The Carbon Crunch and what to do about it

IPPR January 15th 2013

Dieter Helm, Professor of Energy Policy, Author of The Carbon Crunch: How we are geng wrong and how to fix it. Yale University Press, 2012 The Quesons

• What are the causes of global warming? – Facing up to some inconvenient facts • Why has so lile been achieved? – Recognising current failures • How do we make progress? – Delivering effecve climate migaon

15th January 2013 Professor Dieter Helm 3 An ever-upward path Atmospheric CO2 (ppm)

400

390

380

370

360

350

340

330 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Source: US Department of Commerce National Oceanic & Atmospheric Administration (NOAA)

15th January 2013 Professor Dieter Helm 4 What causes global warming?

3 related causes: • The role of coal • China • Populaon growth

ICarbon consumpon, not producon, is what maers

15th January 2013 Professor Dieter Helm 5 Historical coal burn vs atmospheric CO2 (mt & ppm)

6000 400

390 5000

380 4000

370 3000 360

2000

350 Atmospheric CO2 (ppm)

1000 Coal consumpon Atmospheric CO2 340

Coal consumpon (million tonnes of coal equivalent) 0 330

Source: US Department of Commerce Naonal Oceanic & Atmospheric Administraon (NOAA), BP stascal 15th January 2013 Professor Dieter Helm 6 review of world energy 2011 World coal demand scenarios to 2035 (mt)

9000

8000

7000

6000

5000 New policies Current policies 4000

Million tonnes 450 scenario 3000

2000

1000

0 1980 2009 2020 2035

15th January 2013 Professor Dieter Helm Source: OECD/IEA World Energy Outlook 2011 7 Global and Chinese coal demand in the base-case scenario (BCS) and Chinese slow-down case (CSDC)

Source: IEA Medium-term coal market report 2012 8 Europe’s own dash-for-coal

• EUETS < EUR10 I gas ž coal • Germany: nuclear ž coal

I major new coal build in Europe I lignite coal is being expanded in Germany I There is a gas ž coal switch in Europe

15th January 2013 Professor Dieter Helm 9 Gas and coal-based electricity generaon in select European countries

From gas From From From gas Relave Relave Electricity Jan-Jun coal Jan- Coal Jan- Jan-Jun 2012 growth growth generaon 2011 (in Jun 2011 Jun 2012 (in GWh) (in %) (in %) GWh) (in GWh) (in GWh)

Germany 40984 34749 -15 129399 140008 8

Spain 40696 35790 -12 16803 27656 65

UK 71894 48109 -33 52422 70991 35

Source: IEA Medium-term coal market report 2012 10 Populaon growth – providing energy for another 2 billion people

Source: United Naons

15th January 2013 Professor Dieter Helm 11 What is likely to happen before 2020?

By 2020: • China X 2 GDP • India X 2 GDP

While no further acon following Durban & Doha before 2020

I 400 – 600 GWs new coal by 2020 (if 12th 5 year plan implemented in China)

15th January 2013 Professor Dieter Helm 12 Why has so lile been achieved?

• Kyoto is producon-based & largely European • Europe has been de-industrialising • Some current renewables are expensive, contribute lile to global climate change migaon and raise energy prices • Nuclear is reducing across Europe (especially in UK and Germany) + being replaced by coal in Germany

15th January 2013 Professor Dieter Helm 13 EU Climate Change Package

• 2020 – 20 – 20 : It all adds up to 20!!!! • Raonale was “World leadership” – offering 30% at Copenhagen But then…. • Nuclear exit • More coal • 2050 Roadmap and 2030 targets

15th January 2013 Professor Dieter Helm 14 Europe: an unviable posion

Compeveness

Current renewables policies

Consumpon of carbon Costs

• Current renewables cannot make much difference to global climate change– land & shallow sea areas just not big enough • Energy efficiency – good idea but does not necessarily reduce energy demand 15th January 2013 Professor Dieter Helm 15 How do we make progress (if we really want to)?

1. Carbon pricing and Carbon consumpon and border adjustments 2. Coal ž gas substuon

And then…. 3. Enormous scope for new technologies – future renewables

15th January 2013 Professor Dieter Helm 16 Carbon taxes v. EU ETS

35 A 30 alternave

25

20

15 Carbon price EUR price Carbon 10 EU ETS futures prices 5

0 Source: Bloomberg

15th January 2013 Professor Dieter Helm 17 Border carbon adjustments

• Focus on carbon consumpon • Not to price carbon is to subsidise exports • Locaonal indifference • Start with small number of very large carbon- intensive industries • Encourages others to introduce carbon prices I Boom up, step-wise towards global carbon pricing

15th January 2013 Professor Dieter Helm 18 Coal " gas for the transion

Fossil fuel emissions

1000

800

600

400

200

0 Coal (average) Fuel oil Natural gas

Approximate CO2 emissions: grammes of CO2 per KwH of electricity generated Source: International Energy Agency "CO2 emissions from fuel combustion highlights 2011" 15th January 2013 Professor Dieter Helm 19 The new technologies – future renewables, acve grids and more…

• Next generaon solar • Smart Meters • Storage and baeries • Electrificaon of transport • Biotechnologies • Nuclear: PRISM, Fast-breeders

15th January 2013 Professor Dieter Helm 20 Conclusions

• European leadership has failed • 2020 – 20 – 20 has probably made maers worse • Durban will probably lead to 450ppm ++

EITHER: • Change tack now • Admit defeat

15th January 2013 Professor Dieter Helm 21 8/21/12 The Carbon Crunch by Dieter Helm - Yale University Press

15th January 2013 Professor Dieter Helm 22 yalebooks.co.uk/display.asp?K=9780300186598# 1/3 www.dieterhelm.co.uk

• “EMR and the Energy Bill – a crique” hp://www.dieterhelm.co.uk/node/1330 • “Mr Davey’s ‘myths’” hp://www.dieterhelm.co.uk/node/1343 • European Energy Policy, in: The Oxford Handbook of the European Union Edited by E Jones, A Menon, and S Weatherill, OUP, August 2012. • The UK’s new dash for gas, Prospect, 20th September 2012. • Trade, climate change and the polical game theory of border carbon adjustments, with and Giovanni Ruta, May 2012, Grantham Research Instute on Climate Change and the Environment, Working Paper No. 80. • Surprise – the oil price isn’t higher, Prospect, April 2012. • What next for EU energy policy?, in Green, safe, cheap: Where next for EU energy policy? edited by Kanka Barysch, Centre for European Reform, 2011. • The Economics and Polics of Climate Change, Helm, D. R. and Hepburn, C. (eds), (new edion 2011), Oxford University Press.

15th January 2013 Professor Dieter Helm 23