The$Carbon$Crunch$$ and$whatto$do$aboutit · The$Carbon$Crunch$$ and$whatto$do$aboutit IPPR January$15th2013 Dieter$Helm,$Professor$of$Energy$Policy,$University$of$Oxford$ Author$of$The$Carbon$Crunch:$How$we$are

The Carbon Crunch and what to do about it

IPPR January 15th 2013

Dieter Helm, Professor of Energy Policy, University of Oxford

Author of The Carbon Crunch: How we are ge1ng climate change wrong and how to fix it. Yale University Press, 2012

The QuesLons

•  What are the causes of global warming? – Facing up to some inconvenient facts

•  Why has so liQle been achieved? – Recognising current failures

•  How do we make progress? – Delivering effecLve climate miLgaLon

Professor Dieter Helm 15th January 2013 3

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1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

An ever-‐upward path Atmospheric CO2 (ppm)

Source: US Department of Commerce National Oceanic & Atmospheric Administration (NOAA)


What causes global warming?

3 related causes: •  The role of coal •  China •  PopulaLon growth I Carbon consumpLon, not producLon, is what maQers


Historical coal burn vs atmospheric CO2 (mt & ppm)

Professor Dieter Helm

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Atmosph

eric CO2 (ppm

)

Coal con

sump6

on (m

illion tonn

es of coa

l equ

ivalen

t)

Coal consumpLon Atmospheric CO2

Source: US Department of Commerce NaLonal Oceanic & Atmospheric AdministraLon (NOAA), BP staLsLcal

review of world energy 2011 15th January 2013 6

World coal demand scenarios to 2035 (mt)


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1980 2009 2020 2035

Million tonn

es

New policies

Current policies

450 scenario

Source: OECD/IEA World Energy Outlook 2011 15th January 2013 7

Global and Chinese coal demand in the base-‐case scenario (BCS) and Chinese slow-‐down case (CSDC)

8 Source: IEA Medium-‐term coal market report 2012

Europe’s own dash-‐for-‐coal

•  EUETS < EUR10 I gas � coal •  Germany: nuclear � coal

I major new coal build in Europe I lignite coal is being expanded in Germany I There is a gas � coal switch in Europe

15th January 2013 Professor Dieter Helm 9

Gas and coal-‐based electricity generaLon in select European countries

Electricity genera6on

From gas Jan-‐Jun 2011 (in GWh)

From gas Jan-‐Jun 2012 (in GWh)

Rela6ve growth (in %)

From coal Jan-‐Jun 2011 (in GWh)

From Coal Jan-‐Jun 2012 (in GWh)

Rela6ve growth (in %)

Germany 40984 34749 -‐15 129399 140008 8

Spain 40696 35790 -‐12 16803 27656 65

UK 71894 48109 -‐33 52422 70991 35

10 Source: IEA Medium-‐term coal market report 2012

PopulaLon growth – providing energy for another 2 billion people


Source: United NaLons 15th January 2013 11

What is likely to happen before 2020?

By 2020: •  China X 2 GDP •  India X 2 GDP

While no further acLon following Durban & Doha before 2020 I 400 – 600 GWs new coal by 2020 (if 12th 5 year plan implemented in China)


Why has so liQle been achieved?

•  Kyoto is producLon-‐based & largely European •  Europe has been de-‐industrialising •  Some current renewables are expensive, contribute liQle to global climate change miLgaLon and raise energy prices

•  Nuclear is reducing across Europe (especially in UK and Germany) + being replaced by coal in Germany


EU Climate Change Package

•  2020 – 20 – 20 : It all adds up to 20!!!! •  RaLonale was “World leadership” – offering 30% at Copenhagen

But then…. •  Nuclear exit •  More coal •  2050 Roadmap and 2030 targets


Europe: an unviable posiLon

CompeLLveness

ConsumpLon of carbon

Current renewables policies

Costs

•  Current renewables cannot make much difference to global climate change– land & shallow sea areas just not big enough

•  Energy efficiency – good idea but does not necessarily reduce energy demand Professor Dieter Helm 15th January 2013 15

How do we make progress (if we really want to)?

1.  Carbon pricing and Carbon consumpLon and border adjustments

2.  Coal � gas subsLtuLon And then…. 3.  Enormous scope for new technologies –

future renewables


Carbon taxes v. EU ETS

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Car

bon

pric

e E

UR

Source: Bloomberg

A carbon tax alternaLve

EU ETS futures prices


Border carbon adjustments

•  Focus on carbon consumpLon •  Not to price carbon is to subsidise exports •  LocaLonal indifference •  Start with small number of very large carbon-‐intensive industries

•  Encourages others to introduce carbon prices I BoQom up, step-‐wise towards global carbon pricing

15th January 2013 Professor Dieter Helm 18

Coal " gas for the transiLon

Fossil fuel emissions

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400

600

800

1000

Coal (average) Fuel oil Natural gas

Approximate CO2 emissions: grammes of CO2 per KwH of electricity generated Source: International Energy Agency "CO2 emissions from fuel combustion highlights 2011"


The new technologies – future renewables, acLve grids and more…

•  Next generaLon solar •  Smart Meters •  Storage and baQeries •  ElectrificaLon of transport •  Biotechnologies •  Nuclear: PRISM, Fast-‐breeders


Conclusions

•  European leadership has failed •  2020 – 20 – 20 has probably made maQers worse

•  Durban will probably lead to 450ppm ++ EITHER:

•  Change tack now •  Admit defeat


8/21/12 The Carbon Crunch by Dieter Helm -‐‑ Yale University Press

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www.dieterhelm.co.uk

•  “EMR and the Energy Bill – a criLque” hQp://www.dieterhelm.co.uk/node/1330 •  “Mr Davey’s ‘myths’” hQp://www.dieterhelm.co.uk/node/1343 •  European Energy Policy, in: The Oxford Handbook of the European Union Edited by E

Jones, A Menon, and S Weatherill, OUP, August 2012. •  The UK’s new dash for gas, Prospect, 20th September 2012. •  Trade, climate change and the poliEcal game theory of border carbon adjustments,

with Cameron Hepburn and Giovanni Ruta, May 2012, Grantham Research InsLtute on Climate Change and the Environment, Working Paper No. 80.

•  Surprise – the oil price isn’t higher, Prospect, April 2012. •  What next for EU energy policy?, in Green, safe, cheap: Where next for EU energy

policy? edited by KaLnka Barysch, Centre for European Reform, 2011. •  The Economics and PoliEcs of Climate Change, Helm, D. R. and Hepburn, C. (eds),

(new ediLon 2011), Oxford University Press.


Documents

The$Carbon$Crunch$$ and$whatto$do$aboutit · The$Carbon$Crunch$$ and$whatto$do$aboutit IPPR January$15th2013 Dieter$Helm,$Professor$of$Energy$Policy,$University$of$Oxford$ Author$of$The$Carbon$Crunch:$How$we$are