WITHOUT NEW ENERGY, WORLD’S EMISSIONS COSTS COULD SKYROCKET

Climate Change Mitigation; What Do We Do?, a new report from the Organization for Economic Cooperation and Development (OECD), compares the predicted costs of climate change to the costs expected for mitigating it.

From the report: “Ambitious greenhouse gas abatement is economically rational, but it will not be cheap…”

The OECD plan stabilizes emissions at 550 ppm CO2e, (i.e., 450 ppm CO2). In that sense, the OECD report undercuts its own significance, because evolving thinking now suggests atmospheric greenhouse gas (GhG) concentrations of 350 ppm or less will be necessary to avoid the worst impacts of global climate change.

The basic message of the report is that New Energy technologies are the only way to effectively deal with the challenge of bringing down GhG emissions and spending to develop them is cheaper than coping with the climate change-provoked upheavals that will ensue without them.

Another way in which the OECD undercuts its own significance is in its assumption that “clean” coal should be among the climate change-mitigating technologies. This unfounded commitment to carbon-capture-and-sequestration (CCS) is a fallacy many in Europe have not yet gotten past.

It is easy to understand Europeans’ attachment to CCS. As the OECD report points out, the biggest costs in dealing with climate change will come in the power generation sector. At first glance, “clean” coal is a cheap resolution of that cost. The problem: A closer look reveals “clean” coal does not now exist. Proving it is expected to take a decade or more, by which time climate change could be out of hand. And implementing it will be prohibitively more expensive than developing New Energy technologies at a time when the world's economy is struggling to afford necessities.

Dana Hanby, director of international markets, First Climate Group: “We already see the lower investment in renewables because of the current recession…”

In other words, the recession is forcing cutbacks in spending on New Energy and those cutbacks will have long-term counterproductive impacts in the fight to turn back climate change.

From the report: “Much of the economic response comes in the power sector, currently the largest source of emissions. As carbon emissions become more expensive, nuclear power generation, which does not emit carbon, becomes increasingly attractive. Indeed, it accounts for a growing share of total power generation capacity in the reference scenario. At the same time, coal-powered generation increasingly uses carbon capture and storage technology (CCS). In the mitigation reference scenario, power from renewable energy such as wind and solar will also increase strongly in percentage terms. However, their contribution to total energy production in global terms is assessed by OECD to remain relatively small...”

If this assessment turns out to be an accurate description of the world's options for getting to 2050, it is likely the worst costs of climate change can be expected because - in reality - nuclear and "clean" coal will be too expensive to be implemented.

The OECD also foresees difficulty in the transport sector.

From the report: “The transport sector may be the most challenging in the sense that even very large changes in the cost of emissions appear to have only modest impact on their level. Price changes seem to produce only small behavioural changes in automobile use in the short run, and are slow to come even when public transport alternatives are well-developed, as in Europe.”

Is there any HOPE in the OECD report? Absolutely. Hope, audacious as it may be, lies in technological innovation.

From the OECD report. (click to enlarge)

From the report: “Very significant reductions in the costs of meeting the mitigation scenario could be achieved if intensified R&D policies resulted in the early development of radical new technologies for energy generation and, above all, for the transport sector… Initially, such new technologies would likely be prohibitively expensive, but R&D and learning-by-doing might bring their costs down to economically relevant levels over time in the face of strongly rising costs of emitting GHGs…Developing new technologies will require a massive up front R&D effort in the years to come, boosting such R&D several fold...But they will substantially lower the long-term costs of GHG abatement…”

To fund the necessary R&D, the OECD advocates a strict and global cap-and-trade system with very specific provisions to accomplish needed objectives.

From the report: “Long-term stabilisation of GHG concentrations will not be achieved, or will be achieved at an unacceptably high level of emissions or cost, unless there is widespread buy-in to an abatement strategy…”

To bridge the period before innovation can be effective, the OECD calls for serious efforts to improve carbon intensity, per capita emissions, globally.

From the OECD report. (click to enlarge)

Carbon May Rise to $400 a Ton Unless Spending Surges, OECD Says
Matthew Carr, December 16, 2008 (Bloomberg News)

WHO
Romain Duval, senior economist, Organization for Economic Cooperation and Development (OECD)

WHAT
In Climate Change Mitigation; What Do We Do?, the OECD suggests New Energy development is crucial to prevent the price of emissions from skyrocketing to unimagined highs.

From the OECD report. (click to enlarge)

WHEN
- 2050: Without an extensive New Energy infrastructure generating emissions-free electricity, the price could reach $400/tonne. Developing New Energy could keep the price of emissions at $200/tonne.
- 2013: Implementation of the Kyoto Protocols 3rd phase plan, which is expected to be finalized in December 2009.

WHERE
- Duvall talked about the report’s findings at the Poznan, Poland, UN climate change summit.
- The world’s 2 biggest emitters are the U.S., a member of the OECD, and China, not a member.
- OECD: 30 countries (Australia, Austria, Belgium, Canada, the Czech
Republic, Denmark, Finland, France, Germany, Greece, Hungary, Iceland, Ireland,
Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway,
Poland, Portugal, the Slovak Republic, Spain, Sweden, Switzerland, Turkey, the
United Kingdom and the United States.)

WHY
- The OECD plan stabilizes emissions at 550 ppm CO2e, (i.e., 450 ppm CO2).
- The implementation of low emissions technologies and New Energy will keep the costs of global climate change to 2% of the world’s 2050 GDP instead of allowing those costs to reach 4+% of world GDP.
- The OECD includes “clean” coal among the climate change-mitigating technologies it advocates.
- The report sees the cost of dealing with global climate change rising very gradually, from less than 1% in this decade to over 4% in 2050 (in the worst case scenario).
- The report contains an extensive discussion of how to think about and address carbon leakage.
- First Climate Group manages funds with emissions credits investments.
- Four essential qualities: (1) Comprehensiveness; (2) Decoupling; (3) Credibility/Flexibility; (4) Urgency.

From the OECD report. (click to enlarge)

QUOTES
- Romain Duval, senior economist, OECD: “The big difference is you assume major new technologies penetrate the non-electric sector…”
- From the report: “International support to help with adaptation to climate change will be essential for many of the poorest countries who are likely to bear the brunt of the cost of climate change, but who have limited resources and capacity available to adapt to the impacts…India and China are key global partners in an effective abatement strategy…they may see binding emission caps as potentially significant impediments to future growth…buy-in by energy-intensive sectors within the OECD will be essential for the credibility of any programme that has global engagement as its aim. Global sectoral agreements may encourage broad engagement and complement economy-wide instruments such as cap and trade…”
- From the report: “While many of the cheap options for reducing emissions can be found in developing countries, some of these countries lack the capacity or financing to implement these reductions without support. In addition to bilateral and multilateral funds for mitigation action, the Clean Development Mechanism (CDM) under the Kyoto Protocol is designed to help encourage private financing for mitigation action in developing countries.”