Our Common Future Under Climate Change

International Scientific Conference 7-10 JULY 2015 Paris, France

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Thursday 9 July - 16:30-18:00 UNESCO Fontenoy - ROOM II

3306 - Transitioning from fossil fuels and avoiding lock-ins

Parallel Session

Lead Convener(s): L. Michael (Stockholm Environment Institute, Seattle, WA, United States of America), N. Bauer (Potsdam Institute for Climate Impact Research, Potsdam, Germany)

Convener(s): H. Rogner (IIASA, Laxenburg, Austria), H. Van Asselt (Stockholm Environment Institute, Oxford, United Kingdom)

The role of fossil energy in conventional and carbon-constrained worlds

D. Mccollum (International Institute for Applied Systems Analysis (IIASA), Laxenburg, Austria)

Abstract details
The role of fossil energy in conventional and carbon-constrained worlds

D. Mccollum (1)
(1) International Institute for Applied Systems Analysis (IIASA), Energy Program, Laxenburg, Austria

Abstract content

The transition between today’s fossil-dominated energy system and one based on low-carbon supply sources will be a decades-long process. Getting from here to there will present a number of challenges, not least of which are phasing out of the ubiquitous fossil fuel infrastructure that has been built up over the past century and a half and providing the necessary incentives for foregoing the ample deposits of fossil energy lodged within the Earth’s crust. In this regard, future advancements in fossil technologies, fossil resource endowments and the long-term development of fossil fuel prices are important factors that will critically influence the nature and direction of the global energy system.

This talk will summarize recent literature emanating from the global integrated assessment modeling (IAM) community which has explored the role of fossil energy (coal, oil, and natural gas) in its various energy and emissions scenarios for the twenty-first century (both in low-carbon pathways and in fossil-dominant counterfactuals). The studies to be discussed principally include those from multi-model inter-comparison projects, such as EMF27 (Energy Modeling Forum), AMPERE (Assessment of Climate Change Mitigation Pathways and Evaluation of the Robustness of Mitigation Cost Estimates), LIMITS (Low climate IMpact scenarios and the Implications of required Tight emission control Strategies), and RoSE (Roadmaps towards Sustainable Energy futures), among others.

The diverse modeling frameworks employed in these studies highlight large uncertainties in the likely development of fossil resource consumption, trade, and prices over the course of the twenty-first century and under different climate policy frameworks. A seemingly robust finding across the suite of IAMs is that the upper end of cumulative fossil fuel consumption foreseen by the models is well within the bounds of estimated recoverable reserves and resources. Hence, fossil resource constraints are, in and of themselves, unlikely to limit future GHG emissions this century. And while a vast amount of unconventional gas resources have recently become cost-competitive and could alter the future energy landscape, the climate may be no better off because of it, given the emissions impacts elsewhere in the energy system. Further, analyses show that globally agreed mitigation policies could lead to a major reallocation of financial flows between regions, in terms of expenditures on fossil fuels and carbon; carbon leakage could become an issue in fragmented policy environments; and carbon lock-in and the eventual premature retirement of fossil infrastructure are realities to be mindful of if major mitigation efforts are delayed beyond 2020.

The market and lock-in effects of new fossil fuel infrastructure, and the need to integrate supply- and demand-side climate policies

P. Erickson (Stockholm Environment Institute, Seattle, United States of America), L. Michael (Stockholm Environment Institute, Seattle, United States of America)

Abstract details
The market and lock-in effects of new fossil fuel infrastructure, and the need to integrate supply- and demand-side climate policies

P. Erickson (1) ; L. Michael (1)
(1) Stockholm Environment Institute, Seattle, United States of America

Abstract content

Climate policy and analysis often focus on energy production and consumption, but seldom consider how fossil fuel supply and transportation infrastructure shape energy systems. US President Obama, among others, has recently brought these issues to the fore, stating that he would only approve the Keystone XL pipeline, connecting Canadian oil sands with US refineries and ports, if it does not significantly increase global greenhouse gas emissions. In this presentation, based on our paper in Nature Climate Change (doi:10.1038/nclimate2335) we show how such infrastructure investments, through market effects, could affect fuel use and global GHG emissions on a scale similar to national policies aimed at reducing fossil fuel  consumption and GHG emissions. We contend that in order to increase the effectiveness and efficiency of meeting climate protection goals in the coming decades: (1) examination of supply-side investments and their implications for fuel markets, consumption, and emissions, needs to be undertaken widely and systematically; and (2) policies addressing the supply side need to be considered and integrated with more typical, demand-side climate policy. The presentation will synthesize insights from recent literature (e.g., Erickson and Lazarus 2014, Collier and Venables 2014, Faehn, Hagem, et al 2013, McGlade and Ekins 2015), and suggest areas for further inquiry and action for research and policy communities.

 

[Please note:  this abstract was requested by the conveners of the session “Fossil Energies and Energy Transformation Politics”  and is integral to the design of that session.]  

Commitment accounting of CO2 emissions: long-term consequences of current investments

S. Davis (University of California, Irvine, CA, United States of America)

Abstract details
Commitment accounting of CO2 emissions: long-term consequences of current investments

S. Davis (1)
(1) University of California, Department of earth system science, Irvine, CA, United States of America

Abstract content

Any limit on future global warming is associated with a budget of cumulative CO2 emissions, such that annual global emissions must ultimately approach zero.  Yet, unless retrofitted or retired early, currently new and existing fossil fuel-burning infrastructures commit us to future CO2 emissions over their expected lifetimes.  I will highlight the results of two recent publications, Davis and Socolow [1] and Raupach et al. [2], which together describe trends in ‘committed’ emissions related to energy infrastructure and how these commitments compare with the remaining budgets of emissions under different climate targets and the options for sharing this budget among nations.  Next, I'll show how the expansion of economic fossil fuel reserves (e.g., by exploration, innovative extraction methods, or improved transport infrastructure), may also represent commitments to extract and burn these fuels [3].  Finally, I’ll discuss the required carbon intensity of new investments given the constraints of a cumulative carbon budget and existing capital stock, with explicit comparisons to a range of top-down energy-emissions scenarios.  The combination of such top-down global scenarios and bottom-up appraisals of real-world trends may inform policies that minimize international carbon leakage and carbon lock-in (or stranded assets).

 

[1] S. J. Davis, R. H. Socolow, Commitment accounting of CO2 emissions. Environmental Research Letters,  (2014).

[2] M. R. Raupach et al., Sharing a quota on cumulative carbon emissions. Nature Climate Change 4, 873 (2014).

[3] H.D. Matthews, A growing commitment accounting to future CO2 emissions. Environmental Research Letters,  (2014).

A global abundance of natural gas increases the challenges of climate change stabilisation

J. Hilaire (Potsdam Institute for Climate Impact Research, Potsdam, Germany), N. Bauer (Potsdam Institute for Climate Impact Research, Potsdam, Germany), E. Kriegler (Potsdam Institute for Climate Impact Research, Potsdam, Germany), L. Baumstark (Potsdam Institute for Climate Impact Research, Potsdam, Germany)

Abstract details
A global abundance of natural gas increases the challenges of climate change stabilisation

J. Hilaire (1) ; N. Bauer (1) ; E. Kriegler (1) ; L. Baumstark (1)
(1) Potsdam Institute for Climate Impact Research, Potsdam, Germany

Abstract content

The US economic gains and carbon emission reductions associated to the recent US shale gas boom are frequently mentioned to portray natural gas as a bridge technology to a low-carbon future. Having half the carbon footprint of coal, natural gas seems indeed an attractive carbon mitigation option. As a result, several countries including China, India, Mexico, Poland and the UK are seeking to take advantage of the late technological improvements (e.g. hydraulic fracturing, horizontal drilling ...) and replicate the US development. If successful, this collective endeavour could bless the world with a global abundance of natural gas that would lead to a ''golden age of gas''. Regular upward revisions in natural gas resources - and decline in associated extraction costs - support the possibility of such future. However, should global warming be limited to below 2°C with high probability, this global gas bonanza would have to occur simultaneously with a global energy transition aiming at reducing worldwide greenhouse gas (GHG) emissions to zero or below by 2100.

 

Economic theory suggests that the global energy transition can be efficiently orchestrated by setting a global price on carbon emissions. Nonetheless a global carbon price regime is still subject to fierce debates during climate negotiations and will most likely be implemented with a several year delay. Currently, the climate political landscape consists of a mosaic of regional carbon markets and national technology policies. In this context, can a global abundance of natural gas facilitate the global energy transition by reducing its costs, fostering the deployment of low-carbon technologies and reducing CO2 emissions?

 

We address this question by generating various scenarios with a global model of the energy-economy-climate system. These scenarios differ along two dimensions: the degree of natural gas supply and the delay to implement a global carbon price consistent with a 2°C target. Our results show that seeking to expand natural gas supply whilst trying to protect the climate would bring short-term benefits such as higher GDP, lower electricity prices and reduced short-term mitigation costs. However it would also increase medium- and long-term mitigation costs substantially, owing to larger CO2 emissions and hence higher CO2 prices. Differences in aggregated discounted consumption losses over 2011-2100 between an abundant-gas and a conventional-gas world amount to more than 0.25 percentage points.

 

Interestingly, living under a “gloden age of gas” increases the opportunity costs of climate change mitigation, partially because of lock-ins in natural gas technologies. This can be seen by looking at differences in GDP growth reduction. Even though GDP growth is only marginally reduced by an increase in natural gas supply over 2015-2030, this reduction becomes much larger over 2031-2050. More importantly, a delay in comprehensive climate policies leads to more than a quadrupling in GDP growth reduction over 2031-2050 compared with immediate climate action. Consequently not only climate change stabilisation becomes more challenging to achieve in a gas-abundant world but it is even more difficult when climate proection is delayed.

South Africa's planned coal infrastructure expansion: drivers, dynamics and implications for carbon emissions

J. Burton (University of Cape Town, Cape Town, South Africa)

Abstract details
South Africa's planned coal infrastructure expansion: drivers, dynamics and implications for carbon emissions

J. Burton (1)
(1) University of Cape Town, Energy Research Centre, Cape Town, South Africa

Abstract content

South Africa has both domestic climate mitigation objectives and has pledged internationally to reduce its emissions by 34% and 42% below a business as usual baseline by 2020 and 2025 respectively. The peak of this emissions trajectory has already almost been reached. While mitigation policy has filtered into electricity planning processes, limiting demand for coal in the longer-term, both the state and private actors are at the same time investing (or planning to invest) in supply side coal-related sectors.  Besides Eskom’s large-scale coal-fired power plants currently under construction and the possibility of extending the lives of Eskom’s older coal-fired plants, a coal-based independent power producer procurement programme has recently been announced. This power infrastructure depends on maintaining security of coal supply.

Geological factors, domestic market impacts of past high coal prices and other cost increases in the Central Basin (where most coal is currently mined) have lead, however, to serious security of physical supply and affordability concerns for Eskom in the medium to long-term. Coupled with political support for expansion of the coal sector both domestically and for export, new investments in the Waterberg coalfield are widely viewed by Eskom, the coal industry and parts of the state as the long-term future of the South African coal industry.

The presentation will briefly outline the implications of planned supply side fossil fuel investments in South Africa, using the results of an extraction-based emissions analysis of the coal industry’s South African Coal Road Map scenarios.

Under these scenarios it is likely that South Africa will exceed its carbon budget to 2035. Furthermore, meeting coal demand depends on several upstream investment decisions that are being taken without consideration of either the direct impacts on emissions or the indirect effects on domestic or export coal prices, in particular new rail investment decisions.  Such decisions result in increasing economic and financial lock-in of current supply systems.

Coal has historically been, and remains, key to the political economy of South Africa. Part of the explanation for the support for the Waterberg coalfield expansion lies in economic arguments put forward by the industry, which has argued that coal from the Waterberg is significantly cheaper than current and future supplies in the Central Basin. However, evidence for this claim remains limited. More broadly, political support remains important; both in supporting coal-fired electricity, liquid fuels and upstream coal mining in general, and for the Waterberg expansion in particular.

 Both the major mining houses and several junior miners are connected to the new political elite; either through large-scale Black Economic Empowerment (BEE) deals, or through direct ownership interests in smaller firms. BEE policies, including Eskom procurement and rail and port access designed to encourage black-owned junior miners, contribute to linking the industry to actors in the ANC and to actors in government who are supportive of BEE as an economic policy.  The Waterberg coalfield furthermore provides new investment opportunities for the mining industry, thus providing a focal point around which rail, BEE and coal interests have coalesced and leading to socio-political lock-in.

There is a mismatch between the political economy of the coal  (and broader energy) sector and the mitigation efforts of certain parts of the state (based on the implementation of a carbon tax and on sectoral carbon budgets to be imposed on the economy).  Despite numerous technical assessments of demand-side policy options to reduce emissions, current institutional arrangements reflect the power of coal-based economic and political interests in Eskom, Transnet, the state and politically connected elites.  It appears that transformational energy policy that reduces the extraction of coal is limited by the political make-up of post-apartheid South Africa. Without the integration of supply side investment decisions with future carbon constraints, the country runs the risk of further exacerbating the systemic lock-in of South Africa’s high emissions trajectory.