Climate Change Science Rationale for Investment in Clean Energy and the Carbon Markets
Figure 4: UK Climate Change Committee Suggested Pathway to an 80% Carbon Emission Reduction by 2050
500 400 300 200 100
2000 0
2010
Services Residential Transport Hydrogen
2020 2030 Electricity
Upstream and non-sector Industry Agriculture
Note the initial decarbonisation of electricity generation and then the shift to electric-based transport.
Stern has recently revised his figure to 2% of world GDP. Others have argued the costs could be offset by a regional, then ultimately global, carbon trading system.2
Others suggest that the impacts and
the associated costs of global warming have been underestimated by the IPCC the Stern report. Even if the cost–benefit of solving global warming is less than suggested by Stern,13
there is an undeniable
ethical case for preventing the deaths of tens of millions of people and the increase in human misery for billions. If we look at the UK, the Climate Change Committee estimates that an 80% cut in carbon emissions by 2050 would cost between 0.5% and 3.0% of 2050 GDP depending on how different technologies develop (see Figure 3).
Solutions
Climate change is one of the major challenges for our global society. We must remember, however, that the use of fossil fuels was an amazing invention, and has allowed the world to develop at a faster rate than at any time in history. The high standard of living in the developed world is based on cheap and relatively safe fossil fuels; so it is rather naïve for us then to complain about them or depict them as evil. However, what we do need to do is to replace our reliance on them with carbon-free or renewable or alternative energy sources. This is essential, as the power needs of humanity will continue to expand due to the rapid development of China, India and other countries.12
For example, the IEA suggests that at least
50% of worldwide energy demand for 2030 has yet to be built, as illustrated by the suggestion that China is opening a new coal-fired power station every four days and each year planting more wind turbines than the rest of the world put together. This energy expansion is not limited to the developing world: in the UK, there will need to be at least another 20 Petawatts of power generated by 2020. The global demand for fossil fuels is so strong and the price high. There is also concern that we have reached ‘peak oil’ and that the world is now running out of oil. This does, however, provide two other reasons why countries should adopt a less intensive carbon-energy sector: first, the era of power from gas and oil will
10 2040 2050
There are two levels of solutions. First, there must be an international political solution; any political agreement will have to include developing countries and protect their moral right to rapid development. Political solutions also have a huge impact on markets, both clean energy and carbon trading. For example, the European Trading Scheme (ETS) drives an internal European market in carbon, while the UN Clean Development Mechanism (CDM) tries to drive low-carbon investment in developing countries. In the UK, the Climate Change Act has a target of reducing greenhouse gas emissions by at least 80% by 2050, compared with 1990 levels. The Climate Change Committee, which oversees Government, has proposed a pathway to achieve this target (see Figure 4) that in itself becomes a major drive of policy and thus the UK energy market.
If we look globally a major international agreement on binding emissions targets is a long way off but if the UN Collaborative Programme on Reducing Emissions from Deforestation and Forest
At the moment despite the global recession global carbon dioxide emissions are rising at the level predicted by the most extreme ‘business as usual’ IPCC emission scenarios.
Degradation in Developing Countries (REDD+) is agreed and ratified, which is more likely, then this will drive the tropical forest carbon credits market. Already there is a huge market in carbon information and carbon-related data; a recent commissioned report by K-matrix put the global figure of actual transaction at £29.2 billion last year, of which £3 billion was just for monitoring.
The second level of solutions is providing the means to cut global emissions through alternative methods of energy generation and reduction in deforestation and land use changes.16
This calls for
massive investment in alternative/renewable power sources and low-carbon technology17
to provide the means of reducing world
carbon emissions, many of which have been discussed in detail in this journal. This investment should take many forms including tax breaks and cost incentives, a proper functioning Green Bank, direct research and development support, investment in universities and supply-line protection. I add the last point as it is well known that China has cornered the market in rare earth elements, which are essential for most low-carbon technology. In a world when climate change is not going away and regional and global politics will start to catch up with the science we do need some enlightened
MODERN ENERGY REVIEW – VOLUME 3 ISSUE 1
soon be over due to a combination of huge global demands and dwindling global reserves. Note, there are now worries that high-quality coal will also start to be limited due to the current record level of demand and its price will go the same way that oil has.15
Second, countries have in the 21st century become very aware of ‘energy security’; most developed countries’ economies are heavily reliant on the import of fossil fuels, making them very vulnerable to international blackmail.12
Domestic fossil fuel and industry process C02 per year)
(MtCO2
emissions
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