Stabilising World CO2 Emissions: a Bridge Too Far?

[PAPER TITLE] Stabilising World CO2 Emissions: a Bridge Too Far?

Alan Moran. Institute of Public Affairs, 61 3 95101035, [email protected]

Overview Proposals to reduce greenhouse gas emissions by 20 to 50 per cent of prevailing levels have been made to address concerns about climate change. These goals would require per capita emissions to be reduced to 3.4 and 2 tonnes of carbon dioxide equivalent per capita, respectively. US emissions are currently 20 tonnes per capita and the OECD as a whole is at 11.5 tonnes; China already exceeds 3.4 tonnes per capita. Even in those developed economies which are not predominantly reliant on fossil fuel for electricity generation, emissions far exceed the targets under discussion. If emission reduction targets are to be met alongside higher living standards this will require immense ingenuity.

Methods Examination of UN data on carbon dioxide emissions and the actions and proposals of nations in taking measures to abate these emissions. 2 Intelligent Well Technology: Status and Opportunities for Developing Marginal Reserves SPE

Results Presumably those calling for radical reductions in carbon emissions, especially when they are also largely rejecting nuclear power, consider reductions in carbon emissions have penalties akin to reducing a sub-component of a major demand category like food or shelter. They consider that man’s ingenuity, given adequate incentives, will discover low cost alternatives and means of satisfying demand in ways that use a different mix of inputs and outputs.

Such notions appear to be highly optimistic. Already we have seen prices of low carbon emitting fuels increase markedly – before falling at the end of 2008, gas prices more than trebled over recent years – in response to an aversion to coal use in Europe and North America.

Even for targets involving less than an 80 per cent reduction in emissions, considerable restructuring and costs would be required. For stabilisation at 2004 levels, a wholesale replacement of coal and gas by nuclear for electricity generation would be capable of achieving some but by no means all of the required reductions.

Some indication of the practicality of emission levels that are achievable from this approach is illustrated by low carbon economies such as France, Switzerland and Sweden. In all three cases nuclear power dominates, with hydro playing important roles in Sweden and Switzerland, and all three produce less than 6 tonnes of carbon dioxide equivalent per capita. Even so, this remains a far cry from the 2-3.4 tonnes of CO2 equivalent per capita in 2030 that is necessary with stabilisation at 2004 levels.

Adoption of nuclear power presents the only lowish cost option to move the world substantially towards stabilising emissions, however, many of those pressing most strongly for emission reductions are also tenaciously opposed to this form of electricity generation.

While more attainable than some approaches, even an extensive replacement of fossil fuels with nuclear power is a task of considerable magnitude. For many countries resource rich in fossil fuels, the journey will mean a huge sacrifice of living standards compared to those that would otherwise prevail. Some would see levels of wealth loss that would be difficult to compensate.

Australia demonstrates considerable policy confusion, not least because measures to suppress domestic CO2 emissions are accompanied by continued enthusiasm for coal exports, which comprise 13 per cent of the country’s total exports. Australia, has issued several reports involving a tradeable rights system, largely based on auctions, and additional regulatory measures. The objective, a reduction of emissions by 60 per cent by 2050, would still leave Australia at double the level required for stabilisation at a uniform per capita emission level.

The modelling by the Australian Treasury, which was issued separately but also formed the basis of the modelling results of Garnaut, used a price of $A20 per tonne of CO2 (2005 dollars) escalating over time and estimated the cost to the economy of stabilisation would be only two years loss of growth by 2050 or 4.7 per cent of GDP.

Treasury has taken a controversial, almost unworldly, view that, “Where emission pricing is gradually introduced across the world, countries that defer action face higher long-term costs, because global investment is redirected to countries that act early. Australia therefore benefits from being an early mover in a multi-stage world.”

The modelling forecasts a great deal of trading. It has Australia, in the central Treasury scenario (called Garnaut 10), buying 293 MT C02e, 40 per cent of its needs in 2050 at $US 91 per tonne (in 2005 prices) or over $US 26 billion per annum. Such numbers are largely determined by assumptions on how cheap it is for countries to mitigate emission relative to each other. The US and China are said to find easy opportunities to do this while countries like Australia, the EU and the OPEC countries are in the world market buying the permits –the former Soviet bloc is spending over $200 billion a year buying credits.

As with all modelling, that of the Australian Treasury is dependent on the assumptions employed. Critical in this respect are the following:

 Responsiveness of energy demand to higher prices;  Substitution of energy for other goods and services due to higher prices; and  Technological developments of non-carbon energy sources and the abilities to sequester carbon cheaply. 3 Intelligent Well Technology: Status and Opportunities for Developing Marginal Reserves SPE

Conclusions  The sort of GHG reduction target that the scientists believe is necessary to avert climate change involve stabilisation of CO2-e emissions at their present level of around 550 parts per million (ppm). Many argue that a trajectory to 450 ppm is necessary. Politicians in developed countries have in general endorsed the need for emphatic action to address emissions.  Under a business-as-usual scenario, emissions are likely to be more than double 2004 levels by 2030 and to continue rising thereafter. In July 2008 the G8 called for a reduction in emissions by 50 per cent by 2050. Meeting such targets in the time frames proposed is challenging, requiring significant resources and resourcefulness.

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