Category Archives: Climate change policy

Momentum towards net zero emissions is growing

Over the last year and a half there has been a wave of pledges to reduce greenhouse gas emissions to net zero[i].  In June 2019 the UK became the first major economy to commit to achieving net zero.  However, the UK now accounts for just under 1% of world emissions, so this commitment on its own makes little difference to prospects for global emissions, even if it is met in full.  The UK’s commitment was followed by similar pledges by the EU and New Zealand[ii].  These pledges increased coverage to around 9% of emissions. 

The proportion of emissions covered by such pledges changed radically in September 2020 when China, by far the world’s largest emitter with around 30% of the global total, committed to achieving carbon neutrality[iii]. With Japan and South Korea recently making similar pledges, nearly half of emissions from energy and industry are now covered by pledges to eliminate them (see chart).

Chart: proportion of emissions from energy and industry covered by net-zero pledges[iv]

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Shares of emissions are in 2019.  Source: EDGAR database

This has happened so fast that it seems likely to create strong momentum for action by other countries.  For example,  it is hard to see Australia (1.14 % of emissions) not responding while its major trading partners in Asia are taking such action.   The Government of Canada (1.54% of emissions) has already made a net-zero pledge, though it has not yet been passed into law. 

India (6.8 % of emissions) alone could increase the proportion of emissions covered to over 50%.  However the Indian Government does not yet appear ready for such a pledge. 

The USA (13.4 % of emissions) could make a huge difference.  President-elect Biden has committed to rejoining the Paris Agreement and has proposed a net zero target. However the balance of power in the Senate is still unclear, and this may prove an obstacle to some types of action.

The data described here covers emissions from energy and industry only, so does not include emissions from land use change. Tropical countries with rapid deforestation, notably Brazil and Indonesia, add substantially to global emissions – partly, of course, driven by demand for agricultural products from China, Europe and North America and elsewhere.  Reforestation, alongside other measures, could enable routes to net-zero for these jurisdictions, especially with support from elsewhere.  

The challenge of meeting net zero commitments remains daunting.  However, the more countries that adopt such commitments, the easier it will be to meet them, as new technologies will be deployed at larger scale and lower cost, and there will be fewer distortions to trade arising from different levels of ambition to reduce emissions. 

For too many years far too little has been done to reduce emissions and avoid damaging climate change.  However it appears that, while there is still a vast amount of work to be done, at last things are beginning to head in the right direction.

Adam Whitmore – 10th November 2020


[i] In this post I use the terms carbon neutrality and net zero emissions interchangeably.  I have interpreted each to be consistent with the definition used in the Paris Agreement (Article 4) of achieving a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases.  It is not always clear what is implied by the use of each term in public announcements.  It may be that in some cases carbon neutrality is intended to refer to carbon dioxide only, allowing net emissions of other greenhouse gases to continue.

[ii] Other countries within the EU, including France, Sweden and Denmark, made their own pledges.  This was followed by an EU wide commitment.  The full legal processes for ratifying this commitment by the EU have not yet been completed but the commitment has support from all major parties and institutions, and its ratification appears to be a formality.

[iii] China’s pledge is to achieve carbon neutrality by 2060, rather than the date of 2050 pledged by others, but it is possible this date will be brought forward in future. It is in any case a hugely ambitious commitment.

[iv] The chart shows commitments excluding small economies, and including only those where the commitment seems firm.  Some smaller economies, including Costa Rica, also have net zero targets, while others have aspirational targets with varying degrees of commitment. 

China’s commitment to carbon neutrality

China’s newly stated aim to reach to carbon neutrality by 2060 is one of the most important announcements on climate change policy ever made.

A few months ago I stood back from updating this blog.  I am now returning to posting regularly.  I will be doing so at an exciting time for climate policy.

At the United Nations General Assembly last month China’s President Xi announced that China will achieve carbon neutrality before 2060[i] with emissions peaking before 2030.  This is among most significant announcements on climate change policy ever made.

It commits the world’s largest emitter (by far) to eliminating greenhouse gas emissions over the next 40 years. This alone is likely to reduce global temperature increases by about 0.25 degrees C, compared with China reaching carbon neutrality in 2100[ii]

And its impact will go beyond that.  Emissions reductions elsewhere are now likely to be cheaper and more readily available, because China’s efforts to reduce its own emissions will lead to low carbon technologies being deployed at huge scale.  And with Europe also setting goals of reaching net zero by 2050 there appears to be enough political momentum to encourage other countries to follow a similar path. 

This could lead to global emissions being reduced to close to zero well before 2100, with the world thus standing a good chance of meeting the goal of the Paris Agreement of limiting temperature rises to well below 2 degrees.  This is the first time this has looked at all likely – though limiting temperature rises to 1.5 degrees still looks very difficult.

Why has China chosen to make this announcement?  There seem to be four main reasons for the announcement.

First, China has long been concerned about the effects of climate change, especially because of the risks it creates for food and water supply.  The increasing effects of climate change now visible around the world are likely to have heightened China’s concerns.

Second, it seems clearly designed to promote Chinese leadership in a global context. President Xi’s speech was notably internationalist in its rhetoric, a perspective conspicuously absent from the United States over the last four years.  It is not necessary to take the text at face value to interpret it as seeking leverage internationally.  Such leverage is likely to be especially valuable to China at a time when the Chinese Government is rightly being criticised for gross violations of human rights.

Third, the costs of reducing emissions, especially the costs of renewable energy sources, have fallen rapidly, and are expected to continue doing so.

Fourth, China appears to see major opportunities for its industries in producing and exporting low carbon technologies.  It is already a world leader in the production of many technologies, notably solar panels and batteries, and it will doubtless look to extend this to other technologies.  There will inevitably be losers from this, especially in coal mining and in coal fuelled industry and power generation, of which China has vast amounts.  However there seems likely to be time to manage this.  Approaches may include very large scale retrofitting carbon capture and storage to existing power and industrial plants using coal.

A fifth motivation may be increasing energy security by reducing demand for imported oil and gas.

One caveat is that, in line with other countries, China’s commitments refer to emissions within China.  However, emissions from other countries supplying China will also matter a great deal.  For example, if greatly increased meat consumption in China is supplied by imports it will likely put tremendous pressure on emissions, ecosystems and biodiversity elsewhere.  It is thus essential that China’s efforts to reduce its emissions are accompanied by other measures to reduce the environmental impact of its development in other parts of the world, including through activities in its belt and road initiative.

China’s new course of action poses a challenge for other countries that have previously led in this area. 

The UK can justly claim it has long provided leadership on climate change. Margaret Thatcher was among the first world leaders to highlight the importance of climate change, which she did in a number of speeches she gave in the late 1980s. The Hadley Centre, one of the world’s leading centres for climate research, was established in 1990. In 2005 the UK further raised the international political profile of climate change when it chaired the Gleneagles G8 summit.  The Climate Change Act, passed nearly unanimously by Parliament in 2008, established legally binding targets for emissions reduction – the first legislation of its kind anywhere in the world.  In 2019 the UK became the first major economy to adopt a legally binding net zero emissions target, to be achieved by 2050.  And the UK has reduced per capita emissions since 1990 by more than any other major economy, although this partly reflects changes in industrial structure not connected with climate policy.

To play a continued leadership role, the UK will need to continue to show by its actions what can be done to reduce emissions to net zero.  It needs to identify and implement practical, cost effective pathways to this goal.  This process has begun, but more is needed.

In parallel, diplomatic activity is necessary so that Europe, China and others seeking to eliminate their emissions can be effective in bringing other countries along, especially the USA.

Those of us working on climate change policy for a long time have become accustomed to the idea that the chances of limiting global temperature rise to below 2 degrees were low.  China’s announcement has changed that.  It may not be enough.  Even more rapid action, followed by decades of negative emissions, may prove essential to stabilising the climate.  Nevertheless it marks a huge step forward, and should inspire everyone to make even greater efforts.

Adam Whitmore – 14th of October 2020


[i] I assume here that carbon neutrality means net zero emissions of greenhouse gases, as set in the Paris Agreement and many other documents.  It is possible it refers to eliminating carbon dioxide emissions only, but this would in any case be a huge step forward as CO2 is by far the most significant greenhouse gas.

[ii] This depends on assumptions of the emissions track that would otherwise be achieved. Reducing temperature rises by 0.25 degrees with 50% probability requires cumulative emissions to be reduced about 210GtCO2.  China’s annual emissions were 11.2 Gt in 2017 (energy and industry only – see https://www.pbl.nl/sites/default/files/downloads/pbl-2020-trends-in-global-co2-and-total-greenhouse-gas-emissions-2019-report_4068.pdf ) so reducing emissions linearly to zero by 2060 instead of by 2100 saves around 210GtCO2.

Seven Years On

The last seven year have seen too little progress on solving the climate change problem, despite some welcome developments.  Much more rapid progress is now needed.

It is now seven years since I started this blog – my first post was on 3rd March 2013.  It seems a good time to take a look at what has gone well and what has gone badly over that period in efforts to reduce climate change.  So here are seven ways in which things have gone badly, and seven ways in which they have gone well.

Things that have gone badly over the last seven years

  1. Annual CO2 emissions from energy and industry have increased over the last seven years, continuing the long-term trend, when they need to be decreasing rapidly.

Chart 1: Emissions of CO2 from energy and industry (excluding land use)

Source: EDGAR  https://edgar.jrc.ec.europa.eu/booklet2019/Fossil_CO2andGHG_emissions_of_all_world_countries_booklet_2019report.pdf

  1. Deforestation has not fallen – if anything it’s increased.

This not only bad for the climate, it’s bad for biodiversity and the wider stability of ecosystems.

Chart 2: Tropical primary forest loss (million hectares)

See:  https://www.bbc.co.uk/news/science-environment-48104037

  1. Over 15% of the remaining carbon budget has been used since 2013, even on the most optimistic view[i].

In 2013 the remaining carbon budget (that is, total cumulative CO2 emissions that remain possible while limiting global mean surface temperature rises to 2 degrees) was around 1900Gt CO2.  It is now around 1600Gt CO2.The remainder is getting used up ever more quickly as emissions continue to rise.

  1. Large amounts of high carbon infrastructure are still being built.

This includes large amounts of new coal-fuelled power generation. This risks lock-in of emissions for decades.

  1. There is a lack of progress with developing and implementing low carbon technologies in many sectors

Most emissions intensive industries, notably steel, have made little progress in changing their processes to reduce emissions.  One of the main technologies likely to be needed for decarbonising industrial emissions, CCS, has seen very little deployment, with only about an additional 10 mtpa[ii] stored from projects coming on line since 2013.  The largest contributor to the increase has been the Gorgan project, which is natural gas production, so not likely to be part of a net zero emissions world.  10 mtpa is only about 0.02% of global emissions.  CCS is also likely to be essential for achieving negative emissions from Bioenergy with CCS (BECCS), among other things.  There has also been only very limited progress to date on deploying low carbon hydrogen.

  1. China appears to be making emissions reduction less of a priority.

Among other factors, recently slowing economic growth seems to have focussed attention in China towards economic stability and energy security rather than the threats from climate change.

  1. Most countries have targets that are far too weak

Existing pledges under the Paris Agreement imply a continuing increase in global emissions rather than the rapid decrease that is needed[iii].

This is a daunting list of problems.  However, there is also some good news, although in all cases it would be even better if positive trends were happening faster.

Good news from the last seven years

  1. Costs of low carbon technologies have fallen rapidly, and continue to fall.

Wind and solar electricity are in many cases now competitive with, and often cheaper than, electricity from new fossil fuel generation.  Falling battery costs will enable to the electrification of surface transport and help balance the grid.

This seems to me to be by far the greatest cause for optimism.  Low carbon options will simply become the default choice for new investment in many cases, and policies to reduce emissions will increasingly be working to support a trend that is driven by economic as well as environment imperatives.

  1. Some countries have put binding targets in place for net zero emissions.

The UK already has such a target for 2050, seeking to end the UK’s contribution to climate change.  The EU seems likely to formalise a similar target very soon.

  1. Some countries have cut emissions significantly, showing what can be done.

The UK has cut its annual emissions by nearly 20% since 2013[iv], with the largest component of this being a reduction in coal use in the power sector, a change readily replicable elsewhere.

  1. Public concern about climate change has risen while scepticism about the science has largely disappeared, at least outside the USA and a few other countries.

85% of UK voters are now concerned about climate change[v] with over a quarter ranking it among their top three issues[vi].  This was reflected during the recent general election campaign[vii] in all parties offering policies to reduce emissions to net zero .  Over time this should create the political space for some of the more challenging policies that will be needed to reduce emissions to close to zero.

  1. Additional policies are being put in place, and carbon pricing is increasingly widespread.

For example, almost all major economies now have renewables targets, and there are over 50 carbon pricing systems in place around the world.

  1. Governments increasingly see economic opportunities in decarbonisation rather than costs.

The opportunities created by new industries are increasingly recognised as part of wider industrial policy.

  1. The Paris Agreement has been signed.

Almost all countries have now committed to limit temperature rises to below 2 degrees and to make a contribution to reaching that target, recognising different national circumstances.  Some may consider this is the main piece of good news over the past seven years.  However its effectiveness remains to be proven, and its success looks likely to depend on some of the other trends I’ve highlighted, notably falling costs for low carbon technologies.

Looking at these trends together, I am both less optimistic and more optimistic than I was in 2013.  I am less optimistic because seven years of rising emissions and continuing investment in high carbon infrastructure have made the challenge of limiting climate change even greater than it was.  But I am more optimistic because there is greater recognition and acceptance of the problem, more is now being done (though still nowhere near enough) and, above all, because low carbon energy is rapidly becoming cheaper than high carbon energy.  As a result it looks likely that emissions from the energy sector will eventually be greatly reduced and even halted entirely.  This may make it easier to focus on reducing other emissions as well, especially those from deforestation.

But eventually will be too late.  Much damage is already being done to our world.  More will inevitably follow. This will include the loss of irreplaceable parts of the natural world.  Given rising emissions, and how much of the carbon budget has been used up, it now looks practically impossible to keep temperature rises to 1.5 degrees, and difficult, though still possible, even to limit them to 2 degrees.

However it could still get much worse.  The task now is to avoid the worst of the risks by keeping emissions and accompanying temperature rises as low as possible, including keeping global temperature rises to below 2 degrees.  With a lot of effort and a little luck there is still time (just) to achieve this.  But the task has never been greater or more urgent.

Adam Whitmore – 9th March 2020

[i] For a 50% chance of remaining below 2 degrees, based on cumulative CO2 emissions.  See https://onclimatechangepolicydotorg.wordpress.com/2018/10/

[ii] https://www.globalccsinstitute.com/resources/global-status-report/

[iii] https://climateactiontracker.org/global/cat-emissions-gaps/

[iv] https://www.theccc.org.uk/publication/reducing-uk-emissions-2019-progress-report-to-parliament/

[v] https://www.ipsos.com/ipsos-mori/en-uk/concern-about-climate-change-reaches-record-levels-half-now-very-concerned

[vi] https://www.bbc.co.uk/news/science-environment-50307304

[vii] https://onclimatechangepolicydotorg.wordpress.com/2019/11/25/the-uks-political-consensus-on-climate-change/

 

The need to focus on production based measures of emissions

Consumption based accounting for emissions can provide valuable insights, but focussing on production based accounting is the right approach for most policy work.

There has been much discussion of whether it is more useful for policy purposes to measure emissions on a production basis or consumption basis. Production based accounting looks at emissions from a jurisdiction, including in making goods for exports.  Consumption based accounting looks at emissions from the entire production chain for all the goods and services consumed in a jurisdiction.  This means including emissions occurring elsewhere in the manufacturing process – looking at the total carbon footprint.  For example, if a car includes steel made in another jurisdiction, then the emissions from that steel production will be counted under a consumption based approach.  However, to exclude double counting, consumption based accounting should exclude emissions from making exports.

Many advocate for the use of consumption-based accounting for judging policy, as representing the full impact of consuming goods.  However, while both approaches have merit, there are good reasons for preferring production-based accounting for most policy making.

The international policy architecture that covers emissions reduction is based on commitments by governments under the Paris Agreement to reduce emissions from within their borders, a production-based approach.  This architecture does not appear likely to change. This means that production-based accounting must at least play a significant role in efforts to reduce emissions.

Furthermore, this international policy architecture is based on sound principles.  It reflects that fact that while the effect of emissions is global, control over emissions is largely national.  This means production-based accounting makes more sense, as it puts measurement where the control is.

It is possible to influence emissions elsewhere, for example by introducing border adjustments and product standards in some cases, most likely mainly for bulk commodities.  This could in principle extend to limiting consumption emissions in some cases.  For example, imports of steel could be included in the EUETS (see here), restricting total emissions from steel consumption in Europe.  However in most cases the ability to control of emissions still fundamentally lies with production.

Finally, the economic benefit of production usually accompanies the emissions.  For example, if steel production relocated from Europe to China the economic benefits of that production also relocate.

Without either the direct control over the emissions from production, or the economic benefits of production, it does not seem appropriate to hold jurisdictions responsible for emissions beyond their borders (although imposing border taxes or similar measures on some types of emissions may make sense to prevent carbon leakage).  Put bluntly, reducing emissions resulting from (for example) Chinese production for export is and should be China’s responsibility, not that of importing countries.  And when, for example, it is said that the UK has reduced its emissions by around 40% since 1990 (a production-based figure) this is both accurate, and a good measure of the progress that has been made, even though a significant proportion of this has been due to changes in economic structure.

This is not intended to suggest that no attention should paid to consumption-based accounting. Consumption-based emissions have fallen less rapidly than production emissions from the UK, as industry has relocated.  This does indicate the need to put continuing pressure on exporters to the UK to reduce their emissions.  It also helps individuals to make different choices, and to put pressure companies to produce lower carbon products.

Indeed, from the point of view of an individual seeking to take action to reduce their carbon footprint consumption-based emissions can provide valuable insights into the appropriate choices. And there are of course good reasons for reducing consumption of many goods, with benefits that go beyond limiting climate change.  And policies to reduce consumption can clearly have many merits as well.

However, the main focus needs to be on each country putting its own house in order, and that means focusing on reducing emissions within its borders.

Adam Whitmore – 19th February 2020

 

 

Border Carbon Adjustments are moving up the political agenda

Border Carbon Adjustments have been discussed for many years.  However they are now receiving renewed political impetus.  This is especially so in Europe, as the new head of the European Commission has asked for proposals on BCAs to be developed.

A new report, of which I am the principal author, looks at the design issues raised by BCAs, their advantages, and the potential difficulties with their implementation.

It covers a range of issues, some of which have received limited discussion to date, including:

  • The different ways of implementing BCAs – tariffs, different types of allowances, and relationship to consumption taxes
  • Dealing with imports from jurisdictions with their own carbon pricing
  • Phasing in of BCAs
  • Use of different benchmarks for different purposes (BCAs vs. free allocation)

The report, including a summary table of the issues that need to be addressed, can be found here:

https://sandbag.org.uk/project/the-abc-of-bcas/

Adam Whitmore – 4th December 2019

The UK’s political consensus on climate change

The major political parties all make commitments in their general election manifestos on policies to reduce greenhouse gas emissions.  

All the UK’s main political parties have now published their manifestos for the forthcoming general election on 12th December.  These include their programmes on climate change.

The most remarkable feature of the manifestos is the similarities between them.  All make specific commitments on climate change.  All envisage reaching net zero emissions.  All see an increased role for renewables, see the need to improve building insulation, and recognise the role of land use.  All refer to the opportunities created by a green economy.  Compared with only a few years ago this is substantial progress.  Of course, commitments set out now may never be implemented in government, but the fact that parties need to make such commitments is a sign of the increased recognition of what needs to be done.

The table below summarises some of the main points from each manifesto.

2019 UK general election manifesto commitments on climate change 

  Conservatives Labour Liberal Democrats Green
Net-zero target date 2050 2030s 2045 2030
Renewables 40GW of offshore wind by 2030 90% renewable electricity and 50% renewable heat by 2030, including roll out of heat pumps and hydrogen 80% of electricity from renewables by 2030 70% of electricity from wind by 2030.
Buildings £9.2 billion on improving energy efficiency Upgrade insulation for almost all of 27 million homes, zero carbon standards for all new homes Insulate all of Britain’s homes by 2030, new homes to be built to a low carbon standard, £6 billion p.a. on home insulation and low carbon heating A million homes a year to near zero carbon, improved insulation for all who need it, roll out of heat pumps
Surface Transport Consult on earliest date for phasing out sale of petrol and diesel cars Improve public transport. Aim to end sales of petrol and diesel cars by 2030. Invest in public transport, and make sure all new cars are electric by 2030 Major shift to public transport. All new vehicles zero carbon by 2030
Industry £800 million on CCS, support gas for hydrogen Invest in new technology Supporting CCS and new low-carbon processes for steel and cement Start deployment of CCS
Land Use 75,000 acres p.a. of additional trees Ambitious programme of tree planting Planting 60 million trees a year 700 million new trees by 2030.
International and supporting action International partnership to tackle deforestation Assess emissions in imports and suggest policies to tackle them. Require companies to set targets compatible with the Paris Agreement Economy wide carbon tax, with border tax on embedded carbon

Reaching net-zero emissions by 2050 will be very difficult, requiring huge transformations of the UK energy system alongside changes in land use.  Reaching net zero earlier, and especially in 2030 or the 2030s as proposed by the Greens and Labour, seems impractical.  Otherwise, there is much to welcome among what is proposed.

However, there are significant differences between the parties along with the similarities.  The proposals from the Conservative party appear weaker than the others, and the manifesto does not contain a clear programme for the necessary scale of transition towards net zero emissions.  The other parties’ programmes look similar in many respects.  However, looking at the detail, the Liberal Democrats’ programme looks to provide the best set of policies, judged on a combination of comprehensive coverage, likely effectiveness, and realism.

The inclusion of extensive proposals from all parties for reducing emissions is an encouraging sign of how far the debate has come.  However, the real test will come when the next government must decide on implementation.

Adam Whitmore – 25th November 2019

 

 

Cheap, abundant solar power looks increasingly likely to transform prospects for decarbonisation

Cheap, widely available electricity from solar PV in the coming decades looks increasingly likely.  It could transform the world’s energy system, and prospects for reducing carbon dioxide emissions.

Only a decade ago solar was a niche source of energy, accounting for a tiny fraction of world electricity consumption.  It was also very expensive.

Since then its status has been transformed.  The installed base grew by a factor of about 17 between 2010 and 2018, with consecutive doublings of cumulative installed capacity every two years or so.  By 2018 output was over 2% of world electricity demand, and continuing to grow rapidly.

Over the same period prices came down by a factor of four.  Analysis by the International Renewable Energy Agency (Irena) shows average prices to have fallen from $240/MWh in 2010 to around $60/MWh in 2018 (see chart, which also shows that prices for wind power have also fallen, but by a much smaller proportion).

Chart 1:  Global average prices resulting from auctions for solar and wind, 2010-18

Source: Irena[i]

Some recent solar PV contracts are already well below the level found by Irena.  Prices are below $20/MWh in some cases (see Table 1).

Table 1:  Some contract prices for solar PV in 2019

Location Price ($/MWh)
California 1 22.0
California 2 20.0
Brazil 17.5
Portugal 16.5
Dubai 17.0

Source: press reports[ii]

The reasons for the differences between these costs and the higher costs shown by Irena appear to include:

  • Comparing global averages with world’s lowest cost. For example, the Portuguese contract is an outlier, with most contracts in Europe remaining above $50/MWh.  Similarly, the Dubai project may benefit from cheap land, and perhaps low-cost capital.
  • The inclusion of incentives reducing some of the contract prices. For example, the California projects’ prices would likely be closer to $30/MWh without production tax credits available to the projects.
  • Continued fall in costs since 2018

So how far could solar PV costs go in the long term?

Projecting cost trends following such large changes is inherently uncertain.  However there seems no clear reason why changes as large as those that have already taken place should not happen again.  Costs fell by 75% between 2010 and 2019 in response to capacity increasing by a factor of 17, following a typical experience curve.   There is scope for a similar increase in capacity – a factor of about 17 would take solar to around 40% total electricity production, plausible over the next few decades.  This may lead to a similar reduction in costs of around 75%.

Indeed cost reductions may occur much more quickly than that.  The transformation to date has happened very rapidly, and there may be as yet more unrealised gains as more fundamental R&D, which is longer lead time, comes through.

There may also be potential for currently higher cost locations where the industry is relatively undeveloped to catch up with the best.  This may reduce average costs, even if the best projects do not reduce costs as rapidly.

Conversely, some efficiency gains, such as those in construction costs of large scale installations may be one-offs, and similar gains may not be possible in future.  These limits have not been binding so far, but may be more so in future.

Taking these considerations together, a very rough and ready estimate would suggest widespread availability of unsubsidised solar power at prices at around $10/MWh or less within the next 2 or 3 decades or so, and possibly much more quickly than that.

This would make solar the among the cheapest form of large scale, high value energy the world has ever seen.  By comparison, annual average crude oil prices dropped to $7/MWh (in $2019) only briefly at the end of the 1960s before the oil crises of the 1970s took effect and prices increased[iii].  Oil is currently around $25/MWh ($60/bbl), and is a less valuable and versatile form of energy than electricity.  Coal may in some cases be cheaper per MWh but is expensive and inefficient to convert to electricity, so total fuel costs may exceed even some current solar costs.  Coal is also, of course, highly polluting, with expensive CCS required to reduce its emissions.

What are the implications of this?

To bring low carbon energy prices to close to the levels prevailing for high carbon energy in the era of cheap oil would be potentially transformative for emissions reduction.  Effects would be widespread and may include the following.

  • The generally expected route of decarbonising the power sector and electrifying end use becomes much easier with plenty of cheap low carbon electricity. This is supported by falls in the costs of batteries, which will help solar based systems cope with large daily variations in output.  Land availability for solar is not a constraint globally, but maybe in certain places where population density is high and there are other uses for land.
  • It will also support electrification of transport, helped by electric cars being much more efficient than internal combustion engines anyway.
  • Hydrogen is increasingly likely to be produced by electrolysis, especially as large amounts of surplus solar may be available at times of peak production. And with cheap electricity, hydrogen use is likely to be focussed on applications where its specific qualities are needed, for example some industrial processes requiring high flame temperatures.
  • CCS is also likely to be focussed on a few special classes of emissions, especially those from industrial processes.

Some things seem likely to remain true even with cheap solar …

  • Wind power is likely to continue to play an important role for reasons of system security, diversity, and different locations of resource.
  • Improving energy efficiency, especially in buildings, will continue to be worthwhile, as it makes the transition to lower emissions easier in many respects.
  • The emissions reduction challenge remains daunting, not least because of the scale of the transformation required is formidable, and existing assets are long lived.
  • Long-haul aviation looks likely to continue to be a challenge, perhaps requiring synthetic fuels or biofuels.
  • Land use emissions from deforestation and agriculture remain a large problem.

So far modelling of the energy system seems to have largely ignored the possibility of very cheap solar being widely available.  This is an area which needs much more consideration.  Nothing gives greater hope for solving the climate change problem than the prospect of abundant cheap low carbon electricity.

Adam Whitmore – 18th November 2019

[i] https://www.irena.org/publications/2019/Jun/Renewable-energy-auctions-Status-and-trends-beyond-price

[i] See here for contract prices quoted in the table and commentaries.

https://pv-magazine-usa.com/2019/09/30/solar-plus-storage-pricing-record-set-in-california/

https://www.pv-tech.org/news/brazils-solar-price-record-seen-as-global-renewable-milestone

https://reneweconomy.com.au/coal-and-gas-on-notice-as-us-big-solar-and-battery-deal-stuns-market-60011/

https://www.energy-reporters.com/opinion/by-adding-solar-portugal-pushes-all-in-on-renewables/

https://reneweconomy.com.au/solar-pv-prices-fall-to-record-lows-in-tender-for-900mw-solar-park-in-dubai-51069/

[iii] Based on $12/bbl (source: BP statistical review of world energy) and 1.7MWh per bbl of crude oil

Hydrogen and heat pumps may both play a role in UK building heating

Low carbon hydrogen and electricity via heat pumps may both play a large role in decarbonising building heating in the UK.  Ways forward are needed that maintain optionality around solutions while more is learnt about the right mix.

Decarbonising building heating in the UK poses a range of challenges.  First, the required transition is very large scale.  There are around 27 million households in the UK, with many more commercial buildings, small and large.  This implies around a million or more premises a year on average need to be converted to low carbon heat between now and 2050.

Along with scale, there is cost.  Replacing the UK’s heating system is expensive both in total and by household, even if the existing natural gas network can be used for hydrogen.   This challenge is made more difficult by the high seasonality of heating demand (Chart 1).  Building natural gas supply chains, reformers to produce hydrogen from natural gas, CCS, low carbon electricity and heat pumps all involve major capital investment.  Running this for only part of the year – the colder months – increases unit costs substantially. The chart below shows daily gas and electricity demand from non-daily metered (i.e. small) customers.  Demand for energy from gas, the major source of building heating at present, is about two or three times electricity demand during winter, and is much more seasonal.

Chart 1: Heating demand is highly seasonal …

Source: BEIS (2018) ‘Clean Growth – Transforming Heating’ https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/766109/decarbonising-heating.pdf

Furthermore, the transition to low carbon heat needs to be made largely with the UK’s existing building stock, which is mainly old and often badly insulated.  Improved insulation is a priority in any programme, but there are practical and cost constraints on what can be done with existing buildings.  (Buildings also need to be able to cope with the increased prevalence of heat waves as the climate warms, but that is a separate topic.)

Finally, building heating directly affects people’s day to day lives, so consumers’ acceptance is critical.  On the whole the present system, based mainly on natural gas boilers, works quite well except for its emissions.  Any new system should preferably work as well or better.

The leading candidates for low carbon heating in buildings are electricity, almost certainly using heat pumps to increase efficiency, and low carbon hydrogen.  Biomass seems unlikely to be available either at the scale or cost that would be needed for it to be a major contributor to low carbon heating, though it may find a niche.  District heating networks require low carbon heat and this must draw on the same ultimate set of sources of heat.  Waste heat from nuclear, once discussed as a possibility, no longer seems likely to be either practical or cost effective.

Recently the Committee on Climate Change (CCC) analysed the costs of decarbonising heat in 2050 using different approaches.  They looked at electricity, hydrogen, and combinations of the two.  The analysis concluded that a 50% increase over current costs was likely (Chart 2).  The remarkable thing about the analysis is that this cost was similar for all of the options considered.  Any differences were well within the uncertainty of the estimates.

Chart 2: Costs of different modes for decarbonising building heating …

Source:  Committee on Climate Change

With no large cost difference leading to one or the other option being preferred there is a need to test each option out to see which works better in practice.  Mixed solutions may be appropriate in many cases.  For example, hydrogen may be useful in providing top-up heat even if heat pumps are providing the baseload, or may be the only solution for some poorly insulated properties for which heat pumps don’t run at high enough temperatures.

The CCC’s analysis includes expected cost savings.  The transition to low carbon heat will clearly be more acceptable if this cost can be reduced further.  In particular there seem likely to be both technical advances and large economies of scale in heat pump manufacture and installation, and the costs of low carbon power may fall by more than assumed by the CCC.  As the analysis stands, a 50% increase is clearly politically difficult, especially when there do not seem to be advantages for the customer, and potentially some drawbacks.  However, this is less than a 2% p.a. compound increase in real terms over a 30 year period, which might be politically feasible if introduced gradually and spread across all consumers.

With such large changes in demand between summer and winter, seasonal storage is a major issue for reasons of both cost and practicality.  This is an under-researched area, and needs further work.  There are various possibilities – storage of hydrogen itself in salt caverns, storage of hydrogen as ammonia or storage of heat in ground sinks, but each has its problems and the scale involved is very large.

A final uncertainty is the form which hydrogen production will take.  At the moment methane in reformers predominates and, with the addition of CCS, may continue to do so.  However both the costs of low carbon electricity and of the electrolysis are decreasing rapidly.  Over the long term this may become a more significant pathway for hydrogen production.

These uncertainties imply that building heating poses a particularly difficult set of choices for policy.  It is not clear what route, or mix of routes, is the right one.  The transition needs to be quite rapid relative to the lifetimes and scale of existing infrastructure, and it involves the need for consumer acceptance.  There are also potentially strong network and lock in issues.

The best approach is likely to be to develop several types of solution in parallel, maintaining optionality while learning, and being prepared for some approaches to be dead ends.  The implications of this include the need for roll out of low carbon heat sources in some districts now to get an idea of how they will work at scale.

Some of this is happening, much more is needed.

Adam Whitmore -29th October 2019.

 

Comparison of cost estimates with previous analysis by this blog.

Around four and a half years ago I looked at the costs of decarbonising domestic heating in the UK in winter using low carbon electricity.  I concluded that switching to low carbon heat would add 75% or more to domestic heating bills, with some drawbacks for consumers (I also looked at higher cost case, but this case no longer seems likely due to the fall in the costs of low carbon electricity, especially offshore wind, since the analysis was done.)  I suggested that this meant that the transition would be difficult and that reductions in capital costs were necessary.

This analysis is broadly consistent with the CCC analysis quoted here, which suggests a 50% increase on current costs.  The estimates are roughly similar given the large uncertainties involved , the inevitable differences is assumptions, and different basis of the estimates.  In particular the CCC analysis factors in reductions in costs of low carbon heating likely by 2050, whereas my previous analysis was based on current costs to make the point that cost reductions are necessary,  Consequently it would be expected that the CCC analysis would show a smaller cost increase relative to current costs.  Also, the CCC’s analysis may exclude some costs – estimates such as these have a tendency to go up when you look at them more closely.  Equally it may understate the cost reductions possible over decades.

 

 

Europe’s phase out of coal

Europe is progressing with phasing out hard coal and lignite in power generation, but needs to move further faster, especially in Germany and Poland

Reducing coal use in power generation and replacing it with renewables (and in the short run with natural gas) remains one of the best ways of reducing emissions simply, cheaply and quickly at large scale.  Indeed, it is essential to meet the targets of the Paris Agreement that the world’s limited remaining cumulative emissions budget is not squandered on burning coal and lignite in power generation.

Europe is now making progress in phasing out coal.  The UK experience has already illustrated what can be done with incentives from carbon pricing to reduce coal generation.  Emissions from coal have reduced by more than 80% in the last few years, even though coal plant remains on the system[i].  However, many countries, including the UK, are now going further and committing to end coal use in power generation completely in the next few years.  The map below shows these commitments as they now stand.  Most countries in western Europe now have commitments in place. (Spain is an exception.  The government is expecting coal plant to be phased out by 2030, but currently does not mandate this.)

Map: Current coal phase-out commitments in Europe[ii]

Source: Adapted from material by Sandbag (see endnotes).

In some countries there is little or no coal generation anyway.  In other countries plants are old and coming to the end of their life on commercial grounds, or are unable to comply with limits on other pollutants.  In each case phase-out is expected to go smoothly.

However, the largest emitters are mainly in Germany and Poland and here progress is more limited.  Germany has now committed to coal phase-out.  But full phase-out might be as late as 2038.  Taking another 20 years or so to phase out such a major source of emissions is simply too long.  And Poland currently looks unlikely to make any commitment to complete phase out.

This means the Europe is still doing less than it could and should be doing to reduce emissions from coal and lignite.  As a result, EU emissions are too high, and the EU loses moral authority when urging other nations, especially in Asia and the USA, to reduce their emissions further, including by cutting coal use.

Several things are needed to improve this situation, including the following.

  • Further strengthening the carbon price under the EUETS by reducing the cap. I looked at the problem of continuing surpluses of allowances in another recent post, and accelerated coal closure would make the surplus even greater.  Although the rise in the EUA price in the last 18 months or so is welcome, further strengthening of the EUETS is necessary to reduce the risk of future price falls, and preferably to keep prices on a rising track so they more effectively signal the need for decarbonisation.
  • Continuing tightening of regulations on other pollutants, which can improve public health, while increasing polluters’ costs and therefore adding to commercial pressure to close plant.
  • Strengthening existing phase out commitments, including be specifying an earlier completion date in Germany.
  • Further enabling renewables, for example by continuing to improve grid integration, so that it is clear that continuing coal generation is unnecessary.

As I noted in my last post, making deep emissions cuts to avoid overshooting the world’s limited remaining carbon budget will require many difficulties to be overcome.  There is no excuse for failing to make the relatively cheap and easy reductions now.   Reducing hard coal and lignite use in power generation in Europe (and elsewhere) continues to require further attention.

Adam Whitmore – 18th June 2019

[i] See https://onclimatechangepolicydotorg.wordpress.com/2018/01/17/emissions-reductions-due-to-carbon-pricing-can-be-big-quick-and-cheap/

With and updated chart at:

https://onclimatechangepolicydotorg.wordpress.com/carbon-pricing/price-floors-and-ceilings/

[ii] Map adapted from Sandbag:

https://sandbag.org.uk/wp-content/uploads/2018/11/Last-Gasp-2018-slim-version.pdf

and data in:

https://beyond-coal.eu/wp-content/uploads/2018/11/Overview-of-national-coal-phase-out-announcements-Europe-Beyond-Coal-November-2018.pdf

and https://www.eia.gov/todayinenergy/detail.php?id=39652

How well is the UK on track for zero emissions by 2050?

By 2020 the UK will have very nearly halved its emissions over 30 years.  Reducing emissions by the same amount over the next 30 years will get the UK very close to zero.  However this will be very much more difficult.

A robust net zero target has been recommended for the UK …

A recent report by the UK’s Committee on Climate Change (CCC), the Government’s official advisory body, recommends that the UK adopts a legally binding target of net zero emissions of greenhouse gases by 2050[i], that is remaining emissions must be balanced by removal from the atmosphere.  If the Government agrees, this will be implemented by amending the reduction mandated by the Climate Change Act, from an 80% reduction from 1990 to a 100% reduction.

The target has several features that make it particularly ambitious.  It:

  • sets a target of net zero emissions covering all greenhouse gases;
  • includes international aviation and shipping;
  • allows no use of international offsets; and
  • is legally binding.

This is intended to end the UK’s contribution global warming.  It has no precedents elsewhere, although in France a bill with comparable provisions is under consideration[ii].

Progress to date has been good …

The UK has made good progress so far in reducing emissions since 1990.  Emissions in 2018 were around 45% below 1990 levels, having reduced at an average rate of about 12.5 million tonnes p.a. over the period.  On current trends, over the thirty years from 1990 to 2020 emissions will be reduced to about 420 million tonnes p.a., 47% below their 1990 levels.  Emissions will thus have nearly halved over the 30 years 1990 to 2020, half the period from 1990 to the target date of 2050.

Chart 1 shows how the UK’s progress compares with a linear track to the current target of an 80% reduction, to a 95% reduction and to a 100% reduction.  (For simplicity I’m ignoring international aviation and shipping).  The UK is currently on a linear track towards a 95% reduction by 2050.

Chart 1: Actual UK emissions compared with straight line progress towards different 2050 targets

 

Source: My analysis based on data from the Committee on Climate Change and UK Government.  Data for 2018 is provisional[iii]

The largest contributor to the total reduction so far has been the power sector.  Analysis by Carbon Brief[iv] showed that the fall in power sector emissions has been due to a combination deploying renewables, which made up about of third of generation in 2018, reducing coal use by switching to natural gas, and limiting electricity demand growth.

Industrial emissions have also fallen significantly.  However some of this likely represents heavy industry now being concentrated elsewhere in the world, so likely does not represent a fall in global emissions.  Emissions from waste have also fallen, due to better management.

Reducing emissions will be relatively easy in some sectors …

There are also reasons for optimism about continuing emissions reductions.  Many technologies are now there at scale and at competitive prices, which they were not in previous decades.  For example, falling renewables costs and better grid management, including cheaper storage, will help further decarbonisation of the power sector.  Electrification of surface transport now appears not only feasible, but likely to be strongly driven (at least for cars and vans) by economic factors alone as the cost of batteries continues to fall.

But huge challenges remain …

Nevertheless important difficulties remain for complete decarbonisation.

CCS is identified by the report as an essential technology.  However, as I have noted previously, it has made very little progress in recent years in the UK or elsewhere[v].  CCS is especially important for decarbonising industry.  This includes a major role for low carbon hydrogen, which is assumed to be produced from natural gas using CCS – although another possibility is that it comes from electrolysis using very cheap renewables power, e.g. at times of surplus.  CCS also looks to be necessary because of its use with bioenergy (BECCS), to give some negative emissions, though the lifecycle emissions from this will require careful attention

Decarbonising building heating, especially in the residential sector, continues to be a challenge.  The report envisages a mix of heat pumps and hydrogen, perhaps in the form of hybrid designs, with heat pumps providing the baseload being topped-up up by burning of hydrogen in winter.  I have previously written about the difficulties of widespread use of heat pumps[vi], and low carbon hydrogen from natural gas with CCS is also capital intensive to produce and therefore expensive to run for the winter only.  The scale of any programme and consumer acceptance remain major challenges, and the difficulties encountered by the UK’s smart meter installation programme – by comparison a very simple change – are not an encouraging precedent.

Emissions from agriculture are difficult to eliminate completely, and no technologies are likely to be available by 2050 that enable aviation emissions to be completely eliminated.  This will require some negative emissions to balance remaining emissions from these sectors.

Policy needs to be greatly strengthened …

Crucially several of the necessary transformations are very large scale, and need long lead times, and investment over decades.  There is an urgent need to make progress on these, and policy needs to recognise this.  This includes plans for significant absorption from reforestation, as trees need to be planted early enough that they can grow to be absorbing substantial amounts by 2050.

The UK’s progress on emissions reduction so far has been good, having made greater reductions than any other major economy[vii].  And technological advances in some areas are likely to enable substantial further progress.  However much more is needed.  In particular policy needs to look now at some of the difficult areas where substantial long-term investment will be needed

Adam Whitmore – 22nd May 2019

 

 

[i] https://www.theccc.org.uk/2019/05/02/phase-out-greenhouse-gas-emissions-by-2050-to-end-uk-contribution-to-global-warming/

 

[ii] The CCC report notes that Norway, Sweden and Denmark have net zero targets, but they allow use of international offsets (up to 15% in the case of Sweden).  France has published a target similar to the UK’s in a bill.  The European Commission has proposed something similar for the EU as a whole, but this is a long way from being adopted. California has non-legally binding targets to achieve net zero by 2045.  Two smaller jurisdictions (Costa Rica, Bhutan) have established net zero targets but these are expected to be achieved mainly by land use changes.  New Zealand has a draft bill to establish a target, but eliminating all GHGs will be difficult because of the role of agriculture in the New Zealand economy.

 

[iii] https://www.gov.uk/government/statistics/provisional-uk-greenhouse-gas-emissions-national-statistics-2018  The change from 2017 to 2018 is applied to the data series from 1990 produced by the CCC (the two data series differ very slightly in their absolute levels).

 

[iv] https://www.carbonbrief.org/analysis-uk-electricity-generation-2018-falls-to-lowest-since-1994

 

[v] https://onclimatechangepolicydotorg.wordpress.com/2018/04/25/a-limited-but-important-medium-term-future-for-ccs/

 

[vi] https://onclimatechangepolicydotorg.wordpress.com/2015/05/18/reducing-the-costs-of-decarbonising-winter-heating-needs-to-be-a-priority/

 

[vii] https://onclimatechangepolicydotorg.wordpress.com/2017/05/09/uk-emissions-reductions-offer-lessons-for-others/