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 3^rd 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

2. 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

3. 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.

4. 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.

5. 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.

6. 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.

7. 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.

2. 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.

3. 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.

4. 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.

5. 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.

6. 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.

7. 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 – 9^th 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/

 

Prospects for Electric Vehicles look increasingly good

Electric vehicles update

Indicators emerging over the last 18 months increase the likelihood of plug-in vehicles becoming predominant over the next 20 years.  However, continuing strong policy support is necessary to achieve this.

Several indicators have recently emerged for longer term sales of plug-in vehicles (electric vehicles and plug-in hybrids).  These include targets set by governments and projections by analysts and manufacturers.

The chart shows these indicators compared with three scenarios for the growth of plug-in vehicles globally if policy drivers are strong.  (The scenarios are based on those I published around 18 months ago, and have been slightly updated for this post – see the end of this post and previous post for details.) The green lines show the share of sales, and the blue lines show the share of the total vehicle stock.  Other indicators are marked on the chart as diamonds, shown in green as they correspond to the green lines.  I’ve excluded some projections from oil companies as they appear unrealistic.

The scenarios show plug in vehicles sales in 2040 at between just over half and nearly all of new light vehicles.  However the time taken for the vehicle fleet to turn over means that they are a smaller proportion of the fleet, accounting for between a third and about three quarters of the light vehicle fleet by 2040.  The large range of the scenarios reflects the large uncertainties involved, but they all show plug-in vehicles becoming predominant over the next 20 years or so.

The indicators shown are all roughly in line with the scenario range (see detailed notes at the end of this post), giving additional confidence that the scenario range is broadly realistic, although the challenges of achieving growth towards the upper end of the range remain formidable.  Some of the projections by manufacturers and individual jurisdictions are towards the top end of the range, but the global average may be lower.

Chart.  Growth of sales of Plug-in light vehicles

 

The transition will of course need to be accompanied by continuing decarbonisation of the power sector to meet greenhouse gas emissions reduction goals.

Maintaining the growth of electric vehicle sales nevertheless looks likely to require continuing regulatory drivers, at least for the next 15 years or so.  This will include continuing tightening emissions standards on CO₂ and NO_x and enabling charging infrastructure.  If these things are done then the decarbonisation of a major source of emissions thus now seems well within sight.

Adam Whitmore – 13^th October 2017

 

 

Background and notes

This background section gives further information on the data shown on the chart.  In some cases it is unclear from the reports whether projections are for pure electric vehicles only or also include plug-in hybrids.

Developments in regulation

Policy in many countries seems increasingly to favour plug-in vehicles.  Some recent developments are summarised in the table below.   These policy positions for the most part still need to be backed by solid implementation programmes.  Nevertheless they appear to increase the probability that growth will lie within the envelope of the projections shown above, which are intended to correspond to a world of strong policy drivers towards electrification.

Policy developments 

Jurisdiction	Policy commitment
UK	Prohibit sale of new cars with internal combustion engines by 2040[1]
France	Prohibit sale of new cars with internal combustion engines by 2040[2]
Norway	All new sales electric by 2025[3]
India	All cars electric by 2030 (which appears unrealistic so goal may be modified, for example to new cars)[4]
China	Reportedly considering a prohibition on new petrol and diesel.  Date remains to be confirmed, but target is for 20% of the market to be electric by 2025.[5]

 

Sales

The market is currently growing rapidly from a low base.  Total vehicle sales were 0.73 million in 2016, compared with 0.58 million in 2015.  Six countries have reached over 1% electric car market share in 2016: Norway, the Netherlands, Sweden, France, the United Kingdom and China. Norway saw 42% of sales being EVs in June 2017

Manufacturers’ projections

Several manufacturers have issued projections for the share of their sales they expect to be for plug-in vehicles.  Some of these are shown in the table.

Manufacturers’ projections for sales of plug-in vehicles

 

Manufacturer	Target/expectation for plug-in vehicles
Volkswagen	20-25% of sales by 2025[6]
Volvo	All new models launched from 2019[7]
PSA ( Peugeot and Citroen brands)	80% percent of models electrified by 2023[8]

 

Clearly individual manufacturers’ projections may not be achieved, and to some extent the statements may be designed to reassure shareholders that they are not missing an opportunity.  So far European manufacturers have been slow to develop EVs.  Also these manufacturers may not representative of the market as a whole.  Other companies may progress more slowly.

However others may proceed more quickly.  As has been widely reported, Tesla has taken over 500,000 advanced orders for its Model 3 EV, itself equivalent to almost the entire market for electric vehicles in 2015.  And in line with the Chinese Government’s targets manufacturers in China are expected to increase production rapidly.

Projections by other observers

Projections by other observers are in most cases now in line with the scenairos shown here.

• Morgan Stanley project 7% of global sales by 2025[9]
• BNP Paribas project 11% of global sales by 2025, 26% by 2030[10]
• JP Morgan profject 35% of sales by 2025 and 48% of sales by 2030[11]
• Last year Bloomberg’s projections showed growth to be slower than with these projections. However they have since updated their analysis, showing 54% of new cars being electric by 2040[12].
• DNV.GL recently published analysis showing EV’s accounting for half of sales globally by 2033, in line with the mid case in this analysis.

In contrast BP predicts much slower growth in their projections[13].  However BP’s view seems implausibly low in any scenario in which regulatory drivers towards EVs are as strong as they appear to be.  Exxon Mobil gives lower projections still, while OPEC’s are a little above BP’s but still well below the low case shown here.[14].

Notes on changes to projections since May 2016

These projections are updated from my post last year but the differences over the next 15 years are comparatively minor.  The projections are for light vehicles, so exclude trucks and buses.  Note that percentage growth in early years has been faster than shown by the s-curve model – however this is likely to prove a result of the choice of a simple function.  What matters most for emissions reductions is the growth from now and in particular through the 2020s.

Assumption change	Rationale
Higher saturation point	Continuing advances in batteries reduce the size of the remaining niche for internal combustion engine vehicles
Longer time to saturation	The higher saturation point will need additional time to reach.
Somewhat slower growth in total numbers of vehicles	Concerns about congestion and changed modes of ownership and use are assumed to lead to lower growth in the total vehicle stock over time.  This tends to make a certain percentage penetrations easier to achieve because the percentage applies to fewer vehicles.

 

[1] http://www.bbc.co.uk/news/uk-40723581

[2] http://www.bbc.co.uk/news/world-europe-40518293

[3] http://fortune.com/2016/06/04/norway-banning-gas-cars-2025/

[4] https://electrek.co/2016/03/28/india-electric-cars-2030/

[5] http://www.bbc.co.uk/news/business-41218243

[6] http://www.bbc.co.uk/news/business-36548893

[7] https://www.media.volvocars.com/global/en-gb/media/pressreleases/210058/volvo-cars-to-go-all-electric

[8] http://www.nasdaq.com/video/psa-prepared-for-electric-vehicle-disruption–says-ceo-59b80a969e451049f87653d9

[9] https://www.economist.com/news/business/21717070-carmakers-face-short-term-pain-and-long-term-gain-electric-cars-are-set-arrive-far-more

[10] https://www.economist.com/news/business/21717070-carmakers-face-short-term-pain-and-long-term-gain-electric-cars-are-set-arrive-far-more

[11] https://www.cnbc.com/2017/08/22/jpmorgan-thinks-the-electric-vehicle-revolution-will-create-a-lot-of-losers.html

[12] https://about.bnef.com/electric-vehicle-outlook/

[13] https://www.bp.com/en/global/corporate/energy-economics/energy-outlook.html

[14] https://www.economist.com/news/briefing/21726069-no-need-subsidies-higher-volumes-and-better-chemistry-are-causing-costs-plummet-after

Will carbon pricing in China be regional or national?

Regional differences are already an important feature of carbon pricing in China.  These differences seem unlikely to stop the emergence of carbon pricing across the country, but prices and scheme designs may continue to vary between regions for many years.  Something may emerge with characteristics between the complete integration of the EUETS and the diversity of provincial schemes in Canada.

Policy developments in China, the world’s largest greenhouse gas emitter, are critical to global prospects for limiting climate change.  The trial emission trading schemes being implemented in seven provinces and cities, accounting for around a quarter of the economy, are, taken together, by far the world’s largest carbon pricing system, after the EUETS.  However wealth and economic structure are very different across China.  The seven trial schemes are in the richer eastern and central parts of the country, with as yet nothing equivalent in poorer provinces.  This raises the question of whether economic diversity will be a barrier to establishing national carbon pricing in China.

A unified emissions trading scheme might prove possible despite differences in wealth.  The chart below compares the percentage variation in GDP per capita across the twenty-seven countries in the EU with the thirty-one provinces in China in 2030 (see note below chart for details).   The variation between rich and poor countries in the EU is substantial. The three richest countries (Denmark, Sweden and the Netherlands) have per capita incomes around 4.8 times those of the three poorest (Bulgaria, Romania and Poland).  The range of incomes among China’s provinces is slightly smaller, with the three richest provinces, the cities of Tianjin, Shanghai and Beijing, having incomes around 4.5 times those of the three poorest (Gansu, Yunnan and Guizhou).  However the variation in the middle of the income range is greater in China.  Thus, very broadly, the variation in incomes across China is comparable to that across the EU.  As it has been possible to establish and maintain a unified emissions trading scheme across the EU with its diversity of income then it may be possible to establish something similar in China.

The countries/provinces are arranged in order of increasing GDP per capita.  The horizontal axis shows the cumulative proportion of the population in countries/provinces with GDP per capita below a certain level, relative to the national mean per capita GDP (population weighted average across provinces/countries).  The vertical axis shows the relative GDP per capita of countries/provinces.  The blue arrows indicate the positions of the Chinese provinces with trial ETSs.  Data sources are World Bank and China NBS Database.  Data for China is for 31 provinces (taken to include the 22 provinces – Taiwan being excluded – 5 autonomous regions and 4 municipalities). Hong Kong and Macau are excluded.  Data for the EU is for the 27 Members States.  Data is for 2011 in both cases. 

Furthermore, emissions trading creates the potential for transfers of wealth from richer to poorer provinces.  If richer provinces in China have more demanding emissions caps they may buy in allowances from the less prosperous provinces, transferring funds in the process.  Such differences in stringency may to some extent resemble the EU’s burden sharing agreements.  Wealth transfer may stimulate further economic integration and convergence, especially if there is also a transfer of administrative infrastructure and capabilities to less developed provinces as part of the process of building a national scheme.

These considerations lend credibility to a scenario in which there is a single national scheme with uniform prices, but different stringencies of cap in different provinces, and perhaps different allocations of allowances to industry and other sectors across different provinces.  Coverage of sectors and facilities may also vary between provinces.

Nevertheless, even in the EU diversity of economic circumstances is proving an obstacle to reform of the EUETS, with poorer countries in eastern Europe more resistant to reform than more prosperous countries in western Europe.  China’s provinces remain economically diverse and politically distinct, and this may form a barrier to establishing a national trading scheme.  A scenario in which there are separate regional schemes, each having its own rules and prices, with prices generally lower in poorer regions, seems at least as plausible as a fully national scheme, and perhaps more so.  There might be some linkage and trading between schemes, perhaps in the form of offsets, but this might not be enough to fully equalise prices.  Over time schemes might converge, and perhaps eventually merge, but this may take many years.  (Alternatively, differing regional carbon taxes might be introduced.)

Canada is the clearest example of distinct regional pricing in a single country.  Despite total 2011 emissions in Canada being only about 6% of China’s, Canada has three separate provincial carbon pricing schemes (British Columbia, Alberta and Quebec), with other provinces currently considering what, if anything, they might implement.   Any unification of these schemes seems a distant prospect.   Although British Columbia is, like Quebec, a member of the Western Climate Initiative it does not currently appear to be moving towards introduction of an ETS.

Among the barriers to unification of carbon pricing are the different economic structures and resource bases of Canadian provinces, for example hydropower rich Quebec contrasting with fossil fuel rich Alberta.  Similarly, differences in the economies and resource endowment of provinces across China may create persistent barriers to full integration of emissions trading schemes, although there may be greater commonality of design than between the Canadian carbon pricing schemes, which are notably diverse in their approaches to pricing.

Whichever model it chooses it seems clear that China is pursuing carbon pricing as an important component of its emissions reductions programme.  Carbon pricing will surely spread across the country.  And there may well be much in common between regional schemes, and increasing linkage.  But although a national price may emerge in the next few years it also appears possible that pricing could remain diverse for many years to come.

Adam Whitmore  –  17^th June 2013   

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