The International Energy Agency’s (IEA) latest report repeats the message we’ve heard from many sources - we’re heading for a temperature rise of much more than 2°C. But given its international reach and expertise, the agency is uniquely placed to recommend what we can do to fix the problem. They’ve come up with four recommendations, and they’re emphasising some surprising things.
The IEA finds that policies currently being pursued or implemented will lead to a rise of between 3.6 to 5.3°C in global temperature.
There has been a remarkable fall in emissions from the United States between 2011 and 2012 as the US has switched from coal to shale gas. However, countries outside the OECD now contribute the bulk of emissions and these continue to rise; the main contributors are China and India.
Where to cut
The necessary cut in emissions to keep temperatures tolerable is massive. The IEA is promoting four energy policies it thinks will get us there. Energy efficiency in buildings, industry and transport delivers nearly half the required emissions reduction by 2020. Curbing least-efficient power plants while increasing renewables and gas contributes more than 20% of the emission reduction. Curbing the releases of methane from oil and gas provides 18%, and phasing out fossil fuel subsidies 12%.
Strangely, when calling for a cut in methane release the IEA makes its recommendations based on the 100-year global warming potential of the gas (which is 25 times that of CO2). The short-term warming potential - that generated around 2020 - is 72 times that of CO2. Given the emphasis on bringing down emissions in the near future, the higher warming potential would be much more appropriate.
Also surprising is the IEA’s recommendation that the major investment should be in increasing vehicle efficiency. This is a particularly interesting challenge for Australia, where transport makes up around 15% of our emissions and is still growing. The potential for reduction is definitely there but we have, until now (and probably will need to continue to do so give our reliance on coal) placed far more emphasis on reducing emissions from power generation.
Reducing the energy demand of buildings and decarbonising power plants comes in second. To this end, hydro, nuclear, wind and bioenergy are expected to be the major low carbon technologies generating electricity.
Winners and losers
While the IEA claims no impact on economic growth there are winners and losers in its policy recommendations. Revenue from new power plants will climb and that from coal-fired plants will decline.
There are serious implications for the future of the Australian resources sector if these policies are adopted. Coal and gas burning would reduce sharply. In fact most of the world’s coal reserves would need to remain in the ground.
The fall of in prices for coal that this implies would lead to the closure of marginally profitable coal mines. There would be capital losses as costly infrastructure such as rail and ports would be stranded.
International cooperation is required to curb global warming. To be effective in the short time available such cooperation would arguably need to include not only binding emissions targets for developing as well as developed counties but also robust markets for carbon.
These conditions are painfully absent. Since the heady days when everyone expected countries to cooperate, there has been a slide away in commitment.
Commitment weak, incentives absent
The present international agreement is to reach a global treaty by 2015, but not to come into force until 2020. In other words much of the crucial action the IEA says is required by 2020 will need to be unilateral. But the economic crisis has depressed incentives rather than stimulating them.
As the IEA points out, only 8% of carbon emissions are subject to a carbon price. Furthermore the carbon markets have completely lost their bite.
The price of carbon permits in the EU’s trading scheme fell to €3.00 per tonne, from €20 in 2008. The carbon budget in the Regional Greenhouse Gas Initiative in the US had to be cut by 45% because of the availability of low cost shale gas and the economic downturn. In addition the price in the Clean Development Mechanism fell to €0.3 per tonne.
At the same time there has been a continuation of the payments of incentives to pollute. Fifteen per cent of emissions receive US$110 per tonne through fossil fuel subsidies subsidies.
The IEA bravely soldiers on promoting policies that, if implemented, would do the trick and prevent catastrophic climate change.
But one could surely be forgiven for taking the view that we need to get ready for a much hotter world.