Beyond Euro/US Financial Uncertainly, is a Looming Energy/Climate Disaster

Not from some doomsday prophet or climate change
fanatic, but from the normally cool headed International Energy Agency (IEA). The
world is effectively heading for disaster. If it continues with business as
usual, then the world is hurtling towards a 6°C global warming scenario and the
runaway impacts of climate change. And David Jones says that at forums like
G20, in the midst of all of the economic and financial uncertainty, it’s easy
to forget the looming issue of climate change. Yet if we do not act and find a
solution, issues such as the size of Greece’s debt may unfortunately be
somewhat academic.

Giles Parkinson in Climate Spectator (11
November 2011):

Much of big business, particularly the fossil
fuel industry and its cheer-squad in the mainstream media, likes to dismiss the
ambitions and the policy proposals of the green movement as some sort of
unrealistic, utopian dream. But the bombshell dropped by the deeply
conservative International Energy Agency in its World Energy Outlook, released
overnight, should shake them out of their socks: It is not the
environmentalists and clean energy developers that are kidding themselves about
the world’s energy future needs, it’s Big Oil and Big Coal.

The IEA said overnight that the world is
effectively heading for disaster. If it continues with business as usual, then
the world is hurtling towards a 6°C global warming scenario, and the runaway
impacts of climate change. But even under the “new policies” scenario, which
includes the pledges made at the last UN climate talks in Cancun, and national
initiatives such as Australia’s newly passed carbon pricing legislation, the
world only gets one third down the track to where it has said it wants to be –
limiting greenhouse gas emissions to 450 parts per million.

The World Energy Outlook is an annual
publication keenly watched by the energy industries that it serves. Under its
“new policies” scenario, coal, gas and oil have a rosy future. But the IEA says
this is not good enough. “We cannot continue to rely on insecure and
environmentally unsustainable uses of energy,” it says. “Governments need to
introduce stronger measures to drive investment in efficient and low-carbon
technologies. If fossil fuel infrastructure is not rapidly changed, the world
will lose forever the chance to avoid dangerous climate change.”

So the IEA also paints its 450 scenario –
which it says gives the world an even bet at limiting global warming to 2°C –
and it requires a dramatic and immediate change in policies and investment,
effectively a halt to new coal fired power plants, increased deployment of gas
(but only as a transitional fuel), massive investment in renewables, and a
significant deployment in nuclear, particularly in developing economies (to
replace their coal-fired plans). It also turns the assumptions made by
Australian Treasury, and possibly the business plans of the oil, coal and gas
industries, on their head.

The critical leap made by the IEA – often
described as a bland, conservative organisation over its 40-year existence – is
that it has now firmly embraced the concept that the world has a finite carbon
budget. And it gives the energy industry, particularly those who seek to
prevent early policy action, a clarion call about the implications.

The IEA calculates that 80 per cent of that
carbon budget is already locked in by plants that have already been built. This
“lock-in” leaves little room for manoeuvre. But delaying serious action until
2015, just three years away, would lift that lock-in to 95 per cent of the
carbon budget, a scenario that that would mean that half of the world’s coal-
and gas-fired energy plants would need to be shut early – by 2035.

If action was delayed until 2017, then the
“lock-in” of existing plants would exceed the world’s carbon budget. In this
case, the IEA says, if the world wants to meet that 450 target, then no new
coal- or gas-fired generation could be built after that time, without forcing
the immediate closure of another dirtier plant. Effectively, the only option
after 2017 is to build emissions-free generation – renewables and nuclear. And
not just that; the IEA says any investment in appliances, buildings and
passenger and commercial vehicles after 2017 will also have to be emissions
free, or require the early retirement of some existing plant or facility to
create headroom for the new investment.

So what does the 450 scenario look like?
According to the IEA, both our means of transport and our energy grids are
completely transformed. Improved fuel efficiency plays the biggest role in
transport, but by 2035, electric vehicles or plug-in hybrids will account for
one third of all vehicle sales. Biofuels also are a major contributor.

The energy grid is dominated by renewables
and the share of fossil fuels falls dramatically. Coal goes from 32 per cent of
capacity (and 41 per cent of generation) to just 13 per cent (and 15 per cent),
with a net loss of 300GW of capacity to 1,268GW. To understand the implications
of that, around 330GW-worth of plants are now under construction, so more than
600GW of coal fired plants will have to be retired – much of it early. That’s
not much of a growth scenario.

Gas nearly doubles its capacity, to 2,10GW,
but its market share falls from 24 per cent to 22 per cent; nuclear’s share
increases slightly to 9 per cent from 8 per cent, but its capacity also doubles
(to 865GW), mostly in developing countries such as China, India and Korea. The
share of hydro falls slightly, to 19 per cent from 20 per cent, although its
capacity also nearly doubles to 1,803GW.

The most dramatic change is in non-hydro
renewables, whose share increases phenomenally – from just 4 per cent in 2009,
to 34 per cent of global electricity capacity in 2035. Wind capacity grows
10-fold to 1,685GW, sending Landscape Guardians across the globe completely
barmy. Solar PV rises 40-fold to 901GW from 22GW in 2009; solar thermal leaps
from just 1GW to 226GW; geothermal from 11GW to 60GW; marine from zero to 23GW,
and biomass grows six-fold to 329GW. In terms of generation, non-hydro
renewables soar to 28 per cent from just 2 per cent in 2009, nuclear and hydro
have a 20 per cent share each, while coal drops from 41 per cent to 15 per
cent, and gas from 21 per cent to 17 per cent.

There couldn’t be a clearer picture about
where the investment and business and job opportunities lie in the future.
According to the IEA scenario, solar thermal has a compound annual growth rate
in investment of 35 per cent from 2011 to 2035, little wonder that the world’s
biggest energy groups are falling over each other trying to get hold of the
best technology. Solar PV, even after its spectacular growth in recent years,
delivers 15 per cent compound annual growth for the next two and a half
decades, wind grows at 10 per cent per annum and marine at 18 per cent.

The renewables sector will attract a total of
$20 trillion in new investment. The other growth industries in this scenario
are clean transport – fuel efficiency and EVs – which attract around $6.3
trillion. The building sector attracts an extra $4.1 trillion, “smart” energy
technology attracts $2 trillion. The losers? Coal capacity slumps by 0.5 per
cent per year out to 2035, a net reduction in investment of $6 trillion, and
investment in poles and wries would be reduced by $900 billion – even after the
investment needed to accommodate intermittent renewables. There is a lot at
stake for vested interests.

And if all this sounds like it is
horrendously expensive and should be put off for as long as possible – echoing
those old chestnuts trotted out by business lobbies hand-wringing about poor
economic conditions, and it not being the right time – then the IEA is
dismissive. “Delaying action is a false economy,” it says. “For every $1 of
avoided investment between 2011 and 2020, either through reduced low-carbon
investment or adoption of cheaper fossil-fuel investment options, an additional
$4.30 would need to be spent between 2021 and 2035 to compensate for the
increased emissions.”

But there is another surprise. The aggressive
investment in the 450 scenario, which includes the dismantling of fossil fuel
subsidies, and the diversion of some of that to renewables, will mean consumers
around the world actually pay $669 billion less in energy costs than they
otherwise would. And, says the IEA, there are other benefits: less pollution;
more countries that are energy self reliant (less chance of conflict);
healthier people who live longer; and a much greater chance of preventing
runaway global warming, with far lower adaptation costs. It seems like a policy
no-brainer.

But contrast the 450 scenario to the
direction we are now headed. Australian miners are relatively happy for the
world’s politicians to continue to say they want to limit global warming to
2°C, but not actually implement the policies to do it. In the IEA’s “New
Policies” scenario, Australia is actually the only major OECD country to
increase coal production out to 2035 and, along with Indonesia, to dominate
regional trade, which is why so many coal companies are piling into NSW and
Queensland to dig the ore up.

But in the 450 scenario, should politicians
get their act together, the outlook is turned on its head. China is no longer
Australia’s biggest customer, it actually ceases to become an importer of coal.
Output in the US and Europe declines dramatically, India becomes the biggest
customer. These go completely against the scenarios outlined by Australian
Treasury.

The IEA says gas may well be facing a
“golden” age, but it is not inevitable. It carries several caveats. Like
renewables, it will require the policy intervention of governments to displace
coal – this could be mandated closures, or a high enough carbon price. This is
particularly so in China, where the IEA says gas would have little impact on
the power mix if market economics became the absolute priority for deployment
in power generation in that country. In certain scenarios – such as the delayed
response to 450, and the delayed deployment of CCS – the golden age is brought
to an abrupt halt, possibly as early as 2030, when it begins to decline. In all
scenarios, renewables account for a far greater level of abatement of either
gas or nuclear, second only to reduced consumption, or energy efficiency.

But if these scenarios look like hell on
earth for Big Coal and Big Oil, the IEA paints an even more radical scenario –
the one that happens if policies are delayed, but the world finally decides
that it wants to get to 450 in a big hurry. In other words, what does it do if
OECD countries do not lock in, by 2013, CO2 pricing and support for low-carbon
technologies at levels which are strong enough to steer the energy sector onto
a steep decarbonisation path? This, after all, given the state of international
negotiations and individual country commitments, is the most likely scenario.

Essentially it means the early retirement of
fossil fuel plants – well ahead of their economic life. Anyone building a new
coal-fired power station, or even a gas-fired power station, cannot rely on it
surviving until the end of its normal economic life, unless stringent policies
are implemented within two years, or there is a great leap ahead in CCS.

But of particular concern to the IEA is that
the rollout of CCS is delayed. This will require an even greater shift to
renewables, and particularly solar PV in buildings. Wind would have to grow at
90GW a year; sales of hybrids, plug-in hybrids and electric vehicles would need
to be three quarters of passenger and commercial vehicle sales in 2035,
requiring a significant transformation of the infrastructure used to fuel/recharge
the cars. There would also need to be a more rapid roll-out of nuclear.

But therein lies a problem. The IEA says the
accident at the Fukushima Daiichi power station has led to a re-evaluation of
the risks associated with nuclear power, and to greater uncertainty about the
future role of nuclear power in the energy mix. It paints varying scenarios,
including a “low nuclear case” in which it plays a smaller role in global
energy supply, and more is required of renewables to compensate – 20 per cent
more than in the base-case 450 scenario. And CCS would need to deliver 30 per
cent more.

But what would happen if both CCS failed to
deliver in time, and governments were reluctant to push the button on nuclear?
The IEA doesn’t cover that scenario; it’s not quite ready to go there. Maybe
next year.

Source: www.climatespectator.com.au

David R. Jones, Global CEO of Havas and
co-founder of One Young World on  Why
Greece’s Debt Shouldn’t Be the G20′s Biggest Economic Issue  (4 November 2011):

As the G20 leaders meet in Cannes, the entire
meeting is being consumed by the current debt crisis in Europe and its
potential impact on the global economy.

On one level, that is completely
understandable. The world’s economy is precariously balanced and without
confident, decisive action could tip back into another major global downturn.
It’s a critical issue and one that must be resolved. Especially after defeat
was almost snatched from the jaws of victory by Greece’s decision to hold a
referendum which has fortunately now been reversed

However, there is another subject that the
G20 has a unique opportunity to take action on. And one that is every bit as
critical. In the midst of all of the economic and financial uncertainty, it’s
easy to forget the looming issue of climate change. Yet if we do not act and
find a solution, issues such as the size of Greece’s debt may unfortunately be
somewhat academic. The phrase ‘rearranging deckchairs on the Titanic’ springs
to mind.

Climate is an economic issue. Both in its
threat and in its potential opportunity. And while history will probably forget
the current Greek debt crisis, it will not forget the consequences of action,
or to be more pessimistic inaction, on climate. As the quote on the wall of
Patagonia’s head office says: “There is no business to be done on a dead
planet.”

President Sarkozy has stated that he wishes
to lead the G20 in addressing global problems with “action and
ambition” — this can and should include action on mitigating the effects
of Climate Change. Alongside resolving the world’s debt crisis, establishing a
new framework for consultation on a financial transaction tax and exchange rate
developments, the G20 should be stating clear, specific commitments by member
states as to how they will deliver on the recent Cancun agreement within their
own legislative programs, as well as acting in concert, and thereby delivering
economic growth and jobs through the green economy.

While taking action on climate change has
been somewhat of a political hot potato in recent years — given both its
complexity and low perceived chance of success many politicians have sought to
steer well clear of the subject — it could actually, almost
counter-intuitively, be the one subject the G20 leaders could agree on. The
opposition from member states regarding financial transaction taxes and
exchange rate reform make the chances of agreement on those issues limited –
the White House has already this week expressed its skepticism about Sarkozy
and Merkel’s plan on taxing financial market transactions, and it is highly
unlikely that the US and China will resolve their very public differences on
exchange rate — thus realistic practical proposals regarding action on Climate
Change have a very real chance of being adopted and therein delivering a major
tangible success to the Summit. Which may interest those leaders who have a
rather important date with the polls next year.

In order for Cannes to deliver concrete
action on climate, any solution needs to achieve the following:

Firstly, it needs to be practical and have a
realistic chance of being adopted. It must be within relatively easy reach of
each member of the G20 and be something they are already looking at. It must
also be something on which they can legislate quickly. What is key is that it
is a starting point, not an end point.

Secondly, it needs to diffuse the political
standoff between the developed and developing world and the tensions between
China and America — already exacerbated by the currency debate. The Chinese
government is paying the highest financial price of all the G20 members for the
negative effects of carbon emissions, but they need to keep their economy
growing and they need a realistic starting point for world action on climate
change that they can adopt. Their investments in Green Energy show how
committed they are to acting — just not on someone else’s terms.

The following two simple proposals address
these criteria and could and should be adopted by the G20 leaders in Cannes.

Proposal 1: PEY18

In order to ensure that the negative effects
of carbon emission begin to come under control, the G20 member states should
resolve to set 2018 as the year in which these emissions will peak; emissions
will fall after 2018, Peak Emission Year, as a result of the legislative action
agreed by the G20 member states. If it should be that a G20 member will not
accept 2018 then they must state and commit to their own national peak
emissions year.

Peak Emission Year (PEY) will give the
Chinese government something they can sign up to without losing face and
without being seen to ‘blink first’ in a standoff with US interests. It allows
for a global agreement but with everyone acting on their own terms. And China
can be seen to ‘lead’ as opposed to bending to the will of developed economies.

Proposal 2: FFS18

The G20 members will agree to abolish Fossil
Fuel Subsidies by 2018.

The G20 has already made a commitment to
establish a plan to end fossil fuel subsidies. They can and should demonstrate
that they are accountable to that commitment. A report by the International
Energy Agency (IEA), Organization of Petroleum Exporting Countries (OPEC),
Organization for

Economic Cooperation and Development (OECD),
and World Bank estimated that fossil fuel consumption subsidies cost the global
economy $557 billion in 2008, and unless eliminated can be expected to impose
similar costs in the future — that can finance a lot of Greek debt! There is
even political momentum on this issue, with the US in particular wanting to
pursue an end to FFS.

These two proposals are broadly in line with
the publicly-stated views of the majority of G20 government environment
ministers. They have been developed with the informal input of the governments
or environment ministries of many of the G20 countries, and after consultation
with Climate experts, Business leaders, the Global Climate Change Alliance and
the Global Sustainability 50 Committee of 50 of the world’s largest companies.

More importantly, they are credible, tangible
and achievable.

As President Sarkozy said in his August 20,
2010 speech to the 18th UN Ambassadors Conference: “Shouldn’t the G20 be
discussing the financing of a climate agreement? At a time when the fight
against climate change is at a standstill.”

Yes, I think it should.

PEY18/FFS18 is one of the nine proposals that
were developed for the French government, this year’s G20 Chair, by the ‘G20
Paris Initiative Task Force’ of the World Economic Forum’s Young Global Leaders
community including David Aikman, Fabrice Seiman,Thomas Buberl, Alfredo Capote,
Kevin Lu, Erwann Michel-Kerjan, Jill Janaina Otto, Anthony Stevens and David
Jones.

About the Author:

David
Jones is the Global CEO of Havas and co-founder of One Young World. In advance
of the United Nations’ Copenhagen Climate Summit, David led Kofi Annan’s
TckTckTck campaign, recruiting 18 million “climate allies.” He also
led the advertising agency team working with David Cameron and the UK
Conservative Party team from 2007 to the successful election in 2010.

The opinions are the author’s own.

Source: www.huffingtonpost.com