Wednesday, December 07, 2011

Will Britain exceed its carbon reduction targets? Post 2

fossil fuel processing

This is the second of two posts that examine the UK's claims and efforts to reduce its carbon emissions.

Its conclusion: the UK must stop burning coal to win the battle to cut carbon emissions.

The Government claimed last week in its Carbon Plan that it is on track to meet its carbon reduction target, but this is contradicted by other independent evidence.

Emissions and carbon intensity are increasing

This evidence shows that the UK's greenhouse gas emissions actually increased last year by 3.5%; more than double the 1.3% growth in the economy, according to the PwC Low Carbon Economy Index published two weeks ago.

And this is a trend. The previous years' statistics from the UK government also show an increase in net carbon dioxide emissions of 3.8%.

If we carry on in this trend, the UK will undoubtedly miss its 34% reduction target.

Worse, the PWc report shows how, globally, national economies' carbon intensities are increasing everywhere.

Carbon intensity is a measure of how much Gross Domestic Product is produced per unit of energy generated from fossil fuels.

PWc's modelling shows that globally, the annual reduction in carbon intensity required to meet the 2° reduction target in carbon emissions by 2050, required to avoid climate chaos, has increased in the last year from 4.7% to 4.8%.

The UK's requirement is higher than this global average. The carbon intensity of its economy is actually increasing by 2.2% a year, and the annual decarbonisation rate now required to meet the 2° reduction target is 5.6%.

Much of the cause of the previous decarbonisation of the UK economy is actually due to the “dash for gas" which happened in the 1990s and resulted in a decarbonisation rate of 3%.

Its recent rise, correspondingly, is due to an increase in coal burning. The latest energy statistics show that in the last financial year, instead of renewables generating 10%, as is commonly believed, they provided 6.5% of our needs.

We are burning more coal

Coal provided 35.7% and natural gas 48.9%, with the shrinking contribution of nuclear power contributing 5.2%.

(The global warming potential of coal is nearly three times that of natural gas: 910gCO2/kWh compared to 360gCO2/kWh.)

This increase in the burning of fossil fuels to generate our electricity underscores how unfortunate it is that the U.K.'s carbon capture and storage programme is suffering delays.

PWc observe that “the longer the delay in significant action to tackle emissions growth, the steeper the path becomes to stay on track with a 2° reduction target," and the more it will cost us.

In industrialised countries, meeting this target will require massive emissions reductions in the order of 80-95% according to another annual report, the EU Climate Policy Tracker, out today from ECOFYS and WWF.

On the other hand, energy intensive industries have been complaining loudly about the cost to them of carbon reduction policies, and in his Autumn Statement, the Chancellor George Osborne promised to reduce this cost, which has the effect of reducing their incentives to save carbon.

PWc warn that there could be a large funding gap in the amount of investment which the UK needs not just to decarbonise the power sector (£89 billion) but to meet energy needs with coal and gas (hundred and £10 billion).

The big 6 utilities in the UK would have to triple their investment to meet the government's target, and in the current economic climate this does not seem likely.

The government suggested last week that pension and insurance funds could contribute to the sums required.

But for this to happen there must be a stable return with limited downsides risk.

Matthew Brown, the CBI's head of energy and climate change policy, has said that although the government's Carbon Plan gives investors a "clearer" picture of how the nation can transition to a low-carbon economy, "we now need this to be backed by consistent, long-term policies, avoiding any sudden changes of direction which put investors off."

What is the solution?

In an ideal world there would be plenty of funding available for low carbon technology, shale gas would not have been discovered, the Fukshima nuclear disaster would not have happened, and the European Emissions Trading Scheme would be operating perfectly to give a high price for carbon that would allow the necessary investments to take place.

Instead, we have to live with what we've got. Either you believe that there is an almost 100% certainty that we have to reduce emissions very fast in order to his avoid global disaster, or you believe that we should have other priorities, namely, our short-term national economies.

The Chancellor clearly believes the latter. The U.K.'s Energy and Climate Change Department believes the former.

The Chancellor believes that European legislation is holding back British business.

But half of the environmental performance of the average European member state is directly related to European legislation. Without it, the European natural environment and carbon emissions would be in a much worse state.

While the UK is one of the better performers in the European Union in legislation to fight climate change, we must not forget that under the Spending Review the Warm Front Scheme was cut, and the aspirations or funding for the Renewable Heat Incentive, Zero Carbon Homes and Carbon Trust were scaled back.

The Carbon Reduction Commitment Energy Efficiency Scheme has now been transformed into essentially a carbon tax with revenues going to the Treasury instead of scheme participants.

Back in June 2011, the UK Committee on Climate Change warned that UK policies are failing to achieve the needed step change.

Since then there have been many delays in policy decisions and changes of tack, which all impact on investor confidence.

In just one snapshot of the challenge ahead, The Centre for Low Carbon Futures and the Energy Saving Trust warned on Monday that "one building every minute must be retrofitted with carbon cutting solutions to meet 2050 energy targets".

Their report argues that the Government must invest in interdisciplinary research which brings together technical, social and economic expertise.

This is both a huge challenge and a huge opportunity, both for job creation and to save energy costs.

I firmly believe that the nation is hungry for this kind of action, for the sake of jobs, the economy and reduction of energy bills.

But the most important thing we can do is to stop burning coal.

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