Category Archives: climate change

A chance to change some dubious climate accounting

The UK should change the way it accounts for emissions under its legally binding carbon budgets, whether or not it remains part of the EUETS.

An apparently technical question about the UK’s accounting for its carbon budgets raises broader questions about alignment of targets and policy instruments.

The UK’s carbon budgets are legally binding obligations under the Climate Change Act (2008) to limit total emissions from the UK.  Checking whether emissions are within the budget ought to be simple.  Measure the UK’s emissions to see if they are at or under budget.  If not there’s a problem.

But it does not work that way.  For sectors not covered by the EUETS actual emissions are indeed used.  However for those sectors covered by the EUETS – power generation and large industry – emissions are deemed always to be equal to the UK’s allocation under the EUETS (which is made up of both auctioned allowances allocated free of charge[1]), whatever emissions are in reality.  Actual emissions from the covered sectors could be much higher and carbon budgets would still be met

While this may sound bizarre, there was a logic to it when the rules were established.  If UK emissions from the traded sector are above the UK’s allocation UK emitters need to buy in EUAs.  If the scheme were short of allowances, as was expected when present accounting rules were set, the additional EUAs bought by UK emitters to cover emissions above the UK’s allocation would lead to reduced supply of EUAs for others.  There would in consequently be reduced emissions elsewhere matching the increased emissions in the UK.  The approach was therefore to some extent a reliable measure of net emissions.  It also aligned with the EUETS having clear National Allocation Plans (NAPs) for EUAs for each Member State, something that no longer exists.

Now this type of accounting no longer makes sense.  With a large surplus of allowances in the EUETS, if the covered sectors in the UK emit more than their budget they will simply buy surplus allowances.  These allowances would otherwise almost all eventually be placed in the Market Stability Reserve (MSR).  Under current proposals (and indeed most likely eventualities), these EUAs would eventually be cancelled.  Additional emissions in the UK are therefore not balanced by reductions elsewhere – they simply result in buying surplus EUAs which would never be used.  This type of situation is sometimes called “buying hot air”.

To avoid this occurring in future, accounting for carbon budgets needs to change to actual emissions.  This will necessarily happen anyway if the UK leaves the EU ETS.  UK allocations under the EUETS will no longer exist. Accounting cannot be based on a non-existent allocation.

But even if the UK stays part of the EU ETS the basis of accounting should change to prevent the UK is meeting its carbon budgets by simply buying in surplus EUAs.

The possibility of buying in surplus to cover UK emissions appears quite real.  UK emissions were above allocation until quite recently.  This was not too serious a problem then, because carbon budgets were being met fairly comfortably anyway.  However the situation may recur under the 2020s and early 2030s under fourth and fifth carbon budgets, which will be much more challenging to meet.  Total UK emissions could be allowed to rise above those carbon budgets simply as a result of an accounting treatment[2].

When a target applies to a jurisdiction that does not wholly align with the policy instrument there will always be a need to consider circumstances in assessing whether targets are being met.  The UK should not be able to meet its carbon budgets simply due to an accounting convention.  Current rules were put in place before the current oversupply under the EUETS arose.  It is no longer fit for purpose.  It should be changed to accounting based on actual emissions whether or not the UK is part of the EUETS.

Adam Whitmore -20th June 2017

[1] This consists of auctioning plus free allowances plus UK allocation under the NER. In Phase 4 it would also include any allocation from the Innovation Fund. Future volumes placed in the MSR and thus excluded from auctioning would also be deducted from the total. If the UK were to leave the EU ETS and backloaded UK allowances currently destined for the MSR were to return to the market this would have a significant effect on measured performance against carbon budgets under current accounting.

[2] Whether this led to total actual emissions being above carbon budgets would depend on the performance of the non-traded sector.

Climate change: how did we get here, and why is it so hard to fix? (Part 1)

Activities that cause emissions are ubiquitous, diverse and deeply embedded in modern life.  The world’s energy system is huge and long-lived.  This makes emissions tough to deal with. 

This post is the first of two stepping back a little from the specific topics I usually cover to take a very high level look at why the climate change problem is so hard to fix.  This first post looks at how we got here and (at a very high level) the physical and engineering challenges of addressing the climate change problem.  The next post will consider some of the political and psychological barriers to greater action.

The consequence of industrialisation

The world’s climate was remarkably stable from before the birth of agriculture, some 8-10,000 years ago, until very recent times[1].  Human civilisation grew up in a stable climate, and knew nothing else, despite the calamities caused on occasions by storms, floods, drought, and so forth.

Industrialisation changed this.  There is no single year that definitively marks the beginning of industrialisation, but 1776 probably as good a reference point as any.  It was an eventful year, with the US Declaration of Independence giving history one of its most famous dates, while elsewhere the first edition of Adam Smith’s Wealth of Nations was published and the Bolshoi Theatre opened its first season.  But in the long view of history perhaps more important than any of these was that James Watt’s steam engines began to power industrial production[2].  This, more than any other event, marks the beginning of the industrial era.

In the nearly two and a half centuries since 1776, world population has grown by almost a factor of about 10.  Economic output per person has also grown by a factor of about 10.  Taking these two changes together, the world’s economic activity has increased by a factor of about 100.  This has put huge stresses on a range of natural systems, including the atmosphere[3],[4].

The increase in the use of fossil fuels has been even greater than the increase in industrial activity.  Around 12 million tonnes of fossil fuels, almost entirely coal, were burnt each year before 1776[5].  Today the world burns about 12 billion tonnes of fossil fuels each year, an increase of a factor of 1000[6].

This huge increase in the burning of fossil fuels is now – together with deforestation, agriculture and a few other activities – changing the make-up of the atmosphere on a large scale.  This in turn, is changing the world’s climate.   Within a single human lifetime – just one percent or so of the time since the birth of agriculture – changes to the climate are likely to be much greater than human civilisation has ever before experienced.  The consequences of these changes are likely to be largely harmful, because manmade and natural systems are largely adapted to the world we have, not the one we are making.

The characteristics of the systems that have led to these changes also make the problems hard to address.

The scale of emissions is huge …

The scale of CO2 emitted from the energy system is vast, around 36 billion tonnes p.a.  If this were frozen into solid form as “dry ice” it would cover the whole of Manhattan Island to the depth of about two thirds of the Empire State building.

The system that generates these emissions is correspondingly huge.  The world’s energy system cost tens of trillions of dollars to build, and is correspondingly immensely expensive to replace.

The diversity and dispersion of emissions makes the problem more challenging …

The problem is worse even than its scale alone suggests.  It would be simpler to deal with emissions if they were all in one place, whether Manhattan or elsewhere, and in solid form.  Instead emissions are dispersed across billions of individual sources around the world.  And they come from many different types of activity, from transporting food and powering electronics to heating and cooling homes and offices.  There is no single technology doing one thing to be replaced, but a wide diversity of technologies and applications.

And once emissions get into the atmosphere the greenhouse gases are very dilute.  Carbon dioxide makes up only 400 parts per million (0.04%) of the atmosphere.  Among other things this makes capture of CO2 once it has got into the atmosphere difficult and expensive.

And assets producing emissions are very long lived …

Energy infrastructure often lasts many decades, so changing infrastructure tends to be a long term process, with premature replacement expensive.  And on the whole the existing system does its job remarkably well.  Some political considerations aside, there would be little need for very rapid changes to the system if it were not for climate change and other forms of pollution.

Energy is central to modern life …

Finally it’s not possible to simply switch off the world’s energy system because it is essential to modern life.  Hurricane Sandy disrupted much of New York’s energy system, and the consequences of that gave an indication of how quickly modern life collapses without critical energy infrastructure.

These physical characteristics of the problem are compounded by the political and psychological obstacles to change at the necessary scale.  I will return to these in my next post.

Adam Whitmore – 22nd May 2017

 

[1] This climatically stable period since the end of the last ice age between 11,000 to 12,000 years ago is referred to as the Holocene.  Agriculture started not long after the ice sheets retreated and the world warmed.  Human activity has now led to a new period, referred to as the Anthropocene.

[2]   https://en.wikipedia.org/wiki/Watt_steam_engine.  The first use of the Watt engine to provide the rotary power, which was crucial for factories, was a little later in 1782 at the Soho manufactory near Birmingham.  https://en.wikipedia.org/wiki/Soho_Manufactory.

[3] http://www.scottmanning.com/content/year-by-year-world-population-estimates/

[4] http://www.ggdc.net/maddison/maddison-project/data.htm

[5]Reliable data is obviously hard to come by that far back, but See Energy for a Sustainable World: From the Oil Age to a Sun-Powered Future By Vincenzo Balzani, Nicola Armaroli .  They estimate 10 million tonnes in 1700 and 16 million tonnes by 1815.  The majority of the increase would have been in the later part of this period.  See also Socioecological Transitions and Global Change, edited by Marina Fischer-Kowalski, Helmut Haberl, who quote estimates of 3 million tonnes p.a. in 1700 in the UK, a large proportion of the world total at the time, with little increase to 1776.  This consumption included a few primitive, inefficient steam engines, used mainly for pumping water from coal mines themselves.  The Newcomen steam engine required such large quantities of coal that it was rarely economic to site it away from coal mines.  The Watt engine was more than twice as efficient.

[6] My estimate of the total mass of coal, oil and gas, based on data in BP statistical review of World Energy.