Changing views in the energy sector on the need to act on climate change

Last week the International Energy Agency released a new report, Redrawing the Energy-Climate Map,  in which it reported that the world is drifting ever further from the 2^oC target that was agreed to at the Copenhagen climate conference in December 2009.  UNFCCC Executive Secretary, Cristiana Figueres, was quick to note the appearance of the report, and to warn countries once more that we are collectively failing to achieve necessary goals.  Lord Stern, an economist and author of the Stern Report on climate also welcomed the report.  He emphasized the need to act quickly and decisively to move towards a carbon-free economy, noting that governments’ collective failure to set clear policy re climate is a major deterrent to long-term investment in clean energy, and adding that “this is surely unacceptable at a time of idle resources, low interest rates, strong liquidity within much of the private sector, attractive medium-term prospects for low-carbon growth and a climate at great risk.”  What is interesting about this report is that the IEA makes its case for some significant and immediate changes within the energy industry, and uses arguments based on economic self-interest to do so.  The report is lengthy and detailed, and it makes clear that achieving this 2^OC goal is a desirable thing to do.  So desirable that we should not wait for the lengthy and cumbersome climate conference round-about to get us doing something in 2020 as currently planned.  We, or more correctly, governments and the energy sector should do some things now, in preparation.

IEA has projected likely CO₂ emissions due to the energy sector assuming that countries do implement the new policies they have announced, and found that emissions rate and amount were consistent with a global temperature increase of 3^oC by 2100 and 3.6^oC to 5.3^oC in the longer term.  Despite significant improvements in some countries, global energy-related CO₂ emissions increased to 31.6 gigatonnes (Gt) in 2012, the highest level since records have been kept, and an increase of 1.4% from 2011.  China’s emissions increased, but by a lower percentage than in past years due to their substantial efforts to improve energy intensity and to push renewable sources.  The USA made major improvements, chiefly because of a substantial switch from coal to natural gas for power generation.  Europe also made major improvements, but the lack of progress in other places kept the CO₂ trend on its rapid upward path.  In the view of IEA, unless steps are taken now to further reduce energy-related CO₂ emissions, by 2020, when the next climate treaty is intended to come into effect, the task confronting the world will be very large, very expensive, and possibly politically unachievable.

The Copenhagen Accord, which Canada signed onto, included a series of optional pledges of emissions goals, and Canada made the pledge.  So far as we know, Stephen Harper has not decided yet to cancel this pledge.  It is of course the one that every member of his government keeps telling us we are halfway towards reaching.  If only that were true.  We are not halfway to reaching the rate of emissions we have targeted for 2020, and what little progress we are making is due to significant efforts by Quebec, slightly less significant, but still noteworthy efforts by Ontario and British Columbia, an accounting adjustment that let every country appear to improve in 2011, whether or not it actually had done so (we had not), and action by California and the USA to require further efficiencies in automobiles.  But I digress.

The Copenhagen Accord was reached following consensus among the assembled climate negotiators that humanity would not cope well if we allowed climate to warm during this century by more than 2^oC relative to preindustrial times.  As pointed out in the new IEA report, a number of respected climate scientists are now saying that 2^oC may be too much, that it may bring us to a threshold for positive feedback loops, to do with methane stores in permafrost and so on, that will really ramp up temperature and change the world climate profoundly.  Increasingly, those who know the situation best are talking 1.5^oC or 1^oC.  (Bringing CO₂ concentrations in the atmosphere back from 400 ppm to 350 ppm – where it was in the late 1980s – gives us a 1^oC world, a world where coral reefs might have a reasonable chance for survival.)  The IEA report does not push these cooler alternatives, but I was impressed that the risk at 2 degrees was mentioned.

A Coral Reef.  I sometimes forget just how wondrous they are, wondrousness that we are going to wipe off the planet if we continue our irresponsible behavior on CO₂ emissions.  Photo © R.S. Steneck

The IEA report proposes four actions that could be taken immediately by the energy sector without risking economic growth (funny how economic growth is more important than securing a livable planet).  These are not new, and they are definitely feasible.  First is to target energy efficiency measures, raising standards for lighting, heating and cooling of buildings, for vehicles, and for power use in industry.  Sixty percent of the energy savings would come from the building sector.  The goal is to reduce global energy-related emissions by 1.5 Gt in 2020, an amount equal to Russia’s current annual rate of emissions.  IEA estimates that this action would require an investment of $200 billion by 2020, an amount that is more than compensated by the savings in fuel purchases.

The second action is to ensure that regulations are in place that will prevent new subcritical coal-fired plants to be built, while limiting the use of the least efficient existing ones.  This would reduce emissions by 640 Mt in 2020 and also help efforts to curb local air pollution.  Emissions standards, a carbon tax, or other regulatory mechanisms would be needed, but are already in place in many countries.  IEA sees a reduction by 25% over what it would have been in use of coal.

The third action tackles a common pattern of waste within the fuel production industry, the flaring or venting of methane at well-heads.  Methane is a potent greenhouse gas, and IEA reports that about 1.1 Gt CO₂ equivalents of methane were released in this way by the oil and gas industry in 2010, an amount equal to twice the annual natural gas production of Nigeria.  Mechanisms for capturing this gas are readily available at relatively low cost, and countries such as the USA are already putting regulations in place to require this conservation.

The fourth action is to begin an accelerated partial phase-out of fossil-fuel subsidies, sufficient to reduce CO₂ emissions by 360 Mt in 2020 and enable energy efficiency policies.  IEA reports that fuel subsidies of various types amount to $523 billion in 2011, six times the level of subsidies to the renewables sector.  Currently just 8% of global CO₂ emissions are subject to a carbon tax, while 15% enjoy a subsidy averaging $110 per tonne.  G20 and APEC countries have each agreed in principle to phase out “inefficient” subsidies, however I am not holding my breath on this one – getting rid of subsidies is something that happens very slowly in the sheltered halls of government.

None of these actions will be easy, especially for governments that sit happily in the laps of fossil fuel multinationals, but they are all feasible right now.  If all were done, we would move back on track towards a 2^oC world ready for the treaties that people are hoping for in 2015 for 2020 implementation.  The IEA report devotes its final chapter to the implications of climate change for the energy sector, and the cost of failing to act in time.  It makes the point clearly that changing priorities forced on governments by the need to combat climate change are going to have significant bottom line impacts on the energy sector – the changes to climate that will be occurring during the next several decades fall well within the usual planning horizon of energy companies.  The report actually discusses energy reserves that lose their economic value and are left in the ground because the world cannot afford to burn them, and it speaks cogently about the value for an energy company to get ahead of the curve, anticipate changes to come and position itself to benefit rather than lose.  The IEA primarily exists to advise governments and the energy sector.  This report advises them that climate change is here, and that it has major economic implications for them.  I find it satisfying to recognize that when I have commented in the past about the likelihood of Canada’s tar sands industry collapsing because the product becomes environmentally unacceptable, I was not just being an overly green environmentalist.  Well, maybe I was, but now I know that serious businessmen who have not shown a lot of interest in environmental conservation are singing a similar tune.  The IEA report states that if governments and the energy sector do nothing more than they have already committed to until 2020, about $1.5 trillion will be saved, but about $5 trillion extra will be required after 2020 to keep within the 2^oC envelope.  The report also mentions some other costs (some in the trillions) to the energy sector to cope with the stresses on its infrastructure caused by aspects of climate change.  In this regard, the future economic potential of North Sea oil is already being downgraded because of the expectation that more severe storms are going to disrupt extraction activities.

Meanwhile closer to home, Ontario’s Environmental Commissioner, Gordon Miller, has released his annual report admonishing the Ontario government for having lost its way on climate change.  Ontario made good progress initially, shifting electricity generation away from coal and encouraging wind energy developments.  But politics interfered and a government anxious to hang onto seats scrapped two new gas-fired generation stations at great cost, giving into nimbyism, and does not seem to have anything new to offer.  Miller’s blunt assessment, “The world is becoming more engaged in climate change and mitigating its effect but Ontario is falling by the wayside.”  A pity because Ontario was one of three Provinces singled out for (mild) praise in the IEA report – a report which did not mention Alberta once, and mentioned Canada only in reference to its special challenges (permafrost roads melting and high winter heating demand), or for the initiatives shown by Provinces such as Quebec.

Ontario’s government encouraged wind power enterprises, particularly along the shores of Lake Erie and in southwestern Ontario.  Nimbyism predictably developed, and the government’s resolve weakened – offshore installations seem to have been delayed indefinitely.  Joe Heller image © Press-Gazette Media.

And out in the tar sands?  An article in Macleans reports how Cenovus invented a light drilling rig that can be dropped from a helicopter so that the many wells needed for an in situ tar sands project can be developed without first building lots of roads.  Then, it shared its SkyStrat technology with its competitors.  According to Macleans, oil company executives are now coming to recognize that Canada, and their industry in particular, has got to show some leadership on environmental issues or risk getting shut out of international markets.  Once again, it’s all about the bottom line.  Oil company leaders see their enormous investments at risk if the world shuns tar sands oil, so they have to start becoming more environmentally responsible, and cooperating with each other to do this while preserving their competitive advantages.  Meanwhile the Harper government continues to talk about new environmental regulations (except that there is little time to talk while a Senate free spending problem takes up everyone’s time), but shows no signs of actually putting any in place.  Meanwhile, CBC News just ran a piece on the tailings ponds, and the fact that restoration of tailings ponds was proceeding so slowly it almost was not proceeding at all.  And they had the most deliciously gooey shot of someone swirling a paddle in the surface gloop on one of the tailings ponds.  Ah yes, Alberta, a land of greenwashed landscapes.