LONDON: The energy sector is responsible for 60% of the world’s total greenhouse gases (GHG) emissions, which is why interventions and policies in this sector are key for a low carbon economy, says the just-published report Energy, Climate Change and Environment: 2014 Insights by the International Energy Agency (IEA).
After COP20 in Lima last December, the world has again been urged to take bold action to reduce emissions and avoid the runaway effects of climate disruption. With the lion’s share of global GHGs attributed to the energy sector, the challenge lies not only in unlocking new low carbon energy investments, but also in accelerating the decarbonization of existing high-emissions power plants, such as coal-powered structures.
The new IEA report warns the timescale for this transition is tight: “Staying on track to limit temperature rise to below 2 degree Celsius requires a transition away from these assets at faster rates than natural infrastructure replacement would dictate.” Strong climate policies are therefore essential in accelerating and successfully ‘unlocking’ such assets.
So far, one of the most successful policies implemented has been putting a price on carbon with emissions trading schemes (ETS), and hundreds of companies around the world see this measure as “an opportunity for their business”. But due to low prices in most current carbon pricing systems, other policy solutions are becoming more crucial.
An example is retrofitting coal-fired plants to increase their efficiency, or adapting them for carbon dioxide capture and sequestration (CCS). To unlock an action like this, policies such as fleet-wide GHG emissions performance standards, removal of fossil fuel subsidies and preferential pricing for CSS technology must be implemented.
However, the study underlines it is also critical that before replacing such coal-powered plants, new clean power plants with the same amount of output are ready to be implemented.
ETS systems are currently widely used by many governments to reduce industrial GHG emissions with a cost-effective, clear and fair policy. Since 2005, Europe has implemented the biggest ETS in the world, with many smaller bilateral systems - like our States & Regions members Québec and California - sharing the same success.
While South Korea officially launched the second largest ETS in the world yesterday, China has already launched several pilots and will implement a national system in 2016 – creating what will be the biggest ETS, estimated at US$65 billion.
Image: Current status of ETSs worldwide, from the report Energy, Climate Change and Environment: 2014 Insights, courtesy of IEA
Critically, an improved integration between ETS and complementary energy policies can boost both types of policies, and the system must be more resilient and flexible to account for the changing economic and political conditions worldwide, the report states. Another important policy measure IEA suggests is to implement ETS in highly-regulated electricity systems, while compensating groups affected by rising electricity prices.
The benefits of such policies to reduce GHG emissions vary from energy security to building experience with new technologies, and from cutting air pollution to reducing energy bills.
An energy sector heavily based on fossil fuels not only rises GHG emissions but also increases air pollution. But while the report warns “interplay between air pollution control and GHG emissions abatement may not always be positive”, on the contrary, it has been proven a successful integration between GHG and air quality controls of large stationary sources – especially in the US, which is using a ‘sectorial approach’ by applying federal carbon pollution standards to the electric power sector.
But China’s efforts to limit air pollution has shown limited benefits in tackling GHGs, due to regional variation in pollution control measures. To overcome such a problem, the IEA suggest low-carbon technology must provide security of supply, and air quality measures must take account of environmental impacts.
Selected indicators of global CO2 emissions, per capita GDP (GDP/population), carbon intensity of economic activity (CO2/GDP), population, and energy sector carbon intensity (ESCII): Change from 1990. From the report Energy, Climate Change and Environment: 2014 Insights, courtesy of IEA
The report also indicates that global energy-related CO2 emissions dramatically rose to a record 5.4% in 2010, and then slowed to 2.8% in 2011, and 1.2% in 2012. However, the emissions reached their highest levels in 2012 – with coal accounting for 43.9%, oil for 35.3% and gas for 20.3%. The fossil fuel growth has been driven by the huge demand from developing countries, which have fast-rising populations and wealth.
Importantly though, in 2012 renewable energy rose to 5% of the global electricity mix, matching for the first time the oil increase – even if the carbon intensity has been almost the same for decades.
“The world will need to significantly ‘bend the curve’ away from current energy and emissions trends in order to tackle the challenge of global climate change,” concludes the report.