trend is expected to continue in the coming years.  Goldman Sachs[v] estimates that continuing advances in technology (see chart below) will lead to major improvements in cost and performance over the next five years.

Projected battery cost reductions and performance improvements

Goldman Sachs chart cropped

Source:  Goldman Sachs

CO2 emissions standards will continue to tighten

Regulations limiting average CO2 emissions from cars are tightening across the world.  As this trend is sustained and extended  electric vehicles are likely to play an increasingly important role in reaching targets.  As adoption of electric vehicles increases this is in turn likely to lead to governments to seek tighter standards, knowing that the technology to meet them is available.  Furthermore, a move to electricity in transport is consistent with wider programmes of emissions reduction that include increasing decarbonisation of electricity generation.  However, lifecycle emissions including from vehicle production will require continuing attention.

Regulations to promote urban air quality are likely to tighten

Just about every major city in the (increasingly urbanised) world has problems with poor air quality.  Vehicles are responsible for much of this.  Concerns about this are likely to lead to increasing prevalence of low emissions zones in cities.  The UK Conservative party manifesto went further in its 2015 election manifesto, setting out an aim for nearly all cars and vans on the road to be zero emissions by 2050[vi].  Indeed, improving local air quality is often seen as a more pressing problem than reducing CO2 emissions because of the immediate and localised health effects.

Such regulations are likely to lead to greatly increased take-up of electric cars and buses.  (Around 46,000 electric buses were already in use worldwide by 2014[vii].)  This is among the reasons why choices between EVs and internal combustion engine vehicles won’t simply be a matter of which is cheaper.  EVs only need to be close enough in cost and sufficiently available for tighter regulation to be practicable.

Consumer preferences and lifestyle are likely to favour electric vehicles

Electric vehicles are quieter than those with internal combustion engines, especially at low speeds (at higher speeds wind and road noise tend to predominate for all vehicles).  They are also good to drive, with excellent acceleration and road holding, and they reduce or eliminate trips to petrol stations (never pleasant places despite the best efforts of those involved).  They fit with consumer preferences for cleaner vehicles, which seem likely to increase in tandem with regulatory action.  And they fit comfortably with trends towards increased functionality of communication systems (cars as “smart phones on wheels”), driver assistance and autonomous driving, and greater prevalence of car sharing models.  These trends look to be significant, especially for younger consumers.

Together these trends give a convergent story of much earlier and more rapid growth in EVs than suggested by BP.  Norway shows what can be done.  Electric vehicles reached 16% of sales of new cars there in 2015[viii].  Changeover of the vehicle stock will take a while.  And oil products look likely to continue to predominate in aviation and heavy trucking.  But their future in light vehicles seems much more challenged.  Electrification of light vehicles is likely to lead to substantial changes in the transport system over the next 20 years.  It is to be hoped that the next edition of BP’s long-term outlook includes a much more realistic view of this.

Adam Whitmore – 18th February 2016

[i] http://www.bp.com/content/dam/bp/pdf/energy-economics/energy-outlook-2016/bp-energy-outlook-2016.pdf , see p.22-23  of the presentation

[ii] http://www.statista.com/statistics/200002/international-car-sales-since-1990/

[iii] See BP presentation page 25 for current global total

[iv] Data is from:

http://www.iea.org/evi/Global-EV-Outlook-2015-Update_1page.pdf

http://cleantechnica.com/2015/03/28/ev-demand-growing-global-market-hits-740000-units/ ,

https://en.wikipedia.org/wiki/Electric_car_use_by_country, http://cleantechnica.com/2015/03/28/ev-demand-growing-global-market-hits-740000-units/

http://ev-sales.blogspot.co.uk/search?updated-min=2015-01-01T00:00:00Z&updated-max=2016-01-01T00:00:00Z&max-results=50

[v] See  http://www.goldmansachs.com/our-thinking/pages/new-energy-landscape-folder/report-the-low-carbon-economy/report.pdf  See p.23for sales projection

[vi] https://www.conservatives.com/manifesto, see page 15

[vii] http://www.iea.org/evi/Global-EV-Outlook-2015-Update_1page.pdf

[viii] See  http://www.goldmansachs.com/our-thinking/pages/new-energy-landscape-folder/report-the-low-carbon-economy/report.pdf

More trading does not always mean a better market

 

Carbon markets need some liquidity to provide efficient price signals, but low cost abatement is the ultimate objective, not more trading.

Carbon markets have become widespread because trading can allow emissions to be reduced at lower cost, providing flexibility to emitters and revealing information about where low cost abatement is available.  However, this does not imply that higher trading volumes should be an end in themselves.  Liquidity needs to be sufficient to allow for emitters to take advantage of flexibility and to understand their own costs in relation to others’.  Beyond this, large trading volumes may be a sign of difficulties, for example excessively volatile prices.

In particular, some have claimed that higher trading volumes imply that the EUETS is functioning better than the California scheme.  Trading volumes are indeed higher in the EU than in California relative to the size of the market, but this does not make for a more effective price signal.  Indeed the California scheme seems currently to provide the better price signal.

The chart below shows data from Bloomberg New Energy Finance (BNEF) on the ratio of trading volumes to the annual cap in the EU, California and China.  This data is for trading on secondary markets – it excludes the volumes from the original auctions.  In the EUETS trading is about three times the volume of the cap.  In California the volume of trading is slightly more than the annual cap, implying that on average allowances are bought and sold once after their original auction.  In contrast there are very few trades at all in the Guangdong or Shanghai pilot schemes in China, with only 5 and 2 million tonnes of recorded trades respectively (other Chinese pilot schemes show similar behaviour), about 1% of the annual cap.

Ratio of traded volumes on secondary markets to the annual cap in different emissions trading schemes in 2015

Chart

Source:  Bloomberg New Energy Finance

The low volumes of trading in the Chinese schemes indicate that the schemes are not yet functioning effectively to provide market-determined price signals in the way they would in Europe or the US, although this does not, of course, imply that the schemes are having no effect.  However the greater volume of trading in the EUETS is not the sign of a more efficient price signal than in California.

Trading in California seems clearly sufficient to allow higher cost emitters to purchase allowances rather than undertake expensive abatement, especially given that these trades are in addition to the original auctioning of allowances which in itself creates a market price.  The main reason that trading volumes are lower than California than in the EU looks to be that the auction reserve price in California has led to a stable market price, close to the reserve price, and this is likely to persist as the auction reserve price continues to escalate at its specified rate of 5% p.a. plus inflation.  In contrast, the EUA price continues to remain relatively volatile, creating more opportunities for trading (although price volatility is a feature of most commodity markets and not necessarily a sign of a badly functioning market).  Yet prices in California are both higher than in the EU (currently about $13/tCO2 in California compared with about $7/tCO2 in the EU), and more stable.  Higher, more stable prices give a better signal for companies looking at low carbon investment.

There are also some additional restrictions in the California scheme such as allowance holding limits, which are intended to prevent market manipulation and may affect some market participants.  However none of these rules seem likely to inhibit efficient price formation.

There continue to be some, especially in the EU, who object to price containment, such as auction reserve prices, in principle.  However these objections are not well founded.  In the California system additional opportunities for abatement below the auction reserve price lead to more abatement, rather than lower prices.  This is a more efficient outcome, and more in line with the way that normal markets work (see here).  Indeed, even the California price lies well below the social cost of carbon, so is still too low.

Markets are a means to an end: efficient emissions reduction.  Trading should serve this overall objective.  Suggesting that the EUETS is somehow a better functioning market than California because it has higher trading volumes misses the larger goal, which is efficient abatement, not increasing the number of opportunities for traders.

Adam Whitmore – 28th January 2016

Uses of revenues from carbon pricing

There are many worthwhile uses for revenues for carbon pricing.  In practice a mixture of uses is likely to be found. 

My previous post estimated that carbon pricing will raise around $22 billion worldwide this year, and suggested that this has the potential to grow by an order of magnitude.  This post looks at how revenues might be used.

Revenues from carbon pricing can be used for both climate change related purposes and more general purposes.  The main categories are summarised in the table, and described briefly below.

Summary of potential uses of revenue raised by carbon pricing

General fiscal and social goals Climate change related purposes
Support for vulnerable groups Adaptation
Reduction of other taxes Distribution to those affected by climate change
Government retention of revenues Support for further emissions reduction, including for innovation
Returned to citizens

Support for vulnerable groups

The introduction of carbon pricing is often accompanied by concerns about the effects on energy prices on lower income households.  Rises in electricity prices to households due to pricing of power sector emissions are of concern even under schemes such as the EUETS which do not directly cover households.

Some proportion of revenue can be set aside to compensate vulnerable households.  This was a feature of the now repealed Australian scheme.

Reduction of other taxes

Other taxes can be reduced by an amount equal to the revenue raised from carbon pricing.  If this is done in full the carbon pricing scheme is usually referred to as revenue neutral.  This is a feature of the British Columbia carbon tax.

Government retention of revenues.

Governments can retain some or all of the revenue for general expenditure or deficit reduction.  This is, for example, the case in the UK, where the Treasury has a long history of viewing taxation and expenditure as a whole, and there is resistance to earmarking (“hypothecation”) of funds.

Returned to citizens.

An equal payment can be made to all citizens in a jurisdiction (see previous post).  The Swiss carbon tax currently returns a portion of revenue equally to all citizens.  Such an approach has been proposed as part of bills at federal and state level in the USA.

Adaptation

Measures to adapt to climate change can be funded either within the jurisdiction that raised the revenue or internationally.  For example, in its July proposals for the next phase of the EUETS, the European Commission included provisions for Member States to use some of the revenues from the EUETS to finance actions to help other countries adapt to the impacts of climate change.

Funds could be channelled through international institutions to provide funds to match national expenditure, potentially making a substantial contribution to meeting any funding shortfalls.

Distribution to those affected by climate change

Funds could be provided to those adversely affected by climate change.  There is a continuing debate on this issue and how it relates the “loss and damage” agenda within the UNFCCC process, including the large overlap with the issue of adaptation.  However there has been little practical progress on this to date.

Support for further emissions reduction and for innovation

Funds may be provided for measures such as retrofitting homes and businesses for greater energy efficiency, and the installation of renewable energy technologies.  Revenues may also be used to fund research, development and deployment of new low carbon technologies.  A number of schemes in North America include provisions of this type, including California, RGGI and Alberta.  The EUETS has also included support for new technology from the sale of 300 million allowances from the new entrant reserve (the “NER 300”).  However funds raised from this were less than originally expected due to lower allowance prices, and the allocation process has been delayed.  The EU is now planning an Innovation Fund in the 2020s, again to be funded by the sale of allowances.

So which should be preferred?

Many uses of funds have merit, and the choice will depend on local political and economic circumstances.  However some seem to have particular arguments in their favour, with a mixture of often likely to be preferred.

Supporting adaptation and potentially also providing recompense to those adversely affected by climate change has a strong appeal on grounds of justice, and may form a valuable element of some programmes.

Returning funds equally to citizens has advantages covered in my previous post.  This could be accompanied by providing additional support to some vulnerable groups.

Finally, using revenue to fund additional emissions reductions, especially with a component of assistance for the disadvantaged, has proved understandably attractive in a number of jurisdictions in North America and to some extent in the EU.  Deeper emissions cuts will require new technologies and large-scale investment.  This in turn requires progress to be made now, increasing in scope and extent over time.  Increased use of funds from carbon pricing to support such efforts seems likely to prove worthwhile.

Adam Whitmore – 10th November 2015

Material in this post, as well as my previous one, can also be found in the Carbon Markets Investment Association (CMIA) paper at http://cmia.net/forums/climate-finance-forum/climate-finance-forum-docs

Revenue from carbon pricing

Carbon pricing already raises over $20 billion p.a. worldwide.  This has the potential to grow by an order of magnitude.  What to do with this money will be an increasing important issue.

As carbon pricing spreads around the world (see here) substantial amounts of money are now being raised.  The amounts depend on:

  1. The coverage of each scheme
  2. The number of allowances allocated free of charge (under an emissions trading scheme) or the extent of tax exemptions and rebates (under a carbon tax).
  3. The level of the price in each scheme

Estimating these parameters for each scheme around the world indicates that about $22 billion will be raised globally this year, excluding the value of free allowances, tax exemptions and rebates.  The breakdown of this total is shown in the chart below.  (The data is a rough estimate in some cases because summary data on coverage and rebates is not readily available for some schemes, especially carbon taxes in Europe.  Also, average prices for allowances over the whole of this year are not yet known.)

About three quarters of the revenue raised is in Europe.  Interestingly, revenues from auctioning of allowances under the EUETS are lower than those from other carbon pricing in Europe, which includes carbon price support in the UK and carbon taxes in France and Scandinavia.  This is in part because EUETS revenues have been reduced this year by the postponement of some allowance auctioning (backloading).

The remainder of revenues raised worldwide are from the various North American schemes and the (rather low) carbon tax in Japan.  There is no auctioning of allowances under the New Zealand or South Korean schemes, or in China, so they don’t yet contribute to the total.

Indicative estimates of revenue from carbon pricing in 2015

revenue chart

Notes: Estimates based on prevailing prices multiplied by volumes covered, excluding freely allocated allowances and tax exemptions and rebates.  Data is estimated from a variety of sources and totals may be lower or higher or than shown as assumptions have been adopted for coverage and rebates where data is not readily available.  Small variations in coverage can affect estimates significantly in individual jurisdictions because of high prices.The Mexican carbon tax is excluded as it does not price emissions from natural gas so more resembles an energy tax on some fuels.  Other Europe includes Portugal, Switzerland and Iceland.

Revenue is significantly higher this year than it was last year, when the total raised worldwide was around $15 billion.  This mainly reflects increases in:

  • prices and volumes of EUAs auctioned;
  • the level of UK carbon price support;
  • the price and coverage of the French carbon tax; and
  • the coverage of the California and Quebec schemes, which expanded to cover transport and other sectors in January this year.

The total revenue raised has the potential to increase vastly if:

  • new schemes are introduced, especially nationally in China as planned and in the USA, or coverage of existing schemes is expanded;
  • the amount of auctioning is increased, with the amount of auctioning in the planned national scheme in China especially important; and
  • prices rise under the major schemes, including the EUETS.

Indeed, over time revenue raised globally could increase by an order of magnitude or from current levels to reach into the hundreds of billions in the longer term.  However even if revenue grows to approximately ten times current levels over the next decade or more it would still represent only perhaps 0.2% of global GDP, and so remain only a small proportion of total flows within the world economy.

This is nevertheless a substantial amount of money, and there is likely to be increasing debate about how it might best be used.  I will return to this in my next post.

Adam Whitmore – 26th October 2015

A paper on revenues from carbon pricing including much of this material has been published by the Climate Markets and Investment Association (CMIA), see http://cmia.net/forums/climate-finance-forum/climate-finance-forum-docs

The problematic governance of climate engineering

Deployment of climate engineering faces formidable and perhaps insurmountable governance challenges, even if it looks technically feasible.  This prospect should reinforce efforts to reduce emissions.

If climate change becomes too severe some might favour climate engineering  …

This post looks very briefly at governance of climate engineering – managing the total net solar radiation the earth absorbs (Solar Radiation Management), most likely by injecting particles into the stratosphere[i].  I’ll assume a highly favourable case in which deployment appears technically feasible, likely to be at least partly  effective and cheap; is gradual and modified in response to experience; and seeks only to moderate changes, for example by offsetting (say) half of the additional radiative forcing in order to reduce the risks[ii].

Whatever its merits, almost no one who has looked seriously as the issues thinks that climate engineering is a substitute for reducing emissions.  There are problems that climate engineering won’t fix, such as ocean acidification.   There are also likely to be severe side-effects, such as disruption to rainfall patterns.  And the full effects of deployment are impossible to know in advance, even after thorough research.

Despite these drawbacks, many are becoming concerned that slow progress in reducing emissions may require climate engineering as the least undesirable option – an emergency response to forestall imminent catastrophic climate change.

But the control of any “global thermostat” is likely to be contentious …

However, it is not at all clear how agreement would be reached to deploy climate engineering, and how the deployment would then be governed.  The effects of climate engineering will be global, so some kind of global arrangement will be necessary for general acceptance of its legitimacy.  But different parts of the world would be affected differently, with consensus about what constitutes an emergency unlikely[iii].  Some vulnerable countries might favour deployment even at a relatively low threshold.  Others may be more cautious.  Some are likely to be against deployment on principle.  There might also be demands by some for compensation for adverse effects that could be very difficult to agree.  And acceptance may need to go beyond governments to the public, which is likely to have widely differing views.

These difficulties are likely to be compounded because early action may be required to forestall an emergency, because of lags in the climate system.  However signals may not be sufficiently clear early enough, so any emergency may become irreversible before there is agreement on action.

Intergenerational effects complicate things further.  Climate engineering would commit future generations to certain pathways, and the legitimacy of this would be difficult to establish.

With unilateral action a severe risk …

Failure to reach some kind of global agreement might lead to a single country, or small groups of countries, deploying unilaterally whatever the doubts about the legitimacy of such actions.  This would be very likely lead to international tension and potentially to conflict as states saw their vital national interests threatened.  This conflict would likely be exacerbated the problems of dealing with climate change, including, for example, threats to food supplies and large-scale migration.  This could in turn reduce trust and political co-operation, making agreement even more difficult.  It is hard to say how serious such a scenario would be, but it is not a welcome prospect and could potentially become an immensely dangerous threat to global political and social stability.

But no clear route to building the necessary frameworks to ensure legitimacy of  deployment …

All of this implies at the very least the need for strong frameworks – international treaties and processes, perhaps underpinning new institutions – to manage any deployment and reduce the risks of conflict.    There is currently very little in place.  Some existing laws and institutions are relevant, and initial regulation is likely to build gradually drawing on some of these[iv].  For example, states that are party to the UN Convention on Biological Diversity have adopted a decision that explicitly restricts implementation of climate engineering that may affect biodiversity (which is in practice all likely cases) until a scientific basis exists to justify it taking account of the risks.  However this is not intended for broader decisions making.  The Convention on Long Range Transboundary Air Pollution (CLRTAP) may require Environmental Impact Assessments (EIAs) to be made.  In some cases the Convention on the Prohibition of Military or other Hostile use of Environmental Modification Techniques (ENMOD) may be relevant.  The UNFCCC could play a role, although does not appear to be doing so to date, as could UNEP and international forums such as the G20.  The UN Security Council could get involved in the case of conflict.  Lessons from outside environmental governance may be helpful, such as those from nuclear non-proliferation.

However none these arrangements appear sufficient for wider governance of climate engineering deployment, or to be likely to grow into something adequate.  This implies the need for a new institution or at least a set of formal arrangements for global governance, which at the very least substantially expands the remit of current institutions and treaties.

The precedents for effectiveness of any such regime do not look promising.  The UNFCCC has over 20 years failed to reach adequate agreement on mitigation pathways, despite reduction of emissions being unambiguously a good thing, although potentially costly.  Whatever agreement is reached in Paris in a few weeks it looks likely to remain inadequate to the required task.

Indeed there does not appear to be an example of global agreement to effectively manage a problem anything like as consequential, difficult, and diverse and extensive in its impacts as climate engineering.  For example the Montreal Protocol on ozone depletion dealt with a much more tractable problem.  Effective arrangements for governing climate engineering may simply prove impossible to realise.

Some sorts of global emergency might arise that is so clear cut that all major nations can agree that the only remaining possibility is deployment of climate engineering.  But this sounds more like international panic than international governance.

Implying all the more need for greater emissions reductions …

It is often said that the technological problems and risks of climate engineering imply that there in every need to put as much effort as possible into emissions abatement.  This is true.  But governance also matters.  The lack of good prospects for adequate and effective governance of climate engineering, as much as any technical challenges it may raise, should reinforce concentration on efforts to reduce emissions.

Adam Whitmore – September 2015

Thanks to Carlos Munoz Browning, who provided me with his research, on which some of this post draws .

References

[i] A good review of such techniques and their application is provided in the US National Academy of Sciences recent report at http://www.nap.edu/catalog/18988/climate-intervention-reflecting-sunlight-to-cool-earth

[ii] For more on this type of scenario see:  A temporary, moderate and responsive scenario for solar geoengineering, David W. Keith  & Douglas G. MacMartin Nature Climate Change 5,  201–206 (2015)

[iii] For a fuller discussion of some of these points see Climate emergencies do not justify engineering the climate, Jana Sillmann, et al. Nature Climate Change 5, 290–292 (2015)

[iv] For a discussion of some of these possibilities see Options and Proposals for the International Governance of Geoengineering, Bodle et al. (2013)