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Why Europe must back a technology-neutral energy policy

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Some observers believe the Europe 2020 package, coupled with the economic showdown, is bringing the EU’s greenhouse gas emissions under control. Bryony Worthington disagrees and looks to the EU’s 2030 package for the necessary measures.

The growing risk of climate change means that energy systems that have served us well for so long now have to change. Climate science indicates that to stay within the agreed limit of no more than a 2ºC average global increase in temperature, greenhouse gas emissions need to drop to zero, and that in the second half of this century we will probably need to remove those gases from the atmosphere to make up for today’s high emissions levels.

The profound implications for our energy markets mean that the question is how best to manage this transition while maintaining security of supply, and without massive increases in energy bills. There’s no straightforward answer because in theory the most cost-efficient way is to apply a price to emissions that allows market forces to establish least-cost solutions. In practice, though, this has already proved difficult. The EU’s emissions trading scheme (ETS) introduced in 2005 a carbon price affecting half of the European economy, and it hasn’t fixed the problem. It wasn’t then, and still isn’t, the only EU policy for reducing emissions. The EU’s 2020 energy and climate package included policies to boost renewables and increase energy efficiency. The renewables policy was as much an industrial innovation and energy security policy as a carbon policy, and it resulted in significant investments across the EU. Energy efficiency policies have helped to overcome non-price barriers to carbon abatement, and demand for energy is falling further as these policies are supplemented by warmer than average temperatures.

Technology neutral subsidies need not exist forever since their purpose is to stimulate innovation and bring down costs of commercial solutions

The 2020 package, combined with slower economic growth following the 2008 banking crisis, has meant that Europe’s emissions are falling and the carbon price under the ETS is low. Some therefore see little need to do more to manage the transition to a low carbon economy, but I disagree. We need to increase our efforts, but use a different approach.

Europe’s growth of renewables has not displaced the most carbon intensive forms of energy; high gas prices and low coal prices have meant higher coal burn. This has kept the carbon intensity of the economy higher than it would otherwise have been. Large subsidies have been available in the power sector for renewables, but in industrial sectors there have been few incentives for investment in decarbonisation beyond incremental increases in efficiency. The focus of any industry facing a low but rising carbon price has been on securing compensations and exemptions. Few have argued in favour of support for investment in decarbonisation technologies, with the result that there is no support mechanism for CCS, CHP, gas or nuclear in industry beyond a weak carbon price. And the carbon price mechanism is designed in such a way as to penalise investment and sometimes reward the offshoring of production, so further exacerbating industries’ investment woes. This has to change.

Fortunately, there are signs that the EU’s 2030 climate and energy package will introduce changes. But it is far from clear that the new approach needed will actually be adopted. If Europe is serious about achieving deep long term emissions cuts here’s what it will need to do.

The place to start is with the Emissions Trading Scheme, which instead of being the EU’s flagship climate policy has run aground, weighed down by a massive surplus of emissions allowances. Permanently removing excess allowances and introducing an on-going mechanism to adjust for over and under supply has to be Europe’s priority and it is greatly to be hoped that legislation can be passed next year to achieve this.

It is high time we started to take decarbonisation in industry seriously and adopt a carrot and stick approach in which the carrot is sufficiently well designed to change investment behaviour

Sorting out the surplus is only part of the solution. The ETS also needs to properly reward investment, and not to create windfalls for companies that reduce production within the EU. This can be done through allocation methodologies that take production levels into account.

With a functioning carbon pricing policy in place once more, the need for additional policies to deliver emissions reductions is reduced, so the cost of abatement per tonne saved can also be reduced. But it would be wrong to assume that a higher carbon price is all that is needed. For one thing, at the moment the carbon price covers only half of the economy, and for another there are plenty of non-price barriers to saving emissions and money that policy-makers should address. Subsidies for specific technologies like renewables should be reformed and already the EU has decided to drop legally-binding elements of the renewables targets. The risk remains that non-carbon elements of these subsidies like industrial innovation and energy security will be lost, thus slowing the speed of the EU’s transition.

To counter this, a technology-neutral approach to creating markets for zero carbon technologies across all sectors should be adopted. For power generation, this could be achieved by setting performance standards relating to the carbon intensity of supplied electricity – similar to the standards applied to vehicles industry. For industry, a system for spurring investment in innovation can be designed which rewards zero carbon heat production, as opposed to electricity. This could be funded out of ETS receipts and delivered via long-term contracts or tradable certificates. So far though, if no renewable technology to decarbonise industrial processes is available, industrial players have been frozen out of market-based incentives, with the carbon price unable alone to provide the level of incentive that’s needed.

It is high time we started to take decarbonisation in industry seriously and adopt a carrot and stick approach in which the carrot is sufficiently well designed to change investment behaviour. Technology neutral subsidies need not exist forever since their purpose is to stimulate innovation and bring down costs of commercial solutions. But just as renewable subsidies had a role to play, industrial decarbonisation will need targeted temporary support.

There is the need for a much more dynamic approach to energy R&D focussed on high risk, high reward breakthroughs in the way that the successful DARP-E model in the U.S. does. Of course, full decarbonisation needs to be achieved, but it must be done at least cost and securely. For this we will need to deploy a whole host of technologies, some of which we know about and have already made progress in, but many others are still only ideas in labs. Europe has a proud history of invention and innovation but we are less good at commercialising new technologies. Market-led innovation already occurs where there are sufficient deployment incentives to justify investment, but these are likely to deliver only incremental improvements and not step changes – across the EU, the state still has an important role to play here.

I hope that Europe will enter the Paris climate negotiations in December with an ambitious overall goal for reducing emissions along with a realistic plan for delivering a long-term transition of our energy systems. We cannot focus all our attention on the power sector to the detriment of heavy industries, and we cannot pretend that only one or two technologies will deliver the cuts we need. We Europeans must secure investment in innovation and show that it really is possible to run an industrialised economy and to reduce greenhouse gases. If we want China, India, Brazil, Mexico and South Korea to commit to reducing their emissions, they will want to know how they can do so in the context of their own industrialisation. We must have answers when they ask us how to decarbonise refining along with the production of metals, chemicals, cement and ceramics.

It is not too late – we still have five years before the 2030 energy and climate package starts. There is much detail still to be developed and negotiated, but we can yet arrive at a policy package that secures Europe’s place at the forefront of zero carbon innovation and investment. 

 

This article first appeared in the Spring 2015 issue of Europe’s World.

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Green Planet

Is the world living up to its climate commitments?

MD Staff

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As the United Nations gears up for the September Climate Action Summit in New York, one of its most high-profile climate conferences in recent times, what progress is the world making in tackling the climate crisis, and how is that progress being measured?

Around three years ago, the global community gathered in Paris in order to build a common approach to fighting climate change. They agreed to make efforts to restrict the rise in global temperatures to “well below”  2 degrees Celsius above pre-industrial levels and, if possible, reach 1.5 degrees Celsius.

However, in July of this year the temperature measured 1.2 degrees Celsius above those levels – matching, and even breaking, the record for the hottest month since records began – and the trend is continuing upwards. Extreme weather events across the world mean the planet is on track to record the five hottest years on record, according to the UN Secretary-General, António Guterres.

Mr. Guterres says that we are engaged in a “race to limit climate change”. So are we winning? UN News decided to take a closer look at one of the key international instruments used to measure the fight against global warming: Nationally Determined Contributions, or NDCs.

What are NDCs?

It should be stressed that the Paris Agreement on Climate Change is not legally binding in its entirety: it does not tell countries how they should reduce emissions or build climate resilience and adaptation, but encourages countries to write their own ticket: the NDCs.

These climate plans outline what a country promises to do, and how much they plan to reduce emissions. Recognizing that developing countries often lack the resources, finance, and technology, the Paris Agreement calls for developing countries to show what they can do on their own, and what they can do with assistance from the international community.

Why are they important?

Countries have many options on how they can pursue the goals of the Paris Agreement.  This could involve legislation, financial incentives, or tax policies to promote activities that will reduce emissions.  For example, countries can decide to put a price on carbon, through a tax or by building a carbon trading system.

The idea is that, if people have a clear idea of the cost of carbon pollution, they will invest and spend in areas, or fuels, that cost less.  For the average citizen, this could affect what kind of car, or heating, or cooling system they use, among a myriad of other facets of life.

In addition, these policies can help regulate development in areas that are most vulnerable to the impacts of climate change, such as coastal areas that are facing rising sea levels.

Why are we talking about them now?

Under the Paris Agreement, countries are supposed to enhance their NDCs every few years to show increased ambition over time.

This is known as the “ratchet” mechanism, acknowledging that the initial submissions were nowhere near where we need to be: even if you added up the NDCs of all countries, we would only, at best, be a third of where we need to be, in order to achieve the Paris Goals.

So, countries are supposed to submit updated and enhanced NDCs in 2020, and it is important to mobilize now, to push for increased ambition and action: this is why the Climate Action Summit is being held in 2019.

Is it all doom and gloom?

No! We are seeing a surge of action around the world to move to renewable energy, with huge solar power plants being built in Morocco and the United Arab Emirates, Portugal receiving most of its energy now from renewables, and increasingly, many countries finding that they can power their grids entirely on renewable energy. 

Investment in renewable energy is now outpacing that in fossil fuels, particularly in developing countries, and many countries and sub-regions have successfully enacted carbon pricing.

At the same time, the bottom line is that the world is not moving quickly enough: global emissions are increasing, and the temperature is rising. 

Which regions are leading the way?

No region is clearly surpassing others, but there are countries, and cities, that are showing great progress.  Many countries, including Pacific Island Small Island Developing States, have said that they are moving towards climate neutrality, or having a net zero carbon footprint.

In practice, that means they are able to balance carbon emissions, for example from industry or even just car usage, with carbon removal from the atmosphere, via such techniques as planting more trees, which absorb carbon.

It is a sad irony that these countries, among the most affected by climate change, have done little to contribute to the problem.

Climate action requires investment, and that often requires sound government policies to provide the incentive. Alongside Portugal, several other countries have invested heavily in renewables – including Chile, Ireland, Kenya and Costa Rica –and many European nations have made major advances in reducing their emissions.   

How can we move faster?

We need to see greater political leadership and political will. Carrying on with business as usual will be disastrous and will lead to a global temperature rise of 3 degrees Celsius, or more, this century.

Bold leadership, on the part of government, business and civil society leaders, is critical for advancing climate action. People make a difference as well: changing consumer behavior is important in moving toward a low-carbon economy, which is why the UN has promoted the ActNow Campaign, to offer basic ideas on the steps we all can take.

So, can we solve the climate crisis?

Yes. We have the solutions that we need to address climate change, but we need to use them.  We need to shift investment from the grey, dirty, economy, to the green economy.  The money is there.

We have the technology, now we need to make it accessible to all people in all countries. 

But we need to take action now.  Every bit of warming matters, and the longer we wait, the greater the negative impact.

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Towards a sustainable Blue economy: A Plan to restore the health of our oceans

MD Staff

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Samba Lahy recalls the time when, as a young man, he used to go fishing with his parents off the coast of Tampolove, one of the fishing villages dotting the southwestern coast of Madagascar. Every time his family returned from the sea, their long and narrow canoe would be filled to the brim with fish. But things have changed.

Mr. Lahy, now with a family of his own, has seen his catches dwindle. As a result, like others in Tampolove, he can no longer rely on fishing as his main source of income. His story sounds familiar to many, in scores of fishing villages around the world. 

Today, one third of the world’s fish stocks are overfished, up from 10 per cent in the mid-1970s. Another 60% of fish stocks have been exploited at their maximum sustainable limit. But overfishing is only one of many problems affecting the oceans. Over the past 30 to 40 years, the world has lost half of its coral reefs. Other problems include a rise in ocean temperatures and acidity, both a result of the climate crisis.

Despite a growing awareness of these challenges, progress in tackling them has been slow. This is due to many factors, not least the perception that protecting the environment is costly and will therefore hinder economic growth and socio-economic development. However, the quest for a healthy environment can be compatible with a prosperous economy and a global trading system.

The ingenuity of rural producers like Lahy offers inspiration and assurance that the two are not inherently incompatible. Faced with dwindling catches, Lahy and others in the community began experimenting with seaweed farming with the help from non-governmental organizations.  Soon this turned into a profitable economic activity, and the village soon started to sell their seaweed to foreign markets, where it is used to produce food, personal care products, cosmetics, paints, adhesives, dyes and gels.

Commercial ventures like seaweed farming can create new economic opportunities, particularly for women in rural communities, enhanced by the interconnectedness of the global economy. They can also be more environmentally friendly than other aquaculture activities. Part of the reason is that seaweed and other species of algae do not need fertilizers to grow—just sunlight, carbon dioxide and water. All these factors begin to show how economic prosperity, trade and the preservation of the environment can, in fact, reinforce each other.

In the context of the Paris Agreement, oceans-based economic diversification can enhance the nationally determined contributions of small island developing states, supporting the implementation of the agreement. This shows that trade can be an enabling factor in adaptation and in mainstreaming oceans-based economic activities, where domestic markets remain small and remoteness is an intractable hindering factor.

In other areas of the oceans economy, adapting trade policies can play a decisive role in making economic activities more sustainable. One example relates to fisheries subsidies, government support schemes for the fisheries sectors. “Despite the clear trend of declining fish populations, a majority of these subsidies further promote overfishing. Instead, support should be provided to improve the sustainability of the sector, or promote new sustainable economic activities.”

explains Steven Stone, Chief of Resources and Markets at UN Environment. “Currently, countries are negotiating on a new set of trade rules at the multilateral level, that can put an end to these harmful practises. Successfully concluding these negotiations in 2020, at the 12th WTO Ministerial Conference will be crucial to move towards sustainable fishing practises. It is also a crucial part and parcel of the 2030 Agenda.”

The oceans economy, climate and efforts to eliminate harmful fisheries subsidies are all headline topics of the Third Oceans Forum, an event on the sidelines of the September 2019 UN Trade, SDGs and Climate  Forum in Geneva. The Oceans Forum is a unique global platform to take stock, exchange experiences and present options for the implementation of trade-related targets of Sustainable Development Goal 14 – Life below water – through the involvement of leading United Nations agencies, regional bodies, government institutions and civil society organizations.

This year’s forum is particularly important, as it precedes the 2020 deadline to deliver on several trade-related Sustainable Development Goal targets on healthy oceans. To support countries to deliver on these targets, UNCTAD, FAO, and UN Environment have come together to develop a draft Inter-agency Plan of Action (the so-called ‘IPoA’), on sustainable oceans and trade. Through this Plan of Action, the agencies are proposing a comprehensive instrument to support countries in their transition to sustainable ocean economies, and to align their trade policies with overall sustainable development considerations.

UN Environment

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Green Planet

Hurricanes, Melting Ice Sheets, Rising Sea Levels and A 16-Year Old’s Courage

Dr. Arshad M. Khan

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When the Duke of Windsor, the former Edward VIII, was made governor of the Bahamas in 1940, he and his wife Wallis Simpson arrived to peaceful islands favored by a benign climate, away from the violent upheavals of a war-torn Europe.

Whatever the reasons — and many point to rising sea temperatures from climate change — the climate in the Caribbean is a little less benign as the unfortunate residents of Cuba, Haiti and Puerto Rico among others have noticed in the last few years.

And now hurricane Dorian, a category 5 monster when it made landfall on the northern island of Abaco and Grand Bahama on Sunday.  The strongest storm on record to hit the islands with winds reaching 185 mph, it left not a single roof untouched in Abaco, some areas being completely obliterated as if nothing had ever existed.

How many dead?  Nobody knows yet.  Shelters designed to accommodate a few dozen are crammed with  a thousand and more.  Sarah St. George, the chairman of the Grand Bahama Port Authority experienced it first hand.  “Grand Bahama is not in good shape at all because 70 percent of it is under water.”  If water is up to the second floor, then people have lost everything.  Recovery will be long and arduous. 

The islands need help and is owed it.  Mia Mottley the prime minister of Barbados put it bluntly:  “We are on the front line of the consequences of climate change and  we don’t cause it.”  Climate experts predict worse and more frequent storms in the future.  Dorian, for example, formed in August, earlier than normal.  Global warming is playing havoc with weather and warmer seas fuel more moisture-laden, powerful storms. 

Sea levels are rising from higher temperature expansion and greater ice melt, increasing the danger to coastal communities.  In Greenland, the melting ice caps and sheets by a record amount have surprised researchers, who say this summer’s melt has been enough to raise global sea levels by one millimeter.  The ice sheet is 2-3 km thick and covers an area six times the size of Germany.  If all that ice melted, it would raise sea levels worldwide by 7 meters or almost 23 feet.

When greenhouse gases are causing global warming, responsibility lies with the largest producers/polluters.  Would an international court find them liable to the small island nations suffering the consequences?  But then, if it does, who is going to persuade them to pay up?

It is in everyone’s interest to reduce global warming and since the powers that be do not listen to us, 16-year old Greta Thunberg is doing something about it.  To prove her point on greenhouse gases she refused to take a transatlantic flight, crossing on a sailboat instead to attend the United Nations climate summit later this month.  While she gears up for it, she is also preparing for the global strike on Friday September 20th preceding the climate summit on the Monday following.  She chose Friday, a workday, because she is asking adults to join the action and stay away from their jobs. 

Of course UN climate summit reports try to achieve consensus and in doing so have to appease fossil fuel producers.  If caveats are multiplied and uncertainties magnified, it is all part of the game.

Then there are the unexpected consequences.  As electric cars multiply and the demand for copper escalates, new sources must be developed.  Thus a new copper mine is being dug in the pristine wilderness of northern Norway, north of the Arctic Circle.  How well will reindeer and their Sami herders coexist with copper mining in the sparse wilderness is an open question.

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