Next month negotiators will convene under the auspices of the UNFCCC to start in earnest the process of putting flesh on the bones of the Paris Agreement. Although this work has been underway for a year now, most of this time has been spent on further conceptual thinking about the necessary framework, rather than the specific text that will drive the Paris Agreement forward.

Within this process, there is also the need to further define Article 6, the part of the Paris Agreement that many hope will usher in a framework on which a global carbon market can be constructed. Although Article 6 doesn’t specifically mention carbon markets, the references to transferable mitigation outcomes and mitigation mechanisms can be readily interpreted as trade of carbon units for the purpose of monetizing and financing mitigation – i.e. carbon pricing.

Over the last twelve months, the International Emissions Trading Association (IETA) has published various articles and given presentations around its own view on Article 6 development. A summary of that view is as follows;

  • Article 6.2 – Underpins carbon trade between countries as cap-and-trade systems are linked and emitters seek to optimize their mitigation economics; e.g. California-Quebec (i.e. USA and Canada).
  • Article 6.4 – Offers a means of assigning units to mitigation actions, both at the project level and the system / sector level. This is a pre-requisite for trade.
    • Create allowances for a cap-and-trade system at national level.
    • Create credits within a sector baseline-and-credit system.
    • Create CERs for a specific project.
    • Certify carbon sequestration.
  • Article 6.5 – Changes the accounting for cross-border carbon trade, but particularly for project based units.
  • Article 6.8 – Non-market approaches, such as the Kigali Amendment to the Montreal Protocol, can offer solutions in areas that are not as well suited to emissions trading, therefore supporting the development of more robust carbon markets.

The challenge is to turn the above into a text framework that can be built on as more granular rules, modalities and procedures are required to fully define the operation of Article 6. That more granular work will likely emerge after COP24 in 2018, but for now an initial text framework is required. IETA has taken a first step in this direction by writing a straw-proposal for negotiators to consider, in a format that would be suitable for inclusion in a COP24 Decision. It draws on the work the association over the past 18 months and builds on the straw-proposal launched in 2014 which helped deliver Article 6 in the first instance.

The straw-proposal can be obtained directly from IETA by contacting the Secretariat at This email address is being protected from spambots. You need JavaScript enabled to view it..

One particular aspect of the proposal is the rule required to ensure avoidance of double-counting of carbon emission reductions when Parties instigate a mitigation transfer between their economies. Avoidance of double-counting is a key provision of Article 6 of the Paris Agreement. This is easily managed in conventional cap-and-trade systems, such as the linked Quebec-California system (Canada-USA), but is more complex between nationally determined contributions (NDCs) which may not be similar in structure. IETA have chosen to follow a route the requires quantification of the NDCs, even if their initial basis is not in terms of absolute emissions. For example, the IETA definition of an internationally transferred mitigation outcome (ITMO, as given in Article 6.2 of the Paris Agreement) has a specific reference to quantification, that is later used to ensure double-counting cannot take place;

An internationally transferred mitigation outcome (ITMO) is the subtraction of a given absolute quantity of greenhouse gas emissions measured in tonnes of carbon dioxide equivalent from the quantitatively defined nationally determined contribution of a given Party or sector within said contribution and the addition of an equivalent amount to the quantitatively defined nationally determined contribution or sector of another Party.

The IETA straw-proposal is a starting point, but nevertheless an important one. It takes the concepts of Article 6 and moves them forward into a format which can be further debated and improved. Hopefully, it helps accelerate the negotiating process and leads to an outcome that is both suitable for the Parties themselves and workable for the business world that the Parties will likely turn to for full implementation of the Paris Agreement.

There is certainly concern in the academic community that the world is following an emissions pathway which will result in overshoot in comparison with the Paris goal to limit warming of the climate system to well below 2°C. Because of this, considerable effort is being expended on developing pathways and roadmaps that may help change that course; but not all are viable. One example emerged recently from a group of researchers representing the Stockholm Resilience Centre, the Royal Swedish Academy of Sciences, the International Institute for Applied Systems Analysis, the Potsdam Institute for Climate Impact Research and the Australian-German Climate and Energy College, School of Earth Sciences, University of Melbourne. This is a distinguished group, without a doubt.

They propose a global decadal roadmap based on a simple heuristic — a ‘carbon law’— of halving gross anthropogenic carbon-dioxide emissions every decade. In addition, they propose an expansion of the renewable energy base by keeping the historical doubling times of around 5.5 years constant in the next three decades. This would yield full decarbonisation in the entire energy sector by ~2040, with coal use ending around 2030–2035 and oil use, 2040–2045. The proposed transition also calls for rapidly scaling up carbon dioxide removal by technical means from zero to at least 0.5 GtCO2/year by 2030, 2.5 by 2040, and 5 by 2050.

While the pathway proposed and its component parts do illustrate the Herculean (their terminology for the period 2020-2030) efforts required to limit warming to 1.5°C, their proposal also stretches past the point of feasibility. This starts with the premise that carbon emissions must halve each decade, which means the biggest effort is required in the first decade. This is the opposite of an outcome that a technology pathway might deliver. For example, some months ago I looked at the theoretical pathway required in the passenger automobile sector to rapidly reduce emissions to near zero in under 40 years [Link]. If this is translated into emissions for that sector, on the basis of each internal combustion engine passenger vehicle doing 10,000 miles per annum and emitting some 4 tonnes of CO2, then the emissions profile would be approximately as given in the chart below (Blue line). The red dotted line represents a halving of emissions each decade, as the ‘carbon-law’ pathway proposes. As manufacturing of electric vehicles scales up in the early years, the impact on emissions is small, but after 2030 when the internal combustion engine vehicle stock begins to fall sharply, the emission reduction accelerates. The biggest drop in emissions is in the decade 2040-2050, not 2020 to 2030 as the ‘carbon law’ dictates.

Passenger Vehicle Emissions

The second major issue with the proposed roadmap is the notion of doubling of renewable energy capacity every five or so years. While this has been the case in the early years of renewable energy deployment, it will not continue through to full deployment. This is simple to test by considering the last doubling, when renewable energy capacity would need to shift from half its final level of deployment to full deployment in just five years. This would require an extraordinary scale up of manufacturing capacity for wind turbine blades and solar PV cells. But after five years that capacity would then be redundant as no further major deployment of renewable energy would be required. The investors in the manufacturing facilities would be left with stranded assets had the investments been made

While it is certainly the case that initial deployment of new energy technologies can take place at exponential rates, once the technology reaches material deployment (>1% of the energy system), the rate increase begins to decline, although the absolute level of deployment may well continue to rise. This is a typical pathway for growth rates and has been seen at national level, for example in China. The very high annual growth rates of a decade ago have passed, but absolute annual growth is higher today than it was in 2007.

Limiting warming to well below 2°C or even to 1.5°C will certainly require very rapid change in the energy system, but this may still follow historic patterns of deployment, even if the overall rate of change can be accelerated to levels not seen in prior transitions. Those transitions have followed hard to break deployment ‘laws’ that may yet guide the current transition.

The past couple of weeks have seen something of a storm of protest directed at Bret Stephens of the New York Times, following the publication of his first column for that newspaper which happened to be on climate change. In the article Stephens does note ‘By now I can almost hear the heads exploding’ and that is exactly what happened.

While he could have easily avoided some of the petty criticism by not using words such as ‘modest’ to describe the extent of warming over the last century, his somewhat clumsy venture into the world of probability and uncertainty led many commentators to accuse him of climate denial – in fact they labelled him with the very names that he was cautioning were part of the problem with regards public disinterest in the climate issue itself. Stephens had noted;

Censoriously asserting one’s moral superiority and treating sceptics as imbeciles and deplorables wins few converts.

While I don’t subscribe to the way in which Stephens put together his story, he was nevertheless correct in his assertion that ‘much else that passes as accepted fact is really a matter of probabilities’. This issue is also a problem when it comes to discussing mitigation strategies.

While it is very clear that the Paris Agreement sets a goal of ‘well below 2°C’ and also challenges society to attempt to limit warming to 1.5°C, the current reality is that the world is not on track for this outcome and none of the Nationally Determined Contributions (NDC) submitted to date are aligned with the ambition that emerged from Paris. Yet there is almost no possibility of discussing the implications of such an outcome for fear in the minds of many that the discussion could become a slippery slope to reduced ambition. So there is a return to the language that Stephens encountered.

In my forthcoming book, Putting the Genie Back: Solving the Climate and Energy Dilemma, I do actually explore this issue. The discussion emerges from the world of climate probability and uncertainty, which is at the heart of the work of the MIT Joint Program on the Science and Policy of Global Change. Unfortunately, the use of a 2°C reference point has now become politically rigid, to the extent that it is hardly possible to explore what the number really means, let alone talk of surpassing it. The most common argument is that if 2°C is passed then society must be on a certain pathway to catastrophe. Talk of catastrophe and hopelessness can distance an audience, exactly the point that Stephens is making. Even the IEA 450 Scenario is based on probability; the mitigation pathway it delivers gives a 50% chance of limiting warming to 2°C; it is far from a guarantee of 2°C success.

By contrast, MIT have demonstrated that even a modest attempt to mitigate emissions could profoundly affect the risk profile for equilibrium surface temperature. They looked at five mitigation scenarios (see below), from a ‘do nothing’ approach to a very stringent climate regime (Level 1, akin to a 2ºC case). In the ‘do nothing’ approach, mid-range warming by the end of the century is some 5ºC compared to the late 20th century, but with a wide distribution, which means that there is a small probability of warming up to 8ºC or more – almost certainly a catastrophic outcome even when accounting for the small probability that it might occur. But even modest mitigation efforts, while not shifting the mid-range sufficiently for an outcome close to 2ºC, nevertheless radically changes the shape of the distribution curve such that the spread narrows considerably, with the highest impact outcome dropping by almost 5ºC. As mitigation effort increases and the mid-range approaches 2ºC, the distribution narrows further such that the highest possible outcome is limited to 3ºC (more like the IEA 450 case).

Climate Risk
This is not an argument for limiting the global effort to modest mitigation, but recognition that if modest mitigation is the best that can ultimately be achieved, the risk reduction it delivers has very high value to society. It also highlights that a singular focus on a very difficult-to-achieve goal can be counter-productive if it results in a breakdown of the efforts that deliver a less ambitious outcome. Some thought along these lines may be required as the current US Administration ponders the Paris Agreement.

Perhaps a more pragmatic discussion about effort and outcomes would also garner more interest from a broader swathe of society and offer renewed interest in climate change for the 64% of Americans who Stephens notes do not care ‘a great deal‘ about the subject.

Book cover

On April 26th the Washington DC based Center for Climate and Energy Solutions (C2ES) sent a letter to US President Donald Trump urging continued US participation in and support of the Paris Agreement. Shell was one of thirteen signatory companies. The arguments offered in the letter provided a perspective on the benefits that continued participation in the Agreement could bring to the business community in the United States, in the form of investment opportunity, cost minimization and risk management.

While these business benefits also translate into a benefit for the United States as a whole, the letter was not particularly specific on this matter. Benefits at a national level can be difficult to assess, but it is worth looking at these to get a full picture of where the Paris Agreement might take the US economy over the decades to come.

At its core, the Paris Agreement calls for a global shift to net-zero emissions of greenhouse gases, with carbon dioxide being the critical component of this given the scale and its accumulation in the atmosphere. The earlier net-zero emissions of carbon dioxide is reached, the lower the warming of the climate system is likely to be. That journey will require a major transition of the energy system, from one that emits carbon dioxide to one that doesn’t. This will require three core elements that have largely driven the economy of the United States over the last 150 years;

  • Innovation – the US has excelled in this area when challenged to do so, from the development of the first electricity grids by companies such as Edison Illuminating Company in the 1880s, through the moon landing in 1969 and the more recent landing of the Space X rocket on an ocean platform after launching a satellite into orbit. In the energy sector, this has included developments such as hydraulic fracturing (which enabled the rapid shift from coal to gas in the power sector), energy storage technologies, digital energy management and distributed energy systems.  Particularly in the case of the USA, diverse, state level energy systems enable the unique ability to experiment with market and policy innovations on a smaller, sub-national scale.
  • Trade – the US is a trading nation and this is likely to be at the core of the implementation of the Paris Agreement. A world of net-zero emissions is not going to be a world of no emissions, but as the Agreement notes it will be one of balancing emission sources and sinks. Some form of trading, operating at significant scale, will be required to match these two parts. Significant trade will also arise from energy system deployment.
  • Scale-up – perhaps more than any other aspect of industrialization, the US has demonstrated time and again its ability to rapidly scale the solutions that innovation opens up. It has done this more recently with hydraulic fracturing for natural gas and now oil production, but during WWII the optimization and scale-up of various manufacturing disciplines led to Liberty Ship construction at the rate of three vessels per day. Today, we are seeing scale-up again with the construction of the Tesla Gigafactory in Nevada. More will doubtless follow.

A world heading towards net-zero emissions is one that the USA has the potential to thrive in;

  • It has vast natural resources, which almost certainly includes very significant geological storage capacity for carbon dioxide. That means the USA could position itself as a net-negative emissions economy, effectively selling stored carbon dioxide as an export. This would encompass its capacity for trade and scale-up in particular, as much of the innovation has already taken place, notably in the USA.
  • American innovation in the energy sector is well known, from the speedy development of nuclear power in the 1950s to the current rush towards ultra-low-cost solar PV and battery storage. Several start-ups are working new angles on nuclear fusion, an entrepreneurial approach to energy development that is hardly contemplated anywhere else in the world.
  • The USA is moving rapidly to become a major exporter of natural gas as LNG, a development that wasn’t even on the horizon just a decade ago. Natural gas demand could increase with energy consumers and national governments looking to reduce emissions, thereby offering the USA the opportunity to be a leader in the LNG space.
  • The US is the leading global developer of carbon capture, with more projects than any other country thanks to its sizable enhanced oil recovery industry. It has a mature and expanding carbon dioxide pipeline system, a key infrastructure requirement for the full development of CCS.

While none of the above specifically required the Paris Agreement as the enabler, there is equally no doubt that the UNFCCC process, fraught as it may sometimes appear, has catalyzed change in the energy sector over many years. For example, it has brought additional focus to renewable energy development, raised the profile of CCS and helped companies such as Tesla gain valuable traction as EV proponents.

The Paris Agreement has sharpened the emphasis on energy transition, along with other economic signals and drivers that continue to push the global economy forward. While the Agreement would continue without US involvement, the focus would be blunted to some extent, thereby weakening the global economic signal coming from it. With innovation, trade and scaled deployment at the core of the Agreement, those countries which excel in these areas, of which the USA is pre-eminent, may miss new growth opportunities.

Translator

Advertisement

SolarQuarter Tweets

Follow Us For Latest Tweets

SolarQuarter REIFF - 4th Renewable Energy Investment Finance Forum 2017 >> India's Largest Gathering Of Financial Community From…https://t.co/HdMY3ztff4
About 7 hours ago
SolarQuarter Biggest Solar Rooftop Business Opportunity in Your City_Register Now For SolarRoofs Pan India Series… https://t.co/IgqKNEvJrM
Monday, 24 July 2017 05:26
SolarQuarter Challenges developers & epc players face while procuring modules? Pv moduletech @acmemarkets @ENGIEgroup https://t.co/YupP48y2gX
Friday, 21 July 2017 08:36

Advertisement
Advertisement